## Facts

- Summit Community Bank (Summit) loaned money to Artemis Technologies, Inc. (Artemis) and received a security agreement granting Summit a security interest in Artemis’s accounts receivable and other assets.
- Summit perfected its security interest before System Soft Technologies, LLC (SST) became a judgment creditor.
- The security agreement confirmed Summit’s rights as a secured party under Article 9 of the Uniform Commercial Code (UCC) and also stated that Summit “shall have and may exercise” any other rights and remedies available to lenders.
- Artemis fell behind on its repayment obligations. Summit concluded Artemis could repay only by continuing to operate as a going concern.
- Summit and Artemis entered into a forbearance agreement that (1) declared Artemis in default, (2) accelerated the debt, but (3) temporarily suspended Summit’s immediate foreclosure remedies so Artemis could continue operating and make payments.
- After the forbearance agreement, Artemis made timely payments to Summit under the revised arrangement.
- Separately, SST obtained a money judgment against Artemis on an unrelated dispute and attempted to collect by serving writs of garnishment directed at Artemis’s accounts receivable.
- Summit moved to intervene, asserted that its perfected security interest had priority over SST’s garnishment, and requested relief to stop SST’s collection efforts against the receivables.
- The trial court allowed Summit to intervene, quashed SST’s garnishment writs, and enjoined SST from taking collection action that would interfere with Summit’s collateral.
- SST obtained leave to appeal to the Michigan Court of Appeals.

## Issues

1. Does a creditor with a prior perfected security interest in a debtor’s accounts receivable retain priority over a later judgment creditor’s garnishment of those receivables when the secured creditor declared default, accelerated the debt, and entered a forbearance agreement that temporarily suspended foreclosure?
2. Was SST’s request to require Summit to marshal assets ripe for review?

## Decision

- The Michigan Court of Appeals affirmed.
- Summit’s prior perfected security interest in Artemis’s accounts receivable had priority over SST’s later judgment-based garnishment efforts directed at the same receivables.
- The forbearance arrangement—despite suspending immediate foreclosure—did not waive, terminate, or subordinate Summit’s perfected lien or its priority position.
- The trial court properly quashed the writs of garnishment and enjoined SST from collection efforts that would interfere with Summit’s rights in the receivables.
- SST’s marshaling argument was not ripe for appellate review.

## Legal Principles

- Under Article 9 priority rules, a perfected security interest in accounts receivable generally has priority over a later-acquired lien or collection remedy asserted by a judgment creditor against the same collateral.
- After default, a secured party’s contractual and UCC rights may include enforcing its interest in accounts receivable, including directing payment and collecting proceeds, consistent with the governing loan documents and applicable UCC provisions.
- A forbearance agreement that gives the debtor time to continue operations and pay down the debt does not, by itself, surrender the secured party’s perfected status or priority absent a clear agreement changing lien priority.
- Marshaling of assets is a discretionary remedy and requires a concrete dispute about the senior creditor’s pursuit of multiple sources of repayment; courts will not decide marshaling based on future, uncertain enforcement choices.

## Conclusion

The court held that Summit’s earlier perfected security interest in Artemis’s accounts receivable took priority over SST’s later attempt to garnish those receivables to satisfy its judgment, and it declined to consider SST’s marshaling request because the issue was premature.


System Soft Technologies, LLC v. Artemis Technologies, Inc., 837 N.W.2d 449 (2013)