Title: Mitchell Bank v. Thomas G. Schanke
Citation: 2004 WI 13
Docket Number: 2001AP001590
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: February 27, 2004

2004 WI 13 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
01-1590 & 01-1591 
COMPLETE TITLE: 
 
 
Mitchell Bank,  
          Plaintiff-Appellant-Petitioner, 
     v. 
Thomas G. Schanke, Alfred G. Waltke,  
Marilyn M. Waltke, State of Wisconsin  
Department of Revenue and Internal  
Revenue Service,  
          Defendants-Respondents, 
United States,  
          Defendant. 
 
 
Thomas G. Schanke,  
          Plaintiff-Respondent, 
     v. 
Mitchell Street State Bank, 
n/k/a Mitchell Bank,  
          Defendant-Appellant-Petitioner. 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2002 WI App 225 
Reported at: 257 Wis. 2d 723, 652 N.W.2d 636 
(Ct. App. 2002-Published) 
 
 
OPINION FILED: 
February 27, 2004   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
November 5, 2003   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Waukesha   
 
JUDGE: 
Kathryn W. Foster   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For Mitchell Bank there were briefs by Hugh R. Braun, 
Jeffrey L. Janik and Godfrey, Braun & Frazier, LLP, Milwaukee, 
and oral argument by Hugh R. Braun. 
 
 
 
2
For Thomas G. Schanke there were briefs by Joseph J. 
Welcenbach, Robert J. Welcenbach and Welcenbach & Widmann, 
S.C, Milwaukee, and oral argument by Joseph J. Welcenbach. 
 
There were amicus curiae briefs filed by John E. 
Knight, James E. Bartzen, Kristen E. Spira and Boardman, 
Suhr, Curry & Field, LLP, Madison, on behalf of the 
Wisconsin Bankers Association, and oral argument by John E. 
Knight. 
 
 
2004 WI 13 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  01-1590 & 01-1591  
(L.C. Nos. 00 CV 1612 & 00 CV 480) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Mitchell Bank,  
 
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Thomas G. Schanke, Alfred G. Waltke,  
Marilyn M. Waltke, State of Wisconsin  
Department of Revenue and Internal  
Revenue Service,  
 
          Defendants-Respondents, 
 
United States,  
 
          Defendant. 
 
FILED 
 
FEB 27, 2004 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
Thomas G. Schanke,  
 
          Plaintiff-Respondent, 
 
     v. 
 
Mitchell Street State Bank, 
n/k/a Mitchell Bank,  
 
          Defendant-Appellant-Petitioner. 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed & 
cause remanded.   
 
No. 
01-1590 & 01-1591   
 
2 
 
¶1 
JON 
P. 
WILCOX, 
J.   This 
case 
involves 
two 
consolidated actions:  a foreclosure action and a declaratory 
judgment action.  The parties dispute the validity of a mortgage 
Mitchell State Street Bank, now known as Mitchell Bank (the 
Bank), has on certain lands in Genesee, Wisconsin, of which 
Thomas Schanke (Schanke) owns an undivided one-half interest.  
Schanke purchased his interest following a previous successful 
action against Dr. Alfred Waltke (Waltke) to collect on an 
outstanding debt.  Waltke's wife owns the other undivided one-
half interest in the disputed property.   
¶2 
On March 7, 2000, Schanke, naming the Bank as a 
defendant, filed a declaratory judgment action in the Waukesha 
County Circuit Court, seeking a determination that the Bank's 
mortgage on the Genesee property was invalid.  The Bank 
subsequently began a foreclosure action on August 9, 2000, with 
respect to the Genesee property, naming Waltke and his wife, 
among others, as defendants.  The cases were consolidated and 
tried before the court on the foreclosure action.   
¶3 
This case comes to us on appeal from a published court 
of appeals decision, Mitchell Bank v. Schanke, 2002 WI App 225, 
¶29, 257 Wis. 2d 723, 652 N.W.2d 636, affirming a judgment of  
the Waukesha County Circuit Court, Kathryn W. Foster, Judge, 
dismissing the foreclosure action after finding that the 
mortgage of the Bank on the Genesee property was invalid for 
lack of consideration.  The court of appeals also held, as a 
matter of law, that the Bank failed to prove the underlying debt 
No. 
01-1590 & 01-1591   
 
3 
 
in the mortgage and that the "dragnet clause"1 within the 
mortgage was unenforceable.  Id.  For the reasons discussed 
below, we reverse the court of appeals' decision and remand for 
further proceedings.  
I.  FACTS 
¶4 
The facts of these consolidated cases are largely 
undisputed, but they are also extremely complicated and somewhat 
incomplete.  During the course of 1986 and 1987, Waltke executed 
several loans, guaranties, and mortgages with various creditors, 
including the Bank and Schanke.2  These loans were both personal 
and business related.  Sometime during 1987 or 1988, Waltke 
became insolvent and later declared bankruptcy; he defaulted on 
nearly all of his loans. 
A.  The Mortgage at Issue 
¶5 
On May 7, 1987, Waltke and his wife Marilyn executed a 
real estate mortgage on 34 acres of non-homestead property in 
Genesee, Wisconsin.  The May 7 mortgage (the Mortgage) was a 
preprinted form that was originally prepared to have been 
                                                 
1 A "dragnet clause," also known as a "Mother Hubbard 
clause" or "anaconda clause," is "[a] clause stating that a 
mortgage secures all the debts that the mortgagor may at any 
time owe to the mortgagee."  Black's Law Dictionary 1031 (7th ed. 
1999).  Paragraph four of the Mortgage in this case is such a 
clause.   
2 The Wisconsin Department of Revenue and the Internal 
Revenue Service, two of the four respondents in this action, 
have liens on the Genesee property, but both have conceded the 
priority of the Bank's Mortgage.  They did not play any role in 
the trial 
of 
these cases. 
 The 
Waltkes, 
the 
remaining 
respondents, did not answer the Bank's complaint.  
No. 
01-1590 & 01-1591   
 
4 
 
executed on May 14, 1987.3  The Mortgage was not recorded until 
June 2, 1987.  This Mortgage is the subject of the parties' 
respective actions. 
¶6 
The face of the Mortgage states that it was given in 
consideration for a $50,000 promissory note (the Note), also 
dated May 7, 1987, in favor of the Bank.  The Note is missing; 
however, the record clearly indicates that no money was 
disbursed to Waltke on May 7, 1987.  The Bank asserts that this 
Note was a renewal of a September 4, 1986, loan, while Schanke 
argues that the Mortgage was a fraudulent transfer. 
¶7 
The Bank asserts that the Note, along with countless 
other documents, was destroyed in a flood of the Bank's 
basement.  The circuit court found it was plausible that a flood 
destroyed the Note, although Schanke contested this explanation.  
Accordingly, the controversy between the Bank and Schanke arises 
from the missing Note. 
¶8 
Waltke had many other transactions with the Bank, 
including two related notes that were executed in the months 
leading up to May 7, 1987.  Waltke signed the first of those 
notes on September 4, 1986.  This $50,000 note in favor of the 
Bank was due December 3, 1986, and was secured by a printing 
press.  This was a new loan; the record shows Waltke received a 
$50,000 cashier's check on September 4, 1986.  The Bank claims 
                                                 
3 Since no one who was directly involved with any of 
Waltke's transactions with the Bank testified at trial, we do 
not know why the parties executed this Mortgage a week early. 
No. 
01-1590 & 01-1591   
 
5 
 
that this note was renewed in December 1986 for another 90 days, 
to be due in early March.4 
¶9 
As for the second note, the record shows that on March 
3, 1987, Waltke renewed the $50,000 September 4 note for another 
90 days.  This new note was due June 1, 1987, and states that it 
was a renewal of the September 4 note, but does not reflect that 
it was secured by any collateral.5 
¶10 The Bank claims that the May 7 Mortgage and Note were 
a renewal and restructuring of the March 3 renewal note; the May 
7 Note renewed the loan period, and the May 7 Mortgage secured 
the $50,000 debt in the March 3 renewal note.  It is likely that, 
on its face, the May 7 Note would reveal whether it was, in 
fact, a renewal of the March 3 note.   
B.  Waltke's Indebtedness to Schanke 
¶11 During all of his dealings with the Bank, Waltke was 
also in debt to Schanke.  Waltke signed a $20,000 note in favor 
of Schanke on March 10, 1986, which was due September 9, 1986.  
Waltke never made any payments on this debt, and Schanke filed 
suit against Waltke on April 9, 1987, to collect on the note.  
He served process on Waltke on April 13, 1987.  Waltke's answer 
was due May 4, 1987, three days before he executed the Mortgage 
at issue in this case. 
                                                 
4 This note, like the May 7 Note, is missing. 
5 Mr. Croke, the Bank's vice president and the only witness 
at trial, testified that the March 3 note was unsecured.  He 
also testified at his deposition that the September 4 note was 
secured by the printing press and that the March 3 note renewed 
the September 4 note.   
No. 
01-1590 & 01-1591   
 
