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Prince Corporation v. Vandenberg

Supreme Court of Wisconsin

June 23, 2016

Prince Corporation, Plaintiff-Intervenor-Respondent,
v.
James N. Vandenberg, Defendant, Van De Hey Real Estate, LLC, Garnishee-Defendant-Cross Claimant-Respondent, Sharon Kempen, Sandra Schmit and Mark Vandenberg, Intervenors-Cross-Claim Defendants-Third-Party Plaintiffs-Appellants-Petitioners,
v.
BMO Harris Bank (f/k/a M&I Marshall & Ilsley) and State of Wisconsin, Third-Party Defendants, Wisconsin Department of Revenue, Third-Party Defendant-Respondent.

          Oral Argument: January 25, 2016

         REVIEW OF A DECISION OF THE COURT OF APPEAL (Reported at 364 Wis.2d 599, 868 N.W.2d 599)(Ct. App. 2015 – Published) PDC No: 2015 WI App. 55

         REVIEW of a decision of the Court of Appeals. Circuit Court Brown County Marc A. Hammer Judge, Reversed in part, affirmed in part and remanded.[1]

          For the intervenors-cross-claim defendants-third-party plaintiffs-appellants-petitioners, there were briefs by George Burnett and the Law Firm of Conway, Olejniczak & Jerry, S.C., Green Bay. Oral argument by George Burnett.

          For the third-party defendant-respondent, the cause was argued by S. Michael Murphy, assistant attorney general, with whom on the brief was Brad D. Schimel, attorney general.

          PATIENCE DRAKE ROGGENSACK, C.J.

         ¶1 We review a published decision of the court of appeals, [2] which affirmed the circuit court's[3] order entitling the Department of Revenue (DOR) to garnish land contract proceeds due to James N. Vandenberg (James) and three other tenants-in-common of real property, Sharon Kempen, Sandra Schmidt and Mark Vandenberg (collectively, the intervenors), and denying the intervenors' request to partition the real estate that is subject to the land contract.

         ¶2 Our review centers on three issues: (1) whether the DOR is entitled to garnish any portion of the final land contract payment; and, if so, (2) whether the DOR is entitled to garnish 1/4 of the final payment due on the land contract or 1/4 of the land contract's full purchase price; and (3) whether the circuit court erroneously exercised its discretion in refusing to partition the property.

         ¶3 We conclude that the DOR is entitled to garnish a portion of the final land contract payment, and the portion subject to garnishment is limited to the amount that James could require be paid to him from that payment. We remand to the circuit court to make the factual determination of the amount that James has a right to receive from the final payment.

         ¶4 Finally, we conclude that the circuit court did not erroneously exercise its discretion by refusing to partition the property. Accordingly, we reverse the court of appeals in part, affirm in part and remand.

         I. BACKGROUND

         ¶5 In 1997, James, Sharon Kempen, Sandra Schmidt and Mark Vandenberg acquired real estate located in Brown County as tenants-in-common, with each individual having an undivided 1/4 ownership interest. During the time that they owned the property, James accumulated personal debts that resulted in encumbrances being filed against the property.

         ¶6 For example, on February 16, 2004, James gave a mortgage to M&I Marshall & Ilsley Bank for a $54, 100 indebtedness.[4] On January 4, 2010, DOR docketed two tax warrants totaling $112, 655.24 for taxes that James owed. And on May 6, 2010, Prince Corporation (Prince) obtained a money judgment against James for $165, 000. The judgment was docketed in Brown County on May 6, 2010. Finally, on June 3, 2010, the State of Wisconsin docketed a judgment against James for $100, 000 in Brown County.

         ¶7 On July 14, 2011, James and the intervenors contracted to sell their property to Van De Hey Real Estate, LLC (Van De Hey) on land contract for $341, 700.[5] The land contract provided that Van De Hey would remit payments in the following manner: $113, 900 at the execution of the contract on July 14, 2011; $113, 900 on October 1, 2011; and the remaining $113, 900 on April 15, 2012. The land contract also provided that James and the intervenors were obligated to deliver a warranty deed to the property, "free and clear of all liens and encumbrances" when the final payment was made.

