PUBLISHED
OPINION
COURT OF
APPEALS
DECISION
DATED AND FILED
February
22, 2001
Cornelia G. Clark
Clerk, Court of Appeals
of
Wisconsin
NOTICE
This opinion is subject to further editing. If published, the official version will
appear in the bound volume of the Official Reports.
A party may file with
the Supreme Court a petition to review an adverse decision by the Court of Appeals.
See
Wis. Stat. §808.10
and Rule 809.62.
No. 00-1076
STATE OF
WISCONSIN IN COURT OF APPEALS
DISTRICT
IV
Bank of Sun Prairie,
Plaintiff-Appellant,
v.
Marshall Development
Company, Thomas E. Schoenauer, Kaltenberg Seed Farms, Inc., Badgerland Farm Credit
Services, ACA, State of Wisconsin-Department of Workforce Development, and State of
Wisconsin-Department of Revenue,
Defendants,
John J.
Grimmer,
Defendant-Respondent.
APPEAL from a judgment of the circuit court for Dane County:
PAUL B. HIGGINBOTHAM, Judge. Reversed and cause remanded.
Before Vergeront, Roggensack and Deininger, JJ.
¶1. VERGERONT, J.The Bank of Sun Prairie appeals the summary judgment
dismissing its action for foreclosure of a mortgage on the ground that the Bank had
previously obtained a deficiency judgment in a foreclosure action on another mortgage
securing the same debt. The trial court concluded that under the doctrine of merger, the debt
was extinguished when the deficiency judgment was entered, and the Bank's only remedy
was to execute on the deficiency judgment. We agree with the Bank that the doctrine of
merger does not bar this action, and we also conclude neither Wisconsin case law nor
statutory law nor the doctrine of claim preclusion bars this action. We therefore reverse and
remand for further proceedings.
BACKGROUND
¶2. The parties agree the facts are not in dispute. Central States Construction
Company executed and delivered to the Bank a note in the amount of $198,000. The
president of Central States, Thomas Ludlow, personally guaranteed the debt. The debt was
secured by two mortgages: one granted by Central States on real estate located in Sun
Prairie, Wisconsin, and one granted by Marshall Development Company on real estate
located in Marshall, Wisconsin. After Central States defaulted on the note, the Bank brought
an action against Central States and Ludlow, requesting foreclosure of the Sun Prairie
mortgage and a deficiency judgment. The court in that action entered a judgment of
foreclosure, which provided that if the proceeds of the sale of the Sun Prairie property were
insufficient to pay the amount due the Bank under the note, a deficiency judgment was to be
entered against Central States and Ludlow. On April 2, 1998, the court entered an order in
that action confirming the sheriff's sale and directing a deficiency judgment to be entered
against Central States and Ludlow, jointly and severally in the amount of $173,636.41.
¶3. The Bank filed this action against Marshall Development on June 9, 1999,
alleging the amount due under the judgment against Central States and Ludlow and
requesting foreclosure of the Marshall mortgage. The Bank also named as defendants
persons with an interest in the Marshall property, including John Grimmer. Grimmer moved
for summary judgment, asserting that the note and all mortgages merged into the deficiency
judgment and the Bank was thus precluded from foreclosing on the Marshall mortgage. He
also asserted the doctrine of claim preclusion barred the Bank from maintaining this
action.1 The court agreed with
Grimmer's merger argument and did not reach the issue of claim preclusion. Relying on
Production Credit Ass'n v. Laufenberg, 143 Wis. 2d 200, 205, 420
N.W.2d 778 (Ct. App. 1988), the court ruled that, by operation of the doctrine of merger,
with the entry of the deficiency judgment the note ceased to bind the parties, and the Bank's
only recourse was to enforce the deficiency judgment. The court concluded: "[t]o
permit the Bank to foreclose on the second mortgage in addition to collecting on the
deficiency judgment would result in a windfall to the plaintiff and allow the Bank to
foreclose on a mortgage that secures a debt that no longer exists."
