Security Interest in Investment Account Trumps Judgment Lien

Wells Fargo obtained a judgment against Charles Paschall and then sought to collect by garnishing an investment account Paschall held at U.S. Trust. U.S. Trust opposed the garnishment, asserting that the funds it held were subject to a properly perfected security interest held by Inwood National Bank. Inwood then intervened to protect its lien interest in the account. The trial court ultimately ruled that Wells Fargo’s judgment lien trumped Inwood’s security interest and awarded the funds to Wells.

Inwood appealed. The issue before the Dallas Court of Appeals was whether Inwood lost its priority over Wells Fargo by executing a new promissory note with Paschall several months after Wells Fargo recorded its judgment lien. Under Texas law, if this new obligation were considered an “advance” as opposed to a renewal or extension of an existing indebtedness, then Inwood would lose its priority. Relying on several cases interpreting the UCC, the Court determined that the new promissory note was not an advance, reversed the trial court’s ruling, and held that Wells Fargo was not entitled to garnish the funds.

Inwood Nat’l Bank v. Wells Fargo Bank, N.A.

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