Title: Veritas Steel, LLC v. Lunda Construction Co.

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2020 WI 3 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2017AP822 
 
 
 
COMPLETE TITLE: 
Veritas Steel, LLC, 
          Plaintiff-Respondent, 
     v. 
Lunda Construction Company, 
          Defendant-Third-Party  
          Plaintiff-Appellant-Petitioner, 
     v. 
Bridge Resources, LLC n/k/a Bridge Fabrication 
Holdings,  
LLC, Alan Sobel, Matthew Cahill and Atlas 
Holdings, LLC, 
          Third-Party Defendants-Respondents. 
 
 
 
 
 
REVIEW OF DECISION OF THE COURT OF APPEALS 
Reported at 385 Wis. 2d 210,923 N.W.2d 181 
(2018 – unpublished) 
 
 
OPINION FILED: 
January 15, 2020   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 19, 2019   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit    
 
COUNTY: 
Dane   
 
JUDGE: 
Frank D. Remington   
 
 
 
JUSTICES: 
 
DALLET, J., delivered the majority opinion of the Court, in 
which ANN WALSH BRADLEY, ZIEGLER, REBECCA GRASSL BRADLEY, KELLY 
and HAGEDORN, JJ., joined.  ROGGENSACK, C.J., filed a concurring 
opinion. 
NOT PARTICIPATING: 
        
 
 
 
ATTORNEYS: 
 
 
For 
the 
defendant-third-party-plaintiff-appellant-
petitioner, there were briefs filed by Saul C. Glazer, Michael D. 
Hahn, and Axley Brynelson, Madison. With whom on the brief was 
Dean Thomson, Paul Ratelle, and Fabyanske Westra Hart & Thomson 
 
 
2 
PA, Minneapolis, Minnesota. There was an oral argument by Paul 
Ratelle. 
 
For the third-party-defendants-respondents, there was a brief 
filed by Michael D. Leffel, Kevin M. LeRoy, Thomas L. Shriner, Jr. 
and Foley & Lardener LLP, Madison and Milwaukee. With whom on the 
brief was Richard Mancino, Jill K. Grant, Stuart R. Lombardi, 
William O’Brien, Patricia O. Haynes, Joseph G. Davis, and Willkie 
Farr & Gallagher LLP, New York, New York and Washington, DC. There 
was an oral argument by Richard Macino. 
 
 
 
 
2020 WI 3
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.   2017AP822 
(L.C. No. 
2015CV509) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Veritas Steel, LLC, 
 
          Plaintiff-Respondent, 
 
     v. 
 
Lunda Construction Company, 
 
          Defendant-Third-Party  
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Bridge Resources, LLC n/k/a Bridge Fabrication 
Holdings, LLC, Alan Sobel, Matthew Cahill and 
Atlas Holdings, LLC, 
 
          Third-Party Defendants-Respondents. 
FILED 
 
JAN 15, 2020 
 
Sheila T. Reiff 
Clerk of Supreme Court 
 
 
 
 
DALLET, J., delivered the majority opinion of the Court, in which 
ANN WALSH BRADLEY, ZIEGLER, REBECCA GRASSL BRADLEY, KELLY and 
HAGEDORN, JJ., joined.  ROGGENSACK, C.J., filed a concurring 
opinion.  
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
REBECCA FRANK DALLET, J.    Lunda Construction Company 
(Lunda) alleges that Veritas Steel, LLC (Veritas), and third-party 
defendants Atlas Holdings, LLC (Atlas), and Bridge Fabrication 
No. 
2017AP822   
 
2 
 
Holdings, LLC, took unfair advantage of PDM Bridge, LLC's (PDM) 
loan defaults, "with the intent to gain ownership of PDM's 
lucrative steel fabrication business for grossly inadequate 
consideration through a secretive, unlawful and fraudulent process 
designed to render PDM an empty shell with no assets remaining to 
satisfy PDM's eight-figure liability to Lunda."    
¶2 
The circuit court granted summary judgment to Veritas on 
Lunda's successor liability claim because there was no genuine 
issue of material fact as to the de facto merger, mere 
continuation, and fraudulent transaction exceptions to the general 
rule against successor liability.1  The court of appeals affirmed 
as to the de facto merger and mere continuation exceptions, the 
only exceptions Lunda raised on appeal.2   
¶3 
The question before us is whether the de facto merger, 
mere continuation, and fraudulent transaction exceptions to the 
rule against successor liability apply in this case to impose 
successor liability on Veritas.  Lunda asks this court to read 
Fish v. Amsted Indus., Inc., 126 Wis. 2d 293, 376 N.W.2d 820 
(1985), as having expanded the de facto merger and mere 
continuation exceptions.  Lunda further asserts that the court of 
appeals erroneously dismissed its successor liability claim in 
light of the fraudulent transaction exception.   
                                                 
1 Judge Frank D. Remington of Dane County Circuit Court 
presided.   
2 Veritas Steel, LLC v. Lunda Construction Co., No. 2017AP822, 
unpublished slip op. (Wis. Ct. App. Nov. 21, 2018). 
No. 
2017AP822   
 
3 
 
¶4 
We reject Lunda's expanded reading of Fish, 126 
Wis. 2d 293, and conclude that Lunda has not raised a genuine issue 
of material fact as to an "identity of ownership" between Veritas 
and PDM, the key component necessary to satisfy the de facto merger 
and mere continuation exceptions.  We further conclude that by not 
raising the fraudulent transaction exception before the court of 
appeals, Lunda forfeited that argument.  We therefore affirm the 
court of appeals.    
I.  FACTUAL BACKGROUND AND PROCEDURAL POSTURE 
¶5 
The facts of this case are lengthy and fairly complex.  
PDM operated a steel fabrication business.3  In 2006, PDM entered 
into a credit agreement with a syndicate of lenders for a $115 
million term and $25 million revolving loan.  As security for 
repayment, the lenders obtained a first priority lien on 
"substantially all of PDM's assets." 
¶6 
PDM's financial condition had begun to significantly 
decline by 2011.  PDM eventually defaulted on its obligations to 
the lenders under the 2006 credit agreement.  By 2013, PDM was 
indebted to the lenders on secured debt with a face value of 
approximately $76 million.  In June 2013, the lenders and PDM 
executed a forbearance agreement in which PDM agreed to either 
sell itself to an interested acquirer or restructure with the 
assistance of an investment banker. 
                                                 
3 American Securities, a private equity firm, purchased PDM 
in 2006 and held it through a company called ASP PDM LLC.  Like 
the court of appeals, for ease of reference, we will use "PDM" to 
refer both to the limited liability corporation and its only 
member.  See Veritas, No. 2017AP822, ¶6 n.2.   
No. 
2017AP822   
 
4 
 
¶7 
Pursuant to the forbearance agreement, PDM retained an 
investment banker to market a sale of the company for the highest 
possible price.  Of 136 potential acquirers contacted by the 
investment banker, none of them offered a price that came close to 
satisfying PDM's outstanding secured debt.  The highest bid came 
from Atlas, a private equity firm.   
¶8 
Rather than purchase PDM's assets directly, Atlas and 
the lenders agreed that Atlas would acquire the lenders' secured 
claims against PDM and then foreclose on PDM's assets.  Atlas 
caused the creation of a new entity, Bridge Resources, LLC, to aid 
in the acquisition of PDM's assets.  Bridge Resources subsequently 
filed amended Uniform Commercial Code (UCC) financing statements, 
in which it confirmed itself as the new administrative agent under 
the credit agreement and verified its protected security interest 
in PDM's assets.  Through a series of transactions, affiliates of 
Atlas and a co-investor purchased all of PDM's outstanding debt 
directly from the lenders for approximately $22 million, which was 
indicative of the value of PDM's assets.  
¶9 
PDM, having no prospect of paying back the outstanding 
debt under the credit agreement, entered into a "transaction 
support agreement" with Bridge Resources in October 2013.  The 
agreement anticipated that the parties would work towards a strict 
foreclosure on the collateral securing PDM's loans in exchange for 
partial satisfaction of PDM's obligations under the 2006 credit 
agreement.  To carry out the strict foreclosure, Atlas created a 
subsidiary called Veritas, which was assigned a first priority 
No. 
2017AP822   
 
