Suntex Fuller Corporation v. Nationsrent of Texas, L.L.P., D/B/A Nationsrent ( 2007 )

    Opinion issued April 5, 2007

In The  

Court of Appeals

For The  

First District of Texas

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NO. 01-04-00994-CV

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SUNTEX FULLER CORPORATION, Appellant

V.

FLINT MORTGAGE GROUP, Appellee

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On Appeal from the 149th District Court

Brazoria County, Texas

Trial Court Cause No. 18712*RM02

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MEMORANDUM OPINION

Appellant, Suntex Fuller Corporation ("Suntex"), appeals the trial court's rendition of summary judgment in favor of appellee, Flint Mortgage Group ("Flint"). In two issues, Suntex argues that material issues of fact precluded summary judgment in favor of Flint and that no material issues of fact precluded summary judgment in favor of Suntex. We affirm.

Factual and Procedural Background

This action arises from a dispute regarding the relative priority between a mechanic's and materialman's lien and a deed of trust lien. Suntex, a development corporation, entered into a contract to purchase property for a subdivision in Brazoria County ("Property"). To fund this purchase, Suntex executed a promissory note payable to Merchants Mortgage & Trust Corporation ("Merchants"). On January 13, 1999, Suntex secured the note by executing and delivering to Merchants a deed of trust lien against the Property in favor of Merchants.

Beginning in October 1998 and continuing until January 21, 1999, Suntex moved a one-story sales office onto the Property, built a driveway to the sales office, and erected wooden fencing around some of the Property. Suntex contracted with several different laborers and suppliers to perform some of this work. In October 1999, one of the suppliers, Nationsrent, began delivering materials to Suntex for use on the Property.

Suntex executed a promissory note to Flint, using some of the proceeds to extinguish its note to Merchants. The parties to this appeal do not dispute that, as a result of this payment, Flint became equitably subrogated to the Merchants deed of trust lien against the Property. Ultimately, Suntex defaulted on its note to Flint, and Flint foreclosed on the deed of trust lien against the Property. After the foreclosure, Nationsrent filed a "constitutional" mechanic's and materialman's lien based on the materials it supplied to Suntex.

Nationsrent sued Suntex to recover monies owed for the materials it had delivered to the Property, and it sought to enforce its mechanic's and materialman's lien against the Property. Suntex filed a third party petition against Flint, alleging that the Nationsrent lien had priority over the Flint deed of trust lien and, pursuant to a contract between Suntex and Flint, Flint was responsible to pay the monies owed by Suntex to Nationsrent. In its answer, Flint asserted that its deed of trust lien was superior to the Nationsrent lien and, therefore, Flint did not owe any payment under the agreement. All parties filed motions for summary judgment concerning the relative priorities of the liens. The trial granted Flint's motion, denied Suntex's motion, and entered a judgment in favor of Flint.

Standard of Review

Flint sought both a traditional and no-evidence summary judgment in the trial court. Suntex sought only a traditional summary judgment. This is significant because the two forms of summary judgment invoke different standards of review. The movant for a traditional summary judgment must show that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Clarendon Nat. Ins. Co. v. Thompson, 199 S.W.3d 482, 486 (Tex. App.--Houston [1st Dist.] 2006, no pet.). That is, a defendant movant must conclusively negate at least one essential element of each of the plaintiff's causes of action or, alternatively, must conclusively establish each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997); Thompson, 199 S.W.3d at 486. Evidence is conclusive only if reasonable persons could not differ in their conclusions. City of Keller v. Wilson, 168 S.W.3d 802, 816 (Tex. 2005). Where the defendant establishes its right to summary judgment as a matter of law, the burden shifts to the plaintiff to present evidence sufficient to raise a genuine issue of material fact. Thompson, 199 S.W.3d at 486-87. If the plaintiff does so, summary judgment is precluded. Id.

In contrast, a party moving for a no-evidence summary judgment under rule 166a(i), must assert only that, after adequate time for discovery, there is no evidence of one or more essential elements of a claim or defense on which the non-movant would have the burden of proof at trial. Tex. R. Civ. P. 166a(i). Summary judgment is precluded if the non-movant then satisfies its burden to produce more than a scintilla of evidence raising a fact issue on the challenged elements. See id.; Forbes Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 172 (Tex. 2003). More than a scintilla of evidence exists if the evidence would allow reasonable and fair-minded people to differ in their conclusions. Id. Less than a scintilla of evidence exists when the evidence is so weak as to do no more than create a mere surmise or suspicion of a fact. Id.

Under both the traditional and no-evidence standards of review, we take as true all evidence favorable to the non-movant, indulging every reasonable inference and resolving any doubts in the non-movant's favor. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 157 (Tex. 2004) (traditional summary judgment); King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (no-evidence summary judgment). When, as here, a summary judgment does not specify the grounds on which it was granted, we will affirm the judgment if any one of the theories advanced in the motion is meritorious. Joe, 145 S.W.3d at 157. When both sides move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment proof presented by both sides and determine all questions presented. See Comm'rs Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997); Admiral Ins. Co. v. Trident NGL, Inc., 988 S.W.2d 451, 453 (Tex. App.--Houston [1st Dist.] 1999, pet. denied). If we find error, we must render the judgment the trial court should have entered. Agan, 940 S.W.2d at 81.

