Court Opinion

ID: 3078666
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:38:03.700026+00
Date Added: 2024-06-11T07:38:24.486049
License: Public Domain

COURT OF APPEALS
                                     EIGHTH DISTRICT OF TEXAS
                                          EL PASO, TEXAS

    TRINITY DRYWALL SYSTEMS, LLC.,                       §
                                                                           No. 08-12-00041-CV
                       Appellant,                        §
                                                                              Appeal from the
    v.                                                   §
                                                                             67th District Court
    TOKA GENERAL CONTRACTORS,                            §
    LTD., AND VINEYARD VILLAGE,                                          of Tarrant County, Texas
    MSV, LLC,                                            §
                                                                            (TC#67-240386-09)
                       Appellees.                        §

                                                 OPINION

         Appellant Trinity Drywall Systems, LLC, (“Trinity”) appeals a final judgment in favor of

TOKA General Contractors, LTD (“TOKA”) and Vineyard Village, MSV, LLC, (“Vineyard”).1

For the reasons that follow, we reverse, render, and remand.

                                              BACKGROUND

         Vineyard owns the Shops at Vineyard Village Shopping Center in Euless, Tarrant

County, Texas.        On December 3, 2006, Vineyard signed a contract with TOKA for the

1
  TOKA initially filed a notice of appeal, but after it moved to dismiss its cross-appeal, this Court granted the
motion to dismiss on May 16, 2012. See Trinity Drywall Systems, LLC v. Toka General Contractors, LTD., No.
08-12-00041-CV, 2012 WL 1745583, at *1 (Tex.App. – El Paso May 16, 2012, no pet.) (memo op.). On appeal,
Trinity does not challenge the trial court’s final judgment as it applies to TOKA. Thus, Vineyard is the only
Appellee now before us.
construction of a project known as “Vineyard Village.” Under the contract, TOKA agreed to

act as the general contractor for the construction project.

       On or about April 18, 2007, TOKA hired Trinity as a subcontractor to provide labor and

materials for lath, plaster, and simulated stone finishing for the construction project.         After

Trinity completed its work on the project, TOKA observed cracking in the stucco plaster that

Trinity had applied to the exterior of the shopping center. Trinity and TOKA agreed that

Trinity would repair the cracks in the stucco. Thereafter, Trinity sent an invoice for $60,795 to

TOKA for the repair work and TOKA refused to pay.

       On August 17, 2009, Trinity filed a mechanic’s lien and materialman’s lien affidavit to

place a lien upon the property on which the work was performed. Trinity then sued TOKA and

Vineyard asserting claims for breach of contract, unjust enrichment, and quantum meruit.

Trinity also sought to foreclose its mechanic’s lien. TOKA and Vineyard answered with a

general denial and Vineyard counterclaimed seeking a declaratory judgment that the mechanic’s

lien on its property was invalid, and attorney’s fees.

       Trinity moved for summary judgment on its breach of contract and quantum meruit claims

against TOKA, the validity of its mechanic’s lien, and Vineyard’s declaratory judgment. After

considering Trinity’s motion, TOKA and Vineyard’s responses, and Trinity’s reply, the trial court

denied Trinity’s motion for summary judgment.

       Vineyard and TOKA filed a trial brief on constitutional mechanic’s liens and requested that

the trial court rule as a matter of law that Trinity’s foreclosure claim could not be maintained on the

basis asserted by Trinity. Before the jury was empanelled, the trial court ruled as a matter of law

that Vineyard should recover on its counterclaim for a declaratory judgment and declared that

                                                  2
Trinity’s mechanic’s lien was invalid and unenforceable. After the court made its pretrial ruling,

the remaining claims in the case were tried to a jury. The jury found in favor of Trinity on its

breach of contract claim against TOKA.

         The trial court entered a final judgment on December 15, 2011. In pertinent part, the

judgment decreed that Trinity’s mechanic’s lien against Vineyard’s real property was invalid and

unenforceable and awarded Vineyard $43,585.50 as attorney’s fees pursuant to Section 37.009 of

the Texas Civil Practice and Remedies Code and Section 53.156 of the Texas Property Code. In

addition, the trial court with conditioning the award on Vineyard’s success, awarded Vineyard:

(1) $30,000 upon the filing of an appeal to the court of appeals; (2) $15,000 upon the filing a

petition for review by either party to the supreme court; and (3) and additional $25,000 if briefing

on the merits is requested. The trial court made findings of fact and conclusions of law in support

of its judgment. This appeal followed.2

                                                  DISCUSSION

         In four issues on appeal, Trinity contends that: (1) a subcontractor is entitled to enforce a

constitutional lien without having to perfect any statutory requirements if the subcontractor meets

the requirements of the “sham contracts” provision under Section 53.026 of the Texas Property

Code; (2) the trial court erroneously found that Trinity “admitted” it was a subcontractor; (3) the

trial court erred by denying Trinity’s mechanic’s lien and by granting Vineyard’s declaratory

judgment and request for attorney’s fees; and (4) Trinity is entitled to judgment as a matter of law

because it satisfied the requirements of the sham contract provision.

