This appeal is before the court on certification from the court of appeals, pursuant to Wis. Stat. § 809.61 (Rule) (2003-04).
¶ 2. We conclude that the circuit court erred in refusing to satisfy the judgment debt pursuant to Wis. Stat. § 806.19(4). The plain language of the statute unambiguously provides that when a proper application
¶ 3. The relevant facts are not in dispute. On May 18, 1994, Megal Development Corporation (Megal) obtained a small claims judgment for eviction and money damages against the Shadofs in the amount of $52,713.78. Pursuant to Wis. Stat. §§ 806.10(1), 806.15(1) and 815.20(1), the judgment subsequently became a lien upon the Shadofs' homestead property located in Waukesha County, Wisconsin.
¶ 4. In February 2003 the Shadofs filed for Chapter 7 bankruptcy relief in the United States Bankruptcy Court for the Eastern District of Wisconsin. They included the Megal judgment as a dischargeable debt on Schedule D of their bankruptcy forms. On June 12, 2003, at the conclusion of the bankruptcy proceedings, Judge James E. Shapiro granted the Shadofs a Discharge of Debtor, which included a discharge of the debt to Megal. The Trustee in bankruptcy found that after subtracting the first and second mortgages, the homestead exemption, and the judgment lien from the value of the homestead, there was no money left in the estate to pay unsecured creditors. Therefore, the Trustee abandoned the property at which point it reverted to
¶ 5. During the bankruptcy proceeding, Megal filed an Objection to Debtor's Claim for Exemption on May 22, 2003, arguing that the Shadofs had equity in their homestead in excess of the $40,000 exemption. The bankruptcy court set aside Megal's objection as premature, because the Shadofs had not sought to avoid any portion of Megal's judgment lien. However, the bankruptcy court order specified that Megal retained the right to challenge any subsequent lien avoidance motion brought under 11 U.S.C. § 522(f)(2004).
¶ 6. On June 16, 2003, the Shadofs filed an application with the Waukesha County Circuit Court seeking an order satisfying the Megal judgment and the judgment lien pursuant to Wis. Stat. § 806.19(4). Circuit Court Judge Donald J. Hassin, Jr. signed an order satisfying Megal's judgment and associated judgment lien on June 20, 2003. That same day, Megal filed an objection to the Shadofs' application based upon the position that § 806.19(4) only permits satisfaction of judgments, and judgment liens, which have been discharged in bankruptcy. As a result, the circuit court vacated its previous order and scheduled the matter for further proceedings.
¶ 7. At the hearing on application for satisfaction, Megal argued that under Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773 (1992), a Chapter 7 bankruptcy proceeding discharges a person's in personam debt, but not the in rem judgment lien, which survives bankruptcy. Because the judgment lien had not been discharged, Megal maintained it was inappropriate to satisfy the lien under Wis. Stat. § 806.19(4). Megal asserted that the Shadofs could not obtain satisfaction
¶ 8. Statutory interpretation is an issue of law which we review de novo. While the review is de novo, this court benefits from the analyses of the circuit court and the court of appeals. State v. Anderson, 2005 WI 54, ¶ 23, 280 Wis.2d 104, 695 N.W.2d 731 (citing State v. Waushara County Bd. of Adjustment, 2004 WI 56, ¶ 14, 271 Wis.2d 547, 679 N.W.2d 514).
¶ 9. We address two issues in this case. First, whether under the circumstances presented, Wis. Stat. § 806.19(4) requires the satisfaction of Megal's judgment debt, including the judgment lien against the Shadofs' homestead. Second, if this court determines that § 806.19(4) does require satisfaction of the judgment debt, is that statute preempted by federal bankruptcy law. We will consider each in turn.
¶ 10. The first issue before the court is whether Wis. Stat. § 806.19(4) requires satisfaction of a judgment debt, including a judgment lien, when the underlying
¶ 12. Because an in rem judgment lien survives bankruptcy, Megal urges, a debtor must pursue an 11 U.S.C. § 522(f)(2004) motion in federal court to avoid the lien. Therefore, to make Megal's in personam judgment debt and in rem judgment lien eligible for satisfaction under Wis. Stat. § 806.19(4), the Shadofs must have successfully avoided the lien under § 522(f). Having failed to avoid the lien, Megal reasons, its judgment lien was not "discharged" in bankruptcy, and is therefore ineligible for satisfaction under § 806.19(4).
¶ 13. The Shadofs also believe the statute to be unambiguous, yet in support of the opposite result. The Shadofs maintain that the plain language of Wis. Stat. § 806.19(4) clearly states that if a judgment debt is discharged in bankruptcy, the judgment shall be satisfied if a proper application is made to the court. The court of appeals seems to agree, stating in its certification "On the surface, Wis. Stat. § 806.19(4) appears to clearly and unambiguously entitle a judgment debtor to a satisfaction of a judgment debt that has been discharged in bankruptcy."
