CoreTech Industries, LLC

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The following constitutes the ruling of the court and has the force and effect therein described.

Signed December 31, 2019 rd

United States Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

IN RE: §

§

CORETECH INDUSTRIES, LLC, § CASE NO. 18-34196-SGJ11

Debtor. § (Chapter 11)

§

§

§

§

§

MEMORANDUM OPINION AND ORDER GRANTING SUMMARY JUDGMENT AS

TO CREDITOR SOUTHWEST DYNAMICS, INC.’S SECURED STATUS

CONTENTS

MEMORANDUM OPINION AND ORDER GRANTING SUMMARY JUDGMENT AS TO

CREDITOR’S SECURED STATUS ................................................................................. 3

I. Procedural Background .................................................................................................... 4

II. The Undisputed Facts According to Each Party ............................................................. 6

A. The Mostly Undisputed Facts Presented by SDI ......................................................... 6

B. The Mostly Undisputed Facts Presented by the Debtor ............................................... 8

III. Jurisdiction ......................................................................................................................... 9

IV. Summary Judgment Standard.......................................................................................... 9

V. Analysis: The Summary Judgment Evidence Establishes SDI’s Entitlement to both a

Statutory Mechanic’s Lien and Constitutional Lien. However, the Amount of SDI’s Claim

Remains an Open Issue. ......................................................................................................... 11

A. SDI is Entitled to a Statutory Mechanic’s Lien. ......................................................... 11

1. There is No Genuine Dispute of Material Fact that Mr. Bomer Provided Labor and

Furnished Materials, Satisfying the First Element of Section 53.021(a). ...................................... 12

2. There is No Genuine Dispute of Material Fact that Mr. Bomer Performed his Services in

Dallas, Texas, Satisfying the Second Element of Section 53.021(a). ............................................. 13

3. There is No Genuine Dispute of Material Fact that Mr. Bomer Performed his Services

Pursuant to a Contract, Satisfying the Fourth Element of Section 53.021(a). .............................. 14

4. When Section 53.021(a) is Construed Liberally, the Summary-Judgment Evidence Shows

There is No Genuine Dispute of Material Fact that Mr. Bomer Provided Labor and Materials for

the Construction of a Building. ...................................................................................................... 15

5. There is No Genuine Dispute of Material Fact that SDI Properly Perfected its Mechanic’s

Lien in Accordance with Texas Property Code Sections 53.051-53.054. ...................................... 20

B. SDI is, Alternatively, Entitled to a Lien Under the Texas Constitution. .................... 22

1. SDI Qualifies as a “Mechanic,” an “Artisan,” and a “Materialman.” ............................. 23

2. SDI Furnished Labor and Materials to “Repair” an “Article.” ........................................ 25

C. The Amount of SDI’s Allowable Claim Remains an Open Question. ....................... 27

VI. Conclusion ........................................................................................................................ 28

MEMORANDUM OPINION AND ORDER GRANTING SUMMARY

JUDGMENT AS TO CREDITOR’S SECURED STATUS

This contested matter arises in the context of a post-confirmation claim objection. Both the

Claimant and the Reorganized Debtor (who is objecting to Claimant’s Proof of Claim) have agreed

that the court should preliminarily decide whether the underlying claim involved is secured or not,

before adjudication of the actual amount of the claim. Specifically, disputed creditor Southwest

Dynamics, Inc. (“SDI” or “Claimant”) filed a motion for summary judgment (“SDI’s MSJ”)

seeking to establish the validity of an alleged statutory mechanic’s lien for services it rendered to

install and repair several pieces of industrial equipment in a facility formerly leased by the Debtor

CoreTech Industries, LLC (“CoreTech,” the “Debtor,” or sometimes “Reorganized Debtor” when

referring to the post-confirmation time period).1 The Reorganized Debtor filed a cross-motion for

partial summary judgment (“Debtor’s MSJ”) on the issue of whether SDI is a secured creditor.2

SDI then filed a response to Debtor’s MSJ, asserting an artisan’s lien under the Texas Constitution

(hereon, a “constitutional lien”) in addition to the statutory mechanic’s lien it had originally

asserted in SDI’s MSJ.3

For the reasons set forth in this Memorandum Opinion and Order, summary judgment to

SDI is granted and partial summary judgment to the Reorganized Debtor is denied. With regard to

SDI’s MSJ, the bankruptcy court has determined that SDI’s summary judgment evidence

establishes a properly perfected statutory mechanic’s lien and, alternatively, a constitutional lien.

However, because the Reorganized Debtor has an alleged $150,000 counterclaim that remains

unadjudicated, the size of SDI’s overall claim and, thus, the enforceability of SDI’s lien, cannot

1 Case No. 18-34196-sgj11, Docket No. 90. Hereon, docket entries will be cited as “ECF [#]” because all docket

entries relate to the same bankruptcy case and are accessible through the CM/ECF system.

2 ECF 91.

3 ECF 101 at 2-3.

yet be determined. Accordingly, further proceedings are necessary to resolve the amount of SDI’s

secured claim.

I. Procedural Background

The Debtor was formed in 2014 to provide industrial machining services.4 After operating

at mere break-even for several years, the Debtor decided to file Chapter 11 bankruptcy on

December 18, 2018, to accomplish an orderly sale of all of its assets and use the proceeds to pay

creditors.5 SDI filed Proof of Claim No. 6-1 in the Debtor’s bankruptcy case on February 8, 2019,

asserting secured creditor status for alleged installation and repair services provided by SDI’s

principal and owner, Mr. Richard Bomer.6 Then, on March 22, 2019, the Debtor filed its Objection

to Proof of Claim 6 (hereon, “Objection to POC”), arguing that SDI’s proof of claim should be

denied because (a) SDI attached no supporting documentation and (b) SDI owed the Debtor

$150,000 for damaging the machine it allegedly repaired, which would more than offset the entire

$85,308 amount claimed in SDI’s Proof of Claim No. 6-1.7 In response, SDI amended its proof of

claim on April 24, 2019, adding documentation to support its claim.8 Shortly thereafter, the parties

appeared at a nonevidentiary hearing to announce a settlement and, on May 2, 2019, the Debtor

filed its Motion of CoreTech Industries, LLC for Approval of Proposed Settlement Agreement (the

“Settlement Motion”), in which the parties proposed to allow SDI’s secured claim in the amount

of $32,500.9

4 Amended Disclosure Statement of CoreTech Industries, LLC Pursuant to Section 1125 of the Bankruptcy Code Dated

March 21, 2019 (hereon, the “Disclosure Statement”), ECF 53.

