Wisconsin Appeals Court: Legal Notice Published In Wrong Newspaper Sinks Foreclosure Judgment

The following facts are taken from a recent ruling by a Wisconsin state appeals court:

• Mortgage lender files a foreclosure action against homeowner;

• The home subject to the foreclosure action is located in Waukesha County, Wisconsin;

• Process server can't find homeowners to serve lawsuit, so lender serves the lawsuit by publication of a legal notice in a local newspaper;

• For reasons not explained, lender publishes the notice of the foreclosure action in a newspaper of general circulation in neighboring Milwaukee County, and not in Waukesha County (the home's location which was the homeowners' last known address);

• Trial court ultimately enters an order for judgment and judgment of foreclosure and sale in the amount of $373,068.12 against homeowners;

• Homeowners file a motion to vacate the judgment of foreclosure, arguing that the judgment was void due to the court's lack of jurisdiction resulting from the failure of service of process;

• Trial court denies motion, and the foreclosing mortgage lender ultimately takes title to the home at the subsequent foreclosure sale;

• Homeowner files an appeal.

On appeal, District II of the Wisconsin Court of Appeals reversed the trial court's order denying the homeowners motion and remanded the case back to the lower court with direction to vacate the default judgment. The court stated that the legal notice is to be published in a newspaper "likely to give notice in the area or to the person affected," as required by WISCONSIN STAT. §985.02. The court found that, based on the evidence presented, publishing the notice in the Milwaukee County newspaper when the property being foreclosed and homeowners' last known address was in Waukesha County did not comply with the requirements of the statute.(1)

For the ruling, see PHH Mortgage Corporation v. Mattfeld, No. 2010AP612 (Wis. App, Dist. II, March 16, 2011).

(1) In reaching its conclusion, the three-judge Wisconsin appellate panel stated, in relevant part:

• WISCONSIN STAT. § 806.07(1)(d) allows relief from a judgment or order if a "judgment is void." A judgment is void for purposes of §806.07 when the court rendering it lacked subject matter or personal jurisdiction. Richards v. First Union Secs., 2006 WI 55, ¶15, 290 Wis.2d 620, 714 N.W.2d 913. A court gains jurisdiction over the parties only by valid personal and substituted service. See WIS. STAT. § 801.04; see also Span v. Span, 52 Wis.2d 786, 789, 191 N.W.2d 209 (1971). Wisconsin compels strict compliance with the rules of statutory service, even though the consequences may appear to be harsh. Useni v. Boudron, 2003 WI App 98, ¶13, 264 Wis.2d 783, 662 N.W.2d 672.
  
  When a motion to reopen involves a question of proper service, the burden of proof is on the party seeking, pursuant to WIS. STAT. §806.07, to set aside or vacate a default judgment. See Richards, 290 Wis.2d 620, ¶27. The evidence necessary to set aside a default judgment is evidence sufficient to allow a court to determine that the circuit court's findings of fact were contrary to the great weight and clear preponderance of the credible evidence. Id.

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• The Mattfelds contend both that PHH Mortgage did not exercise reasonable diligence in serving them personally and that PHH Mortgage failed to comply with WIS. STAT. ch. 985 when it published the summons. Based on our review of the record, we conclude that the Mattfelds have demonstrated that the circuit court's finding as to compliance with ch. 985 is contrary to the great weight of the evidence.
  
  WISCONSIN STAT. § 985.02 governs "[m]ethod of notification." It provides in relevant part that "[e]xcept as otherwise provided by law, a legal notice shall be published in a newspaper likely to give notice in the area or to the person affected." (Emphasis added.) Proof of publication is required by WIS. STAT. § 985.12 in the form of an affidavit of printing "annexed to a copy of the notice clipped from the newspaper, and specifying the date of each insertion." See § 985.12(1). Here, the affidavit of printing indicates that The Daily Reporter "is a public newspaper of general circulation, printed and published daily ... in the City of Milwaukee, in said county." While PHH Mortgage asserted that "The Daily Reporter is the predominant newspaper to publish legal notices in the Milwaukee Metropolitan area," it failed to provide any evidence to that effect. Indeed, a later affidavit submitted by the publisher notes that "The Daily Reporter is a newspaper that is distributed throughout the State of Wisconsin," but also states that it is "a qualified legal newspaper in Milwaukee County, but it is not a qualified legal newspaper in Waukesha County, where the property that is a subject of the action is located." In contrast, PHH Mortgage's proof of publication for notice of the sheriff's foreclosure sale published in the Waukesha Freeman newspaper contains a statement from the billing coordinator for the Waukesha Freeman, "a public newspaper of general circulation, printed and published ... in the City of Waukesha, in Waukesha County, Wisconsin." It is undisputed that at that time of publication the Mattfelds' last known residence was in Menomonee Falls in Waukesha county, and that Scott Mattfeld still resided in Menomonee Falls in October 2008.
  
  While PHH Mortgage asserts that the Mattfelds failed to provide argument or authority as to why The Daily Reporter would not have given notice to the Mattfelds, the undisputed record as it stood at the time of the default judgment failed to establish that publication in a newspaper "printed and published daily ... in the City of Milwaukee, in said county" would have been likely to provide notice to a resident of Menomonee Falls in Waukesha county. Although The Daily Reporter publisher later averred that the newspaper is distributed throughout Wisconsin, the only mention of Waukesha county was that The Daily Reporter was not qualified in that county. This again failed to establish that publication in The Daily Reporter would have been likely to provide notice to a resident of Waukesha county. The circuit court's finding to the contrary was against the great weight of the evidence of record at the time of the Mattfelds' WIS. STAT. §806.07 motion to reopen.