First Bank Financial Centre v Miller et. al. Part 2 (WI)

Summary: Under the discovery rule, whether reasonable diligence requires someone to discover an injury associated with a mortgage upon finding that the mortgage was recorded late is a question of fact reserved for the jury.

First Bank Financial Centre v Miller et. al., 2010 AP 2971 (Wis. Ct. App., 2011).

Facts: In 1993 Dagmar Griffin (Griffin) and her husband made a loan to Thomas Miller (Miller) and were granted a mortgage on Miller’s West Allis restaurant as a security. 

To obtain clear title for a loan on the West Allis property, Louis Kaiser (Kaiser), Miller’s attorney, suggested that Miller convince Griffin to exchange her mortgage on the West Allis property for one of equal value on the Greenfield property.  On June 16, 1998, Kaiser sent a letter to the Griffins stating that the new mortgage on the Greenfield property was second only to Park Bank’s $200,000 mortgage and that the Griffins’ mortgage would be executed and submitted on or before July 10, 1998.  Kaiser sent a second letter stating that Miller would sign the mortgage and have it recorded at the closing when he refinanced. On August 8, 1998, Kaiser recorded a satisfaction of mortgage from Griffin for the West Allis property.

On July 31, 1998, Miller executed a mortgage in favor of the Griffins on the Greenfield property. One week later, Kaiser’s partner, Terry Mitchell (Mitchell), created a mortgage for First Bank’s which stated its mortgage on the West Allis property was second only to Park Bank’s mortgage.  First Bank’s mortgage was recorded on August 31, 1998.  The Griffins’ mortgage was recorded January 11, 2000.

On March 23, 2000, the Griffins received a letter from Mitchell which included a copy of the recorded mortgage and informed them that he finally received it back from the register of deeds office.

In June of 2008, Miller defaulted on his loan payments and First Bank filed an action to foreclose on Miller’s properties.  The Griffins discovered their injury upon hearing about the foreclosure and bought third party claims against Kaiser and Mitchell alleging promissory estoppel, negligence, fraudulent misrepresentation, and intentional interference with contract.  Kaiser and Mitchell sought summary judgment on statute of limitations grounds.  The circuit court agreed, granting summary judgment and stating that the Griffins should have known of their injury as of March 23, 2000, therefore barring the complaints alleged in 2009.  The Griffins appealed the decision.

Holding: Judgment reversed and cause remanded.  The discovery rule states that a cause of action accrues on the date the injury is discovered or with reasonable diligence should be discovered, whichever is first.  The question is whether Griffin could have discovered the injury earlier through the exercise of reasonable diligence.  The court of appeals found that, while one interpretation of the March 23, 2000 letter is that the Griffins needed to verify the mortgage’s position, another reasonable explanation is that, despite the tie-up at the register’s office, the mortgage still has the same position as originally represented.  Because the date of discovery is a question of fact for the jury, and Griffin raised a genuine issue of material fact regarding whether reasonable diligence was exercised, the judgment of the lower court was reversed.

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By: ATG Underwriting Department | Posted on: Mon, 07/02/2012 - 12:03pm