The Trusted Adviser February 2011 | Volume 4 • Number 1



Foreclosure; Mortgages

First Bank of Highland Park v Summerhaven, LLC, 2009 AP 669 (Wis Ct App, 2010).

Facts:Summerhaven, LLC, (Summerhaven) was a real estate developer who purchased several parcels of real estate with funds it borrowed from the First Bank of Highland Park (First Bank), a bank chartered in the state of Illinois. Two of the property owners who sold a parcel to Summerhaven were Vito and Marta Gieron, who in addition to selling their property to Summerhaven also loaned the purchase money to Summerhaven in exchange for a mortgage on the property.

The Gierons' mortgage was clearly identified in all documents as being second in priority to First Bank's purchase-money mortgage. Both mortgages were recorded on the same day at the same time by the same individuals, at the same recording office. The identification number the recording office stamped on the bank's mortgage was lower than that stamped on the Gierons' mortgage.

When Summerhaven missed payments on the loan, First Bank attempted to foreclose on their mortgage. The Gierons answered Summerhaven's filings to foreclose, cross-claiming against Summerhaven, and counterclaiming against the bank under the theory that their mortgage was prior and senior to the bank's.

First Bank filed for summary judgment, which the trial court granted. The Gierons appealed this decision.

Holding:Affirmed. The Gierons first argued that the bank's statutory priority under Wisconsin Statutes Section 706.11 was not valid. Section 706.11 provides that loans to state or national banks have priority over all liens except for tax and special assessments. The Gierons, however, argued that by being chartered in Illinois, First Bank qualified neither as a state bank or a national bank. The court, however, did not accept this argument and instead followed its 2009 precedent ofLowell Management Services, Inc v Geneva National PQC, LLC, 2009 WI App 149, concluding that "state bank" under Section 706.11 includes banks chartered in any state of the union, rather than solely those chartered in Wisconsin.

The Gierons then argued that there was an issue of material fact as to which mortgage had been recorded first because the recording date and time was identical for both. However, the court relied on Section 59.43(1) which provides that the register of deeds must record the instruments in the order received. This, the court concluded, meant that the lower identification number on the bank's mortgage showed without a doubt that it was recorded first.

However, the court further concluded that even if the Gierons had been right on either point, it would not have changed the outcome because the Gierons agreed for their mortgage to be placed in second position when they signed documents to that effect. As a result, the court concluded that no matter what priority the statutes gave the Gieron mortgage, it would continue to be second to First Bank's because the Gierons negotiated and agreed to a second mortgage originally.






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[Last update: 1-20-11]