IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13-10969

In the Matter of: HERITAGE CONSOLIDATED, L.L.C., 

 Debtor,

ENDEAVOR ENERGY RESOURCES, L.P.; ACME ENERGY SERVICES, 

INCORPORATED, D/B/A RIG MOVERS EXPRESS, D/B/A BIG DOG 

DRILLING,

Appellants,

v.

HERITAGE CONSOLIDATED, L.L.C.; HERITAGE STANDARD

CORPORATION,

Appellees.

Appeal from the United States District Court

for the Northern District of Texas

Before STEWART, Chief Judge, and HIGGINBOTHAM and ELROD, Circuit 

Judges.

JENNIFER WALKER ELROD, Circuit Judge: 

Appellants Endeavor Energy Resources, L.P. and Acme Energy Services, 

Inc. (collectively, Drillers) performed work on Debtors’ well, but were never 

paid. Drillers subsequently filed a mineral lien on the well, and then a claim 

in Debtors’ bankruptcy. The bankruptcy court dismissed Drillers’ constructive 

trust and equitable lien claims and granted summary judgment to Debtors on 

United States Court of Appeals

Fifth Circuit

FILED

August 27, 2014

Lyle W. Cayce

Clerk

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Drillers’ mineral contractor’s and subcontractor’s lien claims. The district 

court affirmed. We AFFIRM the district court’s dismissal of Drillers’ 

constructive trust and equitable lien claims. We REVERSE and REMAND the 

district court’s grant of summary judgment on Drillers’ mineral subcontractors’ 

lien claims because Drillers submitted sufficient evidence to survive summary 

judgment. 

I.

Heritage Standard Corporation (HSC) owned mineral property leases for

a nonfunctioning oil well in Winkler County, Texas. This well was governed 

by a series of contractual arrangements. Because these contracts bear on 

Drillers’ ability to recover on their claims, we will briefly outline them here. 

In January 2008, HSC entered into a farmout agreement (Staley Agreement) 

with George Staley to develop the well.1 Staley then entered into an 

assignment contract (Lakehills Agreement) with Lake Hills Productions, Inc. 

(Lakehills) to perform the work. Staley, HSC, and Lakehills, along with well 

operator Stratco Operating Co., Inc. (Stratco) subsequently signed a Joint 

Operating Agreement (JOA) to develop the well. The JOA was made effective 

as of January 2008, and the parties all signed it between April and June of 

2008. 

Lakehills then sold and assigned its interests in the well to Trius Energy, 

LLC (Trius) in February 2008, and Trius was added to the JOA in September 

2008. As a result, HSC was responsible for 12.5% of the well expenditures, and 

Trius was responsible for the remaining 87.5% of the expenditures. In July 

2008, Lakehills replaced Stratco as the official well operator. Under this new 

1 A farmout is a contract “whereby a lease owner not desirous of drilling at the time 

agrees to assign the lease, or some portion of it . . . to another operator who is desirous of 

drilling the tract.” 8-F Williams & Meyers, Oil Gas Law Scope. “The primary characteristic 

of the farmout is the obligation of the assignee to drill one or more wells on the assigned 

acreage as a prerequisite to completion of the transfer to him.” Id. 

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arrangement, Lakehills was responsible for ensuring that necessary work was 

done on the well, and Trius and HSC were to make payments for this work to 

Lakehills. In May, June, and July of 2008, Lakehills contracted with Drillers, 

who then performed work on the well during that same time period. 

This arrangement apparently took a downward turn in the late summer 

of 2008. Both Trius and HSC stopped making payments to Lakehills. 

Lakehills then failed to pay Drillers for their work, and Drillers filed mineral 

liens against HSC to recover the money they were owed. Drillers’ liens were

filed within the six month period required by the Texas statute, and HSC 

received notice as required under the statute for a subcontractor’s lien. See

Tex. Prop. Code Ann. § 56.001–3, 0.21. After Drillers filed their liens, HSC 

assigned its interest in the well to Heritage Consolidated. Several of the other 

parties to these agreements subsequently defaulted on their contract 

obligations. As a result, HSC, Heritage Consolidated, Trius, Stratco, 

Lakehills, and Staley negotiated a settlement agreement (Settlement 

Agreement) in May 2009. 

