Title: Daniel P. Gaugert v. Howard E. Duve

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2001 WI 83 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
98-3004 
 
 
Complete Title 
of Case: 
 
Daniel P. Gaugert and Gayle J. Gaugert,  
 
Plaintiffs-Appellants-Petitioners, 
 
v. 
Howard E. Duve and Jeffery J. Hansen,  
 
Defendants-Respondents.  
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2000 WI App 34 
Reported at:  233 Wis. 2d 190, 607 N.W.2d 310 
(Published) 
 
 
Opinion Filed: 
July 2, 2001 
Submitted on Briefs: 
      
Oral Argument: 
November 1, 2000 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Waukesha 
 
JUDGE: 
Kathryn W. Foster 
 
 
JUSTICES: 
 
Concurred: 
      
 
Dissented: 
      
 
Not Participating:       
 
 
ATTORNEYS: 
For the plaintiffs-appellants-petitioners there 
were briefs by Joseph C. Niebler, Sr. and Niebler & Muren, S.C., 
Brookfield, and oral argument by Joseph C. Niebler, Sr. 
 
 
For the defendant-respondent Jeffery J. Hansen 
there was a brief by E. Joseph Kershek and Kershek Law Offices, 
Milwaukee, and Paul W. Schwarzenbart and Lee, Kilkelly, Paulson & 
Younger, S.C., Madison, and oral argument by E. Joseph Kershek. 
 
 
2 
 
For the defendant-respondent Howard E. Duve there 
was a brief (in the court of appeals) by Katherine Gutenkunst and 
Cramer, Multhauf & Hammes, LLP, Waukesha, and oral argument by 
Katherine Gutenkunst. 
 
2001 WI 83 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 98-3004 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Daniel P. Gaugert and Gayle J. Gaugert, 
 
 
Plaintiffs-Appellants-Petitioners, 
 
 
v. 
 
Howard E. Duve and Jeffery J. Hansen, 
 
 
Defendants-Respondents. 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
remanded. 
 
¶1 
WILLIAM A. BABLITCH, J.  Daniel and Gayle Gaugert (the 
Gaugerts) petition this court to review a decision by the court 
of appeals that denied them specific performance of an option 
they held to purchase real estate owned by Howard E. Duve 
(Duve).  Duve, notwithstanding the Gaugerts' option, entered 
into an offer to purchase contract with Jeffery J. Hansen 
(Hansen).  The Gaugerts sued Duve and Hansen seeking specific 
performance of their contract.  After a trial, the circuit court 
dismissed the complaint and the Gaugerts appealed.  Following 
the Gaugerts filing of an appeal but before the court of appeals 
issued its decision, the circuit court discharged a statutory 
FILED 
 
JUL 2, 2001 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 
98-3004 
 
 
2 
lis pendens filed by the Gaugerts pursuant to Wis. Stat. 
§ 840.10 (1997-98). 1.  The Gaugerts did not obtain a stay of the 
                     
1 All subsequent references to the Wisconsin statutes are to 
the 1997-98 version unless noted otherwise.  
Wisconsin Stat. § 840.10 provides as follows: 
 
Lis 
pendens; 
who 
may 
file; 
effect 
when 
void; 
discharge.  (1)(a) In an action where relief is 
demanded 
affecting 
described 
real 
property 
which 
relief might confirm or change interests in the real 
property, after the filing of the complaint the 
plaintiff shall present for filing or recording in the 
office of the register of deeds of each county where 
any part thereof is situated, a lis pendens containing 
the names of the parties, the object of the action and 
a description of the land in that county affected 
thereby.  In any action if the defendant asks relief 
on a counterclaim or cross-complaint, which contains a 
legal description of the real estate and seeks such 
relief, after the filing of the counterclaim or cross-
complaint the defendant shall present for filing or 
recording a lis pendens.  From the time of filing or 
recording 
every 
purchaser 
or 
encumbrancer 
whose 
conveyance or encumbrance is not recorded or filed 
shall be deemed a subsequent purchaser or encumbrancer 
and shall be bound by the proceedings in the action to 
the same extent and in the same manner as if the 
purchaser or encumbrancer were a party thereto.  In 
any such action in which a lis pendens has been filed 
or recorded, if the party who presents for filing or 
recording the lis pendens fails for one year after the 
filing or recording thereof to serve and file proof of 
service of the summons or the counterclaim or cross-
complaint on one or more of the adverse parties, the 
lis pendens shall be void, and upon motion and proof 
the court may order it discharged.  Judgment shall not 
be entered in favor of the party required to present 
for filing or recording a lis pendens until 20 days 
after the lis pendens has been filed or recorded. 
(b) A lis pendens that is prepared by a member of 
the state bar of Wisconsin need not be authenticated. 
(2) Proceedings for acquiring land by right of 
eminent domain are actions within the provisions of 
this section and notice of the pendency thereof may be 
No. 
98-3004 
 
