Debtors claimed exemptions in three annuity accounts pursuant to Wis. Stat. § 815.18(3)(j). The trustee objected, relying on Wis. Stat. § 815.18(3)(f). The only issue before the court was the interpretation of § 815.18(3)(j), in particular the phrase “the plan or contract complies with the provisions of the internal revenue code.” The prevailing view is that compliance with the IRC is accomplished by meeting the tax-deferral provision of IRC § 72. However, the trustee argued that compliance with the IRC is accomplished by meeting the retirement plan provisions of IRC §§ 401-409 because a broader interpretation makes the amendment to Wis. Stat. § 815.18(3)(f) redundant. The court found that the amendment of § 815.18(3)(f) did not change the prevailing statutory interpretation of § 815.18(3)(j). Thus, debtors only need to comply with IRC § 72 to exempt a retirement annuity under Wis. Stat. § 815.18(3)(j).
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The Western District of Wisconsin offers a database of opinions for the years 1986 to present, listed by year and judge. For a more detailed search, enter a keyword, statute, rule or case number in the search box above.
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- Chief Judge Catherine J. Furay--2013-present
- Judge William V. Altenberger--2016-present
- Judge Brett H. Ludwig--2017-present
- Judge Robert D. Martin (retired)--1990-2016
- Judge Thomas S. Utschig (retired)--1986-2012
Chief Judge Catherine J. Furay
Creditor Maxwell Foods filed a Motion to Approve Recoupment or to Exercise Right of Setoff in Debtor’s chapter 11 case. Debtor moved for summary judgment on the motion. Prior to the petition, the parties executed an agreement whereby Debtor shipped seven loads of cranberries to Maxwell and offered Maxwell an exclusive sales arrangement for 2017. Debtor shipped all seven loads, but Maxwell failed to pay for the last three loads. Maxwell instead sought recoupment or setoff, claiming Debtor agreed to sell an additional ten loads, but breached by failing to fulfill the order. Relying on the single integrated transaction test, the Court granted Debtor’s motion for summary judgment. Even if the purchase order for the additional ten loads was binding and enforceable, Maxwell lacked a valid recoupment claim. The original 2017 agreement did not obligate Debtor to purchase anything beyond the agreed-upon seven loads. Thus, the 2017 agreement and the later purchase orders for ten loads were not part of a single integrated transaction and Maxwell’s claim was not eligible for recoupment. Similarly, Maxwell could not set off its claim because the two agreements were stand-alone contracts and occurred on opposite sides of the petition date.
11 U.S.C. §553 -- Setoff
Plaintiff filed a chapter 7 petition and received a discharge. Plaintiff then filed an adversary seeking to discharge a student loan under 11 U.S.C. § 523(a)(8). Plaintiff denied ever taking out a student loan, but Defendant claimed Plaintiff signed it on behalf of his daughter and that it survived discharge. Neither party produced evidence of loan documents or the existence of a debt in advance of trial, and the opportunity to file evidence expired. Without evidence the loan existed, the Court ordered briefing on the burden of proof for establishing the existence of a student loan under 523(a)(8). Defendant challenged the Court’s jurisdiction. The Court held it had jurisdiction over the adversary because (1) Plaintiff stated a 523(a)(8) claim, (2) the Order of Discharge explicitly did not affect the adversary, and (3) the validity of the signature on the student loan related directly to Plaintiff’s liabilities. While the debtor bears the burden of proving undue hardship, the creditor bears the initial burden of proving a debt exists and proving the debt is of the type excepted from discharge. Therefore, the Court held Defendant bore the burden of proving a debt exists but failed to produce any evidence to that end. Thus, no presumption of validity for the signature arose under Wisconsin’s negotiable instruments law, Wis. Stat. §403.308(1). The Court declared the debt—if any—discharged.
