Walworth State Bank v. Abbey Springs Condo. Ass'n, Inc.

• Decision Date: 29 April 2016
• Docket Number: No. 2014AP940.,2014AP940.
• Citation: 878 N.W.2d 170,368 Wis.2d 72,2016 WI 30
• Parties: WALWORTH STATE BANK, Plaintiff–Respondent–Petitioner, v. ABBEY SPRINGS CONDOMINIUM ASSOCIATION, INC. and Abbey Springs, Inc., Defendants–Appellants.
• Court: Wisconsin Supreme Court

368 Wis.2d 72

878 N.W.2d 170

2016 WI 30

WALWORTH STATE BANK, Plaintiff–Respondent–Petitioner,

v.ABBEY SPRINGS CONDOMINIUM ASSOCIATION, INC. and Abbey Springs, Inc., Defendants–Appellants.

No. 2014AP940.

Supreme Court of Wisconsin.

Argued Nov. 9, 2015.

Decided April 29, 2016.

For the plaintiff-respondent-petitioner, there were briefs by Edward F. Thompson, and Clair Law Offices, S.C., Delavan, and oral argument by Edward F. Thompson.

For the defendants-appellants, there was a brief by David C. Williams, and Harrison, Williams & McDonell, LLP, Lake Geneva, and oral argument by David C. Williams.

There was an amicus curiae brief by John E. Knight, Kirsten E. Sprira, and Boardman & Clark LLP, Madison, on behalf of the Wisconsin Bankers Association.

REBECCA G. BRADLEY

, J.

¶ 1 We must decide whether a condominium policy violates Wisconsin law. Abbey Springs Condominium Association, Inc. and Abbey Springs, Inc. (collectively, "Abbey Springs") have a Membership and Guest Policy that forbids both current and subsequent unit owners from utilizing recreational facilities until unpaid condominium assessments are paid in full. In other words, the policy forbids new owners of a particular unit from utilizing recreational facilities if there are outstanding assessments attributable to the unit. Following a foreclosure action and sheriff's sale of the property at issue to Walworth State Bank, the Bank paid the former owner's outstanding assessments under protest. Walworth State Bank then asserted that the Abbey Springs policy violates Wisconsin law because it impermissibly revives a lien on the condominium units that was eliminated by the foreclosure action. As an alternative argument, Walworth State Bank argues that the policy renders title to the units unmarketable. The Walworth County Circuit Court¹ agreed with Walworth State Bank and granted it summary judgment. The court of appeals reversed.² For the reasons that follow, we reverse the court of appeals.

¶ 2 We hold that Abbey Springs's Membership and Guest Policy effectively revived the lien against the property that the Order for Judgment on Foreclosure and Judgment (hereinafter Foreclosure Judgment) entered against Abbey Springs and the former unit owners had extinguished. Although Abbey Springs concedes that Walworth State Bank had no legal obligation to pay the former owners' unpaid assessments following foreclosure, the policy dictates that any unpaid assessments stay with the unit and transfer to the new owners rather than travel with the former unit's owner who actually incurred the debt.³ The policy does so by preventing a new purchaser of any unit, whose only connection to the unpaid assessments is through the unit itself, from accessing the recreational facilities if the prior owner failed to pay his or her assessments. As a result, the policy effectively allows Abbey Springs to assert a right against the property for the prior owner's unpaid assessments in violation of well-established foreclosure law. Furthermore, the policy violates the Foreclosure Judgment that eliminated "all right, title, interest, lien or equity of redemption" of Abbey Springs in and to the foreclosed units. Because we conclude that the condominium policy violates well-established foreclosure law and the Foreclosure Judgment entered in the underlying foreclosure action, we do not address Walworth State Bank's argument that the policy renders the unit's title unmarketable.

I. Background

A. Units 18 and 19 at Abbey Springs

¶ 3 Walworth State Bank held a first real estate mortgage on Units 18 and 19, a single family residence on two lots, in Abbey Springs Condominium No. 1. Unit owners in Abbey Springs Condominium No. 1 pay assessments that allow access to recreational facilities that include a Yacht Club, restaurants, fitness and golf facilities, and boat slips.⁴ These recreational facilities are not listed as common elements of units located in Abbey Springs Condominium No. 1.

¶ 4 Abbey Springs has a Membership and Guest Policy that suspends both current unit owners and subsequent owners from the recreational facilities if unpaid assessments attributed to the unit are 90 days past due. The policy, in pertinent part, provides:

If any regular monthly or special assessment against any Unit is delinquent for more than ninety (90) days past its due date, the owner or owners of that Unit, and any subsequent owners, shall automatically and without notice be suspended from any use or occupation of the Yacht Club, Clubhouse Grille, Pool Café, fitness facilities, golf facilities, and boat launching facilities, until such time as assessments are paid in full.

