Hennessy v. Wells Fargo Bank, N.A.

Decision Date15 September 2020
Docket NumberAppeal No. 2019AP1206
Citation394 Wis.2d 357,2020 WI App 64,950 N.W.2d 877
Parties Daniel J. HENNESSY, Jr. and Jane E. Hennessy, Plaintiffs-Appellants, v. WELLS FARGO BANK, N.A., Defendant-Respondent.
CourtWisconsin Court of Appeals

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Brian G. Cahill, Daniel A. Manna, and Daniel J. Kennedy of Gass Weber Mullins LLC, Milwaukee.

On behalf of the defendant-respondent, the cause was submitted on the brief of Carla O. Andres, Nina G. Beck, Daniel J. Blinka of Godfrey & Kahn, S.C., Milwaukee.

Before Brash, P.J., Blanchard and Donald, JJ.

BLANCHARD, J.

¶1 Daniel Hennessy and Jane Hennessy appeal a circuit court order finding that a Mexican court judgment against the Hennessys is valid under Mexican law, and determining that Wells Fargo Bank, N.A., is entitled to domesticate the Mexican judgment in Milwaukee County Circuit Court, giving it effect in Wisconsin under principles of comity. On the valid-under-Mexican-law issue, the Hennessys argue that the circuit court clearly erred in finding key facts. We disagree and conclude that there is evidence in the record that would permit a reasonable person to make the same findings. On the comity issue, the Hennessys contend that the circuit court erroneously exercised its discretion in multiple ways. We reject this argument because we conclude that the court properly considered the facts of record under the proper legal standards and reasoned its way to a rational conclusion. Accordingly, we affirm.

BACKGROUND

¶2 The Hennessys planned to build a new condominium building on property in the city of San José del Cabo in the Mexican state of Baja California Sur. To finance the project, the Hennessys borrowed $7.5 million from M&I Bank in June 2008. The obligations of the parties to the financing of the condo project were defined in a set of interrelated construction loan documents: a loan agreement, a note, and a trust agreement.1 We provide additional details as necessary in the Discussion section below, but the following serves as basic background, none of which is disputed.

¶3 Mexican law limits ownership of certain types of real property by non-Mexican citizens such as the Hennessys. For this reason, the construction loan documents reflected that the Mexican property was to be held in trust with a Mexican entity as trustee, not by the Hennessys. M&I agreed to make the loan based on the "lien[s] or security interest[s]" in the property granted under the trust agreement, with the Hennessys obligated to make timely payments to note holder M&I under the loan agreement and note. If the Hennessys defaulted, and M&I made a request, the Mexican trustee was to "sell the Trust Property and use the income received from the sale to pay" M&I.

¶4 Wells Fargo succeeded in interest to all rights of M&I under the construction loan agreements.

¶5 After the loan proceeds were disbursed, the Hennessys failed to make required payments on the loan under the note. In August 2010, Wells Fargo instructed the Mexican trustee to take steps to sell the property, outside formal court proceedings, as contemplated in the event of default under the construction loan agreements. However, this attempt at extrajudicial action was stalled by a legal action that the Hennessys initiated in a Mexican court seeking to nullify the assignment from M&I to Wells Fargo, although the Hennessys' nullification action was ultimately unsuccessful.

¶6 In May 2012, Wells Fargo initiated a form of foreclosure action in the Eighth District Civil Court, a Mexican federal court in Mexico City.2 Wells Fargo sought in this action the return of the $7.5 million principal plus interest, damages, and fees pursuant to the construction loan documents, and its submission included copies of the construction loan agreements.

¶7 In March 2014, the court issued the Mexican judgment that is at issue in this case. The court stated in pertinent part, as translated into English:

The Hennessys are sentenced to pay Wells Fargo the principal amount of US $ 7,500,000.00 (seven million, five hundred thousand and 00/100 United States dollars, legal tender in the United States of America), in its equivalent in national currency (pesos) at the time that payment is made. In addition, the Hennessys are sentenced to pay ordinary interest, as was agreed to in the construction loan agreement, documented in the promissory note signed on the twenty-seventh of June of two thousand and eight, which may be quantified in an enforcement ruling. The Hennessys are notified that if they do not pay the foregoing amounts, they will be ordered to deliver to Wells Fargo the property with which the Hennessys guaranteed the promissory note in the loan agreement, so that the property can be auctioned off according to the terms of the chapter that applies to this matter.

