Oldenburg v. RJT Associates, Inc., Appeal No. 2010AP1299

• Decision Date: 23 June 2011
• Docket Number: Appeal No. 2010AP1299,Cir. Ct. No. 2006CV1001
• Parties: DANIEL OLDENBURG, PLAINTIFF-RESPONDENT, v. RJT ASSOCIATES, INC., DEFENDANT, ROBERT KREHL, APPELLANT.
• Court: Wisconsin Court of Appeals

DANIEL OLDENBURG, PLAINTIFF-RESPONDENT, v. RJT ASSOCIATES, INC. DEFENDANT, ROBERT KREHL, APPELLANT.

Appeal No. 2010AP1299

Cir. Ct. No. 2006CV1001

STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT IV

Dated: June 23, 2011

A. John Voelker Acting Clerk of Court of Appeals

NOTICE

This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports.

A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See Wis. Stat. § 808.10 and Rule 809.62.

APPEAL from an order of the circuit court for Rock County: JAMES WELKER, Judge. Affirmed in part and reversed in part.

Before Higginbotham, Sherman, and Blanchard, JJ. ¶1 BLANCHARD, J. In this action for an accounting and a money judgment, Daniel Oldenburg obtained a default judgment in the amount of $366,814.83 against RJT Associates, Inc. After the money judgment was issued, a supplementary proceeding in aid of its execution was held. As part of the supplementary proceeding, Oldenburg sought and obtained from the circuit court an order allowing Oldenburg to satisfy the judgment by permitting a receiver, acting on Oldenburg's behalf, to seize personal assets of Robert Krehl to satisfy the judgment.

¶2 Krehl now challenges this order on the grounds that he is not named in the default judgment, nor did he have an opportunity to defend his interest in his personal property in a separate action filed by the receiver. Krehl maintains that, because the judgment was not against him, the receiver needed to file a separate action pursuant to WIS. STAT. § 816.08 (2009-10),¹ before the receiver could seek to adjudicate Krehl's rights to his assets. Under § 816.08, if a receiver in a supplementary proceeding seeks to collect property in the possession of a non-party property holder such as Krehl, the receiver must first bring a separate action against the property holder, in order to provide the property holder with the procedural and substantive protections available to all defendants in civil actions.

¶3 Oldenburg contends that it was not necessary for the judgment to be against Krehl, nor for the receiver to name him in a separately filed action, because the circuit court made the factual finding in the supplementary proceedingthat RJT is an alter ego of Krehl, and therefore assets of Krehl are assets of RJT for purposes of satisfying RJT's judgment debt.

¶4 We conclude that the circuit court's order is in error to the extent that it grants the receiver authority to collect and take possession of Krehl's personal assets to satisfy RJT's judgment debt under the plain terms of WIS. STAT. § 816.08, and as the statute has been interpreted by the supreme court. The receiver seeking to apply Krehl's assets to satisfy the judgment against the judgment debtor, RJT, must bring a separate action against Krehl to adjudicate the parties' interests in Krehl's assets. Accordingly, we reverse on this issue, but affirm the circuit court's order appointing Oldenburg's attorney as a receiver, and do not address Krehl's remaining arguments on appeal.

BACKGROUND

¶5 The relevant facts are not in dispute and may be stated briefly. At least during the relevant period, RJT was an employment agency. It contracted with companies affiliated with RJT to provide the companies with RJT employees to do their work. RJT obligated itself to collect from the affiliated companies, and then pass along to its employees, the money that the companies owed to the employees for the work they performed for the affiliated companies.

¶6 On behalf of RJT, Krehl hired Oldenburg under an employment contract that provided for a base salary plus commissions. Oldenburg was subsequently terminated from employment at RJT and its affiliated companies.

¶7 Oldenburg filed a civil lawsuit against RJT for an accounting and money judgment, on the grounds that RJT owed him commission payments under the terms of his employment contract. The summons and complaint, which wasnever amended, named only one defendant, RJT, and it was served only on RJT. Krehl was not mentioned by name in the complaint. The circuit court entered a default judgment against RJT on Oldenburg's claims.

¶8 After obtaining the default judgment against RJT, Oldenburg subpoenaed Krehl to a supplemental examination in aid of execution before a court commissioner to determine what assets of RJT were available to satisfy the judgment. RJT did not produce Krehl, but did produce a different person who identified herself as the president of RJT. RJT also produced financial records, such as tax returns, payroll reports, and banking records. Following a dispute between RJT and Oldenburg over the scope of relevant questioning and other issues not relevant to this appeal, the circuit court ordered both the RJT president and Krehl to be examined before the circuit court. Both the RJT president and Krehl appeared and testified at the supplementary proceeding regarding RJT's assets.

