Wells Fargo Bank, NA v. Estate of Bizzell
| Decision Date | 02 July 2015 |
| Docket Number | No. 2014AP1091.,2014AP1091. |
| Parties | WELLS FARGO BANK, NA, Plaintiff–Counter Defendant–Respondent, v. ESTATE OF Owen E. BIZZELL, Jr., Defendant, Brock O. Bizzell and Pamela Bizzell, Defendants–Counter Claimants–Appellants, Midland Funding, LLC and Capital One Bank (USA) National Association, Involuntary–Defendants. |
| Court | Wisconsin Court of Appeals |
In 2003, in order to obtain financing for the purchase of real property, Owen Bizzell executed a note in favor of Wells Fargo Bank, NA, secured by a mortgage on the property he was purchasing. In 2009, Owen refinanced the 2003 debt, again through Wells Fargo, securing the new note with a new mortgage on the property, and receiving a discharge of all debt under the 2003 note. After Owen died in 2010, his son, Brock Bizzell, then a joint tenant on the property, defaulted on the 2009 note. Wells Fargo initiated this foreclosure action on the 2009 mortgage, and the circuit court granted summary judgment of foreclosure to Wells Fargo.
¶ 2 Brock and his wife, Pamela, appeal the summary judgment of foreclosure.1 The Bizzells argue that the circuit court erroneously exercised its discretion in permitting Wells Fargo to amend its pleadings to allege a right to foreclose on the 2009 mortgage on the ground of equitable subrogation and in denying the Bizzells' motion to sanction Wells Fargo for failing to timely supplement responses to the Bizzells' discovery requests. The Bizzells also argue that the court should not have granted Wells Fargo summary judgment on the ground of equitable subrogation, which entitled Wells Fargo to foreclose on the 2009 mortgage based on its rights and Brock's obligations under the 2003 mortgage, because genuine issues of material fact remain.
¶ 3 For the following reasons, we conclude that the court did not erroneously exercise its discretion in permitting Wells Fargo to amend its pleadings to include equitable subrogation and in denying the Bizzells' sanctions motion. However, we agree with the Bizzells that at least one genuine issue of material fact precludes summary judgment based on the summary judgment record as it currently exists and the arguments of the parties raised to date. We therefore reverse the circuit court's grant of summary judgment to Wells Fargo.
¶ 4 In November 2003, Owen purchased a house and accompanying real property. Owen applied for financing from Wells Fargo for this purchase. On November 14, 2003, the sellers executed a warranty deed that on its face transferred the property to Owen and Brock “as joint tenants with the right of survivorship.” However, at some point prior to November 26, 2003, the date on which the warranty deed was recorded, someone wrote on the deed, purporting to modify it by crossing out Brock's name, leaving Owen identified as the sole grantee of the seller. Thus, on the recorded deed, Brock's name and the phrase “as joint tenants with the right of survivorship” were crossed out, leaving Owen as the sole grantee under the terms of the deed. What appears to be “O.B.” is written above this modification.
¶ 5 After the warranty deed was executed but before it was recorded, Owen alone executed a note in favor of Wells Fargo secured by a mortgage on the property on November 24, 2003. In affidavits presented on summary judgment, Brock avers that he was not aware that there was ever any mortgage on the property, including the 2003 mortgage, until after Owen's death in 2010, although Brock avers that Owen told Brock at the time Owen purchased the property in 2003 that Owen “needed a small loan to assist in the purchase of the property.” The 2003 mortgage was recorded on November 26, 2003.
¶ 6 On December 31, 2003, Owen executed a quit claim deed transferring his ownership of the property to himself and Brock, as joint tenants with the right of survivorship. This deed was recorded on January 5, 2004.
¶ 7 On October 30, 2009, Owen refinanced his 2003 debt to Wells Fargo with another loan from Wells Fargo, the proceeds of which were used to pay off the 2003 debt. This entailed Owen executing a new note to Wells Fargo, secured by a new mortgage on the property. In addition, Owen signed an affidavit in which he averred that “[e]veryone who owns an interest in the Property being refinanced is listed on page one of the Deed of Trust, and is listed as a Mortgagor/Trustor/Borrower above.” Only Owen was listed on the Deed of Trust and as a mortgagor. Brock did not sign the new mortgage that Owen executed to Wells Fargo for the 2009 refinance transaction, and as stated above Brock avers that he was unaware of the 2009 mortgage when it was executed.
