Suburban Homes Lumber Co. v. Lomas & Nettleton Financial Corp.

609 F.2d 1387
CourtCourt of Appeals for the Fifth Circuit
DecidedJanuary 21, 1980
DocketNo. 79-2705
StatusPublished
Cited by1 cases

This text of 609 F.2d 1387 (Suburban Homes Lumber Co. v. Lomas & Nettleton Financial Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Suburban Homes Lumber Co. v. Lomas & Nettleton Financial Corp., 609 F.2d 1387 (5th Cir. 1980).

Opinion

CHARLES CLARK, Circuit Judge:

Suburban Homes Lumber Co. [Suburban] appeals from the district court’s ruling denying priority to materialman’s liens asserted upon building materials it furnished for the construction of three apartment complexes. We affirm.

Suburban furnished lumber, roofing, nails, hardware, reinforcing mesh, rebar steel, and other general building supplies to John Jamail Builders, Inc. [Jamail] for the use in the construction of three apartment complexes in Houston, Texas. While it was the major supplier of materials to Jamail, Suburban was not the sole supplier, and it admitted at trial that it could not distinguish its materials from those provided by other suppliers. Jamail financed the construction of each of the three apartment complexes by obtaining a loan from Lomas & Nettleton Financial Corp. [Lomas] secured by a deed of trust. Lomas recorded all three deeds of trust, together with financing statements, prior to Suburban’s filing of its materialman’s lien on each complex. Following Jamail’s default on the construction loans, Lomas foreclosed on the deeds of trust, and shortly thereafter Ja-mail filed for reorganization under Chapter XI of the Bankruptcy Act, 11 U.S.C. §§ 761-99 (repealed 1979).

Suburban filed a complaint before the Bankruptcy Judge seeking a declaration that its materialman’s liens were superior to the deeds of trust held by Lomas. The Bankruptcy Judge, however, held that Lo-mas’s deeds of trust had priority over Suburban’s materialman’s liens since the construction on each apartment complex did not commence prior to the recording of Lomas’s deed of trust securing the loan used to finance that complex. He rejected Suburban’s claim that it was entitled to foreclose its liens regardless of priority on any materials not incorporated into the apartment complexes and on any improvements constructed from materials furnished by it that could be removed without damaging the realty, other improvements, or the improvements removed on the ground that Suburban had failed to segregate and identify the materials it had supplied. The district court affirmed the decision of the Bankruptcy Judge, rejecting Suburban’s arguments that the identification requirement should not be applied to fungible goods and that it was entitled to a portion of the materials claimed under the doctrine [1389]*1389of confusion of goods. On this appeal Suburban argues that Texas law does not require a materialman to be able to identify the goods he supplied to enforce a preference lien upon unincorporated materials or removable improvements, that it has sufficiently identified the materials it furnished to establish its priority, that the requirement of identification should not apply to fungible goods, and that it is entitled to a portion of the materials claimed under the doctrine of confusion of goods.

Tex.Rev.Civ.Stat.Ann. art. 5452(1) (Supp.1978) grants any person who supplies materials for the construction of any building or improvement a lien on such building or improvement and the underlying realty to secure payment for the material furnished. In First National Bank v. Whirlpool Corp., the Texas Supreme Court ruled that the statutory lien granted to a materialman by art. 5452 is superior to a lien created by a prior recorded deed of trust with respect to the improvements made that can be removed without material injury to the underlying realty, to preexisting improvements, or to the improvements removed. 517 S.W.2d 262 (Tex.1974). See also, First Continental Real Estate Investment Trust v. Continental Steel Co., 569 S.W.2d 42 (Tex.Civ.App.1978); Majestic Building Corp. v. McClelland, 559 S.W.2d 883 (Tex.Civ. App.1977); Parkdale State Bank v. McCord, 428 S.W.2d 121 (Tex.Civ. App.1968) (writ ref’d, n. r. e.). This preference lien accorded to materialmen also attaches to materials that the supplier has delivered but which have not yet been incorporated into the building or improvement. First Continental Real Estate Investment Trust v. Continental Steel Co., 569 S.W.2d 42, 45 (Tex.Civ.App.1978); Justice Mortgage Investors v. C. B. Thompson Construction Co., 533 S.W.2d 939, 944 (Tex.Civ. App.1976) (writ ref’d, n. r. e.). The ability of Suburban to foreclose on its material-man’s liens, however, depends upon an interpretation of conflicting decisions by the Texas Court of Civil Appeals.

In 1937, the Texas Court of Civil Appeals held in Wallace Gin Co. v. Burton-Lingo Co. that a materialman’s lien held by Burton-Lingo, which had furnished the Wallace Gin Co. with some of the materials used by it in the construction of a cotton house next to its gin facility, had priority over a prior deed of trust encumbering the property on which the cotton house was built. 104 S.W.2d 891 (Tex.Civ.App.1937). The court concluded that upon foreclosure of its lien Burton-Lingo was entitled to sell the entire cotton house, which it found to be a removable improvement, regardless of whether it had furnished all of the materials used in its construction. Relying upon the policies underlying the establishment of material-man’s liens, the court reasoned that to refuse to enforce such a lien because the materialman did not supply all of the materials used in the construction of an improvement would in many cases allow the lien and the rights of a materialman to be easily defeated since generally no one supplier furnishes all of the materials used in a construction project. Such a result, the court concluded, would violate “the manifest purpose of the [Texas] Constitution and the [Texas] statutes to afford the material-man a lien, and to give him his remedies, for the materials furnished for such purpose, whether they be all or only a part of the materials used in the construction of the improvements.” Id. at 892. See also Parkdale State Bank v. McCord, 428 S.W.2d 121, 126-27 (Tex.Civ.App.1968) (writ ref’d, n. r. e.); R. B. Spencer & Co. v. Brown, 198 S.W. 1179 (Tex.Civ.App.1917).

The decision in Wallace Gin Co. was recently relied upon by the Texas Court of Civil Appeals in Richard H. Sikes, Inc. v. L & N Consultants, Inc., in which the court again addressed the issue of a conflict between a prior recorded deed of trust and materialman’s lien. 586 S.W.2d 950 (Tex. Civ.App.1979). In Richard H. Sikes, Inc., the court concluded that a general contractor was entitled to foreclose his material-man’s lien on removable improvements furnished and installed by his subcontractors regardless of whether he had paid the subcontractors. Citing, inter alia, Wallace Gin Co., the court stated that under art.

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Related

In The Matter Of John Jamail, Debtor
609 F.2d 1387 (Fifth Circuit, 1980)

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Bluebook (online)
609 F.2d 1387, Counsel Stack Legal Research, https://law.counselstack.com/opinion/suburban-homes-lumber-co-v-lomas-nettleton-financial-corp-ca5-1980.