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Appeals court affirms judge who refunded part of deposit

In a March 3 decision, the appeals court found a bank isn't entitled to the deposit paid by a man who decided a foreclosure property wasn't worth what he bid.

Chase Home Finance argued that it was entitled to the full $26,500 deposit paid by Richard Nels Pearson when he bid on property at 506 Cherry Lane, Roberts.

But the Third District Court of Appeals found that because the sale was not confirmed and Chase didn't object to a resale, the 10 percent deposit forfeited to Chase was more than it was entitled to by law.

The case involves a house formerly owned by Sandra M. and Michael S. Netz. After foreclosure, a sheriff's sale was held. Pearson outbid Chase with a $265,000 offer.

The notice of foreclosure required the buyer to post a 10 percent deposit and pay the balance of the bid price within 10 days of the sale being confirmed by the county court or the deposit would be forfeited. The notice also said the property would be sold "as is."

When the confirmation sale was held March 11, 2008, Pearson asked Judge Eric Lundell not to confirm the sale but to order a second sale and refund his deposit.

According to court records, Pearson's attorney said the house was poorly built and had smoke, water and mold damage.

The lawyer suggested the house might need to be demolished and Pearson estimated its value at $140,000.

"Chase responded that the sale was an as-is purchase, sight unseen," wrote the appeals court. The bank argued that Pearson took the risk and should forfeit the deposit if he didn't pay the full purchase price within 10 days of confirmation.

Lundell said he couldn't decide the issue immediately and would order the deposit held. He then said he'd order a resale. Chase's attorney agreed.

Lundell then signed an order vacating the sheriff's sale.

At the resale confirmation hearing, Lundell awarded 10 percent of Pearson's deposit to Chase to cover resale costs. He ordered that the rest of the deposit be returned to Pearson.

Chase appealed, but the appeals court found that by readily agreeing to the resale and failing to object in a timely fashion, Chase waived its right to challenge the decision to resell the property.

The court said Wisconsin law says the buyer forfeits his deposit if he doesn't pay the full purchase price within 10 days of the confirmation of sale, but if the sale isn't confirmed, the deposit is to be returned.

Because the judge decided that in fairness 10 percent should be forfeited to Chase, the bank has already gotten more than it was entitled to under state law, concluded the appeals court.