The Wisconsin Supreme Court issued a pair of decisions in July of 2014 that will make life for judgment creditors much more complicated. On July 15, 2014, the court issued Attorney’s Title Guaranty Fund, Inc. v. Town Bank, 2014 WI 63, ¶ 25, ___ Wis. 2d _____ and Associated Bank N.A. v. Collier, 2014 WI 62, ¶ 23-25, 38, ____Wis. 2d ______. These cases change the way judgment creditors must act to obtain a priority interest in the personal property of a debtor.
Before Associated Bank, a judgment creditor could obtain a priority lien by docketing its judgment, initiating a supplemental proceeding, and serving the judgment debtor with an order to appear at the supplemental proceeding. With these few steps, the judgment creditor obtained a blanket lien on the debtor’s personal property superior to all unsecured creditors and all subsequently perfected security interests as soon as debtor was served, and did not need to take any additional steps to perfect its lien.
However, under Associated Bank and Attorney’s Title Guaranty Fund, the judgment creditor must now levy the property in one of three ways: (1) by executing against specifically identified personal property with the assistance of a sheriff, (2) by serving the garnishee defendant in a garnishment action to seize specific property in the hands of the garnishee defendant; or (3) by obtaining an order to apply specifically identified personal property to the satisfaction of the judgment, which a creditor may do with the assistance of a supplemental receiver. Id. ¶ 26 (citing Associated Bank, ¶ 23-25; Wis. Stat. § 815.05(6); Wis. Stat. § 812.01; Wis. Stat. § 816.08). Moreover, the judgment creditor’s lien only extends to the property that was specifically identified in the proceeding and then executed upon. In the past, it was assumed that the lien the judgment creditor’s obtains after a supplemental proceeding was a blanket lien on the debtor’s personal property. However, the Wisconsin Supreme Court has made it clear that this is not the case. See Attorney’s Title Guaranty Fund, ¶ 38-45.
Therefore, a judgment creditor’s lien will not prevail against a third party with regard to personal property that was not specifically levied in one of the ways identified above and seized. This is the case even where the personal property in question is after-acquired or where the debtor simply did not disclose the property as part of the supplemental proceeding. Id.
Associated Bank and Attorney’s Title Guaranty Fund represent a marked change in the law. Going forward, judgment creditors will have their work cut out for them. Judgment creditors will have to docket their judgment, begin supplemental proceedings, and serve the debtor. Additionally, creditors will need to conduct extensive investigative activities to identify property of a debtor so that it can be specifically identified in the proceedings. Finally, they will have to take the additional steps to levy personal property set out by the Wisconsin Supreme Court.