Court Opinion

ID: 13946
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:31:20+00
Date Added: 2024-06-11T15:04:01.988969
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                         FOR THE FIFTH CIRCUIT

                         _____________________

                              No. 97-40486
                            Summary Calendar
                         _____________________

In The Matter of: RICHARD A. TAFF;
VICTORIA TAFF,

                                                             Debtors.

                   *********************************

ELWOOD McKINNEY,

                                                           Appellant,

                                versus

RICHARD A. TAFF, also known as
Richard A. Taff, doing business
as National Agency of North America;
VICTORIA TAFF, also known as Vickie Taff,

                                                       Appellees.
_________________________________________________________________

      Appeal from the United States District Court for the
                    Southern District of Texas
                            (M-96-CV-23)
_________________________________________________________________
                          January 7, 1998

Before JOLLY, BENAVIDES, and PARKER, Circuit Judges.

PER CURIAM:*

     The only question before us in this appeal is whether the 1982

agreement between Taff and McKinney was an actual assignment of

commissions or a disguised security arrangement.       The bankruptcy

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
and district courts concluded that it was a security arrangement,

and we agree.

     Under Southern Rock, Inc. v. B & B Auto Supply, 711 F.2d 683,

685 (5th Cir. 1983), whether an agreement constitutes a security

arrangement is determined with reference to state law.    Under the

Texas law applicable to this case, the test for creation of a

secured interest is whether “‘the transaction [was] intended to

have effect as security.’”   Id. (quoting Tex. Bus. & Comm. Code.

§ 9.102 comment 1).   To determine whether a particular agreement

was so intended, Texas courts look to “the substance of the

documents in light of the circumstances of the case.”    John Bezdek

Insurance Associates, Inc. v. American Indemnity Company, 834
S.W.2d 401, 403 (Tex. App. San Antonio 1992) (citing In re Miller,

545 F.2d 916, 918 (5th Cir. 1977)).      In this case, contrary to

other areas of Texas contract law, the “substance of the documents

controls over the words used therein.”   Id.

     Although the bankruptcy court did not reveal the test it

employed, it was nonetheless correct to conclude that the 1982

agreement was a disguised security arrangement.   There was direct

testimony from McKinney himself that the purported assignment was

intended to secure the guarantee of a loan, and that the assignment

was not aggressively collected on until after the loan had gone

into default.   There was further testimony that the commissions

purportedly assigned absolutely were actually pledged as security

elsewhere.   In addition, several of the clauses of the agreement

                               -2-
itself   were   more   typical   of   a     security   arrangement   than   an

assignment.     Because this evidence of intent to provide security

vastly outweighed the mere wording of the document, the agreement

was a security arrangement.

     Because the 1982 agreement was clearly a disguised security

arrangement under the governing Texas law, the bankruptcy court was

also correct to apply 11 U.S.C. § 522(a) to prevent it from

extending post petition.

     For these reasons, we AFFIRM the district court.

                                                           A F F I R M E D.

                                      -3-