First Western SBLC, Inc. v. New Lisbon Travel Mart, LLC ( 2019 )

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
December 19, 2019
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Appeal No. 2019AP113 Cir. Ct. No. 2016CV8
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV
FIRST WESTERN SBLC, INC.,
PLAINTIFF-RESPONDENT,
V.
NEW LISBON TRAVEL MART, LLC,
DEFENDANT-APPELLANT,
JOSEPH R. DIORIO,
DEFENDANT.
APPEAL from a judgment and an order of the circuit court for
Juneau County: STACY A. SMITH, Judge. Affirmed.
Before Blanchard, Graham and Nashold, JJ.
No. 2019AP113
Per curiam opinions may not be cited in any court of this state as precedent
or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
¶1 PER CURIAM. New Lisbon Travel Mart, LLC, appeals a money
judgment in favor of First Western SBLC, Inc., in the amount of $779,013.68.1
The judgment was entered in a foreclosure action. New Lisbon contends that it
was entitled to a $190,000 credit toward the judgment based on a promissory note
that it assigned to First Western in a short sale of the underlying property. We
affirm.2
Background
¶2 In January 2016, First Western filed for foreclosure against New
Lisbon and others on property that New Lisbon refers to as the “Travel Mart”
property. In February 2017, First Western obtained a foreclosure judgment that
included a total judgment amount of approximately $1.6 million.
¶3 It is undisputed that no sheriff’s sale of the Travel Mart property
occurred. Instead, in November 2017, with First Western’s consent, New Lisbon
sold the property in a short sale to a different entity. It is also undisputed that, as
part of the short sale, the entity’s principal, Robert Rugg, gave New Lisbon a
1
We construe New Lisbon’s notice of appeal as also appealing a circuit court order
entered on the same day as the judgment that appears to clarify the liability of New Lisbon and
other defendants under the judgment.
2
We note that each party cites to an unpublished per curiam opinion of this court, and
that New Lisbon does not identify as unpublished the per curiam it cites, KNA Family LLC v.
Fazio, No. 2015AP771, unpublished slip op. (WI App July 6, 2016). We remind the parties that,
with limited exceptions that do not apply here, citation to unpublished per curiam opinions
violates our appellate rules. See WIS. STAT. RULE 809.23(3). All references to the Wisconsin
Statutes are to the 2017-18 version unless otherwise noted.
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No. 2019AP113
promissory note for $190,000, and First Western required New Lisbon to assign
the note to First Western.
¶4 The proceeds from the short sale were applied to the amount owed
under the foreclosure judgment, reducing but not eliminating New Lisbon’s
obligation. The parties disputed whether New Lisbon was entitled to an additional
$190,000 credit based on the promissory note that New Lisbon had assigned to
First Western.
¶5 The circuit court held an evidentiary hearing and, approximately one
year after the short sale, the court issued an oral decision. The court found that the
note was “some form of an asset” payable to its holder, First Western, with
payments not due until 2020. The court further found that New Lisbon’s former
business on the Travel Mart property had failed, resulting in the foreclosure and
short sale. The court took judicial notice that Rugg’s business on the property had
already closed, making it “even more difficult for the Court to believe that the
190,000 debt would likely be paid on time, if ever.” The court found that the
failure of Rugg’s business meant that there were now two recent owners of the
Travel Mart property that had been unable to produce enough income to pay
expenses. Finally, the court found that New Lisbon provided no expert testimony
or other evidence establishing a value for the note.
¶6 Based on its findings, the circuit court concluded that New Lisbon
“failed to prove a proper valuation of the note.” In effect, the court concluded that
New Lisbon had the burden to prove the value of the note if New Lisbon wanted a
credit, and that New Lisbon failed to carry that burden.
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No. 2019AP113
Discussion
¶7 On appeal, New Lisbon renews its contention that it was entitled to a
$190,000 credit toward the judgment based on the note. As we understand it, New
Lisbon makes four main arguments. We address each argument in separate
sections below.
1. Circuit Court’s Factual Finding that the Note Was Unlikely to Be Paid
¶8 New Lisbon first argues that the circuit court based its decision on
an erroneous factual finding that the note was unlikely to be paid. Putting aside
whether the circuit court’s decision was based primarily on that finding, we reject
this argument for the reasons that follow.
¶9 New Lisbon correctly states that a factual finding is clearly
erroneous if it is “against the great weight and clear preponderance of the
evidence.” See Wisconsin Auto Title Loans, Inc. v. Jones, 2006 WI 53, ¶25,
290 Wis. 2d 514, 714 N.W.2d 155. However, New Lisbon does not demonstrate
that the circuit court’s finding that the note was unlikely to be paid was against the
great weight and clear preponderance of the evidence. On the contrary, New
Lisbon concedes that the circuit court properly took judicial notice that Rugg’s
business on the Travel Mart property had closed. Further, it was undisputed that
New Lisbon’s business on the same property had failed.