6 
 
¶12 Waltke did not contest the suit with Schanke and on 
May 19, 1987, the presiding judge awarded Schanke a default 
judgment.  Schanke purchased a half interest in the Waltkes' 
Genesee property at a sheriff's sale on June 13, 1998.  This is 
the same property that is the subject of the Mortgage with the 
Bank.6 
C.  Waltke's Unpaid Obligations to the Bank 
¶13 There is no dispute that Waltke never repaid the 
$50,000 loan taken out on September 4, 1986.  In December of 
1988, Waltke declared bankruptcy.  About this time, under the 
instruction of the FDIC, the Bank "wrote off" this $50,000 debt 
and the rest of Waltke's outstanding obligations as "legal bad 
debts."7  Waltke's end-of-the-year account statement from the 
Bank for 1988 demonstrates that until December 2, 1988, he owed 
                                                 
6 Curiously, the Mortgage was recorded prior to Schanke 
obtaining an interest in the Genesee property.  A title report 
dated June 30, 2000, states that the May 7 Mortgage was recorded 
on June 2, 1987.  The title report describes the Mortgage as 
follows:   
Mortgage, 
according to 
the terms 
and 
provisions 
thereof, from Alfred G. Waltke and Marilyn M. Waltke, 
his wife, to Mitchell Street State Bank, to secure the 
originally stated indebtedness of $50,000 and any 
other amounts payable under the terms thereof, dated 
May 7, 1987 and recorded on June 2, 1987 as Document 
No. 1426917.   
(Emphasis added.)   
7 When a lending institution "writes off" a "bad debt," it 
is merely indicating that the debt is uncollectible.  That is, 
it is no longer an asset of the institution.  A "write off" does 
not mean that the institution has forgiven the debt or that the 
debt is not still owing. 
No. 
01-1590 & 01-1591   
 
7 
 
the Bank $50,000 in principal and a considerable amount in 
interest.  The Bank's general ledger reflects that on December 
2, 1988, it charged Waltke's $50,000 debt to its reserve account 
as a loss to the Bank.  Around this time, the Bank also posted a 
letter to the FDIC describing all of the bad debts it was 
writing off, including the $50,000 Waltke debt.  The Bank's 
general ledger, the letter to the FDIC, and the Bank's end-of-
the-year account statements demonstrate that Waltke owed an 
additional $42,000 in outstanding obligations as of December 
1988. 
¶14 Twenty-five thousand dollars of that debt stems from 
Waltke's personal guaranty of a $25,000 loan the Bank made to 
Gary Butler in the summer of 1986.  Over the course of 1986, 
that note was renewed three times and no payments were ever made 
against it.  The most recent due date for that loan was February 
2, 1987, about a month before Waltke's September 4, 1986, $50,000 
note was due. 
¶15 A smaller portion of Waltke's unpaid obligation to the 
Bank came from his personal guaranty of a May 29, 1986, $15,000 
loan to Miracle Shield International, Inc., a Waltke business 
interest.  The record demonstrates that Waltke and other 
individuals guaranteed this loan and that some payments were 
made against it during the summer and fall of 1986.  Waltke's 
No. 
01-1590 & 01-1591   
 
8 
 
personal guaranty of this note was limited to $5,000 and 
therefore the Bank does not claim interest against this sum.8 
¶16 The 
remaining 
$12,000 
of 
Waltke's 
total 
unpaid 
obligations to the Bank as of December 1988 came from his 
personal guaranty of a $50,000 note to another business 
interest, Universal Graphics Services, Inc.  The Universal 
Graphics loan originated on November 3, 1986, and established a 
master line of credit for the business, which was secured by 
Waltke's personal guaranty. 
¶17 This note was renewed on February 3, 1987, in the sum 
of $45,271.98.  Apparently, some payments had been made against 
this note.  Also, upon renewal, Waltke secured the note with a 
real estate mortgage on his Grand Avenue property in Waukesha.  
The face of the mortgage recites that it was granted in 
consideration for a $145,271.98 note.  Mr. Croke, the Bank's 
vice president and chief financial officer, testified that this 
entire sum was probably made available to Universal Graphics for 
incremental disbursements, although only $45,271.98 had been 
actually drawn out as of February 1987.   
¶18 The 
subsequent 
disposition 
of 
the 
Grand 
Avenue 
mortgage is not clear from the record.9  The record shows that 
the most recent amount owed on the Universal Graphics debt was 
                                                 
8 Confusingly, the Bank does not explain why it is claiming 
interest upon the Butler debt ($25,000), as Waltke had executed 
a personal guaranty for that note that was limited to $25,000. 
9 At trial, Mr. Croke testified that he had never seen this 
mortgage before and that he did not know what happened to it. 
No. 
01-1590 & 01-1591   
 
9 
 
$45,271.98, the entire sum of the February 3 renewal note.  On 
December 2, 1988, the Bank wrote off the Universal Graphics debt 
in the amount of $12,000.  The Bank stated in its letter to the 
FDIC that as of November 29, 1988, the only security the Bank 
had for all of Waltke's obligations was his personal guaranty 
and a lien on a printing press.10   
¶19 The Bank recovered the written-off $12,000 Universal 
Graphics debt in July of 1989 upon the foreclosure and sale of 
one of Waltke's printing presses.11  The press was originally 
appraised with a value of $133,000, but was sold for only 
$25,000.  The Bank satisfied the remaining Universal Graphics 
debt from this $25,000 and the remaining $13,000 was applied to 
Waltke's September 4, 1986, personal $50,000 loan.  Therefore, 
the Bank claims that Waltke owes nothing on the Universal 
Graphics loan and only owes $37,000 in principal (though some 
$75,041.43 in interest) on the September 4, 1986, $50,000 
personal loan.  In sum, the Bank claims that Waltke owes $67,000 
                                                 
10 Conspicuously, the May 7 Mortgage was also absent from 
the letter to the FDIC. 
11 The September 4 note to Waltke was secured by a printing 
press.  At trial, Mr. Croke testified that Waltke had mortgaged 
more than one printing press and that the presses were 
associated with the Universal Graphics business.  However, the 
Bank foreclosed on only one of these presses because it 
improperly filed lien perfections against the other presses.  
Mr. Croke was unsure whether the press that the Bank actually 
acted upon was the same press that secured the September 4 note. 
No. 
01-1590 & 01-1591   
 
10 
 
in principal and over $125,000 in interest for his personal note 
and his guaranties of the Butler and Miracle Shield loans.12  
II. PROCEDURAL POSTURE 
¶20 As noted, these two cases were consolidated before 
trial.  The Waltkes filed a notice of appearance but never 
answered the Bank's complaint.  At the joint trial, the only 
witness was Mr. Croke, the Bank's vice president and chief 
financial officer.  Schanke never took the stand and did not 
call any witnesses.  After the trial, the circuit court orally 
dictated its findings of fact and conclusions of law.  The 
circuit court concluded that because the Note could not be 
produced "the Mortgage be released as a matter of law as there 
is no consideration granted for the Mortgage of May 7, 
1987 . . . without a concurrent note. . . . "  The circuit court 
also found that the Mortgage was intended to secure only the 
$50,000 missing Note and that because the parties did not intend 
to secure the other obligations and the Note could not be 
produced, the "Mortgage ceases to exist as a matter of 
                                                 
12 In 
summary, 
the 
Bank 
calculates 
Waltke's 
unpaid 
obligations as follows: 
Note/Guarantee  
Principal  
Interest  
Total 
Alfred Waltke  
$37,000 
 
$75,041.43 
$112,041.43 
Gary Butler 
 
$25,000 
 
$49,739.67 
$ 74,739.67 
Miracle Shield  
$ 5,000 
 
$      0.00 
$  5,000.00 
Universal Graphics Recovered  
        n/a 
 
  zero 
TOTAL: 
 
 
$67,000 
 
$124,781.10 
$191,781.10 
 
Mitchell Bank v. Schanke, 2002 WI App 225, ¶9 n.3, 257 
Wis. 2d 723, 652 N.W.2d 636.   
No. 
01-1590 & 01-1591   
 
11 
 
law. . . . "  Finally, the circuit court concluded that the 
dragnet clause was unenforceable.   
¶21 The 
court 
of 
appeals 
affirmed, 
stating, 
"[t]he 
Mortgage is invalid because the Note cannot be produced and 
Mitchell Bank cannot establish the indebtedness secured by the 
Mortgage."  Mitchell Bank, 257 Wis. 2d 723, ¶29.  The court of 
appeals also determined that the dragnet clause was invalid 
because "if the amount of debt is not both stated in the 
mortgage and identifiable from the mortgage documents, the 
mortgage is not enforceable."  Id., ¶27.  Mitchell Bank appealed 
and we accepted review.  After the parties submitted briefs and 
oral argument was completed, we asked the parties to provide 
supplemental briefs and oral argument to address several 
controlling issues not raised in their original materials.  
III. ISSUES 
¶22 Whether 
the 
Bank's 
Mortgage 
is 
enforceable 
is 
dependent upon the following issues:  1) whether there was 
consideration for the Mortgage; 2) whether Mitchell Bank proved 
the debt underlying the Mortgage; and 3) whether the dragnet 
clause contained in the Mortgage is enforceable.  We hold that 
because the Mortgage is an executed contract and is under seal, 
consideration for the Mortgage was conclusively presumed, and 
the circuit court erred in finding to the contrary.  Second, we 
hold that the Bank did prove the debt underlying the Mortgage, 
despite the Bank's failure to produce the Note, because the 
parties intended the Mortgage to secure antecedent debt and the 
Bank 
proved 
the 
existence 
of 
extensive 
antecedent 
debt.  
No. 
01-1590 & 01-1591   
 
12 
 
Finally, we hold that the dragnet clause contained in the 
Mortgage, which secured this antecedent debt, is valid because 
it clearly states that it secures antecedent debt and the debt 
and 
the 
security 
are 
not 
wholly 
unrelated 
or 
unclear.  
Therefore, we reverse the decision of the court of appeals and 
remand for a determination of the exact amount of debt owed to 
the Bank.  
IV. ANALYSIS 
A. 
Consideration for the Mortgage  
¶23 As noted, the circuit court ruled that because the 
Bank could not produce the Note, the Mortgage failed as a matter 
of law 
for want 
of 
consideration. 
 
