In Carmel Financial Corporation, Inc. v. Castro, 2016 WL 7478048 (Tex. App. — Houston [14th Dist.] December 29, 2016), the court of appeals held that a company’s fixture filing did not independently create a lien on the real property on which the fixture was located. In April 2008, Carmel Financial Corporation (“Carmel”) financed the purchase and installation of a water treatment system. Carmel perfected its security interest in the water treatment system by filing a fixture filing which described only the water treatment system. No additional real or personal property filings were made. The homeowner subsequently defaulted on payments under his mortgage as well as payments on the water treatment system, and in September 2010, Bank of America, as mortgagee, foreclosed on the home and transferred its rights in the property to the Secretary of Housing and Urban Development (the “HUD”). After offering to pay Carmel a portion of the remaining balance on the water treatment system (which offer was denied), HUD removed the water treatment system and attempted to return it to Carmel. Carmel refused to accept redelivery, and subsequently sued the HUD and the new homeowner seeking judicial foreclosure and a declaratory judgment. Carmel asserted that the new homeowner purchased the property subject to its lien, and that the removal of the water treatment system from the property did not eliminate its lien, because its lien had already attached to the underlying real property by the time the water treatment system had been removed. The trial court ruled in favor of HUD and the new homeowner, and Carmel appealed. In its appeal, Carmel asserted, among other things, that the fixture filing created a lien which extended to the underlying real property in addition to the water treatment system. The court of appeals disagreed. In affirming the trial court’s ruling, the court of appeals ruled simply that, absent any agreement among the parties to grant a lien on the underlying real property, a fixture filing is not independently sufficient to expand the scope of collateral to include the whole of the real property to which the fixture is attached, and therefore Carmel’s remedies would be limited to removal of the water treatment system.
