American Oil Co. v. L. A. Davidson, Inc – Case Brief Summary (Michigan)

In American Oil Co. v. L. A. Davidson, Inc., 95 Mich. App. 358, 290 N.W.2d 144 (Mich. Ct. App. 1980), the Michigan UCC did not abridge the subrogation rights of a surety.

Subrogation rights, while often growing out of contracts, are not contract rights because it is a right created by law to avoid an injustice; therefore, in relation to the UCC, "subrogation rights are not security interests within the meaning of Article 9." Id. at 145.

Furthermore, during the drafting phase of the UCC, surety companies and banks fought over their respective rights concerning who enjoyed priority to a limited fund; the surety companies won. Id. at 146.