Accession Law LLC


Jun 17, 2015

Prince Corp. v. Vandenberg, 2014AP2097 (June 16, 2015) - How does tax lien apply to tenants in common?

Prince Corp. v. Vandenberg, 2014AP2097 (June 16, 2015)

The Court of Appeals addressed 2 issues.  1) Where the Wisconsin Department of Revenue had docketed tax liens but had not commenced a garnishment action, was the DOR entitled to capture proceeds from the sale of real estate?  Answered - Yes.  2) Where the property was held as a tenancy in common and only one debtor owed the taxes, and where the sale proceeds were first used to pay jointly held debt and with the remainder distributed to the owners, was the DOR nonetheless able to capture a proportionate share of ALL of the proceeds including those used to pay joint debt?  Answered - Yes.
¶19 The Intervenors next argue that, even if the final land contract payment is subject to garnishment, the garnishable amount is limited to one-fourth of the final payment. They observe that WIS. STAT. § 812.01(1) allows a creditor to garnish property “in [the garnishee’s] possession or under his or her controlbelonging to such creditor’s debtor[.]” They argue the property in Van De Hey’s possession that belongs to Vandenberg is limited to one-fourth of the final land contract payment, or $28,475. They essentially assert the circuit court employed an inconsistent analysis by treating the land contract payments as divisible for purposes of concluding the final payment is garnishable, but then treating the payments as indivisible for purposes of calculating the garnishable amount. ¶20 We conclude, as a matter of law, that the circuit court correctly interpreted the land contract and properly applied WIS. STAT. § 700.21(1). Under the plain language of the land contract, the full contract price is payable to all four covendors. However, by operation of § 700.21(1), the contract price is divided between the covendors according to their respective interests in the Brown County property. Contrary to the Intervenors’ assertion, the individual payments are not subdivided; only the full contract price is subdivided. Under § 700.21(1), Vandenberg has a property right to one-fourth of the full contract price, or $85,425. Accordingly, that is the garnishable amount.

Mar 11, 2015

Wisconsin Supreme Court vs. Zombie House

In foreclosure parlance, a "zombie house" is a home that has been abandoned by the owner/borrower where the lender/mortgagee does not move promptly to obtain a sheriff's sale and confirmation.  The house sits uncared for indefinitely in a state of legal limbo.  The Wisconsin Supreme Court addressed this situation in the case of Bank of New York Mellon v. Carson, 2015 WI 2015(Feb. 17, 2015).

In that case, mortgagee Bank of New York Mellon filed a foreclosure action and obtained a judgment.  However, the lender did not move to obtain a sheriff's sale after the redemption period passed.  Often in cases such as this, the lender assumes that it will be the high bidder at sheriff's sale and thereafter will become the owner of the property.  For various reasons, the lender may wish to delay or defer its ownership.

In Carson, the lender opted not to complete the foreclosure process.  The borrower, Shirley Carson, felt aggrieved by this decision.  Carson had abandoned the property, had apparently conceded to or at least defaulted to a judgment and apparently wished to be done with the matter.  A borrower's credit recovery generally does not begin until the foreclosure process is complete, so Carson may have been concerned with the continuing damage to her credit score.  As title owner to the property, Carson may have been concerned with other liability arising from ownership.  Carson moved the trial court to order the lender to complete the sheriff's sale.

The trial court determined that it did not have authority to order this relief.  The court found that  Wis. Stat. § 846.102 (2011-12), the statute governing foreclosure of abandoned properties, permits but does not require sale of a property after the redemption period has passed and that the statute also does not contain any deadline.

