State Bar of Wisconsin

Feel Like a Bear During a Salmon Run?

By Paul Swanson

I was sitting in a courtroom full of lawyers last month at the Bankruptcy Court.   During a break in the proceedings, one of my colleagues turned to us all and said, “Isn’t it a great time to be alive and be a bankruptcy lawyer ... although these 70-hour weeks are killers.”  Surprisingly, we all agreed.

It was just a few short years ago that we were lamenting that BAPCPA was going to drive us all into real estate law, probate or, God forbid, family law.   The Chapter 13 trustees thought they would all be filing their own bankruptcies and the Consumer Debtors Bar was in shell shock.  Oh, who could have imagined what we would be dealing with in 2008.

Now, mind you, this is not a gleeful or gloating situation that we find ourselves in, but these are simply the facts.  All of us have gotten very busy with the economy on the skids.  Consumer debtors need more relief, and the practice of bankruptcy law has gotten about as complex as patent or tax law and just about as arcane.   We who are in the thick of it are so busy that I, at least, feel like a bear standing in the middle of an Alaskan stream during a salmon run.

Welcome new board members. As I write this column, I have just come from the first BICR board meeting of the Bar year.  I would like to welcome Rebecca Garcia and Dayton Hansen to the board.  Both are capable, experienced lawyers who will contribute to the furtherance of the Bankruptcy Bar.  I am sure they, along with the rest of the board, will be busy in the upcoming year.

Even though we are busy, we need to remember we as professionals owe a debt to the profession and the public.  To that end, there are several projects on the horizon that, if you are interested and have time, the section welcomes your participation in.

Mortgage foreclosure handbook. First of all, we have the Mortgage Foreclosure Defense Project while not technically a section project, is being supported by our section and hopefully the mother bar.  Board member Jim McNeilly and his partner David Liebowitz, along with other volunteers, are drafting a handbook to guide consumers through the scary and complex world of mortgage foreclosure.  There also will be a more technical guide for lawyers to train us to identify issues with mortgagers or lenders so as to better represent clients with this type of problem.  This project was suggested by David Liebowitz, who observed other projects of this nature going on around the country and who, as a trustee, saw firsthand the horrors of the foreclosure process on the uninformed public.  In many cases, there are systematic abuses and in some cases, outright fraud and heavy handedness.  People are losing their homes and giving up rights without having any idea what they are doing.  The Legal Aid Society in Milwaukee is lending great assistance to the project, and we believe that the U.W. Extension, the Department of Agriculture Trade and Consumer Protection, and others also will support the project, much the same as occurred during the farm crisis in the late 80s.  Anyone interested in helping out should contact Jim McNeilly directly.  The section is firmly behind the project.

Annual bankruptcy update. The 2008 Annual Bankruptcy Update through State Bar of Wisconsin CLE is scheduled for October 30 (Eastern District) and October 31 (Western District) in Milwaukee and Madison, respectively.  In addition to the live event, the program will be available via webcast and video. The program will be interesting and, as always, current topics will be discussed.  We believe that there will be a large turnout of both the Bench and Bar for the seminars and urge you to attend.  On behalf of the section, Mark Bromley coordinated the educational program with State Bar CLE.

Section retreat. We have once again arranged for the Bankruptcy Section Retreat at the American Club in Kohler.  This will be the third annual event scheduled for March 5 and 6.  There will be a luncheon on the 5th, and the format will be the same as last year.   The band has not yet been selected for the dinner dance, and if anyone has a suggestion, kindly let me know.  We hope that all of the judges will once again attend, and we will have national speakers in attendance who should serve to educate and entertain.  Mark your calendars now and reserve your rooms early.  This promises to be, yet again, a great time and a wonderful educational experience.

Annual Convention program. The Bankruptcy Section Program at the State Bar Annual Convention will be held on Wednesday, May 6.  The program will start at 1 p.m., and we believe that we have lined up John Rao of the National Consumer Law Center as our speaker.  Some of you have heard John speak in the past, and I can assure that he is an interesting speaker with a command of the law.  The program will be rounded out with other members of the section. Chris Wolk is making the arrangements.

