December 29, 2015

I. INTRODUCTION
The Texas Constitution and the Texas Property Code have created mechanic’s liens to enable contractors, subcontractors, and materials suppliers to protect their interests when performing construction on real property. These lien claimants are adding value to real property
through their labor and materials, therefore by filing liens, the law enables them to stake a claim in the value they are providing.

II. CONSTITUTIONAL LIENS
A contractor who has a contract with the owner can have a self-executing constitutional lien on the property pursuant to the Texas Constitution. TEX. CONST. art. XVI, § 37. Subcontractors and materials suppliers do not have constitutional liens. Id. Although, the Constitution does not establish any deadlines to file a constitutional lien, one court has ruled that it must be filed by the fifteenth day of the month, four months after the work is completed. Detering Co. v. Green, 989 S.W.2d 479 (Tex. App.—Houston [1st Dist.] 1999, pet. denied).

III. STATUTORY MECHANIC’S LIENS

A. GENERALLY
Suppliers of labor or material, persons specially fabricating materials, and design professionals are entitled to assert mechanic’s liens on real property. TEX. PROP. CODE ANN. § 53.021 (Vernon 2007). A lien which is properly perfected ensures payment for labor or materials furnished for construction or repair, and for specially fabricated material irrespective whether the material is delivered or incorporated into the construction or repair. Id. at § 53.023.

B. NOTICE REQUIREMENTS
To authorize the owner to withhold funds due a general contractor, also known as an original contractor, because a subcontractor or materials supplier has not been paid, the claimant must send a letter to the owner via certified mail stating that if the claim remains unpaid, the owner may be personally liable and the owner’s property may be subjected to a lien unless:

(1) the owner withholds payments from the general contractor for payment of the claim; or
(2) the claim is otherwise paid or settled. Id. at § 53.056(d). A sub-subcontractor must also give its written notice to the general contractor that it has not been paid, not later than the fifteenth day of the second month following each month in which all or part of its labor was performed or delivered. Id. at § 53.056(b) (emphasis added). This same written notice must also be given by all subcontractors and materials suppliers to the owner and the general contractor not later than the fifteenth day of the third month following each month in which all or part of the labor is performed or materials were provided, unless it is a residential construction project, and then must be given on or before the fifteenth day of the second month. Id. at § 53.056(b) & 53.252 (emphasis added).1

For specially fabricated materials, subcontractors must send notice to the owner by certified mail on or before the fifteenth day of the second month after the month in which the claimant receives and accepts the order for the material. Id. at § 53.058(b). The notice must
provide (1) a statement that the order has been received and accepted; and (2) the price of the order. Id. at § 53.058(c).

All lien claimants must file a lien affidavit with the county clerk of the county in which the property is located, not later than the fifteenth day of the fourth calendar month after the day on which the claimant’s debt accrues. Id. at § 53.052(a). For residential construction projects, lien affidavits must be filed on or before the fifteenth day of the third calendar month of the date the indebtedness accrues. Id. at § 53.052(b). 

For the purposes of the filing a lien affidavit, indebtedness to a subcontractor accrues on the last day of the last month in which the labor or material was provided by the subcontractor. Id. at § 53.053(c). Indebtedness to a general contractor accrues on the last day of the month in which the original contract was completed, finally settled, or abandoned, or on the last day of the month in which a written declaration by the contractor or the owner is received by the other party stating the original contract has been terminated. Id. at § 53.053(b).

