Capital Mtg. Assoc., LLC v. Hulton

Full title: CAPITAL MORTGAGE ASSOCIATES, LLC v. PATRICK T. HULTON ET AL

Court: Connecticut Superior Court Judicial District of New Haven at Meriden

Date published: Feb 13, 2009

2009 Ct. Sup. 3090 (Conn. Super. Ct. 2009)

Opinion

No. NNI-CV-06-5000431-S

February 13, 2009

MEMORANDUM OF DECISION

N. RUBINOW, J.

This memorandum of decision addresses the legal and factual issues raised through the amended complaint filed by the plaintiff Capital Mortgage Associates, LLC (CMA) on April 18, 2008 (#120), as well as through the answer and the special defenses filed by the defendant Fidelity National Title Insurance Company (Fidelity) on April 25, 2008 (#132). A default for failure to appear was entered against the first-named defendant, an attorney named Patrick T. Hulton (Hulton) on April 25, 2006 (#102). Through this litigation, CMA, a mortgage broker and correspondent lender, seeks to recover monetary damages to cover the losses it incurred in relation to a real estate transaction that occurred in May 2004. These damages include interest CMA was required to pay upon loans it had to incur as a result of this transaction; costs CMA incurred as the result of closings upon the property involved; and the difference between the net funds CMA acquired when it sold the property, and the original mortgage amount CMA had extended to fund the May 2004 transaction. CMA's claims against Fidelity, and a hearing in damages concerning the claims against Hulton, were tried to the court.

As explained by CMA's counsel in his opening statement and comprehensive, detailed post-trial brief, the plaintiff is an entity that provides mortgage proceeds to qualified purchasers of real estate. CMA's business model anticipates selling such mortgages to a third party, for a profit. The mortgages can only be sold if valid documentation is provided to support the purchaser's qualifications. Prior to engaging in the transaction at issue in this case, CMA had procured a closing protection letter which, the plaintiff believed, established that Fidelity, a title insurance company, had agreed to reimburse the plaintiff for actual losses resulting from any mishandling of documents or funds or fraud on the part of any one of the defendant's agents. Hulton, who was an agent for both CMA and Fidelity, failed to provide CMA with valid documentation related to this transaction, so that CMA's mortgage was rendered unmarketable. CMA claimed that this occurrence triggered the reimbursement provisions of the closing protection letter, and thus demanded that Fidelity repay it for the mortgage amount. When Fidelity refused to do so, CMA had to borrow funds from a CMA affiliate in order to make the mortgage payments due. Eventually, in an effort to mitigate its damages, CMA accepted a deed in lieu of foreclosure and acquired the property at issue; evicted tenants; and eventually was able to sell the property for an amount far less than the mortgage loan it had extended.

In its responsive opening statement and thorough, incisive post-trial brief, Fidelity argued that CMA's ability to recover damages is strictly limited by the language of the closing protection letter referenced above, which provides reimbursement for losses incurred only by entities which had purchased title insurance from Fidelity. Fidelity contended that unless CMA can meet its burden of proving that the closing protection letter provides it with any coverage, CMA cannot access damage payments from this defendant. Thus, Fidelity argued that even if Hulton committed any fraud with respect to the real estate transaction at issue, the plaintiff can prevail only against him. Fidelity further argues that CMA is functionally unable to demonstrate any monetary damages in this case because, in part, its acceptance of the deed in lieu of foreclosure constitutes full satisfaction of any mortgage debt and extinguishes the plaintiff's legal ability to acquire reimbursement of any damages accrued after accepting the deed. Fidelity also asserts that the property's value had increased between the time CMA issued the mortgage and accepted the deed in lieu of foreclosure, rendering the transaction one that profited, rather than debited, the plaintiff.

Upon deliberation, the court finds Counts I and II, the claims against Hulton, in favor of the plaintiff, CMA, but finds Counts III and IV, the claims against Fidelity, in favor of that defendant.

I. PROCEDURAL HISTORY

This cause of action was originally brought before the court through CMA's complaint filed on March 13, 2006 against Hulton and Fidelity. Counts I and II of the original complaint were brought against Hulton, generally sounding in negligence and fraud, respectively, with regard to his involvement as an attorney in the purchase and sale on May 19, 2004 of residential real property located at 28-30 Rockville Street, Hartford, Connecticut (the property). Fairly read, ¶ 3 of Count I specifically alleged that on or that date, Hulton was employed by CMA "to act as its closing agent concerning funds to be provided for a residential mortgage" on the property, which was to be purchased by an individual named Nelson Gonzalez. Paragraph 4 of Count I alleged that in this capacity, Hulton was obliged to follow CMA's closing instructions and to ensure that all closing documents were accurate and executed properly; ¶ 5 alleged that Hulton was further obliged to provide "proof and documentation to the plaintiff of all down payments and earnest money deposits paid through escrow as reflected in the HUD-1 settlement statement . . ." Paragraph 6 of Count I alleged that Hulton was negligent in representing CMA because he "failed to collect and/or document any and all earnest money deposits paid by the purchaser . . . as reflected in the executed HUD-1 settlement statement and failed to provide verification of these funds to the plaintiff." In ¶ 7 of Count I, the plaintiff claimed that "as a result of [Hulton's] negligence . . . in handling the before mentioned real estate transaction, it suffered substantial money damages including but not limited to the fact that they were (sic) required to initiate foreclosure proceedings, proceed to a deed in lieu of foreclosure, take title to the real property, evict tenants that were in possession of real property, sell said real property for a loss, interest on the money lent, and substantial attorneys fees." The court considers these allegations to assert, overall, allegations of negligent misrepresentation on Hulton's part, to the detriment of CMA.¹

1 "[T]he interpretation of pleadings is always a question of law for the court . . . We have pointed out that [t]he burden [is] upon the pleaders to make such averments that the material facts should appear with reasonable certainty; and for that purpose [the pleaders] were allowed to use their own language. Whenever that language fails to define clearly the issues in dispute, the court will put upon it such reasonable construction as will give effect to the pleadings in conformity with the general theory which it was intended to follow, and do substantial justice between the parties." (Internal quotation marks omitted.) United Components, Inc. v. Wdowiak, 239 Conn. 259, 264, 684 A.2d 693 (1996).

Count II of the original complaint incorporated each of the allegations of Count I, including ¶ 6's allegation of Hulton's negligence and the ostensible nexus between this conduct and CMA's resultant losses, but added references to the attorney's fraudulent conduct with regard to the closing at issue. In addition, ¶ 8 of Count II alleged that at the time of the transaction referenced in Count I, Hulton "knowingly and fraudulently executed a HUD-1 settlement statement which represented that earnest money deposits were paid by the purchase/borrower to the seller when he knew that said proceeds were in fact not paid." Concluding Count II, ¶ 9 alleged that "[a]s a direct result of the fraud and misrepresentations of [Hulton, CMA] incurred substantial damages including, but not limited to the fact that they were required to initiate foreclosure proceedings, proceed to a deed in lieu of foreclosure, take title to the real property, evict tenants that were in possession of real property, sell said real property for a loss, interest on the money lent, substantial attorneys fees, and/or other damages."

Count III, separately brought against Fidelity, did not incorporate any of the factual allegations presented in Counts I or II. Count III, ¶ 2, alleged that at all relevant times, Fidelity was a corporation licensed to transact title insurance business in the State of Connecticut. Count III, ¶ 3 alleged that "[o]n or about May 13, 2004, the defendant, Patrick T. Hulton, an agent of the defendant, Fidelity . . . issued a closing protection letter to [CMA], concerning a proposed mortgage on the real property . . ." at issue. CMA alleged in ¶ 4 of Count III that "[i]n reliance on the before mentioned closing protection letter, on or about May 19, 2004, [CMA] funded a first mortgage encumbering the . . . property." In Count III, ¶ 5, the plaintiff alleged that this closing protection letter, "issued by Fidelity . . ., by and through their authorized agent, [Hulton], provided protection to [CMA] concerning fraud or dishonesty of the issuing agent or approved attorney in handling funds or documents in connection with such closing." In ¶ 6 of Count III, the plaintiff alleged that "[a]t the time of the before mentioned real estate transaction, [Hulton] committed fraud and/or dishonesty in that he executed a HUD-1 settlement statement demonstrating that earnest money deposits were paid by buyer to seller." In ¶ 7, the plaintiff concluded Count III by alleging that "[a]s a result of said fraud and dishonesty, [CMA] incurred substantial damages including but not limited to interest, late fees, attorneys fees and costs associated with procurement to title and sale of the real property." CMA claimed money damages, attorneys fees, and costs in Count III.

At trial of this matter, the parties stipulated that the court could take judicial notice of the contents of the clerk's file. The file reflects that on April 25, 2006, the plaintiff filed a Motion for Default for Failure to Appear against Hulton (#102). The clerk granted this motion pursuant to Practice Book § 17-20(a).² Despite due notice from the clerk (SCRAM) that the default motions were granted, Hulton never entered his appearance, never moved to open the default, and despite the opportunity to do so, never submitted any written notice of his intention to establish a defense.³ (See Tr. 1/3/08.)

2 Practice Book Sec. 17-20 provides, in pertinent part: "(a) If no appearance has been entered for any party to any action on or before the second day following the return day, any other party to the action may make a motion that a nonsuit or default be entered for failure to appear . . . (c) [M]otions for default for failure to appear shall be acted on by the clerk upon filing and shall not be printed on the short calendar. The motion shall be granted by the clerk if the party who is the subject of the motion has not filed an appearance."

3 See General Statutes § 52-221(a), providing, in pertinent part: "In any hearing in damages upon default . . . the defendant shall not . . . be permitted to prove any matter of defense, unless he has given written notice to the plaintiff of his intention . . . to prove such matter of defense." During his participation in the trial as a witness, Hulton stated that he declined to proffer any defenses in the matter.

On April 18, 2008, during the course of trial, the plaintiff filed an amended complaint (#120). The amended complaint left the allegations against Hulton in Count I and Count II intact, but presented the following additional allegation in Count III, ¶ 6 against Fidelity: "At the time of the before mentioned real estate transaction, the defendant, Patrick T. Hulton, committed fraud and/or dishonesty in that he executed a HUD-1 settlement statement demonstrating that earnest money deposits were paid by buyer to seller and, in handling funds or documents in connection with such closing." Also in Count III, ¶ 7 against Fidelity, the amended complaint alleged that "As a result of Attorney Hulton's fraud and dishonesty, the plaintiff has incurred substantial damages including but not limited to interest, late fees, attorneys fees and costs associated with procurement to title and sale of the real property." (#120.)

On April 25, 2008, Fidelity filed its answers and special defenses (#121) directed at the amended complaint. Fidelity did not respond to the allegations contained in Counts I or II, which were filed against Hulton, alone. Fidelity either denied or left the plaintiff to its proof with regard to the allegations contained in Count III of #120. However, Fidelity raised three special defenses alleging: first, that because CMA "accepted a deed in lieu of foreclosure from its borrower in full satisfaction of its debt . . . [it] has suffered no loss . . ."; second, that "[i]f plaintiff suffered any damages, those damages are determinated as of the date it accepted a deed in lieu of foreclosure from its borrower [and thus] had suffered no damage"; and third, that any damages CMA may have sustained after acquiring the deed in lieu of foreclosure are not compensable. (#121.)

On June 9, 2009, counsel for both CMA and Fidelity submitted scholarly and analytical briefs concerning certain legal and factual issues presented by the closing protection letter at issue in this case. On October 17, 2008, in lieu of argument, the parties submitted thorough and detailed trial briefs addressing each of the multiple, complex matters raised by their continued contest over the subject matter of the amended complaint, the answer, and the special defenses.