         ¶8 Van De Hey timely made the first two payments as required by the land contract.[6] On February 17, 2012, Prince filed a non-earnings garnishment summons and complaint, seeking to garnish Van De Hey's final payment of $113, 900 as partial satisfaction of its judgment against James. The intervenors moved to intervene in Prince's garnishment action, and the circuit court granted their motion on June 6, 2012. The intervenors argued that the DOR had an interest superior to Prince's interest. They also argued that garnishment was limited to James's 1/4 share of the final $113, 900 payment, which was $28, 475. However, on November 6, 2012, the circuit court issued an order entitling Prince to garnish 1/4 of the full contract price, or $85, 425. Van De Hey did not make the final payment.

         ¶9 On November 14, 2013, the intervenors filed a third-party summons and complaint, impleading the DOR as an interested party due to its earlier filed tax warrants that resulted from James's delinquent taxes.[7] They attached as exhibits to their third-party complaint copies of Prince's non-earnings garnishment complaint and the land contract for the sale of the property.

         ¶10 On December 20, 2013, the DOR answered the third-party complaint, admitting that it claimed an interest in the property because it docketed state income tax warrants against James for $64, 719.47 and $47, 935.77 on January 4, 2010.[8] The DOR's answer further stated that "judgment is requested in accordance with the foregoing, together with such other and further relief as is just and equitable."

         ¶11 On April 9, 2014, the intervenors moved for partition as well as reconsideration of the circuit court's November 6, 2012 order entitling Prince to garnish $85, 425 from Van De Hey's final land contract payment. The intervenors argued that Prince's garnishment action should be dismissed due to the DOR's superior tax warrants and that garnishment by any party was limited to James's 1/4 outstanding share of the final payment, or $28, 475. The intervenors also requested partition of the property as the only method of conveying title to Van De Hey "free and clear of all liens and encumbrances" as required by the land contract.

         ¶12 On reconsideration, the circuit court concluded that it would "maintain[] its previous holding that a valid lienholder may garnish the entirety of [James's] interest in the land sale--one-fourth of the total contract price[, ] or $85, 425." However, the circuit court concluded that the DOR's previously-docketed tax warrants were superior to Prince's money judgment. Therefore, the circuit court held that the DOR, rather than Prince, was entitled to garnish $85, 425 from Van De Hey's final payment of $113, 900.

         ¶13 With respect to the intervenors' request for partition, the circuit court acknowledged that "[a]ny person having an interest in real property" has the right to request partition. However, the circuit court denied partition because any such action would prejudice one or more persons with an interest in the property. Both Prince and the intervenors separately appealed the circuit court's order.

         ¶14 The court of appeals affirmed in all respects, holding that (1) the DOR's answer to the third-party complaint was sufficient to entitle it to garnish a portion of Van De Hey's final payment; (2) the DOR was entitled to garnish 1/4 of the full sale price of the land contract, $85, 425; and (3) the circuit court did not erroneously exercise its discretion in denying partition. We granted the intervenors' petition for review.[9]

         II. DISCUSSION

         A. Standard of Review

         ¶15 Resolution of this dispute requires us to interpret and apply Wisconsin garnishment statutes.[10] Statutory interpretation and application are questions of law that we review independently, while benefitting from the analyses of the circuit court and court of appeals. Richards v. Badger Mut. Ins. Co., 2008 WI 52, ¶14, 309 Wis.2d 541, 749 N.W.2d 581; Milwaukee Stove & Furnace Supply Co. v. Apex Heating & Cooling, Inc., 142 Wis.2d 151, 155, 418 N.W.2d 4 (Ct. App. 1987) (explaining that garnishment is a statutory remedy, requiring independent appellate review).

