January-February Vol. 5, No. 1

Casenotes

Wisconsin

US Bank v Landa, 2010 AP 3036 (Wis Ct App, 2011).

Facts: In December 2005, Brenda Landa took out two loans from Mortgage Lenders in the amount of $168,000 and $42,000. Each loan was secured by a real estate mortgage. The $168,000 mortgage consisted of 15 pages of terms and conditions. The $42,000 mortgage was had only four pages of terms and conditions, including acknowledgment that it was a second mortgage. Mortgage Lenders also instructed its title company that the $168,000 mortgage was to have first lien priority and the $42,000 was to have second lien priority. However, the $42,000 mortgage was recorded on January 23, 2006 while the $168,000 mortgage was recorded on February 14, 2006.

In 2008, Meadowland filed two condominium liens against Landa. Shortly after that, Mortgage Lenders assigned the $168,000 to U.S. Bank. By 2009, Landa had defaulted on her loan payments and U.S. Bank commenced foreclosure. U.S. Bank alleged that Meadowland's condominium liens were subordinate to the $168,000 mortgage. Meadowland denied that its liens were subordinate.

The parties disagreed over the interpretation of Wisconsin Statutes Section 703.165(5)(b), which provides that a condominium lien has priority over all other liens, except for five exceptions. One of the exceptions is "[a]ll sums unpaid on a first mortgage recorded prior to the making of the assessment."

U.S. Bank alleged that the $168,000 mortgage was intended by the parties to be the first mortgage and thus under the statute, the Meadowland lien was subordinate to it. Meadowland argued that it did not matter that the $168,000 mortgage was intended to be the first mortgage. The $42,000 mortgage was recorded first and therefore only the $42,000 mortgage had priority over Meadowland's liens.

The circuit court agreed with Meadowland's argument and ruled that the $42,000 mortgage was first lien, followed by Meadowland's liens, and then U.S. Bank's $168,000 mortgage. U.S. Bank appealed.

Holding: Reversed and remanded. The court of appeals agreed with U.S. Bank that the $168,000 mortgage was the first mortgage and given priority over the $42,000 mortgage. This was explicitly found in the mortgage terms and conditions and the closing instructions to the title company.

Additionally, the plain reading of the statute states that "a first mortgage" recorded prior to the condominium assessment is the only mortgage lien superior to the condominium lien. § 703.165(5)(b) emphasis added. The statute does not say that "the first mortgage" recorded is the only mortgage lien superior to a condominium lien.

Therefore, the first two mortgages on their face reflect that the $168,000 mortgage was superior to the $42,000 mortgage. Both mortgages were recorded prior to Meadowland's condominium liens. The fact that the $168,000 mortgage was recorded after the $42,000 mortgage does not alter the $168,000 mortgage's first mortgage status. The court found that the $168,000 mortgage was superior to Meadowland's liens, and the $42,000 mortgage was junior to Meadowland's liens.

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