RCN Capital, LLC v. Chicago Title Ins. Co.

***********************************************
The “officially released” date that appears near the be-
ginning of each opinion is the date the opinion will be pub-
lished in the Connecticut Law Journal or the date it was
released as a slip opinion. The operative date for the be-
ginning of all time periods for filing postopinion motions
and petitions for certification is the “officially released”
date appearing in the opinion.

All opinions are subject to modification and technical
correction prior to official publication in the Connecticut
Reports and Connecticut Appellate Reports. In the event of
discrepancies between the advance release version of an
opinion and the latest version appearing in the Connecticut
Law Journal and subsequently in the Connecticut Reports
or Connecticut Appellate Reports, the latest version is to
be considered authoritative.

The syllabus and procedural history accompanying the
opinion as it appears in the Connecticut Law Journal and
bound volumes of official reports are copyrighted by the
Secretary of the State, State of Connecticut, and may not
be reproduced and distributed without the express written
permission of the Commission on Official Legal Publica-
tions, Judicial Branch, State of Connecticut.
***********************************************
RCN CAPITAL, LLC v. CHICAGO TITLE
INSURANCE COMPANY
(AC 42082)
Elgo, Bright and Devlin, Js.

Syllabus

The plaintiff, R Co., sought to recover damages from the defendant, C Co.,
a mortgage title insurance company, for, inter alia, breach of contract
in connection with its failure to pay a claim on a policy that it had
issued. The policy insured R Co.’s interests, as a mortgagee, in certain
real property that secured a note executed by S Co. in exchange for a
commercial loan. S Co. defaulted on the note and R Co. commenced
foreclosure proceedings, during which R Co. discovered that its rights
in the property were subordinate to the interests of a superior mortgage
held by M. The property also became subject to a tax foreclosure action,
and R Co.’s and M’s mortgages were found to be subordinate to the
interests of the municipality that brought the tax foreclosure action. R
Co. purchased the property for $150,000, pursuant to the tax foreclosure
by sale. As a result of that sale, M received approximately $108,000,
which represented the total purchase price of $150,000 less committee
expenses and the satisfaction of the tax lien. Thereafter, R Co. com-
menced the present action after C Co. failed to pay money damages to
R Co. due to M’s superior encumbrance on the property. The trial court
rendered judgment in favor of R Co. and awarded it $108,000, which
represented R Co.’s loss in equity had its mortgage been superior to
that of M. On appeal, R Co. claimed that the trial court improperly
calculated the damages award by using the tax foreclosure sale price
of the property instead of the estimated fair market value of the property
at the time it commenced its foreclosure action. Held that the trial court
did not err in calculating R Co.’s damages to be $108,000, which was
the actual amount R Co. did not receive as a result of having to satisfy
M’s superior mortgage; R Co.’s claim that the damages should have been
calculated as approximately $270,000, measured as the fair market value
of the property as determined in the foreclosure action less the satisfac-
tion of the tax lien, on the basis that due to the small amount of bidders,
the purchase price from a foreclosure by sale was an unreliable valua-
tion, was unavailing, as the law of contract damages limits an injured
party to its actual loss caused by the breach, and an award in excess
of that amount, based on an estimated fair market value, would have
provided R Co. with an impermissible windfall.
Argued October 25, 2019—officially released March 17, 2020

Procedural History

Action to recover damages for, inter alia, breach of
contract, and for other relief, brought to the Superior
Court in the judicial district of Hartford and tried to
the court, Moukawsher, J.; judgment for the plaintiff,
from which the plaintiff appealed to this court.
Affirmed.
Jon C. Leary, for the appellant (plaintiff).
Frank B. Velardi, Jr., for the appellee (defendant).
Opinion

ELGO, J. In this breach of contract action, the plain-
tiff, RCN Capital, LLC, appeals from the judgment of
the trial court awarding it $108,000 in damages. On
appeal, the plaintiff claims that the court improperly
determined the amount of damages. We affirm the judg-
ment of the trial court.
