Wells Fargo Bank, N.A. v Pena, Index No. 500827/2015, 01/06/16, (Demarest, J.)

Cross Collateralized Real Estate Loan; CPLR 3211 Motion to Dismiss; RPAPL 1301; Deficiency Judgment.

By: Aaron Jacob | Senior Staff Writer

Plaintiff, Wells Fargo, a national banking association, acquired two promissory notes from its merger with Wachovia Bank. The notes were issued from Defendants, Yolanda P. Plasencia and Donasia Pena (“borrower” and “guarantor” respectively). Commercial property in New Jersey secured the notes. Note I was issued for three hundred thousand dollars and Note II was fifty thousand dollars. When Plaintiff merged with Wachovia, they restructured both notes by: extending their maturity dates two years and included a cross-default provision, which would cause a default in both notes if plaintiff defaulted in either one. Upon Note I’s maturity date, Defendants failed to pay the amounts due under the note. This resulted in defaults on both notes through the aforementioned cross-default provision. Plaintiff is now engaged in a New Jersey mortgage foreclosure action against both Defendants and all other tenants of the collateralized commercial property.

Plaintiff commenced an action in New York to recover the unpaid balance of both promissory notes, in the amounts of $246,553.47 and $39,604.66. Plaintiff’s complaint alleges three causes of action: the breach of Note I as a first cause of action, breach of Note II as a second cause of action, and breach of the unconditional guaranty and the commercial guaranty (collectively, “the Guaranty”) as a third cause of action. Defendant moves for dismissal under CPLR (a) (8) on the grounds of improper service, and dismissal under RPAPL 1301 (3) and CPLR 3211 (a) (4) on the grounds of a duplicate action in a New Jersey court towards collection of the same debt, or in the alternative, a stay pending the outcome of the duplicate New Jersey action.

The Court granted the Defendants’ motion to stay the action, pending the results of the New Jersey action. First, the Court denied Defendants personal jurisdiction claim under CPLR 3211 (a) (8). To prevail under CPLR 3211 (a) (8), a defendant must show facts that warrant further disclosure from plaintiff that personal jurisdiction was established. Here, Defendants had not reached the required proof to rebut the prima facia proof of proper service. Significantly, Defendants’ lawyer had admitted that she was prepared to accept the notice. Second, the Court denied Defendants’ claim that RPAPL 1301 “prohibits a party from commencing an action at law to recover any part of the mortgage debt while the foreclosure proceeding is pending.” this prohibition does not apply when the property securing the loan is located outside of New York State. Such is the case here.

Third, the Court accepted Defendants’ second claim under CPLR 3211(a) (4). Under this statute, actions must be dismissed or stayed if another action is presently pending in another jurisdiction between the same parties and based upon the same debt. Here, the Court held that Plaintiff has made its decision to foreclose on the mortgages and should not be permitted to commence a simultaneous second action to recover the same debt until after the New Jersey court has made a determination. Thus, the Court ruled in favor of Defendants as to this point.

Based upon the foregoing, the Court stayed the case because, if Plaintiff is unable to obtain a sufficient deficiency judgment against Defendants to satisfy the judgment in the New Jersey court, Plaintiff is permitted from proceeding in the New York court.

Wells Fargo Bank, N.A. v Pena, Index No. 500827/2015, 01/06/16, (Demarest, J.).

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