CITY OF MILWAUKEE, Plаintiff-Respondent, v. Martin J. GREENBERG, Defendant-Appellant-Petitioner, Lawrence EATON, Defendant.
No. 90-0088
Supreme Court of Wisconsin
June 25, 1991
163 Wis. 2d 28 | 471 N.W.2d 33
For the plaintiff-respondent there was a brief by Beverly A. Temple, assistant city attorney, with whom on the brief was Grant F. Langley, city attorney.
HEFFERNAN, CHIEF JUSTICE. This is a review of a published court of appeals decision1 affirming a summary judgment of the circuit court for Milwaukee county, William J. Haese, circuit judge, which found Martin J. Greenberg personally liable to the City of Milwaukee for costs incurred in razing property which Greenberg had sold to Lawrence Eaton under a land contract. We reverse and remand.
The single issue before this court is whether the vendor of real property under a land contract continues to “own” the property so as to be personally liable for the cost of razing that property pursuant to
Because under well established legal principles in Wisconsin, a vendor transfers all equitable ownership rights to the vendee at the time the parties enter into a land contract, the courts below erred as a matter of law in finding Greenberg a property owner under the relevant statutes. Accordingly, we reverse the court of appeals decision affirming the circuit court‘s grant of summary judgment.
The pertinent facts are undisputed. On September 1, 1985, Greenberg sold the property located at 3106 West Lisbon Avenue in the City of Milwaukee to Eaton on a land contract.
Over two yeаrs later, the City of Milwaukee on October 30, 1987, having determined that a dwelling on the property was unfit for further occupancy or use, issued an “Order to Raze and Remove Building” pursuant to
The order stated that the record owners and lienholders had thirty days to raze and remove the building from the premises or the city would arrange to do so itself and the costs would constitute a lien on the property and be assessed and collected as a special tax or be collected personally. When no one complied with the order, the city arranged to have the dwelling razed on June 22, 1988.
The city filеd suit against Greenberg and Eaton on August 24, 1988, to recover the costs. The complaint alleged that, pursuant to
A default judgment was taken against Eaton, the land contract vendee. Pursuant to an agreement between the city and Greenberg, the issue whether Greenberg as the vendor was personally liable was submitted to the
The circuit court found that there were no issues of fact and ruled as a matter of law that Greenberg, as a land contract vendor holding legal title to the property, was jointly and severally liable with the vendee for the cost of razing the dwelling.
The court of appeals affirmed the circuit court‘s summary judgment, concluding that a vendor‘s interest in property conveyed by land contract, while minor in comparison to the vendee‘s interest, is sufficient to constitute ownership under the relevant statutes.4
We accepted Greenberg‘s petition for reviеw and reverse the court of appeals decision and remand to the circuit court for entry of summary judgment against the City of Milwaukee, dismissing the complaint against Martin J. Greenberg.
In reviewing a grant of summary judgment under
Whether Greenberg is a “person who owns real property that is razed by a city under s. 66.05(2)” (
It is equally well established, however, thаt ownership should not be equated with possession of legal title. In Mitchell Aero, Inc. v. Milwaukee, 42 Wis. 2d 656, 662, 168 N.W.2d 183 (1969), for example, this court, in determining whether a person “owned” property under a tax exemption statute, explained:
Ownership is often referred to in legal philosophy as a bundle of sticks or rights and one or more of the sticks may be separated from the bundle and the
bundle will still be considered ownership. What combination of rights less than the whole bundle will constitute ownership is a question which must be determined in each case in the context of the purpose of the determination. In this case for [tax] exemption one needs more than the title stick to constitute ownership.
The task beforе us, therefore, is two-fold. First, we must determine from general legal principles pertaining to land contracts which “sticks or rights” a vendor retains. Second, we must examine the scope, history, and context of
The City of Milwaukee and Greenberg both properly recognize Wisconsin‘s longstanding principles of land contract law. The vendor and vendee in a land contract have separate rights and duties due to the principle of “equitable conversion” which generally governs the sale of real property. Kallenbach v. Lake Publications, Inc., 30 Wis. 2d 647, 651, 142 N.W.2d 212 (1966); see generally Church, Equitable Conversion in Wisconsin, 1970 Wis. L. Rev. 404.