The court of appeals reversed and concluded that the trial court did have the authority to grant Carson's motion.  The Wisconsin Supreme Court affirmed and held:
¶3 Based on the statute's plain language and context, we conclude that when the court determines that a property is abandoned, Wis. Stat. § 846.102 authorizes the circuit court to order a mortgagee to bring the property to sale after the redemption period. We further conclude, consistent with the purpose of the statute, that the circuit court shall order the property to be brought to sale within a reasonable time after the redemption period. The circuit court's determination of what constitutes a reasonable time should be based on the totality of the circumstances in each case.
Thus, under Wisconsin law, a lender in a foreclosure action must expect that it will be required to bring a property to sheriff's sale within a reasonable time after the redemption period expires.

Mar 10, 2015

Short Sale vs. Foreclosure

"Short sale" refers to the sale of a property in circumstances where a secured party such as a mortgagee will not be paid in full.  The mortgagee's cooperation will be necessary because, absent payment in full, the mortgagee is not necessarily required to satisfy the mortgage.

There are a variety of reasons why a home owner may consider a short sale.  Debt on the home may be greater than the home's market value.  This can occur when the debt-to-ratio is high and then the property depreciates in value.  Another common reason is that financial distress due to a job loss or a medical emergency may cause a borrower to default on a mortgage note.  Once a borrower is in default, the lender typically calls the note due meaning the entire principal balance must be repaid.  However, the fact of a default damages the borrower's credit such that it may be impossible to refinance the debt in order to repay the entire principal balance.

When a home owner/borrower either is in default or is considering defaulting, the borrower has 2 basic options.

Short sale: One choice is the "short sale" whereby the owner sells the property for market value and the creditor "bank" agrees to release its mortgage even though it is not paid in full on the mortgage note.  This requires the owner to market the property (let in prospective buyers, etc), to negotiate a proposed sale, and then to seek the bank's cooperation.

Default/foreclosure  Alternatively, the owner could default (stop paying) and lose the house through foreclosure.  Typically, the bank serves notice and then files suit, eventually obtains a judgment, and then has a sheriff's sale after which the owner must leave.

How do these two options compare?

A short sale involves substantial cooperation between the borrower/seller and the lender.   From the perspective of the borrower/seller, the short-sale approval process often is long and frustrating.  The lender often gives conflicting or unclear direction as to when or whether the short sale will be approved.  The lender typically requests numerous documents from the borrower such as the borrower's budget, income, expenses, wage statements, tax returns, utility bills etc.  Often, the lender requests these same documents numerous times and/or in numerous different formats.  The process can take an unlimited amount of time since the lender need not necessarily agree to the short sale.  The short sale process is entirely a process of negotiation.

 The foreclosure process, to the contrary, is a legal proceeding with timeliness set by statutes and the court.  A typical owner-occupied home foreclosure typically takes 7-18 months depending upon a few key factors.  At the conclusion of the process, if the lender is entitled to and obtains a judgment, there will be a sheriff's sale.      

One key concept related to either option is the "deficiency."  The deficiency is the amount owed to the bank less the amount received by the bank.  Either option could result in the owner owing the deficiency amount to the creditor(s).  However, with respect to the first mortgage debt, either option typically results in forgiveness or waiver of the deficiency.  (Caution:  this is not necessarily the case and is an important area for review by an attorney.  Also, there may be important tax consequences to how this situation is treated.)

Contrary to conventional wisdom, according to FICO Banking Analytics Blog 2011, there is no difference in credit score damage between a short sale and a foreclosure.  Depending upon where the borrower's credit started, either a short sale or a foreclosure will cause the credit score to drop 100-160 points.  The time needed for the borrower's credit to recover is estimated to be the same for a short sale as for a foreclosure (3-7 years).  The only difference between the two options with respect to credit score seems to be that the credit score recovery will begin earlier in the case of a successful short sale since the timeframe presumably will be shorter for a successful short sale than for a foreclosure.

Feb 3, 2015

Confirmation of sheriff's sale in WI

The "final" step in the foreclosure process typically is the confirmation by the court of the sheriff's sale.

After the sheriff's sale, the plaintiff typically moves to confirm the sale so that a deed can be given and the proceeds paid to the plaintiff.  The court must confirm that the sale was conducted in accordance with the judgment entered in the case and the law.

