SANDTON CREDIT OPPORTUNITIES SPECIAL HOLDINGS LLC v. NASTASI (2025)

In this action, plaintiff, Sandton Credit Opportunities Special Holdings, LLC, is suing defendant, Anthony Nastasi, to collect on the unpaid balance of a promissory note, which, Sandton alleges, exceeds $2.5 million. The note is secured by mortgages on real property located in Greene County. Sandton previously brought an action in Supreme Court, Greene County, seeking to foreclose on those mortgages. That action was dismissed in December 2023. Sandton noticed an appeal from the dismissal of the action. Sandton's time to perfect its appeal had not expired, and Sandton had not withdrawn the appeal, when it brought this action in February 2024.

Nastasi now moves to dismiss this action under Real Property Actions and Proceedings Law (RPAPL) 1301 (3). Nastasi's motion requires this court to whether an action to recover on a mortgage debt remains “pending” for purposes of RPAPL 1301 (3) when an appeal from the dismissal of that action has been taken and not yet resolved. This court concludes that the action does remain pending in these circumstances. Nastasi's motion to dismiss is granted.

DISCUSSION

RPAPL 1301 (3) provides that while an action to recover any part of a mortgage debt “is pending ․ 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.” The statute further provides that leave of court is “a condition precedent to commencement of the second action”; and that “the failure to procure such leave shall be a defense to such other action.”

It is undisputed that Sandton brought an action in Supreme Court, Greene County, to recover on the debt secured by the Greene County mortgage; and that the current action on the note is also one seeking to recover on the mortgage debt for purposes of § 1301 (3). It is also undisputed that the Greene Supreme action was dismissed in December 2023, before commencement of this action in February 2024; that Sandton had noticed an appeal from the Greene Supreme action; that the appeal was not withdrawn until after Nastasi moved in March 2024 to dismiss this action; and that Sandton did not obtain leave from Greene Supreme to bring this action. The question for this court is the legal import of these undisputed facts.

Neither party has cited appellate authority on this particular question.¹ Nor has this court's own research found New York precedent directly on point. But Appellate Division authority in the closely related context of RPAPL 1501 (4) supports Nastasi's motion to dismiss.

RPAPL 1501 (4) permits a party having an interest in real property subject to a mortgage to bring an action to cancel and discharge if the statute of limitations on a mortgage-foreclosure action has expired. However, “[b]ecause the expiration of the statute of limitations is an essential element of an action pursuant to RPAPL 1501(4), the existence of a pending foreclosure action precludes a RPAPL 1501(a) action.” (4 Stella Mgt. v. Citimortgage, Inc., 204 A.D.3d 868, 869, 164 N.Y.S.3d 827 [2d Dept. 2022].) And for § 1501 (4) purposes, if a foreclosure action has been dismissed, but an as-of-right appeal from the dismissal remains available, or has been taken and remains unresolved, that foreclosure action remains pending. (See Davis v. Wilmington Sav. Fund Socy., FSB, 219 A.D.3d 798, 799, 195 N.Y.S.3d 494 [2d Dept. 2023] [as-of-right appeal still available]; Mizrahi v. U.S. Bank, N.A., 156 A.D.3d 617, 618, 64 N.Y.S.3d 572 [2d Dept. 2017] [as-of-right appeal taken but not resolved].)

This court sees no reason why a mortgage-foreclosure action should be treated as terminated for purposes of RPAPL 1301 (3) when, on the same facts, the action would be treated as still pending for purposes of RPAPL 1501 (4). If anything, the statutory purpose of § 1301 (3) cuts the other way. The Appellate Division's interpretation of “pending” or “terminated” in the § 1501 (4) operates to limit the rights of a mortgagor, because that interpretation restricts the circumstances in which an action to cancel a mortgage may be maintained. Section 1301 (3), on the other hand, is intended to protect the rights of a mortgagor by shielding the mortgagor “from the expense and annoyance of two independent actions at the same time with reference to the same debt.” (U.S. Bank N.A. v. Beymer, 183 A.D.3d 454, 454, 124 N.Y.S.3d 25 [1st Dept. 2020] [internal quotation marks omitted].) So “pending” in the language of § 1301 (3) should be interpreted at least as broadly as “pending” in the cases applying § 1501 (4)—i.e., to encompass a scenario in which a foreclosure action has been dismissed but the time to take or perfect an as-of-right appeal from the dismissal has not yet run.²

Although less analogous than RPAPL 1501 (4), appellate precedent on when an action has been “terminated” or “finally determined” for purposes of several limitations-related tolling provisions provides for a similar rule. (See Lehman Bros., Inc. v. Hughes Hubbard & Reed, L.L.P., 92 N.Y.2d 1014, 1016-1017, 684 N.Y.S.2d 478, 707 N.E.2d 433 [1998] [CPLR 205 [a]]; Joseph Francese, Inc. v. Enlarged City School Dist. of Troy, 95 N.Y.2d 59, 64-65, 710 N.Y.S.2d 315, 731 N.E.2d 1123 [2000] [CPLR 204 [b]]; Britt v. Nestor, 145 A.D.3d 544, 545, 43 N.Y.S.3d 338 [1st Dept. 2016] [CPLR 203 [e]].)

