Valley Sav. Bank v. Rose

• Decision Date: 24 June 1996
• Citation: 646 N.Y.S.2d 349,228 A.D.2d 666
• Parties: VALLEY SAVINGS BANK, Appellant, v. William H. ROSE, et al., Defendants, Doris L. Sassower, P.C., Respondent.
• Court: New York Supreme Court — Appellate Division

Page 349

646 N.Y.S.2d 349

228 A.D.2d 666

VALLEY SAVINGS BANK, Appellant, v. William H. ROSE, et al., Defendants Doris L. Sassower, P.C., Respondent.

Supreme Court, Appellate Division Second Department.

June 24, 1996.

Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, L.L.P., New York City (Jay D Lukowski, of counsel; Roy H. Carlin on the brief), for appellant.

Before ROSENBLATT, J.P., and THOMPSON, PIZZUTO and HART, JJ.

MEMORANDUM BY THE COURT.

In an action to foreclose a mortgage, the plaintiff appeals from an order of the Supreme Court, Westchester County (Wood, J.), entered April 25, 1994, which denied its motion for summary judgment of foreclosure and sale, and to dismiss the counterclaims of the defendant Doris L. Sassower, P.C.

ORDERED that the order is modified, on the law, by deleting therefrom the provision denying that branch of the plaintiff's motion which was for summary judgment of foreclosure and sale, and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed, with costs to the plaintiff, the counterclaims are severed, and the matter is remitted for the Supreme Court, Westchester County, to set a date for the foreclosure sale and for further proceedings consistent herewith.

The plaintiff Valley Savings Bank (hereinafter the Bank) holds a $300,000 promissory note and mortgage on a parcel of real property owned by the defendants William H. Rose and Marci P. Rose as security for a line of credit utilized by a corporate entity, Rosewall, Inc., owned by the Roses. In or about 1990, the Roses commenced an action against the Bank in New Jersey, and the Bank counterclaimed to recover money loaned to Rosewall, Inc., and guaranteed by the Roses. In this New Jersey action, the Bank was awarded judgment in an amount in excess of $714,000, which included money which was the subject of the aforementioned $300,000 note and mortgage. The Bank entered this judgment in New York on April 16, 1993. On April 20, 1993, the Roses filed a joint petition under 1978 Bankruptcy Code chapter 7. On May 21, 1993, the United States Bankruptcy Court, Southern District of New York, modified an automatic stay so as to permit the Bank to commence the instant action to foreclose upon the subject property. It is uncontroverted that the Roses received a discharge in their bankruptcy case, thereby voiding the Bank's prior judgment and operating as an injunction against the commencement or continuation of any action to collect on the judgment (see, 1978 Bankruptcy Code [11 USC] § 524[a][1], [2] ).

The Bank did not attempt to execute against the Roses' property upon the judgment prior to commencing this foreclosure action in October 1993. Consequently, after the Bank moved for summary judgment, the Supreme Court determined that pursuant to RPAPL 1301, the final judgment in the New Jersey action "constituted an election of remedies precluding this foreclosure action". We hold that under the unique circumstances of this case, the Bank's failure to comply with RPAPL 1301(1) does not mandate dismissal.

RPAPL 1301(1) provides as follows:

"Where a 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".

This statute 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 (see, Goddard v. Johnson, 96 Misc.2d 230, 231, 408 N.Y.S.2d 923; 14 Carmody-Wait 2d, N.Y. Prac § 92:29, at 653). 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" (Dollar Dry Dock Bank v. Piping Rock Bldrs., 181 A.D.2d 709, 710, 581 N.Y.S.2d 361). Moreover, 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" ( Dollar Dry Dock Bank v. Piping Rock Bldrs., supra, at 710, 581 N.Y.S.2d 361).

Construing RPAPL 1301(1) in this manner and mindful that an action to foreclose upon a mortgage is an action in equity (see, Jamaica Sav. Bank v. M.S. Investing Co., 274 N.Y. 215, 219, 8 N.E.2d 493), we conclude that the Bank's failure to attempt to execute against the Roses' property upon the...