Court Opinion

ID: 3116945
Source: CourtListenerOpinion
Date Created: 2015-10-16 07:47:47.666005+00
Date Added: 2024-06-11T10:19:47.260143
License: Public Domain

Fourth Court of Appeals
                                    San Antonio, Texas
                                           OPINION
                                       No. 04-12-00716-CV

                            Maria SANCHEZ d/b/a Progressive Painters,
                                         Appellant

                                                 v.

                           Michael SCHROECK and Rebecca Schroeck,
                                        Appellees

                         From the 33rd District Court, Burnet County, Texas
                                       Trial Court No. 38284
                          Honorable Guilford L. Jones, III, Judge Presiding

Opinion by:       Sandee Bryan Marion, Justice

Sitting:          Sandee Bryan Marion, Justice
                  Marialyn Barnard, Justice
                  Luz Elena D. Chapa, Justice

Delivered and Filed: June 26, 2013

REVERSED AND REMANDED

           Appellant, Maria Sanchez d/b/a Progressive Painters, appeals from a summary judgment

rendered in favor of appellees, Michael and Rebecca Schroeck, in which the trial court decreed

appellees held title to certain real property free and clear of appellant’s mechanic’s and

materialman’s lien on the grounds that appellant’s lien was extinguished by foreclosure of a

superior first lien. On appeal, appellant asserts the trial court erred in granting appellees’

traditional and no-evidence motions for summary judgment. We reverse and remand.
                                                                                                    04-12-00716-CV

                                               BACKGROUND

         In 2008, James Cope purchased the real property at issue in this appeal. Campos Colinas

Development, LLC is the entity that conveyed the property via a Warranty Deed to Cope in 2008.

Cope granted to Stock Loan Services a Construction Deed of Trust securing a $225,000.00

vendor’s lien for the purpose of purchasing the property and constructing improvements on the

property. The Deed of Trust was executed on July 25, 2008 and recorded on July 31, 2008. Also

on July 25, 2008, Cope (as borrower) and Stock Loan (as lender) executed a Construction Loan

Agreement (“Loan Agreement”) that included the following provision:

         NO CONSTRUCTION PRIOR TO RECORDING OF SECURITY
         INSTRUMENT: Borrower will not permit any work or materials to be furnished in
         connection with the Project until (A) Borrower has signed the related Documents;
         (B) Lender’s mortgage or deed of trust and other Security Interests in the Property
         have been duly recorded and perfected; (C) Lender has been provided evidence,
         satisfactory to Lender, that Borrower has obtained all insurance required under this
         Agreement or any Related Documents and the Lender’s liens on the Property and
         improvements are valid perfected first liens, subject only to such exceptions, if any,
         acceptable to Lender.

         Although the Loan Agreement required no construction, work, or materials before the date

the deed of trust was recorded—July 31, 2008—Cope and Ron Bruno signed an Affidavit of Non

Commencement, 1 stating that construction of improvements on the property had not begun and no

material to be used in constructing the improvements had been delivered to the property as of the

date of the Loan Agreement—July 25, 2008.

         On January 15, 2009, appellant filed an Affidavit of Mechanic’s and Materialman’s Lien

(“Affidavit”), in which she claimed that she provided labor and/or furnished material to improve

1
  The affidavit contains a signature line for “Contractor (entity),” which is blank. Underneath this line, are Bruno’s
name and signature, as well as his title of “President.” The name of the entity of which he is “President” is not
indicated on the affidavit.

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Cope’s property in the months of October and November 2008. Appellant claimed the amount of

$1,456.30 remained due and owing to her.

       Cope later defaulted on the loan, and Stock Loan foreclosed on its Construction Deed of

Trust and purchased the property on April 6, 2010. On July 8, 2010, Stock Loan conveyed the

property to appellees.

       On November 22, 2010, appellant sued appellees. Appellant contended her lien extended

to appellees’ property and, although she provided them with notice of her claim, she has not

received payment. Appellant asked the trial court to establish her right to payment from appellees

and establish her statutory lien on the property and improvements and her lien on proceeds from

the sale of the property.

       Appellant moved for a partial summary judgment and appellees moved for a traditional

and no-evidence summary judgment. On September 15, 2011, the trial court granted appellant’s

motion for summary judgment, holding that she had established a valid lien on the property and

ordering the property foreclosed and sold with appellant having a lien on the proceeds. In its order,

the trial court also denied appellees’ motion for summary judgment. The next day, appellees filed

an amended answer asserting as affirmative defenses lien extinguishment and release. Appellees

also filed a motion asking the trial court to reconsider its summary judgment ruling. Appellant

responded and also filed a no-evidence motion for summary judgment on appellees’ affirmative

defenses. On April 4, 2012, the trial court set aside its order granting appellant’s motion for

summary judgment, and denied all previously urged motions for summary judgment.

