Judicial District of Hartford


      Foreclosure; Deficiency Judgment; Whether Plaintiff Adequately Proved Fair Market Value of Property in Deficiency Judgment Proceeding; Whether Trial Court Properly Found Value of Property by Treating Leased Fee Interest Value as Equivalent to Fee Simple Interest Value.  The named plaintiff brought this action seeking to foreclose a mortgage secured by defendant Signature Properties’ commercial property in New London.  Signature’s obligations under the note and mortgage were guaranteed by defendants Andrew Julian and Michael Murray (the guarantors).  While the action was pending, Shaw’s New London, LLC (Shaw’s), was substituted as plaintiff.  The trial court rendered a judgment of strict foreclosure.  After the Supreme Court affirmed that judgment on appeal, the trial court set new law days.  The defendants did not redeem on their law days, and title to the property vested in Shaw’s.  Shaw’s then filed a motion for a deficiency judgment.  The trial court held a hearing on the motion pursuant to General Statutes § 49-14 (a), which provides that the court “shall hear the evidence, establish a valuation for the mortgaged property and shall render judgment for the plaintiff for the difference, if any, between such valuation and the plaintiff’s claim.”  At the hearing, Shaw’s presented an appraisal report and the testimony of its appraiser.  The appraiser calculated the fair market value of the property to be $5.3 million and testified that he had performed his calculations on a “leased fee interest” basis using contract rates and not a “fee simple interest” basis using market rates.  A “leased fee interest” is an ownership interest in which the possessory interest is held by another party by virtue of a lease, whereas a “fee simple interest” is an unencumbered ownership interest.  The appraiser also opined that, here, there would be no significant difference between the leased fee value and the fee simple value.  The guarantors argued that § 49-14 (a) required that the value of the property to be appraised on a “fee simple interest” basis.  The trial court rejected that claim, observing that the “leased fee interest is simply the fee simple interest encumbered by a lease [and that] if the lease is at market rent, then the leased fee value and the fee simple value are equal.”  The court noted that the defendants had offered no evidence to contradict the plaintiff’s appraiser’s analysis that the contract rents in place on the mortgaged property were close or equal to market rates and concluded that it was justified in finding the fair market value of the property to be $5.3 million.  The court rendered a deficiency judgment, and the guarantors appeal.  The Supreme Court will decide whether the trial court properly rendered a deficiency judgment of $13,264,319, where the guarantors argue that (1) Shaw’s did not establish the property’s fair market value and therefore failed to meet its burden in seeking a deficiency judgment under § 49-14 and (2) the “leased fee interest” valuation and the “fee simple interest” valuation of the property were not equivalent, such that the “leased fee interest” should not have been used in determining the property’s fair market value for purposes of calculating the deficiency judgment.