Case Title: Badger State Bank v. Roger A. Taylor

Citation: 2004 WI 128

Docket Number: 2003AP000750

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2004-11-02T00:00:00Z

Document:
2004 WI 128 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
03-0750 
COMPLETE TITLE: 
 
 
Badger State Bank,  
          Plaintiff-Appellant, 
 
     v. 
 
Roger A. Taylor, Rodney J. Taylor and  
Economy Feed Mill,  
          Defendants-Respondents-Petitioners. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2004 WI App 17 
Reported at:  268 Wis. 2d 774, 674 N.W.2d 872 
(Ct. App. 2003-Published) 
 
 
OPINION FILED: 
November 2, 2004   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
October 5, 2004   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Grant   
 
JUDGE: 
Robert P. VanDeHey   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For 
the 
defendants-respondents-petitioners 
there 
were 
briefs by James P. Czajkowski, Lara Czajkowski Higgins and 
Czajkowski & Rider, S.C., Prairie du Chien, and oral argument by 
James P. Czajkowski. 
 
For the plaintiff-appellant there was a brief by Mark 
Bromley, Platteville, and oral argument by F. Bromley. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2004 WI 128 
 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No. 03-0750  
(L.C. No. 
02 CV 000069) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Badger State Bank,  
 
          Plaintiff-Appellant, 
 
     v. 
 
Roger A. Taylor, Rodney J. Taylor and  
Economy Feed Mill,  
 
          Defendants-Respondents- 
          Petitioners. 
 
FILED 
 
NOV 2, 2004 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is a review of a 
published decision of the court of appeals reversing a judgment 
and an order of the Circuit Court for Grant County, Robert P. 
VanDeHey, Judge.1  The circuit court granted summary judgment to 
Roger Taylor, Rodney Taylor, and Economy Feed Mill (collectively 
the Taylors), dismissing Badger State Bank's complaint alleging 
that the Taylors were the recipients of fraudulent transfers 
                                                 
1 Badger State Bank v. Taylor, 2004 WI App 17, 268 
Wis. 2d 774, 674 N.W.2d 872. 
No. 
03-0750   
 
2 
 
within the meaning of the Wisconsin Uniform Fraudulent Transfer 
Act, specifically, Wis. Stat. § 242.05(1) (2001-02).2 
¶2 
The issue presented is whether a transfer constitutes 
a fraudulent transfer under Wis. Stat. § 242.05(1) of the 
Wisconsin Uniform Fraudulent Transfer Act when the transferees 
(here the Taylors) were unaware that the creditor (here the 
Bank) held a security interest in the accounts receivable of the 
debtor (here Vogt's Ag-Tech West, Inc.).    
¶3 
The court of appeals reversed the circuit court's 
judgment in favor of the Taylors, concluding that the Bank had 
established 
all 
of 
the 
elements 
required 
by 
Wis. 
Stat. 
§ 242.05(1).3  The court of appeals held that any transfer must 
be viewed exclusively from the perspective of the creditor Bank; 
the beliefs of the transferees regarding the nature of the 
transfer were not relevant to the analysis under § 242.05(1).4  
The court of appeals remanded the cause to the circuit court, 
directing it to enter judgment in favor of the Bank after it 
determines the amount of the judgment and the nature of any 
other remedies to which the Bank may be entitled.   
¶4 
We hold, as did the court of appeals, that the Bank 
has met all the requirements of Wis. Stat. § 242.05(1) and is 
therefore 
entitled 
to 
summary 
judgment 
in 
its 
favor. 
                                                 
2 All references to the Wisconsin statutes are to the 2001-
02 version unless otherwise indicated. 
3 Badger State Bank, 268 Wis. 2d 774, ¶11. 
4 Id. 
No. 
03-0750   
 