Mitchell 
Bank, 257 
Wis. 2d 723, ¶18.  Although the court of appeals did not 
expressly rely on this finding, it implicitly did so in 
affirming the circuit court.  Id., ¶29.  The parties did not 
originally address the consideration issue; however, this was 
one of the issues that we asked the parties to address in their 
supplemental briefs and argument to this court. 
¶24 We review legal conclusions of the circuit court de 
novo.  See First Nat'l Leasing Corp. v. City of Madison, 81 
Wis. 2d 205, 208, 260 N.W.2d 251 (1977).  The May 7 Mortgage was 
signed by both of the Waltkes with "(seal)" printed after both 
of their names.13  Under Wisconsin law, when an executed contract 
                                                 
13 Wisconsin 
Stat. 
§ 990.001(37) 
(1985-86) 
provides:  
"Except for the sealing of instruments by persons required to 
have and use official seals, 'seal' includes the word 'seal,' 
the letters 'L S' and a scroll or other device intended to 
represent a seal, if any is affixed in the proper place for a 
seal . . . ."  The Mortgage was also notarized.   
No. 
01-1590 & 01-1591   
 
13 
 
is signed 
under seal, 
the 
seal 
is 
conclusive 
proof of 
consideration, and consideration may not be impeached absent a 
factual showing of fraud.   
[A] seal imports consideration for the mortgage.  
This imports consideration for the note also.  In 
absence of allegations of fact showing fraud the 
mortgage 
cannot 
be 
impeached 
for 
want 
of 
consideration.  
 . . . . 
However, because, as we have concluded, the 
executed mortgage did not constitute an executory 
instrument as contended by appellant, the trial court 
was correct in concluding that fraud must be alleged 
and proven in order to defend against foreclosure upon 
the grounds of lack of consideration.  The seal was 
conclusive as to the issue of consideration.     
Sec. Nat'l Bank v. Cohen, 41 Wis. 2d  710, 719, 165 N.W.2d 140 
(1969)(citing Virkshus v. Virkshus, 250 Wis. 90, 93, 26 
N.W.2d 156 (1947)).  See also Hoffmann v. Wausau Concrete Co., 
58 Wis. 2d 472, 486-87, 207 N.W.2d 80 (1973) (ruling that the 
presence of a seal establishes consideration when the contract 
has 
been 
executed 
but 
creates 
merely 
a 
presumption 
of 
consideration when the contract is executory); Edwards v. 
Petrone, 160 Wis. 2d 255, 258-59, 465 N.W.2d 847 (Ct. App. 1990) 
(holding that "an executed contract under seal [is] conclusive 
proof 
of 
consideration . . . . 
[T]here 
is 
a 
conclusive 
presumption as to consideration which is afforded to executed 
contracts under seal"). 
¶25 In contrast, Wis. Stat. § 891.27 (1985-86) provides:  
"A seal upon an executory instrument shall be received as only 
presumptive evidence of a sufficient consideration."  See also 
No. 
01-1590 & 01-1591   
 
14 
 
Frank v. Schroeder, 239 Wis. 159, 162, 300 N.W. 254 (1941) 
(noting "[a] seal is conclusive of consideration only in the 
case of executed contracts."); Singer v. Gen. Acc., Fire & Life 
Assur. Corp., 219 Wis. 508, 511, 262 N.W. 702 (1935) (stating 
that "[a]n executed contract under seal conclusively imports 
consideration, and is to be distinguished from an executory 
contract, with respect to which . . . a seal shall be merely 
presumptive evidence of consideration").  
¶26 The Bank contends that the Mortgage is an executed 
contract under seal and Schanke never proved fraud, such that 
the circuit court committed legal error in concluding that the 
Mortgage failed for lack of consideration.  Schanke contends 
that while most mortgages constitute executed contracts, the 
Mortgage in question is executory because the Bank never 
advanced any money the day the Mortgage was signed and could not 
produce the Note.  Thus, the effect of the seal on the Mortgage 
is dependent upon whether the Mortgage constituted an executed 
or executory contract. 
¶27 "An executory contract is one in which the parties 
have bound themselves to future activity that is not yet 
completed, while an executed contract is one in which all 
promises have been fulfilled and nothing remains to be done."  
Gaugert v. Duve, 217 Wis. 2d 164, 178, 579 N.W.2d 746 (Ct. App. 
1998).  See also Blacks Law Dictionary 321 (7th ed. 1999) 
(defining an executed contract as follows:  "1.  A contract that 
has been fully performed by both parties.  2.  A signed 
contract.").  In the absence of proof that a mortgage is 
No. 
01-1590 & 01-1591   
 
15 
 
contingent upon the happening of a future event, a signed 
mortgage is an executed contract.  Sec. Nat'l Bank, 41 Wis. at 
718.   
¶28 In Sec. Nat'l Bank, the appellant contended that the 
mortgage in question was executory, as it was conditioned on the 
return of certain insurance policies.  Id. at 716-17.  The court 
found that there was no evidence to suggest that the giving of 
the mortgage was so conditioned.  Id. at 718.  Therefore, the 
court concluded that the mortgage was not executory and that the 
defendant could not defend against foreclosure on the ground of 
want of consideration because the mortgage was under seal and 
the defendant had not proven fraud.  Id. at 719.   
¶29 Here, there is absolutely no evidence that the 
Mortgage was conditioned upon the happening of some future 
event.  The Mortgage was signed, delivered, and recorded.  It is 
a complete contract; both parties fully performed and nothing 
was left to be done.  The fact that Waltke was required to make 
payments on the loan does not render the contract executory.  
See Edwards, 160 Wis. 2d at 258 (ruling that a signed promissory 
note was not rendered an executory contract merely because it 
required the debtor to make payments).  Therefore, the Mortgage 
is an executed contract.   
¶30 Schanke's argument that the Mortgage is executory 
because no money changed hands the day the Mortgage was signed 
is without merit.  A mortgage may lawfully be given in 
No. 
01-1590 & 01-1591   
 
16 
 
consideration for the extension of time to repay a debt,14 or to 
secure a renewal note evidencing pre-existing debt.15  However, 
we need not deduce the exact form of consideration here; 
consideration is conclusively established because the Mortgage 
is an executed contract under seal.  
¶31 Schanke further argues that even an executed contract 
under seal may be challenged for failure of consideration if one 
party never performs.  However, this contention was squarely 
addressed in Singer.  The issue in Singer was whether "one who 
has executed under seal a release of a cause of action for the 
purpose of compromising a dispute may rescind the contract of 
release upon a breach constituting a failure of consideration."  
Singer, 219 Wis. at 510.  The court held that because the 
release was executed under seal, the validity of the instrument 
could not be attacked by inquiring into consideration.  Id. at 
511.  Noting that the delivery of the release was not 
conditional, the court applied the rule that "[a]n executed 
contract under seal conclusively imports consideration."  Id. at 
511.  The court stated that "[t]he conclusive presumption of 
consideration, or, somewhat more realistically stated, the fact 
that no consideration is required for its validity, compels this 
conclusion."  Id.  The court then discussed the application of 
this rule to deeds of conveyance: 
                                                 
14 Kellogg-Citizens Nat. Bank of Green Bay v. Francois, 240 
Wis. 432, 436-37, 3 N.W.2d 686 (1942). 
15 Cremer v. Banking Comm'n, 224 Wis. 174, 177, 272 N.W. 40 
(1937). 
No. 
01-1590 & 01-1591   
 
17 
 
"In our ordinary deeds of conveyance the recital that 
there has been paid a consideration, and what that 
consideration was, is merely a statement of a fact 
theoretically necessary to exist in order that the 
conveyance might take effect, but which early became 
practically a mere immaterial fiction by reason of the 
rule that the grantor's seal raised a conclusive 
presumption of a consideration sufficient to support 
the instrument.  Hence one cannot deny existence of 
some consideration in order to defeat the conveyance." 
Id. (citation omitted).   
¶32 While certainly this court would not allow a creditor 
to recover sums from a debtor if the creditor never advanced the 
money, Schanke's argument is more germane to the requirement 
that the mortgagee prove the existence of debt in order to 
foreclose on the mortgage, as a mortgage cannot exist without a 
debt.  See Doyon & Rayne Lumber Co. v. Nichols, 196 Wis. 387, 
390, 220 N.W. 181 (1928).  Thus, while a mortgagee will not be 
able to foreclose upon the mortgage if there is no debt, the law 
still conclusively 
presumes 
consideration for 
an executed 
mortgage that was signed under seal.   
¶33 Schanke is essentially attempting to dress up his 
fraudulent conveyance argument in new clothes.  However, the 
circuit court declined to find that the Mortgage represented a 
fraudulent conveyance.  Notably, the Waltkes themselves have 
never alleged that the Bank did not perform or that they are not 
liable.16  In fact, the Waltkes have in essence admitted the 
                                                 
