In the
United States Court of Appeals
For the Seventh Circuit
No. 10-2509
IN RE:
G REDE F OUNDRIES, INC.
Debtor.
R EEDSBURG U TILITY C OMMISSION,
Plaintiff-Appellant,
v.
G REDE F OUNDRIES, INC.,
Debtor-Appellee.
Appeal from the United States District Court
for the Western District of Wisconsin.
No. 10-CV-84—Barbara B. Crabb, Judge.
A RGUED JANUARY 18, 2011—D ECIDED JULY 13, 2011
Before T INDER and H AMILTON, Circuit Judges, and
M URPHY, District Judge.
The Honorable G. Patrick Murphy of the Southern District
of Illinois, sitting by designation.
2 No. 10-2509
T INDER, Circuit Judge. When debtor and appellee
Grede Foundries, Inc. entered bankruptcy, the Wisconsin
smelting plant owed more than $1.3 million in delinquent
utility charges to the local municipal utility, appellant
Reedsburg Utility Commission. Months after Grede
filed for bankruptcy, and despite the automatic stay
that accompanied Grede’s filing, Reedsburg implemented
the process pursuant to state law by which it could
collect on Grede’s arrearage. Grede sought to enforce
the stay. The bankruptcy court and the district court
found that none of the exceptions to the automatic stay
applied to Reedsburg’s efforts to collect on Grede’s debt,
which is substantial considering that Grede’s billings
constituted more than one-third of Reedsburg’s operating
revenue. We are sympathetic to Reedsburg’s plight but
the exceptions to the automatic stay do not apply to
Reedsburg’s efforts to collect on Grede’s debt. We affirm.
I. Background
Grede owned properties in Reedsburg, Wisconsin,
that received utility services from the Reedsburg Utility
Commission, a municipal utility. The utility services—
primarily electricity—were critical to Grede’s operations.
The foundry conducted the electricity through rods to
heat vats of molten steel to press into parts for the auto-
motive industry. Heating the rods to the appropriate
degree to melt steel produced a hefty electric bill;
Grede’s average monthly utility bill was around $600,000
to $700,000. Reedsburg’s billings with Grede were also
significant, constituting about 35% of its operating
No. 10-2509 3
revenue in 2008. Reedsburg provides electric, water,
telephone, internet, and cable TV service to 4,170 residents
and 681 businesses in the Reedsburg area in Sauk County,
Wisconsin.
Perhaps triggered by the major downturn in the Ameri-
can automotive industry, Grede voluntarily filed for
Chapter 11 bankruptcy on June 30, 2009, with assets
between $100 million and $500 million. The filing
initiated the automatic stay pursuant to 11 U.S.C.
§ 362(a)(4) & (6), halting “any act to create, perfect, or
enforce any lien against property of the estate” or “any
act to collect, assess, or recover a claim.” Yet Congress
also created several exceptions to the automatic stay,
three of which are at issue in this appeal: perfecting
prepetition interests in property, id. § 362(b)(3), deter-
mining the existence of and providing notice of a tax
matter, id. § 362(b)(9), and creating or perfecting a lien
for a special tax or special assessment on real property,
id. § 362(b)(18). At the time of filing, Grede owed
Reedsburg $1,312,314.09 in prepetition unpaid utility
charges—or a few months’ worth of utility services. Grede
continued operating as a debtor in possession pursuant
to 11 U.S.C. §§ 1107(a), 1108.
The Wisconsin law governing how municipal utilities
collect on an arrearage is fairly straightforward for
our purposes. Reedsburg must give delinquent
property owners a written notice on October 15 of their
pre-October 1 arrearage for the year pursuant to Wis.
Stat. § 66.0809(3). The notice must state:
that unless the amount is paid by November 1 a
penalty of 10 percent of the amount of arrears will
4 No. 10-2509
be added; and that unless the arrears, with any
added penalty, are paid by November 15, the
arrears and penalty will be levied as a tax against
the lot or parcel of real estate to which utility
service was furnished and for which payment
is delinquent.
Id. (emphasis supplied). On November 16 of each year,
Reedsburg must submit to local government officials
a certified list of the properties in arrears and the
amounts due so that
[e]ach delinquent amount, including the penalty,
becomes a lien upon the lot or parcel of real estate
to which the utility service was furnished and
payment for which is delinquent, and the clerk
shall insert the delinquent amount and penalty
as a tax against the lot or parcel of real estate.
