COURT OF APPEALS

DECISION

DATED AND FILED

July 30, 2021

Sheila T. Reiff

Clerk of Court of Appeals

NOTICE

This opinion is subject to further editing. If 

published, the official version will appear in 

the bound volume of the Official Reports. 

A party may file with the Supreme Court a 

petition to review an adverse decision by the 

Court of Appeals. See WIS. STAT. § 808.10 

and RULE 809.62. 

Appeal Nos. 2019AP1728

2019AP2063

Cir. Ct. No. 2017CV1133

STATE OF WISCONSIN IN COURT OF APPEALS

DISTRICT II

NO. 2019AP1728

IN RE: 

THE ATRIUM OF RACINE, INC., D/B/A THE ATRIUM AND BAY 

POINTE:

MARILYN CASANOVA, MEMBER OF CREDITOR COMMITTEE,

AUDREY J. FOX, MEMBER OF CREDITOR COMMITTEE, DR.

MELVIN MIRITZ, MEMBER OF CREDITOR COMMITTEE, LINDA 

MIRITZ, MEMBER OF CREDITOR COMMITTEE, EDWARD AND 

LOUISE LANGLEIB TRUST, MEMBER OF CREDITOR 

COMMITTEE, CARLETON MUSSON, MEMBER OF CREDITOR 

COMMITTEE, WILMA MILOVANCEVIC, MEMBER OF CREDITOR 

COMMITTEE, HELEN TAYLOR, MEMBER OF CREDITOR 

COMMITTEE, LOUIS P. TEICHERET TRUST, MEMBER OF 

CREDITOR COMMITTEE, REVEREND FREDERICK MARKS,

MEMBER OF CREDITOR COMMITTEE, JEWEL MARKS, MEMBER 

OF CREDITOR COMMITTEE, PATRICIA MEIER, MEMBER OF 

CREDITOR COMMITTEE, PATRICIA TEERNSTRA, MEMBER OF 

CREDITOR COMMITTEE, ANDREW MIKAELIAN, MEMBER OF 

CREDITOR COMMITTEE, MARCELLA MIKAELIAN, MEMBER OF 

CREDITOR COMMITTEE, JOSEPHINE BROOKS, MEMBER OF 

CREDITOR COMMITTEE, EVELYN ODELL, MEMBER OF 
Nos. 2019AP1728

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2

CREDITOR COMMITTEE, LAURENCE FREER, MEMBER OF 

CREDITOR COMMITTEE, DOROTHY KOHL, MEMBER OF 

CREDITOR COMMITTEE, KAREN BOERGER, MEMBER OF 

CREDITOR COMMITTEE, JACQUELINE WILLIAMSON, MEMBER 

OF CREDITOR COMMITTEE, JUDY GLOWINSKI, MEMBER OF 

CREDITOR COMMITTEE, ANNE TREDWELL, MEMBER OF 

CREDITOR COMMITTEE, MARILYN BAHAM, MEMBER OF 

CREDITOR COMMITTEE, ELSIE GOTZMAN, MEMBER OF 

CREDITOR COMMITTEE, LUCILLE CIARAMITA, MEMBER OF 

CREDITOR COMMITTEE, JOANNE RAMAKER, MEMBER OF 

CREDITOR COMMITTEE, JOHANNA SANDER, MEMBER OF 

CREDITOR COMMITTEE, THOMAS ESER, MEMBER OF 

CREDITOR COMMITTEE, HENRYETTA ESER, MEMBER OF 

CREDITOR COMMITTEE, GRACE NELSON, MEMBER OF 

CREDITOR COMMITTEE, JANE ODDERS, MEMBER OF 

CREDITOR COMMITTEE, DAVID NELSON, MEMBER OF 

CREDITOR COMMITTEE, RAY KATT (DECEASED), MEMBER OF

CREDITOR COMMITTEE, LOUISE KATT, MEMBER OF CREDITOR 

COMMITTEE, ETHEL HADER, MEMBER OF CREDITOR 

COMMITTEE, WARREN LARSEN, MEMBER OF CREDITOR 

COMMITTEE, ELLEN LARSEN, MEMBER OF CREDITOR 

COMMITTEE, FRANCES SCOTT, MEMBER OF CREDITOR 

COMMITTEE, SUSAN PROUTY, MEMBER OF CREDITOR 

COMMITTEE, ROBERT RAINEY, MEMBER OF CREDITOR 

COMMITTEE, PATRICIA RAINEY, MEMBER OF CREDITOR 

COMMITTEE, HELEN ECKHEART, MEMBER OF CREDITOR 

COMMITTEE, WILMA WISER, MEMBER OF CREDITOR 

COMMITTEE, EARL CHRISTIANSON, MEMBER OF CREDITOR 

COMMITTEE AND MARIAN BLOCH, MEMBER OF CREDITOR 

COMMITTEE,

 APPELLANTS,

 V.