Analysis

The dispositive issue central to both motions for summary judgment is the order of priority of the Nationsrent mechanic's and materialman's lien and Flint's deed of trust lien. A properly perfected mechanic's and materialman's lien has priority over all other liens, encumbrances, or mortgages upon the property. Tex. Prop. Code Ann. § 53.123(a) (Vernon 1995). However, a mechanic's and materialman's lien will not have priority over liens existing on land at the time of the inception of the mechanic's lien. Id. § 53.123(b). Accordingly, to determine the priority of liens, we must first examine the summary judgment evidence to determine the time of the inception of the Nationsrent mechanic's and materialman's lien. See Diversified Mortg. Investors v. Lloyd D. Blaylock Gen. Contractor, Inc., 576 S.W.2d 794, 800 (Tex. 1978).

Time of Inception of the Nationsrent Lien

The time of inception of a properly perfected mechanic's and materialman's lien is the earlier of either (1) the commencement of a lienholder's construction of improvements on the property or (2) the lienholder's delivery of materials to the land on which the improvements are to be located and on which the materials are to be used. Tex. Prop. Code Ann. § 53.124(a) (Vernon Supp. 2006). The time of inception does not take into consideration the date that the property owner decides to start improvements on his property. See Univ. Sav. & Loan Ass'n v. Security Lumber Co., 423 S.W.2d 287, 295 (Tex. 1967). The Texas Supreme Court has specifically "rejected the idea that such liens had their inception when the owner determined to improve his property." Id. The rights of the parties are fixed by the statute and "cannot be disposed of upon any equitable ground." Id.

If there is a general contract regarding the construction of improvements to the property, the courts apply the "relation back doctrine" to determine the time of a lien's inception. Oriental Hotel v. Griffiths, 33 S.W. 652, 653 (Tex. 1895). Under the "relation back" doctrine, if there is a general construction contract between the owner and a contractor, the time of inception of all mechanic's and materialman's liens created by the construction will be the date that the contract was executed. McConnell v. Mortgage Investment Co. of El Paso, 305 S.W.2d 280, 283 (Tex. 1957). In other words, regardless of when the materials were delivered or the work was performed by the mechanics and materialmen, the time of the inception of their liens "relates back" to the execution date of the general construction contract. See id.

Citing University Savings & Loan Ass'n v. Security Lumber Company, 423 S.W.2d 287 (Tex. 1967), Suntex argues that the Texas Supreme Court has abandoned the need for a general contract before applying the relation back doctrine. However, in University Savings & Loan Association, the court merely noted that the existence of a general construction contract is not the only way to establish that the date of inception of a lien was prior to that of other liens. See id. at 295. The relation back doctrine should be narrowly and cautiously applied and not expanded to apply to factual situations not strictly analogous to those existing in Oriental. See McConnell, 305 S.W.2d at 283.

In this case, there was no general construction contract or general contractor for making improvements to the Property. The summary judgment evidence establishes that the work and materials were furnished directly to Suntex by the various mechanics and materialmen, individually, and, therefore, the relation back doctrine does not apply. See id. Accordingly, the summary judgment evidence establishes that the time of the inception of the Nationsrent lien is October 1999, the date that Nationsrent began delivering materials to the property. See Tex. Prop. Code Ann. § 53.124(a).

Priority of Liens

Having determined the time of inception of the Nationsrent lien, we next determine the relative priority of the liens. The Merchants deed of trust lien was recorded on January 21, 1999. It is undisputed that some of the proceeds of the Flint note were paid to Merchants to extinguish the Merchants promissory note. It is also undisputed that, as a result of this payment, Flint became equitably subrogated to the rights of the Merchants deed of trust lien. ⁽¹⁾ See Diversified Mortg. Investors, 576 S.W.2d at 796. Accordingly, Flint's subrogated deed of trust lien, created on January 13, 1999, was in existence prior to the Nationsrent lien, created in October 1999, and Flint's lien is superior to the Nationsrent lien. See Tex. Prop. Code Ann. § 53.123(a). Flint's foreclosure on the Property extinguished the Nationsrent lien, and the trial court did not err in granting, under rule 166a(c), summary judgment in favor of Flint and against Suntex. See Diversified Mortg. Investors, 576 S.W.2d at 808.

Excess Proceeds

Alternatively, Suntex argues that the trial court erred in rendering summary judgment in favor of Flint because Nationsrent has a remedy against Flint for any excess proceeds from the foreclosure sale of the Property. Suntex argues that Flint was equitably subrogated to the Merchants deed of trust lien only in the amount of Flint's loan to Suntex that was paid to extinguish the Merchants note. Thus, Suntex contends that Nationsrent is entitled to receive from Flint any proceeds, over and above the amount paid to extinguish the note, that may have resulted from Flint's foreclosure on the Property.

In this case, prior to the entry of summary judgment in favor of Flint, Nationsrent and Flint announced an agreement to take nothing against each other, and Nationsrent is not pursuing any excess proceeds in this action. Accordingly, the trial court did not err by excluding from its judgment Nationsrent's right to any excess proceeds in this action.   

We overrule appellant's first and second issues.

Conclusion

We affirm the judgment of the trial court.

George C. Hanks, Jr.

Justice

Panel consists of Justices Jennings, Hanks, and Higley.

1. As discussed in detail below, Suntex does however dispute the extent of the equitable subrogation.