John M. Wirth v. Gwen A. Bosben

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 9, 2020
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.
Appeal No. 2019AP576 Cir. Ct. No. 2015CV1673
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT IV
JOHN M. WIRTH,
PLAINTIFF-RESPONDENT,
V.
GWEN A. BOSBEN AND B&G BOSBEN LLC,
DEFENDANTS-APPELLANTS,
BRUCE R. BOSBEN,
DEFENDANT.
APPEAL from an order of the circuit court for Dane County:
RHONDA L. LANFORD, Judge. Affirmed.
Before Kloppenburg, Graham, and Nashold, JJ.
No. 2019AP576
Per curiam opinions may not be cited in any court of this state as precedent
or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
¶1 PER CURIAM. This case involves fraudulent transfer claims against
Bruce Bosben, his wife Gwen Bosben, and their solely owned entity, B&G Bosben
LLC.1 Gwen and B&G appeal a circuit court order that granted summary judgment
against all three defendants and invalidated Bruce’s transfer of property interests to
Gwen and B&G on the ground that the material issues had already been decided in
a prior lawsuit. Gwen and B&G contend that the circuit court misunderstood the
scope of the prior decision, that the property is exempt from execution under WIS.
STAT. § 815.18(3)(b)2. and (10) (2017-18),2 and that Bruce’s transfer of the property
is not subject to fraudulent transfer attack. For the reasons set forth below, we reject
these arguments and affirm.
BACKGROUND
¶2 There are two parallel proceedings that are important to the issues on
appeal. The first is Dane County case 2010CV4324, which was the subject of a
prior appeal. See Gebhardt v. Bosben, No. 2016AP2531, unpublished slip op. (WI
App Nov. 22, 2017). We refer to that case, including the supplemental proceedings
that followed, as the “judgment action,” and we refer to the circuit court that
presided over those proceedings as the “judgment court.” The second is Dane
1
For ease of reading, we refer to Bruce Bosben and Gwen Bosben by their first names,
and we refer to the limited liability company as B&G. At times, we refer to Gwen and B&G
collectively as Gwen/B&G.
2
All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise
noted.
2
No. 2019AP576
County case 2015CV1673, which is the subject of the current appeal, and which we
refer to as the “fraudulent transfer action.”
¶3 We begin by setting forth the procedural history of the judgment
action with some detail, since this history is important to our analysis of issue
preclusion in this case. Bruce was the sole defendant, and the plaintiff, Chad
Gebhardt, obtained a judgment against him in the amount of $610,896.55. After the
judgment was entered, Bruce transferred his ownership interests in various
companies and real estate to Gwen and B&G. Attorney John Wirth was appointed
as a receiver in supplemental proceedings to collect on the judgment, and he filed a
motion seeking turnover of the property. At certain times during the proceedings
that followed in the judgment court, the same attorney who represented Bruce also
represented Gwen and B&G and appeared on their behalf, at least for limited
purposes. However, Gwen and B&G were never served a summons and complaint,
and neither became parties to the judgment action.
¶4 WISCONSIN STAT. § 815.18 provides that certain property is exempt
from execution to satisfy a judgment. Bruce argued that the property he had
transferred was wholly exempt under § 815.18(3)(b)2. and (10) because its
aggregate value was less than $15,000, but the judgment court disagreed. It noted
that the property interests Bruce had transferred had a gross value worth millions of
dollars, but that it was unable to make a determination of its net value based on the
financial documents that Bruce had provided. Ultimately, the court determined that
the property was not exempt under § 815.18(10) because Bruce had transferred it
with the intent to defraud Gebhardt. The court entered an order that, among other
things, purported to avoid (that is, invalidate) the transfers and require Bruce to
surrender the property to satisfy Gebhardt’s judgment.
3
No. 2019AP576
¶5 Bruce filed a motion seeking relief from the order. The judgment
court reversed the portions of its prior decision that avoided the transfer and ordered
Bruce to surrender the property on the grounds that Gwen and B&G had not been
parties in the judgment action.3 However, the court did not reverse its prior
determination “that the properties which were transferred [to Gwen/B&G] were not
exempt pursuant to 815.18(10) ….” As the court explained, Bruce had “fully
litigated the issue of the exemptions,” and “[s]ustaining this finding does not impair
the rights of the third party owners of the properties”—that is, Gwen and B&G—
“because the issue of exemption does not go to or impede their rights, or their ability
to litigate those rights. The issue belongs to the debtor who, allegedly, fraudulently
transferred assets – and not to the third party holders of such assets.”
