Texas Wood Mill Cabinets, Inc. v. Butter

117 S.W.3d 98, 2003 Tex. App. LEXIS 6767, 2003 WL 21804809

• Court: Court of Appeals of Texas
• Decided: August 6, 2003
• Docket: 12-02-00083-CV
• Status: Published

Opinion

OPINION ON MOTION FOR REHEARING

SAM GRIFFITH, Justice.

We deny the motion for rehearing filed by Appellant Texas Wood Mill Cabinets, Inc. However, we withdraw our opinion and judgment dated April 23, 2003 and substitute this opinion and its associated judgment in their place.

Appellant Texas Wood Mill Cabinets, Inc. (“TWM”) appeals a take-nothing judgment in a suit to foreclose its mechanic’s and materialman’s lien against property owned by Appellees Leo and Holly Butter (“Leo” and “Holly” or “the Butters”). In two issues, TWM challenges the trial court’s findings and conclusions regarding the Butters’ constructive notice of its hen and the completion date of the contract. The Butters, in one cross-issue, dispute the trial court’s finding that TWM’s hen affidavit was timely filed. We reverse and render judgment for TWM, but remand the issue of attorney’s fees to the trial court.

Background

In April of 1999, David Deutsch (“Deutsch”), a partner in D & D Construction (“D & D”), asked Timothy Kelley (“Kelley”), as president of TWM (then known as WoodMark Cabinets & Doors, Inc.), to design and bid on cabinets to be installed in a “spec home” that D & D was building in Longview, Texas. The house was being constructed on property owned by D & D. On April 5, KeUey went to the construction site to make the required measurements. D & D subsequently entered into a contract with TWM (“the contract”) to build and install the cabinets. 1 The initial installation was performed in mid-May 1999 and additional work was performed on June 17 and July 5. TWM billed D & D a total of $12,884.84 for the project.

On June 18, the Butters agreed to purchase the house from D & D and signed a “New Home Contract (Incomplete Construction).” The transaction closed on July 6. D & D did not pay TWM, and on October 11, 1999, TWM filed an “Original Contractor’s Affidavit of Claim for Mechanic’s Lien” in the Official Public Records of Gregg County, Texas. On the same date, TWM sent a copy of the affidavit to the Butters and to Deutsch by certified mail. On September 1, 2000, TWM sued the Butters seeking foreclosure of its lien. The Butters filed a general denial and also alleged that they were subsequent purchasers who had neither actual nor constructive notice of TWM’s lien against the property.

After a nonjury trial, the trial court entered judgment in favor of the Butters and filed findings of fact and conclusions of law. The trial court found and concluded, in pertinent part, that (1) the debt of $12,884.84, which is a reasonable, customary and usual charge for the services performed and material furnished for cabinet work under the contract in Gregg County, Texas, was due and owing to TWM and had not been paid; (2) TWM timely filed its lien affidavit in accordance with section 53.053(b) of the Texas Property Code; 2 (3) the lien was properly perfected and relates back to TWM’s commencement of work in April 1999; (4) the Butters, being bona fide purchasers for value without actual or constructive knowledge of TWM’s cabinet work, were not bound by the lien; (5) though the Butters may have acquired the property subject to TWM’s lien claim, TWM is not entitled to foreclose the subject hen unless the Butters had either actual or constructive notice of TWM’s work or hen, and they had neither; (6) the Butters’ personal knowledge that the subject property was new residential construction and that improvements had been made on the property at or shortly before they took possession on July 6, 1999 did not constitute constructive knowledge of TWM’s cabinet work, claim or debt; and (7) the Butters did not have actual or constructive knowledge of TWM’s constitutional hen at the time they purchased the property as bona fide purchasers for value or of TWM’s cabinet work, claim or debt. TWM filed a motion for new trial, which was overruled by operation of law. This appeal fohowed.

Issues Presented

In two issues, TWM contends that there is legally insufficient evidence to support the trial court’s findings that (1) the Butters did not have constructive notice of TWM’s right to assert a hen claim and that (2) TWM’s contract with Deutsch was completed in June 1999. In one cross-issue, the Butters chahenge the trial court’s conclusion that TWM’s hen affidavit was timely filed.

