Court Opinion

ID: 2925716
Source: CourtListenerOpinion
Date Created: 2015-09-11 21:25:55.999187+00
Date Added: 2024-06-11T11:39:13.605452
License: Public Domain

NUMBER 13-06-575-CV

                                   COURT OF APPEALS

                      THIRTEENTH DISTRICT OF TEXAS

                         CORPUS CHRISTI - EDINBURG

POKORNE PRIVATE
CAPITAL GROUP, LLC,                                                                           Appellant,

                                                      v.

21ST MORTGAGE CORP. &
NELLA INVESTMENTS, INC.                                                                       Appellees.

 On appeal from the 26th District Court of Williamson County, Texas.

                               MEMORANDUM OPINION

     Before Chief Justice Valdez and Justices Garza and Benavides
                Memorandum Opinion by Justice Garza

        This is an appeal from an order of the trial court granting no-evidence motions for

summary judgment in favor of appellees, 21st Mortgage Corporation (“21st Mortgage”) and

Nella Investments, Inc. (“Nella”),1 and denying a cross-motion for traditional summary

        1
           W e refer to 21st Mortgage Corporation (“21st Mortgage”) and Nella Investm ents, Inc. (“Nella”)
collectively as appellees because the parties jointly filed an appellate brief and both parties raised the sam e
argum ents with the trial court in their respective no-evidence m otions for sum m ary judgm ent. In addition,
judgment filed by appellant, Pokorne Private Capital Group, LLC. This case involves the

priority of conflicting security interests in a manufactured home located in Williamson

County. By three issues, appellant contends that the trial court erred in granting appellees’

no-evidence motions for summary judgment and denying its cross-motion for summary

judgment because: (1) once a manufactured home is elected and recognized by the State

of Texas as real property, it is no longer inventory under the business and commerce code

and thus not subject to an inventory lien; (2) once the manufactured home was sold, 21st

Mortgage’s inventory lien no longer attached to the manufactured home but rather to the

proceeds of the purchase money loan made by appellant to Sedona; and (3) appellant

produced more than a scintilla of probative evidence to establish its causes of action for

trespass, trespass to try title, conversion, and its declaratory judgment in response to

appellees’ no-evidence motions for summary judgment; alternatively, appellant conclusively

established its causes of action. We affirm the judgment of the trial court.

                              I. FACTUAL AND PROCEDURAL BACKGROUND

        Sedona Homes Inc. (“Sedona”) is a retailer of manufactured homes in Texas.2 On

May 24, 2001, Sedona granted Vanderbilt Mortgage and Finance, Inc. (“Vanderbilt”) a

security interest in its inventory.3 Vanderbilt filed various UCC-1 documents with the Texas

appellant does not dispute to the collective treatm ent of 21st Mortgage and Nella on appeal or with the trial
court.

        2
           A “HUD-code m anufactured hom e” is a structure built on or after June 15, 1976 on a perm anent
chassis that is (1) “designed for use as a dwelling without a perm anent foundation when the structure is
connected to the required utilities,” (2) “transportable in one or m ore sections,” and (3) “in the traveling m ode,
at least eight body feet in width or at least 40 body feet in length or, when erected on site, at least 320 square
feet.” T EX . O C C . C OD E A N N . § 1201.003(9) (Vernon Supp. 2007).

        3
          The financing statem ent filed by Vanderbilt with the Texas Secretary of State contained the following
description of property covered by the security interest:

        All of Dealer’s [Sedona Hom es, Inc. and an additional debtor, First Texas Hom es] inventory,
        new and used and repossessed units, presently owned and hereafter acquired (including but
                                                         2
Secretary of State to perfect its security interest. A Texas Inventory Finance Security Form

was filed by Vanderbilt with the Texas Department of Housing and Community Affairs

(“TDHCA”) on May 23, 2002. Vanderbilt later assigned its interest to 21st Mortgage.

         On August 31, 2001, Sedona purchased a manufactured home from Redman

Homes. On September 6, 2001, Sedona installed the home in Williamson County.

Appellees allege that once Sedona installed the home in Williamson County, the home

became part of Sedona’s inventory and, thus, it became subject to 21st Mortgage’s first

priority lien.4

         On November 6, 2002, Sedona executed a deed of trust for the benefit of appellant

to secure the purchase of (1) a piece of real property located in Hutto, Texas and (2) the

home. Sedona executed the deed of trust to secure financing from appellant for what

appellant refers to as a “land-home package,” whereby the home and the land are

conveyed in a single transaction and are financed with a traditional purchase-money

mortgage.5 Appellant filed a UCC financing statement and a fixture filing that secured the

home, as well as the personal property within the home. Appellant recorded its deed of

trust in Williamson County on November 8, 2002.

         not lim ited to m anufactured hom es, travel trailers, cam per units, boats, and recreational
         vehicles), equipm ent used or intended for use in conjunction therewith, accounts, contract
         rights, accounts receivable, general intangibles, chattel paper covering the property
         described above, any such property returned to Dealer, including such property as m ay be
         after-acquired property, and any and all Proceeds thereof.