DISCUSSION
¶4. The Bank2 argues on
appeal that the trial court erred in applying the doctrine of merger to bar this action. It also
argues the alternative grounds asserted by Grimmer to support the summary judgment-Wis.
Stat. §§ 846.10 and 846.101 (1999-2000)3 as construed in Glover v. Marine
Bank, 117 Wis. 2d 684, 693-94, 345 N.W.2d 449 (1984), and the doctrine of
claim preclusion-do not bar this action.4
¶5. When we review a summary judgment we apply the same methodology as
the trial court, and our review is de novo. Green Spring Farms v.
Kersten, 136 Wis. 2d 304, 315, 401 N.W.2d 816 (1987). The remedy is
appropriate in cases where there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Germanotta v. National Indem.
Co., 119 Wis. 2d 293, 296, 349 N.W.2d 733 (Ct. App. 1984).
Merger
¶6. The general statement of the merger doctrine, which we adopted
from Restatement (Second) of Judgments §18 (1982) in Waukesha Concrete
Prods. v. Capitol Indem. Corp., 127 Wis. 2d 332, 343-44, 379 N.W.2d 333
(Ct. App. 1985), is:
When a valid and final personal judgment is rendered in favor
of the plaintiff:
(1) The plaintiff cannot thereafter maintain an action on the original claim or any
part thereof, although he may be able to maintain an action upon the judgment; and
(2) In an action upon the judgment, the defendant cannot avail himself of defenses
he might have interposed, or did interpose, in the first action.
¶7. In Production Credit, we
applied this doctrine to preclude recovery of costs and attorney fees under a contract
provision after a judgment was entered on the claim for breach of that contract, and the
judgment did not include costs and attorney fees as provided in the contract.
Id. at 205-06. We described the doctrine of merger as "a common
law principle that is generally applied throughout state and federal forums in a consistent
manner." Id. at 205. In Waukesha Concrete,
we applied the doctrine to preclude recovery of the contractual rate of interest (rather than
the statutory rate of 12% on judgments), concluding that, upon the entry of the judgment on
the claim for breach of contract, the claim for interest under the contract was extinguished.
Waukesha Concrete, 127 Wis. 2d at 343-44.
¶8. Our reasoning in Production Credit and Waukesha
Concrete instructs that, with the entry of the deficiency judgment in the Bank's
first action, the Bank's claim on the note merged with that judgment, thereby precluding the
Bank from bringing another action to recover on the note. However, neither the general
statement of the merger doctrine we adopted in Waukesha Concrete, nor
the application of it in either that case or Production Credit, is a basis for
concluding the deficiency judgment in the Bank's first action precludes a later lawsuit to
foreclose on a mortgage securing the same debt, when that mortgage was not the subject of
foreclosure in the first action. Indeed, Restatement (Second) of Judgments §18 cmt. g,
illus. 10 (1982) specifically provides otherwise:
Incidents of claim preserved. When by reason
of the plaintiff's obtaining judgment upon a claim the original claim is extinguished and
rights arise upon the judgment, advantages to which the plaintiff was entitled with respect to
the original claim may still be preserved despite the judgment. Thus if a creditor has a
lien upon property of the debtor and obtains a judgment against him, the creditor does not
thereby lose the benefit of the lien.
(Emphasis added.)
¶9. As courts in other jurisdictions that have followed Restatement cmt. g
explain,
[t]he doctrine of merger is an aspect of res
judicata5 which prevents relitigation
of existing judgments ... [and] serves to prevent the splitting of causes of action. ...
[However] [m]erger does not discharge the debt for all purposes. The judgment only
changes the form of the action for recovery. The creditor retains the right to enforce a lien
or gain possession of property held as collateral for the debt.
Brenton State Bank v. Tiffany, 440
N.W.2d 583, 585 (Iowa 1989) (footnote added; citations omitted). See also
Albrecht v. Zwaanshoek Holding En Financiering, 816 P.2d 808, 811
(Wyo. 1991).
