Accession Law LLC


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.