Associated Bank N.A. v. Collier
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SB1 Waukesha County, LLC and Decade Properties, Inc. were two judgment creditors of defendant Jack Collier. SB1 purchased from Associated Bank, N.A. a portion of a default judgment against Collier. Subsequently, Decade obtained a judgment against Collier personally. Each party claimed that they were entitled to collect on Collier’s personal property. The Supreme Court held (1) because SB1 was the first judgment creditor with a docketed money judgment to levy specific, non-exempt personal property of Collier, SB1 had priority over Decade in regard to specific personal property that SB1 identified and levied; but (2) there was no blanket lien in favor of SB1 or Decade that prevented other creditors from pursuing collection from Collier’s personal property.
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2014 WI 62 SUPREME COURT CASE NO.: COMPLETE TITLE: OF WISCONSIN 2011AP2597 Associated Bank N.A., Plaintiff, SB1 Waukesha County, LLC, Co-Plaintiff-Respondent, v. Jack W. Collier, Deborah L. Collier, Greenbrier Developers, LLC, Executive Realty Partnership LP, Gerald Franklin, Kenneth Whaley, ISB Community Bank and United States of America, Defendants, Decade Properties, Inc., Intervening Defendant-Appellant-Petitioner. REVIEW OF A DECISION OF THE COURT OF APPEALS Reported at 345 Wis. 2d 397, 824 N.W.2d 928 (Ct. App. 2012 Unpublished) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: July 15, 2014 September 11, 2013 SOURCE OF APPEAL: COURT: COUNTY: JUDGE: Circuit Waukesha Donald J. Hassin Jr. JUSTICES: CONCURRED: DISSENTED: ABRAHAMSON, C.J., BRADLEY, J., dissent. (Opinion filed.) PROSSER, J., did not participate. NOT PARTICIPATING: ATTORNEYS: For were the briefs intervening by Roy L. defendant-appellant-petitioner, Prange, Valerie L. there Bailey-Rihn, and Quarles & Brady LLP, Madison, and oral argument by Valerie L. Baily Rihn. For the co-plaintiff-respondent, there was a brief by John M. Van Lieshout, Joseph W. Voiland, and Reinhart Boerner Van Deuren S.C., Milwaukee; and Neal H. Levin and Freeborn & Peters LLP, Chicago, and oral argument by Neal H. Levin. 2 2014 WI 62 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2011AP2597 (L.C. No. 2009CV4938) STATE OF WISCONSIN : IN SUPREME COURT Associated Bank N.A., Plaintiff, SB1 Waukesha County, LLC, Co-Plaintiff-Respondent, FILED v. Jack W. Collier, Deborah L. Collier, Greenbrier Developers, LLC, Executive Realty Partnership LP, Gerald Franklin, Kenneth Whaley, ISB Community Bank and United States of America, JUL 15, 2014 Diane M. Fremgen Clerk of Supreme Court Defendants, Decade Properties, Inc., Intervening Defendant-AppellantPetitioner. REVIEW of a decision of the Court of Appeals. Modified in part and as modified, affirmed. ¶1 PATIENCE DRAKE ROGGENSACK, J. unpublished 1 decision of the court of This is a review of an appeals1 affirming Associated Bank N.A. v. Collier, No. unpublished slip op. (Wis. Ct. App. Nov. 28, 2012). the 2011AP2597, No. 2011AP2597 circuit court's2 denial of summary judgment, grant of a motion to turn over property to the receiver, and denial of a motion for reconsideration. The review concerns the collection efforts of two judgment creditors of defendant Jack Collier, SB1 Waukesha County, LLC and Decade Properties, Inc., the latter being owned by Collier's business associate, Jeffrey Keierleber. ¶2 order Decade appear to "common argues at supplemental creditor's lien" law property. for when it served Collier proceedings, on all of it with an perfected Collier's a personal According to Decade, its lien preserves the property Decade's benefit, collection from it. Collier that with an thereby precluding SB1 from pursuing SB1 argues that even though Decade served order to appear at supplemental proceedings before SB1 did so, Decade has no lien on Collier's personal property because Decade's judgment was not docketed before its service of the order to appear. SB1 reasons that a judgment must be capable of execution before there is the potential for a common law lien on personal property and undocketed judgments cannot obtain an execution. ¶3 816 We conclude that supplemental proceedings under ch. are a Decade's discovery serving tool Collier in with aid an of judgment order to collection. appear for supplemental proceedings did not give rise to a blanket lien on all of Collier's personal property 2 that prevented SB1 from The Honorable Donald J. Hassin, Jr. of Waukesha County presided. 2 No. 2011AP2597 pursuing collection. A judgment creditor obtains an interest in a identified, judgment debtor's non-exempt personal property superior to other unsecured creditors when it dockets its money judgment, identifies specific personal property and levies that property. Levying different means: may be accomplished by at least three (1) by executing against specific 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 specific personal property to the satisfaction of the judgment, which a creditor may do with the assistance of a supplemental receiver. Wis. Stat. § 815.05(6) (2011-12);3 Wis. Stat. § 812.01; Wis. Stat. § 816.08. ¶4 Here, SB1 was the first judgment creditor with a docketed money judgment to levy specific, non-exempt personal property of Collier. turn over It did so by obtaining a court order to specifically identified property to its receiver. Accordingly, we affirm the decision of the court of appeals that concluded that SB1 has priority over Decade in regard to the specific personal property SB1 identified and levied. However, insofar as the decision of the court of appeals can be read to recognize a blanket lien in favor of SB1 that prevents other creditors from pursuing collection 3 from Collier's personal All subsequent references to the Wisconsin Statutes are to the 2011-12 version unless otherwise indicated. 3 No. property, we modify that decision because no 2011AP2597 blanket lien exists. I. ¶5 This case BACKGROUND concerns SB1's attempt to satisfy the portion of a default judgment against Collier that it purchased from Associated Bank, N.A. The relevant portion of the judgment4 relates to Collier's default on a $7.2 million promissory note in favor of Associated, which Collier secured with a personal guarantee and a mortgage on a Brookfield property. ¶6 money After purchasing a portion of Associated's docketed judgment against Collier, SB1 obtained Collier to appear at supplemental proceedings. attempts to serve Collier in Wisconsin and an order for Despite repeated Florida, where Collier had a second home, SB1 was unsuccessful and the order expired. ¶7 Shortly after SB1 obtained an order for Collier to appear, Keierleber, the owner of Decade, sued Collier. court of appeals succinctly summarized the litigation The as follows: In short order, Keierleber commenced six lawsuits on behalf of Keierleber, Keierleber-owned, and Keierleber- and Collier-owned Wisconsin and Florida entities, Decade among them. Each complaint sought enforcement of a claimed loan right and money judgment against Collier or against two business entities of which Keierleber and Collier each owned a fifty4 The judgment also related to Collier's default on a $1.8 million promissory note, which he secured with his interest in Clearwater Bay Investors, LLC. This debt is not part of the proceedings before us. 4 No. 2011AP2597 percent interest. While still unserved with SB1's order to appear, Collier accepted service of these six complaints. The parties involved in the six new actions executed stipulations agreeing to judgment amounts in each of them. Associated Bank N.A. v. Collier, No. 2011AP2597, unpublished slip op., at ¶4 (Wis. Ct. App. Nov. 28, 2012). ¶8 the Of these six lawsuits, the present case concerns only $654,646.83 personally. judgment Decade tried Decade to obtained docket this against judgment Collier with the Waukesha County Clerk of Court by sending the judgment, a $5.00 docketing fee and a receipt for docketing to the circuit court, where the judgment was to be signed and forwarded to the clerk with the docketing fee and receipt. However, even though Decade's attorneys received the receipt dated October 26, 2010, the clerk did not enter the judgment in the judgment and lien docket. Instead, on June 29, 2011, after the error was discovered, the clerk docketed Decade's judgment. ¶9 order to On November 16, 2010, Decade served Collier with an appear for supplemental proceedings, attorney conducted on November 22, 2010. which Decade's In its brief, Decade explained that it took these actions after learning about SB1's collection efforts in order to "protect its interest by first obtaining a judgment and then a superior Creditor's/Receivers Lien against Collier's personal property." It does not appear from the record that Decade took any additional steps to seize any of Collier's personal property to satisfy its judgment. ¶10 Having been unsuccessful in serving Collier before the initial order expired, SB1 subsequently obtained a second order 5 No. 2011AP2597 for Collier to appear for supplemental proceedings. SB1 also moved the circuit court to appoint a supplemental receiver. ¶11 On April 2, 2011, at Collier's Florida residence, SB1 finally obtained service of the order to appear for supplemental proceedings and its motion to appoint a receiver. On April 18, 2011, Collier failed to appear at the scheduled supplemental proceedings and the supplemental commissioner issued an order to show cause why Collier should not be held in contempt of court. The commissioner also appointed Douglas Mann as supplemental receiver. ¶12 order On June 9, 2011, the day before the return date of the to show proceeding cause, Collier in Florida. SB1 initiated moved to a state enjoin insolvency the insolvency proceeding on the grounds that SB1 had a receiver's lien on Collier's personal property, which was perfected. Decade intervened and objected to imposition of an injunction. The Florida insolvency proceeding was enjoined and Collier was found in contempt of court for failing to appear at SB1's supplemental proceedings. ¶13 sale of On July 29, 2011, SB1 moved for court approval of the Collier's personal property located in Brookfield, Wisconsin, which had a fair market value of $63,925. SB1 also moved to order Collier to turn over certain shares of stock, rights to unasserted counterclaims and affirmative defenses in Waukesha County cases, and all partnership interests profits from an entity called AWI Limited Partnership. 