Before SPARLING, VANCE and WHITHAM, JJ.
Appellee, Interkal, Inc., is a beneficiary-materialman of the trust created in section one of TEX.REV.CIV.STAT.ANN. art. 5472e (Vernon Supp.1983).
We are called on in the present case to determine the scope of the first sentence of section four of the Act reading:
In Jensen v. First City National Bank, 623 S.W.2d 924 (Tex.1981), the Supreme Court reserved the question of the scope of section four of the Act.
The contractor executed a security agreement on the contractor's accounts receivable to secure the payment of promissory notes held by RepublicBank. Thereafter, the contractor ordered material from Interkal and used these materials in constructing and remodeling the gymnasiums. The property owners partly paid the contractor for this work with four checks. Temporary injunction intervened and the trial court ordered Interkal to deposit the checks into an escrow account at RepublicBank to be held pending the outcome of the lawsuit. Consequently, we treat the funds as being in the registry of the court and RepublicBank as the officer of the court holding the funds pending final disposition of the lawsuit. RepublicBank contends that section one of the Act is inapplicable in circumstances in which a non-beneficiary bank is competing with a beneficiary-materialman for money declared to be trust funds in section one of the Act. We disagree for three reasons.
First, the transaction between the contractor and RepublicBank is not a transaction to which the Act is applicable. Section four states that the Act "shall have no application to [RepublicBank] ... in connection with any transaction to which this Act is applicable." The Act is applicable to transactions involving construction contracts for the improvement of specific real property. The Act is not applicable to transactions involving bank loans made by the contractor to finance the operations of the contractor's business. We conclude, therefore, that the security agreement on the contractor's accounts receivable to secure the payment of promissory notes held by RepublicBank is not a transaction to which the Act is applicable. Thus, by its own terms, section four of the Act does not render section one of the Act inapplicable.
Second, consider the way in which the Act is organized. Sections two and three of the Act provide criminal liability for misapplication of the trust funds. Thus, section four follows criminal sanctions. We conclude, therefore, that section four was intended to protect lenders and title companies from criminal charges arising out of receipt or disbursement of money that might be construed to be trust funds under the Act. Considering their function, inclusion of title companies and
Third, we conclude that under the Act the money in question became impressed with a trust status when paid to the contractor. Consequently, the money could not be available to the contractor for payment of its loans from RepublicBank. See Owens v. Drywall and Acoustical Supply Corp., 325 F.Supp. 397, 399-401 (S.D.Tex.1971), in which the court held that a tax lien could not attach to the trust fund created by the Act because the holder of the trust funds, the contractor, never acquired property rights in the trust funds to which the tax lien could attach. Therefore, the security interest of RepublicBank never attached to the money in question because the contractor never acquired property rights in the payments. Since RepublicBank's security interest could not be satisfied out of the trust fund, section four of the Act does not render section one of the Act inapplicable.
The lien statutes in Texas are liberally construed for the purpose of protecting laborers and materialmen. Lodal & Bain Engineers, Inc. v. Bayfield Public Utility District, 583 S.W.2d 653, 656 (Tex. Civ.App.—Houston [1st Dist.] (1979), rev'd on other grounds, 602 S.W.2d 262 (Tex. 1980); Marathon Metallic Building Co. v. Texas National Bank of Waco, 534 S.W.2d 743, 747 (Tex.Civ.App.—Waco 1976, no writ). The Act was added to the lien laws by the legislature for the purpose of providing "an additional protection for laborers and materialmen...." Stone Fort National Bank v. Elliott Electric Supply Co., Inc., 548 S.W.2d 441, 446 (Tex.Civ.App. — Tyler 1977, writ ref'd n.r.e.); Owens, 325 F.Supp. at 400.
Accordingly, we adopt the holding in Stone Fort National Bank, 548 S.W.2d at 446:
Consequently, we decline to follow the contrary holding in Heldenfels Brothers, Inc. v. First National Bank of Hallettsville, 657 S.W.2d 883, 885 (Tex.App.—Corpus Christi 1983, writ ref'd n.r.e.), that "Section 4 of Article 5472e exempts banks from the other provisions of [the Act]." We hold, therefore, that section four of the Act does not operate to terminate a trust created by section one of the Act when a bank claims a non-beneficiary interest in money declared to be a trust fund in section one of the Act. It follows, and we so hold, that Interkal was entitled to the trust funds in preference to RepublicBank. Therefore, we conclude that the trial court did not err in rendering summary judgment in favor of Interkal.
