Royal Credit Union v. Schneider
| Decision Date | 07 July 2015 |
| Docket Number | No. 2014AP2850.,2014AP2850. |
| Citation | 364 Wis.2d 760,869 N.W.2d 171 (Table) |
| Parties | ROYAL CREDIT UNION, Plaintiff–Respondent, v. Frances M. SCHNEIDER and Valley Credit Union, Defendants, Deutsche Bank National Trust Company, as Trustee for Ameriquest Mortgage Securities, Inc., Asset–Backed Pass-through Certificates, Series 2004–R4, Defendant–Appellant. |
| Court | Wisconsin Court of Appeals |
Deutsche Bank National Trust Company appeals a foreclosure judgment entered in favor of Royal Credit Union (RCU). Deutsche Bank argues the circuit court erred by denying its motion to enlarge the time to answer RCU's complaint and its motion for relief from judgment. Deutsche Bank also raises arguments based on unjust enrichment and equitable subrogation. We reject all of Deutsche Bank's arguments and affirm the foreclosure judgment.
¶ 2 On March 25, 2003, Frances Schneider executed a note in the amount of $41,500 in favor of RCU. As security for the loan, Schneider granted RCU a revolving credit mortgage on certain real property in Eau Claire.
¶ 3 Deutsche Bank asserts that, in March 2004, Schneider “refinanced the Property by executing a mortgage in favor of Ameriquest Mortgage Company [,]” and the Ameriquest mortgage was subsequently assigned to Deutsche Bank. Deutsche Bank further contends that, as part of the refinancing, it paid the outstanding balance on the RCU loan. The record contains a letter, dated March 24, 2004, by which Ameriquest sent RCU a check in the amount of $40,658.78, which Ameriquest asserted represented “payment in full of your loan.” The letter requested that RCU “prepare either a release of Mortgage or a Reconveyance of the Deed of Trust.”
¶ 4 The record also contains a “Request for Reconveyance and Estoppel,” executed by Schneider on March 24, 2004. This document referenced the $40,658.78 check from Ameriquest and requested that RCU remove its lien against the subject property if the funds provided were sufficient to pay off Schneider's loan. RCU was directed to notify Ameriquest if the funds were insufficient.
¶ 5 RCU did not remove its lien on the property or file a satisfaction of Schneider's mortgage. Instead, on March 28, 2014, RCU filed a summons and complaint seeking to foreclose the mortgage, naming Schneider and Deutsche Bank as defendants.1 The complaint alleged Schneider had defaulted on the note and owed RCU $43,304.78. The complaint also alleged that Deutsche Bank “may claim some interest or lien in and to the Property by virtue of the Assignment of Ameriquest Mortgage Company Mortgage from Frances M. Schneider to Ameriquest Mortgage Company dated March 24, 2004[.]” However, the complaint asserted Deutsche Bank's interest, if any, was “subsequent, subordinate, and junior” to RCU's lien.
¶ 6 RCU's summons and complaint were served on Deutsche Bank on April 7, 2014. The summons informed Deutsche Bank it was required to respond with a written answer within twenty days. Deutsche Bank failed to do so. On May 23, 2014, RCU moved for summary judgment. Deutsche Bank retained outside counsel to represent it in the foreclosure action on June 17, 2014.
¶ 7 On June 23, 2014—seventy-seven days after it was served with RCU's summons and complaint—Deutsche Bank filed a proposed answer to the complaint, along with a motion to enlarge the time to answer. Attached to the motion was an affidavit of Deutsche Bank's attorney, Thomas Dill. Dill conceded Deutsche Bank was served with the summons and complaint on April 7, 2014, but he asserted the “individual who accepted service ... is not an attorney.” Dill also averred that Deutsche Bank's legal department received RCU's summary judgment motion on May 29, 2014, but “did not receive a copy of the Summons and Complaint.” Dill further asserted the RCU mortgage was “paid in full on or about March 24, 2004[,]” and Deutsche Bank's interest in the subject property was superior to RCU's.
¶ 8 RCU subsequently moved to strike Deutsche Bank's proposed answer and requested a default judgment. The circuit court held a hearing on both parties' pending motions on July 8, 2014. During the hearing, the court granted Deutsche Bank additional time to submit documentation regarding its claim that it had a “meritorious defense” to RCU's lawsuit.
¶ 9 The court granted RCU's motion to strike Deutsche Bank's proposed answer and its motion for default judgment in an August 22, 2014 oral ruling. The court also denied Deutsche Bank's motion to enlarge the time to answer RCU's complaint and its oral motion for relief from judgment. A written foreclosure judgment was entered on October 24, 2014. Deutsche Bank appeals.
