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Casenotes

Wisconsin

Foreclosure

Bank Mutual v SJ Boyer Const Inc, 326 Wis 2d 521, 785 NW2d 462, 2008 AP 912 (Wis, 2010).

Facts:Between February 2003 and October 2005, S.J. Boyer Construction, Inc (Boyer Construction) borrowed funds from Bank Mutual in 5 independent installments and further securing the five notes with seven mortgages over five properties. Steven and Marcy Boyer (the Boyers) signed a guaranty which provided that they would personally liable in the event that the company would default on the notes.

Boyer Construction defaulted and Bank Mutual initiated foreclosure proceedings in February 2007. Bank Mutual waived any deficiencies against Boyer Construction. The trial court granted Bank Mutual's motion for summary judgment. The court further authorized a shorter, three month redemption period. Wisconsin Statutes Section 846.103(2) allows a short redemption period when the mortgagee waives its right to a deficiency judgment against all individuals "personally liable for the debt secured by the mortgage." The Boyers objected to confirmation of this faster sale, arguing that Bank Mutual had failed to waive deficiency against the Boyers individually. The bank maintained that the statute did not cover individuals liable through a guarantee and only covered the original debtors. The trial court agreed.

The Boyers appealed this decision. The court of appeals found that the trial court had misinterpreted the statute and exceeded its authority in confirming the shorter redemption period. Bank Mutual appealed that decision to the Wisconsin Supreme Court.

Holding:Reversed. The court concluded that "personally liable for the debt secured by the mortgage" was not intended to include guarantors who secured the note through a separate contract. The statutory language implies that mortgagors are not liable for deficiency judgments unless they are also the debtor on the underlying note. As a result, the court concluded that the "personally liable" language was meant to distinguish individuals whose liability is limited to a property from those who have liability beyond the property. A guarantor's liability, the court declared, was a distinct creation because it is not directly dependent on the note. Therefore, guarantors were not a concern of the legislation and not intended to be covered by this rule.

Only the borrower is personally liable for the note. On the other hand, guarantors are not personally liable on the note, but are personally liable on the contract that creates the guaranty. Because the redemption statute only covers those personally liable for the debt, guarantors have no redemption right.

Because Boyer Construction was personally liable on the debt, but not Steven or Marcy Boyer were not, the Bank had to waive deficiency against only the company, and not the individuals, to qualify for the statutorily shortened redemption period. As such, the Supreme Court of Wisconsin reversed the court of appeals decision.

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