Court Opinion

ID: 2852686
Source: CourtListenerOpinion
Date Created: 2015-09-04 16:41:50.587715+00
Date Added: 2024-06-11T12:46:03.264872
License: Public Domain

COURT OF APPEALS
                       SECOND DISTRICT OF TEXAS
                            FORT WORTH

                                NO. 2-08-010-CV

ROYCE SANDERS                                                 APPELLANT

                                        V.

COMERICA BANK, INC.                                             APPELLEE
D/B/A COMERICA BANK—TEXAS

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    FROM THE COUNTY COURT AT LAW NO. 3 OF TARRANT COUNTY

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                                   OPINION

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                                 I. INTRODUCTION

     Appellant Royce Sanders appeals the summary judgment entered against

him and in favor of Appellee Comerica Bank, Inc. d/b/a Comerica Bank—Texas

(“Comerica”). We will affirm.

                  II. F ACTUAL AND P ROCEDURAL B ACKGROUND

     Sanders sold his construction company, Legend Construction, Inc., to

David Chaney.   In connection with the sale, Sanders and Chaney signed a
March 13, 2001 security agreement giving Sanders a security interest in

collateral described as “Certificate of Stock No. 5, representing 400 shares of

stock of Legend Construction, Inc., a Texas corporation, and all inuring to the

shares of stock of said corporation, tangible and intangible.” Sanders filed a

March 30, 2001 financing statement covering the following collateral: “400

Shares of common stock of Legend Construction, Inc., a Texas corporation

Certificate No. 5.” Approximately three years later, Sanders filed a March 29,

2004    financing   statement   purportedly   covering   thirty-three   pieces   of

construction equipment and some office assets.           This second financing

statement is not signed by the debtor.

       Subsequently, Comerica made a loan to Legend. In connection with the

loan, Comerica requested that Sanders sign, and Sanders did sign, a

Subordination Agreement, subordinating any interest he had in the construction

equipment to Comerica’s interest.        Legend defaulted in its payments to

Comerica, and Comerica foreclosed on the construction equipment collateral

securing its loan to Legend. The proceeds from the foreclosure sale of the

construction equipment exceeded Legend’s indebtedness to Comerica by

$55,860.00. Comerica paid this surplus to Legend.

       Sanders sued Comerica claiming that the $55,860.00 surplus should have

been paid to him. Comerica moved for a traditional summary judgment alleging

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as one of its grounds that Sanders “failed to obtain a security agreement

regarding the Construction Equipment and, thus, held no perfected security

interest in the Construction Equipment. Sanders, thus, had no right to the

surplus.” The trial court granted Comerica’s motion for summary judgment, and

Sanders perfected this appeal. In two issues, Sanders claims that the trial court

erred by granting summary judgment for Comerica.

                            III. S TANDARD OF R EVIEW

      A defendant who conclusively negates at least one essential element of

a cause of action is entitled to summary judgment on that claim. IHS Cedars

Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex.

2004); see Tex. R. Civ. P. 166a(b), (c). When reviewing a summary judgment,

we take as true all evidence favorable to the nonmovant, and we indulge every

reasonable inference and resolve any doubts in the nonmovant’s favor. IHS

Cedars Treatment Ctr., 143 S.W.3d at 798.

          IV. S ANDERS P OSSESSES A S ECURITY INTEREST O NLY IN S TOCK

      In his first issue, Sanders claims that the trial court erred by granting

Comerica summary judgment on the ground that Sanders held no security

interest in the construction equipment.       The summary judgment evidence

establishes that the security agreement signed by Sanders and Chaney created

a security interest for Sanders only in the collateral described as “Certificate of

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Stock No. 5, representing 400 shares of stock of Legend Construction, Inc., a

Texas corporation, and all inuring to the shares of stock of said corporation,

tangible and intangible.” The March 30, 2001 financing statement filed by

Sanders again described the collateral as “400 Shares of common stock of

Legend Construction, Inc., a Texas corporation Certificate No. 5.”

      Sanders argues that the description of the collateral in the security

agreement at least creates a fact issue as to whether it created a security

interest in the construction equipment ultimately sold by Comerica. But the law

is clear that in order to create a security interest, the security agreement must

describe the collateral with sufficient particularity to identify it. See Tex. Bus.