 
3 
order discharging statutory lis pendens or an injunction 
prohibiting the sale of the property from Duve to Hansen.  While 
the case was pending before the court of appeals, Duve conveyed 
the real estate to Hansen.  Although in its subsequent decision 
the court of appeals reversed the circuit court, on remand the 
circuit 
court 
denied 
the 
Gaugerts' 
motion 
for 
specific 
performance.  The Gaugerts brought another appeal.  The court of 
appeals affirmed the denial of specific performance.  It is this 
decision that is now before use.  We reverse that decision. 
FACTS AND PROCEDURAL HISTORY 
¶2 
This case has a long and complex history that has been 
detailed by the court of appeals in Gaugert v. Duve, 217 Wis. 2d 
164, 579 N.W.2d 746 (Ct. App. 1998) (Gaugert I), and in Gaugert 
v. Duve, 2000 WI App 34, 233 Wis. 2d 190, 607 N.W.2d 310 
(Gaugert II).  The facts relevant to the disposition of the 
issues before us now are not in dispute. 
¶3 
In December 1988 the Gaugerts acquired 36.33 acres of 
farmland from Duve.  At the closing the Gaugerts obtained an 
option of first refusal on the remaining farmland, an additional 
113 acres, the property at issue in the present case.   
                                                                  
filed at any time, except as otherwise provided by 
statute. 
(3) The lis pendens may be discharged upon the 
condition and in the manner provided by s. 811.22 for 
discharging an attachment or by s. 806.19(1)(a) for 
satisfying a judgment.  An instrument filed before May 
1, 1951, but in accordance with this subsection shall 
be a discharge of the lis pendens described therein. 
(4) This section applies to all courts in this 
state, including United States district courts. 
No. 
98-3004 
 
 
4 
¶4 
The Gaugerts' option was recorded on March 9, 1995.  
Prior to that date, on February 15, 1995, Hansen entered into an 
offer to purchase contract with Duve to purchase this same 113-
acre farmland.  
¶5 
The Gaugerts sought the opportunity to exercise their 
option.  In June 1995 the Gaugerts received from Duve a notice 
of right to exercise option of first refusal.  The Gaugerts sent 
Duve earnest money of $1000 and a sale contract that they asked 
him to sign.  Hansen, upon learning of the Gaugerts' offer, 
amended his offer to purchase; the Gaugerts then amended their 
offer.  In July Duve sent the Gaugerts a letter rescinding the 
option. 
¶6 
The Gaugerts then filed a complaint against Duve and 
Hansen seeking specific performance and breach of contract 
damages.2  A trial was held before the Honorable Robert G. 
Mawdsley of the Waukesha County Circuit Court.  Judge Mawdsley 
ultimately dismissed the complaint.  In January 1997 the 
Gaugerts filed a notice of appeal.   
¶7 
On February 13, 1997, Duve filed a motion in circuit 
court seeking discharge of the lis pendens filed by the Gaugerts 
pursuant to Wis. Stat. § 840.10(3).  A hearing on the motion was 
conducted in circuit court.  At the hearing, counsel for the 
                     
2 The Gaugerts' complaint also named as defendants Agribank, 
FCB (f/k/a Farm Credit Bank of St. Paul) and the County of 
Waukesha.  The Gaugerts subsequently stipulated to dismissal of 
Agribank and Waukesha County as party defendants.  Based upon 
these stipulations, the circuit court dismissed these defendants 
from the action. 
No. 
98-3004 
 
 
5 
Gaugerts stated that they were not seeking to stop Duve and 
Hansen from closing on their deal because Hansen will take the 
land subject to the final outcome of the lawsuit on appeal.  
Counsel for the Gaugerts also argued that the court lacked 
authority to discharge a lis pendens. 
¶8 
The circuit court ordered the discharge of the lis 
pendens and gave the Gaugerts 10 days to seek a stay from the 
court of appeals.  The Gaugerts filed with the court of appeals 
a motion for relief pending appeal.  The Gaugerts sought either 
a stay of the circuit court's order discharging the lis pendens 
filed at the commencement of the action or, in the alternative, 
an injunction prohibiting the sale of the property at issue 
pending a ruling by the court of appeals.  The Gaugerts' motion 
was denied.  The court of appeals was not persuaded that seeking 
relief pending appeal in the circuit court was impractical.  At 
this point the Gaugerts did not return to circuit court for 
relief.  In May of 1997 the circuit court formally discharged 
the lis pendens.   
¶9 
On May 23, 1997, Duve sold the farmland to Premier, a 
limited liability company of which Hansen was a member.  Premier 
began taking steps to develop the property. 
¶10 In February 1998 the court of appeals issued its 
decision 
reversing 
the 
decision 
of 
the 
circuit 
court.  
Throughout 
the 
remainder 
of 
1998 
and 
1999 
the 
Gaugerts 
unsuccessfully undertook various efforts to obtain an order from 
the circuit court for specific performance.  The Gaugerts again 
appealed to the court of appeals.  The court of appeals 
No. 
98-3004 
 
 
6 
dismissed the case, concluding that in the absence of a stay, 
the conveyance of the property from Duve to Hansen rendered the 
appeal moot.  This court subsequently accepted review. 
¶11 Two 
issues 
are 
presented. 
 
First, 
following 
a 
discharge of a filing of lis pendens pursuant to Wis. Stat. 
§ 840.10, to what extent, if any, does the common law of lis 
pendens apply to a party to a lawsuit affecting the disputed 
real property?  With respect to this issue, we hold that because 
Hansen was a party to the lawsuit and thus had actual notice of 
the pendency of the appeal, under the doctrine of common law lis 
pendens Hansen purchased the property subject to the final 
outcome of the litigation on appeal.3 
¶12 The 
second 
issue 
is 
whether 
the 
circuit 
court 
erroneously exercised its discretion in denying the Gaugerts' 
request for specific performance.  As to this issue, we hold 
that the Gaugerts are entitled to specific performance on their 
contract.  Accordingly, we remand to the circuit court to enter 
an order granting the Gaugerts' motion. 
ANALYSIS 
I 
¶13 Our analysis begins with a brief overview of the 
arguments set forth by the parties.  Hansen contends that 
pursuant to Wis. Stat. § 808.07(1)4 the Gaugerts were required to 
                     
3 We do not address the issue of the affect of actual notice 
on a person who is not a party to the transaction.  
4 Wisconsin Stat. § 808.07 provides in relevant part:   
 
