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Appeals court says bank had right to foreclose on Miller Homes property

A Hudson development group's contention that its longtime understanding with the bank should have protected it from foreclosure on $2 million in loans has been rejected by a Wisconsin appeals court.

In a decision released last week, the District III Court of Appeals upheld a judgment by St. Croix County Judge Howard Cameron granting foreclosure in a case brought by Associated Bank against Miller Homes of Hudson LLC, Samuel E. Miller and Leo A. and Monica J. Draveling.

According to the appeals court decision, between 2005 and 2008 the parties signed a series of documents relating to 10 construction loans. In each case the document stated when Miller Homes would begin payments and when repayment of the entire loan was due. Each loan was backed by a mortgage against real estate and personal property. As time went on, the loans and maturity dates were extended.

In March 2009 Associated placed the Miller Homes' loans in a "special loan group," a group of loans that would no longer be given extensions. Almost $2 million in outstanding debt came due in June 2009, and on Sept. 17, 2009, the bank began foreclosure proceedings.

Miller Homes counterclaimed, alleging breach of contract, misrepresentation, breach of good faith and fair dealing and violation of the Truth in Lending Act.

The developers claimed that a 25-year relationship between them and the bank "clearly established a common basis of understanding relating to the loan agreements."

Miller Homes alleged both parties understood the loans would be paid when the mortgaged property was sold. The developers also claimed the bank's decision not to extend the loans and its alleged failure to give notice that the relationship could be in jeopardy amounted to breach of implied duty of good faith and fair dealing and to misrepresentation.

Cameron granted foreclosure. A judgment of $2,229,550 was entered against Miller Homes, which then appealed.

In its decision, the appeals court noted that Miller "completely ignores" the actual loan documents in its 28-page argument but instead "argues its own interpretations of the loan documents should be superimposed on the written documents" to provide that the loans would be extended as long as Miller was making payments and marketing the property.

But, said the appeals court, the loan documents are the only contracts between the parties and they say the terms can't be changed unless put in writing and signed.

The bank was not required to continue extending credit to Miller Homes, said the court.

"Quite simply, Associated Bank extended credit to Miller Homes when it believed Miller Homes was good for the credit, but declined when it no longer believed Miller Homes was able to fulfill its obligations," wrote the court. "Miller Homes may be disappointed with this business decision, but it did not create an issue of fact regarding an agreement outside the loan documents."

The court said the bank had the right to call the loans due at maturity or upon any default, and the county judge properly dismissed Miller's claim for breach of contract.

Judy Wiff

Judy Wiff has been regional editor for RiverTown’s Wisconsin newspapers since 1996. She holds a bachelor’s degree in journalism and sociology from UW-River Falls. She has worked as a reporter for several weekly newspapers in Wisconsin.