2014 WI 63

SUPREME COURT OF WISCONSIN

CASE NO.: 2011AP2774 

COMPLETE TITLE: Attorney's Title Guaranty Fund, Inc.,

 Plaintiff,

 v.

Town Bank,

 Defendant-Respondent,

Heartland Wisconsin Corp.,

 Defendant-Appellant-Petitioner. 

REVIEW OF A DECISION OF THE COURT OF APPEALS

Reported at 345 Wis. 2d 705, 827 N.W.2d 116

(Ct. App. 2013 – Published)

PDC No: 2013 WI App 6 

OPINION FILED: July 15, 2014 

SUBMITTED ON BRIEFS: 

ORAL ARGUMENT: February 25, 2014 

SOURCE OF APPEAL:

COURT: Circuit 

COUNTY: Waukesha

JUDGE: J. Mac Davis 

JUSTICES:

CONCURRED: 

DISSENTED: ABRAHAMSON, C.J., BRADLEY, J., dissent. (Opinion 

filed.)

BRADLEY, J., ABRAHAMSON, C.J., dissent. (Opinion 

filed.) 

NOT PARTICIPATING: 

ATTORNEYS:

For the defendant-appellant-petitioner, there were briefs 

by David H. Hutchinson and Hutchinson Law Office, New Berlin, 

and oral argument by David H. Hutchinson. 

For the defendant-respondent, there was a brief by David I. 

Cisar, Peter F. Mullaney, and von Briesen & Roper, S.C., 

Milwaukee, and oral argument by David I. Cisar.

 
2014 WI 63

NOTICE

This opinion is subject to further 

editing and modification. The final 

version will appear in the bound 

volume of the official reports. 

No. 2011AP2774

(L.C. No. 2011CV440)

STATE OF WISCONSIN : IN SUPREME COURT

Attorney's Title Guaranty Fund, Inc.,

 Plaintiff,

 v.

Town Bank,

 Defendant-Respondent,

Heartland Wisconsin Corp.,

 Defendant-Appellant-Petitioner.

FILED

JUL 15, 2014

Diane M. Fremgen

Clerk of Supreme Court

REVIEW of a decision of the Court of Appeals. Reversed. 

¶1 PATIENCE DRAKE ROGGENSACK, J. We review a decision 

of the court of appeals1 affirming an order of the circuit court2

granting summary judgment to defendant Town Bank. This case is 

a priority battle between defendants Heartland Wisconsin Corp. 

and Town Bank for proceeds of a debtor's legal malpractice claim 

 

1 Attorney's Title Guar. Fund, Inc. v. Town Bank, 2013 WI 

App 6, 345 Wis. 2d 705, 827 N.W.2d 116.

2 The Honorable J. Mac Davis of Waukesha County presided.
No. 2011AP2774 

2

that plaintiff Attorney's Title Guaranty Fund, Inc. held in 

escrow pending resolution of their dispute. 

¶2 Town Bank claims that it is entitled to the proceeds 

because proceeds from legal malpractice claims are not 

assignable; therefore, Heartland, who claims its interest by 

assignment of proceeds, has no protectable interest. Town Bank 

also claims that if proceeds are assignable, it perfected a 

common law creditor's lien on all of the debtor's personal 

property, no matter when acquired, by serving the debtor with an 

order to appear at supplemental proceedings. 

¶3 Heartland disputes Town Bank's claims. First, 

Heartland contends that the debtor validly assigned the proceeds 

of his legal malpractice claim, which gave Heartland a security 

interest in those proceeds that is superior to Town Bank's 

interest as an unsecured judgment creditor. Second, Heartland 

argues that a common law judgment creditor's lien does not 

attach to property the debtor acquires after a supplemental 

examination. 

¶4 We conclude that (1) the debtor lawfully assigned the 

potential proceeds from his legal malpractice claim as 

collateral for a contemporaneously incurred debt to Heartland; 

and (2) Heartland is entitled to the proceeds because it 

perfected a security interest in them before Town Bank obtained 

a superior interest by levy. See Associated Bank N.A. v. 

Collier, 2014 WI 62, ¶3, __ Wis. 2d __, __ N.W.2d __ (a judgment 

creditor with a docketed money judgment obtains a superior 

interest in a debtor's non-exempt personal property when it 
No. 2011AP2774 

3

levies specifically identified property). In reaching this 

conclusion, we note that Heartland lent money to the debtor. In 

consideration for the loan, Heartland took a security interest 

in the potential proceeds of the debtor's malpractice claim. 

This allowed Heartland to access the debtor's property in a way 

that Town Bank could not. Heartland filed a financing statement 

for its security interest in the proceeds of the malpractice 

claim before the proceeds came into existence. Therefore, the 

moment the debtor acquired proceeds from his claim, Heartland's 

interest became superior to that of other creditors, including 

Town Bank, who had not levied the proceeds. 

I. BACKGROUND

¶5 Defendants in the present case are creditors of 

Timothy Brophy, a Milwaukee real estate investor and landlord. 

Brophy has been involved in multiple lawsuits, including a class 

action brought by tenants of certain rental properties, a 

bankruptcy proceeding, and a malpractice claim against his 

former attorney, all three of which provide factual 

underpinnings of the present case. The narrow issue in this 

case, however, is one of priority between a judgment creditor 

and a Wis. Stat. ch. 409 secured creditor. 

¶6 Town Bank became a judgment creditor of Brophy in an 

action that included mortgage foreclosures of certain Milwaukee

properties. On February 13, 2006, Town Bank obtained and 

docketed a judgment for $1,690,870. It pursued collection by 

several means. First, it foreclosed on real estate and applied 

the proceeds from the sale of those properties to the judgment, 
No. 2011AP2774 

4

leaving a $224,774.40 deficiency. Next, on February 15, 2006, 

it obtained an order requiring Brophy to appear at supplemental 

proceedings. It served Brophy with that order two days later. 

