ADMANCO, Inc. ex rel. Polsky v. 700 Stanton Drive, LLC

N. PATRICK CROOKS, J.

¶ 67. {dissenting). Who needs the legislature when we have this majority? Essentially, the majority does not appear to like the cap in Wis. Stat. § 128.17(2) limiting landlord claims for rent in receivership proceedings, so it writes its way around it. In so doing, the majority fails to honor the principles underlying receivership proceedings in Wisconsin and demolishes the utility of § 128.17(2), which is designed to compensate a landlord for loss of rent while preventing a claim for prospective rent so large that it would deplete an estate in receivership to the detriment of unsecured creditors.

¶ 68. The majority does that all in the name of protecting the integrity of all letters of credit. However, the majority's fear that to rule otherwise will destroy the utility of letters of credit is unfounded. The court of appeals' opinion in this matter was narrow and impacted only letters of credit between landlords and *621tenants, and only proceeds exceeding a landlord's allowable claims under chapter 128. As a result of the majority opinion, receivership estates are more likely to be depleted by a landlord that had contracted for all of its future rent, and unsecured creditors in receivership proceedings are more likely to be left twisting in the wind.

¶ 69. Accordingly, I dissent. I agree with the parties, the circuit court, the court of appeals, and numerous federal courts1 that, in the context of receivership and bankruptcy, the proceeds of the letter of credit here, are secured by property of the estate, and thus are within the receiver's (or bankruptcy trustee's) control, Additionally, in response to the questions asked of this court by the parties, I would conclude, as did the court of appeals, that Stanton is not a secured creditor as defined by Wis. Stat. § 128.25(l)(e), that that conclusion does not offend the independence principle, and that Stanton's claim is limited by the landlord cap in Wis. Stat. § 128.17(2). Hence, I would affirm the court of appeals.

¶ 70. To understand why the majority's approach is misguided, it is important to understand how receivership proceedings operate and the rationale behind the statutory scheme. Wisconsin Stat. ch. 128 governs assignments for the benefit of creditors. "An assignment provides a means of liquidating the assets of a debtor in an orderly and controlled manner." 4 Charles G. Center et al., Wisconsin Business Advisor Series: Collections & Bankruptcy § 4.2.16, at 2:21 (2006). The Wisconsin legislature originally adopted chapter 128 in 1937, L. 1937, ch. 431, and modeled it on particular provisions of the federal Bankruptcy Act of *6221898 as it was amended through 1928.2 See Capitol Indem. Corp. v. Hoppe (In re Bossell, Van Vechten & Chapman), 30 Wis. 2d 20, 26, 139 N.W.2d 639 (1966); 4 Center et al., § 4.2.16, at 2:21.

¶ 71. To initiate receivership proceedings under chapter 128, a debtor voluntarily assigns its assets to an assignee who files the assignment and delivers the bond to the circuit court. Wis. Stat. § 128.02; see Linton v. Schmidt, 88 Wis. 2d 183, 189, 277 N.W.2d 136 (1979). Thereafter, as Wis. Stat. § 128.05(1) provides, "[t]he court shall. . . order the assignee to administer the debtor's estate pursuant to this chapter, and the assignee shall be vested with the powers of a receiver." See also 4 Center et al., § 4.2.16, at 2:21.

¶ 72. Once appointed, a receiver generally has a duty to "act[] for the benefit of the insolvent debtor and all of his creditors." Candee v. Egan, 84 Wis. 2d 348, 361, 267 N.W.2d 890 (1978) (citing Harrigan v. Gilchrist, 121 Wis. 127, 237, 99 N.W. 909 (1904)). However, given that "[t]he object and purpose of assignment law is to afford an equal distribution of the assignor's estate to all creditors in proportion to their claims," the receiver is "bound to look primarily to the interests of the creditors." Linton, 88 Wis. 2d at 198.

