Marine Midland Bank, N.A. v. Lake Huntington Development Group, Inc.

• Decision Date: 09 July 1992
• Parties: MARINE MIDLAND BANK N.A., Respondent, v. LAKE HUNTINGTON DEVELOPMENT GROUP, INC., Appellant, et al., Defendants. (And Two Other Related Actions.)
• Court: New York Supreme Court — Appellate Division

Page 836

585 N.Y.S.2d 836

185 A.D.2d 395

MARINE MIDLAND BANK N.A., Respondent, v. LAKE HUNTINGTON DEVELOPMENT GROUP, INC., Appellant, et al Defendants (And Two Other Related Actions.)

Supreme Court, Appellate Division,

Third Department.

July 9, 1992.

Andrew Chertoff, New York City, for appellant.

Ingber & Lagarenne (Keith G. Ingber, of counsel), Monticello, for respondent.

Before MIKOLL, J.P., and YESAWICH, CREW, CASEY and HARVEY, JJ.

CASEY, Justice.

Appeal from an order of the Supreme Court (Williams, J.), entered March 1, 1991 in Sullivan County, which, inter alia, denied a motion by defendant Lake Huntington Development Group, Inc. for summary judgment dismissing the complaint against it.

These three actions arise out of a 1987 financing transaction whereby Lake Huntington Development Group, Inc. (hereinafter Lake Huntington) executed a note and mortgage in favor of Marine Midland Bank N.A. (hereinafter the Bank) and four individuals executed personal guarantees. In January 1990 Lake Huntington commenced an action against the Bank to rescind the note and mortgage, and the following month the individual guarantors commenced an action against the Bank to rescind their personal guarantees. Both actions set venue in New York County. The Bank commenced a foreclosure action against Lake Huntington, among others, in Sullivan County, where the mortgaged property is located, and filed a lis pendens. Lake Huntington moved to dismiss or stay the foreclosure action against it based upon its pending action for rescission against the Bank. The Bank cross-moved to have the two rescission actions removed from New York County and consolidated with the foreclosure action in Sullivan County. Supreme Court denied Lake Huntington's motion and granted the Bank's cross motion, resulting in this appeal by Lake Huntington.

Lake Huntington contends that because the Bank asserted counterclaims in the action by the individual guarantors, the Bank elected to pursue recovery on the debt as its remedy and was barred by RPAPL 1301(3) from commencing the subsequent foreclosure action. We disagree. RPAPL 1301(3) states:

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.

We are of the view that the phrase "the action" in RPAPL 1301(3) refers to a foreclosure action (see, Dollar Dry Dock Bank v. Piping Rock Bldrs., 181 A.D.2d 709, 710, 581 N.Y.S.2d 361, 362; see also Meehan, Practice Commentaries, McKinney's Cons. Laws of N.Y., Book 49 1/2, RPAPL 1301 [1992 Pocket Part], at 3). The statute precludes a mortgagee who has elected foreclosure from commencing an action on the mortgage debt without leave of the court (Brown v. Bellamy, 170 A.D.2d 876, 566 N.Y.S.2d 703, lv. denied 78 N.Y.2d 853, 573 N.Y.S.2d 467, 577 N.E.2d 1059). The relevant provision when a mortgagee has commenced an action on the mortgage debt and thereafter seeks to foreclose on the mortgage is RPAPL 1301(1), which precludes commencement of a foreclosure action after final judgment has been rendered in an action on the debt unless certain conditions are satisfied. No final judgment has been rendered in favor of the Bank on any claim based on the mortgage debt and, therefore, there was no statutory bar to the commencement of the foreclosure...