In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-3738

IN RE:

GLOBE BUILDING MATERIALS, INCORPORATED,

Debtor.

APPEAL OF:

STATE OF WISCONSIN AND PEGGY LAUTENSCHLAGER

____________

Appeal from the United States District Court

for the Northern District of Indiana, Hammond Division.

No. 04 C 481—Rudy Lozano, Judge.

____________

ARGUED MAY 10, 2006—DECIDED SEPTEMBER 8, 2006

____________

Before FLAUM, Chief Judge, and BAUER and EVANS,

Circuit Judges.

BAUER, Circuit Judge. After an unsuccessful attempt to

restructure, Globe Building Materials, Incorporated (Globe)

was liquidated under Chapter 7 of the Bankruptcy Code.

Peggy Lautenschlager, the Attorney General for the State

of Wisconsin, sought to recover wages owed to former Globe

employees in her state through a statutory lien. The trustee

brought this adversary proceeding, and argued that the lien

was avoidable under 11 U.S.C. § 545(2). Both the bankruptcy and district courts found for the trustee. We affirm.

The facts of this case are not in dispute. On January 19,

2001, Globe filed a voluntary petition for relief under
2 No. 05-3738

Chapter 11 of the Bankruptcy Code. Before ceasing operations, Globe manufactured, sold, and distributed residential

roofing materials. The company’s primary assets consisted

of three manufacturing plants (one located in Wisconsin),

machinery, equipment, inventory, and receivables. On April

4, 2001, the case was converted to Chapter 7, and Gordon E.

Gouveia was appointed Trustee for the Debtor’s estate.

On or about July 24, 2001, the State of Wisconsin’s (the

State) Department of Workforce Development filed a Notice

of Lien with the State Department of Financial Institutions

and the Office of the Chippewa Wisconsin County Clerk.

The State asserted a wage lien under Wis. Stat. 109.09(2)

against all real and personal property then owned or

thereafter acquired by Globe within its boundaries. The lien

was properly perfected by its filing.

Around February 22, 2002, the bankruptcy court approved the trustee’s sale of Globe’s Wisconsin manufacturing facility. The proceeds of the sale were paid to the

trustee. On the basis of Wis. Stat. 109.09, the State claimed

a first priority lien on the net sale proceeds. On January 17,

2003, the trustee brought this adversary proceeding to set

aside the wage lien.

On September 13, 2004, the bankruptcy court found that

there was no genuine issue of material fact and granted

summary judgment to the trustee. The bankruptcy

court held that 11 U.S.C. § 545(2) allowed the trustee to

avoid the wage lien because Wis. Stat. 109.09 delineates the

conditions under which the lien takes precedence, and the

statutory language does not account for the trustee’s

hypothetical bona fide purchaser status. The district court

affirmed, and this appeal followed. Both parties agree

that this discrete legal issue represents the entirety of the

case.

We review the decisions of the bankruptcy and district

court to grant summary judgment on this matter de novo.
No. 05-3738 3

In re AR Accessories Group, Inc., 345 F.3d 454, 457 (7th Cir.

2003).

Whether 11 U.S.C. § 545(2) allows the trustee to avoid the

State’s wage lien turns on the construction and interaction

of three separate statutory sections. Sections 545 and 546

of the Bankruptcy Code set forth the extent of the trustee’s

power to avoid statutory liens. The relevant language of

§ 545(2) provides:

The trustee may avoid the fixing of a statutory lien on

property of the debtor to the extent that such lien—

. . .

(2) is not perfected or enforceable at the time of the

commencement of the case against a bona fide purchaser that purchases such property at the time of the

commencement of the case, whether or not such a

purchaser exists.

But this power is not absolute, 11 U.S.C. § 546 states, in

relevant part:

(b)(1) The rights and powers of a trustee under sections

544, 545, and 549 of this title are subject to any generally applicable law that—

(A) permits perfection of an interest in property to

be effective against an entity that acquires rights in

such property before the date of perfection[.]