¶10. Allowing an action to foreclose on a mortgage securing a debt that has been
reduced to a judgment is the general rule:
Independent action as bar to foreclosure.
Except as affected by statute in a few states and subject to the conflict of authority as
respects the effect of an execution or an attachment upon the mortgaged property by the
judgment creditor or a sale thereunder, the cases are uniform in holding that until the
mortgage debt is actually satisfied, the recovery of a judgment on the obligation secured by a
mortgage, without the foreclosure of the mortgage, although merging the debt in the
judgment, has no effect upon the mortgage or its lien, does not merge it, and does not
preclude its foreclosure in a subsequent suit instituted for that purpose, or the exercise of the
power of sale contained in the mortgage or deed of trust-the conclusion often reached in such
cases being that the debt is not destroyed by the merger and that the mortgage secures the
debt in its new form as merged in the judgment.
55 Am. Jur. 2d §524 (1996) (footnotes omitted).
Accord 50 C.J.S. §773(c) (1997) (in absence of statute to contrary, it is
generally held that an unsatisfied judgment on a debt or a note evidencing it, is no bar to an
action to enforce mortgage or other lien given as security for such debt).
¶11. Grimmer contends, however, that Wisconsin case law addressing the
relationship between deficiency judgments and actions for foreclosure of mortgages require
that we apply the doctrine of merger in this case. Our examination of the cases Grimmer
relies on persuades us they neither require nor provide support for that result in this case.
¶12. In Wisconsin, the cause of action on a note evidencing an indebtedness and
the cause of action to foreclose the mortgage on real estate that secures the indebtedness are
distinct. Witter v. Neeves, 78 Wis. 547, 548, 47 N.W. 938 (1891). At
common law these remedies had to be pursued separately; they could be brought at the same
time, or either one could be brought before the other. Id. Since 1862,
Wisconsin has had a statute authorizing the plaintiff in a foreclosure action to obtain a
judgment for deficiency against the defendants who are personally liable on the note.
Glover, 117 Wis. 2d at 693-94. That statute, now numbered Wis. Stat.
§846.04(1), permits but does not require a plaintiff in a foreclosure action to
"demand judgment for any deficiency that may remain due the plaintiff after sale of the
mortgaged premises against every party who is personally liable for the debt secured by the
mortgage."
¶13. Because a creditor in Wisconsin is not required by statute to combine the
action on a note with the action to foreclose, we do not agree with Grimmer that Wisconsin
is a "one action" state. The "one action" states are the few states that
do not follow the general rule embodied in Restatement cmt. g. See Kepler v.
Slade, 896 P.2d 482, 485 (N.M. 1995). See also In re Sunnymead
Shopping Ctr. Co., 178 B.R. 809, 815 (9th Cir. 1995)
(discussing California's "one-action" statute).
¶14. Grimmer relies on Witter v. Neeves, 78 Wis. 547, 47
N.W. 938 (1891), for the proposition that "when a creditor pursues an action upon a
note to a deficiency judgment without bringing a concurrent foreclosure action, that creditor
has no further remedy in another action." However, this is not the holding in
Witter. In Witter, the creditor had previously brought
an action for foreclosure under the predecessor to Wis. Stat. §846.04(1); the court
characterized that prior action as uniting in one action the action at law on the note and the
action in equity to foreclose the mortgage. Witter, 78 Wis. at 548. The
creditor then brought an action at law on the note. The court concluded the second action on
the note was precluded because the judgment in the first action (fixing the amount of debt
due, ordering a sale of the mortgaged property, and directing that judgment be entered for
any deficiency) had fully and finally adjudicated the rights of the parties under the note.
Id. at 549. The court rejected the argument that the fact a deficiency
judgment had not yet been entered required a different result, finding the entry of a
deficiency judgment to be merely a ministerial act. Id. at 549-50.
