Court Opinion

ID: 9714610
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:41:25.48208+00
Date Added: 2024-06-11T18:23:25.124907
License: Public Domain

*505DYKMAN, J.
¶ 51. (dissenting). The property involved in this foreclosure is worth $6,668,000.1 In 2002, Jakubow sold the property to Lichosyt on land contract for $4,350,000 with a down payment of $350,000, leaving $4,000,000 to be paid over seven years. The Republic Bank of Chicago has judgment liens against the property totaling about two million dollars. Were this a mortgage foreclosure, both Jakubow and the bank would be paid in full. The majority concludes that because this is a strict foreclosure proceeding, ungoverned except in equity, Jakubow gets the property worth $6,668,000 and the bank gets nothing. That seems inequitable to me. I see nothing in the majority opinion explaining why secondary interests should be treated differently depending on the financing structure chosen by real estate sellers and buyers. The purpose of both forms of financing is the same: financing the purchase of real estate over time.
¶ 52. The only reason the majority seems to give for its result is that it fears to go where no court has gone before. While timidity has its place, and I recognize that we cannot contradict published opinions of this court and the supreme court, see Cook v. Cook, 208 Wis. 2d 166, 189-90, 560 N.W.2d 246 (1997), nothing here prevents us from reaching an equitable conclusion.
*506¶ 53. The parties, the majority and I agree that this case raises an issue of first impression. Claiming that issues of first impression that will effect a change in the law should be decided only by the supreme court is a cop out. We do not routinely decline to decide thorny issues of first impression. In Kessel ex rel. Swenson v. Stansfield Vending, Inc., 2006 WI App 68, ¶ 26, 291 Wis. 2d 504, 714 N.W.2d 206, we noted: "Our research has disclosed no Wisconsin case that has addressed the duty to warn in a context sufficiently analogous to provide guidance in this case." Despite the lack of authority, we went on to decide the issue anyway, adopting the Restatement (Second) of Torts § 388(b) and cmt. k (1965). Kessel, 291 Wis. 2d 504, ¶ 32; cf. Hottenroth v. Hetsko, 2006 WI App 249, ¶ 25, 298 Wis. 2d 200, 727 N.W.2d 38 ("In the absence of case law directly on point, we turn to consideration of the reasoning underlying the principle that a party has a right — up until a time we have yet to define — to withdraw from a stipulation under Wis. Stat. § 767.10(1) [(2003-04)].") and State v. Hydrite Chem. Co., 2005 WI App 60, ¶ 30, 280 Wis. 2d 647, 695 N.W.2d 816 ("[B]ecause there is no Wisconsin law on point, we look to cases from other jurisdictions.").
¶ 54. I conclude that addressing difficult issues of first impression is nothing new or surprising for this court. We have used the phrase "first impression" in hundreds of cases, beginning with Zander v. County of Eau Claire, 87 Wis. 2d 503, 510, 275 N.W.2d 143 (Ct. App. 1979). We should decide cases on the best law available, and certify the cases that meet the criteria of Wis. Stat. Rule 809.61 (2005-06).2 See Wis. S. Ct. IOP *507II.B.2 (March 16, 2000). If leaving issues of first impression for the supreme court to decide is the appropriate method to address these issues, I do not know why at least one member of the majority did not join me in my conclusion that we should certify this case to the supreme court. See Rule 809.61. Because we have chosen to decide this case rather than certify it, I would address the issues as follows.
¶ 55. Strict foreclosure is equitable in nature, and the trial court "should balance the equities between the parties to determine if foreclosure is merited." Pleasure Time, Inc. v. Kuss, 78 Wis. 2d 373, 383, 254 N.W.2d 463 (1977). Republic Bank of Chicago is a party here. But the trial court, and now the majority, have concluded as a matter of law, not equity, that the bank is not entitled to realize on its judgment lien, a right the legislature gave Republic Bank under Wis. Stat. § 806.15(1). Though we recognize the right of a judgment lien holder to foreclose on its lien, see Edwin E. Bryant, 6 Callaghan's Wisconsin Pleading and Practice § 44:29 (3rd ed. 2001), the result of the majority opinion is to make this a right without a remedy when the primary interest is a land contract rather than a mortgage.
¶ 56. We have permitted the holder of an interest secondary to a land contract to pay the balance owing the vendor and receive a deed where the secondary interest is an assignment of the vendee's interest in the land contract. See Coraci v. Noack, 61 Wis. 2d 183, 212 N.W.2d 164 (1973). In Coraci, the court recognized a trial court's duty, in equity, to take the relative positions of the parties into account when deciding who gets a right of redemption, irrespective of what the land contract vendor contracted for and irrespective of the fact that the vendor had elected strict foreclosure as a *508remedy. Id. at 189-90. Neither the trial court nor the majority opinion considers the equitable duty required by Corad.