Wikipedia for bankruptcy information. Finally, one of the board members wanted me to float the idea of having a resource on our section Web site created by section members somewhat similar to Wikipedia, which he thought could be “Wikibicr.”  Please let me know if you have interest in writing on some of the subjects.  It basically would be an encyclopedia of bankruptcy information germane to our Bar written by our Bar. I am floating this as a “trial balloon” and want to see if anyone thinks it is a good idea.  Please let me know.

Well, back to work.  At least we won’t starve.  I would like to take a moment to publically apologize to anyone out there who may have called me in the last six months and that I didn’t get back to.  I am truly sorry and tried not to do this on purpose.  I really mean that.

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United States Supreme Court

Chapter 11, Tax-Exempt Transfer

The USSC recently held that the Bankruptcy Code's stamp-tax exemption does not apply to transfers made before a plan is confirmed under Chapter 11.  A transfer pursuant to § 363 is not exempt from transfer tax, although a transfer pursuant to a confirmed plan would be exempt. 11 U.S.C. § 1146(a) provides a tax-stamp exemption for any asset transferred “under a plan confirmed under section 1129.” Section 1146(a) unambiguously limits stamp-tax exemptions to post confirmation transfers made under the authority of a confirmed plan and is specifically placed in a subchapter entitled “POSTCONFIRMATION MATTERS.” The federalism canon requires courts to “proceed carefully when asked to recognize an exemption from state taxation that Congress has not clearly expressed,” which obliges the Court to construe § 1146(a)'s exemption narrowly.  The Court reasoned that “Congress could have used more precise language and thus removed all ambiguity,” but that only one reading of the statute could be plausible.  The requirement in § 1146 that the sale be “under a plan confirmed” means just that, that the sale must be pursuant to a confirmed plan.  The tax-exempt provisions do not apply because the sale occurred pursuant to § 363 before a plan was confirmed,.  There is a dissent by Justices Breyer and Stevens arguing that “under a plan” does not require the Plan to be confirmed prior to the sale, and that to so hold is against the purpose of the statute.  Florida Department of Revenue v. Piccadilly Cafeterias, Inc., 128 S.Ct. 2326 (2008).

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United States District Courts

Bankruptcy, Foreclosure, Fraud, Res Judicata, Rooker-Feldman Doctrine, Truth in Lending Act, Wisconsin Consumer Act

Debtors obtained purchase money mortgage loan from USA Funding Corporation. USA Funding assigned the mortgage to GMAC, which in turn assigned it to Mortgage Electronic Registration Systems, Inc. (MERS). After debtors defaulted, MERS commenced a foreclosure action in circuit court, and default judgment of foreclosure was granted. One day before the sheriff’s sale, debtors filed a bankruptcy petition. Debtors then filed an adversary action in which they sought injunctive relief from foreclosure, claiming that USA Funding and GMAC failed to provide disclosures required by the Truth in Lending Act, committed fraud by concealing and misrepresenting the yield spread premium, fraudulently concealed private mortgage insurance, and violated the Wisconsin Consumer Protection Act. The Bankruptcy Court granted GMAC’s motion to dismiss on the basis that the debtors’ claims were barred by the Rooker-Feldman doctrine and res judicata. The debtors appealed.