6 in and No. ¶14 2011AP2597 Decade intervened and opposed SB1's motions. Decade moved for summary judgment on the grounds that it had a superior lien on all of Collier's personal property. It argued that according to our decision in Mann v. Bankruptcy Estate of Badger Lines, Inc., 224 Wis. 2d 646, 590 N.W.2d 270 (1999), all that is necessary to perfect a common law lien that prevents SB1 from pursuing collection is service on Collier of an order to appear at a supplemental proceeding. ¶15 SB1 responded that Decade could not have had a lien on Collier's personal property when it served Collier with a notice to appear at supplemental proceedings because Decade's judgment had not been entered in the judgment and lien docket. ¶16 Decade contended that the failure to enter the judgment in the judgment and lien docket did not affect the validity of its lien.5 At a hearing before the circuit court, Decade's attorney argued that "the key issue is that execution and the ability to execute [are] separate from the ability to institute supplementary proceedings because you don't need to have [an un]satisfied execution in order to proceed with compelling order to appear before a court commissioner." a In other words, Decade's position was that a judgment creditor can obtain a common law lien even if its judgment is not docketed or executable because the ability to execute and a judgment creditor's lien are not tethered. 5 The parties seem to agree that the failure to enter Decade's judgment in the judgment and lien docket was due to a clerk's error. 7 No. ¶17 The circuit court rejected Decade's 2011AP2597 argument, reasoning that "if the underpinning for the proceeding fails[,] the proceeding itself necessarily fails." motion for reconsideration, the In denying Decade's court reiterated that its position was that "you can't pursue collection unless you have an executable judgment. . . . [H]ow can you go forward and compel somebody to appear at a supplementary where you don't have a judgment that you can collect on[?]" ¶18 Accordingly, the circuit court concluded that SB1's interest in Collier's personal property was superior to that of Decade's, holding that "[a]ll actions, proceedings, liens or other orders relative to Decade's un-docketed judgment prior to June 29, 2011 that would otherwise [a]ffect or limit SB1's supplemental proceedings or attempt to execute upon the judgment are held for naught." The circuit court then granted SB1's motions and approved the sale of Collier's personal property. The court also vested the supplemental receiver with Collier's rights in the property identified in SB1's motion for turnover. ¶19 Decade appealed and the court of appeals affirmed the orders of the circuit court. The court of appeals concluded that service of an order to appear at supplemental proceedings "does not . . . present an alternative to a properly docketed judgment." The court also concluded that the circuit court's refusal to exercise the court's equitable power in favor of Decade was within its discretion, noting that "the record suggests that Collier evaded service from SB1 for months and that Decade's six lawsuits were filed as a dilatory tactic." 8 No. ¶20 Decade seeks review before us, making 2011AP2597 the same arguments it made to the circuit court and the court of appeals. We affirm the decision of the court of appeals to the extent that it recognized SB1's priority to the property SB1 levied. We also affirm its conclusion that an undocketed judgment cannot obtain an execution. We modify the decision of the court of appeals insofar as it could be read to recognize a blanket lien giving any one unsecured judgment creditor the exclusive right to pursue collection from all of a debtor's personal property, simply due to service of an order to appear for supplemental proceedings.6 II. A. ¶21 DISCUSSION Standard of Review Decade asks us to uphold what it asserts is a judgment creditor's lien on all of Collier's personal property. 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. See McIntyre v. Cox, 68 Wis. 2d 597, 602, 229 6 In explaining its refusal to separate execution and supplemental proceedings, the court of appeals held that "[w]ithout a creditor's lien, there is no right to pursue collection under § 816.03." Associated Bank, No. 2011AP2597, unpublished slip op., ¶16. This statement may simply express the same uneasiness we have with allowing a creditor to circumvent statutory execution processes. Lest our affirmation of the decision of the court of appeals be construed to recognize a blanket lien that gives an unsecured judgment creditor the exclusive right to pursue collection from all of the judgment debtor's personal property, we clarify that no such blanket lien exists or is necessary to pursue collection from a judgment debtor. 9 No. N.W.2d 613 (1975); Yorgan v. Durkin, 2006 WI 2011AP2597 60, ¶55, 290 Wis. 2d 671, 715 N.W.2d 160 (Roggensack, J., dissenting). ¶22 Decade also asks us to review the circuit court's refusal to exercise its equitable powers, for which we employ an erroneous exercise of discretion standard. J.L. Phillips & Assocs. v. E & H Plastic Corp., 217 Wis. 2d 348, 365, 577 N.W.2d 13 (1998). An erroneous exercise of discretion occurs when the circuit court fails to exercise discretion, the facts fail to support the court's decision or the circuit court applies the wrong legal standard. B. ¶23 By Id. at 364-65. General Debtor/Creditor Principles entering a judgment in the judgment and lien docket, a judgment creditor obtains a ten-year statutory lien on real property of the debtor located in the county in which the judgment was docketed. Wis. Stat. § 806.15(1). However, entering a judgment in the judgment and lien docket does not create a Instead, statutory a lien judgment on the creditor debtor's obtains an personal property. unsecured, inchoate interest with regard to the debtor's personal property, tangible and intangible, against which to levy. As such, a judgment creditor will typically "have to take further steps to enforce the judgment." Wisconsin Robert A. Pasch, 12 Wisconsin Practice Series: Collection Law § 14:1, at 286 (2d ed. 2006). Execution, garnishment and turnover orders applying property in satisfaction of a judgment are all judgment debtor's personal property. 10 methods of levying the No. 1. ¶24 2011AP2597 Levy Wisconsin statutes provide several different methods by which to levy, but each "require[s] reachable, non-exempt, assets of the debtor." Pasch, supra, § 14:1, at 287. One method used to judicially enforce money judgments is execution. Black's Law Dictionary 650 (9th ed. 2009); see Wis. Stat. § 815.02 ("A judgment which requires the payment of money or the delivery of property execution."). specific, may be enforced in those respects by For instance, a judgment creditor can execute on non-exempt personal property of the debtor obtaining an order to have the sheriff seize the property. by Wis. Stat. § 815.05(6). ¶25 If a judgment creditor locates specific, non-exempt personal property belonging to the debtor or owed to the debtor in the control of a third party, the judgment creditor may be able to levy that property through garnishment. § 812.01. the Garnishment is entirely statutory.7 absence of does not lie." specific statutory Wis. Stat. Therefore, "[i]n authorization, garnishment Moskowitz v. Mark, 41 Wis. 2d 87, 91, 163 N.W.2d 175 (1968). 7 Garnishment actions vary in type and requirements. For example, under certain circumstances, a garnishment action may be commenced prior to judgment. See Wis. Stat. § 812.02; Wis. Stat. § 812.05. In addition, the filing of a garnishment action does not assure that other creditors do not have a superior claim to the property the garnishee holds. See Wis. Stat. § 812.11(5). 11 No. ¶26 Finally, a creditor may personal property by obtaining a levy court specific, order property in satisfaction of the judgment. to 2011AP2597 non-exempt apply that Wis. Stat. § 816.08. A supplemental receiver may obtain such a turnover order on a creditor's behalf. 267 N.W.2d 890 Id.; Candee v. Egan, 84 Wis. 2d 348, 361, (1978) ("A receiver in aid of execution is authorized to collect those assets revealed by the examination of the debtor, satisfaction of take the possession judgment, of and them, return apply the them to the excess to the judgment debtor."). ¶27 Because each of these statutory collection procedures requires a creditor to identify specific, non-exempt property of the debtor to levy, judgment collection can be cumbersome and expensive if the details of a debtor's property are not known to the judgment creditor. Supplemental proceedings provide a mechanism by which to obtain information in aid of judgment collection. 2. ¶28 Wisconsin Supplemental proceedings Stat. Supplementary to Execution." ch. 816 is entitled "Remedies Supplementary proceedings are a "form of discovery . . . used where the judgment creditor is uncertain of the nature, location, extent, and amount of the debtor's property." Stat. ch. 816 vests Pasch, supra, § 16:1, at 318. a supplemental court Wisconsin commissioner with certain powers to aid in enforcement of the judgment against the judgment debtor's property. For instance, a supplemental court commissioner can compel a judgment debtor who has been served 12 No. 2011AP2597 with an order in compliance with Wis. Stat. § 816.035 to appear to answer questions concerning his or her property. § 816.03. Wis. Stat. If it appears that there is danger of a judgment debtor leaving the state or if the judgment debtor has property he or she unjustly refuses to apply to the judgment, the commissioner may require the debtor to give a bond and refrain from disposing of property not exempt from execution. Stat. § 816.07. Wis. If supplemental proceedings reveal non-exempt personal property, a court commissioner or judge may order that the property be applied toward the judgment, sometimes through the use of a supplemental receiver, rather than having a sheriff seize the property. Wis. Stat. § 816.04; Wis. Stat. § 816.08. 