No. 
98-3004 
 
 
7 
obtain a stay pending appeal in order to preserve the status quo 
after the circuit court entered judgment.  Section 808.07(1) 
provides that "[a]n appeal does not stay the execution or 
enforcement of the judgment or order appealed from except as 
provided in this section or as otherwise expressly provided by 
law."  Hansen asserts that the common law doctrine of lis 
pendens has no role after the entry of final judgment by the 
circuit court and an order dissolving statutory lis pendens.  
Statutory lis pendens, Wis. Stat. § 840.10(3), provides in part 
that "[t]he lis pendens may be discharged upon the condition and 
in the manner provided by s. 811.22 for discharging an 
attachment or by s. 806.19(1)(a) for satisfying a judgment."  In 
                                                                  
Relief pending appeal.  (1) Effect of appeal.  An 
appeal does not stay the execution or enforcement of 
the judgment or order appealed from except as provided 
in this section or as otherwise expressly provided by 
law. 
(2) Authority of a court to grant relief pending 
appeal.  (a) During the pendency of an appeal, a trial 
court or an appellate court may: 
1. Stay execution or enforcement of a judgment or 
order; 
2. 
Suspend, 
modify, 
restore 
or 
grant 
an 
injunction;  or 
3. Make any order appropriate to preserve the 
existing state of affairs or the effectiveness of the 
judgment subsequently to be entered. 
(am) During the pendency of an appeal, the trial 
court may hear and determine a motion filed under s. 
806.07. 
(b) Except as provided in s. 655.27(5)(a)3., 
relief under this subsection may be conditioned upon 
the filing of an undertaking in the trial court. 
 
 
No. 
98-3004 
 
 
8 
total, according to Hansen, the circuit court's final judgment 
was enforceable upon dissolution of lis pendens, unless stayed. 
¶14 The Gaugerts contend that the common law doctrine of 
lis pendens is in effect under the circumstances of this case.  
In their view, this means that after the circuit court's finding 
for Duve, Duve was free to transfer his property.  However, the 
Gaugerts assert that as a result of the operation of common law 
lis pendens, Hansen took title to the property subject to their 
claim.  According to the Gaugerts, the circuit court's discharge 
of statutory lis pendens had no impact among the parties to this 
action, the Gaugerts, Duve, and Hansen. 
¶15 The resolution of this case requires the analysis of 
common law lis pendens, statutory lis pendens, and the rules of 
appellate procedure.  These are questions of law that we resolve 
independently, with the benefit of the analysis undertaken by 
both the circuit court and court of appeals.  See State v. 
Hansford, 219 Wis. 2d 226, 246, 580 N.W.2d 171 (1998); South 
Milwaukee Sav. Bank v. Barrett, 2000 WI 48, ¶26, 234 Wis. 2d 
733, 611 N.W.2d 448.   
¶16 In analyzing this issue, we will first discuss the 
doctrine of lis pendens as a general matter, because the 
fundamental principles underlying common law lis pendens and 
statutory lis pendens are the same.  We will then discuss the 
doctrine of common law lis pendens, followed by a discussion of 
statutory lis pendens.  We then conclude with a discussion of 
what remains of common law lis pendens in Wisconsin in light of 
the creation of Wis. Stat. § 840.10. 
No. 
98-3004 
 
 
9 
1.  The Doctrine of Lis Pendens 
¶17 The term "lis pendens" means pending litigation.5  The 
purpose of the doctrine "is not, primarily, notice, but to hold 
the subject of the suit——the res——within the power of the court, 
so as to enable it to pronounce judgment upon it."  Brown v. 
Cohn, 95 Wis. 90, 93, 69 N.W.71 (1896).  
¶18 Under this doctrine when property that is the subject 
of a suit is conveyed, the purchaser or encumbrancer pendente 
lite (while the action is pending) is bound by the outcome of 
the litigation.  This well-established rule is expressed as 
follows in the Restatement (Second) of Judgments (1982): 
 
§ 44. 
Effect 
of 
Judgment 
Concerning 
Property 
Transferred While Action Is Pending 
 
A successor in interest of property that is the 
subject of a pending action to which his transferor is 
a party is bound by and entitled to the benefits of 
the rules of res judicata to the same extent as his 
transferor, unless: 
 
(1) 
A 
procedure 
exists 
for 
notifying 
potential 
successors in interest of pending actions concerning 
property, the procedure was not followed, and the 
                     
5 Lis pendens is defined in Black's Law Dictionary 942-43 
(7th ed. 1999) as follows: 
1.  A pending lawsuit.  2.  The jurisdiction, power, 
or control acquired by a court over property while a 
legal action is pending.  3.  A notice, recorded in 
the chain of title to real property, required or 
permitted in some jurisdictions to warn all persons 
that certain property is the subject matter of 
litigation, and that any interests acquired during the 
pendency of the suit are subject to its outcome.  —— 
Also termed (in sense 3) notice of lis pendens; notice 
of pendency. 
No. 
98-3004 
 
 
10
successor did not otherwise have knowledge of the 
actions; or 
 
(2)  The opposing party in the action knew of the 
transfer to the successor and knew also that the 
successor was unaware of the pending action. 
¶19 Without the doctrine of lis pendens, a defeated 
litigant 
could avoid the 
final judgment of 
a 
court by 
transferring disputed real property to another person, who then 
could claim it free of any subsequently rendered judgment. 
Belleville State Bank v. Steele, 117 Wis. 2d 563, 571, 345 
N.W.2d 405 (1984). 
 This 
rationale 
is repeated in the 
Restatement, which states in part: 
 