Standard of Review

Findings of fact have the same force and dignity as a jury verdict. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex.1991). Findings of fact are not conclusive, however, when a complete statement of facts appears in the record. Seelbach v. Clubb, 7 S.W.3d 749, 754 (Tex.App.-Texarkana 1999, pet. denied). Where, as here, the appellate record contains a complete reporter’s record of the trial, we review a legal sufficiency chahenge to the trial court’s findings of fact under the same standards for legal sufficiency as govern review of jury findings. Id.

An appehant attacking the legal sufficiency of the evidence to support an adverse finding on an issue on which it did not have the burden of proof must demonstrate on appeal that no evidence supports the adverse finding. See Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex.1988). In reviewing a no-evidence issue, we consider only the evidence favoring the finding, disregarding ah direct and circumstantial evidence to the contrary. Lenz v. Lenz, 79 S.W.3d 10, 13 (Tex.2002). Anything more than a scintilla of evidence is legally sufficient to support the finding. Continental Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex.1996). More than a scintilla of evidence exists if the evidence furnishes some reasonable basis for differing conclusions by reasonable minds about a vital fact’s existence. Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex.2002). A legal sufficiency chahenge by an appehant who had the burden of proof on an issue will be successful only upon a showing that the evidence conclusively establishes ah vital facts in support of the issue as a matter of law. Ritchey v. Crawford, 734 S.W.2d 85, 86 (Tex.App.-Houston [1st Dist.] 1987, no writ).

We review the trial court’s conclusions of law de novo. Stolz v. Honeycutt, 42 S.W.3d 305, 310 (Tex.App.-Houston [14th Dist.] 2001, no pet.). Further, we fohow a trial court’s conclusion of law unless it is erroneous as a matter of law. Id.

Contract Completion Date

In its second issue, TWM complains that the evidence is legally insufficient to support the trial court’s finding that the contract was completed in June 1999 and further contends that the evidence presented at trial establishes as a matter of law that the contract was completed in July 1999. The Butters respond that the lien affidavit was not timely filed and therefore TWM’s lien is unenforceable. Specifically, the Butters challenge the trial court’s conclusion that section 58.052(a) determines the time within which TWM was required to file its lien affidavit and also dispute its finding that the contract was completed in June 1999. Because the Butters complain of alleged error in the trial court, we construe this response as a cross-issue. See Jackson v. Ewton, 411 S.W.2d 715, 715 (Tex.1967) (reply points assist appellate court in finding answers to points of appellant and show their invalidity; cross-points are means by which appellee complains of ruling or action of trial court allegedly constituting error as to him); see also Atlantic Richfield Oil & Gas Co. v. McGuffin, 773 S.W.2d 711, 715 (Tex.App.Corpus Christi 1989, writ dism’d by agr.). We address TWM’s second issue and the Butters’ cross-issue together.

Nature of the Project

The Butters contend that the house they purchased was a “residential construction project.” Therefore, they argue, subsection (b), and not subsection (a), of section 58.052 prescribes the time within which TWM was required to file its lien affidavit. Subsection (b) provides that a person claiming a lien arising from a residential construction project must file an affidavit with the county clerk of the county in which the property is located not later than the fifteenth day of the third calendar month after the day on which the indebtedness accrues. Tex. PROP.Code Ann. § 53.052(b) (emphasis added). Subsection (a) allows an additional month for filing the affidavit. Tex. PROP.Code Ann. § 53.052(a). If subsection (b) applies and the contract was completed in May as the Butters assert or in June as the trial court found, TWM’s lien affidavit was untimely.

The term “residential construction project” means “a project for the construction or repair of a new or existing residence, including improvements appurtenant to the residence, provided by a residential construction contract.” Tex. PROP.Code Ann. § 53.001(10) (Vernon Supp.2003). The record reflects that the house was constructed by D & D, the owner, as a “spec house” and not pursuant to a residential construction contract. Therefore, the trial court correctly concluded that section 53.052(a) applies and that TWM was required to file its lien no later than the fifteenth day of the fourth calendar month after the day on which the contract is completed. See Tex. PROP.Code Ann. § 53.052(a). Consequently, TWM’s hen affidavit was untimely only in the event the contract was completed in May 1999 as the Butters ahege.