II. FACTUAL FINDINGS

At trial to the court, the parties presented extensive documentary evidence as well as testimony from numerous witnesses including: Nelson Gonzalez, to whom CMA originally lent funds to purchase the property at issue;⁴ William Liska, an attorney, underwriting counsel and Vice President of Fidelity;⁵ Patrick Hulton, once a practicing attorney who represented many interests at issue in this litigation;⁶ Steven Kroop, a partial owner and managing member of CMA; and Robert Criscuolo, CMA's certified public accountant (CPA), a vice president, and partial member of CMA who also served as the manager of its correspondent lending division. Each witness was subjected to extensive direct and thorough cross-examination. The court utilized the applicable legal standards in considering the evidence in its totality.⁷ Using the appropriate measure, the court finds the following facts.⁸

4 Gonzalez testified at trial in response to the plaintiff's subpoena. (Ex. 13.)

5 Liska testified at trial in response to the plaintiff's subpoena. (Exs. 21, 22.)

6 Hulton testified at trial in response to the plaintiff's subpoena. (Ex. 15.) Hulton formerly was licensed to practice law in this state. While he was a practicing member of the bar in May 2004, he was neither licensed nor practicing at the time of trial, having relinquished those privileges for a period of 30 months commencing approximately January 2006. (Tes. Hulton.) The court was not informed of any other specific legal proceedings in which Hulton may have been a party prior to trial. Contrast Statewide Grievance Committee v. Alan Spier, 247 Conn. 762, 767, 725 A.2d 948 (1999).

7 "It is an abiding principle of our jurisprudence that `[t]he sifting and weighing of evidence is peculiarly the function of the trier [of fact]. [N]othing in our law is more elementary than that the trier [of fact] is the final judge of the credibility of witnesses and of the weight to be accorded to their testimony . . . The trier has the witnesses before it and is in the position to analyze all the evidence. The trier is free to accept or reject, in whole or in part, the testimony offered by either party.' (Citations omitted; internal quotation marks omitted.) Smith v. Smith, 183 Conn. 121, 123, 438 A.2d 842 (1981). The determination of the credibility of the witnesses is a function of the trial court . . ." Welsch v. Groat, 95 Conn.App. 658, 664, 897 A.2d 710 (2006). "The [fact-finding] function is vested in the trial court with its unique opportunity to view the evidence presented in a totality of circumstances, i.e., including its observations of the demeanor and conduct of the witnesses and parties . . . `[i]t is the right and the duty of the [trier of fact] to draw reasonable and logical inferences from the evidence.' (Internal quotation marks omitted.) Russell v. Russell, 91 Conn.App. 619, 642, 882 A.2d 98, cert. denied, 276 Conn. 924, 925, 888 A.2d 92 (2005). `In considering the evidence introduced in a case, [triers of fact] are not required to leave common sense at the courtroom door . . . nor are they expected to lay aside matters of common knowledge or their own observations and experience of the affairs of life, but, on the contrary, to apply them to the facts in hand, to the end that their action may be intelligent and their conclusions correct.' (Internal quotation marks omitted.) In re Kristy A., 83 Conn.App. 298, 316, 848 A.2d 1276, cert. denied, 271 Conn. 921, 859 A.2d 579 (2004)." Welsch v. Groat, supra, 95 Conn.App. 666-67. "The probative force of conflicting evidence for the trier to determine . . ." (Internal quotation marks omitted; external citation omitted.) Anderson v. Whitten, 100 Conn.App. 730, 740, 918 A.2d 1056 (2007).

8 Additional facts will be found throughout, as required.

At all times relevant hereto, CMA was a limited liability company, organized and existing under the laws of the state of Connecticut. (Ex. C.) Steven Kroop and Robert Criscuolo were partners in CMA. CMA was known as a correspondent lender which originated loans for one to four family residences, funded those loans, and then sold the loans to investors for a profit. In deciding whether to approve an applicant for a loan, CMA considered the potential purchaser's credit, assets, intention to reside in the home or use it for investment purposes, and the loan to value ratio of the residence the applicant sought to purchase. In anticipation of extending a loan to an applicant, CMA communicated the potential for purchase of the loan to its investors, who sometimes indicated a commitment to purchase the loan. For that purpose, CMA's loan approval process required the applicant to meet criteria set by the investor who had committed to purchasing the loan from CMA. (Tes. Kroop.)

Generally, CMA's office produced the closing documents that would be used to commemorate the loan, purchase and sale of the property at issue. These closing documents, which included specific instructions from both CMA and the investor, were provided to the attorney of a person who is obtaining the loan from CMA. CMA sometimes approved the process by which, during the closing process, a single attorney would represent the purchaser, as the borrower, and also represent CMA, as the lender. CMA would only forward the closing documents to the attorney designated to represent CMA at the closing if that attorney has procured a closing protection letter to protect the lender in case of fraud or mishandling of documents or funds. (Tes. Kroop.)

CMA does not service loans, i.e., it does not collect mortgage payments from home purchasers. CMA funds its loans to borrowers through its own financial resources known as a warehouse line. Although CMA's total warehouse line maintains a fifteen million dollar line of credit, loans can be maintained from the warehouse line for no more than 60 days at a time, during which time the loan is expected to be purchased by an investor. After that period, either Kroop or Criscuolo would have to use their personal or other business lines of credit to maintain an unsold loan. (Tes. Kroop, Criscuolo.)

CMA's investors rely upon the accuracy of a HUD-1 form to determine whether to fulfill previously designated commitments to purchase the loans extended by CMA to buyers of residential real estate.⁹ Verification of all funds identified and disclosed upon the HUD-1 is thus essential to enable CMA to assign a mortgage to an investor. Knowing that the loan could not be sold to an investor in the absence of an accurate HUD-1, CMA would never lend to a borrower the purchaser had not provided the seller with designated deposit and/or down payment as shown upon the transaction's HUD-1 form. If the borrower/purchaser had not, for instance, actually paid the designated deposit and/or down payment, CMA would not provide the funds necessary for the borrower close the transaction. In a situation where CMA receives a HUD-1 which demonstrates that certain monies passed hands at or before the closing, but CMA cannot verify that the seller actually received funds which the purchaser was required to pay, CMA cannot successfully market or sell that loan to an investor. Under such circumstances, CMA would rely upon the reimbursement protections provided through the closing protection letter that had been acquired by its attorney in advance of the transaction. (Tes. Kroop.)

9 A HUD-1 is a document, governed by the Real Estate Settlement Procedures Act, which presents an accounting of the financial terms of a residential property-transfer transaction. Monies that are exchanged as a part of the closing process are identified and disclosed upon the HUD-1 statement. (Tes. Hulton, Kroop.)

Prior to March 2004, the property was owned by Ollie E. Morris, Jr. On March 11, 2004, Morris entered into a purchase and sale agreement, agreeing to transfer his ownership in the property to Nelson Gonzalez for a total purchase price of $160,000. Although Hulton did not prepare the purchase and sale agreement, Hulton agreed to serve as Gonzalez's attorney in connection with the closing.¹⁰ The purchase and sale agreement expressly contemplated Gonzalez's procurement of a mortgage to fund the transaction. Gonzalez intended to borrow funds $136,000 from CMA to purchase the property. CMA as the lender, Gonzalez as the buyer and Hulton all understood that CMA had agreed to extend its loan on the condition that prior to actually making $136,000 available at the closing, Gonzalez would produce $24,000 in cash as a deposit and/or earnest money payment to Morris. (Ex. 14; Tes. Gonzalez, Hulton, Kroop.)

10 Jonathan Halstead (Halstead) was a mortgage originator who worked upon the CMA premises and was affiliated with CMA. Halstead had asked Hulton to represent Gonzalez as the buyer, and CMA as the lender at this real property transfer. (Tes. Hulton, Kroop.) When Hulton learned that Morris, the seller, had no counsel, Hulton agreed to represent him, as well. (Tes. Hulton.)

At all times pertinent to this litigation, Hulton also served as an agent for Fidelity.¹¹ (Tes. Hulton, Liska.) In May 2004, Hulton as Fidelity's authorized agent, issued a closing protection letter for the benefit of CMA in connection with Gonzalez's purchase of the property.¹² The particular letter issued by Hulton in connection with the Gonzalez closing contained the following specific, relevant language: " When title insurance of Fidelity National Title Insurance Company is specified for [CMA's] protection in connection with closings of real estate transactions in which [CMA is] to be the . . . lender secured by a mortgage . . . of an interest in land, [Fidelity] agrees to reimburse [CMA] for actual loss incurred by [CMA] in connection with such closings when conducted by an Issuing Agent (an agent authorized to issue title insurance for the Company) or an Approved Attorney ( an attorney upon whose certification of title [Fidelity] issues title insurance) and when such losses arise out of: 1. Failure of the Issuing Agent . . . to comply with your written closing instructions to the extent that they relate to . . . (c) collection and payment of funds to you, or 2. Fraud or dishonesty of the Issuing Agent . . . and handling your funds or documents in connection with such closings."¹³ (Emphasis added.) (Ex. 17.) The closing protection letter issued by Hulton thus clearly and unambiguously established that Fidelity would protect CMA only "[w]hen title insurance of Fidelity . . . is specified for [CMA's] protection . . ." (Emphasis added.) (Ex. 17.) Hulton signed the second page of the closing protection letter; the first page bore the electronic signature of Randy Corp, Fidelity's president. (Ex. 17; Tes. Liska.) Notwithstanding the clear language of this closing protection letter, the evidence at trial was insufficient to permit the court to reasonably conclude either that CMA ever took any steps to acquire any title insurance from Fidelity in connection with the Gonzalez closing, or that Fidelity had received any consideration from CMA, or from any other person, in connection with Hulton's issuance of this closing protection letter. (Ex. 7.)

11 Specifically, on April 12, 2004, Fidelity and the Law Offices of Patrick T. Hulton entered into an agreement by which the company appointed Hulton as its "Agent solely to countersign and issued title insurance commitments, binders, guarantees, endorsements, title insurance policies of Company, or any other form whereby Company assumes liability . . . in Agent's territory . . ." (Ex. 23.) Among other things, this Issuing Agency Agreement was to be extended on a "Perpetual" basis; identified the agent's territory as being "Connecticut"; and provided for Hulton to pay Fidelity "40% of the gross premiums on all Title Assurances issued by Agent."

12 Generally, such letters serve to effectively insure the entity for whom the letter is directed, under certain circumstances, against acts of malfeasance or mishandling of documents. (Exs. 17, 23, 24; Tes. Hulton, Liska.)

13 Furthermore, in a section entitled "CONDITIONS AND EXCLUSIONS," the closing protection letter further provided that "D. Any liability of the company for loss secured by [CMA], in connection with closings of real estate transactions by an Issuing Agent . . . Channel be limited to the protection provided by this letter. B. Claims shall be made promptly to the Company at 711 Third Avenue, 5th Floor, NY, NY 10017. When the failure to get prompt notice shall prejudice the company, then liability of the Company hereunder shall be reduced to the extent of such prejudice." (Ex. 17.)

Consistent with its expectation to profit by selling its loan to Gonzalez, on May 18, 2004, CMA communicated with BNC Mortgage, Inc. (BNC), one of its investors, about the planned residential real estate closing. BNC informed CMA that it would purchase the $136,000 Gonzalez loan to for 1.00% of its face value, or $1,360.00. This purchase, however, was conditioned on certain specified events, including CMA's presentation to BNC of "Proof of all Down Payment/Earnest Money deposits paid through Escrow" and a "Certified Copy of Final HUD-1 Settlement Statement" to the investor.¹⁴ (Ex. 20; Tes. Kroop.)