5 
 
lien on PDM's assets and eventually became the sole secured lender 
under the credit agreement.4   
¶10 In November 2013, PDM, Bridge Resources, and Veritas 
executed a strict foreclosure agreement.  PDM conveyed to Veritas 
the collateral securing the loan in exchange for the discharge of 
approximately $71 million out of $76 million of unpaid, secured 
debt that PDM owed under the credit agreement.5  The strict 
foreclosure agreement did not change the ownership or board 
structure of PDM.  It is undisputed that there was no stock or 
other indicia of equitable ownership transferred from Veritas to 
PDM.  Further, no director or owner of PDM became a director or 
owner of Veritas.   
¶11 Meanwhile, in 2010, Lunda, a civil construction 
contractor, entered into a subcontract with PDM, which required 
PDM to provide steel for a bridge construction project.  In 2012, 
after PDM failed to perform, Lunda sued for breach of contract.  
At the time that Veritas foreclosed on PDM's assets, Lunda had a 
                                                 
4 Veritas was formed in October 2013 by Bridge Fabrication 
Holdings, Veritas's sole member.  Bridge Fabrications Holdings and 
Bridge Resources merged in 2014 and became BFH Holdings, LLC, which 
is majority-owned by Atlas affiliates. 
5 Pursuant to Uniform Commercial Code § 9-620, a debtor may 
turn over to a lender the collateral for a loan in exchange for 
full or partial satisfaction of a debt.  Wisconsin's Uniform 
Commercial Code has a similar provision, see Wis. Stat. § 409.620 
(2017-18).  There is no dispute that the transaction support 
agreement and the subsequent strict foreclosure were in full 
compliance with the procedures set forth in the UCC. 
All subsequent references to the Wisconsin Statutes are to 
the 2017-18 version unless otherwise indicated. 
No. 
2017AP822   
 
6 
 
contingent, unsecured breach of contract claim.  It was not until 
2014, after the strict foreclosure agreement was finalized, that 
Lunda obtained a $16 million judgment against PDM.  Lunda, as an 
unsecured creditor, subsequently took steps under Wis. Stat. 
§ 779.155 to assert a lien on funds owed to Veritas by the 
Wisconsin Department of Transportation (DOT) for projects on which 
PDM had worked. 
¶12 In February 2015, Veritas commenced this action against 
Lunda and sought a declaration that Lunda had no claim to payments 
by the DOT for the projects at issue.  Lunda asserted eight 
counterclaims against Veritas and commenced a third-party action 
against Atlas, Bridge Fabrication Holdings, and two former 
officers of PDM.6  The circuit court granted Veritas's motion to 
dismiss on six of Lunda's counterclaims.  Only two claims remained:  
a successor liability claim against Veritas7 and a claim against 
Veritas, Atlas, and Bridge Fabrication Holdings under the 
Wisconsin Uniform Fraudulent Transfer Act (WUFTA claim).8  Summary 
                                                 
6 The two former officers, Alan Sobel and Matthew Cahill, are 
not involved in this appeal.  Cahill, who was the CEO of PDM, and 
Sobel, who was the CFO of PDM, continued for at least some period 
of time in those roles at Veritas.  However, neither had an owner's 
interest in PDM or Veritas.   
7 The circuit court had previously 
dismissed Lunda's successor 
liability claim against Atlas and Bridge Fabrication Holdings, 
which is not at issue in this case. 
8 The circuit court had previously granted a separate motion 
for summary judgment filed by Sobel and Cahill as to Lunda's WUFTA 
claim. 
No. 
2017AP822   
 
7 
 
judgment motions on the remaining two claims were granted by the 
circuit court. 
¶13 On appeal, Lunda challenged the dismissal of its 
successor liability claim against Veritas under the de facto merger 
and mere continuation exceptions.  Lunda also appealed the 
dismissal of its WUFTA claim against Veritas and the third-party 
defendants.  The court of appeals affirmed the circuit court as to 
both issues.9   
¶14 Lunda petitioned this court for review and challenges 
the dismissal of its successor liability claim against Veritas as 
it relates to the de facto and mere continuation exceptions.  Lunda 
also alleges that the court of appeals erroneously dismissed its 
successor liability claim in light of the fraudulent transaction 
exception to the rule against successor liability.   
II.  STANDARD OF REVIEW 
¶15 We review a decision on summary judgment using the same 
methodology as the circuit court.  Green Spring Farms v. 
Kersten, 136 Wis. 2d 304, 314-15, 401 N.W.2d 816 (1987).  Summary 
judgment shall be granted where the record demonstrates "that there 
is no genuine issue as to any material fact and that the moving 
party is entitled to a judgment as a matter of law."  Wis. Stat. 
§ 802.08(2).   
III.  ANALYSIS 
                                                 
9 The portion of the court of appeals' decision regarding 
Lunda's WUFTA claim is not at issue here.  See Veritas, No. 
2017AP822, ¶¶36-42. 
No. 
2017AP822   
 
8 
 
¶16 We first discuss the purpose of the general rule against 
successor liability and the exceptions to that rule as developed 
in Wisconsin jurisprudence.  We next clarify the de facto merger 
and mere continuation exceptions and determine whether Lunda 
raised a genuine issue of material fact as to these exceptions.  
Finally, we decide whether Lunda forfeited its successor liability 
claim as to the fraudulent transaction exception by failing to 
raise it before the court of appeals.   
A.  The general rule against successor liability: 
its purpose and relevant exceptions 
¶17 It is well established that when a company sells or 
transfers all of its assets to another company, the purchasing 
company does not become liable for the transferring company's debts 
and liabilities.  See Fish, 126 Wis. 2d at 298 (quoting Leannais 
v. Cincinnati, Inc., 565 F.2d 437, 439 (7th Cir. 1977))("'[a] 
corporation which purchases the assets of another corporation does 
not succeed to the liabilities of the selling corporation.'").  
This general rule against successor liability was designed to 
protect a bona fide purchaser from assuming the liabilities of a 
predecessor corporation.10  See Springer v. Nohl Elec. Prods. 
                                                 
10 Although first applied in the corporate context, we have 
recognized that the rule against successor liability also belongs 
in the product liability context because:   
[T]he successor corporation did not create the risk nor 
did it directly profit from the predecessor's sale of 
the defective product; it did not solicit the use of the 
defective product nor make any representations as to its 
safety; nor is it able to enhance the safety of a product 
that is already on the market. 
No. 
2017AP822   
 
