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Court Forces Bank to Complete Foreclosure

Norman D. Farnam

January 2, 2014

UPDATE:  The Wisconsin Supreme Court has accepted the Bank of New York v. Carson case for review during its 2014-2015 term.

The Wisconsin Court of Appeals recently held that a bank can be compelled to take abandoned foreclosed property to Sheriff’s Sale. On November 26, 2013, the Court of Appeals issued its decision in Bank of New York v. Carson, 2013AP544. The Court of Appeals has recommended Bank of New York for publication, meaning that it will be binding precedent that circuit courts statewide must follow. This ruling flies in the face of current wisdom on foreclosure sales.

In Bank of New York, the defendant borrower abandoned her residence and stopped making her loan payments. The bank obtained a default judgment of foreclosure in 2011. However, the bank never took the property to Sheriff’s Sale. After receiving several fines from the City of Milwaukee related to the condition of the property, the defendant borrower filed a motion seeking to compel the sale pursuant to Wisconsin Statute s. 846.102(1). This subsection states that in the case of abandoned properties, the sale shall occur upon the expiration of five weeks after the date of judgment. The bank argued that only it could compel a sale under 846.102(1), not the borrower or third parties. The circuit court agreed.

The Court of Appeals reversed the circuit court. The Court of Appeals held that under 846.02(1), any party (or a municipal representative) could present evidence of abandonment and compel a sale after the expiration of five weeks from the date of judgment. The Court stated: “We conclude that the plain language of the statute directs the court to ensure that an abandoned property is sold without delay.” The Court noted that its contempt authority was available to enforce an order for sale.

There are a few points to remember with respect to the Bank of New York holding. First, the case only expressly applies to abandoned properties. Second, the mandate to sell at Sheriff’s Sale is only triggered upon a judgment of foreclosure. There is no law requiring a bank to start a foreclosure action on an undesirable property. Third, while the decision states that the bank must take the property to Sheriff’s Sale, it does not state that the bank must bid on the property. We do not know what would happen if the bank did not make an opening bid. Finally, there is a chance the decision may be appealed to the Wisconsin Supreme Court, although the Court of Appeals’ decision will remain the law unless and until the Wisconsin Supreme Court weighs in.

If you have any questions about how the information in this article may affect you or your business, please contact Norm Farnam at nfarnam@stroudlaw.com or (608) 257‑2281 or your Stroud attorney.


DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.