¶ 14. The Shadofs contend that the statute provides a checklist of conditions which, if met, shall lead to the satisfaction of a creditor's judgment and associated judgment lien. Wisconsin Stat. § 806.19(4) requires judgment debtors to (1) "secure a discharge of a judgment debt in bankruptcy"; (2) give notice to judgment creditors; and (3) make a proper application for an order of satisfaction, certifying that the judgment has been discharged in bankruptcy. The Shadofs do not dispute Megal's position that ordinarily liens survive bankruptcy. See Johnson, 501 U.S. at 84. Nor do they
¶ 15. The Shadofs' position is that Wis. Stat. § 806.19(4) provides a mechanism through operation of state law for a debtor to obtain satisfaction of a judgment and a judgment lien when the underlying judgment has been discharged in bankruptcy, whether or not the debtor has first obtained a lien avoidance. Having satisfied what they interpret to be the exclusive requirements of § 806.19(4), the Shadofs believe the circuit court should have satisfied the judgment and judgment lien.
¶ 17. In this case, both parties urge the court to conclude that the statute is unambiguous, yet they disagree as to its meaning. We find the language of the statute clearly and unambiguously supports the Shadofs' position. Wisconsin Stat. § 806.19(4)(a) provides in relevant part that "[a]ny person who has secured a discharge of a judgment debt in bankruptcy . . . may submit an application for an order of satisfaction of the judgment. . . ." Subsection (4)(d) then states in relevant part that "[u]pon receipt of a completed application . . .
¶ 18. Megal urges the court to adopt an alternate understanding of the statute. Megal would have us read the statutory phrase "judgment" as encompassing two elements—the in personam judgment debt, and the associated judgment lien. After discussing the discharge of a "judgment debt," Wis. Stat. § 806.19(4) refers exclusively to the satisfaction of a "judgment." Megal argues that since the rights of secured creditors to proceed against property in rem survive Chapter 7 proceedings, only the in personam judgment debt, not the entire judgment, has been "discharged."
¶ 19. The weakness in Megal's position is evident when the statute is reviewed in light of terms used in bankruptcy. First, applying the technical meaning particular to bankruptcy, a discharge "voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor. . . ." 11 U.S.C. § 524(a)(1) (2004).
¶ 20. The final sentence of Wis. Stat. § 806.19(4)(d) states: "Upon satisfaction, a judgment shall cease to be a lien on any real property that the person discharged in bankruptcy owns or later acquires." Wis. Stat. § 806.19(4)(d) (emphasis added). Although "judgment debt" could be understood to be comprised of only the in personam judgment, a judgment lien is not a judgment in rem.
¶ 22. Further buttressing our plain language reading of Wis. Stat. § 806.19(4) is the legislative history of the statute. While the traditional rule is that "`resort to legislative history is not appropriate in the absence of a finding of ambiguity'" this court has recognized that "[o]n occasion . . . we consult legislative history to show how that history supports our interpretation of a statute otherwise clear on its face." Seider v. O'Connell, 2000 WI 76, ¶¶ 50, 52, 236 Wis.2d 211, 612 N.W.2d 659.
¶ 23. The legislative history of Wis. Stat. § 806.19(4) strongly supports the position that the discharge of an in personam judgment in bankruptcy
¶ 24. The first significant amendment of the statute came in 1985, following the court of appeals' decision in State Central Credit Union v. Bigus, 101 Wis.2d 237, 304 N.W.2d 148 (Ct. App. 1981). In Bigus, the question before the court was quite similar to the issue in this case: "whether a satisfaction order entered on behalf of a discharged bankrupt relieves the discharged bankrupt of the statutorily created in rem effects of a judgment. . . ." Id. at 239-40.
¶ 25. The court of appeals sought to reconcile what it felt to be "apparently conflicting remedial statutes." Id. at 241. Wisconsin Stat. § 806.15(1) gave a judgment creditor a lien against real property owned by the judgment debtor. Yet the last sentence of the statute provided "the limitation that, where a satisfaction order has been entered upon a claim discharged in bankruptcy, a judgment based upon that claim cannot `thereafter become a lien on any real property of the discharged person then owned or thereafter acquired.'" Bigus, 101 Wis. 2d at 241. In apparent conflict was Wis. Stat. § 806.19(4) that "provide[d] that a person discharged in bankruptcy can obtain a satisfaction of judgment order from the proper court upon application."
¶ 26. The Bigus court failed to consider the language immediately preceding the statutory language it relied upon, however. The final sentence of Wis. Stat. § 806.15 actually stated "A judgment based upon a claim discharged in bankruptcy shall upon entry of the order of satisfaction or discharge cease to be and shall not thereafter become a lien on any real property of the discharged person then owned or acquired." Wis. Stat. § 806.15(1) (1981-82) (emphasis added). By ignoring the statutory phrase "cease to be" the court was able to reason that the legislature only intended to prevent the attachment of liens on property after the conclusion of the bankruptcy proceeding.
