J.E. Robert Company, Inc. v. Signature Properties, LLC
A loan servicer for the owner and holder of a note and mortgage can have standing in its own right to institute a foreclosure action as transferee of the holder's rights under the Uniform Commercial Code, Connecticut General Statutes §42a-3-203 and §42a-3-301. Signature Properties, LLC executed an $8.8 million promissory note to JPMorgan Chase Bank, N.A. secured by a mortgage and security interest on Signature's commercial property and assignment of leases and rents. The note was a conditional nonrecourse instrument limited to the mortgaged property unless certain provisions were breached. Then, Signature would be liable for the full debt. Signature's members, including Andrew Julian and Michael Murray, guaranteed the loan. The note and related instruments were assigned to LaSalle Bank National Association. A pooling and servicing agreement established a mortgage backed security with J.E. Robert Company, Inc., as special servicer. Signature ceased making payments. J.E. Robert brought a foreclosure action against Signature. LaSalle assigned the note and related instruments to Shaw's New London, LLC. Shaw's, substituted as plaintiff, filed an amended complaint, adding the guarantors as defendants and alleging breaches, converting the note into a full recourse obligation. Ultimately, the court granted summary judgment to the plaintiff, denied motions to dismiss, and rendered a judgment of strict foreclosure with a deficiency judgment against the defendants. Signature, Julian and Murray appealed challenging, inter alia, the court's determination that J.E. Robert had standing to institute the action. The Supreme Court affirmed the judgment. Under C.G.S. §42a-3-301 and §42a-3-203(b), a loan servicer need not be the owner or holder of the note and mortgage to have standing to bring a foreclosure action if it otherwise has established the right to enforce those instruments. C.G.S. §49-17 codifies the common-law principle that the mortgage follows the note and only the notes' rightful owner can enforce the mortgage. Even assuming that C.G.S. §49-17 applied in a case in which ownership of the note and mortgage rests in the same party, a loan servicer entitled to receive money and administer a loan under the terms of a pooling and service agreement would not necessarily need to be the note's owner or holder to institute a foreclosure action. The pooling agreement and other documents fully supported the trial court's findings and conclusions that J.E. Robert constituted a transferee entitled to enforce the note.