¶ 57. The supreme court has used common law and equitable principles in the absence of statutory guidance to allow a person with an interest in real estate secondary to a land contract to avoid the result the majority reaches today. In Else v. Cannon, 265 Wis. 510, 62 N.W.2d 3 (1953), the supreme court reviewed a circuit court decision voiding a mechanic's lien, an interest equal to Republic Bank's interest, where the land contract vendee and vendor agreed that the land contract would be cancelled. The supreme court reversed, holding that the mechanic's lien could be foreclosed, but only against the equity possessed by the land contract vendee. The majority rejects Else because it was not a strict foreclosure case. That is true, of course. But the majority misses the point by focusing on the nature of the action. What the supreme court really decided was that, using equitable principles, a person with an interest secondary to a land contract interest could reach the vendee's equity in the real estate, though not the vendor's interest.
¶ 58. Else gave the land contract vendors what they contracted for, the balance due on their land contract, and the mechanic lien holder everything he was entitled to. The land contract vendees were required to pay for improvements which they had commissioned, assuming that the property sold for enough to pay the vendor and the holder of the mechanic's lien. Everyone won. And that is what would have happened here had the majority followed my view, rather than focusing on only the form of the action.
¶ 59. The United States Bankruptcy Court for the Western District of Wisconsin addressed a fact situation *509identical to the one before us, and reached a conclusion contrary to the one reached by the majority. In Berge v. Sweet, 33 B.R. 642 (Bankr. WD. Wis. 1983), the Bankruptcy Court concluded that a land contract vendee's substantial equity in a farm could not be cut off by a judgment of strict foreclosure. Were this case tried in Bankruptcy Court on the facts before us, the trustee, armed with the judgment lien obtained by the Republic Bank of Chicago, could obtain what had been, prior to the strict foreclosure, the equity owned by Lichosyt. See 11 U.S.C. § 544(a) and (b) (2000); see also Musso v. Ostashko, 468 F.3d 99, 102-03 (2d Cir. 2006) (11 U.S.C. § 544 gives bankruptcy trustee the rights of a hypothetical perfected judgment lien creditor as of date of bankruptcy petition and consent judgment was constructive fraudulent conveyance).
¶ 60. The Restatement agrees with the Bankruptcy Court's view of land contracts. Restatement (Third) of Property: Mortgages § 3.4 (1997) provides:
A Contract for Deed Creates a Mortgage
(a) A contract for deed is a contract for the purchase and sale of real estate under which the purchaser acquires the immediate right to possession of the real estate and the vendor defers delivery of a deed until a later time to secure all or part of the purchase price.
(b) A contract for deed creates a mortgage.
¶ 61. Even the majority agrees that had Lichosyt and Jakubow been mortgagee and mortgagor instead of land-contract vendor and vendee, Republic Bank of Chicago could have protected its judgment-lien rights. The Restatement has debunked the distinction between the two financing methods by showing numerous problems with using a sui generis approach to land con*510tracts, and the many advantages of treating them as mortgages. See Restatement (Third) of Property: Mortgages § 3.4 cmt. d.
¶ 62. Comment d to § 3.4 of the Restatement of Property: Mortgages is entitled "Rationale of this section." It explains the reasoning behind treating land contracts as mortgages, noting that "the rights of judgment creditors against vendor or purchaser will be rendered more predictable and secure" as a result. Further,
to the extent that a discernable judicial trend in this area exists, it favors mortgage characterization [of land contracts]. Recent decisions in several states, including Indiana, New York, and Kentucky have adopted this approach. Florida, in most situations, can also be included in this category. California decisions stop just short of this result.
The Restatement, frequently followed in nearly every jurisdiction, will sooner rather than later render the majority's view an anachronism. If the Restatement was good enough to provide the réasoning to support our venture into an issue of first impression in Kessel, 291 Wis. 2d 504, ¶ 22, why is the Restatement unimportant to the extent of non-citation here?
¶ 63. An article arising out of the Restatement of Mortgages Symposium is The contract for Deed as a Mortgage: The Case for the Restatement Approach, 1998 BYU L. Rev. 1111. The author, Professor Grant S. Nelson, concluded: "The Restatement approach to the contract for deed should be viewed as being neither 'pro-debtor' nor 'pro-creditor.' Rather, it represents an attempt to instill rationality and efficiency into the nation's land financing system." Id. at 1166. The extensive analysis and positive review of Professor Nelson's article is another reason why we should adopt the *511Restatement's approach in a case where, because of lack of precedent, we are free to do so.
