The Wisconsin Statute of Limitations
“Defer no time, delays have dangerous ends.” – William Shakespeare, Henry VI
I often get the question, “What is the statute of limitations?” for all the states where we practice foreclosure. That’s a good question, because it is an important question. In fact, recently the CFPB has indicated it intends to double-down on its regulatory oversight of servicers and debt buyers who seek to collect on time-barred debt. So, this and other blog posts may be useful to educate readers about the general rules concerning statutes of limitations for mortgage foreclosure in various states. Last time, we indicated we would start at the beginning [Link to Earlier Post], this time we will start close to the end – in the “W’s” – with Wisconsin.
The first thing you need to know is Wisconsin has TWO relevant mortgage-related statutes of limitations – or “SOL” for short[1] – But only one really matters to Note Investors. Ok… Both could really matter, but one is definitely more important to understand than the other. We’ll discuss them both.
SOL #1: Contracts
First, if you want to only enforce the promissory note and seek a personal judgment directly from the borrower, your claim would be governed by Wisconsin’s 6-year statute of limitations on contracts. The statute reads:
“An action upon any contract, obligation, or liability, express or implied, including an
action to recover fees for professional services, except those mentioned in s. 893.40, shall
be commenced within 6 years after the cause of action accrues or be barred.”
As always, many statutory texts create more questions than they give answers. Some questions that arise out of this clunky statute might include…When does the cause of action accrue? What does accrue even mean here?
In this context, think of the “accrual of a cause of action” as the date of the event that caused the statute-of-limitations-clock to start running. In Wisconsin, the 6-year SOL on contracts (and thereby, notes) accrues on the date of breach – here, the date of the missed payment.
SOL #2: Mortgage Foreclosures
The more important SOL for note investors is this one – Wisconsin’s 30-year limitation on mortgage foreclosures. This SOL is governed by Wis. Stat. 893.33 (2), (5).[2] This one is more important to note investors because you can foreclose on a mortgage and collect a deficiency for monies owed under the note in such actions. In effect, this statute extends the amount of time you would have to enforce an unsecured note.
So, when does the 30-year SOL clock on mortgage foreclosures begin to run? That’s hard to decipher from the statute alone. I’ll spare you the statutory language, but the gist of the statute indicates that the 30-year clock begins to run on the date of the “transaction or event” giving rise to the cause of action. Again, the ever-complicated statutory language leaves us with more questions than answers.
To help determine when the 30-year SOL begins to run, we look to experience and context. Most mortgage documents require a notice of acceleration before the lender/mortgagee may proceed with foreclosure. So, either the date of default or the date of acceleration could arguably start the clock. However, with a 30-year SOL, most note investors will be in the clear to move forward with foreclosure under the applicable SOL, because in practice we’re rarely dealing with mortgages with longer terms than that of 30 years.
“Laches” – The Borrower’s Defense to a Foreclosure Too Long in Coming
There’s more to the laches defense than I’ll put here, but in Wisconsin it’s important to know the basics. Laches is the defense raised by the defendant against the plaintiff who waits too long to enforce its rights, and that long wait unjustly harms the defendant. In legalese, laches is:
“[A]n equitable doctrine, [that] applies when a party's delay in making a claim results in the loss of its right to assert the claim even though the statute of limitations has not run.[3] Laches has three elements:
(1) unreasonable delay by the party seeking, in this context, to enforce the mortgage;
(2) lack of knowledge or acquiescence by the party asserting laches that a claim for relief was forthcoming; and
(3) prejudice to the party asserting laches caused by the delay.[4]”
This is where note investors can get tripped up by a clever borrower’s counsel and/or a judge who may be sympathetic to a borrower. The borrower who asserts the laches defense in her answer can put on proof that you, the note holder, waited an unreasonably long time to foreclose and that your “waiting” harmed the borrower. Moreover, I’ve run into situations in Wisconsin where an assignee of a mortgage is deemed to be “in the shoes” of a previous holder of the mortgage and the previous holder’s unreasonable delay is attributed to the assignee and now holder of the mortgage who is trying to foreclose. In that case, an assignee may be barred from foreclosure because of an earlier holder’s unreasonable delay – even if the foreclosure is brought within the SOL period!
If this seems unfair, the courts of some states would agree with you. (More on that in a later blog covering an in-depth look at laches.) Most state courts place a pretty high evidentiary bar on borrowers asserting laches. For instance, Ohio holds that the mere accrual of interest and penalties, alone, is not enough to show the prejudice element of the laches defense. However, I’ve personally seen at least one Wisconsin judge swayed by the argument.
So even though you have 30 years to foreclose in Wisconsin, act in a timely fashion, and heed the advice of Shakespeare – “Defer no time, delays have dangerous ends.”
____________________________________________________________________________________________________
[1] The humor and irony of the acronym “SOL” is not lost on the author.
[2] See Bank of New York Mellon v. Klomsten, 2018 WI App 25, 381 Wis. 2d 218, 911 N.W.2d 364.
[3] Zizzo v. Lakeside Steel & Mfg. Co., 2008 WI App 69, ¶7, 312 Wis. 2d 463, 752 N.W. 889.
[4] Id.