9 
 
Corp., 2018 WI 48, ¶15, 381 Wis. 2d 438, 912 N.W.2d 1.  "'The 
traditional rule of nonliability was developed . . . to protect 
the rights of commercial creditors and dissenting shareholders 
following corporate acquisitions, as well as to determine 
successor 
corporation 
liability 
for 
tax 
assessments 
and 
contractual obligations of the predecessor.'"  Fish, 126 
Wis. 2d at 303 (quoting Ramirez v. Amsted Indus., Inc., 431 A.2d 
811, 815-16 (N.J. 1981)).    
¶18 We have recognized four exceptions to the rule against 
successor liability under the following circumstances:  
(1) when the purchasing corporation expressly or 
impliedly agreed to assume the selling corporation's 
liability; (2) when the transaction amounts to a 
consolidation or merger of the purchaser and seller 
corporations; (3) when the purchaser corporation is 
merely a continuation of the seller corporation; or (4) 
when the transaction is entered into fraudulently to 
escape liability for such obligations. 
Tift v. Forage King Indus., Inc., 108 Wis. 2d 72, 75-76, 322 
N.W.2d 14 (1982) (quoting Leannais, 565 F.2d at 439).  These 
exceptions illustrate the balance in successor liability law 
between "two competing, and often conflicting, policy goals:  to 
provide a necessary remedy to injured parties, often tort 
claimants, and to provide transactional clarity and certainty for 
business parties engaged in fundamental corporate transactions."  
Matheson, John H., Successor Liability, 96 Minn. L. Rev. 371, 372-
73 (2011). 
                                                 
Springer v. Nohl Elec. Prods. Corp., 2018 WI 48, ¶15, 381 
Wis. 2d 438, 912 N.W.2d 1 (quoting Fish v. Amsted Indus., Inc., 
126 Wis. 2d 293, 307, 376 N.W.2d 820 (1985)).  
No. 
2017AP822   
 
10 
 
¶19 We focus our discussion on exceptions two and three, 
also known as the de facto merger and mere continuation exceptions.  
Both exceptions "are declaratory of tests to be applied to 
encourage 'piercing the corporate veil'" and thus examine "the 
substance 
and 
effect 
of 
business 
transformations 
or 
reorganizations to determine whether the original organization 
continues to have life or identity in a subsequent and existing 
business organization."  Tift, 108 Wis. 2d at 79.  We resolve the 
parties' dispute over the type of "identity" evidence necessary 
for purposes of establishing these exceptions. 
B.  The de facto merger and mere  
continuation exceptions defined  
¶20 The de facto merger and mere continuation exceptions 
were defined and then developed in three main cases:  Tift, Cody 
and Fish.  This court first explicitly recognized the exceptions 
in Tift, 108 Wis. 2d 72, a products liability action alleging 
injuries caused by a "chopper box" tractor attachment.  The chopper 
box was first manufactured by a sole proprietorship, which turned 
into a partnership and eventually "metamorphosed into" a 
corporation, Forage King Industries.  Id. at 74.  Forage King 
Industries consisted of two shareholders who had formed the 
partnership, one of whom was the original sole proprietor.  Id.  
Throughout its different business forms, the company retained the 
same employees, manufactured the same products, and sold to the 
same dealers.  Id. at 74-75.   
¶21 In 1975, just before the plaintiff was injured, all of 
the Forage King Industries stock was purchased by another 
No. 
2017AP822   
 
11 
 
corporation that continued to operate as Forage King Industries 
and manufacture the same products.  Id. at 75.  The plaintiff 
commenced an action against Forage King Industries and its insurer, 
alleging that the company was a successor to the manufacturer of 
the chopper box and was therefore responsible for the plaintiff's 
injuries.  Id.   
¶22 We applied the "rules of corporate law" and reasoned 
that the de facto merger and mere continuation exceptions 
"demonstrate that, when it is the same business organization that 
one is dealing with, whether it be by consolidation, merger, or 
continuation, liability may be enforced" because "[t]hese are 
tests of identity."  Id. at 79.  We thus concluded that, despite 
organizational transformation, the present Forage King Industries 
was "substantially identical to the organization that manufactured 
the allegedly defective chopper box and [was] therefore liable."11  
Id. at 80.    
¶23 The mere continuation exception to successor liability 
was further developed in Cody v. Sheboygan Mach. Co., 108 
Wis. 2d 105, 321 N.W.2d 142 (1982).  The plaintiff sued Sheboygan 
Machine Company for injuries caused by a defective sander.  Id. at 
109.  The defective sander had been manufactured by the original 
Sheboygan Machine Company, but that company sold its assets and 
its name to a different company, who again resold the company 
                                                 
11 The court in Tift did not distinguish between the 
application of the de facto merger and mere continuation 
exceptions.  See Tift v. Forage King Indus., Inc., 108 Wis. 2d 72, 
79-80, 322 N.W.2d 14 (1982).  
No. 
2017AP822   
 
12 
 
assets and name.  Id. at 107-08.  The plaintiff brought suit 
against Sheboygan Machine Company, a corporation that shared the 
same name as the manufacturer of the sander but functioned 
exclusively as a repair shop.  Id. at 108-09.  Sheboygan Machine 
Company shared none of the officers, directors, or stockholders as 
the predecessor companies.  Id. at 108.  
¶24 Citing to the facts of Tift and the principles enunciated 
in that case, the Cody court concluded that the mere continuation 
exception did not apply because the facts did "not demonstrate any 
continuity or identity of business organizations" between the two 
entities in question.  Id. at 106.  The Cody court concluded that 
the second corporation "was an entirely different corporation" and 
that the "subsequent businesses were markedly different in 
character and purpose from the original manufacturer" and "were 
not continuations of the original business."  Id. at 111.   
¶25 This court refined the de facto merger and mere 
continuation exceptions several years later in Fish, 126 
Wis. 2d 293.  The Fish plaintiffs alleged injuries resulting from 
the use of a power press manufactured by Bontrager Construction 
Company.  Id. at 295-96.  The plaintiffs filed suit against Amsted 
Industries, Inc., the company that acquired Bontrager's assets and 
continued to make the power press, and South Bend II, the company 
who subsequently bought the power press line from Amsted.  Id. at 
295-97.  They alleged that, as successor corporations, Amsted and 
South Bend II were liable for the acts of Bontrager in 
manufacturing the allegedly defective power press.  Id. at 297.  
All parties agreed that the traditional exceptions to the rule 
No. 
2017AP822   
 
13 
 
against successor liability did not apply to the case, but the 
plaintiffs argued that Tift expanded both the de facto merger and 
mere continuation exceptions.  Id. at 298.  The plaintiffs argued 
that "identity" meant "identity of assets, operations and identity 
of the product, rather than identity of ownership."  Id. at 300-
01 (emphasis added). 
¶26 The Fish court plainly rejected the argument that Tift 
expanded the de facto and mere continuation exceptions:  "the 
[p]laintiffs are in error in alleging that the Tift decision has 
expanded the exceptions to the rule of nonliability."  Id. at 301.  
The court specified that "[i]dentity refers to identity of 
ownership, not identity of product line."  Id.  The court affirmed 
dismissal of the successor liability claim as related to both 
exceptions because "there [was] not sufficient identity between 
Bontrager and either Amsted or South Bend II to justify holding 
them liable for the acts of their predecessor."  Id. at 295. 
¶27 The Fish court also delineated the "key elements" 
required to meet the de facto and mere continuation exceptions.  
In determining whether a de facto merger has occurred, the "key 
element" "is that the transfer of ownership was for stock in the 
successor corporation rather than cash."  Id. at 301.  The "key 
element" to resolve whether the successor is a mere continuation 
of the seller corporation "'is a common identity of the officers, 
directors and stockholders in the selling and purchasing 
corporations.'"  Id. at 302 (quoting Leannais, 565 F.2d at 440).   
C.  The requirement of identity of ownership  
No. 
2017AP822   
 
