818 F.2d 643 (7th Cir. 1987), 86-2734, Matter of Kubly

Docket Nº:86-2734.
Citation:818 F.2d 643
Party Name:In the Matter of Richard A. KUBLY, et al., Debtors. WISCONSIN DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS, Plaintiff-Appellant, v. MARINE BANK MONROE, Defendant-Appellee.
Case Date:May 11, 1987
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

Page 643

818 F.2d 643 (7th Cir. 1987)

In the Matter of Richard A. KUBLY, et al., Debtors.

WISCONSIN DEPARTMENT OF INDUSTRY, LABOR AND HUMAN RELATIONS,

Plaintiff-Appellant,

v.

MARINE BANK MONROE, Defendant-Appellee.

No. 86-2734.

United States Court of Appeals, Seventh Circuit

May 11, 1987

Argued April 16, 1987.

Page 644

Dewitt J. Strong, Asst. Atty. Gen., Dept. of Justice, Stuart D. Levitan, Dept. of Justice, Madison, Wis., for plaintiff-appellant.

Charles R. Wellington, Kittelson-Barry-Ross-Wellington, Monroe, Wis., for defendant-appellee.

Before WOOD and EASTERBROOK, Circuit Judges, and WILL, Senior District Judge. [*]

EASTERBROOK, Circuit Judge.

The Wisconsin Department of Industry, Labor and Human Relations has a dispute with Marine Bank Monroe, Wisconsin, about what to do with the proceeds of a sale of assets belonging to Kubly Construction Company, Inc. The Department believes it is entitled to some $11,000 of the money as assignee of wage claims of the Construction Co.'s employees under Wis.Stat. 109.09(2). The Bank wants to keep the whole $63,000 on the ground that it had a perfected security interest in the property sold, an interest that survived in the proceeds and trumps the Department's later-acquired interest. The statute gives the Department a super priority, to which the Bank replies that the statute is inapplicable, unconstitutional, or both. Both a bankruptcy judge and a district judge, 65 B.R. 845 (W.D.Wis.1986), concluded that

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the statute does not apply, although for different reasons.

We do not resolve the parties' dispute, however, because this case is not within federal jurisdiction. The case arises under state law, and the parties are not of diverse citizenship. The Department filed its claim as an adversary proceeding in the bankruptcy of Richard and Linda Kubly, who owned the Construction Co.'s stock and were co-makers of its notes to the Bank. The Construction Co. has not filed for bankruptcy. The proceeds belong to the Construction Co., the Bank, or the Department; the Kublys have not claimed them. The Department did not seek anything of the Kublys; its grievance was with the Construction Co. and the Bank. And the resolution of the Department's dispute with the Bank cannot affect either the Kublys or their other creditors. The Bank had a security interest worth about $400,000 in the Kublys' personal property...

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