In re Lundy Estate
291 Mich. App. 347
| Mich. Ct. App. | 2011Background
- Decedent David Gary Lundy personally guaranteed a mortgage with Lundy’s Lane, L.L.C., and the First Federal Bank, and an Assignment of Deposit Account granted the bank a security interest in a CD as collateral.
- The assignment allowed the bank to accelerate the loan on default and to take all funds in the CD account to apply against the indebtedness, with any excess to the decedent.
- Decedent died on February 20, 2008; Bridget A. Lundy was appointed as personal representative following informal probate on April 24, 2008.
- The bank defaulted on the loan, liquidated the CD, and applied the funds to reduce the loan principal secured by the CD.
- Lundy, as personal representative, sought return of estate funds arguing EPIC priority over the bank’s perfected security interest; the bank contended its security interest is superior under UCC Article 9.
- The probate court concluded EPIC superseded article 9 after appointment, granting the surviving spouse priority for homestead and family allowances; the court reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EPIC prioritization limits a secured creditor’s right to exhaust security. | Lundy argues EPIC priority over bank’s security interest. | Bank asserts security interest superior under UCC Article 9 and can apply CD balance to debt. | Bank entitled to exhaust the CD; EPIC does not override. |
| Whether EPIC governs secured creditors after appointment of personal representative. | Lundy contends EPIC rules deprive secured creditor of priority before estate claims. | Bank relies on secured status and UCC control principles to exhaust security. | EPIC treatment of secured creditors does not alter bank’s right to security repayment. |
| Whether the CD account became estate property requiring claims process before disposition. | CD proceeds should be paid to estate creditors per EPIC priorities. | Secured creditor may collect from security; no need to file a claim against the estate. | Bank could exhaust the security without filing a claim against the estate. |
Key Cases Cited
- In re Larson Estate, 359 NW2d 281 (Minn App, 1984) (secured creditor options to enforce security under probate code)
- Binder v Fruth, 721 P2d 679 (Ariz. App., 1986) (secured creditor remedies under probate-like statutes)
- Stephenson Estate, 173 P.3d 448 (Ariz. App., 2007) (secured creditor execution vs. claims process in probate context)
- Browning v. Eiken, 249 N.W. • 573 (Minn.) (intermediate account and secured claim handling after debtor’s death)
- Shurlow v. Bonthuis, 576 NW2d 159 (Mich. 1998) (article 9 and secured parties; control of deposit accounts)
- In re Clarence W Temple & Florence A Temple Marital Trust, 748 NW2d 265 (Mich. App., 2008) (statutory interpretation of EPIC and related reliability of probate tools)