Wausau WI Real Estate Lawyer

Wausau WI Real Estate Lawyer: Contractual Status of Mortgages Trumps Recording Order

A Wisconsin appellate court ruled in U.S. Bank v. Landa, 2010AP3036, that a loan agreement designating one loan as the “second mortgage” controlled, even though the “second mortgage” was recorded with the register of deeds before the mortgage that was intended to be the “first”  mortgage.

In that case, Landa bought a home for $210,000. Landa financed the entire purchase by taking out two loans — one in the amount of $168,000 and another in the amount of $42,000. The $42,000 mortgage stated on its face that it was a “second mortgage.” For some unknown reason, however, the $42,000 mortgage was recorded 3 weeks before the $168,000 mortgage.

Landa defaulted on the mortgages.  In addition, she failed to pay condo association assessments and fines owed to Meadowland Villa Condominium Owners Association, Inc. Meadowland recorded a condominium lien against Landa more than two years after the mortgage liens were filed. Under Wis. Stat. section 703.165(5), a condominium lien has priority over other liens with some exceptions, one of which is a “first mortgage” recorded before the condo lien is recorded.  The question, then, is which mortgage was the “first” mortgage: the mortgage that was recorded first (even though it stated on the document that it was a “second” mortgage)?  Or the one not designate the second mortgage, even though it was, in fact, recorded second?

Meadowland argued that U.S. Bank’s $42,000 mortgage was actually the “first mortgage” because it was recorded first. This would mean that Meadowlands’ lien was subordinate only to the $42,000 mortgage — not the $168,000 mortgage.

A circuit court ruled in favor of Meadowlands. But the District II Wisconsin Court of Appeals reversed, concluding that time of recording “does not alter the $168,000 mortgage’s contractual status as the first mortgage.”

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Mary is a partner practicing in the areas of estate planning, probate, business law and real estate.