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Property – foreclosure — breach of mortgage contract

By: WISCONSIN LAW JOURNAL STAFF//May 31, 2012//

Property – foreclosure — breach of mortgage contract

By: WISCONSIN LAW JOURNAL STAFF//May 31, 2012//

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Wisconsin Court of Appeals

Civil

Property – foreclosure — breach of mortgage contract

The parties to this appeal and cross-appeal are Diane Pauk and Deutsche Bank National Trust Company, the holder of a first mortgage on Pauk’s residential property. The Bank sought to foreclose on that mortgage after Pauk stopped making mortgage payments. Pauk asserted a counterclaim for breach of the mortgage contract, alleging that the Bank’s failure to timely provide her with a critical document, namely, a payoff statement reflecting the remaining loan balance on the first mortgage, prevented her from selling the property, causing her to default on the mortgage and leading to the foreclosure action.

The circuit court held a bench trial, and found, consistent with Pauk’s allegations, that she would have sold the property and thereby satisfied the first mortgage but for the Bank’s failure to timely provide the payoff statement. The court concluded that the Bank’s failure in this regard was a breach of the parties’ mortgage contract and that, as a result, it would be inequitable to grant the Bank a judgment of foreclosure on the first mortgage. At the same time, however, the court rejected tort claims Pauk made for bad faith and conversion. Based on the court’s conclusions, the court fashioned relief in the form of a judgment ordering the Bank to release Pauk from the mortgage, ordering Pauk to transfer title to the property to the Bank, and including other relief provisions.

The Bank appeals, and Pauk cross-appeals. The parties agree that the circuit court exceeded its authority by structuring the relief as it did. However, the parties dispute whether the circuit court was required to enter a judgment of foreclosure, as the Bank argues, and whether the court properly dismissed Pauk’s tort claims.

We conclude that the circuit court reasonably exercised its equitable discretion to deny the Bank’s request for foreclosure. We also conclude that the court properly rejected Pauk’s tort claims. We therefore affirm the court’s judgment in those respects. However, consistent with the parties’ agreement, we conclude that the circuit court exceeded its authority by ordering relief, including transfer of title, apparently based on the Bank’s foreclosure claim, without entering a foreclosure judgment that complied with Wis. Stat. ch. 846 (“Foreclosure”) (2009-10). We therefore reverse that part of the court’s judgment providing relief between the parties and remand for the court to reconsider what, if any, relief is appropriate for either party, given our conclusions and any additional facts that may be found by the court on remand.  Not recommended for publication in the official reports.

2010AP1583 Deutsche Bank National Trust Co., et al. vs. Pauk

Dist IV, Dane County, Genovese, J., Blanchard, J.

Attorneys: For Appellant: Heiser, Edward J., Jr., Milwaukee; Nowakowski, Kenneth R., Milwaukee; Lawless, Lisa M., Milwaukee; For Respondent: Peterson, Reed, Madison

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