The District Court found the Bankruptcy Court erred in its application of the Rooker-Feldman doctrine. The Rooker-Feldman doctrine is inapplicable because it is confined to cases brought by state-court losers, and it does not bar actions by non-parties to the earlier state court judgment. MERS initiated the foreclosure action as plaintiff, not GMAC. Nevertheless, the District Court held the debtors’ claims are barred because of res judicata. For claim preclusion to apply, three factors must be present: (1) an identity between the parties or their privies in the prior and present suits; (2) the prior litigation resulted in a final judgment on the merits by a court with jurisdiction; and (3) identity of the causes of action in the two suits. The first requirement is met because GMAC was in privity with MERS. The second factor is also met because the circuit court had jurisdiction over the foreclosure action and issued a final judgment on the merits. The final factor is also met: the debtors had the opportunity to raise their claims because the claims are all related to the execution of the note and mortgage. Under the transactional approach adopted in Wisconsin to determine whether there is an identity of claims, the legal theories, remedies sought, and evidence used may be different between the first and second actions. Fritz v. GMAC Mortgage Corp., 2008 WL 2783218 (E.D. Wis. 2008) (Judge Randa).

Objection to Out-of-state Gambling Claims

This case deals with objections to claims of $1.2 million and $386,000 for out-of-state gambling losses. The debtor, a successful businessman, was apparently an unsuccessful gambler and incurred huge obligations in Las Vegas and the Bahamas. Challenges were made to the proofs of claim. The creditors were owners of Nevada casinos. Each time the debtor gambled at the casinos, he did so using credit that had been advanced to him by the creditors. After a certain date, the debtor stopped repaying his gambling debts. The bankruptcy court disallowed the creditors' claims on the grounds that they were unenforceable under Wisconsin law.

In reversing and remanding the bankruptcy court's decision, the court held that, under Wisconsin choice-of-law principles, a court should apply the law of the state with which the contract had its most significant relationship. The court held that the significant contacts weighed heavily in favor of Nevada, not Wisconsin, and that Nevada law should govern the claims because the debtor was in Nevada when he requested and received the credit-line increases that gave rise to the creditors' claims against him, the contracts were negotiated and executed in the state of Nevada, the casinos did business in Nevada, and Nevada had an interest in insuring that entities that did business and entered into contracts within its borders were able to rely on the bargains they struck. Desert Palace Inc. v. Jafari (In re Jafari), 385 B.R. 262 (W.D. Wis. 2008). (Judge Crabb).

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Bankruptcy Courts

Chapter 13, Means Test

Self-employed debtor took expenses relating to her business at line 3b of the means test, following the Official Form, resulting in a below median current monthly income (CMI). Chapter 13 trustee objected to confirmation of the plan, saying the expenses should be taken after calculating CMI. The court sustained the objection within the plain meaning of § 101(10A), which includes income from all sources, whether taxable or not; and §1325(b)(2), which calls for a deduction of such expenses after CMI. While the debtor correctly followed the Official Form, the Code, not the Form, governs to determine CMI. Business expenses should be deducted in the Other Expenses category in Part IV of the Form. In re: Bembenek, 2008 WL 2704289 (Bankr. E.D. Wis. 2008) (Judge Kelley).

Adversary Proceedings, Nondischargeable Student Loans

Chapter 7 debtor’s former employer brought an adversary proceeding, seeking to have a debt for tuition and books declared nondischargeable under §523(a)(8). The former employer reimbursed the debtor for her tuition and book expenses under a program requiring her to repay funds paid within two years after her voluntary departure from the company. The debtor argued §523 (a)(8)(A)(i) requires an actual loan, but the court noted the employer provided funds to pay for education related expenses under a definite agreement for the debtor to either fulfill a service obligation or repay the funds. Thus, the circumstances of this case present a clear example of an “obligation to repay funds received as an educational benefit...” within the meaning of §523(a)(8)(A)(ii), created under BAPCPA to be read separate and apart from §523 (a)(8)(A)(i). Sensient Technologies Corp. v. Baiocchi, 2008 WL 2311563 (Bankr. E.D. Wis. 2008) (Judge Kelley).

Adversary Proceedings, Nondischargeable Domestic Support Obligation

State of Wisconsin brought an adversary proceeding, seeking to have a debt arising from the overpayment of child care expenses declared nondischargeable under §523(a)(5). The State paid child care assistance for a period when the debtor was ineligible, resulting in an overpayment that the State argued constituted a domestic support obligation within the meaning of §101(14A), and thus is nondischargeable under §523(a)(5). The court agreed, finding that all the requirements of §101(14A) were met. In particular, the court noted that BAPCPA broadened the scope of domestic support obligations to include those owed to or recoverable by a governmental unit. State of Wisconsin v. Schauer, 2008 WL 2437530 (Bankr. E.D. Wis.) (Judge McGarity).