11 U.S.C. § 523(a)(8) -- Nondischargeability - student loans
Wis. Stat. § 403.308(1) -- Proof of signature and status as holder in due course
Burden of proof
Defendant was convicted of second-degree intentional homicide for shooting and killing Plaintiffs’ father. Plaintiffs brought a civil action against Defendant in state court, which the parties settled by a stipulation. Defendant voluntarily signed the stipulation, in which he admitted his actions were intentional, willful, and malicious. Defendant then filed his chapter 7 petition and Plaintiffs brought this adversary for a determination the civil judgment is nondischargeable for Defendant’s willful and malicious conduct. The Court held the stipulation, state court judgment, and criminal conviction were binding under the doctrine of preclusion and therefore ruled in favor of Plaintiffs. Defendant admitted in the stipulation and the state court found his actions were willful and malicious; therefore, there were no remaining issues for this Court to decide.
11 U.S.C. § 523(a)(6)
Chapter 7 Trustee filed this adversary proceeding seeking a declaratory judgment that a mortgage was void on its face because it lacked a legal description of the property. The mortgage at issue contained only a street address, but did not include a legal description. It was also recorded in the grantor/grantee index. Trustee argued the mortgage could be avoided under 11 U.S.C. §544(a)(3) because it did not give adequate notice of the mortgage and it violated the Wisconsin statute of frauds. Defendant Wells Fargo argued the mortgage described the property with reasonable certainty. The Court ruled the Trustee had sufficient notice of the mortgage because it was recorded in the grantor/grantee index. The Court also found the mortgage satisfied the statute of frauds because under the facts of this case the address described the land with reasonable certainty.
11 U.S.C. § 544(a)(3)
Wis. Stat. § 706 –Conveyances of real property; recording; titles
Statute of Frauds
Plaintiff filed an adversary against Defendant, a chapter 7 debtor, seeking a determination that Defendant’s student loan was nondischargeable under 11 U.S.C. §523(a)(8). Plaintiff agreed to make loans to Defendant to refinance her two qualified educational loans. The agreement also allowed Plaintiff to declare the entire loan due immediately upon default. The Court found Defendant failed to show an undue hardship under the Brunner test. While Defendant could not maintain a minimal standard of living under the loan’s current repayment plans, Defendant lacked “exceptional circumstances”making it improbable she could ever repay the loan. Specifically, Defendant’s current full-time employment and continued employability weighed against a full discharge. The expense of caring for her adult daughter would decrease if her daughter contributed to household expenses or lived independently. However, the Court granted a partial discharge because under the current loan terms, Defendant could neither pay the balance in full nor afford the monthly payments. Instead, the Court ordered repayment based on the federal loan repayment plans. Defendant’s monthly payment would be recalculated each year based on income, tax status, and family size and any unpaid debt would be discharged after 20 years.
11 U.S.C. § 523(a)(8) –Nondischargeability - student loans
Debtors Leonard and Jamie Kersten filed a chapter 7 petition. The majority in dollar amount of their debt arose from Debtors’embezzlement of funds from a former employer, Kersten Lumber Company (“KLC debt”). The U.S. Trustee moved to dismiss under 11 U.S.C. §§707(a) and (b) for failure to file a Form B122A-2, a form which debtors with primarily consumer debt must file. The U.S. Trustee argued Debtors were required to file this form because the KLC debt was consumer in nature. The Court declined to dismiss. First, the U.S. Trustee lacked decisive evidence showing the KLC debt was in fact consumer. While Debtors used some of the funds for household expenses, those funds came from a business, not the extension of credit to a consumer. The Court declined to rule on the nature of the debt because dismissal is discretionary under sec. 707(a). Instead, the Court declined to dismiss under 707(a) because (1) the lack of the Form B122A-2 did not cause any prejudice and (2) Debtors’counsel made a reasonable judgment about the nature of the debt, given the split in authority on the definition and the lack of probative evidence. The Court also declined to dismiss under sec. 707(b) because of the lack of evidence demonstrating the debt was primarily consumer or the chapter 7 would be an abuse of the Code.
