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Mark Products US v. Interfirst Bank

Citations: 737 S.W.2d 389; 4 U.C.C. Rep. Serv. 2d (West) 1333Docket: A14-87-118-CV

Court: Court of Appeals of Texas; August 13, 1987; Texas; State Appellate Court

Narrative Opinion Summary

This case involves Mark Products U.S. Inc. and InterFirst Bank Houston, N.A., concerning priority security interests in seismic exploration equipment under the Texas Uniform Commercial Code (UCC). Mark Products sold equipment to Vibrosearch companies without securing it, later receiving a promissory note and security agreement for unpaid amounts, claiming a purchase money security interest. InterFirst, having provided a loan to Vibrosearch, secured its interest via timely filed U.C.C.-1 statements. When Vibrosearch defaulted, disputes arose over the priority of security interests, with Mark Products asserting a superior interest based on its later-filed financing statement. The trial court granted summary judgment to InterFirst, noting its first-to-file status and compliance with UCC provisions. Mark Products failed to perfect its purchase money security interest within the statutory grace period. The court rejected Mark Products' claims of conversion and improper sale of collateral, emphasizing that InterFirst's security interest endured despite unauthorized sales. The appellate court affirmed the trial court's decision, upholding InterFirst's priority interest and rejecting Mark Products' motions for summary judgment due to noncompliance with procedural requirements and lack of evidence supporting its claims.

Legal Issues Addressed

Effect of Unauthorized Sale on Security Interests

Application: Mark Products U.S. Inc.'s claim to possession of the equipment due to Vibrosearch's default was rejected because InterFirst's security interest survived the unauthorized sale to Vibrosonics, Inc.

Reasoning: Since InterFirst did not provide unrestricted authorization for the transfer of the equipment, the security interest survived the sale, negating Mark Products' claim to possession.

Priority of Security Interests under the Texas UCC

Application: InterFirst Bank Houston, N.A. held the first priority security interest in the seismic exploration equipment due to its timely filed U.C.C.-1 financing statement, while Mark Products U.S. Inc. failed to perfect its purchase money security interest within the required timeframe.

Reasoning: Since Mark Products filed its financing statement on September 3, 1982, it did not perfect its interest within the required time, failing to qualify for special priority as a purchase money security interest. InterFirst perfected its interest in July, thus holding the first priority security interest in the seismic exploration equipment.

Requirements for Purchase Money Security Interests

Application: Mark Products U.S. Inc.'s claim for a purchase money security interest was denied because it did not perfect the interest within the twenty-day grace period and failed to provide consideration after the equipment's initial delivery.

Reasoning: Mark Products' argument contradicts its earlier assertion that Vibrosearch assumed obligations of other companies in May 1982. Consequently, the court will not consider Mark Products' claim for a purchase money security interest on appeal, as it was not raised at the trial level.

Summary Judgment Standards

Application: The trial court's summary judgment was affirmed as Mark Products failed to demonstrate the absence of genuine material fact issues concerning its security interest claims.

Reasoning: The Texas Supreme Court's standards for summary judgment require the movant to prove the absence of genuine material fact issues and entitle them to judgment as a matter of law, with all favorable evidence to the non-movant considered as true.