3. ¶29 No statute grants a judgment creditor a lien on the judgment debtor's judgment. had as There, Liens personal property simply by docketing the However, in Badger Lines, we mentioned a lien that one of the its United underpinnings States a Court of docketed Appeals money for judgment. the Seventh Circuit certified the following question that arose in a dispute in federal bankruptcy court: lien obtained supplementary by a "Does Wisconsin law require that a judgment proceedings creditor under Wis. who Stat. institutes § 816.04 perfected, and if so, how is the lien to be perfected?" Lines, 224 Wis. 2d at 649 n.2. assumed, as did the be Badger When we decided Badger Lines, we certified question, that the judgment creditor had a lien, and we answered that "a creditor's lien is valid and superior against other 13 creditors at the time the No. creditor serves the debtor with a summons to 2011AP2597 appear at supplementary proceeding under Wis. Stat. § 816.03(1)(b)." at 649. the Id. We now take a closer look at when a lien may arise and to which personal property such a lien may attach. ¶30 Kellogg v. Coller, 47 Wis. 649, 3 N.W. 433 (1879), involved two judgment creditors who sought to employ Wis. Stat. § 3030 and Wis. Stat. § 3031 (1878) when the executions of their individual judgments were returned unsatisfied. Id. at 657. To some extent, Kellogg's discussion is helpful to determining when a judgment creditor may obtain a lien. There, we explained: In several summary proceedings supplementary to executions against the same debtor, returned unsatisfied (R. S., secs. 3028-3038), such a proceeding being a substitute for a creditor's bill, the creditor who first commences his proceeding and obtains service of process upon the debtor, and prosecutes the proceeding with proper diligence to the appointment of a receiver, obtains a prior lien upon the assets of the debtor. Id. at 649 (emphasis added). This passage appears to be the source of the common law receiver's lien discussed in Candee, which we cited in Badger Lines, and Badger Lines itself. Badger Lines, 224 Wis. 2d at 654. ¶31 However, Kellogg says nothing about a blanket judgment creditor's property. lien on all of the judgment debtor's personal In addition, it is somewhat problematic to argue too strongly from cases as old as Kellogg because the statutes they employ differ from current legislative enactments, and the ever developing body of case law and code can shade what at the moment of decision once seemed so clear. 14 No. ¶32 2011AP2597 Furthermore, there is a "diversity of opinion as to [the] real character" of judgment creditor's liens relating to execution that dates back much farther than Candee. For instance, in Bank of Commerce v. Elliott, 109 Wis. 648, 660-61, 85 N.W. 417 (1901), we examined the rights of creditor who had initiated a garnishment action. a judgment In attempting to ascertain the creditor's rights in relation to a bankruptcy trustee, we noted: The courts have uniformly said . . . that the service of a garnishee process is an equitable levy upon the property of the debtor in the hands of the garnishee, and that the interest thereby obtained in such property is at least in the nature of an equitable lien, and has been commonly called a lien. In many cases it has been called a lien without qualification, in others an equitable lien, and in some a mere inchoate or incipient lien, the mere commencement of proceedings to obtain a lien in fact. . . . Some . . . authorities are to the effect that a garnishee levy creates a specific lien. Others are directly to the contrary. Id. at 660-61 (emphasis added). As we have explained, garnishment creates a lien due to the seizure of the debtor's property that is in the hands of the garnishee defendant. Morawetz v. Sun Ins. Office, 96 Wis. 175, 178, 71 N.W. 109 (1897) ("[G]arnishment is a seizure in the hands of the garnishee by notice to him, creating an effectual lien upon the garnished property to satisfy whatever judgment"). ¶33 The judgment creditors in both Kellogg and Bank of Commerce levied the debtor's property in order to affix common law liens Kellogg by attempted 15 execution that was returned No. 2011AP2597 unsatisfied and then securing the appointment of a receiver, who applied the debtor's personal property to the judgment debt, and Bank of Commerce by prosecuting a garnishment action, wherein the specific personal property in the hands of a third party was levied. 661. Kellogg, 47 Wis. at 656; Bank of Commerce, 109 Wis. at The conclusion that a judgment creditor who first identifies and levies specific, non-exempt personal property of a judgment debtor has a superior interest in regard to other judgment creditors who have taken no such actions in regard to the identified property is consistent with our earlier decisions.8 ¶34 For example, in Alexander v. Wald, 231 Wis. 550, 286 N.W. 6 (1939), we examined the rights of a supplemental receiver vis-a-vie a bankruptcy trustee. Id. at 551. We held that the receiver, who had discovered and executed on intangible personal property mortgage, consisting and of certain a real personal estate property mortgage, that the a chattel debtor had fraudulently conveyed, had an interest superior to that of the bankruptcy trustee with respect to that property because the receiver had been appointed and levied more than four months before commencement of the bankruptcy. 8 Id. It should be noted that when two judgment creditors with docketed money judgments each attempt to levy identified, nonexempt personal property, or when a perfected secured party's rights are at issue, further analysis may be necessary to determine relative priorities. 16 No. ¶35 2011AP2597 In Holton v. Burton, 78 Wis. 321, 47 N.W. 624 (1890),9 we reached a consistent result. Holton concerned a judgment creditor who had initiated supplemental proceedings, but had not levied any specific property. An assignment for the benefit of creditors was made after supplemental proceedings were begun, but before a supplemental receiver was appointed. Id. at 322. We reasoned that the judgment creditor did not have a superior interest, but instead had to take a pro rata share of the debtor's personal property in the insolvency proceeding because the judgment creditor had not timely levied specific personal property to avoid the effect of the insolvency proceedings. Id. at 327-28. ¶36 It is reasonable to conclude that the results in Alexander and Holton, where judgment creditors were in disputes with insolvency trustees, were at least partially due to the different steps the judgment creditors took and the timing of those steps. When the judgment creditor exercised rights to the debtor's property by timely levying specific property well in advance of the insolvency proceedings, the creditor prevailed. When the creditor did nothing more than initiate supplemental proceedings prior to an insolvency proceeding, the creditor did not prevail. Stated otherwise, a judgment creditor obtained a superior interest in identified personal property of a judgment debtor that could defeat the claim of a trustee in insolvency or 9 While the reasoning in Holton v. Burton, 78 Wis. 321, 47 N.W. 624 (1890), is interesting, I note that the statutes then employed have been changed significantly. 17 No. 2011AP2597 bankruptcy proceedings when the judgment creditor or a receiver acting on the judgment creditor's behalf levied that property before the trustee obtained an interest in the property.10 ¶37 At first glance, Kellogg may appear to cast doubt on this interpretation. had executions proceedings receivers.11 and In Kellogg, two judgment creditors, who returned unsatisfied, obtained The first appointments judgment initiated of two creditor supplemental supplemental to initiate supplemental proceedings was second to properly serve the debtor with an order to appear for supplemental proceedings because of a technical problem with its first service. 651-52. Kellogg, 47 Wis. at By the time the first judgment creditor properly served the debtor, the second judgment creditor had served the debtor and the debtor had assigned his property to the second judgment creditor's receiver in aid of execution of the second creditor's 10 Early New York cases are particularly persuasive because Wisconsin adopted its supplemental proceeding statutes from New York. Robert S. Moss, Supplementary Proceedings in Wisconsin, 23 Marq. L. Rev. 49, 51 (1939). These cases also support our interpretation. While the New York and Wisconsin supplemental proceeding statutes were still comparable, the New York rule was "to give the creditor a lien on the debtor's equitable assets which was [an] 'inchoate' [lien] at the time the examination order was served." See Isadore H. Cohen, Collection of Money Judgments in New York: Supplementary Proceedings, 35 Colum. L. Rev. 1007, 1015-17 (1935) (citing Edmonstone v. McLoud, 16 N.Y. 543 (N.Y. 1858); Lynch v. Johnson, 48 N.Y. 27 (N.Y. 1871)). 11 We ultimately held that "where different judgment creditors are prosecuting supplementary proceedings against the same debtor at the same time," only one receiver should be appointed. Kellogg v. Coller, 47 Wis. 649, 657, 3 N.W. 433 (1879). 18 No. judgment. Id. 2011AP2597 Despite the assignment, we concluded that "under all of the circumstances of the case, [the second creditor's] proceeding [wa]s inoperative to give [the second creditor] a prior lien." ¶38 Id. at 657. Read in light of its facts, Kellogg established the judgment creditor for whose benefit a supplemental receiver must act, i.e., which judgment creditor had priority to money that the supplemental receiver recovered, creditor had the receiver appointed. regardless of which Under Kellogg, the first judgment creditor who made a "bona fide attempt to serve" an order to appear for supplemental proceedings and also prosecuted "with proper diligence" to the appointment of a supplemental receiver had recovered, priority if the assets the receiver supplemental was appointed receiver in the supplemental proceedings of a different judgment creditor. Id. at 656-57.12 even to The equities of the underlying facts also may have impacted our decision in Kellogg because the second judgment creditor and her attorney "had actual notice that [Kellogg] had previously commenced [supplemental instituted her proceeding. ¶39 proceedings]" when she Id. at 652. However, it is significant that two judgment creditors remained free to pursue collection on their docketed judgments 12 See also Alexander v. Wald, 231 Wis. 550, 552, 286 N.W. 6 (1939) ("bankruptcy proceedings had not displaced the lien acquired by the receiver upon his appointment"); Cohen, supra note 10, at 1016 (in New York, it was only upon appointment of a receiver that a creditor's interest "ripen[ed] into a full lien"). 