Case Name: WILSON LEASING COMPANY v. SEAWAY PHARMACAL CORPORATION
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1974-05-29
Citations: 53 Mich. App. 359
Docket Number: Docket No. 15250
Parties: WILSON LEASING COMPANY v SEAWAY PHARMACAL CORPORATION
Judges: Before: R. B. Burns, P. J., and Danhof and O’Hara, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 53
Pages: 359–374

Head Matter:
WILSON LEASING COMPANY v SEAWAY PHARMACAL CORPORATION
Opinion of the Court
1. Guaranty — Payments—Application of Payments.
Payments made by guarantors pursuant to guaranties on two specific leases entered into by a corporation could not be applied to the balance due on two other leases entered into by the corporation because the guarantors are not liable for payment on leases they did not guarantee.
Concurrence in Part, Dissent in Part by
R. B. Burns, P. J.
2. Account, Action on — Amount Due — Prima Facie Evidence— Statutes.
The failure of a defendant in an action to recover the amount due on an account to file an affidavit of denial in response to the plaintiffs affidavit of amount due on- the account did not render the plaintiffs affidavit prima facie evidence of the indebtedness where the plaintiff failed to serve upon the defendant a copy of the account as required by statute (MCLA 600.2145).
3. Interest — Compound Interest — Statutes.
A lease which provided that delinquent rent installments bear interest at "the highest lawful contract rate or 1% per month, whichever be the lesser”, entitled the lessor to compound interest at an annual rate of 7% on that portion of each past due and unpaid rental installment which was itself a payment of interest, and interest at the rate of 1% per month on that portion of the installments which was not interest (MCLA 438.101).
References for Points in Headnotes
[1, 6] 38 Am Jur 2d, Guaranty § 22.
1 Am Jur 2d, Accounts and Accounting §§ 12,13, 19,
45 Am Jur 2d, Interest and Usury §§ 83-86.
[4, 5, 8-10] 68 Am Jur 2d, Secured Transactions § 137.
[7] 38 Am Jur 2d, Guaranty §§ 81-83.
4. Secured Transactions — Uniform Commercial Code — Collateral —Disposition of Collateral — Reasonable Expenses — Unpaid Liability.
Plaintiffs in contract and tort actions are allowed to recover any reasonable financial liability incurred, whether or not actually paid at the time of suit; therefore, a requirement by a trial court that a secured creditor, in order to recover the reasonable expenses of the disposition of collateral, provide proof of payment was improper.
5. Secured Transactions — Uniform Commercial Code — Attorneys’ Pees — Costs.
In an action to recover the amount due on a contract within the coverage of article nine of the Uniform Commercial Code, when the contract provides for reasonable attorneys’ fees pursuant to the code, the amount of the attorneys’ fees is an element of the principal debt; the fees are not "costs” within the meaning of statutes which authorize or limit the taxation of costs (MCLA 440.9540[1] [a]).
6. Guaranty — Payments—Application of Payments.
Payments made by guarantors of two speciñc leases entered into by a corporation could be properly applied to the balance due on other leases entered into by the corporation where the payments were made without directions for their application.
7. Guaranty — Alteration of Debt — Discharge of Guarantor— Material Alteration.
Any material alteration of a principal debt or obligation operates to completely discharge any guaranty of that debt or obligation unless the guarantor consented to the alteration; any alteration that increases the debt or obligation or extends the time for performance is material.
8. Secured Transactions — Uniform Commercial Code — Collateral —Disposition of Collateral.
A debtor is not entitled to completely avoid its obligation to a creditor where the creditor disposes of collateral in violation of the Uniform Commercial Code; rather, the debtor is entitled to recover any loss occasioned by the secured party’s failure to comply with the appropriate provisions of the code (MCLA 440.9507[1]).
9. Secured Transactions — Uniform Commercial Code — Collateral —Disposition of Collateral — Reasonableness.
The Uniform Commercial Code does not require that repossessed collateral be disposed of in any particular manner, but only that the disposition be made in good faith and in a commercially reasonable manner; therefore, the sale of repossessed equipment which was the subject matter of four separate leases as a single unit to a single purchaser was not contrary to the provisions of the code where it was not claimed that the sale was not made in good faith or in a commercially reasonable manner (MCLA 440.1203, 440.9504[3], 440.9507[2]).
10. Secured Transactions — Uniform Commercial Code — Collateral — Disposition of Collateral — Application of Proceeds.
The proceeds from dispositions of distinct units of collateral pledged pursuant to distinct security agreements are to be applied separately; therefore, in a case where repossessed equipment which was the subject matter of four separate leases was sold as a single unit, the court must approximate the portion of the total proceeds attributable to each unit of collateral, and then apply an appropriate amount of the total proceeds to the balances due on each of the leases (MCLA 440.9504[1] [b]).
Appeal from Muskegon, James F. Schoener, J.
Submitted Division 3 November 6, 1973, at Grand Rapids.
(Docket No. 15250.)
Decided May 29, 1974.
Complaint by Wilson Leasing Company against Seaway Pharmacal Corporation, L. D. Brubaker, I. W. Caplitz, and John Sullivan for a deficiency judgment after sale of repossessed goods. Judgment for plaintiff. Plaintiff appeals the amount of the judgment; defendants other than Seaway cross appeal.
Reversed and remanded with instructions.
Seymour I. Rosenberg, for plaintiff.
Balgooyen, Daniels & Balgooyen, P. C, for defendants.
Before: R. B. Burns, P. J., and Danhof and O’Hara, JJ.

Opinion:
O'Hara, J.
This case was originally assigned to Judge R. B. Burns for the preparation of the Court's opinion. He has fully set forth the necessary facts and we agree with his opinion except as to the holding concerning the application of the funds paid over by the individual guarantors of corporate debts.
We do not read Chris Nelsen & Son, Inc v Shubow, 374 Mich 403; 132 NW2d 122 (1965), as does our colleague. True, there is language in Shubow which tends to obscure its basic decisional holding.
The fact situation in the case at bar is so essentially different from that in Shubow that the difference renders the case inapposite — whatever the legal effect of the opinion may be.
In this case the corporate officers personally guaranteed two specific leases. They made certain payments to Wilson pursuant to that guaranty. Wilson applied, as Judge Burns correctly notes, the bulk of these payments to the two guaranteed leases. For some inexplicable reason Wilson applied $777.70 to the balance due on two leases which were not guaranteed. This was totally impermissible. Whatever Shubow says about crediting payments made, the application of which is unspecified, it certainly does not say the guarantors can become liable for a payment they did not guarantee. Thus we hold that on remand the trial judge is to credit the $777.70 to the amount due on the two leases which were individually guaranteed.
Subject to the foregoing exception we join in the reversal and remand, and the award of no costs.
Danhof, J., concurred.