                                               Standards of Review

2
  On appeal, Trinity assigns error on those portions of the final judgment that declare its mechanic’s lien invalid and
unenforceable and that award attorney’s fees to Vineyard.
                                                          3
       A. Declaratory Judgment

       The purpose of the Uniform Declaratory Judgments Act is “to settle and to afford relief

from uncertainty and insecurity with respect to rights, status, and other legal relations . . . .” TEX.

CIV. PRAC. & REM. CODE ANN. § 37.002(b) (West 2008); see City of El Paso v. Heinrich, 284
S.W.3d 366, 370 (Tex. 2009). The statute is “remedial” and “to be liberally construed . . . .” See

TEX. CIV. PRAC. & REM. CODE ANN. § 37.002(b). A declaratory judgment requires a justiciable

controversy as to the rights or status of the parties, and the declaration must actually resolve the

controversy. Brooks v. Northglen Ass’n, 141 S.W.3d 158, 163-64 (Tex. 2004). A trial court may

exercise its discretion in entering a declaratory judgment as long as it will serve a useful purpose or

will terminate the controversy between the parties. Bonham State Bank v. Beadle, 907 S.W.2d
465, 468 (Tex. 1995) (citing James v. Hitchcock Indep. Sch. Dist., 742 S.W.2d 701, 704 (Tex.App.

– Houston [1st Dist.] 1987, writ denied)).

       Declaratory judgments are reviewed under the same standards as other judgments. TEX.

CIV. PRAC. & REM. CODE ANN. § 37.010 (West 2008); see In re Estate of Tyner, 292 S.W.3d 179,

182 (Tex.App. – Tyler 2009, no pet.). We look to the procedure used to resolve the issue below to

determine the standard of review on appeal. Hawkins v. El Paso First Health Plans, Inc., 214
S.W.3d 709, 719 (Tex.App. – Austin 2007, pet. denied). When a declaratory judgment is entered

after a bench trial, we review the trial court’s factual findings and conclusions of law de novo. See

McCulloch v. Brewster County, 391 S.W.3d 612, 615 (Tex.App. – El Paso 2012, no pet.); Van

Dam v. Lewis, 307 S.W.3d 336, 339 (Tex.App. – San Antonio 2009, no pet.). The trial court’s

determination in a declaratory judgment action must be upheld if it can be sustained upon any legal

theory supported by the evidence. See Rosen v. Wells Fargo Bank Tex., N.A., 114 S.W.3d 145,

                                                  4
149 (Tex.App. – Austin 2003, no pet.); Bell v. Katy Indep. Sch. Dist., 994 S.W.2d 862, 864

(Tex.App. – Houston [1st Dist.] 1999, no pet.); Oak Hills Props. v. Saga Rests., Inc., 940 S.W.2d
243, 245 (Tex.App. – San Antonio 1997, no writ).

       B. Legal and Factual Sufficiency

       In an appeal from a bench trial, a trial court’s findings of fact “have the same force and

dignity as a jury’s verdict upon questions.” Anderson v. City of Seven Points, 806 S.W.2d 791,

794 (Tex. 1991). A trial court’s findings of fact may be reviewed for legal and factual sufficiency

under the same standards that are applied in reviewing evidence to support a jury’s answer. See

Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996). In conducting a legal sufficiency review, we

consider evidence in the light most favorable to the trial court’s findings and indulge every

reasonable inference that would support them.        City of Keller v. Wilson, 168 S.W.3d 802, 822

(Tex. 2005). We credit favorable evidence if a reasonable fact finder could and disregard

contrary evidence unless a reasonable fact finder could not.    Id. at 827.

       However, in a factual sufficiency review, we consider and weigh all of the evidence and

will set aside the verdict only if it is so contrary to the overwhelming weight of the evidence as

to be clearly wrong and unjust.        Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).             In

conducting our reviews, we are mindful that the trier of fact is the sole judge of the credibility of

the witnesses and the weight to give their testimony, and that it is within his exclusive province

to resolve any conflicts in the evidence.   City of Keller, 168 S.W.3d at 819; Precision Homes,

Inc. v. Cooper, 671 S.W.2d 924, 929 (Tex.App. – Houston [14th Dist.] 1984, writ ref’d n.r.e.).

       We review the trial court’s conclusions of law de novo. BMC Software Belgium, N.V. v.

Marchand, 83 S.W.3d 789, 794 (Tex. 2002). A trial court’s conclusions of law will be upheld on

                                                 5
appeal if the judgment can be sustained on any legal theory supported by the evidence. In re

Moers, 104 S.W.3d 609, 611 (Tex.App. – Houston [1st Dist.] 2003, no pet.). Although the trial

court’s conclusions of law are not subject to a factual sufficiency challenge, an appellate court may

review the legal conclusions drawn from the facts to determine their correctness. Apex Fin. Corp.

v. Garza, 155 S.W.3d 230, 234 (Tex.App. – Dallas 2004, pet. denied).

                                              Analysis

         MECHANIC’S LIENS AND THE “SHAM CONTRACTS” PROVISION

       In Issue One, Trinity asserts that it is entitled to enforce a constitutional lien without having

to satisfy the perfection requirements of Chapter 53 of the Texas Property Code because it

qualifies as an original contractor under the Section 53.026 or the “sham contracts” provision of

the Property Code.