The Court of Appeals explained the process as follows in Countrywide Home Loans v. Russ, 09AP2873, (WI App 2010) unpublished, so not legal precedent:

The statute's command that the circuit court must be "satisfied that the fair value of the premises sold has been credited on the mortgage debt, interest and costs" is triggered by three things: (1) a deficiency judgment is sought; (2) the mortgaged property "sell[s] for less than the amount due and to become due on the mortgage debt and costs of sale"; and (3) the property's "fair value" "has been credited on the mortgage debt, interest and costs." Significantly, "mere inadequacy of price is not a sufficient reason for failing to confirm a sale." Citizens Bank of Sheboygan v. Rose, 59 Wis. 2d 385, 387, 208 N.W.2d 110, 111 (1973). Rather, "[t]here are two situations where refusal to confirm is warranted. The first is where there is an inadequate price which has resulted from circumstances such as a mistake, misapprehension, or inadvertence. The second is where the price is so inadequate as to shock the conscience of the court." Id., 59 Wis. 2d at 387­388, 208 N.W.2d at 111. Stated another way, a circuit court does not have the unfettered freedom to deny confirmation of a mortgage-foreclosure sale; there must be a demand for a deficiency judgment (so that if the sale is not for "fair value" the mortgagor is unjustly saddled with a deficiency judgment) and one or both of the conditions set out in Rose are present. See First Wisconsin Nat'l Bank of Oshkosh v. KSW Investments, Inc., 71 Wis. 2d 359, 367, 238 N.W.2d 123, 128 (1976) ("The language of the statute that 'no sale shall be confirmed and judgment for deficiency rendered[,] until the court is satisfied that the fair value of the premises sold has been credited on the mortgage debt, interest and cost' was subsequently interpreted by this court to mean nothing more than 'such reasonable value as does not shock the conscience of the court.'") (citation omitted). 

Nov 2, 2014

Advertising Real Estate in Wisconsin

For the following discussion relating to the advertisement of interests in real estate and Wisconsin real estate practice law, consider that those conducting advertising relating to interests in real estate may include 1) people who are not required to have a license, or 2) people who have a real estate license (licensees, licensed brokers), or 3) people required to have a license but who have failed to become properly licensed.  (Figuring out which classification applies to a particular circumstance is the subject of other discussions).

All persons (all 3 classes) conducting advertising may be liable for misrepresentation.

Statutory fraudulent representation claims.
100.18  Fraudulent representations. (1) No person, firm, corporation or association, or agent or employee thereof, with intent to sell, distribute, increase the consumption of or in any wise dispose of any real estate ...  or with intent to induce the public in any manner to enter into any contract or obligation ... shall make ... an advertisement, announcement, statement or representation of any kind to the public  ... which advertisement, announcement, statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.
There are numerous deceptive advertising practices defined by statute.  For example, it is a deceptive practice to fail to "affirmatively and unmistakably" indicate when a transaction involves someone engaged in a business rather than by a private party not engaged in a business.  100.18(3), Stats.  Another deceptive practice involves misleading advertising as to the plan or scheme involved in a transaction.  100.18(9), Stats.  Finally, and more generally, any material representation or statement of fact relating to a transaction which is untrue, deceptive or misleading may be actionable.

Violation of sec. 100.18, Stats., will subject the violator to an action for civil damages plus attorney fees (sec. 100.18(11)(b) (except a real estate licensee isn't liable for attorney fees) and forfeitures, fines, and possible imprisonment (sec. 100.26).

Common law misrepresentation claims.

There also remain additional, cumulative common law claims which can arise from the same facts.  A statement made by someone who knew or should have known it was false and which was (reasonably) relied upon by another to their detriment can give rise to a tort claim for negligent misrepresentation. 