¶ 5 In addition, Abbey Springs has Bylaws that govern operation of the property. Article V, Section four, titled Waiver of Use, provides that "no unit owner may exempt himself from liability for his contribution towards the common expenses or recreational facilities expenses by waiver of the use or enjoyment of any of the common areas and facilities or the recreational facilities, or by abandonment of his unit."

B. Underlying Foreclosure Action

¶ 6 In 2012, Walworth State Bank initiated a foreclosure action against the owners of units 18 and 19, a single family residence. The Complaint named Abbey Springs as a defendant in that action due to its claim of unpaid assessments attributable to the property . In January 2013, the Walworth County Circuit Court entered a Foreclosure Judgment. It determined the total amount owed Walworth State Bank to be $855,511.41. The circuit court's order and judgment in the foreclosure action also provided that the current owners and Abbey Springs were "forever barred and foreclosed of all right, title, interest, lien or equity of redemption" in and to the property. The circuit court retained jurisdiction in the foreclosure action "until redemption, or confirmation of sale, whichever occurs first." Walworth State Bank later purchased the property in a sheriff's sale. On April 29, 2013, the circuit court confirmed the sheriff's sale of the property to Walworth State Bank.

¶ 7 Prior to the sheriff's sale, Abbey Springs sent a letter to Walworth State Bank to alert the Bank to a policy it had adopted "to forbid use of the recreational facilities to the owners or occupants of any unit upon which assessments or other amounts owed to the Association are delinquent, regardless of whether or not the Association's lien rights were eliminated by foreclosure." Abbey Springs suggested that Walworth State Bank include notification of this policy in its announcements of the sheriff's sale of the property. On February 5, 2013, Abbey Springs sent a follow up letter to Walworth State Bank with a copy of the Membership and Guest policy enclosed.

¶ 8 Walworth State Bank responded to Abbey Springs's letters on June 24, 2013 and asserted that the Membership and Guest Policy violated numerous laws and the order in the foreclosure action. On June 26, 2013, Abbey Springs countered that it "does not claim, and has never claimed, that Walworth State Bank or any grantee from Walworth State Bank is liable for past assessments due the Association."

¶ 9 Walworth State Bank arranged for the property to be sold to new buyers with a closing scheduled for July 12, 2013. However, on July 12, 2013, Abbey Springs's Executive Director issued a letter stating that the outstanding assessments would be satisfied if "the seller pays Abbey Springs $13,225.32." As a result, the new buyers refused to close on the property as scheduled. On the same day, July 12, 2013, Walworth State Bank sent Abbey Springs another letter accusing the condominium association of "thwarting" the sale and requiring Walworth State Bank to pay the outstanding assessments. Abbey Springs reasserted its position—the Bank was not required to pay the prior owner's outstanding assessments—in a July 16, 2013 letter. Ultimately and under protest, Walworth State Bank paid the prior owners' unpaid assessments in the amount of $13,225.32 to complete the sale of the property to the new owners.

C. Procedural History

¶ 10 Walworth State Bank filed suit against Abbey Springs and asked the circuit court to declare Abbey Springs's policy in violation of Wisconsin law and to order judgment in the amount of $13,225.32 for the assessments it paid under protest. The circuit court granted Walworth State Bank's summary judgment motion after considering cross-motions for summary judgment. It determined that Abbey Springs's policy violated Wisconsin law by holding new owners jointly and severally liable for the prior owners' unpaid assessments in violation of Wis. Stat. § 703.165(2)

(2013–14)⁵ and by affecting the quality and marketability of the property's title in violation of Wis. Stat. § 703.10(6)

. It also granted Walworth State Bank a monetary judgment against Abbey Springs in the amount of $13,225.32.

¶ 11 The court of appeals reversed. Walworth State Bank v. Abbey Springs Condo. Ass'n, No. 2014AP940, unpublished slip op., 2015 WL 1333691 (Wis.Ct.App. Mar. 26, 2015)

. It held that the policy was not contrary to any Wisconsin statute and that Walworth State Bank had "no obligation to pay the delinquent assessments." Id., ¶ 18. Specifically, it held that Wis. Stat. § 703.165(5)(b), which establishes lien priority for unpaid assessments, did not govern the issue of liability for the unpaid assessments. Id., ¶ 16. It further held that Wis. Stat. § 703.165(2), which governs liability for assessments, does not govern liability for unpaid assessments in an involuntary grant, such as the sheriff's sale that occurred here. Id., ¶ 18. It further reasoned that "[t]he policy merely created a pay-to-play requirement, and did not attempt to create joint and several liability in any respect."⁶

Id.

II. Analysis

¶ 12 Appellate courts independently review orders for summary judgment utilizing the "same methodology as the circuit court."

Yahnke v. Carson, 2000 WI 74, ¶ 10, 236 Wis.2d 257, 613 N.W.2d 102

. "Summary judgment is appropriate when ...