(Names of parties here substituted for party designations before the Eighth District Civil Court.) Both parties appealed this decision to Mexico's Third Unitary Court. In an October 2014 decision, the appellate court modified the judgment, but affirmed it as modified. The modifications made by the appellate court are not significant to the arguments between the parties here. Neither side successfully appealed the judgment of the appellate court, as modified, and we follow the circuit court here in referring to this as "the Mexican judgment."3

¶8 The Hennessys filed this action in Milwaukee County Circuit Court in November 2016. They sought a declaration "that Wells Fargo is barred from asserting any action or claim against the Hennessys to enforce any obligation under" the construction loan documents. This request was based on Wisconsin's six-year statute of limitations for breach of contract claims. See WIS. STAT. § 893.43(1) (2017-18).4 The Hennessys argued that Wells Fargo's attempt at an extrajudicial sale of the property in August 2010 triggered the running of the limitations period, which had lapsed three months earlier, in August 2016. The circuit court agreed with the Hennessys. On summary judgment, the court declared that Wells Fargo could not initiate after August 26, 2016, a breach of contract claim based on the construction loan documents.

¶9 Separately, Wells Fargo counterclaimed for domestication of the Mexican judgment. This was a request for an order from the circuit court declaring, as a matter of comity, that the Mexican judgment against the Hennessys is a valid, final money judgment enforceable against the Hennessys that should be entered on the Milwaukee County judgment and lien docket. In its summary judgment ruling, the circuit court explained that its ruling on the statute of limitations issue had no effect on Wells Fargo's counterclaim, because the Mexican judgment arose from a proceeding initiated before August 26, 2016 (indeed, the judgment was itself issued before that date).5

¶10 To resolve the counterclaim, the circuit court began by conducting an extended evidentiary hearing over the course of two days. At this hearing, both sides were allowed to present evidence and present arguments addressing the circumstances surrounding the creation of the Mexican judgment and the judgment's meaning under Mexican law. The court was presented with citations to Mexican legal authorities, documents from the Mexican proceedings, and expert testimony.

¶11 After weighing this evidence and the arguments of the parties, the circuit court found that the Mexican judgment is valid under Mexican law. The court then considered arguments from the parties as to whether comity requires that the Mexican judgment be recognized as a valid judgment in Wisconsin. The court agreed with Wells Fargo, ruling that the Mexican judgment "is a final [j]udgment entitled to recognition by this [c]ourt."

¶12 Accordingly, the circuit court entered an order directing the county judgment clerk to enter and docket the Mexican judgment against the Hennessys in the principal amount of $7.5 million, plus unpaid ordinary accrued interest. As part of this order, the court declared that the Mexican judgment "allows Wells Fargo to foreclose on the underlying collateral property and to seek any resulting deficiency from the Hennessys" between what Well Fargo can realize from the sale of the property and outstanding loan debt, and that the judgment clerk "need not calculate the amounts due and owing, if any." The Hennessys appeal.

DISCUSSION

¶13 We address in turn the Hennessys' arguments that the circuit court clearly erred in finding that the Mexican judgment is valid under Mexican law and that it erroneously exercised its discretion in recognizing the Mexican judgment for domestication in Wisconsin.

I. VALIDITY UNDER MEXICAN LAW

¶14 The Hennessys do not challenge the form of the Mexican judgment in itself, nor the authority of the Mexican court to issue it. Instead, their validity challenge is that the circuit court clearly erred in accepting one expert view that the Mexican judgment gives Wells Fargo authority to pursue a deficiency against the Hennessys under Mexican law. Specifically, they argue that the circuit court clearly erred in finding the following as facts: (1) that the Mexican judgment functions, at least in part, as an in personam money judgment against the Hennessys (when the circuit court should have found instead that the Mexican judgment is solely the product of an in rem proceeding, with foreclosure as the only remedy that it provides); and (2) that the Mexican judgment resolved the personal liability of the Hennessys on the loan agreement and the note.

A. Standard Of Review

¶15 Our standard of review on this issue is unusual, in that it requires us to treat as issues of fact the resolution of what a foreign country's laws mean. When Wisconsin circuit courts are called on to examine the substance of the laws of a foreign country, they are finding facts, which " ‘must be proved [in the same way] as any...

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