       The source of all mechanic’s liens in Texas is Article 16, section 37 of the Texas

Constitution. See Cavazos v. Munoz, 305 B.R. 661, 679-80 (S.D. Tex. 2004) (discussing the

nature and history of Texas’ constitutional and statutory liens). The Texas Constitution provides:

       Mechanics, artisans and material men, of every class, shall have a lien upon the
       buildings and articles made or repaired by them for the value of their labor done
       thereon, or material furnished therefor; and the Legislature shall provide by law
       for the speedy and efficient enforcement of said liens.

TEX. CONST. art. XVI, § 37. The lien authorized by this constitutional provision is self-executing,

and exists independently and apart from any legislative act. Strang v. Pray, 89 Tex. 525, 35 S.W.
1054 (1896); Clifton v. Jones, 634 S.W.2d 883, 886 (Tex.App. – El Paso 1982, no writ).

       In accordance with the constitutional mandate found in Article 16, section 37 of the Texas

Constitution, the Legislature enacted Chapter 53 of the Texas Property Code, which is entitled

“Mechanic’s, Contractor’s, or Materialman’s Lien” to govern the assertion and enforcement of

                                                  6
mechanic’s liens. See TEX. CONST. art. XVI, § 37; TEX. PROP. CODE ANN. §§ 53.001-53.287.

(West 2007); see also CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 246-47 (Tex. 2002) (stating

that the constitutional lien is not self-enforcing and that the constitution mandates that the

Legislature set forth a scheme for the enforcement of mechanic’s liens). Chapter 53 also creates a

statutory lien for a person who is contracted to labor, specially fabricate material, or furnish labor

or material for the construction or repair of a house, building, or improvement, regardless of

whether the person has a direct contractual relationship with the property owner. See TEX. PROP.

CODE ANN. § 53.021 (West 2007); CVN Group, 95 S.W.3d at 247.

       Accordingly, Texas law recognizes two types of mechanic’s liens: (1) a constitutional lien;

and (2) a statutory lien. TEX. CONST. art. XVI, § 37; TEX. PROP. CODE ANN. § 53.001 (West

2007); Advance’d Temps., Inc. v. Reliance Sur. Co., 165 S.W.3d 1 (Tex.App. – Corpus Christi

2004, pet. granted); Cavazos, 305 B.R. at 668 (citing Apex Fin. 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.”)). The constitutional lien is only available to those who contract directly with the

property owner or its agent. Da-Col Paint Mfg. Co. v. American Indem. Co., 517 S.W.2d 270,

273 (Tex. 1974); Gibson v. Bostick Roofing and Sheet Metal Co., 148 S.W.3d 482, 493 (Tex.App.

– El Paso 2004, no pet.). This requirement addressed the concern that the owner of the property

on which the lien is claimed will have notice of the lien. Atkinson v. Jackson Bros., 259 S.W. 280,

286 (Tex.Civ.App. – Austin 1923, writ granted), modified on other grounds, 270 S.W. 848 (Tex.

Comm’n App. 1925). The statutory lien differs from the constitutional lien in that the statutory

lien protects both subcontractors and original contractors.      See CVN Group, 95 S.W.3d at 247.

                                                   7
However, when an original contractor fails to meet the requirements for a statutory lien, the

constitutional lien is still available to him. See Terraces at Cedar Hill, L.L.C. v. Gartex Masonry

and Supply Inc., No. 05-10-00226-CV, 2011 WL 1050852, at * 2 (Tex.App. – Dallas Mar. 24,

2011, pet. denied) (mem. op.).       Thus, “[w]hether one is considered an original contractor or a

subcontractor is of fundamental importance. A subcontractor does not have a constitutional lien,

and faces a more onerous burden in perfecting a statutory lien.” Da-Col Paint Mfg. Co., 517
S.W.2d at 273 (citations omitted).

       It is well-settled that a constitutional lien requires a person to be in privity of contract with

the property owner and, therefore, that lien does not apply to derivative claimants such as

subcontractors. See Gibson, 148 S.W.3d at 493. In Gibson, this Court had to determine whether

a subcontractor held a valid constitutional lien, and due to the constitution’s lack of the definitions

for the terms “contractor” and “subcontractor,” we looked to the definitions provided in Chapter

53 of the Property Code. Id. An “original contractor” is a person contracting with an owner

directly or through the owner’s agent. TEX. PROP. CODE ANN. § 53.001(7) (West 2007). A

“subcontractor” is a person who has furnished labor or materials to fulfill an obligation to an

original contractor or to a subcontractor to perform all or part of the work required by an original

contract. Id. § 53.001(13).

       Trinity does not dispute that it failed to comply with the applicable statutory perfection

requirements for a statutory lien and thus, the statutory lien is not at issue. Instead, Trinity

contends that it is entitled to enforce a constitutional lien because it is an “original contractor”

pursuant to Section 53.026. See TEX. PROP. CODE ANN. § 53.026 (West 2007). Specifically,

Trinity challenges the trial court’s Conclusion of Law Three, in which the trial court held that

                                                  8
Trinity’s request to be treated as an original contractor under Section 53.026 was unfounded

because the provisions of Chapter 53 of the Property Code cannot be used to alter or modify the

rights created under Article 16, section 37 of the Texas Constitution. Whether Section 53.026

applies to the constitutional lien authorized by TEX. CONST. art. XVI, § 37 appears to be a matter of

first impression.

