### 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 W IS

. S TAT . § 808.10
and R ULE 809.62.

Appeal No s

. 2019AP1728

2019AP2063 Cir. Ct. No. 2017CV1133

STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT II

N O

. 2019AP1728

I N RE :

T HE A TRIUM OF R ACINE , I NC ., D / B / A T HE A TRIUM AND B AY P OINTE :

M ARILYN C ASANOVA , MEMBER OF C REDITOR C OMMITTEE , A UDREY J. F OX , MEMBER OF C REDITOR C OMMITTEE , D R

. M ELVIN M IRITZ , MEMBER OF C REDITOR C OMMITTEE , L INDA M IRITZ , MEMBER OF C REDITOR C OMMITTEE , E DWARD AND L OUISE L ANGLEIB T RUST , MEMBER OF C REDITOR C OMMITTEE , C ARLET ON M USSON , MEMBER OF C REDITOR C OMMITTEE , W ILMA M ILOVANCEVIC , MEMBER OF C REDITOR C OMMITTEE , H ELEN T AYLOR , MEMBER OF C REDITOR C OMMITTEE , L OUIS P. T EICHERET T RUST , MEMBER OF C REDITOR C OMMITTEE , R EVEREND F REDERICK M ARKS , MEMBER OF C REDITOR C OMMITTEE , J EWEL M AR KS , MEMBER

OF C REDITOR C OMMITTEE , P ATRICIA M EIER , MEMBER OF C REDITOR C OMMITTEE , P ATRICIA T EERNSTRA , MEMBER OF C REDITOR C OMMITTEE , A NDREW M IKAELIAN , MEMBER OF C REDITOR C OMMITTEE , M ARCELLA M IKAELIAN , MEMBER OF C REDITOR C OMMITTEE , J OSEPHINE B ROOKS , MEMBER OF C REDITOR C OMMITTEE , E VELYN O DELL , MEMBER OFNos. 2019AP1728 2019AP2063

2 C REDITOR C OMMITTEE , L AURENCE F REER , MEMBER OF C REDITOR C OMMITTEE , D OROTHY K OHL , MEMBER OF C REDITOR C OMMITTEE , K AREN B OERGER , MEMBER OF C REDITOR C OMMITTEE , J ACQUELINE W ILLIAMSON , MEMBER

OF C REDITOR C OMMITTEE , J UDY G LOWINSKI , MEMBER OF C REDITOR C OMMITTEE , A NNE T REDWELL , MEMBER OF C REDITOR C OMMITTEE , M ARILYN B AHAM , MEMBER OF C REDITOR C OMMITTEE , E LSIE G OTZMAN , MEMBER OF C REDITOR C OMMITTEE , L UCILLE C IARAMITA , MEMBER OF C REDITOR C OMMITTEE , J OANNE R AMAKER , MEMBER OF C RED ITOR C OMMITTEE , J OHANNA S ANDER , MEMBER OF C REDITOR C OMMITTEE , T HOMAS E SER , MEMBER OF C REDITOR C OMMITTEE , H ENRYETTA E SER , MEMBER OF C REDITOR C OMMITTEE , G RACE N ELSON , MEMBER OF C REDITOR C OMMITTEE , J ANE O DDERS , MEMBER OF C REDITOR C OMMITTEE , D AVID N ELSON , MEMB ER OF C REDITOR C OMMITTEE , R AY K ATT ( DECEASED ), MEMBER OF C REDITOR C OMMITTEE , L OUISE K ATT , MEMBER OF C REDITOR C OMMITTEE , E THEL H ADER , MEMBER OF C REDITOR C OMMITTEE , W ARREN L ARSEN , MEMBER OF C REDITOR C OMMITTEE , E LLEN L ARSEN , MEMBER OF C REDITOR C OMMITTEE , F RAN CES S COTT , MEMBER OF C REDITOR C OMMITTEE , S USAN P ROUTY , MEMBER OF C REDITOR C OMMITTEE , R OBERT R AINEY , MEMBER OF C REDITOR C OMMITTEE , P ATRICIA R AINEY , MEMBER OF C REDITOR C OMMITTEE , H ELEN E CKHEART , MEMBER OF C REDITOR C OMMITTEE , W ILMA W ISER , MEMBER OF C REDITOR C OMMITTEE , E ARL C HRISTIANSON , MEMBER OF C REDITOR C OMMITTEE AND M ARIAN B LOCH , MEMBER OF C REDITOR C OMMITTEE ,