All proceedings in relation to the collection of
general property taxes and to the return and sale
of property for delinquent taxes apply to the tax
if it is not paid within the time required by law
for payment of taxes upon real estate.
Id. (emphases supplied). Thus, pursuant to Wis. Stat.
§ 66.0809(3), on October 15, 2009, Reedsburg’s general
manager David Mikonowicz sent Grede nineteen
separate notices regarding the unpaid utility charges. The
notices stated:
Our records indicate a current balance in the
amount of $[amount] for the account of GREDE
FOUNDRY at [location].
No. 10-2509 5
As provided for in sections 66.0809 and 66.0627 of
the Wisconsin Statutes and Reedsburg City Ordi-
nance No. 1083 Section 3.08, unpaid electric, water
and sewer bills become a lien against the property
if they remain uncollected after October 30, 2009.
***
We are aware that Grede Foundry is a debtor in
a currently pending Chapter 11 bankruptcy pro-
ceeding. . . . This letter constitutes notice of the
Reedsburg Utility Commission’s right under
municipal ordinance and state law to place
amounts due on this account on the property
tax roll. This notice does not constitute the
filing of a lien. This notice is provided pursuant to
and in compliance with 11 U.S.C. § 362(b)(3) and
546(b)(1)(A).
Grede’s account balances with Reedsburg ranged from
$20.26 to $1,271,649.33. On November 3, Reedsburg
reported all delinquent charges, including Grede’s, to
the City. On November 12, the City reported all
delinquent utility charges to the Sauk County Treasurer,
including Grede’s arrearage. The City typically reimbursed
Reedsburg for all arrearages from its general fund, but
the size of Grede’s delinquency proved too much for
the City.
But for Grede’s bankruptcy filing, Grede’s arrearage
would have been included in the following process pursu-
ant to Wisconsin law and Reedsburg’s ordinances and
practices. The City calculated and reported its mill rate
to the County Treasurer in late November or early Decem-
6 No. 10-2509
ber. Then the County printed and mailed property tax
bills during the first two weeks of December. Unpaid
utility charges, (such as Grede’s but for the bankruptcy
filing), appeared on the bills as a “special charge.” The
City accepted payment for the entire property tax bill
including the special charge up to January 31. Pursuant
to Wis. Stat. § 74.11(12), money the City received would
be applied first to personal property taxes and next to
late utility charges. After January 31, the County paid
the City for all unpaid property taxes and special
charges and assumed responsibility for collecting the
unpaid amounts. If an arrearage persisted after the
due date, the County sent the property owner a notice,
and if the owner still did not pay, the County placed a
lien on the property for the amount of the arrearage,
including unpaid utility charges.
Yet the process for collecting on Grede’s arrearage
halted when Grede filed a motion on November 5 to
enforce the stay and hold Reedsburg in contempt for
violating the stay. The bankruptcy court held on
November 12 that Reedsburg was not in contempt and
deferred deciding whether Reedsburg violated the stay.
But the court ordered Reedsburg, the City, and the
County to refrain from taking actions “to create, file,
perfect, or enforce any lien against Grede’s real property
or to place any unpaid utility charges for utility services
on the property tax roll. . . .” Thus, Grede’s unpaid
utility charges were left off Grede’s 2009 property tax bill.
The bankruptcy court found on December 21 that
Reedsburg violated the automatic stay by sending delin-
No. 10-2509 7
quency notices to Grede and reporting the delinquencies
to the City. The court voided Reedsburg’s “actions to
perfect a lien against Grede’s properties” and found
that Reedsburg’s actions constituted efforts to create or
perfect a lien or collect a debt within the meaning of 11
U.S.C. § 362(a) and that none of the § 362(b) exceptions
applied. In re Grede Foundries, Inc., No. 09-14337, 2009
WL 4927491, at *6 (Bankr. W.D. Wis. Dec. 21, 2009). The
district court affirmed, Reedsburg Util. Comm’n v. Grede
Foundries, Inc., No. 10-cv-84-bbc, 2010 WL 2159358
(W.D. Wis. May 24, 2010), and Reedsburg filed a timely
appeal.