16 Once a party executes a contract, he is bound by it, and 
can no longer contend that the contract is void for lack of 
consideration. See Gaugert v. Duve, 217 Wis. 2d 164, 178, 579 
N.W.2d 746 (Ct. App. 1998). 
No. 
01-1590 & 01-1591   
 
18 
 
validity of the Mortgage by failing to deny any of the 
allegations contained in the Bank's complaint.  Wisconsin Stat. 
§ 802.02(4)(1999-2000) provides that "[a]verments in a pleading 
to which a responsive pleading is required, other than those as 
to the fact, nature and extent of injury and damage, are 
admitted when not denied in the responsive pleading . . . ."  We 
agree with the Bank that as defendants in the foreclosure 
action, the Waltkes were required to file an answer.  The 
Waltkes' failure to do so thus results in their admission of all 
the facts alleged in the Bank's complaint.  
¶34 Schanke contends the Waltkes' failure to answer cannot 
be deemed an admission because the Bank never received a default 
judgment 
and 
under 
Chetek 
State 
Bank 
v. 
Barberg, 
170 
Wis. 2d 516, 523, 489 N.W.2d 385 (Ct. App. 1992), a party may 
not recover when a claim is not recognized by law, even if the 
other party is in default.  However, § 802.02(4) does not 
require that a court enter a default judgment.  The Waltkes were 
required to answer the Bank's complaint; they failed to do so.  
Under 
§ 802.02(4), 
the 
Waltkes 
are 
deemed 
to 
admit 
any 
allegation they did not deny.  As such, they admitted all 
allegations 
contained 
therein. 
 
The 
Waltkes 
have 
never 
challenged or contested the validity of the Mortgage themselves.  
¶35 We conclude that the Mortgage at issue was an executed 
contract, not an executory contract.  The contract was under 
seal.  Schanke did not put in any evidence, nor did the circuit 
court find as a matter of fact, that the Mortgage was 
fraudulent.  Therefore, consideration for the Mortgage was 
No. 
01-1590 & 01-1591   
 
19 
 
conclusively established.  The circuit court erred in concluding 
that as a matter of law the Mortgage failed for lack of 
consideration.   
B. 
Proof of the Underlying Debt 
¶36 We next address the issue of whether the circuit court 
and court of appeals erred in determining that the Bank had 
failed to prove the debt underlying the Mortgage.  The court of 
appeals ultimately upheld the circuit court's conclusion that 
the Mortgage was invalid because the Bank had failed to prove 
the existence of the debt underlying the Mortgage.  Mitchell 
Bank, 257 Wis. 2d 723, ¶¶18, 25.  The circuit court concluded 
that because the Bank could not produce the Note and could not 
prove the existence and contents of that Note——the $50,000 debt 
referenced in the Mortgage——the Mortgage was invalid for failure 
of the Bank to prove the underlying debt.  Id., ¶18. 
¶37 In order to foreclose on the Mortgage, the Bank was 
required to prove the existence of the underlying debt that the 
Mortgage secured.  "Where there is no debt—no relation of debtor 
and creditor—there can be no mortgage."  Doyon & Rayne Lumber 
Co., 196 Wis. at 390 (internal quotation and citation omitted).  
Schanke contends that the evidence overwhelmingly supports the 
circuit court's conclusion that the Bank failed to prove the 
existence of the May 7 Note, while the Bank contends that the 
evidence demonstrates that the missing Note was the latest in a 
series of renewal notes, securing the September 1986, $50,000 
obligation.  
No. 
01-1590 & 01-1591   
 
20 
 
¶38 This issue is complicated as a result of the presence 
of the dragnet clause, which purports to secure all outstanding 
antecedent debt.  One of the issues we asked the parties to 
address in their supplemental materials was whether "proof of a 
valid dragnet clause, by itself, [is] sufficient to validate a 
mortgage when there is no proof of underlying debt other than 
the antecedent debt secured by the dragnet clause[.]"  Both 
Schanke and the Bank concede that if a mortgage contains a valid 
dragnet clause and proof is made as to the specific amount of 
debt secured thereby, the mortgage is valid.  Schanke contends 
that 
the 
mortgage 
must 
also 
clearly 
recite 
the 
past 
consideration and state a specific amount of antecedent debt.  
Schanke further contends that the mortgage must be executed in 
good faith.   
¶39 However, 
Schanke 
fails 
to 
substantiate 
these 
"requirements" with citation to case law.  His contention that 
the mortgage must clearly state that it secures antecedent debt 
and specifically state the amount is more appropriately directed 
at the question of what is required for a dragnet clause to be 
enforceable in the first instance.  Likewise, his "good faith" 
requirement is merely an attempt to persuade this court to 
consider his fraudulent transfer argument, which was not 
established at the circuit court.   
¶40 We conclude that a legally enforceable dragnet clause 
can by itself validate a mortgage when there is proof of the 
underlying antecedent debt secured by the dragnet clause and the 
mortgage clearly indicates that the parties intended for the 
No. 
01-1590 & 01-1591   
 
21 
 
mortgage to secure antecedent debt.  This is perfectly logical 
because the bank has the burden of specifically proving the 
underlying debt secured by the mortgage.  Capocasa v. First 
Nat'l Bank, 36 Wis. 2d 714, 720, 154 N.W.2d 271 (1967).   
¶41 The parties to this litigation focus on the missing 
Note and whether the Bank needed to produce the Note to 
foreclose.  The circuit court, the court of appeals, and the 
parties all speak of the Mortgage as "securing the $50,000 
note."  Yet, this is an improper use of terminology.  "A 
mortgage, secures the debt, not the note, bond, or other 
evidence of the debt, while the note represents, and is the 
primary evidence of, the debt."  59 C.J.S. Mortgages § 143 
(1998).  What matters is the debt itself, not the Note.  Thus, 
the proper inquiry is whether the Bank failed to prove the debt 
secured by the Mortgage.   
¶42 The Mortgage in question here secures two categories 
of debts.  First, it secures the $50,000 debt evidenced by the 
missing Note.  Second, the Mortgage, via the dragnet clause, 
purports to secure all antecedent debt owed by the Waltkes to 
the Bank.  With respect to the first category——the debt 
evidenced by the Note——the Bank was not required to produce the 
Note in physical form, if it could establish the Note's 
existence, terms, and conditions through other evidence, or 
otherwise establish the existence of outstanding debt secured by 
the Mortgage.  See, e.g., New England Savs. Bank v. Bedford 
Realty Corp., 680 A.2d 301, 310 (Conn. 1996) (finding that the 
loss of a promissory note supporting a mortgage was not fatal to 
No. 
01-1590 & 01-1591   
 
22 
 
foreclosure action).  "In Wisconsin, the cause of action on a 
note evidencing an indebtedness and the cause of action to 
foreclose 
the 
mortgage 
on 
real 
estate 
that 
secures 
the 
indebtedness are distinct."  Bank of Sun Prairie v. Marshall 
Dev. Co., 2001 WI App 64, ¶12, 242 Wis. 2d 355, 626 N.W.2d 319.  
Thus, in the context of a mortgage foreclosure action: 
A bill or note is not a debt; it is only primary 
evidence of a debt; and where this is lost, impaired 
or destroyed bona fide, it may be supplied by 
secondary evidence.  The loss of a bill or note alters 
not the rights of the owner, but merely renders 
secondary evidence necessary and proper.   
New England Savs. Bank, 680 A.2d at 310 (internal citations & 
quotations omitted).  See Bank of Sun Prairie, 242 Wis. 2d 355, 
¶¶17-19 (implying that where an outstanding debt has been 
reduced to a judgment, the judgment can serve as proof of the 
debt secured by the mortgage).   
¶43 Therefore, it matters not whether the Note itself is 
produced, as long as the Bank can prove the underlying debt 
secured by the Mortgage:  "'A mortgage is only an incident to a 
debt, which is the principal thing.'"  Doyon & Rayne Lumber Co., 
196 Wis. at 390 (quoting Cawley v. Kelley, 60 Wis. 315, 319, 19 
N.W. 65 (1884))  See also Sec. Nat'l Bank, 41 Wis. 2d at 715-16 
(concluding that the fact that a note was not executed was 
immaterial when the mortgagee proved the existence of the 
underlying debt described in the mortgage); Badger State Agri-
Credit & Realty, Inc. v. Lubahn, 122 Wis. 2d 718, 724, 365 
N.W.2d 616 (Ct. App. 1985) (stating that "[e]xtrinsic evidence 
may be used to ascertain and prove the debt").  Thus, even if 
No. 
01-1590 & 01-1591   
 
23 
 
the Bank could not produce the Note and did not establish its 
terms via secondary evidence, this simply means that they did 
not prove the existence of the $50,000 debt stated on the face 
of the Mortgage.  However, even if the Bank did not prove the 
$50,000 debt referenced in the missing Note, the Bank can still 
foreclose if it proved that the Mortgage secured antecedent debt 
and proved the existence of such antecedent debt.  Thus, the 
Mortgage is still valid, as long as the dragnet clause is 
enforceable and the Bank proved the amount of underlying debt 
secured thereby.17   
¶44 In essence, whether the Bank proved the existence of 
the May 7 Note is immaterial in this case because we hold that 
the circuit court and court of appeals erred in finding that the 
parties intended the Mortgage to secure only the debt evidenced 
in the Note.  We conclude that the plain language of the 
Mortgage unambiguously indicates an intention on the part of the 
Waltkes and the Bank that the Mortgage was to secure all of the 
outstanding Waltke debt.  We hold that the Mortgage is valid and 
enforceable because the parties intended the Mortgage to secure 
antecedent debt through the dragnet clause, the Bank proved the 
existence of antecedent debt, and the dragnet clause contained 
in the Mortgage is valid under Wisconsin law. 
                                                 
17 We note that if the Bank is correct in its contention 
that the missing Note was a renewal of antecedent outstanding 
debt, the Bank may nevertheless be able to recover this amount, 
if it is included in the antecedent debt that the Bank proves 
was secured by the dragnet clause.   
No. 
01-1590 & 01-1591   
 
24 
 
¶45 Whether a mortgage sufficiently identifies the debt it 
secures 
is 
a 
factual 
determination. 
 