The question before us, then, is whether Wis. Stat. 109.09

is such a “generally applicable law,” and if so, how is it

applied? The statutory language provides that:

(1) The department shall investigate and attempt

equitably to adjust controversies between employers

and employees as to alleged wage claims . . . .

(2)(a) The department of workforce development, under

its authority under sub. (1) to maintain actions for the
4 No. 05-3738

benefit of employees, or an employee who brings an

action under s. 109.03 (5) shall have a lien upon all

property of the employer, real or personal, located in

this state for the full amount of any wage claim or wage

deficiency.

. . .

(c) A lien under par. (a) takes precedence over all other

debts, judgments, decrees, liens or mortgages against the

employer, except a lien of a financial institution, as

defined in s. 69.30(1)(b), that originates before the

lien under par. (a) takes effect or a lien under

s. 292.31(8)(I) or 292.81 . . . .

(Emphasis added.)

At the outset, we must dispose of the State’s preliminary

argument that the absence of an actual bona fide purchaser

has some bearing on this matter. The express purpose of the

§ 545(2) language is not to affirm the rights of an actual

bona fide purchaser, but to vest the trustee with those

rights were such an entity to exist. This is a simple, but

possibly deceptive, statutory mechanism designed to access

a legal concept without establishing the traditional elements necessary to do so. The trustee’s hypothetical status

is therefore of no dispositive value to our analysis.

Turning back to the interaction of these three statutory

subsections, we consider first the State’s argument. The

Attorney General submits that Wisconsin’s wage lien

statute “[meets] the requirements” of § 546(b)(1)(A), and

thus completely forecloses all of the trustee’s powers under

§§ 544, 545, and 549, specifically those as a bona fide

purchaser. To support this claim, the State relies heavily on

our holding in AR Accessories, 345 F.3d at 454.

In AR Accessories, we addressed the initial question of

whether a Wis. Stat. 109.09 wage lien was void ab initio

when created after the debtor had filed its petition for
No. 05-3738 5

bankruptcy. 345 F.3d at 456. We held that a priming

statute, such as 109.09, “need not contain language expressly providing for retroactive perfection in order to

trigger the exception provided in 11 U.S.C. § 546(b)(1)(A) to

the automatic stay of postpetition efforts to protect a

property interest.” Id. at 458. Thus, the wage lien did not

violate the Bankruptcy Code’s automatic stay, and was

generally valid. Additionally, in rejecting an alternative

argument, we noted that the Wis. Stat. 109.09 lien interest

was created when the last services were rendered for which

wages went unpaid. Id. at 459. We agreed with

the bankruptcy court that the Department’s filing did

not create a new interest under § 546(b), it merely put other

claimants on notice of the pre-existing claim. But this

analysis was the extent of our Wis. Stat. 109.09 review. AR

Accessories did not address, as we do today, the internal

operation of the Wisconsin statute and its interaction with

the various powers of the trustee. This is because the debtor

there did not assert that the wage lien could have been

avoided under §§ 544 or 545, a legal question distinct from

whether the lien’s prescribed operation was generally void.

The challenge in AR Accessories was primarily facial, and,

as such, our review was, too.

Despite having acknowledged these legal and factual

differences, the State argues here that our analysis in

AR Accessories informs and controls the instant matter.

This argument turns on a broad interpretation of the

§ 546(b)(1) language that subjects the trustee’s power to

“any generally applicable law. . . .” Specifically, the State

claims that because we held Wis. Stat. 109.09 generally

applies under § 546(b)(1)(A), the wage lien automatically

forecloses all of the trustee’s powers under §§ 544, 545, and

549. But this interpretation reads § 546(b)(1)(A) as if the

wage lien itself was the direct object of the “subject to”

language, and turns a blind eye to the internal structure of

Wis. Stat. 109.09.
6 No. 05-3738

In drafting §§ 545(2) and 546(b)(1)(A) as it did, Congress

largely left the avoidability of statutory liens to state law.

