Court Opinion

ID: 767526
Source: CourtListenerOpinion
Date Created: 2012-04-18 08:36:12+00
Date Added: 2024-06-11T17:55:29.080821
License: Public Domain

202 F.3d 945 (7th Cir. 2000)
IN THE MATTER OF:    BADGER LINES, INC.,    DebtorAPPEAL OF:  DOUGLAS F. MANN
No. 97-2274
In the  United States Court of Appeals  For the Seventh Circuit
Submitted April 26, 1999Decided February 7, 2000

Appeal from the United States District Court   for the Eastern District of Wisconsin.  No. 96 C 1135--J.P. Stadtmueller, Chief Judge.
Before BAUER, COFFEY and ROVNER, Circuit Judges.
ROVNER, Circuit Judge.

1
This case comes to us on  remand from the Wisconsin Supreme Court. We  certified the following question to that Court:

2
Does Wisconsin law require that a lien obtained  by a judgment creditor who institutes  supplementary proceedings under Wis. Stat. sec.  816.04 be perfected, and if so, how is the lien  to be perfected?

3
In the Matter of Badger Lines, Inc., 140 F.3d 691, 699 (7th Cir. 1998). The Wisconsin Supreme  Court has now answered that question in the  negative. See In the Matter of Badger Lines,  Inc., 590 N.W.2d 270 (Wis. 1999). In light of  this decision, we must reverse the judgment of  the district court and remand for further  proceedings.

I.

4
We will assume familiarity with our earlier  opinion and restate only those facts necessary to  finally resolve this dispute. Emerald Leasing  sued Badger on an unpaid debt and received a  default judgment in excess of $80,000. A state  court commissioner entered an order directing  Badger to appear at a supplementary proceeding  involving the judgment, and that order was served  on Badger on October 30, 1991. Douglas Mann was  appointed the receiver for Emerald on December  17, 1991. Before Mann could collect the judgment,  Badger filed a voluntary petition under Chapter  7 of the United States Bankruptcy Code, on  February 11, 1992. Robert Waud was appointed  trustee of Badger's estate, and Waud formulated  a final report to distribute the assets to  Badger's creditors. Under Waud's report, Emerald  was to be treated as an unsecured creditor, and  was to receive no distribution from the estate.  Mann filed a motion seeking a turnover of funds  from Badger's estate on the grounds that he held  a judicial lien as defined in 11 U.S.C. sec.  101(36), which was prior to and superior to the  lien and priority creditors listed in Waud's  final report.

5
The dates of these events turned out to be  significant. Under Mann's theory, his lien was  created and perfected as of the date Badger was  ordered to appear at supplementary proceedings.  Under Waud's theory, Mann's lien was not  perfected until Mann was appointed receiver for  Emerald. The first date, October 30, 1991, was  outside the ninety day period during which a  trustee can avoid certain transfers as  preferences. The second date, December 17, 1991,  was within the preference period, and the trustee  could avoid certain transfers made during that  time. The district court ultimately concluded  that Wisconsin law required perfection, and that  the receiver's lien was not perfected until a  supplementary receiver was appointed and/or until  the court commissioner issued a turnover order.  In this case, the court commissioner appointed  Mann and issued a turnover order on December 17,  1991, within the preference period. The effect of  this holding would be that Waud could avoid the  lien as preferential, and Emerald would receive  nothing.

6
As we determined in our previous opinion, the  perfection of this lien was the type of transfer  the trustee could avoid if it occurred during the  preference period. We were not, however,  satisfied that Wisconsin law decisively answered  whether perfection was required, or how  perfection could be accomplished. Because we look  to state law to determine property interests, we  certified the question to the Wisconsin Supreme  Court. That Court concluded:

7
[A] receiver's lien is superior against another  creditor on a simple contract at the time the  creditor serves the debtor with notice to appear  at supplementary proceedings under Wis. Stat.  chapter 816. Accordingly, Wisconsin law does not  require a creditor to take additional steps to  perfect a receiver's lien beyond service on the  debtor.

8
590 N.W.2d at 276. Under this formulation, Mann's  lien was superior to the othercreditors as of  the date that Badger was served notice to appear  at supplementary proceedings. Notice was served  on October 30, 1991, which is more than ninety  days before Badger filed its Chapter 7 petition  on February 11, 1992. Thus, the trustee may not  avoid the transfer as preferential. We therefore  reverse and remand for proceedings consistent  with this opinion, our March 27, 1998 opinion,  and the Wisconsin Supreme Court's March 17, 1999  opinion.

9
REVERSED AND REMANDED.