II. Analysis
The parties do not dispute this case’s facts. Their dis-
agreement involves an analysis of state and federal stat-
utes. Thus, we apply de novo review, “which allows us
to ‘assess the bankruptcy court’s judgment anew.’ ” In re
Ingersoll, Inc., 562 F.3d 856, 863 (7th Cir. 2009) (quoting
In re Boone Cnty. Utils., LLC, 506 F.3d 541, 542 (7th Cir.
2007)).
The automatic stay generally prohibits, among other
actions, “any act to create, perfect, or enforce any lien
against property of the estate” or “any act to collect,
assess, or recover a claim.” 11 U.S.C. § 362(a)(4) & (6). The
stay functions as “one of the fundamental protections
afforded to debtors by the bankruptcy laws,” In re 229
Main St. Ltd. P’ship, 262 F.3d 1, 3 (1st Cir. 2001), as it
preserves “what remains of the debtor’s insolvent
8 No. 10-2509
estate and [provides] a systematic equitable liquidation
procedure for all creditors, secured as well as unsecured,
thereby preventing a chaotic and uncontrolled scramble
for the debtor’s assets in a variety of uncoordinated
proceedings in different courts,” In re Holtkamp, 669
F.2d 505, 508 (7th Cir. 1982) (quotations and citations
omitted). Reedsburg abandoned arguing at the district
court that it did not act to perfect or create a lien
but maintained that a § 362(b) exception applied to its
actions. Courts interpret these exceptions narrowly to
give the automatic stay its intended broad application.
See In re Stringer, 847 F.2d 549, 552 (9th Cir. 1988) (“Con-
gress clearly intended the automatic stay to be quite
broad. Exemptions to the stay, on the other hand, should
be read narrowly to secure the broad grant of relief to
the debtor.” (footnotes omitted)). Reedsburg argues that
at least one of three exceptions applied to its efforts to
collect on Grede’s unpaid utility charges: perfecting a
prepetition interest in property, id. § 362(b)(3), determining
the existence of a tax liability and providing notice of
the tax liability, id. § 362(b)(9), and creating or perfecting
a lien for a special tax or a special assessment on real
property, id. § 362(b)(18). We will examine in turn
whether any one of those exceptions applied to Reeds-
burg’s actions.
A. Section 362(b)(3) exception
Reedsburg argues that the exception for perfection of
a prepetition interest pursuant to 11 U.S.C. § 362(b)(3)
No. 10-2509 9
applied to its actions. Section § 362(b)(3) provides that
the automatic stay does not halt:
any act to perfect, or to maintain or continue the
perfection of, an interest in property to the extent
that the trustee’s rights and powers are subject to
such perfection under section 546(b) of [the
Code] . . . .
Id. (emphasis supplied). Section 546(b)(1)(A) in turn
subjects the trustee’s avoidance powers to any generally
applicable law that (emphasis supplied):
(A) permits perfection of an interest in property to
be effective against an entity that acquires rights
in such property before the date of perfection . . . .
The narrow purpose of this “exception is to ‘protect,
in spite of the surprise intervention of [the] bankruptcy
petition, those whom State law protects’ by allowing
[creditors] to perfect an interest they obtained be-
fore the bankruptcy proceedings began.” In re Parr Mead-
ows Racing Ass’n, Inc., 880 F.2d 1540, 1546 (2d Cir. 1989)
(quoting legislative reports). Stated otherwise, “ ‘if an
interest holder against whom the trustee would have rights
still has, under applicable nonbankruptcy law, and as of
the date of the petition, the opportunity to perfect his
lien against an intervening interest holder, then he
may perfect his interest against the trustee.’ ” Makoroff v.
City of Lockport, N.Y., 916 F.2d 890, 891-92 (3d Cir.
10 No. 10-2509
1990) (quoting legislative reports).1 As the Third Circuit
explained in Makoroff, the paradigm § 546(b) case
arises under the Uniform Commercial Code, where a
perfected security interest relates back to either the
filing of a financing statement or the date that the
security interest attaches. See id. at 892 (citing legislative
history). If the creditor has a prepetition unperfected
interest in the debtor’s property, this exception allows
the creditor to take the steps necessary to perfect that
interest because “[s]uch a perfection of a lien is not con-
sidered the creation of a lien.” Id. at 892 n.1. Without
§ 546(b), creditors could not perfect their interests
without violating the automatic stay “even if all that
remained was a ministerial act” to achieve perfection. Id.
at 892. The § 546(b) exception permits “a creditor to
snatch victory from the jaws of defeat . . . when the
debtor files bankruptcy before a security interest” is
perfected. Ginsberg & Martin on Bankr. § 3.02[F].
