Can a New York lender sue on the note and foreclose at the same time?

This page explains New York law, mainly section 1301 of the Real Property Actions and Proceedings Law (RPAPL). The rule is sometimes described as an election of remedies: a lender holding a note secured by a mortgage can sue on the note for a money judgment, or foreclose the mortgage, but it cannot run both cases side by side against the borrower without the court's leave. KOR Law LLP's debtor and creditor practice handles these overlapping suits for borrowers, guarantors and lenders. The mortgage side is part of the firm's foreclosure and real estate litigation practice.

What exactly does RPAPL 1301 require?

How does the leave rule work, step by step?

1. The first action. The lender sues on the note, for example by a CPLR 3213 motion for summary judgment in lieu of complaint, or starts a foreclosure. Either is an action to recover the mortgage debt.
2. The second action. Before starting another action to recover any part of the same debt, the lender must ask the court in the first action for leave (RPAPL 1301(3)).
3. If the lender skips that step. The defendant can raise the missing leave as a defense in the second action, or move to dismiss it because another action is pending between the same parties for the same cause of action (RPAPL 1301(3); CPLR 3211(a)(4)).
4. If the defendant stays silent. The statute provides that the first action is deemed discontinued when the second one is commenced without leave, unless, before final judgment in the second action, a defendant raises the missing leave or seeks dismissal under CPLR 3211(a)(4) (RPAPL 1301(3)).
5. The limitations clock keeps running. The leave requirement is not treated as a stay or statutory prohibition when calculating the time to sue (RPAPL 1301(3), referring to CPLR 204 and 213). Waiting for leave does not buy the lender extra time.

What does the rule accomplish?

The effect is that a borrower is not sued in two courts at once for the same dollars without a judge's say-so, and one court stays in charge of the debt. The statute's structure shows the order it expects: if the lender chooses a money judgment first, it must try to collect it through the sheriff before foreclosing (RPAPL 1301(1)); if it chooses foreclosure first, it gets a deficiency for any shortfall only by a timely motion in the foreclosure, measured against the property's market value (RPAPL 1371). The deficiency side is explained in whether a lender can get a deficiency judgment after a New York foreclosure sale.

Does the rule apply to a suit against a guarantor?

The statute speaks of any other action "to recover any part of the mortgage debt." Whether a separate suit on a guaranty is such an action can turn on the parties, the guaranty and the facts. What is clear is the practical point: if you are a guarantor sued on the guaranty while the foreclosure is pending, look at whether the lender obtained leave, and raise the issue early in the response rather than at the end. The guarantor's other defenses are in what defenses a personal guarantor has when a New York lender sues. The fast-track procedure lenders use for guaranty suits is in what a CPLR 3213 motion is.

What if the debt is not secured by real estate?

RPAPL 1301 is a mortgage rule. For loans secured by personal property, such as equipment or pledged ownership interests, the Uniform Commercial Code says a secured party's rights after default are cumulative and may be exercised simultaneously: it may reduce the claim to judgment and enforce its security interest at the same time (UCC 9-601(a), (c)). How a lender sells pledged interests is covered in what a UCC foreclosure sale of an ownership interest is in New York. A loan secured by both a mortgage and personal property can raise both sets of rules, which is one reason the order of a lender's steps after a default matters; see what happens after a lender declares a commercial loan in default.

What should a lender check before starting a second action?

The firm also represents lenders, and for a lender the statute reads as a checklist. Before a second action on the same debt:

• apply to the court in the first action for leave, and keep the order with the new filing (RPAPL 1301(3));
• if a money judgment already exists, issue an execution to the right sheriff and wait for its return before foreclosing (RPAPL 1301(1));
• in any foreclosure complaint, state whether another action was brought and what was collected (RPAPL 1301(2));
• ask whether a timely deficiency motion in the foreclosure would do the job of a separate suit (RPAPL 1371(2)); and
• calendar the limitations period on the accelerated debt, because the leave process does not extend it (RPAPL 1301(3); CPLR 213).

What changes the answer?

• Which action came first. Leave is sought from the court where the former action was brought (RPAPL 1301(3)).
• Whether a final judgment exists. After a money judgment, foreclosure needs an execution returned unsatisfied (RPAPL 1301(1)).
• Whether the defendant raised it in time. The missing leave must be raised before final judgment in the second action, or the first action is deemed discontinued (RPAPL 1301(3)).
• What the second action seeks. The rule covers actions to recover any part of the mortgage debt, including foreclosure (RPAPL 1301(3)).
• Timeliness. A time-bar ruling in one action carries over to the other (RPAPL 1301(4)); see how long a lender has to sue on a note or guaranty.
• The type of collateral. For personal property collateral, Article 9 allows remedies to be pursued simultaneously (UCC 9-601(c)).

For example: a note suit filed during a foreclosure

Common mistakes

• Raising the defense too late. It must come before final judgment in the second action (RPAPL 1301(3)).
• Assuming two suits mean double recovery. Both cases are aimed at one debt; the statute requires disclosure of other actions and collections (RPAPL 1301(2)).
• Lenders assuming leave is automatic. It is a condition precedent the lender must satisfy before suing (RPAPL 1301(3)).
• Treating a pending application for leave as extra time. It does not stop the limitations clock (RPAPL 1301(3)).
• Ignoring the deficiency deadline. After a foreclosure sale, a shortfall must be sought by motion within 90 days of deed delivery (RPAPL 1371(2)).

What to do this week

1. List every lawsuit about the loan, with the court, the index number, the parties and the date each started.
2. Check each later complaint for the RPAPL 1301(2) statement about other actions.
3. Search each later court file for an order granting leave.
4. Mark every response deadline, including any CPLR 3213 return date.
5. Note whether any judgment has been entered, and whether an execution was issued on it.
6. Bring the papers to a first meeting; the list is in what to bring to a first meeting about a loan dispute.

Frequently asked questions

Who decides whether to grant leave?

The court in which the former action was brought (RPAPL 1301(3)).

Can the lender foreclose after it already has a judgment on the note?

Only if an execution on that judgment was issued to the sheriff, of the county where the defendant lives or, for a non-resident, where the judgment-roll is filed, and was returned wholly or partly unsatisfied (RPAPL 1301(1)). The sheriff's role is described in what a sheriff can seize under a property execution.

Is the defense lost if I do not raise it?

The statute ties the consequence to timing: if a second action is commenced without leave and no defendant raises the issue before final judgment in it, the first action is deemed discontinued (RPAPL 1301(3)).

Does the rule stop the lender from moving for a deficiency in the foreclosure?

No. The deficiency is sought by motion within the foreclosure itself (RPAPL 1371(2)), not as a separate action.

What if the lender's foreclosure is dismissed as untimely?

Then any other action to foreclose or recover any part of the same mortgage debt is also barred (RPAPL 1301(4)). The foreclosure timing rules are in how long a lender has to foreclose in New York.

Does the rule apply to equipment loans?

No. Section 1301 concerns mortgage debt. Personal property collateral follows Article 9, under which a secured party's remedies are cumulative (UCC 9-601(c)).