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DOCKET NO. CV 13 6007042 SUPERIOR COURT
HAWKINS STREET, LLC WINDHAM JUDICIAL DISTRICT
Vv.
ONG REAL PROPERTY HOLDINGS NOVEMBER 21, 2014
LLC
MEMORANDUM OF DECISION ON MOTION FOR PROTECTIVE ORDER
AND MOTION TO QUASH A SUBPOENA DUCES TECUM
In this suit seeking foreclosure of a mortgage on real property due to alleged
we
lag Sieve on the part of the mortgagor, the defendant moves for a protective
cL
ea 5 Sie plaintiff from making any attempts to depose defendant’s business
2S=25
Hh Gand to quash a subpoena duces tecum plaintiff had served demanding that she
k= appear for a deposition along with substantial financial information of defendant.
including tax returns, ledgers and check registers, bank and checking account statements
and more. The gravamen of the motions is that the case is in the prejudgment phase, and
that the material sought is overly broad, intrusive, and aimed at harassing defendant in
light of the issues the court must determine in order to enter a judgment. Defendant
concedes that if a deficiency judgment is sought after judgment, the present inquiry might
be warranted. Plaintiff objected to each motion. The parties appeared before this court at
short calendar and argued their respective positions.
The complaint here is dated June 18, 2013, and alleges a failure of monthly
principal and interest payments, along with tax payments, going back to October of 2012
On plaintiff's motion, the court (Riley, J.) appointed a receiver of rents on August 19
2013. Plaintiff moved for a judgment of strict foreclosure on June 12, 2014, but for
OFt
Co: pe noe ? L DECISIONS.
EICA
TUU
1
(f
cos PAM WEY
undisclosed reasons has not sought a hearing on that motion as of today, November 21.
In the fifteen-months between the appointment of the receiver and this moment, the
dispute over the instant discovery efforts appears to be the only significant development
in the case.
Defendant relies upon the provision within Practice Book §13-5 permitting a
court, for good cause shown, to enter an order protecting a party from annoyance,
embarrassment, oppression, or undue burden or expense. The matter is one left to the
discretion of this court, after determining whether “good cause” exists for the order
sought. “Good cause” to bar this type of discovery is the counterweight to plaintiff's
contention that the discovery ought to be permitted “if the disclosure sought would be of
assistance in the prosecution or defense of the action;” Practice Book §13-2.
Defendant cites three trial court decisions which it maintains support its quest,
namely, State DOT v. Steinman Boynton Gronquist & Birdsall, Inc., Superior Court,
judicial district of Hartford, Docket No. CV97 0571964 (May 26, 1998; Hennessey, J.)
Bank of Boston v. Stiles, Superior Court, judicial district of Hartford, Docket No. CV96
0557595 (August 24, 1999; Freed, J.), and Seifert v. Nemeth/Martin Personnel
Consulting, Superior Court, judicial district of Danbury, Docket No. CV99 0335762
(August 21, 2000; Moraghan, J.). The State DOT case is inapposite; the court there
issued orders similar to those sought here, but in connection with a party’s attempt to
depose the opposing parties counsel; the case turned upon issues of whom that attorney
represented, and privilege and attorney work product considerations. The Bank of
Boston was successful in the case bearing its name in preventing defendant access to the
bank’s internal documents relating to settlement discussions, after the court determined
that none of the information sought had anything to do with preparation of a defense, the
basis upon which they were sought. In the Seifert case, plaintiff sued on two theories,
defendant counter-sued on two theories, and the subject of the protective order was
information irrelevant to any of those four causes of action, although it might have been
pertinent to another claim that was not then in litigation; the court granted the protection
sought.
Plaintiff here indicates that the property encumbered by the mortgage is a multi-
family residence. Despite the receiver’s efforts, he has been unable through working
with the tenants in possession to discern exactly what the terms of each lease are, or
whether rentals are current or in arrears, or what repairs and code violations might need
to be addressed. In this case, the court accepts the representation that only the defendant
would have access to the information plaintiff seeks, and that plaintiff has no practical
means of obtaining such information at all absent disclosure by defendant.
"In order to establish a prima facie case in a mortgage foreclosure action, the
plaintiff must prove by a preponderance of the evidence that it is the owner of the note
and mortgage, that the defendant mortgagor has defaulted on the note and that any
conditions precedent to foreclosure, as established by the note and mortgage, have been
satisfied;” United States Bank, N.A. v. Foote, 151 Conn.App. 620, 632 (2014). A court
cannot enter a judgment in such a case, however, until the plaintiff also produces
evidence of the value of the subject property. This requirement is elementary. The
relationship of value to debt is the predominant factor in deciding whether the judgment
ought to be of strict foreclosure, or foreclosure by sale.