Exemptions, Life Insurance

Debtors obtained substantial loans from the cash value of three life insurance policies. Within 24 months before filing their Chapter 7 petition, debtors sold nonexempt assets amounting to $68,820 and repaid the loans. Debtors then claimed as exempt $90,027 in life insurance cash surrender value. The Chapter 7 trustee objected to the exemption arguing that debtors’ repayment of the loans constituted a “funding” of the policy that occurred less than 24 months before the filing of debtors’ Chapter 7 petition. Wis. Stat. § 815.18(3)(f)2, provides that the exemption in life insurance and annuity contracts, for which there is a dollar limit of $150,000, is limited to the value of the contract the day before the first funding that occurred less than 24 months before a bankruptcy filing.

Bankruptcy Court held the term “funding,” as used in § 815.18(3)(f)2, was broader in scope than payment of premiums, and encompassed debtors’ repayment of policy loans. Had the legislature meant to limit the exemption statute to premium payments, it probably would have done so. “Funding” must be read in a sense that harmonizes the purpose of the statute. The trustee’s interpretation of “funded” is consistent with the apparent purpose of the statute of allowing legitimately acquired exemptions while preserving creditors’ rights to funds shifted in contemplation of possible recovery by creditors. Finally, the court rejected the Debtors’ contention that the nature of the loans taken against the policies created a true creditor/debtor relationship between themselves and the insurance company that resulted in a satisfaction on an obligation for a debt, and not the payment of premiums. A life insurance policy loan is not a “debt” because the debtor is not liable to the insurance company for repayment; the insurance company can merely offset against monies due when the policy is paid to the owner or beneficiary because of death or surrender of the policy. In re Bork, 389 B.R. 823, (Bankr. E.D. Wis. 2008) (Judge McGarity).

Attorney’s Fees, Chapter 7, Chapter 13, Discharge Injunction, Foreclosure, Reaffirmation Agreement, Secured Claims

After debtors filed a Chapter 7 petition, debtors and mortgagee entered into a reaffirmation agreement that provided the secured debt and all fees and costs totaled $92,601.31. The reaffirmation agreement did not address any past-due payments or require that the mortgage be made current. Following the reaffirmation agreement, mortgagee demanded a lump sum catch-up payment, which the debtors failed to pay. When mortgagee filed a foreclosure action, debtors filed a Chapter 13 petition. Mortgagee then filed a proof of claim in the amount of $102,987.35, and debtors objected to the claim, arguing that the reaffirmation agreement in their previous Chapter 7 case appeared to roll the entire deficiency into the outstanding balance owed on the claim. Mortgagee argued that the reaffirmation agreement did not reduce or incorporate any mortgage arrearage, an obligation that was outside the scope of the agreement, and that mortgagee was entitled to collect the arrearage by foreclosure.

Reaffirmation agreements are subject to strict requirements and are construed in favor of the debtor. A reaffirmation agreement is a contract between a debtor and a creditor, to which conventional contract principles apply. The Bankruptcy Court determined the reaffirmation agreement in this case specifically limited the extent of debtors’ personal liability on the indebtedness to $92,601.31. Thus, the amount of the obligation was fixed, whether intentionally or not. Since the amount was quantified and detailed, without any mention of arrearage, this provision supersedes the general statement that no changes were made to the loan agreement or payment schedule. The amounts asserted as due and owning by mortgagee’s various forbearance and reaffirmation agreements were conflicting and confusing. Debtors’ objection to the mortgagee’s claim was sustained. As a sanction for mortgagee’s violation of the discharge injunction for its attempts to collect an obligation in excess of what was due following discharge, the mortgagee’s claim consisting of attorney’s fees and costs was denied. In re Eiler, 2008 WL 2074043 (Bankr. E.D. Wis. 2008) (Judge McGarity).