If property is transferred when an action is 
pending concerning it, the successor in interest may 
be aware of the litigation and seasonably join as a 
party, by intervention or by substitution in place of 
his transferor.  In that circumstance, the successor 
then becomes bound because he is a party.  If he is 
aware of the litigation but does not join as a party, 
he acquiesces in the transferor's continuing, for 
purposes of the litigation, to be the apparent owner 
of the interest in the property.  His doing so is in 
effect treating the transferor as his representative 
in the action. 
Restatement (Second) of Judgments § 44 cmt. a (1982).   
¶20 The doctrine of lis pendens is principally concerned 
with the power of the court to effectively administer justice 
when real property is in dispute.  
2.  Common Law Lis Pendens 
¶21 Under the common law doctrine of lis pendens all 
purchasers were bound by the result of pending litigation even 
when they had no actual notice of the litigation.  The pending 
action itself was deemed notice of the title, or claim of title, 
No. 
98-3004 
 
 
11
being asserted by the particular parties to the litigation.  
Belleville State Bank, 117 Wis. 2d at 572; 2 Callaghan's 
Wisconsin Pleading and Practice § 15.01, at 296 (4th ed. 1996). 
 Commenting upon this procedure, an early case noted:  "It is 
deemed that every person is bound to know the law, and to take 
notice of what is transpiring in the courts, from the time when 
the process is served and the complaint filed until the final 
judgment is entered."  Brown, 95 Wis. at 93.   
3.  Statutory Lis Pendens 
¶22 The common law method of deeming a pending suit to be 
constructive notice of lis pendens proved unsatisfactory due to 
the potentially harsh impact on purchasers who did not have 
actual notice of pending real estate transactions.  As a result, 
Wisconsin and most other jurisdictions enacted lis pendens 
statutes.  Belleville State Bank, 117 Wis. 2d at 572.  Lis 
pendens statutes "were intended to ameliorate the harsh effect 
of the common law rule on third parties, by limiting the legal 
fiction of 'constructive knowledge' of pending claims to those 
instances where a notice of lis pendens was recorded."  TSA 
Int'l Ltd. v. Shimizu Corp., 990 P.2d 713, 736 (Haw. 1999) 
(brackets, internal quotation marks, and citation omitted).  We 
outlined the history of Wisconsin's lis pendens statute in 
Belleville State Bank: 
 
The 
first 
Wisconsin 
lis 
pendens 
statute 
authorized a party to an action affecting real 
property to file a lis pendens with the clerk of the 
circuit court of each county in which the real 
property was situated.  Ch. 120, sec. 37, Laws of 
1856.  In 1858, the place of filing was changed to the 
No. 
98-3004 
 
 
12
register of deeds of each county in which the property 
was situated.  Ch. 124, sec. 7, 1858 Rev. Stats.  The 
1858 
lis 
pendens 
statute 
remained 
substantially 
unchanged until 1955 when the filing of a lis pendens 
was made mandatory where the complaint or counterclaim 
contains a legal description of the real property and 
seeks relief in respect to the title thereto.  The 
1955 law also prohibited the entry of judgment in 
favor of the party required to file lis pendens until 
20 days after the lis pendens has been filed.  Ch. 
553, sec. 8, Laws of 1955; sec. 281.03(1), Stats. 
1955. 
Id. at 573-74 (footnotes omitted). 
 
4.  What Remains of Common Law Lis Pendens Following the 
Enactment of Statutory Lis Pendens in Wisconsin 
¶23 Case law, treatises, and Wis. Stat. § 840.10 itself 
make it evident that statutory lis pendens was designed to 
supplement, not abrogate, common law lis pendens in Wisconsin.  
Our case law has held that the lis pendens created by statute 
"was evidently intended to be supplemental to the common law, 
and not repeal it."  Brown, 95 Wis. 2d at 93.   
¶24 Commentators have noted that lis pendens statutes were 
intended 
to 
provide 
constructive 
notice 
of 
the 
pending 
litigation to persons other than the parties to the action.  6A 
Richard R. Powell, Powell on Real Property ¶ 907.3[2], at 82A-21 
(discussing formal statutory notice of lis pendens).  Statutory 
lis pendens is thus intended to provide the means for third 
parties to obtain notice of the pending litigation and the 
court's power to enforce the outcome of that dispute against a 
subsequent purchaser or encumbrancer.  Other commentators agree 
that this statutory notice "supersedes the common law, except as 
to those with actual notice of the pending action or who are not 
No. 
98-3004 
 
 
13
bona fide."  2 Callaghan's Wisconsin Pleading and Practice 
§ 15.02, at 296 (4th ed. 1996) (citing Bell v. Peterson, 105 
Wis. 607, 613, 81 N.W. 279 (1899); Brown, 95 Wis. at 93).   
¶25 The 
plain 
language 
of Wis. 
Stat. 
§ 840.10(1)(a) 
supports our conclusion that Wisconsin's lis pendens statute 
plays no role as to a purchaser who is a party to the relevant 
litigation.  The statute states in relevant part:  
 
From the time of filing or recording [of lis pendens 
in the office of the register of deeds] every 
purchaser 
or 
encumbrancer 
whose 
conveyance 
or 
encumbrance is not recorded or filed shall be deemed a 
subsequent purchaser or encumbrancer and shall be 
bound by the proceedings in the action to the same 
extent and in the same manner as if the purchaser or 
encumbrancer 
were 
a 
party 
thereto. 
 
