Cavazos v. Munoz
| Decision Date | 12 February 2004 |
| Docket Number | Civ.A. No. B-03-057. |
| Citation | 305 B.R. 661 |
| Parties | Harry J. CAVAZOS and Minerva Cavazos, Plaintiffs, v. Luis MUNOZ, d/b/a/ Munoz Roofing and Construction, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Gerardo Ernesto Linan, Attorney at Law, Brownsville, TX, for Petitioner.
Richard O. Habermann, Attorney at Law, McAllen, TX, for Respondent.
This appeal concerns the validity of an original contractor's mechanic's lien to secure a debt for labor and material furnished in connection with renovations of existing improvements on a residential homestead. Debtors in a Chapter 13 bankruptcy case filed an adversary proceeding in the United States Bankruptcy Court for the Southern District of Texas seeking to avoid the lien. Although the contractor complied with the preconditions set forth in Article 16, Section 50(a)(5)(A)-(D) of the Texas Constitution and Section 53.254(a)-(c), (e) of the Property Code, the Bankruptcy Court denied the lien because the contractor had failed to file a lien affidavit pursuant to Section 53.052(b) of the Property Code. The contractor appealed. Upon careful consideration of this matter, this court holds that the contractor obtained an enforceable constitutional lien upon fulfillment of the requirements prescribed in Article 16, Section 50(a)(5)(A)-(D) of the Constitution and Section 53.254(a)-(c), (e) of the Property Code. Filing a lien affidavit was not necessary in order to effectuate that lien. Accordingly, the Bankruptcy Court's ruling is reversed.
Findings of fact made by the Bankruptcy Court will not be set aside unless clearly erroneous, and conclusions of law reached by the Bankruptcy Court are reviewed de novo by this court. Matter of T.B. Westex Foods, Inc., 950 F.2d 1187, 1190 (5th Cir.1992).
This case involves an appeal from the Bankruptcy Court's order denying an original contractor's mechanic's lien on a residential homestead for renovation of existing improvements thereon. The Bankruptcy Court filed its Findings of Fact and Conclusions of Law. This court adopts the former, and the controlling facts are as follows: Appellant Luis Munoz, doing business as Munoz Roofing and Construction ("Munoz") prepared a proposal for improvements to Appellees Harry J. and Minerva Cavazos' ("the Cavazos") homestead on or about January 1, 1998. Upon acceptance of the proposal, the Cavazos applied for a mortgage to finance the construction work from the Rio Grande Mortgage Company in Harlingen, Texas; the mortgage was approved in September 1998. Munoz agreed to finance the work until its completion, at which time the mortgage company would fund the mortgage and reimburse Munoz for his work.
A Builder's and Mechanic's Lien Contract and Lien Note, which set forth the terms of the agreement, were prepared on March 5, 1999.1 Munoz and the Cavazos signed the documents — and the signatures were properly acknowledged — at the office of the Rio Grande Valley Abstract Company, Inc. on March 10, 1999, and the documents were recorded on or about March 16, 1999. The contract contained the following capitalized, boldfaced language: "YOU MAY, WITHIN 3 BUSINESS DAYS AFTER CLOSING, RESCIND THIS LOAN WITHOUT PENALTY OR CHARGE."
Munoz began performance of the work after recordation of the contract and continued until September 1999, when construction was halted because the Cavazos terminated the mortgage application and refused to pay Munoz for either the work completed or remaining. Munoz never filed a lien affidavit after the indebtedness accrued.
On January 28, 2000, the Cavazos filed a petition for Chapter 13 relief and subsequently filed an adversary proceeding to avoid Munoz's purported lien on their property. The Bankruptcy Court, relying upon CVN Group, Inc. v. Delgado, 47 S.W.3d 157 (Tex.App. — Austin 2001), rev'd on other grounds, 95 S.W.3d 234 (Tex.2002), concluded that Munoz needed to comply with the requisites set forth in Article 16, Section 50(a)(5)(A)-(D) of the Texas Constitution and Sections 53.254(a)-(c) and 53.052(b) of the Texas Property Code in order to perfect his lien.2 The Bankruptcy Court determined that Munoz satisfied the constitutional requirements and those of Section 53.254, but not Section 53.052(b) because he did not file a lien affidavit, as prescribed by that provision. The Court therefore held that Munoz failed to properly perfect his lien on the Cavazos' homestead, entered judgment in favor of the Cavazos, and granted their application to remove Munoz's lien on their property.
