SIGNATURE PROPERTIES, LLC, et al., SC 19050/19051/19052

Judicial District of Hartford


     Foreclosure; Whether a Mortgage Loan Servicer has Standing to Bring a Foreclosure Action; Whether Mortgagor Violated Mortgage Covenants; Whether an Ownership Interest in a Limited Liability Company is Subject to Prejudgment Attachment.  J.E. Robert Company, Inc., in its capacity as mortgage loan servicer for LaSalle National Bank Association, as Trustee (LaSalle), brought this action to foreclose a mortgage on commercial property owned by defendant Signature Properties, LLC (Signature).  The mortgage secured a conditional non-recourse promissory note in the amount of $8.8 million.  Guarantors of Signature's obligations under the note were also named as defendants.  After commencement of the action, LaSalle assigned the note, mortgage, and guaranty to Shaw's New London, LLC (SNL), and SNL was subsequently substituted as the plaintiff.  The trial court granted summary judgment in favor of SNL, finding that Signature had defaulted on its payment obligations and that its breach of covenants in the mortgage invalidated the non-recourse provisions in the loan documents.  The court also ruled that the guarantors were liable for Signature's full recourse obligation, including any deficiency judgment.  The defendants then moved to dismiss this action for lack of subject matter jurisdiction, claiming that J.E. Robert lacked standing to sue because it was never the holder of the note and mortgage.  The trial court denied the motion to dismiss, determining that, because J.E. Robert had been vested with the right to enforce the note and had been given possession of the note for that purpose, it had standing to foreclose under the Uniform Commercial Code (UCC).  Alternatively, the court ruled that, even if J.E. Robert lacked standing, the action was not void ab initio because SNL's substitution as plaintiff cured any standing defect.  The court then rendered a judgment of strict foreclosure.  The defendants appeal, claiming that J.E. Robert lacked standing to bring this action because it was never the holder and owner of the note or mortgage and that the court erred in finding that the non-recourse provisions were unenforceable.  SNL counters that J.E. Robert had standing as a transferee of the note under §§ 42a-3-203 and 42a-3-301 of the UCC.  SNL also argues that, as servicer for a mortgage loan securitization trust, J.E. Robert was the real party in interest to enforce the note and mortgage held in the trust or, at very least, had standing as a nominee for the trustee. Lastly, SNL argues that, even if J.E. Robert lacked standing, the trial court nonetheless had jurisdiction under General Statutes § 52-123, which provides that no proceeding shall be abated due to circumstantial defects.  Finally, guarantor Andrew Julian challenges an order granting SNL's application for a prejudgment remedy in the amount of $7,308,400 against the guarantors and permitting the attachment of their ownership interests in limited liability companies.  Julian claims that there is no statutory authority permitting the attachment of an ownership interest in a limited liability company for a debt or obligation that is unrelated to the company.