Supreme Court Digest

By Prof. Daniel D. Blinka & Prof. Thomas J. Hammer

| Creditor-Debtor Law | Family Law |

Supplementary Proceedings - Receiver's Lien - Perfection

Mann v. Bankruptcy Estate of Badger Line Inc., No. 98-0888-CQ (filed 17 March 1999)

This case was before the Wisconsin Supreme Court on a certified question from the U.S. Court of Appeals for the Seventh Circuit. The certified question, which arose in the context of bankruptcy proceedings, was: "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?"

In a unanimous decision authored by Justice Bradley, the supreme court began its analysis by noting that supplementary proceedings are actions initiated by unsatisfied judgment creditors to identify a debtor's property, other than real property, on which the creditor can execute his or her judgment. These proceedings, governed by chapter 816 of the Wisconsin Statutes, are the statutory equivalent of a creditor's bill in equity at common law and follow essentially the same rules of law. While the statutory scheme authorizes the appointment of a receiver, the statute says nothing about a receiver's lien. In light of this statutory silence, the supreme court has on prior occasions concluded that a receiver's lien is an equitable creation and therefore governed by the common law.

The parties were in agreement that Wisconsin law does not specify whether a receiver's lien must be perfected and, if so, how that is to be accomplished. In this case the court concluded that a receiver's lien is superior against another creditor on a simple contract when the creditor serves the debtor with notice to appear at supplementary proceedings under chapter 816. Wisconsin law does not require a creditor to take additional steps to perfect a receiver's lien beyond service on the debtor.

Divorce - Maintenance Awards

King v. King, No. 97-0994 (filed 3 March 1999)

Christopher King and Sonia King were married in 1988. Though they did not have children together, Sonia had four children from a previous marriage ranging in age from 3 to 9 at the time of marriage. Neither Christopher nor Sonia brought property of any significant value to the marriage. Christopher was completing his medical residency when he married Sonia and was earning $40,000 per year. However, by the time he filed for divorce in 1995, he was earning more than $500,000 per year as a neurosurgeon. Sonia was unemployed from 1982 until 1994. She was supporting her family on AFDC when she met Christopher. She never completed her high school education.

This appeal was primarily about the award of maintenance made by the circuit court. The lower court considered the objectives of maintenance and made findings regarding the statutory factors governing the award of maintenance. See Wis. Stat. § 767.26. Most of those findings seemed to weigh against awarding maintenance to Sonia, with the court finding among other things that the marriage was short-term, that the parties' levels of education and training had not changed since the date of their marriage, and that Sonia's role was primarily that of being allowed to raise her children but that her other contributions were not extremely significant. Nonetheless, the court awarded Sonia maintenance for 3 years in the amounts of $200,000, $150,000, and $100,000 respectively.

The court of appeals concluded that the circuit court erroneously exercised its discretion in making the maintenance award. In a unanimous decision authored by Justice Crooks, the supreme court affirmed the court of appeals. In setting awards of maintenance, the court concluded that a circuit judge must apply the section 767.26 factors to the facts of the case and must convert the factors into appropriate dollar amounts and time periods. At the same time the court must ensure that its award will further the dual objectives of maintenance: to support the recipient spouse in accordance with the needs and earning capacities of the parties and to ensure a fair and equitable financial arrangement between the parties. For the reasons that follow, the supreme court held that the circuit judge's award of maintenance constituted an erroneous exercise of discretion.

First, the circuit court based its award of maintenance on an error of law. In its decision the circuit court stated that, despite its findings, maintenance was justified because a spouse "legally has the right to expect maintenance, to demand it, and is entitled to it." There is no law in Wisconsin that would support this assumption and the circuit court's reliance upon it constituted an erroneous exercise of discretion.

Second, in awarding maintenance, the circuit court disregarded its findings as to the section 767.26 factors and a failure to apply or a misapplication of the statutory factors is an erroneous exercise of discretion. Accordingly, the supreme court remanded the case to the circuit court so that it may properly exercise its discretion in determining maintenance.

Prof. Daniel D. Blinka and Prof. Thomas J. Hammer invite comments and questions about the digests. They can be reached at the Marquette University Law School, 1103 W. Wisconsin Ave., Milwaukee, WI 53233, (414) 288-7090.