Opinion
April 17, 1939.
Present — Lazansky, P.J., Hagarty, Carswell, Johnston and Close, JJ.
Order granting defendants' motion dismissing complaint pursuant to section 1078 of the Civil Practice Act on the ground that while an action to foreclose a mortgage on real property is pending between the parties this action is being maintained to recover the mortgage debt without leave of the court in which the action to foreclose the mortgage is pending, and judgment entered in accordance therewith, unanimously affirmed, with ten dollars costs and disbursements. The only indebtedness was that evidenced by the notes. It appears without question that the mortgage was executed and delivered as collateral security. The bond accompanying the mortgage served no useful purpose and ostensibly evidenced a debt which, however, was nonexistent. The mortgage itself recites that it was made as collateral security for the payment of the notes. The note indebtedness, therefore, constitutes the mortgage debt within the purview of section 1078 of the Civil Practice Act. The purported sale of the bond and mortgage by the pledgee to itself was a nullity. The actual indebtedness as evidenced by the notes did not accompany the mortgage. ( Merritt v. Bartholick, 36 N.Y. 44; Title Guarantee Trust Co. v. Nessle, 163 Misc. 577.) These facts are admitted in the complaint in the foreclosure action wherein the appellant expressly alleges that the bond and mortgage were given as collateral security for the payment of the notes and "that the plaintiff is still the owner and holder of said bond and mortgage under the terms of said collateral agreement." The appellant might, at its election, recover judgment on the notes and, upon execution returned unsatisfied, commence its foreclosure of the mortgage, or as pledgee, might apply the proceeds of a sale upon foreclosure of the mortgage to the note indebtedness. It could not, however, do both at the same time, without leave of the court.