Foreclosure – Summary Judgment

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WI Court of Appeals – District III

Case Name: KNA Family, LLC v. Peter Fazio et al

Case No.: 2015AP771

Officials: Stark, P.J., Hruz and Seidl, JJ.

Focus: Foreclosure – Summary Judgment

Peter and Shari Fazio appeal a judgment of foreclosure involving commercial real property located in Barron County. The circuit court granted KNA Family LLC’s motion for summary judgment, concluding KNA Family was entitled to a foreclosure judgment as a matter of law and there were no genuine issues of material fact regarding any of the Fazios’ affirmative defenses. In particular, the court rejected the Fazios’ affirmative defense based on an alleged violation of CAL. CIVIL CODE § 2943,1 concluding California law did not apply in any manner to this foreclosure action. The court also rejected the Fazios’ affirmative defense based on an alleged breach of the duty of good faith and fair dealing, concluding there was no competent evidence that KNA Family or its predecessors engaged in unfair conduct. The court entered a judgment of foreclosure and directed that, at a future time, rental income from the property being held in receivership would be applied to reduce the amount of the judgment. We reverse and remand for further proceedings. We conclude the Fazios have stated and adequately supported a valid affirmative defense for a violation of CAL. CIVIL CODE § 2943, which, if proved at trial, could reduce the amount of the foreclosure judgment. Likewise, we conclude the Fazios have stated and adequately supported a valid affirmative defense for a breach of the duty of good faith and fair dealing. On remand, should a judgment of foreclosure be entered, the circuit court is directed to exercise its equitable discretion with respect to the application of the receivership funds to the amount of the judgment.

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.