Bank Mut. F/K/A First Northern Sav. Bank v. S.J. Boyer Constr. Inc.

• Decision Date: 09 July 2010
• Docket Number: No. 2008AP912.,2008AP912.
• Citation: 785 N.W.2d 462,326 Wis.2d 521,2010 WI 74
• Parties: BANK MUTUAL f/k/a First Northern Savings Bank, Plaintiff-Respondent-Petitioner, v. S.J. BOYER CONSTRUCTION, INC., Steven J. Boyer and Marcy A. Boyer, Defendants-Appellants, Pioneer Credit Union, Defendant.
• Court: Wisconsin Supreme Court

326 Wis.2d 521

785 N.W.2d 462

2010 WI 74

BANK MUTUAL f/k/a First Northern Savings Bank, Plaintiff-Respondent-Petitioner,

v.S.J. BOYER CONSTRUCTION, INC., Steven J. Boyer and Marcy A. Boyer, Defendants-Appellants,Pioneer Credit Union, Defendant.

No. 2008AP912.

Supreme Court of Wisconsin.

Argued Oct. 20, 2009.

Decided July 9, 2010.

For the plaintiff-respondent-petitioner there were briefs by Roy L. Prange, Jr. and Quarles & Brady LLP, Madison, and oral argument by Roy L. Prange, Jr.

For the defendants-appellants there was a brief by Philip J. Danen and Roels, Keidatz, Fronsee & Danen, LLP, DePere, and oral argument by Philip J. Danen.

An amicus curiae brief was filed by John E. Knight, James E. Bartzen, Kirsten E. Spira, and Boardman, Suhr, Curry & Field LLP, Madison, on behalf of the Wisconsin Bankers Association.

DAVID T. PROSSER, J.

¶ 1 This is a review of a published decision of the court of appeals, Bank Mutual v. S.J. Boyer Construction, Inc., 2009 WI App 14, 316 Wis.2d 266, 762 N.W.2d 826, which reversed an order of the Brown County Circuit Court, Timothy A. Hinkfuss, Judge. The order denied Steven and Marcy Boyer (the Boyers) relief from judgments for the amount due on several notes. The Boyers had guaranteed payment on the notes.

¶ 2 The case presents two issues. The first is whether a mortgagee, by electing to foreclose on a mortgage under the shortened redemption period provided by Wis. Stat. § 846.103(2) (2007-08),¹ forfeits the right to obtain a judgment against a guarantor of payment of the underlying debt. The second is whether, if Wis. Stat. § 846.103(2) requires a mortgagee foreclosing under the shortened redemption period to waive or forfeit its right to obtain a judgment against a guarantor of payment, the guarantor may nonetheless waive by contract the right to be free from such a judgment.

¶ 3 We conclude that a mortgagee who forecloses under the shortened redemption period of Wis. Stat. § 846.103(2) does not forfeit the right to obtain a judgment against a guarantor of payment even though it must waive its right to collect any deficiency from the debtor. We conclude that guarantors of payment are not members of the class of persons against whom a mortgagee must waive judgment when invoking Wis. Stat. § 846.103(2) because guarantors are not "personally liable for the debt secured by the mortgage." This statutory phrase is used to distinguish the liability of a borrower on a debt, which is a personal obligation, fromthe liability of a mortgagor, which is an obligation limited to the property the mortgagor has put up as security for the debt. The statutory phrase does not contemplate guarantors whose liability arises not from the debt but from a separate contract. We also conclude that the textually and contextually manifest purpose of the statute is not furthered by requiring a mortgagee to waive the right to judgment against a guarantor when proceeding under Wis. Stat. § 846.103(2). Because we reach this conclusion, we decline to address whether a guarantor may waive the right to be free from deficiency judgment under Wis. Stat. § 846.103(2).

¶ 4 Because a mortgagee proceeding under Wis. Stat. § 846.103(2) need not waive and does not forfeit judgment against a guarantor of payment, the circuit court properly denied the Boyers' motions for relief from judgment. Consequently, we reverse the decision of the court of appeals.

I. FACTS AND PROCEDURAL HISTORY

¶ 5 The facts are undisputed. On February 1, 2000, the Boyers entered into aContinuing Guaranty (Unlimited) with First Northern Savings Bank, now doing business as Bank Mutual. This Guaranty read, in relevant part:

GUARANTY. For value received, and to induce First Northern Savings Bank, S.A. of Green Bay, Wisconsin ("Lender"), to extend credit or to grant or continue other credit accommodations to S.J. Boyer Construction, Inc. ("Debtor"), the undersigned jointly and severally guarantee payment of the Obligations defined below when due.... "Obligations" means all loans, drafts, overdrafts, checks, notes, and all other debts, obligations and liabilities of every kind anddescription, whether of the same or a different nature, arising out of credit previously granted, credit contemporaneously granted or credit granted in the future by Lender to any Debtor, to any Debtor and another, or to another guaranteed or endorsed by any Debtor.... This guaranty is also secured (to the extent not prohibited by law) by all existing and future security agreements between Lender and any of the undersigned and by any mortgage stating it secures guaranties of any of the undersigned. This Guaranty is valid and enforceable against the undersigned even though any Obligation is invalid or unenforceable against any Debtor.