19 No. at the same time. proceedings may be restriction upon a Id. at 658 pending junior at ("different the proceeding same [supplemental] time, being 2011AP2597 that the only creditors prosecuting prior proceedings shall be notified of the pendency thereof, and that but one receiver shall be appointed. . . . the plaintiff in the junior proceeding should be allowed to proceed . . . without regard to priorities"). ¶40 Furthermore, our conclusion that a superior judgment creditor's interest in specific personal property may arise when that property is seized has been the statutory directive of the legislature since at least 1864. As we explained so long ago in Knox v. Webster, 18 Wis. 426 (*406) (1864), when interpreting a prior statute, "'[p]ersonal property shall be bound from the time of its seizure on execution.' Before seizure there is no lien[;] . . . [t]he lien takes effect from the date of the levy and by virtue thereof." omitted). In this regard, the current statute states the same legal principle: time it Id. at 429-30 (*409) (internal citation is "Personal property shall be bound from the seized." Wis. Stat. § 815.19(1). Accordingly, seizure, often referred to as levying, of personal property is necessary to create a lien in favor of an unsecured judgment creditor. ¶41 Having explained the common law foundation and the statutory foundation for when a judgment creditor's lien may 20 No. 2011AP2597 arise in identified personal property,13 we briefly return to Badger Lines. Badger Lines arose in a priority contest between a judgment creditor, Emerald Industrial Leasing Corporation, and a trustee in bankruptcy. Badger Lines, 224 Wis. 2d at 649-50. A trustee in bankruptcy has, by federal statute, all the rights of a judgment creditor. 11 U.S.C. § 544(a). A supplemental receiver had been appointed to administer Badger Lines' property for the benefit of Emerald before the case made its way to us. Prior to the appointment docketed its judgment. And subsequent directing to the receiver, Emerald also had Badger Lines, 224 Wis. 2d at 649-50. said Badger proceeding. ¶42 to of docketing, appear for Emerald served an order a ch. 816 supplemental judgment is a Id. at 650. Docketing a creditor's condition precedent to establishing the priority of a judgment creditor's interest because a judgment must be docketed before an execution against the property of a judgment debtor can issue. § 815.05(1g)(a)6. (requiring that an execution Wis. Stat. shall state, "[t]he time of entry in the judgment and lien docket in the county to judgment which creditor the execution must levy is issued"). specifically 13 Furthermore, identified a personal See In re Badger Lines, Inc., 140 F.3d 691, 694-95 (7th Cir. 1998) (finding that Kellogg's omission of a perfection requirement is "too thin a reed on which to rest [an] important [priority] determination, especially in light of the significant changes which have occurred in debtor/creditor law in the 120 years since" that decision). 21 No. 2011AP2597 property of the debtor before a lien can arise in that property. Knox, 18 Wis. 2d at 429-30; Wis. Stat. § 815.19(1). ¶43 In Badger Lines, the trustee in bankruptcy attempted to declare Emerald's interest a preference, whereby he could place Emerald's money judgment among all of the other unsecured creditors' claims. Badger Lines, 224 Wis. 2d at 650-51. Of course, Emerald had no interest in sharing the assets it had uncovered with other creditors. However, if Emerald's lien was created within 90 days of filing the bankruptcy, it would be held to be an avoidable preference and Emerald would lose to the trustee. creation Id. at 651. of its lien, Therefore, instead of focusing on the Emerald "perfection" of its lien. shifted the court's focus to Emerald did so because if perfection occurred more than 90 days before the filing of the bankruptcy, Emerald could possibly prevail. ¶44 displayed In Badger Lines, we did not have a full record that all the issues that we might have considered; therefore, it differed significantly from the case now before us.14 Badger Lines' statement that the date of service on Badger 14 At least one commentator seemed to view the Badger Lines as a departure from older case law, noting that: The Wisconsin Supreme Court, In re Badger Lines, Inc., 224 Wis. 2d 646, 590 N.W.2d 270 (1999), held that service upon the debtor of an order to appear at a supplemental examination under Chapter 816 establishes at the time of service a lien in favor of the creditor without requiring the creditor to take additional steps to perfect the lien . . . The court rejected arguments that, to avoid a secret lien, some additional action should be required of a judgment creditor. The court also rejected arguments that the 22 No. 2011AP2597 Lines of the order to appear for supplemental proceedings was the date of "perfection" must be limited to the context in which it arose. That context did not include an assertion that common law liens do not require "perfection," but rather, liens arise in specifically identified, non-exempt personal property when that property is levied. ¶45 Accordingly, it must be recognized that service of an order to appear for supplemental proceedings will not create an interest that is superior to the interest of a docketed judgment creditor who debtor. Merely serving an order to appear for supplemental proceedings has also levied will specific not create personal a common property law lien of on the the debtor's personal property nor will it give a judgment creditor an interest superior to that of a secured creditor who has lien should not arise until a supplemental receiver is appointed or the court issues a turnover order as to the debtor's assets; the court held that the lien arises at an earlier stage, when the judgment debtor is served with the order to appear at the supplemental examination. See Holton v. Burton, 78 Wis. 321, 47 N.W. 624 (1890). Robert A. Pasch, 12 Wisconsin Practice Series: Wisconsin Collection Law § 16:13, at 330-31 (2d ed. 2006). Pasch also noted the breadth of the decision, explaining that the case "references the lien as a 'receiver's lien,' [but] . . . appears to have broader application to the lien of a judgment creditor pursuing supplemental proceedings." Id. at 331. 23 No. 2011AP2597 timely proceeded according to the directives of Wis. Stat. ch. 409.15 4. ¶46 judgment Statutory collection procedures To conclude, as Decade asserts, that simply serving a debtor with an order to appear at supplemental proceedings gives a judgment creditor the exclusive right to pursue collection from all of the debtor's personal property would improperly "impinge on the purview of the legislature" by eviscerating its statutory scheme for judgment collection. See Crown Castle USA, Inc. v. Orion Constr. Group, LLC, 2012 WI 29, ¶17, 339 Wis. 2d 252, 811 N.W.2d 332 (refusing to find an implied right to compel a third party to appear at supplemental proceedings because Wis. Stat. ch. 816 did not provide for one). ¶47 For example, if a judgment creditor were able to encumber all of a judgment debtor's personal property simply by 15 Wisconsin Stat. ch. 409 governs voluntarily given security interests, rather than creditors' rights represented by a judgment. Wis. Stat. § 409.109(4)(i) (chapter does not apply to "assignment of a right represented by a judgment, other than a judgment taken on a right to payment that was collateral"). Under this system of secured transactions, a creditor obtains a security interest in property the debtor has assigned as collateral that is enforceable against the debtor when "attachment" occurs pursuant to Wis. Stat. § 409.203. The creditor's security interest is valid against the claims of other creditors when it perfects that interest by meeting "all of the applicable requirements for perfection in ss. 409.310 to 409.316." Wis. Stat. § 409.308. These "applicable requirements" vary depending on the type of collateral, but the general rule is that "a financing statement must be filed to perfect all security interests." § 409.310(1). See Attorney's Title Guaranty Fund, Inc. v. Town Bank, 2014 WI 63, __ Wis. 2d __, __ N.W.2d __. 24 No. serving an order to appear for supplemental 2011AP2597 proceedings, alternate statutory processes such as execution, ch. 815, and garnishment, ch. 812, and turnover orders useless for collection of money judgments. who does nothing more than initiate would be nearly A judgment creditor supplemental proceedings could stop another judgment creditor who has located specific, non-exempt personal property from having the sheriff seize the asset under a valid execution order. Similarly, a judgment creditor who discovered a judgment debtor's bank account could be prevented from garnishing that account once appear for supplemental proceedings was served. an order to And since state law determines priority in bankruptcy, a judgment creditor who does nothing more than serve a debtor with an order to appear at supplemental proceedings outside of the bankruptcy preference period could thereby defeat the claim of a bankruptcy trustee (and the unsecured creditors he or she represents) to all of the debtor's personal property. If those results were to occur, they would directly contradict the legislature's directive that "[p]ersonal property shall be bound from the time it is seized." Wis. Stat. § 815.19(1). ¶48 docketed Moreover, by granting the judgment who first judgment levies on creditor non-exempt with a personal property a superior interest in that property, "[t]he law justly rewards the diligent creditor who by his timely efforts succeeds in discovering assets of the withheld from his creditors." debtor which are John W. Smith, inequitably The Equitable Remedies of Creditors § 235, at 243 (Chicago, Callaghan & Co. 25 No. 1899). 