This case presents this court with a single issue: whether an original contractor, who has complied with the requirements of Article 16, Section 50(a)(5)(A)-(D) of the Texas Constitution and Section 53.254(a)-(c), (e) of the Property Code, must also file a lien affidavit pursuant to Section 53.052(b) of the Code in order to perfect a mechanic's lien on a residential homestead for repayment of material and labor furnished for the renovations of existing improvements thereon.3 As mechanic's liens — referred to by many authorities as "mechanic's and materialman's liens"4 — do not arise at common law, but rather are creatures of constitutional and statutory law, Lippencott v. York, 86 Tex. 276, 280, 24 S.W. 275, 276 (1893), the Texas Constitution and the mechanic's lien statutes of the State must be referenced to determine the rights of a claimant asserting such a lien.
Due to the numerous changes in the constitutional and statutory provisions pertaining to mechanics' liens and the myriad cases construing — and, at times, misconstruing — these provisions over the past 165 years, courts have not always been as consistent or as specific as they might have been in some of their observations and rulings. Consequently, the body of case law on such liens is not a model of clarity, and it is doubtful that all the germane cases could be reconciled. This court, therefore, finds it beneficial to review that portion of Texas' lien history relevant to the issue at hand, with citation to a few pertinent authorities.
Texas law recognizes two different mechanic's liens: the statutory mechanic's lien and the constitutional mechanic's lien. Apex Financial Corp. v. Brown, 7 S.W.3d 820, 830 (Tex.App. — Texarkana 1999, no writ) ("[a] statutory lien exists through compliance with the applicable statutes, while a constitutional lien arises by virtue of the Constitution without the aid of the statutes.") (citations omitted); see also Youngblood, Mechanics' and Materialmen's Liens in Texas, 26 SW. L.J. 665 (). Prior to the adoption of the Texas State Constitution of 1869, the sole basis of a mechanic's lien was statutory. Consequently, and perhaps surprisingly, the statutory mechanic's lien predated the constitutional lien, and its roots can be traced back to the Acts of the Republic.
The mechanic's lien debuted in Texas in 1839, when the Congress of the Republic of Texas enacted "An Act For the relief of Master Builders and Mechanics of Texas." Act of Jan. 23, 1839, 3rd Cong., Repub. Tex. Laws, reprinted in 2 H.P.N. GAMMEL, THE LAWS OF TEXAS 1822-1897, at 66 (Austin, Gammel Book Co. 1898). Pursuant to the Act, an original contractor who entered into a written contract for the construction of a building in an incorporated city or town was given a lien on the building and the land on which it was situated to secure payment for work and material furnished. 2 GAMMEL, supra at 66-67. The Act further required that the contract be filed within thirty days of execution; otherwise, the lien was inoperative as to all persons without notice. 2 GAMMEL, supra at 67. When the "new" State of Texas adopted a Constitution in 1845, the Act of 1839, along with the Act of 1844 — which pertained to the rights of subcontractors — became statutes of the State and continued to regulate the rights of those claiming a mechanic's lien. Tex. Const. of 1845, art. XIII, § 3 ().
The adoption of the Constitution of 1869 gave birth to the constitutional mechanic's lien, and it also instructed the Legislature to provide for its "speedy and efficient enforcement."5 Tex. Const. of 1869, art XII, § 47. However, this provision did not reference liens on buildings erected or repaired and was judicially construed not to grant original contractors a self-executing lien on real estate independent of the then existing statute that required the original contractor to record the written contract to perfect the lien. Campbell v. Fields, 35 Tex. 751, 1872 WL 7476, at *3 (1872) ().
At this point in the history of the mechanic's lien, an original contractor created a valid lien upon buildings erected or repaired on either homestead or non-homestead property in the same manner. Id. In other words, prior to the Act of 1871, which is discussed below, the work performed and the labor furnished must have been contracted for in writing and recorded within thirty days of execution. Id. Moreover, at this point in time, courts seemingly did not differentiate between the constitutional and statutory provisions and consequently read them as establishing only one lien. See e.g., Shields v. Morrow, 51 Tex. 393, 1879 WL 7684 (1879).
The Legislature responded to the Constitution's directive to provide for "the...
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