Brophy appeared and revealed his assets, which at that time did 

not include a filed malpractice claim, the proceeds of which 

underlie this suit. Town Bank's supplemental receiver was 

dismissed September 11, 2006. 

¶7 In June and July 2007, Brophy obtained two loans 

totaling $222,539 from Heartland. Brophy used the money 

Heartland provided to settle a class action lawsuit pending 

against him. As security for these loans, Brophy assigned 

Heartland his interest in potential proceeds from his 

malpractice claim against his former attorney, Harvey Goldstein. 

Brophy defaulted on the loans Heartland made and, on August 17, 

2007, he filed for bankruptcy. 

¶8 Town Bank learned of Brophy's malpractice claim and 

Heartland's interest in the proceeds during Brophy's bankruptcy 

proceedings. On April 4, 2008, Town Bank filed a proof of claim 

in the bankruptcy asserting that it had a "Judgment Lien on all 

Real Estate; Receiver's Lien on all Real and Personal Property 

of Debtor." 

¶9 On January 23, 2009, Brophy's bankruptcy was dismissed 

without a confirmed plan. Heartland filed a financing statement 

for its security interest in the proceeds that same day. 

¶10 On August 3, 2009, Town Bank moved the circuit court 

to appoint a supplementary receiver and to grant that receiver 
No. 2011AP2774 

5

authority to proceed on Brophy's malpractice claim. The circuit 

court did not rule on Town Bank's motion. 

¶11 On September 9, 2009, Brophy settled his malpractice 

lawsuit. Pursuant to an agreement among the parties to this 

suit, Attorney's Title placed the proceeds from the settlement

in escrow. On February 3, 2011, Attorney's Title filed suit to 

determine whether Town Bank or Heartland has a superior interest 

in the proceeds of Brophy's malpractice claim. 

¶12 Town Bank moved for summary judgment, which the 

circuit court granted. Heartland appealed, and the court of 

appeals affirmed. We accepted Heartland's petition for review, 

and asked for additional briefing on two issues: (1) whether 

the potential proceeds from a legal malpractice claim can be 

lawfully assigned as security for a contemporaneously incurred 

debt; and (2) whether such proceeds were future property at the 

time of the 2006 supplemental examination Town Bank conducted.

We now reverse the decision of the court of appeals. 

II. DISCUSSION

A. Standard of Review

¶13 Town Bank asks us to confirm what it asserts is a 

judgment creditor's blanket lien on all of Brophy's personal 

property, no matter when acquired. Heartland asserts it is a 

secured creditor with respect to the proceeds of the legal 

malpractice claim and therefore, its interest is superior. 

"Whether a lien exists and the effect of an alleged lien against 

third parties are questions of law that we review independently 

of the court of appeals." Associated Bank, __ Wis. 2d __, ¶21. 
No. 2011AP2774 

6

B. Introduction 

¶14 The conclusion we reached in Associated Bank, __ 

Wis. 2d __, also released today, underlies part of our decision 

in the present case. In Associated Bank, we parsed the 

competing interests of two judgment creditors. Id., ¶¶51-54. 

We concluded that supplemental proceedings are a discovery tool 

in aid of execution, and clarified that a judgment creditor with 

a docketed money judgment obtains an interest superior to other 

judgment creditors by levying specifically identified, nonexempt personal property of the debtor. Id., ¶38. We rejected 

the notion of a blanket lien on all of a judgment debtor's 

personal property in favor of the first judgment creditor to 

serve the debtor with notice to appear at a supplemental 

examination. Id., ¶¶28, 38. 

¶15 Statutory collection procedures drove our conclusion. 

If a judgment creditor could encumber all of a debtor's personal 

property by serving the debtor with an order to appear at 

supplemental proceedings, statutory collection procedures would 

be eviscerated. Id., ¶45. Put another way, the notion of a 

blanket lien arising due to service of an order to appear at a 

discovery proceeding is inconsistent with the incremental 

statutory scheme of judgment debt collection. 

¶16 We further explained that a blanket lien would 

frustrate the policies statutory collection procedures serve. 

For instance, requiring a debtor to levy specific items of a 

debtor's personal property ensures that a creditor does not 

encumber, at the expense of other creditors and the debtor, more 
No. 2011AP2774 

7

property than is necessary to satisfy its judgment. Id., ¶¶47-

48. By binding property at the time of levy, statutory 

collection procedures also provide clear notice to third parties 

that the debtor no longer has rights in the levied property. 

Id., ¶49. Finally, the collection statutes reward diligence by 

allowing competing judgment creditors to simultaneously seek out 

assets to levy. Id., ¶50. 

¶17 We do not repeat our full discussion from Associated 

Bank. Instead, we apply its holding to the facts of this case. 

First, however, we conclude that proceeds from legal 

malpractice claims are assignable as collateral for 

contemporaneously incurred debt. We then conclude that

Heartland, a secured creditor, perfected its security interest 

in the proceeds of Brophy's malpractice claim before Town Bank 

obtained a superior interest in those proceeds by levy. In our 

discussion that follows, we further explain why Heartland was 

able to access the proceeds in a way that Town Bank was not. 

And finally, we discuss legislative choices about judgment 

collection and secured transactions that drive our conclusions. 