Badger 
State, 
122 
Wis. 2d at 723.  However, we find that the circuit court erred 
as a matter of law in determining that the parties intended the 
Mortgage to secure only the $50,000 debt evidenced in the 
missing Note.  Mitchell Bank, 257 Wis. 2d 723, ¶¶18-19. 
¶46  In order to ascertain the intent of the parties with 
respect to what debt the Mortgage secured, the circuit court was 
not required to look beyond the Mortgage document itself.  
"While intent is a factual matter, . . . the parol evidence rule 
prohibits a trial court from inquiring into the intent of 
parties to an unambiguous written agreement."  Schmitz v. 
Grudzinski, 141 Wis. 2d 867, 872 n.4, 416 N.W.2d 639 (Ct. App. 
1987)(internal citations omitted).18  "Whether a contract is 
ambiguous is . . . a question of law which we review de novo."  
Id. at 871.  "A contract is ambiguous when it is reasonably 
susceptible of more than one meaning."  Id.   
¶47 First, the Mortgage states that it secures the $50,000 
debt as evidenced by the missing Note.  More importantly, the 
Mortgage provides, in pertinent part:   
This Mortgage is also given to secure any extension(s) 
and/or renewal(s) of the note(s) and the payment of 
                                                 
18 The court in Schmitz v. Grudzinski, 141 Wis. 2d 867, 871-
73, 416 N.W.2d 639 (Ct. App. 1987), concluded that a provision 
in 
Real 
Estate 
Security 
Agreement 
providing 
that 
"[c]ustomer . . . grants 
lender 
a . . . lien . . . to 
secure . . . debts . . . arising 
out 
of 
credit 
previously 
granted" unambiguously indicated the parties' intent to secure 
prior debt.   
No. 
01-1590 & 01-1591   
 
25 
 
any and all other sums advanced hereunder or secured 
by this Mortgage as further described and permitted in 
Paragraph 4 below, for any reason, and to secure 
performance 
of 
the 
covenants, 
conditions 
and 
agreements contained herein or in any note or other 
evidence of any of the Obligations (as hereinafter 
defined) secured by this Mortgage. 
(Emphasis added.)  Paragraph Four, the "Dragnet Clause," further 
provides: 
Present and Future Advances and Mortgage as Security.  
The term "Obligor" as used herein shall include 
without limitation the Mortgagor, Borrower, maker, co-
maker, endorser or guarantor of any of the Obligations 
as hereafter defined.  The term "Obligations" as used 
herein shall include, without limitation, all of the 
debts, notes, guaranties, obligations and liabilities 
of whatever nature or amount (and any extension, 
renewals or modification thereof) arising out of 
credit or other financial accommodation previously 
granted, contemporaneously granted or granted in the 
future by Mortgagee to or at the request of any 
Obligor, 
and 
the 
performance 
of 
all 
covenants, 
conditions and agreements contained in this Mortgage 
or in any evidence of or document relating to any of 
the foregoing and, to the extent not prohibited by 
law, costs and expenses of collection or enforcement 
of 
the Obligations . . . .  
Since 
this 
Mortgage 
secures all Obligations of any Obligor to Mortgagee, 
it is acknowledged that it may secure Obligations in a 
greater dollar amount than the amount stated in this 
Mortgage . . . .  
(Emphasis added.)   
¶48 The language of the dragnet clause makes it abundantly 
clear that the Mortgage was intended to secure all prior 
obligations and that such obligations may be greater than the 
face amount of the Mortgage.  This language is unambiguous.19  
                                                 
19 This clarity is evidenced by the fact that the title 
report on the Genesee property states that the Mortgage secures 
"the originally stated indebtedness of $50,000 and any other 
amounts payable under the terms thereof[.]"  (Emphasis added.)   
No. 
01-1590 & 01-1591   
 
26 
 
Thus, "[w]e need not consider the trial court's findings of 
fact, because the interpretation of a written agreement is a 
question of law to which we owe no deference to the trial 
court."  Schmitz, 141 Wis. 2d at 871.  As "[w]e have already 
concluded that the [mortgage] unambiguously secured previously 
granted credit[,] . . . the only evidence of [the parties'] 
intent 
was 
the 
[mortgage], 
which 
we 
have 
concluded 
is 
unambiguous."  Id. at 872-73.  Therefore, we disregard the 
circuit court's finding as to the intent of the parties because 
the Mortgage unambiguously states that it secures all prior 
debts in addition to the debt listed at the top of the Mortgage.  
Thus, we conclude that the parties intended the Mortgage to 
secure antecedent debt.  
¶49 There is no dispute the Bank proved a substantial 
amount of underlying antecedent debt.  The record is replete 
with proof that the Waltkes have a substantial amount of 
antecedent debt due and owing to the Bank.  There is no dispute 
that a portion of the $50,000 advanced to Waltke on September 4, 
1986, is still outstanding.  The Bank's ledgers, the cashier's 
check, 
and 
the 
write-off 
to 
the 
FDIC, 
taken 
together, 
conclusively establish that this amount is still due and owing.  
It is clear from the record that the Bank conclusively 
established the existence of other outstanding Waltke debt in 
the form of personal debt, Miracle Shield guaranties, and Gary 
Butler guaranties.  As the court of appeals noted, "Mitchell 
Bank 
introduced . . . evidence 
of 
ascertainable, 
underlying 
prior 
debts 
existing 
antecedent 
to 
the 
Mortgage 
and 
No. 
01-1590 & 01-1591   
 
27 
 
Note . . . that remain unpaid by the Waltkes and that fall under 
the dragnet clause.  Mitchell Bank, 257 Wis. 2d 723, ¶21.  
Assuming the dragnet clause is valid, it is for the circuit 
court on remand to make factual findings as to the precise 
amount of this debt.20   
C. 
Validity of the Dragnet Clause  
¶50 Having determined 
that the 
parties 
intended the 
Mortgage to secure antecedent debt and that the Bank proved the 
                                                 
20 As noted supra, the Waltkes did not answer the Bank's 
complaint in the underlying foreclosure action.  The Bank's 
complaint alleges the following:  
That on May 7, 1987 Alfred G. Waltke and Marilyn 
M. Waltke, his wife, executed a Real Estate Mortgage 
subsequently recorded on June 2, 1987 at 9:00 AM by 
the Register of Deeds . . . obligations to the Bank 
incurred in the past or to be incurred in the future 
including liability for personal guarantees of the 
obligations of others.   
That 
regarding 
such 
obligations 
there 
is 
currently due for principal the total of $74,451.93 
plus interest in the amount of $149,789.83, for a 
total amount due of $224,241.76 as of May 1, 2000.  
(Pet'r. Complaint at ¶¶7-8).   
 
The complaint alleged that some $224,241.76 in principal 
and interest relate to the Mortgage.  This amount is far in 
excess of the $50,000 debt referenced at the top of the 
Mortgage.  Because the Waltkes did not answer the complaint, 
under § 802.02(4), they essentially admitted the allegation that 
the Mortgage secured more than just the $50,000 loan stated at 
the top of the Mortgage.  The Bank, however, cannot rely on the 
Waltkes' failure to answer as proof of the exact amount of debt 
that is outstanding.  Wisconsin Stat. § 802.02(4) provides, 
"[a]verments in a pleading to which a responsive pleading is 
required, other than those as to the fact, nature and extent of 
injury and damage, are admitted when not denied in the 
responsive pleading . . . ." (Emphasis added.)   
No. 
01-1590 & 01-1591   
 
28 
 
existence of such antecedent debt, the final question we address 
is whether the "dragnet clause" purporting to secure the 
antecedent debt, is, as a matter of law, enforceable in 
Wisconsin, such that the Mortgage actually secured the prior 
debt in this case.  "Whether a mortgage containing a dragnet 
clause is enforceable in Wisconsin is a question of law which we 
shall decide independently without deference to the decision of 
the trial court."  Badger State, 122 Wis. 2d at 723.  
¶51 Schanke argues that in order for a dragnet clause to 
be valid, it must clearly state that it secures antecedent debt 
and must also either specifically list the individual debts or 
the total amount of antecedent debt secured by the dragnet 
clause.  In contrast, the Bank contends that in antecedent debt 
cases, a dragnet clause is valid if the mortgage clearly and 
unambiguously states that it secures antecedent debt; it is not 
necessary to list the specific amount of each debt secured.  The 
amicus 
curiae, 
the 
Wisconsin 
Bankers 
Association 
(WBA), 
maintains that a dragnet clause securing antecedent debt is 
valid as long as the relation between the debt and the security 
for the debt is not wholly unclear.  Both the Bank and the WBA 
are partially correct.  We hold that a dragnet clause securing 
antecedent debt is enforceable in Wisconsin if the mortgage 
clearly states that it secures antecedent debt and the relation 
between the debt and the security for the debt is not wholly 
unclear. 
¶52 The first case interpreting the validity of dragnet 
clauses in Wisconsin was Capocasa v. First National Bank, 36 
No. 
01-1590 & 01-1591   
 