       About a month later, appellees again moved for both a traditional and no-evidence

summary judgment. Appellant responded. On June 28, 2012, the trial court granted appellees’

traditional and no-evidence motion for summary judgment and decreed appellees held title to the

property free and clear of appellant’s mechanic’s lien on the grounds that appellant’s lien was
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extinguished by foreclosure of the first lien Construction Deed of Trust on April 6, 2010. In this

appeal, appellant challenges both the traditional and no-evidence summary judgments rendered in

favor of appellees. She does not challenge the trial court’s denial of her motion for partial summary

judgment.

                               TRADITIONAL SUMMARY JUDGMENT 2

         We review an order granting a traditional motion for summary judgment de novo. Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). A traditional motion for summary

judgment should be granted only when the movant establishes there are no genuine issues of

material fact and the movant is entitled to judgment as a matter of law on the grounds expressly

set forth in the motion. TEX. R. CIV. P. 166a(c); Browning v. Prostok, 165 S.W.3d 336, 344 (Tex.

2005).

         In their motion for a traditional summary judgment, appellees asserted that when the

Construction Deed of Trust was foreclosed all inferior mechanic’s liens, including appellant’s,

were extinguished by operation of law. Appellees also argued appellant’s lien did not relate back

to a time before the initial construction began because there was no general construction contract.

Therefore, appellees concluded, the inception date of appellant’s mechanic’s lien was in October

2008, long after Stock Loan’s Deed of Trust was perfected. In response, appellant argued a

construction contract existed between Cope and the general contractor and, therefore, the inception

2
  Appellees also moved for a no-evidence summary judgment in which they asserted there was no evidence “to refute
that [appellant’s] lien was extinguished by foreclosure of the superior deed of trust,” no evidence of a general contract,
and the Affidavit of Non Commencement was prima facie evidence that no work had begun and no materials had been
supplied prior to execution of the Construction Deed of Trust. However, in their amended answer, appellees asserted
lien extinguishment as an affirmative defense. A movant cannot file a no-evidence motion for summary judgment on
an affirmative defense that it has the burden to prove at trial. Killam Ranch Props., Ltd. v. Webb County, 376 S.W.3d
147, 157 (Tex. App.—San Antonio 2012, pet. denied). Therefore, to the extent appellees pled lien extinguishment as
an affirmative defense; they were not entitled to a no-evidence summary judgment. Id. at 158. Accordingly, we
consider only whether appellees conclusively established their entitlement to a traditional summary judgment on the
issue of whether appellant’s mechanic’s lien was extinguished.

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                                                                                       04-12-00716-CV

date of her lien was the date the construction contract was executed, which, according to appellant,

was before the Deed of Trust was recorded on July 31, 2008. On appeal, appellant argues the trial

court erred because (1) the relation-back doctrine applies; (2) for purposes of lien superiority, a

deed of trust lien is perfected when recorded, not when executed; and (3) there is a clear factual

dispute about whether construction began between July 25, 2008 and July 31, 2008.

       A valid foreclosure on a senior lien (sometimes referred to as a “superior” lien)

extinguishes a junior lien (sometimes referred to as “inferior” or “subordinate”) if there are not

sufficient excess proceeds from the foreclosure sale to satisfy the junior lien. See, e.g., Diversified

Mortg. Investors v. Lloyd D. Blaylock Gen. Contractor, Inc., 576 S.W.2d 794, 808 (Tex. 1978);

Kothari v. Oyervidez, 373 S.W.3d 801, 807 (Tex. App.—Houston [1st Dist.] 2012, pet. denied).

For the purpose of determining whether a mechanic’s lien is superior, “[a]s a general rule, a

properly perfected mechanic’s lien ‘relates back’ to a time referred to as the inception of the lien

for the purpose of determining lien priorities.” Diversified Mortgage, 576 S.W.2d at 800. In

general, mechanic’s liens whose inception is subsequent to the date of a deed-of-trust lien will be

subordinate to the deed-of-trust lien. Id. at 806.

       However, if there is a general contract regarding the construction of improvements to the

property, courts apply the relation-back doctrine to determine the time of a mechanic’s lien’s

inception. Oriental Hotel v. Griffiths, 33 S.W. 652, 653-54 (Tex. 1895). Under this doctrine, the

inception date of subsequently perfected mechanic’s liens will relate back to the date of a general

contract for a building or other improvement between the owner of the land and a contractor for

the construction of which the mechanic contributed. Id. at 653; see also McConnell v. Mortg. Inv.

Co. of El Paso, 305 S.W.2d 280, 283 (Tex. 1957); Inman v. Orndorff, 596 S.W.2d 236, 238 (Tex.

Civ. App.—Houston [1st Dist.] 1980, no writ); see also Finger Furniture Co. v. The Chase

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                                                                                      04-12-00716-CV

Manhattan Bank, 413 S.W.2d 131, 137 (Tex. Civ. App.—San Antonio 1967, writ ref’d n.r.e.)

(considering constitutional lien and relation-back rule of Oriental Hotel).

