Coral Petroleum, Inc. v. Banque Paribas (In re Coral Petroleum, Inc.)
United States District Court for the Southern District of Texas
50 B.R. 830 (1985)
In 1982, Coral Petroleum, Inc.’s (Coral) (debtor) subsidiary sold properties to Tricentrol Resources, Inc. and received an interest-bearing installment promissory note for $30,000,000 (Tricentrol Note), which was assigned to Coral. Coral entered into a credit agreement with the First National Bank of Chicago (First Chicago). As security, Coral pledged and delivered possession of the Tricentrol Note to First Chicago. Banque Paribas (Paribas) and MBank, N.A. (MBank) (creditors) also loaned Coral money. In 1981, Paribas’s predecessor loaned Coral money and received an interest in all of Coral’s personal property, including instruments and general intangibles. Paribas perfected its security interest in Coral’s general intangibles by filing financing statements. In January 1983, Paribas loaned Coral money and received a security interest in artwork. At the loan closing, Coral’s vice president signed a letter agreement assigning all the payments received by Coral from the Tricentrol Note to Paribas. Paribas filed a financing statement regarding the artwork and sent a letter to the art gallery requesting that it sign an agency agreement. MBank filed a financing statement in 1977 covering Coral’s general intangibles and instruments, then subsequently filed a continuation statement. In March and April of 1983, MBank loaned Coral money. In June 1983, Coral filed for bankruptcy. Before filing the petition, Coral negotiated to sell the Tricentrol Note to First Chicago. The transaction was set to close before the bankruptcy petition was filed but closed afterward. There was conflicting evidence regarding whether Paribas orally indicated its interest in the Tricentrol Note to First Bank. After Coral filed for bankruptcy, Paribas sent a telex to First Chicago regarding Paribas’s interest in the Tricentrol Note surplus. Coral sought to avoid Paribas and MBank’s interests under the Bankruptcy Code. Coral argued that the Tricentrol Note must be classified as an instrument and Paribas and MBank lacked possession to perfect their interests. Paribas and MBank argued that the Tricentrol Note must be classified as a general intangible and their filing statements perfected their interests. Paribas also argued that it perfected its interest by notice to First Chicago.
Rule of Law
Holding and Reasoning (Leal, J.)
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