MICHAEL S. POLSKY, ESQ., RECEIVER AND THE BANK OF NEW 

YORK MELLON TRUST COMPANY, N.A.,

 RESPONDENTS.
Nos. 2019AP1728

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3

NO. 2019AP2063

IN RE: 

THE ATRIUM OF RACINE, INC., D/B/A THE ATRIUM AND BAY 

POINTE:

MARILYN CASANOVA, MEMBER OF CREDITOR COMMITTEE,

AUDREY J. FOX, MEMBER OF CREDITOR COMMITTEE, DR.

MELVIN MIRITZ, MEMBER OF CREDITOR COMMITTEE, LINDA 

MIRITZ, MEMBER OF CREDITOR COMMITTEE, EDWARD AND 

LOUISE LANGLEIB TRUST, MEMBER OF CREDITOR 

COMMITTEE, CARLETON MUSSON, MEMBER OF CREDITOR 

COMMITTEE, WILMA MILOVANCEVIC, MEMBER OF CREDITOR 

COMMITTEE, HELEN TAYLOR, MEMBER OF CREDITOR 

COMMITTEE, LOUIS P. TEICHERT TRUST, MEMBER OF 

CREDITOR COMMITTEE, REVEREND FREDERICK MARKS,

MEMBER OF CREDITOR COMMITTEE, JEWEL MARKS, MEMBER 

OF CREDITOR COMMITTEE, PATRICIA MEIER, MEMBER OF 

CREDITOR COMMITTEE, PATRICIA TEERNSTRA, MEMBER OF 

CREDITOR COMMITTEE, ANDREW MIKAELIAN, MEMBER OF 

CREDITOR COMMITTEE, MARCELLA MIKAELIAN, MEMBER OF 

CREDITOR COMMITTEE, JOSEPHINE BROOKS, MEMBER OF 

CREDITOR COMMITTEE, EVELYN ODELL, MEMBER OF 

CREDITOR COMMITTEE, LAURENCE FREER, MEMBER OF 

CREDITOR COMMITTEE, DOROTHY KOHL, MEMBER OF 

CREDITOR COMMITTEE, KAREN BOERGER, MEMBER OF 

CREDITOR COMMITTEE, JACQUELINE WILLIAMSON, MEMBER 

OF CREDITOR COMMITTEE, JUDY GLOWINSKI, MEMBER OF 

CREDITOR COMMITTEE, ANNE TREDWELL, MEMBER OF 

CREDITOR COMMITTEE, MARILYN BAHAM, MEMBER OF 

CREDITOR COMMITTEE, ELSIE GOTZMAN, MEMBER OF 

CREDITOR COMMITTEE, LUCILLE CIARAMITA, MEMBER OF 

CREDITOR COMMITTEE, JOANNE RAMAKER, MEMBER OF 

CREDITOR COMMITTEE, JOHANNA SANDER, MEMBER OF 

CREDITOR COMMITTEE, THOMAS ESER, MEMBER OF 

CREDITOR COMMITTEE, HENRYETTA ESER, MEMBER OF 

CREDITOR COMMITTEE, GRACE NELSON, MEMBER OF 

CREDITOR COMMITTEE, JANE ODDERS, MEMBER OF 

CREDITOR COMMITTEE, DAVID NELSON, MEMBER OF 

CREDITOR COMMITTEE, RAY KATT (DECEASED), MEMBER OF 
Nos. 2019AP1728

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CREDITOR COMMITTEE, LOUISE KATT, MEMBER OF CREDITOR 

COMMITTEE, ETHEL HADER, MEMBER OF CREDITOR 

COMMITTEE, WARREN LARSEN, MEMBER OF CREDITOR 

COMMITTEE, ELLEN LARSEN, MEMBER OF CREDITOR 

COMMITTEE, FRANCES SCOTT, MEMBER OF CREDITOR 

COMMITTEE, SUSAN PROUTY, MEMBER OF CREDITOR 

COMMITTEE, ROBERT RAINEY, MEMBER OF CREDITOR 

COMMITTEE, PATRICIA RAINEY, MEMBER OF CREDITOR 

