State Bank of Drummond v. Christophersen

• Decision Date: 13 February 1980
• Docket Number: No. 77-197,77-197
• Citation: 93 Wis.2d 148,286 N.W.2d 547
• Parties: STATE BANK OF DRUMMOND, a Wisconsin Banking Corporation, Plaintiff-Respondent, v. John N. CHRISTOPHERSEN, Defendant-Appellant, Emily Christophersen, Defendant.
• Court: Wisconsin Supreme Court

Page 547

286 N.W.2d 547

93 Wis.2d 148

STATE BANK OF DRUMMOND, a Wisconsin Banking Corporation, Plaintiff-Respondent, v. John N. CHRISTOPHERSEN, Defendant-Appellant, Emily Christophersen, Defendant.

No. 77-197.

Supreme Court of Wisconsin.

Argued Nov. 5, 1979.

Decided Jan. 8, 1980.

Reconsideration Denied Feb. 13, 1980.

Robert L. Swanson, Ashland, argued for appellant; Richard F. Wartman, Keith W. Dallenbach and Wartman, Wartman & Swanson & Dallenbach, S. C., Ashland, and Robert M. Spears Law Offices, Washburn, on brief.

Thomas J. Gallagher, Park Falls, argued for respondent; and Gallagher & Naleid Law Office, Park Falls, on brief.

HEFFERNAN, Justice.

John N. Christophersen has appealed from an order of the county court which modified a foreclosure judgment from which he sought to be relieved in toto pursuant to sec. 806.07, Stats.

The essence of John Christophersen's claim is that the mortgage the original judgment purported to foreclose was totally void, because his signature appearing on the mortgage and note was forged, that the signature was fraudulently affixed by his then wife, Emily Christophersen, and that he was unaware of the existence of the mortgage-foreclosure action until after entry of judgment. Upon these basic facts, he asserts that he should be relieved from the judgment of foreclosure, because, under the provisions of sec. 806.07(1)(a), Stats., his failure to answer was the result of excusable neglect, and because the fraudulent conduct of his co-defendant, Emily Christophersen, in forging his signature to the mortgage and note constituted another reason "justifying relief" under the provisions of sec. 806.07(1)(h).

The record reveals a tangled skein of misrepresentation, negligence, and legal and factual error. We cannot on this appeal fully resolve the rights of the parties. The best that can be done on the basis of the record before us is to set aside the trial court's judgment, direct the dismissal of the action, and leave the parties to seek whatever remedies may be appropriate. We set aside the order and the underlying judgment and remand with directions to dismiss the complaint.

This appeal had its origin in the foreclosure of a mortgage by the State Bank of Drummond in respect to a delinquent note allegedly executed by John and Emily Christophersen to the bank. The mortgage foreclosed was executed on June 13, 1975, to secure a debt of $17,438 on the couple's jointly owned homestead. John Christophersen did not appear in the action, and a default foreclosure judgment was entered on March 8, 1976.

On January 26, 1977, John Christophersen petitioned for relief from the judgment for the reasons set forth above. On March 4, 1977, a hearing was held on the petition. The following uncontroverted facts were adduced at the hearing.

John and Emily Christophersen, as joint tenants on January 30, 1973, executed a mortgage on their homestead to the State Bank of Drummond to secure a $15,000-8 percent interest note. ¹ The relationship of mortgagor and mortgagee under the 1973 mortgage continued until June 13, 1975. Whether the payments on the original mortgage were delinquent is not shown by the record.

On June 13, 1975, Emily Christophersen, without the knowledge or consent of John, secured a replacement mortgage on the property. She did so by forging her husband's signature to the mortgage documents. She placed her husband's forged signature on the documents prior to taking them to the bank. There she added her own name. She explained her husband's absence by the fact that he was working in Illinois and only returned home on weekends. Despite the absence of John Christophersen, Leslie Miles, an employee of the State Bank of Drummond, signed a false affidavit which recited that both John Christophersen and Emily Christophersen had personally come before her and acknowledged the signatures.

This new mortgage secured a debt in the amount of $17,438 at an interest rate of 93/4 percent. It was executed with the understanding that the original mortgage was to be replaced by the new one and that the original mortgage was to be fully satisfied. Insofar as the record reveals, the original $15,000 mortgage was "satisfied" and the satisfaction filed with the register of deeds. As a part of this transaction, Emily Christophersen received approximately $4,000, which she used for her own purposes. John was entirely ignorant of the transaction.

