First National Bank in Munday v. Lubbock Feeders, L.P.

When John Cox (defendant) defaulted on loans from First National Bank in Munday (the bank) (plaintiff), the bank sued Cox, alleging that it had a security interest in all livestock owned by Cox wherever located. Lubbock Feeders, L.P. (Feeders) (defendant) intervened in the suit, claiming that Cox owed Feeders money and that Feeders had a superior security interest in Cox’s cattle located in Lubbock County because Feeders had provided the funds to purchase those cattle, making Feeders’ security interest a purchase-money security interest. Feeders offered evidence that it advanced money to Cox on 20 occasions, with each advance relating to the purchase of a set of cattle by Cox. Cox made the purchases from third-party vendors at sale-barn auctions, and the cattle were delivered directly to Feeders’ feed yard, giving Feeders possession. The bank argued that Feeders’ security interest in the Lubbock cattle was not a purchase-money security interest because, for each of the cattle purchases, Cox technically made the purchase shortly before receiving the loan proceeds from Feeders. Consequently, the bank argued that the loan proceeds were not what enabled Cox to acquire his interest in the cattle, negating the existence of a purchase-money security interest. The trial court granted summary judgment in Feeders’ favor, and the bank appealed.