Contract Completion Date

TWM argues that the evidence at trial establishes as a matter of law that the contract was completed in July 1999. The Butters contend that the “evidence clearly established ... that all “work’ done after May 25, 1999 related to specific requests made by D & D to make adjustments on work already billed for and abandoned by the Appellant.” Therefore, contrary to the trial court’s finding, the Butters assert that the contract was completed in May 1999. We interpret the Butters’ argument as a challenge to the legal sufficiency of the evidence to support the trial court’s finding.

When a term in a statute is not defined, we apply its ordinary meaning. See Tex. Gov’t Code Ann. § 312.002(a) (Vernon 1998). We interpret the term “completed,” as it relates to the contract before us, to mean “ended” or “concluded.” 3 AmeRI-CAN HERITAGE DICTIONARY 181 (4th ed.2001). The objective of the contract between D & D and TWM was the construction and installation of the cabinets for the house the Butters purchased from D & D. It therefore follows that the contract could not be “completed,” as we have defined the term, until the cabinets were constructed, installed, and functional.

Kelley testified that TWM performed the initial installation around the middle of May. At that point, the cabinets were in the house, and the trim carpenters could start “trimming up to them.” Kelley also testified about other work that is necessary after an initial installation. He stated that the cabinet doors may not be hung during the initial installation. Also, the doors may need adjustments after the cabinets are painted, and the customer may want changes after the job is installed. Other factors, such as the installation of appliances, countertops, and flooring affect the nature of any additional work required. Thus, the initial installation is not a completed installation.

On June 17, TWM workers returned to the property at Deutsch’s request because “one of the pullouts in the master bath was dragging on the floor.” TWM determined that the tile was thicker than they had assumed it would be and modified the pullout to accommodate the increased thickness. On July 6, TWM workers again returned to the property because “there were a couple of drawers that were hitting on the range.” Holly testified that she learned this problem occurred because the cooktop went in last and should have gone in first. To correct the problem, TWM modified the drawers. Nothing in the record indicates that the work done in June and July was required because of any fault of TWM. According to Kelley, the contract was complete once the work on the kitchen drawers was performed. The Butters do not dispute that work was done on June 17 and July 6, but contend it was “ ‘punch list’ work, defined by the Appellant at trial as alterations or adjustments to previously performed work.” Furthermore, the Butters also point out that “all “work’ done after May 25, 1999 related to specific requests made by D & D to make adjustments on work already billed for and abandoned by the Appellant.” However, Kelley testified that items on their punch list are work that “needs to be done to a house in order to finish it up.... ”

As previously stated, the word “completed” means “ended” or “concluded.” The contract before us cannot be considered “completed” until the cabinets were constructed, installed, and functional. As of May 25, 1999, TWM had completed the initial installation and furnished some additional trim. The final adjustments to the work previously done, which Kelley testified were part of the contract requirements and part of the usual procedure in cabinet installations, had not been performed. Therefore, we conclude that the contract was not completed on May 25, 1999 as the Butters assert.

For TWM to prevail on its legal sufficiency challenge, it must show that the evidence conclusively establishes the vital facts in support of the issue. Based upon our review of the record, we conclude that the uncontroverted evidence shows (1) that in July 1999, TWM modified the kitchen cabinets to accommodate the cooktop, which was installed after the initial installation of the cabinets, (2) that the work performed in July was required by the contract, and (3) that, after the performance of the work in July, no further work was required to complete the contract. Therefore, we hold that the evidence establishes, as a matter of law, that the contract was completed in July 1999. Consequently, we also hold that the evidence is legally insufficient to support the trial court’s finding that the contract was completed in June 1999. Accordingly, we sustain TWM’s second issue and overrule the Butters’ cross-issue.

Constructive Notice

Applicable Law

The Texas Constitution grants to mechanics, artisans, and materialmen of every class a lien on the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor, and requires that the Legislature provide by law for the speedy and efficient enforcement of such hens. Tex. Const. art. XVI, § 37. Constitutional mechanic’s liens are self-executing as between the original contractor and the owner. First Nat'l Bank in Dallas v. Whirlpool Corp., 517 S.W.2d 262, 267 (Tex. 1974). However, constitutional hens will not be enforced against a subsequent purchaser who has neither actual nor constructive notice of the hen. Apex Financial Corp. v. Brown, 7 S.W.3d 820, 830 (Tex.App.Texarkana 1999, no pet.); Irving Lumber Co. v. Alltex Mortgage Co., 446 S.W.2d 64, 72 (Tex.Civ.App.Dallas 1969), aff'd, 468 S.W.2d 341 (Tex.1971).