*623¶ 73. As for specific duties, the receiver inventories all assets of the estate and lists all of the debtor's creditors. Wis. Stat. § 128.13. Moreover, the receiver is given the title of the debtor to the property and given the right to recover property that the debtor improperly transferred. Wis. Stat. § 128.19(l)-(2). The debtor's creditors have three months from the filing or appointment of the receiver to file claims. Wis. Stat. § 128.14. The receiver then, in accordance with Wis. Stat. § 128.17, distributes the estate assets. The receiver first pays costs of preserving and administering the estate, wages, taxes, and other debts entitled to priority. Wis. Stat. § 128.17(l)(a)-(f). The receiver then pays debts due to general unsecured creditors pro rata "in proportion to the amount of their claims, as allowed." Wis. Stat. § 128.17(l)(g).

¶ 74. In receivership proceedings, landlords' or lessors' claims receive treatment unique from claims of secured and general unsecured creditors. Wis. Stat. § 128.17(2) provides:

Debts to become due as well as debts due may be proved, but a lessor's claim shall be limited to past due rent, and to any actual damage caused the lessor by a rejection of the lease on the part of the debtor or by its termination by force of its provisions. The lessor shall be entitled to payment in full, at the rate specified in the lease, for the period of any actual occupancy by the receiver or assignee.

In other words, a landlord or lessor is limited to claims for "past due rent," including rent due for the period during which the receiver or assignee occupied the property, and any actual damage caused by the debtor's rejection of the lease or its termination. Although the statute does not expressly state that a landlord or lessor has no claim for future rent, it can be reasonably *624inferred from the language "past due rent" and "actual damage" that the statute does not permit a claim for future rent. The parties do not appear to dispute that the statute, if applicable, would limit Stanton's allowable claim. Additionally, the statutory history bears out that interpretation, as explained herein.

¶ 75. As an initial matter, courts have understood the original enactment of the federal Bankruptcy Act of 1898, after which the legislature modeled Wis. Stat. § 128.17(2), to preclude a landlord from recovering future rent because such a claim could not be proved. See Oldden v. Tonto Realty Corp., 143 F.2d 916, 918 (2d Cir. 1944) (listing cases so holding). Although the court in Oldden noted that the rule limiting a landlord to past due rent "was often harsh as to the landlord, ... it did prevent the exhaustion of bankrupt estates for disproportionately large lease claims." Id. at 919.

¶ 76. In 1934, Congress amended federal bankruptcy law to permit a landlord to claim past due rent as well as a portion of future rent capped at "the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease."3 11 U.S.C. § 502(b)(6). In other words, Congress permitted larger claims for future rent "to compensate the landlord for his loss," yet it still retained a cap under § 502(b)(6) to prevent "a claim so large (based on a long-term lease) as to prevent *625other general unsecured creditors from recovering a dividend of the estate." Redback Networks, Inc. v. Mayan Networks Corp. (In re Mayan Networks Corp.), 306 B.R. 295, 298 (B.A.E 9th Cir. 2004) (quoting the legislative history of § 502(b)(6) in S. Rep. No. 95-989, reprinted in 1978 U.S.C.C.A.N. 5787, 5849; H.R. Rep. No. 95-595, reprinted in 1978 U.S.C.C.A.N. 5963, 6309). Notably, the Wisconsin legislature did not follow the lead of Congress and thus made no such change to Wis. Stat. § 128.17(2). Rather, that statute maintains the Bankruptcy Act's pre-1934 limit to claims for past due rent and actual damages only.4

*626¶ 77. Hence, Wis. Stat. § 128.17(2) would limit Stanton to a claim for its past due rent and actual damages only. Given that, the majority endorses an end run, taking the proceeds of the letter of credit out of the receivership based on its conclusion that the proceeds are not property of the estate. Although I agree with the majority's conclusion that chapter 128 limits the receiver's control to property of the debtor's estate, I believe that the majority's conclusion that the proceeds here are not property of the estate is misguided, precisely because these proceeds were secured by property of the estate, as explained below.