¶6 Bruce appealed, and we affirmed. Gebhardt, No. 2016AP2531.
Among other things, Bruce argued that the judgment court lacked authority to
decide whether the transferred properties were exempt because Gwen and B&G
were not parties to the judgment action, and the court’s determination would affect
their rights in subsequent proceedings. Id., ¶13. We rejected that argument, id.,
¶¶14-21, and we upheld the judgment court’s determination that Bruce had no right
to claim exemptions in those property interests under WIS. STAT. § 815.18 (10), id.,
¶¶27-29.
¶7 Meanwhile, Wirth had also initiated this fraudulent transfer action
against Bruce, Gwen, and B&G. In this action, Wirth seeks to avoid the transfers
under WIS. STAT. §§ 242.04 and 242.05 so that the property will be available to
satisfy the money judgment. Gwen and B&G have not advanced any of the defenses
3
The judgment court cited Department of Revenue v. Milwaukee Mack Truck Sales,
Inc., 91 Wis. 2d 1, 280 N.W.2d 274 (1979) for the proposition that the transferees, Gwen and B&G,
were necessary parties to any proceeding that avoided the transfer.
4
No. 2019AP576
available to transferees in a fraudulent transfer action under WIS. STAT. § 242.08,
and during a hearing, their attorney conceded that those defenses are unavailable
based on the undisputed evidence.
¶8 After we issued our decision in Bruce’s appeal of the judgment action,
Wirth and Gwen/B&G filed cross-motions for summary judgment in this fraudulent
transfer case. Gwen and B&G advanced the same argument that had been rejected
in the judgment action: that the transferred property was exempt from execution
under WIS. STAT. § 815.18(3)(b)2. and (10) because its aggregate value may be less
than $15,000. Gwen/B&G also argued that Wirth had the burden to prove that the
transferred property was not wholly exempt based on its value on the dates it was
transferred. They argued that they were entitled to summary judgment because
Wirth failed to name an expert to offer evidence on this issue.
¶9 The circuit court granted summary judgment to Wirth and denied
summary judgment to Gwen/B&G. According to the court, the only disputed issue
was whether the transferred property was exempt from execution under WIS. STAT.
§ 815.18, and this issue had already been determined in the judgment action. The
court concluded that Gwen/B&G were not allowed to relitigate that issue in this
fraudulent transfer action. The court determined that the transfers were fraudulent
and thus avoided them, making the property that Bruce had transferred available to
satisfy the judgment. Gwen and B&G appeal.
DISCUSSION
¶10 Gwen and B&G contend that the circuit court erred when it granted
summary judgment in Wirth’s favor, and they advance a number of arguments in
support of this position. First, they contend that the circuit court misconstrued the
scope of the prior decisions from the judgment action. Although their discussion
5
No. 2019AP576
about the scope of those decisions is difficult to parse, we understand Gwen and
B&G to be arguing that the judgment court could not and did not determine their
rights to claim an exclusion, that it merely discussed Bruce’s “future” right to claim
an exclusion and that it could not have actually adjudicated whether the transferred
property is exempt because it did not make any determination about its value.
Second, Gwen and B&G argue that, based on their interpretation of WIS. STAT.
§ 815.18(10), the court should have determined the value of the transferred property
as a prerequisite to determining whether it was exempt. Finally, they contend that
the circuit court should have granted summary judgment in their favor because, they
assert, Wirth had the burden to prove that the property was not exempt, and he did
not offer any evidence on that issue.
¶11 For the reasons we explain below, we conclude that all of Gwen and
B&G’s arguments are disposed of on the basis of issue preclusion. But before
turning to the elements of that doctrine, we first consider two threshold issues. The
first is whether Gwen and B&G have an independent right, separate from Bruce, to
claim that the transferred property is exempt from execution under WIS. STAT.
§ 815.18. The second relates to Bruce’s exemption claim, and whether that issue
was decided in the judgment action.
I. Gwen and B&G’s Rights to Claim an Exemption
¶12 Wirth argues that Bruce is the only party who can claim an exemption
under WIS. STAT. § 815.18. To understand this argument, it is important to
distinguish between Bruce, who was the “debtor” and who transferred the property
at issue in this case, and Gwen/B&G, who are the “transferees” and are not
themselves “debtors.” Wirth argues that the right to claim an exemption belongs to
the debtor, and that as the only debtor, Bruce is the only party that has this right.