This doctrine is based on the premise that “equity treats that as being done which should be done.” 8A Thompson on Real Property, sec. 4447, pp. 273-74 (1963). Accordingly, as cogently stated by Pomeroy:
By the terms of the contract the land ought to be conveyed to the vendee, and the purchase price ought to be transferred to the vendor; equity therefore regards these as done: the vendee as having acquired
the property in the land, and the vendor as having acquired the property in the price. The vendee is looked upon and treated as the owner of the land; . . . although the vendor remains owner of the legal estate, he holds it as a trustee for the vendee, to whom all the beneficial interest has passed, having a lien on the land, even if in possession of the vendee, as security for any unpaid portion of the purchase-money. The consequences of this doctrine are all followed out. As the vendee has acquired the full equitable estate, although still wanting the confirmation of the legal title for purposes of security against third persons, he may convey or encumber it; may devise it by will; on his death intestate, it descends to his heirs, and not to his administrators; . . . in short, all the incidents of a real ownership belong to it. As the vendor‘s legal estate is held by him on a naked trust for the vendee, this trust, impressed upon the land, follows it in the hands of other persons who may succeed to his legal title, his heirs and his grantees, who take with notice of the vendee‘s equitable right. (Footnote omitted.)
Pomeroy‘s Equity Jurisprudence, sec. 368, pp. 686-87 (4th ed. 1918). See also W. Walsh, A Treatise on Equity, sec. 86, p. 415 (1930).
As early as 1855, this court applied these equitable principles to determine the relation between the parties to an ordinary land contract. Button v. Schroyer, 5 Wis. 598, 598-99 (1855). Even though the vendor holds legal title to the property, because “the vendee must be regarded as the real owner,” we have held that the vendee is liable for taxes assessed on the property after taking possession under a land contract. Williamson v. Neeves, 94 Wis. 656, 665, 69 N.W. 806 (1897); see also
Furthermore, because only the vendee has full rights over the land from the date of the contract, we have held that the vendor merely “has an interest in personalty equivalent to a mortgagee‘s interest” such that a vendor‘s judgment creditors cannot levy against the property. Mueller v. Novelty Dye Works, 273 Wis. 501, 506-07, 78 N.W.2d 881 (1956); Estate of Fischer, 22 Wis. 2d 637, 642, 126 N.W.2d 596 (1964). Conversely, because the vendor‘s lien on the property arises at the time of contracting (with the retention of legal title serving as security), any lien interests of the vendee‘s creditors arising after the land contract date are considered subordinate to the vendor‘s. Rees v. Ludington, 13 Wis. 308 (*276), 314-15 (*282) (1860).
While the vendor‘s interests have been likened to those of a mortgagee, the two are nоt identical. Because Wisconsin adheres to the “lien theory” of mortgages, we have recognized that a mortgagee, unlike a land contract vendor, does not hold legal title to mortgaged property and that a “mortgagor retains full ownership in the property, which consists of equitable and legal title.” Glover v. Marine Bank of Beaver Dam, 117 Wis. 2d 684, 691-92, 345 N.W.2d 449 (1984);
In light of the foregoing legal principles, it is evident that, to the extent the property was conveyed to Eaton under a standard land contract, Greenberg did not retain any ownership “sticks or rights” other than the bare legal title. The bundle was basically transferred to Eaton. Notwithstanding the clarity of these governing equitable rules, however, this court historically has found the question of whether a land contract vendor or vendee “owns” property under a statute to be troublesome. Because under the equitable conversion doctrine the vendor can be characterized as having the legal, and the vendee the equitable, title, we have stated on several occasions over the years that “there may be a measure of ownership in each.” Evans-Lee Co. v. Hoton, 190 Wis. 207, 211, 208 N.W. 872 (1926).