By cross-point, Interkal contends that the trial court erred in refusing to grant it prejudgment interest with respect to the trust funds awarded in the summary judgment. The trust fund secures payment for labor or material furnished. The trust fund does not secure payment of prejudgment interest. We conclude, therefore, that the trial court correctly denied prejudgment interest out of the trust fund.
SPARLING, Justice, dissenting.
I respectfully dissent. The majority interprets section 4 of article 5472e TEX. REV.CIV.STAT.ANN. (Vernon Supp. 1983)
Two lines of authority are in apparent conflict on this issue. One line of cases emphasizes the principle that statutes protecting materialmen should be afforded a broad and liberal construction and holds that materialmen may assert 5472e trust rights when competing with a bank for construction funds paid into the registry of the court. Stone Fort National Bank v. Elliott Electric Supply, 548 S.W.2d 441, 446 (Tex.Civ.App.—Tyler 1977, writ ref'd n.r.e.); Panhandle Bank & Trust Co. v. Graybar Electric. Co., 492 S.W.2d 76 (Tex. Civ.App.—Amarillo 1973, writ ref'd n.r.e.). However, these cases are distinguishable from our case because the banks involved, inexplicably, did not argue, as RepublicBank has, that the first sentence of section 4 exempted them from the provisions of 5472e. The other line of authority, Heldenfels Bros., Inc. v. First National Bank, 657 S.W.2d 883, 885 (Tex.App.—Corpus Christi 1983, writ ref'd n.r.e.), held that the express language of the statute exempts banks from the provisions of 5472e and must be followed. That case is distinguishable because, despite its broad holding, it only involved a bank threatened with civil liability rather than a bank asserting its priority in construction funds held in the registry of the court.
I would hold that the plain language of section 4 abates article 5472e under circumstances in which a bank is the competing creditor. The first sentence is straightforward and unambiguous: "This Act shall have no application to any bank ... in connection with any transaction to which this Act is applicable." Article 5472e's "application to a bank" appears obvious if we deny funds to a bank based only upon a trust created by the statute. Should we then ignore the unambiguous meaning of section 4 in order to "liberally [construe the lien statutes] for the purpose of protecting laborers and materialmen"? I would hold not. When a statute is susceptible to only one meaning, a court should not engage in interpreting it. Caminetti v. United States, 242 U.S. 470, 37 S.Ct. 192, 61 L.Ed. 442 (1916); Fox v. Burgess, 157 Tex. 292, 302 S.W.2d 405 (1957); Franklin v. Pietzsch, 334 S.W.2d 214 (Tex.Civ.App. — Dallas 1960, writ ref'd n.r.e.). When a law is clear, it will be enforced as it reads, Gilmore v. Waples, 108 Tex. 167, 188 S.W. 1037 (1916), regardless of its effect. Weaver v. Robison, 114 Tex. 272, 268 S.W. 133 (1924). Properly enforcing a statute involves enforcing the restrictions and exemptions it includes as well. Chambers v. Robison, 107 Tex. 315, 318, 179 S.W. 123, 124 (1915). This is particularly true when the exemption is part of the very statute that created the right sought to be enforced. Employer's Liability Assurance Corp. v. Young County Lumber Co., 122 Tex. 647, 656, 64 S.W.2d 339, 343 (1933). I recognize Interkal's argument that this broad exemption will reduce the protection afforded materialmen under 5472e, as many contractors have granted banks security interests in their accounts receivable. Nonetheless, the Texas Supreme Court has clearly defined our duty in Simmons v. Arnim, 110 Tex. 309, 220 S.W. 66 (1920):
Adhering to this guidance, I would hold that article 5472e should not be applied against banks under any circumstances, and the summary judgment in Interkal's favor should be reversed.
Interkal and RepublicBank, in my judgment, stand in the position of ordinary creditors competing for funds in the registry of the court. Without consideration of article 5472e, the trial court should determine which party has priority in these funds under other applicable principles governing the rights of creditors. I would, therefore, reverse and remand.