Kienbaum v. Haberny

• Citation: 273 Wis. 413,78 N.W.2d 888
• Parties: Carl KIENBAUM, Plaintiff, v. Edward C. HABERNY et al., Defendants, Agnes Haberny et al., Appellants, Thornton Finance Corp., a corporation of Fond du Lac, Respondent.
• Decision Date: 09 October 1956
• Court: United States State Supreme Court of Wisconsin

Page 888

78 N.W.2d 888

273 Wis. 413

Carl KIENBAUM, Plaintiff, v. Edward C. HABERNY et al., Defendants, Agnes Haberny et al., Appellants, Thornton Finance Corp., a corporation of Fond du Lac, Respondent.

Supreme Court of Wisconsin.

Oct. 9, 1956.

Clark Dempsey, Whitewater, for Agnes Haberny.

John J. Byrnes, Elkhorn, for Home Lumber & Fuel Co.

Morrisy, Morrisy & Zastrow, Elkhorn, for respondent.

STEINLE, Justice.

The complaint in the mortgage foreclosure action commenced by the plaintiff, Carl Kienbaum, in March, 1954, alleged default in payment of the obligation of the defendants Edward C. Haberny and Mary Haberny, his wife, under a first mortgage executed to the plaintiff on December 17, 1951 conditioned for the payment of $18,000 as evidenced by a note in said sum.

The complaint also alleged that the defendant, Agnes Haberny, is the owner and holder of a second mortgage in the sum of $2,000 covering the real estate involved. It was alleged that this second mortgage was recorded in vol. 290 of mortgages on page 251 in the Office of the Register of Deeds of Walworth county. It was further asserted that 'the right, title and interest of said Agnes Haberny is subject and subordinate to the lien of the plaintiff's mortgage.'

The complaint set forth the interest of the defendant, Thornton Finance Corporation, as owner and holder of a third mortgage against the property. Certain recording data was specified. It was alleged that the records indicate an obligation of $7,389.02 due on said mortgage, but that the plaintiff had no knowledge as to the correct amount. The priority of plaintiff's mortgage to said mortgage was alleged.

Further, the complaint alleged the interest of the defendant, Lloyd H. Sietam as holder of a judgment against Edward C. and Mary Haberny for $300.43 which was subject and subordinate to the mortgage of the plaintiff.

Judgments of the defendants, Bank of Oregon and John Peyer, against Edward C. and Mary Haberny, also subject to the prior rights of the plaintiff, were set forth in the complaint.

The complaint also alleged that the defendant, Home Lumber and Fuel Company, a corporation, appears to hold a mechanic's lien against the premises, filed October 13, 1953, and that said lien is subject to plaintiff's mortgage lien.

None of the defendants, excepting Thornton Finance Corporation, interposed an answer to the complaint. The answer alleged that $6,229.61 was due to said finance company. The answer was served only upon the plaintiff. The defendant, Sietam, by his attorneys, filed a notice of appearance. By its answer, Thornton Finance Corporation set up its third mortgage and its priority to all other interests asserted in the complaint excepting as to the first and second mortgages. Issue was not taken with the answer of Thornton Finance Corporation by any of the parties defendant. In its prayer for relief, the finance company petitioned that the remainder of any surplus, after the first and second mortgages had been fully paid, be delivered to it.