29 
 
Wis. 2d 714, 154 N.W.2d 271 (1967).  In Capocasa, a husband and 
wife had executed a joint mortgage containing a dragnet clause 
that purported to secure all future indebtedness of the parties.  
The question before the court was whether the dragnet clause 
would allow the husband to encumber his wife's interest in the 
property by virtue of his unilateral subsequent borrowings.  Id. 
at 716-20.  The court noted that dragnet clauses are "looked 
upon with disfavor by the courts . . . and 'should be closely 
scrutinized.'"  Id. at 721 (citations omitted).   
¶53 The court also noted that under one view, "the 
contemplation of the parties" test, 
the security will not be extended as to antecedent 
debts unless the instrument so provides and identifies 
those intended to be secured in clear terms, and, to 
be extended to cover debts subsequently incurred, 
these must be of the same class and so related to the 
primary debt secured that the assent of the mortgagor 
will be inferred.   
Id. at 723-24 (internal citations & quotations omitted).  The 
court ultimately rejected the "contemplation of the parties" 
test in the context of joint mortgagors, noting:  
There seems to be no good reason for one who has 
executed a mortgage with [a] "dragnet" clause to be 
permitted to escape its consequences for his personal 
borrowing merely because subjectively it was not 
within his contemplation (contrary to the words of the 
written instrument) that an additional obligation to 
the same creditor would subject his property to the 
"dragnet" feature of the mortgage. 
Id. at 724.  
¶54 The court in Capocasa went on to hold that: 
No. 
01-1590 & 01-1591   
 
30 
 
[W]hen a "dragnet" clause is made part of a mortgage 
executed by joint tenants, each mortgagor pledges his 
undivided interest in the mortgaged property to secure 
(1) the joint indebtedness or other indebtedness 
specifically named in the instrument, and any existing 
or future joint indebtedness of the mortgagors to the 
mortgagee; (2) any existing or future individual 
indebtedness to the mortgagee . . . .  
Id. at 726-27 (emphasis added).  Notably the court did not state 
that the "existing indebtedness" had to be specifically named.  
Under Capocasa, a dragnet clause will secure "indebtedness 
specifically 
named 
in 
the 
instrument, 
and 
any 
existing . . . indebtedness."  Id. (emphasis added).  
¶55 The court in John Miller Supply Co. v. Western State 
Bank, 55 Wis. 2d 385, 390, 199 N.W.2d 161 (1972), also addressed 
the validity of a dragnet clause purporting to secure debts 
incurred subsequent to the execution of a mortgage.  The court 
considered whether the common law relating to dragnet clauses 
survived the adoption of the Uniform Commercial Code, Article 9.  
Id. at 393-94.  The court ruled that the common law remained the 
same since the adoption of Article 9 of the Uniform Commercial 
Code: 
"Where [the other indebtedness] is antecedent it must 
be identified in clear terms, and where it is 
subsequent, it must be of the same class as the 
primary obligation secured by the instrument and so 
related to it that the consent of the debtor to its 
inclusion may be inferred." 
Id. at 394 (citations omitted).   
¶56 The court ultimately concluded the dragnet clause at 
issue was not valid under the "contemplation of the parties" 
test because the future obligations were "not within the clear 
No. 
01-1590 & 01-1591   
 
31 
 
contemplation . . . of the parties . . . and . . . not of the 
same nature or related to the types of indebtedness involved in 
the original financing agreement."  Id. at 394.  But see 
Capocasa, 
36 
Wis. 2d at 
724-27 
(explicitly 
rejecting 
the 
"contemplation of the parties" test for subsequent debts secured 
by a mortgage executed by joint mortgagors). 
¶57 The court of appeals in Schmitz specifically addressed 
the validity of a dragnet clause securing antecedent debt (the 
type of dragnet clause at issue in the case at bar).  The court 
summarized the law in relation to dragnet clauses as follows:   
Debts antecedent and debts subsequent to dragnet 
clauses 
in 
security 
devices 
require 
different 
analyses.  In both cases, the policy is "no big 
surprises."  However, in antecedent debt cases, the 
parties have knowledge of the debt and the security, 
and the question is whether the two are so wholly 
unrelated or unclear that as a matter of public policy 
a court will refuse to enforce the clause as to 
specific 
security.  
Debts subsequent 
to 
dragnet 
clauses are unknown to the parties when the mortgage 
is given, though a future course of conduct may be 
contemplated.  The similarity between future debts 
contemplated and future debts incurred is what a court 
scrutinizes when analyzing subsequent debt cases.   
Schmitz, 141 Wis. 2d at 874-75. 
¶58 Synthesizing the law from these cases, under Wisconsin 
law, a mortgage with a dragnet clause may properly secure 
antecedent debts only if the mortgage clearly identifies that it 
secures antecedent debt, and the relation between the debt and 
security is not so wholly unclear that as a matter of public 
policy a court will refuse to enforce the dragnet clause.  The 
parties in the case before us dispute what the phrase "clearly 
No. 
01-1590 & 01-1591   
 
32 
 
identified" means.  Schanke, relying on Badger State, contends 
that this phrase means the specific antecedent debt must be 
clearly identified, that is, listed on the face of the mortgage 
in dollar amounts.  The Bank argues that "clearly identified" 
merely means that the dragnet clause must unambiguously state 
that it secures all prior debt.   
¶59 In this respect, the Schmitz decision is enlightening.  
The dragnet clause in Schmitz was part of a Real Estate Security 
Agreement (RESA) that provided:  "'Customer . . . grants lender 
a . . . lien . . . to secure . . . debts . . . arising out of 
credit previously granted.'"  Id. at 871.  The debtor in that 
case, through the RESA, gave the bank a lien on his farm in 
exchange for a $9,000 loan.  Id. at 869.  The debtor had also 
taken out substantial previous loans for his farm operation that 
were secured with personal property.  Id.  The court first 
concluded that the language in the RESA unambiguously secured 
previously granted obligations.  Id. at 871-72.  The court then 
went on to uphold the dragnet clause within the RESA, in a 
factual scenario not dissimilar to our own, stating: 
Though the prior loans were secured by personal 
property, the additional . . . credit made the total 
debt substantial, and in the absence of a RESA, the 
$9,000 would have been unsecured. . . . [Both the bank 
and the debtor] knew that . . . [the debtor] was 
increasing his indebtedness for the third consecutive 
year.  The previously pledged collateral was one or 
two years older.  There is no surprise in either the 
bank's request to become secured or in [the debtor's] 
accession to that request.  
Id. at 875-76 (emphasis added).   
No. 
01-1590 & 01-1591   
 
33 
 
¶60 Thus, even though the RESA in Schmitz did not state 
the specific amount of antecedent debt secured by the dragnet 
clause, the court nonetheless enforced the dragnet clause 
because 
the 
language 
stating 
that 
the 
lien 
"'secure[ed] . . . debts . . . arising out of credit previously 
granted,'" id. at 871, clearly indicated that the RESA secured 
the prior debt.  Further, the nature of the prior debtor-
creditor relationship between the parties was such that allowing 
the lien to secure the past debt would come as no surprise to 
the parties.  Id. at 875-76. 
¶61 Schanke argues that Badger State stands for the 
opposite proposition, as the court there stated:  "We conclude 
that because the amount of debt was stated in the mortgage and 
is identifiable from the mortgage documents, the mortgage is 
enforceable."  Badger State, 122 Wis. 2d at 721.  This is the 
precise language the court of appeals below used to posit the 
"obvious corollary" that "if the amount of debt is not both 
stated in the mortgage and identifiable from the mortgage 
documents, the mortgage is not enforceable."  Mitchell Bank, 257 
Wis. 2d 723, ¶27.  However, this interpretation is a misreading 
of the holding of Badger State because the court in Badger State 
merely held that stating the dollar amount of the antecedent 
debt was sufficient, but not necessary, to render the dragnet 
clause enforceable.  Badger State, 122 Wis. 2d at 724.   
¶62 The junior interest holder in Badger State made the 
same argument Schanke is making in this case:  "[A] mortgage 
containing a dragnet clause for antecedent debts which does not 
No. 
01-1590 & 01-1591   
 