         4
          Appellees note that it held the “Hom e’s Manufacturer’s Certificate of Origin,” which, in com bination
with the UCC-1 statem ents filed with the Texas Secretary of State, created a valid, perfected first priority lien
on the m anufactured hom e.

         5
         Appellant characterizes the transaction with Sedona as a m anufactured-hom e transaction, which
has an explicit definition contained in the business and com m erce code. A “‘m anufactured-hom e transaction’
m eans a secured transaction: (A) that creates a purchase-m oney security interest in a m anufactured hom e,
other than a m anufactured hom e held as inventory; or (B) in which a m anufactured hom e, other than a
m anufactured hom e held as inventory, is the prim ary collateral.” T EX . B U S . & C O M . C OD E A N N . § 9.102(a)(54)
(Vernon Supp. 2007).
                                                            3
        Sedona defaulted on its note, and appellant, therefore, foreclosed its security

interest under the deed of trust and purchased the property and the home at the

foreclosure sale on March 3, 2004. Appellant recorded the trustee’s deed from the

foreclosure sale on March 15, 2004. Appellant asserts that this recording put “the world

on notice that Appellant was the legal owner of the real property and the manufactured

home.”

        On July 21, 2004, Sedona filed a statement of ownership and location with the

TDHCA. In the statement of ownership and location, Sedona elected to declare the home

as real property and certified that it owns the piece of real property upon which the home

sits or that it holds a qualifying long-term lease. Sedona recorded its statement of

ownership and location in the Williamson County public records on July 26, 2004.

        On October 4, 2004, 21st Mortgage repossessed the Home under the belief that it

held a valid perfected first priority lien on the home and that it was entitled to self-help

repossession of the home upon Sedona’s default. Subsequently, on February 10, 2005,

TDHCA issued a statement of ownership and location regarding the home to Ariceli L. Cruz

and Diego A. Cruz, who purchased the home from Nella.6

        On March 23, 2005, appellant filed suit against appellees for trespass, trespass to

try title, and conversion for repossessing the home and for a declaratory judgment that its

security interest in the home was superior to that of 21st Mortgage. On December 5, 2005,

Nella and 21st Mortgage filed separate no-evidence motions for summary judgment

arguing that 21st Mortgage’s security interest was superior to appellant’s and that 21st

        6
           The record is not clear as to how the hom e was transferred from 21st Mortgage to Nella. Nella
noted in its m otion for sum m ary judgm ent filed on Decem ber 5, 2005, that “[t]he acts of Nella did not cause
any injury to Plaintiff because the Hom e was placed on Nella’s property by 21st Mortgage and 21st Mortgage
was sim ply taking possession of its own property.” On the other hand, appellant, in its original petition, asserts
that Nella was directed by 21st Mortgage to physically enter appellant’s property and rem ove the Hom e.
                                                        4
Mortgage was entitled to repossess the home upon Sedona’s default.7 On January 6,

2006, appellant filed its response to appellees’ no-evidence motions for summary judgment

and filed its own cross-motion for summary judgment.

        On March 22, 2006, the trial court conducted a hearing on appellees’ no-evidence

motions for summary judgment and appellant’s cross-motion for summary judgment. The

trial court, in its final judgment signed on August 29, 2006, granted appellees’ no-evidence

motions for summary judgment and denied appellant’s cross-motion for summary judgment

without stating grounds. This appeal ensued.

                                       II. STANDARD OF REVIEW

        The function of summary judgment is to eliminate patently unmeritorious claims and

defenses, not to deprive litigants of the right to a trial by jury. Tex. Dep’t of Parks & Wildlife

v. Miranda, 133 S.W.3d 217, 228 (Tex. 2004) (citing Casso v. Brand, 776 S.W.2d 551, 556

(Tex. 1989)); Alaniz v. Hoyt, 105 S.W.3d 330, 344 (Tex. App.–Corpus Christi 2003, no

pet.). We review a trial court’s grant or denial of a motion for summary judgment de novo.

Creditwatch, Inc. v. Jackson, 157 S.W.3d 814, 816 n.7 (Tex. 2005) (citing Schneider Nat’l

Carriers, Inc. v. Bates, 147 S.W.3d 264, 290 n.137 (Tex. 2004)); Alaniz, 105 S.W.3d at

345.

A. Traditional Motion for Summary Judgment

        Under a traditional motion for summary judgment, the movant must establish that

no material fact issue exists and that it is entitled to judgment as a matter of law. TEX . R.

CIV. P. 166a(c); Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002); Alaniz,
105 S.W.3d at 345; Mowbray v. Avery, 76 S.W.3d 663, 690 (Tex. App.–Corpus Christi

        7
          Although 21st Mortgage and Nella filed separate no-evidence m otions for sum m ary judgm ent, both
parties advanced the sam e argum ents in their m otions.
                                                     5
2002, pet. denied). After the movant produces evidence sufficient to show it is entitled to

summary judgment, the nonmovant must then present evidence raising a fact issue. See

Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996).