¶ 78. The lease between Stanton and Admanco contained a provision with the heading "Security Deposit," which stated that Admanco would provide Stanton with a $61,313.66 cash security deposit5 and two irrevocable standby letters of credit for $375,000 each "representing security for the performance by Tenant of its rental obligations and certain of Tenant's other obligations hereunder." Both letters of credit were issued by M&I Bank (M&I), designated Stanton as the beneficiary, and stated that M&I would pay Stanton the proceeds from the letters "upon presentation of' docu*627merits stating that Stanton "is entitled to draw upon" the letters. The first letter of credit designated Admanco as the applicant (the Admanco letter) and the second letter designated Admanco's principals, Edward and Cristopher Bumby, as the applicants (the Bumby letter). Importantly, Admanco pledged its assets to M&I to secure Admanco's and the Bumbys' obligations under both letters of credit.

¶ 79. The court of appeals' decision turns on the fact that the proceeds were secured by estate assets and that Stanton and Admanco considered the letters of credit to act as a security deposit on the lease. Admanco, 318 Wis. 2d 232, ¶¶ 35-36. The majority calls the court of appeals' reasoning — an approach that the circuit court in this case endorsed and that has support in numerous federal courts — a "shortcut." Majority op., ¶¶ 34-35. In my view, the court of appeals got it right. It followed an approach taken by numerous federal courts. Moreover, that approach, which the Ninth Circuit Bankruptcy Appellate Panel set forth in the Mayan Networks case, comports with the principles underlying Wisconsin receivership law.

¶ 80. Mayan Networks involved the sublease of a commercial building. The tenant delivered to the landlord both a cash security deposit and a letter of credit secured by the tenant's cash, both of which the sublease referred to as "security" for the "faithful performance by [the tenant] of all of [the tenant's] obligations under this [s]ublease." In re Mayan Networks, 306 B.R. at 297. After the tenant filed for Chapter 11 bankruptcy, the landlord drew down the full amount of the letter of credit proceeds and applied the cash security deposit to reduce its allowed claim under the 11 U.S.C. § 502(b)(6) statutory cap. Id. The issue was whether the landlord had to apply the letter of credit proceeds toward the *628remaining amount of its allowed claim under § 502(b)(6), thus reducing the amount of its unsecured claims. Id. at 297-98.

¶ 81. The Mayan Networks court first looked to the language and history of § 502(b)(6), noting that the intent behind the statute was that a security deposit must be applied toward a landlord's total claim, which left the question of whether it was to treat the letter of credit like a security deposit for purposes of determining the landlord's claim. The court first invoked the general consensus among bankruptcy courts that letters of credit are not property of the estate. However, it stated,

[T]he fact that letters of credit themselves are not property of the estate is a red herring. There is nothing in [§ 502(b)(6)] or in case law that suggests that the limitation in § 502(b)(6) applies only to amounts that are paid directly from property of the estate. Rather, the appropriate analysis looks to the impact that the draw upon the letter of credit has on property of the estate.

Id. at 299 (emphasis added).

¶ 82. Looking to the impact that the landlord's draw on the proceeds had on the property of the estate, the court reasoned that the proceeds secured by property of the estate were essentially a security deposit. Id. at 300-01. It concluded that "[t]he draw upon the letter of credit had the same effect on the estate as the forfeiture of a cash security deposit." Id. at 301. The court determined that there was further support for that conclusion based on the facts that the sublease described the letter of credit as "security" for the sublease and that the letter of credit was to be returned to the tenant if the tenant had met all of its obligations under the sublease. Id. at 297, 301. Accordingly, the *629proceeds of the letter of credit were to be applied to the landlord's allowable claim as limited by 11 U.S.C. § 502(b)(6).

¶ 83. Following that reasoning, just as trustees in bankruptcy6 may seek the return of a security deposit to the extent that the amount exceeds the debtor's satisfied obligation, bankruptcy courts have held that a trustee in bankruptcy is entitled to seek proceeds from a letter of credit exceeding the debtor's obligation to the creditor, to the extent that those proceeds are secured by estate assets. See, e.g., First Avenue West Building, LLC v. James (In re Onecast Media, Inc.), 439 F.3d 558, 564 (9th Cir. 2006); AMB Property L.P. v. Official Creditors (In re AB Liquidating Corp.), 416 F.3d 961, 963 (9th Cir. 2005); S-Tran Holdings, Inc. v. Protective Ins. Co. (In re S-Tran Holdings, Inc.), 414 B.R. 28, 35 (Bankr. D. Del. 2009) (debtors may seek proceeds from letters of credit exceeding their obligation); see also Two Trees v. Builders Transport, Inc. (In re Builders Transport, Inc.), 471 F.3d 1178, 1187 (11th Cir. 2006) (a letter of credit beneficiary had a duty to return to the debtor excess proceeds not used to secure the debtor's obligation).

