Chapter 242

242.01(7)(d) (d) An affiliate, or an insider of an affiliate as if the affiliate were the debtor.

242.01(7)(e) (e) A managing agent of the debtor.

242.01(8) (8) “Lien” means a charge against or an interest in property to secure payment of a debt or performance of an obligation, and includes a security interest created by agreement, a judicial lien obtained by legal or equitable process or proceedings, a common-law lien or a statutory lien.

242.01(8m) (8m) “Organization” means a person other than an individual.

242.01(9) (9) “Person” means an individual, estate, partnership, corporation, limited liability company, association, trust, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

242.01(10) (10) “Property” means anything that may be the subject of ownership.

242.01(10m) (10m) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

242.01(11) (11) “Relative” means an individual related by blood within the 3rd degree of kinship as computed under s. 990.001 (16), a spouse or an individual related to a spouse within the 3rd degree as so computed, and includes an individual in an adoptive relationship within the 3rd degree.

242.01(11m) (11m) “Sign” means, with present intent to authenticate or adopt a record, any of the following:

242.01(11m)(a) (a) To execute or adopt a tangible symbol.

242.01(11m)(b) (b) To attach to or logically associate with the record an electronic symbol, sound, or process.

242.01(12) (12) “Transfer” means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, license, and creation of a lien or other encumbrance.

242.01(13) (13) “Valid lien” means a lien that is effective against the holder of a judicial lien subsequently obtained by legal or equitable process or proceedings.

242.01 History History: 1987 a. 192; 1989 a. 278; 1993 a. 112; 1997 a. 188; 1999 a. 32, 85, 162; 2001 a. 38; 2023 a. 246.

242.01 Annotation Federal law does not preclude a labor union from bringing a state action for an alleged fraudulent conveyance by an employer when the claim does not require substantial interpretation of a collective bargaining agreement. International Machinist Association v. United States Can Co., 150 Wis. 2d 479, 441 N.W.2d 710 (1989).

242.02 242.02 Insolvency.

242.02(1) (1) In this section:

242.02(1)(a) (a) “Assets” do not include property that has been transferred, concealed or removed with intent to hinder, delay or defraud creditors or that has been transferred in a manner making the transfer voidable under this chapter.

242.02(1)(b) (b) “Debts” do not include an obligation to the extent it is secured by a valid lien on property of the debtor not included as an asset.

242.02(2) (2) A debtor is insolvent if, at a fair valuation, the sum of the debtor’s debts is greater than the sum of the debtor’s assets.

242.02(3) (3) A debtor who is generally not paying the debtor’s debts as they become due other than as a result of a bona fide dispute is presumed to be insolvent. The presumption imposes on the party against which the presumption is directed the burden of proving that the nonexistence of insolvency is more probable than its existence.

242.02 History History: 1987 a. 192; 2023 a. 246.

242.03 242.03 Value.

242.03(1) (1) Value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied, but value does not include an unperformed promise made otherwise than in the ordinary course of the promisor’s business to furnish support to the debtor or another person.

242.03(2) (2) For the purposes of ss. 242.04 (1) (b) and 242.05, a person gives a reasonably equivalent value if the person acquires an interest of the debtor in an asset pursuant to a regularly conducted, noncollusive foreclosure sale or execution of a power of sale for the acquisition or disposition of the interest of the debtor upon default under a mortgage, deed of trust or security agreement.

242.03(3) (3) A transfer is made for present value if the exchange between the debtor and the transferee is intended by them to be contemporaneous and is in fact substantially contemporaneous.

242.03 History History: 1987 a. 192.

242.04 242.04 Transfer or obligation voidable as to present or future creditor.

242.04(1) (1) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

242.04(1)(a) (a) With actual intent to hinder, delay or defraud any creditor of the debtor; or

242.04(1)(b) (b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

242.04(1)(b)1. 1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

242.04(1)(b)2. 2. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.

