Irving Lumber Co. v. Alltex Mortg. Co.

• Decision Date: 09 May 1969
• Docket Number: No. 17256,17256
• Citation: 446 S.W.2d 64
• Parties: IRVING LUMBER COMPANY, Appellant, v. ALLTEX MORTGAGE COMPANY, Inc., Appellee. . Dallas
• Court: Texas Court of Appeals

Page 64

446 S.W.2d 64

IRVING LUMBER COMPANY, Appellant, v.ALLTEX MORTGAGE COMPANY, Inc., Appellee.

No. 17256.

Court of Civil Appeals of Texas Dallas.

May 9, 1969.

Rehearing Denied July 25, 1969.

Second Rehearing Denied Oct. 10, 1969.

Eldon Youngblood, Patrick E. Higginbotham, Coke & Coke, Dallas, for appellant.

James E. Coleman, Jr., Gene L. McCoy, Carrington, Johnson & Stephens, Dallas, for appellee.

DIXON, Chief Justice.

This suit was filed by appellantIrving Lumber Company, a corporation, against two defendants: Alltex Mortgage Company, Inc., appellee here, and Merit Homes, Inc.Appellant will hereinafter be referred to as Lumber Company and appellee as Alltex.

Lumber Company seeks a declaratory judgment against Alltex establishing the priority of its mechanic's and materialman's liens over deed of trust liens of Alltex, on four pieces of property, including residential improvements thereon; and seeks also judgment pursuant to a stipulation between the parties.

Lumber Company sought judgment against Merit Homes, Inc. for debt and foreclosure of its mechanic's and materialman's liens.Merit Homes, Inc. did not file an answer.Judgment was rendered against it for the sum of $13,967.50 principal.Merit Homes did not appeal.

Previous to the trial Alltex had foreclosed its deed of trust liens against the four properties.

Lumber Company and Alltex have entered into a stipulation as follows:

'In order to induce Plaintiff not to join as parties herein the owners of the four (4) lots or parcels of land against which Plaintiff was asserting a lien herein, Defendant agrees and hereby states that, should the Court determine that Plaintiff is entitled to foreclose any liens against any of the four (4) lots of land, Defendant agrees that a money judgment in the total amount of such lien or liens which the Court deems would be entitled to foreclosure but for the failure to join necessary parties may be entered against Defendant, and execution thereon issue against the Defendant should it not be paid.'

At the conclusion of Lumber Company's presentation of its evidence before a jury Alltex moved for an instructed verdict, which motion was sustained.Judgment was accordingly rendered that Lumber Company take nothing against Alltex.

FACTS

On July 8, 1964 Merit Homes, Inc., a real estate development company, executed a demand promissory note in the amount of $137,850 secured by deed of trust liens on a number of pieces of property including the four properties involved in this suit.Part of the money loaned by Alltex was used by Merit Homes, Inc. to purchase and acquire title to three lots in the City of Garland, Texas; and part was used to pay off a prior existing vendor's lien against a lot in the City of Richardson, Texas.

After July 8, 1964, the date of Alltex's note and liens, Lumber Company furnished labor and materials which went into the construction of improvements on the four lots; but Lumber Company alleges that Before July 8, 1964 it had entered into oral contracts with Merit Homes, Inc. to furnish said labor and materials, which were subsequently delivered on the sites pursuant to the prior oral contracts.

Lumber Company does not claim that its alleged oral contracts obligated it to furnish all work and materials necessary to complete the houses to be built.The permanent financing of the improvements was guaranteed by the Federal Housing Authority.The construction of each house was subject to inspections and approval by the Authority at three different stages: (1) when the foundation has been completed and the plumbing 'roughed in'; (2) when the wall sections, the roof trusses, the cornice material and the exterior ceilings have been constructed; and (3) when the houses are completed.Lumber Company says that its oral contracts obligated it to construct the improvements only through the first two of the above stages.When the improvements reached this second stage they became what are known as 'shell homes'.

OPINION

The substance of Lumber Company's first point of error is that the court erroneously concluded that under Texas law the inception of mechanic's and materialman's liens occurs only upon the delivery of materials to the construction site.