14 
 
¶28 As Fish made clear, the de facto and mere continuation 
exceptions to the rule against successor liability require 
evidence of identity of ownership.12  For the de facto merger 
exception, identity of ownership hinges on whether "the transfer 
of ownership was for stock in the successor corporation rather 
than cash."  Fish, 126 Wis. 2d at 301.  It is important to recognize 
that transfer of ownership may still exist even where the successor 
entity does not have stock to offer the acquired entity.  In such 
cases, proof of identity of ownership may be established through 
equity ownership.13  For example, equity ownership could take the 
form of membership interests in a limited liability corporation.14 
                                                 
12 As one federal district court correctly noted, "it would 
appear that the Wisconsin Supreme Court [in Fish] has effectively 
determined that, absent a transfer of stock ownership, other merger 
factors are insufficient to sustain application of the de facto 
merger exception." Smith v. Meadows Mills, Inc., 60 F. Supp. 2d 
911, 917 (E.D. Wis. 1999).  The Smith court also reflected that, 
"it appears that the Wisconsin Supreme Court [in Fish] has made 
one factor——identity of ownership——a necessary requirement for the 
mere continuation exception to apply."  Id. at 918.   
13 Lunda contends that there is "inconsistency" between 
Wisconsin's statutory merger law, Wis. Stat. § 180.1101, which 
allows for exchange of shares of one entity for "cash or property" 
of another, and the stock transfer requirement under the de facto 
merger exception.  As support, Lunda cites to a footnote in the 
court of appeals' decision.  See Veritas, No. 2017AP822, ¶32 n.11.  
A statutory merger pursuant to § 180.1101 is distinct from a de 
facto merger in that it involves two companies formally stating 
their intentions to merge and following statutory procedures to 
effectuate the merger.    
14 Not all entities will fit within the de facto merger 
exception.  Where there is no ownership interest to be transferred, 
as in a case involving nonprofit corporations, the de facto merger 
exception does not apply.  As one federal court commented, "[t]he 
policies underlying the no successor liability principle are 
geared toward encouraging economic actors to function effectively 
No. 
2017AP822   
 
15 
 
¶29 As to the mere continuation exception, identity of 
ownership is established where there "'is a common identity of the 
officers, directors and stockholders in the selling and purchasing 
corporations.'"  Fish, 126 Wis. 2d at 302 (quoting Leannais, 565 
F.2d at 440).15  Some evidence, like the common identity of 
stockholders, will support application of both the de facto merger 
and mere continuation exceptions.  However, unlike the de facto 
merger exception, the mere continuation exception may be 
established with evidence of the continuation of the same officers, 
directors, and stockholders under circumstances where there is no 
transfer of equity or stock ownership.   
¶30 Despite Fish's clear mandate that identity of ownership 
is the key inquiry, Lunda asserts that Fish significantly expanded 
the de facto merger and mere continuation exceptions to allow the 
substitution of "identity of management and control" for identity 
of ownership.  In support of its argument, Lunda highlights the 
Fish court's use of the phrase "identity of management and control" 
twice in the decision:  once, in addressing Tift, where the court 
said there was an "identity of management and control throughout 
the transformation from sole proprietorship to partnership;" and 
again, in discussing Cody, where the court said there was "no 
                                                 
in a market economy and have no application in the context of non-
profit and non-stock organizations." Gallenberg Equip., Inc. v. 
Agromac Int'l, Inc., 10 F. Supp. 2d 1050, 1056 (E.D. Wis. 1998).  
15 Tift and Fish relied upon Leannais v. Cincinnati, Inc., 565 
F.2d 437 (7th Cir. 1977), for the basic principles regarding 
successor liability.  See Veritas, No. 2017AP822, ¶24 n.8 
(describing the Leannais case). 
No. 
2017AP822   
 
16 
 
identity of management and control throughout the transfers of 
ownership."  Fish, 126 Wis. 2d at 302.  Lunda further cites to IGL 
and Gallenberg for the proposition that courts post-Fish have not 
required identity of ownership.  IGL-Wis. Awning, Tent & Trailer 
Co., Inc. v. Greater Milwaukee Air & Water Show, Inc., 185 Wis. 2d 
864, 520 N.W.2d 279 (Ct. App. 1994); Gallenberg Equip., Inc. v. 
Agromac Int'l, Inc., 10 F. Supp. 2d 1050 (E.D. Wis. 1998).   
¶31 Identity of ownership remains the sine qua non of 
successor liability.  Although the phrase "identity of management 
and control" was used to describe the transfers of ownership in 
Tift and Cody, the Fish court maintained that identity of ownership 
is required to meet the de facto merger and mere continuation 
exceptions.  The Fish court explained that in Tift there was 
identity of ownership because "the identical organization 
continued to manufacture the same product" and in Cody there was 
not identity of ownership because "the successor corporation was 
an entirely different corporation" with "'no common identity of 
officers, directors and stockholders between the two companies.'"  
Fish, 126 Wis. 2d at 300, 302 (quoted source omitted).    
¶32 Contrary to Lunda's assertion, courts post-Fish have 
required proof of identity of ownership to establish the de facto 
merger and mere continuation exceptions.  Lunda contends that the 
IGL court "impos[ed] successor liability based on a finding that 
there 
was 
'identity 
of 
management 
and 
control' 
of 
two 
corporations."  However, in concluding that the mere continuation 
exception applied, the court of appeals in IGL relied upon the 
circuit court's finding of fact that "'[f]or all intents and 
No. 
2017AP822   
 
17 
 
purposes, only the name of the business changed.'"  IGL, 185 
Wis. 2d at 870.16  The IGL court additionally relied upon the 
circuit court's finding of fact that "[t]he identical organization 
in substance continued to operate with the same persons . . ." 
including the same director who formed the predecessor nonprofit 
corporation.  Id. at 868, 870.   
¶33 Similarly, in Gallenberg, the federal court rejected the 
plaintiff's successor liability claim because the "plaintiff 
cannot show continuity of ownership," which it described as "the 
common thread" of the de facto merger and mere continuation 
exceptions.  Gallenberg, 10 F. Supp. 2d at 1054.  The court refused 
to consider the argument that by actively managing the predecessor 
corporation for a time period before the asset purchase, the 
successor corporation's owners were "de facto shareholders" and 
exercised pre-transfer control.  Id. at 1056.  The Gallenberg court 
concluded that the plaintiff wrongly "equate[d] control with 
ownership.  They are not the same."  Id.  Both IGL and Gallenberg 
thus required evidence of identity of ownership in order to meet 
the relevant exceptions to successor liability at issue in each 
case. 
                                                 
16 The mere continuation exception was the only exception to 
the general rule against successor liability that was addressed by 
the court in IGL-Wis. Awning, Tent & Trailer Co., Inc. v. Greater 
Milwaukee Air & Water Show, Inc., 185 Wis. 2d 864, 520 N.W.2d 279 
(Ct. App. 1994).   
No. 
2017AP822   
 