¶15. Although using the term "res adjudicata," the reasoning and
result in Witter is consistent with the doctrine of merger: the
Witter court barred a subsequent action on the note when the debt due
under the note had already been reduced to a judgment in the form of an order for a
deficiency judgment after a sale. Witter, like Production
Credit and Waukesha Concrete, would prevent the Bank
from bringing an action on the note, since the Bank has already obtained a deficiency
judgment. But the Bank is not doing that.
¶16. Roseliep v. Herro, 206 Wis. 256, 262, 239 N.W. 413
(1931), on which Grimmer relies to reinforce his reading of Witter,
makes clear Grimmer is overlooking the significance of the nature of the second
action:
The only exception to both proceeding at common law on the
note and also foreclosing the mortgage is that found in Witter v. Neeves,
supra, wherein it was held that after judgment of foreclosure has been entered
which provides for a deficiency judgment, no action on the note may thereafter be
brought.
(Emphasis added.)
¶17. In Roseliep, the court held that a judgment on a note
given to a mechanic's lien claimant did not prevent the lien claimant from bringing a
subsequent action to foreclose on the lien. Id. at 263. This holding,
rather than supporting the application of merger in this case, is consistent with the view
expressed in Restatement cmt. g: the fact that the debt due under the note has merged with
the judgment on the note does not prevent an action to foreclose on the lien.
¶18. As additional support for his merger argument, Grimmer relies on the line
of cases that emphasize the relationship between a debt secured by a mortgage and the
mortgage. For example, Doyon & Rayne Lumber Co. v. Nichols,
196 Wis. 387, 390, 220 N.W. 181 (1928), holds since there can be no mortgage without a
debt, and since the mortgage given in that case did not secure any debt at the time the
mortgage was given, the mortgage was not a valid lien on the property on that date. We
find nothing in the holding or reasoning of this or other similar cases to suggest a valid
mortgage no longer exists solely because the debt the mortgage secures has been reduced to a
judgment.
¶19. The cases Grimmer cites that concern the finality of a judgment of
foreclosure for purposes of appeal also do not support his merger argument. In Anchor
Savings & Loan Ass'n v. Coyle, 145 Wis. 2d 375, 380, 427 N.W.2d 383
(Ct. App. 1988), overruled on other grounds, 148 Wis. 2d 94, 435 N.W.2d 727
(1989), we held that an order in a foreclosure action confirming a sheriff sale is a final order
for purposes of appeal under Wis. Stat. §808.03(1), even though the order
contemplated the entry of a deficiency judgment. In reaching this conclusion, we referred to
cases holding that the order for a deficiency judgment in the judgment of foreclosure
"is a final adjudication of the defendant's liability for the debt,"
id. at 386 (quoting Kane v. Williams, 99 Wis. 65, 72,
74 N.W. 570 (1898)), and the entry of the deficiency judgment is merely a ministerial act,
which is not itself a final judgment for purposes of appeal, id. at 386. In
the situation before us, there is no question the judgment in the first action was a final
adjudication of the personal liability of Ludlow and Central States on the note. Rather, the
question here is whether that judgment precludes the Bank from seeking foreclosure on a
different mortgage on different property that secures the same debt, and Anchor
Savings has no bearing on this question.
¶20. We are satisfied no Wisconsin case has applied the merger doctrine to bar
an action to foreclose on security for a debt because a judgment has been entered on the note
promising to repay the debt. We are also satisfied Restatement cmt.g is consistent with
Wisconsin case law recognizing that the cause of action for a judgment on a note promising
to repay a debt and a cause of action to foreclose a lien that secures the debt are distinct, and
permits the latter to proceed separately and subsequently to the former.
Roseliep, 206 Wis. at 261-62. We therefore conclude the doctrine of
merger does not bar the Bank's action to foreclose on the Marshall mortgage solely because
the Bank has already obtained a deficiency judgment.