Under the Settlement Agreement, Lakehills received a 1% interest in the 

well as consideration for releasing its operator liens against HSC and Heritage 

Consolidated (collectively, Debtors). The Settlement Agreement also 

stipulated that Trius was obligated to satisfy Drillers’ liens and to indemnify 

all other signees against claims arising from those liens. In consideration for 

Trius’s agreement to discharge the liens, Debtors forgave Trius’s 87.5% share 

of the working expenses incurred by Debtors after Debtors took over well 

operations in November 2008. Even after this settlement, no one paid Drillers 

for their services. 

Debtors filed for Chapter 11 bankruptcy. Drillers filed proofs of claim in 

their bankruptcies asserting secured lien claims and, alternatively, unsecured 

nonpriority claims. Drillers also filed an amended complaint seeking a 

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determination of the validity, extent, and priority of their mineral liens. The 

bankruptcy court entered judgment against the Drillers on all claims. The 

bankruptcy court granted summary judgment to Debtors on Drillers’ mineral 

contractors’ and subcontractors’ lien claims, and granted Debtors’ motion to 

dismiss Drillers’ additional claims for a constructive trust and equitable lien 

asserted in their amended complaint. The district court affirmed, and Drillers 

appealed. 

II.

We review “the decision of a district court sitting as an appellate court 

in a bankruptcy case ‘by applying the same standards of review to the 

bankruptcy court’s findings of fact and conclusions of law as applied by the 

district court.’” Clinton Growers v. Pilgrim’s Pride Corp. (In re Pilgrim’s Pride 

Corp.), 706 F.3d 636, 640 (5th Cir. 2013) (quoting Wooley v. Faulkner (In re SI 

Restructuring, Inc.), 542 F.3d 131, 134–35 (5th Cir. 2008)). “‘Generally, a 

bankruptcy court’s findings of fact are reviewed for clear error, and its 

conclusions of law are reviewed de novo.’” Id. at 640 (quoting In re SI 

Restructuring, Inc., 542 F.3d at 135). 

We review a bankruptcy court’s grant of summary judgment de novo. See 

Id. (citing SeaQuest Diving, LP v. S & J Diving, Inc. (In re SeaQuest Diving, 

LP), 579 F.3d 411, 417 (5th Cir. 2009)). When seeking summary judgment, the 

moving party—here, Debtors—bears the initial burden to demonstrate that 

there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 

317, 322–23 (1986). Once this initial burden is satisfied, the burden shifts and 

the non-moving party “must come forward with ‘specific facts showing that 

there is a genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio 

Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56(e)). We must draw 

inferences in the light most favorable to the party opposing the motion. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). However, the non4

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moving party’s burden may not be satisfied by relying upon mere 

“conclusionary denials, improbable inferences, and legalistic argumentation.” 

S.E.C. v. Recile, 10 F.3d 1093, 1097 (5th Cir. 1993).

We also review the dismissal of claims pursuant to Rule 12(b)(6) de novo. 

Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009). We accept all well-pleaded 

facts as true and view those facts in the light most favorable to the plaintiffs. 

Id. at 603 (quoting Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 

2008)). However, “plaintiffs must allege facts that support the elements of the 

cause of action in order to make out a valid claim.” City of Clinton, Ark. v. 

Pilgrim’s Pride Corp., 632 F.3d 148, 152–53 (5th Cir. 2010) (citing Bell Atlantic 

Corp. v. Twombly, 550 U.S. 544 (2007)). “[T]o survive a motion to dismiss, a 

complaint must contain sufficient factual matter, accepted as true, to state a 

claim to relief that is plausible on its face.” Gonzalez, 577 F.3d at 603 (internal 

quotation marks and citations omitted).