The matter came on for hearing before the court on April 21, 1954. The findings of fact and conclusions of law set forth the priority of the mortgages of Carl Kienbaum, plaintiff; Agnes Haberny, defendant; and Thornton Finance Corporation, defendant, in that order. Judgment was entered April 26, 1954. It directed that the surplus money from the sale was subject 'to further order of the court.' Sheriff's sale of the mortgaged premises was held on June 29, 1955. Thornton Finance Corporation purchased the premises at the sale by offering the highest bid, to wit, $25,500. The amount due to the first mortgagee was $22,229.36. Confirmation of sale came on for hearing on July 18, 1955. The defendants Agnes Haberny and Home Lumber and Fuel Company appeared at said hearing. Agnes Haberny petitioned the court for the face amount of her note in the sum of $2,000 plus the interest thereon. Home Lumber and Fuel Company petitioned for its share of the surplus based upon a mechanic's lien filed subsequent to the execution of the mortgage to Thornton Finance Corporation for materials delivered by it to the mortgaged premises and which were visible to view in the structure of a fence, prior to the execution of said finance company's mortgage. The third mortgagee, Thornton Finance Company, made application to the court to disallow all claims for the surplus of the proceeds of the sale made by claimants not appearing and alleging the amount and priority of their claims in the foreclosure action. The sale was confirmed. On September 28, 1955, the court heard motions for the distribution of the surplus. Thornton Finance Corporation moved the court for an order directing payment to if of all surplus after $2,000 had been paid to Agnes Haberny in satisfaction of her mortgage, and after $223.73 had been paid to Lloyd H. Sietam in full payment of his judgment. On November 9, 1955, in its decision on motions for the surplus, the court ordered payment to Agnes Haberny in the sum of $2,00; payment to Llyod H. Sietam in the sum of $223.73 and payment of the balance of $2,694.67 to Thornton Finance Corporation. Specifically the court determined that 'Agnes Haberny and Home Lumber and Fuel Company failed to appear and exert or establish the face amount of their claim or priority in the foreclosure proceedings, and are barred now in sharing in the surplus, except in so far as their respective priority is agreed to and admitted by Thornton Finance Corporation in its motion for disbursement of the surplus.

The question presented is whether the holder of the second mortgage and the holder of the mechanic's lien, both of whom were parties to the action, lost any of their rights to share in the surplus by failing to answer or make an appearance prior to the confirmation of the foreclosure sale.

The learned trial court was of the view that sections 278.09 and 278.15 as published in the Wisconsin Statutes of 1953 and 1955 show a clear legislative intent that equities in foreclosure should be determined in the foreclosure action, or in any event before the foreclosure sale. It is the position of the appellants that under the common law and the statutes, junior mortgage holders and other junior lienholders are not required in the protection of their interests to make claim for a division of surplus until such time as there has been determination that a surplus exists.

Appellants and respondents in their printed and oral arguments have presented an abundance of citations to sustain their respective positions with reference to the issue raised.

A crucial consideration in the deciding of the issue is whether the provisions appearing in section 278.095(4), Stats. of 1933, were in existence and pertinent to the cause in 1955 when the order appealed from was rendered. Section 278.095(4), Stats. of 1933, Court Rule XXV, provided:

'If there shall be any surplus paid into court by the sheriff or referee, any party to the action or any person not a party who had a lien on the mortgaged premises at the time of sale, may file with the clerk of court into which the surplus was paid, a notice stating that he is entitled to such surplus money or some part thereof, together with the nature and extent of his claim. The court shall determine the rights of all persons in such surplus fund by reference or by testimony taken in open court, but no such hearing shall be had in court or before a referee except upon eight days' notice to all persons that have appeared in the action or filed notice of claim to such surplus money. If any such claimant shall not have appeared by attorney, notice of such hearing may be served by mail directed to the claimant at the place of his residence as stated in his notice of claim.'

Chapter 541 of the Laws of 1935 was an act of the Legislature which was designed in part to revise portion of Title XXV relating to procedure in civil actions 'for clarity and conciseness of language and simplifying and improving said proceedings and for harmonizing the substantive provisions with the procedural rules which are being revised by the Supreme Court.' Wisconsin Session Laws, 1935, p. 947 et seq.

Chapter 541, Laws of 1935, was introduced in the Legislature on January 18, 1935 as Bill 50 S. The bill passed in the Senate August 16, 1935. It was amended and passed in the Assembly August 22, 1935. It was concurred in by the Senate August 30, 1935. It was approved by the Governor September 28, 1935 and was published October 2, 1935. The act provided for a delayed effective date of January 1, 1936.

Prior to the introduction of Bill 50 S, § 278.095(4), Stats., of 1933, was included under Title XXV.

In the Revisor's note of section 369 of ch. 541, Laws of 1935, there appeared a statement that sections 278.095 and 278.10 are consolidated, and renumbered 278.10. However, the revised section 278.10 as appears in section 369 of ch. 541 failed to include any provision of section 278.095. Under section 373 of ch. 541, Laws of Wisconsin, 1935, Wis. Session Laws, 1935, pp. 1058-1059, section 278.095(4), Stats., of 1933 in its entirety was made a part of section 278.16 entitled 'Notice and Report of Sale, Payment to Plaintiff;...