First National Bank in Dallas v. Whirlpool Corp.
517 S.W.2d 262, 1974 Tex. LEXIS 340 (1974)
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Rule of Law:
A statutory materialman's lien attaches only to materials that are physically incorporated into a building and become fixtures, not to chattels connected merely by an electrical cord. A Texas constitutional lien on manufactured articles applies only to items specially fabricated for a purchaser according to their specifications, not to mass-produced goods sold from a manufacturer's general stock.
Facts:
- Beckwood, Inc. obtained an $1,850,000 loan from First National Bank in Dallas to finance the construction of an apartment complex.
- As security, Beckwood executed a deed of trust to the bank covering the land and all future improvements, which the bank recorded on July 31, 1969.
- Between January and May 1970, Whirlpool Corporation delivered appliances, including garbage disposals, dishwashers, electric ranges, and electric refrigerators, to the apartment project.
- The garbage disposals were installed by being screwed into the sink and drain pipe, and the dishwashers were installed by being screwed to the underside of cabinets and connected to plumbing.
- The electric ranges and refrigerators were connected to the property only by being plugged into electrical outlets.
- Beckwood, Inc. subsequently defaulted on its loan from First National Bank.
- Whirlpool was left with an unpaid balance of $9,935.02 for the appliances it had delivered.
- After Beckwood's default, First National Bank foreclosed on its deed of trust and purchased the property, later selling it to Jo Anna R. Kaspar.
Procedural Posture:
- Whirlpool Corporation sued First National Bank in Dallas and Jo Anna R. Kaspar in the district court (trial court) to foreclose on its asserted materialman's liens.
- Following a non-jury trial, the district court found that Whirlpool held superior constitutional and statutory liens on all the appliances and ordered foreclosure.
- First National Bank and Kaspar, as appellants, appealed to the court of civil appeals (intermediate appellate court).
- The court of civil appeals affirmed the trial court's judgment, basing its decision solely on Whirlpool having a superior statutory lien on all the appliances.
- First National Bank and Kaspar, as petitioners, were granted a writ of error to have the case reviewed by the Supreme Court of Texas (highest court).
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Issue:
Does a supplier of standard, mass-produced appliances obtain a constitutional or statutory materialman's lien that is superior to a prior recorded deed of trust on both appliances that are physically installed and those that are merely plugged in?
Opinions:
Majority - Daniel, Justice
Yes, in part, and No, in part. A supplier obtains a superior statutory lien on appliances that are physically incorporated into the building as fixtures, but obtains no lien on appliances that remain chattels or on any mass-produced goods under the Texas Constitution. For a statutory lien to attach to personal property, the property must be incorporated into the construction of the building. The dishwashers and disposals, which were screwed in and connected to plumbing, met this test as they were intended to be permanent fixtures. The refrigerators and ranges, connected only by electrical cords, were not 'incorporated' and remained chattels, so no statutory lien attached. Regarding the constitutional lien, it is intended to protect artisans who create or repair specific articles for a customer. It does not extend to a manufacturer selling mass-produced goods from its general inventory, as Whirlpool did. Finally, the statutory lien on the dishwashers and disposals is superior to the bank's prior deed of trust because the items can be removed without material injury to the property or to the items themselves.
Analysis:
This case significantly clarifies the distinction between fixtures and chattels for the purpose of attaching a statutory materialman's lien in Texas. By establishing that mere plug-in appliances do not qualify as 'incorporated' materials, the court limited the reach of such liens, providing greater certainty for construction lenders. The decision also narrowly construes the Texas constitutional lien, preventing it from applying to every sale of goods by a manufacturer. This holding reinforces the idea that the constitutional lien is a special protection for custom fabricators, not a general security interest for sellers of standard inventory, thereby protecting purchasers and lenders from unforeseen, self-executing liens on common goods.