       In Oriental Hotel, on February 28, 1890, John Griffiths, as contractor, entered into a

general construction contract with the hotel company as owner whereby he agreed to construct a

proposed hotel building according to plans and specifications for the sum of $315,000 and shortly

thereafter began the work contemplated by the contract. The building was completed but certain

claims for labor and material were not paid and a dispute arose between the holders of such claims,

which were secured by statutory mechanic’s and materialman’s liens, and the holders of bonds

secured by a deed of trust against the property that was executed by the hotel company on May 1,

1890 and recorded twenty days thereafter.

       The Supreme Court held the mechanic’s and materialman’s liens related back and had their

inception as of the date of Griffiths’ contract of February 28, 1890 rather than the dates upon which

the labor was performed or the materials furnished. Thus, priority was given to such liens although

the labor and materials giving rise to the liens were furnished after the date of the deed of trust

securing the bonds. Griffiths’ general construction contract was given controlling importance as

fixing the date of the inception of the mechanic’s and materialman’s liens. 33 S.W. at 662-63.

       In their motion for a traditional summary judgment, appellees acknowledged the relation-

back doctrine, but they argued that because there was no general construction contract in this

project, the date of inception of appellant’s mechanic’s lien was no earlier than October 2008, the

date appellant began work on the project.        Appellees also relied on the Affidavit of Non

Commencement, stating that construction of improvements on the property had not begun as of

July 25, 2008 and no material to be used in constructing the improvements had been delivered to

the property as of July 25, 2008. Appellees argued Stock Loan’s lien attached on July 25, 2008

when the Deed of Trust was executed. Appellant argues the relevant date for determining which
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                                                                                       04-12-00716-CV

lien is superior is the date the deed of trust was recorded (July 31, 2008), not the date it was

executed (July 25, 2008). Appellant contends that while the Affidavit of Non Commencement

may show no construction commenced before July 25, 2008, it does not establish whether any

construction commenced before July 31, 2008. We need not decide which date is the relevant date

for determining lien superiority because, as explained below, we conclude that appellant raised a

genuine issue of material fact on whether a construction contract existed and, therefore, on whether

her lien was superior to Stock Loan’s lien under the relation-back doctrine.

       Appellant argues that, although her work and/or materials were supplied after the Deed of

Trust was executed and recorded, the inception date of her lien relates back to a construction

contract in existence prior to that date; therefore, her lien is superior. In support of this argument,

in her Affidavit, appellant stated as follows:

              Pursuant to a contract by and between [appellant] and Johnny Ramirez
       and/or Ryan Haberer on behalf of Unique Homes of Texas Inc. and/or Campo
       Colinas Development LLS and/or CC Development LLC, [appellant] has
       performed labor and/or furnished material to improve [the subject property].

             [Appellant] was employed by and/or furnished materials or labor to Johnny
       Ramirez and/or Ryan Haberer on behalf of Unique Homes of Texas Inc. and/or
       Campo Colinas Development LLS and/or CC Development LLC for the
       improvements for which a lien is claimed. . . .
                                                    ...

               The owner or reputed owner of the [subject property] is James Cope . . . .

             The original contractor for the improvements for which a lien is claimed is
       Unique Homes of Texas Inc. and/or Campo Colinas Development LLS and/or CC
       Development LLC. . . . .

       Appellant attached to her summary judgment response the affidavit of Daniel Orozco who

attested that in approximately August 2008, on behalf of appellant, he “entered into a contract with

Unique Homes to do painting for many new-home constructions, including” Cope’s. Orozco

stated Unique Homes was the original contractor of the project who contracted directly with Cope,

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                                                                                      04-12-00716-CV

and Unique Homes contracted the work out to him pursuant to the contract with Cope. Orozco

alleged Unique Homes still owes him $1,456.30 for his labor.

       Appellant also contends the following summary judgment evidence raises a fact issue on

the existence of a general construction contract: (1) the Construction Deed of Trust secured a

vendor’s lien for the purpose of constructing improvements, (2) the Loan Agreement was executed

to obtain a loan to construct improvements, (3) the Loan Agreement references a “General

Contractor” and defines “Construction Contract” as “the contract dated July 25, 2008 between

Borrower and the general contractor for the Project,” and (4) the Affidavit of Non Commencement

was signed by a Ron Bruno as “President,” although the identity of the “Contractor” was left blank.

Finally, in reference to the Affidavit of Non Commencement, appellant points to the language of

the Loan Agreement which obligated Cope to “[c]ommence construction of the Project no later

than July 25, 2008, and cause the improvements to be constructed and equipped in a diligent and

orderly manner and in strict accordance with the Plans and Specifications approved by Lender, the

Construction Contract, and all applicable laws, . . . .”

       We conclude appellant raised a genuine issue of material fact on the issue of the existence

of a contract between Cope and a contractor and on the issue of when construction of

improvements of which appellant contributed under the contract began. Thus, appellees did not

establish as a matter of law that the inception date of appellant’s mechanic’s lien was subsequent

to the deed-of-trust lien. Accordingly, the trial court erred in rendering a traditional summary

judgment in favor of appellees.

                                          CONCLUSION

       We reverse the trial court’s summary judgment in favor of appellees and remand the cause

to the trial court for further proceedings.

                                                       Sandee Bryan Marion, Justice
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