Preferential Transfers – Voidability
Freund v. Nasonville Dairy Inc., 2019 WI App 55 (filed 10 Sept. 2019) (ordered published 30 Oct. 2019)
HOLDING: The circuit court properly found that a payment to a creditor was a preferential transfer voidable under the Wisconsin Statutes.
SUMMARY: After a bench trial, the circuit court found that one creditor, Nasonville Dairy, received a $290,000 payment from “Liberty Milk” only one month before Liberty entered receivership. This payment constituted a preferential transfer that disadvantaged Liberty’s other similarly situated creditors. The court ordered the receiver to recover the payment from Nasonville.
The court of appeals affirmed in an opinion authored by Judge Hruz. It interpreted the preferential transfer statute, Wis. Stat. section 128.07, which “favors the equal distribution of assets when creditors cannot be fully paid” (¶ 25). The parties stipulated that a preference existed, as defined by Wis. Stat. section 128.07(1) (see ¶ 27). The disputed issue involved whether the preference was voidable under Wis. Stat. section 128.07(2).
“Voidability,” the court held, turns on two beliefs. “First, the creditor must have had a reasonable cause to believe the debtor was insolvent at the time of the transfer. Second, the creditor must have had reasonable cause to believe the transfer would put him or her in a preferential position – i.e., the transfer would enable the recipient ‘to obtain a greater percentage of his or her debt that any other creditor of the same class’” (¶ 31).
Reviewing the record, the court of appeals found that sufficient evidence supported the trial judge’s finding that Nasonville had “reasonable cause to believe” that Liberty was insolvent and that the $290,000 payment would effect a preference.
Sentencing – Credit for Time Spent in Custody
State v. Zahurones, 2019 WI App 57 (filed 10 Sept. 2019) (ordered published 30 Oct. 2019)
HOLDING: The defendant was entitled to sentence credit on a charge for which there had been a “deferred entry of judgment agreement” for the time she was in custody on probation holds for three other convictions arising out of the same course of conduct.
Prof. Daniel D. Blinka, U.W. 1978, is a professor of law at Marquette University Law School, Milwaukee.
Prof. Thomas J. Hammer, Marquette 1975, is a law professor and Director of Clinical Education at Marquette University Law School, Milwaukee.
SUMMARY: Defendant Zahurones pleaded no contest to four counts arising from a single course of conduct. On three of the counts to which Zahurones pleaded, the circuit court withheld sentence and imposed two years’ probation. The court deferred entry of judgment on the remaining count – Count 2 – pending the successful completion of Zahurones’ probation but the defendant remained subject to a signature bond on Count 2.
Following multiple probation holds, the defendant’s probation and the deferred entry of judgment agreement were all revoked, and the court imposed concurrent sentences on all four counts. The court granted sentence credit on the three counts for which the defendant was on probation for the time she spent in custody on probation holds on those three counts, but it denied that credit on Count 2. The defendant appealed and the court of appeals, in a decision authored by Judge Stark, reversed.
Pursuant to Wis. Stat. section 973.155, a convicted offender “shall be given credit toward the service of his or her sentence for all days spent in custody in connection with the course of conduct for which sentence was imposed.” “To qualify as time spent ‘in connection with’ the course of conduct giving rise to a sentence, a period of custody must be ‘factually connected with the course of conduct for which sentence was imposed.’ The term ‘course of conduct,’ in turn, refers to the specific offense or acts embodied in the charge for which the defendant is being sentenced” (¶ 14) (citations omitted).
The statute’s provisions are mandatory, and a sentencing court must grant the defendant any credit to which he or she is entitled under the statute (see ¶ 29).
In this case the appellate court concluded that the defendant was entitled to credit on Count 2 for the periods of time she was in custody on probation holds for the other three counts because they were factually connected with the course of conduct for which the defendant was ultimately sentenced on Count 2 (see ¶ 15). The factual connection between the defendant’s custody during the probation holds and the course of conduct underlying her sentence on Count 2 “is further strengthened by the manner in which her probation and [her deferred entry of judgment agreement on Count 2] were structured” (¶ 16).
Settlements – Material Terms – Indefinite Terms
Paul R. Ponfil Tr. v. Charmoli Holdings LLC, 2019 WI App 56 (filed 18 Sept. 2019) (ordered published 30 Oct. 2019)
HOLDING: A settlement agreement arising out of a mediation was unenforceable because it lacked agreement on material terms.
SUMMARY: This case involved a property dispute. During a mediation, the parties prepared and signed a handwritten one-page document titled “Mediation Settlement Agreement” (¶ 2). In the agreement’s fifth paragraph, the parties “agree[d] to sign a separate substantive agreement covering such things as liability & indemnity in usual form” (¶ 3). The parties never arrived at any agreement on this point despite later attempts to do so. One party, the Paul R. Ponfil Trust, filed a motion to compel the agreement’s enforcement under Wis. Stat. section 807.05.
The circuit court found that the parties had entered into a binding agreement and that the case had been settled in full. The court did not, however, identity the terms of paragraph 5 and urged the parties to return to mediation to work them out.
The court of appeals reversed in a majority opinion authored by Chief Judge Neubauer. After reviewing the basics of settlement law, the court held that the parties’ failure to agree on the terms of paragraph 5 meant that the settlement was not enforceable (see ¶ 17). “Agreements to agree are unenforceable when there is not agreement as to material terms” (¶ 19). The terms regarding liability and indemnity were both “(1) material and (2) remain to be worked out” (¶ 20).
“To be enforceable, the material terms of the settlement must be addressed with a reasonable degree of certainty and definiteness” (¶ 22). The record showed that “complex issues” remained to be worked out. “In sum, these material terms are not sufficiently definite; there is not objective basis upon which to determine what the terms might be. We have no authority to eliminate Paragraph 5, rewrite its terms, or kick the can down the road by enforcing an agreement with indefinite material terms” (¶ 25).
Dissenting, Judge Reilly observed that the handwritten agreement by “sophisticated parties” had as its objective the dismissal of “THIS CASE.” Paragraph 5 was not a “material term of the contract,” but a “clean-up paragraph meant to handle the executory details ‘in usual form’” (¶ 31). The agreement itself stated that “THIS CASE IS SETTLED IN FULL” (id.).