In this foreclosure action, plaintiff moves for summary judgment pursuant to CPLR 3212 and for the appointment of a referee to compute the amount due to the plaintiff under the mortgage. Defendants Tibor J. Paskesz and Eva Paskesz cross-move to dismiss the action pursuant to CPLR 3211(a)(1), (3) & (7) and Real Property Actions and Proceedings Law 1301 and, in the alternative, for leave to amend their answer pursuant to CPLR 3025(b).

On November 18, 2002, Jacob Paskesz, Inc. ("Corporation"), an importer and wholesaler of diamonds, executed a note ("2002 Note") in favor of the Merchants Bank of New York, A Division of Valley National Bank ("Merchants Bank"),^[FN1] in the sum of $2,500,000. On November 7, 2002, in addition to the security pledged by the Corporation,^[FN2] Tibor Paskesz ("Tibor") and Eva Paskesz personally executed a guaranty ("Guaranty") of every debt the Corporation owed to Merchants Bank or that the Corporation may owe in the future. On August 19, 2010, the defendants executed a mortgage ("Mortgage") in the amount of $1,000,000 to plaintiff, against the defendants' personal residence, 1353 56th Street, Brooklyn, NY 11219 ("Property"), in consideration for the modification of the terms of the 2002 Note. On September 15, 2010, the Corporation executed a note to plaintiff for $2,115,000 ("2010 Note") to replace the 2002 Note. On March 15, 2011, Tibor, on behalf of the Corporation, signed an amendment to the 2010 Note ("Amended Note"). The Amended Note recited the history of the loans to the Corporation, indicated that the principal amount of $1,945,000 remained due under the 2010 Note, and stated that the purpose of the amendment was to modify the repayment terms and the maturity date. By notice of default dated December 22, 2011, plaintiff notified the Corporation and the defendants that monthly payments due in October, November and December of 2011 had not been paid and demanded payment of the full accelerated amount due, $1,935,756.27.

On February 13, 2012, plaintiff filed an action in New York County, VNB New York Corp. v Jacob Paskes, Inc., a/k/a Jacob Paskesz, Inc., Tibor Paskesz a/k/a Jacob Paskesz, Chaya Paskesz, Eva Paskesz and Charles Paskesz, Index no. 650394/12 seeking to recover upon the [*2]2010 Note^[FN3] ("Note Action"). In the Note Action, plaintiff alleged that the Corporation had defaulted on the 2010 Note and sought possession of the Corporation's collateral pursuant to the security agreement dated November 7, 2002, and the filing of a UCC-1 financing statement, as well as a monetary judgment for the unpaid balance^[FN4] of the Note. In addition to a judgment against the Corporation, the Note Action sought monetary judgments against the individual defendants herein pursuant to the Guaranty.

On September 20, 2012, plaintiff commenced the present foreclosure action. The verified complaint alleges a default under the Note and seeks to foreclose upon the Property of Defendants to recover the amount due on the Note, $1,935,756.27, and obtain a deficiency judgment in the event that the sale proceeds from the foreclosed Property are insufficient to pay the debt.

In support of the plaintiff's motion for summary judgment, plaintiff argues that it has established that it owns the Amended Note, the Corporation defaulted on the Amended Note, and pursuant to the Guaranty and Mortgage, plaintiff is entitled to foreclose the defendants' interest in the Property. It is noted that the plaintiff's motion did not make any reference to the Note Action in New York County despite it having been commenced by the same firm that represents the plaintiff in the present action. It was only after defendants made a cross-motion to dismiss this action that plaintiff submitted a supplemental affidavit in support of the motion stating:

Previously, an action was initiated by [plaintiff] to recover collateral securing the loan to the [Corporation (the "Note Action")]. The [Note Action] was 1) discontinued in all respects with regard to [the defendants], and 2) discontinued as to any claim for a money judgment. Only the replevin claim against the [Corporation], and no claim against [the defendants], continues in the [Note Action]. No Judgment has been rendered in the [Note Action].

Prior to the commencement of this action, on February 28, 2012, plaintiffs discontinued the Note Action as to the defendants in the present action, without prejudice. A stipulation in the Note Action, indicating that the claim for a money judgment against defendant guarantors in the Note Action had been dismissed without prejudice, was also so-ordered by Justice Jeffrey K. Oing on May 29, 2012 ("So-Ordered Stipulation").