(Emphasis 
supplied.)   
At the very least, the plain language of the statute ("as if the 
purchaser were a party thereto") indicates that the statute does 
not apply to those who are parties. 
¶26 Parties to litigation have actual notice of the 
dispute and, therefore, as to these individuals the statute 
plays no role.  This point was illustrated in Hailey v. 
Zacharais, 39 Wis. 2d 536, 159 N.W.2d 667 (1968).  In Hailey, 
the plaintiff failed to file a notice of lis pendens as required 
by statute.  It was held that the subsequent judgment was not 
void because "[a]s to parties to the action . . .  who appear 
and participate in the proceedings, the lis pendens serves no 
real purpose and actually has no application."  Id. at 538 
(citing Pennfeather v. Kenosha, 210 Wis. 695, 700, 247 N.W. 440 
(1933)). 
No. 
98-3004 
 
 
14
¶27 Based on all the above, we hold that because Hansen 
was a party to the lawsuit, and thus had actual notice of the 
pending of the appeal, the doctrine of common law lis pendens 
continued to protect the Gaugerts' interest.  Therefore, Hansen 
took the property subject to the outcome of the litigation on 
appeal. 
¶28 Hansen disagrees with this holding for a number of 
reasons.  Hansen argues that once the statutory notice of lis 
pendens was discharged, and absent any order to stay the 
discharge, Duve was entitled to sell the property under the rule 
that "enforcement of a judgment is not stayed pending appeal."  
Chase Lumber and Fuel Co. v. Chase, 228 Wis. 2d 179, 203, 596 
N.W.2d 840 (Ct. App. 1999).  Hansen contends that seeking 
discharge of lis pendens is a species of enforcement.  This 
analysis, however, does not go far enough.  In this case, Duve, 
the property owner, sold the disputed land to Hansen, a co-
defendant who appeared and participated in the proceedings.  
Statutory lis pendens is for the benefit of third parties.  As a 
result statutory lis pendens has no role as to Hansen and 
neither the filing nor the discharge of statutory lis pendens 
affected the court's jurisdiction over the real property as 
between Duve, Hansen, and the Gaugerts.6  Thus under our common 
law doctrine of lis pendens Hansen, the successor in interest of 
                     
6 Because of our conclusion that the common law of lis 
pendens applied to Hansen, we do not address the Gaugerts' 
argument that the circuit court lacked the power to discharge 
the statutory lis pendens.  
No. 
98-3004 
 
 
15
property that was the subject of a pending action to which his 
transferor was also a party, took the property subject to the 
final resolution of the Gaugerts' claim.7  
¶29 Hansen next contends that the doctrine of common law 
lis pendens does not survive final judgment of the circuit 
court.  In other words, because Duve conveyed the property to 
Hansen after the circuit court entered its judgment, Hansen 
asserts that he should not be bound by the court of appeals' 
decision to reverse the circuit court.  In his view, the proper 
remedy for the Gaugerts after succeeding on appeal is breach of 
contract damages.  We disagree with this analysis.  Hansen is 
bound to the final outcome of the Gaugerts' appeal as the 
successor in interest to the property and a party to the action. 
 Treatises indicate the majority rule to be that the doctrine 
remains in effect as long as procedures for review remain 
available to the losing party. 6A Powell, supra, ¶ 907.4[2], at 
82A-24-25; 3 Merrill on Notice § 1169, 93 (1952).   
 
[P]ersons who obtain an interest in property involved 
in litigation after the entry of the court's judgment 
but 
before review proceedings are 
completed are 
subject to the results of the review.  Most types of 
review that are considered to be continuations of the 
original litigation qualify to keep the lis pendens in 
operation.  (Footnote omitted.) 
                     
7 For the purposes of resolving this case, we need not and 
do not address how the dissolution of statutory lis pendens 
impacts upon the sale of disputed property to a buyer who is not 
a party to the litigation. 
No. 
98-3004 
 
 
16
6A Powell, supra, ¶ 907.4 [2], at 82A-25.  In Wisconsin, an 
action is pending until there is an exhaustion of rights of 
appeal.  See Larson v. Fetherston, 44 Wis. 2d 712, 718, 172 
N.W.2d 20 (1969).  As a result, common law lis pendens operates 
until the time to seek an appeal has expired or until there is 
an exhaustion of the right to appeal.   
¶30 Based 
upon 
the 
foregoing 
analysis, 
we 
find 
unpersuasive Hansen's contention that Wis. Stat. § 808.07 trumps 
common law lis pendens.  Pursuant to § 808.07, "[a]n appeal does 
not stay the execution or enforcement of the judgment or order 
appealed from except as provided [in § 808.07] or as otherwise 
expressly provided by law."  Wis. Stat. § 808.07(1).  The 
Gaugerts did not obtain a stay pursuant to § 808.07(2) of the 
circuit court's order expunging statutory lis pendens.  However, 
because Hansen is bound by the decision of the court of appeals' 
reversing the circuit court because of the common law of lis 
pendens and his party status, the order expunging statutory lis 
pendens has no effect on the Duve to Hansen transaction.  
Accordingly, the absence of a stay of Judge Mawdsley's order 
discharging statutory lis pendens does not change our analysis. 
¶31 Further, as a doctrinal matter, although an objective 
of common law lis pendens was to preserve the status of property 
pending the outcome of litigation, the doctrine of lis pendens 
is distinct from a stay.  6A Powell, supra, ¶ 907.1, at 82A-3.  
"Unlike a judicial stay, the lis pendens does not prevent 
transfer of property even though it is involved in a court 
action, but any transfer is made with the risk that the transfer 
No. 
98-3004 
 
