Opinion ID: 2214876
Heading Depth: 2
Heading Rank: 4

Heading: Purposes of the Statute

Text: ¶ 67 We next turn to the textually and contextually manifest purposes of Wis. Stat. § 846.103(2). See Kalal, 271 Wis.2d 633, ¶ 49, 681 N.W.2d 110. Interpreting the phrase personally liable for the debt secured by the mortgage to exclude guarantors effectuates the purposes of § 846.103(2). ¶ 68 In Glover, the court explained the purposes of Wis. Stat. § 846.101. [19] Glover addressed the question of whether a mortgagee who elected the shortened redemption period under Wis. Stat. § 846.101 and waived the right to a deficiency judgment was then precluded from satisfying the remainder of the debt by foreclosing on other mortgages securing the same debt. Glover, 117 Wis.2d at 687, 345 N.W.2d 449. Concluding that the mortgagee could collect on the remaining mortgages, the court explained the purpose of § 846.101: [The statute] obviously benefits the mortgagee, since the mortgagee may be able to reduce the losses normally attendant to the twelve-month redemption period. However, the mortgagor is also protected, because at the end of this shortened period, the mortgagor is secure in the knowledge that he or she will not be responsible for any deficiency resulting from the sale. Id. at 694-95, 345 N.W.2d 449. ¶ 69 The court confirmed its explanation of the purpose behind Wis. Stat. § 846.101 by examining legislative history: The language prefacing the enactment of [sec. 846.101], evinces an attempt by the legislature to shorten the period of redemption in a complicated and costly time-consuming process. Likewise, it evinces a concern for the protection of the mortgagor, who is not allowed the usual twelve-month period in which to redeem. This protection comes in the form of a waiver of personal deficiency by the mortgagee. Id. at 699, 345 N.W.2d 449. ¶ 70 Including guarantors within the class of parties personally liable for the debt secured by the mortgage would not further either of the two statutory purposes articulated in Glover. First, it would both lengthen and complicate the redemption process. More banks would opt for the standard redemption period to ensure that they would be able to collect against their guarantors. Second, it would do little to protect mortgagors and could even harm them because banks might limit their lending to loans that could be provided without the extra assurance of a guarantor, or opt for the standard redemption period, leaving the mortgagor open to liability for a deficiency judgment. Neither of these results is consistent with the statute's goal of expediting the foreclosure process while protecting the rights of the mortgagor. ¶ 71 The approach taken by other jurisdictions also provides guidance on how best to further the intended purpose of Wis. Stat. § 846.103. A number of courts have reasoned that the protections of anti-deficiency statutes should not be extended to guarantors because the statutes are intended to protect borrowers. [20] Their reasoning has generally followed this basic pattern: [The] denial of protection to guarantors often involves purchase money anti-deficiency legislation, one-action rules, and prohibitions of deficiency judgments after power of sale foreclosure. [These] statutes are aimed primarily at protecting debtors.... [By contrast,] [f]air value legislation is primarily aimed at preventing the unjust enrichment of the mortgagee and the extension of fair value protection to guarantors clearly serves that purpose. Restatement (Third) of Property: Mortgages, § 8.4, cmt. b. at 605. ¶ 72 Like the anti-deficiency legislation in other states, the deficiency-waiver provision in Wis. Stat. § 846.103(2) is designed to protect borrowers. We see no indication that the provision of § 846.103(2) seeks to prevent unjust enrichment of the mortgagee, as this purpose is already served by the fair value requirement of Wis. Stat. § 846.165(2). [21] Thus, the decisions of other states not to extend the protections of anti-deficiency statutes support our decision not to extend the protections of § 846.103(2) to guarantors in a fashion that would not further the statute's purposes. ¶ 73 Bank Mutual argues that Wis. Stat. § 846.103(2) does not include guarantors because the purpose of the statute is to address redemption rights, an argument that was rejected by the court of appeals. [22] Although § 846.103 connects the deficiency waiver and the shortened redemption period, it does not limit the waivers to those with a right to redeem. The phrase personally liable for the debt secured by the mortgage, by its very terms, contemplates the distinction between the borrower's personal obligation and the mortgagor's obligation to provide security for the debt. A person has the right to redeem property only if he has some kind of interest in the property. [23] The person may be personally liable for a debt secured by a mortgage, but may not have a right to redeem if the debt was secured by another person's property. On the other hand, a mortgagor, who has a right to redeem, may not necessarily be personally liable for the underlying debt. [24] ¶ 74 Although the deficiency-waiver provision of Wis. Stat. § 846.103(2) is not limited to those who have redemption rights, guarantors possess neither redemption rights nor personal liability on the underlying debt. That the statute does not limit its protections to those with a right to redeem does not support the conclusion that guarantors are parties personally liable for the debt. Guarantors are in a significantly different position from both borrowers and persons with a right to redeem, and are therefore outside the scope of the protections contained in Wis. Stat. § 846.103(2). ¶ 75 Finally, our interpretation of Wis. Stat. § 846.103(2) leads to a more reasonable and sensible result than an interpretation that would require a mortgagee to waive judgment of deficiency against a guarantor. In Glover, we relied on this principle when interpreting Wis. Stat. § 846.101: Not allowing the Bank to foreclose upon the remaining mortgages would in essence deprive the Bank from realizing upon the security on which it initially based its decision to extend the loan. It would also provide a windfall to the mortgagors. However, in order to protect the mortgagor in situations where the mortgagee does not foreclose upon all mortgages securing the debt in one proceeding, we hold that the mortgagee waives personal deficiencies upon the completed sale of all of the remaining properties. Glover, 117 Wis.2d at 699, 345 N.W.2d 449. ¶ 76 The reasoning espoused in Glover is directly applicable here. If Wis. Stat. § 846.103(2) requires a waiver of deficiency against a guarantor, mortgagees would be deprived of some of the security they relied upon for their loannot the security provided by the mortgage, but the security provided by the guaranty. Such an interpretation would also result in a windfall to the guarantor, who would be relieved of liability under the guaranty without paying the obligation set out in the guaranty. We conclude that the legislature did not intend such a result when it enacted Wis. Stat. § 846.103(2).