       Section 53.026 of the Texas Property Code entitled “Sham Contract” provides:

       (a) A person who labors, specially fabricates materials, or furnishes labor or
           materials under a direct contractual relationship with another person is
           considered to be in direct contractual relationship with the owner and has a
           lien as an original contractor, if:
       (1) the owner contracted with the other person for the construction or repair of a
           house, building, or improvements and the owner can effectively control that
           person through ownership of voting stock, interlocking directorships, or
           otherwise;
       (2) the owner contracted with the other person for the construction or repair of a
           house, building, or improvements and that other person can effectively control
           the owner through ownership of voting stock, interlocking directorships, or
           otherwise; or
       (3) the owner contracted with the other person for the construction or repair of a
           house, building, or improvements and the contract was made without good
           faith intention of the parties that the other person was to perform the contract.

       TEX. PROP. CODE ANN. § 53.026(a) (West 2007). Although relatively few courts have

interpreted Section 53.026, case law establishes that the “sham contracts” provision was designed

to elevate a subcontractor or materialman to an original contractor where the original contractor

acquired such status by virtue of a sham relationship with the owner. See Da-Col Paint Mfg. Co.

v. American Indem. Co., 517 S.W.2d 270, 273 (Tex. 1974) (construing predecessor statute to

Section 53.026); see also First Nat’l Bank, 517 S.W.2d at 265 (same); In re Waterpoint Int’l, LLC,

330 F.3d 339, 348 (5th Cir. 2003) (noting that the sham contracts provision protects subcontractors

and materialmen from situations where the original contractors are no more than an “alter ego” of

                                                 9
the owners). Therefore, the effect of Section 53.026 is to change and improve a subcontractor or

materialman’s position in the construction contract chain.

        On appeal, Trinity asserts that the Texas Constitution creates the mechanic’s and

materialmen’s liens and that Chapter 53 of the Texas Property Code tell us how those liens are to

be enforced. Trinity argues that when a subcontractor is elevated to the status of an original

contractor under the sham contracts provision of Chapter 53, the subcontractor is entitled to

enforce a constitutional lien without having to satisfy any statutory requirements because the

statutory provisions set forth which mechanics and materialmen may rely on the constitutional

lien.

        Vineyard responds that Texas case law is clear that the sham contract provision was never

meant to be applied to a constitutional lien. In support of this argument, Vineyard cites to

Southwest Properties, L.P. v. Lite-Dec of Tex., Inc., 989 S.W.2d 69 (Tex.App. – San Antonio

1998, pet. denied). In Southwest Properties, the San Antonio Court of Appeals concluded that

Section 53.026 does not provide a method of allocating liability to a property owner, but rather, the

provision applies for the sole purpose of filing and perfecting mechanic’s liens. See Southwest

Properties, 989 S.W.2d at 69, 72. In reaching its decision, the Southwest Properties court looked

to Texas case law which had observed that prior to 1965 it was common for owners to prevent

persons they transacted with from obtaining the advantageous position of original contractor by

assuming that position themselves by means of a sham contract. Id. at 71 (quoting Da-Col Paint

Mfg. Co., 517 S.W.2d at 273). In response to such practices, the Legislature enacted the statutory

provision giving a subcontractor his true status of original contractor. Id. The Southwest

Properties court explained that by using the phrases “original contractor” and “direct contractual

                                                 10
relationship with the owner” in Section 53.026, “the Legislature ensured that claimants would not

have liens voided over a failure to meet specific notice requirements, which are tied to whether that

person is an original contractor. Applying this statute as only controlling lien requirements gives

a subcontractor certain benefits that normally only an original contractor would receive.” Id. at

72.

       Therefore, based on Southwest Properties, Vineyard maintains that Section 53.026 was

clearly never meant to be utilized outside of the statutory lien context because statutory liens are

the only liens that have timetables. Vineyard also relies on Shaw v. McPhail Elec. Co., Inc., 544
S.W.2d 497 (Tex. Civ. App. – Dallas 1976, writ refused n.r.e.) (involving the statutory predecessor

to Section 53.026) in making this point. In Shaw, the owner of a residence appealed from a

judgment granting an electrician’s enforcement of a mechanic’s and materialmen’s lien. Shaw,
544 S.W.2d at 498. On appeal, the residence owner argued in pertinent part that: (1) the

electrician did not qualify for a statutory lien as subcontractor; and (2) the electrician did not

qualify for a constitutional or statutory lien because there was no evidence establishing privity of

contract between the parties. Id. at 499.

       The Dallas Court of Appeals concluded that the owner’s contention that the electrician

failed to qualify for a statutory lien as a subcontractor was immaterial where the electrician did not

plead subcontractor status and disclaimed any subcontractor’s lien on appeal. Id. As to the

owner’s second contention, the Shaw court held that the evidence was sufficient to bring the case

under the sham contracts provision and that the trial court was permitted to treat the electrician as a

contractor in a direct contractual relationship with the owner and was entitled to perfect his lien

against the property in the same manner as any other original contractor, by taking the steps

                                                  11
prescribed by the statute, and without having to comply with the additional requirements

prescribed for subcontractors. Id. at 499-500.