For a contractor who has a constitutional lien to be protected against the rights of third parties, he must either comply with the statutes relating to affidavits for fixing mechanic’s and material-men’s hens, thus giving constructive notice to third parties, or he must give actual notice to third parties within the time prescribed by statute. Wood v. Barnes, 420 S.W.2d 425, 429 (Tex.Civ.App.Dallas 1967, writ ref d n.r.e.) (citations omitted). Once the hen affidavit has been properly filed, the hen relates back to the inception of the contract. Valdez v. Diamond Shamrock Ref. and Mktg. Co., 842 S.W.2d 273, 276 (Tex.1992). When a hen affidavit is filed after the property is sold by the owner who contracted for the improvements, the purchaser is deemed to have constructive notice of a contractor’s right to assert a hen for the statutory period, even where the filing period commenced prior to the purchase. Id.; Inman v. Clark, 485 S.W.2d 372, 374 (Tex.Civ.App.-Houston [1st Dist.] 1972, no writ); Wood, 420 S.W.2d at 428. Additionally, personal knowledge of improvements being made on the property at or shortly before the time the subsequent purchaser took possession of the property provides sufficient notice of a contractor’s right to assert a hen claim. See Contract Sales Co. v. Skaggs, 612 S.W.2d 652, 653 (Tex.Civ.App.Dallas 1981, no writ); Inman, 485 S.W.2d at 374.

Analysis

Bona fide purchaser status in the context of a constitutional mechanic’s hen is an affirmative defense that must be supported by pleadings and evidence. Skaggs, 612 S.W.2d at 653; Valley Ready-Mix Concrete Co. v. Valley State Bank, 227 S.W.2d 231, 234 (Tex.Civ.App.San Antonio 1950, no writ). In the case at hand, the Butters aheged they were subsequent purchasers who had neither actual nor constructive notice of TWM’s hen against their property. Consequently, they had the burden of proof on the issue. See Skaggs, 612 S.W.2d at 653; Valley Ready- Mix, 227 S.W.2d at 234. Actual notice rests on personal information or knowledge. Madison v. Gordon, 39 S.W.3d 604, 605 (Tex.2001). Constructive notice is imputed in law to a person not having personal information or knowledge. Id.

At trial, Leo testified that he was not a party to Deutsch’s contract with TWM and that he purchased the property after TWM had completed its work. He also stated that prior to closing, he requested a title search on the property, which revealed no Kens or clouds on the title to the property. Leo also testified that he checked with D & D to determine whether they “owed anyone any money” and was told that “all the bills were paid in full.” At closing, D & D provided him with an affidavit stating that “there are now no unpaid labor or material claims against the improvements or repairs, if any, or the property upon which same are situated.... ” Consequently, it was his understanding that on July 6, the property was free and clear from any Kens and clouds on the title. He was not aware that anyone had a right to file a Ken against the property until he received notice that TWM had filed its Ken affidavit. Although Holly did not testify at trial, Leo testified that, to his knowledge, HoKy did not know about the Ken until they received the certified letter from TWM. However, this evidence relates to the Butters’ contention, and the trial court’s finding, that they were without actual notice of TWM’s right to file a Ken and does not relate to whether the Butters had constructive notice.

Based upon our examination of the record, we find no evidence supporting the trial court’s finding that the Butters did not have constructive notice of TWM’s right to assert a Ken claim. To the contrary, the uncontroverted evidence shows that the Butters first saw the house in June 1999, while it was still under construction. When they first saw the house, it had a concrete slab, but no flooring. The bricking may have been in progress, and the interior painting had begun. The cabinets were installed, but the “granite [countertops] had not been laid.” Some of the plumbing fixtures were in, but the mirrors and “things of that nature” were not. Between June 18, the date of the contract, and the closing on July 6, there was more work to be done to complete the structure. Neither knew how long it took to build the house, but Leo agreed that a house of its size would probably take more than two months to buKd.

