Zizzo v. Lakeside Steel & Mfg. Co.

• Decision Date: 30 April 2008
• Docket Number: No. 2007AP566.,2007AP566.
• Citation: 752 N.W.2d 889,2008 WI App 69
• Parties: Daniel M. ZIZZO, Sr., Plaintiff-Respondent-Cross-Appellant, v. LAKESIDE STEEL & MFG. CO. p/k/a The Kenosha Boiler & Structural Company, Defendant-Appellant-Cross-Respondent, U.S. Bank p/k/a First Bank Southeast NA, Bane-Nelson, Inc., Maurer Electric p/k/a Maurer Electric Company, Inc., Frank J. Smaniotto, Victor Misurelli, Defendants.
• Court: Wisconsin Court of Appeals

752 N.W.2d 889

2008 WI App 69

Daniel M. ZIZZO, Sr., Plaintiff-Respondent-Cross-Appellant, v. LAKESIDE STEEL & MFG. CO. p/k/a The Kenosha Boiler & Structural Company, Defendant-Appellant-Cross-Respondent U.S. Bank p/k/a First Bank Southeast NA, Bane-Nelson, Inc., Maurer Electric p/k/a Maurer Electric Company, Inc., Frank J. Smaniotto, Victor Misurelli, Defendants.

No. 2007AP566.

Court of Appeals of Wisconsin.

Submitted on Briefs January 31, 2008.

Opinion Filed April 30, 2008.

On behalf of the defendant-appellant-cross-respondent, the cause was submitted on the briefs of Jonathan A. Mulligan of Davison & Mulligan, Ltd. of Kenosha.

On behalf of the plaintiff-respondent-cross-appellant, the cause was submitted on the briefs of Eugene J. Brookhouse of Brookhouse & Parise of Kenosha.

Before BROWN, C.J., ANDERSON, P.J., and SNYDER, J.

¶ 1 BROWN, C.J

In 1989, Lakeside Steel & Manufacturing Co.¹ loaned Daniel Zizzo's parents some money and secured its loan with a mortgage on their property. The loan was to be paid off in monthly installments beginning that year and ending in 1993. For unknown reasons, the Zizzos apparently never made a single payment, and Lakeside never attempted to collect or to foreclose on the mortgage. The elder Zizzos died and Daniel became owner of the mortgaged property. Still Lakeside did not take any action to enforce its mortgage. Finally, in 2005, Daniel Zizzo brought a declaratory judgment action asking the court to discharge the mortgage on several grounds, including laches. On summary judgment, the circuit court found Lakeside guilty of laches and extinguished the mortgage.

¶ 2 On appeal, Lakeside argues that Zizzo may not claim laches because laches is an affirmative defense and Zizzo is the plaintiff, rather than the defendant, in this action. We reject this argument for two reasons. First, we are not convinced, either by Lakeside's cited authorities or by those that we have found, that Wisconsin law bars a plaintiff from asserting laches as a general matter. Second and more importantly, this is a declaratory judgment action. In such actions, the usual positions of the parties are sometimes reversed, and this is the case here. Zizzo, though procedurally a plaintiff, is still seeking to establish laches as an affirmative defense against any potential foreclosure by Lakeside — a shield and not a sword. We see no reason why he should not be able to establish this defense by declaratory judgment, particularly where Lakeside has refused for sixteen years to test its claims by bringing its own action. We further reject Lakeside's argument that the court's application of laches was a declaration of "hypothetical or future rights," and uphold the circuit court's conclusion that all of the elements of laches are present in this case. We therefore affirm.

¶ 3 This litigation began in September 2005, when Zizzo brought a declaratory judgment action requesting the court to discharge notes and mortgages that his parents had made to six named defendants. The first note and mortgage were to U.S. Bank; Zizzo alleged that this note had been paid off. U.S. Bank never answered the complaint or appeared in the case, and so the court granted default judgment to Zizzo. The second mortgage secured five notes that Zizzo's parents had given to the five other defendants in the action; Lakeside Steel among them. Each note's repayment terms involved the lender receiving a share of the proceeds of "a certain metal shredding machine" located on the mortgaged property. No payments were ever made on the five notes, though the date of the last scheduled payment was more than twelve years earlier. No claim or action had been brought on the notes or mortgage except for the claim of defendant Bane Nelson in Zizzo's father's probate proceeding, which claim had been withdrawn. Zizzo argued that any claims on the notes were barred by the statute of limitations or by laches or estoppel and that the mortgages securing them should therefore be discharged.

¶ 4 Zizzo eventually moved for summary judgment. The circuit court initially rejected each of Zizzo's arguments. It noted that the notes were subject to a six-year statute of limitations and thus no longer enforceable. See WIS. STAT. § 893.43 (2005-06).² However, it held that the mortgage securing them was separately enforceable for up to thirty years under WIS. STAT. § 893.33, and thus defendants were entitled to foreclosure even though they could not collect on the underlying notes. The court further held the prejudice element of laches to be missing and thus denied Zizzo relief on this ground as well.