3 
 
Accordingly, we affirm the decision of the court of appeals 
reversing the judgment and order of the circuit court and 
remanding the cause to the circuit court with directions.   
I 
¶5 
For 
purposes 
of 
the 
cross 
motions 
for 
summary 
judgment, the relevant facts are not in dispute.  Ronald (Al) 
Vogt was the president and principal shareholder of Vogt's Ag-
Tech West, Inc., a Wisconsin corporation.  Ag-Tech was in the 
business of selling agricultural pesticides, fertilizer, and 
spraying services. 
¶6 
Badger State Bank made business loans to Ag-Tech.  To 
secure its loans, the Bank held a perfected security interest in 
Ag-Tech's assets, specifically Ag-Tech's accounts receivable.  
Ag-Tech was indebted to the Bank at all times material to this 
action in the approximate amount of $446,000.   
¶7 
Roger and Rodney Taylor did business as Economy Feed 
Mill, an operation that sold livestock feed.   
¶8 
Ag-Tech sold pesticides, fertilizer, and spraying 
services to the Taylors for their feed business.  The Taylors 
sold feed to A&T Livestock, LLC, a Wisconsin limited liability 
company organized under chapter 183 of the Wisconsin Statutes.  
A&T Livestock raised and sold hogs.  Al Vogt was a member of A&T 
Livestock.  
¶9 
At the time of the transfer at issue in this case, the 
Taylors owed Ag-Tech $12,489, and A&T Livestock owed the Taylors 
$17,890.  In a memo dated August 9, 2001, Al Vogt and the 
Taylors agreed to cancel the accounts receivable, whereby Ag-
No. 
03-0750   
 
4 
 
Tech's account receivable from the Taylors would be forgiven in 
exchange for the Taylors forgiving their account receivable from 
A&T Livestock.  Since the difference between the two accounts 
receivable was over $5,000, Al Vogt also paid, by check from Ag-
Tech's account, an additional $2,350 to the Taylors in partial 
payment toward A&T Livestock's remaining debt to the Taylors. 
¶10 The 
Bank 
sued 
the 
Taylors 
to 
set 
aside 
the 
cancellation of Ag-Tech's account receivable and cash payment as 
fraudulent transfers under Wis. Stat. § 242.05(1).  The Bank 
asserted that its debtor, Ag-Tech, not Al Vogt individually, was 
the transferor, and that the transaction was fraudulent as to 
the Bank because Ag-Tech was indebted to the Bank, was 
insolvent, and did not receive "reasonably equivalent value" in 
exchange for the transfer.  The Bank did not consider it 
relevant that the Taylors did not know of its security interest 
in the account receivable transferred to them.  
¶11 On cross motions for summary judgment, the circuit 
court granted summary judgment to the Taylors.  The circuit 
court determined that the Taylors were not dealing with  
corporate entities; they were dealing with Al Vogt personally.  
Thus, Al Vogt was not the Bank's debtor, the circuit court 
concluded, and the asset transferred (the Taylors' account 
receivable) was not an asset of Ag-Tech.  Accordingly, the 
circuit court denied the Bank's motion for summary judgment, 
granted the Taylors' motion for summary judgment, and dismissed 
the Bank's complaint.  The court of appeals reversed the 
judgment and order of the circuit court. 
No. 
03-0750   
 
5 
 
II 
¶12 In reviewing a grant of summary judgment, an appellate 
court applies the standards set forth in Wis. Stat. § 802.08(2) 
governing summary judgment in the same manner as the circuit 
court.5  Summary judgment is properly granted when there are no 
issues of material fact, but only questions of law upon which 
the moving party is entitled to judgment.6   
¶13 The interpretation of a statute and the application of 
a statute to undisputed facts are ordinarily questions of law 
that this court determines independently of the circuit court 
and the court of appeals, benefiting from their analyses.7 
III 
¶14 A 
creditor 
pursuing 
a 
claim 
under 
Wis. 
Stat. 
§ 242.05(1) must satisfy three requirements:  (1) the creditor's 
claim arose before the transfer was made; (2) the debtor made 
the transfer without receiving a reasonably equivalent value in 
exchange for the transfer; and (3) the debtor either was 
insolvent at the time of the transfer or became insolvent as a 
result of the transfer. 
¶15 Wisconsin Stat. § 242.05(1) provides as follows: 
A transfer made or obligation incurred by a debtor is 
fraudulent as to a creditor whose claim arose before 
                                                 
5 Hubbard v. Messer, 2003 WI 145 ¶7, 267 Wis. 2d 92, 673 
N.W.2d 676. 
6 Id. 
7 State v. Cole, 2003 WI 59, ¶12, 262 Wis. 2d 167, 663 
N.W.2d 700. 
No. 
03-0750   
 