This evidence establishes that, in June 1999, the Butters had personal knowledge that improvements were being constructed on the property. In turn, this knowledge is sufficient to charge the Butters with constructive notice of TWM’s right to assert a Ken claim during the statutory period. See Valdez, 842 S.W.2d at 276; Inman, 485 S.W.2d at 374; Wood, 420 S.W.2d at 428. The Butters contend that the cases cited by Appellant, such as Valdez and Inman, hold that constructive notice is imputed to a subsequent purchaser only where work is performed by the Ken claimant at or after the date the purchaser takes possession of the property or where the purchaser knows the identity of the specific entity performing the work for which the Ken is claimed. However, we do not read those cases so narrowly. Furthermore, it is a rule of long standing that the Texas mechanic’s and materialmen’s Ken statutes wül be KberaKy construed for the purpose of protecting laborers and ma-terialmen. Hayek v. Western Steel Co., 478 S.W.2d 786, 795 (Tex.1972). The interpretation urged by the Butters is contrary to this rule.

Moreover, TWM’s Ken affidavit was in compliance with the statutory requirements and was timely filed on October 11. Consequently, even if the Butters had no personal knowledge of the improvements, they were charged with constructive notice of TWM’s right to assert a lien for the statutory period. See Valdez, 842 S.W.2d at 276; Inman, 485 S.W.2d at 374; Wood, 420 S.W.2d at 428. Therefore, we sustain TWM’s first issue.

Attorney’s Fees

In its prayer for relief, TWM requests that we render judgment for its reasonable attorney’s fees incurred at trial and for the appeal. Section 53.156 of the Texas Property Code provides that “[i]n any proceeding to foreclose a lien ... the court may award costs and reasonable attorney’s fees as are equitable and just.” Tex. PROp.Code Ann. § 53.156 (Vernon 1995). The language of section 53.156 indicates that a trial court’s award of attorney’s fees is discretionary, not mandatory. World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 685 (Tex.App.Fort Worth 1998, pet. denied) (citing Texas Constr. Assoes. v. Balli, 558 S.W.2d 513, 522 (Tex.Civ.App.Corpus Christi 1977, no writ) (holding that trial court’s award of attorney’s fees under predecessor statute was discretionary, not mandatory)). Furthermore, the authority to award attorney’s fees lies with the trial court and not this court. Tex. Prop.Code Ann. § 53.156.

In the instant case, both TWM and the Butters requested attorney’s fees, but the Butters introduced no evidence on the issue. The trial court did not award attorney’s fees to TWM, but made the following finding:

11. That reasonable and necessary fees in the following amounts were incurred by the Plaintiff [TWM] in presenting Plaintiffs [TWM’s] claim in this case or would reasonably be incurred in the event of successful prosecution of any appeal: (a) Trial Court-$7,290.00; (b) Court of Appeals-$5,250.00; Supreme^,750.00.

We recognize that an award of attorney’s fees is not automatic under section 53.156, even to the prevailing party. World Help, 977 S.W.2d at 685. However, in view of our reversal and rendering of the trial court’s judgment, we sever and remand the issue of attorney’s fees to the trial court for a determination of whether TWM should be awarded its attorney’s fees. See Valdez, 842 S.W.2d at 277.

Conclusion

The trial court concluded that TWM has a valid lien against the property owned by the Butters to secure a debt of $12,884.84. Having determined that the Butters had constructive notice of Appellant’s constitutional lien, we hold that TWM is entitled to a judgment for foreclosure of its lien. We therefore reverse the judgment of the trial court and render a judgment of foreclosure for TWM. The issue of attorney’s fees is severed and remanded to the trial court for a determination of whether TWM should be awarded its attorney’s fees.

1 . It is unclear whether the contract was written or oral.

2 . Section 53.053(b)(2) provides that indebtedness to an original contractor accrues on the last day of the month in which the original contract has been completed, finally settled, or abandoned. Tex Prop.Code Ann. § 53.053(b)(2) (Vernon Supp.2003). An original contractor is a person who contracts with an owner either directly or through the owner’s agent. Tex. Prop.Code Ann. § 53.001(7) (Vernon Supp.2003). A person claiming a lien must file an affidavit with the county clerk in the county in which the property is located not later than the fifteenth day of the fourth calendar month after the day on which the indebtedness accrues. Tex Prop.Code Ann. § 53.052(a) (Vernon Supp.2003).

3 . TWM points out that “completion” is defined in Property Code section 53.001(15). However, that provision does not apply to matters relating to or claims arising from an original contract entered into before September 1, 1999. Act of June 18, 1999, 76th Leg., R.S., ch. 889, §§ 1, 13(b), 1999 Tex. Gen. Laws 3586, 3591.