Shurlow v. Bonthuis

In 1991, Market Place Media, Inc.’s (MPM) predecessors (the predecessors) leased office space from Shurlow and others (the landlords) (plaintiffs). Under the leases, the landlords received a landlord’s lien covering personal property on the leased premises, meaning the landlords could levy the predecessors’ personal property on the leased premises to satisfy unpaid rents or property damage. Bonthuis was an officer for the predecessors who personally guaranteed the predecessors’ performance of their lease obligations. The landlords never attempted to perfect their landlord’s lien. MPM purchased the predecessors’ business and fired Bonthuis. In 1993, MPM failed to pay rent under the leases. Accordingly, the landlords sued MPM and Bonthuis. The district court granted the landlords a judgment of possession and a money judgment against MPM and Bonthuis. Thereafter, the landlords filed suit against MPM and Bonthuis (defendants) seeking additional damages. MPM and Bonthuis filed for bankruptcy. Consequently, the trial court stayed this matter until the bankruptcies were resolved. The bankruptcy court sold MPM’s personal property for $34,929.50. In turn, the landlords filed a claim against the bankruptcy estate for $22,758.93, arguing that its landlord’s lien made it a secured creditor entitled to priority as to the personal property proceeds. However, the bankruptcy court gave priority to MPM’s bankruptcy trustee, and the landlords did not receive any proceeds. Subsequently, Bonthuis withdrew his bankruptcy petition and moved for summary judgment. Bonthuis argued that the landlords’ failure to file a financing statement to perfect their lien under Uniform Commercial Code (UCC) Article 9 relieved Bonthuis of any personal obligations. The landlords argued that Article 9 exempted contractual landlord’s liens and, even if it did not, Bonthuis remained personally obligated to the landlords. The trial court ruled for Bonthuis. The court of appeals affirmed.