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ITT Diversified Credit Corp. v. First City Capital Corp.

737 S.W.2d 803 (1987)

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ITT Diversified Credit Corp. v. First City Capital Corp.

Texas Supreme Court
737 S.W.2d 803 (1987)

DH

Facts

First City National Bank (the Bank), First City Capital Corporation (FCCC) (defendant), and ITT Diversified Corporation (ITT) (plaintiff) held liens in the same personal property owned by Sisco Enterprises. The Bank obtained its lien first, FCCC obtained its lien second, and ITT obtained its lien third. Subsequently, the Bank entered into a subordination agreement with ITT in which the Bank agreed to subordinate its interest in some of Sisco Enterprises’ personal property to ITT’s interest so ITT could lend money to Sisco Enterprises. Sisco Enterprises failed to repay ITT, so ITT brought a foreclosure action regarding its interest. Sisco Enterprises’ personal property was sold in a foreclosure sale. FCCC claimed entitlement to the proceeds of the foreclosure sale and argued that its second lien had priority over ITT’s third lien. The trial court ruled in FCCC’s favor despite the subordination agreement between the Bank and ITT. The court of appeals affirmed the trial court’s ruling based on a case involving real property. ITT appealed and argued that it had priority over FCCC pursuant to the subordination agreement.

Rule of Law

Issue

Holding and Reasoning (Gonzalez, J.)

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