14 The investor's purchase of the Gonzalez loan was also conditioned upon CMA's payment of a $280 transaction fee to BNC. (Tes. Kroop.)

Prior to May 19, 2004, CMA formally authorized Hulton to represent it during the Gonzalez closing process. In conjunction with this legal representation, Louis Storo, CMA's closing supervisor, timely faxed Hulton documents which clearly stated all the conditions CMA required him to follow in connection with the loan closing process, including specific closing instructions and conditions regarding data collection and funding with which BNC demanded compliance as a prerequisite to purchasing the Gonzalez mortgage. (Exs. 8-A, 20; Tes. Kroop.) Hulton had received both general and specific closing instructions from CMA, including the precise BNC conditions, prior to the Gonzalez closing. The instructions clearly indicated that the total consideration for the transfer of the property from Morris to Gonzalez, with the exception of CMA's loan funds and any approved secondary financing, had to pass through Hulton, as CMA's representative, in the form of cash only. The instructions further required Hulton to timely record the deed from Morris to Gonzalez, to facilitate CMA's assignment of the loan to BNC. The instructions from CMA did not contain any exceptions to the cash transfer provisions, and made no reference to the use of unapproved secured or unsecured promissory notes in lieu of cash at the closing.¹⁵ (Ex. 16; Tes. Hulton, Kroop.)

15 Exhibit 16 contains one page of general closing instructions and pages 1 and 2 of 3 of the specific closing instructions. Among other things, the specific instructions admonished Hulton as follows: "Do not close or funded this loan unless ALL conditions in these closing instructions and any supplemental closing instructions have been satisfied. The total consideration in this transaction except for our loan proceeds and approved secondary financing must pass to you in the form of cash. All proceeds must be dispersed upon closing unless you have received specific written authorization to the contrary from us . . . You must follow these instructions exactly . . . All documents with the exception of those to be recorded . . . must be returned to our office within 24 hours of the signing." (Ex. 16.) Among other things, the specific instructions admonished Hulton as follows: "PAYOFF REQUIREMENTS: It is a condition to the funding of the loan that the debts listed on the CONDITIONAL LOAN APPROVAL be paid. Indicate payoffs on the HUD-1 Settlement Statement provide other satisfactory evidence of payoff . . . HUD-1 SETTLEMENT STATEMENT: The final HUD-1 Settlement Statement must be completed at settlement and must accurately reflect all receipts and disbursements indicated in these closing instructions . . . Send the certified final HUD-1 Settlement Statement to us at the following address within 24 hours of settlement: CMA MORTGAGE ASSOC. LLC, 2340 WHITNEY AVE, HAMDEN, CT 06518." (Ex. 16, Tes. Hulton.)

Hulton engaged in certain preparations for the closing at issue.¹⁶ For instance, it is uncontested that he incurred a charge of $671 for the purchase of title insurance to cover the property and transaction, with the fee expected to be paid from the borrower's funds at settlement; notwithstanding the express language of the closing protection letter, however, although he was authorized to write title insurance for the defendant, Hulton did not obtain this title insurance issued by Fidelity, but by "CATIC."¹⁷ (Exs. 7, 17; Tes. Liska.) No evidence was provided from which the court could have concluded that, at any time, CMA had specified use of title insurance from Fidelity "for its protection" in connection with the Gonzalez closing. (Ex. 17, Tes. Kroop, Criscuolo, Hulton.) As previously noted, no evidence was provided from which the court could reasonably conclude that Fidelity received any monetary consideration, or any other benefit, from Hulton's provision of the closing protection letter. (Ex. 17.)

16 Also, to prepare for the closing at issue, CMA paid $552 for an appraisal of the property and $45 for a credit report ostensibly reflecting Gonzalez's ability to meet the terms of the loan. CMA also paid a loan origination fee to Halstead in the amount of $1,921. (Tes. Kroop.)

17 It is uncontested that "CATIC" is an acronym commonly used to refer to the Connecticut Attorneys Title Insurance Company, See, e.g., Sokoloski v. Cameron A. McCorison, et al., 108 Conn.App. 296, 297, 947 A.2d 1022 (2008); Martinez v. Zovich, 87 Conn.App. 766, 767 n. 1, 867 A.2d 149, cert. denied, 274 Conn. 908, 876 A.2d 1202 (2005).

The closing transferring the property's ownership from Morris to Gonzalez took place on May 19, 2004. Morris, Gonzalez, Halstead and Hulton were present at the closing; at this time, Hulton served as the attorney for the buyer, the seller, CMA as the lender, and as Fidelity's agent in connection with provision of the closing protection letter. Although Gonzalez did not bring with him cash sufficient to pay the prerequisites for procurement of CMA's $136,000 loan, that transaction was settled and closed by Hulton on that date. (Exs. 8-A, 14, 23; Tes. Gonzalez, Kroop, Hulton.) In connection with this closing, Gonzalez executed an "Open-End Mortgage Deed" which identified CMA as the lender. (Ex. 28.) The mortgage deed further identified MERS (Mortgage Electronic Registration Systems, Inc.) as "the mortgagee under this Security Instrument." (Ex. 28.) Hulton and Halstead witnessed the execution of the mortgage deed and its riders.¹⁸ Although Hulton knew that he was responsible for timely attention to the task, the mortgage deed was not recorded in the Hartford land records until October 29, 2004, more than five months after the closing.¹⁹ (Ex. 28; Tes. Kroop, Hulton.)

18 The riders addressed issues related to prepayment, rent assignments, and adjustment of the interest rate Gonzalez owed upon the note ("interest rate will never be greater than 14.650 % nor less than 7.650%").

19 Although Hulton describes the delay in recording as an "oversight," a pattern of such delays apparently resulted in his loss of privileges to practice law. See footnote 3.

At the closing, Hulton and another person witnessed the signature of Ollie E. Morris upon a warranty deed reflecting Morris's conveyance of the property to Gonzalez "for and in consideration of the sum of One Hundred Sixty Thousand and 00/100 ($160,000.00) received to his full satisfaction of NELSON GONZALEZ . . ." (Ex. 19; Tes. Hulton.) Although responsible for this task, and although he was aware that recording of such documents should take place as quickly as possible after a closing, Hulton did not record the warranty deed in the Hartford land records until October 19, 2004, some five months after Gonzalez's purchase of Morris's property. (Ex. 19; Tes. Hulton.)

In preparation for the closing, Hulton prepared and Gonzalez signed a typewritten "Promissory Note" that stated as follows: "For good and valuable consideration received to his full satisfaction, the undersigned promises to pay to the order of Ollie E. Morris, Jr. the sum of Twenty-four Thousand and 00/100 ($24,000.00) Dollars, together with interest at the rate of ________% per annum, until fully paid."²⁰ (Ex. 18; Tes. Hulton.) Halstead was present when Gonzalez signed the note. Although Gonzalez signed this note, he had no discussion with Hulton or Morris about how or when the $24,000 was to be paid. (Tes. Gonzalez, Hulton.)

20 Neither the documentary nor testimonial evidence indicated any particular interest rate for this so-called promissory note. (Ex. 18; Tes. Hulton.)

In connection with the closing, Hulton also prepared and executed a HUD-1 Settlement Statement (HUD-1) which identified the property at issue; Gonzalez as the borrower; Morris as the seller; CMA as the lender; himself as the settlement agent; and May 19, 2004 as the settlement date. (Ex. 7.) Hulton's signature upon the HUD-1 form served as a certification that the monies designated thereon had actually been transferred between buyer, seller, lender and other interested parties have actually been distributed.²¹ Gonzalez also signed the HUD-1 at the time of the closing. (Ex. 7; Tes. Hulton.)

21 In executing the HUD-1, Hulton certified: "The HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused or will cause the funds to be disbursed in accordance with this statement." (Ex. 7.)

Although the HUD-1 represented that he had done so, Gonzalez did not bring or transfer $6,780.06 or any other monies to the closing; he had never paid Morris $24,000 in cash prior to, nor at, the closing. (Ex. 7; Tes. Gonzalez, Hulton.) Nonetheless, the HUD-1 showed that $6,621.70 of the accumulated settlement costs had been paid from borrower's funds at settlement, and that $2,266.00 in such costs had been paid from seller's funds at Settlement. (Ex. 7.) Hulton testified that the portion of the HUD-1 demonstrating that Gonzalez had paid $6,780.06 was actually an entry representing a credit that Morris, as the seller, gave to Gonzalez, as the buyer, at the time of the closing. However, the court declines to credit this explanation, as the HUD-1 does not set forth a representation of any such credit, and no other evidence indicates that any such credit was an element of the transaction between buyer and seller. Hulton knew, however, upon certifying the HUD-1 form, that $6,780.06 had not been actually paid by Gonzalez, or by any person, in the course of the closing process. (Ex. 7, 18; Tes. Gonzalez, Hulton.)

The HUD-1, as prepared by Hulton also specifically identified Gonzalez's payment of $24,000.00 to Morris as a deposit and/or down payment for purchase of the property. However, Gonzalez never actually paid that amount, or any amount, in cash, certified or liquid funds as a deposit and/or down payment. Moreover, CMA, as the lender, had never approved Gonzalez's and Morris's participation in a purchase money mortgage process. Despite explicit instructions from CMA and BNC, Hulton utilized the unsecured, incomplete $24,000.00 promissory note referred to indicate that payment of this deposit and/or down payment amount had been made. Hulton knew, however, upon certifying the HUD-1 form, that $24,000 had not been actually paid by Gonzalez, as the buyer, to Morris, as the seller.²² Hulton also knew that no one had paid the cash amounts the HUD-1 form indicated having been transferred from borrower to seller, Gonzalez actually received $5,000.00 in his pocket at the time of the closing as a "repair credit." The court finds insufficient basis for crediting Hulton's explanation at trial that other repair offsets were accounted for by the $6,780.06 amount demonstrated as having been paid by Gonzalez on the HUD-1, as undesignated amounts were ostensibly forgiven by Morris in exchange "for work that needed to be done on the property." (Ex. 7, 18; Tes. Gonzalez, Hulton; Tr. 1/3/08.)

22 Although Halstead was present at the closing on CMA's behalf, there is insufficient evidence from which the court could reasonably conclude that he ever ratified or condoned the use of this promissory note. At trial, Hulton explained that Morris knew he would never likely receive $24,000 from Gonzalez, notwithstanding the promissory note. Hulton was of the opinion that Morris "was happy to get rid of this property he was getting on in years." (Tes. Hulton Tr. 1/3/08.)

As the result of the representations made through the HUD-1 document certified by Hulton, Gonzalez acquired the mortgage proceeds from CMA and purchased the property from Morris. Following the closing, Gonzalez tendered several mortgage payments of approximately $960 each directly to Halstead; on August 9, 2004, CMA received a single mortgage payment from Gonzalez in the amount of $965.00.²³ (Ex. L; Tes. Kroop.)

23 There is insufficient evidence from which the court could reasonably conclude that CMA ever received any benefit from Gonzalez's direct payments to Halstead.

From the closing proceeds, Hulton received $650 for representing the buyer, and $600 for representing Morris as the seller. In addition, Hulton received 60% of the $671 dollars that represented the agent's portion of the title insurance premium that had been purchased from CATIC. He received $75 for preparing the title insurance, and reimbursement of the $160 title search charge, as well. (Ex. 7; Tes. Hulton.)