The baseline issue is whether Reedsburg acquired
prepetition “an interest in property” within the meaning
of § 362(b)(3) and § 546(b)(1)(A), see 229 Main St., 262
F.3d at 5; Makoroff, 916 F.2d at 893; Parr Meadows, 880
F.2d at 1546; see also In re AR Accessories Grp., Inc., 345
1
Congress rendered the specific holdings in Makoroff and Parr
Meadows moot by enacting the 11 U.S.C. § 362(b)(18) exception,
noted infra n.4, see H.R. Rep. No. 103-835, at 58-590 n.20 (1994),
reprinted in 140 Cong. Rec. 27,698 (1994), 1994 U.S.C.C.A.N.
3340, 3367-68 n.20, but their reasoning remains instructive.
See 229 Main St., 262 F.3d at 6 n.4.
No. 10-2509 11
F.3d 454, 458 (7th Cir. 2003) (addressing the “interest in
property” provision as an alternative grounds for
affirmance). If Reedsburg acquired an interest in Grede’s
property, Reedsburg would also have to show that Wis.
Stat. § 66.0809(3) allows that interest “to be effective
against an entity that acquires rights in such property
before the date of perfection.” See 11 U.S.C. § 546(b)(1)(A);
229 Main St., 262 F.3d at 10.2 But we do not need to
address whether Reedsburg’s interest would be effec-
tive against an entity that acquired rights in the prop-
erty before the date of perfection because our analysis
begins and ends with whether Wis. Stat. § 66.0809(3)
granted Reedsburg “an interest in property” for purposes
of § 362(b)(3) and § 546(b)(1)(A). Reedsburg argues that
it acquired an interest in Grede’s property by sending
Grede utility bills or alternatively when it provided
Grede with utility services 3 because these actions set
in motion a process by which Reedsburg could have
2
Creditors must also act pursuant to a law of general applica-
bility, § 546(b)(1), but the parties do not dispute that Wis. Stat.
§ 66.0809(3) applies generally. See 229 Main St., 262 F.3d at 10
(noting that for a law to be “generally applicable,” it must
apply to cases regardless of a bankruptcy (citing Makoroff,
916 F.2d at 892)).
3
At oral argument, Reedsburg’s counsel suggested that the
interest in Grede’s property arose when a bill came due—twenty
or thirty days after mailing. This argument is not developed
in Reedsburg’s briefs, but we note that our holding applies to
all three proposed dates.
12 No. 10-2509
obtained a perfected tax lien. We disagree with
Reedsburg’s broad reading of the exception. Although
Congress did not limit the exception to formal liens, see
229 Main St., 262 F.3d at 5-7, Reedsburg only had the
possibility of an interest in Grede’s property when Grede
filed its bankruptcy petition on June 30—not an interest
in Grede’s property.
We have no doubt that Reedsburg’s action of delivering
services to Grede or mailing Grede utility bills created
a debt or an account. But unless and until Reedsburg
performed the requirements of Wis. Stat. § 66.0809(3),
Reedsburg could not claim any interest in Grede’s prop-
erty. Reedsburg’s interest at the time of service and
billing amounted to accounts for services rendered or
energy provided, see, e.g., U.C.C. § 9-102(2)(ii) & (v).
Holding that Reedsburg’s prepetition actions of delivering
services or mailing utility bills gave Reedsburg an interest
in Grede’s property would functionally give Wisconsin
municipal utilities an ever-present interest in their cus-
tomers’ property to the extent of the monthly utility bill.