A false statement also may give rise to a strict liability misrepresentation claim. The elements of strict liability misrepresentation are: (1) statement of fact made by the defendant on personal knowledge or where he should have known whether the statement was true (2) which is false (3) that the injured party believed and relied upon to his detriment (reasonableness of reliance may or may not be an element) (4) in circumstances in which the defendant had an economic interest.  Kailin v. Armstrong, 2002 WI 70, 252 Wis.2d 676, 643 N.W.2d 132, 148, fn. 23.

A person making statements in advertising relating to a real estate transaction could be liable under several different theories if the statements are not true.  Further, the law recognizes that misrepresentation can occur by omission,  In other words, the failure to make a statement of fact in circumstances where silence misleads the other party can be a misrepresentation.


Real estate licensees are further restricted by REEB 24.04
 (1)  False advertising. Licensees shall not advertise in a manner which is false, deceptive, or misleading.
 (2) Disclosure of name. (a) Except for advertisements for the rental of real estate owned by the broker, a broker shall in all advertising disclose the broker's name exactly as printed on the broker's license or disclose a trade name previously filed with the department, as required by s. REEB 23.03, and in either case clearly indicate that the broker is a business concern and not a private party. (b) Except for advertisements for the rental of real estate owned by the licensee, a licensee employed by a broker shall advertise under the supervision of and in the name of the employing broker. (c) A licensee may advertise the occasional sale of real estate owned by the licensee or the solicitation of real estate for purchase by the licensee without complying with pars. (a) and (b), provided that the licensee clearly identifies himself, herself or itself as a real estate licensee in the advertisement.
(3) Advertising without authority prohibited. Brokers shall not advertise property without the consent of the owner.
 (4) Advertised price. Brokers shall not advertise property at a price other than that agreed upon with the owner; however, the price may be stated as a range or in general terms if it reflects the agreed upon price.


A person who should be but is not licensed as a broker has numerous liability concerns in addition to the sec. 100.18 fraudulent representation liability noted above.

Certain types of advertising activity relating to interests in real estate falls within the definition of the activity of a "broker" under sec. 452.01, Stats.,  The fact that the broker is not licensed obviously would not provide any liability shield.  Instead, the person would stand exposed to liability for violating the law relating to the practice of real estate.  Penalties can include forfeitures, fines and imprisonment. Sec. 452.17.

In addition, any contract agreeing to compensate an unlicensed broker is void at inception.  Badger III Ltd. v. Howard, Needles, Tammen & Bergendoff, 196 Wis. 2d 891539 N.W.2d 904 (Ct. App. 1995), 94-2531  The unlicensed broker is not entitled to compensation.

For example, a "broker" includes anyone who, for another and for consideration, offers or promotes an interest in real estate.  This paragraph does not apply to a person who only publishes or disseminates verbatim information provided by another person.  So some advertisement may be done for "another" provided that the advertiser is only publishing or disseminating verbatim information. 

This exception for publishers would not seem to apply to a company that seeks out owners, contracts with them to obtain an option of some type on the property, and then advertises the property for sale, lease, lease option, land contract, etc.  That activity almost certainly constitutes acting as a "broker."

A "broker" also includes anyone engaged in the business of selling real estate interests.  There is a presumption that 5 sales in 1 year or 10 sales in 5 years shows that one is engaged in the business. A person engaging in such practice without a license

Note that a "broker" has a host of statutory duties.  See, ex. 452.133, Stats.  These duties do not apply only to licensed brokers.  Rather, a broker who violates a duty and is unlicensed is violating 2 laws instead of one.

Advertising by an unlicensed "broker" almost certainly will not contain the disclosures required of brokers by Wisconsin law.  Presumably the "broker" does not realize that they need to obtain a license to do what they are doing.

There are a host of varieties of misrepresentation that can arise in the advertisement of real estate.  There also are considerations as to what must be said depending upon whether the person making the statements is an owner, a licensed broker, or a "broker" who should be licensed.