Republic Bank of Chicago v. Lichosyt, 2006AP1578.

• Court: Court of Appeals of Wisconsin
• Citation: 2007 WI App 150,736 N.W.2d 153
• Docket Number: No. 2006AP1579.,No. 2006AP1578.,2006AP1578.,2006AP1579.
• Parties: REPUBLIC BANK OF CHICAGO, Plaintiff-Appellant, v. Jozef LICHOSYT a/k/a Joseph Lichosyt and Julia Jakubow, Trustee of The Julia Jakubow Living Trust, Defendants-Respondents, Village of lake Delton and Sauk County, Defendants. Julia Jakubow, Plaintiff-Respondent, v. Joseph Lichosyt a/k/a Jozef Lichosyt, Defendant-Respondent, Republic Bank of Chicago, Defendant-Appellant.
• Decision Date: 17 May 2007

736 N.W.2d 153 2007 WI App 150 REPUBLIC BANK OF CHICAGO, Plaintiff-Appellant,
v.
Jozef LICHOSYT a/k/a Joseph Lichosyt and Julia Jakubow, Trustee of The Julia Jakubow Living Trust, Defendants-Respondents,
Village of lake Delton and Sauk County, Defendants.
Julia Jakubow, Plaintiff-Respondent,
v.
Joseph Lichosyt a/k/a Jozef Lichosyt, Defendant-Respondent,
Republic Bank of Chicago, Defendant-Appellant. No. 2006AP1578. No. 2006AP1579. Court of Appeals of Wisconsin. Submitted on Briefs January 23, 2007. Opinion Filed May 17, 2007.

[736 N.W.2d 155]

On behalf of the plaintiff-appellant and defendant-appellant, the cause was submitted on the briefs of Michael S. Polsky and Dorothy H. Dey of Beck, Chaet & Bamberger, S.C., Milwaukee.

On behalf of the defendants-respondents and plaintiff-respondent, the cause was submitted on the brief of Gregory J. Fumelle of Krueger & Hernandez SC, Madison.

Before LUNDSTEN, P.J., DYKMAN and VERGERONT, JJ.

¶ 1 VERGERONT, J.

This appeal concerns the relationship between two actions that affect the interests of a judgment lienholder, a land contract vendor, and a land contract vendee. In one action the judgment lienholder, the Republic Bank of Chicago, seeks a foreclosure and sale of the judgment debtor's interest as a land contract vendee; in the other action, the land contract vendor seeks strict foreclosure of the land contract. Although the Bank's action was filed first, the circuit court permitted the strict foreclosure action to continue and granted a judgment of strict foreclosure; it then dismissed the Bank's action. The Bank appeals both the strict foreclosure judgment and the order dismissing its action, and we have consolidated the appeals.

¶ 2 We affirm the circuit court's judgment of strict foreclosure and its order dismissing the Bank's action for foreclosure and sale. We conclude: (1) the circuit court did not err in declining to dismiss the strict foreclosure action because of the Bank's action; (2) the circuit court properly exercised its discretion in declining to dismiss the strict foreclosure action because of the no-transfer order entered in the Bank's action; (3) the land contract vendee's quitclaim deed to the land contract vendor did not require dismissal of the strict foreclosure action; (4) WIS. STAT. § 846.30 (2005-06)¹ does not prevent a land contract vendee from waiving the right to redemption in a strict foreclosure action; and (5) the circuit court correctly decided it did not have the discretion under existing case law to grant the Bank a redemption period in the strict foreclosure action.

BACKGROUND

¶ 3 In February 2002, Jozef Lichosyt entered into a land contract with Julia Jakubow, as trustee of the Julia Jakubow Living Trust (Jakubow),² for the purchase of property in Wisconsin Dells, Sauk County, that contained a motel, inn, restaurant, and cocktail lounge (the property). The total purchase price was $4,350,000, with $350,000 to be paid upon the execution of

736 N.W.2d 156

the contract and the remainder, with interest, to be paid in installments over the next seven years. The contract was recorded in the office of the Sauk County Register of Deeds in March 2002.

¶ 4 In November 2004, the Bank filed and docketed in the Sauk County circuit court a judgment against Lichosyt for $1,331,082.05 that had been entered in favor of the Bank in a proceeding in the State of Illinois. The Bank then filed an action in Sauk County circuit court seeking a judgment of foreclosure and sale of the property and distribution of the proceeds (the Bank's action). The complaint alleged that by virtue of the docketed judgment, the Bank held a judgment lien on the property. The complaint named as defendants Jakubow, as land contract vendor, and municipalities who might have an interest because of delinquent taxes.