Following the closing, however, despite CMA's repeated efforts at securing the attorney's cooperation, Hulton delayed and ultimately failed to provide CMA with proof of the down payments/earnest money deposits and other cash transfers from buyer to seller that were ostensibly paid at the time of the closing, as recorded on the certified HUD-1 statement. (Exs.7, 8-A, 8-B; Tes. Kroop, Criscuolo.) Hulton was clearly aware of his obligation to timely return the closing documents, including the HUD-1, to CMA, but he did not follow the ordinary course of CMA's business practices in which he, as the lender's closing attorney, would return all of the closing documents to the lender within a brief period of time. CMA specifically communicated with Hulton requesting that he produce verification of the $24,000 deposit/down payment, so-called credited amounts, and other monies represented on the HUD-1 as having been distributed at the closing. Despite CMA's repeated oral and written inquiries, however, Hulton never provided CMA with documents or other proof that Gonzalez paid the $6,780.06 and/or the $24,000 documented by Hulton upon the HUD-1 form were actually transferred. CMA never received any copies of certified checks or cash representing payments made at the closing. Hulton was never able to verify these payments and never explained his failure to respond to CMA's inquiries about the actual transfer of funds reported upon the HUD-1. Accordingly, CMA was left without the verification it needed to meet the conditions BNC had set for purchase of the Gonzalez loan. (Ex. 7; Tes. Hulton, Kroop.)

On May 20, 2004, BNC informed CMA that certain conditions had not yet been fulfilled as anticipated by the investor's conditional loan purchase approval. Among other things, BNC indicated that it had not yet received: a certified copy of the final HUD-1 settlement statement; a copy of the check for $24,000, ostensibly representing the deposit and/or earnest money paid by or on behalf of Gonzalez at the May 19, 2004 closing; a deposit receipt representing the $6,780.06 ostensibly due from Gonzalez to represent advance payment of municipal taxes and the settlement charges imposed upon him at the closing; and the warranty deed reflecting Morris's sale of the property to Gonzalez. (Ex. 8-B.) As CMA was never able to provide the investor's requisite documentation concerning the buyer's payment of the monies as documented upon Hulton's executed HUD-1, CMA was unable to assign the Gonzalez $136,000 loan to BNC. In addition, CMA was thus unable to acquire the fee it had expected to receive from BNC if the loan documents had been competent to have supported successful assignment to that investor. (Tes. Kroop, Criscuolo.)

On November 16, 2004, CMA wrote to Gonzalez indicating that he was in default, had accumulated an arrearage in principal and interest payments in the amount of $4,488.92 and also that it had never had not received verification that the borrower had provided $30,780.06 in "personal proceeds" at the closing as required by the mortgage agreement. (Ex. A; Tes. Gonzalez, Kroop.)

As it was unable to assign the mortgage to BNC, due to Hulton's fault and/or failure to meet the closing obligations, CMA was itself required to take up the responsibility for funding the $136,000 Gonzalez mortgage. CMA had first acquired the funds for the Gonzalez mortgage by borrowing from $136,000 from its warehouse line of credit, established though First Tennessee National Bank (FTNB), with the understanding that Hulton would verify the information on the HUD-1 so that the loan in this amount could be assigned to BNC. CMA paid off the FTNB loan on July 29, 2004 and purchased the Gonzalez mortgage using funds it borrowed on that date through a different line of credit established at New Alliance Bank.²⁴ (Tes. Kroop, Criscuolo.)

24 The amount paid by CMA on July 29, 2004 to reimburse its own warehouse line of credit for the Gonzalez mortgage was $131,127.30, although the original mortgage amount was $136,000.00. This process was accomplished prior to the date on which CMA acquired an ownership interest in the property by taking a deed in lieu of foreclosure from Gonzalez, an event that did not occur until April 2005, as further discussed herein. (Tes. Criscuolo.)

All together, CMA, though its principals Kroop and Criscuolo, was required to pay $12,830.03 in interest upon the lines of credit, over the period of approximately July 2004 to November 2005, before the FTNB and New Alliance Bank lines of credit could be reimbursed with regard to necessary expenditures concerning the Gonzalez mortgage. In addition, CMA was required to expend approximately $3,000.00 in accounting fees, representing 30 hours of accounting work specifically related not to the ordinary business of CMA or its affiliates, but to curative action related the Gonzalez mortgage, after it had become apparent that Hulton would not, or could not, verify the information upon the HUD-1 form, rendering the mortgage unassignable to BNC.²⁵ (Ex. 3-A; Tes. Kroop, Criscuolo.)

25 These fees were accrued because Criscuolo was required to perform specific professional work to address the Gonzalez loan situation, outside the scope of his ordinary functions and obligations as a CPA who rendered other, general accounting work for CMA, such as preparing taxes and performing bookkeeping services, and also outside the scope of his ordinary duties performed in running the warehouse line at CMA. Under ordinary circumstances, Criscuolo is not directly compensated by CMA, but by Capital Funding Group (CFG). CFG is a separate entity which runs the correspondent lending business and bills CMA for its services. (Tes. Criscuolo.)

In December 2004, CMA retained the services of the Law Office of George H. Romania to represent it in a "Title claim against Patrick Hulton and Fidelity National Title . . ." (Ex. 5.) CMA agreed to pay Romania "$250.00 per hour" for legal services related to this claim.²⁶ (Ex. 5.) It was CMA's intention to have Fidelity effectively buy $136,000 obligation that had been extended to Gonzalez, based upon Hulton's negligent and/or fraudulent entries upon the HUD-1. (Tes. Kroop.)

26 The parties at trial deferred any consideration of an award of attorneys fees until after the issuance of the court's memorandum of decision.

On or about December 21, 2004, William Liska, a District Counsel for Fidelity whose office was in East Hartford, CT, received a letter Romania informing him that CMA intended to file a claim for damages caused by Hulton's conduct with regard to the matters covered by Fidelity's closing protection letter. (Tes. Liska, Kroop, Criscuolo.) Romania then provided Liska with a copy of Fidelity's closing protection that Hulton had produced in connection with the Gonzalez closing. Fidelity did not honor Romania's claim, but opened a claim file regarding the matter in its New York office on January 10, 2005.²⁷ (Tes. Liska.)

27 On December 2, 2004, Fidelity's vice president Michael Ciarleglio terminated Hulton's agency relationship with the company. (Ex.25; Tes. Liska.) Ciarleglio canceled Clinton's contract "for cause" effective December 15, 2004, and further ordered "all inventory collected and destroyed." (Ex. 25.)

CMA determined to mitigate its losses concerning the Gonzalez mortgage by acquiring title to the property without incurring the expense and delay of formal foreclosure proceedings; CMA intended to sell the property, relieving itself of the continuing obligation to pay interest, on the outstanding loan that was being financed through its line of credit, and to attempt to recoup at least some of its losses. (Tes. Kroop.)

On or about April 26, 2005, in exchange for CMA's determination to forgo foreclosure upon the property but without receipt of further consideration, Gonzalez agreed to transfer his fee simple ownership interest to CMA. (Ex. C; Tes. Gonzalez, Kroop.) On that date, when the deed in lieu of foreclosure was executed, there was a tenant in residence on the second floor of the two-family residence upon the property.²⁸ (Tes. Gonzalez.) CMA did not know the current actual or appraised value of the property on April 26, 2005 when it actually acquired the deed in lieu of foreclosure from Gonzalez, as it sought only to stem losses that it related to the lack of verification for information Hulton had presented through the HUD-1 at issue. (Ex. C; Tes. Kroop, Criscuolo.)

28 On May 4, 2005, Gonzalez executed an affidavit, witnessed by Parese, stating with regard to the property that "[t]he first floor . . . is occupied by Veronica Padilla pursuant to an unwritten month-to-month lease. The rent is $500 per month. I have not collected the rent for the month of May 2005 or thereafter . . . The second floor . . . is occupied by Mr. Harris (first name unknown) pursuant to an unwritten month-to-month lease. The rent is $575 per month. I have not collected the rent for the month of May 2005 or thereafter . . . I make this affidavit for the purpose of inducing CMA MORTGAGE ASSOCIATES, LLC to accept my deed to the . . . property in lieu of foreclosure . . ." (Ex. E-1; Tes. Gonzalez. See also Exs C, D.)

At that time, Gonzalez executed a document entitled Warranty Deed in Lieu of Foreclosure, which was executed by Alise Emerson, ostensibly on CMA's behalf, and was witnessed by attorney John Parese, whom Gonzalez had engaged to represent him.²⁹ (Ex. C; Tes. Gonzalez.) It was Gonzalez's intention that through tender of this deed in lieu of foreclosure, he would have no further obligations to make mortgage payments to CMA. Gonzalez executed the deed because he understood that he owed funds that were supposed to have been transferred at the closing, but he was unable to meet this financial obligation. (Tes. Gonzalez.) At or about that time, Kroop signed a general release relieving Gonzalez of the need to make any further payments to CMA. (Tes. Kroop.) When the April 2005 deed in lieu of foreclosure was executed, CMA had in its file approximately two appraisals representing the value of the property as of October 2004; these appraisals had been performed by and on behalf of third parties, even though CMA had received an invoice for some of the appraisal services.³⁰ (Ex. F; Tes. Kroop.) CMA did not know if these October 2004 appraisals were accurate, and did not order or possess any more recent or temporally relevant appraisals when it accepted the deed in lieu of foreclosure.³¹ Under the circumstances of this case, there is insufficient basis from which the court could reasonably conclude that in April 2005, CMA had come to the conclusion that even if the appraisals at issue had some reliability as of October 2004, the appraisals in its file actually represented, or had any relevance at all, to the value property at issue some nine months later, when the deed in lieu of foreclosure was accepted; to the contrary, even if it had retained copies of the appraisals. (Ex. 1; Tes. Kroop, Criscuolo.)

29 That deed was received by CMA in July 2005, and was recorded in the Hartford Land Records on "July 26, 2005 AT 10:55 A.M. IN VL5385, PAGE 65." (Ex. C; Tes. Kroop.)

30 CMA never paid for that appraisal service. (Tes. Kroop.)

31 In responses to the defendant's Interrogatories, CMA admitted that it had received a written appraisal of the property dated October 13, 2004. At that time, many months before CMA accepted the deed in lieu of foreclosure from Gonzalez, an appraisal indicated the property's value to be $160,000. (Ex. I; Tes. Kroop.)

CMA effectively held the property from April 2005 through November 2005. (Tes. Kroop.) The evidence did not disclose any expert testimony concerning the value of the property when CMA took the deed in lieu of foreclosure from Gonzalez. Notwithstanding the vigor of the defendant's cross-examination, the evidence was insufficient to enable the court to conclude that when CMA accepted the deed in lieu of foreclosure from Gonzalez, it had functionally relied upon an appraised value of the property that had been established many months before.³² (Tes. Kroop.)

32 In its Post-Trial Brief, Fidelity emphasizes that Kroop, acting for CMA, "relied upon a $160,000.00 appraisal in his file in deciding whether or not to take the deed in lieu of foreclosure" from Gonzalez. (Fidelity's Brief, p. 7.) Upon careful consideration, the court concludes that the evidence on this issue is sufficient only to establish that Kroop was aware that an appraisal had been completed, months prior to taking title to the property from Gonzalez, but that the evidence is insufficient to support Fidelity's suggested inference: that CMA would take the deed in lieu of foreclosure because the property was worth more than the loans CMA remained obligated to pay FTNB and then New Alliance Bank. Taken as a whole, the court is constrained to conclude that it received neither reliable evidence concerning the actual value of the property as of April 2005 when Gonzalez passed the deed to CMA, nor credible evidence concerning the qualifications of the individual who performed the appraisal, nor valid evidence that CMA utilized the designated $160,000.00 appraisal value in any way when determining to attempt to stem its financial losses by taking title to the property and selling it on the open market.

