Opinion ID: 1925557
Heading Depth: 2
Heading Rank: 1

Heading: Consideration for the Mortgage

Text: ¶ 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 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 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 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 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: 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 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 conclusively established. The circuit court erred in concluding that as a matter of law the Mortgage failed for lack of consideration.