Chapter 7 Means Test, Transportation Allowance, Presumption of Abuse

Debtors, whose income exceeded the state median family income, had three vehicles secured by one loan that would be paid off 35 months after their bankruptcy petition was filed. Debtors claimed both the additional $200 transportation allowance for two vehicles and the ownership expenses for those two vehicles. The U.S. trustee rejected the additional $400 transportation allowance and prorated the loan by the three vehicles, allowing a smaller ownership allowance. The U.S. trustee moved to dismiss the Chapter 7 case. The court held the means test is a “snapshot” as of the petition date and the court should not consider future intentions of the debtors. The court disallowed the additional $400 transportation allowance. As a result, the debtors’ monthly net income was greater than the means test allows, and the court found the presumption of abuse arose. The U.S. trustee’s motion to dismiss was granted and the debtors were given thirty days to convert the case to Chapter 13. In re Martinez, 2008 WL 2018281 (Bank. E.D. Wis. 2008) (Judge McGarity).

Adversary Proceeding, Denial of Discharge

The trustee challenged six actions or omissions by the debtors contending that they fraudulently intended to defraud creditors and the trustee. The court found the trustee failed to show the debtors knew certain statements were false and that their failure to list other items in their schedules were not made with intent to deceive. Some statements or omissions were found to be inadvertent, or made by mistake. Others were found to have been made due to a lack of understanding of the corporate identity of their business and were based upon an apparent lack of explanation by a former bankruptcy attorney. Accordingly, the trustee’s complaint was dismissed. In re Smith, 2008 WL 2517134 (E.D. Bankr. 2008) (Judge Kelley).

Lien Avoidance, Lien Perfection, Priority of Liens.

Chapter 7 trustee brought an adversary proceeding to avoid the liens of two creditors (a bank and another creditor), and sought priority over the bank. The court held that Wisconsin, a race-notice state under the UCC, ranks conflicting security interests according to priority in time of filing of perfection. Thus, the bank’s lien (filed first) was given priority. It made no difference that the bank knew about the other creditor’s lien when the bank perfected its lien, nor did it matter that the debtors waited 92 days after the bank’s perfection to file a petition. The court further denied the other creditor’s request to bring an action at a later date based upon an alleged conspiracy between the bank and the debtors. In re Vission, Inc., 2008 WL 2230741 (E.D. Bankr. 2008) (Judge McGarity).

Chapter 7; Partner; Partnership’s Real Estate

The debtor’s partnership had previously sold some of its real estate and the debtor partner had taken more than his share of the proceeds from that sale than his partnership share entitled him to. A memorandum entered into after the sale provided that the debtor was not entitled to any proceeds when the last piece of real estate owned by the partnership was sold. The trustee claimed under §363(h) that the real estate should be sold and the proceeds divided equally between the partners. The court resorted to partnership law to decide that a partner is liable to the partnership for any overpayment taken by one partner. It found that the memorandum was a recitation of what the law provided-that one partner has to true up for any excess payment taken from the partnership. It also found that the debtor’s obligation to repay the partnership was present consideration for the memorandum executed shortly after the initial transfer. The court dismissed the trustee’s complaint because the neither the debtor nor the trustee had an interest in the remaining real estate of the partnership. In re Williams, 383 BR 727 (2007) (Judge Martin).

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Wisconsin Supreme Court

Wis. Stat. 100.18 Claims, Reliance

Sellers who deceive buyers and then get sued have, from time, to time, claimed that they shouldn’t be liable because even if they lied, the buyer did not reasonably rely on their lie in making the purchase.   Wisconsin courts uniformly reject that as a defense by pointing out that reasonable reliance is not an element of a deceptive advertising claim under section 100.18, Wis. Stats. – then those courts go on to give new life to deceptive sellers by holding that even though “reasonable reliance” is not an element of a section 100.18 claim, it is relevant, and may be considered by a jury in such a case to determine whether the deception “materially induced” the purchase. Confused?  So are the courts, and Novell v. Migliaccio did not help matters.