In opposing dismissal, Sandton, citing (U.S. Bank N.A. v. Karnaby, 190 A.D.3d 1005, 136 N.Y.S.3d 886 [2d Dept. 2021]), argues that “this action still should not be barred by RPAPL 1301(3) because Sandton has dismissed its appeal.” (NYSCEF No. 80 at 4-5.) But Karnaby does not help Sandton here.

Karnaby does not address whether an action remains “pending” for § 1301 (3) purposes if an appeal has been taken. Instead, it concerns how a court should proceed when a mortgagee brings two actions on the same mortgage debt in the same court, and does not discontinue the first action until after commencement of the second.

In that case, the mortgagee brought both foreclosure actions in Supreme Court, Kings County. When the mortgagor moved to dismiss the second action, the motion court denied dismissal, noting not only that the first action had now been discontinued, but also that leave of court to bring the second action could “seemingly be given retroactively, nunc pro tunc and this Court ․ elects to do so.” (See Index No. 513122/2015, NYSCEF No. 65.) The Second Department affirmed. It held that it was appropriate for the motion court, in deciding the request for dismissal, to “retroactively grant the plaintiff leave to commence the instant action, nunc pro tunc, as the defendants were not thereby placed in the position of having to defend against more than one lawsuit.” (190 A.D.3d at 1007, 136 N.Y.S.3d 886.) Here, on the other hand, the first action was brought in a different court (Supreme Court, Greene County). There is no suggestion in the record that Sandton sought leave of court there, even after the fact, to bring this action.

Moreover, even if the Second Department's decision in Karnaby were taken to stand for the broader proposition that a § 1301 (3) motion should be denied when Action 1 is discontinued shortly after commencement of Action 2, the result here would remain the same, because the Appellate Division, First Department, does not accept that proposition. In U.S. Bank N.A. v. Beymer, the First Department held that the complaint was subject to dismissal because it was “undisputed that the 2008 foreclosure action was pending at the time the 2013 foreclosure action was brought, and that plaintiff did not seek leave of court before doing so.” (161 A.D.3d 543, 544, 77 N.Y.S.3d 380 [1st Dept. 2018].) In doing so, the Court expressly rejected “[p]laintiff's arguments contesting the applicability” of § 1301 (3), “most notably” plaintiff's reliance on the fact that “the 2008 foreclosure action was dismissed prior to the relevant motion practice in the 2013 foreclosure action.” (Id.) Beymer, not Karnaby, controls here. And if (as this court has concluded above) the Greene Supreme action remained pending when Sandton brought this action, Beymer requires dismissal of Sandton's complaint.³

Given the court's conclusion on this point, the court does not reach Nastasi's alternative statute-of-limitations argument for dismissal. This court also does not reach the parties' related disagreement about whether conclusions reached by Supreme Court, Greene County, in dismissing the first action are entitled to issue-preclusive effect here for limitations purposes.

Accordingly, it is

ORDERED that defendant's motion to dismiss the complaint is granted, and plaintiff's complaint is dismissed without prejudice, with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further

ORDERED that defendant serve a copy of this order on plaintiff and on the office of the County Clerk (by the means set forth in the court's e-filing protocol, available on the e-filing page of the court's website, https://ww2.nycourts.gov/courts/1jd/supctmanh/E-Filing.shtml), which shall enter judgment accordingly.

FOOTNOTES

1.   A decision cited by both parties, (27 W. 72nd St. Note Buyer LLC v. Terzi, 2020 N.Y. Slip Op. 31431[U], at *4-5, 2020 WL 2302994 [Sup. Ct., N.Y. County 2020]), was affirmed on appeal (see 194 A.D.3d 630, 150 N.Y.S.3d 34 [1st Dept. 2021]); but the RPAPL 1301 (3) question addressed by the motion court was not raised on appeal. Sandton also cites the decision of the Appellate Division, Second Department, in (U.S. Bank N.A. v. Karnaby, 190 A.D.3d 1005, 136 N.Y.S.3d 886 [2d Dept. 2021]); but, as discussed further below, Karnaby addressed a different question (and does not require denial of the dismissal motion in any event).

2.   A different rule might obtain if an appeal from a dismissal order has been noticed but not timely perfected. (Cf. U.S. Bank N.A. v. Chait, 178 A.D.3d 448, 448-449, 111 N.Y.S.3d 180 [1st Dept. 2019] [explaining that when a foreclosure action is “inactive and effectively abandoned and therefor not pending,” commencement of a second foreclosure action is not barred by RPAPL 1301 [3]].) But Sandton was still well within its time to perfect the appeal from the Greene Supreme dismissal when it brought this action.

3.   As Nastasi concedes (see NYSCEF No. 81 at ¶ 12), this dismissal is without prejudice.

Gerald Lebovits, J.