COURT OF APPEALS
DECISION
DATED AND FILED
March 16, 2011
A.
John Voelker
Acting Clerk of Court of Appeals
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NOTICE
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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 No.
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STATE OF WISCONSIN
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IN COURT OF
APPEALS
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DISTRICT II
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Cambridge Financial
Services, LLC, A Virginia Limited
Liability Company,
Plaintiff-Respondent,
v.
Manuel Rolon, Jr.,
Defendant-Appellant.
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APPEAL
from a judgment of the circuit court for Fond du Lac County: robert
j. wirtz, Judge. Affirmed.
Before Brown, C.J., Anderson and Reilly, JJ.
¶1 REILLY, J. Manuel Rolon, Jr. appeals from a judgment of
the circuit court awarding foreclosure to Cambridge Financial Services, LLC
against one of Rolon’s properties. Rolon
argues that Cambridge is not entitled to the
judgment of foreclosure because Cambridge
previously released its mortgage interest on the property. We hold that while the agreement to release
the mortgage is ambiguous, the record clearly supports the circuit court’s
determination that the parties did not intend to release Cambridge’s mortgage interest on the
foreclosed property. The judgment of the
circuit court is affirmed.
BACKGROUND
¶2 Cambridge
is what is known as a “bridge lender”—it issues short-term high risk loans to
borrowers who cannot get conventional financing. On
July 21, 2005, Cambridge
loaned Rolon $375,000 in return for a note requiring repayment at fourteen percent
interest. The note required Rolon to
make monthly payments of $4443.27 with a balloon payment of the principal
amount due on July 21, 2008. The note
was secured by a recorded mortgage listing two separate properties as
collateral: 271 North Park Ave. and 101
E. Division St., both
in Fond du Lac, Wisconsin.
¶3 One year into the loan, Rolon accepted an offer to sell the Division St.
property for $550,000, with Rolon financing $400,000 of the purchase price. Here
is where the dispute unfolds. Rolon
agreed to assign to Cambridge
the note and mortgage that Rolon received from the buyer of the Division St. property. Rolon claims that Cambridge
agreed to release its mortgage interest in both
the Park Ave.
and Division St.
properties, while Cambridge
argues that it only agreed to release the Division St. property from the mortgage.
¶4 Rolon points to an “agreement to substitute collateral” dated
September 14, 2006, that listed exclusively the Park Ave. property and stated that Rolon
entered into a contract to sell “the Property,” and that Cambridge would fully satisfy “the mortgage
on the Property.” This agreement was
signed by one of Cambridge’s
partners. Rolon argues that the
agreement to substitute collateral released him from the entire mortgage rather
than just the Division St.
property that he was selling.
¶5 Cambridge
responds that the September 14, 2006 agreement erroneously listed the Park Ave. property as
“the Property” instead of the Division
St. property.
Cambridge
recognized the error prior to the closing date and a revised agreement was
prepared by Rolon’s attorney that substituted the Division St. address for the Park Ave.
address. The agreement was e-mailed to Cambridge on September 14 and signed by Cambridge the next day, although Rolon’s
signature does not appear on this agreement. The closing of the Division St. property occurred on
September 15, 2006.
¶6 A Cambridge partner testified at trial that Rolon asked Cambridge to release the Division St.
property so Rolon could sell it. Cambridge agreed to release just the Division St. property on the condition
that Rolon would assign the note and mortgage Rolon obtained from the buyer of
the Division St.
property to Cambridge.
¶7 After the sale of the Division St. property, Rolon continued to
make his monthly note payments to Cambridge
for seventeen months. Rolon admitted at
trial that he continued to make these payments because “I had to. I didn’t have a release on [the Park Ave.
property]. I didn’t have my satisfaction
on it.” Rolon stopped making his
payments in March 2008, four months before the final balloon payment was due.
¶8 In 2009, Cambridge
commenced a foreclosure action against the Park Ave. property. Rolon defended, arguing that Cambridge
was not entitled to a foreclosure judgment because Cambridge released its interest in the Park Ave. property
in the agreement to substitute collateral.
Following a bench trial, the circuit court granted a judgment of
foreclosure. Rolon appeals the judgment
and we affirm.
The Circuit Court’s Decision
¶9 The circuit court found that the September 14, 2006 agreement
to substitute collateral listing the Park
Ave. property was “an utter and blatant mistake.” While Cambridge
acknowledged that it signed this document, a corrected version listing the Division St.
property was drafted by Rolon’s lawyer prior to the closing date. This version was signed by Cambridge, although Rolon’s signature does
not appear on the agreement.