B. No-Evidence Motion for Summary Judgment

       Texas Rule of Civil Procedure 166a(i) provides that "a party without presenting

summary judgment evidence may move for summary judgment on the ground that there

is no evidence of one or more essential elements of a claim or defense on which an

adverse party would have the burden of proof." TEX . R. CIV. P. 166a(i). The trial court

must grant the motion if the nonmovant does not produce summary judgment evidence

raising a genuine issue of material fact on each element challenged. Id.; Mack Trucks v.

Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The nonmovant must produce more than a

scintilla of probative evidence to raise an issue of material fact. Oasis Oil Corp. v. Koch

Ref. Co. L.P., 60 S.W.3d 248, 252 (Tex. App.–Corpus Christi 2001, pet. denied). More

than a scintilla of evidence exists when the evidence "rises to a level that would enable

reasonable and fair-minded people to differ in their conclusions." Merrell Dow Pharms.,

Inc., v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). We "must examine the entire record

in the light most favorable to the nonmovant, indulging every reasonable inference and

resolving any doubts against the motion." Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex.

2006) (per curiam); see City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005).

       Where, as here, both parties move for summary judgment, and the trial court grants

one motion and denies the other, we review both parties’ motions for summary judgment

and determine whether the trial court erred in its decision. Tex. Workers’ Comp. Comm’n

v. Patient Advocates, 136 S.W.3d 643, 648 (Tex. 2004); Dow Chem. Co. v. Bright, 89

                                            6
S.W.3d 602, 605 (Tex. 2002); Parker v. Parker, 131 S.W.3d 524, 530 (Tex. App.–Fort

Worth 2004, pet. denied).      Moreover, “when a trial court’s order granting summary

judgment does not specify the ground or grounds relied on for its ruling, summary judgment

will be affirmed on appeal if any of the theories advanced are meritorious.” Dow Chem.

Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001) (quoting Carr v. Brasher, 776 S.W.2d 567,

569 (Tex. 1989)).

                                        III. ANALYSIS

       In its first and second issues, appellant asserts that once Sedona filed its statement

of ownership and location and recorded it in the real property records of Williamson County

on July 26, 2004, the home became, as a matter of law, real property in the form of an

improvement to the underlying real property on which the home was located. Appellant

therefore contends that its purchase-money security interest (“PMSI”) had priority over 21st

Mortgage’s inventory lien. Additionally, appellant argues that once the home was sold at

the foreclosure sale, 21st Mortgage’s inventory lien attached to the proceeds of the

purchase-money loan made to Sedona by appellant, rather than the home.

       Conversely, appellees assert that appellant’s security interest in the home is

subordinate to 21st Mortgage’s inventory lien that was filed “first in time.” Appellees further

argue that Sedona was not a buyer in the ordinary course of business; therefore, the home

remained in Sedona’s inventory, and the financing of the home by appellant did not

extinguish 21st Mortgage’s first priority lien on the home. Appellees also contend that

appellant’s security interest in the home was not perfected. Finally, appellees argue that

even if 21st Mortgage’s security interest had attached to the proceeds of the inventory

loan, appellant failed to disburse the proceeds to 21st Mortgage.

A. Applicable Law
                                              7
        Manufactured homes are either HUD-code manufactured homes or mobile homes.

See TEX . OCC . CODE ANN . § 1201.003(15) (Vernon Supp. 2007).8 A manufactured home

is categorized as real property if (1) the statement of ownership and location issued

pursuant to section 1201.207 of the occupations code reflects that the owner elected to

treat the home as real property, and (2) a certified copy of the statement of ownership and

location was filed in the real property records of the county where the home is located.

TEX . PROP . CODE ANN . § 2.001(b) (Vernon 2004); see TEX . OCC . CODE ANN . § 1201.207

(Vernon Supp. 2007). Otherwise, a manufactured home is considered personal property.

TEX . PROP. CODE ANN . § 2.001(a).

        1. Attachment of Liens in Manufactured Homes

        A lien is defined as:

        [A] security interest created by lease, conditional sales contract, deed of
        trust, chattel mortgage, trust receipt, reservation of title, or other security
        agreement if an interest other than an absolute title is sought to be held or
        given in a manufactured home . . . .

TEX . OCC . CODE ANN . § 1201.201 (Vernon 2004). A security interest is an interest in

personal property or fixtures which secures payment or performance of an obligation. TEX .

BUS. & COM . CODE ANN . § 1.201(35)(A) (Vernon Supp. 2007).9 A security interest is

perfected when it has attached and when all the applicable steps required for perfection

have been taken. Id. § 9.308(a) (Vernon 2002). Generally, a security interest attaches

when (1) the debtor authenticates a security agreement containing a description of the

        8
           The parties do not dispute that the hom e is a HUD-code m anufactured hom e. See T EX . O C C . C O DE
A N N . § 1201.003(9).