We do not believe Congress intended the § 362(b)(3)
exception to stretch that far, particularly when the state
statutory scheme limits the municipal utility’s ability
to acquire an interest in a debtor’s property to particular
dates. Cf. In re Glasply Marine Indus., Inc., 971 F.2d 391,
395 (9th Cir. 1992) (rejecting the proposition that
Congress intended to create an “ever-present interest”
for the § 546(b) exception); Equibank, N.A. v. Wheeling-
Pittsburgh Steel Corp., 884 F.2d 80, 86 (3d Cir. 1989) (same);
Parr Meadows, 880 F.2d at 1547 (same). But cf. Md. Nat’l
Bank v. Mayor of Baltimore, 723 F.2d 1138, 1141-44 (4th
No. 10-2509 13
Cir. 1983) (holding that pursuant to Maryland law, the
government maintains an “ever-present” interest in
property owners’ land for tax purposes). The statutory
mechanism giving Reedsburg an interest in Grede’s
property does not even apply if Grede pays its past
due balances by October 1; Reedsburg’s mailing of the
October 15 notices served as the first of a series of
actions that would give Reedsburg an interest in Grede’s
property. See Wis. Stat. § 66.0809(3). We would have a
closer case if Grede’s bankruptcy filing occurred after
October 15 or even October 1, but we will not
speculate when a municipal utility acquires an interest
in its customers’ property pursuant to Wis. Stat.
§ 66.0809(3) because such hypothesizing is unnecessary
for our holding that Reedsburg did not obtain an interest
in Grede’s property at the time of service or billing.
Reedsburg argues that the Second Circuit’s analysis
in Parr Meadows suggests that its mailing of utility
bills gave Reedsburg a prepetition interest in Grede’s
property. In Parr Meadows, the court found that a
county obtains a § 546(b) interest in property on a statuto-
rily established “tax status date” when all properties
are assessed. 880 F.2d at 1546-47. Upon the tax status
date, the county received “a real and identifiable interest
in the property which cannot be erased or altered by
subsequent events.” Id. at 1548. Although adjustments
could be made, clerical mistakes could be corrected,
and the actual property taxes were not levied until at
least six months later, the tax status date gave the
county an interest in a property because the county
(1) determined the property was taxable and (2) fixed
the value of the property. See id. at 1547. The actions
14 No. 10-2509
subsequent to the tax status date constituted “merely
further steps towards the completion of the taxation
process and the perfection of the county’s interest in
the property.” Id.
Here, Reedsburg’s actions of sending Grede utility
bills or providing utility services did not fix “a real and
identifiable interest” in Grede’s property which could
not “be erased or altered by subsequent events.” Id. at
1548. Grede’s payment of its utility bills pre-October 1
would have wiped out Reedsburg’s ability to attach
any interest in Grede’s property. In Parr Meadows, the
persistent nature of property taxes kept the property
owners from ducking the state’s ability to acquire an
interest in their property after the assessment on the
tax status date. If the provision of utility services or the
mailing of a bill triggered the creation of “an interest
in property,” any number of debts that could potentially
attach to the debtor’s property would be drawn into
the exception’s orbit even though at the time of the bank-
ruptcy filing the debts were mere accounts due for
services rendered.
AR Accessories illustrates how a state law gives an
entity an interest in property for the § 546(b) exception, 345
F.3d at 458, and contrary to Reedsburg’s arguments,
why Wis. Stat. § 66.0809(3) does not perform the same
function. The AR Accessories statute provided that Wis-
consin’s Department of Workforce Development:
shall have a lien upon all property of the employer,
real or personal, located in this state for the full
amount of any wage claim or wage deficiency. A
No. 10-2509 15
lien under this subsection takes effect when the
Department files a verified petition claiming the
lien with the clerk of the circuit court of the county
in which the services or some part of the services
were performed within 2 years after the date
that the wages were due. . . .
Id. at 456-57 (brackets and alterations omitted) (quoting
Wis. Stat. § 109.09(2) in its form at the time of the bank-
ruptcy court’s decision). Despite the Wisconsin legisla-
ture’s deletion of language in this statute that explicitly
stated that the lien interest existed as of the date of the
last unpaid services, the bankruptcy court found that
the legislative history and a Wisconsin state court case
justified finding that the department’s wage lien arose
when the last unpaid services were performed by the
debtor’s employees. See id. at 458-59 (citing Pfister v.
Milwaukee Econ. Dev. Corp., 576 N.W.2d 554, 558 (Wis.
Ct. App. 1998)). We agreed and held that the effective
date of the lien in the debtor’s property was when the
debtor’s employees performed the last unpaid services.
The filing of the petition with a county clerk merely
provided notice of the claim and did not create “any
new interest within the meaning” of § 546(b). Id. at 459 n.4.
