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Second Department Decides Two Cases Under RPAPL 1301

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  • Posted on: Apr 8 2022

By Jonathan H. Freiberger

As noted in several of this Blog’s previous articles [here], [here] and [here], when an individual or entity borrows money from a lender, the repayment obligation is typically evidenced by a promissory note.  To secure the borrower’s repayment obligations, lenders generally request some form of collateral.  When the collateral is an interest in real property, the borrower generally delivers a mortgage to the lender.

RPAPL 1301, which addresses circumstances under which a lender can commence a mortgage foreclosure action, provides: 

1.  Where final judgment for the plaintiff has been rendered in an action to recover any part of the mortgage debt, an action shall not be commenced or maintained to foreclose the mortgage, unless an execution against the property of the defendant has been issued upon the judgment to the sheriff of the county where he resides, if he resides within the state, or if he resides without the state, to the sheriff of the county where the judgment-roll is filed; and has been returned wholly or partly unsatisfied.

2.  The complaint shall state whether any other action has been brought to recover any part of the mortgage debt, and, if so, whether any part has been collected.

3.  While the action is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained to recover any part of the mortgage debt, without leave of the court in which the former action was brought.

Thus, upon a borrower’s default, among the remedies available to the lender, is an action at law on the promissory note (i.e., sue the borrower for the money owed) or an action in equity to foreclose the mortgage.  A lender cannot simultaneously do both.  Accordingly, if a lender sues on the note and obtains a judgment, it must demonstrate that its efforts to execute on the judgment were unsuccessful before it can commence a foreclosure action.  RPAPL 1301(1); Sabbatini v. Galati, 14 A.D.3d 547 (2nd Dep’t 2005) (foreclosure action dismissed where lender docketed a money judgment against borrower, but never attempted to execute on the judgment).  Nor can a lender simultaneously maintain multiple foreclosure actions.  RPAPL 1301(3).  

RPAPL 1301 “is the embodiment of the equitable principle that once a remedy at law has been resorted to, it must be exercised to exhaustion before a remedy in equity, such as foreclosure, may be sought.  The purpose of RPAPL 1301 is to avoid multiple suits to recover the same mortgage debt and confine the proceedings to collect the mortgage debt to one court and one action.”  Valley Savings Bank v. Rose, 228 A.D.2d 666, 667 (2nd Dep’t 1996) (citations and internal quotation marks omitted); see also Bank of America v. Ali, 202 A.D.3d 726 (2nd Dep’t 2022).

Courts have held that “RPAPL 1301(3) should be strictly construed since it is in derogation of a plaintiff’s common-law right to pursue the alternate remedies of foreclosure and recovery of the mortgage debt at the same time.”  Bank of America, 202 A.D.3d at *3 (citation and internal quotation marks omitted).  However, this “strict” construction rule is not without limits.  For example, the First and Second Departments have held that “although the first actions were not formally discontinued, the effective abandonment of those actions was a ‘de facto discontinuance’ that militated against dismissal of the second action pursuant to RPAPL 1301(3).”  Bank of America, 202 A.D.3d at *3 (emphasis in original) (citing to U.S. Bank N.A. v. Chait, 178 A.D.3d 448 448–449 (1st Dep’t 2019); U.S. Bank Trust, N.A. v. Humphrey, 173 A.D.3d 811, 812 (2nd Dep’t 2019); Old Republic Natl. Tit. Ins. Co. v. Conlin, 129 A.D.3d 804, 805 (2nd Dep’t 2015); see also this Blog [here].

On April 6, 2022, the Appellate Division, Second Department, decided two cases addressing RPAPL 1301.

HSBC Bank USA v. Kading

In 2003, defendant in Kading borrowed $600,000 from lender and secured his repayment obligations with a mortgage on real property in Staten Island, New York.  Borrower subsequently executed two loan modifications.  After a default, lender commenced a mortgage foreclosure action in 2010 (the “2010 Action”).  In 2014, borrower executed another loan modification, but defaulted again in January of 2015.  The 2010 Action was marked “DISPOSED – PROCEED BY MOTION.”  In September of 2015, Lender commenced a new foreclosure action in January of 2016 and, in its complaint, alleged that it “intended the 2010 [A]ction to be discontinued.”  In April 2018, supreme court issued an order directing dismissal of the 2010 Action due to inactivity.  Lender moved for summary judgment and borrower cross-moved for summary judgment dismissing the action pursuant to RPAPL 1301(3).  Supreme court granted borrower’s cross-motion and lender’s motion was denied as academic.  

On lender’s appeal, the Second Department reversed and stated:

Here, the plaintiff failed to seek leave of court to commence this action while the 2010 action was still pending. However, the 2010 action had previously been marked disposed, and no further action occurred in the 2010 action until the administrative dismissal on April 9, 2018. Additionally, by the time the defendants cross-moved in this action for summary judgment dismissing the complaint insofar as asserted against them, the 2010 action had already been dismissed for nearly six months. Thus, the defendants were not prejudiced by having to defend against more than one action, and the plaintiff’s failure to strictly comply with RPAPL 1301(3) should have been disregarded as a mere irregularity.  (Citations omitted.)

The Kading matter was remitted to supreme court for a determination of lender’s summary judgment motion.

U.S. Bank Trust, N.A. v. Biggs

[Eds. Note:  some of the facts were obtained from the electronically filed record on appeal.]  Borrower defaulted in his repayment obligations under a promissory note secured by a mortgage on real property.  Accordingly, in 2016, plaintiff’s assignor (the “Assignor”) commenced an action to foreclose the mortgage.  Assignor moved for summary judgment and borrower cross-moved for summary judgment dismissing the complaint.  Thereafter, Assignor withdrew its motion and moved for leave to discontinue the action, without prejudice, and to cancel the notice of pendency.  In an August 2017 order, supreme court granted Assignor’s motion to voluntarily discontinue and in a September 2017 order supreme court discontinued the action and cancelled the notice of pendency. Both orders were affirmed on borrower’s appeals.  The loan was assigned to plaintiff (the “Assignment”).

Two months prior to the order discontinuing the first action, and after the Assignment, plaintiff commenced an action to foreclose the mortgage due to a new default.  Lender moved for summary judgment and borrower cross-moved for summary judgment dismissing the complaint pursuant to RPAPL 1301(3) “arguing that the plaintiff commenced the instant action while the prior action was pending.”  Borrower appealed supreme court’s denial of his cross-motion.  The Second Department affirmed, stating that: 

Here, in the order dated September 28, 2017, the Supreme Court, upon granting [Assignor]’s motion, inter alia, for leave to voluntarily discontinue the prior action, discontinued the prior action and cancelled the notice of pendency. Consequently, the prior action was not pending at the time the plaintiff commenced the instant action in July 2018, and thus, the commencement of the instant action was not in violation of RPAPL 1301(3).

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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