¶9 Oldenburg then moved the court for an order appointing Oldenburg's counsel as a receiver and for a "turnover" order for Krehl's personal assets and the assets of RJT's client companies to satisfy RJT's judgment. Through his attorney, Krehl objected to Oldenburg's claim that Krehl could be held personally liable for RJT's judgment debt, because Krehl was not a party to Oldenburg's action against RJT, and had not been given the opportunity in a separate civil action to defend his property from application to the judgment.

¶10 The court granted Oldenburg's requests in part and denied them in part.² Granted was the request that the court appoint Oldenburg's counsel to act as a receiver, acting without need to post a bond, and authorized "to marshal the assets of Robert Krehl to satisfy the judgment entered in the above-captioned cause."

¶11 In support of its order that the receiver could pursue personal property of Krehl, the court made a set of findings to the effect that RJT and its client companies were alter egos of Krehl, which the court found Krehl had "created and exist for the specific purpose of avoiding financial obligations owed to Daniel Oldenburg and others." The court also found the following:

I think Mr. Krehl has been a party to this action from the beginning. RJT is simply his alter ego. He's paying counsel to be here to argue this case . . . . [It] is not as though we're bringing in some other party. Mr. Krehl has been a party to this action through RJT from the very beginning.

Because the court found that Krehl held assets of RJT, as its alter ego, the court concluded that the receiver should be permitted to seize Krehl's individual assets to satisfy Oldenburg's judgment against RJT.

¶12 Krehl asks this court to reverse the entire order appointing Oldenburg's attorney as the receiver with authority to collect Krehl's personal property.

DISCUSSION

¶13 On appeal, Krehl does not object to the court conducting the supplementary proceeding in aid of execution of the judgment against RJT. Krehl also provides no reason to upset the court's decision, as part of the supplementary proceeding, to appoint Oldenburg's attorney as a receiver who is authorized, in the words of one supreme court opinion, "to collect those assets revealed by the examination of the debtor, take possession of them, apply them to the satisfaction of the judgment, and return the excess to the judgment debtor." See Candee v. Egan, 84 Wis. 2d 348, 361, 267 N.W.2d 890 (1978). Instead, Krehl challenges only the court's order, made as part of the supplementary proceeding, that the receiver may apply Krehl's assets to the judgment against RJT.³

¶14 This presents an issue that involves application of WIS. STAT. § 816.08 to undisputed facts, and therefore is a question of law that we review de novo. See LaCount v. General Cas. Co., 2006 WI 14, ¶20, 288 Wis. 2d 358, 709 N.W.2d 418.

¶15 We conclude, based on the plain language of WIS. STAT. § 816.03, consistent with interpretations of the supreme court, that the circuit court was without authority to issue an order as part of the supplementary proceeding permitting the receiver to collect personal assets of Krehl. Therefore, we reverse that particular order.

¶16 "Supplementary proceedings are actions initiated by unsatisfied judgment creditors to identify a debtor's property, other than real property, on which the creditor can execute his or her judgment." Mann v. Bankruptcy Estate of Badger Lines, Inc., 224 Wis. 2d 646, 653, 590 N.W.2d 270 (1999). Such proceedings are a postjudgment discovery procedure in which the judgment-debtor is compelled to provide information about its own property, so that it can be determined what assets are available to the debtor to satisfy a judgment. WIS. STAT. § 816.03. The proceedings are a continuation of and a part of the original action against a judgment debtor, not an independent action or proceeding. Department of Revenue v. Milwaukee Mack Sales, Inc., 91 Wis. 2d 1, 8, 280 N.W.2d 274 (1979). A judge may appoint a receiver during or following the supplementary proceeding to assist the judgment creditor in locating and securing the debtor's property. § 816.04. Once appointed, the receiver may seek to recover all non-exempt assets in the debtor's possession available to the judgment creditor. Id.

¶17 Property may be applied to the judgment at a supplementary proceeding under the procedures outlined in WIS. STAT. § 816.08, which provides:

The court or judge may order any property of the judgment debtor or due to the judgment debtor, not exempt from execution, to be applied toward the satisfaction of the judgment; but if it appear that any person, [who is] alleged to have property of the judgment debtor or to be indebted to the judgment debtor[,] claims an adverse interest in the property or denies the debt, such interest or debt shall be recoverable only in an action against such person by the receiver; and a transfer or other disposition

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