We cannot find and Reedsburg does not point to any
Wisconsin authority or legislative history suggesting
that Wis. Stat. § 66.0809(3), like the wage lien statute,
gives a municipal utility an interest in a delinquents’
property by merely providing utility services or mailing
utility bills. Although the statute in AR Accessories did
not expressly state that the wage lien came into
16 No. 10-2509
existence when the employee performed services, it did
state that the department “shall have a lien.” By
contrast, Wis. Stat. § 66.0809(3) states that the “delinquent
amount . . . becomes a lien” not when services are
rendered or bills delivered, but after (1) notice is pro-
vided on October 15; (2) a list of properties in arrears
is furnished to municipal officials; (3) the arrearage re-
mains unpaid by November 15; and (4) the municipal
officials file a list with the county clerk on November 16.
Only then, and assuming Grede did not meanwhile pay
its utility bill, could the “delinquent amount . . . become[]
a lien” on Grede’s property. Thus, because Reedsburg
did not have a prepetition interest in Grede’s property,
the § 362(b)(3) exception did not apply to Reedsburg’s
actions.
B. Section 362(b)(9) exception
Reedsburg next argues that one of the exceptions in 11
U.S.C. § 362(b)(9) applied to its actions. Section 362(b)(9)
provides that a filing does not stay:
(A) an audit by a governmental unit to determine
tax liability;
(B) the issuance to the debtor by a governmental
unit of a notice of tax deficiency;
***
(D) the making of an assessment for any tax and
issuance of a notice and demand for payment
of such an assessment . . . .
No. 10-2509 17
This exception allows government entities to determine
the amount of tax due and send the bill to the tax-
payer/debtor without violating the automatic stay. See
In re Innovation Instruments, Inc., 228 B.R. 313, 314-15
(Bankr. N.D. Fla. 1998) (citing lawmaker’s statement).
The exception’s legislative history suggests Congress
wanted to expand the IRS’s ability to assess tax liability
but not actually collect on the taxes. See id.
Although there is room for debate in some cases what
constitutes a tax, compare Empress Casino Joliet Corp. v.
Balmoral Racing Club, Inc., No. 09-3975, 2011 WL 2652201, at
*1-11 (7th Cir. July 8, 2011) (en banc), with id. at *11-18
(Sykes, J., dissenting), Reedsburg’s utility charges in
no sense constitute a tax despite the fact that they po-
tentially end up on a property tax bill among
genuine taxes, see Wis. Stat. § 74.11(12) (distinguishing
“delinquent utility charges” from other taxes). We note
that Wis. Stat. § 66.0809(3) states that arrears for
utility services “will be levied as a tax.” But the
phrase “as a tax” simply gives a municipality the
ability to collect the unpaid charge as if the charges were
a tax, or “in the same way or manner” of a tax. See,
e.g., Webster’s Third New Int’l Dictionary 125 (1986)
(defining “as”).
Even if the phrase “as a tax” somehow transformed
the utility charges into a tax, state law terms are not
dispositive in bankruptcy law. See United States v. Reorga-
nized CF & I Fabricators of Utah, Inc., 518 U.S. 213, 220-
21 (1996) (noting that the Court places “no weight on the
‘tax’ label in the” state law). Instead, we look to the
18 No. 10-2509
state statute merely to determine whether “its incidents
are such as to constitute a tax within the meaning” of the
Code provision. Id. (quoting City of New York v. Feiring,
313 U.S. 283, 285 (1941)). A tax is generally defined as a
source of revenue that provides general benefits to the
public. See, e.g., Hager v. City of W. Peoria, 84 F.3d 865,
870 (7th Cir. 1996); Diginet, Inc. v. W. Union ATS, Inc., 958
F.2d 1388, 1399 (7th Cir. 1992) (holding that the test for
identifying a tax, regardless of “its nominal designation,”
is whether “it is calculated not just to recover a cost
imposed on the municipality or its residents but to gen-
erate revenues that the municipality can use to offset
unrelated costs or confer unrelated benefits”); Black’s
Law Dictionary 1594 (9th ed. 2009) (defining “tax” as a
“charge, usu. monetary, imposed by the government on
persons, entities, transactions, or property to yield
public revenue”); Webster’s Third New Int’l Dictionary
2345 (1986) (defining “tax” usually as a “pecuniary charge
imposed by legislative or other public authority upon
persons or property for public purposes”). The utility
charges in this case do nothing more than recover
Reedsburg’s costs of delivering utility services. Because
the utility charges are not taxes, the § 362(b)(9) exception
does not apply to Reedsburg’s actions.