¶ 5 In April 2007, however, on Zizzo's motion for reconsideration, the circuit court reversed itself on the issue of laches and held that it would bar the defendants from enforcing the mortgage. The circuit court noted that each of the elements of the doctrine was present: unreasonable delay, because no action had been brought on the mortgage in the eighteen years that the notes had gone unpaid; lack of knowledge on Zizzo's part that the mortgagees would assert rights under the mortgages, because they had not done so during this time, even once Zizzo brought his own action; and prejudice, because the original mortgagors and note-signers were dead and thus Zizzo had no way of getting any favorable evidence about the notes' and mortgage's execution and validity. See State ex rel. Coleman v. McCaughtry, 2006 WI 49, ¶¶ 27-29, 290 Wis.2d 352, 714 N.W.2d 900, opinion clarified, 2006 WI 121, 297 Wis.2d 587, 723 N.W.2d 424. Of the original defendants, only Lakeside appealed; Zizzo cross-appealed the circuit court's holding that the six-year statute of limitations did not bar action on the mortgage.

¶ 6 Our standard of review is de novo for two reasons. First, we are reviewing a summary judgment. See Commercial Union Midwest Ins. Co. v. Vorbeck, 2004 WI App 11, ¶ 7, 269 Wis.2d 204, 674 N.W.2d 665. Second, the issues presented are questions of law. Though the grant or denial of declaratory relief is addressed to the trial court's discretion, where the exercise of such discretion turns on a question of law, we review the question of law de novo. Id. Further, whether the elements of laches are met in this case presents a question of law. See Sawyer v. Midelfort, 227 Wis.2d 124, 159, 595 N.W.2d 423 (1999).³

¶ 7 There is no dispute that Lakeside's mortgage meets all of the formal requirements for validity found in WIS. STAT. § 706.02. Rather, Zizzo claims, and the trial court agreed, that Lakeside has lost its right to enforce the mortgage by operation of laches. Laches is an equitable doctrine whereby a party that delays making a claim may lose its right to assert that claim. Laches is distinct from a statute of limitations and may be found where the statute of limitations has not yet run. See Schafer v. Wegner, 78 Wis.2d 127, 132, 254 N.W.2d 193 (1977). It may be asserted against actions founded in both equity and law. Andersen v. Kojo, 110 Wis.2d 22 26, 327 N.W.2d 195 (1982). The three elements of laches, as noted above, are (1) unreasonable delay by the party seeking relief, (2) lack of knowledge or acquiescence by the party asserting laches that a claim for relief was forthcoming, and (3) prejudice to the party asserting laches caused by the delay. See State ex rel. Coleman, 290 Wis.2d 352, ¶¶ 27-29, 714 N.W.2d 900.

¶ 8 However, before addressing the elements of laches as applied to this case, we must first address whether Zizzo, being a plaintiff and not a defendant, may assert the doctrine at all. Lakeside argues that he may not, relying chiefly on WIS. STAT. § 802.02(3). That subsection provides that "[i]n pleading to a preceding pleading, a party shall set forth affirmatively any matter constituting an avoidance or affirmative defense including but not limited to the following:...." It then lists twenty-four defenses that must be so pled, including laches. Lakeside's argument is that since laches is listed as an affirmative defense, it can only be used by a defendant; since Lakeside has never begun any action or filed any pleading seeking to enforce the mortgage, Zizzo could not have pled laches in a "pleading to a preceding pleading."

¶ 9 We find this logic unconvincing. First, the statute is contained in a section titled "General rules of pleading." It is also limited by its own terms: it only applies "[i]n pleading to a preceding pleading." Its point is to require a defendant, counterclaim defendant, third-party defendant, etc., to identify any affirmative defenses in his or her answer, reply to a counterclaim, third party answer, etc. (or by motion, see WIS. STAT. § 802.06(2)(a)) — or the defenses are deemed waived. See County of Milwaukee v. State, 113 Wis.2d 199, 206, 335 N.W.2d 412 (Ct.App.1983). The statute is not about what claims or defenses are available to what parties, and it does not say that the listed claims may only be pled by defendants—if it did, no plaintiff could ever allege "fraud," since that is listed in the statute alongside "laches." WIS. STAT. § 802.02(3).

¶ 10 Lakeside's only other authority on this point is Sawyer, in which the supreme court described laches as an "equitable defense to an action" and referred repeatedly to the doctrine being invoked by the defendant and against the plaintiff. Sawyer, 227 Wis.2d at 159, 595 N.W.2d 423. But that was what was happening in Sawyer: a defendant was claiming laches against a plaintiff. See id. at 130, 595 N.W.2d 423. The court was describing the doctrine as it applied to the case before it. There is no hint in the Sawyer opinion of the court considering, much less deciding, the question of whether a plaintiff may invoke laches.

¶ 11 And there are other cases, unmentioned by Lakeside, that suggest that a plaintiff may assert the doctrine. For example, in Mansfield v. Smith, 88 Wis.2d 575, 593, 277 N.W.2d 740 (1979), the plaintiff contended that the defendant had, by laches, waived his...