5 Id.; ECF 1.

6 Proof of Claim No. 6-1; see also SDI’s MSJ at 1-2.

7 ECF 56 at 1-2. The bankruptcy court notes that, apart from the incomplete oral testimony of Mr. Arn, the Debtor’s

Principal, the Debtor’s counterclaim for $150,000 remains, at this time, largely unsubstantiated by admissible

evidence.

8 Proof of Claim No. 6-2.

9 ECF 70.

From the outset of the Debtor’s bankruptcy case, the Debtor was simultaneously working

to confirm a plan and resolve disputes with SDI. Prior to the Settlement Motion, the bankruptcy

court entered a final order confirming the Debtor’s Amended Plan of Reorganization of CoreTech

Industries, LLC Dated March 21, 2019 (the “Chapter 11 Plan”).10 The Chapter 11 Plan treated

SDI as a disputed secured creditor and asserted that the Debtor owed SDI nothing, but also

contemplated paying SDI out of a pool of funds that would otherwise available for general

unsecured creditors, in the event that SDI was determined to hold a valid secured claim.11 Thus,

general unsecured creditors had a vested interest in ensuring that SDI’s claim was either disallowed

or treated, at most, as an allowed unsecured claim (so as to participate pro rata in the distribution

to general unsecured creditors). KeyStaff, Inc. (“KeyStaff”) was one such general unsecured

creditor. KeyStaff filed an Objection to the Motion of CoreTech Industries, LLC for Approval of

Proposed Settlement Agreement, arguing that the proposed payout of $32,500 to SDI as a “secured

creditor” unfairly depleted the distribution to the unsecured creditors in light of the Objection to

POC, which, as mentioned, asserted a $150,000 counterclaim against SDI. 12

On August 15, 2019, the bankruptcy court held a hearing on the Settlement Motion in which

the Debtor, SDI and KeyStaff each made appearances and argued on the record (the “Settlement

Motion Hearing”). At the hearing, the Debtor stated that there was approximately $100,000

remaining from the earlier sale of substantially all the Debtor’s assets during the case (including

assets upon which SDI performed work) to pay unsecured creditors and/or SDI. Although the

subject of the Settlement Motion Hearing was the fairness of the Settlement Motion, the Debtor

and SDI came prepared to present evidence regarding the underlying dispute over the validity of

10 ECF 65.

11 Id. at 17-18.

12 ECF 72 at 2-4.

SDI’s secured claim, in light of the KeyStaff objection. The bankruptcy court ultimately adjourned

the hearing, due to time constraints. In doing so, the court announced concerns about the bona

fides of the Settlement Motion and the record developed thus far in support. After the hearing, the

Debtor withdrew the Settlement Motion. The Debtor and SDI, in subsequent status conferences,

announced that they both believed that—rather than setting the Claim Objection for hearing—the

court should determine in a Summary Judgment context whether SDI’s claim (whatever the

amount) was secured or not. The Debtor and SDI thereafter filed their motions for summary

judgment and responses and argued before the bankruptcy court on November 25, 2019. At the

conclusion of the hearing, the court took the matter under advisement.

II. The Undisputed Facts According to Each Party

For the most part, both parties agree on the underlying facts. Importantly, it is undisputed

that, at the time this controversy arose, the Debtor owned the machinery and equipment that SDI

was hired to repair and install but did not own the real property on which the machines were

installed and on which the Debtor operated its business.13

A. The Mostly Undisputed Facts Presented by SDI 14

SDI received a call from the Debtor on or about October 1, 2015, seeking assistance with

the installation of machinery and equipment at the Debtor’s new roll-conditioning facility.15 The

next day, SDI’s Principal and Owner, Mr. Richard Bomer, went out to meet with Mr. Richard Arn,

Principal of the Debtor.16 The parties entered into an oral contract whereby SDI would install and

13 See Debtor’s Schedule A/B, ECF 10; see also Debtor’s MSJ, Exh. A (attaching SDI’s Partial Release of Lien, which

expressly released the Debtor’s landlord and owner of the real property, Turner’s Machinery, Inc., from SDI’s

purported lien. The Partial Release of Lien explicitly excluded the Debtor from the release.).

14 In this Memorandum Opinion, footnote references to “Exh.” are references to the exhibits that were attached to each

party’s motion for summary judgment, which were presented to the bankruptcy court for hearing on November 25,

2019. SDI’s exhibits were numbered “1” through “19” while the Debtor’s exhibits were labeled “A” through “B.”

15 SDI’s MSJ, ECF 90 at 1.

16 Id.

service heavy-duty lathes, reconditioned electronic systems, and other equipment to help get the

Debtor’s new facility up and running.17 Yet, most of the equipment was used and, according to

SDI, in poor condition, such that it had to be completely rebuilt to operate.18 So, over the course

of roughly eight months, Mr. Bomer spent nearly 800 hours at the Debtor’s plant to install and/or

repair a LeBlond Lathe, a Sub-Arc Welder, a Lehmann Lathe, a Shaw Box Overhead Crane, a

Gardner-Denver Air Compressor, and a Giddings & Lewis Mill (hereon, the “machines”).19 SDI

presented summary-judgment evidence in the form of deposition testimony of Mr. Arn that, after

hiring SDI, the Debtor completed a $300,000 contract which, according to SDI, proves that Mr.

Bomer’s repairs and installations were successful.20 SDI allegedly incurred $23,789 of materials

expenses and billed the Debtor for a total of $125,926, including labor at $125 per hour.21 SDI

billed the Debtor for services rendered. Attached to SDI’s MSJ were copies of the invoices that

SDI sent the Debtor, which are dated from February 2, 2016 through August 1, 2016.22 The Debtor

allegedly refused to pay more than ten invoices totaling $40,618.40 to SDI for Mr. Bomer’s

services, leaving a balance of $85,307.60.23

At that point, sometime in May of 2016, SDI stopped performing services for the Debtor

and retained counsel.24 Counsel for SDI sent copies of the invoices to the Debtor’s purported

attorney at the time, one Mr. King of Oklahoma, and also sent a notice of intent to lien to the

Debtor’s real property landlord, Turner’s Machinery, Inc.25 SDI duly recorded its Lien Affidavit &

17 Id.

18 Id. at 2.

19 Id.

20 Id. at 2; Exh. 4.

21 Id. at 2; Exh. 5.

22 Id. at Exhs. 2, 14. The itemized entries on the invoices reflect billings for a mixture of labor, travel time, and

materials.

