Official Comm. of Unsecured Creditors of Great Lakes Quick Lube LP v. Theisen

2018 WI App 70, 920 N.W.2d 356, 384 Wis. 2d 580
CourtCourt of Appeals of Wisconsin
DecidedOctober 30, 2018
DocketAppeal No. 2018AP333
StatusPublished
Cited by4 cases

This text of 2018 WI App 70 (Official Comm. of Unsecured Creditors of Great Lakes Quick Lube LP v. Theisen) is published on Counsel Stack Legal Research, covering Court of Appeals of Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Official Comm. of Unsecured Creditors of Great Lakes Quick Lube LP v. Theisen, 2018 WI App 70, 920 N.W.2d 356, 384 Wis. 2d 580 (Wis. Ct. App. 2018).

Opinion

BRENNAN, J.

¶ 1 *584This is an appeal of an order that granted summary judgment and dismissed as time-barred a WIS. STAT. § 242.04(1)(a) (2015-16)1 claim alleging a fraudulent transfer. WISCONSIN STAT. § 893.425 bars "an action with respect to a fraudulent transfer or obligation under ch. 242" that is not commenced within one year after claimants "could reasonably have ... discovered" it. This case requires us to interpret what the legislature intended by *359§ 893.425 and to apply the statute to a motion for summary *585judgment. The plaintiff argues that the statute creates a discovery-of-the-fraud rule-where the clock starts to run when the fraudulent nature of the transfer could reasonably have been discovered-and that the statute had not run on creditors' state law claims at the relevant point. The defendants argue that the statute creates a discovery-of-the-transfer rule-where the clock starts to run when the transfer could reasonably have been discovered-but that regardless of which rule is applied, the statute had run, and creditors' state law claims had expired.

¶ 2 We note at the outset that this state court action arises in the context of a federal bankruptcy case. Plaintiff is the Official Committee of Unsecured Creditors of Great Lakes Quick Lube LP (the Committee), a committee appointed in a federal bankruptcy case and given the right to pursue claims on behalf of the debtor's 140 unsecured creditors. Defendants are John W. Theisen, Tom Chambasian, and Chester J. Bojanowski (the Individual Sellers), who sold a company in a leveraged buyout to an entity that later filed for bankruptcy. The Committee alleges that two transactions made in connection with the sale of that company-the issuance of a note to each Individual Seller for one million dollars and the satisfaction of the notes as the debtor's financial condition was deteriorating-were fraudulent within the meaning of WIS. STAT. § 242.04(1)(a). The Committee is attempting to recoup for unsecured creditors the three million dollars the Individual Sellers received.

¶ 3 The specific question before us is whether summary judgment was properly granted to the Individual Sellers on the grounds that no individual creditor had a viable state law claim as of the date of the bankruptcy petition filing because the statute of limitations *586on any such claims had run. To be entitled to summary judgment, the moving party must show that all of the creditors in question could reasonably have discovered the fraudulent nature of the transfer prior to April 2, 2011, such that each creditor's state law claim was extinguished by the date the bankruptcy petition was filed.2 Conversely, to survive summary judgment, the Committee must show that at least one creditor (a "triggering creditor") had a valid state law claim on the date of the bankruptcy filing, which means here that at least one creditor could not reasonably have discovered the fraudulent nature of the transfer by April 2, 2011. As to such a creditor, the statute of limitations would not have run on its claim by the time of the bankruptcy petition filing, and that creditor would have had a valid state law claim at the time of the filing and could thus pursue it.

¶ 4 We conclude that the trial court erred in granting summary judgment to the Individual Sellers. First, it misconstrued the statute of limitations test to be one based on discovery of the transfer , as opposed to discovery of the fraudulent nature of the transfer . Second, it erred in concluding that the moving parties (the Individual Sellers) had shown that not one creditor had a timely state law claim as of the date of the bankruptcy filing. The trial court concluded that by April 2, 2011, at the latest, the discovery period had been triggered because by that point, "a reasonable creditor exercising *587its duty to reasonably inquire would have discovered these *360notes." It held that under either standard, the statute had run and the claims had expired. The trial court failed to apply the correct legal standard because its analysis did not apply the "triggering creditor" rule from bankruptcy law that governs this case. We therefore reverse the order for summary judgment and remand for further proceedings.

BACKGROUND

The parties and the underlying bankruptcy case.

¶ 5 For purposes of this appeal, we are concerned only with whether the Committee's claim is barred under the applicable statute of limitations, and not with the merits of the claim, so an extensive recitation of the facts is unnecessary. For the purpose of providing context, however, we briefly describe the circumstances surrounding the allegedly fraudulent transfer and the theory under which it is pursued.

¶ 6 The Individual Sellers are individuals who have been in the lube oil business for many years. They were owners of a company that operated oil change or "quick lube" businesses, first under the name "Speedy Lube" and later as franchisees of Valvoline Instant Oil Change. In September 2004, the Individual Sellers contracted with a buyer, Great Lakes Quick Lube LP, for the sale of their company's assets, including forty-seven quick lube stores and the real estate and leases associated with each store. The parties to this action disagree3 about the nature of the promissory notes that were issued to the Individual Sellers on November 9, *5882004, but the Committee acknowledges that "[t]he Seller Notes were unquestionably issued in November 2004 as part of the larger transaction involving the defendants selling their quick lube business to the Debtor." In November 2009, Great Lakes Quick Lube LP made full payments on the promissory notes to the Individual Sellers. Great Lakes Quick Lube LP subsequently filed a bankruptcy petition on April 2, 2012. Shortly thereafter, the bankruptcy court appointed the Committee, and the amended reorganization plan, effective February 13, 2013, authorized the Committee to pursue certain causes of action, including avoidance actions, on behalf of the unsecured creditors.

The fraudulent transfer claim.

¶ 7 Pursuant to its authorization under the plan approved by the bankruptcy court, the Committee filed its complaint in this case.4 The Individual Sellers moved for summary judgment on the grounds that the claim was time barred.

¶ 8 *589The trial court granted the motion for summary judgment in an oral ruling, concluding that the statute created a discovery-of-the-transfer *361rule and *590that the action was filed more than a year after the creditors represented by the Committee could reasonably have discovered the transfer.

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Cite This Page — Counsel Stack

Bluebook (online)
2018 WI App 70, 920 N.W.2d 356, 384 Wis. 2d 580, Counsel Stack Legal Research, https://law.counselstack.com/opinion/official-comm-of-unsecured-creditors-of-great-lakes-quick-lube-lp-v-wisctapp-2018.