Parkdale State Bank v. McCord
1968 Tex. App. LEXIS 2199, 428 S.W.2d 121 (1968)
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Rule of Law:
A properly perfected mechanic's and materialman's lien on improvements is superior to a prior recorded deed of trust lien on the land if the improvements can be removed without material injury to the land, any pre-existing improvements, or the improvements themselves.
Facts:
- On November 4, 1965, Driftwood Corporation executed deeds of trust to Parkdale State Bank on two lots, granting Parkdale a first lien on the land and any improvements to be placed thereon in the future.
- The deeds of trust were recorded on November 5, 1965, in connection with an interim financing arrangement.
- After the deeds were recorded, concrete foundation slabs, driveways, and sidewalks were constructed on each lot.
- From approximately March to June 1966, J. E. McCord furnished fabricated building components, such as wall sections and roof trusses, and the labor to install them on the existing foundations for Driftwood.
- Before McCord could complete his work under the contract, Driftwood repudiated the agreement.
- Driftwood subsequently defaulted on its loan payments to Parkdale.
Procedural Posture:
- J. E. McCord filed suit in a Texas trial court against Driftwood Corporation for non-payment and against Parkdale State Bank and subsequent property owners to foreclose his mechanic's and materialman's lien.
- The case was tried before a jury, which found in response to special issues that the structures McCord provided could be removed from the concrete foundations without material injury.
- The trial court entered a judgment in favor of McCord, ordering the foreclosure and sale of the improvements he supplied (all structures above the foundations).
- Parkdale State Bank and Pels Quality Homes, Inc. (as appellants) appealed the judgment to the Texas Court of Civil Appeals.
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Issue:
Does a mechanic's and materialman's lien for labor and materials furnished for new improvements have priority over a previously recorded deed of trust lien on the land and future improvements, when the new improvements can be removed without material injury to the land or pre-existing structures?
Opinions:
Majority - Sharpe, J.
Yes. A mechanic's lien on removable improvements has priority over a prior deed of trust lien on the underlying real estate. While Parkdale's deed of trust lien is superior as to the land and the concrete foundations that existed before McCord's work began, McCord's mechanic's lien is superior as to the improvements he furnished. The court relied on the well-settled rule that where improvements are severable and can be removed without material injury to the land, existing structures, or the improvements themselves, the mechanic's lien on those improvements has priority. The jury found as a matter of fact that the structures McCord built could be removed without such injury. This finding effectively severs the improvements from the realty for lien priority purposes, preventing the holder of the prior deed of trust from being unjustly enriched by foreclosing on unpaid-for, removable additions.
Analysis:
This decision reinforces the significant protection afforded to mechanics and material suppliers under Texas law, creating a critical exception to the general 'first in time, first in right' rule of lien priority. By prioritizing a mechanic's lien on removable improvements over a pre-existing mortgage, the court ensures that lenders cannot use their prior lien on the land to claim the value of new construction for which suppliers have not been paid. This precedent solidifies the 'removability' doctrine as a key factual inquiry in lien disputes, thereby encouraging construction and the extension of credit by material suppliers who can retain a superior security interest in the specific, severable value they add to a property.
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