The following relevant facts are not in dispute. On
June 28, 2012, Sunford Properties & Development, LLC
(Sunford), executed a note in favor of the plaintiff in
exchange for a commercial loan in the amount of
$600,000. To secure the note, Kwok L. Sang executed
and delivered a limited guarantee agreement to the
plaintiff, which was secured by a commercial guarantee
mortgage deed (mortgage) on certain real property
located in Norwich (property).1 On June 29, 2012, the
mortgage was recorded on the Norwich land records.
Under the terms of the loan agreement, Sunford and
Sang directed their attorney—an agent of the defendant,
Chicago Title Insurance Company—to have the defen-
dant issue a mortgage title insurance policy (policy),
insuring the interests of the plaintiff with respect to the
property. The policy was executed on June 29, 2012,
and provided for up to $600,000 in coverage. The policy
insured various types of losses that could be suffered
by the plaintiff, including ‘‘[t]he lack of priority of the
lien of the [i]nsured [m]ortgage upon the [t]itle over
any other lien or encumbrance.’’2 On November 5, 2013,
the policy was modified by way of an endorsement that
included, in part, an increase of coverage to $800,000
and reflected the plaintiff’s name change. That same
day, the note, the limited guarantee, and the commercial
guarantee mortgage were also modified to increase the
loan amount to $800,000.
On April 1, 2014, Sunford defaulted on the loan. On
January 6, 2015, the plaintiff commenced a foreclosure
action seeking a judgment of foreclosure on the prop-
erty.3 During the foreclosure litigation, the plaintiff
learned that its rights in the property as a mortgagee
were subordinate to the interest of a mortgage held by
the Mashantucket Pequot Tribal Nation (Tribal Nation).
The Tribal Nation mortgage was in the principal amount
of $1,400,000 and was recorded on the Norwich land
records in July, 2007. The plaintiff’s original complaint
did not identify the Tribal Nation mortgage as an encum-
brance on the property.4
On April 27, 2015, the property became the subject
of a tax foreclosure action commenced by the city of
Norwich (tax foreclosure action). Both the plaintiff’s
mortgage and the Tribal Nation mortgage were found
to be subordinate in right to the interests of Norwich.5
On May 12, 2016, the court in the tax foreclosure action
rendered a judgment of foreclosure by sale of the
property.
On May 16, 2016, the court in the plaintiff’s foreclo-
sure action rendered a judgment of strict foreclosure
and found the property to have a fair market value of
$304,000.6 On August 19, 2016, the plaintiff purchased
the property for $150,000 pursuant to the tax foreclo-
sure by sale. As a result of the sale to the plaintiff, the
Tribal Nation received $108,478.32, which represented
the total purchase price of $150,000 less committee
expenses and satisfaction of Norwich’s tax lien. Having
now acquired the property through the tax foreclosure
action, the plaintiff filed a motion to open the judgment
in its own foreclosure action. After the court granted
that motion, the plaintiff withdrew its count seeking
foreclosure of the property.7
On April 26, 2016, the plaintiff notified the defendant
of its claim for monetary damages under the policy.
After the defendant failed to pay on the claim, the plain-
tiff instituted this action against the defendant. In its
revised complaint dated May 23, 2017, the plaintiff
alleged a single count of breach of contract and sought
monetary damages for the defendant’s failure to pay
the claim submitted under the policy. On February 20,
2018, the court, Noble, J., denied the defendant’s motion
for summary judgment as to liability. In its memoran-
dum of decision, the court found that, although ‘‘the
plaintiff acquired title [to the property] free and clear
of the Tribal Nation’s mortgage . . . it was required to
satisfy the Tribal Nation’s superior encumbrance to the
extent of the equity remaining in the property. The
partial satisfaction of the Tribal Nation’s mortgage
deprived the plaintiff of access to equity otherwise avail-
able to it to satisfy the debt owed it, thereby causing
it to suffer actual loss.’’
After the defendant conceded liability at trial, the
court, Moukawsher, J., rendered judgment in favor of
the plaintiff on August 27, 2018, awarding the plaintiff
$108,000 in damages. In its memorandum of decision,
the court rejected the plaintiff’s damages valuation of
$269,337.08, which represented the fair market value
of the property at the time of the plaintiff’s foreclosure
action less the $34,662.92 in taxes paid to Norwich.