        9
             The occupations code specifically provides that: “The Business & Com m erce C ode applies to
transactions relating to m anufactured housing except to the extent that it conflicts with this chapter.” T EX .
O C C . C OD E A N N . § 1201.006 (Vernon 2004).
                                                       8
collateral; (2) the secured party gives value for a security interest; and (3) the debtor

obtains rights in the collateral or the power to transfer rights in the collateral to a secured

party. Id. § 9.203(b) (Vernon Supp. 2007). Moreover, the attachment of a security

agreement in collateral gives the secured party the rights to proceeds from the sale of the

collateral. Id. § 9.203(f).

       2. Perfection of Liens in Manufactured Homes

       Generally, a financing statement must be filed in the Texas Secretary of State’s

Office to perfect a security interest in inventory. See id. § 9.310(a) (Vernon Supp. 2007).

Under section 9.311(d) of the business and commerce code, the filing of a financing

statement is not necessary or effective to perfect a security interest in property subject to

chapter 1201 of the occupations code, relating to the documents of title for manufactured

homes. Id. § 9.311(a)(2), (d) (Vernon Supp. 2007). However, the occupations code

provides, with respect to the perfection and priority of liens on manufactured homes in

inventory, that:

       (a) A lien on manufactured homes in inventory is perfected by filing a security
       agreement with the department in a form that contains the information the
       director requires. Once perfected, the lien applies to the manufactured
       homes in inventory as well as to any proceeds from the sale of those homes.

              ....

       (b) Except as provided by Subsection (a), a lien on a manufactured home is
       perfected only by filing with the department the notice of lien on a form
       provided by the department. The recordation of a lien with the department
       is notice to all persons that the lien exists. Except as expressly provided by
       Chapter 32, Tax Code, a lien recorded with the department has priority,
       according to the chronological order of recordation, over another lien or claim
       against the manufactured home.

       (c) Notwithstanding any other provision of this or any other law, the filing of
       a lien security agreement on the inventory of a retailer does not prevent a
       buyer in the ordinary course of business, as defined by Section 1.201,
       Business & Commerce Code, from acquiring good marketable title free of
                                            9
        that lien, and the department may not consider that for the purpose of title
        issuance.

TEX . OCC . CODE ANN . § 1201.219 (Vernon Supp. 2007) (emphasis added); see W.H.V.,

Inc. v. Assocs. Hous. Fin., LLC, 43 S.W.3d 83, 90 (Tex. App.–Dallas 2001, pet. denied)

(construing the Texas Manufactured Housing Standards Act codified as former article

5221f, section 19(m) of the Texas Revised Civil Statutes); Giese v. NCNB Tex. Forney

Banking Ctr., 881 S.W.2d 776, 780 (Tex. App.–Dallas 1994, no writ) (same).

B. Discussion

        1. 21st Mortgage’s Security Interest in Sedona’s Inventory

        The record contains an inventory finance security form filed with the TDHCA on May

23, 2002. This form reflects that Vanderbilt and Sedona executed a separate security

agreement dated May 2, 2001, covering Sedona’s inventory.10 Further, this form provides

that:

        [t]he filing of the inventory—finance security form with the Texas Department
        of Housing and Community Affairs perfects the security interest in all
        manufactured homes which have been financed by the creditor-lender
        [Vanderbilt] or for which the creditor-lender advanced any funds or has
        incurred any obligation which enabled the retailer to acquire the
        manufactured home. The filing of the inventory—finance security form also
        perfects a security interest in all manufactured homes which are hereafter
        acquired by the retailer for which the creditor-lender has advanced any funds
        or the incurrence of the obligation, and the creditor-lender is not required to
        file additional inventory—finance security forms.

        Despite the fact that the TDHCA noted that Vanderbilt’s security interest was

perfected in all of Sedona’s manufactured homes, Vanderbilt filed a financing statement

        10
             The parties do not dispute the validity of Vanderbilt’s security agreem ent with Sedona dated May
2, 2001. Furtherm ore, the parties do not dispute the attachm ent of Vanderbilt’s security interest in Sedona’s
inventory. The record reflects that the TDHCA, in filing Vanderbilt’s inventory finance security form ,
determ ined that Vanderbilt com plied with the statutory requirem ents for attachm ent. See T EX . B U S . & C O M .
C OD E A N N . § 9.203(b) (Vernon Supp. 2007).
                                                        10
with the Texas Secretary of State on May 24, 2001.11 The financing statement specifically

covered:

         All of Dealer’s [Sedona Homes, Inc. and an additional debtor, First Texas
         Homes] inventory, new and used and repossessed units, presently owned
         and hereafter acquired (including but not limited to manufactured homes,
         travel trailers, camper units, boats, and recreational vehicles), equipment
         used or intended for use in conjunction therewith, accounts, contract rights,
         accounts receivable, general intangibles, chattel paper covering the property
         described above, any such property returned to Dealer, including such
         property as may be after-acquired property, and any and all Proceeds
         thereof.