A PPELLANTS ,

V

.

M ICHAEL S. P OLSKY , E SQ ., R ECEIVER AND T HE B ANK OF N EW Y ORK M ELLON T RUST C OMPANY , N.A.,

R ESPONDENTS

.Nos. 2019AP1728 2019AP2063

3 N O

. 2019AP2063

I N RE :

T HE A TRIUM OF R ACINE , I NC ., D / B / A T HE A TRIUM AND B AY P OINTE :

M ARILYN C ASANOVA , MEMBER OF C REDITOR C OMMITTEE , A UDREY J. F OX , MEMBER OF C REDITOR C OMMITTEE , D R

. M ELVIN M IRITZ , MEMBER OF C REDITOR C OMMITTEE , L INDA M IRITZ , MEMBER OF C REDITOR C OMMITTEE , E DWARD AND L OUISE L ANGLEIB T RUST , MEMBER OF C REDITOR C OMMITTEE , C ARLET ON M USSON , MEMBER OF C REDITOR C OMMITTEE , W ILMA M ILOVANCEVIC , MEMBER OF C REDITOR C OMMITTEE , H ELEN T AYLOR , MEMBER OF C REDITOR C OMMITTEE , L OUIS P. T EICHERT T RUST , MEMBER OF C REDITOR C OMMITTEE , R EVEREND F REDERICK M ARKS , MEMBER OF C REDITOR C OMMITTEE , J EWEL M ARK S , MEMBER

OF C REDITOR C OMMITTEE , P ATRICIA M EIER , MEMBER OF C REDITOR C OMMITTEE , P ATRICIA T EERNSTRA , MEMBER OF C REDITOR C OMMITTEE , A NDREW M IKAELIAN , MEMBER OF C REDITOR C OMMITTEE , M ARCELLA M IKAELIAN , MEMBER OF C REDITOR C OMMITTEE , J OSEPHINE B ROOKS , MEMBER OF C REDITOR C OMMITTEE , E VELYN O DELL , MEMBER OF C REDITOR C OMMITTEE , L AURENCE F REER , MEMBER OF C REDITOR C OMMITTEE , D OROTHY K OHL , MEMBER OF C REDITOR C OMMITTEE , K AREN B OERGER , MEMBER OF C REDITOR C OMMITTEE , J ACQUELINE W ILLIAMSON , MEMBER

OF C REDITOR C OMMITTEE , J UDY G LOWINSKI , MEMBER OF C REDITOR C OMMITTEE , A NNE T REDWELL , MEMBER OF C REDITOR C OMMITTEE , M ARILYN B AHAM , MEMBER OF C REDITOR C OMMITTEE , E LSIE G OTZMAN , MEMBER OF C REDITOR C OMMITTEE , L UCILLE C IARAMITA , MEMBER OF C REDITOR C OMMITTEE , J OANNE R AMAKER , MEMBER OF C REDI TOR C OMMITTEE , J OHANNA S ANDER , MEMBER OF C REDITOR C OMMITTEE , T HOMAS E SER , MEMBER OF C REDITOR C OMMITTEE , H ENRYETTA E SER , MEMBER OF C REDITOR C OMMITTEE , G RACE N ELSON , MEMBER OF C REDITOR C OMMITTEE , J ANE O DDERS , MEMBER OF C REDITOR C OMMITTEE , D AVID N ELSON , MEMBE R OF C REDITOR C OMMITTEE , R AY K ATT ( DECEASED ), MEMBER OFNos. 2019AP1728 2019AP2063

