Park Bank v. Jackson (WI)

Summary: When a party refinanced the first mortgage and entered into a subordination agreement with a second mortgage holder, the subordination agreement could not be held invalid for summary judgment purposes.


Park Bank v. Jackson, 349 Wis.2d 787, 2013 WI App 105 (Wis. Ct. App. 2013).


Facts: When Park Bank filed a foreclosure complaint against David W. Jackson (Jackson), it also named Wachovia Mortgage Corporation (Wachovia) as a defendant, alleging that Park Bank had a superior mortgage on Jackson’s property. Wachovia was successor in interest to World Savings Bank, which originally refinanced Jackson’s loan from First National Bank of Bangor, then the first mortgage holder. At the time of refinancing, Park Bank was the second mortgage holder. As part of the refinancing transaction, World Savings Bank entered into a subordination agreement with Park Bank. Wachovia argued that, in the agreement, Park Bank agreed to remain as the second mortgage holder. Challenging the validity of the agreement, however, Park Bank moved the court for summary judgment. The circuit court granted, and Wachovia appealed.


Holding: Reversed. The issue on appeal was whether Park Bank established that there was no genuine issue as to any material fact on the validity of the subordination agreement and it was entitled to a judgment as a matter of law. Wis. Stat. § 802.08 (2011–12). After considering each of Park Bank’s arguments in light of evidence presented, the appellate court concluded that it didn’t.

First, Park Bank argued that it didn’t approve the subordination agreement. Park Bank’s vice president signed the agreement, but the signature line for its loan officer was left blank. In addition, Park Bank claimed that the vice president didn’t have authority to sign the agreement. To support the argument, Park Bank submitted an affidavit by its executive vice president, but it was vague, general, and conclusory. Park Bank presented no other legal or factual support for the proposition that the bank vice president lacked the authority to approve the subordination agreement or that the bank policy required signatures by two officials for approval. Park Bank further argued that the Small Business Administration did not, and would not have approved, the subordination agreement. But the argument was without legal or factual support.

On the other hand, fax machine stamps that appear on the subordination agreement showed that Park Bank sent the copy of the agreement to World Savings Bank on the date that the bank vice president signed the agreement and received it back from World Savings Bank three days later. This conflicting evidence made the court conclude that it was reasonable to infer that the subordination agreement was approved by Park Bank.

Second, Park Bank argued that, due to lack of notarization or authentication, the subordination agreement couldn’t be recorded under Wis. Stat. § 706.05(2) (2011–12), and thus was ineffective against the world. But the court couldn’t see how the alleged defect affected the enforceability of the agreement between Park Bank and Wachovia.

Third, Park Bank argued that, per literal reading of the subordination agreement, in light of the names filled in the blanks, the transaction was in fact a subordination of Park Bank’s mortgage to itself, not to World Savings Bank. Wachovia acknowledged the wrong names filled in, but asserted that the agreement nonetheless unambiguously subordinated Park Bank’s mortgage to World Savings Bank, or alternatively, the agreement is ambiguous. Rejecting both of these arguments, the court first noted that the wrong names couldn’t possibly indicate that Park Bank’s mortgage was subordinated to World Savings Bank. In addition, Wachovia was not arguing that the agreement was subject to two different reasonable interpretations, i.e., ambiguous; rather, it argued that the agreement was absurd because the transaction as written was impossible to occur.

In response, Park Bank claimed that the agreement was not absurd because the transaction as written was “very possible” because “[l]enders make multiple mortgages on properties all the time.” Other than listing several examples of such transactions, however, Park Bank didn’t provide sufficient background or citation to authorities for the court to rely on to determine whether subordination of one’s mortgage to itself is possible or plausible in banking law and practice.

In the absence of proper guidance to make a summary judgment, the court then turned to extrinsic evidence, including the underwriting worksheet and the mortgage document. These documents contained evidence that the refinancing transaction at issue involved subordination of Park Bank’s mortgage to World Savings Bank. Therefore, it was reasonable to infer that Park Bank subordinated its mortgage to World Savings Bank. Park Bank didn’t submit other evidence rebutting this inference or indicating that the subordination agreement was for some other transaction.

Fourth, Park Bank argued that equitable subrogation cannot be applied here because cases that Wachovia cited did not involve a situation where there was a prior recorded mortgage. But Park Bank didn’t cite any authorities establishing that equitable subrogation was not applicable in this situation either.

Finally, Park Bank argued that Wachovia did not rely on the subordination agreement when it refinanced Jackson’s loan. The evidence, however, provided reasonable grounds to infer that Wachovia regarded the subordination by Park Bank as an integral part of the refinancing transaction.

For these reasons, the appellate court concluded that Park Bank did not make a prima facie case that the subordination agreement was invalid or otherwise unenforceable. The circuit court’s summary judgment was reversed and cause was remanded.


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By: ATG Underwriting Department | Posted on: Thu, 02/06/2014 - 2:00pm