6 
 
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 the time or the debtor 
became insolvent as a result of the transfer or 
obligation.  
¶16 It is undisputed that Ag-Tech was a "debtor"8 of the 
"creditor" Bank.9  It is further undisputed that the Bank's claim 
arose before the transfer was made.  Further, because Ag-Tech's 
"debt"10 exceeded its "assets,"11 Ag-Tech was "insolvent"12 under 
the Act.  The parties agree that Al Vogt was not a debtor of the 
Bank.  
¶17 Two requirements of Wis. Stat. § 242.05(1) are at 
issue in this case: (1) Was an asset of Ag-Tech transferred to 
the Taylors?  And if it was, (2) Did Ag-Tech receive a 
                                                 
8 "'Debtor' means a person who is liable on a claim."  Wis. 
Stat. § 242.01(6).  "Claim" is "a right to payment, whether or 
not the right is reduced to judgment, liquidated, unliquidated, 
fixed, contingent, matured, unmatured, disputed, undisputed, 
legal, 
equitable, 
secured 
or 
unsecured." 
 
Wis. 
Stat. 
§ 242.01(3). 
9 "'Creditor' means a person who has a claim."  Wis. Stat. 
§ 242.01(4). 
10 "'Debt' means liability on a claim."  Wis. Stat. 
§ 242.01(5). 
11 "'Asset' means property of a debtor . . . ."  Wis. Stat. 
§ 242.01(2).  Statutory exclusions from the definition of an 
"asset" are not relevant to this case. 
12 "A debtor is insolvent if the sum of the debtor's debts 
is greater than all of the debtor's assets at a fair valuation."  
Wis. Stat. § 242.02(2). 
No. 
03-0750   
 
7 
 
reasonably equivalent value in exchange for the transferred 
asset? 
¶18 First, the Taylors argue that the asset, the account 
receivable, was not an asset of Ag-Tech within the meaning of 
Wis. Stat. § 242.05(1) and was never "transferred" by Ag-Tech to 
them.13  The Taylors take this position because they believed 
they were dealing with Al Vogt personally and were unaware of 
the corporate and legal status of either Ag-Tech or A&T 
Livestock.   
¶19 Second, from the Taylors' perspective, the transfer 
between Al Vogt and the Taylors was for reasonably equivalent 
value because Al Vogt cancelled the $12,489 they owed him, while 
they cancelled the $17,890 Al Vogt owed them.14 
 
                                                 
13 "'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 and creation of a lien 
or other encumbrance."  Wis. Stat. § 242.01(12). 
14 The 
Taylors 
proffered 
another 
way 
of 
calculating 
"reasonably equivalent value" for the first time in their Reply 
Brief and at oral argument.  The Taylors assert that by wiping 
out each other's debt, Ag-Tech, A&T Livestock, and the Taylors 
were all able to stay in business.  The "reasonably equivalent 
value," according to the Taylors, is this ability to remain in 
business.  They cite Image Worldwide, Ltd. v. Parkway Bank & 
Trust Co., 139 F.3d 574 (7th Cir. 1998), for this proposition.   
No. 
03-0750   
 
8 
 
¶20 The Taylors argue that they were doing business with 
Al Vogt personally, as a sole proprietor, and at no time did 
business with the corporation, Ag-Tech.  They maintain that they 
did not know Al Vogt was acting as an agent or employee of any 
corporate entity.  According to the Taylors, Al Vogt never, 
either orally or through his correspondence, indicated that 
either Ag-Tech or A&T Livestock were separate legal entities 
from himself.  None of the invoices and checks in the record 
from Ag-Tech included the word "Inc." in describing Ag-Tech so 
that a third party would know a corporate entity was involved.  
¶21 They argue therefore that, as between the Taylors and 
Al Vogt, Al Vogt personally owned the account receivable, not 
Ag-Tech, and Al Vogt, not Ag-Tech, was the transferor.  Under 
the Taylors' view of the facts, Al Vogt was not the Bank's 
debtor under § 245.05(1) and when Al Vogt cancelled the account 
receivable, Al Vogt was not transferring an asset of Ag-Tech, 
the Bank's debtor.   
                                                                                                                                                             
Even if we ignore that the Taylors' new argument was waived 
because it was not presented anywhere in the circuit court, the 
court of appeals, or its main brief to this court, Image 
Worldwide does not compel the result the Taylors seek.  Applying 
Illinois law based on the Uniform Fraudulent Transfer Act, Image 
Worldwide involved "reasonably equivalent value" within the 
context of "transfers" amongst corporate affiliates.  The 
Seventh Circuit noted that indirect benefits could be considered 
as part of valuation, but only when the cross-stream guarantees 
(a transaction) strengthened the corporate group as a whole.  
Ultimately, however, the Seventh Circuit did label the transfer 
fraudulent and voided it because the transaction did not 
strengthen the corporate group.  It was represented at oral 
argument that both Ag-Tech and A&T Livestock went out of 
business soon after these transactions.  
No. 
03-0750   
 