COMMITTEE, HELEN ECKHEART, MEMBER OF CREDITOR 

COMMITTEE, WILMA WISER, MEMBER OF CREDITOR 

COMMITTEE, EARL CHRISTIANSON, MEMBER OF CREDITOR 

COMMITTEE, MARIAN BLOCH, MEMBER OF CREDITOR 

COMMITTEE, JAN TEICHERT, MEMBER OF CREDITOR 

COMMITTEE, DOROTHY NELSON, MEMBER OF CREDITOR 

COMMITTEE, METTA REIKER, MEMBER OF CREDITOR 

COMMITTEE, PRUDENCE WHITE, MEMBER OF CREDITOR 

COMMITTEE, ELAINE OETLINGER, MEMBER OF CREDITOR 

COMMITTEE, ESTHER WULFF, MEMBER OF CREDITOR 

COMMITTEE, HELEN VEENSTRA, MEMBER OF CREDITOR 

COMMITTEE, REV. DR. ROSS HENRY LARSON, MEMBER OF 

CREDITOR COMMITTEE, FRED HOFER, MEMBER OF CREDITOR 

COMMITTEE, NANCY HOFER, MEMBER OF CREDITOR 

COMMITTEE, WINIFRED WISER, MEMBER OF CREDITOR 

COMMITTEE, NAZALY BAGDASIAN, MEMBER OF CREDITOR 

COMMITTEE, ROBERT CALLAWAY, MEMBER OF CREDITOR 

COMMITTEE, ESTATE OF ELAINE ZLEVOR, MEMBER OF 

CREDITOR COMMITTEE, MARSHALL CUSHMAN, MEMBER OF 

CREDITOR COMMITTEE, VAR KRIKORIAN, MEMBER OF 

CREDITOR COMMITTEE, RUTH MINTON, MEMBER OF 

CREDITOR COMMITTEE, RICHARD MINTON, MEMBER OF 

CREDITOR COMMITTEE, WALTER STEIDL, MEMBER OF 

CREDITOR COMMITTEE, IRENE MILLER, MEMBER OF 

CREDITOR COMMITTEE, MARIAN KORNWOLF, MEMBER OF 

CREDITOR COMMITTEE, MARJORIE SPECKHARD, MEMBER OF 

CREDITOR COMMITTEE, DELORES TORPHY, MEMBER OF 

CREDITOR COMMITTEE, GERALDINE BAUMBLATT, MEMBER 

OF CREDITOR COMMITTEE, JOAN PETERSON, MEMBER OF 

CREDITOR COMMITTEE, JOHN ROWLAND, MEMBER OF 

CREDITOR COMMITTEE, JULIANNE ROWLAND, MEMBER OF 

CREDITOR COMMITTEE, LORRAINE PAVELCIK, MEMBER OF 

CREDITOR COMMITTEE, MARILYN ISELIN, MEMBER OF 

CREDITOR COMMITTEE, BERNARD BRAUN, MEMBER OF 
Nos. 2019AP1728

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CREDITOR COMMITTEE, PATRICIA BRAUN, MEMBER OF 

CREDITOR COMMITTEE, BOB OTTUM, MEMBER OF CREDITOR 

COMMITTEE, HOLLY OTTUM, MEMBER OF CREDITOR 

COMMITTEE, JOYCE OTTUM, MEMBER OF CREDITOR 

COMMITTEE, JEANNE HAAS, MEMBER OF CREDITOR 

COMMITTEE, GLORIA MURPHY, MEMBER OF CREDITOR 

COMMITTEE, RALPH ANDERSON, MEMBER OF CREDITOR 

COMMITTEE, DORIS BEUTTLER, MEMBER OF CREDITOR 

COMMITTEE, GENEVIEVE HOSTAK, MEMBER OF CREDITOR 

COMMITTEE, MARLENE WEICHMANN, MEMBER OF CREDITOR 

COMMITTEE, MARY MUELLER, MEMBER OF CREDITOR 

COMMITTEE, WOOD FAMILY TRUST, MEMBER OF CREDITOR 

COMMITTEE AND MARY HOLTZ, MEMBER OF CREDITOR 

COMMITTEE,

 APPELLANTS,

 V.