         We are not persuaded by Vineyard’s reliance on Southwest Properties and Shaw to argue

that the sham contracts provision only moves a subcontractor to original contractor status within

the statutory scheme for a statutory lien and does not provide for the status as an original contractor

for purposes of asserting and enforcing a constitutional lien. First, we find Southwest Properties

inapplicable because the issue in that case was not whether Section 53.026 applied to a

constitutional lien, but rather, whether the sham contracts provision creates contractual alter ego

liability for the property owner independent from a lien claim. Southwest Properties, 989 S.W.2d

at 69, 72. Second, Shaw did not hold that the shams contract provision only applies to statutory

liens, instead, the trial court found that the subcontractor in that case was elevated to the status of

an original contractor and, that, in such a case, the notices required of subcontractors or

materialmen were not necessary.3 Shaw, 544 S.W.2d at 498.

         Moreover, the mechanic’s and materialmen’s lien statutes of Texas are to be liberally

construed for the purpose of protecting laborers, materialmen, and owners. Cabintree, Inc. v.

Schneider, 728 S.W.2d 395, 396 (Tex.App. – Houston [1st Dist.] 1986, writ ref’d). The argument

raised by Vineyard is contrary to this rule. The Legislature codified Chapter 53 for the speedy

and efficient enforcement of mechanic’s liens as mandated by Article 16, section 37 of the Texas

Constitution. TEX. CONST. art. XVI, § 37; CVN Group, 95 S.W.3d at 246-47. While the

Legislature has no power to affix conditions of forfeiture of lien created by the constitutional

3
  We also note that the Southwest Properties court specifically overruled the owner’s contention that the electrician
did not qualify for a constitutional or statutory lien because there was no evidence establishing privity of contract
between the parties. Shaw, 544 S.W.2d at 499, 500.

                                                         12
provision, it may provide means for enforcement of such lien and, in doing so, prescribe necessary

things for the protection of owners or purchasers of such property. Newman v. Coker, 310
S.W.2d 354, 362 (Tex.Civ.App. – Amarillo 1958, no writ). Although Vineyard asserts that

Trinity is attempting to use the statutory scheme to alter a constitutional right, we note that Article

16, section 37 itself does not limit liens to “original contractors” rather, it states “[m]echanics,

artisans and material men, of every class, shall have a lien . . . .” and then directs the Legislature to

provide for the enforcement of such liens. TEX. CONST. art. XVI, § 37 [emphasis added].

         Section 53.026 specifically provides that where a sham contract exists, the legal fiction is

to be ignored and the subcontractor is deemed to be an original contractor. TEX. PROP. CODE

ANN. § 53.026 (West 2007). This is consistent with the practice the Legislature sought to

eliminate by enacting Section 53.026’s statutory predecessor. See Da-Col Paint Mfg. Co., 517
S.W.2d at 273 (stating that it was common practice for owners to enter into sham contracts to

ensure that the persons they contracted with would be subcontractors, and therefore, those

subcontractors could not enjoy the advantages of being an original contractor).4 Accordingly,

under the sham contracts provision, a subcontractor is placed in direct privity with the property

owner for purposes of the mechanic’s and materialman’s lien statutes. See Da-Col Paint Mfg.

Co., 517 S.W.2d at 273; Shaw, 544 S.W.2d at 500; In re Waterpoint, 330 F.3d at 348. As a result,

by changing a subcontractor’s position in the construction contract chain, the statutory provisions

allow a subcontractor hired under a sham contract to assert and enforce a constitutional lien

because he is deemed to have a direct contractual relationship with the owner. See TEX. PROP.

4
  The Da-Col court stated that the sham contracts provision is not a notice statute and further explained that,
“[f]undamental to the operation of the statute, however, is the recognition that the owner and sham contractor are
one and the same.” See Da-Col Paint Mfg. Co., 517 S.W.2d at 273.
                                                         13
CODE ANN. § 53.001(7) (West 2007); Da-Col Paint Mfg. Co., 517 S.W.2d at 273; First Nat’l Bank,
517 S.W.2d at 265.

        Accordingly, if Trinity was, in fact, an original contractor, pursuant to Section 53.026 he is

entitled to assert and enforce a constitutional lien. See TEX. PROP. CODE ANN. § 53.001(7) (West

2007); Da-Col Paint Mfg. Co., 517 S.W.2d at 273; First Nat’l Bank, 517 S.W.2d at 265. Because

Section 53.026 elevates a subcontractor to an original contractor such that he is deemed to have a

direct contractual relationship with the owner, the trial court erred in concluding that Trinity’s

claim that it be treated as an original contractor under Section 53.026 was unfounded because the

provisions of Chapter 53 of the Property Code cannot be used to alter or modify the rights provided

by Article 16, section 37 of the Texas Constitutional lien. See TEX. PROP. CODE ANN. § 53.001(7)

(West 2007); Da-Col Paint Mfg. Co., 517 S.W.2d at 273; First Nat’l Bank, 517 S.W.2d at 265.

Issue One is sustained.

                                SUFFICIENCY OF THE EVIDENCE

        In Issue Two, Trinity asserts that the evidence is legally and factually insufficient to

support the trial court’s Finding of Fact Two.           In its Finding of Fact Two the trial court stated

that: “[i]n [its] Petition, [Trinity] admitted that it performed work on a project for the improvement

of real property owned by [Vineyard] as a subcontractor under a contract with [TOKA] that served

as the general contractor on the project.”