CMA was required to pay attorneys fees and costs associated with obtaining the deed in lieu of foreclosure, amounting to $1,250.0. Also, as a reasonable means of protecting the property, the asset CMA intended to sell to mitigate the losses incurred as the result of the HUD-1 documentation at issue, the plaintiff expended $2,021.92 for liability insurance. To ready the property for sale, in further mitigation of its losses, CMA reasonably incurred attorneys fees in the amount of $1,297.50, in association with eviction proceedings necessary to remove the existing tenant from the property. State Marshal's fees and court costs associated with this process totaled $854.53. (Tes. Kroop.)

After some failed efforts at selling the property, on September 15, 2005 CMA entered into a real estate purchase and sale agreement, agreeing to sell the property to Robert Wilson in exchange for payment of $135,000. Wilson signed the agreement on September 21, 2005. (Ex. 11-A; Tes. Kroop, Criscuolo.)

CMA's sale of the property to Wilson, and the related legal closing, did not occur until November 10, 2005.³³ (Ex. 29.) On that date, CMA released and discharged "a certain Mortgage from Nelson Gonzalez to MERS (CMA Mortgage Associates, LLC) dated May 19, 2004 and recorded in Volume 5174, at Page 90 of the Hartford Land Records; the indebtedness or other obligation secured thereby having been satisfied."³⁴ (Ex. J; Tes. Criscuolo.) CMA and Wilson executed a HUD-1 form at the time of the closing. (Ex. 11-B; Tes. Kroop.) At the time, the amount required for CMA to discharge the amount it had borrowed from its New Alliance Bank line of credit was approximately $143,957.33, including $1,2830.03 in interest; the sale price of the property, $135,000.00, was thus less than the amount CMA owed to New Alliance Bank.³⁵ (Ex. 3-A; Tes. Criscuolo.) It is uncontested that at the Wilson closing, CMA, as the seller, received only $120,264.85 in cash, as the contract sales price was affected by $1,000.00 representing the buyer's deposit, and $13,958.00 in settlement charges. Through this sale, CMA thus received $15,735.15 less than the $136,000.00 it had originally expended to finance Gonzalez's purchase of the property in May 2004. (Ex. 11-B; Tes. Kroop.) CMA was required to pay a $650 attorneys fee in association with the sale of the property to Wilson. (Tes. Kroop.)

33 A warranty deed reflecting CMA's transfer of the property to Wilson was recorded in Hartford land records at VOL 5482 [PG]84 on November 14, 2005. (Ex. 29.)

34 That release document was executed by Steven Kroop, CMA's "Managing Member," and was witnessed by Romania and Christine Bertini. (Ex. J.)

35 See also Fidelity's Brief, p. 9.

III. RESOLUTION OF THE PARTIES' CLAIMS

A. COUNT I — NEGLIGENT MISREPRESENTATION AGAINST HULTON

In Count I of the plaintiff's amended complaint, brought against its former attorney and agent Patrick Hulton, the plaintiff residential mortgage lending company alleges negligent representation during the May 2004 closing. Count I of the amended complaint specifically alleges that Hulton failed to collect or document payments allegedly made by the purchaser of a residential property, yet negligently misrepresented that he had done so. CMA alleges that as a result of Hulton's negligence it suffered injury compensable by money damages in that it had to initiate foreclosure proceedings, proceed to a deed in lieu of foreclosure, take title to the real property, evict tenants in possession of the property, sell the property for a loss, forgo interest on the money lent, and incur substantial attorneys fees. For the following reasons, the court finds this count in favor of the plaintiff.

1. EFFECT OF HULTON'S DEFAULT AS TO COUNT I

As found in Part I, a default for failure to appear was granted against Hulton on April 25, 2006. Accordingly, as the plaintiff has aptly argued in its trial brief filed October 17, 2008, the proceedings at issue constituted a hearing in damages as to Hulton.³⁶ (CMA's Brief, pp. 1, 10-11.)

36 Accordingly, pursuant to General Statutes § 52-221a, without objection from the non-appearing party, the plaintiff was "permitted to submit affidavits, duly sworn and acknowledged, of damages and special damages as proof of such damages."

"A default admits the material facts that constitute a cause of action . . . and entry of default, when appropriately made, conclusively determines the liability of a defendant. Ratner v. Willametz, 9 Conn.App. 565, 579, 520 A.2d 621 (1987) . . . Skyler Ltd. Partnership v. S.P. Douthett Co., 18 Conn.App. 245, 253, 557 A.2d 927 [cert. denied, 212 Conn. 802, 560 A.2d 984] (1989) . . . Voluntown v. Rytman, 27 Conn.App. 549, 557, 607 A.2d 896, cert. denied, 223 Conn. 913, 614 A.2d 831 (1992)." (External citation omitted.) Bank of America, FSB v. Franco, 57 Conn.App. 688, 693 (2000). Again, as CMA has correctly observed, "[a] plaintiff is entitled to at least nominal damages following an entry of default in a legal action . . ." (External citation omitted.) Bank of New York v. National Funding, 97 Conn.App. 133, 138, 902 A.2d 1073, cert. denied, 280 Conn. 925, 908 A.2d 1087 (2006), cert. denied sub nom. Reyad v. Bank of New York, 127 S.Ct. 1493, 167 L.Ed.2d 229 (2007).

Accordingly, through the default entered against Hulton, he has effectively admitted the liability-based allegations of Count I of the amended complaint sounding in negligence misrepresentation. Declining to proffer any defenses, he has further admitted the allegations of causation and damages, leaving the plaintiff to its proof. Without contesting the existence of a factual nexus between his own conduct, Hulton will be financially liable to the plaintiff for any financial losses that CMA been shown to have suffered as the result of this defendant's acts or omissions as found in Part II, above.

Therefore, judgment shall enter in favor of the plaintiff against the defendant Hulton on Count I of the amended complaint, with an award of damages as specified in Part V, below.

2. OTHER REASONS FOR CMA TO PREVAIL ON COUNT I

Even if the default is insufficient to establish the basis for a judgment against Hulton on Count I in this case, abundant evidence is available to support like conclusion with regard to the claims of negligence and negligent misrepresentation which, as previously noted, form the basis of this aspect of CMA's claims against Hulton.³⁷ To prevail in such a matter, CMA must prove that (1) its attorney, Hulton owed a duty of care to CMA; 2) Hulton made a negligent misrepresentation to CMA and (2) CMA reasonably relied upon that negligent misrepresentation. Savings Bank of Manchester v. Ralion Financial Services, Inc., 91 Conn.App. 386, 389-90, 881 A.2d 1035 (2005). Although not clearly so stated in the case law, it appears that the usual standard of proof for negligence cases, a fair preponderance of the evidence, is applicable in negligent misrepresentation cases as well, unlike matters based upon fraudulent misrepresentation which require the higher clear and convincing proof standard. See, e.g., Citino v. Redevelopment Agency, 51 Conn.App. 262, 269-76, 721 A.2d 1197 (1998).

37 While the plaintiff alleges negligent representation, the more appropriate designation for its claim, as used regularly by Connecticut courts, is negligent misrepresentation. See, e.g., Citino v. Redevelopment Agency, 51 Conn.App. 262, 269-76, 721 A.2d 1197 (1998).

The Connecticut Supreme Court "has long recognized liability for negligent misrepresentation. [It has] held that even an innocent misrepresentation of fact may be actionable if the declarant has the means of knowing, ought to know, or has the duty of knowing the truth . . . The governing principles are set forth in similar terms in § 552 of the Restatement Second of Torts (1977): One who, in the course of his business, profession or employment . . . supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information." Kramer v. Petisi, 285 Conn. 674, 681, 940 A.2d 800 (2008). "[A]n action for negligent misrepresentation requires a plaintiff to prove that (1) the defendant made a misrepresentation and (2) the plaintiff reasonably relied upon that misrepresentation . . . Whether evidence supports a claim of . . . negligent misrepresentation is a question of fact." (Internal quotation marks omitted.) Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, 91 Conn.App. 389-90. "[T]he plaintiff need not prove that the representations made by the [defendant] were promissory. It is sufficient . . . that the representations contained false information." Citino v. Redevelopment Agency, supra, Conn.App. 274, 721 A.2d 1197 (1998), citing D'Ulisse-Cupo v. Board of Directors of Notre Dame High School, 202 Conn. 206, 218, 520 A.2d 217 (1987).

The preponderant evidence in this case supports the inference that Hulton negligently misrepresented to CMA that he had fully completed all the requisite terms of the closing transaction that occurred on May 19, 2004 under his supervision. Hulton was professionally responsible for ensuring that the closing process took place both lawfully and in accordance with CMA's instructions.³⁸ (Tes. Kroop, Hulton.) Fidelity claims that because Halstead was present at the Gonzalez closing, CMA had somehow ratified or condoned Hulton's negligent misrepresentation concerning the completion of that process. To the contrary, the court finds the evidence fully sufficient to establish that only Hulton was accountable for the implementation of proper procedures relevant to the exchange of monies required for CMA's funding of that mortgage.

38 At trial of this matter, counsel for both parties inquired of Hulton concerning matters related to his skill and experience in the legal aspect of real estate transactions. Neither party contested Hulton's status as a relative expert in such matters, notwithstanding the fact that he was no longer a member of the bar. (Tes. Hulton; See Tr. 1/3/08; see also n. 3, above.)

Hulton has admitted that, as the closing attorney, he violated the terms and condition of his representation of CMA, by negligently failing to properly supervise the closing process on that date, by negligently failing to timely relay the closing documents to CMA, and by negligently failing to timely record the deed representing Morris's transfer of the property to Gonzalez. (Ex. 16; Tes. Hulton.) Taken as a whole, the evidence is further sufficient to support the conclusion that Hulton causing, allowing or permitting CMA to presume that he had followed their closing instructions, and the instructions provided by BNC with regard to the Gonzalez transaction, he engaged in negligent misrepresentation. Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, 91 Conn.App. 389-90.

The evidence, as a whole, further supports the conclusion that CMA relied, to its detriment, upon Hulton's professional capacity to adequately supervise the closing on May 19, 2004, and to timely and properly handle the documents so that CMA effectively assign the loan at issue to BNC, its willing buyer. (Exs. 16, 20; Tes. Kroop.) This evidence reflecting this aspect of Hulton's negligent misrepresentations without question resulted in CMA's inability to assign the loan, and further resulted in the plaintiff's sufferance of the damages and losses described in Parts II and V of this decision.

In sum, a preponderance of the evidence establishes that Hulton "fail[ed] to exercise reasonable care or competence in obtaining or communicating the information" CMA required him to obtain at the closing. Kramer v. Petisi, supra, 285 Conn. 681. Thus, CMA has met its burden of proving the requisite elements of negligent misrepresentation, and the plaintiff is accordingly entitled to prevail on Count I of the amended complaint. Savings Bank of Manchester v. Ralion Financial Services, Inc., supra, 91 Conn.App. 389-90; Citino v. Redevelopment Agency, supra, 51 Conn.App. 274.