In determining that a lien arising after a land contract sale attached to the vendor‘s interest in the property, for example, this court in Edwards & McCulloch Lumber Co. v. Mosher, 88 Wis. 672, 60 N.W. 264 (1894), found the vendor to be an “owner” of real property under the mechanic‘s lien statute. While the provisions of that statute were unusual,6 Mosher did strongly suggest that
This court also suggested in In re Catfish River Drainage District, 176 Wis. 607, 187 N.W. 673 (1922), that a land contract vendor would be an “owner” under the relevant drainage district statute. According to sec. 1379-11, Stats. 1921, the owners of land within a proposed district had the right to petition for the creation of such a district. Following the principles set forth by the majority opinion in Mosher, this court ruled that the land contract vendee, like the vendor, had a voice in the district‘s creation, because he was an owner tо the extent of the purchase money paid. 176 Wis. at 612-15. The court concluded that “[e]ach, in the sense indicated by the Wisconsin decisions referred to, is an owner; each has an interest in the land . . ..” Id. at 615.7
Subsequent to these aberrant decisions, this court has on several occasions expressly or implicitly found a land contract vendor not to be an owner under the rele-
In Mueller v. Novelty Dye Works, supra, 273 Wis. 501, this court held that real estate conveyed under a land contract was not “real property” of the vendor and accordingly a statutory judgment lien could not attach to the vendor‘s interest. 273 Wis. at 507. The vendor was not considered to have any ownership interest in the property but only a lien as security for the unpaid purchase balance. Consistent with the rationale of Mueller, the court held the land contract vendee to be an “owner” of tax exempt property in Ritchie v. Green Bay, 215 Wis. at 437, because, as between the vendee and the vendor, the vendee assumes all the burdens of ownership. Under a long line of statutory tax cases, Wisconsin courts have consistently considered the owner to be the party which has the beneficial interest in the property and not the party which merely has bare legal title theretо. See, e.g., American Motors Corp. v. Kenosha, 274 Wis. 315, 319-20, 80 N.W.2d 363 (1957), aff‘d 356 U.S. 21 (1958); Wall v. Department of Revenue, 157 Wis. 2d 1, 8, 458 N.W.2d 814 (Ct. App. 1990) (review denied).
Having set forth the applicable land contract principles and Wisconsin decisions determining whether a vendor or vendee is an owner under particular statutes, we also consider the scope, history, and context of
Whenever a city arranges to have a building razed upon the owner‘s failure to do so, the razing costs are
While one of the purposes of the new statute was to create an alternative mechanism for recovering razing costs,
The dispositive issue in this case is whether Greenberg, as a land contract vendor, “owns” the real property under
Applying the general principles of this court‘s decisions over the past seventy-five years, we hold that a land contract vendor does not “own” property for purposes of imposing personal liability under
Under the doctrine of equitable conversion, Eaton, the vendee, has been the beneficial owner of the property since the execution of the land contract, and as such he enjoys the rights and sustains the burdens of ownership. Because Eaton was the only owner when the property was razed, he alone is liable for the razing costs which the City of Milwaukee can collect either through a “special tax” assessment under
While we deem factually оr legally distinguishable those earlier cases suggesting that land contract vendors
The City of Milwaukee has also set forth a number of policy reasons why
The city also asserts that failing to hold land contract vendors personally liable under
We are not persuaded by the city‘s policy arguments. To the extent a vendor and vendee by contractual stipulation attempt to alter the common law rights and duties imposed upon them, such changes must be brought to the attention of the court. Our determination in this case is based on the basic assumption of this action that Greenberg and Eaton have entered into a standard land contract. To the extent a vendee normally covenants not to commit waste,13 however, such a contract provision merely serves as evidence that the vendee, and not the vendor, exercises control over the property.14
We recognize that land contracts have been utilized as an instrument for the conveyance and financing of
While we must construe
The City of Milwaukee also relies heavily on the decision of In Matter of Foreclosure of Tax Liens, 106 Wis. 2d 244, 250, 316 N.W.2d 362 (1982), wherein this court ruled that a land contract vendor qualified аs an “owner” under the notice provisions of a statute governing the foreclosure of tax liens. In Tax Liens, the vendee failed to pay the real estate taxes which accrued after he purchased the property on a land contract. Accordingly, Waukesha county proceeded to foreclose its tax lien on the property under sec. 75.521, Stats. 1977. Under the notice provisions of that statute, the county had to file a list containing the names of the “last owner or owners, and the mortgagee or mortgagees” as indicated by the records of the register of deeds. See
The issue before this court in Tax Liens was whether the trial court could enter a foreclosure judgment when the land contract vendor was not notified of the action. The court stated that, under past cases of this court, “both the vendor and vendee have an interest in the land. The vendee becomes the equitable owner, while the vendor retains legal title to secure the balance of the purchase price. Kallenbach v. Lake Publications, Inc., 30 Wis. 2d 647, 651, 142 N.W.2d 212 (1966).”