23 Id. at 2; Exh. 2 at 2; Exh. 3.

24 Id. at 2.

25 Id. at 3.

Claim with the Dallas County Clerk on August 12, 2016—within four calendar months and fifteen

days of completion of the work provided, as required by the Texas Property Code.26 Thereafter,

SDI filed its Original Petition in Dallas County court on August 22, 2016.27 A different attorney

for the Debtor, Mr. Howard Klatsky, filed an Original Answer in the state action.28 The parties

litigated in state court for two years, during which time SDI filed its Second Amended Petition on

May 4, 2018.29 The state court litigation proceeded a few more months until it was stayed when

the Debtor filed its Voluntary Petition on December 18, 2019.30

B. The Mostly Undisputed Facts Presented by the Debtor

The Debtor does not dispute that SDI was originally hired to install equipment at the

Debtor’s plant, which it leased from Turner’s Machinery, Inc.31 The Debtor also does not dispute

that it did not pay “the disputed invoices,” which is the term designated by the Debtor for the

invoices it refused to pay.32 The Debtor does dispute precisely what services SDI performed (e.g.

whether SDI repaired the machines), whether SDI performed the services properly, whether the

Debtor paid for all agreed-upon services, and whether SDI damaged the Debtor’s equipment.33

However, apart from the oral testimony of Mr. Arn at the August 15, 2019 hearing on the

Settlement Motion, the Debtor has presented no evidence in either the Debtor’s MSJ or the

Debtor’s Response that Mr. Bomer caused damage to the machines, let alone $150,000 worth.34 It

26 Id. at Exh. 14; see Tex. Prop. Code Ann. §§ 53.051, 53.053 (West 2019).

27 Id. at 3; Exh. 1.

28 Id. at Exh. 17.

29 Id. at 3; Exh. 2.

30 ECF 1.

31 CoreTech Industries, LLC’s Response to Motion of Southwest Dynamics, Inc.’s for Summary Judgment and Brief

in Support Thereof (hereon, “Debtor’s Response”), ECF 98 at 2.

32 ECF 91 at 2, ¶ 7.

33 Id. at 2, ¶ 4.

34 See ECF 91, 98. The court has discretion to take judicial notice of evidence in the record beyond the documents

attached to the summary judgment motions. See Fed. R. Civ. P. 56(c)(3); see also Sherman v. Greenstone Farm Credit

Services, ACA, Case No. 3:11-CV-0710-N, 2011 WL 2038573, at *3 n. 6 (N.D. Tex. May 24, 2011) (citing Fed. R.

Evid. 201(b), (f)) (noting that in determining the merits of the motions for summary judgment, the court has discretion

to take judicial notice of all documents filed in the action).

is further undisputed that on August 12, 2016, SDI filed a Partial Release of Lien that released

only Turner’s Machinery, Inc.—the Debtor’s landlord—from any lien SDI may have had on the

real property.35

Finally, it is undisputed that, after a hearing upon the Debtor’s Motion for Authority to Sell

Property of the Estate Under 11 U.S.C. § 363(b) and (f), this court entered its Order Granting

Debtor’s Motion for Authority to Sell Property of the Estate Under 11 U.S.C. § 363(b) and (f).36

It is further undisputed that the bankruptcy court approved, and the Debtor ultimately

consummated, a sale of all of the Debtor’s assets, comprised primarily of the machines the Debtor

owned, to a third-party called SMS Group, LLC, generating proceeds to pay creditors.37 The assets

sold included the machinery on which SDI had performed services.

III. Jurisdiction

Bankruptcy subject matter jurisdiction exists in this proceeding pursuant to 28 U.S.C.

§ 1334. This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (B), (C), (K), and (O). The

bankruptcy court has authority to adjudicate this matter pursuant to Miscellaneous Rule No. 33 for

the Northern District of Texas.

IV. Summary Judgment Standard

To succeed on summary judgment, SDI must first establish that there is no genuine issue

of material fact pertaining to the existence of its lien.38 “The Court shall grant summary judgment

if the movant shows that there is no genuine dispute as to any material fact and that the movant is

entitled to judgment as a matter of law.”39 Disputes regarding material facts are genuine if a

35 ECF 91 at Exh. B; ECF 98 at 3. The Partial Release of Lien is explicitly limited to Turner’s Machinery, Inc. and

does not release the Debtor from any purported liens.

36 ECF 13, 35.

37 ECF 53, 65.

38 See In re Rotary Drilling Tools USA, LLC, Case No. 16-33433, 2017 WL 4990440, at *3 (Bankr. S.D. Tex. Oct. 27,

2017) (hereon, “In re Rotary Drilling”).

39 Fed. R. Civ. P. 56(a); Fed. R. Bankr. P. 7056 (incorporating the Rule 56 standard into adversary proceedings).

reasonable jury could return a verdict for the nonmoving party.40 In order to support or refute an

assertion that a genuine issue of material fact exists, the parties must cite to particular parts of the

record to demonstrate that “the materials cited do not establish the absence or presence of a genuine

dispute, or that an adverse party cannot produce admissible evidence to support the fact.”41 The

court views the facts and evidence in the light most favorable to the nonmoving party at all times.42

The court has discretion to consider all evidence in the record, beyond simply the evidence attached

to the summary-judgment motions.43 Although all evidence in the record may be considered, the

court refrains from making credibility determinations and weighing the evidence.44 Yet, a party

may nevertheless object that evidence cited in the record cannot be produced as admissible

evidence.45

The evidentiary support needed to meet the initial summary judgment burden depends on

whether the moving party bears the ultimate burden of proof at trial.46 If the moving party bears

the burden of proof on an issue, they must present adequate evidence to entitle the moving party

to judgment at trial.47 If the movant establishes this evidence, the burden then shifts to the

nonmovant to cite to specific evidence that a genuine issue of material fact exists.48 The nonmovant

must also articulate the manner in which that evidence supports that party’s claim.49 Even if the

movant meets the initial burden, the motion should be granted only if the nonmovant cannot show

a genuine dispute of material fact.50

40 Anderson v. Liberty Lobby, Inc., 477 US. 242, 248 (1986).

41 Fed. R. Civ. P. 56(c)(1).

42 Plumhoff v. Rickard, 572 U.S. 765, 768 (2014).

43 See Fed. R. Civ. P. 56(c)(3).

44 Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000).

