## Facts

- Plaintiffs Miko Enterprises, Inc., Marvin L. Piersma, and Allegan Real Estate, LLC sued Allegan Nursing Home, LLC to collect $765,119.17, the unpaid balance on an $850,000 loan Piersma made in 2006.
- The 2006 loan was documented by a promissory note and a security agreement granting the Marvin L. Piersma Trust a security interest in Allegan Nursing Home’s accounts receivable.
- The Piersma Trust perfected its security interest by filing under Article 9 of the UCC.
- A Michigan state court entered judgment for Piersma for $765,119.17 on the loan.
- After obtaining judgment, Piersma sought a writ of execution to enforce against Allegan Nursing Home’s accounts receivable, relying on both his perfected security interest and his judgment lien.
- Capital Funding Group, Inc., its subsidiary 1200 Ely Holdings Co. LLC, and the United States intervened, claiming they held a prior interest in the same accounts receivable and requesting declaratory relief and a stay of execution.
- The intervenors’ claimed priority traced back to a 2000 refinancing in which Capital financed a mortgage for Allegan Real Estate (the entity that owned the nursing-home real property), taking a security interest in Allegan Real Estate’s collateral rather than Allegan Nursing Home’s operating assets.
- While Piersma controlled both the property-owning entity and the nursing-home operator, Allegan Real Estate and Allegan Nursing Home entered into a lease that granted the lessor a priority interest in the nursing home’s license and certificates, but did not grant an interest in accounts receivable.
- In 2008, Piersma sold the nursing home business to Rhema Holdings One, Inc.
- In 2009, Piersma sold Allegan Real Estate to Ely, Capital’s subsidiary; after that sale, a new lease between Ely and the nursing-home operator again granted a security interest in the license and certificates, but not in accounts receivable.
- The United States removed the dispute to federal court, where the parties litigated lien priority and whether execution should be stayed.

## Issues

1. Whether Capital, Ely, and the United States held a prior perfected security interest in Allegan Nursing Home’s accounts receivable that had priority over the Piersma Trust’s perfected Article 9 security interest.
2. Whether the intervenors’ financing and lease documents granted and reasonably identified “accounts” or “accounts receivable” as collateral.
3. Whether enforcement of Piersma’s state-court judgment against the accounts receivable should be stayed pending resolution of the intervenors’ priority claims.

## Decision

- The court rejected the intervenors’ claim that they held a prior security interest in Allegan Nursing Home’s accounts receivable.
- The court concluded the intervenors’ documents related to real-estate financing and to security interests in the nursing home’s license and certificates, not to the nursing home’s receivables.
- The court recognized the Piersma Trust’s properly perfected security interest in accounts receivable as having priority in that collateral.
- The court denied the intervenors’ request to stay Piersma’s enforcement efforts and allowed execution to proceed against the receivables.

## Legal Principles

- A security interest attaches only to collateral granted in the security agreement and identified with a description that reasonably identifies the property; courts will not treat omitted collateral as included.
- Real-estate collateral and interests tied to regulatory operating rights (such as licenses and certificates) are distinct from “accounts” under Article 9 and do not give a lien in receivables without express language.
- In a priority contest under Article 9, a creditor with a valid, perfected security interest in the specific collateral generally prevails over a claimant whose documents do not grant a security interest in that collateral.
- A stay of post-judgment execution is not warranted where the party seeking the stay cannot show a superior interest in the property targeted for execution.

## Conclusion

In *Miko Enterprises, Inc. v. Allegan Nursing Home, LLC*, the court resolved a receivables-priority dispute by enforcing the collateral descriptions the parties actually used: because the intervenors’ financing and lease documents did not grant a security interest in accounts receivable, their claimed priority failed, and the Piersma Trust’s perfected Article 9 security interest in receivables remained senior, permitting execution without a stay.


Miko Enterprises, Inc. v. Allegan Nursing Home, LLC, 2010 U.S. Dist. LEXIS 2043 (2010)