It should be noted that an owner is only required to hold retainage on the project for a limited period of time at the end of the Project. The deadline to file a lien is the earliest of the following:

1. The normal filing deadline referenced above (15th day of 4th month for nonresidential or 15th day of 3rd month for residential);
2. the 40th day after the date stated in the Affidavit of Completion if the Owner sends the claimant notice of the Affidavit;
3. for non-residential projects only, the 40th day after the date of termination or abandonment of the original contract if notice of the termination or abandonment is properly sent by the owner to the claimants; or
4. the 30th day after the day the owner sends written notice to the claimant demanding that the claimant file its lien. Id. at § 53.057. It is possible to perfect a lien, but not be entitled to payment from the owner. If the owner releases final payment on the project after holding retainage for the required thirty days, and the lien claimant files the lien after that money has been released (but within fifteen days of
the fourth month), the owner is not liable to the claimant on the lien. Id. at § 53.101. Thus, lien claimants should always file their liens prior to thirty days after final completion on the project to ensure that the owner still has funds in its hands for payment of the lien claim.

C. PERFECTION OF CONTRACTUAL RETAINAGE CLAIM
A subcontractor or materials supplier can perfect its claim for retainage at different stages during the work. If the claimant gives its notice properly satisfying the statutory requirements, no further notice is required to perfect a lien on retainage. Id. at § 53.057(e). The claimant must notify the owner or reputed owner of the retainage agreement by certified mail at the last known business or residence address at the earlier of: the 30th day after the claimant’s agreement (i.e. subcontract work) is completed, terminated, or abandoned; or (2) the 30th day after the date the original owner/contractor agreement is terminated or abandoned. Id. at § 53.057. The notice must contain (1) the “existence of a requirement for retainage”, (2) name and address of the claimant, and (3) name and address of the subcontractor if the claimant’s agreement is with a subcontractor rather than the original contractor. Id. If the retainage agreement is with a subcontractor, the same notice must be given to the original contractor within the same timeframe. Id. Retainage claims can also be perfected through the normal lien process reflected above.

D. LIEN AFFIDAVIT CONTENT

1. Generally
The lien affidavit must be signed by the person claiming the lien or by another person, on the claimant’s behalf, and must contain substantially the following: (1) a sworn statement of the amount of the claim; (2) the name and last known address of the owner or reputed owner; (3) a general statement of the kind of work done and materials furnished by the claimant and, for a claimant other than an original contractor, a statement of each month in which the work was done and materials furnished for which payment was requested; (4) the name and last known address of the person by whom the claimant was employed or to whom the claimant furnished material or labor; (5) the name and last known address of the original contractor; (6) a description, legally sufficient for identification, of the property sought to be charged with the lien; (7) the claimant’s name, mailing address, and, if different, physical address; and (8) for a claimant other than an original contractor, a statement identifying the date each notice of the claim was sent to the owner and the method by which the notice was sent. Id. at § 53.054(a). The person filing the affidavit must send a copy of the affidavit by certified mail to the owner and general contractor not later than the fifth day after the date the affidavit was filed with the county clerk. Id. at § 53.055.

2. Residential Lien Affidavit Content
In addition to the inclusion of the requirements referenced in Sections III D.1, to perfect a lien for constructing or repairing a homestead, the following additional requirements must be complied with:
1. The owner and spouse must execute a written contract before labor or materialsare furnished.
2. The contract must be filed with the county clerk in the county where the homestead is located. If the original contractor files the contract, this filing inures to the benefit of all lien claimants.
3. The notice to be given to the owner to trap funds must contain the following language:

“If a subcontractor or supplier who furnishes materials or performs labor for any construction of improvements on your property is not
paid, your property may be subject to a lien for the unpaid amount if:

A. After receiving notice of the unpaid claim from the claimant you failed to withhold payment to your contractor that is sufficient to cover the unpaid claim until the dispute is resolved; or
B. During construction and for thirty days after completion of construction, you fail to retain 10% of the contract price or 10% of the value of the work performed by your contractor.

If you have complied with the law regarding the 10% retainage and you have withheld payment to the contractor sufficient to cover
any written notice of claim and have paid that amount, if any, to the claimant, any lien claim filed on your property by a subcontractor or supplier, other than a person who contracted directly with you, will not be a valid lien on your property. In addition, except for the required 10% retainage, you are not liable to a subcontractor or supplier for any amount paid to your contractor before you received written notice of the claim.”

