Opinion
2013-07163, Index No. 2286/13.
2015-04-01
HOMETOWN BANK OF HUDSON VALLEY, formerly known as Walden Federal Savings and Loan Association, appellant, v. Tulio BELARDINELLI, respondent.
Jacobowitz and Gubits, LLP, Walden, N.Y. (Kara J. Cavallo and Michael L. Fox of counsel), for appellant. Bloom & Bloom, P.C., New Windsor, N.Y. (Kevin D. Bloom of counsel), and Robert N. Isseks, Middletown, N.Y., for respondent (one brief filed).
Jacobowitz and Gubits, LLP, Walden, N.Y. (Kara J. Cavallo and Michael L. Fox of counsel), for appellant. Bloom & Bloom, P.C., New Windsor, N.Y. (Kevin D. Bloom of counsel), and Robert N. Isseks, Middletown, N.Y., for respondent (one brief filed).
WILLIAM F. MASTRO, J.P., MARK C. DILLON, L. PRISCILLA HALL and ROBERT J. MILLER, JJ.
In an action to recover on a personal guaranty, the plaintiff appeals from an order of the Supreme Court, Orange County (Bartlett, J.), dated May 7, 2013, which granted the defendant's motion pursuant to CPLR 3211(a) to dismiss the complaint.
ORDERED that the order is reversed, on the law, with costs, and the defendant's motion pursuant to CPLR 3211(a) to dismiss the complaint is denied.
In 2006, the plaintiff, Hometown Bank of the Hudson Valley, formerly known as Walden Federal Savings and Loan Association (hereinafter the Bank), agreed to provide nonparty TJMJR Developers, LLC (hereinafter the borrower), with financing in connection with the borrower's development of a residential subdivision in Shawangunk, New York. The total sum financed was structured into three separate loans: (1) a construction loan in the sum of $1,420,000, (2) a line-of-credit loan in the sum of $1,285,119, and (3) a revolving credit loan in the sum of $794,881, which was ultimately increased to the sum of $829,881. In January 2007, the defendant executed a personal guaranty with respect to the revolving credit loan. In February 2007, the borrower executed three separate notes and mortgages with respect to each of the loans.
After the borrower defaulted on the loans in April 2009, the Bank commenced an action to foreclose on the mortgages against, among others, the defendant. Pursuant to a stipulation, that action was discontinued, “without prejudice,” against the defendant. The Bank then filed a supplemental summons and amended verified complaint, seeking to foreclose on only the construction loan and line-of-credit loan. To settle the action, the Bank accepted a deed in lieu of foreclosure to the property which was the subject of the loans.
Thereafter, the Bank commenced this action against the defendant to recover on the guaranty executed by him. The defendant moved pursuant to CPLR 3211(a) to dismiss the complaint. In an order dated May 7, 2013, the Supreme Court granted the defendant's motion. The Bank appeals, and we reverse.
Contrary to the Supreme Court's determination, the instant action was not barred by RPAPL 1301(3). Pursuant to RPAPL 1301, “ ‘[t]he holder of a note and mortgage may proceed at law to recover on the note or proceed in equity to foreclose on the mortgage, but must only elect one of these alternate remedies' ” ( Aurora Loan Servs., LLC v. Lopa, 88 A.D.3d 929, 930, 932 N.Y.S.2d 496, quoting Gizzi v. Hall, 309 A.D.2d 1140, 1141, 767 N.Y.S.2d 469). “The purpose of the statute is to avoid multiple lawsuits to recover the same mortgage debt” ( Aurora Loan Servs., LLC v. Lopa, 88 A.D.3d at 930, 932 N.Y.S.2d 496). Courts have recognized that “this statute is to 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’ ” ( Valley Sav. Bank v. Rose, 228 A.D.2d 666, 667, 646 N.Y.S.2d 349, quoting Dollar Dry Dock Bank v. Piping Rock Bldrs., 181 A.D.2d 709, 710, 581 N.Y.S.2d 361). RPAPL 1301(3) provides that “ [w]hile [an] 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” (emphasis added). However, where a “foreclosure action is no longer pending and did not result in a judgment in the plaintiff's favor, the plaintiff is not precluded from commencing a separate action” without leave of the court ( McSorley v. Spear, 13 A.D.3d 495, 496, 789 N.Y.S.2d 52). Here, the prior foreclosure action was settled and discontinued, without the entry of any judgment. Since the foreclosure action was not pending at the time the Bank commenced the instant action to recover on the guaranty and no judgment was entered for the Bank, RPAPL 1301(3), which must be strictly construed ( see Valley Sav. Bank v. Rose, 228 A.D.2d at 667, 646 N.Y.S.2d 349), is not applicable ( see McSorley v. Spear, 13 A.D.3d at 496, 789 N.Y.S.2d 52; Credit–Based Asset Servicing & Securitization v. Grimmer, 299 A.D.2d 887, 750 N.Y.S.2d 673).
Furthermore, contrary to the Supreme Court's determination, the instant action was not barred by RPAPL 1371(3). RPAPL 1371(3) provides that “[i]f no motion for a deficiency judgment shall be made as herein prescribed the proceeds of the sale regardless of amount shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist.” However, that provision has no applicability where, as here, no foreclosure sale was conducted ( see Federal Deposit Inc. Corp. v. 1873 W. Ave. Corp., 225 A.D.2d 893, 895, 639 N.Y.S.2d 163; cf. TBS Enters. v. Grobe, 114 A.D.2d 445, 494 N.Y.S.2d 716).
Consequently, the defendant failed to establish any ground for dismissal of the complaint pursuant to CPLR 3211(a) based on the discontinued foreclosure action.
The defendant's remaining contentions are without merit.
Accordingly, the Supreme Court should have denied the defendant's motion pursuant to CPLR 3211(a) to dismiss the complaint.