911 N.W.2d 364
Wis. Ct. App.2018Background
- Bank of New York Mellon (the Bank) sued Gloria and Steven Klomsten in 2016 to foreclose a 2003 mortgage and note after default in 2005; copies of the note and mortgage (note endorsed in blank) were attached to the complaint.
- The Klomstens moved to dismiss, arguing (1) the six-year contract statute of limitations barred the action and (2) the complaint failed to state a claim because the Bank did not allege possession of the original note.
- While the motion to dismiss was pending, the Bank moved for summary judgment and submitted two affidavits: an attorney affidavit (fees/costs) and an affidavit from a Shellpoint employee (servicer) stating Shellpoint or its counsel had possession of the promissory note; the Bank did not submit admissible evidence showing it personally possessed the original note.
- The circuit court denied the Klomstens' motion to dismiss and granted the Bank summary judgment; the Klomstens appealed.
- The court of appeals affirmed denial of the dismissal motion but reversed the summary judgment: it held the complaint adequately pleaded facts to state a foreclosure claim, but the Bank failed on summary judgment to present admissible evidence that it (not just the servicer) possessed the original note.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether six-year contract SoL bars foreclosure | Klomstens: foreclosure is based on the note/mortgage contract and is time-barred under the six-year statute | Bank: foreclosure is an action affecting title/real estate and governed by a longer (30-year) real-estate statute; foreclosure may proceed though action on note is time-barred | Court: SoL on note does not bar foreclosure; denial of dismissal on this ground affirmed |
| Whether complaint failed to state claim for lack of allegation of possession of original note | Klomstens: complaint must plead possession (or ability to possess) of original note | Bank: complaint alleges it is mortgagee, attaches copy of note endorsed in blank, and alleges servicer relationship—sufficient notice pleading | Court: complaint permits reasonable inference Bank will be able to prove possession when needed; dismissal for failure to state claim denied |
| Whether Bank made prima facie case at summary judgment that it is proper plaintiff (possession of original note) | Bank: servicer affidavit shows servicer (and thus Bank) has rights to note; attached copy of endorsed note supports enforcement | Klomstens: Bank submitted no admissible evidence that Bank itself possesses the original endorsed note | Court: Bank failed to present admissible evidence that it possesses the original note; summary judgment reversed |
| Whether note copy attached to affidavit suffices to show original note chain | Bank: attached copy and servicer averments imply authenticity and control | Klomstens: inferences should favor nonmovant; nothing proves attachment is true copy of the original or that Bank controls original | Court: cannot infer on summary judgment that attached copy is a true copy of the original; additional evidence required |
Key Cases Cited
- Wiswell v. Baxter, 20 Wis. 680 (1866) (statute of limitations on the note does not bar mortgage foreclosure)
- Security Nat'l Bank v. Cohen, 31 Wis. 2d 656 (1966) (same principle reaffirmed)
- Data Key Partners v. Permira Advisers LLC, 356 Wis. 2d 665 (2014) (pleading standard and de novo review for motions to dismiss)
- PNC Bank, N.A. v. Bierbrauer, 346 Wis. 2d 1 (2013) (plaintiff must prove right to enforce note; servicer testimony may support possession with proper foundation)
- Dow Family, LLC v. PHH Mortg. Corp., 350 Wis. 2d 411 (2013) (summary judgment inadequate when plaintiff fails to show copy of note is a true original)