4. A lien affidavit must contain the following conspicuously printed, stamped, or typed, in a size equal to at least 10-point bold faced or computer equivalent, at the top of the page:

“NOTICE: THIS IS NOT A LIEN. THIS IS ONLY AN AFFIDAVIT CLAIMING A LIEN.” - Id. at § 53.254.

IV. LIEN PRIORITIES

A. PREFERENCE OF MECHANIC'S LIENS GENERALLY
All subcontractors, laborers, and materialmen who have a perfected mechanic's lien have a preference over other creditors of the original contractor. TEX. PROP. CODE ANN. § 53.121 (Vernon 2007). Except for the preference given to individual artisans and mechanics as to
statutory retainage, perfected mechanic's liens arising out of the same general contract are on equal footing with each other without reference to the date of filing the affidavit claiming the lien. TEX. PROP. CODE ANN. § 53.122(a). If the proceeds of a foreclosure sale of property are insufficient to discharge all mechanic's liens against the property, the proceeds shall be paid pro rata on the perfected mechanic's liens on which suit is brought. TEX. PROP. CODE ANN. § 53.122(b).

The Property Code provides that a mechanic's lien attaches to the house, building, improvements, or railroad property in preference to any prior lien, encumbrance, or mortgage on the land on which it is located, and the person enforcing the lien may have the house, building, improvement, or any piece of the railroad property sold separately. TEX. PROP. CODE ANN. § 53.123(a). If there is a pre-existing lien, encumbrance, or mortgage on the land or improvement, that lien, encumbrance or mortgage takes precedence over the later-filed mechanic’s lien. While the holder of the pre-existing lien, encumbrance, or mortgage need not be made a party to a suit to foreclose the mechanic's lien, its rights must be addressed first. TEX. PROP. CODE ANN. § 53.123(b); Lyon-Gray Lumber Co. v. Nocona Cotton Oil Co., 194 S.W. 633 (Tex. Civ. App.– Fort Worth 1917, writ ref'd) (mechanic's liens are subordinate to liens that lawfully existed prior to the inception time of the mechanic's lien).

B. INCEPTION OF THE LIEN
In order to establish the priority of mechanic's liens over other liens, it is necessary to determine the inception date of the mechanic's lien. The time of inception of a mechanic's lien is the commencement of construction of improvements or delivery of materials to the land on which the improvements are to be located and on which the materials are to be used. TEX. PROP. CODE ANN. § 53.124(a); see First Continental Real Estate Investment Trust v. Continental Steel Co., 569 S.W.2d 42, 45 (Tex. Civ. App.-Fort Worth 1978, no writ); Mortgage & Trust, Inc. v. Bonner & Co., 572 S.W.2d 344 (Tex. Civ. App.-Corpus Christi 1978, writ ref'd n.r.e). The construction or materials must be visible from an inspection of the land on which the improvements are being made. TEX. PROP. CODE ANN. § 53.124(b). The time of inception does not take into consideration the date that the property owner decides to start improvements on his property. Univ. Sav. & Loan Ass'n v. Security Lumber Co., 423 S.W.2d 287, 295 (Tex.1967). The Texas Supreme Court has specifically “rejected the idea that such liens had their inception when the owner determined to improve his property.” Id.

1. Commencement of Construction
In the landmark case of Diversified Mortgage Investors v. Blaylock, 576 S.W.2d 794 (Tex. 1978), the Texas Supreme Court concluded that "commencement of construction" occurs only when the activity:
1. is conducted on the land itself;
2. is visible upon the land; and
3. constitutes either an activity which is defined as an improvement under the Texas statute or the excavation for or the laying of the foundation of a building or structure. - Id. at 802.

Clearing and grading land constitutes commencement of construction. Reliable Life Ins. Co. v. Brown & Root, Inc., 607 S.W.2d 621, 629 (Tex. Civ. App.-Waco 1980, writ ref'd n.r.e.). Work that is merely preparatory does not constitute commencement. Blaylock, 576 S.W.2d at 802.