¶ 84. I am persuaded that the approach taken by the court in Mayan Networks, and numerous other federal courts,7 supports the conclusion that letter of *630credit proceeds secured by estate collateral are property of the estate and thus are subject to the receiver's control in a chapter 128 proceeding. The approach that a beneficiary may not retain standby letter of credit proceeds that are secured by estate assets, to the extent that those secured proceeds exceed the limit on a landlord's or lessor's claimed damages in chapter 128, comports with the clear legislative intent that a landlord is entitled to unpaid rent through the date of the receivership petition. See Wis. Stat. § 128.17(2). It also comports with a receiver's duty to act for the benefit of the creditors and to collect and inventory the property of the estate. See Wis. Stat. § 128.13 (the receiver has a duty to inventory the property of estate); § 128.19(2) *631(the receiver has authority to avoid wrongful transfers of property); Linton, 88 Wis. 2d at 198 (the receiver is "bound to look primarily to the interests of the creditors"). Moreover, that approach is consistent with the rationale that the limits in Wis. Stat. § 128.17(2) prevent a landlord or lessor from asserting a claim against the estate "so large as to prevent other general unsecured creditors from receiving a dividend." Waldschmidt v. Appleton Inv. Co. (In re Zienel Furniture, Inc.), 13 B.R. 264, 266 (Bankr. E.D. Wis. 1981); cf. EOP v. Faulkner (In re Stonebridge Techs., Inc.), 430 F.3d 260, 268-69 (5th Cir. 2005) (observing that the federal statutory cap on landlord claims "prevents a lessor who files a claim against the estate from reaping an unfair share of the bankruptcy estate over the remaining pool of unsecured creditors").

¶ 85. Yet the majority eats up the "red herring" discussed in Mayan Networks — hook, line, and sinker. Rather than focus on the effect that the draw on the letter of credit has on the estate in receivership and its impact on the other creditors, the majority declares that the proceeds are not property of the estate, period, on the basis of a handful of largely distinguishable cases.

¶ 86. For example, the majority seizes upon language in Kellogg v. Blue Quail Energy, Inc. (In re Compton Corp.), 831 F.2d 586, 589 (5th Cir. 1987), stating that a letter of credit and its proceeds are not property of the estate. See majority op., ¶¶ 37, 48. However, the court in that case goes on to state, "When a debtor pledges its assets to secure a letter of credit, a transfer of debtor's property has occurred under the provisions of 11 U.S.C. § 547. . .. Overall, the letter of credit itself and the payments thereunder may not be property of debtor, but the collateral pledged as a *632security interest for the letter of credit is." In re Compton Corp., 831 F.2d at 590-91 (emphasis added). Other cases invoked by the majority, upon close examination, likewise do not clearly appear to support its proposition concerning the property of the estate.8

¶ 87. Despite the majority's claim that I am conflating the rights of a beneficiary of a letter of credit with the rights of a secured creditor to an interest in property of the debtor's estate, I do no such thing. Rather, the majority uses such a claim to avoid the question of whether Stanton is a secured creditor. Because the proceeds at issue are property of the estate, by virtue of the estate collateral securing them, Stanton's lease claim is within the receivership. Which leads to the primary question presented to us by the parties themselves: Is Stanton a secured creditor, as defined by Wis. Stat. § 128.25(1)(e), and therefore entitled to retain the letter of credit proceeds? Because I would conclude — like the parties, the circuit court, the court of appeals, and numerous federal courts — that *633secured proceeds from a letter of credit are property of the estate, the issue of whether Stanton is a secured creditor is important.

