Perfecting a statutory mechanic’s and materialman’s lien under current Texas law is difficult. The statutes are less than clear and chocked full of traps and deadlines that trip up many contractors and material suppliers. Fortunately, lien perfection typically results in payment or pre-trial settlement once foreclosure is threatened. However, when payment is not forthcoming, a claimant must timely file a lawsuit to foreclose the lien.
On more than one occasion I’ve represented contractors who managed to dot every ‘i’ and cross every ‘t’ necessary to perfect a lien claim only to have a trial court deny foreclosure because he “just didn’t feel right about it”, “foreclosure seems vindictive” or because in their experience, “its customary that the lien will get paid whenever the property is sold.” WHAT?!? My unstated response is: “You can’t do that!” or “Judge, you are rewriting the law based upon whims and feelings. My client has no way of getting paid without foreclosure.” Unfortunately, most of my clients were either unwilling or unable to appeal.
This week lien claimants won an important victory in Crawford Services, Inc., v. Skillman International Firm, L.L.C., when the Texas Fifth Court of Appeals published an opinion reversing and rendering judgment from Dallas County. Specifically, the appellate court held that a Dallas County District court abused its discretion by refusing to foreclose a perfected mechanic’s lien.
The facts were classic. Crawford and Skillman executed contracts for Crawford to replace and repair air conditioning components. Crawford substantially completed its work but Skillman breached by failing to pay $140,000.00. Crawford filed a mechanic’s lien that complied with Chapter 53 of the Texas Property Code. Crawford sued for breach of contract and foreclosure of the lien. The trial court found that the work was performed, the mechanic’s lien was perfected and rendered judgment for the air conditioning subcontractor. However, the trial court denied Crawford’s request for foreclosure and an order permitting sale of the liened property.
In its judgment, the trial court ruled that pursuant to §53.154 of the Property Code, it had discretion and declined to grant a judgment of foreclosure and an order of sale, “given the facts presented in this action.”
Section 53.154 states:
A mechanic’s lien may be foreclosed only on judgment of a court of competent jurisdiction foreclosing the lien and order the sale of the property subject to the lien.
Reverse and Render
In reversing the trial court’s judgment, the Dallas Court of Appeals noted that the validity of Crawford’s debt and lien were undisputed and that the appeal turned upon the trial court’s interpretation of the statutory phrase, “may be foreclosed” found in section 53.154. After analyzing two possible interpretations, the appellate court concluded that the permissive “may be foreclosed” language referred only to action by a lien claimant and not by the court. In other words, the court decided that interpreting the statute as “may be foreclosed [by a lien holder] only on judgment of a court of competent jurisdiction…” made sense and that “may be foreclosed [by the trial court] only on judgment of a court of competent jurisdiction…” did not make sense. Therefore, the statute’s apparently permissive language did not grant the judge discretion whether to foreclose but instead limits the manner in which a lien holder can foreclose and sell property.
Undoubtedly, the appellate court’s interpretation is correct. It is consistent with the legislative purpose of statute and the historical mandate that the mechanic’s lien statutes be liberally interpreted to protect contractors and material suppliers. An interpretation that grants the trial court unfettered discretion defeats this purpose and injects uncertainty into the lien enforcement process.
In future cases, should lien holders needing to foreclose their claims and sell project property, Crawford Services, Inc. v. Skillman International will prove to be an invaluable tool. This opinion should provide a new and solid basis to ensure that courts follow this invaluable statutory procedure.