¶ 64. Wisconsin has already adopted the view of the Restatement, though in a context different from that involved here. In Towne Realty, Inc. v. Edwards, 156 Wis. 2d 344, 349, 456 N.W.2d 651 (Ct. App. 1990), we noted: "A plain reading of chapter 703 evinces a legislative purpose to equate land contract vendors and mortgagees."
¶ 65. Other courts have recognized that the distinction between land contracts and mortgages is one of form only. In White v. Brousseau, 566 So. 2d 832, 835 (Fla. Dist. Ct. App. 1990), the court said:
[A] contract for deed wherein the seller agrees to convey title to land after the buyer pays all installments of the purchase price is merely a security device and is an alternative or substitute to an immediate conveyance of the title to the buyer with a purchase money mortgage back to the seller .... The form is different but the substance is the same for equitable purposes including the foreclosure procedure in the event the buyer defaults in payment of some portion of the purchase price.
Skendzel v. Marshall, 301 N.E.2d 641, 646 (Ind. 1973), echoes this view: "Conceptually, therefore, the retention of the title by the vendor is the same as reserving a lien or mortgage. Realistically, vendor-vendee should be viewed as mortgagee-mortgagor. To conceive of the relationship in different terms is to pay homage to form over substance." In Sebastian v. Floyd, 585 S.W.2d 381, 383 (Ky. 1979), the court wrote:
There is no practical distinction between the land sale contract and a purchase money mortgage, in which the seller conveys legal title to the buyer but retains a *512lien on the property to secure payment. The significant feature of each device is the seller's financing the buyer's purchase of the property, using the property as collateral for the loan.
Bean v. Walker, 464 N.Y.S.2d 895, 898 (App. Div. 1983), gives New York's answer to the problem we face:
[T]he vendees herein occupy the same position as the mortgagor at common law; both have an equitable title only, while another person has legal title. We perceive no reason why the instant vendees should be treated any differently than the mortgagor at common law. Thus the contract vendors may not summarily dispossess the vendees of their equitable ownership without first bringing an action to foreclose the vendees' equity of redemption. This view reflects the modern trend in other jurisdictions.
¶ 66. Had I been able to attract the vote of one of the majority judges, I would have concluded that the distinction between land contracts and mortgages is one of name only. I would have concluded that the trial court erroneously exercised its equitable discretion by holding, as a matter of law, that the Republic Bank's interest did not survive the strict foreclosure.3 I would have remanded with directions to order a sale of the property, and force Republic Bank to put its money where its assertions of inequity lie. No one gets hurt if *513the bank is right. If the property is worth what the bank contends, Jakubow gets what she contracted for — the balance due on the land contract. Lichosyt is home free — Jakubow and Republic Bank are paid. And Republic Bank gets property which it can sell, pay off Jakubow and apply the balance to its judgment. This is not only the modern view of this situation, it is certainly equitable. Because the majority adopts a rule in which Jakubow gets a windfall and Lichosyt and the Republic Bank get bankruptcy and nothing, respectively, I respectfully dissent.

 Because the trial court decided as a matter of law that Republic Bank, a person with a secondary interest in a land contract, could recover nothing, it did not address the question of the property's value. Were this a majority opinion, I would remand for this determination, among others. I take the values asserted by the bank because, assuming these values, there would be substantial equity in the property available to satisfy the bank's judgment lien. Also, I do not address other issues that would become relevant only if this were a majority opinion.

 All references to the Wisconsin Statutes are to the 2005-06 version unless otherwise noted.

 This view raises the question of whether this appeal is moot, since a deed back is a common alternative to strict foreclosure. The parties have not argued mootness, though they have discussed the merger of title in Jakubow. But the question persists why Jakubow continued an action in which she received no more than she already had. The practical reason, of course, is that she wanted to foreclose out Republic Bank's liens. That brings me full circle to whether Jakubow could do that without a sale that would protect Republic Bank's interests.