         ¶16 Although the common law of partition is now codified, it remains an equitable remedy. Klawitter v. Klawitter, 2001 WI App. 16, ¶7, 240 Wis.2d 685, 623 N.W.2d 169. Therefore, we review the circuit court's partition decision under the "highly deferential" erroneous exercise of discretion standard, which we apply to equitable remedies. Id., ¶8 (applying erroneous exercise of discretion to circuit court's discretionary decision in regard to contribution during partition action); Associated Bank N.A. v. Collier, 2014 WI 62, ¶22, 355 Wis.2d 343, 852 N.W.2d 443 (explaining that review of a circuit court's decision about whether to employ its equitable powers applies the erroneous exercise of discretion standard).

B. General Principles of Statutory Interpretation

         ¶17 "[S]tatutory interpretation 'begins with the language of the statute. If the meaning of the statute is plain, we ordinarily stop the inquiry.'" State ex rel. Kalal v. Circuit Court for Dane Cnty., 2004 WI 58, ¶45, 271 Wis.2d 633, 681 N.W.2d 110 (quoting Seider v. O'Connell, 2000 WI 76, ¶43, 236 Wis.2d 211, 612 N.W.2d 659). Plain meaning may be ascertained not only from the words employed in the statute, but also from the context. Id., ¶46. We interpret statutory language in the context in which those words are used; "not in isolation but as part of a whole; in relation to the language of surrounding or closely-related statutes; and reasonably, to avoid absurd or unreasonable results." Id.

         ¶18 "If the words chosen for the statute exhibit a 'plain, clear statutory meaning, ' without ambiguity, the statute is applied according to the plain meaning of the statutory terms." State v. Grunke, 2008 WI 82, ¶22, 311 Wis.2d 439, 752 N.W.2d 769 (quoting Kalal, 271 Wis.2d 633, ¶46). However, where the statute is "capable of being understood by reasonably well-informed persons in two or more senses[, ]" then the statute is ambiguous. Kalal, 271 Wis.2d 633, ¶47. Where the language is ambiguous, we may consult extrinsic sources. Id., ¶50. "While extrinsic sources are usually not consulted if the statutory language bears a plain meaning, we nevertheless may consult extrinsic sources 'to confirm or verify a plain-meaning interpretation.'" Grunke, 311 Wis.2d 439, ¶22 (quoting Kalal, 271 Wis.2d 633, ¶51).

         C. Garnishment Principles

         ¶19 Garnishment is a remedy available to a creditor, the garnishor, seeking satisfaction of its debtor's debts by garnishing property of the debtor, the defendant, that is in the hands of a third-party, the garnishee. See Mundt v. Shabow, 120 Wis. 303, 304, 97 N.W. 897 (1904); Wis.Stat. § 812.01. Garnishment is a wholly statutory remedy, requiring strict compliance. Liberty Loan Corp. & Affiliates v. Eis, 69 Wis.2d 642, 646-47, 230 N.W.2d 617 (1975) (explaining that the statutory prerequisites for garnishment are strictly enforced); Milwaukee Stove, 142 Wis.2d at 155 (stating that action for garnishment will not lie absent statutory authority). Therefore, "the right to commence a garnishment action must be found within the provisions of the garnishment statute[s]." Hometown Bank v. Acuity Ins., 2008 WI App. 48, ¶8, 308 Wis.2d 503, 748 N.W.2d 203.

         ¶20 Chapter 812, Subchapter I of the Wisconsin Statutes governs non-earnings garnishment actions. Wisconsin Stat. § 812.01(1) provides that any "creditor may commence a nonearnings garnishment [action] 'against any person who is indebted to or has any property in his or her possession or under his or her control belonging to such creditor's debtor.'" Id. (quoting Wis.Stat. § 812.01(1)). Wisconsin Stat. § 812.04(3) states that "[a] garnishment action shall be commenced by the filing of a garnishee summons and annexed complaint."

         ¶21 Pursuant to the foregoing statutes, Prince, the garnishor, commenced the instant garnishment action against Van De Hey, the garnishee, having possession of land contract proceeds due to James, the debtor, by virtue of Van De Hey's obligation to make payments under the land contract. As required by Wis.Stat. § 812.04(3), Prince filed a non-earnings garnishment summons and complaint on February 17, 2012 and timely served the appropriate parties; thereafter, the garnishment action proceeded in circuit court.