See Stanford v. Butler (In re Stanford), 826 F.2d 353, 355-56

(5th Cir. 1987). Where the applicable state statute permits

the lien in question to defeat the rights of a bona fide

purchaser, the Bankruptcy Code will adopt that state policy

choice and grant secured status to the lien. Limperis v. First

Nat’l Bank of Geneva (In re Phillips Constr. Co., Inc.), 579

F.2d 431, 432 (7th Cir. 1978). Further, where the state law

denies enforcement of a statutory lien against a bona fide

purchaser, the lien is avoidable pursuant to § 545(2). See El

Paso v. Am. W. Airlines, Inc. (In re Am. W. Airlines, Inc.),

217 F.3d 1161, 1164 (9th Cir. 2000); City of Boerne v. Boerne

Hills Leasing Corp. (In re Boerne Hills Leasing Corp.), 15

F.3d 57, 59 (5th Cir. 1994). We must, therefore, examine

Wis. Stat. 109.09 to determine if the Wisconsin legislature

intended for the wage lien to defeat the rights of a bona fide

purchaser.

Our analysis of the wage lien statute’s interaction with

§ 546 is a two-step process, and tracks the analysis conducted by both the bankruptcy and district courts.

First, is the statutory lien protected under nonbankruptcy law against . . . a bona fide purchaser under

Code § 545 . . . arising as of the date of the filing of the

bankruptcy petition? If the answer is “yes,” the analysis

need proceed no further. Unless avoided as a disguised

priority or a landlord’s lien under Code § 545, the

statutory lien is valid in bankruptcy . . . . If the answer

to . . . this first question is “no,” then a second question

must be asked. Under applicable nonbankruptcy law,

does there remain a procedure by which the statutory

lien claimant can still perfect the lien as against . . .

bona fide purchasers whose interest arose as of the date

of bankruptcy? If such a procedure exists and applies to

the type of claimant against whom the statutory lien
No. 05-3738 7

was not previously protected, the holder of the statutory

lien may still protect his interest.

2 WILLIAM L. NORTON, JR., NORTON BANKRUPTCY LAW &

PRACTICE 2d § 55:3 (2003).

Upon subjecting Wis. Stat. 109.09 to this analysis, we

hold that the State’s argument fails. The express statutory

language states that the lien “takes precedence over all

other debts, judgments, decrees, liens or mortgages against

the employer, except a lien of a financial institution . . . .”

Wis. Stat. 109.09(1)(c). The bona fide purchaser is conspicuously absent from this list. By specifying with such

precision the claims over which the lien takes precedence,

the Wisconsin legislature implicitly established the outer

boundaries of Wis. Stat. 109.09. This is a straightforward application of the concept expressio unius est exlusio

alterius, “to express or include the one thing implies the

exclusion of the other . . . .” BLACK’S LAW DICTIONARY 620

(8th ed. 2004); see also Dersch Energies, Inc. v. Shell Oil Co.,

314 F.3d 846, 861 (7th Cir. 2002) (citing Freightliner Corp.

v. Myrick, 514 U.S. 280, 288 (1995). In interpreting the

statute we will not invent missing language. In re Kmart

Corp., 359 F.3d 866, 869 (7th Cir. 2004).

The State, however, argues that because the lien interest

was created on the last date unpaid services were rendered,

it defeats a bona fide purchaser under nonbankruptcy law.

Again, its sole support for this argument is our reasoning in

AR Accessories. But as we noted above, the ultimate issue

before this court in AR Accessories was whether Wis. Stat.

109.09 violated the Bankruptcy Code’s automatic stay. Our

adoption of the statute’s implied retroactive perfection was

limited to that single legal question. We did not, as we have

today, examine the specific workings of the statute itself.

And nothing within Wis. Stat. 109.09 expressly provides for

the wage lien’s retroactive perfection or makes it enforceable against the rights of a bona fide purchaser under

§ 545(2).
8 No. 05-3738

Should the State feel this holding does not reflect their

intended meaning of Wis. Stat. 109.09, the legislature

need only amend the statutory language to provide for the

lien’s express precedence over the rights of bona fide

purchasers in addition to “all other debts, judgments,

decrees, liens, or mortgages . . . .”

For the abovementioned reasons, the decision of the

district court is AFFIRMED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—9-8-06