## Facts

- Dr. Sena Yaddehige loaned money to Legacy Group Lighting, LLC, doing business as Creative Lighting Solutions (Creative/CLS), and received a security interest in all assets of Creative as collateral.
- The loaned funds were placed into a deposit account.
- Creative regularly made monthly payments to Yaddehige on the loan and, according to Yaddehige, always had enough collateral to satisfy the debt.
- Xpert Technologies, Inc. obtained a judgment against Creative in separate litigation.
- Creative satisfied Xpert’s judgment using funds from the deposit account.
- Yaddehige sued Xpert in Michigan state court, asserting that he had a perfected, first-priority security interest under the UCC in the funds used to pay Xpert, sought an injunction limiting collection, and claimed Xpert would be unjustly enriched if it kept the payment.
- There was no evidence that Xpert colluded with Creative to violate Yaddehige’s rights as a secured creditor.
- The trial court granted summary disposition to Xpert, and Yaddehige appealed.

## Issues

1. Under MCL 440.9332 (UCC § 9-332), does a transferee of money or funds from a deposit account take free of a prior security interest when there is no collusion with the debtor?
2. Did Yaddehige present evidence creating a genuine issue of material fact that the funds used to pay Xpert were “identifiable proceeds” of collateral subject to Yaddehige’s security interest under MCL 440.9315(b) (UCC § 9-315(b))?
3. Can Yaddehige maintain an unjust-enrichment claim to recover the payment from Xpert where the UCC provision protects Xpert’s receipt of the funds?

## Decision

- The Michigan Court of Appeals affirmed the grant of summary disposition for Xpert.
- The court held that MCL 440.9332 protects a transferee of money and a transferee of funds from a deposit account from a secured party’s claim, unless the transferee colludes with the debtor to violate the secured party’s rights; no collusion was shown or argued.
- The court rejected Yaddehige’s attempt to avoid MCL 440.9332 by characterizing the payment as proceeds of his collateral, concluding he failed to produce evidence that the account funds used to pay Xpert were identifiable cash proceeds of collateral securing his loan.
- The court further reasoned that even assuming the deposit-account funds were proceeds, MCL 440.9332(1) addresses transferees of “money” and still allows the transferee to take free of the security interest absent collusion.
- Because the UCC provision authorized Xpert to keep the payment, Yaddehige’s unjust-enrichment theory could not be used to require restitution of the same funds.

## Legal Principles

- MCL 440.9332(1) provides that a transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the secured party’s rights.
- MCL 440.9332(2) provides that a transferee of funds from a deposit account takes the funds free of a security interest in the deposit account unless the transferee acts in collusion with the debtor in violating the secured party’s rights.
- A secured party claiming rights in proceeds under MCL 440.9315(b) must show the disputed funds are identifiable proceeds of collateral; unsupported assertions do not create a factual dispute under MCR 2.116(C)(10).
- Where Article 9 assigns priority and protects a transferee in the absence of collusion, equitable restitution (including unjust enrichment) cannot be used to reallocate the same funds contrary to that statute.

## Conclusion

The court affirmed summary disposition for Xpert because UCC § 9-332 (MCL 440.9332) allowed Xpert, as a transferee of money/funds paid from Creative’s deposit account, to take the payment free of Yaddehige’s asserted security interest absent collusion, and Yaddehige also failed to show the payment consisted of identifiable proceeds; with the statutory protection in place, unjust enrichment did not provide a workaround to recover the funds.


Yaddehige v. Xpert Technologies, 2019 WL 1746077 (2019)