Equity — marshaling assets

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Wisconsin Court of Appeals

Civil

Equity — marshaling assets

It is inequitable to require a creditor to apply assets to a subordinate creditor.

“As is apparent in Moser, the doctrine of marshaling assets attempts to prevent the exhaustion of a common asset if a creditor has the ability to recoup its loan from an asset to which it alone has access. Briarwood turns this equitable doctrine on its head by arguing that Waterstone must take the asset to which only it has claim and apply it so as to diminish its debt position in the common fund. This is not what Moser provides. The court in Moser found that the senior creditor would not be disadvantaged by marshaling assets (i.e., the bank’s security would not be taken from it). Id. Marshaling assets is not to ‘operate as to work substantial injustice or injury to any party in interest.’ Gilbert v. Crane, 227 Wis. 455, 467, 279 N.W. 24 (1938) (citation omitted). Under Briarwood’s proposal, Briarwood receives more proceeds from the anticipated sheriff’s sale, and Waterstone less, than each would receive under normal foreclosure proceedings in accordance with their mortgage positions—a result not in accord with equity. The doctrine does not operate equitably if it diminishes the debt position of the senior creditor. Briarwood could have sought personal guarantees; the fact that it did not, while Waterstone did, should not operate to Waterstone’s detriment.” Affirmed. Recommended for publication in the official reports.

2012AP2105 Briarwood Club, LLC, v. Vespera, LLC

Dist. II, Waukesha County, Davis, J., Reilly, J.

Attorneys: For Appellant: Lyons, Thomas P., Brookfield; Ranta, Bruce A., Brookfield; For Respondent: Neary, Elizabeth A., Waukesha; Stevens, Daniel W., Brookfield; Kuss, Rudolph J., Brookfield