Peerless Packing Co. v. Malone & Hyde, Inc

Brief Fact Summary. Peerless Packing Co., (Appellant), brought suit against Malone & Hyde, Inc. (Appellee), alleging unjust enrichment. Appellant appeals a directed verdict in Appellee’s favor.

Synopsis of Rule of Law. Equitable claims of unjust enrichment are generally disallowed in cases governed by Article 9 of the U.C.C.

Facts. Appellee contracted to sell a store to John Kizer, (Kizer). Appellee agreed to sell inventory and equipment, sublease the store, and allow the use of its trade name in exchange for a promissory note for approximately $387,000 plus interest. Kizer took over the store selling goods out of inventory as well as those supplied by Appellant on credit. After about a year, Appellee determined that the store was not successful. When two checks were returned for insufficient funds, Appellee presented Kizer with a Notice of Default and Transfer of Possession Agreement. Under the agreement, Appellee would retake ownership of the store, its equipment and inventory and in exchange release Kizer from liability. Appellee resumed ownership of the store and notified Appellants that it had realized on its security interest in the store’s assets without assuming any liability to third parties and would not pay any invoices for delivery prior to its resumption of ownership. Appellants sued Appelle
e on the unpaid accounts on the theory of unjust enrichment.

Issue. Whether the theory of unjust enrichment is applicable in a case governed by Article 9 of the U.C.C.

Held. No. The theory of unjust enrichment is inapplicable in a case governed by Article 9 of the U.C.C.

Discussion. The purpose and effectiveness of the U.C.C. would be substantially impaired if interests created in compliance with the U.C.C. could be defeated by application of the equitable doctrine of unjust enrichment. The U.C.C. provides justice in the long run in large part through the certainty and predictability of its provisions, which should not be set aside absent truly egregious circumstances verging on actual fraud. In this case, no such circumstances have been presented.