         ¶22 Neither the intervenors nor Van De Hey has argued that the garnishment action was not properly commenced by Prince. Accordingly, we assume, without deciding, that Prince strictly complied with Wis.Stat. § 812.04(3), thereby properly commencing the instant garnishment action against James's right to payment from Van De Hey.

         1. Impleader into already-commenced garnishment action

         ¶23 Although it is undisputed that Prince properly commenced the instant garnishment action, the intervenors argue that the DOR is not entitled to garnish any portion of Van De Hey's final payment because the DOR did not file a non-earnings garnishment summons and complaint after being impleaded into the garnishment action.

         ¶24 However, Wis.Stat. § 812.17 addresses impleading a third-party into an already-commenced garnishment action where that third-party claims an interest in the property held by the garnishee:

When the answer of the garnishee discloses that any 3rd person claims the debt or property in the garnishee's hands[, ] . . . the court may order that such claimant be impleaded as a defendant in the garnishment action . . . . Upon such service being made[, ] such claimant shall be deemed a defendant in the garnishee action, and within 20 days shall answer setting forth the claimant's claim or any defense that the garnishee might have made.

Wis. Stat. § 812.17.

         ¶25 Initially, we note that Wis.Stat. § 812.17 contemplates impleader when it is the answer of the garnishee that discloses a third-party's claim to the garnishable property. In the instant case, it was not the answer of the garnishee, Van De Hey, that disclosed the DOR's superior claim to a portion of the final payment under the land contract. Rather, upon learning of Prince's garnishment action against Van De Hey, the intervenors moved to intervene and sought to implead the DOR due to tax warrants docketed against the real estate. Accordingly, the intervenors impleaded the DOR into the already-commenced garnishment action by serving a third-party summons and complaint, to which they attached Prince's original non-earnings garnishment complaint.

         ¶26 Perhaps because they are the very parties who impleaded the DOR, the intervenors do not argue to us that the DOR is not a proper party to the already-commenced garnishment action. Although the intervenors raised this argument to the court of appeals, the court of appeals properly noted that the intervenors did not argue to the circuit court that impleader of the DOR was improper under Wis.Stat. § 812.17. As the intervenors do not raise the issue before us and did not raise the issue to the circuit court, we will not consider it. Shadley v. Lloyds of London, 2009 WI App. 165, ¶25, 322 Wis.2d 189, 776 N.W.2d 838 (stating that "[i]t is well-established law in Wisconsin that those issues not presented to the trial court will not be considered for the first time at the appellate level." (citing State v. Gove, 148 Wis.2d 936, 940-41, 437 N.W.2d 218 (1989); State v. Caban, 210 Wis.2d 597, 604-05, 563 N.W.2d 501 (1997); Hopper v. City of Madison, 79 Wis.2d 120, 137, 256 N.W.2d 139 (1977))).

         ¶27 Indeed, arguing that the DOR was not a proper party to the garnishment action would have been contrary to the intervenors having sought to implead the DOR in the first instance. Therefore, we assume, without deciding, that the DOR was properly impleaded as a party to the already-commenced garnishment action under Wis.Stat. § 812.17. However, the intervenors argue that the DOR is not entitled to garnishment because it did not file a non-earnings garnishment summons and complaint after being impleaded under Wis.Stat. § 812.17.

         ¶28 While a non-earnings garnishment summons and complaint are required by Wis.Stat. § 812.04(3) in order to commence a garnishment action, the plain language of Wis.Stat. § 812.17 does not require an impleaded third-party to file a summons and complaint in an already-commenced garnishment action in order to be entitled to garnish the property to which it claims an interest. We decline to impose a requirement that is plainly not required by the statute. Harris v. Kelley, 70 Wis.2d 242, 250, 234 N.W.2d 628 (1975) (declining to rewrite statute under the guise of statutory interpretation). Rather, once a garnishment action is commenced under Wis.Stat. § 812.04(3) and the impleaded third-party files an answer setting forth its claim to the property in the garnishee's hands, the impleaded third-party begins its garnishment. Wis.Stat. § 812.17. As aptly noted by the court of appeals, "[t]hat is precisely what happened in this case." Prince Corp. v. Vandenberg, 2015 WI App. 55, ¶37, 364 Wis.2d 457, 868 N.W.2d 599.