4 C REDITOR C OMMITTEE , L OUISE K ATT , MEMBER OF C REDITOR C OMMITTEE , E THEL H ADER , MEMBER OF C REDITOR C OMMITTEE , W ARREN L ARSEN , MEMBER OF C REDITOR C OMMITTEE , E LLEN L ARSEN , MEMBER OF C REDITOR C OMMITTEE , F RANC ES S COTT , MEMBER OF C REDITOR C OMMITTEE , S USAN P ROUTY , MEMBER OF C REDITOR C OMMITTEE , R OBERT R AINEY , MEMBER OF C REDITOR C OMMITTEE , P ATRICIA R AINEY , MEMBER OF C REDITOR C OMMITTEE , H ELEN E CKHEART , MEMBER OF C REDITOR C OMMITTEE , W ILMA W ISER , MEMBER OF C REDITOR C O MMITTEE , E ARL C HRISTIANSON , MEMBER OF C REDITOR C OMMITTEE , M ARIAN B LOCH , MEMBER OF C REDITOR C OMMITTEE , J AN T EICHERT , MEMBER OF C REDITOR C OMMITTEE , D OROTHY N ELSON , MEMBER OF C REDITOR C OMMITTEE , M ETTA R EIKER , MEMBER OF C REDITOR C OMMITTEE , P RUDENCE W HITE , MEMB ER OF C REDITOR C OMMITTEE , E LAINE O ETLINGER , MEMBER OF C REDITOR C OMMITTEE , E STHER W ULFF , MEMBER OF C REDITOR C OMMITTEE , H ELEN V EENSTRA , MEMBER OF C REDITOR C OMMITTEE , R EV

. D R

. R OSS H ENRY L ARSON , MEMBER OF C REDITOR C OMMITTEE , F RED H OFER , MEMBER OF C REDITOR C OM MITTEE , N ANCY H OFER , MEMBER OF C REDITOR C OMMITTEE , W INIFRED W ISER , MEMBER OF C REDITOR C OMMITTEE , N AZALY B AGDASIAN , MEMBER OF C REDITOR C OMMITTEE , R OBERT C ALLAWAY , MEMBER OF C REDITOR C OMMITTEE , E STATE OF E LAINE Z LEVOR , MEMBER OF C REDITOR C OMMITTEE , M ARSHALL C USHMAN , MEMBER OF C REDITOR C OMMITTEE , V AR K RIKORIAN , MEMBER OF C REDITOR C OMMITTEE , R UTH M INTON , MEMBER OF C REDITOR C OMMITTEE , R ICHARD M INTON , MEMBER OF C REDITOR C OMMITTEE , W ALTER S TEIDL , MEMBER OF C REDITOR C OMMITTEE , I RENE M ILLER , MEMBER OF C REDITOR C OMMI TTEE , M ARIAN K ORNWOLF , MEMBER OF C REDITOR C OMMITTEE , M ARJORIE S PECKHARD , MEMBER OF C REDITOR C OMMITTEE , D ELORES T ORPHY , MEMBER OF C REDITOR C OMMITTEE , G ERALDINE B AUMBLATT , MEMBER

OF C REDITOR C OMMITTEE , J OAN P ETERSON , MEMBER OF C REDITOR C OMMITTEE , J OHN R OWLAN D , MEMBER OF C REDITOR C OMMITTEE , J ULIANNE R OWLAND , MEMBER OF C REDITOR C OMMITTEE , L ORRAINE P AVELCIK , MEMBER OF C REDITOR C OMMITTEE , M ARILYN I SELIN , MEMBER OF C REDITOR C OMMITTEE , B ERNARD B RAUN , MEMBER OFNos. 2019AP1728 2019AP2063

