Recovery Guarantied? WI Supreme Court Clarifies Guarantor Credits in Mortgage Foreclosures

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Recovery Guarantied? WI Supreme Court Clarifies Guarantor Credits in Mortgage Foreclosures

Recovery Guarantied? WI Supreme Court Clarifies Guarantor Credits in Mortgage Foreclosures

Lexology-

Mortgage lenders using personal or commercial guaranties as recourse against default should take note of the Wisconsin Supreme Court’s decision this Tuesday in Horizon Bank, N.A. v. Marshalls Point Retreat LLC, No. 2016AP832, 2018 WI 19 (Mar. 6, 2018). In that case, amounts owing to Horizon Bank were secured by both a mortgage on real property and a personal guaranty. After the property sold at a foreclosure sale, the guarantor conceded that the amount bid at the sale was sufficient to meet the “fair value” requirement for confirmation of the foreclosure sale under Wisconsin law. However, the guarantor maintained that the amount was less than the fair market value of the property and that he should receive a credit for the fair market value of the property in determining the amount remaining as his obligation on his guaranty. The court agreed with the guarantor.

Guarantor Does Not Oppose Foreclosure, But Wants Credit Amount Left Open

Horizon Bank loaned $5 million to Marshalls Point Retreat LLC, secured by a mortgage on property located in Sister Bay. Allen Musikantow signed a continuing guaranty of payment for the loan. Some time later, alleging that Marshalls Point had defaulted on the loan, Horizon Bank brought a foreclosure action. In the same action, the bank also brought a claim for a money judgment against Musikantow pursuant to the terms of the guaranty.

[LEXOLOGY]

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