45 Fed. R. Civ. P. 56(c)(2).

46 See In re Rotary Drilling, 2017 WL 4990440, at *2.

47 Id. (citing Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986)).

48 Id. (citing Fed. R. Civ. P. 56(c)(1); Celotex, 477 U.S. at 324).

49 Id. (citing Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998)).

50 Id. (citing Duffie v. U.S., 600 F.3d 362, 371 (5th Cir. 2010)).

V. Analysis: The Summary Judgment Evidence Establishes SDI’s Entitlement to

both a Statutory Mechanic’s Lien and Constitutional Lien. However, the

Amount of SDI’s Claim Remains an Open Issue.

SDI’s MSJ is granted such that SDI’s claim—whatever the amount—is entitled to secured

status. First, with regard to a statutory lien, there are two discrete issues before the court: (1)

whether the work Mr. Bomer performed satisfied the elements of Section 53.021(a) of the Texas

Property Code, so as to entitle SDI to a statutory mechanic’s lien; and, if so, (2) whether SDI

properly perfected that lien in accordance with Section 53.052(a) of the Texas Property Code.51

A. SDI is Entitled to a Statutory Mechanic’s Lien.

The relevant Texas Property Code provision regarding establishment of a statutory

mechanic’s lien reads as follows:

A person has a lien if: (1) the person labors, specially fabricates material, or

furnishes labor or materials for construction or repair in this state of: (A) a house,

building, or improvement; . . . and (2) the person labors, specially fabricates the

material, or furnishes the labor or materials under or by virtue of a contract with the

owner or the owner’s agent, trustee, receiver, contractor, or subcontractor.52

Thus, there are, essentially, four elements to establish a statutory mechanic’s lien. The lien

claimant must have: (1) labored, specially fabricated material, or furnished labor or materials; (2)

in the state of Texas; (3) for the construction or repair of a house, building, or improvement; (4)

pursuant to a contract with the owner of the property to be encumbered by the lien or a party with

legal authority to authorize the work on the property, such as the owner’s agent. Importantly, “[i]t

is a rule of long standing that the mechanic’s and materialman’s lien statutes of [Texas] will be

liberally construed for the purpose of protecting laborers and materialmen.”53 As explained herein,

51 Tex. Prop. Code § 53.021(a) sets forth the elements to determine whether a laborer or materialman is entitled to a

statutory mechanic’s lien, and Tex. Prop. Code §§ 53.051-53.054 set forth the requirements for perfecting a statutory

mechanic’s lien.

52 Tex. Prop. Code Ann. § 53.021(a) (West 2019).

53 Hayek v. W. Steel Co., 478 S.W.2d 786, 795 (Tex. 1972); see also In re Rotary Drilling, 2017 WL 4990440, at *3

(citing Hayek).

SDI’s evidence demonstrates that Mr. Bomer (1) labored and furnished materials, (2) in Texas, (3)

for the construction or repair of a building, (4) pursuant to a contract with the Debtor, who owned

the machines at the time. The Debtor has submitted no evidence to dispute the four elements of

this section.54 Instead, the Debtor relies on legal argument—essentially proposing that there are

only three ways that a party may obtain a lien on personal property, none of which apply here: (a)

through the filing of a UCC-1 financing statement to perfect a security interest under Article 9 of

the Texas Business and Commerce Code; (b) through the sale of property and the obtaining of a

purchase money security interest; and (c) through retaining of possession of the personal property.

The Debtor adds that, whatever lien SDI might have asserted could only have attached to the real

property and was, therefore, released.55 The Debtor’s arguments and evidence fail to address the

two discrete issues before the court: (1) whether the work Mr. Bomer performed satisfied the

elements of Section 53.021(a) of the Texas Property Code and entitled SDI to a statutory

mechanic’s lien in the underlying personal property; and (2) if so, whether SDI perfected that lien

in accordance with Section 53.052(a).

1. There is No Genuine Dispute of Material Fact that Mr. Bomer Provided Labor and

Furnished Materials, Satisfying the First Element of Section 53.021(a).

54 See Debtor’s MSJ, ECF 91 (attaching only SDI’s Proof of Claim No. 6-2 and SDI’s Partial Release of Lien as

evidence); Debtor’s Response, ECF 98 (attaching no evidence). At the Settlement Motion Hearing held on August 15,

2019, the Debtor presented the testimony of Richard Arn, President and Owner of CoreTech Industries, LLC. Mr. Arn

essentially testified that SDI’s agent, Mr. Bomer, made misrepresentations regarding his qualifications to work on the

Debtor’s machines and that, as a result, Mr. Bomer caused $150,000 worth of damage to the machines. However, Mr.

Arn did not refute that Mr. Bomer provided labor and materials or otherwise dispute SDI’s claim that Mr. Bomer spent

800 hours at the Debtor’s roll facility repairing and installing the machines. In fact, the uncontroverted summary-

judgment evidence shows that the Debtor paid over $40,000 worth of invoices, which supports SDI’s argument. The

next question is whether Mr. Bomer’s labor was to construct a house, building or improvement, as is required by the

statute. As discussed in more detail below, the court finds that Mr. Bomer’s labor extended to a building because

installation of the machines in question enabled the Debtor to begin operating its roll facility. With respect to the

fourth element, the bankruptcy court notes that Mr. Bomer performed services for the Debtor pursuant to an oral

contract that was completed in under a year and, thus, was not subject to the Statute of Frauds.

55 See Debtor’s MSJ, ECF 91 and Debtor’s Response, ECF 98.

SDI’s summary-judgment evidence demonstrates there is no genuine dispute whether Mr.

Bomer provided labor and furnished materials to the Debtor. Thus, SDI satisfied the first element

of Section 53.021(a). Section 53.021(a)(1), titled “Persons Entitled to Lien,” limits the availability

of the lien to persons that “labor[], specially fabricate[] material, or furnish[] labor or

materials. . .”56 Attached to SDI’s MSJ are invoices that reflect a mixture of labor and materials.57

The Debtor submitted no evidence to create a genuine dispute of material fact whether SDI

furnished labor and materials. In the Debtor’s MSJ, the Debtor states that it “hired Dynamic to

install the equipment,” and disputes only “what work Dynamic performed, whether the work was

preformed [sic] properly, whether all agreed upon work was paid for by Coretech, and whether

Dynamic damaged the Debtor’s equipment.”58 Thus, the summary judgment evidence

demonstrates there is no genuine dispute of material fact whether SDI’s agent, Mr. Bomer,

furnished labor and materials, and the first element of the statutory mechanic’s lien is satisfied.