Lumber Company concedes that the liens of Alltex are superior to the extent that part of the money loaned by Alltex was used to purchase the three Garland lots and to pay off the prior existing vendor's lien against the Richardson lot.To that extent Alltex acquired vendor's liens.However Lumber Company contends that its mechanic's and materialman's liens are entitled to priority as a matter of law (except as to said vendor's liens) over the liens of Alltex because said mechanic's and materialman's liens had their Inception when its oral contracts were entered into on April 27, 1964 and July 2, 1964 respectively, prior to the execution on July 8, 1964 of the deed of trust liens of Alltex.In support of this view Lumber Company relies chiefly, but not solely, on Art. 5459, Vernon's Ann.Civ.St., and the holding of our Supreme Court in Oriental Hotel Co. v. Griffiths, 88 Tex. 574, 33 S.W. 652, 30 L.R.A. 765(1895).

Lumber Company frankly concedes that if its liens did not have their Inception until labor and materials were actually delivered to the job sites under its oral contracts the liens of Alltex are entitled to priority, for the deliveries were made After July 8, 1964, the date of Alltex's note and deed of trust liens.

The opinion of our Supreme Court in Oriental Hotel Co. v. Griffiths, 88 Tex. 574, 33 S.W. 652(1895) has been much discussed and analyzed in later cases, but there has not been a unanimity of opinion as to its meaning and application.In Oriental Hotel the facts were that the owner of the hotel property contracted with Griffiths to finish construction of a hotel building, the foundation of which had already been constructed.Griffiths engaged the services of various subcontractors.Subsequent to the execution of the above contract, but Before the labor and material were furnished, a deed of trust lien was executed and filed in favor of St. Louis Trust Company.The Supreme Court held that the Inception of all mechanic's and materialman's liens, under Art. 5459, V.A.C.S., Related back to the time of the formation of Griffiths' contract, thus were superior to the deed of trust lien.This holding has never been expressly overruled by the Supreme Court though its acceptance of the 'relate back' doctrine has been narrowed and cautiously applied.

The opinion in Sullivan v. Texas Briquette & Coal Co., 94 Tex. 541, 63 S.W. 307(1901) was written by Justice Brown, who was also the author of the court's opinion in Oriental Hotel.In Sullivanthe Supreme Court held that under the particular facts of the case the deed of trust lien was superior to the mechanic's and materialman's liens.The fact that improvements were Contemplated prior to the execution of the deed of trust will not give priority to the mechanic's and materialman's lien.The Court of Civil Appeals, relying on the holding in Oriental Hotel, had affirmed a judgment favoring the mechanic's and materialman's lien.In reversing the Court of Civil Appeals, the Supreme Court distinguished its holding in Oriental Hotel.Though the holding was not overruled, the Supreme Court had this to say in defending its earlier decision in Oriental Hotel:

'While we believe that the decision in that case is amply sustained by the law, and correctly made, We are of the opinion that the facts of the case demanded and the opinion went as far as the law justifies to sustain such liens, * * *.'(Emphasis ours.)

In Vaughan Lumber Company v. Martin, 98 Tex. 80, 81 S.W. 1(1904)(a later episode in the Sullivan case) the losers in the Sullivan case attempted to show an oral contract which antedated the deed of trust lien.The recital of the facts indicates that if there was such a contract it was an agreement simply to furnish materials for general needs, not a general contract to construct improvements on a designated site.However the court seems to have assumed the existence of the contract in its holding and again decided that the deed of trust lien was superior.

The facts in McConnell v. Mortgage Investment Co., 157 Tex. 572, 305 S.W.2d 280(1957), were that contractors furnished labor and materials for which they were paid; a deed of trust was later filed; subsequent to the filing of the deed of trust additional labor and materials were furnished but were not paid for.The court held in its majority opinion that the mechanic's and laborer's liens did not relate back to the time when the labor and materials were first furnished--that is, the labor and material for which the contractor had been paid.

But the significance of the majority opinion in McConnell in regard to the instant case lies in the court's statement explaining its decision.The court said, 305 S.W.2d on pages 283 and 285 of its opinion:

'As we understand the rule of the Oriental Hotel Co. case it is a comparatively narrow one and its holding is strictly confined to a set of facts similar to that disclosed in the opinion.The controlling feature or circumstance of the case is the existence of a general contract between an owner on the one hand and a building contractor on the other.'

'An extension of the doctrine of the Oriental Hotel Co. case would be required to support the holdings of the courts below.It would be necessary to say that the 'beginning of the work' is the same as 'the projection of the building and the execution of a contract for its construction.'In 1901this Court refused to make a similarly proposed extension--but in effect held that the doctrine announced in the Oriental Hotel Co. case'went as far as the law justifies,' and hence should not be expanded to apply to factual situations not strictly analogous to those disclosed in the reported opinion.'

We have concluded that under the facts of this...