The record reflects that the home was purchased by Sedona from Redman Homes on

August 31, 2001. At this time, the home would be properly characterized as inventory and

was within the purview of Vanderbilt’s financing statement. See TEX . BUS. & COM . CODE

ANN . § 9.102(a)(48) (Vernon Supp. 2007) (“‘Inventory’ means goods, other than farm

products, that: (A) are leased by a person as lessor; (B) are held by a person for sale or

lease or to be furnished under a contract of service; (C) are furnished by a person under

a contract of service . . . .”).12 Specifically, the home constituted “inventory . . . hereafter

acquired (including but not limited to manufactured homes . . . .),” as described in

Vanderbilt’s financing statement.

         Therefore, because Vanderbilt’s security interest attached to Sedona’s inventory

and because Vanderbilt filed an inventory finance security form and a financing statement

with the Texas Secretary of State, we conclude that 21st Mortgage, Vanderbilt’s successor-

in-interest, had a perfected security interest in Sedona’s inventory. See TEX . OCC . CODE

         11
           Vanderbilt’s successor-in-interest, 21st Mortgage, attached a copy of Vanderbilt’s financing
statem ent covering Sedona’s inventory to its m otion for sum m ary judgm ent.

         12
            W e note that the Texas Uniform Com m ercial Code specifically references m anufactured hom es
in its definition of goods. See T EX . B U S . & C O M . C OD E A N N . § 9.102(44) (“‘Goods’ m eans all things that are
m ovable when a security interest attaches. The term includes . . . (v) m anufactured hom es.”).
                                                          11
ANN . § 1201.219. We further conclude that the home was properly considered a part of

Sedona’s inventory in which 21st Mortgage had a perfected security interest.

        2. Appellant’s Deed of Trust and Sedona’s Statement of Ownership and
        Location

        The record reflects that on November 6, 2002, Sedona executed a deed of trust for

the benefit of appellant to secure the purchase of a piece of real property upon which the

home eventually was installed. Appellant contends that the deed of trust secured the piece

of real property, as well as “any buildings or improvements on the land—including the

manufactured home which was demarcated on the attached survey.”13 Appellant further

contends that it filed a UCC financing statement and fixture filings with the Texas Secretary

of State.14 The record reflects that appellant’s deed of trust was recorded in Williamson

County on November 8, 2002.

        Appellant argues that when Sedona filed its statement of ownership and location

with the TDHCA on July 21, 2004, it elected to declare the home as real property, which,

under the occupations code and the property code, converts appellant’s security interest

into a purchase money security interest that has priority over 21st Mortgage’s inventory

        13
           Appellant’s deed of trust with Sedona provides that: “The Property covered by this Deed of Trust
includes the Land, and: (a) Any and all buildings, im provem ents, and tenem ents now or hereafter attached
to or placed, erected, constructed, or developed on the Land (the “Im provem ents”); (b) all of the Grantor’s
[Sedona] right title and interest in all equipm ent, fixtures, furnishings, inventory, and articles of personal
property . . . now or hereafter attached to or used in or about the Im provem ents . . . .”

        14
           Appellant’s UCC financing statem ent and fixture filing does not contain a file stam p from the Texas
Secretary of State’s Office indicating that the item s were filed and subsequently recorded. Because
appellant’s financing statem ent does not appear to have been filed and recorded, appellees argue that
appellant’s security interest has not been perfected. As we have noted above, the Texas Uniform Com m ercial
Code does not require a financing statem ent to be filed with respect to docum ents of title for m anufactured
hom es pursuant to chapter 1201 of the occupations code. See T EX . B U S . & C O M . C OD E A N N . § 9.311(a)(2)
(Vernon Supp. 2007). Therefore, appellees’ contention that appellant’s security interest was not properly
perfected is unfounded.
                                                       12
lien.15    See TEX . OCC . CODE ANN . § 1201.2055(d) (Vernon Supp. 2007) (“After the

department [TDHCA] and the tax assessor-collector note in their records that a real

property election has been perfected, the home is considered to be real property for all

purposes.”); TEX . PROP. CODE ANN . § 63.003 (Vernon 2007) (“When the manufactured

home converts to real property . . . the lien on the property . . . (1) is converted to a

purchase money lien on real property by operation of law; and (2) exists independently of

any existing lien on the real property to which the home is permanently attached.”).

However, Sedona failed to mention in its statement of ownership and location that 21st

Mortgage had an inventory lien on the Home. See TEX . OCC . CODE ANN . § 1201.205(6)

(Vernon Supp. 2007) (“A statement of ownership and location must be evidenced by a

board-approved form issued by the department setting forth . . . (6) in chronological order

of recordation, the date of each lien, other than a tax lien, on the home and the name and

address of each lienholder, or, if a lien is not recorded, a statement of that fact.”).