¶ 27. The legislature expressed its displeasure with the Bigus decision by amending the statute in 1985. The 1985 Wisconsin Act 137 removed the language from Wis. Stat. § 806.15(1) upon which the court of appeals had based its reasoning and repealed and recreated Wis. Stat. § 806.19(4).
¶ 28. Several years later, in Overhead Door Co. v. Hazard, the Dane County Circuit Court interpreted the amended statute.
¶ 29. In 1995, the legislature acted again. In a move similar to that ten years earlier, the legislature, in its 1995 amendments, removed the language upon which the Overhead Door court had based its reasoning. Rather than requiring the debtor to certify that each judgment had been "completely voided by the discharge," it was now sufficient that the listed judgments be "discharged in bankruptcy." 1995 Wis. Act 393. In addition, the final sentence of the current statute was added to Wis. Stat. § 806.19(4)(d). With both of these amendments, the legislature clearly was attempting to correct an interpretation of the statute that ran counter to its intent.
¶ 30. Further supporting our plain language interpretation of the statute is In re Spore, 105 B.R. 476 (Bankr. W.D. Wis. 1989), a 1989 case from the United States Bankruptcy Court for the Western District of Wisconsin which interpreted Wis. Stat. § 806.19(4). Although the facts were different, and the court was examining the 1985 amendment of the statute, the
¶ 31. In analyzing the relationship between federal bankruptcy law and Wis. Stat. §§ 806.21 and 806.19(4), the court emphasized the unitary nature of judgments. Spore, 105 B.R. at 480. Spore reiterated the fact that a lien survives discharge of the underlying judgment in bankruptcy, and emphasized that "a discharge in bankruptcy voids all aspects of all judgments to the extent of the debtor's personal liability." Id. at 478 (citing 11 U.S.C. § 524(a)(2)(1989)).
¶ 32. At the time of the Spore decision, Wis. Stat. § 806.21 provided "If a judgment is satisfied in whole or in part or as to any judgment debtor and such satisfaction docketed, such judgment shall, to the extent of
¶ 33. Megal contends that Spore is no longer good law after the United States Supreme Court decisions in Johnson and Dewsnup. Both Johnson and Dewsnup stand for the proposition that liens pass through bankruptcy despite the discharge of an underlying judgment. Neither holding altered the law with regard to this concept. Megal misstates the reasoning in Spore by arguing that the court held, in error, that a bankruptcy discharge voided both the in personam and in rem aspects of a judgment. Since that is an incorrect reading of the Spore decision, we conclude that Spore is still good law.
¶ 34. The Wisconsin Legislature, on multiple occasions, has demonstrated its intent to allow debtors to obtain satisfaction of both a judgment and a judgment lien when the underlying judgment has been discharged in bankruptcy. In this decision, we are recognizing and enforcing policy choices made by the Wisconsin Legislature.
¶ 35. We next turn to the issue of whether Wis. Stat. § 806.19(4) is preempted by the Supremacy Clause of the United States Constitution. U.S. Const. art. VI, cl. 2. Because we find that § 806.19(4) does not conflict with federal bankruptcy law, the statute is not preempted.
¶ 36. The United States Constitution is "the supreme law of the land." U.S. Const. art VI, cl. 2. As the United States Supreme Court explained in Gibbons v. Ogden:
Gibbons v. Ogden, 22 U.S. 1, 210-11 (1824).
¶ 37. "Federal preemption may occur through express preemption or implied preemption. Congress may expressly preempt contradictory — or even coterminous — state laws in the text of the laws it passes." Olstad v. Microsoft Corp., 2005 WI 121, ¶ 38, 284 Wis.2d 224, 700 N.W.2d 139
¶ 39. The Shadofs argue that an interpretation of Wis. Stat. § 806.19(4) that allows a debtor to extinguish a judgment and judgment lien upon the satisfaction of the underlying judgment in bankruptcy does not in any way conflict with federal bankruptcy law. Instead, it
¶ 40. Megal maintains that an interpretation of Wis. Stat. § 806.19(4) that would allow a judgment lien to be satisfied when an underlying in personam judgment was discharged in bankruptcy, even though equity remains after applying the homestead exemption, would impermissibly interfere with the Bankruptcy Code (Code), and therefore be preempted by the Supremacy Clause.