9 
 
¶22 The fallacy in this argument is that the Taylors are 
looking at the transactions as involving only two parties (the 
Taylors and Al Vogt), rather than as involving three or four 
parties (the Taylors, Al Vogt, Ag-Tech, and A&T Livestock).  By 
treating the transactions as involving only two parties, the 
Taylors 
ignore 
principles 
of 
agency 
law 
and 
Wis. 
Stat. 
§ 242.05(1).  Wisconsin Stat. § 242.10 provides that the law 
relating to principal and agent supplements chapter 242.15  
Nothing in § 242.05(1) indicates that it displaces the law 
relating to principal and agent. 
¶23 Here, Al Vogt, as the president and sole shareholder 
of Ag-Tech, was the agent of Ag-Tech.16  Under agency law Ag-Tech 
                                                 
15 Wisconsin Stat. § 242.10 reads:  "Unless displaced by 
this chapter, the principles of law and equity, including the 
law merchant and the law relating to principal and agent, 
estoppel, laches, fraud, misrepresentation, duress, coercion, 
mistake, insolvency or other validating or invalidating cause, 
supplement this chapter"  (emphasis added). 
16 See Diederich v. Wis. Wood Prods., Inc., 247 Wis. 212, 
218, 19 N.W.2d 268 (1945) ("The general rule is that the 
president, 
treasurer, 
secretary 
and 
other 
officers 
of 
a 
corporation are merely its agents . . . . [A] president who is 
also general manager of a corporation has the implied power to 
do anything that the corporation could do within the general 
scope of its business.") (internal quotations and citations 
omitted). 
No. 
03-0750   
 
10 
 
was either a partially disclosed principal17 or an undisclosed 
principal.18   
¶24 Al Vogt was acting on behalf of Ag-Tech when he 
engaged in the transactions that eventually led to the Taylors 
owing Ag-Tech money.19  The goods Al Vogt sold to the Taylors 
belonged to Ag-Tech, as did the account receivable resulting 
from the sale.  Ag-Tech apparently acquiesced in and performed 
the transactions Al Vogt arranged with the Taylors.20  
¶25 An undisclosed or partially disclosed principal, like 
Ag-Tech, becomes a party to a transaction between the agent (Al 
Vogt) and the third party (the Taylors) even if the third party 
(the Taylors) is unaware of the name or existence of the 
                                                 
17 When a third party is aware that the agent is acting on 
behalf of a principal, but unaware of the identity of the 
principal, that principal is "partially disclosed."  Restatement 
(Second) of Agency § 4(2) (1959).  This section is quoted with 
approval in Benjamin Plumbing, Inc. v. Barnes, 162 Wis. 2d 837, 
848-49, 470 N.W.2d 888 (1991). 
18 An undisclosed principal exists when the third party has 
no notice that the agent is acting on behalf of a principal.  
Restatement (Second) of Agency § 4(3) (1959). 
19 See Restatement (Second) of Agency § 307(1)(a) (1959) 
("[U]ntil the existence of the principal is known, the agent has 
power to rescind, perform and receive performance of the 
contract and to modify it with binding effect, if the contract 
or conveyance, as modified, is within his agency powers."). 
20 See Johnson v. Associated Seed Growers, Inc., 240 Wis. 
278, 282-83, 3 N.W.2d 332 (1942) (no proof as to express 
authority 
of 
agent 
but 
sufficient 
proof 
that 
principal 
acquiesced in and performed contract and benefited by  accepting 
the warehouse receipts; consequently, agent can be deemed to 
have possessed necessary authority to negotiate on behalf of 
principal and agent-principal status existed). 
No. 
03-0750   
 