2011AP2597 Rather than encouraging diligence, the kind of blanket lien Decade asks us to recognize would remove incentives for a judgment creditor property. to locate and levy a debtor's personal The facts of this case aptly demonstrate some of the problems this would present. 5. ¶49 A Article 9 secured transactions blanket property also uniform would system of lien on a frustrate secured judgment the debtor's legislature's transactions. personal goal The of a Wisconsin Legislature adopted the Uniform Commercial Code in 1965 in order to "simplify, clarify, commercial transactions." ¶50 Chapter 409 and modernize the law governing Wis. Stat. § 401.103(1)(a). governs secured transactions and works toward these stated goals by prescribing the steps a party must take to obtain property.16 and perfect a security interest in personal Wis. Stat. § 409.203; Wis. Stat. § 409.301 et. seq.; see generally Smith & Spidahl Enters., Inc. v. Lee, 206 Wis. 2d 663, 673, 557 N.W.2d 865 (Ct. App. 1996) ("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 16 Article 9 of the Uniform Commercial Code is contained in Wis. Stat. ch. 409. 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 Chapter 409 of the Wisconsin Statutes. Chapter 409 does not vary in any material respect from the uniform law."). 26 No. 2011AP2597 uncertainty and inconsistency that would result from such an approach."). ¶51 Stat. Article 9 does not apply to the present case. § 409.109(4)(i). Judgment creditors are Wis. unsecured creditors with regard to a debtor's personal property. Still, the impact of a blanket lien on the statutory scheme for secured transactions provides additional understanding of the conflicts that such a lien would create. implications a blanket lien We explain in more detail the would have on lending, paying particular attention to Wis. Stat. ch. 409 in Attorney's Title Guaranty Fund v. Town Bank, 2014 WI 63, ¶¶30-36, __ Wis. 2d __, __ N.W.2d __, released today. ¶52 And finally, we conclude that if a judgment creditor were to have a blanket lien on all the personal property of a judgment debtor collection, that that precludes is a policy legislature than to the courts. § 708.110(d) (providing property one for supplemental year for from proceedings); a other choice 27 better from left pursuing to the Compare Cal. Civ. Proc. Code lien service 735 creditors on of ILCS non-exempt notice to 5/2-1402(m) personal appear at (judgment No. 2011AP2597 "becomes a lien" on non-exempt personal property when citation from the clerk is served).17 C. ¶53 Application Decade contends that because it served an order to appear for supplemental proceedings, it has a blanket lien on all of Collier's non-exempt personal property. does not explain how it acquired this lien. However, Decade Instead, it skips that step in the analysis and discusses perfection of its lien. ¶54 SB1 asserts that "neither Decade nor Keierleber had any interest in actually recovering money from Collier." This view is supported by "the record[, which] suggests that Collier 17 Wisconsin is not the first state to face problems regarding the idea of a common law lien arising out of supplemental proceedings. Illinois courts were split on whether the issuance of a "citation to discover assets," a procedure akin to supplemental examination, created a lien, until the legislature expressly provided for the creation of a lien. Prior v. Farm Bureau Oil Co., 176 B.R. 485, 492 (Bankr. S.D. Ill. 1995); see Francis Edward Stepnowski, Less Than Perfected: Uncertainty in Illinois Judgment Lien Law, 13 N. Ill. U. L. Rev. 33, 41 (1992) (before the legislature provided for the lien, Illinois case law created uncertainty, "whereas today's business climate requires bright-line rules to determine priority among creditors"). The New York legislature similarly provided for a lien upon "secur[ing of] an order for delivery of, payment of, or appointment of a receiver of, a debt owed to the judgment debtor or an interest of the judgment debtor in personal property" in order "to avoid the confusion of . . . former law." N.Y. C.P.L.R. § 5202 (Consol. 2013) and Advisory Committee Notes subd. (b); see Cohen, supra note 10, at 1015-17. Finally, the California legislature has provided for a lien on personal property that is compatible with Article 9. See Cal. Civ. Proc. Code § 697.510(a) (providing judgment creditors with the equivalent of a security interest in a debtor's personal property when the creditor files notice of a judgment in the state's central filing system). 28 No. evaded service from SB1 for months and that lawsuits were filed as a dilatory tactic." 2011AP2597, unpublished slip op., at 2011AP2597 Decade's six Associated Bank, No. ¶18. Should we adopt Decade's position, we would be affirming Decade's ability to shelter Collier's assets from SB1 and other creditors. SB1 asserts that if Decade's contention were correct, by serving Collier with an order to appear, Decade could prevent other creditors from executing on Collier's personal property while Decade itself took no steps to apply satisfaction of Decade's judgment. Collier's property in Therefore, as long as Decade continued to take no action to collect, Collier would remain in possession of his personal property, flouting the "noble proposition that debtors ought to pay." David Gray Carlson, Critique Liens of Money Judgment (Part Two: on New York Personal Property), 83 St. John's L. Rev. 43, 44 (2009). ¶55 SB1's argument has a lot of merit. SB1 has not only docketed its money judgment and served Collier with an order to appear for turnover supplemental order through proceedings, a receiver SB1 for also obtained Collier's personal property thereby levying that property. a identified Accordingly, SB1 has a lien on that levied property that is superior to other unsecured judgment creditors. ¶56 In addition, we conclude that Decade does not have the exclusive right to pursue property simply by serving supplemental proceedings collection him because 29 with from a Decade Collier's notice had not to personal appear docketed at its No. 2011AP2597 judgment and proceeded in its collection efforts sufficient to acquire a lien on any of Collier's personal property. ¶57 Before contention that concluding, the circuit we briefly court address erroneously Decade's exercised its discretion when it refused to give Decade priority over SB1 in regard to Collier's personal property. Decade contends that the circuit court should have employed its equitable powers and held its judgment was docketed because the failure in docketing was due to the error of the clerk. ¶58 First, if Decade Again, we disagree. suffered any damages due to the clerk's error, the legislature has provided a statutory remedy for that error in Wis. Stat. § 806.10(3). court balanced Decade's lawsuits and Second, the circuit supplemental proceeding with Collier's apparent evasion of service of SB1's order to appear and concluded that Decade's failure to docket should not be accorded an equitable remedy. Third, we agree with the court of appeals that serving an order to appear for supplemental proceedings is not the equivalent of docketing a money judgment. "In a race-notice docketing of jurisdiction judgments priority of claims." is such needed to as Wisconsin, establish the prompt proper S. Milwaukee Sav. Bank v. Barrett, 2000 WI 48, ¶40, 234 Wis. 2d 733, 611 N.W.2d 448. Fourth, a properly docketed judgment is required to obtain a statutory lien on real property. Wis. Stat. § 806.15; Builder's Lumber Co. v. Stuart, 6 Wis. 2d 356, 364, 94 N.W.2d 630 (1959). required for personal property. 30 No less should be Accordingly, we conclude that No. 2011AP2597 the circuit court did not erroneously exercise its discretion when it refused to grant Decade equitable relief. III. CONCLUSION ¶59 816 We conclude that supplemental proceedings under ch. are a Decade's discovery serving tool in Collier aid with of an judgment order to collection. appear for supplemental proceedings did not give rise to a blanket lien on all of Collier's personal property that prevented SB1 from pursuing collection. A judgment creditor obtains an interest in a identified, judgment debtor's non-exempt personal property superior to other unsecured creditors when it dockets its money judgment, identifies specific personal property and levies that property. Levying different means: may be accomplished by at least three (1) by executing against specific 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 specific personal property to the satisfaction of the judgment, which a creditor may do with the assistance of a supplemental receiver. Wis. Stat. § 815.05(6); Wis. Stat. § 812.01; Wis. Stat. § 816.08. ¶60 Here, SB1 was the first judgment creditor with a docketed money judgment to levy specific, non-exempt personal property of Collier. turn over It did so by obtaining a court order to specifically identified property to its receiver. Accordingly, we affirm the decision of the court of appeals that concluded that SB1 has priority over Decade in regard to the 31 No. 2011AP2597 specific personal property SB1 identified and levied. However, insofar as the decision of the court of appeals can be read to recognize a blanket lien in favor of SB1 that prevents other creditors from property, we pursuing modify collection that decision from Collier's because no personal blanket lien exists. By the Court. The decision of the court of modified and as modified, affirmed. ¶61 DAVID T. PROSSER, J., did not participate. 