& Com. Code Ann. § 9.108(a) (Vernon 2002); see also Orix Credit Alliance,

Inc. v. Omnibank, N.A., 858 S.W.2d 586, 593 (Tex. App.—Houston [14th

Dist.] 1993, writ dism’d) (holding collateral description in security agreement

of “property . . . wherever located” insufficient to create security interest in

intangible property); see also Unicut, Inc. v. Tex. Commerce Bank-Chem., 704
S.W.2d 442, 444 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.)

(discussing sufficiency of security agreement’s description of collateral). By

statute, a collateral description of “all the debtor’s assets” or “all the debtor’s

personal property” does not reasonably identify the collateral. Tex. Bus. &

Com. Code Ann. § 9.108(c).         Thus, we hold that the description of the

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collateral in the March 13, 2001 security agreement signed by Sanders and

Chaney as a matter of law did not create a security interest in the construction

equipment; it identified as collateral only Certificate of Stock No. 5.

      We nonetheless look to the balance of the security agreement to

determine whether it could be construed in Sanders’s favor as identifying the

construction equipment as collateral somewhere in the agreement other than

under the title “Collateral.” Another category of information in the security

agreement is titled, “Classification of Collateral,” and it lists the classification

as “Stock, Chattel Paper, Assets and General Intangibles.”                Although

identification of collateral by classification may be permissible, the security

agreement at issue did not include the classification of “equipment,” which is

the general classification of the construction equipment collateral at issue. See

id. § 9.102(33). Thus, we cannot agree that any language in the security

agreement raises a fact question on the identity of the collateral to which

Sanders’s security interest attached; a security interest was created only in

Stock Certificate No. 5.

      Sanders further argues that the subsequent, March 29, 2004 financing

statement purportedly covering thirty-three pieces of construction equipment

and some office assets gave him the right to the $55,860.00 surplus generated

by Comerica’s sale of the construction equipment. But a financing statement

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is ineffectual absent an executed document creating a security interest. See

Crow-Southland Joint Venture No. 1 v. N. Fort Worth Bank, 838 S.W.2d 720,

724 (Tex. App.—Dallas 1992, writ denied) (explaining that a financing

statement merely serves to notify third parties that debtor’s property is or may

be encumbered); Mosley v. Dallas Entm’t Co., 496 S.W.2d 237, 240 (Tex.

App.—Tyler 1973, writ dism’d) (recognizing financing statement alone is

ineffectual to create security interest absent an executed security agreement).

Thus, the March 29, 2004 financing statement provided Sanders with no

further security interest than that reflected in the March 13, 2001 security

agreement. See Crow-Southland Joint Venture No. 1, 838 S.W.2d at 724;

Mosley, 496 S.W.2d at 240.

      Finally, Sanders argues that Comerica knew when it sold the equipment

that Sanders claimed an interest in it because the March 29, 2004 financing

statement was on file and because Comerica asked Sanders to execute the

Subordination Agreement. Neither Comerica’s factual knowledge of Sanders’s

filing nor Comerica’s request that Sanders sign the Subordination Agreement,

however, change the legal effect of the security agreement, which creates a

security interest for Sanders in only Certificate of Stock No.5.

      For these reasons, we overrule Sanders’s first issue.        The trial court

correctly granted summary judgment on Comerica’s contention that it had

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conclusively established that Sanders failed to obtain a valid security interest

in the construction equipment.

      Because the trial court’s order granting summary judgment does not state

the ground on which it was granted, Sanders was required on appeal to negate

every possible ground asserted by Comerica for summary judgment. See State

Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 381 (Tex. 1993). Because we

have held that the trial court properly granted Comerica summary judgment on

the ground that Sanders failed to obtain a valid security interest in the

construction equipment, we must affirm the trial court’s summary judgment and

need not address Sanders’s other challenge to the summary judgment. See,

e.g., FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872–73 (Tex.

2000).

                                 V. C ONCLUSION

      Having overruled Sanders’s first issue and having held that Comerica

conclusively established its right to summary judgment, we affirm the trial

court’s judgment.

                                           SUE WALKER
                                           JUSTICE

PANEL: DAUPHINOT, WALKER, and MCCOY, JJ.

DELIVERED: December 4, 2008

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