11 
 
principal.21  Thus, had the Taylors defaulted in paying Al Vogt, 
Ag-Tech could have sued the Taylors for the funds they owed the 
corporation.  Likewise, had Al Vogt (or Ag-Tech) failed to 
perform under the sales agreements, the Taylors could have sued 
either Al Vogt, or Ag-Tech, or both. 
¶26 We must also examine the cancellation of the account 
receivable under agency law.  Had the Taylors paid Al Vogt to 
cancel the account receivable, Ag-Tech (the principal) could not 
have recovered payment from the Taylors.  Al Vogt would have 
been Ag-Tech's agent in accepting the payment, and payment to 
the agent would be payment to the principal.  Wisconsin Stat. 
§ 242.05(1) changes this dynamic.  Under agency law, Al Vogt 
acted as agent on behalf of his principal (Ag-Tech) in 
cancelling the account receivable and giving the Taylors the 
check drawn on Ag-Tech's account.  Because Ag-Tech made the 
transfers to the Taylors (through its agent, Al Vogt), under 
Wis. Stat. § 242.05(1), Ag-Tech is the transferor of the account 
receivable and the check.  
                                                 
21 Restatement (Second) of Agency § 7 cmt. d; § 186, cmt. 
(1959).  See also Benjamin Plumbing, Inc. v. Barnes, 162 Wis. 2d 
837, 855, 470 N.W.2d 888 (1991) ("Clearly, it has long been the 
rule in Wisconsin that a corporation can be contractually bound 
even where the corporate name was not used in the contract."). 
See also Indiana Gas Co. v. Home Ins. Co., 141 F.3d 314, 
319 (7th Cir. 1998) ("The proposition that an agent for an 
undisclosed principal is liable does not imply that the 
undisclosed principal is not bound by the contract; the full 
statement of the 'venerable rule' is that both agent and 
principal are bound." (emphasis omitted) (citing Restatement 
(Second) of Agency §§ 186, 302)). 
No. 
03-0750   
 
12 
 
¶27 In sum, when the transactions between Al Vogt and the 
Taylors are properly viewed as three- or four-party transactions 
under agency law and Wis. Stat. § 242.05(1), the account 
receivable belonged to Ag-Tech and Ag-Tech transferred the 
account receivable and the check to the Taylors.22  
¶28 The next question, then, is whether Ag-Tech received 
reasonably equivalent value for the transfer under Wis. Stat. 
§ 242.05(1).23   
¶29 The Taylors argued that by collapsing the two distinct 
legal entities (Ag-Tech and A&T Livestock) into one (Al Vogt), 
the approximately $15,000 they received from Ag-Tech was 
compensated for by the almost $18,000 they cancelled as owing 
them from A&T Livestock.  The Taylors' argument makes sense if 
Ag-Tech, A&T Livestock, and Al Vogt were all one legal entity.  
They were not.  The record reflects three entities existed:  Ag-
Tech, A&T Livestock, and Al Vogt.     
¶30 From the perspective of the creditor Bank, when Al 
Vogt 
cancelled 
Ag-Tech's 
account 
receivable, 
Ag-Tech 
was 
insolvent and received nothing in return for the cancellation.  
                                                 
22 The Bank is concerned only with the transfer from Ag-Tech 
to the Taylors.  They are not concerned about the A&T Livestock 
account receivable.  Nothing in this opinion prevents them from 
seeking their almost $18,000 from A&T Livestock.     
23 "Reasonably equivalent value" is not defined in the 
Uniform Fraudulent Transfer Act.  "Value" is defined as follows:  
"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 . . . ."  Wis. Stat. 
§ 242.03(1). 
No. 
03-0750   
 
13 
 
It was A&T Livestock that benefited from the transaction, not 
Ag-Tech.24 Therefore, canceling the two accounts receivable, 
while of value to the Taylors, did not inure to the benefit of 
Ag-Tech at all. 
¶31 We conclude, as did the court of appeals, that Ag-Tech 
did not receive reasonably equivalent value for the loss of its 
cash and account receivable.     
¶32 Having 
resolved 
the 
two 
disputed 
statutory 
requirements against the Taylors, namely, whether the account 
receivable was an asset of the debtor Ag-Tech that was 
transferred by Ag-Tech, and whether Ag-Tech received reasonably 
equivalent value, we conclude that the transfer satisfied the 
requirements of Wis. Stat. § 242.05(1).  The Taylors argue, 
however, that the transfer should not be held to be a fraudulent 
transfer under Wis. Stat. § 242.05(1).  They urge the court to 
interpret the statute to protect innocent parties so that a bona 
fide purchaser's title to property is beyond the reach of the 
transferor's creditors. 
IV 
                                                 
