Michigan National Bank v. Michigan Livestock Exchange

In this action for conversion, defendant claims that as a matter of law it is shielded from liability by UCC 7-4041 or, in the alternative, by UCC 9-3072 when read in conjunction with 1 Restatement Torts, 2d, § 233(1). The Court of Appeals entered summary judgment in defendant’s favor on the basis of UCC 7-404.

We hold that §7-404 does not apply to the defendant, and we reject the latter defense as it is based upon a misapplication of the Restatement provision. We therefore reverse the decision of the Court of Appeals.

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In 1978 and 1981, plaintiff, Michigan National Bank, made loans to farmers…