“In this diversity action, we must apply Texas law as interpreted by 

Texas state courts.” Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589, 593 

(5th Cir. 2011) (quoting Mid–Continent Cas. Co. v. Swift Energy Co., 206 F.3d 

487, 491 (5th Cir. 2000)). “We consider Texas Supreme Court cases that, while 

not deciding the issue, provide guidance as to how the Texas Supreme Court 

would decide the question before us.” Id. at 594 (internal quotation marks and 

citation omitted). We also “consider decisions of the intermediate appellate 

courts in determining how the Texas Supreme Court would decide this issue. 

We are bound by our own precedent interpreting Texas law unless there has 

been an intervening change in authority.” Id. (citations omitted). 

III.

Drillers first argue that the bankruptcy and district courts should not 

have granted summary judgment to Debtors on their contractors’ and 

subcontractors’ mineral lien claims. We agree that it was error to grant

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summary judgment on Drillers’ subcontractors’ lien claims, and therefore do 

not reach the issue of whether Drillers were also entitled to contractors’ liens. 

A.

In Texas, material liens are creatures of statute, granted to “both 

mineral contractors and mineral subcontractors to secure payment for labor or 

services related to mineral activities, as therein defined.” 56 Tex. Jur. 3d Oil 

& Gas § 678 (2014); see also Trevor Rees–Jones, Tr. for Atkins Petroleum Corp. 

v. Trevor Rees-Jones, Tr. for Apache Services, Inc., 799 S.W.2d 463, 465 (Tex. 

App.—El Paso 1990, writ denied). Texas courts have repeatedly noted that the 

mineral lien statute is “designed to protect laborers and materialmen”2 and 

should therefore be liberally construed. Bandera Drilling Co., Inc. v. Lavino, 

824 S.W.2d 782, 784 (Tex. App.—Eastland 1992, no writ); see also Youngstown 

Sheet & Tube Co. v. Lucey Prods. Co., 403 F.2d 135, 143 (5th Cir. 1968). 

A mineral contractor is a person who “furnishes or hauls material” or 

“performs labor” under an express or implied contract with a mineral property 

owner or with a trustee, agent, or receiver of a mineral property owner. Tex. 

Prop. Code Ann. § 56.001(2). A mineral subcontractor is a person who 

“furnishes or hauls material” or “performs labor” under a contract with a 

mineral contractor. Tex. Prop. Code Ann. § 56.001(4). Contractors and 

subcontractors are treated interchangeably under the mineral lien statute, 

with two notable exceptions: First, subcontractors must give notice to the 

mineral owner when filing material liens, whereas contractors have no notice 

2 While the Texas statute calls these liens “mineral” contractor or subcontractor liens, 

the case law frequently refers to them as “material and mechanics” or “M&M” liens. Laborers 

are sometimes referred to as “materialmen” in the case law. These terms appear to be 

interchangeable.

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requirement.3 Second, contractors must have a contractual relationship with 

a mineral owner, whereas subcontractors only need to have a contractual 

relationship with a contractor. 

When determining whether a laborer is a subcontractor or a contractor, 

the important question is whether there is a contractual relationship between 

the owner and the laborer performing the work: If there is a direct contractual 

relationship between an owner and the laborer, then the laborer is a contractor

with regard to that owner. If there is a contract between the laborer and 

another party who has a contract with an owner, then the laborer is a 

subcontractor. See Rhett G. Campbell, A Survey of Oil and Gas Bankruptcy 

Issues, 5 Tex. J. Oil Gas & Energy L. 265, 311–12 (2010). 

If a well has multiple owners, it is possible for a single laborer to be both 

a subcontractor and a contractor for the work they perform on that well. For 

example, the owners may collectively enter into an agreement that makes one 

owner the well operator, and gives that owner-operator the power to contract 

with laborers. The laborers would then be contractors with respect to the 

contracting owner-operator, but subcontractors with respect to the other 

owners. See id. at 311 (“In the typical transaction, the operator contracts 

directly with vendors but the non-operators do not. A service company 

contracting with the operator is a contractor as to the operator (if the operator 

owns an interest in the lease) but a subcontractor as to non-operators.”). It is 

thus not only possible, but common within the industry for an owner to also be 

a contractor as defined by the statute. See In re Mid-Am. Petroleum, Inc., 83 

B.R. 933, 935 (Bankr. N.D. Tex. 1988) (concluding that MAP was both a 

working interest owner and a mineral contractor); Energy Fund of Am., Inc. v. 