C. Assignment of Potential Proceeds

1. Parties' positions

¶18 Town Bank maintains that it is contrary to law to 

assign potential proceeds from legal malpractice claims. Town 

Bank grounds this contention in what it asserts is a prohibition 

against assigning the underlying legal malpractice claim. Town 

Bank argues that Wisconsin permits assignment of only those 

claims that survive the death of the claim's owner and legal 
No. 2011AP2774 

8

malpractice claims are not within that group. It also asserts 

that such assignment should be prohibited because it would grant 

the right to control the lawsuit to a stranger to the attorneyclient relationship, which is contrary to public policy. Town 

Bank contends that 18 states prohibit assignments of legal 

malpractice claims. Town Bank further contends that there is no 

real distinction between a malpractice claim and its proceeds.

¶19 Not surprisingly, Heartland sees the assignment issue 

quite differently. It asserts that it lawfully took an 

assignment of the potential proceeds of Brophy's malpractice 

claim, which Wis. Stat. ch. 409 specifically permits. It 

thereby became a secured creditor in regard to a right to 

payment out of the proceeds, with an interest superior to Town 

Bank's interest as an unsecured judgment creditor. Heartland 

also contends that proceeds differ from the claim from which 

they arise, both in regard to how proceeds are treated in Wis. 

Stat. ch. 409 and in regard to public policy concerns relating 

to assignments. Heartland contends that proceeds are payment 

intangibles under Wis. Stat. § 409.102(1)(p) and Wis. Stat. 

§ 409.109(1)(c) and that malpractice claims are commercial torts 

under § 409.102(1)(d). Therefore, Heartland asserts that Town 

Bank's argument misses the mark because it is based on the 

contention that a malpractice claim is not assignable; while by 

contrast, Heartland took an assignment only in the potential 

proceeds as a contractual right to payment, if and when proceeds 

came into existence. 
No. 2011AP2774 

9

2. General principles

¶20 In order to validly assign property rights, those 

rights must be alienable, i.e., transferrable from their owner. 

Becker v. Chester, 115 Wis. 90, 110, 91 N.W. 87 (1902). 

Alienability may be controlled by statute or common law public 

policy concerns. See id. at 112; Schneider v. Schneider, 132 

Wis. 2d 171, 176-77, 389 N.W.2d 835 (Ct. App. 1986). 

¶21 In the context of legal malpractice claims, some 

jurisdictions have refused to allow strangers to the attorneyclient relationship to litigate legal malpractice claims, 

thereby restricting those claims "to only the parties involved." 

Goodley v. Wank & Wank, Inc., 133 Cal. Rptr. 83, 86 (Cal. Ct. 

App. 1976); George L. Blum, J.D., Assignability of Claim for 

Legal Malpractice, 64 A.L.R. 6th 473 (updated 2013).3 As with 

assigning a legal malpractice claim, levying such a claim by 

obtaining a turnover order for the right to litigate the claim 

to a receiver would result in a stranger to the attorney-client 

relationship litigating the claim. While we need not decide 

here if Wisconsin law prohibits assigning claims for legal 

 

3 For arguments in favor of the assignability of legal 

malpractice claims, see New Hampshire Insurance Co. v. McCann, 

707 N.E.2d 332, 335-38 (Mass. 1999). These include a concern 

that prohibiting the assignment of such claims will be perceived 

as a self-serving effort by the legal profession to insulate its 

own from litigation. Michael Sean Quinn, On the Assignment of 

Legal Malpractice Claims, 37 S. Tex. L. Rev. 1203, 1206 (1996).
No. 2011AP2774 

10

malpractice, we note potential concerns that some courts have 

expressed.

4

3. Wisconsin policies

¶22 Town Bank has cited no Wisconsin appellate case or 

statute that prohibits assignment of potential proceeds of legal 

malpractice claims. The cases cited by Town Bank speak to when 

claims survive the death of the claimant. Those cases have no 

bearing on Wis. Stat. ch. 409 or the assignment issue before us 

because Heartland does not assert an interest in the malpractice 

claim.

¶23 In addition, there is a real difference between the 

claim from which proceeds arise and the proceeds themselves. 

For example, a malpractice claim involves many choices about 

whether and how to proceed, while proceeds are a payment 

intangible, which is simply the right to be paid.5 In this case, 

 

4 See Anthony J. Sebok, The Inauthentic Claim, 64 Vand. L. 

Rev. 61, 85 n.106 (2011) (listing the states that do not permit 

assigning legal malpractice claims); see also Michael Reese, The 

Use of Legal Malpractice Claims as Security Under the UCC 

Revised Article 9, 20 Rev. Litig. 529, 532-33 (2001) (explaining 

that Article 9 permits the use of commercial tort claims, 

including legal malpractice claims, as collateral and that any 

restriction on their use is governed by law other than Article 

9). 

5 The proceeds of a tort claim are a category of collateral 

known as a "payment intangible." Official Comment 15 to U.C.C. 

9-109(d)(12) ("[O]nce a claim arising in tort has been settled 

and reduced to a contractual obligation to pay, the right to 

payment becomes a payment intangible and ceases to be a claim 

arising in tort."). A party may file to perfect its interest in 

a payment intangible. Official Comment 4 to U.C.C. 9-309(2) 

(Wis. Stat. § 409.309(2)) ("Any person who regularly takes 

assignments of any debtor's accounts or payment intangibles 

should file").
No. 2011AP2774 

11

it is Brophy's right to be paid in settlement of his legal 

malpractice suit. See, e.g., Wis. Stat. § 409.102(1)(p); Wis. 

Stat. § 409.109(1)(c). 

¶24 Furthermore, the Wisconsin Legislature adopted the 

revisions to Article 9 that "clearly contemplate[] that a 

security interest in the proceeds of a tort claim is 

conceptually distinct from one in the tort claim itself." 

Michael Reese, The Use of Legal Malpractice Claims as Security 

Under the UCC Revised Article 9, 20 Rev. Litig. 529, 532 (2001). 

