Election Of Remedies – A Twist On Suing On The Note

This won’t happen too often, but when it does, you will be glad to be familiar with this concept.

Election of remedies (in many states called the one action rule) is a very difficult, highly technical subject.  It is, we suggest, sometimes poorly understood by bench and bar alike which leads to confusion and uncertainty.  In its most general sense (and more than that should not be needed for our purposes) the idea is that a mortgagee holder must choose to sue either on the note (the monetary obligation) or sue to foreclose the mortgage.  Again, generally, both cannot be pursued at the same time.

Typically, lenders would readily choose to foreclose on the mortgage because that is where the value is likely to be.  Suing a borrower on the note to get a money judgment when most often the borrower has no assets is usually unproductive.

Okay so far.  But what happens if a foreclosure is begun and is dismissed – resulting in either that foreclosure anew is impossible or inconvenient?  Or what if a senior forecloses first or a tax deed is taken thus rendering the foreclosure useless?  Can an action then be begun on the note?

It certainly seems like the answer should be, why not?  But a trial court judge in an actual foreclosure case said “no”.  On appeal, however, a “yes” response emerged [McSorley v. Spear, 13 A.D.3d 495, 789 N.Y.S.2d 52(2004)].  The decision said that since the foreclosure was no longer pending (and did not result in a judgment in the mortgage holder’s favor) the plaintiff was not barred from starting a separate action on the note.

As we observed, it will not so often occur, but if a foreclosure is defeated, or rendered moot (and it can happen), suit on the note should most often be and remain an available option.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.