Associated Bank, N.A. v. Bradley (WI)

Summary: A subordinate lienholder, who was omitted from a foreclosure action by the senior lienholder, is entitled to the same rights it would have had, had it been made a party to the foreclosure proceedings.

Associated Bank, N.A. v. Bradley, 2012 AP 81 (Wis. Ct. App. 2013).


Facts: The property in dispute originally had two mortgages: a first lien in favor of Wells Fargo, and a second lien in favor of Associated Bank, which was subordinate to the Wells Fargo mortgage. In 2008, Wells Fargo commenced a foreclosure action on the original owners. After entry of judgment, Wells Fargo filed an amended complaint naming MERS as a party. This was based on an erroneous report from Chicago Title that Associated had assigned its mortgage interest to MERS. Associated was not made a party to the foreclosure and MERS did not respond to the complaint. An amended judgment was entered in May 2009 and the property was sold in a sheriff's sale. The Bradleys purchased the property from the successful bidder.

In 2010, Associated initiated a foreclosure action against the Bradleys, Wells Fargo, and others. The Bradleys filed a counterclaim asserting that Associated’s only option was to exercise its right of redemption or have its lien extinguished. Associated argued that the Bradleys were attempting to reopen the original foreclosure judgment based on mistake made by Chicago Title, which was prohibited by Wisc. Stat. §806.07.

The court concluded that Associated's lien survived the Wells Fargo foreclosure, but was not converted into a primary lien simply because the earlier mortgage was extinguished. Moreover, §806.07 did not apply to this case. Instead, the only remedy available to Associated was its right of redemption. Associated appealed.


Holding: Affirmed. The appellate court agreed with the circuit court that §806.07 did not apply to this case. First, this action did not amend or vacate a previous foreclosure judgment, so the rule would not apply. Second, the parties did not satisfy the criterion to seek relief from the judgment because neither the Bradleys nor Associated were “a party or legal representative” in the earlier action.

The court instead relied on Buchner v. Gether Trust and Carolina Builders Corp. v. Dietzman to illustrate the governing principal behind its decision. In Buchner, the Wisconsin Supreme Court held that a subordinate lienholder shall be neither disadvantaged by its omission from a foreclosure action nor gain an advantage from that omission. Instead, the subordinate lienholder was left with the same rights that it would have had, had it been made a party to the foreclosure proceedings. A subsequent purchaser may “bring an action in equity to compel the junior claimant to exercise his right of redemption or have his redemption barred.” Following this reasoning, the appellate court affirmed that Associated’s only remedy was to redeem the property.


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By: ATG Underwriting Department | Posted on: Tue, 02/12/2013 - 2:08pm