242.04(2) (2) In determining actual intent under sub. (1) (a), consideration may be given, among other factors, to whether:

242.04(2)(a) (a) The transfer or obligation was to an insider;

242.04(2)(b) (b) The debtor retained possession or control of the property transferred after the transfer;

242.04(2)(c) (c) The transfer or the obligation was disclosed or concealed;

242.04(2)(d) (d) Before the transfer was made or the obligation was incurred, the debtor had been sued or threatened with suit;

242.04(2)(e) (e) The transfer was of substantially all the debtor’s assets;

242.04(2)(f) (f) The debtor absconded;

242.04(2)(g) (g) The debtor removed or concealed assets;

242.04(2)(h) (h) The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;

242.04(2)(i) (i) The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;

242.04(2)(j) (j) The transfer occurred shortly before or shortly after a substantial debt was incurred; and

242.04(2)(k) (k) The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

242.04(3) (3) A creditor making a claim for relief under sub. (1) has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

242.04 History History: 1987 a. 192; 2023 a. 246.

242.04 Annotation The Wisconsin Uniform Fraudulent Transfer Act [now the Uniform Voidable Transactions Law] exists independently from the common law history of the law of fraudulent conveyances and fulfills a purpose quite separate from that of the fraudulent transaction exception to the rule of successor non-liability. Whereas the Act is designed to assist creditors in collecting on claims that may be frustrated by recent asset transfers, the fraudulent transaction exception is a doctrine that prevents successor companies from avoiding obligations incurred by their predecessors. This chapter has not supplanted the common law fraudulent transaction exception to the rule of successor non-liability. Springer v. Nohl Electric Products Corporation, 2018 WI 48, 381 Wis. 2d 438, 912 N.W.2d 1, 15-0829.

242.05 242.05 Transfer or obligation voidable as to present creditor.

242.05(1) (1) A transfer made or obligation incurred by a debtor is voidable as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

242.05(2) (2) A transfer made by a debtor is voidable as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time and the insider had reasonable cause to believe that the debtor was insolvent.

242.05(3) (3) Subject to s. 242.02 (3), a creditor making a claim for relief under sub. (1) or (2) has the burden of proving the elements of the claim for relief by a preponderance of the evidence.

242.05 History History: 1987 a. 192; 2023 a. 246.

242.05 Annotation Unlike other provisions of the Uniform Fraudulent Transfer Act governing transfers made with fraudulent intent, this section deems certain transactions constructively fraudulent based on the circumstances of the transfer. Proving fraudulent intent is not necessary under this section. Beck v. BidRX, LLC, 2018 WI App 61, 384 Wis. 2d 207, 918 N.W.2d 96, 17-2043.

242.05 Annotation Sub. (2) addresses “preferential transfers,” a novel category of fraudulent transaction based on bankruptcy principles that attacks a transfer by an insolvent debtor to pay an antecedent debt to a preferred insider. The provision is aimed at diminishing the sometimes unfair advantages insiders possess when they are familiar with the debtor’s financial status. A person attacking a transfer under sub. (2) must show that the debtor is improperly preferring insider creditors over others. Beck v. BidRX, LLC, 2018 WI App 61, 384 Wis. 2d 207, 918 N.W.2d 96, 17-2043.

242.05 Annotation The evidence in this case was insufficient to prove a fraudulent transfer under sub. (2) because no evidence was introduced showing that the allegedly fraudulent transfers were made to satisfy an antecedent debt. The fact of a transfer to an insider is not enough; it is the preferential payment of prior debts to insiders to which sub. (2) is addressed. Beck v. BidRX, LLC, 2018 WI App 61, 384 Wis. 2d 207, 918 N.W.2d 96, 17-2043.

242.05 Annotation Intent to defraud need not be proved under this section. DeWitt, Porter v. Kovalic, 991 F.2d 1243 (1993).

242.05 Note NOTE: The above annotations relate to the Uniform Fraudulent Transfer Act as adopted in this chapter prior to the revision and renaming of that chapter to the Uniform Voidable Transactions Law by 2023 Wis. Act 246.