2. There is No Genuine Dispute of Material Fact that Mr. Bomer Performed his Services

in Dallas, Texas, Satisfying the Second Element of Section 53.021(a).

Although the parties dispute whether Mr. Bomer repaired the machines, both parties agree

at least that SDI was hired to install heavy machinery at the Debtor’s roll facility.59 The Debtor’s

Voluntary Petition lists its principal place of business address at 8300 South Central Expressway,

Dallas, TX 75241.60 Thus, there is no genuine dispute whether the services potentially giving rise

to a statutory mechanic’s lien were performed in Texas. The second element of Section 53.021(a)

is satisfied.

56 Tex. Prop. Code Ann. § 53.021(a)(1) (West 2019).

57 See, e.g., Invoice #13731 dated 2/2/2016, SDI’s MSJ at Exh. 2, which shows $7,000 billed for machinery repair

service at $125/hour and three separate billings for an X Axis Encoder with Freight, an X Axis Encoder Cable, and a

Lube Pump and Motor Assembly.

58 ECF 91 at 2.

59 See id.; see also SDI’s MSJ, ECF 90 at 1, Exh. 2.

60 ECF 1.

3. There is No Genuine Dispute of Material Fact that Mr. Bomer Performed his Services

Pursuant to a Contract, Satisfying the Fourth Element of Section 53.021(a).

Skipping over to the fourth element of Section 53.021(a), the summary-judgment evidence

demonstrates that Mr. Bomer performed services pursuant to a contract with the Debtor and that

the Debtor owned the machines Mr. Bomer installed and serviced. In SDI’s MSJ, SDI asserts that

“the parties entered into an oral agreement whereby Southwest would install and service heavy-

duty lathes, reconditioned electronic systems and other equipment for CoreTech, which CoreTech

had recently purchased.”61 The invoices that SDI attached to its motion support its assertion of the

facts.62 The Debtor refutes neither that it had a contract with SDI nor that it owned the machines

SDI was hired to install and service.63 Rather, according to the Debtor, “the Debtor purchased

certain machinery to be used in its operation” and “[t]he Debtor hired Dynamic to install the

equipment.”64 Consequently, there is no genuine dispute of fact whether Mr. Bomer performed

services pursuant to a contract with the Debtor, who was the owner of the equipment. Although

the Debtor does not argue that the oral contract is invalid under the Statute of Frauds, as with any

oral agreement, there is potentially a Statute of Frauds issue. However, the court determines that

there is no genuine dispute of material fact that the agreement was for services that could be

performed in less than one year.65 Given that the summary-judgment evidence demonstrates there

is no genuine dispute of material fact whether Mr. Bomer performed services on machines owned

61 ECF 90 at 1.

62 Id. at Exhs. 2, 14.

63 See ECF 91, ECF 98.

64 ECF 91 at 2; see also ECF 98 at 2 (“The undisputed facts show that Southwest was originally hired to install

equipment at the Debtor’s leased location.”).

65 See, e.g., Niday v. Niday, 643 S.W.2d 919, 920 (Tex. 1982) (citing Tex. Bus. & Com. Code § 26.01) (“Where the

parties do not fix the time of performance and the agreement itself does not indicate that it cannot be performed within

one year, the contract does not violate the statute [of frauds]”); see also ECF 90 at 1 (“For the period from October 2,

2015 through May 2016, Mr. Bomer spent 800 hours at CoreTech’s plant working to install or repair

[machinery]. . . ”).

by the Debtor, pursuant to a valid oral contract with the Debtor, SDI has satisfied the fourth

element of Section 53.021(a).

4. When Section 53.021(a) is Construed Liberally, the Summary-Judgment Evidence

Shows There is No Genuine Dispute of Material Fact that Mr. Bomer Provided Labor

and Materials for the Construction of a Building.

Returning back to the third element now—whether the labor involved was in connection

with the construction or repair of a house, building, or improvement—this element requires more

analysis. The uncontroverted summary-judgment evidence certainly establishes that Mr. Bomer

worked to install machines in the Debtor’s building. Case law has made clear that the terms

“construction” and “building” should be construed liberally to protect laborers in Texas. The court

concludes that Mr. Bomer provided labor and material for the “construction” of a “building,” when

those terms are construed liberally, and SDI has satisfied the third element of Section 53.021(a).

The key is in the classification of the machines that Mr. Bomer serviced and installed.

While the machines are arguably neither houses, buildings, or improvements, as the statutory text

requires, it appears that the machines are “trade fixtures,” which is a type of equipment that is

affixed to the realty with permanent intent to enable the operation of a trade or business.66 Trade

fixtures have given rise to statutory mechanic’s liens under bankruptcy case law interpreting the

Texas mechanic’s lien statutes.67

The bankruptcy court considers Judge Harmon’s detailed and meticulous opinion in In re

Demay Intern. LLC, which affirmed the bankruptcy court’s ruling in favor of the mechanic’s lien

66 See In re Demay Intern. LLC, 471 B.R. 510, 526 (S.D. Tex. 2012) (affirming the bankruptcy court’s order granting

a statutory mechanic’s lien and reaffirming the longstanding definition of “trade fixtures” under Texas case law as

“such articles as may be annexed to the realty by the tenant to enable him to properly or efficiently to [sic] carry on

the trade, profession, or enterprise contemplated by the tenancy contract or in which he is engaged while occupying

the premises, and which can be removed without material or permanent injury to the freehold. . .”) (quoting C.W. 100

Louis Henna, Ltd. v. El Chico Restaurants of Texas, L.P., 295 S.W.3d 748, 754-55 (Tex. App.—Austin 2009, no

pet.)).

67 Id.

claimant, particularly instructive.68 The posture of that case was very similar to the one now before

this court. After leasing property for manufacturing and general industrial use, a debtor, Demay,

contracted with McCaffety, an electrician, “to install conduit copper wire, light fixtures, panels,

breakers and connections to (1) equipment (machines and air conditioning), (2) offices, (3) plugs,

and (4) switches, in addition to incoming primary service and outgoing secondary service to feed

low voltage and high voltage panels, and electrical controlling mechanisms” (i.e. electrical

components).69 Judge Harmon agreed with the bankruptcy court’s finding that the electrical

components were trade fixtures.70 A dispute over the nature of the electrical components arose

when Demay’s lease terminated and its bankruptcy estate was sold because, even though Demay

purchased the electrical components, its lease with the landlord included a term that, upon

termination of the lease, “improvements to the premises become property of the landlord.”71 A

secured creditor with an interest in all of Demay’s property objected to McCaffety’s proof of

secured claim and argued that “there was no valid materialman’s lien on the fixtures because such

a lien can only attach to the leasehold, not to personalty under Texas Property Code Section

53.002.”72 Affirming the bankruptcy court’s finding that the electrical equipment “was not merely

plugged in” but was “incorporated into the building leased by Demay for its business,” Judge

Harmon held that a “mechanic’s lien extends to fixtures as well as to the land to which they are

necessarily connected.”73

68 471 B.R. 510 (S.D. Tex. 2012).