2. Delivery of Materials
The Blaylock court also defined "delivery of material" as the delivery of material:
1. to the project site;
2. that is visible upon inspection of the land; and
3. is to be consumed during construction or incorporated into the permanent structure. - Id. at 803.

Because it may be difficult to determine solely from delivery of materials whether such materials will be consumed during construction or incorporated into the permanent structure a case-by-case analysis of the facts is necessary to determine when the Blaylock criteria have been met. In re Jamail, 471 F. Supp. 441 (S.D. Tex. 1979), aff'd, 609 F.2d 1387 (5th Cir. 1980). In summary, the inception date could be one of several dates including the date construction commences, the date that materials are delivered, or the date the lien is filed.

3. Affidavit of Commencement
To more definitely set the date construction is commenced, the Property Code provides that an owner and an original contractor may jointly file an affidavit of commencement. TEX. PROP. CODE ANN. § 53.124(c). An affidavit filed in compliance with § 53.124(c) is prima facie evidence of the date of the commencement of the improvement described in the affidavit. TEX. PROP. CODE ANN. § 53.124(d). The time of inception of a mechanic's lien arising from work described in an affidavit of commencement is the date of commencement of the work stated in the affidavit. Id. The affidavit of commencement must be filed with the county clerk of the county in which the property is located not later than the 30th day after the date of actual commencement of the construction of the improvements or delivery of materials to the land. TEX. PROP. CODE ANN. § 53.124(c) The affidavit must contain:
1. the name and address of the owner;
2. the name and address of each original contractor, known at the time to the owner, that is furnishing labor, service, or materials for the construction of the improvements;
3. a description, legally sufficient for identification, of the property being improved;
4. the date the work actually commenced; and
5. a general description of the improvement.

C. EFFECT OF INCEPTION DATE ON PRIORITY
After the date of inception has been determined, the next step is to determine the inception date's effect on the priority of the mechanic's lien. If there are no prior liens, then the mechanic's lien has priority as to the land and the improvements. TEX. PROP. CODE ANN. § 53.121, 53.123, & 53.124. If a deed of trust has been created before any mechanic's lien's inception date, then the deed of trust will have priority. Id. A perfected statutory lien has priority over all liens which attach to the land or improvement after the inception of the lien. When perfected, the mechanic's lien relates back to the time of inception for purposes of determining its relative priority. First Federal Savings & Loan Asso. v. Stewart Title Co., 732 S.W.2d 98, 111 (Tex. App.─Beaumont 1987, writ denied); Reliable Life Ins. Co., 607 S.W.2d at 629; University Savings & Loan Association v. Security Lumber Co., 423 S.W.2d 287, 293 (Tex. 1967). If a deed of trust is filed after the inception of a mechanic's lien as determined by the Blaylock test, any mechanic's lien that arises subsequent to the deed of trust will relate back to the date of inception, giving it priority over the deed of trust.

Stewart Title Company, 732 S.W.2d at 111.2 If there are notice and filing requirements involved, then the lien relates back as soon as the proper steps are taken to fix the lien. Id.; see also Trammell v. Mount, 4 S.W. 377, 379 (Tex. 1887).

D. EFFECT OF MULTIPLE GENERAL CONTRACTS
In an old line of cases, it was argued that one original contractor's lien may commence out of the performance of work done under another different general contract. The courts  applied the doctrine of relation back to situations involving several original contractors. Oriental Hotel Co. v. Griffiths, 33 S.W. 652, 663 (Tex. 1895). In Oriental Hotel, the Texas Supreme Court stated that among various original contractors, the first fixed inception date constituted the inception date for all subsequent liens. Id. Therefore, a mechanic's lien created subsequent to a deed of trust had a common priority with the mechanic's lien created before the deed of trust.