We conclude that the legislature set public policy for Wisconsin 

by those revisions such that public policy does not prohibit the 

assignment of potential proceeds in a malpractice claim as a 

payment intangible. Were we to conclude otherwise, we would be 

contravening the clear meaning of provisions of Wis. Stat. ch. 

409 and could be seen as favoring lawyers against whom legal 

malpractice claims are filed. Having concluded that Brophy's 

assignment to Heartland is valid, we turn to its effect on third 

parties. 

D. Priority

¶25 The first creditor to obtain an interest in the 

proceeds of Brophy's malpractice claim that is superior to other 

creditors prevails here. The actions that a judgment creditor 

and a secured creditor must take in order to obtain an interest 

superior to other creditors, however, are not the same. 

¶26 A judgment creditor with a docketed money judgment 

obtains a superior interest in specifically identified personal 

property of a judgment debtor by levying that property. 
No. 2011AP2774 

12

Associated Bank, __ Wis. 2d __, ¶38. A judgment creditor does 

not have a blanket lien on all of the debtor's personal 

property. A judgment creditor can levy in at least three ways: 

(1) by executing against specifically identified personal 

property with the assistance of a sheriff; (2) by serving the 

garnishee defendant in a garnishment action to seize specific 

property in the hands of the garnishee defendant; or (3) by 

obtaining an order to apply specifically identified personal 

property to the satisfaction of the judgment, which a creditor 

may do with the assistance of a supplemental receiver. Id., 

¶¶23-25; Wis. Stat. § 815.05(6); Wis. Stat. § 812.01; Wis. Stat. 

§ 816.08. Therefore, Town Bank is entitled to the malpractice 

proceeds only if it obtained a superior interest by levy before 

another creditor obtained a superior interest in those same 

proceeds. 

¶27 Heartland is also a creditor of Brophy, to which he 

granted a security interest in potential proceeds of his 

malpractice claim in order to obtain a loan. Because Brophy 

voluntarily gave a security interest to Heartland so that 

Heartland would lend him money, Wis. Stat. ch. 409, which adopts 

Article 9 of the Uniform Commercial Code (UCC), governs the 

steps Heartland needed to take in order to obtain an interest 

superior to other creditors. Wis. Stat. § 409.101; Wis. Stat. 

§ 409.109(1)(a); Nat'l Operating, L.P. v. Mut. Life Ins. Co. of 

N.Y., 2001 WI 87, ¶31, 244 Wis. 2d 839, 630 N.W.2d 116 

("Wisconsin has adopted each section of the U.C.C. relevant to 

this case. This includes all of Article 9, which is embodied in 
No. 2011AP2774 

13

Chapter 409 of the Wisconsin Statutes. Chapter 409 does not 

vary in any material respect from the uniform law."). Under ch. 

409, a party obtains an interest superior to other creditors by 

achieving statutory perfection. Wis. Stat. § 409.308; Daniel v. 

Bank of Hayward, 144 Wis. 2d 931, 936, 425 N.W.2d 416 (1988) 

("As a general rule, the holder of a perfected security interest 

has an interest in . . . secured property which is superior to 

the interests of the debtor, unsecured creditors of the debtor 

and subsequent purchasers of the secured property."). 

¶28 The requirements for statutory perfection can vary 

depending on the type of collateral, but the general rule is 

that "a financing statement must be filed to perfect all 

security interests." Wis. Stat. § 409.310(1); Smith & Spidahl 

Enters., Inc. v. Lee, 206 Wis. 2d 663, 669, 557 N.W.2d 865 (Ct. 

App. 1996) (explaining that generally, the filing of a financing 

statement is required to perfect a security interest). 

Additionally, perfection requires attachment of the security 

interest. Attachment, in turn, generally depends on three 

things: (1) the debtor must sign a security agreement 

identifying the collateral;6 (2) the creditor must give the 

debtor value in exchange for the collateral; and (3) the debtor 

 

6 In some situations, the creditor may use alternative 

methods of perfection such as possession or control of the 

collateral. Wis. Stat. § 409.203(2)(c)2., et seq.; Nat'l Pawn 

Brokers Unlimited v. Osterman, Inc., 176 Wis. 2d 418, 434, 500 

N.W.2d 407 (Ct. App. 1993) (explaining that Wisconsin law 

authorizes perfection by the secured party's possession of the 

collateral). 
No. 2011AP2774 

14

must have rights in the collateral. Wis. Stat. § 409.203(2); 

Nat'l Exch. Bank of Fond du Lac v. Mann, 81 Wis. 2d 352, 358, 

260 N.W.2d 716 (1978) ("The requirements that the debtor sign a 

security agreement describing the collateral, that the creditor 

give value and that the debtor have rights in the collateral 

must all exist to give rise to an enforceable security 

agreement."). 

¶29 Accordingly, a debtor and secured creditor can take 

some actions necessary for perfection at any time, but 

perfection does not actually occur until all the criteria are 

met. For instance, a debtor can execute a security agreement 

and the creditor can disperse a loan and file a financing 

statement, but perfection will not occur until the debtor has 

rights in the collateral. Stated otherwise:

Assuming that the parties previously made an agreement 

covering [an item of] after-acquired property, that 

the secured party has either made an advance or 

obligated himself to do so, and that a proper filing 

has been made, the security interest attaches to the 

after-acquired property and is perfected the instant 

the debtor acquires "rights" to that property.

Peter F. Coogan, Article 9 of the Uniform Commercial Code: 

Priorities Among Secured Creditors and the "Floating Lien", 72 

Harv. L. Rev. 838, 851 (1959); Savig v. Americana State Bank of 

Danube, 50 B.R. 1003, 1008 (D. Minn. 1985) (noting that "a 

secured creditor's interest in after-acquired property is not 

perfected until the debtor receives that property"). 

