CSFB 2001-CP-4 Princeton Park Corporate Center, LLC v. SB Rental I, LLC
New Jersey Superior Court, Appellate Division
980 A.2d 1, 410 N.J. Super. 114 (2009)
Credit Suisse First Boston Mortgage Capital, LLC (CSFB) (plaintiff) agreed to give a mortgage loan to SB Rental I, LLC and its principals as guarantors (collectively, SB Rental) (defendants). The mortgage note provided that the loan was a nonrecourse obligation that allowed CSFB to seek recourse against SB Rental’s secured property but not against the guarantors personally. However, a carveout provision stated that the nonrecourse protection would be destroyed if SB Rental obtained subordinate financing without CSFB’s written consent. SB Rental obtained a second mortgage on the property without CSFB’s consent and paid off the second mortgage. SB Rental later failed to make its mortgage payment to CSFB, and CSFB foreclosed on the property. CSFB then sued SB Rental personally seeking the balance of the loan. SB Rental argued that because the second mortgage was paid in full by the time SB Rental defaulted on CSFB’s loan, the nonrecourse carveout was unrelated to any harm suffered by CSFB and was instead an unenforceable penalty for defaulting on the loan. The trial court disagreed and held that the nonrecourse carveout was enforceable because it addressed liability and not damages. SB Rental appealed.
Rule of Law
Holding and Reasoning (Parrillo, J.)
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