          We have already concluded that 21st Mortgage had a perfected security interest in

the home and that it was recorded in the Williamson County real property records. As a

result, Sedona’s failure to note 21st Mortgage’s inventory lien in its statement of ownership

and location rendered the filing defective. See TEX . OCC . CODE ANN . § 1201.209(1)

(Vernon Supp. 2007) (“The department may not refuse to issue a statement of ownership

and location and may not suspend or revoke a statement of ownership or location unless:

          15
           W e note that in its statem ent of ownership and location, Sedona identified itself as both the owner
of record and seller of the hom e. In addition, Sedona filed its statem ent of ownership and location on July 21,
2004, which was after the hom e was sold to appellant at the foreclosure sale on M arch 15, 2004. The
occupations code provides that “[a]n owner m ay elect to treat a m anufactured hom e as real property only if
the hom e is attached to: (1) real property that is owned by the owner of the home . . .” T EX . O C C . C OD E A N N .
§ 1201.2055 (Vernon Supp. 2007) (em phasis added). The record clearly establishes that Sedona was not
the owner of the hom e or the underlying real property when it filed its statem ent of ownership and location with
the TDHCA; therefore, Sedona’s statem ent of ownership and location was defective on m ultiple grounds.
Furtherm ore, the evidence dem onstrates that appellant did not file its own statem ent of ownership and location
after Sedona’s foreclosure sale when it owned the hom e and the underlying real property.
                                                         13
(1) the application for issuance of the statement of ownership and location contains a false

or fraudulent statement, the application failed to provide information required by the

director . . . .”). In effect, the director of the TDHCA was not able to consider the effect of

21st Mortgage’s inventory lien on the home for the purpose of title issuance and likely

issued the statement of ownership and location under the impression that the Home was

unencumbered.16

        Appellant’s entire argument on appeal rests on the factual assumption that Sedona

filed a proper statement of ownership and location with the TDHCA. Because we have

concluded that Sedona’s filing with the TDHCA was defective, we do not agree with

appellant’s contention that the characterization of the home—as real property—renders its

lien superior to 21st Mortgage’s. We do not, however, have the benefit of ample case law

to guide us in this matter. Relying on a previous version of the Texas Manufactured

Housing Standards Act (the “Act”) now codified in chapter 12 of the occupations code, the

Dallas Court of Appeals noted that “[p]ermanent attachment to real estate does not affect

the validity of a lien recorded or registered with the department before the manufactured

home is permanently attached. The rights of a prior lienholder pursuant to a security

agreement or the provisions of a credit transaction and the rights of the state pursuant to

        16
              T he occupations code provides that “a docum ent of title is considered to be a statem ent of
ownership and location and it m ay be exchanged for a statem ent of ownership and location . . . .” See T EX .
O C C . C OD E A N N . § 1201.201(2) (Vernon 2004), § 1201.214(a) (Vernon Supp. 2007). Essentially, Sedona’s
failure to denote liens on the m anufactured hom e clouded the title for the hom e. Furtherm ore, the
occupations code provides that the “departm ent m ay not issue a statem ent of ownership and location for a
m anufactured hom e that is being converted from personal property to real property until: (1) each lien on the
hom e is released by the lienholder; or (2) each lienholder gives written consent, to be placed on file with the
departm ent.” Id. § 1201.2075 (Vernon Supp. 2007). The legislature did provide two exceptions to this rule
which allowed for a statem ent of ownership and location to be filed prior to the release of any liens or the
consent of any lienholders only if the departm ent releases a certified copy of the statem ent to: “(1) a licensed
title insurance com pany that has issued a title insurance policy covering all prior liens on the hom e; or (2) a
federally insured financial institution or licensed attorney who has obtained from a licensed title insurance
com pany a title insurance policy covering all prior liens on the hom e.” Id. The record does not contain
evidence that 21st Mortgage released its lien on the hom e or that it gave written consent to be placed on file
with the departm ent, nor does it reflect that either of the two exceptions previously m entioned were satisfied.
                                                       14
a tax lien are preserved.” W.H.V., Inc., 43 S.W.3d at 91 (emphasis in original). Therefore,

it does not follow that appellant can avoid 21st Mortgage’s inventory lien simply by having

Sedona file a defective statement of ownership and location and by conducting a

foreclosure sale.

       Appellant also asserts that 21st Mortgage would be, at best, entitled to the

“proceeds of the purchase-money loan made by Plaintiff [appellant] to Sedona Homes.”

Appellant relies on section 1201.204(b) of the occupations code which provides the

following:

       (b) At the first retail sale of a manufactured home, a manufacturer’s
       certificate automatically converts to a document that does not evidence any
       ownership interest in the manufactured home described in the document.
       A security interest in inventory evidenced by a properly recorded inventory
       finance lien automatically converts to a security interest in proceeds and
       cash proceeds.

TEX . OCC . CODE ANN . § 1201.204(b) (Vernon 2004). The automatic conversion of a

security interest in inventory to a security interest in proceeds hinges entirely upon the first

retail sale of a manufactured home. See id. The first retail sale of a manufactured home

refers to “a consumer’s initial acquisition of a new manufactured home from a retailer by

purchase, exchange, or lease-purchase. The term includes a bargain, sale, transfer, or

delivery of a manufactured home for which the director has not previously issued a

statement of ownership and location, with intent to pass an interest in the home, other than

a lien.” Id. § 1201.201. The record does not reflect that the home was subject to a “first

retail sale.” The evidence fails to demonstrate that Sedona, either explicitly or implicitly,

expressed a desire to sell or transfer an interest in the Home to appellant other than a lien.