¶21. We do not agree with Grimmer that the principle underlying Restatement
cmt. g does not apply here because the Bank has already foreclosed on one mortgage. With
respect to the merger doctrine, the inquiry is what cause of action has merged with the
deficiency judgment. Properly articulated, Grimmer's objection to an action for mortgage
foreclosure, after there is already a foreclosure judgment on another mortgage securing the
same debt and a deficiency judgment, has a basis, if at all, in either a statutory bar or claim
preclusion. We examine these in turn.
Statutory Bar
¶22. Grimmer contends that Wis. Stat. §§846.10 and 846.101 and
Glover, which interprets these statutes, prevent a creditor from relying on
remaining mortgages once it obtains a deficiency judgment in an action to foreclose on
another mortgage securing the same debt. We conclude neither the holding nor the reasoning
in Glover supports this result, nor does any applicable statute.
¶23. In Glover, as in this case, several mortgages secured the
same debt.6 The creditor
proceeded under Wis. Stat. §846.1017 to foreclose on three of the five mortgages and
obtained a judgment of foreclosure and sale that stated the amount due on the notes and
waived a deficiency judgment. The sale was confirmed, but the price obtained was less than
the amount due on the notes. The individual debtors8 brought suit requesting that both notes be
declared paid in full and the two mortgages not the subject of the foreclosure action to be
discharged. They contended that, because the creditor had waived a deficiency judgment, the
confirmed sale had the effect of satisfying the debt; since there could be no mortgage when
there was no debt, they argued that the two remaining mortgages were
"extinguished." The creditor objected, contending that, by electing to proceed
under §846.101 on the foreclosure of the three mortgages, it waived only the right to
maintain an action for a deficiency on the notes, and still retained the right to realize upon
the security by foreclosing on the two remaining mortgages, as long as no action for a
deficiency judgment was brought.
¶24. The court agreed with the creditor. It rejected the debtors' argument,
holding that "a waiver of personal deficiency does not imply waiving the right to make
further applications of the remaining security toward the debt. The [creditor] is entitled to
foreclosure on the remaining mortgages securing the debt, since the primary obligation for
the debt still exists until all the security has been applied toward it."
Glover, 117 Wis. 2d at 697. This conclusion, the court stated, was
consistent with recognizing the separate and distinct elements of the action to apply the
security toward the debt and the remedy at law for personal liability for the debt-a distinction
that still existed even though both were now available in one action. Id.
The court also observed the debtor's waiver argument was an unreasonable reading of Wis.
Stat. §846.101 because it deprives the creditor of the security on which it initially
agreed to extend the loan and provides a windfall to the mortgagor.
Glover, 117 Wis. 2d at 699.
¶25. In explaining why the creditor could not seek a deficiency if the sale of the
two remaining properties were not sufficient to satisfy the indebtedness, the court relied on
the purpose of Wis. Stat. §846.101. The legislature intended, the court stated, that the
statute provide a simplified alternative, allowing the mortgagee the benefit of a shortened
period of redemption while protecting the mortgagor by a waiver of deficiency judgment.
Glover, 117 Wis. 2d at 694-95, 699. The court found this intent best
carried out by not allowing the creditor to obtain a shortened redemption period by waiving
the deficiency as to some mortgages and then attempting to obtain a deficiency judgment
when foreclosing the mortgages on other properties. Id. In effect, the
Glover court treated the election of a waiver of a deficiency judgment in
the first foreclosure action as a continuing waiver of a deficiency judgment against those
same mortgagors in any later action to foreclose on other mortgages securing the same debt.
¶26. The Glover court's concern with maintaining the balance
embodied in Wis. Stat. §846.101, when there is more than one mortgage securing the
same debt foreclosed in successive actions, is not present in this case. First and foremost,
the persons against whom the Bank obtained the deficiency judgment, Ludlow and Central
States, are not the mortgagors of the property being foreclosed in this action. Therefore,
their interest in being able to have either the advantage of a longer period to redeem their
property or the advantage of no judgment of personal liability for a deficiency-the interests
the Glover court identified as the foundation for its interpretation of
§846.101-is not implicated in this case.
