Lyda Swinerton Builders, Inc. v. Cathay Bank
2013 Tex. App. LEXIS 10081
| Tex. App. | 2013Background
- Lyda Swinerton Builders (the builder) performed initial construction beginning Feb 2007; stopped active work Oct 2007 but remained on site and continued incurring costs and billing.
- Builder filed an October 2007 mechanic’s lien (≈ $3.2M) encumbering Parcel A; bank closed a loan Oct 31, 2007, paid the builder $1.5M, and the builder executed a release of that October 2007 lien.
- Bank used part of its loan proceeds to pay outstanding property taxes; bank foreclosed later under its deed of trust and purchased the property at trustee’s sale for $10,000.
- After executing the release, the builder filed successive “amended” lien affidavits (Nov 2007–Jan 2009) enlarging the claimed amount and extending the lien to additional parcels; builder contends these relate back to Feb 2007.
- Trial court granted summary judgment to the bank that it owned the property free and clear of the builder’s claims; on appeal the court considered (1) effect of the builder’s release and validity/timeliness of post-release liens, and (2) whether the bank was subrogated to senior tax liens it paid.
Issues
| Issue | Plaintiff's Argument (Builder) | Defendant's Argument (Bank) | Held |
|---|---|---|---|
| Effect of release on original lien and debt | Release only discharged the lien as paid; unpaid underlying debt survives and can be re-secured | Release extinguished lien and prevents refiling or otherwise subordinated builder’s rights | Release unambiguously released the entire October 2007 lien on Parcel A but did not forgive underlying debt; builder may not re-file that same lien against Parcel A for the pre-release debt (partial affirmance) |
| Ability to file new liens after release (post-release liens) | Builder may file new liens for unpaid pre-release debt on other parcels and for post-release expenses; post-release "amended" affidavits substantially complied with statute | Release barred further liens; post-release "amendments" are void because nothing remained to amend | Release did not prohibit filing new liens on other tracts or for post-release expenses; whether the amended affidavits perfected valid liens raises fact issues (summary judgment denied on these points) |
| Timeliness and sufficiency of post-release affidavits | At least first post-release affidavit (Nov 2007) was timely and subsequent affidavits relate back | Later amended affidavits untimely and cannot be treated as relating back to a timely filing | Timeliness (accrual by abandonment or termination) is a fact question; a single timely affidavit only preserves the amount it actually declared — later increases not automatically timely |
| Bank’s subrogation to tax liens it paid | Subrogation improper absent statutory transfer procedures and equity disfavors subrogation because it prejudices builder | Bank is subrogated to taxing authority’s priority because it paid the taxes (contract clause supports), so its foreclosure extinguished junior liens | Statutory transfer regime does not abrogate common-law or equitable subrogation, but subrogation here raises equitable/prejudice issues (e.g., change in foreclosure procedure and lack of notice); whether equity requires subrogation is a fact question (summary judgment improper) |
Key Cases Cited
- Diversified Mortg. Investors v. Lloyd D. Blaylock Gen. Contractor, Inc., 576 S.W.2d 794 (Tex. 1978) (mechanic’s lien relates back to commencement of work for priority)
- Smart v. Tower Land & Inv. Co., 597 S.W.2d 333 (Tex. 1980) (equitable subrogation to tax lien may be available to extent necessary for equitable protection)
- LaSalle Bank Nat’l Ass’n v. White, 246 S.W.3d 616 (Tex. 2007) (doctrine of subrogation and its continued vitality)
- Genesis Tax Loan Servs., Inc. v. Kothmann, 339 S.W.3d 104 (Tex. 2011) (statutory tax-lien transfer requirements and their effects)
- Providence Inst. for Sav. v. Sims, 441 S.W.2d 516 (Tex. 1969) (equitable considerations and prejudice when subrogation affects intervening lienholders)
- Apex Fin. Corp. v. Brown, 7 S.W.3d 820 (Tex.App.-Texarkana 1999) (scope of lien waivers/releases and effect on future lien rights)