6
No. 2019AP576
The implication of Wirth’s argument is that even though Gwen and B&G would
benefit from a determination that the transferred property is exempt from execution,
they have no independent right to claim an exemption under § 815.18.
¶13 Wirth cites language in WIS. STAT. § 815.18 that appears to support
his argument about the parties’ respective rights. Section 815.18(6) is entitled
“Claiming exemptions,” and it provides that “a debtor shall affirmatively claim an
exemption” and that “the debtor may make the claim at the time of seizure of
property or within a reasonable time after the seizure.” (Emphasis added.) Wirth
also cites to WIS. STAT. § 242.08, entitled “Defenses, liability and protection of
transferee,” which specifically identifies defenses that a transferee may make to
defend against a fraudulent transfer claim. None of these statutory defenses relate
to whether the transferred property interests were exempt from execution. See id.
¶14 Gwen and B&G do not respond to Wirth’s interpretation of these
statutes. Nor do they cite any other statutes or authority or make any legal argument
that Gwen and B&G have an independent right to defend against the fraudulent
transfer claim on the basis that the property was exempt from execution. They are
silent on this issue, and we take their failure to respond to Wirth’s argument as a
concession.4 Based on this concession, we determine that Gwen and B&G, as
transferees, do not have an independent right to defend against the fraudulent
transfer claims by arguing that the transferred property is exempt from execution.
We note that this conclusion is consistent with the judgment court’s understanding,
4
See United Coop. v. Frontier FS Coop., 2007 WI App 197, ¶39, 304 Wis. 2d 750, 738
N.W.2d 578 (an appellant’s failure to respond to an argument made in a response brief can be taken
as a concession).
7
No. 2019AP576
quoted above, that “the issue [of exemptions] belongs to the debtor who, allegedly,
fraudulently transferred assets – and not to the third party holders of such assets.”
II. Bruce’s Exemption Claim
¶15 We now turn to Bruce’s exemption claim, and whether that issue was
already decided in the judgment action and subsequent appeal. If Gwen and B&G
mean to argue that the judgment court made no determination about Bruce’s rights
to claim an exemption, we disagree. As mentioned above, we upheld the judgment
court’s determination “that the transferred interests are not exempt from execution”
based on that court’s interpretation and application of WIS. STAT. § 815.18(10).
Gebhardt, No. 2016AP2531, ¶1. We stated that “the [judgment] court acted within
its authority in denying Bruce’s exemption claims in all of the transferred interests.”
Id., ¶28 n.7. We further stated that, “[a]s a result of this exemption determination,
the transferred interests could potentially be applied to satisfy the judgment.” Id.,
¶1. Finally, we recognized that the decision about Bruce’s exemption rights would
likely impact this fraudulent transfer proceeding, and we described that result as
“unobjectionable.” Id., ¶21.
¶16 Gwen and B&G’s argument to the contrary is difficult to follow, but
it appears to turn on our use of the word “potential” when describing Bruce’s right
to claim an exemption. See id., ¶19 (stating that the circuit court had authority to
address “Bruce’s potential rights to exemptions”). Gwen and B&G argue that
“[p]otential rights ipso facto mean future rights, not present right.” As best as we
can tell, they are suggesting that the judgment court was simply offering an opinion
about the likelihood that Bruce’s exemption claim would succeed at some later point
in this fraudulent transfer action, when it would be time for Bruce to claim an
8
No. 2019AP576
exemption. This argument depends on logic that we expressly considered and
rejected in the earlier appeal,5 and we consider it no further here.
¶17 Accordingly, we conclude that the judgment court already considered
and rejected Bruce’s argument that the property was exempt from execution, and
that decision was affirmed on appeal. We further conclude that Bruce would be
barred from relitigating the issue in this case. Paige K.B. v. Steven G.B., 226
Wis. 2d 210, 219, 594 N.W.2d 370 (1999) (“[O]nce an issue is actually and
necessarily determined by a court of competent jurisdiction, that determination is
conclusive in subsequent suits based on a different cause of action involving a party
to the prior litigation.”). Again, our conclusion is consistent with the understanding
of the judgment court at the time it partially granted Bruce’s motion for relief from
judgment. As the judgment court explained, “Under this ruling, Bruce Bosben
ought to be precluded from claiming within [the fraudulent transfer action] that the
properties were wholly exempt and therefore could be transferred to Mrs. Bosben
and the LLC, without taint of fraud.”