34 
 
specifically identify the underlying debt is not enforceable in 
Wisconsin."  Id. at 724.  The Badger State court did not accept 
this argument, noting that this court in Capocasa held:  "[A] 
dragnet clause in a mortgage may secure 'any existing or future 
individual indebtedness to the mortgagee . . . .'"  Id. (quoting 
Capocasa, 36 Wis. 2d at 727).  The court in Badger State, 122 
Wis. 2d at 724, concluded: "[A] dragnet clause may cover any 
specifically named debt and any existing debt."  (Emphasis 
added.)  Notably, like Capocasa, the Badger State court did not 
say that a dragnet clause covers only specifically named debt 
and specifically named existing debt. 
¶63 The Badger State court went on to find that "[i]n this 
case, the amount of indebtedness . . . is plainly stated on the 
face of the mortgage. . . .   We conclude, therefore, that [the] 
mortgage is enforceable."  Id.  The Badger State court did not 
state that existing debt had to be specifically named for a 
dragnet clause to be valid.  It merely held that when the amount 
of the antecedent debt is specifically stated on the face of the 
mortgage, this is sufficient to render the antecedent debt 
"clearly 
identified," 
such 
that 
the 
dragnet 
clause 
is 
enforceable.   
¶64 In other words, under Badger State, it is sufficient 
if the amount of the debt is specifically stated on the face of 
the mortgage, 
but 
Badger 
State cannot be 
read for the 
proposition that it is necessary for the amount of debt to be 
specifically stated on the face of the mortgage in order for a 
dragnet clause to be enforceable.  Thus, the court of appeals' 
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01-1590 & 01-1591   
 
35 
 
"obvious corollary" is, in fact, a logical fallacy.  This 
conclusion is buttressed by the fact that the Schmitz decision 
came two years after Badger State, and in its exhaustive summary 
of Wisconsin dragnet clause law, the court in Schmitz came to 
the exact opposite conclusion than that advanced by Schanke.   
¶65 In the case before us, the Mortgage clearly states 
that it secures all "obligations."  Further, it states: 
The term "Obligations" as used herein shall include, 
without 
limitation, 
all 
of 
the 
debts, 
notes, 
guaranties, obligations and liabilities of whatever 
nature or amount (and any extension, renewals or 
modification thereof) arising out of credit or other 
financial 
accommodation 
previously 
granted, 
contemporaneously granted or granted in the future by 
Mortgagee to or at the request of any Obligor . . . . 
(Emphasis added.)  This language clearly states that all prior 
debts are secured by the Mortgage.  Under the rationale of 
Schmitz, a dragnet clause securing all "'debts . . . arising out 
of credit previously granted'" was sufficiently clear to enforce 
the clause.  Schmitz, 141 Wis. 2d at 871.  Here, the Mortgage 
secures any "obligations," defined in the dragnet clause as 
"credit . . . previously granted, contemporaneously granted or 
granted in the future."  Thus, the pertinent language in the 
No. 
01-1590 & 01-1591   
 
36 
 
dragnet clause here is virtually identical to the operative 
language in the dragnet clause in Schmitz.21   
¶66 Schanke's contention that the individual antecedent 
debts must be specifically listed is in accord with the 
"contemplation 
of 
the 
parties" 
test. 
 
See 
Capocasa, 
36 
Wis. 2d at 724 (noting that "the 'contemplation of the parties' 
cases deny any coverage under the 'dragnet' clause unless the 
obligation 
to 
be 
blanketed 
in 
is 
specifically 
mentioned . . . ").  Yet, this test was specifically rejected in 
Capocasa when dealing with joint mortgagors.  Id. at 724-25 
(rejecting the "contemplation of the parties" test in favor of 
the Iowa approach).  But see John Miller Supply Co., 55 
Wis. 2d at 392 (incorrectly stating that Capocasa adopted the 
"contemplation of the parties" test).  Also, this was not the 
test utilized by Badger State or Schmitz.  Simply put, not a 
single Wisconsin court addressing antecedent debt secured by a 
dragnet 
clause 
has 
required 
the 
antecedent 
debt 
to 
be 
specifically listed in dollar amounts in the mortgage in order 
for the mortgage to be enforceable.    
¶67 In addition, the WBA has brought to our attention the 
fact that a RESA, the type of security agreement in Schmitz, by 
                                                 
21 See also In re Octagon Roofing v. NBD Park Ridge Bank, 
124 B.R. 522, 528 (Bankr. N.D. Ill. 1991) (quoting Nat'l 
Acceptance Co. of America v. Exchange Nat'l Bank of Chicago, 243 
N.E.2d 264, 268 (Ill. App. 1968)) (noting that the dragnet 
clause securing all "past, present, and future debt 'in addition 
to the note described above'" clearly identified antecedent 
debt, while the dragnet clause securing "all indebtedness" did 
not).   
No. 
01-1590 & 01-1591   
 
37 
 
its nature does not list the precise amount of debt on the face 
of the instrument.  See Schmitz, 141 Wis. 2d at 870 (noting that 
"a RESA does not show the sum of money it secures").  While the 
security agreement before us is a mortgage and not a RESA, both 
contain almost identical language, and if we were to accept 
Schanke's argument that a dragnet clause must specifically list 
the amount of antecedent debt, we would, in effect be overruling 
Schmitz.   
¶68 More importantly, were we to agree with Schanke, we 
would essentially invalidate all RESAs.  Schanke himself argues 
in his supplemental brief, "[t]he RESA may be a flawed 
instrument as well."  (Resp't Supplemental Br., 18).  Thus, 
Schanke at least implicitly concedes that his position is 
contrary to the Schmitz decision.  While it may be the better 
practice for a mortgagee to specifically list the specific 
amount of debt secured in a mortgage via a dragnet clause, the 
above authorities clearly demonstrate this is not required under 
Wisconsin law.   
¶69 The decisions in Capocasa, Badger State, and Schmitz 
make clear that as long as the dragnet clause clearly states 
that it secures all past or antecedent debt, the dragnet clause 
is 
presumptively 
valid. 
 
However, 
as 
the 
Schmitz 
court 
recognized, the determination as to whether a dragnet clause is 
valid turns not only upon the language used in the mortgage, but 
also upon whether, the debt and the security "are so wholly 
unrelated or unclear that as a matter of public policy a court 
will refuse to enforce the clause as to specific security."  
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01-1590 & 01-1591   
 
38 
 
Schmitz, 141 Wis. 2d at 874-75.  The court of appeals in Schmitz 
correctly recognized that ultimately, the decision to enforce a 
dragnet clause is a policy decision, dependent on the case 
specific circumstances.  Id. at 874-76.   
¶70 Thus, 
the 
Schmitz 
court 
analyzed 
the 
particular 
relationship between the debtor and creditor to determine 
whether the relation between the debt and the security was 
"wholly unrelated or unclear."  Id.  The court reasoned that 
while 
the 
debtor's 
initial 
obligation 
was 
secured, 
the 
subsequent borrowings of the debtor made his total debt 
substantial and were it 
not for 
the 
dragnet 
clause, a 
significant amount of his debt would have been unsecured.  Id. 
at 875-76.  The court further noted that the original collateral 
was a few years older than the recent debt and the debtor had 
consistently increased his indebtedness since pledging the 
initial security.  Id. at 876.  The court concluded that based 
on this relationship "[t]here is no surprise in either the 
bank's request to become secured or in [the debtor's] accession 
to that request."  Id.   
¶71 Here, the business notes themselves establish the 
relationship between the prior debt and the Mortgage.  The 
September 4, 1986, $50,000 note clearly states on its face:  
"This Note is secured by all existing and future security 
agreements and mortgages between Bank and Maker, between Bank 
and any indorser or guarantor of this Note, and between Bank and 
any other person providing collateral security for Maker's 
obligations . . . ." (Emphasis added.)  The March 3, 1987, 
No. 
01-1590 & 01-1591   
 
39 
 
renewal note, renewing this $50,000 obligation, contains the 
same language, as do the Gary Butler notes, the Miracle Shield 
International note, and the Universal Graphics notes, of which 
Waltke was guarantor.  By signing the Mortgage, Mrs. Waltke 
pledged her interest in the Genesee property as security for 
this debt.  Thus, Mrs. Waltke constitutes a "person providing 
collateral security for [the] Maker's obligations." 
¶72 Like the debtor in Schmitz, 141 Wis. 2d at 875-76, the 
Waltkes owed the Bank a substantial amount of previous unpaid 
debt.  As in Schmitz, it cannot seriously be argued in this case 
that the fact the Mortgage secured all outstanding Waltke 
obligations came as a "big surprise" to Waltke.  At the time the 
Mortgage was executed, the Waltkes were fast approaching 
insolvency, if not already de facto insolvent.  Given the amount 
of indebtedness and frequency with which Waltke was taking and 
guarantying loans in 1986 and 1987, it is fair to say that he 
was a relatively sophisticated businessman.  If Waltke possessed 
enough financial prowess to secure multiple loans for his 
business interests, he certainly can be charged with knowledge 
of the plain language of the notes.  See Deminsky v. Arlington 
Plastics Mach., 2003 WI 15, ¶¶29-30, 259 Wis. 2d 587, 657 
N.W.2d  411.   
¶73 Finally, the title report on the Genesee property 
describes the Mortgage as securing "the originally stated 
indebtedness of $50,000 and any other amounts payable under the 
terms thereof[.]"  (Emphasis added.)  In light of the amount of 
outstanding obligations Waltke owed to the Bank, it is not at 
No. 
01-1590 & 01-1591   
 