Relying on Cohen v. Security Title & Guarantee Co.,
212 Conn. 436, 562 A.2d 510 (1989), the court found
that, because $108,000 was the actual loss suffered by
the plaintiff, ‘‘[a]ny other amount is not a reflection of
the security impairment actually suffered by the [plain-
tiff] . . . .’’ This appeal followed.8
On appeal, the plaintiff challenges the court’s mea-
surement of damages. Specifically, it argues that the
court improperly valued its damages at $108,000, repre-
senting the actual loss of equity it would have received
if its mortgage had priority over the Tribal Nation’s
mortgage. The plaintiff asserts that the proper valuation
of damages should have been the fair market value of
the property as determined in its foreclosure action less
the satisfaction of the Norwich tax lien. We disagree.
‘‘Our standard of review applicable to challenges to
damages awards is well settled. . . . [T]he trial court
has broad discretion in determining damages. . . . The
determination of damages involves a question of fact
that will not be overturned unless it is clearly erroneous.
. . . [If], however, a damages award is challenged on
the basis of a question of law, our review [of that ques-
tion] is plenary.’’ (Internal quotation marks omitted.)
Commerce Park Associates, LLC v. Robbins, 193 Conn.
App. 697, 735, 220 A.3d 86 (2019), cert. denied sub nom.
Robbins Eye Center, P.C. v. Commerce Park Associates,
LLC, 334 Conn. 912, 221 A.3d 447 (2020), and cert.
denied sub nom. Robbins Eye Center, P.C. v. Commerce
Park Associates, LLC, 334 Conn. 912, 221 A.3d 448
(2020).
We begin by noting that ‘‘[a] title insurance policy is
a contract of indemnity under which the insurer agrees
to indemnify the insured in a specified amount against
loss through defect of title to real estate. . . . Accord-
ingly, the relationship between an insurance company
and the insured is essentially contractual.’’ (Citation
omitted.) Lee v. Duncan, 88 Conn. App. 319, 325, 870
A.2d 1, cert. denied, 274 Conn. 902, 876 A.2d 12 (2005).
Because the resolution of this claim necessarily
involves the interpretation of an unambiguous contract,
our review is plenary. See, e.g., Joseph General Con-
tracting, Inc. v. Couto, 317 Conn. 565, 575, 119 A.3d
570 (2015).
The title insurance contract at issue in the present
case provides for coverage against loss caused, in part,
by ‘‘[t]he lack of priority of the lien of the [i]nsured
[m]ortgage upon the [t]itle over any other lien or encum-
brance.’’ Expressly excluded from coverage are
‘‘[d]efects, liens, encumbrances, adverse claims, or
other matters . . . resulting in no loss or damage to
the [plaintiff].’’ As our Supreme Court has held, ‘‘[t]his
exclusion reflects the fact that [t]itle insurance is . . .
an indemnity contract and as such it is to provide reim-
bursement for actual loss only.’’9 (Emphasis in original;
internal quotation marks omitted.) Cohen v. Security
Title & Guarantee Co., supra, 212 Conn. 439. Thus, the
proper measurement of damages is limited to the actual
loss suffered by the plaintiff.
As the trial court found in denying the defendant’s
motion for summary judgment, the plaintiff could
acquire title to the property free and clear of encum-
brances only by partially satisfying the Tribal Nation’s
superior mortgage. The record unequivocally indicates
that the plaintiff would have received approximately
$108,000 had its mortgage been superior to that of the
Tribal Nation’s mortgage. Because its mortgage was not
superior, the court found that the plaintiff sustained an
actual loss of approximately $108,000 upon its purchase
of the property pursuant to the tax foreclosure action.
In challenging this valuation, the plaintiff submits
that the correct methodology for calculating damages
is the fair market value of the property determined
during the plaintiff’s foreclosure action ($304,000) less
the amount required to satisfy Norwich’s tax lien
($33,780), for a total of $270,220. It asserts that, due to
the small number of bidders, the purchase price from
a foreclosure by sale is an unreliable valuation for pur-
poses of damages.10
In support of its claim that the sales price from a
foreclosure sale is not reliable for the valuation of dam-
ages, the plaintiff cites to New England Savings Bank
v. Lopez, 227 Conn. 270, 630 A.2d 1010 (1993). In that
case, the defendants claimed that the trial court’s use
of the foreclosure sale price of the property—instead
of the property’s fair market value—to calculate a defi-
ciency judgment violated their right to due process.
