Attorney, Codilis and Associates, PC
The Seventh Circuit recently broadened
a prior holding and stated that, under a federal standard of finality,
foreclosure judgments are not final and appealable orders. In Bank of America, N.A. v. Martinson, 2016
U.S. App. LEXIS 12402, *1, the bank filed a foreclosure action in Wisconsin,
and the borrowers removed the case to federal court. The federal district court
entered judgment in the bank’s favor, and the order provided for a sheriff’s sale
after the borrowers’ time to redeem the property expired. Id. The borrowers appealed the judgment order to the Seventh
Circuit. Id.
The Seventh Circuit began the opinion
by considering its jurisdiction. It noted that, in HSBC Bank USA, N.A. v. Townsend, 793 F. 3d 771, 777-78 (7th Cir.
2015), it held that Illinois foreclosure judgments were not final orders. The Townsend majority reasoned that Illinois
foreclosure judgments were not final because the order did not resolve all the
issues in the lawsuit. Specifically: (1) the owner retained statutory rights to
redeem the property before the sale; (2) a judicial sale would still need to be
confirmed in a further court proceeding; and (3) the court would still need to
decide the amount of deficiency, if any. Id.
at 775-77. The Seventh Circuit held that Townsend
controlled the issue of appellate jurisdiction, and it was not material that
the bank in this case was not seeking a deficiency. Martinson, 2016 U.S. App. LEXIS 12402 at *5.
The Seventh Circuit then had to resolve
another difference between the present case and Townsend. The outcome in Townsend,
793 F. 3d at 777, resulted from the court’s holding that, under Illinois law,
foreclosure judgments are not final and generally cannot be appealed until the
sale is confirmed. But this case was different—it involved an appeal regarding
a Wisconsin foreclosure judgment, and the court acknowledged that Wisconsin
courts invariably treat foreclosure judgments as final and appealable orders. Martinson, 2016 U.S. App. LEXIS 12402 at
*5-6; see also Anchor Sav. & Loan v.
Coyle, 148 Wis. 2d 94, 100-01 (“[T]he judgment of foreclosure and sale
disposes of the entire matter in litigation and is a final judgment as a matter
of right . . . . [t]he proceedings after the judgment . . . are analogous to
the execution of a judgment and simply enforce the parties’ rights which have
been adjudicated[.]”).
Despite Wisconsin law, the Seventh
Circuit held that Townsend controlled
in this case because Townsend applied
a federal standard of finality—“a procedural issue governed by federal law.” Martinson, 2016 U.S. LEXIS 12402 at *6
(citing Budinich v. Becton Dickinson
& Co., 486 U.S. 196, 202 (1988)). Congress’s use of “final decisions”
in section 1291 did not mean to incorporate state law, and a “final decision”
in federal court is one “which ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment.” Budinich, 486 U.S. at 199.
The Seventh Circuit acknowledged that it
would create a significant “and potentially treacherous” difference between
state and federal forums if it held that a Wisconsin state court foreclosure
judgment was an appealable order but a Wisconsin federal district court
judgment was not. However, it reasoned that, if it did not follow Townsend and apply a federal standard of
finality, it would create an in-circuit conflict about federal procedural law,
and the more palatable option was to be consistent in applying federal procedure
“and to accept the inevitable potential for confusion based on the difference
between federal and state procedure in such cases.” Martinson, 2016 U.S. LEXIS 12402 at *6.
As a result, the court held that Townsend’s application of a federal
standard of finality is binding in the Seventh Circuit, decided that the
foreclosure judgment in this case was not a final order, and dismissed the
appeal for lack of jurisdiction.
DISCLAIMER: The Appellate Lawyers Association does not provide legal services or legal advice. Discussions of legal principles and authority, including, but not limited to, constitutional provisions, statutes, legislative enactments, court rules, case law, and common-law doctrines are for informational purposes only and do not constitute legal advice.