40 
 
all surprising that the Mortgage would secure these obligations.  
Given the language of the Mortgage clearly identifying "credit 
previously granted" as being secured under the Mortgage and the 
nature and extent of the Waltkes' prior indebtedness with the 
Bank, it could not come as any surprise or be "wholly unclear" 
to the Waltkes that the Mortgage executed May 7, 1987, secured 
all previous indebtedness.   
¶74 Yet, the case before us is more complicated than 
Schmitz, as both Mr. and Mrs. Waltke signed the Mortgage and the 
Bank is seeking to foreclose upon property in which Mrs. Waltke 
has an undivided one-half interest.22  One could argue that it is 
inequitable to allow the Bank to proceed on Mrs. Waltke's 
interest in the mortgaged property when the debts secured by the 
Mortgage are those of her husband.23  However, Capocasa set forth 
the standard for what debts a dragnet clause may properly secure 
when a mortgage is jointly executed: 
We conclude therefore that, when a "dragnet" 
clause is made a part of a mortgage executed by joint 
tenants, each mortgagor pledges his undivided interest 
in the mortgaged property to secure (1) the joint 
indebtedness or other indebtedness specifically named 
in the instrument, and any existing or future joint 
                                                 
22 Recall that Schanke purchased Mr. Waltke's interest in 
the property in a sheriff's sale, following his successful 
action against Mr. Waltke to collect an unpaid debt. 
23 In fact, Schanke argued during the first hearing of this 
case that it would be unfair to force Mrs. Waltke to pay for the 
prior debt because although she signed the Mortgage, she did not 
sign the prior notes and there is no indication that she knew 
about the prior debt.  Schanke specifically referenced Capocasa 
v. First National Bank, 36 Wis. 2d 714, 154 N.W.2d 271 (1967). 
No. 
01-1590 & 01-1591   
 
41 
 
indebtedness of the mortgagors to the mortgagee; (2) 
any existing or future individual indebtedness to the 
mortgagee; and (3) any future debt of his comortgagor 
which is known to him and to which he consents to be a 
lien upon his interest; provided (4), in addition, 
that whenever the proceeds or the benefits derived 
from the other mortgagor's contracting a further 
obligation inure to the enhancement of his interest, 
the "dragnet" clause will be construed to cover such 
indebtedness 
to 
the 
extent 
of 
that 
enhancement 
notwithstanding the fact that the mortgagor did not 
know of or consent to the indebtedness.  
Capocasa, 36 Wis. 2d at 726-27 (emphasis added).   
¶75 Capocasa involved the individual indebtedness of one 
spouse, unknown to the other, incurred subsequent to the 
execution of the mortgage.  Id. at 716-17.  Thus, the Capocasa 
court applied the fourth factor to conclude that while the 
husband's interest in the mortgaged property was subject to the 
dragnet clause, his wife's interest was not, as the subsequent 
indebtedness did not benefit the wife's interest in the 
property.  Id. at 727.  Under Capocasa, one spouse's knowledge 
of debts incurred by the other spouse is not controlling in 
determining whether the dragnet clause is valid.  See id.  
¶76 The court of appeals in Schmidt v. Waukesha State 
Bank, 204 Wis. 2d 426, 438, 555 N.W.2d 655 (Ct. App. 1996), 
confirmed the vitality of Capocasa, but noted that changes in 
marital property law since Capocasa was decided would affect the 
application of the rule it set forth.  Id. at 441-43.  While, 
Schmidt, like Capocasa, involved debt incurred subsequent to the 
execution of the mortgage, Schmidt, 204 Wis. 2d at 430, the 
court of appeals specifically noted that Wisconsin's marital 
property law could affect the ability of a dragnet clause to 
No. 
01-1590 & 01-1591   
 
42 
 
secure existing indebtedness because "[a]fter all . . . the very 
concept of 'individual indebtedness' would certainly be affected 
by the marital property law's modern view of whether, and under 
what circumstances a spouse may incur an indebtedness that is 
strictly 'individual.'"  Id. at 441. 
¶77 Schmidt noted that under Wis. Stat. § 766.55(2)(b), 
"an obligation incurred by a spouse in the interest of 
the marriage or the family may be satisfied only from 
all marital property and all other property of the 
incurring 
spouse." . . . [However, 
Wis. Stat. § 766.55(2)(d) provides] "that any other 
obligation incurred by a spouse during marriage, 
including one attributable to an act or omission 
during a marriage, may be satisfied only from property 
of that spouse that is not marital property and from 
that spouse's interest in marital property, in that 
order.  Thus, the issue is whether [the loans of one 
spouse] 
were 
"obligations 
incurred . . . in 
the 
interest of the marriage," under § 766.55(2)(b), or 
"other obligations," under § 766.55(2)(d). 
Schmidt, 204 Wis. 2d at 441-42 (emphasis in original).  The 
court in Schmidt also noted that under Wis. Stat. § 766.55(1), 
an "'obligation incurred by a spouse during marriage, including 
one attributable to an act or omission during marriage, is 
presumed to be incurred in the interest of the marriage of the 
family.'"  Id. at 442 (emphasis in original).   
¶78 The debt in Schmidt fell under the fourth factor 
articulated in Capocasa.  Id. at 442.  Nonetheless, the court of 
appeals' discussion of marital property law as it relates to the 
enforceability of a dragnet clause contained in a mortgage 
executed by spouses is pertinent to the resolution of the case 
at bar.  Schmidt recognized that under the presumption created 
No. 
01-1590 & 01-1591   
 
43 
 
by § 766.55(1), "once the bank established the basic fact that 
the loans to Larson were incurred during the marriage, it became 
Schmidt's burden to prove by a preponderance of the evidence 
that the loans to Larson under consideration were not incurred 
in the interest of the marriage or the family."  Id. at 443. 
¶79 Therefore, under Wis. Stat. § 766.55 (1985-86), the 
debts of Mr. Waltke are presumed to have been incurred in the 
interest of the marriage, as Mrs. Waltke did not testify to the 
contrary.24  As such, Mr. Waltke's debts are property considered 
existing joint indebtedness.  Under the second Capocasa factor, 
a mortgage jointly executed with a dragnet clause properly 
secures "any existing or future joint indebtedness of the 
mortgagors to the mortgagee."  Capocasa, 36 Wis. 2d at 727 
(emphasis in original).  
                                                 
24 Wisconsin Stat. § 766.55 provides, in pertinent part:   
(1) An obligation incurred by a spouse during 
marriage, including one attributable to an act or 
omission during marriage, is presumed to be incurred 
in the interest of the marriage or the family. . . .  
(2) After the determination date all of the 
following apply: 
 . . . . 
(b) An obligation incurred by a spouse in the 
interest of the marriage or the family may be 
satisfied only from all marital property and all other 
property of the incurring spouse.   
The applicable "determination date" here is January 1, 
1986.  Wis. Stat. § 766.01(5) (1985-86).   
No. 
01-1590 & 01-1591   
 
44 
 
¶80 We therefore hold that the dragnet clause in the May 
7, 1987, Mortgage is valid and enforceable under Wisconsin law 
because the Mortgage clearly states that it secures antecedent 
debt and the relation between the debt and security are not so 
wholly unrelated or unclear.  As such, the dragnet clause 
properly secured the existing indebtedness of the Waltkes at the 
time it was executed.   
¶81 Thus, the circuit court's factual finding that the 
Bank did not prove the existence and terms of the missing Note 
is immaterial and non-determinative to the outcome of this case, 
because the circuit court improperly failed to consider the 
Bank's proof of the antecedent debt that the Mortgage secured.  
Because we determine that the parties in this case did intend 
for the Mortgage to secure antecedent debt and that the dragnet 
clause is enforceable, we reverse the court of appeals' 
determination that the Mortgage is invalid because the Bank 
failed to prove the existence of debt underlying the Mortgage. 
V. 
SUMMARY 
¶82 
In conclusion, we reverse the court of appeals' 
decision 
insomuch 
as 
it 
affirmed 
the 
circuit 
court's 
determination that the Mortgage was invalid for lack of 
consideration.  The Mortgage at issue is an executed contract 
under seal, and under Wisconsin law the seal operates as 
conclusive proof of consideration in the absence of proof of 
fraud.  Schanke did not prove fraud at the circuit court.  
Therefore, 
the 
Mortgage 
is 
not 
invalid 
for 
lack 
of 
consideration.   
No. 
01-1590 & 01-1591   
 
45 
 
¶83 
Next, we reverse the court of appeals' determination 
that the Mortgage was invalid because the Bank failed to prove 
the existence of underlying debt.  While the Bank may have 
failed to prove the existence of the debt referenced in the 
missing Note, we conclude that the Mortgage is valid and 
foreclosable because:  1) the plain language of the Mortgage 
indicates that the parties intended for the Mortgage to secure 
antecedent debt; 2) the Bank proved the existence of a large 
amount of underlying antecedent debt; and 3) the dragnet clause 
securing that antecedent debt is valid under Wisconsin law.   
¶84 
Thus, we reverse the decision of the court of appeals 
in its entirety, but remand to the circuit court for specific 
findings as to the amount of debt owed to the Bank.  On remand, 
the Bank will have to prove Waltke's precise liability on each 
outstanding loan, when the loans became due, and the applicable 
interest rate for each outstanding loan.  While the record 
before us is replete with evidence of prior outstanding debt, 
this court is not a fact-finding body.  The circuit court is 
better suited to make these precise determinations.  
By the Court.—The decision of the court of appeals is 
reversed, and the cause is remanded to the circuit court for 
further proceedings consistent with this opinion.  
 
No. 
01-1590 & 01-1591   
 
 
 
1