         ¶29 Namely, the DOR answered the third-party complaint, asserting its claim to James's ownership interest in the land contract payment based on state income tax warrants for James's delinquent taxes. Specifically, the DOR's answer stated that it "claims an interest in the Property, by virtue of the following delinquent state tax warrants which have been docketed . . . against James N. Vandenberg." The DOR's answer identified two warrants that were docketed on January 4, 2010.

         ¶30 We conclude that the DOR's answer sufficiently set forth its claim to the garnishable property at issue in the already-commenced garnishment action; namely, a portion of the final payment due under the land contract.[11] Initially, it is significant that the DOR filed its answer in response to the third-party complaint, which incorporated by reference Prince's original non-earnings garnishment complaint as well as the land contract. Prince's non-earnings garnishment complaint clearly indicates that Prince was seeking to garnish the final payment due under the land contract.

         ¶31 Furthermore, in listing its state income tax warrants in its answer, the DOR identified its interest in the final payment pursuant to Wis.Stat. § 71.91(4), which provides that unpaid state income taxes "shall be a perfected lien in favor of the [DOR] upon all property and rights to property."[12] This includes both real and personal property. Wis.Stat. § 71.91(6)(a)3. Therefore, by virtue of docketing its state income tax warrants, the DOR obtained a statutory, perfected lien on James's right to payment from Van De Hey. The DOR requested judgment in the already-commenced garnishment action in accordance with the priority of its tax warrants relative to Prince's docketed money judgment. Accordingly, we conclude that the DOR's answer sufficiently set forth its claim to James's interest in a portion of Van De Hey's final land contract payment.

         ¶32 Consequently, we conclude that the DOR is entitled to garnish a portion of Van De Hey's final payment under Wis.Stat. § 812.17. Therefore, we must next determine the amount of the final payment that is garnishable by the DOR.

         2. DOR's garnishable amount

         ¶33 As set forth above, the court of appeals held that the DOR was entitled to garnish 1/4 of the total land contract purchase price from the final payment because James "has a property right to one-fourth of the full contract price, or $85, 425." Prince, 364 Wis.2d 457, ¶20. Accordingly, the court of appeals allowed the DOR to garnish $85, 425 from Van De Hey's final payment of $113, 900.

         ¶34 However, contrary to the court of appeals' conclusion, a garnishor is entitled to garnish only the amount that the debtor could require be paid to him from the property in the hands of the garnishee when the garnishment is served. Collier, 355 Wis.2d 343, ¶32; Morawetz v. Sun Ins. Office, 96 Wis. 175, 178, 71 N.W. 109 (1897) (explaining that the garnishor steps into the shoes of the debtor and, therefore, has no better rights to property in the hands of the garnishee than the debtor could assert). Wisconsin Stat. § 812.18 provides, as is relevant to the garnishment of Van De Hey:

From the time of service upon the garnishee, the garnishee shall be liable to the creditor for the property then in the garnishee's possession or under his or her control belonging to the debtor or in which the debtor is interested to the extent of his or her right or interest therein and for all the garnishee's debts due or to become due to the debtor . . .

(emphases added).

         ¶35 Moreover, well-established Wisconsin precedent provides that a garnishment action does not give the garnishor any greater rights in the property held by a third party than the debtor himself or herself possessed on the date that the garnishment action was served. Miracle Feeds, Inc. v. Attica Dairy Farm, 129 Wis.2d 377, 380-81, 385 N.W.2d 208 (Ct. App 1986). In Miracle Feeds, a garnishment action was brought against Zim's Cheese for milk checks payable to the debtor, Attica. Id. at 378-79. A bank, to which Attica also was indebted, intervened in the action, asserting that Attica had assigned its interest in the milk checks to the bank in exchange for the bank making loans to Attica and, therefore, Attica had no interest in the milk checks that could be garnished. Id. at 379-81.

