In a case that "radically revises the law on mortgage foreclosure,"1 the Wisconsin Supreme Court recently held in Bank of New York Mellon v. Carson, 2015 WI 15, that Wisconsin circuit courts have the authority to order a sale of mortgaged premises within a reasonable period of time after the redemption period if the property has been abandoned by the borrower.2 In Carson, Shirley Carson defaulted on her mortgage multiple times, and Bank of New York Mellon, as trustee for the lender, filed a complaint seeking a judgment of foreclosure and sale of the mortgaged property.3 After Carson failed to respond to the notice of foreclosure, the circuit court entered judgment in favor of the Bank.4
In its judgment, the circuit court stated that the Bank could sell the property "at any time after three month(s)," enjoined either party from committing waste on the property, and gave the Bank permission to take steps to secure the property.5 However, the Bank failed to secure the property, and as it sat vacant for sixteen months it was vandalized, burglarized, snow was not shoveled, the lawn was not mowed, and damage was caused by a fire started in the garage.6 As a result, the City of Milwaukee assessed municipal fines of $1,800 on Carson.7 At this point, Carson filed a motion to amend the circuit court's judgment of foreclosure, asking the court to find that the property is abandoned and force a sale of the property within five weeks, citing Wis. Stat. § 846.102.8
The case went to the Wisconsin Supreme Court, which held that Wis. Stat. § 846.102 allows a circuit court to force a mortgagee with a foreclosure judgment to sell mortgaged property that has been abandoned, but instead of setting a specific time frame for such a sale, left it up to the court to determine what a reasonable period of time would be based on each individual case's circumstances.9
Lenders should be aware of this case for a number of reasons. First, if a lender is ordered by a court to put mortgaged property up for sale and the lender does not receive a reasonable bid on it, the lender may be forced to buy in at the foreclosure sale. The result would be that the lender, as owner of the property, would be responsible for maintenance of the property, potential municipal fines if they fail to properly maintain the property, and property taxes. Second, if many borrowers and municipalities10 decide to take advantage of this option, that is, filing a motion requesting that the court deem the property abandoned and forcing a sale within a reasonable period of time, it is possible that these sales will flood the market and depress prices: "[T]housands of foreclosed properties statewide may have to be scheduled for sale within a few months of this decision because they have already been held by mortgagees without sale for an 'unreasonable' period after foreclosure."11
Overall, Bank of New York Mellon v. Carson represents a cautionary tale to lenders that circuit courts can order sales of foreclosed, abandoned properties within a "reasonable" time period if prompted by a borrower.
Footnotes
1 Bank of New York Mellon v. Carson, 2015 WI 15, ¶ 71 (Prosser, J., concurring).
2 ¶¶ 44–45.
3 ¶¶ 5–6.
4 ¶¶ 6–8.
5 ¶ 8.
6 ¶¶ 9–10.
7 ¶ 9.
8 ¶ 10.
9 ¶¶ 44–45.
10 It remains to be seen whether municipalities will have standing to bring such an action under § 846.102. Justice Prosser's concurrence suggests that municipalities would not be able to do so, and that their role is limited to presenting evidence of abandonment to the court. ¶ 62 (Prosser, J., concurrence) (citing § 846.102(2)).
11 ¶ 74 (Prosser, J., concurrence).
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