MICHAEL S. POLSKY, ESQ. , RECEIVER AND THE BANK OF NEW 

YORK MELLON TRUST COMPANY, N.A.,

 RESPONDENTS.

APPEALS from orders of the circuit court for Racine County: 

MICHAEL J. PIONTEK and DAVID W. PAULSON, Judges. Reversed and 

cause remanded.

Before Reilly, P.J., Gundrum and Davis, JJ. 

¶1 REILLY, P.J. This consolidated appeal pits one group of creditors

against another group of creditors. When the Atrium, a seventy-six-unit senior

housing facility, went into receivership in May 2017, it owed its residents 

$7,487,000 for “[r]esident entrance fees, deposit fees and trust funds” that the 
Nos. 2019AP1728

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6

residents had paid at the inception of their residency at the Atrium (the Residents).

It also owed $6,097,000 to some 800 individual bondholders who had invested in 

the Atrium by purchasing bonds (the Bondholders).1 The circuit court concluded 

that the Bondholders have priority over the rights of the Residents to the 

remaining assets of the Atrium. We reverse and remand as pursuant to M&I First 

National Bank v. Episcopal Homes Management, Inc., 195 Wis. 2d 485, 536 

N.W.2d 175 (Ct. App. 1995), the Residents’ entrance fees and security deposits 

have priority over the interests of the Bondholders. 

Facts

¶2 This case involves the demise of the Atrium, a senior housing 

facility in Racine, Wisconsin. The Residents, prior to occupying a unit, were all

required to pay an entrance fee, some a security deposit, and all paid a monthly fee

to live in their unit. Beginning in 1988, the Residents entered into one of six 

versions of residency agreements, all of which provided for payment of a fee 

typically characterized as an entrance fee of approximately $40,000 to $238,000. 

An amount equal to a specified proportion of the entrance fee was to be paid to the 

Resident after a Resident terminated occupancy at the Atrium, and while the 

agreements vary as to when the Residents would receive reimbursement of the 

entrance fees, all of the agreements provided that a portion of the entrance fees 

would be reimbursed. Certain of the residency agreements also provided for 

payment of a security deposit of approximately $608 to $1800. 

 

1

 The Bondholders are represented on appeal by the Bank of New York Mellon Trust 

Co., as Trustee for bondholders. New York Mellon Trust is the successor trustee and acting 

trustee for the benefit of the Bondholders in this action. 
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¶3 The Bondholders’ claims against the Atrium exist as a result of their 

purchase of bonds as an investment. In 2002, the Atrium, which was operating as 

a senior housing facility, contracted to construct and operate a separate assisted 

living facility, called Bay Pointe. Bonds were sold to finance the project, and 

various documents were created for investors to review before purchasing the 

bonds, including a Prospectus, a Mortgage and Security Agreement, a Project 

Contract, and a Trust Indenture. The Bondholders were advised via the Prospectus 

and Project Contract that the entrance fees were “refundable resident deposits” 

that qualified as “Permitted Liens.” (Emphasis added.) The definition of entrance 

fees was contained in both the Project Contract and the Prospectus, which defines 

them as:

[T]he fees, other than monthly service charges, paid by 

residents of a Facility to the [Obligor/Corporation] for the 

purpose of obtaining the right to reside in a Facility, 

including any refundable resident deposits described in any 

lease or similar residency agreements ....

(Emphasis added.) According to both the Prospectus and the Project Contract, 

“Permitted Liens” include “Entrance Fees or similar funds deposited by or on 

behalf of such residents.” 

¶4 While the Bondholders were granted a first mortgage on the 

Atrium’s property, the grant was subject to “Permitted Liens”:

5.12 Restrictions as to Creation of Liens.

 (a) The Obligor agrees that it will not create or suffer to 

be created or exist any Lien upon its Property other than ... 

Permitted Liens whenever created, all of which Permitted 

Liens may be superior to the Lien of the Mortgage....

The Prospectus also provides that “[p]ursuant to the Mortgage, the Corporation 

has granted to the Trustee a first mortgage lien on the campus currently owned by 
Nos. 2019AP1728

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the Corporation, and a security interest in certain tangible personal property of the 

Corporation, subject in each case to Permitted Liens as defined in the Project 

Contract.” (Emphasis added.) 