32 appeals is No. ¶62 SHIRLEY S. ABRAHAMSON, majority opinion reaches its C.J. erroneous 2011AP2597.ssa (dissenting). conclusion today The by operating in its own imaginary world, divorced from reality. ¶63 In the real world, our courts have recognized for the last 150 years a judgment creditor's common-law equitable lien, superior to other creditors, created by service of notice of a supplementary proceeding upon a judgment debtor on the debtor's non-exempt personal property. debtors have relied equitable lien. upon In the real world, creditors and this judgment creditor's common-law In the real world, the parties in the instant case dispute the applicability of this common-law equitable lien to the undisputed facts. ¶64 In the world of the majority opinion, a judgment creditor's common-law equitable lien and the issues raised by the parties simply have not existed and will not exist in the future.1 1 According to the majority opinion, a lien on a judgment debtor's non-exempt personal property turns on the judgment creditor's "levying" on non-exempt personal property after identifying the property and docketing the judgment. Majority op., ¶3. Docketing the judgment is mentioned in only one place in chapter 815, entitled "Execution": Section 815.05(1g)(a)6. provides that the execution "shall intelligibly refer to the judgment stating," inter alia, "the time of entry in the judgment and lien docket in the county to which the execution is issued." With regard to execution, Wis. Stat. § 806.06(4) provides that "[n]o execution shall issue until the judgment is perfected or until the expiration of the time for perfection." (emphasis added). A judgment is perfected "by the taxation of costs and the insertion of the amount thereof in the judgment." Wis. Stat. § 806.06(1)(c). Perfection does not relate to docketing. 1 No. ¶65 2011AP2597.ssa The issue in this case as presented by the parties is whether Decade Property obtained a common-law equitable lien on Jack Collier's personal property superior to SB1's interest when Decade Property, judgment debtor, the judgment with an creditor, order to served appear at Collier, a the supplemental examination but the clerk of circuit court failed to docket the judgment.2 ¶66 Jack SB1 asserts a superior common-law equitable lien on Collier's served Collier non-exempt personal notice the of property even supplementary though proceeding SB1 after Decade Property served Collier, but SB1's judgment was docketed before Decade Property's judgment was docketed. The circuit court and court of appeals agreed with SB1. ¶67 Rather than creditor obtains a opinion broadly and address the common-law issue equitable surprisingly holds of how lien, that a judgment the majority supplemental Furthermore, Wis. Stat. § 815.04(1)(a) permits execution to issue "within 5 years of the rendition of the judgment. Section 806.06(1)(a) provides that "[a] judgment is rendered by the court when it is signed by the judge or by the clerk at the judge's written direction" (emphasis added). The circuit court and court of appeals do not always use the words "perfecting" a judgment, "entering" a judgment, and "docketing" a judgment as these words are used in the statutes. 2 The Petition for Review states the issue as follows: "Is a creditor's right to obtain a common law Creditor's/Receiver's Lien against a judgment debtor's personal property conditioned upon docketing the judgment in the Judgment and Lien Docket under Wis. Stat. § 806.10(1)?" The circuit court concluded, and the court of appeals affirmed, that docketing the judgment was a prerequisite for a common-law creditor's lien. See majority op., ¶19. 2 No. 2011AP2597.ssa proceedings do not give rise to any lien whatsoever on any of the debtor's under ch. personal 816 collection." are property. a Majority "[S]upplemental discovery op., tool ¶3. in aid proceedings of "Supplementary judgment proceedings provide a mechanism by which to obtain information in aid of judgment collection." ¶68 Majority op., ¶27. According to the majority opinion, a judgment creditor obtains an interest in a judgment debtor's identified non-exempt personal property superior to other unsecured creditors when the judgment creditor (1) dockets its money judgment, (2) identifies specific, non-exempt personal property, and (3) "levies" (by at least one of three enumerated means) the specific non-exempt personal property it has identified. ¶69 The long-recognized Majority op. ¶¶3, 23, 33. judgment creditor's equitable common-law lien arising from supplementary proceedings simply does not exist in the world created by the majority opinion. Yet in the real world, creditors and debtors have long relied on the court's recognition of the common-law equitable lien.3 In writing the common-law creditor's lien out of Wisconsin legal history, the majority opinion mischaracterizes or ignores existing case law. ¶70 To put the majority opinion's rewriting of history and case law in proper perspective, I first review the law regarding the judgment creditor's common-law equitable lien arising on a 3 See Attorney's Title Guaranty Fund v. Town Bank, 2014 WI 63, ___ Wis. 2d ___, ___N.W.2d ___ (a judgment creditor acted under the assumption that a common-law equitable lien existed on the judgment debtor's property). 3 No. debtor's personal proceedings. non-exempt property in 2011AP2597.ssa supplementary I then discuss our most recent case, In re Badger Lines, Inc., 224 Wis. 2d 646, 590 N.W.2d 270 (1999), a case that the majority opinion in effect overrules without confronting the doctrine of stare decisis. ¶71 Before I tackle these two issues, I enumerate a few other flaws in the majority opinion (not necessarily in order of significance), but I do not address each in great detail. ¶72 First, the majority opinion is confused and confusing as it describes its holding in different ways in different parts of the opinion. Compare majority op., ¶¶3, 20, 33, 42, 45, 47, 48, 52, 60. ¶73 Second, the majority opinion entangles the law on liens on real property and personal property. See majority op., ¶58; No. Associated Bank N.A. v. Collier, 2011AP2597, unpublished slip op., ¶14 (Wis. Ct. App. Nov. 28, 2012). ¶74 Third, "levying" is the it is undefined. lien on majority opinion, yet majority opinion, a a important judgment concept in the According to the debtor's non-exempt personal property turns on the judgment creditor's "levying" on the non-exempt personal property. ¶75 Majority op., ¶3. Yet service of notice of a supplementary proceeding has been characterized by the court as an "equitable levy." Supplementary proceeding on the debtor "operates as an equitable levy, and creates a lien in equity upon the effects of the judgment debtor, and every species of property belonging to [the debtor] may be reached and applied to the satisfaction of his 4 No. debts." 2011AP2597.ssa Bragg v. Gaynor, 85 Wis. 468, 486, 55 N.W. 919 (1893) (emphasis added).4 See also In re Milburn, 59 Wis. 24, 34, 17 N.W. 965 (1883) (service of the notice of the supplementary proceeding "operates as an equitable levy and creates a lien in equity . . . "). ¶76 opinion Without ignores discussion case law or describing supplementary proceeding as an ¶77 explanation, service of the majority notice of a "equitable levy." Fourth, the majority opinion appears to conflict with various statutes. Contrary to the majority opinion, a judgment creditor need not always docket the judgment to obtain a lien and priority on non-exempt personal property of the debtor.5 ¶78 For example, a judgment creditor may, without docketing the judgment, obtain a lien on a debtor's property by use of garnishment. On service of the garnishment complaint, the garnishment lien has priority. Wis. Stat. § 812.18.6 A garnishee is liable as to debts due "or to become due" at the time of service of the garnishment summons and complaint.7 4 See also Candee v. Egan, 84 Wis. 2d 348, 360, 267 N.W.2d 890 (1978) (service of notice of the supplementary proceeding serves as an equitable levy on the unknown property of the debtor "to preserve the debtor's nonexempt property for the benefit of the specific judgment creditors . . . ."). 5 Liens may be perfected in many different ways. The manner in which a lien is perfected depends on both the type of lien asserted, e.g., a judgment lien, a statutory lien, an equitable lien, and the type of property against which the lien is asserted, e.g., real or personal. 6 See also Robert A. Pasch, 12 Wisconsin Practice Series: Wisconsin Collection Law § 17:15, at 349 (2d ed. 2006). 7 Wis. Stat. § 812.18. 5 No. ¶79 levy 2011AP2597.ssa The court has spoken of garnishment as an equitable upon the property of the debtor in the hands of the garnishee, just as it has spoken of service of notice of a supplementary proceeding as operating as an equitable levy. concern about Bragg, 85 Wis. at 486. ¶80 Fifth, the majority opinion voices "blanket liens" over a debtor's non-exempt personal property.8 agree that issues exist regarding the scope of a I judgment creditor's common-law equitable lien on a debtor's non-exempt personal property, including a lien on after-acquired property. By eliminating the lien entirely, the majority opinion does not tackle the common-law more nuanced equitable lien issues involving created by the notice scope of of the supplementary proceedings, an issue raised by the parties in the instant case. ¶81 Sixth, by subverting the judgment creditor's common-law equitable lien, the majority opinion ignores of court to promote predictability, transactions. the policy efficiency, and longstanding this uniformity rule in on a commercial The majority opinion does not consider whether it should "sunburst" its opinion to maintain the predictability and efficiency of the law governing economic transactions.9 8 9 See majority op., ¶¶3, 20, 51, 52-55. The decision to apply a new rule of law only prospectively, or to "sunburst" the new rule of law, is driven by our attempt to alleviate the unsettling effects of a party justifiably relying on a contrary view of the law. [State ex rel. Buswell v. Tomah Area Sch. Dist., 2007 WI 71, ¶ 46, 301 Wis. 2d 178, 732 N.W.2d 804]. Accordingly, in determining whether to apply a new rule of law prospectively instead of retrospectively, we consider three factors: (1) 6 No. ¶82 2011AP2597.ssa Accordingly, I dissent. I ¶83 I creditor's begin by discussing common-law the equitable case lien law in on a judgment supplementary proceedings. ¶84 Since the early days of statehood, our statutes and case law have recognized that when a judgment creditor properly serves notice upon a debtor of a supplementary proceeding to identify property to satisfy its judgment, the judgment creditor obtains a common-law equitable lien on the debtor's property.10 ¶85 The judgment creditor's common-law equitable lien has a long robust history in our state. It can be traced to the whether our holding establishes a new rule of law, either by overruling clear past precedent on which litigants may have relied, or by deciding an issue of first impression, the resolution of which was not clearly foreshadowed; (2) whether retroactive application would further or impede the operation of the new rule; and (3) whether retroactive application could produce substantial inequitable results. Id., ¶47; see also [Kurtz v. City of Waukesha, 91 Wis. 2d 103, 109, 280 N.W.2d 757 (1979)]. Heritage Farms, Inc. v. Markel Ins. Co., 2012 WI 26, ¶45, 339 Wis. 2d 125, 810 N.W.2d 465 (footnote omitted). 