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Posted: January 13, 2016

Suit on Note Stayed in Favor of Prior Pending Foreclosure Action in Another State

On January 6, 2016, Justice Demarest of the Kings County Commercial Division issued a decision in Wells Fargo Bank, N.A. v. Pena, 2016 NY Slip Op. 26003, staying an action to collect on a note pending the determination of a mortgage foreclosure action in another state, explaining:

RPAPL 1301(3) prohibits a party from commencing an action at law to recover any part of the mortgage debt while the foreclosure proceeding is pending or has not reached final judgment, without leave of the court. Thus, under this election of remedies principle, a plaintiff who has commenced an action to foreclose on a mortgage is not permitted to commence a second simultaneous action attempting to recover the same debt without obtaining leave of court in the foreclosure action. This election of remedies principle fully applies to an action to recover under the guarantee of a note.

It has been held, however, that although RPAPL 1301(3) prohibits a mortgage lender seeking repayment of a loan from simultaneously prosecuting an action at law to recover upon a promissory note and an action in equity to foreclose the mortgage, the prohibition does not apply where the property securing the loan is located outside of New York State. In the present action, the mortgaged property that is the subject of plaintiff’s foreclosure action is located in New Jersey, thus precluding the application of RPAPL 1301(3).

However, while pursuant to the above cited cases relied upon by plaintiff in opposition to defendants’ motion, RPAPL 1301(3) is not technically applicable to this case, the court considers its underlying legislative purpose and policy, to avoid the duplication of claims by the same party and multiple litigation simultaneously addressing the same issues. RPAPL 1301 seeks to protect the mortgagor from the expense and annoyance of simultaneously defending against two independent actions to recover the same mortgage debt. This policy would be contravened if this action were permitted to simultaneously proceed with the New Jersey action.

. . .

Where there is a substantial identity of the parties, the two actions are sufficiently similar, and the relief sought is substantially the same, a court has broad discretion in determining whether an action should be dismissed pursuant to CPLR 3211(a)(4) on the ground that there is another action pending. Substantial, not complete, identity of parties is all that is required to invoke CPLR 3211(a)(4). The presence of additional parties, such as the tenants in the New Jersey action, does not defeat a motion pursuant to CPLR 3211(a)(4).

The critical element is that both suits arise out of the same subject matter or series of alleged wrongs. It is not necessary that the precise legal theories presented in the first action also be presented in the second action. Rather, it is necessary only that the pleadings be based upon the same actionable wrong. Here, the complaint in this action and the complaint in the New Jersey action, which was commenced first, show that these two actions arise out of the same alleged actionable wrong, defendants’ failure to make payment on the Notes, and that the two actions are substantially identical, but for the remedy of the sale of the real property. Moreover, the relief sought in the New Jersey action includes a judgment directing that plaintiff be paid the amount due on the Mortgages, which paragraph 15 of the New Jersey complaint alleges is the amount owed under the Notes and other documents executed in connection with the loans, including the outstanding principal, all unpaid and accrued interest, late charges, default interest, and attorneys’ fees and costs. Clearly the relief sought in the New Jersey action is substantially the same as the relief sought in this New York action

Thus, the court finds that CPLR 3211(a)(4) is applicable to this action since it is undisputed that there is a pending mortgage foreclosure action by plaintiff on the same debt. Plaintiff has made its decision to foreclose on the Mortgages and should not be permitted to commence a second simultaneous action attempting to recover the same debt before the New Jersey Court has made a determination.

(Internal quotations and citations omitted) (emphasis added).

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