08-11-09 CSFB 2001-CP-4 PRINCETON PARK CORPORATE CENTER,
LLC, ETC. V. SB RENTAL I, LLC, ET AL.
A-6307-07T2
We hold that a non-recourse carve-out clause in a
mortgage note is enforceable. It is not a liquidated damages
provision inasmuch as it works to define the terms and
conditions of personal liability, and not to affix probable
damages. Moreover, the fact that in this case the breach that
triggered personal liability (imposition of a subordinate lien
on securitized realty without lender's consent) was eventually
cured, resulting in no harm to the lender, does not render
enforcement of the carve-out unfair or unjust. By further
encumbering the property, even if only temporarily, the
borrower's action had the potential to affect the viability and
value of the collateral that secured the original loan and
therefore cannot be said to be totally unrelated to the
borrower's ultimate default on its mortgage payment.
Chase Smith assistant editor