¶30 This is precisely the type of arrangement into which 

Brophy and Heartland entered. Brophy assigned Heartland the 
No. 2011AP2774 

15

potential proceeds of his malpractice claim as collateral before 

the proceeds came into existence. Heartland gave notice of its 

security interest by filing a financing statement several months 

later, but still before Brophy actually settled the malpractice 

claim. At that point, Heartland had set the stage, so to speak, 

so that the moment Brophy received rights in the proceeds, 

Heartland's interest became perfected. 

¶31 By contrast, as of September 9, 2009, Town Bank had 

not taken sufficient action to provide it with an interest in 

the proceeds superior to other creditors. The only action Town 

Bank took was to move for the appointment of a supplementary 

receiver and to grant that receiver the authority to proceed on 

Brophy's malpractice claim. The court never ruled on Town 

Bank's motions. Stated otherwise, because Town Bank did not 

levy before Heartland achieved statutory perfection, we conclude 

that Heartland has the superior interest in the proceeds. See

Associated Bank, __ Wis. 2d __, ¶38. 

¶32 Having applied the statutes regarding judgment 

collection and secured transactions, we note that Heartland was 

able to access some of Brophy's property in a way that Town Bank 

could not. For example, when Town Bank examined Brophy on 

March 9, 2006, he did not identify a legal malpractice claim. 

Attorney Goldstein, the defendant in Brophy's malpractice claim, 

represented Brophy at the time of the supplemental proceeding, 

which suggests that Brophy was not aware of a potential 

malpractice claim at that time. 
No. 2011AP2774 

16

¶33 Additionally, when Town Bank learned about the 

malpractice claim, it could not levy due to the automatic stay 

of the bankruptcy court, which prevents creditors from taking 

actions to improve their positions during a bankruptcy. See 11 

U.S.C. § 362. As a lender, Heartland avoided these problems by 

taking an assignment of the potential proceeds of Brophy's claim 

before they came into existence. This gave Heartland the upper 

hand in at least two respects. 

¶34 First, it gave Heartland an edge with respect to 

timing. Rather than having to levy on specific property, which 

requires the property to be in existence, Heartland was able to 

encumber property Brophy did not yet have. Wis. Stat. 

§ 409.204(1); see In re Pubs, Inc. of Champaign, 618 F.2d 432, 

436 (7th Cir. 1980). It did so by filing a financing statement 

after lending money so that the moment Brophy obtained the 

proceeds, Heartland's security interest became perfected. See

Pubs, 618 F.2d at 437. 

¶35 Second, Heartland's ability to take an interest in the 

proceeds allowed it to avoid problems that might accompany the 

litigation of a legal malpractice claim by someone other than a 

client. See Official Comment 15 to U.C.C. 9-109(d)(12). As 

explained above, the proceeds of a lawsuit are "treated just 

like any other form of contractual obligation." 1C Julian B. 

McDonnell, Secured Transactions Under the Uniform Commercial 
No. 2011AP2774 

17

Code, § 19A.02[2][b] (2009).7 Therefore, Heartland did not have 

to worry that accepting Brophy's assignment might run afoul of 

state law.

¶36 Applying the respective standards for judgment 

creditors and secured creditors to obtain an interest superior 

to other creditors, we conclude that Heartland is entitled to 

the proceeds. Brophy settled the malpractice suit on 

September 9, 2009, wherein the proceeds of the malpractice claim 

came into existence. By that time, Brophy had executed a 

security agreement identifying the proceeds as collateral, and 

Heartland had loaned Brophy money and filed a financing 

statement. All the requirements for perfection were met on that 

date. See Wis. Stat. § 409.308; Wis. Stat. § 409.203(2); Pubs, 

618 F.2d at 436 (explaining that "[t]he requirement that the 

debtor have rights in the collateral is, inter alia, intended to 

postpone attachment until the property proposed to be subject to 

the security interest comes into existence or until the debtor 

acquires rights in it"). 

¶37 Having explained Heartland's position relative to Town 

Bank, we further review the legislative choices that established 

this structure.

 

7 See also Weston v. Dowty, 414 N.W.2d 165, 167 (Mich. Ct. 

App. 1987) ("[s]ince plaintiffs agreed to assign only a portion 

of their recovery, if any, from the malpractice suit, . . . we 

conclude that no assignment of a legal malpractice action 

occurred"); First Nat'l Bank of Clovis v. Diane, Inc., 698 P.2d 

5, 14 (N.M. Ct. App. 1985) (recognizing the ability of a client 

to "assign[] only the proceeds and not the right of [a legal 

malpractice] action"). 
No. 2011AP2774 

18

E. Statutory Policies

¶38 Wisconsin Stat. ch. 409 is a uniform law that adopts 

Article 9 of the UCC. Wis. Stat. § 409.101; Nat'l Operating, 

244 Wis. 2d 839, ¶31. By adopting each section of the UCC 

relative to secured transactions, the Wisconsin Legislature 

sought to "simplify, clarify, and modernize the law governing 

commercial transactions." Wis. Stat. § 401.103(1)(a). One way 

Article 9 modernizes the law of secured transactions is by 

"maximizing the financing available to [enterprises] and at the 

risk of . . . unsecured creditors." 1 Julian B. McDonnell, 

Secured Transactions Under the Uniform Commercial Code: Article 

9 and the Security Controversy, § 1.03, at 1-14 (2009). As the 

facts of this case aptly demonstrate, secured creditors may be 

able to access a debtor's property in ways that an unsecured 

judgment creditor cannot. 