¶10 The court also noted that Rolon continued making his monthly
note payments to Cambridge
for seventeen months after the Division
St. property was sold. The only logical explanation for this,
according to the circuit court, was that Rolon understood that Cambridge did not release the Park Ave. property.
¶11 Finally, when Rolon tried to sell the Park Ave. property in August 2008, he
requested a payoff statement from Cambridge. The circuit court found that Rolon would not
have made this request if he truly believed that there was no mortgage lien on
the Park Ave.
property.
¶12 The circuit court concluded that there was not a meeting of the
minds as to releasing the mortgage interest in the Park Ave. property. The court granted Cambridge’s request for a judgment of
foreclosure.
STANDARD OF REVIEW
¶13 Our interpretation of the agreement to substitute collateral
between Rolon and Cambridge
is a question of law that we review de novo.
See LDC-728 Milwaukee,
LLC v. Raettig, 2006 WI App 258, ¶8, 297 Wis. 2d 794, 727 N.W.2d
82. When the terms of a contract are
plain and unambiguous, we will construe the contract as it stands. Kernz v. J.L. French Corp., 2003 WI
App 140, ¶9, 266
Wis. 2d 124, 667 N.W.2d 751. Contract
language is ambiguous if it is susceptible to more than one reasonable
interpretation. Id., ¶10. When a contract is ambiguous, a court may
look to extrinsic evidence to determine the parties’ intent. Id. Extrinsic evidence includes the
surrounding circumstances during the negotiations, the conduct of the parties
before and after the agreement was executed, and documents related to the
contract. Id.
¶14 We determine that the contract terms of the agreement to
substitute collateral between Rolon and Cambridge
are ambiguous. We therefore will examine
extrinsic evidence to determine the parties’ intent.
DISCUSSION
¶15 The answer to whether the Park Ave. property was released in the agreement
to substitute collateral should require a simple examination of the
record. Unfortunately, Rolon and Cambridge were both careless
in preparing, documenting, and recording their transaction. Based upon the ambiguity in the contract
terms, the circuit court had to resolve this case by making credibility
determinations. The court ultimately
concluded that the testimony of Rolon was not credible and that Cambridge never released
the Park Ave.
property from the mortgage. We agree and
affirm the circuit court’s decision.
¶16 The Wisconsin Supreme Court has stated that “a course of
dealing between parties which results in a binding construction or
interpretation of their contracts is a species of estoppel.” George J. Meyer Mfg. Co. v. Howard Brass
& Copper Co., 246 Wis.
558, 580, 18 N.W.2d 468 (1945). The
circuit court found that the course of dealings between Rolon and Cambridge demonstrated that neither party intended to
release the Park Ave.
property from Cambridge’s
mortgage in the agreement to substitute collateral. We affirm the circuit court’s
conclusion. The record demonstrates that
both parties recognized that the original agreement to substitute collateral
mistakenly listed the Park Ave.
property. While Cambridge
acknowledged that it erroneously signed this document on
September 14, 2006, it recognized the mistake and later that day Rolon’s lawyer
drafted a corrected version listing the Division St. property and sent it to Cambridge. Cambridge
signed the corrected version prior to the September 15 closing date. Rolon continued making his monthly note
payments to Cambridge
for seventeen months after he sold the Division St. property. Finally, Rolon requested a payoff statement
from Cambridge
when he tried to sell the Park
Ave. property in 2008. Rolon’s conduct is evidence that he did not believe
that the Park Ave.
property was released from the mortgage on September 15, 2006.
¶17 Both versions of the agreement to substitute collateral include
a provision that Cambridge
“agrees to fully satisfy that Mortgage.”
Because only one mortgage containing two properties as collateral
existed, Rolon could plausibly argue that either version of the agreement
satisfied his mortgage. This argument
would have merit if Rolon’s conduct indicated that he thought the agreement
released both properties. As we have
discussed, the conduct of the parties after they executed the agreement is key
to resolving the ambiguities. Rolon
admitted at trial that “I didn’t have a release on [the Park Ave. property]. I didn’t have my satisfaction on it.” The circuit court weighed the credibility of
the parties’ testimony with the record and found that the parties agreed to
release only the Division St.
property from the mortgage. We accept
the circuit court’s credibility determinations and therefore hold that Rolon’s
conduct overcomes any contract ambiguity.
CONCLUSION
¶18 As we hold that the parties never intended to release Cambridge’s mortgage
interest on the Park Ave.
property, we affirm the foreclosure judgment.
By the Court.—Judgment affirmed.
Not recommended for
publication in the official reports.