         ¶36 The court of appeals agreed with the bank. Id. at 379. In explaining the nature of a garnishment action, the court of appeals said, "[i]n effect, the garnishment was 'an action by [Attica] in [Miracle's] name against the garnishee, the purpose of which is to subrogate the plaintiff to the rights of the defendant against the garnishee.'" Id. at 380-81. (quoting Commercial Inv. Trust, Inc. v. Wm. Frankfurth H. Co., 179 Wis. 21, 24, 190 N.W. 1004 (1922)). Because "Miracle merely stands in Attica's shoes, " and because Attica had assigned its rights to all milk sale proceeds to the bank long before Miracle's garnishment, there was no property of the debtor (Attica) to obtain from Zim's Cheese. Id. at 381. See also Morawetz, 96 Wis. at 178 (explaining that garnishment creates an "equitable levy" on the debtor's property that is in the hands of the garnishee at the time that the garnishment action is served).

         ¶37 As set forth above, Prince commenced the instant garnishment action on February 17, 2012, at which time Van De Hey already had made two of the payments due under the land contract. The final payment had not been made and, therefore, the final payment was the only property still in Van De Hey's hands at the time that the garnishment action was served. Therefore, given the foregoing principles, the DOR is entitled to garnish only James's outstanding share of the final payment under the land contract. Stated otherwise, if 1/4 of each of the first two payments has been paid to James or on his behalf, James is entitled to $28, 475 of the final payment on the land contract, and that is the amount available for the DOR to garnish.[13] Wis.Stat. § 812.18; Miracle Feeds, 129 Wis.2d at 381.

         ¶38 It is undisputed that James and the intervenors, as tenants-in-common, each held an undivided 1/4 interest in the real estate and each held a 1/4 interest in the proceeds of the land contract; i.e., at the inception of the land contract each tenant-in-common was to have received $85, 425 when the third payment of $113, 900 was made. Therefore, part of the $113, 900 payment that Van De Hey is holding belongs to James and part belongs to each of the intervenors as the remaining three tenants-in-common.

         ¶39 Determining the amounts payable to each tenant-in-common from the final payment due under the land contract requires factual findings about the amounts that were paid to or on behalf of James from the first two payments Van De Hey made. The third-party complaint asserts that the first two payments due to James were made to M&I Bank on James's behalf.

         ¶40 It is undisputed that, on February 16, 2004, M&I Bank filed a mortgage against the undivided real estate that the parties owned as tenants in common. The intervenors assert that the mortgage was security for debt James incurred personally. However, the parties who responded to the third-party complaint asserted that they could not admit or deny whether James's portions of the first two payments had been paid to M&I Bank and whether the mortgage arose from debt that James personally incurred.

         ¶41 If the assertions of the intervenors prove to be factually correct, James is owed $28, 475 from the final payment, and it is only $28, 475 that is subject to garnishment by the DOR. See Miracle Feeds, 129 Wis.2d at 380-81 (explaining that garnishor is entitled to garnish only the amount of the debtor's property in the hands of the garnishee when the garnishment action is served).[14] Because the amounts that were paid to James, or on his behalf, from the first two payments have not been conclusively established in the record presented to us, we conclude that a remand to the circuit court is necessary for a factual determination of those amounts.

         ¶42 We note that any other result would prejudice the intervenors by allowing the DOR to garnish a portion of Van De Hey's final payment that is not owed to James but, rather, is owed to the intervenors as the remaining three tenants-in-common. See Gray v. Rollo, 85 U.S. 629, 634 (1873) ("If a debt is due to A. and B., how can any court compel the appropriation of it to pay the indebtedness of A. to the common debtor without committing injustice toward B.?"). In sum, we conclude that the DOR is entitled to garnish only what James, ...


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