¶ 88. Secured creditors, as compared to unsecured creditors (and, for that matter, secured creditors under federal Chapter 11 proceedings), have the ability to show some strength in receivership proceedings because secured creditors cannot be compelled to participate in receivership proceedings or have their security taken away without their consent. Wis. Brick & Block Corp. v. Vogel, 54 Wis. 2d 321, 325-26, 195 N.W.2d 664 (1972). Wisconsin Stat. § 128.25(l)(e) defines a secured creditor, in pertinent part, as

a creditor who has either legal or equitable security for his or her debt upon any property of the insolvent debtor of a nature to be liquidated and distributed in a liquidation proceeding, or a creditor to whom is owed a debt for which such security is possessed by some endorser, surety, or other person secondarily liable.

Accordingly, creditors who do not fit within that definition and who have timely filed claims that are not otherwise entitled to priority under § 128.17(1) are placed within the pool of general unsecured creditors.

¶ 89. I am satisfied that Stanton is not a secured creditor under the circumstances presented in the case before us. I strongly endorse the following conclusions made by the court of appeals, that, (1) "M&I, as the issuer of a standby letter of credit, was not 'secondarily liable' for Admanco's contractual obligations with Stanton," Admanco, 318 Wis. 2d 232, ¶ 19; (2) "the letter of credit gave rise to a primary independent obligation of M&I to Stanton, and not that of a guarantor or one who is secondarily liable for Admanco's obligations," id., ¶ 20; and (3) "M&I was not secondarily liable for *634Admanco's nonperformance under the lease — nor was it a surety. We reject Stanton's contention that it meets the definition of a secured creditor under Wis. Stat. § 128.25(l)(e)." Id., ¶ 22.1 also observe, as did the court of appeals, that Stanton has failed to identify a single case holding that a beneficiary of a letter of credit is a secured creditor.9 Id., ¶ 21 n.14. Additionally, I, like the court of appeals, am satisfied that the independence principle is not compromised by the conclusion that Stanton is not a secured creditor.

¶ 90. Because it is not a secured creditor, I would hold that Stanton is subject to the landlord cap in Wis. Stat. § 128.17(2). Here, looking at the "impact that the draw upon the letter of credit has on property of the estate," Mayan Networks, 306 B.R. at 299,1 am satisfied that the proceeds of both the Admanco and Bumby letters of credit may be treated properly as a security deposit for purposes of the chapter 128 proceeding. Like the tenant and landlord in Mayan Networks, Admanco and Stanton appear to have agreed that the letters of credit functioned as a security deposit. In the lease, provisions for delivery of those letters appeared in a section entitled "Security Deposit" and the lease designated the letters as "representing security for the performance by Tenant of its rental obligations and certain of Tenant's other obligations hereunder." (Emphasis added.) The proceeds were secured by assets of the estate. Moreover, the lease provided that the letters of credit were to terminate upon Admanco's satisfactory *635completion of the lease. Those factors lead me to the same conclusion reached by the court of appeals: The proceeds of the letters of credit here operate as a security deposit. Accordingly, Stanton must return any proceeds in excess of its allowable claim, which in this case is $30,656.83: the past due rent for January 2005 at the rate specified in the lease.10

¶ 91. In summary, I would affirm the court of appeals' well-reasoned, narrow, and firmly supported opinion. As that court correctly stated:

This approach recognizes the reality that a letter of credit with a related reimbursement agreement secured by the debtor's assets could overwhelm the estate to the detriment of other creditors and faithfully implements the limit on a landlord's claim set forth in ch. 128.

Admanco, 318 Wis. 2d 232, ¶ 36.

¶ 92. The majority's claim that this approach does "violence" to letters of credit is nothing more than a cry of wolf. First, the court of appeals' approach has no impact on the many letters of credit that are not between a landlord or lessor and tenant. The court of appeals' holding was limited to enabling a receiver to disgorge proceeds only to the extent that those proceeds operate like a security deposit and deplete the estate assets in excess of the beneficiary's allowed claim. Landlords or lessors comprise the only category of *636creditors whose claim has a statutory cap in chapter 128. If a beneficiary of a letter of credit who is not a landlord or lessor draws on a letter of credit for its full, authorized amount, there is no cap to apply to that amount under chapter 128.