¶39 The "fundamental policy choice [of] Article 9" that 

favors secured creditors is not the product of antagonism or 

unfairness toward unsecured creditors. Id. Rather, Article 9 

aims to benefit unsecured creditors by enabling debtors to pay 

them. One scholar succinctly explained the theory as follows:

[T]he availability of secured credit provides 

liquidity, which reduces the chance of debtor 

bankruptcy and thereby increases the expected value of 

unsecured claims. . . . [I]mperfections in the 

bankruptcy process tend to make creditors reluctant to 

lend, even on a secured basis, to debtors that are 

likely to go bankrupt, and also make debtors that are 

likely to go bankrupt reluctant to incur secured debt. 

New money secured credit therefore is usually extended 

only where it helps an otherwise viable debtor avoid 
No. 2011AP2774 

19

bankruptcy, and not to support debtors that should be 

allowed to fail.

Steven L. Schwarcz, The Easy Case for the Priority of Secured 

Claims in Bankruptcy, 47 Duke L.J. 425, 431-32 (1997). Put 

simply, the law favors the secured creditor because "the secured 

creditor often provides the funds to enable the unsecureds to be 

paid." 1 McDonnell, supra, at 1-14.

¶40 While the soundness of this theory has been the 

subject of academic debate, it is beyond dispute that secured 

creditors currently enjoy a specially protected status under the 

law. Prod. Credit Ass'n of Madison v. Nowatzski, 90 Wis. 2d 

344, 350-51, 280 N.W.2d 118 (1979). The ability of a party to 

take a security interest in after-acquired property and achieve 

perfection the moment the debtor acquires rights in the 

property, while a judgment creditor must levy personal property 

in order to bind it, is a prime example of this special status. 

A secured party's potential to avoid public policy prohibitions 

that could attach to the assignment of the legal malpractice 

claim, itself, is another. 

¶41 In the case before us, Town Bank says that it has an 

interest superior to other creditors in all of a debtor's 

personal property because it served the debtor with notice to 

appear at a supplemental proceeding many years ago. This 

includes, according to Town Bank, property that a debtor 

acquired after the 2006 supplemental proceeding. 

¶42 Accepting Town Bank's argument would take away the 

specially protected status of secured creditors. See id. For 
No. 2011AP2774 

20

example, if a judgment creditor could bind all of a debtor's 

personal property with a blanket lien simply by serving a notice 

to appear at a supplemental proceeding instead of levying 

specifically identified property, it too could encumber property 

before a debtor has rights in it. However, unlike a secured 

creditor, an unsecured judgment creditor provides no value to 

the debtor in exchange for such a benefit. It is this value to 

society as a whole——financing to a debtor——that justifies the 

secured creditor's protected status. 

¶43 We conclude that if a judgment creditor were to have a 

blanket lien on all the personal property of a judgment debtor 

that precludes other creditors from pursuing collection, that is 

a policy choice better left to the legislature than to the 

courts. Compare Cal. Civ. Proc. Code § 708.110(d) (providing 

for a lien on non-exempt personal property for one year from 

service of notice to appear at supplemental proceedings); 735 

ILCS 5/2-1402(m) (judgment "becomes a lien" on non-exempt 

personal property when citation from the clerk is served).

¶44 Finally, we note that Town Bank's concept of the scope 

of a judgment creditor's lien would diminish the lending Wis. 

Stat. ch. 409 seeks to encourage. This is so because if a 

judgment creditor could obtain a superior blanket lien on all of 

a debtor's personal property, the debtor would not have 

unencumbered non-exempt personal property to offer as security 

for a loan, which may be necessary to continue the debtor's 

business and pay its debts. In other words, a potential lender 

could not acquire a superior security interest in any non-exempt 
No. 2011AP2774 

21

personal property of a debtor who has an unsatisfied judgment 

against him or her and who has been served with notice to appear 

at supplemental proceedings. This would discourage lending to 

judgment debtors. It would thereby conflict with one of the 

policies underlying Wis. Stat. ch. 409: to provide financing to 

distressed debtors through a system of secured transactions.8 

¶45 For these reasons, we decline to graft a blanket 

common law lien onto statutory judgment collection procedures. 

See generally Smith & Spidahl, 206 Wis. 2d at 673 ("Fashioning 

equitable solutions to mitigate the hardship of [statutory]

requirements on particular creditors undermines [the system's]

purpose. . . . [R]elaxing [statutory] requirements does not

. . . justify the uncertainty and inconsistency that would 

result from such an approach."). Instead, we affirm our 

commitment to statutory procedures for judgment collection, 

under which a judgment creditor with a docketed judgment binds 

personal property by levying specifically identified property, 

and Wis. Stat. ch. 409 grants secured parties special 

protections in order to encourage lending that benefits society 

as a whole. Accordingly, Heartland has the superior interest in 

 

8 We recognize that there are circumstances under Wis. Stat. 

ch. 409 in which a judgment creditor prevails over a ch. 409 

secured creditor——a judgment creditor has priority over a ch. 

409 secured party when it executes on property before the ch. 

409 creditor perfects its interest in the security relative to 

that property. See, e.g., Wis. Stat. § 409.322(1)(a); Wis. 

Stat. § 815.19. 
No. 2011AP2774 

22

the proceeds of Brophy's legal malpractice claim and therefore, 

we reverse the decision of the court of appeals.

