Opinion ID: 3194429
Heading Depth: 2
Heading Rank: 1

Heading: The Bank’s Mortgage

Text: We hold first that the bank’s mortgage validly attached a lien to the Blanchards’ interest as vendors under a land contract. Wisconsin law has long recognized that it is possible to mortgage a vendor’s interest under a land contract. See First National Bank of Stevens Point v. Chafee, 73 N.W. 318, 320 (Wis. 1897) (holding that a mortgagee of a land contract vendor had priority over an earlier unrecorded assignment of the land contract vendor’s interest). The general consensus is in accord with that point of Wisconsin law. Grant S. Nelson et al., 1 Real Estate Finance Law § 3:37 (6th ed. 2014) (“The vendor’s interest in an installment land contract is clearly mortgageable.”); Baxter Dunaway, 2 Law of Distressed Real Estate § 14:35 (2015) (“The vendor’s interest in an installment land contract is mortgageable and is subject to judgments by creditors of the vendor.”); see also, e.g., Mich. Comp. Laws § 565.360(3) (spelling out land contract vendee’s obligations if vendor mortgages vendor’s interest). Because the vendor retains legal title to the land, “Traditionally, it has been a common practice for those who lend money on the security of a vendor’s interest to treat the transaction as a simple mortgage on a fee interest in real estate.” Nelson, supra, § 3:37. The mortgage is often accompanied by an assignment of the vendor’s interest in the contract. Id. That seems clear enough, but the wrinkle that gives the trustee an argument is that Wisconsin courts have also said in other statutory contexts that a vendor’s interest in a land contract should be treated as personal property rather than real property. See City of Milwaukee v. Greenberg, 471 N.W.2d 33, 39 (Wis. 1991) (applying doctrine of equitable conversion, venNo. 15-1970 7 dor was not liable for cost of razing condemned building; vendor held not to be “owner” under applicable statute on liability for government’s cost of razing); Mueller v. Novelty Dye Works, 78 N.W.2d 881, 884 (Wis. 1956) (creditor of vendor could not impose judgment lien on real property subject to land contract). If the vendor’s interest is treated as personal property, it would be odd to attach a lien to it by a real estate mortgage. Wisconsin courts have historically “found the question of whether a land contract vendor or vendee ‘owns’ property under a statute to be troublesome.” Greenberg, 471 N.W.2d at 37– 39 (surveying cases). Under Wisconsin’s doctrine of equitable conversion, a land contract buyer obtains equitable title to the property, which includes “all the incidents of a real ownership.” Id. at 36, quoting John Norton Pomeroy, A Treatise on Equity Jurisprudence, § 368, at 687 (4th ed. 1918). This leaves the vendor with “bare legal title” to the property as security for the unpaid portion of the purchase price. Greenberg, 471 N.W.2d at 36–37. The sometimes metaphysical difference between personal property and an interest in real property has fostered the controversy in this case. Based on the 1897 decision in First National Bank v. Chafee, which was not overruled or modified by these later decisions dealing with different statutes and different purposes, and based on the general rule under the common law, we conclude that the Blanchards’ interest as vendors under the land contract was a proper subject of a mortgage to secure the bank’s loan to them. Consistent with First National Bank v. Chafee, the language of the mortgage here is broad enough to encompass a land contract vendor’s interest as collateral, even without a specific 8 No. 15-1970 mention of a land contract. The best reading of the mortgage is that it was secured by the Blanchards’ interest as land contract vendors, the entire interest they possessed in the land when the mortgage was executed. The mortgage included “all privileges, hereditaments, easements and appurtenances, all rents, leases, issues and profits, all claims, awards and payments made as a result of the exercise of the right of eminent domain, all existing and future improvements and all goods that are or are to become fixtures.” Black’s Law Dictionary defines “rents, issues, and profits” as “The total income or profit arising from the ownership or possession of property.” Rents, Issues, and Profits, Black’s Law Dictionary (10th ed. 2014). This language was broad enough to grant the bank a lien on the land contract payments, which are included in the Blanchards’ “total income” arising from their ownership of bare legal title in the land. We thus agree with the bankruptcy court that the bank’s mortgage “remains a valid lien on the [Blanchards’] interest in the property.” The Blanchards validly mortgaged the (limited) “rights in the real property” that they retained as land contract vendors: “the rights to enforce the land contract, collect payments from the Hoffmans and foreclose if the Hoffmans default.” As the bankruptcy court noted, giving the bank a lien on the land contract payments also “appears to coincide with the parties’ intention: in the land contract, the [Blanchards] and the Hoffmans agreed that the [Blanchards] would obtain a mortgage at a favorable interest rate, and the Hoffmans would pay the balance due on the mortgage as the buyout price of the property.” 1 1Our holding is consistent with a non-precedential decision, Community National Bank v. O’Neill, 463 N.W.2d 880, 1990 WL 198035 (Wis. App. 1990) No. 15-1970 9