Bank of N.Y. Mellon v. Klomsten

• Citation: 911 N.W.2d 364,381 Wis.2d 218,2018 WI App 25
• Decision Date: 22 March 2018
• Docket Number: Appeal No. 2017AP405
• Parties: The BANK OF NEW YORK MELLON, Plaintiff-Respondent, v. Gloria J. KLOMSTEN and Steven S. Klomsten, Defendants-Appellants, McAdams, Inc. and Orthopaedic Associates of Wisconsin, S.C., Defendants.
• Court: Wisconsin Court of Appeals

381 Wis.2d 218
911 N.W.2d 364
2018 WI App 25

The BANK OF NEW YORK MELLON, Plaintiff-Respondent,
v.
Gloria J. KLOMSTEN and Steven S. Klomsten, Defendants-Appellants,^†

McAdams, Inc. and Orthopaedic Associates of Wisconsin, S.C., Defendants.

Appeal No. 2017AP405

Court of Appeals of Wisconsin.

Submitted on Briefs January 22, 2018
Filed March 22, 2018

On behalf of the defendants-appellants, the cause was submitted on the briefs of Reed J. Peterson of Reed Peterson & Associates, LLC, Madison.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Thomas C. Dill of BP Peterman Law Group, LLC, Brookfield.

Before Lundsten, P.J., Sherman and Kloppenburg, JJ.

KLOPPENBURG, J.

381 Wis.2d 222

¶1 This case arises out of a foreclosure action initiated by Bank of New York Mellon against Gloria and Steven Klomsten. The circuit court granted summary judgment in favor of the Bank. On appeal, the Klomstens challenge two rulings of the circuit court: (1) the court’s denial of the Klomstens’ motion to dismiss, and (2) the court’s granting of the Bank’s motion for summary judgment. The Klomstens argue that the circuit court should have granted their motion to dismiss for either of the following reasons: the action is barred by the six-year statute of limitations in WIS. STAT. § 893.43 (2015-16),¹ which applies to breach of contract actions, or the complaint fails to state a claim for relief because the Bank does not sufficiently allege that it possesses the original note, which the Bank must prove to prevail on its foreclosure claim. The Klomstens argue that the circuit court erred in granting the Bank’s motion for summary judgment because the Bank’s submissions in support of summary judgment do not establish a prima facie case that the Bank is the proper plaintiff in this foreclosure action.

¶2 We reject both of the Klomstens’ arguments relating to the motion to dismiss. First, it is well established that the running of the statute of limitations that applies to enforcement of a note does not prevent timely foreclosure of the mortgage that secures the note, and the Klomstens do not cite any legal authority to the contrary or argue that this action is otherwise untimely. Second, assuming without deciding that the Bank must allege that it has possession or the ability to possess the note, we conclude that the

381 Wis.2d 223

complaint does not fail to state a claim because it can reasonably be inferred from the allegations

911 N.W.2d 367

it contains, along with the copies of the mortgage and note endorsed in blank attached to the complaint, that the Bank is asserting that it possesses, or has the ability to possess when needed, the original note. Therefore, the complaint does not fail to state a claim for the reason alleged by the Klomstens.

¶3 However, we agree with the Klomstens’ argument as to the motion for summary judgment. We conclude that the Bank’s submissions in support of summary judgment do not establish each element of its prima facie case for this foreclosure action because the Bank’s submissions do not aver facts showing that the Bank possesses the original note and, therefore, that the Bank is a proper plaintiff in this foreclosure action. Accordingly, we reverse and remand the case for further proceedings.

BACKGROUND

¶4 The Bank filed this action in 2016, alleging that the Klomstens failed to comply with the terms of a note and mortgage executed by the Klomstens "by failing to pay past due payments as required" as of June 2005, and seeking a judgment of foreclosure. The Bank attached to its complaint a copy of the note and mortgage it alleged the Klomstens executed in 2003.²

¶5 The Klomstens filed a motion to dismiss asserting that the action is barred by

381 Wis.2d 224

WIS. STAT. § 893.43, the six-year statute of limitations that applies to breach of contract actions, and that the complaint fails to state a claim for relief because the Bank does not sufficiently allege that it possesses the original note. While the Klomstens’ motion was pending, the Bank filed a motion for summary judgment. In support of its summary judgment motion, the Bank submitted two affidavits, one from the Bank’s attorney, who avers primarily as to the attorney’s fees and costs incurred by the Bank in this action,³ and one from Charlene Butler, an employee of Shellpoint Mortgage Servicing, who avers that Shellpoint is the servicer for the Bank "in relation to the loan that is the subject of this litigation."