¶ 93. Second, letters of credit under the court of appeals' approach will continue to effectuate their purpose of shifting the risk of nonpayment of the amount to which the beneficiary is entitled to the issuer. The majority's arguments to the contrary are premised on the proposition that the beneficiary here, Stanton, is entitled to the full amount of the letter of credit proceeds. For a beneficiary in Stanton's position and under the circumstances here, however, Wis. Stat. § 128.17(2) operates to limit the amount to which Stanton is entitled. The court of appeals properly applied that statute and permitted Stanton to retain the full amount of rent due as proscribed by § 128.17(2). Thus, Stanton effectively shifted the risk of nonpayment of that amount to the issuer. In short, all the court of appeals is doing here is applying the statute; it is not affecting the risk-shifting benefit that is central to letters of credit.

¶ 94. Third, this approach honors the many other benefits that letters of credit convey. Here, for example, the letters of credit provided Stanton with the benefit of being fully compensated for its past-due rent. Had Stanton proved actual damages based on a rejection of the lease, it could have also retained, in full, those amounts. By drawing down on the letters of credit, Stanton was reimbursed for its claim well before other creditors and, moreover, before the unsecured creditors, who will now, at best, receive only a pro rata proportion of the liquidation proceeds. Additionally, Stanton has had the benefit of holding the proceeds over the several *637years that this litigation took place. See In re Builders Transport, Inc., 471 F.3d at 1186 (" '[T]he letter of credit serves, among other things, to shift the burden of litigation. ... [The] beneficiary of the letter of credit holds the stake during the litigation.'") (quoting Resolution Trust Corp. v. United Trust Fund, Inc., 57 F.3d 1025, 1034-35 (11th Cir. 1995)).

¶ 95. Aside from retaining those benefits, Stanton's predicament coming out of these proceedings is not nearly as dire11 as it or the majority would have us believe. As an initial matter, the court of appeals awarded Stanton its past due rent for January 2005. Stanton indicated that it would realize income from the property based on the lease it negotiated with EBSCO, between $4,300 and $4,700 per month through July 2009. Further, Stanton remains in possession of the rental property and can continue to realize an income stream from it. In fact, Stanton projected that it would receive rent of approximately $19,400 per month from at least one other tenant from March 2006 through February 2013. While I acknowledge that Stanton did not recover the full amount of its investment expectations out of its underlying contract with Admanco, I do not believe that the letters of credit under these circumstances operate to insulate Stanton from the risks inherent in such business transactions.

*638¶ 96. As noted previously, indeed, it is the majority's approach that is likely to result in considerable mischief, since that approach ignores the framework that the legislature established in Wis. Stat. § 128.17(2) to protect and treat fairly unsecured creditors in receivership proceedings. Rather, following the majority's reasoning, landlords or lessors could tiptoe around the protections in § 128.17(2) to deplete estate assets to the detriment of unsecured creditors.

¶ 97. Is the landlord cap in Wis. Stat. § 128.17(2) fair? Several courts have observed that limiting a landlord to past due rent and actual damages in receivership proceedings might not provide them adequate compensation. See Oldden, 143 F.2d at 919; Admanco, 318 Wis. 2d 232, ¶ 36 n.20 ("We acknowledge Stanton's contention that this is a harsh result[.]"); see generally In re Bossell, Van Vechten & Chapman, 30 Wis. 2d at 29 (observing "the inadequacy of [Wisconsin]'s insolvency law" compared to federal law). But the question of whether the cap is fair is clearly a question for the legislature, and not in our province. See Holtzman v. Knott, 193 Wis. 2d 649, 711, 533 N.W.2d 419 (1995) (Steinmetz, J., concurring in part & dissenting in part) ("A state court functions at its lowest ebb of legitimacy when it. . . legislates from the bench, usurping power from the appropriate legislative body and forcing the moral views of a small, relatively unaccountable group of judges upon all those living in the state."); Wagner Mobil, Inc. v. City of Madison, 190 Wis. 2d 585, 594, 527 N.W.2d 301 (1995) ("[I]t is not the function of this court to usurp the role of the legislature."). Those courts criticizing the limits imposed on landlord claims appropriately resisted fashioning a convenient work-around of the law. Here, I am disappointed in the majority's failure to exercise such restraint.