In the more modern line of cases, the courts reject the common lien theory and hold that the inception date for mechanic's lien is the date work commenced on the contract with the owner under which each entity is working. See Ferris v. Security Savings & Loan Association,
545 S.W.2d 208, 212 (Tex. Civ. App.─Eastland 1976, no writ); First Continental Real Estate, 569 S.W.2d at 46-47. The Fifth Circuit Court of Appeals, in In re Waller Creek, Ltd., 867 F.2d 228 (5th Cir. 1989) upheld a one-hundred-year-old principle announced by the court in Lyon v. Logan, 5 S.W. 72 (Tex. 1887), by stating that an owner may limit the scope of mechanic's liens by negotiating separate contracts for improvements.

V. REMOVABLES
A. PRIORITY OF MECHANIC'S LIENS
Generally, a mechanic's lien for improvements is subordinate to a vendor's lien when the mechanic's lien's inception date is subsequent to perfection of the vendor's lien. TEX. PROP. CODE ANN. § 53.123. The exception to this general rule is when the materials have been incorporated into the structure but can be removed without causing material injury to the land and pre-existing improvements or the materials or improvements themselves. First National Bank v. Whirlpool Corp., 517 S.W.2d 262, 269 (Tex. 1974); Exchange Savings & Loan Association v. Monocrete Pty., Ltd., 629 S.W.2d 34, 36 (Tex. 1982). These improvements are called "removables." In other words, even if a deed of trust was filed prior to the mechanic’s lien, the mechanic’s lien has priority if the subject of the lien is a removable. This preference lien also attaches to materials that the supplier has delivered but which have not yet been incorporated into the improvement.
In re Jamail, 609 F.2d at 1389.

1. Does a Mechanic's Lien Attach to the Item?
The first question is whether the item is sufficiently incorporated into the structure for a mechanic's lien to attach to that item. A mechanic's lien will not attach to fixtures or personal property that are not incorporated into the structure. McConnell v. Frost, 45 S.W.2d 777 (Tex. Civ. App.─Waco 1931, writ ref'd). In holding that refrigerators and ranges were not fixtures, the Whirlpool court stated that if from the circumstances "it appears to be the intention of the party making the annexation that it shall be permanent, or that it shall so remain annexed until it has become worn out...," then a fixture may be considered a permanent improvement for priority purposes. Id. In Houk Air Conditioning, Inc. v. Mortgage & Trust, Inc., 517 S.W.2d 593 (Tex. Civ. App.─Waco 1974, no writ) the court found that it was the intention of the party making the annexation that the air conditioning and heating systems be permanent, and therefore, these improvements were designated as fixtures for priority purposes.

If an item is considered to be a removable, then it is unreasonable for a deed of trust to have priority over that item. In Whirlpool, 517 S.W.2d at 262, the court held that a mortgagee's deed of trust did not have priority over a mechanic's lien on removable improvements, even though the deed of trust was perfected before the inception of the mechanic's lien. The court reasoned that to allow priority over removables when there is a pre-existing lien at the time of the improvement does not adversely affect the holder of the existing lien since the secured party has the same security for its interest as it had before the improvement. Id. at 268-269. On the other hand, when labor or materials are furnished and used to complete a nonremovable, the mechanic's lien will not have priority because it would adversely affect the existing lienholder. Id. 14

2. Is the Item "Removable"?
a. Material Injury to the Structure or to the Improvement The Property Code does not authorize the removal of any improvement which would cause material injury to the existing structure because it would adversely affect prior liens by reducing the value of the property which serves as the security for these prior liens. TEX. PROP. CODE ANN. § 53.123. Whether an improvement can be removed without material injury to the existing structure or the item itself is a fact question to be determined on a case-by-case analysis of the facts and circumstances of each case. Wallace Gin Co. v. Burton-Lingo Co., 104 S.W.2d 891, 892 (Tex. Civ. App.─Austin 1937, no writ).