        As previously noted the Property Code defines a “subcontractor” as a person who has

furnished labor or materials to fulfill an obligation to an original contractor5 or to a subcontractor

to perform all or part of the work required by an original contract. TEX. PROP. CODE ANN. §

5
 An “original contractor” is a person contracting with an owner directly or through the owner’s agent. TEX. PROP.
CODE ANN. § 53.001(7) (West 2007).
                                                       14
53.001(13) (West 2007). The record establishes that, in both Trinity’s original petition and its

amended petition, Trinity alleged that TOKA is a general contractor that contracted with Trinity to

provide labor and materials for a shopping center owned by Vineyard. In its Finding of Fact Two,

the trial court found that Trinity “admitted” that it performed work for the improvement of real

property owned by Vineyard as a subcontractor under a contract with TOKA who served as the

general contractor on the project.

          Trinity argues that to the extent that the trial court’s finding and conclusion attempt to

establish a judicial admission, they are without support in the record or the law. Trinity maintains

that it never characterized itself as a subcontractor in asserting its constitutional mechanic’s lien,

but rather, clearly and unequivocally alleged in its petition that it is an “original contractor”

pursuant to the sham contracts provision. We agree.

          A judicial admission is a formal waiver of proof that dispenses with the production of

evidence on an issue. Lee v. Lee, 43 S.W.3d 636, 641 (Tex.App. – Fort Worth 2001, no pet.). In

a party’s live pleadings, assertions of fact that are not pleaded in the alternative are regarded as

formal judicial admissions. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 568

(Tex. 2001).        A judicial admission must be deliberate, clear, and unequivocal.                   Bowen v.

Robinson, 227 S.W.3d 86, 94 (Tex.App. – Houston [1st Dist.] 2006, pet. denied).

          The record reflects that in addition to explaining that TOKA had contracted Trinity to work

on a property owned by Vineyard, both Trinity’s original petition and its amended petition,

Trinity: (1) alleged that Vineyard effectively controlled TOKA; 6 (2) sought to foreclose it

mechanic’s lien pursuant to Article 16, section 37 of the Texas Constitution and Section 53.026 of

the Property Code; and (3) asserted that it was an “original contractor for the improvements for
6
    In making this factual allegation, Trinity referenced Section 53.026 of the Texas Property Code.
                                                          15
which a lien is claimed.” Additionally, the “Affidavit for Mechanic’s Lien and Materialman’s

Lien,” filed by Trinity stated that: (1) Trinity claimed a lien “on the property and improvements”

identified in the affidavit under Article 16, section 37 of the Texas Constitution and Section 53.026

of the Property Code; and (2) Vineyard was the owner of the real property, and that Vineyard

operated through and entered in a contract with TOKA, an entity that Vineyard could effectively

control.

        In its live petition, Trinity described the circumstances under which it was contracted by

TOKA, an entity that Vineyard could allegedly control, Trinity asserted it was an original

contractor for purposes of claiming a lien, and claimed a lien under Article 16, section 37 of the

Texas Constitution and Section 53.026 of the Property Code. Although Trinity alleged it was

contracted by TOKA, Vineyard’s general contractor, Trinity asserted in the alternative that it was

an original contractor. Pleading in the alternative does not constitute a judicial admission. See

Robinson, 227 S.W.3d at 94-95.

        While we note that Trinity refers to itself as a “subcontractor” in its motion for summary

judgment and in its appellate brief, Trinity’s position has clearly and consistently been that it

should be treated as an original contractor under the shams contract provision and, that, as an

original contractor, it is entitled to assert and enforce a lien pursuant to Article 16, section 37 of the

Texas Constitution. Based on the foregoing, we conclude that the trial court’s finding that Trinity

admitted it was a subcontractor contradicts Trinity’s pleadings. Accordingly, the trial court’s

Finding of Fact Two is not supported by legally sufficient evidence. See City of Keller, 168
S.W.3d at 810.

                                                   16
       In a sub-issue, Trinity challenges the trial court’s Conclusion of Law Two which provided

that: “[Trinity] admitted that it was a subcontractor on the project to improve [Vineyard’s] real

property. Accordingly, [Trinity] is not entitled to claim a lien under Article 16, section 37 of the

Texas Constitution as a subcontractor.” Trinity argues that the trial court’s conclusion is without

support because there is no factual basis upon which the trial court could have concluded that

Trinity admitted it was a subcontractor. Trinity also argues that it unclear whether the trial court’s

conclusion represents an attempt to use the alleged admission to defeat Trinity’s assertion that it

qualifies as an original contractor under Section 53.026 or whether the conclusion means only that

Trinity contracted with TOKA rather than Vineyard. To the extent that the trial court’s finding

and conclusion signifies the latter, Trinity contends the trial court’s finding and conclusion are

immaterial as to whether Trinity is entitled to enforce a constitutional lien.

       A subcontractor does not have a constitutional lien. See Da-Col Paint Mfg. Co., 517
S.W.2d at 273; Gibson, 148 S.W.3d at 493; see also In re Waterpoint, 330 F.3d at 343-44.