*639¶ 98. For the foregoing reasons, I respectfully dissent.

¶ 99. I am authorized to state that Justice ANN WALSH BRADLEY joins this dissent.

See infra ¶ 84 n.7 (listing cases).

Although the legislature adopted chapter 128 in 1937, there is little Wisconsin case law or legislative history interpreting chapter 128's provisions. Because of that, courts have often looked to sources interpreting the Bankruptcy Act when interpreting parallel provisions in chapter 128. See, e.g., In re Delta Group, 300 B.R. 918, 923-24 (Bankr. E.D. Wis. 2003) (comparing Wis. Stat. ch. 128 provision with similar provision in bankruptcy code); Capitol Indem. Corp. v. Hoppe (In re Bossell, Van Vechten & Chapman), 30 Wis. 2d 20, 26-29, 139 N.W.2d 639 (1966) (same).

However, it is worth noting that in Chapter 11 proceedings, "[t]o the extent that a landlord will have a security deposit in excess of the amount of the claim allowed under § 502(b)(6), the excess will be turned over to the [bankruptcy] trustee." 4 Collier on Bankruptcy, § 502.03[7][h] (15th ed. rev. 2002) (emphasis added); see also Oldden v. Tonto Realty Corp., 143 F.2d 916, 921 (2d Cir. 1944) (stating that any surplus of security deposit held by a landlord beyond its permitted claim "should go to the trustee for the general creditors”).

The majority fails to offer a persuasive explanation of why federal cases such as Oldden and Mayan Networks, which interpret the cap imposed on landlord claims for future rent in 11 U.S.C. § 502(b)(6)(A), "do not inform" its interpretation of the cap imposed on landlord claims in receivership by Wis. Stat. § 128.17(2). Its reasoning seems to be based on the observation that the federal cap permits a larger landlord claim than does the state cap. Therefore, in the majority's view, analogizing to federal case law interpreting 11 U.S.C. § 502(b)(6) is inappropriate here. See majority op., ¶¶ 49-50 & n.24.

The majority, however, stubbornly refuses to acknowledge that the principle present in the Bankruptcy Act of 1898 — i.e., limiting a landlord's claim for future rent prevents depletion of an estate in insolvency proceedings — necessarily underlies both 11 U.S.C. § 502(b)(6) and Wis. Stat. § 128.17(2). See Redback Networks, Inc. v. Mayan Networks Corp. (In re Mayan Networks Corp.), 306 B.R. 295, 298 (B.A.E 9th Cir. 2004) (noting legislative history of stating that "the purpose of [§ 502(b)(6)] is to compensate the landlord for his loss while not permitting a claim so large (based on a long-term lease) as to prevent other general unsecured creditors from recovering a dividend of the estate") (internal quotation marks omitted). In my view, and in the view of the many federal cases discussed herein, those cases cannot be dismissed as inapplicable. The Wisconsin legislature modeled Wis. Stat. § 128.17(2) after the federal bankruptcy act *626and its purpose of limiting landlord claims for future rent; the later amendment in § 502(b)(6) that increased the amount a landlord may claim comports with that purpose. Simply put, the majority's failure to apply those cases defies logic, reason, and common sense.

Along with its arguments that it was entitled to retain the proceeds from the letters of credit, Stanton also argued to the court of appeals that it was entitled to retain the cash security deposit. The court of appeals rejected that argument to the extent that the security deposit exceeded Stanton's allowable claim for damages. See Admanco, 318 Wis. 2d 232, ¶¶ 24-26. Stanton does not renew its argument regarding the security deposit here.

A receiver in a chapter 128 proceeding has responsibilities and obligations similar to those of a trustee in bankruptcy. Compare Wis. Stat. §§ 128.13, 128.14, and 128.17 (describing receiver's duties in state receivership proceedings), with 11 U.S.C. §§ 704,1106 (listing duties of a trustee in federal Chapter 7 and Chapter 11 bankruptcy proceedings).