18 
 
¶34 We reject Lunda's reading of Tift and Fish17 and decline 
to broaden the exceptions to the rule against successor liability, 
as we have declined to do in the past.  See Fish, 126 Wis. 2d at 
303-12 (rejecting the plaintiff's arguments in favor of adopting 
a "product line" exception and "expanded continuation" exception 
to the rule).18  Identity of ownership, not identity of management 
and control, remains the essential element that a plaintiff must 
establish under both the de facto merger and mere continuation 
exceptions. 
D.  No genuine issue of material fact regarding  
identity of ownership  
¶35 The facts in this case do not establish identity of 
ownership between Veritas, the asset purchaser, and PDM, the 
seller, under either the de facto merger or mere continuation 
exceptions.  In regards to the de facto merger exception, it is 
undisputed that there was no stock or other indicia of equity 
ownership transferred from Veritas to PDM.  Therefore, there was 
no de facto merger as a matter of law and Lunda's claim under this 
exception must fail.   
¶36 As to the mere continuation exception, Atlas and its 
subsidiaries, including Veritas, were strangers to Lunda prior to 
                                                 
17 Lunda does not dispute that we must affirm the court of 
appeals if we reject its interpretation of Fish, 126 Wis. 2d 293. 
18 Expanding the exceptions to the rule against successor 
liability would also be inconsistent with its important objective:  
to provide "transactional clarity and certainty for business 
parties engaged in fundamental corporate transactions."  Matheson, 
John H., Successor Liability, 96 Minn. L. Rev. 371, 373 (2011). 
No. 
2017AP822   
 
19 
 
receiving a call from an investment banker regarding the prospect 
of purchasing PDM.  Veritas and PDM had separate and distinct 
ownership before and after Veritas foreclosed on PDM's assets.  No 
director or owner of PDM became a director or owner of Veritas.  
Based on this lack of common identity of officers, directors, and 
stockholders in the selling and purchasing corporations, the mere 
continuation exception does not apply.  
¶37 Lunda has not raised a genuine issue of material fact as 
to identity of ownership under either the de facto merger or  mere 
continuation exceptions and therefore its successor liability 
claim must fail.   
E.  Forfeiture of Lunda's successor liability claim based 
upon the fraudulent transaction exception 
¶38 Finally, Lunda asserts that the court of appeals 
erroneously dismissed its successor liability claim in light of 
the fraudulent transaction exception to the rule against successor 
liability.19  Veritas contends that Lunda forfeited this argument 
when it failed to raise the exception before the court of appeals.20  
We agree.  
                                                 
19 In its third-party complaint, Lunda referred to the 
exception as the "fraudulent purpose exception."  It has also been 
referred to as the "fraudulent transfer exception" and the 
"fraudulent transaction exception."  Like we did in Springer, 381 
Wis. 2d 438, we will refer to it as the fraudulent transaction 
exception so as to not mistake it for the WUFTA claim.   
20 Veritas also contends that Lunda never pursued this 
exception before the circuit court on summary judgment; however, 
as detailed herein, that is inaccurate. 
No. 
2017AP822   
 
20 
 
¶39 A chronological summary of the circuit court proceedings 
and subsequent appellate briefing illustrates how Lunda forfeited 
this argument.  When Lunda filed its counterclaims and third-party 
complaint in response to Veritas's declaratory judgment action, it 
asserted a successor liability claim based on three exceptions to 
the rule against successor liability:  de facto merger, mere 
continuation, and fraudulent transaction.  At the same time, Lunda 
also pleaded a statutory WUFTA claim.  Lunda's brief in opposition 
to Veritas's motion for summary judgment included argument on only 
the de facto merger and mere continuation exceptions, and its WUFTA 
claim.  But, at oral argument before the circuit court, the 
fraudulent transaction exception was raised and both parties 
confirmed its existence within the dispute.  The circuit court's 
final order explained that it found no genuine issue of material 
fact as to successor liability "under any of the theories that 
Lunda advanced, whether de facto merger, mere continuation, or 
fraudulent [transaction]," and that it also found no dispute as to 
Lunda's WUFTA claim.  (Emphasis added.)  
¶40 In its brief to the court of appeals, Lunda chose not to 
raise an argument as to the circuit court's adverse ruling on the 
fraudulent transaction exception.  Instead, Lunda argued that 
there were "genuine issues of material fact as to the elements of 
the de facto merger and mere continuation" exceptions, and as to 
its WUFTA claim.   
¶41 Lunda suggests that this court's recent decision in 
Springer, 381 Wis. 2d 438, revives its claim for successor 
liability on the basis of the fraudulent transaction exception.  
No. 
2017AP822   
 
21 
 
In Springer, we concluded that a fraudulent transfer under WUFTA 
did not supplant the common-law fraudulent transaction exception 
to the rule against successor liability.  Id., ¶29.   
¶42 The court of appeals reached its decision in this case 
in November 2018, several months after publication of Springer, 
and addressed the only issue related to fraudulence that was 
presented by Lunda:  its WUFTA claim.  See Veritas, No. 2017AP822, 
¶¶36-42.  Because Lunda failed to pursue the fraudulent transaction 
exception on appeal, the holding in Springer is of no import.  
Lunda failed to preserve on appeal its successor liability claim 
as to the fraudulent transaction exception and this court's 
decision in Springer cannot revive it.  We decline to address this 
forfeited claim. 
IV.  CONCLUSION 
¶43 We conclude that because Lunda did not establish a 
genuine issue of material fact as to identity of ownership between 
Veritas and PDM, it cannot satisfy the de facto merger or mere 
continuation exceptions to the rule against successor liability.  
We further conclude that by not raising the fraudulent transaction 
exception before the court of appeals, Lunda forfeited its claim 
for successor liability based on that exception.  We therefore 
affirm the court of appeals.   
By the Court.—The decision of the court of appeals is 
affirmed. 
 
 
No.  2017APAP822.pdr 
1 
 
 
¶44 PATIENCE DRAKE ROGGENSACK, C.J.   (concurring).  There 
is no question of fact that Atlas's related entities purchased PDM 
Bridge, LLC's (PDM)1 secured debt from PDM's lenders with the 
intent to obtain control of PDM.  They did so through strict 
foreclosure of that secured debt, which resulted in ownership of 
PDM's assets without encumbrance by any debt with lower priority 
than the secured debt that drove the foreclosure.  
¶45 Lunda Construction Company (Lunda) asserts that the 
strict foreclosure does not save Veritas's assets from its $16 
million judgment against PDM.  Before us, Lunda contends that 
Veritas is the same corporation as PDM, but with a different name, 
due to de facto merger and mere continuation doctrines.  Lunda 
also asserts that Veritas's intent to remove PDM's assets from its 
reach gives rise to common law and statutory fraud claims that 
open Veritas's assets to collection for Lunda's judgment against 
PDM. 
¶46 Therefore, the question before us is whether, given the 
undisputed facts, Atlas lawfully removed PDM's assets from Lunda's 
reach by the actions it and its affiliates took, which actions 
culminated in strict foreclosure that prevented Lunda's claims 
from reaching Veritas's assets.  As I explain below, my answer to 
that question is yes.  Accordingly, although I do not join the 
majority opinion, I respectfully concur in the majority opinion's 
dismissal of Lunda's claims against Veritas. 
                                                 
1 PDM was a non-stock Delaware corporation with a single 
member, ASP PDM, LLC (ASP), which also was a non-stock Delaware 
corporation. 
No.  2017APAP822.pdr 
2 
 