¶27. Second, the Bank did not take advantage of a shorter period of redemption
in the first action by an election to waive the deficiency judgment. In the first action, the
Bank invoked Wis. Stat. §846.102, which provides that a sale may take place two
months from entry of the judgment of foreclosure upon a finding by the court that the
property has been abandoned. There is no provision in §846.102 regarding the waiver
of a deficiency judgment, and the Bank asked for a deficiency judgment in the first action.
The court in the first action found the property was abandoned and therefore set the date of
sale two months from the entry of judgment. There is no indication in the language of
§846.102 that the legislature intended to address the same concerns the
Glover court found the legislature intended to address in Wis. Stat.
§846.101, and Grimmer does not develop an argument to this effect.
¶28. Third, in this action the Bank does not invoke the six-month period of
redemption under Wis. Stat. §846.101 that is permissible only if there is an election to
waive the deficiency judgment. Rather, the Bank asserts, the Marshall property is a
commercial property, as was the Sun Prairie property, and it is proceeding under Wis. Stat.
§846.103(1).9 Section
846.103 governs foreclosures of commercial properties and multi-family residences and
contains the same tradeoff as does §846.101 and Wis. Stat. §846.10, although
with proportionately shorter time periods: section 846.103(1) provides for a six-month
period of redemption, which is shortened to three months in subsec. (2) if the creditor elects
to waive the deficiency judgment.10 Therefore, even if we assume for purpose of
argument that the Bank should not have the advantage of any period of redemption
conditioned upon a waiver of a deficiency because it did not have to waive the deficiency
judgment in order to obtain the two-month period of redemption under Wis. Stat.
§846.102 in the first action, the Bank is not asking for that: it is not requesting the
shorter three-month redemption period in §846.103(2) that is dependent upon the
waiver of deficiency, but instead it is requesting the longer six-month period in
§846.103(1).
¶29. Glover does not support Grimmer's assertion that
"[b]y obtaining a deficiency judgment, [the Bank] represented that all of the security
pledged as collateral for the note had been exhausted and that, after exhausting all of the
collateral, a deficiency remained," and there is no statutory basis for inferring such a
representation. Nor does Glover support Grimmer's position that all
mortgages relating to one debt must be foreclosed in one action before a deficiency judgment
is obtained. That may be a desirable procedure, as Grimmer contends, but the legislature
has not chosen to require that.11
¶30. Finally, Grimmer contends the Bank will obtain a windfall by being able to
foreclose on all the mortgages securing the debt until the deficiency judgment is satisfied.
We do not agree. In no event will the Bank recover more than the amount previously found
to be due on the note. Indeed, as the court in Glover recognized, it is a
windfall to the mortgagor if the creditor cannot foreclose on a mortgage even though the debt
which that mortgage secures has not been fully satisfied. Glover, 117
Wis. 2d at 697. It is for this very reason that equitable considerations support
not applying the merger doctrine to preclude relying on the security for a debt.
See Brenton State Bank, 440 N.W.2d at 585-86.
¶31. We conclude Glover does not support Grimmer's
argument that Wis. Stat. §§846.10 and 846.101, or any other applicable statutes,
prevent the Bank from foreclosing on this mortgage because it obtained a deficiency
judgment in a prior action foreclosing on a different mortgage securing the same
debt.12
Claim Preclusion
¶32. Grimmer argues in general terms that claim preclusion bars this action, but
does not distinguish between claim preclusion and merger. The doctrine of claim preclusion
provides that a final judgment on the merits bars parties from relitigating any claim that
arises out of the same relevant facts, transactions, or occurrences. Sopha v.
