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CFB-5, Inc. v. Cunningham

371 B.R. 175 (2007)

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CFB-5, Inc. v. Cunningham

United States District Court for the Northern District of Texas
371 B.R. 175 (2007)

Facts

In Vernon Hulme’s Chapter 7 bankruptcy proceeding, James Cunningham (the trustee) (plaintiff) was appointed as the trustee of the bankruptcy estate. In that role, he was responsible for identifying estate assets that could be used to repay Hulme’s creditors. The trustee concluded that the only such assets were a collection of paintings owned by Hulme, some of which were in the possession of Greg Cunningham, who was the president of CFB-5, Inc. (defendant). The trustee recovered 19 paintings from Cunningham and CFB-5. However, CFB-5 disputed Hulme’s ownership of three of the paintings, claiming, among other things, that CFB-5 had a purchase-money security interest in and a possessory lien on those paintings. The trustee objected to CFB-5’s claim of any interest in the paintings. At a hearing, Hulme admitted that Cunningham loaned him the money to purchase the three paintings. However, Hulme explained that he never executed a security agreement giving CFB-5 or Cunningham a security interest in the paintings as collateral for his repayment obligation. Finding Hulme’s testimony credible, the bankruptcy court held that CFB-5 did not have a security interest in or a possessory lien on the paintings. CFB-5 appealed to the federal district court.

Rule of Law

Issue

Holding and Reasoning (Solis, J.)

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