¶ 10 Deutsche Bank first argues the circuit court erred by denying its motion to enlarge the time to answer RCU's complaint. A court's decision to grant or deny a motion to enlarge time is “highly discretionary.” Hedtcke v. Sentry Ins. Co., 109 Wis.2d 461, 467, 326 N.W.2d 727 (1982). A court properly exercises its discretion when its decision is based on the facts of record and on the application of a correct legal standard. Miller v. Hanover Ins. Co., 2010 WI 75, ¶ 29, 326 Wis.2d 640, 785 N.W.2d 493. “ ‘We will not reverse a discretionary determination by the [circuit] court if the record shows that discretion was in fact exercised and we can perceive a reasonable basis for the court's decision.’ ” Id., ¶ 30 (quoting Sukala v. Heritage Mut. Ins. Co., 2005 WI 83, ¶ 8, 282 Wis.2d 46, 698 N.W.2d 610 ).
¶ 11 It is undisputed that Deutsche Bank failed to answer RCU's complaint within twenty days of service, as required by Wis. Stat. § 802.06(1).2 A circuit court may enlarge the time for answering a complaint “on motion for cause shown and upon just terms.” Wis. Stat. § 801.15(2)(a). However, the court's power is limited: “If the motion is made after the expiration of the specified time, it shall not be granted unless the court finds that the failure to act was the result of excusable neglect.” Id.
¶ 12 Case law states that a court may grant relief under Wis. Stat. § 801.15(2)(a), if it finds that: “(1) the noncompliance was due to excusable neglect, and (2) an enlargement of time would serve the interests of justice; that is, whether the party seeking relief acted in good faith and whether the opposing party would be prejudiced by the time delay.” Sentry Ins. v. Royal Ins. Co. of Am., 196 Wis.2d 907, 915, 539 N.W.2d 911 (Ct.App.1995). Nevertheless, “when the circuit court determines that there is no excusable neglect, the motion [to enlarge time] must be denied.” Hedtcke, 109 Wis.2d at 468, 326 N.W.2d 727. Excusable neglect is not synonymous with neglect, carelessness or inattentiveness. Id. Rather, it is “that neglect which might have been the act of a reasonably prudent person under the circumstances.” Sentry Ins., 196 Wis.2d at 915, 539 N.W.2d 911.
¶ 13 Here, the circuit court concluded Deutsche Bank's failure to timely answer RCU's complaint was not the result of excusable neglect. The court properly exercised its discretion in this regard. In its oral decision, the court explained:
I think the case law would suggest that there needs to be some explanation, a specific incidence, and [a] really persuasive explanation that would justify the failure to file an answer in that time frame. Here, as I said, the only explanation that was offered came in the form of an affidavit of counsel. I think that was Mr. Dill, that the Complaint was not served on an attorney. There is no explanation offered about upon whom the Summons and Complaint [were] served, what that person's job was. There is no explanation about what that person did with the Summons and Complaint once [they] were served. There is no indication that the person was inexperienced in handling summons[es] and complaints. There is no explanation as to why only an attorney is capable of receiving a summons and complaint. Indeed, there was no explanation at all about what happened in those 77 days between service and when the ... proposed answer was filed, so I have to find that there has been a complete and utter failure to meet the burden of showing that there was excusable neglect here.
The court's explanation shows that it applied the correct legal standard to the facts of record. See Miller, 326 Wis.2d 640, ¶ 29, 785 N.W.2d 493. The court reasonably concluded Deutsche Bank's delay in answering the complaint was not the result of excusable neglect.
¶ 14 Deutsche Bank argues the circuit court erroneously exercised its discretion in three respects. First, Deutsche Bank argues the court erred by failing to consider attorney Dill's affidavit in support of the motion to enlarge time. As the basis for this argument, Deutsche Bank cites the written foreclosure judgment, which states that Deutsche Bank “failed to file any affidavits in support of its claim of excusable neglect” and “failed to file an affidavit to show there was a reasonable basis for its failure to meet the statutory time period to answer.” However, it is clear from the circuit court's oral decision that it did consider attorney Dill's affidavit. As quoted in the preceding paragraph, the court specifically noted that the only explanation provided for Deutsche Bank's delay in answering RCU's complaint was the averment in attorney Dill's affidavit that the summons and complaint were served on a non-attorney. The court properly found that the affidavit did not support Deutsche Bank's claim of excusable neglect or demonstrate a reasonable basis for its failure to meet the statutory time period to answer. We therefore reject Deutsche Bank's argument that the court erred by failing to consider attorney Dill's affidavit.
¶ 15 Second, Deutsche Bank argues the circuit court “misapplied Wisconsin law by imposing a heightened standard” for excusable neglect. Specifically, Deutsche Bank argues the court erred by stating Wisconsin law requires “some explanation, a specific incidence, and [a] really persuasive...
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