69 Id. at 514.

70 Id. at 529.

71 Id. at 525 (emphasis added). Therefore, the outcome of the case turned, in part, on whether trade fixtures fell within

the definition of improvements.

72 Id. at 529. The secured creditor, GSL, argued this position because McCaffety’s purported mechanic’s lien arose

first-in-time and would have taken priority over GSL’s security interest.

73 Id. at 530 (citing 51 Tex. Jur. 3d. Mechanic’s Liens § 27 and First Nat. Bank in Dallas v. Whirlpool Corp., 517

S.W.2d 262, 266 (Tex. 1974)).

Applying the same analysis as Demay, there is no genuine dispute of material fact that Mr.

Bomer’s services amounted to “construction” of a “building,” which would satisfy the third

element of Section 53.021(a) and entitle SDI to a mechanic’s lien. As in Demay, where a contractor

was hired to install a trade fixture (i.e. various electrical components) into a building to enable it

to operate as a manufacturing plant, here, the Debtor hired SDI to install industrial machines so

that the Debtor could begin operating its leased building as a functional machine shop.74 And, as

in Demay, where installation of the electrical components rose to the level of incorporation into

the building, here, the evidence shows that SDI’s work to install the machines enabled the Debtor

to begin operations in its facility and complete at least one job, which generated $300,000 of

income for its business.75

Furthermore, industrial machines, like electrical components, are not “merely plugged in,”

but are incorporated into the building and, thus, included in the property reached by statutory

mechanic’s liens.76 First, Texas Property Code Section 53.022(a), aptly titled “Property to Which

Lien Extends,” states: “The lien extends to the house, building, fixtures, or improvements. . .”77

Because Texas law treats trade fixtures as a subset or special type of fixture, the language of the

Texas Property Code supports SDI’s lien on the machines themselves.78 Second, longstanding

Texas jurisprudence treats industrial machinery, like the lathe and welder and crane that the Debtor

74 See Id. at 514; ECF 91 at 2; ECF 90 at 2, Exh. 2.

75 See Demay, 471 B.R. at 530; ECF 90 at 2, Exh. 4.

76 See Whirlpool, 517 S.W.2d at 266 (contrasting refrigerators, which are merely plugged in and, thus, do not give rise

to a mechanic’s lien, with garbage disposals, which are incorporated into the building and give rise to a mechanic’s

lien).

77 Tex. Prop. Code Ann. § 53.022(a) (West 2019) (emphasis added). See also Demay, 471 B.R. at 528 (“Chattel that

have been incorporated into realty become ‘fixtures’ that are subject to a statutory mechanic’s lien.”).

78 In re Demay Intern., LLC, 431 B.R. 164, 176 (Bankr. S.D. Tex. 2010), aff’d sub nom. In re Demay Intern. LLC, 471

B.R. 510 (S.D. Tex. 2012) (quoting Jim Walter Window Components v. Tpk. Distrib. Ctr., 642 S.W.2d 3, 5 (Tex.

App.—Dallas 1982, writ ref’d n.r.e.)).

hired SDI to install, as trade fixtures.79 Third, in a more recent, 205-page opinion, Judge Martin

Glenn found that numerous industrial machines (e.g. presses that stamp sheet metal into auto body

parts and conveyor systems that were bolted to the building) that General Motors owned but

ultimately removed and liquidated in its bankruptcy case were fixtures subject to a lien perfected

by fixture filings.80

Here, the summary-judgment evidence shows that there is no genuine dispute that the

machines SDI was hired to install are trade fixtures and that the installation required Mr. Bomer

to perform 800 hours of engineering services to convert a building into an operational machine

shop.81 Furthermore, there is also no genuine dispute that, unlike equipment such as refrigerators,

the machines SDI was hired to install could not be “merely plugged in,” otherwise, why would the

Debtor have engaged SDI over the course of nearly eight months and paid over $40,000 for the

work without dispute? On the contrary, the unrefuted evidence demonstrated to the court that these

machines are complex pieces of industrial equipment that require highly specialized training and

79 See Phelan v. Boyd, 14 S.W. 290, 294-95 (Tex. 1890) (“It was held . . . that a sugarmill erected by the owner upon

land passed by the conveyance of the land. Mill machinery attached to the engine by a belt that could be detached and

moved without injury to the house or machinery, but which was necessary to the use and operation of the mill, and

which was put into the mill with the intention of establishing a permanent flouring and grist mill, was held to be a

fixture . . . A chattel may be annexed to the inheritance, and yet be removed without the [real property] owner’s

consent. In such case it would be a removable fixture, or, in other words, a chattel still, subject to be conveyed as any

other chattel . . . [T]he lathes, being a necessary part of the machinery for carrying on the business of the machine-

shop, were fixtures whether they were bolted to the floor or not.”) (emphasis added).

80 See In re Motors Liquidation Co., 576 B.R. 325, 340, 382 (Bankr. S.D.N.Y. 2017), leave to appeal denied sub nom.

Motors Liquidation Co., 17-CV-8712(AJN), 2018 WL 4284286 (S.D.N.Y. Sept. 7, 2018). Judge Glenn held that only

the equipment that the Debtor leased, rather than owned, were not fixtures. Although Judge Glenn applied Michigan

law in his opinion, Texas courts have employed a similar three-factor test to distinguish fixtures subject to a real-

property lien from equipment and other personalty not subject to a lien. See Demay Intern. LLC, 471 B.R. at 528 (“In

Logan v. Mullis, 686 S.W.2d 605, 607 (Tex. 1985), the Texas Supreme Court set out three factors relevant to

determining if personalty has become a fixture, i.e., a permanent part of the realty to which it is affixed: the mode and

sufficiency of annexation, the adaptation of the article to the use or purpose of the realty, and the intention of the party

who annexed the personal property.”).