10 See, e.g., Kellogg v. Coller, 47 Wis. 649, 656 (1879); In re Milburn, 49 Wis. 24, 17 N.W. 965 (1883); Bragg v. Gaynor, 85 Wis. 468, 486, 55 N.W. 919 (1893); In re Badger Lines, Inc., 224 Wis. 2d 646, 654 (citing Candee, 84 Wis. 2d at 360). Wisconsin creditors and debtors, including both parties in the instant case, point to the judgment creditor's common-law equitable lien on a debtor's property created by a subpoena or notice to appear at a supplementary hearing. See Brief of Intervening Defendant-Appellant at 31-39; Brief of the CoPlaintiff-Respondent at 16. 7 No. creditor's bill in equity. 2011AP2597.ssa In 1856 the Wisconsin legislature adopted the precursor to chapter 816 of the Wisconsin Statute governing supplementary proceedings11 substitute supplementary proceedings "with for the obtainable in equity by a creditor's bill."12 the intent relief to formerly The supplementary proceedings are the "statutory equivalent of a creditor's bill in equity at common law and follow essentially the same rules of law."13 ¶86 The court has routinely used the common-law principles of the creditor's bill in equity to interpret the supplementary proceedings statutes. A supplementary proceeding, the court declared, "is a substitute for a creditor's bill in equity, and is governed by the same rules of law in respect to the rights and priorities of parties affected by the proceeding which control the equitable action. . . . [T]he creditor who, after filing his bill, obtained the first service of the subpoena upon the judgment debtor, thereby obtained a prior lien upon the equitable assets of such debtor."14 11 Ch. 120, §§ 200-213, Laws of 1856. 12 Robert S. Moss, Supplementary Proceedings in Wisconsin, 23 Marq. L. Rev. 49, 49 (1939). Moss urged clarification of the principles and practices governing supplementary proceedings. 23 Marq. L. Rev. at 58. 13 In re Badger N.W.2d 270 (1999). Lines, Inc., 224 Wis. 2d 646, 654, 590 If a lien existed at common law, the mere existence of other lien statutes does not abrogate the common-law lien. Moynihan Associates, Inc. v. Hanisch, 56 Wis. 2d 185, 190, 201 N.W.2d 534 (1972). 14 Kellogg v. Coller, 47 Wis. 649, 655-56 (1879). 8 No. ¶87 equity 2011AP2597.ssa The creditor's bill in equity existed as a remedy at for creditor's creditors bill in when equity no remedy arose at to existed.15 law address judgment creditors of debtors who had died. the problem The of At common law, the debtor's property at death no longer belonged to the debtor for purposes of execution; the property debtor's heirs and assigns.16 instead belonged to the The creditor's bill in equity allowed the creditor to reach the assets of the deceased debtor by providing a separate action for the creditor against the estate, heirs, or assigns of the deceased debtor. ¶88 Additionally, the creditor's bill in equity provided an equitable remedy if a judgment debtor concealed assets from the debtor and the sheriff was forced to return with an execution unsatisfied, leaving the creditor with no remedy at law to satisfy his or her judgment.17 15 Robert S. Moss, Supplementary Proceedings in Wisconsin, 23 Marq. L. Rev. 49, 50 (1939). For an extensive discussion of the creditor's bill in equity, see C.C. Langdell, A Brief Survey of Equity Jurisdiction, Part VI, 4 Harv. L. Rev. 99 (1890). 16 At common law, when the debtor died, the creditor was unable to execute on the debtor's property. Langdell, supra note 15, at 119. 17 As in the creditor's bill, an appeal was made to the conscience of the defendant to discover upon oath whether he had property covered up or concealed beyond the reach of an execution, so in this proceeding, the judgment debtor is required to state, under oath, whether he has not property somewhere concealed, which should be applied in payment of his debts. In re Remington, 7 Wis. 541, 548 (1858). 9 No. ¶89 2011AP2597.ssa The common-law lien functioned as an "equitable levy" precisely because the property could not be levied on at law.18 The majority service of opinion notice gets of a it backwards when supplementary it rules proceeding that cannot constitute a lien and that a judgment creditor must levy on the property in order to establish a lien and priority.19 the purpose of the supplementary proceeding was Rather, to allow a judgment creditor to obtain a superior lien, without meeting the statutory requirements of execution or other levy at law. ¶90 Our creditor's longstanding service supplementary of proceeding case law teaches notice upon creates a the judgment that a debtor judgment of the creditor's lien against the non-exempt personal property of the debtor. "[T]he filing of the bill and a bona fide attempt to serve the subpoena give the complainant priority of right to the equitable assets of the judgment debtor . . . ."20 ¶91 The rule that a lien superior to other creditors is created from the time of the judgment creditor's service of 18 Langdell, supra note 15, at 109-118). 19 Majority op., ¶3. 20 Kellogg v. Coller, 47 Wis. 649, 655, 3 N.W. 433 (1879). 10 No. 2011AP2597.ssa notice of the supplementary proceeding upon the debtor has been continuously reiterated and reinforced by this court.21 ¶92 the In In re Milburn, 59 Wis. 24, 34, 17 N.W. 965 (1883), court stated supplementary creates a that proceeding lien in the service "operates equity upon of an as the the equitable effects notice of the levy, the of and judgment debtor": As in a creditor's bill, so in supplementary proceedings: the commencement of them by the service of process or notice operates as an equitable levy, and creates a lien in equity upon the effects of the judgment debtor, and every piece of property belonging to him may be reached and applied to the satisfaction of his debts. ¶93 The Milburn holding is echoed in later cases. In Bragg, 85 Wis. at 486, the court cited Milburn and reiterated that service proceeding of serves process as an or notice equitable of levy the on supplementary all a judgment debtor's property and creates a lien in equity on the judgment debtor's property: When commenced by service of process or notice, [the supplementary proceeding] operates as an equitable levy, and creates a lien in equity upon the effects of the judgment debtor, and every species of property belonging to him may be reached and applied to the satisfaction of his debts. 21 The majority opinion at ¶40 relies on Knox v. Webster, 18 Wis. 426 (1864), for the rule that "[p]ersonal property shall be bound from the time of its seizure on execution." This declarative statement is true, but it does not mean that seizure is always necessary to create a lien. The Knox case dealt with two creditors who attempted to seize the same property. The court held that executions should be levied according to the order in which the sheriff received the executions. 11 No. ¶94 also 2011AP2597.ssa Kellogg v. Coller, 47 Wis. 649, 3 N.W. 433 (1879), is instructive. The majority opinion cites Kellogg approvingly but views the case as establishing the rule that a lien's perfection requires "the appointment of a receiver, who then applied the debtor's specified personal property to the judgment debt." ¶95 The Majority op., ¶33.22 majority opinion's commentary on Kellogg is attempted to contrary to the facts and reasoning of Kellogg. ¶96 In Kellogg, two judgment creditors satisfy their judgments against a debtor. The first creditor, Kellogg, obtained an order of a supplementary proceeding and served the order upon the debtor. Due to a scrivener's error, the affidavit of the sheriff was defective and service of notice of the supplementary proceeding was not completed. Thus, Kellogg did not appoint a receiver, secure a turnover order, or identify specific property of the debtor. ¶97 The second creditor, Coller, instituted supplementary proceedings against the debtor and served the debtor with notice of the proceeding. insurance policy. The debtor appeared and disclosed a life Subsequently, the court commissioner appointed a receiver for the assets of the debtor identified at the hearing. The debtor then assigned all his non-exempt personal property to the receiver. 22 The summary set forth in the majority opinion at ¶33 does not appear in the text of Kellogg v. Coller, 47 Wis. 649, 656, 3 N.W. 433 (1879). 12 No. ¶98 2011AP2597.ssa The first creditor had a receiver appointed after the second creditor's receiver took possession of the property of the debtor. ¶99 The first creditor completed none of the majority opinion's requirements for obtaining priority on the debtor's property: no statutory levy, no execution, no receiver, no specification or identification of property before the second creditor acted. The second creditor in Kellogg completed all of the majority opinion's requirements for obtaining priority on the debtor's property prior to the first creditor: she had identified specific property; a receiver had been appointed and turnover required; and the debtor's property was properly executed against. ¶100 If the majority opinion's interpretation of were correct, debtor's that personal a creditor property by cannot mere obtain service a of lien Kellogg on notice the of a supplementary proceeding, the first creditor should have lost. ¶101 Yet in Kellogg, the first creditor won. court explicitly rejected adopts in the present case. the reasoning the The Kellogg majority opinion The Kellogg court stated: As in a creditor's suit the filing of the bill and a bona fide attempt to serve the subpoena give [the first creditor] priority of right to the equitable assets of the judgment debtor, so, under the circumstances of this case, the bona fide attempt to serve the order issued by the commissioner at the instance of [the first creditor] must be held to confer upon them like priority of right over [the second creditor], although the order obtained by her was served before service of [the first creditor's] order was perfected. Kellogg, 47 Wis. at 656 (emphasis added). 