Date: 03-24-2011

Case Style: The Terraces at Cedar Hill, L.L.C. v. Gartex Masonry and Supply, Inc.

Case Number: 05-10-00226-CV

Judge: Lana Myers

Court: Texas Court of Appeals, Fifth District on appeal from the 193rd Judicial District Court, Dallas County

Plaintiff's Attorney: Tailim Song, Ayesha Rafe and Charles W. McGarry

Defendant's Attorney: David M. Jones

Description: The Terraces at Cedar Hill, L.L.C. and The Terraces Addition Homeowners Association, Inc. appeal the trial court's judgment ordering foreclosure of the mechanic's lien held by Gartex Masonry and Supply, Inc. Appellants bring four issues asserting the trial court erred in ordering foreclosure of the mechanic's lien because (1) Gartex's lien affidavit did not comply with section 53.054 of the Texas Property Code; (2) Gartex did not comply with the notice of lien requirements of section 53.055 of the Texas Property Code; (3) Gartex did not have a contract with the owner of the property; and (4) Gartex did not have a valid lien on the property. We affirm the trial court's judgment. Background

The parties' dispute arises out of the construction of a wall. Pursuant to a contract between appellant The Terraces Addition Homeowners Association, Inc. (Homeowners Association) and Gartex, Gartex was to supply cast stone materials for the construction of the wall at the entrance to a development in Cedar Hill, Texas. When appellants failed to pay, Gartex sued for breach of contract and to foreclose a lien. Appellants answered, alleging affirmative defenses as well as counterclaims for fraud, breach of contract, negligent misrepresentation, and deceptive trade practices. After a bench trial, the trial court entered judgment for Gartex. The trial court made findings of fact and conclusions of law in support of its judgment.

Only the trial court's foreclosure of the mechanic's lien is at issue. The facts relevant to the foreclosure of the lien are as follows: (1) Gartex's contract was with the Homeowners Association; (2) the fence was constructed on Block A, Lots 1 and 13, Terraces Addition to Cedar Hill, Texas; (3) Lots 1 and 13 were owned by appellant The Terraces at Cedar Hill, L.L.C. (Terraces L.L.C.) See Footnote 1 ; (4) Gartex's original petition against Terraces L.L.C. attached an “Original Contractor's Affidavit of Claim for Mechanic's Lien” sworn to by Kevin Cox on behalf of Gartex, dated August 31, 2007; (5) this Affidavit was admitted into evidence without objection from appellants; (6) Gartex's First Amended Petition added Homeowners Association as a defendant, and included allegations regarding “corporate veil piercing” between appellants; (7) Behrooz Khademazed and his wife own Terraces L.L.C., and he is the president and the registered agent for Terraces L.L.C.; (8) Khademazed is the registered agent for, and a director of Homeowners Association; (9) neither appellant pleaded any allegations regarding the sufficiency of the mechanic's lien affidavit, and neither appellant pleaded any allegations regarding a defect in parties or in capacity; (10) appellants' motion for new trial is silent regarding the mechanic's lien. Standard of Review

In any case tried to the court without a jury, a party may request findings of fact and conclusions of law. Tex. R. Civ. P. 296. Findings of fact have the same force and dignity of a jury verdict. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994). However, they are not conclusive when a complete reporter's record appears in the appellate record. Gibson v. Bostick Roofing & Sheet Metal Co., 148 S.W.3d 482, 489 (Tex. App.-El Paso 2004, no pet.). When the trial court acts as a fact finder, its findings are reviewed under legal and factual sufficiency standards. In re Doe, 19 S.W.3d 249, 253 (Tex. 2000). Although a trial court's conclusions of law may not be challenged for factual sufficiency, the appellate court may review the conclusions drawn from the facts to determine their correctness. Gibson, 148 S.W.3d at 489.

