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Foreclosure Case Analysis

Perhaps the most important lesson to be learned from this case is that banks should file foreclosure actions in state court, where they almost always are filed, and where the judges are more familiar with foreclosure proceedings.

Nevertheless, this is a case that can’t be ignored by any civil litigator in federal court. The court’s reasoning could be extended to any civil action, if only partial summary judgment is granted to the plaintiff, but the court actually enters a final judgment.

Not only would the judgment be worthless, but claim preclusion might bar the plaintiff from ever obtaining recovery (the court uses the terms res judicata and collateral estoppel for claim preclusion and issue preclusion, but since we have become more accustomed to the latter terms, those will be used in this analysis).

The court expresses no doubt that, should Chase commence a new foreclosure action, Moore will be barred by the doctrine of issue preclusion from relitigating whether he defaulted on the loan, and the only issues will relate to remedy.

However, on no less than four occasions, the court implies that Chase would be barred from commencing such a suit by the doctrine of claim preclusion. Thus, Chase may never be able to recover.

At least, were this foreclosure case to have arisen in Wisconsin federal court and these unusual procedures to occur, rather than Illinois, it could be distinguished by citation to Shuput v. Lauer, 109 Wis.2d 164, 325 N.W.2d 321 (1982).

In Shuput, the court held, “The judgment of foreclosure and sale determines the parties’ legal rights in the underlying obligation and in the mortgaged property.” Id., 325 N.W.2d at 325. The later proceedings — the sale, judicial confirmation of the sale, and the entry of the judgment of deficiency — enforce the judgment. Id.

The court then held that the judgment of foreclosure is a final judgment appealable as a matter of right that must be appealed within the time prescribed by statute. Id., at 326. The court added, however, that the order confirming the sale is also a final order, but that the appellant may only challenge proceedings subsequent to the judgment of foreclosure and sale, not the judgment itself. Id.

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Foreclosure judgment can be appealed

This being the law in Wisconsin, Chase could not have appealed the judgment in the case at bar, because it would not have been the aggrieved party. Having no right to appeal the judgment, claim preclusion could not possibly bar it from commencing a new action.

Only Moore could appeal, not to avoid potential invocation of collateral estoppel, as the court found in the case at bar, but as of right, because he would be the aggrieved party.

Moore’s appeal being meritless, the case would then be returned to the district court for sale, confirmation, and calculation of the deficiency judgment.

Thus, should the bizarre proceedings that occurred in this case ever occur in Wisconsin, the plaintiff bank will have authority to argue that this case is distinguishable. Still, simply filing in state court, and avoiding these thorny procedural questions would be the wisest course of action.

– David Ziemer

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David Ziemer can be reached by email.

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