3 Drillers averred in their lien affidavit that they gave such notice to the owner (HSC), 

and Debtors do not contest this point. 

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G.E.T. Serv. Co., 610 S.W.2d 833, 835–36 (Tex. Civ. App.—Eastland 1980), 

aff’d in part and rev’d in part on other grounds sub nom., Ayco Dev. Corp. v. 

G.E.T. Serv. Co., 616 S.W.2d 184 (Tex. 1981). Under these circumstances, “the

service company would need to perfect its lien both ways, first as a 

subcontractor and second as a contractor” to secure a claim against all owners.

Campell, supra at 312; see also Mitchell E. Ayer, 34 Energy & Min. L. Found. 

§7.08 (2013).

In order to determine whether Drillers were contractors or 

subcontractors with regard to Debtors, we therefore look to the various 

contractual relationships governing the well at the time that Drillers 

performed their work. Viewed in the light most favorable to non-movant 

Drillers, Drillers have raised a fact issue as to whether they were mineral 

subcontractors with regard to Debtors: Drillers presented evidence that Debtor 

HSC was an owner at the relevant time because HSC owned part of the 

working interest in the lease when Drillers performed their work and perfected 

their liens. Drillers also presented evidence that HSC was the record owner of 

100% of the lease, and retained 12.5% of the working interest even after the 

various farmout agreements and assignments. Drillers presented evidence 

demonstrating that Lakehills was in a contractual relationship with HSC 

because Lakehills was the assignee of the Staley Agreement. Viewed in the 

light most favorable to Drillers, this evidence demonstrates that Lakehills was 

a contractor at the time that Drillers performed their work on the well. Drillers

also put forth evidence showing that Lakehills contracted with Drillers to have 

Drillers perform work on the well. Taken together, these facts at the very least 

raise a genuine issue as to whether Drillers were mineral subcontractors with 

regard to Debtors at the time Drillers performed their work. Tex. Prop. Code 

Ann. § 56.001(2), (4). 

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B.

Debtors argue, and the bankruptcy and district courts agreed, that 

Drillers could not be subcontractors because Lakehills subsequently acquired 

a 1% ownership interest in the lease, and was thus a co-owner, rather than a 

contractor. According to Debtors and the bankruptcy and district courts, 

Lakehills’s ownership interest “relates back” to the time prior to the inception 

of Drillers’ work. The bankruptcy and district courts therefore reasoned that 

Drillers’ liens could only attach to Lakehills’s—and not Debtors’—interest in 

the lease. We disagree. As we explained above, it is possible under Texas law 

for an owner to also be a contractor, and for a laborer to secure liens against 

both the contracting and non-contracting owners. See In re Mid-Am. 

Petroleum, Inc., 83 B.R. at 935; Campbell, supra at 311–12.

In reaching a contrary conclusion, the district court relied on the Texas 

Supreme Court’s decision in Diversified Mortgage Investors v. Lloyd D. 

Blaylock General Contractor, Inc., 576 S.W.2d 794 (Tex. 1978). Specifically, 

Debtors and the district court point to language in Diversified Mortgage to 

argue that Drillers’ liens could only attach to Lakehills’s interest—and not 

Debtors’ interest—if Lakehills was an owner at the relevant time. The district 

court relied on the Texas Supreme Court’s statement that “[o]ur courts have 

long held that a mechanic’s and materialman’s lien attaches to the interest of 

the person contracting for construction. Thus, if a lessee contracts for 

construction, the mechanic’s lien attaches only to the leasehold interest, not to 

the fee interest of the lessor.” Diversified Mortg., 576 S.W.2d at 805. After 

reviewing the case law, we conclude that the district court incorrectly applied 

this decision and the accompanying “relation back” doctrine. 