To evaluate the legal sufficiency of the evidence to support a finding, we must “determine whether the proffered evidence as a whole rises to a level that would enable reasonable and fair- minded people to differ in their conclusions.” Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex. 1994). We view the evidence in the light favorable to the finding, crediting favorable evidence if a reasonable fact-finder could, and disregarding contrary evidence unless a reasonable fact-finder could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). To evaluate the factual sufficiency of the evidence to support a finding, we consider all the evidence and set aside the finding only if the evidence supporting it is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Dyson v. Olin Corp., 692 S.W.2d 456, 457 (Tex. 1985). Discussion

Appellants argue the mechanics lien is defective in four respects. Three of these defects, addressed in appellants' first two issues, relate to the statutory requirements for mechanics liens found in the Texas Property Code. See Tex. Prop. Code Ann. Chapter 53 (West 2007 & Supp. 2010). Appellants argue 1) the lien affidavit does not contain “a statement of each month in which the work was done and materials furnished for which payment is requested,” and therefore does not meet the requirements of section 53.054(a)(3) of the Texas Property Code; 2) the lien affidavit was untimely filed, because it was not filed by the 15th day of the fourth calendar month after the day on which the indebtedness accrues, as required by section 53.052(a) of the Texas Property Code; and 3) there is no evidence that Gartex complied with the statutory notice requirements of section 53.055(a) of the Texas Property Code. In their third issue, appellants argue the mechanics lien was claimed and granted on property not owned by Homeowners Association, the party to the contract. In their fourth issue, appellants assert the trial court erred in concluding that Gartex held a valid mechanics lien on Block A, Lots 1 and 13 of the Terraces Addition to Cedar Hill, Texas. It is undisputed that the first two issues were not raised at trial. There is some argument by the attorneys after the close of evidence regarding the third and fourth issues, in response to a question by the trial judge.

Gartex argues that it holds a constitutional mechanic's lien even if it has not met the requirements for a statutory lien. See Footnote 2 We agree. A constitutional mechanic's lien can exist even if the lienholder fails to comply with the legislative requirements for statutory liens. Apex Fin. Corp. v. Brown, 7 S.W.3d 820, 830 (Tex. App.-Texarkana 1999, no pet.); see Tex. Const. art. XVI, § 37 (liens of mechanics, artisans, and material men). Constitutional liens are self-executing and exist “independently and apart from any legislative act.” First Nat'l Bank in Dallas v. Whirlpool Corp., 517 S.W.2d 262, 267 (Tex. 1974) (citing Hayek v. W. Steel Co., 478 S.W.2d 786 (Tex. 1972), superseded by statute on other grounds, and Strang v. Pray, 35 S.W. 1054 (Tex. 1896)); see also Gibson v. Bostick Roofing & Sheet Metal Co., 148 S.W.3d 482, 493 (Tex. App.-El Paso 2004, no pet.) (discussing constitutional and statutory liens). If Gartex held a constitutional lien, then we may affirm the trial court's foreclosure of the lien even if Gartex did not meet the requirements for the statutory lien.

Appellants assert Gartex cannot foreclose on a contractual lien because its contract was not with the owner of the property. Appellants are correct that a direct contractual relationship is required between the owner of the property and the mechanic, materialman, or artisan. See, e.g., In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 741 (Tex. 2005). As stated in Gibson, “this provision does not give a lien to those who have no privity of contract with the owner.” 148 S.W.3d at 493 (citing Wiseman Hardware Co. v. R.L. King Constr. Co., 387 S.W.2d 79, 81 (Tex. Civ. App.-Dallas 1965, no writ). Appellants also correctly point out that a mechanics lien attaches to the interest of the person contracting for construction. See, e.g., Diversified Mortg. Investors v. Lloyd D. Blaylock Gen. Contractor, Inc., 576 S.W.2d 794, 805 (Tex. 1978) (court notes that if lessee contracts for construction, lien attaches to leasehold estate).

The agent of the owner, however, may also enter into the contract with the mechanic, materialman, or artisan. See Gibson, 148 S.W.3d at 493. In the absence of definitions in the constitutional provision, the Gibson court looked to the definition of “original contractor” in the Property Code: “'original contractor' means a person contracting with an owner either directly or through the owner's agent.” Id. (quoting Tex. Prop. Code § 53.001(7)). If Homeowners Association was the agent of the owner, Terraces L.L.C., for the purposes of the contract with Gartex, then the trial court correctly ordered foreclosure of the lien. See also Astraea Aviation Servs., Inc. v. Nations Air Inc., 172 F.3d 390, 394-95 (5th Cir. 1999) (citing Sumrall v. Russell, 255 S.W. 239, 240 (Tex. Civ. App.-El Paso 1923, writ dism'd w.o.j.), for proposition that Texas courts have interpreted constitutional provision to require owner's consent).

