Opinion ID: 715777
Heading Depth: 2
Heading Rank: 2

Heading: The Valuation

Text: 22 At trial, Appellants spent considerable energy contesting the low valuation claimed by the FDIC for the foreclosed condominiums. They did so, of course, because the lower the valuation, the higher the deficiency between the valuation and the unpaid face amount of the note plus interest for which they would be liable. The district court having accepted the FDIC's proposed valuation, Appellants now challenge the valuation in two ways. First, they argue that the FDIC expert's proposed valuation cannot be accepted as a matter of law. Second, they argue that to the extent that the district court relied upon the testimony of the FDIC's rebuttal expert as affirmative evidence to support the FDIC's proposed valuation, it was in error.
23 Under Connecticut law, in a proceeding for a deficiency judgment, the plaintiff has the burden of proof of establishing, by a preponderance of the evidence, the value of the foreclosed property as of the date of the vesting of title to the property. See Eichman v. J & J Bldg. Co., 216 Conn. 443, 449, 582 A.2d 182, 185 (1990). The Connecticut courts have refused deficiency judgments where the plaintiff's valuation evidence has been found to be incredible. See, e.g., Farmers & Mechanics Sav. Bank v. Durham Realty, Inc., 34 Conn.App. 204, 640 A.2d 1017 (1994). 24 In its case-in-chief, the FDIC offered the testimony of expert Robert Royce. Royce valued the real estate on the basis of a sale of all of the property to a single purchaser and testified that he used a valuation methodology that was a blend of two approaches to valuation: direct sales comparison and income capitalization. Suna alleges that Royce's testimony was neither credible nor reliable. 25 Federal Rule of Evidence 702 provides as follows: 26 If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise. 27 It is well-established that expert testimony must be based upon reliable theories or principles. Glen Weissenberger, Federal Evidence 346 (2d ed.1995) (collecting cases). The Supreme Court recently stated as much in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, ----, 113 S.Ct. 2786, 2799, 125 L.Ed.2d 469 (1993) (the trial judge [has] the task of ensuring that an expert's testimony both rests on a reliable foundation and is relevant to the task at hand). However, the Daubert Court also made clear that  'general acceptance' is not a necessary precondition to the admissibility of scientific evidence under the Federal Rules of Evidence and that the Federal Rules of Evidence superseded the general acceptance test of Frye v. United States, 293 F. 1013 (D.C.Cir.1923). Daubert, 509 U.S. at ----, ----, 113 S.Ct. at 2793, 2799. The Court found that a rigid 'general acceptance' requirement would be at odds with the 'liberal thrust' of the Federal Rules and their 'general approach of relaxing the traditional barriers to opinion testimony.'  Id. at ----, 113 S.Ct. at 2794. However, the Court explained that [t]he adjective 'scientific' implies a grounding in the methods and procedures of science. Similarly, the word 'knowledge' connotes more than subjective belief or unsupported speculation. Id. at ----, 113 S.Ct. at 2795. 28 The Daubert Court stated that, in applying Rule 702, district courts should consider several factors: (1) whether the theory or technique can be (and has been) tested; (2) whether the theory or technique has been subjected to peer review and publication; and (3) the known or potential rate of error associated with a particular scientific technique. Id. at ---- - ----, 113 S.Ct. at 2796-97. The Court was, however, careful not to presume to set out a definitive checklist or test. Id. at ----, 113 S.Ct. at 2796. For example, the Court stated that [p]ublication ... does not necessarily correlate with reliability; that in some instances well-grounded but innovative theories will not have been published; and that [s]ome propositions ... are too particular, too new, or of too limited interest to be published. Id. at ----, 113 S.Ct. at 2797. The Daubert Court expressed confidence in the capacity of federal judges to make the appropriate validity and relevance inquiries. 29 Suna argues that Royce's opinion testimony was based upon a developmental analysis unknown to appraisal literature, unique to him and on factual assumptions which were without any reasonable foundation. The FDIC accurately notes that it was the job of the magistrate judge hearing the case to make the determinations about reliability and relevancy. We should not disturb the findings of Magistrate Eagan unless they are clearly erroneous. See Carter v. South Cent. Bell, 912 F.2d 832, 841 (5th Cir.1990) (A magistrate trying a case with the consent of the parties is entitled to the same deference that is given to findings of a district judge.), cert. denied, 501 U.S. 1260, 111 S.Ct. 2916, 115 L.Ed.2d 1079 (1991); see also American Soc'y of Composers, Authors & Publishers v. Showtime/The Movie Channel, Inc., 912 F.2d 563, 569 (2d Cir.1990). While Royce's testimony is lengthy and not as clear as we might wish, there is ample evidence to support the position taken by the district court. For example, Royce testified at several points that the valuation method he used was a hybrid of two widely-recognized methods and was the most appropriate method for valuing the class of property at issue. Suna argues that certain portions of Royce's testimony contradicted other portions. While this may in fact be true, it was for the district court, in its discretion, to determine the relative weight to place on the differing portions of the testimony. We are unable to conclude that Magistrate Eagan abused his discretion in finding that Royce's testimony was reliable and relevant.
30 Magistrate Eagan allowed an FDIC witness, John LoMonte, to testify in rebuttal but made clear that LoMonte's testimony was to be confined to a rebuttal of the testimony of Sachs's appraisal expert, Norman Benedict. Magistrate Eagan stated: 31 I will allow you to put him on to rebut anything that Mr. Benedict has said, and that may mean that he just has a different opinion of that. The only thing that Mr. Benedict testified to was on a comparison basis. He did not testify on any other basis than that. So I'm sure I would not allow it on any other method of appraisal because that would be just a chance for you to get a second bite of the apple. 32 Suna asserts not only that LoMonte did not restrict his testimony to rebuttal of Benedict's testimony, but also that Magistrate Eagan impermissibly relied on the improper portions of the LoMonte testimony in adopting the FDIC valuation. Suna claims that [a]s a matter of law, the testimony of LoMonte should not have been used as a basis for valuing the Property. Suna offers no authority to support this argument, nor have we been able to locate any. To the contrary, it is well-settled that [a] district court has wide discretion in determining whether to permit evidence on rebuttal. United States v. Tejada, 956 F.2d 1256, 1266 (2d Cir.), cert. denied, 506 U.S. 841, 113 S.Ct. 124, 121 L.Ed.2d 80 (1992); see also United States v. Hiss, 185 F.2d 822, 832 (2d Cir.1950) (Whether certain testimony should have been received in rebuttal is a matter[ ] so clearly within the discretion of the judge ... that we think no more need be said.... [W]hat is within the scope of permissible contradiction is largely a matter of avoiding confusion of issues, and as such should be left to the discretion of the trial judge.), cert. denied, 340 U.S. 948, 71 S.Ct. 532, 95 L.Ed. 683 (1951). Nothing in the record of this case leads us to conclude that Magistrate Eagan abused his discretion in allowing LoMonte's testimony and in taking it into consideration in reaching his decision.