However, having already determined that the trial court erred in finding that Trinity admitted that

it was a subcontractor, we conclude the trial court erred by concluding that Trinity is not entitled to

claim a lien under Article 16, section 37 of the Texas Constitution as a subcontractor because

Trinity has consistently asserted that it was an original contractor under the sham contract

provision for purposes of asserting a constitutional lien. See BMC Software, 83 S.W.3d at 794

(we review the trial court’s legal conclusions drawn from the facts to determine their correctness).

Issue Two is sustained.

                                 DECLARATORY JUDGMENT

                                                  17
       In Issue Three, Trinity argues that the trial court erred in denying Trinity’s lien foreclosure

claim and granting Vineyard Village’s declaratory judgment claim and request for attorney’s fees.

       Vineyard requested a declaration that Trinity’s constitutional lien was invalid and

unenforceable because Trinity’s assertion and enforcement of a constitutional lien was based on an

impermissible application of Section 53.026. Trinity argues that the trial court erred in holding

that Texas law does not allow Trinity, as an admitted subcontractor to claim a lien under Article

16, section 37 of the Texas Constitution and that the lien claim by Trinity in its lien affidavit was

invalid and improper as a matter of law. In effect, Trinity is challenging the trial court’s

Conclusion of Law Four which also stated that: “[Trinity’s] claim to foreclose [its mechanic’s

lien] should be DISMISSED WITH PREJUDICE as a matter of law based on the legal conclusions

and admissions by [Trinity] recited herein.” (Emphasis in original).

       If reversal is warranted, we can render the judgment the trial court should have rendered,

unless a remand for further proceedings is necessary. FDIC v. Projects Am. Corp., 828 S.W.2d
771, 772 (Tex.App. – Texarkana 1992, writ denied). However, we may only render judgment in

cases where the material facts are undisputed. Rosen, 114 S.W.3d at 149. Because we have

already determined that Section 53.026 allows a subcontractor hired under a sham contract to

assert and enforce a constitutional lien because under the statutory provision a subcontractor is

deemed to have a direct contractual relationship with the owner and have also concluded that the

trial court erred in finding that Trinity admitted that it was a subcontractor, we conclude the trial

court erred in rendering declaratory judgment for Vineyard. Accordingly, because there are no

facts left to be determined, we render judgment denying Vineyard’s request for a declaratory

judgment. Rosen, 114 S.W.3d at 149.

                                                 18
                                          Attorney’s Fees

       Next, Trinity asserts the trial court erred in awarding attorney’s fees to Vineyard. The

trial court awarded Vineyard attorney’s fees under Section 37.009 of the Texas Civil Practice and

Remedies Code and Section 53.156 of the Texas Property Code. See TEX. CIV. PRAC. & REM.

CODE ANN. § 37.009 (West 2008) (providing that, in any proceeding under the Declaratory

Judgments Act, the trial court may award reasonable and necessary attorney’s fees that are

equitable and just); TEX. PROP. CODE ANN. § 53.156 (West 2007) (providing that in any

proceeding to foreclose a lien or in any proceeding to declare that any lien is invalid or

unenforceable, the trial court may award costs and reasonable attorney’s fees as are equitable and

just). Trinity contends that we should reverse and remand the trial court’s award of attorney’s

fees to Vineyard because reversal of the trial court’s judgment declaring Trinity’s lien invalid and

unenforceable, “strikes at the heart” of the trial court’s determination that an award of attorney’s

fees was equitable and just under either statute.

       The record shows that the trial court awarded attorney’s fees to Vineyard because it was

forced to incur them in prosecuting its declaratory judgment counterclaim, its attorney’s fees were

reasonable and necessary, and an attorney’s fees award would be equitable and just under the

circumstances and applicable statute. An award of attorney’s fees in a declaratory judgment

action is within the trial court’s discretion and is not limited to the prevailing party. See Funes v.

Villatoro, 352 S.W.3d 200, 217 (Tex.App. – Houston [14th Dist.] 2011, pet. denied); see also

Hartford Cas. Ins. Co. v. Budget Rent-A-Car Sys., Inc., 796 S.W.2d 763, 771 (Tex.App. – Dallas

1990, writ denied). In Bocquet v. Herring, the Supreme Court explained that “the Declaratory

Judgments Act entrusts attorney fee awards to the trial court’s sound discretion, subject to the

                                                    19
requirements that any fees awarded be reasonable and necessary, which are matters of fact, and to

the additional requirements that fees be equitable and just, which are matters of law.” 972 S.W.2d
19, 21 (Tex. 1998). However, unreasonable fees cannot be awarded even if the court believes

them just, but the trial court may conclude that it is not equitable or just to award reasonable and

necessary fees. See id. When a declaratory judgment is reversed on appeal an award of

attorney’s fees may no longer be equitable and just. Boerschig v. Southwestern Holdings, Inc.,

322 S.W.3d 752, 768 (Tex.App. – El Paso 2010, no pet.). Although the award of attorney’s fees

rests in the sound discretion of the trial court, the trial court’s exercise of that discretion should be

based on the facts and circumstances of each case.

        In light of our disposition of the case on appeal, we reverse the award of attorney’s fees and

remand the issue of attorney’s fees so the trial court may reconsider the award of attorney’s fees.