 
17
may be nullified if the judgment goes against the transferor."  
6A id. (footnote omitted). Thus, neither common law lis pendens 
nor statutory lis pendens barred Duve's transfer of the property 
to Hansen either before or after the entry of final judgment in 
the circuit court.  Pursuant to their contractual agreement, 
Duve transferred the property to Hansen.  Hansen, as a party to 
the litigation, took the property with the risk that on appeal 
the circuit court's order would be reversed. Hansen argues that 
this analysis results in a de facto stay of the final judgment 
because the property owner's ability to convey marketable title 
is still tied by the operation of lis pendens.   
¶32 We recognize that although lis pendens does not bar 
the alienation of property, in the ordinary case the pendency of 
litigation either attacking a seller's title or bringing claims 
against it "is treated as an encumbrance and as making the title 
unmarketable."  2 Patton on Land Titles § 580, at 135 (2d ed. 
2000 Supp.); also 6A Powell, supra, ¶ 907.1, at 82A-3 (risk that 
transfer may be nullified is sufficiently great that title 
examiner or insurer will protect itself by noting that title is 
subject to pending litigation through the lis pendens doctrine). 
 As a result, the practical effect of lis pendens may be in some 
instances to restrict a seller's ability to alienate his 
property to another party defendant.  As previously noted, 
however, lis pendens and a stay are separate legal doctrines.  
The legislative intent expressed in Wis. Stat. § 808.07 fulfills 
a different purpose than common law lis pendens.  The two 
No. 
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strands of law may have some overlap in effect, but our analysis 
here is an effort to give full expression to each rule.   
¶33 Arguably, the Gaugerts could have sought to enjoin the 
sale of the farmland by Duve to Hansen.  However from the 
Gaugerts' perspective such a step would have been a redundancy, 
given that pursuant to the common law of lis pendens Hansen 
purchased the real property subject to the final judgment of the 
courts upon the Gaugerts' claim. 
¶34 Next Hansen contends that our conclusion in this case 
leaves him worse off as a result of prevailing in the circuit 
court proceedings, because the property could be sold freely to 
a nonparty.  We note, however, that at the circuit court hearing 
on Duve's motion to discharge statutory lis pendens, counsel for 
Hansen appeared and urged the court to grant Duve's motion to 
expunge lis pendens.  Hansen could have opposed Duve's motion in 
order to ensure that Duve could not convey the property to a 
third party who was not on constructive notice of the pending 
litigation. 
¶35 Finally, we will examine a number of cases from other 
jurisdictions relied upon by both the court of appeals and 
Hansen.  As previously noted, the court of appeals concluded 
that the Gaugerts' failure to obtain a stay rendered their 
demand for specific performance moot.  The court of appeals and 
Hansen direct our consideration of several Illinois cases, 
including Duncan v. Farm Credit Bank, 940 F.2d 1099 (7th Cir. 
1991) (applying Illinois law), and Town of Libertyville v. 
Moran, 535 N.E.2d 82 (Ill. App. Ct. 1989). 
No. 
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19
¶36 In Duncan, the Seventh Circuit considered a situation 
somewhat similar to the case at hand.  Duncan filed a lis 
pendens and sued Farm Credit Bank seeking to enforce a right of 
first refusal to repurchase foreclosed property.  Duncan, 940 
F.2d at 1101.  After the district court dismissed the suit, the 
Duncans did not seek a stay of judgment and the Bank sold the 
disputed property to a third party.  Id.  The Seventh Circuit 
examined its own rule for obtaining a stay, Fed. R. Civ. P. 
62(c).  The court determined that unless the rule is invoked, an 
appellant risks being unable to realize the benefits of the 
successful appeal.  Id. at 1103.  The Duncan court concluded, 
"in light of Illinois law providing for termination of a lis 
pendens upon a court's final judgment, the Duncans' failure to 
seek a stay of that judgment pending appeal, and [the subsequent 
buyers'] status as a non-party, we cannot grant any relief to 
the Duncans."  Id. at 1104.   
¶37 The Duncan case, like the court of appeals in Gaugert 
II, relied upon Moran.  The Moran decision provides additional 
background concerning Illinois law.  In Moran, the Town of 
Libertyville filed a condemnation action to acquire certain 
property.  Moran, 535 N.E.2d at 83.  After a jury returned an 
award of just compensation, the Town appealed but did not 
request a stay of judgment or pay the award.  During the 
pendency of the appeal the property was sold to a nonparty to 
the litigation.  Id.  The Town argued that because it filed a 
notice of lis pendens pursuant to state statute, the notice 
remained in effect during the pendency of the appeal.  Id. at 
No. 
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20
84.  The court disagreed, noting that Illinois Supreme Court 
Rule 305(i) (107 Ill. 2d R. 305) specifically addressed the 
effect of the failure to obtain a stay upon interests in 
property.  This Illinois rule provided in part: 
 
"If a stay is not perfected within the time for filing 
the 
notice 
of 
appeal . . . the 
reversal 
or 
modification of the judgment does not affect the 
right, title, or interest of any person who is not a 
party to the action in or to any real or personal 
property that is acquired after the judgment becomes 
final and before the judgment is stayed  . . . ."  
(emphasis supplied). 
Moran, 535 N.E.2d at 85 (quoting Rule 305(i)) (emphasis 
supplied).8 
¶38 The Moran court concluded that the Illinois rule 
pertaining to obtaining a stay provided the exclusive means by 
which an appellant may protect its interest in property pending 
appeal and that the statute providing for lis pendens was 
inapplicable on appeal.  Id. at 85.  Further, the court wrote 
that the practice and historical notes to the Illinois lis 
pendens statute refer the reader to Illinois Supreme Court Rule 
305(i).  Wisconsin Stats. §§ 808.07 and 840.10 do not contain 
sections analogous to the Illinois rules. 
¶39 In Gaugert II the court of appeals noted that in the 
Illinois cases it cited the third-party purchaser was not a 
party to the appeal and was not subject to the court's 
jurisdiction.  The court of appeals concluded, however, that a 
                     
