| Hometown Bank of Hudson Val. v Colucci |
| 2015 NY Slip Op 02733 [127 AD3d 702] |
| April 1, 2015 |
| Appellate Division, Second Department |
[*1]
| Hometown Bank of Hudson Valley, Formerly Known asWalden Federal Savings and Loan Association, Appellant, v Paul E. Colucci,Respondent. |
Jacobowitz and Gubits, LLP, Walden, N.Y. (Kara J. Cavallo, Antoinette M. Caruso,and Michael L. Fox of counsel), for appellant.
Norton & Christensen, Goshen, N.Y. (Harold M. Pressberg of counsel), forrespondent.
In an action to recover on a personal guaranty, the plaintiff appeals from an order ofthe Supreme Court, Orange County (Bartlett, J.), dated July 30, 2013, which granted thedefendant's motion for summary judgment dismissing the complaint.
Ordered that the order is reversed, on the law, with costs, and the defendant's motionfor summary judgment dismissing the complaint is denied.
In 2006, the plaintiff, Hometown Bank of the Hudson Valley, formerly known asWalden Federal Savings and Loan Association (hereinafter the Bank), agreed to providenonparty TJMJR Developers, LLC (hereinafter the borrower), with financing inconnection with the borrower's development of a residential subdivision in Shawangunk,New York. The total sum financed was structured into three separate loans: (1) aconstruction 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 ultimatelyincreased to the sum of $829,881. In January 2007, the defendant executed a personalguaranty with respect to the revolving credit loan. In February 2007, the borrowerexecuted 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 anaction to foreclose on the mortgages against, among others, the defendant. Pursuant to astipulation, that action was discontinued, "without prejudice," against the defendant. TheBank then filed a supplemental summons and amended verified complaint, seeking toforeclose on only the construction loan and line-of-credit loan. To settle the action, theBank accepted a deed in lieu of foreclosure to the property which was the subject of theloans.
Thereafter, the Bank commenced an action against the defendant to recover on theguaranty executed by him. The defendant moved for summary judgment dismissing thecomplaint. In an order dated July 30, 2013, the Supreme Court granted the defendant'smotion. The Bank appeals, and we reverse.
[*2] Contrary to the Supreme Court's determination, the instant action was not barredby RPAPL 1301 (3). Pursuant to RPAPL 1301, " '[t]he holder of a note andmortgage may proceed at law to recover on the note or proceed in equity to foreclose onthe mortgage, but must only elect one of these alternate remedies' " (Aurora Loan Servs., LLC vLopa, 88 AD3d 929, 930 [2011], quoting Gizzi v Hall, 309 AD2d 1140,1141 [2003]). "The purpose of the statute is to avoid multiple lawsuits to recover thesame mortgage debt" (Aurora Loan Servs., LLC v Lopa, 88 AD3d at 930).Courts have recognized that "this statute is to be 'strictly construed since it is inderogation of a plaintiff's common-law right to pursue the alternate remedies offoreclosure and recovery of the mortgage debt at the same time' " (ValleySav. Bank v Rose, 228 AD2d 666, 667 [1996], quoting Dollar Dry Dock Bank vPiping Rock Bldrs., 181 AD2d 709, 710 [1992]). RPAPL 1301 (3) provides that"[w]hile [an] action is pending or after final judgment for the plaintiff therein, noother 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 ajudgment in the plaintiff's favor, the plaintiff is not precluded from commencing aseparate action" without leave of the court (McSorley v Spear, 13 AD3d 495, 496 [2004]). Here, theprior 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 instantaction to recover on the guaranty and no judgment was entered for the Bank, RPAPL1301 (3), which must be strictly construed (see Valley Sav. Bank v Rose, 228AD2d at 667), is not applicable (see McSorley v Spear, 13 AD3d at 496;Credit-Based Asset Servicing & Securitization v Grimmer, 299 AD2d 887[2002]).
Furthermore, contrary to the Supreme Court's determination, the instant action wasnot barred by RPAPL 1371 (3). RPAPL 1371 (3) provides that "[i]f no motion for adeficiency judgment shall be made as herein prescribed the proceeds of the saleregardless of amount shall be deemed to be in full satisfaction of the mortgage debt andno right to recover any deficiency in any action or proceeding shall exist." However, thatprovision has no applicability where, as here, no foreclosure sale was conducted (seeFederal Deposit Ins. Corp. v 1873 W. Ave. Corp., 225 AD2d 893, 895 [1996]; cf.TBS Enters. v Grobe, 114 AD2d 445 [1985]).
Consequently, the defendant failed to establish his prima facie entitlement tojudgment as a matter of law dismissing the complaint based on the discontinuedforeclosure action (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). Inlight of the defendant's failure to meet his prima facie burden, we need not review thesufficiency of the plaintiff's opposition papers (see Winegrad v New York Univ.Med. Ctr., 64 NY2d 851 [1985]).
The defendant's remaining contentions are without merit.
Accordingly, the Supreme Court should have denied the defendant's motion forsummary judgment dismissing the complaint. Mastro, J.P., Dillon, Hall and Miller, JJ.,concur.