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Bank One Texas N.A. v. Arcadia Financial Ltd.
Citations: 219 F.3d 494; 42 U.C.C. Rep. Serv. 2d (West) 840; 2000 U.S. App. LEXIS 18068; 2000 WL 964032Docket: 99-50655
Court: Court of Appeals for the Fifth Circuit; July 27, 2000; Federal Appellate Court
Original Court Document: View Document
Arcadia Financial Ltd. appeals the district court's denial of its motion for summary judgment and the grant of summary judgment in favor of Bank One Texas N.A. The court affirms that Bank One maintained a perfected security interest in inventory owned by Lone Star Used Cars, supported by its possession of the certificates of title. Despite sales of automobiles by Lone Star to nine buyers funded by Arcadia, Bank One argues its interest remained intact. Arcadia counterclaims for declaratory relief and damages for conversion and tortious interference, and also pursues claims against Lone Star and its principal, Francis Bradshaw. The district court ruled in favor of Bank One, establishing its security interest as paramount and dismissing Arcadia's claims. The court finds that the buyers are not indispensable parties, thus affirming the district court's jurisdiction. The standard of review for summary judgment is de novo, confirming that no genuine issues of material fact exist. Bank One's additional arguments regarding the agreed summary judgment between Arcadia and Lone Star are deemed moot after the ruling on the merits. Lone Star's sale of automobiles did not extinguish Bank One's perfected security interest, which covers all current and future inventory used to secure a line of credit. Bank One maintains possession of the certificates of title until payment is made by Lone Star. Despite Lone Star's sale of nine vehicles without notifying Bank One, the buyers entered into loan agreements with Arcadia, which is seeking the certificates to perfect its security interests. Bank One contends that the sales were invalid under the Texas Certificate of Title Act, which requires the transfer of the title certificate at the time of sale. The district court ruled that the transactions violated the Act, rendering them void, and thus the buyers could not be classified as "buyers in the ordinary course of business," as they did not acquire valid title to the vehicles. Consequently, Bank One's security interest remained intact. Arcadia's claims for conversion and tortious interference were dismissed as no legal sales occurred. The district court's judgment was affirmed, confirming its correct application of Texas law and its jurisdiction based on diversity.