## Facts

- Brown’s Tie & Lumber Co. sold a motel property; Chicago Title Company of Idaho acted as trustee under the bill of sale and as closing agent and title insurer.
- After the buyer defaulted, Brown’s Tie directed Chicago Title to proceed with foreclosure and provide title insurance for the foreclosure sale; required notice was given and the statutory cure period expired.
- Brown’s Tie and the buyer then entered a consensual cure agreement requiring removal of unauthorized encumbrances.
- Chicago Title issued a title report stating there were no unauthorized encumbrances, but it failed to disclose an $880,000 deed executed by the buyer after the initial default.
- Relying on the report, Brown’s Tie did not complete the scheduled foreclosure and instead proceeded under the cure arrangement.
- The buyer defaulted again; foreclosure was restarted. Chicago Title later discovered the $880,000 deed and notified Brown’s Tie.
- Chicago Title advised that if the foreclosure sale proceeded without postponement, the title policy would include an exception for the $880,000 deed; Brown’s Tie permitted postponement.
- The buyer entered bankruptcy; the foreclosure sale was vacated. Brown’s Tie settled with the bankruptcy trustee, later entering a new $2.8 million purchase agreement.
- Brown’s Tie sued Chicago Title, seeking damages including motel operating costs allegedly incurred due to delay in foreclosure and sale.

## Issues

1. Whether Brown’s Tie could pursue tort claims (including negligent misrepresentation) against a title insurer/agent for negligent title work, or whether its remedies were limited to contract absent voluntarily assumed duties beyond the title insurance contract.
2. Whether, on a contract theory, Brown’s Tie could recover consequential damages such as operating expenses and losses attributed to the delayed foreclosure and delayed transfer/sale.

## Decision

- The Idaho Supreme Court held that Brown’s Tie’s claims against Chicago Title sounded in contract, not tort, on these facts.
- The court reaffirmed that tort liability requires proof that the complained-of act resulted directly from duties voluntarily assumed beyond the basic duty to insure title.
- The court recognized a contract cause of action but upheld limits on damages, ruling that operating expenses and related delay-based consequential losses were not recoverable.
- The court largely affirmed the trial court’s dismissal of tort theories and exclusion of evidence aimed at proving operating-loss consequential damages.

## Legal Principles

- A title insurer’s negligent performance of ordinary title-insurance and related title-reporting obligations generally gives rise to contractual remedies, not independent tort liability.
- Tort liability may arise only when the insurer voluntarily undertakes duties in addition to the contract to insure title, and the harm flows directly from breach of those added duties.
- Contract damages are limited to losses that are the natural and foreseeable result of the breach and within the parties’ contemplation at contracting.
- Consequential business losses tied to delayed foreclosure and subsequent events (including bankruptcy-related complications) may be too remote to be recovered as contract damages in a title-insurance dispute.

## Conclusion

The Idaho Supreme Court treated Chicago Title’s erroneous title reporting as a breach of contractual obligations rather than a basis for negligent misrepresentation liability and limited recovery to contract-based, non-remote title-related damages, excluding motel operating-loss consequential damages tied to the delayed foreclosure and sale.


Brown’s Tie & Lumber Co. v. Chicago Title Co. of Idaho, 764 P.2d 423 (Idaho 1988)