5 C REDITOR C OMMITTEE , P ATRICIA B RAUN , MEMBER OF C REDITOR C OMMITTEE , B OB O TTUM , MEMBER OF C REDITOR C OMMITTEE , H OLLY O TTUM , MEMBER OF C REDITOR C OMMITTEE , J OYCE O TTUM , MEMBER OF C REDITOR C OMMITTEE , J EANNE H AAS , MEMBER OF C REDITOR C OMMITTEE , G LORIA M URPHY , MEMBER OF C REDITOR C OMMITTEE , R ALPH A NDERSON , MEMBER OF C RED ITOR C OMMITTEE , D ORIS B EUTTLER , MEMBER OF C REDITOR C OMMITTEE , G ENEVIEVE H OSTAK , MEMBER OF C REDITOR C OMMITTEE , M ARLENE W EICHMANN , MEMBER OF C REDITOR C OMMITTEE , M ARY M UELLER , MEMBER OF C REDITOR C OMMITTEE , W OOD F AMILY T RUST , MEMBER OF C REDITOR C OMMITTEE AND M ARY H OLTZ , MEMBER OF C REDITOR C OMMITTEE ,

A PPELLANTS ,

V

.

M ICHAEL S. P OLSKY , E SQ

. , R ECEIVER AND T HE B ANK OF N EW Y ORK M ELLON T RUST C OMPANY , N.A.,

R ESPONDENTS

.

APPEAL S from orders of the circuit court for Racine County:

MICHAEL J. PIONTEK and DAVID W. PAULSON , Judge s

. Reversed and

cause remanded.

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

¶ 1 REILLY, P.J. This consolidated appeal pits one group of creditor s
against another g roup 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 theNos. 2019AP1728 2019AP2063

6 residents had paid at the inception of their residenc y at the Atrium (the Residents).

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

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

that the B ondholders ha ve priority over the rights of the Resid ents 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 app roximately $40,000 to $238,000.

An amount equal to a specified p roportion 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 entr ance 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 b y 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 B ondholders in this action.Nos. 2019AP1728 2019AP2063

7 ¶ 3 T he Bondholders ’ claim s 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 w ere 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.) Th e definition of entrance

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

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 Li ens” 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 “P ermitted L iens ” :

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 ...
Pe rmitted 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 current ly owned byNos. 2019AP1728 2019AP2063

8 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 B ond holder 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) constr uctive 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 t he Atrium was placed under receivership pursuant to W IS

.
S TAT

. ch

. 128 (201 9

- 20 )

, 2 b oth the Residents and the Receiver asked the court for

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

B ondholders had priority over the assets of the Atrium

. The circuit court issued a

2 All references to the Wisconsin Statutes are to the 201 9

- 20 ver sion unless otherwise
noted.Nos. 2019AP1728 2019AP2063

9 decision determining that the Bondhold ers’ 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. T he 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, t he Bondholders 5 assert that we lack jurisdiction

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

April 23, 2018 order which establish ed priority. 6 The Bondholders p remise 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 appea led 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

— th e 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 tha t 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 briefi ng. We now deny the Bondholders’ motion to dismiss, as we address the jurisdiction argument on the merits.Nos. 2019AP1728 2019AP2063

10 to timely appeal a non final order concerning priority, similar to what occurred in

this case. Burczyk was decided in 1972 when W IS

. S TAT

. ch. 128 contained

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

1972, W IS

. S TAT . § 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

pr ovided for taking appeals from orders in civil actions.

(Emphasis added.)

¶ 9 W ISCONSIN S TAT

. § 128.15 (1983

- 8 4) 7 was modified in 1983 to

eliminate the “thirty day” appeal deadline and made appeals from W IS

. S TAT

.
ch. 128 proceedings uniform with all other appeals via W IS

. S TAT

. § 808.04(1).