¶ 41. In support of its preemption argument, Megal cites to a long list of cases that stand for the proposition that state laws that interfere with the Bankruptcy Code, or provide additional regulations, are
¶ 42. One of the cases Megal relies on is Kanter v. Moneymaker, in which the United States Court of Appeals for the Ninth Circuit struck down a California statute that limited the assignment of an interest in monies recovered from personal injury actions, which were otherwise available to satisfy creditors' claims. Kanter v. Moneymaker, 505 F.2d 228 (9th Cir. 1974). The court held that the statute "`stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,' since it would operate to deny to the trustee assets which could ordinarily be reached in satisfying the claims of general creditors." Id. at 231 (citations omitted). Megal, therefore, concludes that although California had the right to exempt property from the claims of creditors, it could not create exemptions which either interfered with bankruptcy proceedings, or operated only in the context of a bankruptcy.
¶ 43. Megal further cites In re Cross, 255 B.R. 25 (Bankr. N.D. Ind. 2000), to support the proposition that exemptions that operate only in the context of a bankruptcy are preempted by federal law. Cross relied on the Supremacy Clause to strike down an Indiana statute that prevented a trustee in bankruptcy from reaching property held by spouses as a tenancy by the entireties, to satisfy the claims of creditors when only one of the two spouses filed bankruptcy. Id. at 32. However, "outside of bankruptcy, Indiana law allows entireties property to be used to satisfy the claims of creditors, but only for the joint debts of both spouses. . . ." Id. The offending Code section at issue "completely exempt[ed] entireties property from administration by a bankruptcy
¶ 44. We conclude that both Kanter and Cross are distinguishable. Both cases involved state exemption statutes that operated to limit the powers of the trustee during the bankruptcy proceeding from reaching assets that could ordinarily be reached by creditors. The court, in each case, found that while the Bankruptcy Act recognizes state exemptions to assist the debtor to make a fresh start, the provisions at issue failed to meet the criteria of a general exemption. While Wis. Stat. § 806.19(4) is particular to the bankruptcy proceeding, in that it requires the discharge of judgments in bankruptcy before it can operate, it does not create an exemption. Nor does it limit the powers of the trustee during bankruptcy or operate to interfere in any way with the bankruptcy proceeding itself—it simply does not operate during bankruptcy. Section 806.19(4) is dormant until the conclusion of the federal bankruptcy proceeding, and, thus, it does not conflict with the Code. Therefore, neither Kanter nor Cross requires us to conclude that § 806.19(4) is preempted by federal law.
¶ 45. Further, federal bankruptcy law allows variations among states in judgment clearing statutes. South Dakota, for example, provides that:
S.D. Codified Laws § 15-16-20 (West 2003). New York requires the debtor wait a minimum of one year from
Id. Wisconsin Stat. § 806.19(4) provides a mechanism to allow a lien which has survived a bankruptcy to be satisfied through a state procedure. For states that do not have a means of satisfying liens, 11 U.S.C. § 522(f)(2004) provides a mechanism to avoid liens through the federal bankruptcy code. However, the Code itself takes no position on the enforcement or lack thereof of liens after there has been a discharge in bankruptcy, unless § 522(f) has been utilized.
¶ 46. Megal additionally argues that an interpretation of Wis. Stat. § 806.19(4) allowing for a judgment and a judgment lien to be satisfied after the underlying judgment is discharged would operate contrary to Wisconsin's homestead exemption, where equity remains after applying the exemption. We disagree. Neither statute relies upon, or makes reference, to the operation of the other. They are not contingent, nor in conflict.
¶ 47. We agree with the Shadofs' position that Wis. Stat. § 806.19(4) does not conflict with, and is therefore not preempted by, federal bankruptcy law. In this case, the Shadofs' property, including their homestead,
¶ 48. Finally, Megal urges that the Shadofs' interpretation of the statute would violate the Due Process Clause of the XIV Amendment to the United States Constitution, by depriving them of a property right without due process of law. The Shadofs maintain, and we agree, that a judgment lien is nothing more than a mechanism for the enforcement of an in personam money judgment. The judgment and the associated judgment lien only exist through the operation of the Wisconsin statutes. Wis. Stat. §§ 806.10, 806.15.
Musa v. Segelke & Kohlhaus Co., 224 Wis. 432, 435, 272 N.W. 657 (1937). The issue of due process was first raised at the oral arguments on this case, but was not fully argued or briefed by counsel for the parties, and, therefore, we do not address it further.
¶ 49. It is for these reasons we conclude that the circuit court erred in refusing to satisfy the judgment
By the Court. The decision of the circuit court is reversed, and this matter is remanded for further proceedings consistent with this decision.
N.J. Stat. Ann. § 2A:16-49.1 (West 2003).
The Illinois statutes go further and provide for the revival of a judgment.
735 Ill. Comp. Stat. 5/2-1602 (West 2003).
Spore, 105 B.R. at 478.
Younger v. Harris, 401 U.S. 37, 44-45, 91 S.Ct. 746 (1971).
Pacific Gas & Elec. Co. v. California ex rel. California Dept. of Toxic Substances Control, 350 F.3d 932, 943 (9