I.  BACKGROUND 
¶47 PDM was a steel bridge fabrication company with offices 
in Illinois and fabrication facilities in Wisconsin and Florida.  
In 2006, to continue in business, PDM obtained financing from a 
syndicate of lenders (the Syndicate), which provided PDM loans 
evidenced by a $115 million note and a $25 million line of credit.  
The Syndicate collateralized its loans with PDM's real estate and 
personal property, both tangible and intangible, by filing 
appropriate mortgages and financing statements to protect its 
interests.  ASP also pledged its member interest in PDM to the 
Syndicate thereby giving corporate control of PDM to the Syndicate. 
¶48 PDM's financial difficulties continued.  In December of 
2011, PDM suffered losses in excess of $63 million and was in 
default of its financial commitments to the Syndicate.  The 
Syndicate and PDM entered into a Forbearance Agreement, wherein 
PDM agreed to "restructure" its operations.   
¶49 In 2012, PDM's financial troubles continued, producing 
another loss in excess of $63 million.  Its financial difficulties 
also were affecting Lunda.  In July of 2012, Lunda sued PDM for 
breach of contract with damages alleged to be in excess of $16 
million.2  
¶50 Notwithstanding the 2011 "restructuring," PDM continued 
to have general financial difficulties.  PDM also was unable to 
meet the terms of the 2011 Forbearance Agreement between it and 
the Syndicate.   
                                                 
2 Due to a series of intervening events, Lunda did not obtain 
a judgment on this debt until 2014. 
No.  2017APAP822.pdr 
3 
 
¶51 In June of 2013, the principal amount of PDM's debt to 
the Syndicate was approximately $70 million and PDM was insolvent.  
PDM was in default of its credit agreement with the Syndicate.  
Due to PDM's financial condition, the Syndicate and PDM entered 
into a second Forbearance Agreement3 wherein PDM became obligated 
to retain assistance of an investment banker to sell its business 
as a going concern or to sell all of its assets on or before 
September 20, 2013.   
¶52 To accomplish those tasks, PDM retained Houlihan Lokey 
Capital, Inc., a well known investment banker with experience 
selling distressed companies.  Although the investment banker 
contacted 136 potential purchasers, only six letters of interest 
were obtained.  No responding entity was willing to pay enough to 
cover the Syndicate's outstanding $70 million debt.  Atlas, a 
private equity firm and industrial holding company, was the highest 
bidder, offering $33 million as a net purchase price for PDM.   
¶53 Upon learning that Lokey's efforts to sell PDM had not 
been successful, Atlas, and two other unsuccessful bidders in the 
potential sale of PDM, offered to purchase the Syndicate's secured 
debt for varying amounts.  Atlas did so because it determined that 
if properly restructured, PDM could be a valuable asset for Atlas's 
investors.   
¶54 In August 2013, Atlas created Bridge Resources, LLC 
(Bridge Resources), with Atlas as its majority member.  Bridge 
Resources 
and 
another 
Atlas 
entity, 
paid 
the 
Syndicate 
                                                 
3 There is no evidence that Veritas, Atlas and Bridge 
Fabrications Holdings, LLC (BFH) were parties to the Forbearance 
Agreement or had an interest in PDM's debt or equity at the time 
the Forbearance Agreement was executed.   
No.  2017APAP822.pdr 
4 
 
approximately $22 million for all of the Syndicate's secured debt 
and the ASP pledge.  Bridge Resources became the administrative 
agent of the secured debt.  Appropriate financing statements and 
mortgages were filed on all of PDM's personal and real property, 
giving Bridge Resources a perfected security interest in all PDM's 
assets.   
¶55 In September 2013, Bridge Resources created Bridge 
Fabrications Holdings, LLC (BFH).4  In October of 2013, to 
accomplish strict foreclosure of PDM's assets, BFH created Veritas 
Steel, LLC (Veritas) to which rights in PDM's secured debt were 
transferred.5   
¶56 On November 5, 2013, Veritas conducted a Wis. Stat. 
§ 409.620 strict foreclosure procedure on all the secured debt via 
a Strict Foreclosure Agreement.  In that Agreement, Veritas agreed 
to assume only those PDM liabilities that were expressly set forth 
in the agreement.   
¶57 Strict foreclosures on the secured debt permitted 
Veritas to own all PDM assets in satisfaction of the debt that PDM 
had originally incurred during the Syndicate financing.6  At the 
                                                 
4 BFH's members were Lapetus Capital LLC, Atlas Resources, LP 
and SHP; Capital Solutions Fund, LP and Atlas Capital Resources, 
LP.   
5 BFH was Veritas's sole member.  In October of 2013, BFH 
created BFH Secured Lending and was its sole member; then in 
December of 2013, Bridge Resources merged into BFH.   
6 Pursuant to Wis. Stat. § 409.620 (U.C.C. § 9-620) a creditor 
can foreclose on debt collateralized by personal property of a 
type that is subject to Wis. Stat. ch. 409 (U.C.C. ch. 9) and 
accept the collateral in full or partial satisfaction of the debt. 
Foreclosures of PDM's real property proceeded under differing 
statutory provisions depending on the location of the real 
No.  2017APAP822.pdr 
5 
 
conclusion of strict foreclosure, Veritas owned all of PDM's 
assets, cleansed of all secured and unsecured debts that were 
subordinate to the secured debt that Veritas owned.   
¶58 In March of 2014, Lunda obtained a judgment of 
approximately $16 million against PDM, which it filed in Wisconsin 
in July of 2014 and in Illinois in September of 2014.  In July of 
2014, Lunda commenced an action in Wisconsin to obtain funds from 
the Wisconsin Department of Transportation (DOT) pursuant to Wis. 
Stat. § 779.155 based on its judgment against PDM.7   
¶59 In February 2015, Veritas commenced this lawsuit as a 
declaratory judgment action due to Lunda's Wis. Stat. § 779.155 
action seeking payments from DOT, which Veritas claimed belonged 
to it.  Lunda counterclaimed, alleging that Veritas was PDM by 
another name; and therefore, Veritas's assets were subject to 
Lunda's claims for payment of its $16 million judgment against 
PDM.  
¶60 Lunda contended that Veritas is the same entity as PDM 
due to a de facto merger of PDM, or as a mere continuation of PDM.  
Lunda also asserted that the strict foreclosure procedures 
employed were grounded in common law or statutory fraud and 
therefore, permit Lunda to collect its debt from Veritas's assets.  
The circuit court dismissed Lunda's complaint against Veritas, and 
the court of appeals affirmed that dismissal.   
II.  DISCUSSION 
A.  Standard of Review 
                                                 
property.  See Wis. Stat. § 846.15 et seq.   
7 PDM was dissolved in August of 2014.   
No.  2017APAP822.pdr 
6 
 
¶61 Here, we review summary judgment granted to Veritas.  In 
so doing, we independently employ the same methodology as the court 
of appeals and the circuit court.  Wisconsin Pharmacal Co., LLC v. 
Nebraska Cultures of Cal., Inc., 2016 WI 14, ¶12, 367 Wis. 2d 221, 
876 N.W.2d 72.  Summary judgment is to be granted "if the 
pleadings, depositions, answers to interrogatories, and admissions 
on file, together with the affidavits, if any, show that there is 
no genuine issue as to any material fact and that the moving party 
is entitled to a judgment as a matter of law."  Id. (quoting Wis. 
Stat. § 802.08(2) (2013-14)). 
B.  Corporate Assets 
1.  General Rule 
¶62 When one corporation buys the assets of another 
corporation in a commercial context, the transferee corporation 
generally does not succeed to the transferor's debts.  Marie T. 
Reilly, Making Sense of Successor Liability, 31 Hofstra L. Rev. 
745 (2003).  However, a court may decide that the transferee 
corporation should be treated as a successor corporation and be 
liable for the transferor's debts.  Id. at 746.  In the matter 
before us, strict foreclosure, a Wis. Stat. § 409.620, et seq. 
remedy available to secured creditors, is the context in which to 
evaluate Lunda's claims.8    
                                                 