8 It is not precisely clear what year of the Illinois 
statutes is being quoted in Town of Libertyville v. Moran, 535 
N.E.2d 82, 85 (Ill. App. Ct. 1989).   
No. 
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21
different result was not required in this case merely because 
Hansen was a named party.  In the court's view, had the Gaugerts 
sought a stay, the circuit court "would have had the luxury of 
being able to fashion relief that prevented Hansen from 
disturbing the status quo because he was subject to the court's 
authority.  Preventing an alteration of existing conditions is 
preferable to later untangling changes in an attempt to restore 
things to the way they were." Gaugert, 2000 WI App 34, ¶22 n.8. 
 While we may agree with this sentiment, the Gaugerts are 
entitled to what the law permits, and Hansen is subject to what 
the law demands.  In the present case Hansen was a party to the 
case since its initial filing and therefore purchased the 
property subject to the final resolution of the case.  
¶40 Hanson also directs our attention to Da Silva v. 
Musso, 559 N.E. 2d 1268 (N.Y. Ct. App. 1990).  In Da Silva, the 
plaintiff fled a notion of pendency and commenced an action for 
specific performance of a contract to convey real property.  
Specific performance was granted, but the award was reversed on 
appeal.  Plaintiff appealed again, but did not obtain a stay and 
his notice of pendency was cancelled.  The defendants sold the 
disputed property to a buyer who had actual knowledge of the 
pending appeal.  Id. at 1269.  In its review of the matter, the 
New York Court of Appeals reinstated the order for specific 
performance.  Additional litigation occurred.  Upon further 
review, the court determined that "once a final judgment or 
order dismissing the plaintiff's complaint has been entered, the 
plaintiff has no further right to restrain the free transfer of 
No. 
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22
the property that was the subject of the complaint unless he has 
followed the statutorily prescribed procedures for continuing 
the previously filed notice of pendency."  Id. at 1272.  The Da 
Silva court noted that a buyer's actual knowledge of the pending 
appeal does not assist the plaintiff where the plaintiff has not 
complied with other statutorily prescribed procedures.  Id.  
¶41 The reasoning of the Da Silva decision was linked 
closely to the statutes of that jurisdiction.  We do not discern 
from the language of Wis. Stat. § 808.07 any intent to abandon 
the application of common law principles of lis pendens to the 
parties to litigation concerning real property.  Even if we were 
to find that § 808.07 is ambiguous on this issue, we would 
nevertheless reach the same conclusion.  It is a rule of 
statutory construction that an intent to change the common law 
must be clearly expressed.  Esser Distributing Co. v. Steidl, 
149 Wis. 2d 64, 69, 437 N.W.2d 884 (1989).  At the time § 808.07 
was created, our prior holdings had established that statutory 
lis pendens was a supplement to common law lis pendens.  The 
language of the statute does not address either common law lis 
pendens or statutory lis pendens.  The parties have not provided 
any dispositive evidence from the legislative history of 
§ 808.07 that would lead us to conclude that the enactment of 
the statute was intended to modify the common law of lis 
pendens.  
¶42 Based upon all the above, we conclude that neither the 
dissolution of statutory lis pendens nor the adoption of Wis. 
Stat. § 808.07(1) prevent Hansen from holding the property 
No. 
98-3004 
 
 
23
subject to the final resolution of the case in the appellate 
courts. 
II 
¶43 The second issue requires a determination of whether 
the Gaugerts should be granted their demand for specific 
performance. The court of appeals concluded that the equities 
favored Hansen because the Gaugerts did not seek the relief 
available to them under Wis. Stat. § 808.07(1).  Gaugert, 2000 
WI App. 34, ¶27. 
¶44 "'An action for specific performance is an equitable 
remedy and rests in the discretion of the court'".  Anderson v. 
Onsager, 155 Wis. 2d 504, 513, 455 N.W.2d 885 (1990)(quoting 
Edlin v. Soderstrom, 83 Wis. 2d 58, 70, 264 N.W.2d 275 (1978)). 
 We must determine, therefore, whether the circuit court 
erroneously exercised its discretion in refusing to grant the 
Gaugerts specific performance.  The circuit court's decision 
will be sustained if the court "'examined the relevant facts, 
applied a proper standard of law, and, using a demonstrated 
rational process, reached a conclusion that a reasonable judge 
could reach.'"  Id. at 514 (quoting Loy v. Bunderson, 107 
Wis. 2d 400, 414-15, 320 N.W.2d 175 (1982)). 
¶45 In issuing a ruling from the bench, the circuit court 
focused its analysis upon several points, the most significant 
of which are summarized as follows.  First, the court noted that 
Wis. Stat. § 840.10(3) provides for the discharge of lis pendens 
No. 
98-3004 
 
 
24
pursuant to Wis. Stat. § 811.22,9 set forth below.  The circuit 
court found that the lis pendens in this case had been 
discharged, and accordingly the terms of § 811.22 governed.  The 
circuit court reviewed the procedural history of the litigation 
and relevant legal authority.  It was noted that after Judge 
Mawdsley ordered discharge of statutory lis pendens, the 
Gaugerts elected to not seek an injunction or stay of the 
court's decision. 
¶46 The circuit court also concluded that as between the 
Gaugerts and the defendants the equities were perhaps equal due 
to the uniqueness of the property and the competing interests at 
stake.  However, the circuit court concluded that the legal 
considerations in this case indicated that the Gaugerts had 
elected to forego steps that would have preserved the remedy of 
specific performance.  
                     
