McFarland State Bank v. Sherry
809 N.W.2d 58
Wis. Ct. App.2011Background
- Sherry executed a personal guaranty for indebtedness of his son and daughter-in-law on a Bank loan secured by a mortgage on real property.
- Debtors defaulted, Bank foreclosed, and obtained both a foreclosure judgment and a separate judgment against Sherry for the same amount.
- Bank purchased the property at a sheriff’s sale; the order confirming sale valued the property at $147,000.
- Sherry deposited $17,585.82 with the court after sale, seeking relief from judgment by offset of $147,000.
- An exchange agreement later transferred title to Sherry and assigned the Bank’s deficiency rights to him, while Sherry reserved his appeal.
- Bank moved to dismiss as moot; court continued to hear the appeal to determine whether an offset should be awarded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the appeal moot despite the exchange? | Sherry (plaintiff) argues not moot because offset relief remains. | Bank contends mootness since exchange provided full relief. | Not moot; remand appropriate to determine offset relief. |
| Whether Sherry is entitled to an offset against the Bank's judgment for $147,000. | Sherry seeks offset equal to fair value of property acquired by Bank. | Bank argues no offset beyond satisfaction by money; value should not reduce guaranty burden. | Sherry entitled to a $147,000 offset under the common-law bar to over-recovery. |
| What remedy on remand should the circuit court fashion to avoid over-recovery? | Remand should ensure Sherry receives offset while protecting Bank's rights. | Remedies should not undermine Bank's current rights; concerns about property condition can be addressed. | Remand to fashion an equitable remedy, potentially cash payment and return of property, to secure the offset. |
Key Cases Cited
- Continental Bank & Trust Co. v. Akwa, 58 Wis. 2d 376 (Wis. 1973) (guarantor discharged when principal pays; no over-recovery)
- Bank Mutual v. S.J. Boyer Construction, Inc., 326 Wis. 2d 521 (Wis. 2010) (separate and distinct guaranty liability concept)
- First Wisconsin Nat'l Bank of Oshkosh v. Kramer, 74 Wis. 2d 207 (Wis. 1976) (no recovery exceeding amount due on note)
- Bank of Sun Prairie v. Marshall Dev. Co., 242 Wis. 2d 355 (Wis. 2001) (no recovery beyond prior finding due on the debt)
- Crown Life Insurance Co. v. LaBonte, 111 Wis. 2d 26 (Wis. 1983) (discussed value determination in guaranty context)
- GMAC Mortg. Corp. v. Gisvold, 215 Wis. 2d 459 (Wis. 1998) (recognizes broad equitable power to fashion remedies)
- American Med. Servs. Inc. v. Mutual Fed. Sav. & Loan Ass'n, 52 Wis. 2d 198 (Wis. 1971) (equitable adaptability of remedies)
- State ex rel. Olson v. Litscher, 233 Wis. 2d 685 (Wis. Ct. App. 2000) (mootness exception framework)
- Town of Grand Chute v. Outagamie Cnty., 269 Wis. 2d 657 (Wis. Ct. App. 2004) (de novo review of purely legal questions)