¶6 In opposition to the Bank’s summary judgment motion, the Klomstens submitted an affidavit in which Steven Klomsten describes his dealings with various financial and servicing entities regarding the note and mortgage.

¶7 The circuit court denied the Klomstens’ motion to dismiss and granted the Bank’s motion for summary judgment, "having determined that all material allegations are true; that there is no debate as to the caselaw and that applying the facts to the law, Summary Judgment is appropriate." This appeal follows.

¶8 We will relate additional facts, particularly as to the allegations in the complaint and the averments in the affidavits, in the discussion that follows.

381 Wis.2d 225

DISCUSSION

¶9 As stated, the Klomstens challenge the circuit court’s rulings denying their motion to dismiss and granting the Bank’s

911 N.W.2d 368

motion for summary judgment. We address each of the rulings in turn.

I. The Klomstens’ Motion to Dismiss

¶10 The Klomstens argue that the circuit court should have granted the motion to dismiss for either of the following reasons: the action is barred by the six-year statute of limitations in WIS. STAT. § 893.43, or the complaint fails to state a claim for relief because the Bank does not sufficiently allege that it possesses the original note, which the Bank must prove to prevail on its foreclosure claim. As we explain, we reject each of the Klomstens’ arguments.

¶11 Before we address the Klomstens’ arguments, we first dispense with the Bank’s argument that the Klomstens were required to seek an interlocutory appeal of the circuit court’s nonfinal order denying their motion to dismiss in order to preserve the challenge to that order. Under WIS. STAT. RULE 809.50(1), a party may file a petition for leave of the court of appeals permitting appeal of a nonfinal judgment or order that is not appealable as of right within fourteen days after entry of the judgment or order. The Bank cites no legal authority to support its proposition that a party must do so to bring a nonfinal ruling before the appellate court. Nor could the Bank, because the law is to the contrary: "An appeal from a final order brings before the appellate court all prior nonfinal orders and rulings adverse to the appellant and favorable to the

381 Wis.2d 226

respondent made in the action or proceeding." Jacquart v. Jacquart , 183 Wis. 2d 372, 380-81, 515 N.W.2d 539 (Ct. App. 1994) ; WIS. STAT. RULE 809.10(4). Therefore, the circuit court’s nonfinal ruling denying the Klomstens’ motion to dismiss is properly before us via the Klomstens’ appeal from the court’s final ruling granting summary judgment in favor of the Bank.

A. Statute of Limitations

¶12 We are required to choose and apply the appropriate Wisconsin statute of limitations to the Bank’s claims to determine whether they are time-barred. "Choosing the correct statute of limitations involves a question of law that we independently review." Zastrow v. Journal Communications, Inc. , 2006 WI 72, ¶ 12, 291 Wis. 2d 426, 718 N.W.2d 51.

¶13 The Bank brought this foreclosure action eleven years after the Klomstens stopped making payments. The Klomstens argue that the circuit court should have dismissed this action because it is barred by WIS. STAT. § 893.43(1), the six-year statute of limitations that applies to breach of contract actions, and which specifically applies to actions "upon any contract, obligation, or liability." The Bank concedes that the statute of limitations has "expir[ed] on the note," but argues that its action to foreclose the mortgage is timely under WIS. STAT. § 893.33(2) and (5), the thirty-year statute of limitations that applies to actions "affecting the possession or title of any real estate" including "all claims to an interest in real property."

¶14 In response to the Bank’s argument, the Klomstens point to WIS. STAT. § 893.33(4), which provides that the thirty-year statute of limitations "does

381 Wis.2d 227

not extend the right to commence any action or assert any defense or counterclaim beyond the date at which the right would be extinguished by any other statute." See City of Prescott v. Holmgren , 2006 WI App 172, ¶ 9, 295 Wis. 2d 627, 721 N.W.2d 153 ( WIS. STAT. § 893.33 is a "general real...