9 Wisconsin Stat. § 811.22 provides: 
When the defendant recovers judgment all the 
money or property held by any writ of attachment shall 
be delivered to him or her, subject to the plaintiff's 
rights on appeal, and he or she may maintain an action 
on the plaintiff's bond for the assessed damages 
sustained by reason of the writ of attachment.  Upon 
the entry of final judgment in favor of the defendant 
or on satisfaction of a plaintiff's judgment, the 
clerk of court shall, if real estate was attached, 
certify the fact of the judgment or satisfaction, and 
on recording the certificate with the register of 
deeds in any county in which attached lands are 
situated the register shall enter the certificate upon 
the records of his or her office in discharge of the 
attachments.  
No. 
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25
¶47 The circuit court's decision was based upon an 
erroneous interpretation of the law.  In the present case, 
Hansen is bound to the outcome of this action on appellate 
review because he is the successor in interest and a party.  The 
absence of a stay of the order discharging statutory lis pendens 
did not change the Gaugerts' ability to reap the benefit of the 
court of appeals' decision with respect to Hansen.  The circuit 
court's analysis did not reveal any factual considerations that 
would 
make 
specific 
performance 
unfair, 
unreasonable, 
or 
impossible.  See Anderson, 155 Wis. 2d at 512-13.  We find it 
unreasonable to conclude that the Gaugerts should be denied 
specific performance when the law of lis pendens protected their 
interest.  Accordingly, we reverse the circuit court's decision 
and grant the Gaugerts' motion for specific performance.    
¶48 Hansen raises a number of arguments against this 
conclusion, none of which we find to be persuasive.  First, he 
asserts that the Gaugerts improperly made him a party to the 
suit against Duve.  Hansen notes that the circuit court awarded 
him statutory costs and attorney's fees because the Gaugerts 
failed to pursue any cause of action against Hansen.  Although 
the Gaugerts appealed this award, they subsequently abandoned 
their appeal on this matter.  See Gaugert I, 217 Wis. 2d at 79 
n.1.  Hansen contends that the Gaugerts are using his party 
status to contend that his rights are more limited than those of 
other potential third-party purchasers.   
¶49 As set forth in the description of the facts, this 
action began before Judge Mawdsley.  In his decision from the 
No. 
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26
bench after trial was held, Judge Mawdsley discussed Hansen's 
request for fees based upon the argument that he was called upon 
to participate in this case via the Gaugerts' lawsuit when the 
Gaugerts had no claim against Hansen.  Judge Mawdsley concluded 
that Hansen presented himself as an interested party and stood 
to gain if the rulings and findings of the court were upheld.  
The following excerpts of Judge Mawdsley's remarks from the 
bench are illustrative: 
 
After going through the notes and testimony and 
even reading the excerpts from the deposition, Mr. 
Hansen is definitely and presented himself as an 
interested party and also is someone who by way of 
this court's declaration stands to gain if the rulings 
and findings of the court are upheld.  I think that he 
was brought in because of the--his position and 
because of the letters that his attorney wrote back 
and forth during this key time period of what are we 
going to do about this right of first refusal, et 
cetera, and he definitely - - [Hansen's counsel] 
insisted that he would be enforcing his rights.  I 
don't think it's frivolous or precipitous of [the 
Gaugerts' counsel] to -– on behalf of Mr. Gaugert to 
take care of this.  I think there was tremendous 
judicial economy in bringing Mr. Hansen in.  I think 
he's definitely an interested party by his own 
activity.  I can't see that this is a frivolous claim. 
 Some of the claims don't get found to be valid.  I 
agree that in effect what the court's ruling does 
today is give Mr. Hansen a declaratory ruling on the 
documents that are being questioned here, especially 
this right of first refusal, and that inures to his 
benefit.  
 
 . . .  
 
There's nothing-—Court finds nothing frivolous in this 
particular setup of pleadings and this particular 
testimony.  
 
 . . .  
No. 
98-3004 
 
 
27
 
I found you have an interest and your interest 
basically was upheld.  Does that make you a prevailing 
party?  
 
 . . .  
 
I think you can declare that Mr. Hansen by his 
presence does prevail versus the right of first 
refusal held up by Mr. Gaugert. . . . So on that basis 
the court would rule that with respect to Mr. Hansen 
statutory and only statutory attorneys' fees would be 
appropriate.   
¶50 It appears from these remarks from the bench that 
Judge Mawdsley, having conducted the trial in the circuit court 
on this matter, considered Hansen to be both an interested party 
and a prevailing party.  We find this reasoning persuasive.  As 
a result, Hansen's assertion that he was improperly made a party 
to this case fails to move the balancing of the equities in his 
favor. 
¶51 Second, Hansen argues that after Duve's motion to 
discharge lis pendens was granted, Duve threatened to sell the 
property to another buyer, depriving Hansen of the benefit of 
his contract with Duve.  Alternatively, Hansen asserts that if 
he refused to close the transaction with Duve, Duve had the 
option of suing Hansen for breach of contract.  As we have 
previously noted, however, Hansen could have, but did not, 
oppose Duve's motion to expunge statutory lis pendens.   
¶52 Our analysis of this issue is aided by an analogous 
situation presented in Webb v. Mason, 152 Wis. 19, 139 N.W. 442 
(1913), in which this court considered an award of specific 
performance after real property had been conveyed to a party who 
No. 
98-3004 
 
 
28
had notice of a prior sale of the property to another person.  
In that case, it was determined that the respondent, Webb, had 
made his purchase and received a deed with full knowledge of the 
appellant Mason's prior contract of purchase.  As a result, the 
court found that the respondent was chargeable with knowledge of 
Mason's equities in the property and took title to the farm 
subject to Mason's purchase contract.   
¶53 In sum, we conclude that the circuit court erred in 
refusing to grant this remedy.  We conclude that specific 
performance should be ordered.   
By the Court.—The decision of the court of appeals is 
reversed, and the cause remanded to the circuit court for 
further proceedings consistent with this opinion. 
 
 
 
 
 
 
 
 
No. 
98-3004 
 
 
1