24 Al Vogt was an agent of A&T Livestock, as well as of Ag-
Tech.  Under Wis. Stat. § 183.0301(1)(a), "[e]ach member [of a 
limited liability company] is an agent of the limited liability 
company . . . for the purpose of its business.".  The statute 
further provides that "[t]he act of any member . . . binds the 
limited liability company . . . ."  Wis. Stat. § 183.0301(1)(b).  
When the Taylors agreed with Al Vogt, as agent of his 
undisclosed principal A&T Livestock, to release the almost 
$18,000 owed to the Taylors, the benefit flowed to A&T 
Livestock, not Ag-Tech. 
No. 
03-0750   
 
14 
 
¶33 The 
Taylors 
claim 
to 
be 
similar 
to 
bona 
fide 
purchasers for value; that is, they claim to be parties who 
entered into a transaction in good faith and for value.  In sum, 
the Taylors ask the court to interpret Wis. Stat. § 242.05(1) 
from their perspective as innocent transferees.  
¶34 The 
Taylors 
derive 
this 
transferee-oriented 
interpretation 
by 
examining 
the 
entire 
Wisconsin 
Uniform 
Fraudulent Transfer Act.  
¶35 The Taylors point out that Wis. Stat. § 242.04(1)(a) 
proscribes transfers made with "actual intent to hinder, delay 
or defraud any creditor"25 and protects transfers to a person who 
had no knowledge of a transferor's intent and "who took in good 
faith and for a reasonably equivalent value."26  These provisions 
give transferees the means to know of the existence of a 
potential fraud, and the transferees can protect themselves by 
refusing to participate in the transfer.  These provisions give 
transferees a defense against the creditor.   
¶36 The Taylors would like to be able to use the defenses 
provided in Wis. Stat. § 242.08(1), but these defenses by the 
                                                 
25 Wisconsin Stat. 242.04(1)(a) reads as follows:  "A 
transfer made or obligations [sic] incurred by a debtor is 
fraudulent 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:  (a) With actual intent to hinder, delay or defraud 
any creditor of the debtor . . . ."  
Section 242.04(1)(a)(1) requires proof of the debtor's 
intent, whereas § 242.05(1) does not. 
26 Wis. Stat. § 242.08(1). 
No. 
03-0750   
 
15 
 
explicit language of § 242.08(1) apply only to claims made under 
§ 242.04(1)(a).27  The defenses have no bearing on the Bank's 
claim made here under § 242.05(1).          
¶37 We agree with the Bank and the court of appeals that 
we must examine the requirements of a claim under Wis. Stat. 
§ 242.05(1), not the requirements of a claim and the defenses 
available under other provisions of chapter 242.     
¶38 Section 
242.05(1) 
is 
a 
"constructive 
fraud" 
provision.28  It provides a per se rule.  Good faith is not 
relevant in § 242.05(1).  Section § 242.05(1) does not require 
that the Taylors be guilty of any fraud.29  Indeed, no one 
ascribes wrong intent or evil purpose to the Taylors.30 
                                                 
27 Wisconsin Stat. § 242.08(1) 
provides: 
"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 or against any subsequent transferee or obligee."  
Another 
statute 
providing 
a 
defense 
is 
Wis. 
Stat. 
§ 242.05(2), which renders a transfer to an insider a fraudulent 
transfer when the insider had reasonable cause to believe that 
the debtor was insolvent.  Neither party raised this issue of 
whether Al Vogt qualified as an insider.  In any event, the Bank 
brought its claim under § 242.05(1).   
28 Frederick Tung, Limited Liability and Creditors' Rights: 
The Limits of Risk Shifting to Creditors, 34 Ga. L. Rev. 547, 
562-63 (2000). 
29 Although the court of appeals supported its decision by 
asserting that Wis. Stat. § 242.05(1) is clear on its face, the 
court of appeals nevertheless relied on Wirtz v. Jensen, 238 
Wis. 334, 341, 298 N.W. 172 (1941), for the proposition that the 
statute does not require a showing that the transferee possesses 
fraudulent intent.   
No. 
03-0750   
 
16 
 
¶39 The usual motive for transfers without reasonably 
equivalent value in exchange is to hinder creditors, and in fact 
such transfers ordinarily do hinder creditors.31  But such intent 
is difficult to prove, and the drafters of the Uniform 
Fraudulent 
Transfer 
Act 
included 
provisions 
addressing 
transactions that might be considered wrongful toward creditors 
even if a debtor's intent to hinder, delay, or defraud is not 
proven.32 The focus in "constructive fraud" shifts from a 
subjective 
intent 
to 
an 
objective 
result.33 
 
