Supplemental examination of business records authorized where defendant
owned two companies
A corporation obtained a default judgment against Orion Construction,
which was owned completely by Douglas Larson. Larson also owned another
company, Orion Logistics. The appeals court held that a circuit court or
court commissioner could compel supplemental examination of Orion
Logistics' books and records to ascertain whether Larson was
attempting to conceal assets through fraudulent transfers.
By org jforward wisbar Joe Forward, Legal Writer,
State Bar of Wisconsin
Dec. 9, 2010 – To
ascertain the existence of a judgment debtor’s assets, circuit
courts and court commissioners have authority to compel supplemental
examination of a corporate entity’s books and records if the
entity shares common ownership with the judgment debtor.
Douglas Larson was the sole member of Wisconsin-based Orion
Construction LLC, which constructs cell phone towers. Larson also owned
Orion Logistics LLC, a related business.
Crown Castle USA, Inc. obtained a default judgment against Orion
Construction in Pennsylvania based on Crown Castle’s claim that
Orion Construction constructed faulty cell towers.
Thus, Orion Construction became a judgment debtor, and the court
commissioner ordered an accounting of Orion Construction’s assets
for payment of the judgment. Orion Construction indicated that it had no
assets, and no books or records pertaining to its assets.
Orion Construction’s tax returns indicated that it generated only
$188,000 in gross receipts in 2007 after generating millions in 2005 and
2006. Orion Logistics’ 2007 tax return indicated $15 million in
Crown Castle believed Larson made fraudulent transfers to conceal
assets, and sought examination of the books and records of Orion
Logistics LLC. The Outagamie County Circuit Court granted Crown
Castle’s request, and Orion Logistics appealed.
Satisfaction of judgment
Castle USA, Inc. v. Orion Logistics LLC, 2009AP3029 (Dec. 7,
2010), the District III Wisconsin appeals court held that the circuit
court had authority to require Orion Logistics to submit to supplemental
examination of its books and records.
Wis. Stat. sections 816.03 and 816.06 set forth the procedures that can
be applied to satisfy a judgment, the appeals court explained. Whether
these statutes permit the court commissioner and circuit court “to
order a third-party company under common ownership with the judgment
debtor to produce its books and disclose its finances is a matter of
The appeals court relied on Courtyard Condo. Assoc., Inc. v.
Draper, 2001 WI App 115, 244 Wis. 2d 153, 629 N.W.2d 38, a case in
which the court concluded that a judgment creditor may examine the
assets of a judgment debtor’s spouse to satisfy a judgment from
“Property transfers between a judgment debtor and related
business entities present the same risk of fraud as those between
spouses,” wrote Judge Edward Brunner. “Examination of the
alleged third-party recipient may be the only method available to a
judgment creditor to ascertain whether a fraudulent transfer has