In opposition to the plaintiff's motion, and in support of their cross-motion to dismiss, defendants argue that plaintiff elected to file the Note Action prior to the present foreclosure action and, pursuant to Real Property Actions and Proceedings Law ("RPAPL") 1301, plaintiff was precluded from simultaneously commencing the present foreclosure action while the Note Action was still pending. In the Note Action, the Corporation delivered diamonds to plaintiff, [*3]what Tibor describes as the "remaining collateral" of the Corporation, on April 5, 2012 pursuant to a surrender agreement ("Surrender Agreement").^[FN5] Tibor stated that this collateral had a value of $9,964.00. Plaintiff acknowledges that the chattel delivered to plaintiff has not yet been liquidated. It is noted that after being dismissed from the Note Action, the defendants signed the Surrender Agreement in their individual capacity requiring Tibor to appear for a deposition and for the defendants to produce all books and records, as well as other documents and computer hard drives, regarding the Corporation. Although the Surrender Agreement indicates that the Note Action would be dismissed as to the Corporation upon compliance with the Surrender Agreement, without prejudice, neither party has indicated that the Note Action has been discontinued as to the Corporation. As of May 15, 2013, plaintiff's counsel was still pursuing collateral purportedly transferred from the Corporation to a third party, Fatima Siner ("Siner"), in an attempt to recover collateral under the Note Action. Tibor alleges that as the principal of the Corporation, he was "scammed out of millions of dollars in diamonds by [Siner]". Siner filed a petition under Chapter 7 of the United States Bankruptcy Code and the plaintiff is pursuing recovery in the Bankruptcy Court for the Eastern District of Pennsylvania based upon its security interest in the Corporation's diamonds. The Surrender Agreement specifically provides that defendants were to produce to plaintiff all documents relating to Siner.

"The holder of a note and mortgage may proceed at law to recover on the note or proceed in equity to foreclose on the mortgage, but must only elect one of these alternate remedies" (Aurora Loan Servs., LLC v Lopa, 88 AD3d 929, 930 [2d Dept 2011], quoting Gizzi v Hall, 309 AD2d 1140, 1141 [3d Dept 2003]; see RPAPL 1301; Sabbatini v Galati, 14 AD3d 547, 548 [2d Dept 2005]). "RPAPL 1301 (1) 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'" (Aurora Loan, 88 AD3d at 930; quoting Valley Sav. Bank v Rose, 228 AD2d 666, 667 [2d Dept 1996]). "The purpose of the statute is to avoid multiple lawsuits to recover the same mortgage debt" (Aurora Loan, 88 AD3d at 930; quoting Valley Sav. Bank, 228 AD2d at 667).

After the Corporation allegedly defaulted on the Amended Note, plaintiff elected to proceed on the debt by commencing the Note Action and seeking possession of collateral. Accordingly, pursuant to RPAPL 1301(3), as that action is still pending, plaintiff was prohibited from commencing the present action without leave of the court in the Note Action. Plaintiff's contention that its dismissal of the action at law for money damages against the defendants, without prejudice, permits the plaintiff to commence this foreclosure action in equity is unavailing. As the plaintiff is actively seeking recovery of the Corporation's collateral in the Note Action, permitting the plaintiff to foreclose on the real Property in the present action could result in the plaintiff's recovery of the debt in multiple lawsuits which would thwart the purpose of RPAPL 1301 (see Aurora Loan, 88 AD3d at 930; Valley Sav. Bank, 228 AD2d at 667). It is undisputed that the Note Action is pending and plaintiff has not obtained leave from Justice Oing [*4]in the Note Action to commence the present foreclosure action pursuant to RPAPL 1301(3). Plaintiff's reliance on Bank Leumi Trust Co. v Sibthorp, 135 AD2d 476 [1st Dept 1987] and Brandenberg v Tirino, 66 Misc 2d 193 [Sup Ct, Nassau County 1971], for the proposition that simultaneous actions are permitted, is unavailing as those proceedings involved separate debts. In the present action, plaintiff is attempting to recover on the same debt that is already the subject of the Note Action. Accordingly, defendants' motion to dismiss the complaint is granted without prejudice to any relief that may be available to plaintiff in New York County.

Accordingly, defendants' motion to dismiss the complaint is granted.

The foregoing constitutes the decision and order of the Court.

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J.S.C.