¶5 Accordingly, the Bondholders were aware that their rights were 

subject to the repayment of entrance fees and security deposits due to the 

Residents. The Prospectus informed each Bondholder that the Residents had 

priority with respect to a resident’s entrance fees:

[R]esidents of the facilities that require entrance fees may 

have certain rights with respect to their entrance fees and 

therefore the entrance fees held by the Corporation may 

not be available to pay the Series 2002 Bonds in the event 

of a foreclosure.

 The effectiveness of the security interest in Pledged 

Revenues granted pursuant to the mortgage may be limited 

by a number of factors, including ... (vi) the rights of 

residents and prospective residents in entrance fees paid to 

the Corporation; (vii) constructive trusts, equitable or other 

rights impressed or conferred by a federal or state court in 

the exercise of its equitable jurisdiction.

(Emphasis added.)

¶6 When the Atrium was placed under receivership pursuant to WIS.

STAT. ch. 128 (2019-20),

2 both the Residents and the Receiver asked the court for 

a determination as to whether the claims of the Residents or the claims of the 

Bondholders had priority over the assets of the Atrium. The circuit court issued a 

 

2

 All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise 

noted.
Nos. 2019AP1728

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decision determining that the Bondholders’ claims had priority over the Residents’ 

claims.3

¶7 As the receivership action progressed, the Receiver was given 

authorization to sell the main asset of the Atrium: the building housing the senior 

living complex and assisted living facility. The Residents and the Bondholders

stipulated to the approval of the sale with the proceeds held in trust pending this

appeal.4

Jurisdiction

¶8 As an initial matter, the Bondholders5assert that we lack jurisdiction 

to hear this appeal on the ground that the Residents did not appeal from the 

April 23, 2018 order which established priority.6 The Bondholders premise their 

argument on United States v. Burczyk, 54 Wis. 2d 67, 194 N.W.2d 608 (1972), 

where the court dismissed an appeal as untimely due to the failure of the creditor 

 

3

 The Honorable David W. Paulson entered a decision on April 4, 2018, and signed the 

order determining priority on April 23, 2018. The case was subsequently assigned to the 

Honorable Michael J. Piontek.

4

 The Residents appealed from the court’s Order Approving Stipulation to Hold Net Sale 

Proceeds in Escrow, entered on July 31, 2019, and just to be safe, the Residents filed a second, 

similar draft order containing the “final for purposes of appeal” language approved in Wambolt v. 

West Bend Mutual Insurance Co., 2007 WI 35, ¶¶44, 48, 299 Wis. 2d 723, 728 N.W.2d 670. 

The circuit court signed that order on October 17, 2019, which the Residents appealed from as 

well. We ordered these appeals consolidated.

5

 We note that the Respondents in this appeal—the Bondholders and the Receiver—filed 

a joint brief. For ease of reading, we will refer to the Bondholders throughout.

6

 On December 23, 2019, the Bondholders filed a motion to dismiss this consolidated 

appeal, arguing that the Residents did not timely appeal from the April 23, 2018 order. Upon 

review of the motion and the objection, we ordered the motion to dismiss held in abeyance, 

indicating that the parties could argue that this court lacks jurisdiction in their briefing. We now 

deny the Bondholders’ motion to dismiss, as we address the jurisdiction argument on the merits.
Nos. 2019AP1728

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to timely appeal a nonfinal order concerning priority, similar to what occurred in 

this case. Burczyk was decided in 1972 when WIS. STAT. ch. 128 contained 

specific provisions requiring appeals from interlocutory orders in ch. 128 cases. In 

1972, WIS. STAT. § 128.15(1) (1971-72) required that an appeal be commenced 

within thirty days of an interlocutory order:

An appeal may be taken from such order within thirty days

from the entry thereof, but not afterwards, in the manner 

provided for taking appeals from orders in civil actions.

(Emphasis added.) 

¶9 WISCONSIN STAT. § 128.15 (1983-84)7 was modified in 1983 to 

eliminate the “thirty day” appeal deadline and made appeals from WIS. STAT.

ch. 128 proceedings uniform with all other appeals via WIS. STAT. § 808.04(1). 

