Aurora Loan Services, LLC v. Hirsch, 154 A.3d 1009

Background

Harry Hirsch, an approved title agent for Connecticut Attorneys Title Insurance Company (defendant), closed two non-arm’s-length sales (47B and 52B Mardie Lane) in 2007 using forged and false borrower documentation; Hirsch acted for seller, purchaser, lender, and as the insurer’s agent.
Purchaser funds and loan applications were falsified; First Magnus made loans and later foreclosed when payments defaulted; Aurora (predecessor) and later Nationstar (substitute plaintiff) pursued recovery under letters of protection and title policies issued by defendant.
Plaintiff sued defendant alleging (a) title insurance coverage for unmarketable title and (b) contractual indemnification under letters of protection for agent fraud/dishonesty and failure to follow closing instructions.
Trial court found title was marketable (title policy claims failed) but found defendant liable under the letters’ “fraud or dishonesty” clause for Hirsch’s misconduct and awarded $426,362.98 in damages and prejudgment interest of $61,361.23, but denied attorney’s fees.
Court calculated damages by subtracting foreclosure-time fair market values (as found in foreclosure judgments) from outstanding debt and adding foreclosure costs; it excluded post-foreclosure carrying costs and declined punitive attorney’s fees.
Plaintiff appealed as to damages calculation, denial of attorney’s fees, and the start date for prejudgment interest; appellate court affirmed in all respects.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Proper measure of "actual losses" under letters of protection	Damages should equal plaintiff’s actual losses (debt + carrying costs) without offset — use values at closing or full losses incurred	Use fair market value at foreclosure as offset; plaintiff must prove postforeclosure costs with reasonable certainty	Court used foreclosure-time market values (from foreclosure judgments) as offsets and denied unproven carrying costs; no abuse of discretion
Recovery of post-foreclosure carrying costs (maintenance, taxes)	These are recoverable as actual losses caused by agent fraud and should be awarded	Plaintiff failed to prove efforts/causation for carrying costs; such costs speculative	Court declined to award because plaintiff failed to present competent evidence linking/quantifying costs; affirmed
Award of attorney’s fees (as part of damages or punitive damages)	Attorney’s fees are part of "actual costs" under letters or recoverable as punitive damages for fraud/vicarious liability	American rule bars fees absent contract/statute; letters contain no fees provision; defendant not liable for principal-level punitive damages	Court refused fees: letters provide no fee clause, action was breach of contract triggered by agent fraud, and defendant not shown to have authorized/ratified or been reckless in employing agent; affirmed
Prejudgment interest start date under § 37-3a	Interest should run from closing dates (2007) when the funds became payable/wrongfully detained	Interest is discretionary; court may start interest from return date of first filed action	Court exercised discretion and awarded interest from return date (April 13, 2010); declining earlier interest was not abuse of discretion; affirmed

Key Cases Cited

Lyons v. Nichols, 63 Conn. App. 761 (appellate standard for damages review)
Ulbrich v. Groth, 310 Conn. 375 (market-value evidence required for damages with reasonable certainty)
ACMAT Corp. v. Greater New York Mut. Ins. Co., 282 Conn. 576 (American rule; fees require contractual/statutory basis)
Total Recycling Servs. of Conn., Inc. v. Conn. Oil Recycling Servs., LLC, 308 Conn. 312 (limits on recovering attorney’s fees absent contract)
Matthiessen v. Vanech, 266 Conn. 822 (vicarious liability and punitive damages principles)
Sosin v. Sosin, 300 Conn. 205 (discretionary nature of § 37-3a prejudgment interest)
Statewide Grievance Comm. v. Dixon, 62 Conn. App. 507 (weight of evidence is for the factfinder)