Bank Has Discretion When to Publish & When to Conduct Sheriff's Sale

January 5, 2015
 
Clair Law Offices, S.C. desires to make you aware of a recent Wisconsin Court of Appeals decision involving financial institutions, foreclosures, and notices of sheriff’s sales of real property.
 
Key Facts
 
The Borrowers executed a note and mortgage in favor of the Bank. Borrowers then defaulted. The Bank then commenced a foreclosure proceeding against the Borrowers and waived its right to a deficiency judgment. The circuit court entered a foreclosure judgment against the Borrowers on April 23, 2013. Because Bank did not seek a deficiency judgment, the Borrowers’ statutory redemption period was shortened from twelve months to six (6) months.
 
Accordingly, the foreclosure judgment provided that the mortgaged property would be “sold at public auction under the direction of the Sheriff at any time after six months from the date of entry of judgment in the manner provided by law.”
 
The Bank did not publish notice of foreclosure sale during the Borrowers’ six-month redemption period. Thereafter, the Borrowers moved to vacate the foreclosure judgment. The Borrowers’ motion was based on WIS. STAT. § 846.101, which sets forth the procedure for foreclosing a mortgage on an owner-occupied one- to four-family residence when the lender elects not to pursue a deficiency judgment.
 
Section 846.101(2) states, in relevant part:
 
[T]he sale of such mortgaged premises shall be made upon
the expiration of 6 months from the date when such
judgment is entered. Notice of the time and place of sale
shall be given under ss. 815.31 and 846.16 within such 6-
month period except that first printing of a copy of such
notice in a newspaper shall not be made less than 4 months
after the date when such judgment is entered.
 
The Borrowers argued the Bank was required to publish notice of foreclosure sale within the six-month redemption period. Because Bank failed to do so, the Borrowers argued that the Bank could not hold valid foreclosure sale, and it therefore had no way to satisfy the foreclosure judgment.
 
The Bank responded that § 846.101(2) permitted, but did not require, publication of the
notice within the Borrowers’ redemption period.
 
The Court of Appeals ruled that the statutory language stating notice of a foreclosure sale “shall be given” within the six-month redemption period is directory, rather than mandatory.
 
The Court of Appeals found that delaying a foreclosure sale generally benefits a Borrower by enabling the Borrower to retain possession of his or her property longer and by providing additional time to work out a compromise with the lender. In contrast, requiring notices of sale to be published during the redemption period could harm Borrowers by forcing lenders to hold foreclosure sales shortly after the redemption period expires, which would frustrate efforts to reach post-judgment compromises and would likely force Borrowers out of their properties earlier than would otherwise be required. Generally, the word “shall” in the law is usually equivalent to “must” – a command.
 
Court’s Reasoning
 
The Court of Appeals concluded the statement in WIS. STAT. § 846.101(2) that notice of a foreclosure sale “shall” be given within six months after entry of a foreclosure judgment is discretionary, not mandatory. Accordingly, the Bank was permitted, but not required, to publish notice of foreclosure sale during the Borrowers’ redemption period.
 
Why It Matters
 
The fact that Bank’s are permitted, but not required to give notice of sheriff’s sale within the redemption period, provides Bank’s more time to negotiate with debtors. The Court’s decision clarifies a perceived conflict between the language of the law and the intent of its drafters by protecting a Bank’s rights to a debt and also allowing Bank’s more time to negotiate.