1983 Wis. Act 219, § 26. The legislative notes to the amendment of § 128.15(1) 

state:

NOTE: The last sentence of [§] 128.15(1), providing an 

appeal deadline of 30 days after entry of order, is repealed 

for greater uniformity. An appeal must be initiated within 

the time specified in [§] 808.04(1).

1983 Wis. Act 219, § 26 (emphasis added).

¶10 WISCONSIN STAT. § 808.04(1) requires that a notice of appeal be 

filed within forty-five days “of entry of a final judgment or order” (or ninety days 

 

7

 WISCONSIN STAT. § 128.15 has since been amended pursuant to 1997 Wis. Act 253, 

§ 123, but the legislative note indicates the amendment “subdivides provision, reorders text and 

replaces language for greater readability and conformity with current style.” Thus, § 128.15 is 

not substantively different from the 1983 amendment. 
Nos. 2019AP1728

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from such entry if notice of entry is not given). (Emphasis added.) In short, 

Burczyk has been abrogated by statute, and an appeal in a WIS. STAT. ch. 128 

receivership is to be initiated within the time specified in § 808.04(1), which the 

Residents did as the April 23, 2018 order was clearly not “a final judgment or 

order,” see § 808.04(1), as “[a] final judgment or final order is a judgment, order 

or disposition that disposes of the entire matter in litigation as to one or more of 

the parties, whether rendered in an action or special proceeding” and, as relevant 

here, is “entered in accordance with [WIS. STAT. §§] 806.06(1)(b) or 807.11(2),”

see WIS. STAT. § 808.03(1)(a). The April 23, 2018 order addressed priority, but 

left for another day the activity needed to close out the receivership estate. That 

final disposition occurred two years later on July 31, 2019, when the court 

approved the sale of the Atrium and distribution of proceeds.

¶11 We also find support in Wambolt, where our supreme court 

instructed circuit and appellate courts that in the absence of express language 

stating that an order is “final for purposes of appeal,” any doubt should be 

resolved in favor of hearing the appeal. Wambolt v. West Bend Mut. Ins. Co., 

2007 WI 35, ¶46, 299 Wis. 2d 723, 728 N.W.2d 670 (“[A]bsent explicit language 

that the document is intended to be the final order or final judgment for purposes 

of appeal, appellate courts should liberally construe ambiguities to preserve the 

right of appeal.”); see also Admiral Ins. Co. v. Paper Converting Mach. Co., 

2012 WI 30, ¶27, 339 Wis. 2d 291, 811 N.W.2d 351. The Wambolt language was 

rightfully not contained in the April 23, 2018 order, as the case was not terminated 

as to any party. With our jurisdiction thus established, we proceed to the merits.
Nos. 2019AP1728

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Standard of Review

¶12 The Bondholders and Residents agree that the question of priority is 

a question of law that we review independent of the circuit court’s decision. 

Episcopal Homes, 195 Wis. 2d at 498; see also Wisconsin End-User Gas Ass’n v. 

PSC, 218 Wis. 2d 558, 564, 581 N.W.2d 556 (Ct. App. 1998) (“The interpretation 

of a contract is a question of law which is subject to de novo review.”). 

Priority

¶13 The merits of this appeal, factually and legally, are on point with this 

court’s decision in Episcopal Homes. Episcopal Homes Management, Inc., like 

the Atrium, owned and operated a senior housing facility, which defaulted on its 

mortgage obligation. Episcopal Homes, 195 Wis. 2d at 489-93. M&I First 

National Bank, the trustee for approximately 1700 bondholders who held 

mortgage revenue bonds that financed the construction of the facility, claimed that 

its mortgage security interest had priority over the entrance fees (in excess of 

$1,000,000) paid by the residents of the housing facility. Id. at 488. The 

residency agreements executed by the Residents in this case are similar to the

residency agreements executed by the residents in Episcopal Homes. See id. at 

490-92.

¶14 We held in Episcopal Homes that the residency agreements 

constituted rental agreements within the meaning of WIS. ADMIN. CODE 

§ ATCP 134.02(10) and that “the parties contracted in a landlord/tenant 
Nos. 2019AP1728

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capacity.”8 Episcopal Homes, 195 Wis. 2d at 489, 506. The residency 

agreements required an entrance fee and monthly payments in exchange for the 

use and occupation of the property and therefore constituted a lease. Id. at 500-06. 

