Dec. 13, 2012 – Judgment creditors can request
“supplemental proceedings” to make debtors answer for
unsatisfied debts and identify property. Recently, an appeals court
clarified that creditor liens still attach to property acquired
subsequent to supplemental proceedings.
In 2006, Town Bank obtained a judgment for nearly $1.7 million against
Timothy Brophy. Two days later, Town Bank requested and received a
More than a year later, Brophy assigned his interest in legal
malpractice claims to Heartland Wisconsin Corporation as security for
loans totaling $222,539. Brophy defaulted.
The legal malpractice case settled, and both Town Bank and Heartland
Wisconsin Corp. claimed a priority interest in the settlement funds. The
funds were placed in escrow pending resolution.
The Waukesha County Circuit Court ruled that Town Bank had priority.
Heartland appealed, arguing that Town Bank’s priority ceased when
it failed to file notice of the supplemental proceeding and order with
the clerk of court, alleging Wis. Stat. section 816.035
Town Bank had served Brophy with the supplemental hearing order and
summons, but did not file the documents with the circuit court
Heartland Wisconsin characterized Town Bank’s lien as an
unenforceable “secret lien,” and in any event, the lien
could not attach to property acquired after the supplementary
The District II Wisconsin Court of Appeals disagreed in Attorney’s
Title Guaranty Fund Inc. v. Town Bank, 2011AP2774 (Dec. 5,
2012), upholding the lower court’s decision.
A three-judge appeals panel explained that Wis. Stat. chapter 816
requires the “supplemental commissioner,” not the party
requesting the supplemental hearing, to file the supplemental proceeding
order and proof of service with the corresponding circuit court
“While Heartland contends Town Bank had a duty to ensure the
order and return at issue in this case were filed with the clerk of
court, this statute clearly placed that responsibility only upon the
supplemental commissioner, not Town Bank,” wrote Judge Mark
The panel also ruled that Town Bank perfected its creditor lien when it
served Brophy with an order to appear for supplementary hearing, and
this perfected interest was superior.
Citing Mann v. Bankruptcy Estate of Badger Lines Inc., 224
Wis. 2d 646, 590 N.W.2d 270 (1999), the panel noted that “’a
creditor’s lien is valid and superior against other creditors
at the time the creditor serves the debtor with a summons to appear
at the supplementary proceeding under Wis. Stat. §
816.03(1)(b).’” This is the only step necessary to
perfect the lien, it noted.
Finally, the appeals panel downed Heartland Wisconsin’s argument
that Town Bank’s lien did not apply to personal property that
Brophy acquired after the supplemental proceeding.
“We hold that a creditor’s lien may attach to any property
of the judgment debtor, including property acquired subsequent to a
supplementary proceeding,” Judge Gundrum wrote.