In Diversified Mortgage, general contractor Blaylock held contractor’s 

liens on certain properties based on a construction contract with Dollar Inns. 

Id. at 796. The Texas Supreme Court explained that “[t]o further determine 

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the priority of the mechanic’s lien, this court must decide whether Dollar Inns, 

the party contracting with Blaylock, held any legal or equitable interest in the 

property at the time of inception of this mechanic’s [contractor] lien.” Id. at 

806. The Texas Supreme Court determined that: 

[A]t the time of inception of Blaylock’s mechanic’s lien, Dollar Inns 

held an equitable right or interest in the land under a contract of 

purchase to which such mechanic’s lien could attach. Under the 

doctrine of after-acquired title, the security for such mechanic’s 

lien was later expanded to include the legal title to the property 

acquired by Dollar Inns when the sale was consummated on April 

5, 1973.

Id. 

The Texas Supreme Court thus expanded the interest to which the lien 

attached based on the “relation back” doctrine. The Texas Supreme Court 

explained the “relation back” doctrine as follows:

[T]he majority of the courts generally applies the doctrine of “afteracquired title” or the “relation back” doctrine. These doctrines hold 

that the lien attaches to whatever legal or equitable interest the 

contracting party had when the work was begun, and thereafter 

attaches to any other or greater interest whenever acquired before 

the lien is enforced: provided that the after-acquired title enlarges 

an estate or interest to which the lien has already become 

attached. Accordingly, the priority of a mechanic’s lien not only 

depends upon the inception of the lien, but also upon whether the 

party contracting with the mechanic or the materialman has a 

legal or equitable interest in the property at the time of 

contracting.

Id. at 805–06 (internal citations and quotation marks omitted). In other words, 

the “relation back” doctrine is designed to expand the interest to which the lien 

can attach, thus helping to effectuate the statute’s purpose in protecting 

laborers and materialmen. See Youngstown, 403 F.2d at 143; Bandera 

Drilling, 824 S.W.2d at 784. 

We have previously given the Texas Supreme Court’s decision in 

Diversified Mortgage a similar reading in Matter of Waller Creek, Ltd., 867 F.2d 

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228, 234 (5th Cir. 1989). There, we addressed a contractor’s lien claim and 

explained that the “relation back” doctrine:

[H]olds that the lien attaches to whatever legal or equitable 

interest the contracting party had when the work was begun, and 

thereafter attaches to any other or greater interest whenever 

acquired before the lien is enforced: provided that the afteracquired title enlarges an estate or interest to which the lien has 

already become attached.

Matter of Waller Creek, Ltd., 867 F.2d 228, 234 (5th Cir. 1989) (emphasis 

added). The “relation back” doctrine is therefore intended to expand the 

interest to which a lien can attach. 

In contrast, the district court’s construction of the “relation back” would 

have just the opposite effect: because Lakehills later acquired a greater 

interest than it had at the time of Drillers’ work, Drillers would no longer be 

able to attach to HSC’s continued interest, despite the fact that HSC had a 

12.5% interest in the lease, whereas Lakehills only acquired a 1% interest in 

the lease. This application of the “relation back” doctrine thus shrank rather 

than enlarged the interest to which Drillers’ liens could attach. If Lakehills 

gained a 1% ownership interest in the lease at the time that Drillers performed 

their work, then Drillers may have gained an additional claim for contractors’ 

liens against Lakehills. It would not, however, prevent Drillers from asserting

separate subcontractors’ liens against HSC. Such a result would be contrary 

to the statutory scheme, which provides laborers with a method of recourse 

against both contractors and owners with whom they do not have privity of 

contract. See Campbell, supra at 311 (“The basic principle is that the service 

company who contracts through the operator and perfects a subcontractor’s 

lien is entitled to a lien on all amounts due from non-operator-[owner]s to the 

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operator.”).4 The district court’s application of this doctrine conflicts with both 

the language in Diversified Mortgage, and our own subsequent interpretation 

of the “relation back” doctrine. “We are bound by our own precedent 

interpreting Texas law unless there has been an intervening change in 

authority,” and thus reject the district court’s application of the doctrine here. 