We adopt our rationale from Episcopal Homes and hold as a matter of law that the 

Atrium and the Residents contracted in a landlord/tenant capacity and that the 

Atrium residency agreements constituted “rental agreements” within the meaning 

of § ATCP 134.02(10) (June 2018).

9

¶15 After establishing the legal relationship between the contracting 

parties, Episcopal Homes then addressed “whether M&I is entitled to its claimed 

priority security interest in the entrance fees fund as against the interests of the 

residents.” Episcopal Homes, 195 Wis. 2d at 506. As the parties contracted 

within a landlord/tenant relationship, the court applied WIS. ADMIN. CODE 

§ ATCP 134, titled Residential Rental Practices, in addressing priority. Section 

ATCP 134.02(11) defines “[s]ecurity deposit” as “the total of all payments and 

deposits given by a tenant to the landlord as security for the performance of the 

tenant’s obligations, and includes all rent payments in excess of 1 month’s prepaid 

rent.” Section ATCP 134.06 specifically addresses security deposits and provides 

 

8

 We note that in M&I First National Bank v. Episcopal Homes Management, 195 

Wis. 2d 485, 501, 536 N.W.2d 175 (Ct. App. 1995), the court found that the residency agreement 

established a landlord/tenant relationship despite the provisions in the agreement stating that the 

agreement was not a lease. Some of the agreements in this case include similar provisions. We 

agree with the court’s reasoning in Episcopal Homes on this point, that despite the language 

used, the “construction of the residency agreement” demonstrates that the “fundamental goal was 

housing in exchange for rent.” Id. at 503.

9

 “‘Rental agreement’ means an oral or written agreement between a landlord and tenant, 

for the rental or lease of a specific dwelling unit or premises, in which the landlord and tenant 

agree on the essential terms of the tenancy, such as rent. ‘Rental agreement’ includes a lease.” 

WIS. ADMIN. CODE § ATCP 134.02(10).
Nos. 2019AP1728

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that “[a] landlord shall” return to the “tenant the full amount of any security 

deposit paid by the tenant, less any amounts that may be withheld” pursuant to the 

code, upon the tenant vacating the premises. Sec. ATCP 134.06(2), (3) (emphasis 

added).

¶16 In a discussion based in part on public policy considerations, the 

court found that the entrance fees served as security for the resident’s performance 

of their obligations at the termination of the tenancy, thereby constituting a 

“[s]ecurity deposit” under WIS. ADMIN. CODE § ATCP 134.02(11). Episcopal 

Homes, 195 Wis. 2d at 507, 509 (“The classification of a deposit is based on the 

intent of the parties as manifested by their contractual language; however, what 

the parties name the nature and function of the deposit is not always controlling.”) 

As in Episcopal Homes, the Atrium contractually held the entrance fees and 

security deposits for payment of any delinquent fees upon a resident of the Atrium 

vacating his or her unit.10 As we said in Episcopal Homes, and which applies 

equally to the residents of the Atrium, “the security deposits in this case are 

substantial,” but “despite the substantial security deposit, the charges against the 

deposit could also be substantial. In a given case, the amount owed [Episcopal] 

could consume all, or a great portion of, the entrance fee.” See id. at 509-10.

 

10

 We acknowledge that some of the residency agreements also included language that 

the entrance fee is not a security deposit under landlord/tenant law. For the same reasons the 

Episcopal Homes court found that the language in the agreements indicating it was not a lease 

was not controlling, see supra note 8, we conclude the language in the Residents’ agreements 

addressing the entrance fees is not controlling, see Episcopal Homes, 195 Wis. 2d at 501-03. The 

residency agreements in this case operate as rental agreements, and the entrance fees operate as

security deposits. See id. at 501-02 (“[T]he labels which parties use in their agreements are not 

always controlling,” and “we ... must be careful to not alter the true nature of the parties’ 

contract and the legal relationship which they created by their agreement.” (emphasis added)).
Nos. 2019AP1728

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15

¶17 In Episcopal Homes, the circuit court imposed a constructive trust 

on the entrance fees fund, which we concluded was proper under the 

circumstances as the subordination provisions11 contained within the residency 

agreement were in violation of the public policy of this state and were 

“unconscionable and ... unenforceable against the residents” and would “unjustly 

enrich M&I.” Episcopal Homes, 195 Wis. 2d at 512-14. 