Kallenbach, however, in its principal rationale, and as illustrated in the very quotation above, is the antithesis of commоn law ownership in the vendor. Kallenbach makes clear that the right of the vendor is only that of a
Tax Liens merely equated the vendor‘s lien as being similar to the lien of a mortgagee, and hence concluded that, in the absence of notice to the vendor, the tax lien foreclosure was void. Tax Liens merely had the effect of protecting the personal property rights of the vendor as secured by his lien upon the property that was the subject of a land contract. Tax Liens merely held that, “As the holder of legal title to the property, the land contract vendor qualifies as an ‘owner’ for the purposes of sec. 75.521.” (Emphasis supplied.)
Tax Liens рroperly applied the statute to the vendor lienholder in the same manner as the statute applied to the mortgagee lienholder. However, neither the rationale of Tax Liens nor the cases cited in Tax Liens support the city‘s contention that a land contract vendor is to be considered an owner in situations other than the very circumstance determined in Tax Liens.
While a land contract vendor is not considered an “owner” for purposes of determining the legal rights and responsibilities between the vendor and vendee, where a recorded land contract is involved, vendors, as holders of legal title, are commonly considered owners for purposes of notifying them of a potential termination of their interest in the property.16
This court in determining the vendor to be a record owner for the special purpose at issue in Tax Liens was
We conclude that Greenberg as a land contract vendor does not own the property razed by the City of Milwaukee and thus is not personally liable for the razing costs.18 Accordingly, we reverse the court of appeals decision affirming the circuit court‘s grant of summary judgment.19
By the Court.—Decision reversed and remanded.
LOUIS J. CECI, J. (concurring). I concur in the opinion of the court in all respects and write separately only for the purpose of expressing my concern that this opinion may be utilized by unscrupulous slumlords who would avoid their responsibility to repair and refurbish their property as ordered by the building inspectors.
Obviously this matter is one that may require hearings and action by the legislature to ensure that low-income housing remains habitable and in conformity with hеalth department and building inspection requirements.
Notes
(a) “City” means a city authorized by law to collect and sell its own taxes.
(b) “Property owner” means:
1. Any person who owns real property on which real estate taxes or special assessments are delinquent during the period to which the delinquency applies.
2. Any person who owns real property that is razed by a city under s. 66.05(2), (5) or (8)(b).
3. Any person who owns real property on which an excavation is located that is filed by a city under s. 66.05(6).
4. Any person who owns real property on which a public nuisance is abatеd under s. 823.04 or 823.22.
(2) A 1st class city may proceed against any real property, the property owner or both to collect delinquent real estate taxes and other costs.
(3)(a) A city may bring a civil action against a property owner to recover any of the following costs:
1. Delinquent real estate taxes and special assessments. A property owner is personally liable for the payment of delinquent real estate taxes and special assessments to the extent that the delinquency applies to taxes and assessments owed for the period during which the property owner owned the property.
2. The cost of razing property incurred under s. 66.05(2), (5) or (8)(b).
3. The cost of filling аn excavation incurred under s. 66.05(6).
4. The cost of abating a public nuisance under s. 823.04 or 823.22.
(b) If real property is owned simultaneously by more than one person, the owners are jointly and severally liable for the payment of these costs, subject to this section.
(4) If a city proceeds against both the real property and the property owner to collect these costs, the city may not recover more than the amount owed, plus applicable interest and penalties.
These Tax Code Administrative provisions are consistent with the holding of this opinion.Sale of a Land Contract Vendor‘s Interest. A deed which transfers the interest of a vendor in a land contract to another person is excluded from the provisions of
s. 77.22(2), Stats. It is therefore not subject to the transfer fee. Under the doctrine of equitable conversion the vendor‘s interest in the land contract becomes personal property. Such a transfer is not a conveyance within the definition ofs. 77.21(1), Stats. , because it does not provide for the passage of ownership interest in real estate.
To the extent that eligible costs not currently recoverable from enforcement of a lien against property can be recovered in the manner proposed by this bill, local government revenues in cities and counties of the first class will increase. Data are not available to estimate the amount involved, but it is not expected to be large.
This term, particularly used in statutes requiring notice of tax delinquency or sale, means the owner of record, not the owner described in the tax roll; the owner of the title at time of notice.