## Facts

- Carmel Financial Corporation financed and took a security interest in a $5,990 water-treatment system installed in a residence in Katy, Texas.
- The consumer credit contract functioned as a security agreement covering the “purchased products and/or services” and required the system to remain installed; it did not grant a lien on the land.
- Carmel filed a UCC fixture filing in the real property records describing the water-treatment system as collateral; it did not purport to encumber the real estate.
- The homeowner later defaulted on both the mortgage (held by Bank of America) and the obligation to Carmel.
- Bank of America foreclosed, and the property interest transferred to HUD; HUD removed the system and attempted to return it to Carmel.
- Carmel refused to accept return of the system and asserted its fixture filing created a “super-priority” lien on the real property that survived the mortgage foreclosure.
- HUD sold the home to a subsequent purchaser, Stephanie Dickson; Carmel sued seeking judicial foreclosure and declaratory relief establishing priority over the property.

## Issues

1. Whether a properly perfected UCC fixture filing that describes only the fixture as collateral creates or extends a lien to the underlying real property, permitting judicial foreclosure against the land and “super-priority” over a mortgagee and subsequent purchaser.

## Decision

- The court affirmed summary judgment for HUD and Dickson.
- Carmel’s fixture filing did not create a lien on the real property; it only perfected Carmel’s security interest in the water-treatment system.
- Because Carmel had no real-property lien, it could not judicially foreclose on the residence or bind the subsequent purchaser as to the land.
- Carmel’s available remedies were limited to the fixture (e.g., repossession/removal), not foreclosure on the real estate.

## Legal Principles

- A UCC fixture filing is a method under Article 9 to perfect a security interest in goods that have become fixtures; it is not a substitute for an instrument creating a real-property lien (e.g., deed of trust).
- A fixture filing perfects only the security interest actually granted by the parties’ agreement; it does not, by itself, expand the collateral to include the underlying real property.
- Without an express agreement granting a lien in the land, a secured party claiming an interest in a fixture cannot assert a real-property foreclosure remedy based solely on a fixture filing.

## Conclusion

The court held that Carmel’s fixture filing perfected only an interest in the water-treatment system and did not encumber the home or land, so Carmel could not foreclose on the property or claim priority over the mortgage foreclosure and subsequent purchaser.


Carmel Fin. Corp. v. Castro, 514 S.W.3d 291 (Tex. App.—Houston [14th Dist.] 2016, pet. denied)