¶18 We need not create a constructive trust in this action as neither party 

has been unjustly enriched. The sole question before us is whether the Residents 

or the Bondholders have the superior right to the assets being held in the 

receivership. We conclude the entrance fees and security deposits paid by the 

Residents in this case are superior in priority to the Bondholders’ claims. The 

Bondholders were aware from the Prospectus and Project Contract that the 

 

11

 The court in Episcopal Homes found the subordination provisions, which stated that 

“the resident’s rights under the agreement were subordinate to the first mortgage lien and that the 

resident’s claims against [the housing facility] would be unsecured in the event of [the facility’s] 

liquidation,” to be ineffective as “form provisions” under WIS. ADMIN. CODE §§ ATCP 134.02(4) 

and 134.06(3) (Apr. 1993). Episcopal Homes, 195 Wis. 2d at 511-12 (citing Moonlight v. 

Boyce, 125 Wis. 2d 298, 304, 372 N.W.2d 479 (Ct. App. 1985)). 

In this case, the Bondholders also argue that some of the Atrium residency agreements 

had a subordination clause, and based on our review, it appears only contract six included the 

subordination provision, which states: “This Agreement is subject and subordinate to any 

mortgage or deed of trust which now or hereafter covers the property of which the Premises is a 

part.” We note that since Episcopal Homes, both the state statutes and the administrative code 

addressing landlord/tenant law have been amended, compare ch. ATCP 134 (Apr. 1993), with

ch. ATCP 134 (June 2018); see generally 2011 Wis. Act 143, and the previous discussion of 

“form provisions” have been removed from ch. ATCP 134. Instead, the code now references 

“nonstandard rental provisions.” Sec. ATCP 134.06(3)(a)6., (3)(b). The Bondholders do not 

argue that the subordination clause as included in contract six now complies with the current code 

provisions under ch. ATCP 134. Accordingly, and as we found in Episcopal Homes, we 

conclude that the subordination provisions in the Atrium residency agreements are of no legal 

effect, despite the amendments to landlord/tenant law.
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entrance fees constituted permitted liens and had priority over their claims when 

they purchased their bonds. It would be disingenuous to now assert that these 

provisions indicating that the entrance fees were permitted liens are meaningless. 

Thus, the rights of the Residents to their entrance fees and security deposits are 

superior to the Bondholders’ rights to the Atrium’s assets, and as such, the circuit 

court erred as a matter of law in its order that the Bondholders have priority over 

the entrance fees and security deposits owned by the Residents.12

Conclusion

¶19 We hold that (1) the Residents and the Atrium contracted as landlord 

and tenant, (2) their contracts were rental agreements within the meaning of the 

law, (3) the entrance fees (and security deposits) were security deposits within the 

meaning of the law, and (4) the circuit court erred in giving the Bondholders a 

priority security interest over the Residents’ entrance fees and security deposits. 

We remand to the circuit court for proceedings consistent herein.

 

12

 The Residents also claim that the Receiver violated his fiduciary duty to the Residents 

when he “[took] sides on this issue,” citing to Community National Bank v. Medical Benefit 

Administrators, LLC, 2001 WI App 98, ¶7, 242 Wis. 2d 626, 626 N.W.2d 340 (“A receiver is a 

fiduciary to all who come within the scope of its receivership.”). The Receiver argues that he 

“must distribute proceeds of the sale of the Assets in accordance with the priorities established by 

WIS. STAT. §§ 128.17 and 128.18 and as ordered by the Circuit Court,” and in order to 

accomplish this duty, “the Receiver is charged with investigating and confirming the priority and 

perfection of claimed interests in the Assets of the Receivership Estate.” See, e.g., WIS. STAT.

§§ 128.17, 128.18, 128.19. The Residents’ argument on this issue is undeveloped, with little 

citation to legal authority, aside from the above referenced case, in support of its position. See 

State v. Pettit, 171 Wis. 2d 627, 646, 492 N.W.2d 633 (Ct. App. 1992). The Receiver moved the 

circuit court to rule on the issue of priority so that he could accomplish his duties under WIS.

STAT. ch 128. The Receiver has not breached his fiduciary duty by asking the court to make a 

decision as to priority.
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By the Court.—Orders reversed and cause remanded.

Not recommended for publication in the official reports.