In this case, the buyer agreed to purchase a home from the seller.  The seller represented in the Real Estate Condition Report that there were no flooding problems in the basement.  The buyer’s home inspector found problems in the basement, and the buyer and seller toured the home with the inspector.  The seller assured the buyer that there were no problems, and the buyer therefore ignored his inspector’s advice and did not hire an expert to inspect the basement.  The sale went through, and the buyer began suffering from 5-7 floods in his basement per year.  He sued under section 100.18, and the seller claimed that even if he had deceived the buyer, the buyer could not have reasonably relied on his falsehoods because the buyer’s own inspector had raised questions and advised hiring an expert.  The case was dismissed on summary judgment in the circuit court; the Court of Appeals reversed as to the section 100.18 violation, and the seller appealed to the Wisconsin Supreme Court, which held that “a plain reading of the statute reveals that reasonable reliance is not an element of a statutory false representation claim.”

The court, however, went on to hold that even though the statute says nothing about reliance, there are cases in which a circuit court may determine as a matter of law that a plaintiff's belief of a defendant's representation is unreasonable, and as a result the plaintiff's reliance (which is based on the unreasonable belief) is also unreasonable. The circuit court may determine that the representation did not materially induce the plaintiff's decision to act and that plaintiff would have acted in the absence of the representation.  The end result of Novell is that plaintiffs do not need to prove they relied on the falsehood or that their reliance was reasonable – but if they do not prove that, defendants can argue that the falsehood did not “induce the plaintiffs decision to act.”

There is a significant point in Novell in that it sub rosa overrules a six-year old case interpreting section 100.18.  In 2002, The Court of Appeals ruled in Kailin v. Armstrong, 2002 WI App 70, that a real estate purchaser could not sue for violations of section 100.18, Stats., if the representations were made after a binding contract was agreed to because people in a contractual relationship are not “the public” for purposes of section 100.18.  In Novell, though, the Wisconsin Supreme Court let stand the buyer’s claims for violations of section 100.18.  The false representations that the court found to be “precisely the representations which form the basis of the section 100.18 claim” were the representations that the seller made after the contract was agreed to, when the buyer and seller toured the basement with the inspector.  Smart litigants will point to Novell and argue that “the public” under section 100.18 now includes those in a contractual relationship.   Novell v. Migliaccio, 2008 WI 44; 749 N.W.2d 544

Wis. Stat. 100.20 claims

The Stuarts paid $1,000 to Weisflog for architectural drawings of the planned remodel, then hired Weisflog to do the work that was laid out in the plans Weisflog had drawn up.  There were two contracts: one for the drawings, one for the work.  The total cost of all work was $279,000.  Construction commenced in 1996; it is not clear when it was completed.  In 2001, though, Stuart stepped right through the floor of the hot tub room Weisflog had designed and built. In 2003, Stuart sued alleging, among other things, violations of the Home Improvement regulations issued by authority (and enforceable under) section 100.20(5).  The jury awarded damages to the plaintiffs. The defendants appealed, raising several issues.  The court denied relief on each one.