Proof 
of 
                                                                                                                                                             
The Taylors distinguish Wirtz on its facts and law.  
Regarding the facts, in Wirtz (unlike in the present case) the 
transferees were aware that the transferor was the debtor of 
another and that the transfer would hinder the transferor's 
creditors. 
 In Wirtz, 
the 
legal 
issue was 
whether the 
transferees must participate in the fraudulent intent for the 
transfer to be fraudulent.  Intent is not an issue in the 
present case.        
30 Peter A. Alces, Generic Fraud and the Uniform Fraudulent 
Transfer Act, 9 Cardozo L. Rev. 743, 743 (1987) ("But the bad 
man [in the Uniform Fraudulent Transfer Act] to which I allude 
is not necessarily bad, except perhaps from the perspective of 
an all-assets secured creditor."). 
31 The Nostalgia Network, Inc. v. Lockwood, 315 F.3d 717, 
719 (7th Cir. 2002). 
32 See Unif. Fraudulent Transfer Act prefatory note, 7A 
U.L.A. 269 (1999); Tung, supra note 28, at 563; Douglas G. Baird 
& Thomas H. Jackson, Fraudulent Conveyance Law and Its Proper 
Domain, 38 Vand. L. Rev. 829, 830-32 (1985); Barry L. Zaretsky, 
Fraudulent Transfer Law as the Arbiter of Unreasonable Risk, 46 
S.C. L. Rev. 1165, 1166-67 (1995). 
33 Tung, supra note 28, at 562-63; Louis J. Verner, 
Transfers in Fraud of Creditors Under the Uniform Acts and the 
Bankruptcy Code, 92 Com. L.J. 218, 233-37 (1987). 
No. 
03-0750   
 
17 
 
"constructive fraud" simply entails proof of the requirements of 
the statute.   
¶40 The Taylors' argument that Wis. Stat. § 242.05(1) 
should be interpreted from their perspective runs counter to the 
objectives of the Uniform Fraudulent Transfer Act.  The 
Wisconsin legislature enacted the Uniform Fraudulent Transfer 
Act as chapter 242 in 1987.  The Uniform Fraudulent Transfer 
Act, 
which 
was 
adopted 
by 
the 
National 
Conference 
of 
Commissioners on Uniform State Laws in 1984, has been adopted by 
more than 40 states.34  The goal in the interpretation of uniform 
laws is uniformity among the states.35  
                                                 
34 See Unif. Fraudulent Transfer Act, 7A U.L.A. 266 (Supp. 
2004).   
The Uniform Fraudulent Transfer Act replaced the Uniform 
Fraudulent Conveyances Act, which was adopted by the Conference 
in 1918 and enacted in Wisconsin in 1919.  See Analysis of 1987 
S.B. 115, available at the Legislative Reference Bureau, 
Madison, Wisconsin.   
No. 
03-0750   
 
18 
 
¶41 The Uniform Fraudulent Transfer Act reflects a strong 
desire to protect creditors and to allow for the smooth 
functioning of our credit-based society.36  It is a creditor-
                                                                                                                                                             
The sources of the Uniform Act date back to English and 
European law.  Fraudulent conveyance law in the United States 
has its roots in the 1570 Statute of 13 Elizabeth, which 
prohibited a wide array of fraudulent conveyances.  Verner, 
supra note 33, at 219.  However, the concept of voiding 
fraudulent conveyance has much earlier roots, both in England 
and on the European Continent.  See Verner, supra note 33, at 
218.  Fraudulent conveyances were prohibited as early as 1215 
through a provision of the Magna Carta.  Id. at 218 & n.1 
(citing the Magna Carta c. 32: "No freeman henceforth shall give 
or sell more of his land, but so that of the residue of the 
lands, the lord of the fee may have the service due him, which 
belongs to the free.").  In Europe the concept can be traced to 
the Justinian Code:  "Again, if any one has transferred his 
property to another in fraud of his creditors, upon judgment to 
that effect by the chief provincial magistrate, the creditors of 
the transferor may seize his property, avoid the transfer and 
recover the things transferred . . . ."  Max Radin, Fraudulent 
Conveyances at Roman Law, 18 Va. L. Rev. 109, 109 (1931) 
(quoting the Institutes of Justinian (Justinian Code)).  See 
also Unif. Fraudulent Transfer Act prefatory note, 7A U.L.A. 268 
(1999). 
35 Wis. Stat. § 242.11. 
36 Frank R. Kennedy, Involuntary Fraudulent Transfers, 9 
Cardozo L. Rev. 531, 534 (1987) ("If an economic system 
employing credit is to function efficiently, creditors must be 
able to enforce obligations assumed by or imposed on their 
debtors.  The law of fraudulent and preferential transfers 
consists of rules that have developed to enable creditors to 
enforce the duty of a debtor to be fair to all creditors."); see 
also Uniform Law Commissioners, Why State Should Adopt the 
Uniform 
Fraudulent 
Transfer 
Act, 
available 
online 
at 
http://www.nccusl.org/Update/uniformact_why/uniformacts-why-
ufta.asp ("Credit is essential to the economic life of this 
country. . . . Credit remains available so long as those who 
extend it are given assurances about their rights at default.  
The Uniform Fraudulent Transfer Act provides assurances to 
creditors that help make credit available to all of us."). 
No. 
03-0750   
 