B. COUNT II — FRAUDULENT EXECUTION OF THE HUD-1 AGAINST HULTON

As found in Part I, Count II of the amended complaint is nearly identical to Count I in many respects. Count II, however, specifically alleges that Hulton knowingly and fraudulently executed the HUD-1 settlement statement at issue, in which it was represented that the buyer had paid deposits and other amounts that Hulton knew had actually not been paid. Count II further alleges that Hulton's fraudulent misrepresentations concerning this document led CMA to sustain financial loss and damages. For the following reasons, the court finds this count in favor of the plaintiff.

1. EFFECT OF HULTON'S DEFAULT AS TO COUNT II

As discussed in Part III.A.1., above, Hulton's failure to appear renders him fully susceptible to judgment in favor of CMA on the Count II of the amended complaint, sounding in fraud, dishonesty, and intentional misrepresentation of the HUD-1 document. (See also CMA's Brief, p. 13.) For the reasons previously stated, therefore, judgment shall enter in favor of the plaintiff against the defendant Hulton on Count II of the amended complaint, with an award of damages as specified in Part V., below.

2. OTHER REASONS FOR CMA TO PREVAIL AGAINST HULTON ON COUNT II

Even if the default is insufficient to establish the basis for a judgment against Hulton on Count II in this case, clear and convincing evidence supports like conclusion with regard to the claims of fraudulent execution of the HUD-1 form, and his intentional misrepresentation which, as previously noted, form the basis of this aspect of CMA's claims against Hulton.

Generally, in order to prevail on a claim of fraud, the plaintiff must prove (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to her detriment. The plaintiff must prove the first three elements by clear and convincing evidence, and the fourth by a preponderance of the evidence. Nazami v. Patrons Mutual Ins. Co., 280 Conn. 619, 628, 910 A.2d 209 (2006); see also Carr v. Fleet Bank, 73 Conn.App. 593, 595, 812 A.2d 14 (2002).

"Fraud involves deception practiced in order to induce another to act to her detriment, and which causes that detrimental action . . . The four essential elements of fraud are (1) that a false representation of fact was made; (2) that the party making the representation knew it to be false; (3) that the representation was made to induce action by the other party; and (4) that the other party did so act to her detriment . . . Fraud by nondisclosure, which expands on the first three of these four elements, involves the failure to make a full and fair disclosure of known facts connected with a matter about which a party has assumed to speak, under circumstances in which there is a duty to speak." (Emphasis added.) Carr v. Fleet Bank, supra, 73 Conn.App. 595; see also Nazami v. Patrons Mutual Ins. Co., supra, 280 Conn. 628; Chase Manhattan Mortgage Corp. v. Machado, 83 Conn.App. 183, 187, 850 A.2d 260 (2004).

"A party alleging fraudulent misrepresentation `must prove the existence of the first three of [the] elements by a standard higher than the usual fair preponderance of the evidence, which higher standard we have described as clear and satisfactory or clear, precise and unequivocal.' (Internal quotation marks omitted.) Citino v. Redevelopment Agency, 51 Conn.App. 262, 276, 721 A.2d 1197 (1998). `Connecticut case law firmly establishes that fraud must be proven by a standard more exacting than a fair preponderance of the evidence. This court has most recently formulated the proper standard as clear and satisfactory evidence.' Miller v. Appleby, 183 Conn. 51, 55, 438 A.2d 811 (1981)." Wallenta v. Moscowitz, 81 Conn.App. 213, 220, 839 A.2d 641, cert. denied, 268 Conn. 909, 845 A.2d 414 (2004).

"[I]n this state, proof by preponderance of the evidence is the `ordinary civil standard of proof . . .' Mallory v. Mallory, 207 Conn. 48, 52, 53, 539 A.2d 995 (1988); see State v. Davis, 229 Conn. 285, 295-96, 641 A.2d 370 (1994) (noting that `the general rule [in this state is] that when a civil statute is silent as to the applicable standard of proof, the preponderance of the evidence standard governs factual determinations required by that statute'). The plaintiffs accurately state, however, that the clear and convincing standard is the appropriate standard of proof in common-law fraud cases. See Black v. Goodwin, Loomis Britton, Inc., 239 Conn. 144, 163, 681 A.2d 293 (1996) (`the appropriate standard of proof for the party who seeks to prevail in a civil fraud action is clear and convincing evidence')." Goldstar Medical Services v. Dept. of Social Services, 288 Conn. 790, 819 (2008).

This case presents abundant factual basis for the conclusion that CMA has met its burden of proving by clear, convincing and satisfactory evidence that Hulton knowingly and intentionally made false representations of fact upon the HUD-1 form, as found in Part II, and as alleged in Count II of the amended complaint; that the plaintiff relied on fraud by nondisclosure and/or fraudulent misrepresentations; and that the plaintiff suffered thereby. Hulton's direct admissions at trial, and the reasonable and logical inferences that may be drawn from the evidence as a whole, lead to the compelling conclusion that he knowingly made false statements upon the HUD-1 form; that he did so to induce CMA to lend funds so that the Gonzalez closing could occur; that CMA relied upon Hulton's role as its attorney in the closing process as an indication that the transaction had been performed in accordance with its instructions; that CMA, to its detriment, loaned $136,000 to Gonzalez so that he could purchase Morris's property; that Hulton benefitted from the closing process though acquiring payment, from the borrower's funds at settlement, payment of $160.00 for his ostensible performance of a title search, $75.00 for ostensible procurement of a title insurance binder from CATIC, and attorneys fees of $650.00. In addition, Hulton benefitted from the provision of false information upon the HUD-1 form in that he also received $600.00 for document preparation from the seller's funds at the closing. (Ex. 7; Tes. Hulton, Kroop.) See Nazami v. Patrons Mutual Ins. Co., supra, 280 Conn. 628.

As found in Part II, Hulton made specific, material misrepresentations upon the HUD-1 which was prepared in anticipation of the Gonzalez closing. (Ex. 7.) The clear, convincing and satisfactory evidence supports the finding that as CMA's closing attorney, Hulton knew that he had the obligation to complete the HUD-1 form using accurate data; that he was required to return this document, along with the other closing documents, to the lender within a brief time after completion of the transaction; that CMA would assume the preparation of a valid HUD-1 document, and would rely upon the validity of the information contained upon the HUD-1 in the course of its business. Hulton further knew that CMA had specifically instructed him that all monetary transfers between the parties were to be made in cash so as to further protect CMA's promise that it would make a valid mortgage available for BNC to purchase. (Tes. Hulton, Kroop.) See also CMA's Brief, p. 14, citing discussion of the Appellate Court's review of the attorney's obligation with regard to information on a HUD-1 statement as set forth in Statewide Grievance Committee v. Alan Spier, 247 Conn. 762, 767, 725 A.2d 948 (1999).

Instead of complying with this obligation, however the court finds by clear, convincing and satisfactory evidence that Hulton wilfully and intentionally entered false information upon the HUD-1 form when he indicated that $24,000 in cash had been transferred from Gonzalez, as the borrower, to Morris, as the seller. (Ex. 7; Tes. Hulton.) The evidence is sufficient to support the conclusion that Hulton had wilfully and intentionally prepared a unenforceable promissory note for Gonzalez and Morris to execute without any basis for assuming that this document could suffice to meet the cash terms for the transaction imposed through CMA's instructions.³⁹ (Ex. 18; Tes. Hulton.) The evidence related to CMA's delivery of its closing instructions provide clear and convincing basis for concluding that Hulton knew, or should have known, that the plaintiff was depending upon not only the accuracy of information upon the HUD-1 and other closing documents, but also that it expected timely return of the documents.

39 As specifically found in Part II, that promissory note contained no term designating either a particular rate of interest or reliance upon the statutory rate; no scheduled rate for payment, term of the note, or whether the promise to pay was callable at will; and no designation of the consideration Morris may have received in exchange for foregoing his anticipated payment of $24,000.00 in cash at the time of the closing. (Ex. 18; Tes. Hulton.)

Moreover, the delay of Hulton, who was CMA's attorney, and his ultimate failure to provide all the requisite closing documents to his client, CMA effectively constitutes fraud by way of nondisclosure. Here, as CMA's closing counsel, Hulton had a duty to "make a full and fair disclosure of known facts connected with a matter about which a party has assumed to speak, under circumstances in which there is a duty to speak." Carr v. Fleet Bank, supra, 73 Conn.App. 595; see also Nazami v. Patrons Mutual Ins. Co., supra, 280 Conn. 628; Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 187. Instead, he not only fraudulently entered false information upon the HUD-1 form, which was competent to mislead CMA into concluding that the closing had been lawfully completed in accordance with its instructions, and was further competent to specifically mislead the plaintiff that $24,000.00 had, in fact, been transferred from the buyer to the seller at the time of the closing as anticipated by BNC, the potential assignee of this loan. However, no verification of the transfer of $24,000.00 in cash at the closing could ever be provided because that event did not, in fact, take place. (Exs. 8-A, 16, 20; Tes. Kroop, Hulton.) Rather, Hulton fraudulently and intentionally withheld from his client, CMA, the information indicating that he had falsified the HUD-1 document, and procured a fraudulent transfer of CMA's mortgage funds for use at the Gonzalez closing. Such conduct, undertaken by Hulton for the purpose of inducing CMA into concluding that a valid mortgage transaction had occurred on May 19, 2004, constitutes fraud by nondisclosure. Carr v. Fleet Bank, supra, 73 Conn.App. 595; see also Nazami v. Patrons Mutual Ins. Co., supra, 280 Conn. 628; Chase Manhattan Mortgage Corp. v. Machado, supra, 83 Conn.App. 187.

The clear, convincing and satisfactory evidence in this matter supports the conclusion that Hulton engaged in at least one more instance of fraudulent conduct when he entered false and misleading information upon the HUD-1 form at issue. Hulton wilfully and intentionally certified upon the document that Gonzalez, as the borrower, had paid $6,780.06 in cash at the May 2004 closing. Hulton has clearly admitted that he knew, in fact, that no such payment had been made by Gonzalez. Again, the clear, convincing and sufficient evidence establishes that Hulton intentionally withheld from CMA the truth about this aspect of the transaction for the purpose of inducing acquisition of the funds he claimed were due to him as the result of services related to the closing. (Ex. 7; Tes. Hulton.)

"The intentional withholding of information for the purpose of inducing action has been regarded . . . as equivalent to a fraudulent misrepresentation." Pacelli Bros. Transportation, Inc. v. Pacelli, 189 Conn. 401, 407, 456 A.2d 325 (1983); see also Statewide Grievance Committee v. Spier, supra, 247 Conn. 767. The factual findings in Part II and the discussion above leads to the ineluctable conclusion that the plaintiff has met, by clear, convincing, and satisfactory evidence, its burden of proving the first three elements of Hulton's fraud as alleged in the operative paragraphs of Count II of the amended complaint. See Nazami v. Patrons Mutual Ins. Co., supra, 280 Conn. 628. As discussed in Part V of this decision, although its burden of proof on the fourth element is lesser, CMA has also proved its damages by clear, convincing, and satisfactory evidence, as well.

