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 Joe Forward, Legal Writer,
State Bar of Wisconsin
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.”