See Edwards Aquifer Auth. v. Chem. Lime, Ltd., 291 S.W.3d 392, 405 (Tex. 2009) (stating that the

trial court should have the opportunity to reconsider its award of attorney’s fees where claimant is

no longer the prevailing party); Boerschig, 322 S.W.3d at 768-69; Hartsell v. Town of Talty, 130
S.W.3d 325, 329 (Tex.App. – Dallas 2004, pet. denied); Fitzgerald v. Antoine Nat’l Bank, 980
S.W.2d 228, 232 (Tex.App. – Houston [14th Dist.] 1998, no pet.). Issue Three is sustained.

                             JUDGMENT AS A MATTER OF LAW

        In Issue Four, Trinity contends that it established as a matter of law that it is an original

contractor pursuant to Section 53.026 and, as such, is entitled to judgment as a matter of law that it

has a valid and enforceable constitutional lien.

        Under Section 53.026 a person customarily considered a subcontractor may be deemed to

be an original contractor if it can be shown that: (1) the owner can effectively control the original

                                                   20
contractor through ownership of voting stock, interlocking directorships, or otherwise; or (2) the

original contractor can effectively control the owner through ownership of voting stock,

interlocking directorships, or otherwise; or (3) the contract was made without good faith intention

that the original contractor perform the contract. TEX. PROP. CODE ANN. § 53.026 (West 2007).

Under this statutory provision there is no requirement that the owner does in fact control the

original contractor or that the original contractor does in fact control the owner. See id.; see also

Shaw, 544 S.W.2d at 499-500 (where evidence supports an inference that a land owner had the

appearance of control, a sham contract will be found to exist and the subcontractor can be treated

as a contractor in direct privity with the owner in the same manner as any other original

contractor).

        Trinity argues that it conclusively showed that Vineyard and TOKA can effectively control

each other through ownership of voting stock, interlocking directorships, or otherwise and, as

such, it is entitled to judgment as a matter of law that its constitutional lien is valid and enforceable.

Specifically, Trinity refers us to its summary judgment evidence showing TOKA’s general

partner, TOKA, G.P., Inc., is run by Burk Collins and that Collins has the ability to shut down

TOKA if he wanted to make that decision on his own. Collins can require TOKA to take such

actions such as bidding on contracts.

        As to Vineyard, Trinity produced evidence showing that Vineyard is owned by Market

Street Village, LTD., and that the general partner of Market Street Village, LTD. is Market Street

Village, G.P. Collins is the sole director, president, and secretary of Market Street Village, G.P.

Collins and a group of partners based in California are in charge of Vineyard. On behalf of

Vineyard, Collins made the decision to hire TOKA as the general contractor for the shopping

                                                   21
center construction project. In the deposition testimony Trinity provided as evidence in support

of its motion for summary judgment, Collins testified that he did not direct TOKA to submit a bid

for that contract and stated that it was Danny Hooper who made that decision.

       According to the deposition testimony of Danny Hooper, the corporate representative for

TOKA, Collins made the decision that TOKA would submit a bid on Vineyard’s shopping center

construction project.    Hooper testified that Vineyard had no clue that Trinity was the

subcontractor on the project.

       Trinity’s summary judgment evidence further showed TOKA G.P. Inc., owns 1 percent of

TOKA, Hooper owns 49 percent of TOKA, and Collins and his wife own 50 percent of TOKA.

The articles of incorporation show that Vineyard, TOKA, and TOKA, G.P. have the same business

address.

       Vineyard responds that Trinity has not established that Vineyard can effectively control

TOKA for purposes of the sham contract provision. Vineyard maintains that the trial court’s

denial of Trinity’s motion for summary judgment was supported by evidence that raised a fact

question. Vineyard points to deposition testimony from Collins in which he testified that his only

role in TOKA is as an investor, he did not direct TOKA to submit a bid on Vineyard’s shopping

center construction project, he treats TOKA like any other general contractor, he was not aware

that Trinity performed the work at the shopping center, and that he has a fiduciary duty to his

partners at Vineyard to treat TOKA like any other contractor. Additionally, Vineyard refers us to

Collins’ affidavit stating that he does not control the actions or business decisions of TOKA and

that he does not have a role in the daily operations of TOKA.

       Because there is evidence in the record that supports an inference that Vineyard could

                                               22
effectively control TOKA, we conclude that there is evidence in the record that creates a genuine

issue of material fact as to whether a sham contract exists such that Trinity can qualify as an

original contractor under Section 53.026. See Shaw, 544 S.W.2d at 499-500 (where evidence

supports an inference that a land owner had the appearance of control, a sham contract will be

found to exist and the subcontractor can be treated as a contractor in direct privity with the owner

in the same manner as any other original contractor). Accordingly, we remand this issue to the

trial court for further proceedings. Issue Four is sustained.

                                         CONCLUSION

       We reverse the portions of the judgment of trial court granting Vineyard’s counterclaim for

a declaratory judgment and awarding Vineyard attorney’s fees, and render judgment that

Vineyard’s declaratory judgment is denied. We remand this cause to the trial court to reconsider

the issue of attorney’s fees and for further proceedings consistent with this opinion. We affirm

the trial court’s judgment as to TOKA.

                                              GUADALUPE RIVERA, Justice
November 6, 2013

Before McClure, C.J., Rivera, and Rodriguez, JJ.

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