Owens-Corning Fiberglas Corp., 230 Wis. 2d 212, 233, 601 N.W.2d 627
(1999). Ordinarily a judgment is conclusive in all subsequent actions as to all matters which
were litigated or might have been litigated in the former action when these three factors are
present: (1)identity between the parties or their privies in the prior and present suits,
(2)prior litigation resulted in a final judgment on the merits by a court with jurisdiction, and
(3)identity of the causes of actions in the two suits. Id. at 233-34.
¶33. The parties in this action-Marshall Development Company, Grimmer, and
others who are alleged to have an interest in the Marshall property-were not parties in the
first action, and none of the parties in that action are parties in this action. The cause of
action in this case is foreclosure of the Marshall mortgage, and the cause of action in the
first case was foreclosure of the Sun Prairie mortgage combined with an action on the note.
The cause of action to foreclose the Marshall mortgage is distinct from the cause of action to
foreclose the Sun Prairie mortgage: the fact that they secure the same debt does not create
an identity of the cause of action. And, for the reasons we have already discussed, the cause
of action on the note is distinct from an action to foreclose a mortgage securing the debt.
Accordingly, the doctrine of claim preclusion does not bar this action.
CONCLUSION
¶34. In summary, we conclude the doctrine of merger does not bar this action
because the Bank's cause of action to foreclose the Marshall mortgage has not
"merged" with the deficiency judgment against Central States and Ludlow.
Second, Glover does not suggest, and no statute provides, that a creditor
may not foreclose on a mortgage because the creditor has, in a prior action, obtained a
judgment of foreclosure on another mortgage securing the same debt and a deficiency
judgment. Third, the doctrine of claim preclusion does not bar this suit because the
defendants in this suit were not parties to the first suit and the cause of action to foreclose
the Marshall mortgage is distinct from the causes of action in the first suit. Therefore, we
conclude the trial court erred in dismissing the complaint, and we reverse.
By the Court.-Judgment reversed and cause remanded.
Recommended for publication in the official reports.
1 The motion used the term "res judicata," which is also the term used by the
trial court and by Grimmer in his brief on appeal. However, since "res judicata"
is now known as "claim preclusion" in Wisconsin, we use the latter term.
Sopha v. Owens-Corning Fiberglas Corp., 230 Wis. 2d 212, 232 n.25,
601 N.W.2d 627 (1999).
2 The Wisconsin Bankers Association has filed a brief as amicus curiae, also requesting that
we reverse the trial court.
3 All references to the Wisconsin Statutes are to the 1999-2000 version unless otherwise
noted.
4 Because we may affirm a trial court's decision on a different legal basis than that relied on
by the trial court, see State v. Patricia A.M., 176 Wis. 2d 542, 549, 500
N.W.2d 289 (1993), we examine all the grounds asserted by Grimmer, even though the trial
court ruled only on merger.
5 In Restatement (Second) of Judgments, the term "res judicata" is used in a
broad sense to include three concepts: "merger-the extinguishment of a claim in a
judgment for plaintiff; bar-the extinguishment of a claim in a judgment for defendant; and
issue preclusion-the effect of the determination of an issue in another action between the
parties on the same claim ... or a different claim...." Restatement ch. 3, intro. note
(1982).
6 In Glover v. Marine Bank, 117 Wis. 2d 684, 345 N.W.2d 449 (1984),
there were two notes, rather than one as in this action, with mortgages on four parcels of
real estate securing the debt due under one of the notes, and a mortgage on a fifth parcel
securing the debt due under both notes.
7 The statute in effect at the relevant time was Wis. Stat. §816.101, subsequently
renumbered to Wis. Stat. §846.101. We will refer to the statute with its current
number. Section 846.101 provides in part:
(1) If the mortgagor has agreed in writing at the time of the
execution of the mortgage to the provisions of this section, and the foreclosure action
involves a one- to 4-family residence that is owner-occupied at the commencement of the
action, a farm, a church or a tax-exempt charitable organization, the plaintiff in a foreclosure
action of a mortgage on real estate of 20 acres or less, which mortgage is recorded
subsequent to January 22, 1960, may elect by express allegation in the complaint to waive
judgment for any deficiency which may remain due to the plaintiff after sale of the
mortgaged premises against every party who is personally liable for the debt secured by the
mortgage, and to consent that the mortgagor, unless he or she abandons the property, may
remain in possession of the mortgaged property and be entitled to all rents, issues and profits
therefrom to the date of confirmation of the sale by the court.