Gilbane Bldg. Co., 664 F.3d at 593 (citations omitted). 

Moreover, the passage in Diversified Mortgage cited by the district court

and Debtors discussed a contractor’s rather than a subcontractor’s lien. As we 

have explained, a contractor’s lien requires privity of contract with an owner, 

whereas a subcontractor’s lien does not. Placed in context, the Diversified 

Mortgage court was explaining that a contractor’s lien could only attach to the 

interest of the party “contracting for construction.” Diversified Mortg., 576 

S.W.2d at 805. It was not, as Debtors suggest, implying that a subcontractor’s

lien could not also be asserted against other owners. See Campbell, supra at 

311. Instead, the Diversified Mortgage court was distinguishing between the 

ability of a contractor’s lien to attach to a leasehold interest, and the lien’s 

ability to attach to the real property on which the lease is located. It does not 

mean that a subcontractor cannot reach the leasehold interests of owners who 

have contracted with a contractor to have the labor performed. 

Under Debtors’ reading, the entire category of “subcontractors” under 

the statute would be superfluous, because a subcontractor by definition never 

has a contract with the owner. We reject such a reading. See Nat’l Ass’n of 

Home Builders v. Defenders of Wildlife, 551 U.S. 644, 668 (2007) (“But this 

reading would render the regulation entirely superfluous.”); see also Antonin 

Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 174 

4 Non-operator is an industry short-hand for “non-operating working interest owner” 

and refers to those owners who have not been designated as an operator of the lease. It is 

also possible to be an operator without being an owner. 

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(2012) (“If possible, every word and every provision is to be given effect (verba 

cum effectu sunt accipienda). None should be ignored. None should needlessly

be given an interpretation that causes it to duplicate another provision or to 

have no consequence.” (footnote omitted)). In the case before us, the passage 

from Diversified Mortgage means only that Drillers’ liens could not attach to 

an interest held by the real property owner on which the mineral lease was 

located. 

Finally, the approach advocated by Debtors would allow HSC and 

Lakehills to alter Drillers’ statutory rights to recover payment for the work 

Drillers performed by entering into a subsequent contract after the completion 

of the work that Drillers were not party to. It is undisputed that Lakehills was 

not a legal owner of any interest in the well in mid-2008 when Drillers 

performed their work. Lakehills later did receive a 1% working interest in the 

lease after Drillers had completed their work and perfected their liens. Indeed, 

Lakehills received this interest from a separate Settlement Agreement that 

had not even been contemplated at the time that Drillers performed the work.5 

5 Even assuming arguendo that the “relation back” doctrine could prevent Drillers 

from asserting subcontractors’ liens against Debtors, it is not clear that Lakehill’s interest 

actually would relate back to the time that Drillers performed their work. The district court 

noted that “[a]lthough it is a close question, the Court finds that under Diversified, Hoffman, 

and related cases, Lakehills was a mineral owner.” Endeavor Energy Res., L.P. v. Heritage 

Consol., LLC, No. 3:12-CV-03765-B, 2013 WL 4045250, at *8 (N.D. Tex. Aug. 9, 2013). This 

case, however, is distinguishable from those cited by the district court. In Hoffman v. 

Continental Supply Co., Lockhart and Humble Oil had already entered into a contract where 

Lockhart agreed to purchase leases and to complete some drilling activities. 120 S.W.2d 851, 

854 (Tex. Civ. App.—Eastland 1938), rev’d on other grounds, 144 S.W.2d 253 (Tex. 1940). 

Similarly, in Diversified Mortgage, Dollar Inns had executed a contract to purchase the Irving 

property from First Madison and paid First Madison $200,000 prior to the inception of the 

mechanic’s lien. Diversified Mortg., 576 S.W.2d at 806. The court therefore concluded that 

“Dollar Inns held an equitable right or interest in the land under a contract of purchase to 

which such mechanic’s lien could attach.” Id. In contrast, there was no contract in place 

pursuant to which Lakehills would receive an ownership interest at the time that Drillers 

performed their work. 