C. COUNT III — CLAIMS AGAINST FIDELITY BASED ON HULTON'S FRAUD AND/OR DISHONESTY

The plaintiff argues that Count III has been brought against the defendant based upon a breach of contract for failure to provide payment pursuant to — and thus violating — a reimbursement agreement ostensibly entered into between CMA and Fidelity.⁴⁰ (Ex. 17; see CMA's Brief, pp. 15-16.) Count III may also be characterized as an indemnification claim identifying Fidelity as the party responsible for Hulton's fraudulent or dishonest conduct in connection with the Gonzalez closing to the extent that they were covered by the closing protection letter at issue. (Ex. 17.) The plaintiff alleges that Hulton, acting as Fidelity's agent, issued a closing protection letter that protected CMA from any instances of fraud and/or dishonesty by Hulton, who issued the document at issue. (Ex. 17.) CMA alleges that it relied on the protection letter in funding the mortgage, and that Fidelity is accordingly liable for the consequential damages and losses it suffered due to Hulton's conduct. Fidelity counters that the closing protection letter is inapposite under the circumstances of this case, because CMA purchased title insurance from a third party, and thus is not entitled to any reimbursement under Count III. For the following reasons, the court finds this count in favor of Fidelity.

40 The court has construed the relevant allegations according to the principles of United Components, Inc. v. Wdowiak, supra, 239 Conn. 264.

In order to prevail on a claim of breach of contract arising out of a violation of the terms of a protection letter in a case such as this, CMA must prove breach of an express and applicable contract between the parties. The plaintiff must establish by a preponderance of the evidence that there was an agreement between the parties enforceable by law, that the contract contained the terms the plaintiff seeks to enforce, and that any disputed terms should be defined as the plaintiff contends.

"The existence of a contract is a question of fact to be determined by the trier on the basis of all the evidence." Aquarion Water Co. v. Beck Law Products Forms, LLC, 98 Conn.App. 234, 238, 907 A.2d 1274 (2006). "The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Seligson v. Brower, 109 Conn.App. 749, 753, 952 A.2d 1274 (2008). It is "fundamental" that "the plaintiff in a civil matter is not required to prove his case beyond a reasonable doubt; a mere preponderance of the evidence is sufficient." Gaudio v. Griffin Health Services Corp., 249 Conn. 523, 534-35, 733 A.2d 197 (1999).

"The law governing the construction of contracts is well settled. When a party asserts a claim that challenges the trial court's construction of a contract, we must first ascertain whether the relevant language in the agreement is ambiguous . . . A contract is ambiguous if the intent of the parties is not clear and certain from the language of the contract itself . . . Accordingly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms . . . When the language of a contract is ambiguous, the determination of the parties' intent is a question of fact . . . Similarly, [w]e accord the language employed in the contract a rational construction based on its common, natural and ordinary meaning and usage as applied to the subject matter of the contract. Where the language is unambiguous, we must give the contract effect according to its terms . . . Where the language is ambiguous, however, we must construe those ambiguities against the drafter . . . Moreover, in construing contracts, we give effect to all the language included therein, as the law of contract interpretation . . . militates against interpreting a contract in a way that renders a provision superfluous." (Citations omitted; internal quotation marks omitted.) Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 13-14, 938 A.2d 576 (2008).

The court has examined the contract at issue utilizing the legal standards identified above. In so doing, it is constrained to reach the conclusion that CMA's acquisition of title insurance from CATIC, rather than from Fidelity itself, renders this aspect of its arguments, and its cause of action as set forth in Count III of the amended complaint, futile and without recourse. See Part II. Simply put, under the circumstances of this case, the closing protection letter at issue provided no insurance or security to CMA because "title insurance of Fidelity National Title Insurance company" was not specified for the plaintiff's protection in connection with the closing on May 19, 2004. (Exs. 7, 17.)

As Fidelity has accurately argued, CMA's claims in Count III must fail, in their entirety, because the plaintiff did not purchase title insurance from the defendant. Accordingly, pursuant to the terms of the instrument at issue, the plaintiff is not entitled to any coverage that might have been made available through the issuance of the closing protection letter had it utilized Fidelity's title insurance services. (Fidelity's Brief, pp. 10-11.) CMA has made no claim that Fidelity provided title insurance for the transaction at issue; rather, the plaintiff argues that other language contained within the closing protection letter renders Fidelity liable to reimburse it for damages incurred as the result of 1) failure of Hulton to comply with CMA's written closing instructions and/or 2) Hulton's fraud and/or dishonesty in handling CMA's funds or documents in connection with the Gonzalez closing. (Ex. 17.)

On this issue, the court concurs with the defendant, concluding that the clear and express language of the closing protection letter, as described in Part II., above, renders Fidelity liable only "[w]hen title insurance of Fidelity National Title Insurance Company" is specified in connection with CMA's lending of funds to enable Gonzalez's purchase of the property from Morris. (Ex. 17.) The plaintiff has not contested CMA's assertion that title insurance for the Gonzalez purchase was obtained, ostensibly through Hulton, not from Fidelity, but from CATIC. (Ex. 7.) This renders any insurance available through the closing protection letter fully unavailable to the plaintiff, notwithstanding fraud and/or dishonesty committed by Hulton, who stood as an agent for both CMA and Fidelity under the circumstances of this case. Even strictly construing the closing protection letter as a contract against Fidelity, the issuing party, the court concludes that CMA has failed to meet the overt condition precedent to its recovery from the defendant, to wit, that CMA had procured title insurance from the defendant in connection with its loan enabling Gonzalez to purchase the Morris property.⁴¹

41 In reaching this conclusion, the court fully acknowledges that if CMA sought protection from Fidelity based upon a defect in the title to the Gonzalez property, the authorities presented by the defendant would likely lead to a denial of any reimbursement of actual loss due to defective title.

Although Connecticut's appellate level courts do not yet appear to have addressed this specific issue, appropriate guidance is found in the reasoning utilized by the Appellate Division of the New Jersey Superior Court in First American Title Insurance Company v. Vision Mortgage Corporation, Inc., 298 N.J.Super, 138, 689 A.2d 154 (1997). The facts of that case involved issues similar to those of the present matter, in which it was claimed that an approved attorney had engaged in fraud in handling the closing documents. Id., 140. Vision, a defrauded lender sought to recover reimbursement of its losses from First American, from whom the lender had purchased title insurance and from whom a closing protection letter had been secured. Id., 139. When Vision realized that it had been defrauded, it made appropriate demand upon First American, as the insurer of the lender's losses. Id., 140. First American declined Vision's demand, whereupon Vision was forced to acquire the property at issue, and to sell it in an effort to mitigate its losses. Id., 141. First American, as the title insurer, brought a declaratory judgment seeking a determination that it was not responsible for any losses suffered by the mortgage lender. Id., 142. Ultimately, the New Jersey court came to the contrary conclusion, and held First American liable for the reasonable damages incurred by Vision in connection with the fraudulent conduct involved in that case primarily because First American had provided Vision with title insurance. The court reasoned that because First American had issued the title insurance at issue, that carrier "was in the best position to prevent the loss created by the fraud and defalcation of the Approved Attorney" who had written both the title insurance contract and closing protection letters at issue in that case. Id., 144.

The reasoning of First American is applicable to the present circumstances because the New Jersey Court recognized the contract's necessary predicate of procurement of both title insurance and a closing protection letter from the same vendor before a defrauded party can recover losses from the title insurance company. Id. In the present case, as found in Part II, however, CMA's title insurance was not procured from Fidelity, but from CATIC, thus rendering any protection against fraud, dishonesty, mishandling of documents, or non-compliance with closing instructions unamenable to reimbursement through reliance upon the closing protection letter at issue. Id. (See Exs. 7, 17.)

In reaching this conclusion, the court has fully considered CMA's vigorous argument that Hulton acted as Fidelity's agent when issuing the closing protection issue. The court agrees that such an agency relationship existed, and further agrees with the plaintiff, as found in Parts III.A. and B., above, that Hulton acted both negligently with regard to some aspects of the closing process, and fraudulently insofar as he entered false information upon the HUD-1 document that was intended to present an precise, reliable portrayal of the actual cash transactions that ostensibly occurred in May 2004. The court further agrees that CMA engaged in salutary and somewhat successful efforts to mitigate the losses it sustained as the result of Hulton's fraud and dishonesty.

However, the court cannot agree, based upon the clear and unambiguous terms of the closing protection letter at issue, that under the circumstances of this case, "[t]he plaintiff, Capital, is an insured of the defendant, Fidelity, and the beneficiary of the promises contained in the closing protection letter." CMA's Brief, p. 17. Hulton's agency status with Fidelity authorized him to write title insurance for that defendant, but Hulton did not do so in this case. Furthermore, there is no evidence from which the court could even conclude that CMA had demanded Hulton acquire title insurance from the same vendor who issued the closing protection letter for the lender's benefit. Rather, the very first clause of that closing protection letter at issue makes it abundantly apparent that pursuant to its contract with Fidelity, CMA would be able to access reimbursement from the defendant for actual loss incurred in connection with the May 2004 closing only if Fidelity National Title Insurance Company, and not CATIC, had been specified as the plaintiff's title insurer. (Ex. 17.) For that reason, the plaintiff cannot meet its burden of proving Fidelity responsible for any damages caused by breach of the contract at issue, and the court must find Count III in favor of the defendant, Fidelity.

D. COUNT IV — CLAIMS AGAINST FIDELITY BASED ON HULTON'S FAILURE TO FOLLOW CMA's CLOSING INSTRUCTIONS

Count IV of the amended complaint is nearly identical to Count III except that the alleged breach of the closing protection letter qua contract is alleged to be Hulton's failure to comply with the CMA's written closing instructions. CMA claims that Hulton was required to accurately document and/or to collect funds pursuant to the written instructions; that he failed to do so; and that his failure caused it to sustain damage and financial loss. As in Count III, Count IV alleges that Fidelity's closing protection letter effectively requires the defendant to reimburse the plaintiff for such damages, in that Hulton's failure to follow CMA's closing instructions triggered the applicable benefits of this contract. Fidelity again counters that the closing protection letter does not constitute a contract that provides any coverage for CMA under the circumstances of this case, because they purchased title insurance from a third party, and thus is not entitled to any reimbursement under Count IV. For the following reasons, the court finds this count in favor of Fidelity.

In order to prevail on Count IV of the amended complaint, the plaintiff would have to meet the standards for contract construction discussed in Part III.C., above. By this measure, the plaintiff would have to prove, by a preponderance of the evidence, that the closing protection letter at issue entitled CMA to reimbursement for "actual loss" as contemplated by the contract terms as set forth in Exhibit 17.

In assessing the potential merit of plaintiff's claims under Count IV, the court has considered and applied the principles of law and findings of fact discussed with regard to Count III, set forth in Part III.C. Notwithstanding the court's finding that Hulton did, in fact, fail to follow CMA's closing instructions in a number of ways with regard to the Gonzalez loan, that finding is insufficient to implicate the reimbursement provisions of the closing protection letter. Fidelity's responsibility to reimburse CMA for its actual loss, due to Hulton's failure to follow the closing instructions, would have become operative if, but only if, "title insurance of Fidelity National Title Insurance Company [was] specified for [CMA's] protection in connection with" its loan of $136,000 so Gonzalez could purchase the property from Morris. (Ex. 17.) Again, as to Count IV, the clear and ambiguous language of the closing protection letter establishes that it is inapplicable to the present case, due to CMA's use of CATIC rather than Fidelity for title insurance purposes. (Ex. 17.) Accordingly, the court is constrained to conclude that notwithstanding the sincerity of CMA's arguments, the plaintiff is precluded from recovery from the defendant under Count IV of the amended complaint.