81 See SDI’s MSJ at 1; Invoice #13735, SDI’s MSJ at Exh. 2 (itemizing the cost of “47.5 Days Engineering Services”

as $47,500.00).

materials to incorporate into a building.82 And machines like these are typically affixed to the real

property by bolts, though Texas case law treats them as fixtures “whether they [are] bolted to the

floor or not.”83

The Debtor has presented no evidence to dispute that the machines fall squarely within the

definition of “trade fixtures” under Texas law.84 Instead, the Debtor argues only that whatever lien

SDI asserts could have attached only to the real property and that, consequently, the lien is

unenforceable because SDI filed a Partial Release of Lien.85 The court disagrees. In Demay, which

the Debtor failed to distinguish both in its briefs and at oral arguments, Judge Harmon affirmed

the bankruptcy court’s ruling, finding a lien in favor of McCaffety even though Demay had leased

the building where its factory was located.86 When Demay sold all of its assets in bankruptcy,

McCaffety’s lien attached to the proceeds from the sale of the electrical components.87 Put simply,

on the issue of whether a mechanic’s lien can attach to trade fixtures installed at leased premises,

the relevant facts of Demay are nearly identical to the facts in this case.88 Thus, there is no genuine

dispute of material fact whether a statutory mechanic’s lien can attach to trade fixtures like the

machines in this case.

82 Mr. Arn’s allegations that Mr. Bomer misrepresented his qualifications and was underqualified to perform the work

only support the notion that installing these machines correctly is far more difficult than plugging in a refrigerator.

See Tape Recording, 8/15/2019 Hearing at 11:18:24 a.m.

83 See Phelan, 14 S.W. at 295.

84 See C.W. 100 Louis Henna, Ltd. v. El Chico Restaurants of Texas, L.P., 295 S.W.3d 748, 754-55 (Tex. App.—

Austin 2009, no pet.) (“The term ‘trade fixture’ has been defined many times by the courts. . . ‘It is now well settled

that, as between a landlord and his tenant, the term ‘trade fixtures' refers to and means such articles as may be annexed

to the realty by the tenant to enable him properly or efficiently to carry on the trade, profession, or enterprise

contemplated by the tenancy contract or in which he is engaged while occupying the premises, and which can be

removed without material or permanent injury to the freehold.’”).

85 See ECF 91, 98.

86 See 471 B.R. at 513.

87 Id. at 518 n. 13.

88 Other courts applying Texas law have also reached similar conclusions with regard to extending mechanic’s liens

to removable trade fixtures. See, e.g., In re Bigler LP, 458 B.R. 345, 371-74 (Bankr. S.D. Tex. 2011) (extending

mechanic’s lien to contractor that furnished custom boiler system even though boiler units were removable without

injury to building); Houk Air Conditioning, Inc. v. Mortg. & Tr., Inc., 517 S.W.2d 593, 595 (Tex. Civ. App.—Waco

1974, no writ) (extending mechanic’s lien to contractor that furnished and installed a furnace, an air conditioning coil,

compressor, thermostat and condensing unit).

Finally, there may be some question whether SDI’s installation of these machines

constitutes “construction or repair,” as the statute requires. Black’s Law Dictionary defines

“construction” as “The act of building by combining or arranging parts or elements; the thing so

built.”89 This court believes that, when construing the language of Section 53.021(a) “liberally”

for the express purpose of “protecting laborers and materialmen,” SDI’s activities fit within the

meaning of “construction.”90 After the Debtor leased its premises from Turner’s Machinery, Inc.

and purchased its machines, it could not immediately begin operating its business. There was, at

least, one intermediate step that involved the installation of industrial machines into the building.

Moreover, the Debtor was incapable of installing the machines itself. It required the skills and

materials of a specialist—hence, the Debtor hired SDI, allowed Mr. Bomer to provide “engineering

services” at its business for eight months, and paid SDI over $40,000 of the $120,000 it was billed.

In other words, the Debtor hired SDI to help “construct” a functional roll facility from the Debtor’s

nonfunctional leased premises, and this construction involved the installation of machines that

were affixed to the real property as trade fixtures. Accordingly, there is no genuine dispute of

material fact that SDI furnished labor and materials to construct a building.

Having satisfied all four elements of Section 53.021(a) of the Texas Property Code, SDI is

entitled to a statutory mechanic’s lien. However, the enforceability of SDI’s lien depends upon

whether SDI properly perfected the lien.

5. There is No Genuine Dispute of Material Fact that SDI Properly Perfected its

Mechanic’s Lien in Accordance with Texas Property Code Sections 53.051-53.054.

SDI successfully perfected its lien in accordance with Chapter 53 of the Texas Property

Code. In order to perfect a lien, a party must “file an affidavit with the county clerk of the county

89 CONSTRUCTION, Black’s Law Dictionary (11th ed. 2019).

90 See Hayek, 478 S.W.2d at 795; Whirlpool, 517 S.W.2d at 269.

in which the property is located . . . not later than the 15th day of the fourth calendar month after

the day on which the indebtedness accrues.”91 Moreover, “indebtedness accrues” to an original

contractor:

(1) on the last day of the month in which a written declaration by the original

contractor or the owner is received by the other party to the original contract stating

that the original contract has been terminated; or (2) on the last day of the month in

which the original contract has been completed, finally settled, or abandoned.92

And the affidavit must include, in pertinent part: “(1) the signature of the person asserting the lien;

(2) a sworn statement as to the dollar amount of the claim; (3) a general description of the work

and materials furnished; (4) the name and address of the person whom the claimant asserts the lien

against; (5) a description of the property where the materials and services were furnished; (6) the

claimant’s address; and (7) notice within five days of the filing of the affidavit.”93

Here, SDI has a properly perfected statutory mechanic’s lien. SDI submitted a copy of a

Lien Affidavit & Claim with its summary-judgment evidence.94 The Exhibit also contains (1) a

sworn statement of the amount of the claim; (2) the name and address of the Debtor as the reputed

owner of the machines, including Richard Arn’s name; (3) a description of the work done; (4) the

name and address of the original contractor, Southwest Dynamics, Inc.; (5) a legal description of

the property relating to the mechanic’s lien; (6) the claimant’s (i.e. SDI’s) address; and (7) a

certificate of notice.95 SDI sent the final invoice to the Debtor on April 29, 2016, so the

indebtedness for SDI’s services probably accrued on or around this day.96 Given that August is the

91 Tex. Prop. Code Ann. §§ 53.051, 53.052 (West 2019).

92 Id. § 53.053.

93 Id. § 53.054.

94 SDI’s MSJ at Exh. 14. The final page of Exhibit 14 is a copy of a receipt from the County Clerk’s office that reads:

“Filed and Recorded, Official Public Records, John F. Warren, County Clerk, Dallas County, TEXAS, 08/12/2016

12:45:22 PM, $74.00.” The receipt is stamped with an official seal and signed by a representative of the office.

