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Bank of America NA v. Estate of Nelson (2025)

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Bank of America NA v. Estate of Nelson (2025)

Citation: 2025 WI App 61; Appeal No. 2023AP1549 (Wis. Ct. App. Sept. 17, 2025) · Court: Court of Appeals of Wisconsin, District II (Neubauer, P.J., Gundrum, Lazar, JJ.; per Neubauer, P.J.) · Decided: September 17, 2025 (published)

A published Wisconsin Court of Appeals decision holding that the federal priority statute, 31 U.S.C. § 3713, applies to a mortgage-foreclosure surplus held by a clerk of court, so when the deceased owner’s estate is insolvent the United States (IRS) is paid ahead of the Wisconsin Department of Revenue and other competing claimants. Key authority for the wisconsin surplus / competing-claimant module.

Facts

Richard Nelson died owing substantial unpaid taxes: $175,431.51 to the United States and $115,975.33 to the Wisconsin Department of Revenue (DOR). Bank of America, NA, held a mortgage on real property Nelson owned at death and brought a foreclosure action, naming the estate, the United States, and the DOR (both the U.S. and DOR held tax liens against the property). The circuit court (Waukesha County, Judge Michael P. Maxwell) entered judgment of foreclosure; the property sold at a sheriff’s sale. After Bank of America’s claim and certain fees were paid, a surplus of $54,421.96 remained, which the clerk of court held “pending further order of the court.” Both the DOR and the United States claimed the surplus. The circuit court awarded it to the United States; the DOR appealed.

Holding

Affirmed. The federal priority statute, 31 U.S.C. § 3713, applies to the foreclosure surplus. The statute gives the federal government’s claim priority where “the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor” (§ 3713(a)(1)(B)). The clerk of court holding the surplus qualifies as an “administrator” under the statute, so the United States’ claim has priority over the DOR’s, and the United States is entitled to the surplus.

Reasoning

  • Ancient pedigree of the priority statute. Quoting United States v. Moore, 423 U.S. 77, 80 (1975), the court noted the priority statute “is almost as old as the Constitution,” tracing to a 1789 enactment broadened in the 1790s.
  • Clerk as “administrator.” The dispositive question was statutory interpretation, reviewed de novo. The court held the clerk of court, controlling and disbursing the decedent’s surplus, functions as the “administrator” of the insolvent decedent’s estate for § 3713 purposes — triggering federal priority.
  • Insolvent estate. Because Nelson’s combined tax debts far exceeded available assets (including the surplus), the estate was “not enough to pay all debts,” satisfying § 3713(a)(1)(B).

Practical impact

  • For surplus claimants/operators: In wisconsin, a federal tax lien against a deceased, insolvent owner can leapfrog state tax claims (and potentially other unsecured claimants) to a foreclosure surplus via 31 U.S.C. § 3713. Competing-claim analysis must screen for federal liens and decedent insolvency before assuming state-law priority controls. See surplus-funds and lien-priority-waterfall-reading.
  • Scope note: The decision arises in a mortgage foreclosure but its § 3713 reasoning is property-neutral and bears on any clerk-held surplus where a deceased debtor’s estate is insolvent.
  • Petition for review: The published opinion notes a petition for review was filed with the Wisconsin Supreme Court; status should be re-checked (needs_verification as to any further review).

Good-law status

Good law as a published Court of Appeals decision as of last_verified 2026-06-02. A petition for review to the Wisconsin Supreme Court was filed per the opinion’s cover sheet; verify whether review was granted before relying on finality.

Why it matters

It resolves a recurring competing-claimant trap: a clerk-held foreclosure surplus for a deceased, insolvent owner is subject to the federal priority statute, so the IRS can outrank a state revenue department — a sequencing rule that changes who actually collects Wisconsin surplus dollars.

  • tyler-v-hennepin-county — establishes the former owner’s constitutional right to surplus generally; this case allocates surplus among competing lienors.

Applies in →

wisconsin (binding state authority). Concept cross-links: surplus-funds, lien-priority-waterfall-reading.

Legal information, not legal advice. This page summarizes a court decision for educational purposes and does not create an attorney-client relationship. Verify against the primary opinion and consult a licensed attorney in the relevant jurisdiction before acting. Last verified 2026-06-02.

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