242.06 242.06 When transfer is made or obligation is incurred. For the purposes of this chapter:

242.06(1) (1) A transfer is made:

242.06(1)(a) (a) With respect to an asset that is real property other than a fixture, but including the interest of a seller or purchaser under a contract for the sale of the asset, when the transfer is so far perfected that a good-faith purchaser of the asset from the debtor against whom applicable law permits the transfer to be perfected cannot acquire an interest in the asset that is superior to the interest of the transferee.

242.06(1)(b) (b) With respect to an asset that is not real property or that is a fixture, when the transfer is so far perfected that a creditor on a simple contract cannot acquire a judicial lien other than under this chapter that is superior to the interest of the transferee.

242.06(2) (2) If applicable law permits the transfer to be perfected as provided in sub. (1) and the transfer is not so perfected before the commencement of an action for relief under this chapter, the transfer is deemed made immediately before the commencement of the action.

242.06(3) (3) If applicable law does not permit the transfer to be perfected as provided in sub. (1), the transfer is made when it becomes effective between the debtor and the transferee.

242.06(4) (4) A transfer is not made until the debtor has acquired rights in the asset transferred.

242.06(5) (5) An obligation is incurred:

242.06(5)(a) (a) If oral, when it becomes effective between the parties.

242.06(5)(b) (b) If evidenced by a record, when the record signed by the obligor is delivered to or for the benefit of the obligee.

242.06 History History: 1987 a. 192; 2023 a. 246.

242.06 Annotation Sub. (1) requires viewing a transfer exclusively from the perspective of the creditor and not a transferee. What the transferees may have believed regarding with whom they were dealing is irrelevant under sub. (1). The good-faith defense under s. 242.08 (1) applies only to claims made under s. 242.04 (1) (a), not to claims under this section. Badger State Bank v. Taylor, 2004 WI 128, 276 Wis. 2d 312, 688 N.W.2d 439, 03-0750.

242.07 242.07 Remedies of creditors.

242.07(1) (1) In an action for relief against a transfer or obligation under this chapter, a creditor, subject to the limitations in s. 242.08, may obtain any of the following:

242.07(1)(a) (a) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor’s claim.

242.07(1)(b) (b) An attachment or other provisional remedy against the asset transferred or other property of the transferee if available under chs. 810 to 813 or other applicable law.

242.07(1)(c) (c) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure:

242.07(1)(c)1. 1. An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;

242.07(1)(c)2. 2. Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or

242.07(1)(c)3. 3. Any other relief the circumstances may require.

242.07(2) (2) If a creditor has obtained a judgment on a claim against the debtor, the creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

242.07 History History: 1987 a. 192; 2023 a. 246.

242.07 Annotation Nothing in ch. 242 changes the principle of law that compensatory damages are a threshold requirement for awarding punitive damages or otherwise permits a punitive damages award. Rescission under sub. (1) is an equitable remedy and does not constitute compensatory damages. C & A Investments v. Kelly, 2010 WI App 151, 330 Wis. 2d 223, 792 N.W.2d 644, 09-2420.

242.08 242.08 Defenses, liability, and protection of transferee or obligee.

242.08(1) (1) A transfer or obligation is not voidable under s. 242.04 (1) (a) against a person who took in good faith and for a reasonably equivalent value given the debtor or against any subsequent transferee or obligee.

242.08(2) (2) To the extent a transfer is voidable in an action by a creditor under s. 242.07 (1) (a), all of the following rules apply:

242.08(2)(am) (am) Except as otherwise provided in this section, the creditor may recover judgment for the value of the asset transferred, as adjusted under sub. (3), or the amount necessary to satisfy the creditor’s claim, whichever is less. The judgment may be entered against any of the following:

242.08(2)(am)1. 1. The first transferee of the asset or the person for whose benefit the transfer was made.

242.08(2)(am)2. 2. An immediate or mediate transferee of the first transferee, other than any of the following:

242.08(2)(am)2.a. a. A good faith transferee who took for value.

242.08(2)(am)2.b. b. An immediate or mediate good faith transferee of a person described in subd. 2. a.