Id., 274–75. In rejecting this claim, our Supreme Court
stated in dicta that, unlike a foreclosure by sale, ‘‘[f]air
market value is generally said to be the value that would
be fixed in fair negotiations between a desirous buyer
and a willing seller, neither under any undue compul-
sion to make a deal. . . . An auction sale, such as a
foreclosure sale, is not designed to reach that result
because there is no opportunity for negotiations, and
the seller, namely, the committee appointed by the trial
court to conduct the sale, is under compulsion to make
a deal, in the sense that it is required to take the highest
bid . . . .’’11 (Citations omitted; emphasis in original;
internal quotation marks omitted.) Id., 280.
Our appellate courts have not had the occasion to
address the issue of the measurement of an actual loss
sustained by an insured lender under a title insurance
policy for purposes of calculating damages. Courts in
other states, however, have used the foreclosure sale
price to determine the actual loss suffered by an insured
mortgagee under an insurance policy when that loss
resulted from a superior encumbrance.12 See Grun-
berger v. Iseson, 75 App. Div. 2d 329, 331–32, 429
N.Y.S.2d 209 (1980) (market price is irrelevant to
determining actual loss under title insurance policy
where actual sale price establishes amount available
to lienholders); Chicago Title Ins. Co. v. Huntington
National Bank, 87 Ohio St. 3d 270, 274–75, 719 N.E.2d
955 (1999) (appropriate measure of damages under title
insurance policy is what buyer actually paid at foreclo-
sure sale and what lender actually received, ‘‘not a hypo-
thetical valuation based on speculation had the property
been sold on the open market’’).
Under the present circumstances, we believe that
the analysis in Chicago Title Ins. Co. v. Huntington
National Bank, supra, 87 Ohio St. 3d 273, is highly
persuasive regarding how to calculate the actual loss
suffered by an insured under a title insurance policy.
In that case, the Supreme Court of Ohio was presented
with a similar question of whether the actual loss suf-
fered by an insured whose policy covered the insured
having first priority with respect to other encum-
brances,13 was the proceeds it would have received from
a foreclosure by sale had a superior lien not existed.
Id., 273–74. In answering that question in the affirma-
tive, the court emphasized that, when an insured’s cov-
erage includes losses incurred as a result of a superior
lienholder foreclosing on the property, ‘‘[t]he appro-
priate measure of damages is based upon what the
buyer actually paid at the foreclosure sale and what
the [superior] lender actually received . . . .’’ Id., 274.
Because the foreclosure sale resulted in the superior
lienholder receiving approximately $40,000 in proceeds,
and because the insured’s indebtedness remained above
$60,000, the court held that the $40,000 received by the
superior lienholder was the actual loss sustained by the
insured. Id. In so doing, the court reasoned that ‘‘the
use of the actual sale price of the secured property to
measure loss instead of an estimated fair market value
provides the parties with a conclusive method of valua-
tion that is not based on opinion or speculation.’’ Id.,
275. We concur with that assessment.
In the present case, the sale of the property, pursuant
to the tax foreclosure action, resulted in a purchase
price of $150,000. Of that amount, the Tribal Nation
received approximately $108,000 after satisfaction of
the Norwich tax lien and foreclosure expenses. But
for the Tribal Nation’s superior mortgage, the plaintiff,
therefore, would have received $108,000. Thus, under
the circumstances before us, the plaintiff sustained an
actual loss of $108,000. An award in excess of that
amount would provide the plaintiff with an impermissi-
ble windfall. See FCM Group, Inc. v. Miller, 300 Conn.
774, 804, 17 A.3d 40 (2011) (‘‘[g]uarding against exces-
sive compensation, the law of contract damages limits
the injured party to damages based on his actual loss
caused by the breach’’ [internal quotation marks omit-
ted]). We therefore conclude that the court properly
calculated the plaintiff’s damages.
The judgment is affirmed.