See id. To the contrary, appellant argues that 21st Mortgage’s own inventory reports

reflect that “unit [the Home] sold we have info,” which constituted a “first retail sale.” This

                                              15
is not enough. See id. The inventory records do not provide information as to the sales

price, the buyer, or the date of sale.17 Therefore, we conclude that 21st Mortgage’s

security interest did not automatically convert to a security interest in the proceeds of

appellant’s “purchase-money loan with Sedona Homes.”

        3. Conflicting Inventory Liens & Section 1201.219 of the Occupations Code

        Generally, a perfected PMSI in goods other than inventory or livestock has priority

over a conflicting security interest in the same goods. See TEX . BUS. & COM . CODE ANN .

§ 9.324(a) (Vernon 2004). A PMSI in inventory has priority over a conflicting security

interest in the same inventory if the PMSI is perfected by filing or if the PMSI is temporarily

perfected without filing or possession before the beginning of the twenty-day period

prescribed in section 9.312(f) of the business and commerce code. See id. § 9.324(b), (c);

§9.312(f) (Vernon Supp. 2007).                However, the Act does not refer to the priority of

conflicting PMSIs. In fact, the Act provides that a lien on the inventory of manufactured

homes has priority “according to the chronological date of recordation.” TEX . OCC . CODE

ANN . § 1201.219. Therefore, for manufactured homes in particular, the legislature has

specified that conflicting liens on the same inventory must be resolved according to the

chronological date of recordation. See id.18 It is clear from our review of the record that

        17
           The inventory records to which appellant refers contains inform ation about the status of Vanderbilt’s
inventory from March 2003 to Novem ber 2003.

        18
            The legislature provided one exception to the m anufactured hom e priority rules for buyers in the
ordinary course of business. See id. § 1201.219(c). A buyer in ordinary course of business “m eans a person
that buys goods in good faith without knowledge that the sale violates the rights of another person in the
goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods
of that kind. . . . A buyer in ordinary course of business m ay buy for cash, by exchange of other property, or
on secured or unsecured credit, and m ay acquire goods or docum ents of title under a preexisting contract for
sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller
under Chapter 2 m ay be a buyer in ordinary course of business.” T EX . B U S . & C O M . C OD E A N N . § 1.201(9).
However, 21st Mortgage’s filing of its financing statem ent constituted constructive notice of its inventory lien.
See Marine Drilling Co. v. Hobbs Trailers, A D iv. of Fruehauf Corp., 697 S.W .2d 831, 833-34 (Tex.
App.–Corpus Christi 1985, writ ref’d n.r.e.). Therefore, because appellant was on constructive notice of 21st
                                                        16
21st Mortgage’s security interest in the home was perfected prior to appellant’s security

interest and that appellant was not a buyer in the ordinary course of business. In applying

section 1201.219 of the Texas Occupations Code, we conclude that 21st Mortgage’s

inventory lien had priority over appellant’s security interest. See id.

         4. The Foreclosure Sale & 21st Mortgage’s Security Interest

         The Texas Uniform Commercial Code provides that when a lienholder forecloses

upon its lien, any subordinate liens or security interests are discharged. See TEX . BUS. &

COM . CODE ANN . § 9.617(a)(3) (Vernon 2002); see also Conseco Fin. Servicing Corp. v. J

& J Mobile Homes, Inc., 120 S.W.3d 878, 883 (Tex. App.–Fort Worth 2003, pet. denied);

Mortgage & Trust, Inc. v. Bonner & Co., 572 S.W.2d 344, 352 (Tex. Civ. App.–Corpus

Christi 1978, writ ref’d n.r.e). After a foreclosure sale, any senior encumbrances remain

valid and enforceable against the property. See Conseco Fin. Servicing Corp., 120 S.W.3d

at 883; Mortgage & Trust, Inc., 572 S.W.2d at 352; see also Summers v. Consol. Capital

Special Trust, No. C-6817, 1990 Tex. LEXIS 38, at *8 (Tex. Feb. 28, 1990) (Mauzy, J.,

dissenting).

         In the instant case, appellant commenced the foreclosure sale on March 3, 2004,

upon Sedona’s default. Because we have already determined that 21st Mortgage’s

security interest had priority over appellant’s security interest, we conclude that 21st

Mortgage’s security interest continued to encumber the home even after the foreclosure

sale. Accordingly, we overrule appellant’s first and second issues.