The Guaranty also contained a waiver provision:

WAIVER. To the extent not prohibited by law the undersigned expressly waive notice of the acceptance of this Guaranty, the creation of any present or future Obligation, default under any Obligation, proceedings to collect from any Debtor or anyone else, all diligence of collection and presentment, demand, notice and protest and any right to disclosures from Lender regarding the financial condition of any Debtor or guarantor of the Obligations or the enforceability of the Obligations. No claim, including a claim for reimbursement, subrogation, contribution or indemnification which any of the undersigned may, as a guarantor of the Obligations, have against a co-guarantor or any of the Obligations or against any Debtor shall be enforced nor any payment accepted until the Obligations are paid in full and no payments to or collections by Lender are subject to any right of recovery.

¶ 6 Between February 2003 and October 2005, Boyer Construction executed five business notes to Bank Mutual, totaling nearly $1,400,000.² The notes were made in conjunction with loans made by BankMutual to Boyer Construction. The loans were secured by seven mortgages on five properties owned by Boyer Construction.

¶ 7 In time, Boyer Construction defaulted on the notes, and Bank Mutual initiated this action against Boyer Construction and the Boyers individually on February 1, 2007. Bank Mutual's complaint included five counts of foreclosure-one count for each of the properties covered by the seven mortgages-and a separate claim directly against the Boyers for the amounts due under the defaulted notes. For each foreclosure claim, Bank Mutual stated that it waived any deficiency against Boyer Construction.

¶ 8 Boyer Construction and Steven Boyer answered on March 13, 2007, admitting most of the allegations but denying thatSteven was liable on the guaranty. Marcy Boyer did not answer.³

¶ 9 Bank Mutual moved for summary judgment against Steven and Boyer Construction and default judgment against Marcy. Neither Boyer Construction nor Steven opposed the motion for summary judgment. The court granted both motions. On May 31, 2007, the court entered judgments against Steven and Marcy in the amount of $1,436,457.85. The court also entered a foreclosure judgment on the five mortgaged propertiesowned by Boyer Construction, ordering that all five be sold. The court also filed Findings of Fact and Conclusions of Law in which it noted "[t]hat the Plaintiff [Bank Mutual] waived a deficiency claim against the principal defendant Boyer Construction."

¶ 10 Following entry of the foreclosure judgment, the mortgaged properties were sold at a sheriff's sale. The circuit court authorized the sale three months after entry of the foreclosure judgment because Bank Mutual had waived its right to a deficiency judgment against Boyer Construction pursuant to § 846.103(2), which provides for a shortened redemption period if the mortgagee waives a deficiency judgment against "every party who is personally liable for the debt secured by the mortgage." Bank Mutual was the only bidder and purchased the properties for $1,180,000.

¶ 11 Bank Mutual moved for an order confirming the sheriff's sale. Boyer Construction and Steven objected to confirmation on grounds that the sale violated Wis. Stat. § 846.103 because Bank Mutual elected the shortened redemption period but did not expressly waive a deficiency judgment against the Boyers. On January 11, 2008, the circuit court heard oral argument on this objection. At this hearing, Steven also raised a motion for relief from the judgment under Wis. Stat. § 806.07.⁴

¶ 12 The court overruled the objection and denied Steven's motion for relief. The court based its conclusion on two grounds. First, it concluded thatSteven should have challenged the Findings of Fact and Conclusions of Law, rather than waiting until after the sale to raise his objection. Second, it concluded that the Guaranty, as a contract separate from the business notes, provided an independent basis for the Boyers to be liable to Bank Mutual, in spite of the language of § 846.103(2) requiring the waiver of deficiency against parties "personally liable" for the debts.⁵

¶ 13 On February 8, 2008, Marcy filed a motion to re-open the default judgment pursuant to Wis. Stat. § 806.07. The court also denied Marcy's motion for relief.⁶The court entered an order denying Boyer Construction and the Boyers' motions, on February 26, 2008. Boyer Construction and the Boyers appealed.

¶ 14 The court of appeals reversed the circuit court in a unanimous, published opinion. Bank Mutual, 316 Wis.2d 266, 762 N.W.2d 826. The court began its analysis by looking at the text of Wis. Stat. § 846.103(2) and noting that nothing in the text explicitly excluded guarantors from those "personally liable for the debt secured by the mortgage." Id., ¶ 12. The court then turned to the question of whether the guaranty rendered the Boyers personally liable for the notes issued by Boyer Construction. Id. ¶ 15 In determining whether a guaranty makes a party personally liable for a debt, the court distinguished between an absolute guaranty and a conditional guaranty. Id., ¶ 13 (citing 38 Am.Jur.2d Guaranty...