Marathon MacHine Tools, Inc. v. Davis-Lynch, Inc.
400 S.W.3d 133
Tex. App.2013Background
- Marathon sold a lathe to Hanna-Skye for $299,825 funded with stolen money.
- Marathon perfected a security interest in the lathe by filing a financing statement Feb 4, 2010.
- Davis-Lynch sued Hanna-Skye and others in Jan 2010 in federal court over embezzlement and funds misappropriation.
- The federal court enjoined Hanna-Skye from disposing of the lathe and ordered transfer to Davis-Lynch in June 2010.
- Marathon filed a Texas state-court suit Nov 12, 2010 seeking possession and asserting superior security interests; the trial court denied Marathon and granted Davis-Lynch summary judgment.
- Davis-Lynch held a constructive trust on the lathe as a lien creditor; the court held lien-creditor rights trump Marathon’s perfected security interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Davis-Lynch’s lien creditor status outweighs Marathon’s perfected security interest. | Marathon | Davis-Lynch | Davis-Lynch superior |
| Whether Marathon can prevail on conversion/unjust enrichment when Davis-Lynch has superior rights. | Marathon asserts superiority | Davis-Lynch has superior rights | Marathon’s claims fail |
| Whether Marathon is entitled to attorney’s fees for lack of notice under Chapter 9. | Marathon entitled to fees for lack of notice | No notice required | No fee award; notice not required |
Key Cases Cited
- Meadows v. Bierschwale, 516 S.W.2d 125 (Tex. 1974) (constructive trusts and lien creditors; priority over unperfected security interests)
- Lotus Oil Co. v. Spires, 240 S.W.2d 357 (Tex. Civ. App.—El Paso 1950) (constructive trust rights and lien creditor concepts)
- In re Jim Ross Tires, Inc., 379 B.R. 670 (Bankr. S.D. Tex. 2007) (trust/priority discussions under code rules)
- MBank-Waco, N.A. v. L. & J., Inc., 754 S.W.2d 245 (Tex. App.—Waco 1988) (unperfected lien creditor vs secured party under pre/post code rules)