Land Contract, Later Mortgage, and Judgment Lien
In 2020 Owen sold a 40-acre parcel to Priya on a 15-year land contract. Priya paid $60,000 down, has made every payment, built a barn, and fenced the parcel. The contract was not recorded, but Priya has occupied and improved the land openly. Owen kept legal title. In 2023 Owen mortgaged the parcel to River Bank for $150,000; the bank recorded. In 2024 a judgment creditor of Owen recorded a $40,000 lien against Owen. Owen now defaulted on the bank mortgage, and the bank says it will foreclose 'free of Priya's interest.' Priya has the signed land contract and payment receipts.
1. Who has the superior interest in the parcel-Priya, River Bank, or the judgment creditor? Analyze under Wisconsin recording principles.
Read the worked answer
Priya has equitable title and a right to a deed; Owen retained legal title only as security. Under Wisconsin's race-notice recording statute, a later mortgagee for value who records first prevails over a prior unrecorded interest only if it takes without notice. River Bank recorded, but Priya's open, continuous possession, barn, and fencing may give inquiry notice, so the bank may have taken subject to her land contract.
The judgment creditor's lien attaches only to Owen's interest-his legal title and right to receive payments-and does not wipe out Priya's equitable interest. If the bank had no notice and is protected, it could foreclose Priya's interest; if it had notice, its mortgage is subordinate. The judgment lien is likewise subordinate to Priya's prior equitable interest.
2. What difference would recording the land contract or a memorandum have made, and does Priya's possession matter?
Read the worked answer
Recording the land contract or a memorandum in the register of deeds would give constructive notice to later lenders and judgment creditors and would likely have protected Priya without litigation. Possession matters because Wisconsin purchasers are charged with notice of facts a reasonable inspection would reveal; Priya's occupancy and improvements can establish inquiry notice even without recording.
But possession is a fact question, and a lender may dispute it. Recording is the safer, cleaner protection. The bank's actual or constructive notice determines priority; if the bank had none and recorded first, Priya's unrecorded interest is at risk.
3. What should Priya do now to protect her interest?
Read the worked answer
Priya should immediately record the land contract or a memorandum, gather payment receipts, and send written notice of her interest to River Bank and the judgment creditor. She should review the contract for default remedies and demand that Owen deliver a deed or provide a payoff statement. If the bank forecloses, she should assert her interest and seek to quiet title or specific performance.
She should continue payments as the contract requires, avoid default, and consult a Wisconsin real estate attorney. She should also check title for other liens and consider obtaining title insurance or a subordination agreement if refinancing.