Bank Must Sell "Abandoned" Properties Quickly After Obtaining Foreclosure Judgment

As a continuing free service, Clair Law Offices, S.C. thought you might be interested in a recent Wisconsin Court of Appeals decision involving financial institutions, foreclosures, and how quickly financial institutions must sell “abandoned properties” after obtaining a foreclosure judgment.
 
Key Facts
 
On February 17, 2015, the Wisconsin Supreme Court decided the case of Bank of New York Mellon v. Carson.
 
The Borrowers in that case executed a note and mortgage in favor of the Bank. They then defaulted. The Bank then commenced a foreclosure proceeding against the Borrowers and waived its right to a deficiency judgment.
 
Importantly, the Bank did not allege that the property was abandoned under Wisconsin Statute §846.102.  Instead, the Bank obtained an Order that the property be sold at any time after expiration of the three (3) month redemption period.  It is important to note that the Circuit Court did not definitively rule that the house was an abandoned property.
 
The Bank did not secure the property and it was burglarized, vandalized, and became subject to fines and building code violations from the municipality.  The Borrower incurred thousands of dollars of fines and building code penalties for failing to maintain the property, and the Bank did not maintain the property despite an order from the municipality.  Sixteen (16) months after the foreclosure judgment was entered, the property still was not sold or placed up for sale.  The Bank said it elected not to conduct a Sheriff’s sale because it was not fit for selling. 
 
The Borrower, who defaulted on the note and mortgage and could not maintain the property or pay the fines, filed a motion to find the property abandoned and sought an order that the Bank sell the vacant property.  The Circuit Court denied the motion, concluding that circuit courts do not have the authority to compel sale of abandoned property under the statute. 
 
Court’s Reasoning
 
The four-justice majority of the Wisconsin Supreme Court ruled that §846.102 authorized the Circuit Court to order financial institutions to sell abandoned properties, and must order sale within a reasonable time.  The Wisconsin Supreme Court ruled that the financial institution “must” sell, despite the financial institution’s argument that it must wait five (5) weeks to sell, but had a five-year window to sell after that. 
 
The Wisconsin Supreme Court found that the intent of Wisconsin Statute §846.102 was to help municipalities deal with abandoned property promptly since abandoned properties attract crime.  Thus, the majority of the Wisconsin Supreme Court remanded the case back to the Circuit Court for a determination on abandonment, and an order to sell within a reasonable time after the five-week period.
 
Why It Matters
 
The Supreme Court of Wisconsin concluded that when there is a determination of abandonment by the Circuit Court, the Court must order the sale within a reasonable time after the judgment of foreclosure is entered.  Thus, in the future, when there is a finding of abandonment under §846.102, Circuit Courts will be required to order the prompt sale of the abandoned property.  What will constitute a reasonable time to conduct the sale of an abandoned property will be based on the totality of the circumstances.  However, in cases involving “abandoned properties,” financial institutions will no longer be able to delay conducting the Sheriff’s sale, and the Circuit Court now has the authority to compel the sale of abandoned property.
 
You may recall in my January 5, 2015 post, I wrote a letter to you informing you of a previous decision of the Wisconsin Court of Appeals in Bank of America v. Prissel, No. 2014AP642, which supported the conclusion that financial institutions had discretion when to conduct Sheriff’s sales.  That decision is now modified when a court finds that the property has been “abandoned.”