Statutory Interpretation – Foreclosure

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WI Supreme Court

Case Name: Horizon Bank, National Association v. Marshalls Point Retreat LLC, et al

Case No.: 2018 WI 19

Focus: Statutory Interpretation – Foreclosure

The petitioner, Allen S. Musikantow (Musikantow), seeks review of an unpublished per curiam decision of the court of appeals directing that the circuit court apply a credit of $2,250,000 to a money judgment entered against Musikantow as guarantor of a loan.  Musikantow contends that the court of appeals erred by limiting the credit to the amount of the winning bid at the sheriff’s sale thereby precluding the circuit court from hearing evidence of the fair value of the property after the confirmation of sale.

Specifically, Musikantow contends that Wis. Stat. § 846.165 (2015-16) does not require a circuit court to make a determination of a guaranty credit at the time the foreclosure sale is confirmed. He further argues that circuit courts have the discretion to decouple guaranty-related rulings from underlying foreclosure sales.

We conclude that Wis. Stat. § 846.165 does not apply to credits toward a judgment on a guaranty. Rather, it applies to the relationship between only the mortgagee and mortgagor who signed the promissory note underlying the mortgage. It therefore cannot serve as authority for the proposition that, when confirming a foreclosure sale, a circuit court must determine the amount of a credit to be applied to a judgment on a guaranty.

Further, we conclude that when an action for foreclosure against a mortgagor and an action for a money judgment on a guaranty are brought in the same proceeding as in the instant case, the circuit court may, in its discretion, decide the amount of a credit to be applied to a judgment on a guaranty either at the time the sale is confirmed or at another time. The questions of fair value for purposes of Wis. Stat. § 846.165 and the amount of any credit toward the judgment on the guaranty are separate questions. Thus, the circuit court did not erroneously exercise its discretion when it decoupled the confirmation of sale from the determination of the guaranty credit.

Finally, we determine that the stipulation in this case does not establish that the amount of the winning bid at the sheriff’s sale shall be the sole credit toward the money judgment against Musikantow. Accordingly, we reverse the decision of the court of appeals and remand to the circuit court for further proceedings to determine the amount of the credit to be applied toward the judgment against Musikantow as guarantor.

Reversed and Remanded

Concur:

Dissent: R.G. BRADLEY, J. dissents (opinion filed).

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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.