C. Section 362(b)(18) exception
Reedsburg’s final argument—that the 11 U.S.C.
§ 362(b)(18) exception applied to its actions—also fails.
Section 362(b)(18) provides that the automatic stay
does not apply to:
No. 10-2509 19
the creation or perfection of a statutory lien for an
ad valorem property tax, or a special tax or special
assessment on real property whether or not ad
valorem, imposed by a governmental unit, if
such tax or assessment comes due after the date
of the filing of the petition[.]
The exception’s intent was to reverse decisions that had
held that the automatic stay blocked local governments
from attaching statutory liens for property taxes that
accrued subsequent to a bankruptcy filing. See H.R. Rep.
No. 103-835, at 58-59 (1994), reprinted in 140 Cong. Rec.
27,698 (1994), 1994 U.S.C.C.A.N. 3340, 3367-68. Because
local governments rely on such taxes as “one of their
principal sources of revenue” usually secured via statutory
liens, certain court decisions4 created “a windfall for
secured lenders, who would otherwise be subordinated
to such tax liens,” and significantly impaired revenue
collection. Id. at 58. Congress intended this section to
overrule such cases and allow local municipalities to use
their property tax liens to secure “payment of property
taxes.” Id. at 59.
Reedsburg argues that the unpaid utility charges are
either a special tax or special assessment. We disagree. As
we held above, the unpaid utility charges are not taxes.
The charges do not raise revenue; they pay for utility
services Reedsburg provided Grede. And there is
4
Namely, Parr Meadows, 880 F.2d 1540, and Makoroff, 916
F.2d 890; see supra n.1.
20 No. 10-2509
nothing “special” about them. They are regular, run-of-the-
mill delinquent charges (although quite large) for
routine everyday utility services.
Our exclusion of municipal utility charges from the
terms “special tax” and “special assessment” is sup-
ported by a variety of authorities. In Illinois Central R.R.
v. City of Decatur, 147 U.S. 190, 197-98 (1893), the
Supreme Court defined the terms “special assessments”
and “special taxes” as charges “imposed upon property
within a limited area for the payment for a local improve-
ment” that is “supposed to enhance the value of all prop-
erty within that area.” More recently, the Court of
Federal Claims held, relying on Illinois Central Railroad
Co., 147 U.S. at 197-98, that a “special assessment” is
defined as a one-time charge levied exclusively against
properties “specially” benefiting from a particular im-
provement. Wright Runstad Props. Ltd. P’ship v. United
States, 40 Fed. Cl. 820, 826 (1998). Similarly, Chapter 9 of
the Bankruptcy Code defines “special tax payer” as the
owner of “property against which a special assessment
or special tax has been levied the proceeds of which are
the sole source of payment of an obligation issued by
the debtor to defray the cost of an improvement relating
to such real property.” 11 U.S.C. § 902(3); see also Carl M.
Jenks, The Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005: Summary of Tax Provisions, 79 Am.
Bankr. L.J. 893, 896 n.19 (2005) (noting that the terms
“special tax” and “special assessment” in 11 U.S.C.
§ 362(b)(18) “refer to charges that relate to specific
projects that a jurisdiction undertakes to benefit a par-
ticular area and that are funded in whole or in part
No. 10-2509 21
from taxes imposed on properties in the area receiving
the benefit”).
The utility charges do not defray the cost of improving
Grede’s property or benefit Grede’s property in any
particular way; Reedsburg’s provision of electricity
(along with providing water and sewer services) allowed
Grede to heat vats of molten steel. Stretching the
defraying of real property improvement costs to include
the provision of utility services is not a plausible inter-
pretation of this exception. We appreciate that Congress
wanted to reverse decisions holding that the automatic
stay prevented municipalities from attaching liens for
property taxes accruing after a bankruptcy filing, but
if Congress wanted to sweep prepetition utility charges
into this exception, it would have done so using more
explicit language. Because Reedsburg’s utility charges
do not qualify as special taxes or special assessments, the
§ 362(b)(18) exception does not apply to Reedsburg’s
actions.
III. Conclusion
Reedsburg was in a tough spot when its largest
customer filed for bankruptcy protection with more
than $1.3 million in unpaid utility charges. But we
cannot ignore the automatic stay’s broad purpose or
the narrow purposes to which the exceptions apply.
A FFIRMED.
7-13-11