The borrower executed a retail installment contract to finance the purchase of a truck. The bank perfected a purchase-money security interest on the vehicle. After the borrower defaulted on the loan, the borrower sold the truck to the purchaser without satisfying the outstanding indebtedness or transferring title to the vehicle. The purchaser later attempted to obtain title from the Texas Department of Motor Vehicles (DMV), but the DMV notified the purchaser that the bank’s security interest remained on file and rejected the attempt. Later, the bank demanded surrender of the collateral and filed suit for declaratory judgment and conversion after the purchaser refused to surrender the vehicle. In response, the purchaser argued that he: (1) qualified as a good-faith purchaser, (2) lacked knowledge of the bank’s security interest, (3) possessed no contractual relationship with the bank, and (4) had invested substantial resources in repairing the vehicle. The purchaser also asserted counterclaims seeking either release of the security interest and the issuance of a title or compensation for the vehicle’s fair market value. The trial court granted summary judgment to the bank and dismissed the purchaser’s counterclaims. The purchaser appealed.
In Woolen v. Truist Bank, No. 06-25-00031-CV, 2025 WL 3139803, 2025 Tex. App. LEXIS 8636 (Tex. App.—Texarkana Nov. 10, 2025, no pet.) (opinion not yet released for publication), the Texarkana Court of Appeals affirmed summary judgment in favor of the bank seeking possession of collateral encumbered by a perfected purchase-money security interest (“PMSI”). The court held that the bank conclusively established the existence and continued validity of its priority purchase-money security interest through undisputed summary judgment evidence. Applying Texas Business and Commerce Code §§ 2.403(a), 9.324, and 9.609, the court explained that: (1) a transferee acquires no greater interest in collateral than that which the transferor possessed, (2) the bank’s PMSI retained priority after perfection, and (3) that the bank possessed the statutory right to repossess the collateral following default. Consequently, the purchaser acquired the vehicle subject to the bank’s perfected security interest and corresponding superior right to possession. The court further concluded that the bank had established each element of conversion as a matter of law by demonstrating: (1) the bank possessed a stronger right to immediate possession of the collateral; (2) the purchaser exercised “dominion and control over the [vehicle]” in a manner inconsistent with the bank’s rights; (3) the bank had issued a demand for surrender of the collateral; and (4) the purchaser had “refused to return the [vehicle.]” Rejecting the purchaser’s good-faith purchaser defense, the court held that conversion under Texas law does not require proof of wrongful intent, and that good-faith possession does not defeat a secured creditor’s superior possessory interest in the collateral. Accordingly, the court affirmed the trial court’s award of possession of the collateral, damages, and fees in favor of the bank.
By Landon Womack [email protected]
Edited By Charlie Cole [email protected]
Edited By Olivia Lewis [email protected]
Edited By Taylor O’Brien [email protected]