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As one Texas appellate court reasoned:

Can the issue of whether those who provide services and materials 

are contractors or subcontractors be dependent upon events that 

occur after the contract for such services and materials is made? 

We believe the answer should be “No”. Having dealt with Atkins 

when that company owned all of the working interest and at a time 

when there is no question about its right or authority to contract 

for services and materials, the rights of those parties should not be 

governed by subsequent events between the owner and third 

parties who received assignments after the drilling cost had been 

incurred. 

. . . 

The lien claimants’ status as contractors cannot be converted to 

that of subcontractors by another contract to which they are not 

privy.

Trevor Rees-Jones, 799 S.W.2d at 465–66.6 As Drillers note, if subsequent 

contracting by the owner of any portion of the mineral interest, no matter how 

small and whether or not the interest is filed of record, precluded a 

subcontractor’s lien, then laborers would have little remedy for nonpayment. 

See Youngstown, 403 F.2d at 143 (“It is a rule of long standing that the 

mechanic’s and materialman’s lien statutes of this state will be liberally 

construed for the purpose of protecting laborers and materialmen.” (internal 

6 Although not well briefed by the parties, there is another aspect of the Texas mineral 

lien statute that suggests that it is meant to protect subcontractors from going without pay: 

The mineral contractor chapter of the Texas Property Code also has a trapping 

statute. If an unpaid mineral subcontractor or supplier who has led a lien 

notice then also sends notice to working interest owners, the statute has a 

similar effect, “trapping” monies otherwise due and owing to the operator, so 

that they are to be paid directly to the mineral lien claimants instead. Like 

the similar provision for building subcontractors, the trapping statute is only 

available to those who have or are eligible to have a lien on the owner’s 

property, but it does not expressly create a lien as such on the monies that are 

intended to be trapped.

In re S. Tex. Oil Co., No. 09-54233-C, 2010 WL 1903750, at *1 (Bankr. W.D. Tex. May 10, 

2010).

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quotation marks and citation omitted)). Viewed in the light most favorable to 

Drillers, these facts demonstrate that Drillers were subcontractors with regard 

to Debtors. The district court therefore erred in granting summary judgment 

to Debtors on Drillers’ subcontractors’ lien claims.7

IV.

We next turn to Drillers’ argument that the bankruptcy court erred in 

dismissing their claims for relief for a constructive trust or equitable liens. In 

dismissing the claims, the bankruptcy court reasoned that Drillers had 

insufficiently plead the existence of a fiduciary duty or fraud, which are 

necessary components of a constructive trust claim, and the district court 

affirmed.8 We agree. 

A constructive trust requires a breach of fiduciary duty or fraud, 

accompanied by unjust enrichment of the wrongdoer and traceability to a res. 

Haber Oil Co. v. Swinehart (In re Haber Oil), 12 F.3d 426, 437 (5th Cir. 1994). 

In recognizing a constructive trust, the critical requirement for purposes of this 

case is that the parties have a confidential or fiduciary relationship prior to 

and apart from the transaction in question. Harris v. Sentry Title Co., 715 F.2d 

7 The evidence also shows that Drillers complied with the subcontractors’ lien notice 

requirements, and therefore have liens on Debtors’ interest in the well. As a practical matter, 

these liens are the same in substance whether we classify them as contractors’ liens or 

subcontractors’ liens. As a result, we need not reach the issue of whether Drillers might also 

have contractors’ liens. We therefore do not reach the questions of whether Drillers had an 

express or implied contract with Debtors, or whether Lakehills was the agent, joint-venturer, 

or partner of Debtors. 

