In re DeCora
United States Bankruptcy Court for the Western District of Wisconsin
387 B.R. 230 (2008)
Daryl DeCora (debtor) was a member of the Ho-Chunk Nation Indian tribe, which possessed sovereign immunity. The Ho-Chunk Nation earned revenue from casinos and other gaming operations. Each quarter, the Ho-Chunk Nation distributed portions of the revenue to all eligible tribe members via per-capita distributions. The Ho-Chunk Nation had tribal ordinances relating to the per-capita distributions. The ordinances provided that the money belonged to the tribe until at least some of the checks were in the mail. Further, the Ho-Chunk Nation would hold back a tribal member’s check for certain claims if the debt was in a writing signed by the member indicating that the member agreed to allow payment to be made from the per-capita distributions. The ordinances stated that the Ho-Chunk Nation would redirect the per-capita distributions to pay the debts and listed the order that the debts would be paid by the type of debt. A division of Citizens Community Federal Bank (Citizens) (creditor) loaned money to DeCora. DeCora signed security agreements in Wisconsin in which DeCora authorized upon default for payment to be made to Citizens “from the per capita distribution made by the Ho-Chunk Nation to [DeCora].” Though Citizens sent a copy of the documents to the Ho-Chunk Nation, it never filed a financing statement. DeCora subsequently filed for bankruptcy. Citizens received $9,984.16 from the per-capita payments after the bankruptcy filing. The bankruptcy trustee, as a hypothetical lien creditor pursuant to 11 U.S.C. § 544(a), sought to avoid Citizens’ security interest and to compel turnover of the funds to the bankruptcy estate. The bankruptcy trustee argued that his interest had priority over Citizens’ interest because Citizens had failed to file a financing statement before the bankruptcy filing. Citizens argued that the per-capita distributions never became DeCora’s property and that it had perfected its interest by complying with the Ho-Chunk Nation’s ordinances.
Rule of Law
Holding and Reasoning (Utschig, J.)
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