CONCERNS WHEN A PUBLIC UTILITY IS IN THE CHAIN OF TITLE IN WISCONSIN
by William C. Williams, Associate of William A. Abbott, ATG Member from Bell, Metzner, Gierhart & Moore, S.C., Madison, Wisconsin

Many abstractors and title insurance agents are unaware that Wisconsin Statute 182.025(1) permits a public utility in Wisconsin to encumber all of its property by recording a mortgage or trust indenture in the county where the utility's registered office is located. The statute empowers a public utility to subject its after-acquired property to the lien and to substitute property subject to the lien. This special treatment for public utility mortgages and the way public utility trust indentures are prepared creates potential problems for title examiners in Wisconsin.

After-Acquired and Incompletely Described Property May Be Subject to a Blanket Lien on a Public Utility's Real Estate
Typically, a public utility updates the list of property subject to a mortgage or trust indenture only when it issues bonds or is otherwise required to amend the terms of the mortgage or trust indenture. As a result, it can be several years between updates. However, Wisconsin Statute 182.025 provides that property acquired by a utility after it has executed a mortgage or trust indenture may be subject to the lien of the mortgage or trust indenture.

Additionally, under Wisconsin Statute 706.05(2m) (a), a public utility's mortgage or trust indenture is exempt from the requirement that a document submitted for recording must include a complete legal description of the affected property. Wisconsin Statute 706.05(2m) (b)2 states that the requirement of a full legal description does not apply to:

 

"Descriptions of property that are subject to liens granted on property thereafter acquired by a rural electric cooperative, or a telephone cooperative … a pipeline company … [or a] public utility .…"

Furthermore, Wisconsin Statute 706.05(2m) (c) adds that the requirements set out in paragraph (2m)(a) do not affect the validity of liens described in paragraph (2m)(b) 2.

Public utility trust indentures and mortgages often describe the real estate subject to the lien by listing the recording data of the deeds through which the utility acquired title. This, combined with the fact that after-acquired property is subject to the lien of a mortgage or trust deed from a public utility, creates the prospect of a perfected lien, which does not show up in the search of a particular legal description.

Title-Clearing Statutes Might Not Affect Mortgages on Public Utility Property
Wisconsin's title clearing statutes are not always effective against old mortgage liens placed on property by a public utility. Wisconsin Statute 893.33(5) provides that the 30-year statute of limitations for actions affecting title to real estate does not apply to claims founded on a mortgage given by a public service corporation as defined in Wisconsin Statute 200.01 or by a non-profit electric cooperative. Neither Wisconsin Statute 893.33 nor 706.09(3) (a) bars a prior interest in real estate owned by a public service corporation.

Given the scope and durability of a lien given by a public utility or on property titled in a public utility, what is an abstractor or title insurer to do? One option is to except any lien or lien claim by a lender to a public utility. However, this approach could raise marketable title issues. An alternative is to search the complete chain of title of any property that is or ever has been owned by a public utility. In addition, if there is a public utility in the chain of title, the title examiner should review the records at the register of deeds for a recorded mortgage or trust indenture, even if none appears in the chain of title. It is advisable to search both the real estate and the uniform commercial code records for a mortgage or trust indenture, because the registers of deeds throughout Wisconsin do not handle public utility mortgages or trust indentures uniformly. If a search reveals a mortgage or trust indenture, it is likely that the lien reaches all of the public utility's property.

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