III. CONCLUSION

¶46 We conclude that (1) the debtor lawfully assigned the 

potential proceeds from his legal malpractice claim as 

collateral for a contemporaneously incurred debt to Heartland; 

and (2) Heartland is entitled to the proceeds because it 

perfected a security interest in them before Town Bank obtained 

a superior interest by levy. See Associated Bank, __ Wis. 2d 

__, ¶3 (a judgment creditor with a docketed money judgment 

obtains a superior interest in a debtor's non-exempt personal 

property when it levies specifically identified property). In 

reaching this conclusion, we note that Heartland lent money to 

the debtor. In consideration for the loan, Heartland took a 

security interest in the potential proceeds of the debtor's 

malpractice claim. This allowed Heartland to access the 

debtor's property in a way that Town Bank could not. Heartland 

filed a financing statement for its security interest in the 

proceeds of the malpractice claim before the proceeds came into 

existence. Therefore, the moment the debtor acquired proceeds 

from his claim, Heartland's interest became superior to that of 

other creditors, including Town Bank, who had not levied the 

proceeds. 

By the Court.—The decision of the court of appeals is 

reversed. 
No. 2011AP2774.ssa

1

¶47 SHIRLEY S. ABRAHAMSON, C.J. (dissenting). I agree 

with the majority opinion that the proceeds of a legal 

malpractice claim may be used as collateral to secure a loan 

under Article 9 of the Uniform Commercial Code. Majority op., 

¶¶18-24.1 It is unclear from the record whether the malpractice 

claim in question existed at the time of service of the notice 

of the supplementary proceedings.2

¶48 Relying on In re Badger Lines, Inc., 224 Wis. 2d 646, 

590 N.W.2d 270 (1999), the court of appeals concluded that Town 

 

1 Wisconsin has codified its version of Article 9 of the 

Uniform Commercial Code at Wis. Stat. ch. 409.

The majority opinion uses interchangeably the terms 

"assign," "assignment," and "assignable" to refer to both 

assignment of rights in the proceeds of a legal malpractice 

claim and assignment of a security interest in the proceeds as 

collateral for a loan under Article 9.

A property interest may be nonassignable, but may still be 

used as collateral under Article 9, Section 9-408, Wis. Stat. 

§ 409.408. See, e.g., Belke v. M&I First Nat'l Bank of Stevens 

Point, 189 Wis. 2d 385, 525 N.W.2d 737 (Ct. App. 1994) 

(certificates of deposit were properly used as collateral for a 

loan under chapter 409 even though the certificates of deposit 

explicitly stated that they could not be transferred or assigned 

without the bank's consent and the bank did not consent). For 

an overview of the use of nonassignable property interests as 

collateral to secure loans under the UCC, see Thomas E. Plank, 

The Limited Security Interest in Non-Assignable Collateral Under 

Revised Article 9, 9 Am. Bankr. Inst. L. Rev. 323, 329-36 

(2001); G. Ray Warner, Non-Assignable Rights, Contracts, and 

Leases as Collateral Under Revised Article 9, Am. Bankr. Inst. 

J., Oct. 2000, at 18.

2 Because I am in dissent in Associated Bank N.A. v. 

Collier, 2014 WI 62, ___ Wis. 2d ___, ___ N.W.2d ___, and in the 

instant case, I do not address the thorny issues raised by the 

parties, such as whether the creditor's equitable lien extends 

to after acquired property and whether the malpractice claim in 

the present case was after-acquired property. 
No. 2011AP2774.ssa

2

Bank acquired a common-law equitable lien superior to 

Heartland's interest. 

¶49 Relying on its decision in Associated Bank N.A. v. 

Collier, 2014 WI 62, ___ Wis. 2d ___, ___ N.W.2d ___, of even 

date, the majority opinion concludes that because Town Bank did 

not "levy" before Heartland perfected its statutory lien,3

Heartland "has the superior interest" in the proceeds. Majority 

op., ¶4 (citing Associated Bank, 2014 WI 62, ¶3).

¶50 For the reasons stated in my dissent in Associated 

Bank, I do not join the majority opinion in the instant case.

¶51 I am authorized to state that Justice ANN WALSH 

BRADLEY joins this dissent.

 

3 See majority op., ¶4.
No. 2011AP2774.awb

1

¶52 ANN WALSH BRADLEY, J. (dissenting). Although I join 

the dissent, I write separately to voice my concern with this 

court's recent trend in sua sponte expanding the issues before 

it. 

¶53 In this case a majority of the court voted to issue a 

post oral argument order raising an issue heretofore nonexistent. It asked:

(1) whether the potential proceeds from a legal 

malpractice claim can be lawfully assigned as security 

for a contemporaneously incurred debt;

(2) if the potential proceeds from a legal 

malpractice claim are assignable, whether such 

assignment was future property at the time of the 

supplemental exam conducted in this case.

Attorney's Title Guar. Fund, Inc. v. Town Bank, No. 2011AP2774, 

unpublished order (Nov. 19, 2013). 

¶54 Issues relating to the assignability of legal 

malpractice claims were never raised by the parties in this 

court, or in the court of appeals, or in the circuit court. An 

exchange at oral argument nails this point:

Chief Justice Abrahamson: And there's no, is there an 

issue in this case as to whether your assignment was 

any good?

Attorney for Heartland: No, our assignment has never 

been contested.

¶55 Rather than presenting an even playing field, the 

majority appeared to offer an assist to Heartland's opposing 

counsel. The answer to the new issue raised by the majority 

could have proven to be outcome determinative, obviating the 

need to address the issues actually raised and litigated by the 

parties. 
No. 2011AP2774.awb

2

¶56 By raising sua sponte a brand new outcomedeterminative issue, an appellate court tends to blur the lines 

between the role of the lawyer as advocate and the role of the 

judge as impartial decision maker. In contrast to the other 

branches of government, the judicial branch's role seems better 

fitted to respond to issues presented rather than creating 

issues to present.

¶57 As I have previously written: 

[T]he courts play a passive role in our system of 

government. Unlike the legislative or the executive 

branch of government which have as their regular fare 

the responsibility to raise and resolve the issues of 

the day, our role is to respond to the issues 

presented. . . . The wisdom of such restraint is 

apparent.