The court first held that the applicable statute of limitations for home improvement suits is the six-year fraud statute of limitations found in section 893.93(1)(b), Stats., and not the six-year contract statute under section 893.43, Stats., a finding which was significant because making this a fraud case meant that the discovery rule applied, so that the homeowners could sue six years after the discovery of the damage rather than six years after the damage actually occurred.  The court based this decision on the need to protect homeowners.  The court next ruled that all the damages suffered by the homeowners were subject to section 100.20’s doubling rule, because liberal construction of the damages rule (required for these statutes) advance the remedy of protecting consumers.  The “entire” pecuniary loss claimed by the Stuart’s, the Court held, was caused by the initial misrepresentations related to Weisflog’s qualifications.  The court also held that apportioning the damages between damages caused by the misrepresentations and damages caused by negligence, as the jury was asked to do and did, was error because section 100.20 and the regulations under it were “intended to curb unscrupulous business tactics that cause financial distress” to consumers and businesses, and where the damages all flow from the initial violation, damages should not be apportioned.  (The court did hold that in the appropriate case, damages could be apportioned, but ruled that the Weisflog had not met their apportioning burden here – even though the jury was able to apportion the damages in the special verdict.) The court then rejected the claim that the economic loss doctrine, which bars tort damages in contract cases, was applicable here, because public policy bars applying the doctrine. Finally, the court found that individual employees of an offending business may be held personally liable for actions the employee takes on behalf of the corporate employer.  The matter was then remanded for a recalculation of attorney’s fees to be awarded by the circuit court.

The Stuart case, like the Novell decision, may have caused more problems and left unanswered more questions than it resolved.  The court’s discussion of statutes of limitations addressed the fraud and contract statutes., but no mention was made of section 893.89, Stats., which is entitled “Action for injury resulting from improvements to real property” and which governed recovery of damages for a leaky rook on a newly constructed church, Holy Family Catholic Congregation v. Stubenrauch Assoc., Inc. (136 Wis.2d 515 (Ct. App. 1987) and which governed a homeowners’ suit for negligent construction.  Hartland-Richmond Town Ins. Co. v. Wudtke, 145 Wis.2sd 682, 429 N.W.2d 496 (Ct. App. 1988) (overruled on other grounds, Funk v. Wollin Silo & Equipment, Inc., 148 Wis.2d 59, 435 N.W.2d 244 (Wis. Feb 14, 1989).  Also, no mention was made of two other subsections of 893.93:  Subsection (1)(a), which gives a six-year statute of limitation for “[a]n action upon a liability created by statute when a different limitation is not prescribed by law,” and subsection (2)(a), which gives only two years from accrual of the cause of action if the action is “by a private party upon a statute penalty, or forfeiture when the action is given to the party prosecuting therefor and the state.”  Finally, the court did not address the January 29, 2008, decision of the Court of Appeals in Aslani v. Country Creek Homes, Inc., 746 N.W.2d 605 (Unpublished Decision), which affirmed a dismissal of section 100.18 claims brought over negligent construction on grounds that they were brought beyond the applicable statute of limitations period – which the Court of Appeals said was the contract statute, 893.43, a finding it thought was mandated by a century of Wisconsin Supreme Court rulings.  Stuart v. Weisflog’s Showroom Gallery, Inc., 2008 WI 22, 746 N.W.2d

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Wisconsin Courts of Appeal

Wisconsin Consumer Act; Relief from Judgment

NCO bought Crane’s delinquent credit account and sued him. Crane moved to dismiss under section 425.109, arguing that NCO’s pleading was deficient under the Wisconsin Consumer Act. The circuit court granted the motion, dismissed the case and awarded Crane attorney’s fees.

Subsequently, the Court of Appeals decided Rsidue LLC v. Michaud, 2006 WI App 164, which held that assignees like NCO did not have to comply with the Act’s pleading requirements. NCO, on the basis of that decision, moved the circuit court under section 806.07 for relief from the attorney’s fee award, and the circuit court, based on Rsidue, granted the request. Crane appealed and argued that the circuit court had erred, because NCO had moved only for relief from the fees, and had not moved to vacate the actual judgment in Crane’s favor. The Court of Appeals, surprisingly, agreed. Because NCO never moved for relief from the substantive judgment, that judgment was still in force. That meant Crane was still a ‘prevailing party’ entitled to fees under the Act. The Court of Appeals reversed the circuit court, reinstating the award of fees. A review of the case on the Wisconsin Circuit Court Access program did not show whether NCO has yet gone back and sought to simply vacate the judgment, as it should have done in the first place. NCO Portfolio Mgt., Inc. v. Crane, 2008 WI App 99 (unpublished opinion).

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