The term "material injury" is not susceptible to a precise definition. Texas authorities illustrate that each case must be determined upon its particular facts. The general rule is that where the building or improvement is severable, a mechanic's lien will take priority over other
recorded liens. However, if the nature of the improvement is such that it is merged in and becomes a part of the building or structure improved, the mechanic's lien will not take priority. Parkdale State Bank v. McCord, 428 S.W.2d 121 (Tex. Civ. App.–Corpus Christi 1968, writ ref'd n.r.e.).

In deciding whether an item is removable, the court first considers whether the materials can be removed without material injury to (1) the land, (2) the pre-existing improvements, or (3) the materials themselves. Monocrete, 629 S.W.2d at 36. The Orah Wall court applied a
balancing test of "incorporation" v. "nonincorporation" to determine removability. The court gave five questions to be used to define "incorporation" and its effect on removability:

1. Is the item merely attached to the structure in such a manner that it is obvious that removal and/or replacement is always possible?
2. Is the item one which is removed and/or replaced as part of the ordinary maintenance?
3. Is the item one which is removed and/or replaced as part of the ordinary operationof the building?
4. Is removal, while not usual, or even usually contemplated, so simple and so nondestructive of item, structure or freehold, that to deny removability (or separateness) would violate the purpose of the mechanic's lien statutes? See First Nat'l Bank in Dallas v. Whirlpool, Inc., 517 S.W.2d at 269.
5. Is the item, though easily removable, such a part of the finished structure that no party would ever contemplate removal and/or replacement during the ordinary operation and maintenance of the building? Id. at 446. If something is incorporated, but separable under the five tests, then it is removable. Id. The court distinguished factual removability, when an item may be removed without material injury to the item itself or the structure, from legal removability, in applying the five tests.

b. Post-Removal Injury
An additional consideration for the court is the possibility of post-removal damage. Monocrete, 629 S.W.2d at 37. In Monocrete, the court held that the removal of a cement tile roof would cause material damage to the existing structure because the structure would be exposed to the elements. The court noted that the following factors should be considered in analyzing the issue of post-removal damages:
1. the manner and extent of attachment to the land or existing improvements;
2. the extent to which removal would necessitate repairs, modification and/or protection of the land;
3. the state of completion of improvements under construction at the time removal is sought;
4. and, the function of the improvements sought to be removed. Id. In applying these factors, the court noted that the roofing tiles were necessary to prevent penetration of the elements. Thus, the tiles became an integral part of the construction of the structure. Id.

C. The Expanding List of Removable Items

The improvements that have been found to be removable include the following:

1. windows and doors that can be removed by taking out surrounding brick and trim, First Continental Real Estate, 569 S.W.2d at 42 (the improvements were capable of being removed even though the nonremovable fixtures had to be dismantled in order to sever the removables);
2. air conditioning units and heating units, American Amicable Life Ins. Co., v. Jay's Air Conditioning & Heating, Inc., 535 S.W.2d 23 (Tex. Civ. App.─Waco 1976, writ ref'd n.r.e.); Houk Air Conditioning, 517 S.W.2d at 593;
3. carpets, appliances, air conditioning and heating components, smoke detectors, burglar alarms, light fixtures, and door locks, Richard H. Sikes, Inc. v. L. & N. Consultants, Inc., 586 S.W.2d 950 (Tex. Civ. App.─Waco 1979, writ ref'd n.r.e.);
4. garbage disposals and dishwashers, Whirlpool, 517 S.W.2d at 262;
5. a rock house, R.B. Spencer & Co. v. Brown, 198 S.W. 1179 (Tex. Civ. App.─El Paso 1917, writ ref'd);
6. pumps, compressors, fans for air conditioning and heating systems, toilets, basins, doors, windows, light fixtures, wall switches, electrical control panels, building hardware, and cabinets, Orah Wall, 84 B.R. at 442;
7. mirrors, Occidental Nebraska Federal Sav. Bank v. East End Glass Co., 773S.W.2d 687 (Tex. App.-San Antonio 1989, no writ);
8. entire structure removable from foundation, Parkdale State Bank v. McCord, 428 S.W.2d 121 (Tex. Civ. App.–Corpus Christi 1968, writ ref’d n.r.e.); and
9. pumps attached to existing machinery and foundation, Mogul Producing & Refining Co. v. Southern Engine Pump Co., 244 S.W. 212 (Tex. Civ. App.– Beaumont 1922, no writ).