(2) When plaintiff so elects, judgment shall be entered as provided in this
chapter, except that no judgment for deficiency may be ordered therein nor separately
rendered against any party who is personally liable for the debt secured by the mortgage and
the sale of such mortgaged premises shall be made upon the expiration of 6 months from the
date when such judgment is entered.
In contrast to §846.101, Wis. Stat.
§846.10 provides for a sale twelve months from the date of the entry of judgment for
the same properties covered in §846.101 and provides for a deficiency judgment
against those personally liable. See §846.10(1) and (2).
8 The two individuals were makers of one note and guarantors of the second note.
Glover, 117 Wis. 2d at 688-89.
9 Wisconsin Stat. §846.103 provides in part:
Foreclosures of commercial properties and multifamily
residences. (1) No foreclosure sale involving real property other than a one- to 4-family
residence that is owner-occupied at the commencement of the foreclosure action, a farm, a
church or a tax-exempt nonprofit charitable organization may be held until the expiration of 6
months from the date when judgment is entered except a sale under sub. (2).
(2) If the mortgagor of real property other than a one- to 4-family residence that
is owner-occupied at the commencement of the foreclosure action, a farm, a church or a
tax-exempt nonprofit charitable organization has agreed in writing at the time of the
execution of the mortgage to the provisions of this section, the plaintiff in a foreclosure
action of a mortgage, which mortgage is recorded subsequent to May 12, 1978, may elect by
express allegation in the complaint to waive judgment for any deficiency which may remain
due to the plaintiff after sale of the mortgaged premises against every party who is personally
liable for the debt secured by the mortgage, and to consent that the mortgagor, unless he or
she abandons the property, may remain in possession of the mortgaged property and be
entitled to all rents, issues and profits therefrom to the date of confirmation of the sale by the
court. When the plaintiff so elects, judgment shall be entered as provided in this chapter,
except that no judgment for deficiency may be ordered nor separately rendered against any
party who is personally liable for the debt secured by the mortgage and the sale of the
mortgaged premises shall be made upon the expiration of 3 months from the date when such
judgment is entered.
10 Since the Bank makes this argument in reply to Grimmer's argument that Wis. Stat.
§846.101, as construed by the court in Glover, does not permit this
action, we do not have a reply from Grimmer to this assertion. We note the complaint asks
for a sale within six months of the judgment without specifying the statute. However, in his
counterclaim, Grimmer requests "[j]udgment of foreclosure and sale of the mortgaged
real estate as provided by Section 846.103(1) of the Wisconsin Statutes which requires a six
(6) month period of redemption." Therefore, it is undisputed on this record that the
Bank is proceeding under Wis. Stat. §846.103 rather than §846.101.
11 This is in contrast to states which have enacted "security first" statutes, which
require the creditor to exhaust all security before obtaining a deficiency judgment. See,
e.g., In re Sunnymead Shopping Ctr. Co., 178 B.R. 809, 815
(9th Cir. 1995) (discussing California statute).
12 To the extent Grimmer is arguing that Glover, 117 Wis. 2d at 693-94,
supports his merger argument-that the debt the Marshall mortgage secures was extinguished
by the deficiency judgment even though the judgment has not been satisfied-we disagree.
The reasoning of the Glover court that the creditor could not obtain a
deficiency judgment in the action to foreclose on the remaining mortgages is based not on the
doctrine of merger, but on the court's construction of Wis. Stat. §§846.101 and
846.10, as we have explained.
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