In this opinion the other judges concurred.
1
The note was also secured by a different property located in Norwich.
That property is not relevant to this appeal.
2
The policy originally named the insured as Entertainment Financial,
LLC, which was the former name of the plaintiff. The November 5, 2013
modification of the policy, evidenced by an endorsement, reflected the
plaintiff’s name change to RCN Capital, LLC.
3
In a three count complaint, the plaintiff asserted claims against Sunford,
Sang, and another individual—Janny Lam. Those claims included (1) foreclo-
sure of a separate property, (2) foreclosure of the property at issue in the
present case, and (3) a personal guarantee collection as to Lam.
4
The plaintiff filed a second revised complaint on December 24, 2015,
that identified the Tribal Nation mortgage as superior to its mortgage.
5
The policy excluded from coverage ‘‘[a]ny lien on the [t]itle for real estate
taxes or assessments imposed by a governmental authority and created or
attaching between [the date] of [the policy] and the date of recording of
the [i]nsured [m]ortgage in the Public Records.’’ Neither party argues that
the Norwich tax lien was covered by the policy.
6
The court also rendered judgment in favor of the plaintiff with respect
to its claims seeking strict foreclosure of a different property and collection
on the personal guarantee.
7
In its motion to open the judgment, the plaintiff argued that, because
the property was sold pursuant to the tax foreclosure action, its claim
seeking strict foreclosure of the property was moot.
8
After this appeal was filed, and in response to the plaintiff’s motion for
articulation, the court issued an order in which it clarified that it took
judicial notice of the pleadings, orders, and judgments in both the plaintiff’s
foreclosure action and the tax foreclosure action. The court further clarified
that ‘‘[i]ts decision [on the plaintiff’s damages] was made with an understand-
ing of them.’’
9
We further note that paragraph 8 of the policy explicitly states that ‘‘[t]his
policy is a contract of indemnity against actual monetary loss or damage
sustained or incurred by the [insured] who has suffered loss or damage by
reason of matters insured against by this policy.’’ (Emphasis added.)
10
The plaintiff also asserts that it likely would have paid the Norwich tax
lien to avoid the tax foreclosure action from going to judgment. At oral
argument before this court, however, the plaintiff conceded that no evidence
existed to support that assertion. Such speculation for the purposes of
calculating damages is impermissible. See Meadowbrook Center, Inc. v.
Buchman, 149 Conn. App. 177, 191–92, 90 A.3d 219 (2014).
11
Although not directly relevant to our resolution of this claim, it is not
lost on this court that the plaintiff availed itself of the ‘‘unreliable’’ valuation
process in order to secure the property at a price well below the fair market
valuation of its own expert witness.
12
We acknowledge that ‘‘[t]here is a fundamental distinction between the
indemnifiable loss of an insured lender and the indemnifiable loss of an
insured owner of property by virtue of title defects or undisclosed liens.’’
Cale v. Transamerica Title Insurance, 225 Cal. App. 3d 422, 426, 275 Cal.
Rptr. 107 (1990). This difference is significant ‘‘because [t]he fee interest of
an owner is immediately diminished by [the] presence of [a] lien since resale
value will always reflect the cost of removing the lien.’’ (Internal quotation
marks omitted.) Twin Cities Metro-Certified Development Co. v. Stewart,
868 N.W.2d 713, 717 (Minn. App. 2015). However, because measuring dam-
ages incurred by an insured owner is not before us, we do not address
that issue.
13
The relevant language of the title insurance policy in Huntington
National Bank is similar to the policy at issue in the present matter. For
instance, the policy in that case covered any loss or damage incurred by
the insured by reason of ‘‘[t]he priority of any lien or encumbrance over
the lien of the insured mortgage.’’ Chicago Title Ins. Co. v. Huntington
National Bank, supra, 87 Ohio St. 3d 273. It further excluded from coverage
any damages arising from ‘‘[d]efects, liens, encumbrances, adverse claims
or other matters either created . . . by the insured or resulting in no loss
or damage to the insured claimant.’’ (Internal quotation marks omitted.) Id.
Moreover, neither the policy in Huntington National Bank nor the policy
at issue here defined the term ‘‘loss.’’ See id.