11 U.S.C. § 101(8) –Definition of "consumer debt"
11 U.S.C. § 707(a) –Dismissal of a case –failure to file required documents
11 U.S.C. § 707(b) –Dismissal of a case –abuse
Debtors received a chapter 7 discharge of their debt, which included money owed to the Wisconsin Department of Children and Families (“DCF”) for overpayment of FoodShare benefits. Debtor Muhammad provided inaccurate information, resulting in DCF overpaying her $5,520.92 in benefits for her and her grandson. DCF intercepted Debtors’tax return to satisfy part of the overpayment. Debtors moved to hold DCF in contempt and recover the tax intercept. DCF asserted the overpayments were nondischargeable under 11 U.S.C. §523(a)(5). The Court held the overpayment was dischargeable because the debt was not a domestic support obligation as defined by 11 U.S.C. §101(14A). The Court applied the Ninth Circuit’s reading of sec. 101, which requires the debt be tied to a “government’s family support infrastructure”rather than any money from the government. The DCF debt was not a domestic support obligation under section 101 because it was incurred to support her grandchild, not her child. The statute does not include grandchildren and Debtor did not have a legal duty to financially support her grandson. Thus, section 523(a)(5) did not apply and the debt was dischargeable. The Court held the DCF intercept violated the discharge injunction and ordered DCF to immediately release and refund the tax intercept to Debtors.
11 U.S.C. § 101(14A) –Definitions –domestic support obligation
11 U.S.C. § 106 –Waiver of sovereign immunity
11 U.S.C. § 523(a)(5) –Exceptions to discharge –domestic support obligation
Domestic support obligation
Plaintiffs filed an adversary against a chapter 7 debtor seeking a determination of nondischargeability under sections 523(a)(2)(A), (a)(4), (a)(6), and a denial of discharge under section 727. Defendant filed a motion to dismiss on all counts and Plaintiff requested leave to amend the Complaint. The Court granted Defendant’s motion on sections 523(a)(4) and 727, but denied the balance of the motion and Plaintiff’s request for leave to amend. In reaching its conclusion, the Court found Plaintiffs’Complaint failed to allege a fiduciary relationship existed between themselves and Defendants under section 523(a)(4). The Court further found the Plaintiffs failed to articulate a claim under 727 because they did not identify the specific subsection of their 727 claim and they did not plead the 727 claim with specificity. The Court denied Plaintiffs’motion for leave to amend and noted Plaintiffs had many opportunities to amend their Complaint and their lack of specificity in their Complaint was unjustified. Still, the Complaint had sufficiently pled the bare outlines for claims under section 523(a)(2)(A) and (a)(6).
11 U.S.C. § 523(a)(2)(A) -- Nondischargeability - fraud
11 U.S.C. § 523(a)(4) -- Nondischargeability –fraud or defalcation in fiduciary capacity
11 U.S.C. § 523(a)(6) -- Nondischargeability –willful and malicious injury
11 U.S.C. § 727 -- Discharge
Leave to Amend
Judge Robert D. Martin
Matthew and Jennifer Bach purchased a home financed by Countrywide Bank which took a mortgage to secure its note. Although the mortgage identified the house’s street address and tax key number, it failed to include a legal description of the house. Subsequently, debtor purchased the house from Jennifer Bach and gave her a mortgage securing a debt of $116,000. Countrywide later assigned its mortgage to Green Tree Servicing, LLC. After the debtor filed his bankruptcy petition, Green Tree filed a timely proof of claim asserting a security interest in the property. However, both the debtor and the Chapter 7 trustee objected to Green Tree’s claim on the basis that the lack of a legal description in the Countrywide mortgage made it void as against subsequent purchasers under Wis. Stat. §706.08(1). Specifically, they argued that the lack of a legal description in the mortgage made it undiscoverable in the tract index at the time debtor purchased the house. Citing Bank of New York Mellon Trust Co. v. Wittman, No. 12-C-846, 2013 WL 173801 (E.D. Wis. Jan. 16, 2013), Green Tree contended that disclosure in tract indexes is not dispositive of validity and constructive notice in Wisconsin. The court agreed, holding that so long as the information provided in the Countrywide mortgage made it discoverable through the grantor/grantee index, a subsequent purchaser would have been on constructive notice of the existence of the mortgage. Accordingly, the court held that Green Tree’s mortgage was valid as against both the debtor and the trustee.
Wis. Stat. § 706 -- Conveyances of real property; recording; titles
Chain of Title