COURT OF APPEALS DECISION DATED AND FILED June 24, 2008 David R. Schanker Clerk of Court of Appeals |
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This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports. A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62. |
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APPEAL
from a judgment of the circuit court for
Before
¶1 PER CURIAM. Robert Gabert appeals a judgment of foreclosure, asserting Rollan and Deborah Fuller do not have a valid mortgage upon which they can foreclose. We agree and, accordingly, reverse the judgment.
Background
¶2 In 1996, Gabert sought to purchase a 15.8-acre parcel from the Fullers. Deborah handwrote a “land contract,” using another land contract as a template, but making a few customizations. The contract specified a purchase price of $75,000 and provided for payments of $200 per month until a final balloon payment was due in December 2006. Alternatively, the contract provided that Gabert could make payments totaling $5,000 prior to the balloon payment due date. The contract was signed in September 1996.
¶3 Gabert obtained a $20,000 loan from Green Tree Financial for the real estate and used that money as a down payment.[1] To obtain the loan, however, Gabert needed clear title to the real estate. Thus, at closing in November 1996, the Fullers conveyed the property to Gabert by warranty deed. The land contract, however, also provided that if Gabert defaulted, he would “be responsible for the deed to be changed back” to the Fullers.
¶4 Gabert made, at most, payments totaling $800, and when he failed to make the balloon payment in December 2006, the Fullers sought to foreclose. The court orally denied Gabert’s motion for summary judgment and the matter was tried to the court. Ultimately, the court found the purchase price was $75,000[2] and the land contract “constitute[d] a second lien” against the real estate. The court concluded the property had been mortgaged and Gabert owed $106,040.41 to the Fullers. The court set a three-month redemption period and then ordered a sheriff’s sale if Gabert failed to redeem. On a motion for reconsideration of the redemption period, the court stated it did not believe there was a land contract and clarified, “I think I have to hold them to the fact that this has to be treated as a mortgage foreclosure case rather than a land contract foreclosure case….” Gabert appeals.
Discussion
¶5 Gabert asserts the court erred in finding there was a note
and mortgage upon which to foreclose.
This requires us to consider the warranty deed as well as the land
contract document. Interpretation of a deed
is question of law, as is interpretation of a contract. Schorsch v. Blader, 209
¶6 A warranty deed is permitted to contain reservations or
exceptions. See Wis. Stat. § 706.10(5)(2005-06). We will ordinarily attempt to reconcile the
deed with the stated reservations. Lucareli
v. Lucareli, 2000 WI App 133, ¶7, 237
¶7 The Fullers conveyed their property to Gabert with a warranty deed that contained no reservation of rights. It mentioned no lien or mortgage or otherwise indicated a security interest held by the Fullers. Indeed, the Fullers knew Gabert needed clear title to obtain financing and noted, in the contract, that certain paperwork was only for Green Tree’s benefit. When the Fullers conveyed the property by unreserved warranty deed, they warranted the property was unencumbered by a lien. Whether they intended to or not, the Fullers thereby extinguished any security interest they might have held under the land contract. Further, any tacit agreement permitting a security interest not listed in the deed is inconsistent with the nature of conveyance by warranty deed, and the plain language of the deed controls.
¶8 The Fullers try to avoid this result by asserting we can look
to their intent and convert the arrangement with Gabert to a mortgage.[3] This is evidently what the court attempted to
do: with a mortgage, the mortgagor holds
both legal and equitable title. Glover
v. Marine Bank of Beaver Dam, 117
¶9 To support their appellate argument that we should interpret
their arrangement as a mortgage, the Fullers rely principally on Maslowski
v. Bitter, 12
¶10 When the Maslowskis offered to repay the loan, Bitter refused
the funds, wanting his interest in the land instead. The Maslowskis sought a declaration that the
deed was intended only for security, not as a conveyance. The court agreed, noting that the $1,520 was
inadequate as a purchase price and that Bitter had not paid toward an
outstanding mortgage, taxes, or interest.
The court stated that a deed, “though absolute in form, may be shown by
parol [evidence] to have been intended as security and, between the parties,
will have the effect of a mortgage.”
¶11 However, in Maslowski, it was the borrowers who, already holding title to the real estate, conveyed a deed to their lender as security for a loan. Here, the Fullers as the vendors conveyed their deed to their buyer. Asking us to consider their arrangement a mortgage turns the Maslowski deed-as-mortgage notion on its head. As sellers, the Fullers have nothing to secure with a deed; that is, they are not the parties promising repayment by pledging their land.[5]
¶12 The circuit court erroneously concluded there was a mortgage on which the Fullers could foreclose. The warranty deed extinguished any security interest the Fullers had, whether under a mortgage or a land contract, because a warranty deed with no reservations indicates the real estate is unencumbered. The Fullers may or may not have other remedies available, such as an action in contract to collect on the purchase price, but foreclosure is not one of those remedies.[6]
By the Court.—Judgment reversed.
This
opinion will not be published. See Wis.
Stat. Rule 809.23(1)(b)5.
[1] Cavalry SPV II and Platinum Financial Services, Gabert’s co-defendants, are Green Tree’s successors. Also, Gabert had sought additional financing from Green Tree to purchase a mobile home from another vendor.
[2] The closing statement associated with the loan from Green Tree indicated a purchase price of $20,000.
[3] The Fullers make this argument despite the fact that, as will be noted below, they actually intended to create a land contract.
[4] The
remedy in a mortgage situation is foreclosure.
“A foreclosure suit has been said to be merely a proceeding for the
legal determination of the existence of the mortgage lien, the ascertainment of
its extent, and the subjection to a sale of the estate pledged for its
satisfaction.” Glover v. Marine Bank,
117
[5] In
fact, we think it evident the parties never contemplated a mortgage, only a
land contact. First, the contract
itself, although not dispositive on its own, suggests the parties contemplated
a land contract and not a mortgage, as Deborah modeled the document after the
Fullers’ own land contract. Second, a
mortgage usually involves two virtually simultaneous
conveyances: first, a deed from the seller to the purchaser, who
needs title in order to give a mortgage, then the mortgage note from the
purchaser-mortgagor to the lender-mortgagee.
See Gonis v. New York Life Ins. Co.,
70
[6] Gabert
additionally complains the Fullers failed to file a lis pendens, and he notes
there is no record from the trial court to support a conclusion that they
did. This argument was raised for the
first time on appeal—the trial court therefore had no opportunity to make a
record. Also, the judgment indicates a
lis pendens was filed, and we must presume the judgment is accurate in that
respect. Manning v. McClurg, 14