IV. FIDELITY'S SPECIAL DEFENSES

Although it has found no liability for Fidelity under the circumstances of this case, the court has elected to review its special defenses insofar as they may have a bearing upon the court's assessment of the damages Hulton is obligated to pay as the result of his negligent misrepresentation, as found under Count I of the amended complaint, or as the result of his fraudulent conduct, as found under Count II of the amended complaint.⁴²

42 Generally, the defendant has the burden of proof as to the allegations of any special defenses upon which it relies. Perley v. Glastonbury Bank Trust Co., 170 Conn. 691, 698, 368 A.2d 149 (1976). A party claiming a special defense must prove it by a preponderance of the evidence. Gillis v. Gillis, 21 Conn.App. 549, 553 n. 3, 575 A.2d 230, cert. denied, 215 Conn. 815, 576 A.2d 544 (1990). Here again, as found in Part III.A.1 and III.A.2., Hulton has been found in default, and he has declined to present any defenses to the plaintiff's claims of damages.

Fidelity's first special defense asserts that when CMA accepted a deed in lieu of foreclosure from Gonzalez in April 2005, any losses the plaintiff had sustained were thereby fully satisfied. Fidelity argues that because the plaintiff took the deed, the plaintiff has not suffered a loss even if Hulton was negligent or fraudulent. In response to this claim by Fidelity, although the defendant has not specifically stated its reliance upon this legal principle, the court has considered whether CMA's acceptance of the deed in lieu of foreclosure constitutes accord and satisfaction that would preclude recovery of any other damages.

"[T]o prove an accord and satisfaction, the defendant must show that at the time of the agreement there was a good faith dispute over the existence of a debt . . . and that the debtor and the creditor negotiated a contract of accord to settle the claim . . . The proponent must be able to show that there was a meeting of the minds, and that the offer by the debtor was clearly tendered as full satisfaction of the debt and that the payment was knowingly accepted . . . Without a mutual assent, or a meeting of the minds, there cannot be a valid accord . . . Whether a meeting of the minds has occurred is a factual determination." (Citations omitted; internal quotation marks omitted.) M.J. Daly Sons, Inc. v. West Haven, 66 Conn.App. 41, 48, 783 A.2d 1138, cert. denied, 258 Conn. 944, 786 A.2d 430 (2001).

The court finds Fidelity's argument is inapposite to the facts of the case at bar. Even Fidelity has admitted that acceptance of a deed in lieu of foreclosure is "not always" an indication that the entire debt to a lender has been satisfied. (Fidelity's Brief, p. 24.) Moreover, despite the defendant's intense focus upon this aspect of the plaintiff's access to damages, Fidelity has not cited any relevant Connecticut caselaw that supports its proposition that once CMA accepted the deed from Gonzalez, it could not, as a matter of law, establish any further consequential damages.⁴³ Although Fidelity had the opportunity to do so, it did not produce any expert appraisal testimony to establish the value of the property at the time Gonzalez ceded title to CMA in lieu of foreclosure proceedings. Under these circumstances, the court is unable to attribute any particular weight to the arguments raised in Fidelity's first special defense.

43 In reaching this determination, the court has carefully weighed the lessons of First Federal Savings and Loan Association of Rochester v. Charter Appraisal Company, 247 Conn. 597, 610, 724 A.2d 797 (1999); upon which the defendant relies. Upon review, the court declines to conclude that First Federal Savings supports Fidelity's proposition that CMA's acceptance of the deed in lieu of foreclosure effectively terminated any losses it might reasonably associate with Hulton's negligence and/or fraudulent conduct with regard to the May 2004 closing. Rather, First Federal Savings involved issues related to a foreclosure judgment obtained by a bank, and the designation of any deficiency judgment that might have been attributed to the buyer. Id., 610. In that matter, the Supreme Court focused upon an issue unrelated to the case at bar, that is, "whether an appraiser whose negligence results in an excessive valuation of property to be mortgaged bears responsibility for a general decline in real estate values that further decreases the market value of the negligently appraised property." Id., 599.

Fidelity's second and third special defenses effectively assert that any damages suffered by CMA are to be determined from the date it accepted a deed in lieu of foreclosure and that, as of that date, the plaintiff had not suffered any damage. The court finds that this special defense is similarly inapposite to the case at bar. As found in Part II., CMA accepted the deed in lieu of foreclosure in an appropriate effort to mitigate the losses it had incurred as the result of negligence and/or fraudulent conduct on Hulton's behalf, which had rendered it unable to assign the Gonzalez loan to BNC. But for Hulton's negligence and/or fraudulent conduct, CMA would not have incurred the actual losses identified in Part II., which properly included, but did not such "ordinary costs associated with ownership of real property" as Fidelity acknowledges to exist. (Fidelity's Brief, p. 28.) The "actual loss" incurred by CMA as the result of Hulton's negligent misrepresentation and/or fraudulent behavior constitute the exact type of damages that would have been reimbursable under the closing protection letter, had the plaintiff purchased title insurance from Fidelity rather than from CATIC, whether or not Gonzalez had transferred title to CMA as the result of the May 2005 transfer. For the foregoing reasons, the court declines to grant any weight to the issues addressed in the second or third special defenses.

V. DAMAGES

"When the defendants' liability has been established by virtue of a default, the plaintiff's burden at a hearing in damages is limited to proving the amount of damages." See Murray v. Taylor, 65 Conn.App. 300, 335, 782 A.2d 702, cert. denied, 258 Conn. 928, 783 A.2d 1029 (2001).

"[W]hen damages are claimed they are an essential element of the plaintiff's proof and must be proved with reasonable certainty . . . Damages are recoverable only to the extent that the evidence affords a sufficient basis for estimating their amount in money with reasonable certainty." (Citations omitted; internal quotation marks omitted.) Gaudio v. Griffin Health Services Corp., 249 Conn. 523, 554, 733 A.2d 197 (1999). "In an action at law based upon contract, the party seeking recovery has the burden of proving by the fair preponderance of evidence the amount of his damages . . . The court must have evidence by which it can calculate the damages, which is not merely subjective or speculative, but which allows for some objective ascertainment of the amount." (Citations omitted.) Bronson Townsend Co. v. Battistoni, 167 Conn. 321, 326-27, 355 A.2d 299 (1974).

A. HULTON'S NEGLIGENT MISREPRESENTATION

In Part III.A. the court identified the negligent conduct on Hulton's part, in withholding information and in generally failing to follow CMA's closing instructions, all of which caused the plaintiff to sustain measurable, identifiable damages. Miller v. Appleby, 183 Conn. 51, 57-58, 438 A.2d 811 (1981), states a general rule regarding damages that is applicable in the case of Hulton's to the measure of damages under these circumstances: "The general rule in Connecticut in awarding damages in [negligent misrepresentation] cases . . . is that the plaintiff purchaser is entitled to recover the difference in value between the property actually conveyed and the value of the property as it would have been if there had been no false representation, i.e., `the benefit of the bargain' damages, together with any consequential damages resulting directly from the fraud . . . The damages to be recovered in an action of this character are such as are the natural and proximate consequence of the fraudulent representation complained of; and those results are proximate which must be presumed to have been within the contemplation of the defendant as the probable consequence of his fraudulent representations . . . In general, with only a few exceptions, the courts have accordingly restricted recovery to those damages which might foreseeably be expected to follow from the character of the representation itself." (Citations omitted; internal quotation marks omitted.) Miller v. Appleby, 183 Conn. 51, 57-58, 438 A.2d 811 (1981).

Utilizing the principles of law as set forth herein, and the factual conclusions described in Parts II. and III.A., the court concludes that CMA incurred designated, reasonable, and foreseeable financial losses that are directly attributable to Hulton's negligent misrepresentation. Those losses, which Hulton is responsible to pay, include:

15,735.15

$12,830.03 Interest CMA was required to pay upon its lines of credit, over the period of approximately July 2004 to November 2005. $ 1,250.00 Attorneys fees and costs associated with obtaining the deed in lieu of foreclosure. $ 2,021.92 Liability insurance upon the property CMA was required to acquire due to Hulton's conduct. $ 1,297.50 Attorneys fees associated with eviction of tenants to render property marketable by CMA. $ 854.53 State Marshal's fees associated with eviction of tenants. $ 650.00 Attorneys fees associated with CMA's sale of the property to Wilson. $ 3,000.00 Non-standard accounting fees associated with supervision of property due to Hulton's conduct. $ Difference between $136,000 in CMA funds extended in May 2004 to fund Gonzalez's purchase of the property, and the $120,264.85 CMA received at sale of the property to Wilson. TOTAL $37,639.13

Accordingly, CMA is entitled to receive $37,639.13 in damages from Hulton as the result of his negligent misrepresentation, attributable to Count I of the amended complaint.

B. HULTON'S FRAUDULENT MISREPRESENTATION

With respect to fraud, damages may be proved by a preponderance of the evidence. Dockter v. Slowik, 91 Conn.App. 448, 453-54, 881 A.2d 479 ("although the elements of fraud must be proved by clear and convincing evidence, damages may be proved by the preponderance of the evidence"), cert. denied, 276 Conn. 919, 888 A.2d 87 (2005). Whitaker v. Taylor, 99 Conn.App. 719, 734-35, 916 A.2d 834 (2007).

"The general rule in Connecticut in awarding damages in [fraudulent misrepresentation] cases . . . is that the plaintiff purchaser is entitled to recover the difference in value between the property actually conveyed and the value of the property as it would have been if there had been no false representation, i.e., `the benefit of the bargain' damages, together with any consequential damages resulting directly from the fraud . . . The damages to be recovered in an action of this character are such as are the natural and proximate consequence of the fraudulent representation complained of; and those results are proximate which must be presumed to have been within the contemplation of the defendant as the probable consequence of his fraudulent representations . . . In general, with only a few exceptions, the courts have accordingly restricted recovery to those damages which might foreseeably be expected to follow from the character of the representation itself." (Citations omitted; internal quotation marks omitted.) Miller v. Appleby, 183 Conn. 51, 57-58, 438 A.2d 811 (1981).

Using this measure, the court also determines that as the result of Hulton's fraudulent conduct, as found in Part III.B., he is required to pay CMA a total of $37,639.13 in damages attributable to the claims brought forth in Count II of the amended complaint. (See itemization in Part V.A., above.)

However, notwithstanding the fact that CMA has met its burden of proving liability and damages on both Count I and Count II of its claims against Hulton, it is prohibited from duplicating the recovery to which it is entitled as the result of its success on both of these counts. See generally Bonan v. Goldring Home Inspections, Inc., 68 Conn.App. 862, 865, 794 A.2d 997 (2002).⁴⁴ CMA may recover from Hulton the sum of $37,639.13 in its entirety, but no more than once, as a plaintiff is "not entitled to recover twice for the same elements of damage . . . growing out of the same transaction, occurrence or event . . . Put another way, the plaintiff cannot twice suffer damage . . . from . . . one transaction. Thus, he should not twice recover damages." (Internal quotation marks omitted.) Id., 870.

44 In Bonan v. Goldring Home Inspections, Inc., supra, 68 Conn.App. 865, a homeowner sued the home inspector for, inter alia, both negligence and breach of an oral contract. On review, the Appellate Court explained that "despite invoking separate theories of liability, the plaintiff cannot recover twice for expending `considerable sums to correct and repair the problems with the premises . . .'" (Emphasis added.) Id., 870.

VI. CONCLUSION

WHEREFORE, based on the foregoing findings of fact and principles of law, judgment shall enter in favor of the plaintiff, Capital Mortgage Associates, LLC against the defendant Patrick Hulton on both Count I and Count II, with a total award of damages to be paid by Hulton to CMA in the amount of $37,639.13.

AND WHEREFORE, based on the foregoing findings of fact and principles of law, judgment shall enter in favor of the defendant, Fidelity National Title Insurance Company on both Counts III and Count IV of the amended complaint.