Improvements that have been held not to be removable include the following:
1. plastering and painting, R.B. Spencer & Co., 198 S.W. at 1179;
2. lumber used in the construction of a house, Cameron County Lumber Co. v. Al & Lloyd Parker, Inc., 62 S.W.2d 63 (Tex. 1933);
3. roof repairs, Citizens National Bank v. Strauss, 69 S.W. 86 (Tex. Civ. App. 1902,writ ref'd);
4. window frames, McCallen v. Mogul Producing & Refining Co., 257 S.W. 918(Tex. Civ. App.─Galveston 1923, writ dism'd);
5. bricks utilized in the construction of a fireplace and chimney, Chamberlain v.Dollar Savings Bank, 451 S.W.2d 518 (Tex. Civ. App.─Amarillo 1970, no writ);
6. certain types of cabinets, Houk Air Conditioning, 517 S.W.2d at 593;
7. roofing tiles, Monocrete, 629 S.W.2d at 34;
8. a shell home, Irving Lumber Co. v. Alltex Mortgage Co., 446 S.W.2d 64 (Tex.Civ. App.─Dallas 1969), aff'd, 468 S.W.2d 341 (Tex. 1971); and
9. duct work for air conditioning and heating systems, copper plumbing, piping, sheet rock, electrical wiring and conduit, electromagnetic insulation, glass brick interior wall, suspended ceiling, Orah Wall, 84 B.R. at 442.

B. WHO HAS A CLAIM TO A REMOVABLE?
After classifying an item as a removable, it must be determined who may actually remove it. There are two conflicting lines of cases which establish who may remove a removable. One line holds that only the mechanic's lienholder who supplies the removable materials is given a priority over other liens. Additionally, the mechanic's lien is defeated if the materials provided cannot be identified and segregated from materials furnished by others. See Kaspar v. Cockrell-Riggins Lighting Co., 511 S.W.2d 109 (Tex. Civ. App.–Eastland 1974, no writ); In re
Jamail, 609 F.2d 1387, 1389 (5th Cir. 1980). The second line of cases hold that any contractor or subcontractor that has supplied materials or labor may have a preferential lien on all removables on the project, irrespective of who provided them. See L & N Consultants, Inc. v. Sikes, 648 S.W.2d 368, 370-72 (Tex. App.─Dallas 1983, writ ref'd n.r.e.); Wallace Gin Co. v. Burton-Lingo Co., 104 S.W.2d 891, 892 (Tex. Civ. App.─Austin 1937, no writ).

1. Limited Priority - Identification and Segregation Required
Several cases hold that identification and segregation are preconditions to removal. In McCallen v. Mogul Producing & Refining Co., 257 S.W. at 918, 923, the court did not give priority to a claimant for materials furnished because the evidence failed to establish that the
materials supplied could be identified, so as to segregate them from similar materials provided by others.

The court in Kaspar followed McCallen and held that a claimant is required to identify the materials he supplied from materials supplied by others in order to be granted a preferential lien. Kaspar, 511 S.W.2d at 110-11. In the Kasper case, the claimant provided materials that
had been incorporated into an apartment complex. Id. The claimant could not prove which apartments contained items it supplied because none of the materials had any type of identifying number or stamp. Id. at 111. Although the items were classified as removables, the court did not render judgment for the claimant since the materials could not be identified or segregated. Id.