13 No. 2011AP2597.ssa ¶102 In other words, the Kellogg court gave priority over the debtor's personal property to the first creditor, based on the first creditor's bona fide attempt to serve the debtor in the supplementary proceeding. It determined that the second creditor's "proceeding is inoperative to give her a prior lien on the equitable assets of the judgment debtor." Kellogg, 47 Wis. at 657. ¶103 The longstanding rule that the perfection of the creditor's lien depends on "first service of the subpoena upon the judgment debtor" was applied in Kellogg to "give the complainant priority of right to the equitable assets of the judgment debtor." Kellogg, 47 Wis. at 656. ¶104 Kellogg stands in direct contradiction of the majority opinion's assertion that "service of an order to appear for supplemental proceedings will not create an interest that is superior to the interest of a docketed judgment creditor who has levied specific personal property of the debtor." Majority op., ¶48. supplementary Under Kellogg, service of notice of proceedings creates a superior interest in a judgment debtor's property. ¶105 The court has interpreted Kellogg as I do. In Candee v. Egan, 84 Wis. 2d 348, 360, 267 N.W.2d 890 (1978), the court, citing Kellogg, reiterated that "[a] judgment creditor who first begins supplementary proceedings against a particular judgment debtor obtains an equitable lien upon the debtor's nonexempt 14 No. property that is prior to the equitable lien 2011AP2597.ssa of a judgment creditor who commences a supplementary proceeding thereafter."23 ¶106 The same rule of law was confirmed in In re Badger Lines, Inc., 224 Wis. 2d 646, 590 N.W.2d 270 (1999). stated that it is service of notice of the The court supplementary proceeding upon the debtor by which a judgment creditor perfects a common-law equitable lien on the non-exempt personal property of the debtor. Badger Lines, 224 Wis. 2d at 658. ¶107 I now examine Badger Lines. II ¶108 The Lines to majority reach its opinion result, contorts changing the and distorts baseline Badger rule that Badger Lines reiterated and upon which debtors and creditors have relied. ¶109 The question in Badger Lines was presented to this court by the federal Seventh Circuit Court of Appeals as a question of state law necessary to resolve a federal bankruptcy case.24 The following is a rough timeline of the events in Badger Lines: 23 Citing Candee, 84 Wis. 2d at 360, and Alexander v. Wald, 231 Wis. 550, 286 N.W. 6 (1939), Robert Pasch writes: "[A] judgment creditor who first begins a supplementary proceeding against a debtor obtains an equitable lien on the debtor's nonexempt property that is senior to any judgment creditor who subsequently commences a supplementary proceeding." Pasch, supra note 6, § 16:13, at 329. See also Pasch, supra note 6, § 17:15, at 349. 24 See Matter of Badger Lines, Inc., 140 F.3d 691 (7th Cir. 1998) (certifying a question of Wisconsin state law for resolution by the Wisconsin Supreme Court). 15 No. 2011AP2597.ssa ¢ October 18, 1991: A judgment of $82,120.26 was entered in favor of Emerald Industrial Leasing Corporation against Badger Lines, Inc. for services rendered and unpaid. ¢ October 21, 1991: Emerald Industrial's judgment was docketed. ¢ October Lines 30, with 1991: an Emerald order Industrial directing it served to Badger appear at a supplementary hearing pursuant to Wis. Stat. § 816.03 and enjoining Badger Lines from transferring its assets. ¢ December 17, 1991: The court commissioner appointed a supplementary receiver on behalf of Emerald Industrial; issued a "turnover" order that instructed Badger Lines to turn over its assets; and enjoined Badger Lines from transferring its assets. ¢ February 11, 1992: Badger Lines filed for Chapter 7 bankruptcy in the Bankruptcy Court for the Eastern District of Wisconsin. ¢ March 1992: The receiver filed a proof of claim in bankruptcy asserting a receiver's lien on behalf of the Emerald Industrial. ¢ April 1995: The Chapter report distributing Lines; the the receiver 7 trustee remaining and Emerald treated as unsecured creditors. 16 issued assets a of Industrial final Badger were No. ¶110 The federal bankruptcy and 2011AP2597.ssa district courts had determined that Emerald Industrial had a common-law equitable lien on the debtor's property.25 Thus, the federal court asked: "Does Wisconsin law require that a lien obtained by a judgment creditor who institutes supplementary proceedings under Wis. Stat. § 816.04 be perfected, and if so, how is the lien to be perfected?"26 ¶111 The key dispute in the case was whether any additional action besides notice to the debtor was required to perfect Emerald Industrial's common-law equitable lien on Badger Lines' assets. on Emerald Industrial argued that perfection of its lien Badger Lines' assets occurred upon service of notice to Badger Lines of the supplementary proceeding. The bankruptcy trustee the argued, however, that perfection of lien was accomplished either by the appointment of a receiver or the issuance of a turnover order.27 ¶112 If Emerald Industrial were correct and service of notice of the supplementary proceeding provided perfection of the lien, then it would have priority over other creditors. the bankruptcy trustee were correct and Emerald If Industrial 25 See In re Badger Lines, Inc., 199 B.R. 934, 937-38 (Bankr. E.D. Wis. 1996) (recognizing the existence of the lien created by supplementary proceedings); In re Badger Lines, Inc., 1996 WL 33364962 (E.D. Wis. Mar. 14, 1996) (treating the commonlaw lien as already in existence and ruling only on the question of perfection of the lien). 26 Matter of Badger Lines, Inc., 140 F.3d 691, 699 (7th Cir. 1998). 27 In re Badger Lines, 224 Wis. 2d 646, 652, 590 N.W.2d 270 (1999). 17 No. 2011AP2597.ssa needed to take steps in addition to service of notice, then Emerald Industrial's lien would have been perfected within the 90-day preference period in bankruptcy and could be avoided. ¶113 When supplementary what Badger Lines proceeding, property Badger the Lines was served held. notice creditor judgment with did The "specific of not the know personal property" of Badger Lines was not identified until December 17, 1991, when the turnover order was issued. ¶114 Nevertheless, the Badger Lines court held that Emerald Industrial obtained and perfected an equitable lien on October 30, 1991, the date of its service of notice of the supplementary proceedings. ¶115 The Badger Lines court explicitly rejected the bankruptcy trustee's argument that appointment of a receiver or a turnover order were necessary to perfect a judgment creditor's common-law equitable lien on the defendant's property: [R]equiring an additional step beyond service in order to obtain a superior lien removes any incentive for negotiation and settlement between the creditor and the debtor. . . . . Such imposed protraction benefits no one, wastes the parties' time and money, and burdens the courts with potentially unnecessary hearings and proceedings. Badger Lines, 224 Wis. 2d at 660.28 ¶116 Badger Lines concluded that nothing in addition to service of notice to the debtor of a supplementary hearing was required to perfect Emerald Industrial's common-law equitable lien over Badger Lines' personal property: 28 Id. at 660. 18 "Wisconsin law does No. 2011AP2597.ssa not require a creditor to take additional steps to perfect a receiver's lien beyond service on the debtor."29 ¶117 Although the majority opinion frequently cites to Attorney Pasch's treatise on collection law in Wisconsin,30 the majority opinion conveniently fails to reveal that Attorney Pasch disagrees with the majority opinion's characterization of Badger Lines. Pasch explains Badger Lines as I do: The Wisconsin Supreme Court, In re Badger Lines, Inc., 224 Wis.2d 646, 590 N.W.2d 270 (1999), held that service upon the debtor of an order to appear at a supplemental examination under Chapter 816 establishes at the time of service a lien in favor of the creditor without requiring the creditor to take additional steps to perfect the lien. The court determined that a creditor who initiates a supplemental proceeding in Chapter 816 must not do anything more than serve the debtor with notice to appear at the supplemental examination so as to obtain a superior lien that cannot be overcome by another creditor. The court rejected arguments that, to avoid a secret lien, some additional action should be required of a judgment creditor. The court also rejected arguments that the lien should not arise until a supplemental receiver is appointed or the court issues a turnover order as to the debtor's assets; the court held that the lien arises at an earlier stage, when the judgment debtor is served with the order to appear at the supplemental examination. See Holton v. Burton, 78 Wis. 321, 47 N.W. 624 (1890). Although the Badger Lines case references the lien as a "receiver's lien," the decision appears to have broader application to the lien of a judgment creditor pursuing supplemental proceedings. Pasch, supra note 6, § 16:13 at 330-31 (emphasis added). 29 Id. at 661 (emphasis added). 30 See, e.g., majority op., ¶¶24, 28. 19 No. ¶118 Unlike adopts the Pasch, losing the party's majority argument opinion in 2011AP2597.ssa resurrects Badger Lines, and while professing to follow the holding of Badger Lines.31 ¶119 Thus, the majority opinion blithely overturns Badger Lines and 150 years of Wisconsin jurisprudence, creditors and debtors unsure of their rights. leaving I cannot join such an undertaking. ¶120 For the foregoing reasons, I dissent. ¶121 I am authorized to state that Justice ANN WALSH BRADLEY joins this dissent. 31 The majority opinion asserts that in Badger Lines, the court held that "liens arise in specifically identified, nonexempt personal property when that property is levied." Majority op., ¶44. This is flatly wrong. In Badger Lines, the creditor Emerald Industrial had no knowledge of Badger's assets at the time it served notice upon Badger of the supplementary proceeding, but it nonetheless perfected its lien. Additionally, the Badger Lines court specifically refused to comment on the issue of levy (to the extent that "levy" means possession of the property). Badger Lines, 224 Wis. 2d at 658 n.5. 20 No. 1 2011AP2597.ssa
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