Receivership – Priority of Assets

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WI Court of Appeals – District II

Case Name: The Atrium of Racine, Inc., et al., v. Michael S. Polsky, Esq., receiver, et al.,

Case No.: 2019AP1728; 2019AP2063

Officials: Reilly, P.J., Gundrum and Davis, JJ.

Focus: Receivership – Priority of Assets

This consolidated appeal pits one group of creditors against another group of creditors. When the Atrium, a seventy-six-unit senior housing facility, went into receivership in May 2017, it owed its residents $7,487,000 for “[r]esident entrance fees, deposit fees and trust funds” that the residents had paid at the inception of their residency at the Atrium (the Residents). It also owed $6,097,000 to some 800 individual bondholders who had invested in the Atrium by purchasing bonds (the Bondholders). The circuit court concluded that the Bondholders have priority over the rights of the Residents to the remaining assets of the Atrium. We reverse and remand as pursuant to M&I First National Bank v. Episcopal Homes Management, Inc., 195 Wis. 2d 485, 536 N.W.2d 175 (Ct. App. 1995), the Residents’ entrance fees and security deposits have priority over the interests of the Bondholders.

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Derek A Hawkins is Corporate Counsel, at Salesforce.