Although in a case involving municipal tax assessments, rather than foreclosure,
our Supreme Court has indicated that of the three methods appraisers utilize to arrive at
an opinion of value — comparable sales, income, and cost — the preferred of the three with
respect to this form of property was in that case, and may also be in most such cases, the
income approach. “The proper method for assessing the true value of [plaintiff's]
property is the capitalization of net income method as outlined in §§ 12-63b(a)(3) and 12-
63b(b). ‘The income capitalization approach to value consists of methods, techniques,
and mathematical procedures that an appraiser uses to analyze a property's capacity to
generate benefits (i.e., usually the monetary benefits of income and reversion) and
convert these benefits into an indication of present value.’ Appraisal Institute, The
Appraisal of Real Estate (10th Ed.1992) p. 409. It follows that the higher the contract
rent, the higher the income expectancy and the higher the property valuation. When, as in
this case, the contract rent differs significantly from the estimated rent that the property
would command on the open market, the relative weight given to either has a potentially
significant impact on the calculation of the true and actual value.” First Bethel Associates
v. Town of Bethel, 231 Conn. 731, 739 (1995).
The court has reviewed the list of items plaintiff demanded in the subpoena duces
tecum, and finds that in general, the information sought is material to the preparation of
an accurate appraisal of the premises. That information ought to be disclosed. The
Practice Book “liberally permits discovery of information 'material to the subject matter
involved in the pending action;'" Tianti, ex rel. Gluck v. William Raveis Real Estate, Inc. >
231 Conn. 690, 701 (n. 12), (1995). The court holds that number 8, “Any documents
which relate to loans, distributions, profits, compensation or inter-company transfers
from rents or revenues of the subject property to investors, principals, or affiliates of the
defendant” focuses not upon income but upon potentially fraudulent transfers of the
defendant’s assets, and thus departs from the realm of materiality to this case and into
that of laying the groundwork for another suit not yet pending; it must await that suit.
Accordingly:
D. The motion for a protective order is denied.
2). The motion to quash subpoena is granted only as to number 8 and as to
number 1, except that the Schedule E relating to the subject premises for each year sought
shall be disclosed. The motion to quash is denied as to items 2, 3, 6, 7, 9, and 12, except
that the limitations to “the subject property” are to be observed in the examination, and
the same limitation, though not expressed, is to apply in the review of items listed in 4,
10, and 11. The motion is denied in its entirety with respect to number 5.
Boland, J.
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DOCKET NO. CV 13 6007042 SUPERIOR COURT HAWKINS STREET, LLC WINDHAM JUDICIAL DISTRICT Vv. ONG REAL PROPERTY HOLDINGS NOVEMBER 21, 2014 LLC MEMORANDUM OF DECISION ON MOTION FOR PROTECTIVE ORDER AND MOTION TO QUASH A SUBPOENA DUCES TECUM In this suit seeking foreclosure of a mortgage on real property due to alleged we lag Sieve on the part of the mortgagor, the defendant moves for a protective cL ea 5 Sie plaintiff from making any attempts to depose defendant’s business 2S=25 Hh Gand to quash a subpoena duces tecum plaintiff had served demanding that she k= appear for a deposition along with substantial financial information of defendant. including tax returns, ledgers and check registers, bank and checking account statements and more. The gravamen of the motions is that the case is in the prejudgment phase, and that the material sought is overly broad, intrusive, and aimed at harassing defendant in light of the issues the court must determine in order to enter a judgment. Defendant concedes that if a deficiency judgment is sought after judgment, the present inquiry might be warranted. Plaintiff objected to each motion. The parties appeared before this court at short calendar and argued their respective positions. The complaint here is dated June 18, 2013, and alleges a failure of monthly principal and interest payments, along with tax payments, going back to October of 2012 On plaintiff's motion, the court (Riley, J.) appointed a receiver of rents on August 19 2013. Plaintiff moved for a judgment of strict foreclosure on June 12, 2014, but for OFt Co: pe noe ? L DECISIONS. EICA TUU 1 (f cos PAM WEY undisclosed reasons has not sought a hearing on that motion as of today, November 21. In the fifteen-months between the appointment of the receiver and this moment, the dispute over the instant discovery efforts appears to be the only significant development in the case. Defendant relies upon the provision within Practice Book §13-5 permitting a court, for good cause shown, to enter an order protecting a party from annoyance, embarrassment, oppression, or undue burden or expense. The matter is one left to the discretion of this court, after determining whether “good cause” exists for the order sought. “Good cause” to bar this type of discovery is the counterweight to plaintiff's contention that the discovery ought to be permitted “if the disclosure sought would be of assistance in the prosecution or defense of the action;” Practice Book §13-2. Defendant cites three trial court decisions which it maintains support its quest, namely, State DOT v. Steinman Boynton Gronquist & Birdsall, Inc., Superior Court, judicial district of Hartford, Docket No. CV97 0571964 (May 26, 1998; Hennessey, J.) Bank of Boston v. Stiles, Superior Court, judicial district of Hartford, Docket No. CV96 0557595 (August 24, 1999; Freed, J.), and Seifert v. Nemeth/Martin Personnel Consulting, Superior Court, judicial district of Danbury, Docket No. CV99 0335762 (August 21, 2000; Moraghan, J.). The State DOT case is inapposite; the court there issued orders similar to those sought here, but in connection with a party’s attempt to depose the opposing parties counsel; the case turned upon issues of whom that attorney represented, and privilege and attorney work product considerations. The Bank of Boston was successful in the case bearing its name in preventing defendant access to the bank’s internal documents relating to settlement discussions, after the court determined that none of the information sought had anything to do with preparation of a defense, the basis upon which they were sought. In the Seifert case, plaintiff sued on two theories, defendant counter-sued on two theories, and the subject of the protective order was information irrelevant to any of those four causes of action, although it might have been pertinent to another claim that was not then in litigation; the court granted the protection sought. Plaintiff here indicates that the property encumbered by the mortgage is a multi- family residence. Despite the receiver’s efforts, he has been unable through working with the tenants in possession to discern exactly what the terms of each lease are, or whether rentals are current or in arrears, or what repairs and code violations might need to be addressed. In this case, the court accepts the representation that only the defendant would have access to the information plaintiff seeks, and that plaintiff has no practical means of obtaining such information at all absent disclosure by defendant. "In order to establish a prima facie case in a mortgage foreclosure action, the plaintiff must prove by a preponderance of the evidence that it is the owner of the note and mortgage, that the defendant mortgagor has defaulted on the note and that any conditions precedent to foreclosure, as established by the note and mortgage, have been satisfied;” United States Bank, N.A. v. Foote, 151 Conn.App. 620, 632 (2014). A court cannot enter a judgment in such a case, however, until the plaintiff also produces evidence of the value of the subject property. This requirement is elementary. The relationship of value to debt is the predominant factor in deciding whether the judgment ought to be of strict foreclosure, or foreclosure by sale. Although in a case involving municipal tax assessments, rather than foreclosure, our Supreme Court has indicated that of the three methods appraisers utilize to arrive at an opinion of value — comparable sales, income, and cost — the preferred of the three with respect to this form of property was in that case, and may also be in most such cases, the income approach. “The proper method for assessing the true value of [plaintiff's] property is the capitalization of net income method as outlined in §§ 12-63b(a)(3) and 12- 63b(b). ‘The income capitalization approach to value consists of methods, techniques, and mathematical procedures that an appraiser uses to analyze a property's capacity to generate benefits (i.e., usually the monetary benefits of income and reversion) and convert these benefits into an indication of present value.’ Appraisal Institute, The Appraisal of Real Estate (10th Ed.1992) p. 409. It follows that the higher the contract rent, the higher the income expectancy and the higher the property valuation. When, as in this case, the contract rent differs significantly from the estimated rent that the property would command on the open market, the relative weight given to either has a potentially significant impact on the calculation of the true and actual value.” First Bethel Associates v. Town of Bethel, 231 Conn. 731, 739 (1995). The court has reviewed the list of items plaintiff demanded in the subpoena duces tecum, and finds that in general, the information sought is material to the preparation of an accurate appraisal of the premises. That information ought to be disclosed. The Practice Book “liberally permits discovery of information 'material to the subject matter involved in the pending action;'" Tianti, ex rel. Gluck v. William Raveis Real Estate, Inc. > 231 Conn. 690, 701 (n. 12), (1995). The court holds that number 8, “Any documents which relate to loans, distributions, profits, compensation or inter-company transfers from rents or revenues of the subject property to investors, principals, or affiliates of the defendant” focuses not upon income but upon potentially fraudulent transfers of the defendant’s assets, and thus departs from the realm of materiality to this case and into that of laying the groundwork for another suit not yet pending; it must await that suit. Accordingly: D. The motion for a protective order is denied. 2). The motion to quash subpoena is granted only as to number 8 and as to number 1, except that the Schedule E relating to the subject premises for each year sought shall be disclosed. The motion to quash is denied as to items 2, 3, 6, 7, 9, and 12, except that the limitations to “the subject property” are to be observed in the examination, and the same limitation, though not expressed, is to apply in the review of items listed in 4, 10, and 11. The motion is denied in its entirety with respect to number 5. Boland, J.