On Tuesday, December 9, 2014, the Wisconsin Court of Appeals issued its decision in Bank of America, N.A. v. Prissel, --- N.W.2d ---, Nos. 2014AP642 & 2014AP647, a consolidated appeal involving the timing of a lender’s obligation to publish notice of residential foreclosure sales. At issue was the proper interpretation of Wisconsin Statute § 846.101(2), which provides that notice of a foreclosure sale of one- to four-family residences “shall be given” within the six-month redemption period following entry of a foreclosure judgment.
The borrowers challenged Bank of America’s failure to publish notice of two foreclosure sales within the six-month redemption period, arguing that Section 846.101(2)’s use of the word “shall” required publication within that time period. Bank of America, on the other hand, argued that the provision should be interpreted within the context of the entire foreclosure framework and, viewed in that light, should be interpreted to allow, but not require, publication within the six-month period.
In a unanimous opinion designated for publication, the Wisconsin Court of Appeals resolved the issue of first impression in Bank of America’s favor. Reiterating that “interpretations of mortgage foreclosure statutes must be based on the context of [the statutory framework] as a whole,” the court held that the legislature’s use of the word “shall” was “directory, rather than mandatory.”
The court agreed with Bank of America that a permissive construction was appropriate for several reasons. First, even though four other Wisconsin statutes governing different types of foreclosures provided that notice “may be given” within six months, the court concluded that it made no sense to interpret Section 846.101(2) any differently despite the statute’s use of the word “shall.” The court found no “reason why the legislature would have decided to require notice” within six months for one- to four-family residences, but not any other type of property.
Second, Section 846.101(2) “does not express a penalty for failing to publish” within the six-month period, which “lends support for construing the statute as directory.”
Third, requiring notices of sale to be published within the six-month period “could force lenders to market properties for sale when doing so is in neither the lender’s nor the borrower’s interest,” such as when “the borrower is appealing the foreclosure judgment” or the “parties have reached, or are trying to reach, a post-judgment workout or loan modification.”
Fourth, interpreting the word “shall” to be mandatory would contradict the purpose of the six-month redemption period, which “is to delay foreclosure sales for a period of time so that a defaulting borrower has an opportunity to redeem a foreclosed property.”
For these reasons, the court held that “Bank of America was permitted, but not required, to publish notices of foreclosure sale during the Borrowers’ redemption periods.”