The rule of law is generally best developed when 

issues are raised by the parties and then tested by 

the fire of adversarial briefs and oral arguments. 

Indeed, "[t]he fundamental premise of the adversary 

process is that these advocates will uncover and 

present more useful information and arguments to the 

decision maker than would be developed by a judicial 

officer acting on his own in an inquisitorial system." 

Adam A. Milani & Michael R. Smith, Playing God: A 

Critical Look at Sua Sponte Decisions By Appellate 

Courts, 69 Tenn. L. Rev. 245, 247 (2002), citing 

United States v. Burke, 504 U.S. 229 (1992) (Scalia, 

J., concurring).

City of Janesville v. CC Midwest, Inc., 2007 WI 93, ¶¶67-68, 302 

Wis. 2d 599, 734 N.W.2d 428 (Bradley, J., dissenting). 

¶58 Although the issue addressing the validity of the 

assignment of legal malpractice claims relates to the issues 

presented by the parties, it was not necessary for the court to 

address the validity of the assignment in order to answer the 

questions presented. 
No. 2011AP2774.awb

3

¶59 Heartland filed a petition for review, asking this 

court to address the following questions:

1) Does a judgment creditor's common law receiver's 

lien attach to personal property acquired by a 

judgment debtor indefinitely into the future after the 

judgment creditor has conducted supplementary 

proceedings? 

2) Where a judgment creditor has admittedly failed to 

make a supplemental commissioner's order, directing 

the judgment debtor to appear at a supplementary 

examination, a matter of public record by filing this 

order and proof of service in the court file, as is 

required by Wis. Stat. § 816.035(1), should a court 

nevertheless enforce the judgment creditor's secret 

receiver's lien in the judgment debtor's personal 

property?

¶60 I would have addressed those questions and those 

alone. Indeed, it is not apparent to me why the issue raised 

sua sponte by the majority was not subject to our usual approach 

of forfeiture. Here it was not a matter of merely failing to 

preserve for appellate review an issue that was previously 

raised. Rather, the issue never previously existed in this 

case.

¶61 Typically, where a party has not raised an issue 

before the circuit court or the court of appeals, we deem that 

issue forfeited. See, e.g., Bostco LLC v. Milwaukee Metro. 

Sewerage Dist., 2013 WI 78, ¶83, 350 Wis. 2d 554, 835 N.W.2d 160 

(declining to address an inverse condemnation/takings claim 

where its proponent "is attempting to make a fundamentally 

different argument than that which it raised and tried before 

the circuit court . . . ."); State v. Dowdy, 2012 WI 12, ¶5, 338 

Wis. 2d 565, 808 N.W.2d 691 (declining to decide "whether a 
No. 2011AP2774.awb

4

circuit court has inherent authority to reduce the length of 

probation, and if so, what standard applies [because] [n]either 

Dowdy's petition to the circuit court nor the circuit court's 

order was grounded in the court's alleged inherent authority."); 

Schill v. Wis. Rapids Sch. Dist., 2010 WI 86, ¶45, 327 Wis. 2d 

572, 786 N.W.2d 177 ("Because the issue of the circuit court's 

competence was never raised in the circuit court, we treat the 

issue as having been forfeited.").

¶62 This court has emphasized that the forfeiture rule "is 

essential to the efficient and fair conduct of our adversary 

system of justice." State v. Huebner, 2000 WI 59, ¶12, 235 

Wis. 2d 486, 611 N.W.2d 727. The rule:

gives the parties and the circuit court notice of the 

issue and a fair opportunity to address it; encourages 

attorneys to diligently prepare for and conduct 

trials; and prevents attorneys from "sandbagging" 

opposing counsel by failing to object to an error for 

strategic reasons and later claiming that the error is 

grounds for reversal.

Schill, 327 Wis. 2d 572, ¶45 n.21. It further "encourages 

litigation of all issues at one time, simplifies the appellate 

task, and discourages a flood of appeals." State v. Caban, 210 

Wis. 2d 597, 605, 563 N.W.2d 501 (1997).

¶63 With its order for additional briefing on the 

assignability of legal malpractice claims, the court offered 

Town Bank a new bite at the apple. It suggested a new, possibly 

outcome-determinative argument which Town Bank had previously 

not made. This action is a departure from precedent suggesting 

that the development of arguments be left to the litigants. 

See, e.g., Jankee v. Clark Cnty., 2000 WI 64, ¶7, 235 Wis. 2d 
No. 2011AP2774.awb

5

700, 612 N.W.2d 297 ("If an issue is not raised in the petition 

for review or in a cross petition, 'the issue is not before 

us.'"); Gardner v. Gardner, 190 Wis. 2d 216, 238 n.3, 527 N.W.2d 

701 (Ct. App. 1994) ("We will not independently develop 

[appellant]'s argument and, therefore, we will not consider this 

issue"); Estate of Balkus v. Sec. First Nat'l Bank, 128 Wis. 2d 

246, 255 n.5, 381 N.W.2d 593 (Ct. App. 1985) (declining to 

address issue not developed by the appellant).

¶64 Now, after ordering additional briefing and having a 

second round of oral arguments on these new issues, the majority 

comes to the conclusion that the parties' initial decision not 

to contest this issue was correct. In the end, the majority's 

efforts to sua sponte develop its own potentially dispositive 

issue was for naught. 

¶65 This unnecessary excursion underscores the wisdom of 

exercising judicial restraint. The role of the lawyer as 

advocate and the role of the judge as impartial decision maker

should be kept separate.

¶66 Accordingly, I respectfully dissent.

¶67 I am authorized to state that Chief Justice SHIRLEY S. 

ABRAHAMSON joins this dissent. 
No. 2011AP2774.awb

1