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Connecticut: Discovery Sanctions against Lender Reversed on Appeal

Posted By USFN, Tuesday, May 7, 2013
Updated: Monday, November 30, 2015

May 7, 2013


by Geoffrey Milne
Hunt Leibert – USFN Member (Connecticut)

Lenders facing a barrage of discovery from borrower’s counsel may find some comfort in Bank of NY as Trustee v. Bell. This Connecticut Appellate Court decision was officially released on April 23, 2013. It addresses the role of permissible discovery in a mortgage-backed securitization.

In Bell, the trial court ordered the foreclosing lender, the Bank of NY as Trustee for BS Alt A 2005-9, to produce voluminous records regarding other mortgage trusts beyond that which contained the subject loan. Borrowers’ counsel argued that this discovery was necessary to meet the “all or substantially all” test to be a successor trustee under the pooling and servicing agreement. Upon motion, the trial court then found the lender in contempt for failing to produce the discovery. The lender appealed, and the Connecticut Appellate Court reversed the trial court and vacated the contempt order. In reversing the trial court and finding an abuse of discretion, the appellate court stated:

“The plaintiff and Bank of New York, however, are separate entities. See 90 C.J.S. 131, Trusts § 2 (2010) (“[a] fiduciary acting in a representative capacity is a different person for judicial purposes from the same person acting in an individual capacity”). The interrogatories and requests for production to which the court ordered the plaintiff to respond were not limited to the trust assets. Furthermore, Bank of New York was never a party to this action. … Despite Bank of New York’s nonparty status, the court broadened the scope of interrogatories and requests for production to include the entire transaction between JP Morgan Chase and Bank of New York, a nonparty. … [T]he court had no authority to order the plaintiff to turn over documents that belonged to Bank of New York, a separate nonparty entity, nor did it have any authority in the circumstances of this case to order the plaintiff as trustee for BS Alt A 2005-9 to turn over documents from other trusts.”

This ruling by the Connecticut Appellate Court shows that some trial courts have difficulty understanding the securitization process and the role of a trustee. Bell illustrates the need for filing appeals of trial court orders that are an abuse of discretion.

Editor’s Note: The author’s firm represented the appellant (plaintiff) in the case summarized here.

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