Judgment creditors can’t compel testimony from a
A judgment creditor seeking payment of a judgment from a judgment
debtor can’t compel testimony from a third-party
By Joe Forward, Legal Writer,
State Bar of Wisconsin
March 27, 2012 – A creditor with a judgment against a debtor
corporation sought to compel testimony from a third-party entity with
the same owner hoping to uncover information about the debtor
corporation’s assets. Recently, the Wisconsin Supreme Court ruled
that such testimony could not be compelled.
In what is known as “supplementary proceedings,” judgment
debtors who do not satisfy judgments against them can be forced to
testify about their property and assets.
But according to a recent 4-3 decision by the state supreme court, a
judgment creditor can’t compel non-judgment debtors to testify
under Wis. Stat. section 816.06.
“We conclude that Wis. Stat. § 816.06
does not grant a judgment creditor the right to compel a non-judgment
debtor third party to testify at supplemental proceedings,” wrote
Justice Michael Gableman in Crown
Castle USA Inc. v. Orion Construction Group LLC, 2012 WI 29
(March 22, 2012).
Three justices dissented, including Chief Justice Shirley Abrahamson, arguing that the
“anti-creditor” majority opinion “emasculates
Chapter 816 of the statutes” and “empowers debtors to
hide their assets from creditors who have procured valid, enforceable
But the majority – Justices Gableman, Patience
Roggensack, David Prosser, and Annette Ziegler
– noted that statutory rights are not created without express
language from the legislature, and section 816.06 is silent on the right
to compel the testimony of third parties.
“No language in Wis. Stat. § 816.06
grants this right to a judgment creditor,” the Justice Gableman explained for the majority.
Supplemental hearing and third parties
Sections 816.05 and 816.06 allow a judgment creditor to examine a
judgment “debtor and witnesses” if “there is reason to
believe that the judgment debtor has property which the judgment debtor
unjustly refuses to apply to such judgment.”
The plaintiff Crown Castle USA Inc. (Crown Castle) obtained a judgment
of nearly $500,000 against Orion Construction Group LLC (Orion
Construction) in Pennsylvania to satisfy an account receivable. Crown
Castle then filed a notice of judgment in Wisconsin.
Douglas Larson owned Orion Construction as its sole member. Larson also
owned Orion Logistics, a Wisconsin limited liability company not related
to Orion Construction other than its common owner. Orion Construction
dealt in cell phone towers, Orion Logistics wind turbines.
Ultimately, a court commissioner ordered Orion Logistics to provide
books, records, and documents relating to its financial assets, affairs,
and transactions based on ch. 816. A circuit court upheld the order and
compelled the information, and a state appeals court affirmed.
But the supreme court reversed, ruling that while Crown Castle could
compel Orion Construction (through its member Larson) to testify and
produce records for a supplemental proceeding, it could not compel Orion
Logistics, a non-judgment third party debtor, to do so.
“[T]he judgment creditor must be able to compel testimony from
individuals who, because of their relationship to the judgment debtor
corporation, have information relevant to the judgment debtor’s
property that could satisfy the judgment,” Justice Gableman
That did not include Orion Logistics, even though Larson was a common
owner of both companies, according to the majority. “The scope of
testimony these individuals may provide, however, is limited to that
information relevant to the judgment debtor corporation, that is, the
actual entity that is subject to the supplemental proceeding.”
Chief Justice Abrahamson, Justice Patrick Crooks and Justice Ann Walsh
Bradley were not convinced that section 818.06 does not grant a right to
compel third party testimony.
“The text of Wis. Stat. § 816.06, the purpose of
supplemental proceedings, and the statutory history of § 816.06
lead to the conclusion that the statutes permit the compelled
examination of third parties who have information about the judgment
debtor’s property,” the chief wrote.
Charles Koehler and Michael Menghini of Herrling Clark Law Firm Ltd.,
Appleton, and Nicholas Wagener of Bollenbeck, Wagener, Spaude & Fyfe
S.C., Appleton, represented the appellant-petitioner Orion Logistics
LLC. Eric McLeod and Nathan Moenck of Michael Best & Friedrich LLP,
Madison, represented plaintiff-respondent Crown Castle USA.