Poteet v. Winter Garden Production Credit Ass'n

• Decision Date: 05 January 1977
• Docket Number: No. 6521,6521
• Citation: 546 S.W.2d 650
• Parties: 21 UCC Rep.Serv. 645 Fred POTEET, Jr., et al., Appellants, v. WINTER GARDEN PRODUCTION CREDIT ASSOCIATION, Appellee.
• Court: Texas Court of Appeals

Page 650

546 S.W.2d 650

21 UCC Rep.Serv. 645

Fred POTEET, Jr., et al., Appellants, v. WINTER GARDEN PRODUCTION CREDIT ASSOCIATION, Appellee.

No. 6521.

Court of Civil Appeals of Texas,

El Paso.

Jan. 5, 1977.

Rehearing Denied Feb. 2, 1977.

Haley, Fulbright, Winniford, Bice & Davis, W. C. Haley, Waco, for appellants.

Jay R. Sorrell, Pearsall, for appellee.

OPINION

PRESLAR, Chief Justice.

This case involves a contest between one who claims a security interest in after-acquired property, and one who claims ownership of the property because the debtor, as his agent, purchased it for him. In issue is the question of whether the debtor acquired an interest in the 254 cattle to which the security interest would attach. The trial Court found for the holder of the security interest. We affirm.

The debtor, Pat Wootton, operated a cattle feed lot. He fed out cattle for himself and others. Appellant, Fred Poteet, Jr., was one of the others in that cattle owned by him were fed out or fattened by Pat Wootton. About one-third of the cattle that passed through Wootton's feed lot were owned by him, and the other two-thirds by numerous other people in the same arrangement as Fred Poteet, Jr. This controversy arose when Pat Wootton's feed lot was placed in receivership with some 4,000 cattle in his feed lot pens at the time. Fred Poteet claims ownership of 254 cattle located in pens numbered 7 and 8, while Appellee, Winter Garden Production Credit Association, claims a security interest in those cattle or the proceeds thereof. At all times pertinent, Appellee had on file in the county of Wootton's operations a financing statement. Among other things, its security agreement enumerated certain cattle and then provided 'and all livestock hereafter acquired by Debtor, and all progeny, thereof, and proceeds thereof.' It is under this security agreement that they claim a lien on the 254 cattle.

Appellant's basic position is that these were always Poteet's cattle and Wootton never had any interest in them. The arrangement was that Wootton would find cattle and buy them, pay for them himself, put them in a pen and brand them with Appellant's brand and notify or invoice Appellant and be reimbursed by Appellant for the purchase price. Payment to Wootton was by draft of Poteet on Waco Production Credit Association. He would then feed out or fatten the cattle for some 120 days, sell them and remit the proceeds to Poteet . His only charge for this operation was the custom feeding, that is, his charge for feeding out the cattle. The evidence is that this was a customary procedure used by feed lot operators engaged in custom feeding for others. Waco Production Credit Association is a party to the suit in that it advanced money to Fred Poteet to purchase cattle and pay for their feeding, and it had a security agreement covering cattle owned by Appellant Poteet.

The rights of the parties are governed by the provisions of the Texas Business and Commerce Code Annotated, hereinafter referred to as the 'Code.' Section 9.204 provides that a security interest cannot attach until (1) there is agreement that it attach, (2) value is given, and (3) the debtor has rights in the collateral, but that it attaches as soon as all those events have occurred, unless explicit agreements postpone the time of attachment. Clark v. Vaughn, 504 S.W.2d 550 (Tex.Civ.App.--Dallas 1973, writ ref'd n.r.e.); In re Samuels & Co., Inc., 526 F.2d 1238 (5th Cir. 1976, on rehearing en banc), cert. denied, --- U.S. ---, 97 S.Ct. 98, 50 L.Ed.2d 99 (1976) (No. 75--1876), prior decision 483 F.2d 557, reversed and remanded by the Supreme Court, 416 U.S. 100, 94 S.Ct. 1626, 40 L.Ed.2d 79.

The controlling question here is whether the debtor Wootton ever acquired any interest or rights in the cattle to which the security interest could attach. Requirement number 1 above is satisfied by the agreement which we have mentioned. Requirement number 2, value, is met by Wootton's indebtedness to Appellee at the time involved; this pre-existing indebtedness constituted value under the Code, Sec . 1.201(44); In re Samuels & Co., Inc.,supra. The...