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MBank Alamo National Association v. Raytheon Company d/b/a Raytheon Medical Systems
United States Court of Appeals for the Fifth Circuit
886 F.2d 1449 (1989)
Prior to 1983, MBank Alamo National Association (MBank) and E. I. DuPont de Nemours Company, Inc. (DuPont) (plaintiffs) loaned money to Howe X-ray (Howe). In exchange, Howe granted MBank and DuPont security interests in Howe’s current and future accounts receivable. Howe experienced financial trouble and had difficulty obtaining further financing. In January 1983, Raytheon Company (defendant), an X-ray equipment manufacturer, agreed to send Howe X-ray equipment for Howe to sell to one of its customers. In exchange, Howe assigned the accounts receivable tied to the sale, delivery, and installment of the X-ray equipment to Raytheon. Between July 1983 and December 1984, Raytheon collected over $850,000 on the accounts receivable. In November 1984, Howe defaulted on its loans to MBank and DuPont. Pursuant to their security interests in all of Howe’s accounts receivable, MBank and DuPont demanded that Raytheon pay them the amount that Raytheon had collected from the specific accounts it was assigned. Raytheon refused. MBank and DuPont filed a conversion lawsuit against Raytheon in federal district court, seeking to recover the $850,000 that Raytheon collected from Howe’s accounts receivable. Raytheon opposed the lawsuit, claiming that it had a purchase-money security interest (PMSI) in the accounts receivable that it was assigned by Howe and, therefore, that its interest in the accounts was superior to MBank’s and DuPont’s interests. The district court found that Raytheon did not have a PMSI in the accounts receivable and that Raytheon’s interests were subordinate to MBank’s and DuPont’s interests because those interests were perfected first. The district court granted summary judgment for MBank and DuPont. Raytheon appealed.
Rule of Law
Holding and Reasoning (Reavley, J.)
Dissent (Goldberg, J.)
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