Miko Enterprises, Inc. v. Allegan Nursing Home, LLC

Miko Enterprises, Inc., Marvin L. Piersma, and Allegan Real Estate, LLC (plaintiffs) filed a complaint against Allegan Nursing Home, LLC (defendant). The complaint sought $765,119.17, the outstanding balance due on an $850,000 loan Piersma made to Allegan Nursing Home in 2006, for which a note and a security agreement were executed giving the Marvin L. Piersma Trust (the trust) a security interest in Allegan Nursing Home’s accounts receivables. A state court granted Piersma a judgment. As both a secured creditor with a perfected interest and a judgment creditor with a lien, Piersma next sought a writ of execution to enforce his security interest in Allegan Nursing Home’s accounts receivables. However, Capital Funding Group, Inc. (Capital), 1200 Ely Holdings Co. LLC (Ely), a subsidiary of Capital, and the United States (intervenors) intervened and argued that they had a prior security interest in Allegan Nursing Home’s accounts receivables. Previously, Piersma had owned both Allegan Real Estate, which owned the property where the nursing home was located, and Allegan Nursing Home, which operated the nursing home. In 2000 Piersma used Capital to refinance Allegan Real Estate’s mortgage, granting Capital a security interest in Allegan Real Estate’s collateral, not the nursing home’s assets. Later, Allegan Real Estate and Allegan Nursing Home entered into a lease agreement that gave Allegan Real Estate a priority interest in the nursing home’s license and certificates, but not the accounts receivables. In 2008 Piersma sold the nursing home to Rhema Holdings One, Inc. (Rhema), and in 2009, Piersma sold Allegan Real Estate to Ely. After the sale, the nursing home entered into a new lease agreement with Ely, which again granted a security interest in Allegan Nursing Home’s license and certificates, but not its accounts receivables. Yet when Rhema defaulted on the loan from Piersma and Piersma sued, the intervenors sought declaratory judgment that they had a priority security interest in Allegan Nursing Home’s accounts receivables. The case was removed to federal court by the United States, where the intervenors also sought to stay enforcement of Piersma’s judgment.