State, Dept. of Revenue v. Milwaukee Mack Sales, Inc., 76-451
Citation | 280 N.W.2d 274,91 Wis.2d 1 |
Decision Date | 29 June 1979 |
Docket Number | No. 76-451,76-451 |
Parties | STATE of Wisconsin, DEPARTMENT OF REVENUE, Barnett W. Franks, Receiver, Plaintiff-Appellant, v. MILWAUKEE MACK SALES, INC., Defendant-Respondent, B. F. Leasing, Inc., Defendant. |
Court | United States State Supreme Court of Wisconsin |
Seymour Pikofsky, Milwaukee, and N. John Fliss, Dept. of Revenue, Madison, for plaintiff-appellant.
Rakita & Rakita, Milwaukee, for defendant-respondent.
Barnett Franks was appointed receiver at the request of the Department of Revenue (the Department) in a supplementary proceeding brought by the Department against B. F. Leasing, Inc. The circuit court decided, in the supplementary proceeding, that the claim of Milwaukee Mack Sales, Inc. (Mack Sales), an alleged secured creditor of B. F. Leasing, to two trucks had priority over that of the Department or receiver and the circuit court released to Mack Sales the security which Mack Sales had deposited with the clerk of courts. The receiver appeals from the order of the circuit court disbursing the security to Mack Sales. We affirm the order.
On November 11, 1975, and then again on March 5, 1976, the Department docketed a delinquent income tax warrant against B. F. Leasing with the clerk of circuit court for Walworth County. 1 The statutes provide that if a warrant is returned not satisfied in full the Department has the same remedies available to it to enforce its claims for taxes as a judgment creditor. 2 These remedies include remedies supplementary to execution pursuant to ch. 816, Stats. Accordingly, on March 24, 1976 on motion of the Department, Barnett Franks was appointed receiver by the court commissioner of Walworth County pursuant to sec. 816.04, Stats. 3
On June 21, 1976 Mack Sales gave notice of a public sale of two trucks which B. F. Leasing had purchased from Mack Sales in August, 1975. Mack Sales had retained a security interest in the trucks under the sales agreement, but the security interest was not perfected until May 14, 1976, after Mack Sales had repossessed the trucks 4 and after the receiver had been appointed. 5
On June 25, 1976, the receiver gave the attorney for Mack Sales notice that he would seek an order restraining the sale of the trucks. On June 28 the circuit court issued the requested restraining order to prevent the sale. A copy of the restraining order was served on the attorney for Mack Sales.
The restraining order was issued pursuant to sec. 816.08, Stats., which provides:
A hearing on the restraining order was held August 10, 1976. In a memorandum decision issued September 1, 1976, the circuit court held that the lien of Mack Sales had priority over the claim of the Department. The circuit court found that Mack Sales had perfected its lien against the two trucks on May 14, 1976. As to the Department's claim to an interest in the trucks, the circuit court reasoned that that claim was based upon sec. 71.13, Stats., that prior to May 5, 1976 that statute created a lien against only real property, not personal property, 6 and that therefore prior to that date the Department had no lien against the two trucks. The circuit court found that on May 5, 1976 and thereafter (when the Department's lien accrued against personal property in Walworth County under the revised version of the statute) 7 neither truck was in Walworth County. The Department's tax warrant had been docketed only in Walworth County. The circuit court concluded that sec. 71.13, Stats., did not give the Department a lien against the trucks between May 5 and May 14, 1976, when Mack's lien was perfected.
The circuit court consequently directed Mack Sales to draft an order dissolving the restraining order, but this order was never entered. Instead, upon the receiver's motion, the circuit court scheduled an evidentiary hearing on the issue of the location of the trucks from May 5, 1976 through May 14, 1976.
The receiver and Mack Sales then entered into a stipulation providing that Mack Sales would deposit $30,000 with the clerk of courts "until further disposition of the court," that the court might dissolve the restraining order, that the receiver released all claims to the trucks, and that the receiver's claims would attach instead to the $30,000 held by the clerk.
On October 14, 1976, the circuit court issued an order approving the stipulation and accordingly it dissolved the restraining order, authorized Mack Sales to sell the trucks and required Mack Sales to deposit $30,000 with the clerk "until further disposition of the court."
The evidentiary hearing requested by the receiver was held on December 29, 1976, and by order entered January 17, 1977, the circuit court found that the two trucks had not been in Walworth County since April 9 and 10, 1976, respectively. The circuit court ordered that the temporary restraining order be dissolved, that the motion to restrain Mack Sales from selling or otherwise disposing of the collateral "be dismissed on the merits" and that the clerk be directed to pay the $30,000 deposit to Mack Sales on the 20th day following entry of the order. The receiver did not apply for a stay of execution or of enforcement of the order, and the deposited sum was paid to Mack Sales as ordered.
The receiver appeals from the circuit court's order of January 17, 1977, asserting that both as receiver and as representative of the Department he has a lien superior to that of Mack Sales and therefore the $30,000 should have been disbursed to the receiver for the benefit of the Department, not to Mack Sales. We do not reach the question whether Franks, either as receiver or as standing in the shoes of the Department, has a lien superior to that alleged by Mack Sales, because this issue cannot be determined in a supplementary proceeding. The receiver, appointed pursuant to ch. 816, Stats., has misconstrued the remedy available to receivers under that chapter.
Sec. 816.08 provides that "if it appear that any person alleged to have property of the judgment debtor . . . claims an adverse interest in the property . . . such interest . . . shall be recoverable only in an action against such person by the receiver." Past decisions of this court construing this statutory language have clearly established the limits of supplementary proceedings.
A supplementary proceeding is not an independent action or proceeding but a proceeding in the action against a judgment debtor. Barker v. Dayton, 28 Wis. 367, 380 (1871). As such, it is an adversary proceeding against the debtor; no issue can be tried between the receiver (or judgment creditor) and a third person as to any interest or right such third person asserts in property allegedly belonging to the defendant. Blabon v. Gilchrist, 67 Wis. 38, 44-45, 29 N.W. 220 (1886).
We have said that where there is a genuine dispute between the receiver and a third party as to their rights in the property, the dispute must be adjudicated in a suit by the receiver. In Paradise v. Ridenour, 211 Wis. 42, 46, 247 N.W. 472, 473 (1933), we stated:
See also Nick v. Holtz, 237 Wis. 407, 297 N.W. 387 (1941); Moss, Supplementary Proceedings in Wisconsin, 23 Marq.L.Rev. 49, 53-55 (1939).
Other courts have similarly construed supplementary proceedings. In Ryan v. Maxey, 14 Mont. 81, 84, 35 P. 515, 516 (1894), the Montana Supreme Court stated:
8
The requirement that the receiver bring an independent action against a third party claiming an interest in property alleged to belong to the judgment debtor arises from the summary nature of the supplementary proceeding. To allow the circuit court to adjudicate the respective rights of the receiver and Mack Sales in the supplementary proceeding would be to deprive Mack Sales of the protections...
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