Mortgage’s inventory lien and it apparently failed to conduct a file search with the Texas Secretary of State’s
Office of security interests associated with the hom e, appellant would not be a buyer in the ordinary course
of business, as it has not purchased the hom e in good faith without knowledge of 21st Mortgage’s inventory
lien. See id.; see also T EX . B U S . & C O M . C OD E A N N . § 1.201(9). Therefore, the lone exception contained in
section 1201.219 of the occupations code does not apply to the instant case. See T EX . O C C . C OD E A N N . §
1201.219.
                                                         17
       5. “Self-Help Repossession”

       In its third issue, appellant complains that the trial court erred in granting appellees’

no-evidence motions for summary judgment and contends that it produced probative

evidence for its causes of action for trespass, trespass to try title, conversion, and

declaratory judgment. Specifically, appellant contends that appellees were required to

provide notice to it prior to repossessing the home and, in failing to do so, committed a

trespass. Conversely, appellees assert that because 21st Mortgage’s security interest had

priority over appellant’s security interest, appellant’s causes of action for trespass to try

title, conversion, and declaratory judgment fail. In addition, appellees argue that because

they were able to easily repossess the home, the home was not affixed to real property and

no notice was required.

       Unless otherwise agreed upon, a secured party may take possession of the

collateral covered by its security agreement without judicial process (“self-help

repossession”) if it proceeds without breaching of the peace. See TEX . BUS. & COM . CODE

ANN . § 9.609 (Vernon 2004); see also Guillory v. Banctexas Westheimer, No. 01-89-00609-

CV, 1990 Tex. App. LEXIS 1458, at **4-5 (Tex. App.–Houston [1st Dist.] June 14, 1990,

writ denied) (citing Ford Motor Credit Co. v. Cole, 503 S.W.2d 853, 855 (Tex. Civ.

App.–Fort Worth 1973, writ dism’d); Pioneer Fin. & Thrift Corp. v. Adams, 426 S.W.2d 317,

319-20 (Tex. Civ. App.–Eastland 1968, writ ref’d n.r.e.)).

       In the instant case, 21st Mortgage repossessed the home after Sedona defaulted

and Nella subsequently sold the home. See TEX . FIN . CODE ANN . § 347.355(a) (Vernon

2006) (“If a consumer is in default, the creditor who possesses the first recorded perfected

security interest may repossess the manufactured home.”). The record does not contain

any evidence that appellees breached the peace in repossessing the home.
                                         18
        Appellant, however, contends that even if 21st Mortgage’s security interest had

priority, 21st Mortgage was required to provide notice to it prior to repossessing the home

because the home was “affixed to real property.” See id. § 347.355(b). Appellant’s argue

that the term “affix” is synonymous with “installation.”19 On the other hand, appellees

contend that the home could not have been affixed to real property because of the ease

in which they were able to repossess the home. Appellees’ argument appears to give rise

to the notion that appellant failed to make efforts to permanently secure the home.

        The occupations code provides that “installation” means “the temporary or

permanent construction of the foundation system and the placement of a manufactured

home or manufactured component on the foundation. The term includes supporting,

blocking, leveling, securing, anchoring, and properly connecting multiple or expandable

sections or components and making minor adjustments.”                             TEX . OCC . CODE ANN . §

1201.003(10).

        In reviewing the record, appellant has not provided this Court with evidence

indicating that the home was permanently affixed to real property where the home was

repossessed. We are persuaded by the fact that appellees were able to repossess the

home with relative ease. In fact, if the home had been “affixed to real property,” it would

have been extremely difficult for appellees to repossess the home, and they would have

almost certainly breached the peace in doing so. As such, we conclude that the home was

        19
           Neither party disputes that Sedona had “installed” the hom e in W illiam son County on Septem ber
6, 2002. However, the term “installation,” as provided in the occupations code, does provide for the
construction of a foundation system and placem ent of a m anufactured hom e on the foundation for a tem porary
basis. See T EX . O C C . C OD E A N N . § 1201.003(10). Tem porary placem ent of a m anufactured hom e can hardly
be construed to be affixed or fastened perm anently. See id.; see also T EX . F IN . C O D E A N N . § 347.355(b)
(Vernon 2006); B LAC K ’S L AW D IC TIO N AR Y 46 (7th ed. 2000) (defining “affix” as “to attach, add to, fasten on
perm anently.”). W e are not inclined to say that the term “affix” in section 347.355 of the finance code m eans
the sam e thing as “installation” in section 1201.003 of the occupations code.
                                                       19
not “affixed to real property.” Therefore, appellant was not entitled to notice pursuant to

the finance code, and the trial court did not err in granting appellees’ no-evidence motions

for summary judgment. Moreover, because we determined that 21st Mortgage had a valid,

perfected security interest that remained after the foreclosure sale, we conclude that 21st

Mortgage was entitled to “self-help repossession” of the home. Accordingly, we overrule

appellant’s third issue.

                                      IV. CONCLUSION

        Having overruled all of appellant’s issues on appeal, we affirm the judgment of the

trial court.

                                                 ________________________
                                                 DORI CONTRERAS GARZA,
                                                 Justice

Memorandum Opinion delivered and
filed this the 10th day of April, 2008.

                                            20