2. Unlimited Scope on Priority
The second line of cases describing who can remove removables state that mechanic's liens actually attach to all improvements on a project, including those supplied by others. In Wallace Gin Co. v. Burton-Lingo Co., 104 S.W.2d 891, 892 (Tex. Civ. App.─Austin 1937, no
writ), the court held that the claimant was entitled to remove and sell an entire house, since the building was a removable and could be removed without materially injuring the house itself, the property, or the remaining improvements. In this case, Burton-Lingo Company (hereinafter "Burton") furnished some, but not all, of the materials used to construct a cotton house. Id. at 891. Burton brought suit on the balance due on the materials. Id. The court rejected the identification requirement and enforced Burton's lien based on the policies underlying the establishment of the mechanic's lien. Id. at 892. The court argued that because materialmen often do not supply all the materials on a given project, to refuse to recognize a lien on such materials would defeat the rights of the materialmen in many cases. Id. at 892.3 See also Parkdale State Bank v. McCord, 428 S.W.2d at 121, 126, 127.

The court in Richard H. Sikes, Inc. v. L & N Consultants, Inc., 586 S.W.2d 950 (Tex. Civ. App.─Waco 1979, writ ref'd n.r.e.) ("Sikes 1") followed the reasoning of Wallace Gin and held that "a perfected mechanic's and materialman's lien extends to all of the improvements  without regard to who placed them there." Id. at 956. The claimant, an original contractor, furnished and installed the materials for several nonremovable improvements. His subcontractors supplied and installed the remaining materials for improvements, which were
removable. The court refused to limit the scope of the original contractor's lien to the items he furnished and held that his lien extended to all of the removable improvements. 4

In L & N Consultants, Inc. v. Sikes, 648 S.W.2d 368 (Tex. App.─Dallas 1983, writ ref'd n.r.e.) ("Sikes 2") the court further explained the proposition set out in Sikes 1. The Sikes 2 court held that an original contractor should be granted a preferential lien on the removables furnished under his contract. Id. at 371. The court stated that articles 5452 and 5459, section 1 (now sections 53.021-.023 and 53.123, respectively):

do not limit the amount of a contractor's lien to that portion of the
contract price that may be allocated to removables; rather, they
give him a preference lien on the removables furnished under his
contract, and for which he is responsible, for the entire amount due
him for the materials and labor furnished by him under that
contract, even though some of the items furnished are not
removable.

Id. at 371. The court distinguished Kaspar by stating that there was no need to identify the specific materials supplied by the original contractor since he furnished all of the labor and materials under his contract with the owner. Id.

1 Two charts are provided at the end of this paper addressing the lien deadlines.

2 In an opinion styled In re Huber Contracting, Ltd., the Bankruptcy Court for the Western District of Texas held
that the section of the Texas Property Code giving holders of perfected mechanics’ liens “preference over other
creditors” of the principal contractor does not accord subcontractors and suppliers a priority over the contractor’s
secured creditors. 347 B.R. 205, 221 (Bankr. W.D. Tex. 2006). This opinion appears to be contrary to the plain
language of Section 53.121 of the Texas Property Code, as well as one hundred years of substantive case law.
Additionally, the Fifth Circuit in In re Waterpoint Intern. LLC, does not agree with the proposition in Huber
Contracting. 330 F.3d 339, 342-45 (5th Cir. 2003). Nonetheless, this case must be given thorough and fair
consideration due to the extensiveness of the analysis provided by the Bankruptcy Court for the Western District.

3 Recently, the Dorsett court recognized the holding of Wallace Gin and stated that it "read Wallace Gin to hold that a contractor need not supply all of the materials for an improvement to be able to execute a lien on that improvement." Dorsett, 880 S.W.2d at 423.

4 The court in the Dorsett opinion limited the scope of the Sikes 1 holding and stated that it interpreted Sikes 1 to hold that a preferential lien only extends to the "improvements supplied by the lien holder, regardless of who actually placed the improvements on the property . . . . [T]he fact that a contractor used subcontractors to supply labor and materials to improvements did not prevent its mechanic's lien from reaching those improvements." Dorsett, 880 S.W.2d at 423.