19 
 
protection statute.37  Without such protection for creditors, 
"[c]reditors would generally be unwilling to assume the risk of 
the debtor's fraudulent transfers."38   
¶42 In accordance with the objectives of the drafters of 
the Uniform Fraudulent Transfer Act, the Legislative Reference 
Bureau's analysis of the bill creating chapter 242 describes the 
goal of proscribing constructive fraud as follows:  The bill 
"creates a class of transfers of property by debtors that is 
fraudulent to creditors and provides defrauded creditors with 
remedies.  This class of transfers could generally have the 
effect of depriving creditors of assets that would otherwise be 
available to satisfy debts when the debtor becomes insolvent or 
is about to become insolvent."39 
¶43 Both the language of chapter 242 and the policies 
motivating the Uniform Fraudulent Transfer Act are couched in 
terms of creditor protection.  The purpose and scope of chapter 
                                                 
37 Christian C. Day et al., Riding the Rapids: Financing the 
Leveraged Transaction Without Getting Wet, 41 Syracuse L. Rev. 
661, 700 (1990) ("The Uniform Fraudulent Transfer Act is the 
latest stage in a long evolution which has sought to protect 
creditors 
from 
the 
fraudulent 
transfer 
of 
property 
by 
debtors."); H. Bruce Bernstein, Leveraged Buyouts and Fraudulent 
Conveyances: Yet Another Update, 7 J. Bankr. L. & Prac. 315, 316 
(1998) ("This ancient creditor protection device [the avoidance 
of a fraudulent transfer] has found its way into the law of the 
United States in four basic ways . . . (iii) the Uniform 
Fraudulent Transfer Act . . . ."). 
38 Tung, supra note 28, at 563-64. 
39 Legislative Reference Bureau Analysis of 1987 S.B. 115.  
The prefatory note (analysis) is distributed to all legislators.  
See Wis. Stat. § 13.92(1)(b)2. 
No. 
03-0750   
 
20 
 
242 can therefore properly be understood only if viewed from the 
perspective of the creditor (the Bank), not the transferee (the 
Taylors).40  From the creditor's perspective, the present case 
falls squarely into Wis. Stat. § 242.05(1), the transferee has 
no defenses, and the creditor is protected.  Viewed from the 
Bank's 
perspective, 
its 
debtor, 
Ag-Tech, 
was 
insolvent, 
cancelled a $12,000 claim against the Taylors, gave the Taylors 
a check in the sum of $2,350, and received nothing in return.   
¶44 The circuit court erred as a matter of law by focusing 
on the transferee's point of view.  The transferee's subjective 
state of mind does not play a role in resolving the present case 
under Wis. Stat. § 242.05(1). 
¶45 For the reasons set forth, we hold, as did the court 
of appeals, that the Bank has met all the requirements of Wis. 
Stat. § 242.05(1) and is therefore entitled to judgment in its 
favor.  Accordingly, we affirm the decision of the court of 
appeals reversing the judgment and order of the circuit court 
and remanding the cause to the circuit court with directions. 
By the Court.—The decision of the court of appeals is 
affirmed. 
                                                 
40 Kirkland v. Risso, 98 Cal. App. 3d 971, 977 (1979) 
(interpreting 
a 
substantially 
similar 
constructive 
fraud 
provision). 
No. 
03-0750   
 
 
 
1