Court Opinion

ID: 9649222
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:45:40.847811+00
Date Added: 2024-06-11T18:12:09.069867
License: Public Domain

REAVLEY, Justice.
We grant the motion for rehearing filed by Alltex Mortgage Company, set aside our former judgment, withdraw our opinion of February 3, 1971 and affirm the *342judgment of the court of civil appeals with the following opinion.
Irving Lumber Company has held a mechanic’s and materialman’s lien on land against which Alltex Mortgage Company also held a vendor and deed of trust lien. Judgment in the cause turns on the effect upon the mechanic’s and material-man’s lien of foreclosure and sale pursuant to the power in the deed of trust. The trial court directed a verdict in favor of Alltex and rendered judgment that Irving take nothing against Alltex. The court of civil appeals affirmed that judgment. 446 S.W.2d 64.
Merit Homes, Inc. acquired title to several residential lots on July 8, 1964. At this time Merit Homes borrowed from All-tex a large sum of money which included $10,600 used in payment for the land. All-tex obtained on this occasion a note in the total amount of $137,850 and the deed of trust which secured its payment. Merit Homes subsequently defaulted in its payments on the note. The deed of trust was foreclosed according to its terms, and the parcels of land were duly sold. Alltex was the purchaser for the amount of $27,000. Alltex has subsequently sold these lots to other purchasers.
The present suit was brought by Irving against Merit Homes and Alltex. Irving pleaded and proved that it furnished labor and materials toward the construction of houses on the land and that it was owed a total amount of $13,967.50 by Merit Homes. Merit Homes took no appeal from a default judgment against it. The feature of the case before us grows out of the complaint against Alltex by which Irving contended that its mechanic’s lien was not affected by the foreclosure and sale under the deed of trust. Its prayer for relief was “that the Court declare Plaintiff’s lien prior and superior to any other liens or claims in and upon said property and that Plaintiff is entitled to foreclose its lien * * * ” To avoid the joinder of the vendees of the four lots, Irving and Alltex stipulated that Alltex would pay to the other a money judgment in the total amount of any lien “which the Court deems would be entitled to foreclosure” against “any of the four (4) lots of land.”
Irving contends that it had an oral contract with Merit Homes to furnish this labor and material for certain construction on these particular tracts by an agreement made prior to the date (July 8) when Merit Homes first acquired its interest in the lots and executed the deed of trust to All-tex. No delivery of materials was made or actual construction begun on the land by Irving until after this July 8 date. If the deed of trust, executed contemporaneously with the vesting of .title in Merit Homes and securing the repayment of money advanced in part for the purchase price of the lots, was effective to the full extent of its power of sale whereby the sale thereunder cut off Irving’s mechanic’s lien, Irving is entitled to no relief and the lower court judgment is correct.
Irving’s argument seems to be that, whereas its lien did not take priority over the purchase money lien held by Alltex, its lien did survive the private foreclosure and sale provided by the deed of trust. The precedent for this contention is said to be Herbert v. Denman, 44 S.W.2d 441 (Tex.Civ.App. 1931, writ ref’d). In that case there were two vendor lien notes, one for $15,000 and one for $2500. The larger note constituted a first lien; when it was renewed, the maker was required to execute a deed of trust to further secure its payment. The court merely held that sale by the trustee under the power created subsequent to the $2500 vendor’s lien and note did not cut off that junior lien. This case does not justify a separation and assignment of different priorities between a vendor’s lien and the lienholder’s rights under a deed of trust where they come into being by the same instrument and transaction at the moment when the debtor-purchaser first acquires his title to the land.
A fact situation similar to ours existed in National Western Life Insurance Com*343pany v. Acreman where the court of civil appeals held (415 S.W.2d 265) that the holder of the vendor’s lien and deed of trust lien (insurance company) enjoyed priority over the holder of the mechanic’s and materialman’s lien (Acreman). Acre-man had actually commenced his work on the land a week prior to the date that Fuller, the owner with whom he had contracted, had purchased the land from Sisk and executed the deed of trust to the insurance company. The court said:
“The lien created by the deed of trust is impressed by the character of the indebtedness for which it was given to secure. This is the general rule in this state as well as elsewhere. The deed of trust was given to secure the payment of purchase money delivered to Sisk and the deed of trust lien has the status of a purchase money lien, as well as a deed of trust. The insurance company was the purchaser at the sale regularly made in the exercise of a power of sale authorized by the duly recorded mortgage and deed of trust, taking the title of Fuller divested of all incumbrances made subsequent to the execution, delivery and record of such mortgage.” 415 S.W.2d 265, 269.
The holder of the mechanic’s lien did not apply for writ of error in the Supreme Court, and when the case was considered here there was no complaint of the holding as to the priority of these liens. The court assumed that the insurance company’s lien was prior and superior. With that established, this court held: “When National Western’s lien was foreclosed, the purchaser at the trustee’s sale acquired title to the property freed of the claims of Acreman.” National Western Life Insurance Company v. Acreman, 425 S.W.2d 815, 817 (Tex.Sup.1968).
. In McCallen v. Mogul Producing & Refining Co., 257 S.W. 918 (Tex.Civ.App.1923, dism’d w. o. j.), the holder of the mechanic’s lien commenced work on the land prior to the execution of two deeds of trust. One of these deeds of trust secured the payment of the purchase price and the other one was executed by Crescent Association prior to taking title to the land but to secure a collateral loan. The court held that the mechanic’s lien could not antedate the ownership of the party (Crescent) with whom the lienholder contracted. The liens of both deeds of trust were held to be prior to the mechanic’s lien, and the foreclosure and sale by the trustees to Mogul cut off the junior lien.
There is no cause to question the authority of those Texas cases which have held that a lien may be subsequently perfected even though at the time the contract for the construction is made, the purchaser is not then the “owner” of the land. Enlow v. Brown, 357 S.W.2d 608 (Tex.Civ.App.1962, no writ); Breckenridge City Club v. Hardin, 253 S.W. 873 (Tex.Civ.App.1923, no writ). However, the priority of a security interest is not determined on the date of the “inception” of an agreement between the contractor and a prospective owner.
If Irving had held a judgment lien against Merit Homes instead of an oral contract which could prove to be the “inception” of a mechanic’s lien, and even though Irving had filed the abstract of judgment on the public record long before Merit Homes acquired its ownership of the land, the lien would not take priority over the deed of trust given to secure payment of purchase money and executed contemporaneously with the vesting of title in the judgment debtor. It has been held that the lien of the judgment attaches only to the interest which the judgment debtor acquires, and the debtor’s title is burdened by the lien of the deed of trust. Masterson v. Burnett, 27 Tex.Civ.App. 370, 66 S.W. 90 (1901, error ref’d).
The title of these lots passed to Merit Homes burdened by the deed of trust and security interest of Alltex in the same manner as if a prior owner had conveyed a partial interest before Merit Homes acquired its ownership in the lots. At least to the extent of the purchase mon*344ey advanced, a superior title was held by Alltex. That superior title was secured by the deed of trust, and foreclosure and sale thereunder was effective to cut off any inferior lien on the land. Whether Irving was then entitled to pursue a portion of the proceeds of the sale in the hands of Alltex is not raised in this case, because the only issue is whether Irving was entitled to foreclose its lien on the land following the foreclosure under the deed of trust.
We grant respondent’s motion for rehearing, set aside our former judgment and affirm the judgment of the court of civil appeals.
Dissenting opinion by McGEE, J., in which DENTON and DANIEL, JJ„ join.