8 There are occasions when federal law causes the purchasing 
corporation to be liable for the acts of the transferor 
corporation.  See Kathryn A. Barnard, EPA's Policy of Corporate 
Successor Liability Under CERCLA, 6 Stan. Envtl. L. J. 78 (1986-
1987).  CERCLA and its policy concerns are not present here.  I 
mention CERCLA only because the context in which successor 
corporate liability is evaluated is important.   
No.  2017APAP822.pdr 
7 
 
¶63 Wisconsin 
follows 
the 
general 
rule, 
wherein 
a 
corporation that purchases the assets of another corporation in a 
commercial context is not liable for the obligations of the selling 
corporation.  See Fish v. Amsted Indus., Inc., 126 Wis. 2d 293, 
298, 376 N.W.2d 820 (1985).  The general rule stated above promotes 
alienability of corporate assets and is in accord with policies 
that promote productive use of business assets.  Gallenberg Equip., 
Inc. v. Agromac Int'l, Inc., 10 F. Supp. 2d 1050, 1053 (1998).   
2.  Exceptions 
¶64 In Wisconsin, there are four exceptions to the rule of 
non-liability for the transferee corporation: 
(1) when 
the 
purchasing 
corporation 
expressly 
or 
impliedly agreed to assume the selling corporation's 
liability; (2) when the transaction amounts to a 
consolidation or merger of the purchaser and seller 
corporations; (3) when the purchaser corporation is 
merely a continuation of the seller corporation; or 
(4) when the transaction is entered into fraudulently to 
escape liability for such obligations.   
Fish, 126 Wis. 2d at 298 (quoting Leannais v. Cincinnati, Inc., 
565 F.2d 437, 439 (7th Cir. 1977)).   
¶65 Lunda contends that the strict foreclosure employed here 
caused a de facto merger between PDM and Veritas.  In evaluating 
a claim of de facto merger, appellate precedent considers whether: 
(1) the assets of the seller corporation are acquired 
with shares of the stock in the buyer corporation, 
resulting in a continuity of shareholders; (2) the 
seller ceases operations and dissolves soon after the 
sale; (3) the buyer continues the enterprise of the 
seller corporation so that there is a continuity of 
management, employees, business location, assets and 
general business operations; and (4) the buyer assumes 
those liabilities of the seller necessary for the 
uninterrupted 
continuation 
of 
normal 
business 
operations.   
No.  2017APAP822.pdr 
8 
 
Sedbrook v. Zimmerman Design Grp., Ltd., 190 Wis. 2d 14, 20-21, 
526 N.W.2d 758 (Ct. App. 1994) (quoting Parson v. Roper Whitney, 
Inc., 586 F. Supp. 1447, 1449 (W.D. Wis. 1984)).  However, as we 
explained in Fish, "[t]he key element in determining whether a 
merger or de facto merger has occurred is that the transfer of 
ownership was for stock in the successor corporation rather than 
cash."  Fish, 126 Wis. 2d at 301 (quoting Leannais, 565 F.2d at 
439).   
¶66 In the matter before us, Lunda has provided nothing from 
which we could conclude that PDM's member, ASP, received membership 
status in Veritas, upon foreclosure, at the time of asset transfer 
or at any other time.  The assets of PDM were obtained in exchange 
for satisfaction of approximately $65 million of PDM's $70 million 
of secured debt, which Veritas then held.9  Veritas's position 
relative to the assets that belonged to PDM did not arise due to 
a merger or a de facto merger of PDM with Veritas.   
¶67 Lunda also contends that Veritas is a mere continuation 
of PDM; that it is the same corporation, but with a different name.  
In evaluating a claim that one corporation is a mere continuation 
of an earlier corporation, we consider whether there is "a common 
identity of the officers, directors and stockholders in the selling 
and purchasing corporations."  Leannais, 565 F.2d at 440.  In Tift, 
we cited Leannais and also focused on "identity."  As we explained: 
When viewed in the context of a tort caused by a 
defective product, these two "exceptions" merely recite 
that, where either one is applicable, there is 
"identity," because in substance the successor business 
                                                 
9 Five million dollars of secured debt remained and was 
retained by Veritas together with the assets that secured it.   
No.  2017APAP822.pdr 
9 
 
organization which the plaintiff sues is, despite 
organizational 
metamorphosis, 
the 
same 
business 
organization which manufactured the product which caused 
his injury.   
Tift v. Forage King Indus., Inc., 108 Wis. 2d 72, 78, 322 N.W.2d 
14 (1982).  Our major concern in Tift was whether a company that 
began as a sole proprietorship, proceeded to a partnership and 
ended as a corporation could be liable for a product manufactured 
by an earlier business form that was not corporate.  Id. at 76-
77.  However, lest there be confusion on the meaning of "identity," 
in Fish, we explained that "[i]dentity refers to identity of 
ownership, not identity of product line."  Fish, 126 Wis. 2d at 
301.   
¶68 In the matter before us, there is no identity of 
ownership between PDM and Veritas.  Both PDM and Veritas have LLC 
non-stock structures, but there was no overlap in their members or 
in their creators.  PDM, a Delaware LLC, had a single member, ASP.  
Veritas, also a Delaware limited liability company, has a single 
member, BFH.  BFH's members do not include ASP or PDM.  While non-
stock corporations generally are controlled by their articles and 
owned by their members, the articles of neither PDM nor Veritas 
are in the record before us.  There is no proof in the record that 
supports the conclusion that Veritas and PDM have the same 
ownership.  While it appears that Matt Cahill,10 who was the CEO 
of PDM, and Alan Sobel, who was the CFO of PDM, continued for at 
least some period of time in those roles at Veritas, neither had 
an owner's interest PDM or in Veritas.  Accordingly, Veritas does 
                                                 
10 Cahill was replaced as CEO in April of 2014.   
No.  2017APAP822.pdr 
10 
 
not meet the criteria necessary for us to conclude that it is a 
mere continuation of PDM. 
¶69 Lunda also contends that because Veritas foreclosed by 
using strict foreclosure procedures that were designed to 
eliminate all debt that had a lesser priority than the debt Atlas 
affiliates purchased from the Syndicate, the transactions at issue 
here were fraudulent as to Lunda.11  Therefore, Lunda reasons the 
general rule that the purchasing corporation is not responsible 
for the debts of the seller does not apply; and accordingly, it 
has the right to execute its $16 million judgment against Veritas's 
assets. 
¶70 The 
elements 
of 
common 
law 
fraud 
are: 
 
(1) a 
representation of fact that the speaker intends the hearer to rely 
on; (2) which the speaker either knows is untrue, or makes with 
reckless disregard for its truthfulness; (3) another believes such 
representation and relies on it; (4) with resulting damage.  
Ollerman v. O'Rourke Co., Inc., 94 Wis. 2d 17, 25, 288 N.W.2d 95 
(1980) (quoting Whipp v. Iverson, 43 Wis. 2d 166, 169-170, 168 
N.W.2d 201 (1969)).   
                                                 
11 Lunda pled common law fraud and the circuit court addressed 
it.  Lunda also raised it in its arguments before us.  The majority 
opinion applies forfeiture and does not address this contention 
because Lunda did not continue this allegation before the court of 
appeals.  Majority op., ¶¶38-42.   
Forfeiture is a doctrine of judicial administration.  See 
State v. Soto, 2012 WI 93, ¶¶35, 36, 343 Wis. 2d 43, 817 N.W.2d 
848.  Because Lunda's contention arises in a commercial context 
where statutory procedures under ch. 409 were employed and 
guidance may be helpful to future commercial litigants, I choose 
to address Lunda's contention.  
No.  2017APAP822.pdr 
11 
 