¶ 5 Lichosyt and Jakubow both filed answers to the complaint. Jakubow's answer asserted that its land contract vendor's lien was superior to any judgment lien held by the Bank and asked either for dismissal of the complaint or, in the event of foreclosure, a determination of the land contract vendor's first lien priority. The Bank moved for appointment of a receiver on the ground that Lichosyt was committing waste because he was collecting income from the property, but was not applying it to the delinquent taxes or the Bank's judgment against Lichosyt.³

¶ 6 A day before the hearing on the receivership motion, Jakubow filed a complaint for strict foreclosure in the Sauk County circuit court naming both Lichosyt and the Bank as defendants (the Jakubow action). The complaint alleged that Lichosyt was in default under the land contract and asked the court to set a date by which Lichosyt was to pay all sums due under the contract; if he failed to do so, the complaint asked the court to order that Lichosyt, the Bank, and all persons claiming under them subsequent to the notice of the filing of the complaint be foreclosed from "all right, title interest and equity of redemption" in the property. This action was assigned to the judge presiding in the Bank's action.

¶ 7 At the hearing the next day on the Bank's receivership motion in the Bank action, Lichosyt and the Bank presented to the court a stipulation and proposed order they had agreed upon regarding the appointment of a receiver; under the stipulation and proposed order, the receiver could sell the property after December 31 without Lichosyt's consent under certain conditions. Jakubow, through counsel, agreed to the stipulation "contingent on the agreement between [Jakubow and the Bank] for payment of interest pending sale of the property as specified." At the same time, Jakubow's counsel referred to the strict foreclosure action filed the previous day and "reserved the right to proceed independently" in that action. The court approved and signed the proposed order.

¶ 8 On October 14, 2005, Lichosyt filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code in the United States District Court, Northern District of Illinois. The bankruptcy court granted relief from the automatic stay imposed by 11 U.S.C. § 362 to both the Bank and Jakubow.⁴

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¶ 9 After the automatic stay was lifted, Lichosyt and Jakubow entered into a stipulation for judgment in the strict foreclosure action in which Lichosyt waived any right to redemption he had, agreed that Jakubow was entitled to strict foreclosure, and agreed that the judgment could provide that "any and all persons claiming under him, shall be forever foreclosed from any right, title and interest to the land" and "title shall vest" in Jakubow. At the same time, Lichosyt executed a quitclaim deed to Jakubow that "released all [his] right, title, and interest in and to the Property . . . arising from [the] Land Contract," and executed an "Affidavit of Fair Dealing." In the affidavit, Lichosyt averred that he understood he had the right to redeem in the strict foreclosure action, but he did not want to refinance the property and he did not have the funds to eliminate the default or pay the entire land contract; he had executed the quitclaim deed voluntarily, without being pressured, and had consulted with his attorney; in his opinion the current value of the property was not in excess of the amount he owed plus the accruing taxes; and Jakubow, in accepting the deed, had agreed to cancel all his obligations under the land contract, including any deficiency.

¶ 10 In a hearing in February 2006, the court took up pending motions regarding the receiver in the Bank's action⁵ and the impact of the stipulation for judgment in the strict foreclosure action. Jakubow's position was that the receivership should be terminated because, by virtue of the stipulation in the foreclosure action and the quitclaim deed, legal and equitable title were now merged with her; therefore, she had the right to manage the property herself and to choose whether or not she wanted to sell it. The Bank's position was that the receiver should be permitted to go ahead with the sale of the property and that Lichosyt should not be allowed to frustrate the Bank's action by a stipulation and quitclaim deed in the strict foreclosure action. The Bank also argued that, while its judgment lien was junior to that of Jakubow, it had a right of redemption in the strict foreclosure action because of its lien and the pending action to foreclose its lien.⁶

736 N.W.2d 158

¶ 11 The court issued a decision in the Bank's action in which it concluded that the execution of the quitclaim deed granted all of Lichosyt's interest in the property to Jakubow, but had no effect on the Bank's judgment lien or on the Bank's foreclosure action; similarly, the stipulation and Lichosyt's waiver of the right of redemption did not affect the Bank's judgment lien rights because it was a party in the strict foreclosure action and whatever rights it had continued until the court issued a decision on the merits. The court rejected the Bank's argument that it had the right in the strict foreclosure action to place itself in Lichosyt's position and exercise his right to redemption and thereby acquire the property. The court reasoned that the Bank was the holder of a judgment lien, was not a secured creditor, and its rights as a judgment lienholder were governed by statute, which does not provide such a right. The court observed that a judgment lienholder did have a statutory right to bid and purchase at a sale, but that in the common law strict foreclosure action there was no sale, and Jakubow had the right under common law to elect strict foreclosure rather than a judgment and sale. The court noted the case law cited by the Bank in which the assignee of a land contract vendee's interest had been permitted to exercise the right of redemption; but the court concluded those cases did not apply because there was no assignment to the Bank in this case.

¶ 12 The court denied the receiver's motion to...