III. Issue Precision
¶18 We now turn to whether the circuit court erred when it concluded that
like Bruce, Gwen and B&G are also barred from relitigating the exemption issue in
this case. “Issue preclusion, formerly known as collateral estoppel, is designed to
limit the relitigation of issues that have been actually litigated in a previous action.”
5
Gwen and B&G suggest that the judgment court could not have adjudicated Bruce’s right
to claim an exemption because “Bruce did not possess any ownership interest” in the property that
he had already transferred to Gwen and B&G, and the court only had authority to make decisions
about property that actually belonged to the debtor. We considered and rejected this same argument
in the appeal of the judgment action. As we explained, it was “circular reasoning” to contend that
the judgment court “cannot consider whether a debtor can be denied exemptions due to a fraudulent
transfer of a property interest because the debtor has already made the transfer.” Gebhardt v.
Bosben, No. 2016AP2531, unpublished slip op. at ¶24 (WI App Nov. 22, 2017).
9
No. 2019AP576
K.B., 226 Wis. 2d at 219 (internal quotations and citations omitted). Although
Gwen and B&G were not parties to the judgment action, issue preclusion can still
also apply if it “comports with due process” and is “fundamentally fair,” based on a
two-part test. Id. at 224-25.
¶19 The first step is whether Bruce, Gwen, and B&G have a sufficient
identity of interests to comport with due process. See id. at 224 (“[t]he threshold
issue is whether [the person who was not a party to the prior action] was in privity
or had sufficient identity of interests [with the party to that prior action] to comport
with due process”) (quoted source omitted). As discussed above, Gwen and B&G
do not have any independent right to assert an exemption. And notably, they make
no argument that they lack a sufficient identity of interest with Bruce regarding
Bruce’s exemption rights.
¶20 Gwen is Bruce’s spouse, and B&G is an entity solely owned by Bruce
and Gwen. All three have been represented by the same attorney. All three would
benefit from a determination that the transferred property was exempt, and, as the
judgment court remarked, Bruce “fully litigated the issue of the exemptions.” Based
on these facts and Gwen/B&G’s failure to develop any persuasive argument to the
contrary, we agree with Wirth that the parties have a sufficient identity of interests
to warrant application of issue preclusion in this case.
¶21 In the second step of the issue preclusion analysis, we consider
whether applying the doctrine comports with principles of fundamental fairness. Id.
at 225. Among other things, we consider whether there are any differences between
the proceedings such that it would be unfair to bar relitigation of an issue, and
whether public policy considerations weigh in favor or against application of the
10
No. 2019AP576
doctrine. See Aldrich v. LIRC, 2012 WI 53, ¶110, 341 Wis. 2d 36, 814 N.W.2d 433(setting forth factors to consider in fundamental fairness analysis).
¶22 Again, Gwen/B&G make no argument about the principles of
fundamental fairness. They do not identify any differences between the proceedings
as to the parties’ right to review, legal standards, or burdens of persuasion, nor do
they identify any public policy considerations that would relitigation of Bruce’s
right to an exemption. Instead, Gwen and B&G’s argument against issue preclusion
appears to depend on the fact that the judgment court did not determine Gwen or
B&G’s rights. While true, this fact is immaterial because, as we have explained,
Gwen and B&G do not have any independent right to claim an exemption.
¶23 Accordingly, we conclude that the sole defense that Gwen and B&G
asserted to the fraudulent transfer claims—that the property is exempt under WIS.
STAT. § 815.18(10)—is barred by issue preclusion. This determination is
dispositive, and it resolves all remaining issues that Gwen and B&G raise on
appeal.6
By the Court.—Order affirmed.
This opinion will not be published. See WIS. STAT. RULE
809.23(1)(b)5.
6
Gwen and B&G strain mightily to convince us that WIS. STAT. § 815.18(10) should be
interpreted such that the value of the property had to be determined before Bruce’s exemptions
rights could be decided, and that Wirth had the burden to prove that the property was not exempt.
These arguments are beside the point because it has already been decided that the property is not
exempt and that issue cannot be relitigated here.
11