September 2015

Disclaimer: The blog content on this website is provided for informational purposes only; it is not legal advice and may not be relied upon as such. Comments are solely the work of their authors and as such do not necessarily reflect the views of Kohn Law Firm. Neither the use of content provided on Kohn Law Firm blogs nor the submission of any information through Kohn Law Firm blogs creates an attorney-client relationship between you and Kohn Law Firm. Please be aware that any information that you provide through Kohn Law Firm blogs is not secure and it is not privileged or confidential. In fact, by posting you intend that your comment be displayed so that others can read it and comment on it. Kohn Law Firm reserves the right to edit submissions for any reason in its sole discretion.

By Attorney Kaitlyn A. DeVries

Supplemental examinations are important tools of asset discovery available to creditors. Pursuant to Wisconsin law1], a creditor may apply to a court commissioner for an order to have a judgment debtor submit to a hearing to disclose financial information, such as income, assets, and liabilities, in an effort to collect on a judgment. With this knowledge, creditors may ascertain which involuntary collection methods are available2].

The language of Wisconsin Statute § 816.03(1)(b) is specific in that it authorizes a court commissioner to order a judgment debtor to appear and disclose requested financial information3]. But imagine a scenario where a debtor does not work and is financially supported by his or her spouse, or where a debtor and spouse choose to keep their finances separate. These types of situations are fairly common, and Wisconsin law has evolved to allow creditors to examine the spouse of a debtor through testimony at a supplemental hearing.

Such was the situation in Courtyard Condominium Association v. Draper, where the Court of Appeals held that a creditor may examine a debtor’s spouse through a supplemental examination4]. The crux of the issue examined by the Court of Appeals lies in Wisconsin’s Marital Property Act (MPA), which states that “an obligation incurred by a spouse during marriage…is presumed to be incurred in the interest of the marriage or the family”5]. Additionally, the Court noted that Wisconsin law allows a creditor to proceed against a spouse to reach marital property in order to satisfy a judgment6]. Reading the MPA and Wis. Stat. 803.045(3) together, a creditor can look to proceed against even a non-judgment spouse to reach marital property in an effort to satisfy a judgment7]. The Court reasoned that it would defy common sense for a creditor to be able to satisfy a judgment using marital property, but be barred from examining a non-judgment spouse regarding the location or amount of such property8].

But can other non-judgment parties be similarly compelled to testify at a supplemental examination? The Supreme Court of Wisconsin addressed this issue a few years ago in Crown Castle v. Orion Construction Group. In reviewing the language, context, and statutory history of Wisconsin Statute § 816, the Court found that only in limited circumstances may a creditor compel a non-judgment debtor third party to testify in a supplemental hearing9]. One situation in which a third party may be examined is as an agent of a corporation when there is a judgment against the corporation. Since a corporation cannot testify, an agent or officer must be allowed to do so in order to effectuate Wisconsin Statute § 816.0310]. Non-judgment spouses may also be compelled to testify, as the Court upheld the finding of Courtyard Condominium11]. The Court recognized the narrowness of the Courtyard Condominium decision, and stated that “the court of appeals clearly distinguished cases that involve marital property from cases that involve all other types of property”12].

Utilizing a supplemental proceeding to examine a debtor’s spouse to discover details regarding martial property is a valuable option available to creditors. It is important to recognize that the law does specifically limit the examination of third party non-judgment debtors. On the other hand, the Court is clear in Crown Castle that the right to examine a non-judgment third party through a supplemental examination is a statutory one; this means that the power to alter this right is in the hands of the legislature13]. While current law is relatively clear on the subject, it is not unthinkable that things may change in the future.

[1] Wis. Stat. § 816.03(1)(b).

[2] For example, wage garnishments or non-earnings garnishments, such as a garnishment targeting a debtor’s bank account or rental income.

[3] Wis. Stat. § 816.03(1)(b) states, “A supplemental court commissioner upon application of a judgment creditor shall order any judgment debtor to appear before the supplemental court commissioner and answer concerning the judgment debtor's property…”.

[4] Courtyard Condominium Association v. Draper, 244 Wis.2d 153 (2001).

[5] Wis. Stat. § 766.55.

[6] Wis. Stat. § 803.045(3).

[7] Courtyard Condominium, 244 Wis.2d 153, 159-60 (2001).

[8] Id. at 161.

[9] Crown Castle USA v. Orion Construction Group, 339 Wis.2d 252 (2012).

[10] Id.

[11] Id.

[12] 345.

[13] Relyea v. Tomahawk Paper & Pulp Co., 102 Wis. 301 (1899) (holding that statutory rights "are entirely the subject of legislative discretion," not judicial discretion).

Posted: 9/11/2015 3:40:09 PM by Tom Connor | with 0 comments