Attorney's Title Guaranty Fund, Inc. v. Town Bank
850 N.W.2d 28
Wis.2014Background
- Brophy is a Milwaukee real estate investor with multiple lawsuits, including a malpractice claim; Town Bank is a judgment creditor with a docketed judgment against Brophy and sought to attach proceeds; Heartland loaned money to Brophy and obtained a security interest in the potential proceeds of the malpractice claim; the malpractice claim's settlement proceeds were placed in escrow; Heartland filed a security interest and financing statement before the proceeds existed, giving it a priority position; Town Bank argued proceeds are not assignable and sought to obtain a blanket lien via supplemental proceedings
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are proceeds from a legal malpractice claim assignable as collateral? | Heartland: proceeds are assignable as payment intangibles under ch. 409 | Town Bank: assignment of malpractice claim proceeds is prohibited as a matter of public policy | Yes; proceeds are assignable as collateral for a contemporaneously incurred debt |
| Who has priority in the proceeds, Heartland or Town Bank? | Heartland: perfected security interest before Town Bank’s levy, thus superior | Town Bank: blanket lien by service of supplemental proceedings could encumber all property | Heartland has the superior interest because it perfected before levy and under Article 9 rules |
| Does Town Bank gain a blanket lien by supplemental proceedings? | Heartland: blanket lien not allowed; statutory scheme requires specific levies | Town Bank: its prior service could blanketly lien all property | No; statutory judgment collection requires levying specific property, not a blanket lien |
| Was Heartland’s perfection timely and effective as to after-acquired proceeds? | Heartland: perfection occurred when Brophy obtained rights in proceeds; filing before settlement completed perfection | Town Bank: issues about timing of perfection and after-acquired property | Heartland perfected before Town Bank’s superior interest by levy; proceeds belong to Heartland |
Key Cases Cited
- Associated Bank N.A. v. Collier, 355 Wis. 2d 343 (2014 WI) (judgment creditor with a docketed judgment must levy specific property; no blanket lien against all non-exempt property)
- Belke v. M&I First Nat'l Bank of Stevens Point, 189 Wis. 2d 385 (Ct. App. 1994) (non-assignable rights may still be collateral under Article 9 in some contexts)
- Nat'l Exch. Bank of Fond du Lac v. Mann, 81 Wis. 2d 352 (1978) (requirements for attachment and perfection of security interests under UCC Article 9)
- In re Pubs, Inc. of Champaign, 618 F.2d 432 (7th Cir. 1980) (timing of perfection and after-acquired property principles under UCC)