8 The bankruptcy court also concluded that the equitable lien claims were not 

adequately pled because Drillers and Debtors did not agree to create any security interest 

between them, and there is a remedy at law for Drillers, violating two requirements of an 

equitable lien. Drillers do not brief this point and thus waive it on appeal. See Kmart Corp. 

v. Aronds, 123 F.3d 297, 299 n.4 (5th Cir. 1997) (citing Cinel v. Connick, 15 F.3d 1338, 1345 

(5th Cir. 1994) (stating that a party who inadequately briefs an issue waives the claim)).

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No. 13-10969

941, 946 (5th Cir. 1983) (citations omitted). A fiduciary duty must come from 

a preexisting relationship beyond mere business interactions. Id. As we have

previously explained:

[I]n Rankin v. Naftalis, 557 S.W.2d 940 (Tex. 1977), the Supreme 

Court of Texas refused to impose a constructive trust on oil and 

gas lease transactions. The court noted that the parties had been 

involved in a joint venture. It also recognized that confidential 

relationships such as partnerships could impose a broader reach 

for a constructive trust than simple business dealings. However, 

the court found that the transactions in question were not based 

upon the joint venture between the parties. It refused to extend a 

fiduciary duty to cover the business dealings, saying: “[s]ubjective 

business trust, cordiality and the trust which prevails between 

businessmen which is the foundation of ordinary contract law” 

could not be a basis for imposing a trust that would thwart the 

statute of frauds. 557 S.W.2d at 944.

Id. at 947. Likewise, Drillers have not plead sufficient facts demonstrating a 

special trust relationship here. Instead, the facts pleaded indicate that they 

had an ordinary business relationship with Debtors. As Debtors point out, 

Drillers rely solely on language in the Settlement Agreement and Option 

Agreement to try to establish that a special trust relationship existed.

However, Drillers did not participated in the negotiation, execution, or 

performance of these agreements. In addition, the language of these 

agreements does not support Drillers’ claims.9 

Drillers also assert that they are entitled to funds from Debtors under 

the Texas Trust Fund Act. We disagree. While the Trust Fund Act might 

provide Drillers with a claim against Lakehills, it does not give Drillers a claim 

against Debtors, because Debtors were not contractors. As one Texas appellate 

9 A trust can also be established if an owner behaves fraudulently. Haber Oil Co., 12 

F.3d at 437. Drillers have neither briefed this issue, nor pleaded facts sufficient to show that 

Debtors behaved fraudulently. Any such argument is therefore waived. See Kmart, 123 F.3d 

at 299.

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court has explained, “[t]he Trust Fund Act imposes fiduciary responsibilities 

on contractors to ensure that Texas subcontractors, mechanics, and 

materialmen are paid for work completed.” Kelly v. Gen. Interior Constr., Inc., 

262 S.W.3d 79, 84–85 (Tex. App.—Houston [14th Dist.] 2008), rev’d in part on 

other grounds, 301 S.W.3d 653 (Tex. 2010) (emphasis added). 

Under chapter 162, construction payments are trust funds if the 

payments were made to a contractor or to an officer under a 

construction contract for improvement of specific real estate in 

Texas. Tex. Prop. Code Ann. § 162.001. The contractor or officer

who receives the trust funds is a trustee of the funds. Id. [at] 

§ 162.002. The artisan, laborer, mechanic, contractor, 

subcontractor, or materialman who labors or furnishes labor or 

material for the construction or repair of an improvement on 

specific real property located in Texas is the beneficiary of any 

trust funds paid or received in connection with the improvement. 

Id. [at] § 162.003. A trustee who intentionally or knowingly or with 

the intent to defraud directly or indirectly retains, uses, disburses, 

or otherwise diverts the funds has misapplied the trust funds.

Id. at 85 (emphasis added). The language in Chapter 162 does not support 

Drillers’ argument that a fiduciary relationship also exists between Drillers 

and Debtors. As a result, Drillers’ constructive trust claims were properly 

dismissed. 

V.

We AFFIRM the district court’s dismissal of Drillers’ constructive trust 

and equitable lien claims, and REVERSE the district court’s grant of summary 

judgment on Drillers’ subcontractors’ lien claims. We REMAND for 

proceedings consistent with this opinion.

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