¶ 8 Owen died in August 2010, leaving Brock as the sole owner of the property. Brock avers that he learned of the 2009 mortgage only in sorting through his father's financial papers after his death. After learning of the 2009 mortgage, Brock began making mortgage payments on the property, as he avers he was instructed to do by a Wells Fargo employee.
¶ 9 Around July 2011, Brock ceased making mortgage payments on the property. On August 21, 2012, Wells Fargo commenced this foreclosure action against the Bizzells.
¶ 10 In answering Wells Fargo's complaint, the Bizzells asserted that Brock became a joint owner of the property through the December 31, 2003 quit claim deed that Owen executed, conveying the property to Owen and Brock as joint tenants. Based on this factual allegation, the Bizzells asserted affirmative defenses and counterclaims that included the following. As an affirmative defense, the Bizzells alleged that the 2009 mortgage is void because it violates the statute of frauds, specifically because it is not signed by both Owen and Brock, who were joint tenants on the property at the time Owen executed the 2009 refinance transaction. As a counterclaim, the Bizzells requested a declaratory judgment that the 2009 mortgage is void and that “the lien” on the property is “eliminate[ed],” on the ground that Brock did not “permit, authorize or consent to the execution of” the 2009 mortgage encumbering the property.
¶ 11 Wells Fargo moved to dismiss the Bizzells' counterclaim for failure to state a claim, on the grounds that Wis. Stat. § 700.24 (2013–14),2 “expressly contradicts [the Bizzells'] assertion that a mortgage is invalid when granted by only one of two joint tenants with right of survivorship.” The circuit court denied Wells Fargo's motion to dismiss. Wells Fargo subsequently filed an answer to the Bizzells' counterclaim, asserting that the Bizzells' allegation that the 2009 mortgage was “invalid and void” because the Bizzells had not consented to or authorized the execution of the 2009 mortgage was “a legal conclusion to which an answer is not required” and alternatively denying the allegation.
¶ 12 During discovery, the Bizzells demanded that Wells Fargo produce the loan file relating to any loan between Wells Fargo and Owen since January 1, 2000. Wells Fargo objected to the demand in part on the grounds that it was “irrelevant, and not reasonably calculated to lead to the discovery of admissible evidence.” After communications between the parties on this discovery issue, the Bizzells filed motions to compel. At a hearing held on June 10, 2013, the circuit court denied the Bizzells' motions to compel.
¶ 13 On May 21, 2013, Wells Fargo moved for summary judgment on the foreclosure claim. Wells Fargo argued in part that the Bizzells' counterclaim based on Brock owning the property as a joint tenant and not authorizing any mortgage should be dismissed on the ground that, pursuant to Wis. Stat. § 700.24, a joint tenant can unilaterally (that is, without the consent of or any action by the other tenant) execute a mortgage that encumbers the first tenant's interest in jointly owned property.
¶ 14 For reasons not pertinent to any argument raised on appeal, the circuit court directed Wells Fargo to file a revised motion for summary judgment, which it did on September 3, 2013. In this motion, Wells Fargo advanced a new argument for summary judgment, relying on the doctrine of equitable subrogation. Under this theory, Wells Fargo would be entitled to foreclose on the 2009 mortgage based on the rights Wells Fargo obtained under the 2003 mortgage. Specifically, Wells Fargo argued that, because the 2003 mortgage pre-dated the quit claim deed Owen used to grant Brock a joint interest in the property, Brock took his joint interest from Owen subject to the 2003 mortgage, and, because the 2009 mortgage discharged the debt of the 2003 mortgage, Wells Fargo has all rights under the 2009 mortgage that it had under the 2003 mortgage.
¶ 15 The Bizzells filed a motion to strike Wells Fargo's equitable subrogation claim, on the grounds that Wells Fargo had “failed to plead equitable subrogation as a defense to the Bizzells' counterclaim” and had consistently argued that any evidence of events prior to 2009 was irrelevant, while Wells Fargo's new equitable subrogation theory depended on events that occurred in 2003.
¶ 16 On November 25, 2013, Wells Fargo produced the loan file for Owen's 2003 note and mortgage. At the time of this production, Wells Fargo expressed to the Bizzells in a letter its willingness to submit a joint request asking the court not to proceed to consideration of summary judgment, and instead the parties could engage in additional discovery. The record does not reflect any response to this suggestion from the Bizzells at that time.
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