The trial court's findings do not address the issue of agency; however, we imply the necessary findings that the Homeowners Association had actual or apparent authority to act on behalf of Terraces L.L.C. to support the trial court's judgment. See Tex. R. Civ. P. 299. Gartex bore the burden of proving Homeowners Association had actual or apparent authority to act for Terraces L.L.C. See IRA Res., Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007) (Texas law does not presume agency; party who alleges it has burden of proving it). An agent's authority to act on behalf of a principal depends on some communication by the principal either to the agent (actual or express authority) or to the third party (apparent or implied authority). Gaines v. Kelly, 235 S.W.3d 179, 182 (Tex. 2007). Here, there was evidence of both.

The evidence showed that Gartex's original proposal for the work was addressed to Terraces L.L.C., the owner of the property. The evidence also showed that the name on the proposal was changed to the Homeowners Association at appellants' request. Khademazed, a principal of both Terraces L.L.C. and the Homeowners Association, testified that he asked Gartex to change the party on the contract from Terraces L.L.C. to the Homeowners' Association:

Q. At that time do you recall telling Mitch [McNeel of Gartex] who was going to be contracting with-around that time, do you recall telling Mitch who was going to be contracting with Gartex?

A. Yes. We basically asked them to change it to the Homeowners Association who would be involved in the contract.

The evidence showed Khademazed was a principal of both Terraces L.L.C. and Homeowners Association, and was qualified to act on both entities' behalf in his dealings with Gartex. Khademazed also testified the wall was to benefit the lots owned by Terraces L.L.C. To support Terraces L.L.C.'s counterclaim against Gartex that Terraces L.L.C. lost potential sales of the lots because of the condition of the wall, Khademazed testified:

A. We basically had four lots contracted with Ernie Martinek back in May of '06. And his criterion was that the wall or the front entrance would look exactly like the photo or the artistic rendition that we had out there around which was not a problem because there was my intention.

Q. And you lost two of those sales, right?

A.

Yes, sir.


Khademazed was also permitted to testify, over Gartex's objection, to the value of the lots, because he was “the owner of the property.” Khademazed also testified in support of appellants' counterclaim:

Q. And even now, when you built this wall, it was for the benefit of the development, right?

A. Yes, sir.

Q. Even though it was the HOA that contracts for it, Mitch advised you he understood it was for the Terraces, right?

A. Yes, the HOA is going to be maintaining the walls, and it is the responsibility of the Terraces to make sure it's a good quality wall install. . . .

Q. And when Mitch approached you with that invoice at the beginning, it was his understanding that it was for the benefit of the Terraces at that time, . . . right?

A. Yes. . . .

Q. And then it was in January that it was decided that the HOA was the entity that was going to be the direct contracting party even though it was to benefit the whole development?

A. Actually, it was done in December, but the statement of January is a reflection of that, yes.


Khademazed's own testimony established that he had authority to act on behalf of both Homeowners Association and Terraces L.L.C. Through Khademazed, Terraces L.L.C. as principal directly communicated to Gartex that Homeowners Association had authority to enter into the contract with Gartex on behalf of Terraces L.L.C. Because Khademazed acted on behalf of both entities, there is also evidence to support the conclusion that Terraces, L.L.C. directly communicated to Homeowners Association that Homeowners Association had authority to enter into the contract with Gartex to benefit Terraces L.L.C.'s property. See Gaines, 235 S.W.3d at 182. Because there was evidence from which the trial court could conclude that Homeowners Association was the agent of Terraces L.L.C., there is evidence to support the conclusion that Gartex had a lien on the property of Terraces L.L.C. for the work it performed under the contract. See Gibson, 148 S.W.3d at 493.

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See: http://www.5thcoa.courts.state.tx.us/files/05/recent/100226F.HTM

Outcome: We conclude the evidence is sufficient to support a finding that Homeowners Association was the agent of Terraces L.L.C., the owner of the property, in entering into the contract with Gartex. The trial court did not err in ordering foreclosure of the lien against Terraces L.L.C. We overrule appellants' four issues and affirm the trial court's judgment.

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Defendant's Experts:

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