The record shows that Emily Christophersen customarily made the mortgage payments out of the Christophersens' joint account. Without her husband's knowledge, she fell behind in the mortgage payments; and on November 17, 1975, a foreclosure action was commenced against the property. John and Emily Christophersen were named as defendants. The summons and complaint were left at the couple's home. ²

Emily Christophersen did not show the papers to her husband and never informed him about the pending foreclosure action. No notices or other subsequent documents relating to the foreclosure were ever served upon John Christophersen by the bank and none were given to him by Emily Christophersen.

The Christophersens separated on April 13, 1976. In late April, Emily sent John a copy of the replacement mortgage but no documents relating to the pending foreclosure action.

After learning of the replacement mortgage, John Christophersen consulted his attorney, who wrote several letters to the bank inquiring about the note and mortgage. Only after a third letter did the bank's attorney respond, stating that a mortgage foreclosure action had been started in 1975 and that judgment had been entered in March of 1976.

A divorce action was commenced by John Christophersen in May of 1976, and a divorce was subsequently granted. ³

After being told by the bank's attorney on December 6, 1976, that the foreclosure judgment had been entered, John Christophersen petitioned the court pursuant to sec. 806.07, Stats., to set aside the judgment.

The trial court, following a hearing that revealed the facts set forth in this opinion, rendered an oral opinion. This opinion consisted of a colloquy with counsel in which the court explored various alternatives to correct the deficiencies in the original judgment. The court stated that John Christophersen should not be bound by the provisions of the original judgment, but he refused to set aside the original proceedings, stating, "I hesitate to set aside these foreclosure proceedings because of the length of time it takes to complete a foreclosure." The court concluded that the replacement mortgage was "invalid as far as Mr. Christophersen is concerned." (Emphasis supplied.)

Inexplicably, the court offered counsel for the State Bank of Drummond the option of having the foreclosure judgment vacated and the complaint dismissed, or having the judgment modified to provide that "the difference between the last mortgage and the mortgage that was satisfied be removed in a monetary sense from these proceedings. The defendant Emily Christophersen would be personally liable for that amount."

The record shows that the court was of the opinion, erroneously we conclude, that the replacement mortgage executed by Emily Christophersen was valid as to her. In modifying the judgment, the court considered the foreclosure to be of the Original mortgage plus 50 percent of the "lien" secured by the additional sums lent as the result of the replacement mortgage. Despite the fact the court acknowledged that the replacement mortgage was wholly void in respect to John Christophersen, the opinion concluded that, to redeem the property from foreclosure, John Christophersen would have to pay the total amount due on the original mortgage plus 50 percent of the sum secured and unpaid as the result of the replacement mortgage.

The order, in effect, amended the original judgment by postponing the foreclosure sale for an additional ninety days and provided that John Christophersen could redeem:

"a. By payment of the amount due on the original real estate mortgage with interest thereon computed to the date of the refinancing of said real estate and indebtedness to the State Bank of Drummond by the Defendant, Emily A. Christophersen, which mortgage as of such refinancing date had a balance of $13,722.27, b. (By paying) one-half of the sum due on the subsequent mortgage executed by Emily A. Christophersen on June 13, 1975, but without any interest thereon, i. e., the amount of $1,807.86."

The court stated that the redemption on the above terms would fully discharge any lien the Bank of Drummond had on the property and specifically stated that recourse for the amounts unpaid after John Christophersen's redemption would have to be collected from Emily Christophersen. Appeal was taken from this order modifying the judgment. ⁴

It is at once apparent that the record reveals numerous errors that require the vacation of the judgment and the modifying order.

Putting aside the serious question of whether the service of process was sufficient to confer personal jurisdiction over the defendant, John Christophersen, it is clear that the mortgage fraudulently executed on June 13, 1975, by the use of the forged signature of John Christophersen is wholly void. It was totally ineffective to convey a mortgage lien to the State Bank of Drummond.

Because John Christophersen did not join in the mortgage, the mortgage is wholly void as being in contravention of the Statute of Frauds, as codified in sec. 706.01 and 706.02, Stats.

A mortgage, by the definition contained in secs. 706.01(1) and 706.01(3), is a conveyance. Sec. 706.02(1) provides that no conveyance is valid unless it is signed by or on behalf of each grantor. Where a homestead is involved, a conveyance or mortgage must be signed by each of the spouses. Sec. 706.02(1) (f). In applying these statutes, this court has held that both spouses must join in a conveyance for there to be a valid mortgage on homestead...