¶10 What New Lisbon really appears to be arguing is that there was a
lack of evidence to support the circuit court’s finding without more information as
to Rugg’s financial circumstances. New Lisbon complains that the circuit court
“knew nothing about [Rugg’s] wealth, whether he owned other businesses or only
one, or how much money he and/or his other business(es) earned per year.”
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No. 2019AP113
¶11 New Lisbon’s argument as to a lack of evidence does not persuade
us because it assumes, contrary to the circuit court’s conclusion, that New Lisbon
did not have the burden of proof. New Lisbon fails to make a developed argument
showing that New Lisbon did not have the burden. The closest New Lisbon
comes is a citation in its reply brief to Marshall-Wisconsin Co. v. Juneau Square
Corp., 130 Wis. 2d 247, 387 N.W.2d 106 (Ct. App. 1986), aff’d in part, rev’d in
part, 139 Wis. 2d 112, 406 N.W.2d 764 (1987). Marshall-Wisconsin states that
the defendant in a foreclosure action need not “plead or raise an affirmative
defense of accounting or set-off.” See id. at 274. However, Marshall-Wisconsin
does not address the burden of proof and, therefore, New Lisbon’s reliance on
Marshall-Wisconsin does not establish that the circuit court erred in placing the
burden on New Lisbon.
2. The Equitable Nature of Foreclosure
¶12 New Lisbon next argues that the “equitable nature of a foreclosure
action required the Circuit Court to credit New Lisbon with the face value of the
Note.” This argument is not well developed, but, as we understand it, New Lisbon
relies primarily on Body v. Jewsen, 33 Wis. 402 (1873). New Lisbon’s reliance
on Body is not persuasive.
¶13 According to New Lisbon, in Body our supreme court held that the
equitable nature of foreclosure requires that a foreclosure judgment be set off by
the face value of a related promissory note. However, we find no such holding in
Body. The court in Body concluded that a set-off for the face value of a note was
appropriate “[u]nder all the circumstances” in that case. See id. at 412. Thus,
New Lisbon does not persuade us that Body required the circuit court here to
credit New Lisbon with the face value of the note.
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No. 2019AP113
¶14 New Lisbon cites additional cases as well, but does not adequately
explain how those cases support New Lisbon’s argument that, as an equitable
matter, the circuit court had no choice but to credit New Lisbon with the face
value of the note. We deem New Lisbon’s argument based on these cases
insufficiently developed and discuss it no further. See State v. Pettit, 171 Wis. 2d
627, 646-47, 492 N.W.2d 633 (Ct. App. 1992) (we need not consider inadequately
developed arguments).
3. WIS. STAT. § 846.16
¶15 New Lisbon next argues that WIS. STAT. § 846.16 required the
circuit court to determine the “fair value” of the Travel Mart property, and that the
fair value in this case necessarily included the face value of the note. We reject
this argument because we conclude that § 846.16 does not apply to a short sale.
¶16 The statute sets forth the procedure for a sale by “the sheriff or
referee,” see WIS. STAT. § 846.16(1)(a), and includes procedural requirements that
are not logically applied to a short sale, see, e.g., § 846.16(1r)(b)1. (requiring the
sheriff or referee to file a report of the sale with the clerk of court no later than 10
days after sale). New Lisbon argues that, when there is severe pressure to sell, or
a threat of foreclosure, a short sale is a “distressed” sale that should be governed
by the same standards as a sheriff’s sale. However, the statute is plainly not
written so broadly and, by its terms, does not apply to short sales.
4. Estoppel
¶17 New Lisbon’s final argument is that First Western should be
estopped from opposing the $190,000 credit based on First Western’s prior
conduct. In particular, New Lisbon points to First Western’s insistence that the
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note be assigned to First Western, and that the note was accompanied by an
allonge giving First Western all rights to enforce the note as the holder. New
Lisbon asserts that First Western’s conduct was an “admission” that the note “has
value.” New Lisbon argues that First Western should not be permitted to now act
inconsistently with its admission by claiming that the note has no value or that the
value is impossible to determine.
¶18 We reject New Lisbon’s estoppel argument because we disagree that
First Western’s conduct shows an admission as to the note’s value, particularly
when that conduct occurred prior to the failure of Rugg’s business. If there is a
true inconsistency between First Western’s position at the time of the short sale
and its position now, New Lisbon’s briefing fails to demonstrate it.3
By the Court.—Judgment and order affirmed.
This opinion will not be published. See WIS. STAT. RULE
809.23(1)(b)5.
3
New Lisbon asserts that there was unrebutted testimony from its principal that he
“anticipated” that First Western would reduce New Lisbon’s debt by the amount of the note.
However, New Lisbon does not explain why New Lisbon’s one-sided expectation was reasonable
or should control the outcome here.
7