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

state:

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

appeal deadline of 30 days after entry o f 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 W ISCONSIN S TAT . § 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 W ISCONSIN S TAT

. § 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 2019AP2063

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

Burczyk has been abrogated by statute, and an appeal i n a W IS

. S TAT

. 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 [ W IS

. S TAT

. §§] 806.06(1)(b) or 807 .11(2) ,”

see W IS

. S TAT

. § 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

appro ved the sale of the Atrium and distribution of proceeds.

¶1 1 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 “fina l for purposes of appeal,” a ny 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 purpose s
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 cont ained 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 2019AP2063

12 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

¶1 3 The merits of this appeal, factually and legally, are on point with this

court’s decision in Episcopal Homes

. Episcopal Hom es Manage ment, 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 agreeme nts executed by the residents in Episcopal Homes

. See id. at

490

- 92.

¶ 1 4 We held in Episcopal Homes that the residency agreements

constituted rental agreements within the meaning of W IS

. A DMIN

. C ODE

§ ATCP 134.02(10) and that “the parties contracted in a landlord/tenantNos. 2019AP1728 2019AP2063

13 capacity.” 8 Episcopal Homes , 195 Wis. 2d at 489, 506. T he residency

agreements req uired an en trance fee and monthly payments in exchange for the

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

- 06.

W e 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

¶1 5 After establish ing the legal relationship between the contracting

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

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

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

within a landlord/tenant relationship

, the court applied W IS

. A DMIN

. C ODE

§ ATCP 134 , titl ed 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 M anagement , 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 stati ng 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” dem onstrates 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 land lord and tenant agree on the essential term s of the tenancy, such as rent. ‘Rental agreement’ includes a lease. ”
W IS

. A DMIN

. C ODE § ATCP 134.02(10).Nos. 2019AP1728 2019AP2063

14 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)

.

¶1 6 In a discussion based in part on public p olicy considerations, t he

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 W IS

. A DMIN

. C ODE § ATCP 134.02(11). Ep iscopal

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 fee s and

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

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 5 09

- 10.

10 We acknowledge that some of the residency agreements also include d language that the entrance fee is not a security deposit under landlord/tenant law. For the same reason s 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 ca se operate as rental agreements, an d 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.” (emphasi s added)).Nos. 2019AP1728 2019AP2063

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 provisions 11 contained with in 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

.

¶ 1 8 W e 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 B ondholders ha ve the superior right t o the assets being held in the

r eceivership. We conclude the entrance fees and security deposits paid by the

Residents in this case are superior in priority to the Bondholders’ claim s

. The

B ondholders 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 W IS

. A DMIN

. C ODE § § ATCP 134.02(4) and 134.06(3) ( Apr. 1993 ). Episcopal Homes , 195 Wis. 2d at 511

- 12 (citing Moonlight v. Boyce , 125 Wi s. 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 inclu ded 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 statu t es and the administrative cod e 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 prov isions” have been removed from c h. 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 a s we found in Episcopal Homes

, we conclude that the subordination provisions in the Atrium residency ag reements are of no legal effect, despite the amen dments to landlord/tenant law.Nos. 2019AP1728 2019AP2063

16 entrance fees constitute d permitted liens and ha d pri ority over the ir claims when

they purchased the ir bonds

. It would be disingenuous to now assert that these

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

T hus, t he 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 ha ve priority over

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

Conclusion

¶ 19 W e 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 ci rcuit court erred in giving the Bondholders a
priority security interest over the Residents ’ entrance fees and security deposit s

. 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
W IS

. S TAT

. §§ 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. , W IS

. S TAT

. §§ 12 8.17, 128.18, 128.19. The Resident s ’ 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. 199 2)

. T he Receiver moved the circuit court to rule on the issue of priority so that he could accomplish his duties under W IS

. S TAT

. ch 128. T he Receiver has not breached his fiduciary duty by asking the court to make a decision as to priority.Nos. 2019AP1728 2019AP2063

17 By the Court.

— Orders reversed and cause remanded.

Not re commended for publication in the official reports.