¶71 We recently addressed common law fraud in Springer v. 
Nohl Elec. Prods. Corp., 2018 WI 48, 381 Wis. 2d 438, 912 N.W.2d 
1, in the context of a products liability claim that alleged 
successor corporation liability.  There, Mrs. Springer claimed 
that her husband died from exposure to asbestos-containing 
products, which occurred during his employment for a company that 
preceded Nohl.  Id., ¶2.  She sued Nohl to recover for his injuries 
and death.  Id.  We explained that the fraudulent transfer of 
assets exception to non-liability "has rarely been used to impose 
successor liability for products liability claims."  Id., ¶17  
(citing Restatement (Third) of Torts:  Products Liability § 12 
cmt. e (Am. Law Inst. 1998); Timothy J. Murphy, A Policy Analysis 
of a Successor Corporation's Liability for Its Predecessor's 
Defective 
Products 
When 
the 
Successor 
Has 
Acquired 
the 
Predecessor's Assets for Cash, 71 Marq. L. Rev. 815, 819 (1988).   
¶72 In Springer, we painted the fraud exception with broad 
strokes that left the particulars of that exception for another 
day.  We said, "The fraudulent transaction theory turns on the 
intention underlying the transfer of assets to [the successor], 
i.e., whether it was made with an actual intention to hinder, 
delay, or defraud creditors."  Springer, 381 Wis. 2d 438, ¶19 
(quoting United States ex rel. Bunk v. Gov't Logistics N.V., 842 
F.3d 261, 276 (4th Cir. 2016)).  We also said that "the fraudulent 
transfer 
exception, 
[in] 
the 
law 
[of] 
every 
jurisdiction . . . requires a finding that the corporate transfer 
of assets 'is for the fraudulent purpose of escaping liability.'"  
Id. (quoting Raytech Corp. v. White, 54 F.3d 187, 192 (3d Cir. 
1995) (alterations in original)).  The wrongful intent of the 
No.  2017APAP822.pdr 
12 
 
person seeking to avoid liability was critical to our decision in 
Springer.  Id., ¶19. 
¶73 It is important to note that Springer arose in the 
context of a products liability claim.  It did not involve strict 
foreclosure of secured debt pursuant to Wis. Stat. § 409.620.  
Lunda gave little attention to the commercial context in which its 
claim arose, yet an understanding of the context in which Lunda 
makes its claim and Veritas raises its defense is critical.  
Therefore, a brief overview of strict foreclosure will be helpful 
to the reader's understanding of my discussion that follows. 
¶74 "Article 9 of the Uniform Commercial Code (U.C.C.) 
permits a secured creditor to elect among several alternative 
remedies in the event of a default by the debtor."12  LaRoche v. 
Amoskeag Bank, 969 F.2d 1299, 1302 (1st Cir. 1992).  Subsequent to 
debtor default, the secured creditor may dispose of the collateral, 
"as long as it does it in a 'commercially reasonable manner.'"  
Id. at 1303.  However, a secured creditor also may choose to 
proceed by strict foreclosure, which is a different statutory 
opportunity.  Id.   
¶75 Strict foreclosure permits a secured creditor "to retain 
the collateral in complete satisfaction of the indebtedness."  Id.  
"Disputes about valuation or even a clear excess of collateral 
value over the amount of obligations satisfied do not necessarily 
demonstrate the absence of good faith."  Michael L. Monson, Strict 
Foreclosure Under Article 9:  Benefits, Risks, and Strategies, 43 
No. 1 UCC L.J. (Oct. 2010), 3.  
                                                 
12 Wisconsin Stat. ch. 409 is the Wisconsin equivalent of 
Uniform Commercial Code chapter 9. 
No.  2017APAP822.pdr 
13 
 
¶76 When a secured party employs strict foreclosure pursuant 
to statute and accepts the collateral in full or partial 
satisfaction of the debt owed: 
(1) the debt is discharged to the extent consented to by 
the debtor, (2) all of the debtor's rights in the 
collateral are transferred to the secured party, (3) the 
security interest that was the subject of the debtor's 
consent and any subordinate security interest or other 
subordinate liens are discharged, and (4) any other 
subordinate interests are terminated. . . .  After the 
secured party has accepted the collateral it may resell 
the collateral to a subsequent purchaser, keep it, or 
otherwise deal with it as its own property. 
Id. at 6.  
¶77 Wisconsin Stat. § 409.620's authorization of strict 
foreclosure has a number of mandatory procedures and the 
availability of objections that could stop the process.  For 
example, subordinate secured creditors have a right to notice of 
the proposed strict foreclosure, Wis. Stat. § 409.621(1), and a 
right to object to using strict foreclosure, Wis. Stat. 
§ 409.620(1)(b).  However, on November 5, 2013, when Veritas 
strictly foreclosed on the debt that was secured by PDM's assets, 
Lunda was not a subordinate secured creditor.  Therefore, Lunda 
did not have the opportunity to object to Veritas' use of strict 
foreclosure.   
¶78 In addition, Lunda has not claimed that the strict 
foreclosure that occurred here did not satisfy the statutory 
obligations of Wis. Stat. ch. 409.  Lunda simply contends that 
because the strict foreclosure process was used to cleanse assets 
of debt the process was fraudulent.     
¶79 Lunda's 
argument 
misses 
its 
mark 
because 
Wis. Stat. ch. 409 was created in part to do exactly what happened 
No.  2017APAP822.pdr 
14 
 
here.  Veritas's conduct was not fraudulent because it was not 
wrongful in this commercial context.13  Stated otherwise, I 
conclude that a creditor that strictly forecloses in a commercial 
context in accord with the statutory procedures set out in ch. 409 
to avoid the claims of debtors with lesser priority does not 
exhibit wrongful intent that supports a claim of common law fraud.  
Accordingly, the broad statements about "fraudulent intent" set 
out in Springer have no application here.   
¶80 My conclusion that strict foreclosure under Wis. Stat. 
§ 409.620 does not support Lunda's fraud claim is reinforced by 
Wis. Stat. § 242.08(5)(b).  Statutory fraud, Wisconsin Uniform 
Fraudulent Transfer Act (WUFTA), is set out in Wis. Stat. ch. 242.  
Lunda sought to use WUFTA to void the transfer of PDM's assets to 
Veritas.  However, § 242.08(5)(b) provides that a transfer is not 
voidable if it results from "Enforcement of a security interest in 
compliance with ch. 409."  Here, there is no question that the 
transfer of personal property, tangible and intangible, occurred 
through enforcement of a security interest under § 409.620 et seq.  
WUFTA also has no application here.   
                                                 
13 Chapter 409's legislation for secured transactions is 
complicated.  An understanding of the claim and defense and the 
context in which they arise is critical.  Here, we have strict 
foreclosure between commercial parties engaged in commercial 
transactions.  
No.  2017APAP822.pdr 
15 
 
III.  CONCLUSION 
¶81 The question before us is whether, given the undisputed 
facts, Atlas lawfully removed PDM's assets from Lunda's reach by 
the actions it and its affiliates took, which actions culminated 
in strict foreclosure that prevented Lunda's claims from reaching 
Veritas's assets.  As I explained above, my answer to that question 
is yes.  Accordingly, although I do not join the majority opinion, 
I respectfully concur in the majority opinion's dismissal of 
Lunda's claims against Veritas.   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
No.  2017APAP822.pdr 
 
 
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