Molitor v. Advantage Community Bank (WI)

Summary: A reaffirmation agreement that unambiguously applies to one loan does not constitute a dispute under Accord and Satisfaction, when payment only satisfies one of two liens.


Molitor v. Advantage Community Bank, 345 Wis.2d 848, 2012 AP 487 (Wis. Ct. App. 2012).


Facts: In 2001, James and Beverly Molitor opened a restaurant known as New Saloon. Beverly, along with two of her children, Troy and Eve, created TEB, Inc., which owned and operated New Saloon. Various loans were taken out in order to finance New Saloon. These loans include a Personal Loan to James and Beverly and a Business Loan to TEB. James, Beverly, Troy and Eve also gave a guaranty for all past, present, and future credit extended to TEB. James and Beverly executed a RESA, securing all previous and future loans their residential property. In 2008, James and Beverly signed a work-out agreement for the TEB business loan which stated that TEB would surrender the New Saloon restaurant and its equipment and have $150,000 due on the TEB business loan. This agreement was secured by Beverly and James’s residential property.

In 2009, James and Beverly filed for bankruptcy and executed a Reaffirmation Agreement for $14,280.15 which affirmed the “home equity loan” incorporated into the RESA. The Reaffirmation Agreement stated that the residential property remains “subject to such security interest or lien in connection with the debt or debts being reaffirmed.”

In 2010, James and Beverly received a payoff calculation for the Personal Loan in the amount of $13,544.50. James and Beverly’s attorney sent the Bank a letter entitled “Payoff of Mortgage and Recordable Satisfaction of Mortgage,” which referenced “Loan Account: 71533” and contained a check for $13,544.50 on which was written “Mortgage Paid in Full.” The letter also contained a check for $30 and stated that the Bank must “execute and record a proper and full satisfaction of mortgage” within 30 days. The Bank cashed the $13,544.50 check and returned the $30 dollar check with a letter stating that the previous check had been applied to the home equity loan and that it would not release the mortgage because it still secured the Business Work-Out Agreement.

James and Beverly brought suit to quiet title and declare the mortgage liens on their residential property satisfied, arguing that they only reaffirmed the Personal Loan and that the TEB Business Loan no longer existed. The trial court held that the James and Beverly only satisfied the 2008 Personal Loan and that a mortgage was still in place because the 2008 TEB Business Loan was not discharged in bankruptcy. The circuit court further held that claim and issue preclusion based upon the Bank’s suit with Troy and Eve was inapplicable because there was no final judgment and it was not litigated. Finally, the court held that they payment by James and Beverly did not constitute an accord and satisfaction because there was no reasonable notice on the check that it was intended to satisfy both the debt secured under the 2008 TED Business Loan as well as the Personal Loan.


Holding: Affirmed. The court held that, despite the Reaffirmation Agreement mentioning their intent to secure all prior and future debt with a mortgage or lien on the residential property, it only mentioned the Personal Loan and therefore the TEB Business Loan was not incorporated into that Agreement despite being a lien on the residential property. For this reason, while the check paid off the personal loan, that the lien was still intact because of the money owed by way of the TEB Business loan. Because James and Beverly only paid off one of the two loans, accord and satisfaction does not apply. Furthermore, accord and satisfaction is not appropriate because James and Beverly do not dispute the amount due, they dispute whether the payment satisfied two separate loans. For these reasons the holding of the trial court was affirmed.

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By: ATG Underwriting Department | Posted on: Mon, 04/15/2013 - 9:48am