WisBar News: Agreement term, not recording date, determines "first mortgage" in condo lien case:

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  • WisBar News
    August
    24
    2011

    Agreement term, not recording date, determines "first mortgage" in condo lien case

    Joe Forward
    Legal Writer

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    Aug. 24, 2011 – A Wisconsin appeals court recently ruled that a loan agreement designating one loan as the "second mortgage" controlled, although recorded with the register of deeds before another mortgage.

    Agreement term, not recording date, determines “first mortgage” in condo lien case

    A Wisconsin statute that gives “first mortgages” priority over condominium liens does not mean the mortgage lien must be recorded first.

    By org jforward wisbar Joe Forward, Legal Writer, State Bar of Wisconsin

    Agreement term, not recording date, determine 
“first mortgage” in condo lien case Aug. 24, 2011 – A Wisconsin appeals court recently ruled that a loan agreement designating one loan as the “second mortgage” controlled, although recorded with the register of deeds before another mortgage.

    That ruling saved U.S. Bank, which held two mortgages, one for $42,000 and one for $168,000, when Brenda Landa defaulted on her mortgage loan payments. The Meadowland Villa Condominium Owners Association (Meadowland), Inc. sought priority over the “second mortgage” held by U.S. Bank.

    Meadowland recorded a condominium lien against Landa for unpaid fines and condo association assessments 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 except the unpaid balance on a “first mortgage” recorded before the condo lien is recorded.

    The document memorializing U.S. Bank’s mortgage loan of $42,000 clearly designated it as a “second mortgage,” and U.S. Bank directed this loan to have a second lien position. For reasons unstated, the title company filed the $42,000 mortgage first, before it recorded its $168,000 mortgage loan.

    Meadowland argued that U.S. Bank’s “first mortgage” was the balance on the $42,000 loan because it was recorded first. In other words, Meadowlands sought priority over U.S. Bank’s $168,000 loan.

    A circuit court ruled in favor of Meadowlands. But in U.S. Bank N.A. v. Landa, 2010AP3036 (Aug. 17, 2011), 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.”