Before the Ninth Circuit Bankruptcy Appellate Panel issued Mayan Networks, several other courts had observed that collateral securing letter of credit proceeds are property of the *630estate. See Kellogg v. Blue Quail Energy, Inc. (In re Compton Corp.), 831 F.2d 586, 590-91 (5th Cir. 1987); see also American Bank v. Leasing Service Corp. (In re Air Conditioning, Inc.), 845 F.2d 293, 296 (11th Cir. 1988). Others held that letter of credit proceeds acting as a security deposit are subject to the bankruptcy proceedings. Solow v. PPI Enters., Inc. (In re PPI Enterprises (U.S.), Inc.), 324 F.3d 197, 210 (3d Cir. 2003). Since Mayan Networks, multiple other courts have adopted its framework recognizing that proceeds of a letter of credit are property of the estate when they are secured by estate collateral. See, e.g., AMB Prop., L.P. v. Official Creditors for the Estate of AB Liquidating (In re AB Liquidating Corp.), 416 F.3d 961, 965 & n.3 (9th Cir. 2005); Int'l Fin. Corp. v. Kaiser Group Int'l Inc. (In re Kaiser Group Int'l, Inc.), 399 F.3d 558, 566 (3d Cir. 2005); In re Connectix Corp, 372 B.R. 488,496 (Bankr. N.D. Cal. 2007); see also First Avenue West Building L.L.C. v. James (In re Onecast Media, Inc.), 439 F.3d 558 (9th Cir. 2006) (holding that a trustee's interest in letter of credit proceeds acting as a security deposit is property of the estate); cf. S-Tran Holdings, Inc. v. Protective Ins. Co. (In re S-Tran Holdings, Inc.), 414 B.R. 28, 33-34 (Bankr. D. Del. 2009) (holding that because proceeds of a letter of credit were not secured by estate collateral, the proceeds were not property of the estate).

For example, the court in Willis v. Celotex Corp., 978 F.2d 146 (4th Cir. 1992) addressed an issue concerning a bankruptcy court's authority to enjoin execution on supersedeas bonds. Its discussion of proceeds of a letter of credit, which was not at issue in the case, appears to be dicta. Id. at 148 n.3. See also Wetzel v. Lumbermans Mut. Cas. Co., 324 B.R. 333, 340 n.18 (S.D. Ind. 2005) (briefly discussing a letter of credit not at issue in a ease concerned with insurance policy proceeds). In addition, the parties in Leisure Dynamics, Inc. v. Continental Ill. Nat'l Bank & Trust Co., 33 B.R. 171,172-73 (Bankr. D. Minn. 1983), were seeking an injunction of the draw-down of the letter of credit; moreover, whether that letter was secured by property of the estate is not clear. See also Sabratek Corp. v. LaSalle Bank, N.A., 257 B.R. 732, 735 (Bankr. D. Del. 2000) (discussing issue of whether to uphold injunction on honoring letter of credit with no discussion of whether it was secured by estate collateral).

In contrast, in the context of federal bankruptcy proceedings, the Second Circuit Court of Appeals has held that a beneficiary of a letter of credit is not a secured creditor. See New England Dairies, Inc. v. Dairy Mart Convenience Stores, Inc. (In re Dairy Mart Convenience Stores, Inc.), 351 F.3d 86, 91 (2d Cir. 2003).

The receiver remained in possession of the leased premises for only the month of January 2005, at which point he sold Admanco's assets to another entity, EBSCO. At that point, EBSCO occupied the premises and took over the lease obligations for February and March of that year. On April 1, 2005, a new lease between EBSCO and Stanton went into effect. Thus, under Wis. Stat. § 128.17(2), Stanton's allowable claim was limited to the past due rent for January 2005.

For example, in an exhibit accompanying its motion for summary judgment, Stanton alleged that it stood to lose approximately $4,275,000 in base rent. However, that calculation was based on the worst-case scenario that it would have at least one vacancy in the property through March 2019 and no tenants in the building from March 2013 through March 2019. Given that Stanton has been successful at finding other tenants for the property despite its difficulties with Admanco, that worst-case scenario seems improbable.