95 Id. The Lien Affidavit & Claim was also properly notarized.

96 Id. (Invoice #13744). The date that a contractor completes its work plays a crucial role in determining whether the

contractor properly perfected its mechanic’s lien. Tex. Prop. Code Ann. §§ 53.051, 53.053 (West 2019). Accordingly,

the bankruptcy court notes that SDI claims it stopped performing services for the Debtor in May of 2016, as opposed

fourth calendar month after April and that SDI filed its Lien Affidavit & Claim on the twelfth day

of August, there is no genuine dispute that SDI complied with Section 53.052 and filed its Lien

Affidavit & Claim “not later than the 15th day of the fourth calendar month after the day on which

the indebtedness accrue[d]” and, therefore, properly perfected its statutory mechanic’s lien.97

Accordingly, SDI properly perfected its statutory mechanic’s lien and the only remaining issue is

the amount of the underlying debt.

B. SDI is, Alternatively, Entitled to a Lien Under the Texas Constitution.

Even if SDI does not have a statutory mechanic’s lien, SDI is, alternatively, a secured

creditor because it is entitled to a constitutional artisan’s lien (“constitutional lien”) for the value

of both the labor and materials furnished on the trade fixtures. Article 16, Section 37 of the Texas

Constitution provides:

Mechanics, artisans and material men, of every class, shall have a lien upon the

buildings and articles made or repaired by them for the value of their labor done

thereon, or material furnished therefor; and the Legislature shall provide by law for

the speedy and efficient enforcement of said liens.98

In some respects, the constitutional lien is more robust than the statutory mechanic’s lien. For

instance, it is self-executing and arises automatically without any filing of notice or any other

activity.99 Further, a constitutional lien is not dependent upon possession regardless of whether the

claimant works on a building or on personal property.100

Yet, despite the Texas Supreme Court’s ancient directive that this constitutional lien

provision “is as broad as language can make it,” the courts have developed three limitations on the

to April, the date of Invoice #13744. SDI’s MSJ at 2. However, under the court’s interpretation of the perfection

statutes, whether SDI stopped in April or May of 2016 should not make a difference to whether SDI perfected its lien.

97 See id.; Tex. Prop. Code Ann. § 53.052 (West 2019).

98 TEX. CONST. art. XVI, § 37.

99 See In re A & M Operating Co., Inc., 182 B.R. 997, 1000 (E.D. Tex. 1995), aff’d sub nom. In re of A&M Operating

Co., Inc., 84 F.3d 433 (5th Cir. 1996) (quoting Bassett v. Mills, 34 S.W. 93, 95 (Tex. 1896)).

100 50 Tex. Jur. 3d Liens § 44 (citing Shirley-Self Motor Co. v. Simpson, 195 S.W.2d 951 (Tex. Civ. App.—Fort Worth

1946)).

lien’s availability.101 First, the lienor must be in direct privity with the owner of the article or

building.102 Second, the constitutional lien extends only to work performed on an “article” or

“building,” as explicitly stated in the language of Section 37.103 Third, only mechanics, artisans

and material men may claim a constitutional lien.104 The summary-judgment evidence shows that

SDI incurred materials costs of $23,789 and billed the Debtor a total of $125,926. The difference,

$102,137, presumably relates to the 800 labor hours Mr. Bomer incurred providing services to the

Debtor. Thus, given that Mr. Bomer furnished both labor and materials and that the Texas

Constitution extends a lien for the value of “labor done . . . or material furnished,” SDI is

potentially entitled to a constitutional lien on the combined value of its labor and materials.105 After

reviewing the case law and the summary-judgment evidence, the bankruptcy court determines that

SDI is eligible to claim a constitutional lien on the full value of the work performed and materials

furnished (i.e. $125,926), contingent upon resolution in SDI’s favor of the underlying dispute

regarding the alleged damage SDI caused to the Debtor’s equipment.

1. SDI Qualifies as a “Mechanic,” an “Artisan,” and a “Materialman.”

As mentioned, only “mechanics, artisans, or material men” may claim a constitutional lien

in Texas, so SDI may claim one only if Mr. Bomer fits within the meaning of those terms. Several

years ago, Judge Jeff Bohm published a comprehensive opinion that analyzed the constitutional

lien in Texas and defined the relevant terminology.106 Under Texas law, a mechanic is “a person

skilled in the practical use of tools, a workman who shapes and applies material in the building of

101 See In re A & M Operating Co., Inc., 182 at 1000 (quoting Bassett v. Mills, 34 S.W. 93, 95 (Tex. 1896)).

102 Id. The first limitation plays a particularly important role in cases involving subcontractors but not in cases like

this, where SDI contracted directly with the Debtor. Another implication of this limitation is that the constitutional

lien is ineffective against a bona fide purchaser for value without prior notice of the lien.

103 Id. at 1001.

104 Id.

105 See TEX. CONST. art. XVI, § 37 (emphasis added).

106 In re Bigler LP, 458 B.R. 345, 375 (Bankr. S.D. Tex. 2011).

a house or other structure mentioned in the statutes; a person who performs manual labor.”107

Similarly, an artisan is “one skilled in some mechanical craft; one who is employed in an industry

or mechanic art or trade,” or “one trained for manual dexterity in some mechanic art or trade.”108

And, finally, a materialman is “a person who does not follow the business of building or

contracting to build homes for others, but who manufactures, purchases or keeps for sale materials

which enter into buildings and who sells or furnishes such material without performing any work

or labor installing or putting them in place.”109

Whereas one who labors to install materials into a building qualifies for a constitutional

lien, one who merely furnishes equipment does not. In Bigler, two creditors in the bankruptcy

each provided distinct services to the Debtor and later sought to claim a constitutional lien.110 The

first, Shaw, “fabricated and installed a process piping system” at the Debtor’s facility.111 The

second, Halgo, “furnished boilers and related equipment” to the Debtor’s facility.112 The parties

stipulated that Shaw was a “mechanic” or “artisan” and that it was also entitled to a constitutional

lien on the process piping system that it fabricated for Bigler.113 The parties further stipulated that

Halgo was a “materialman,” but not a “mechanic” or “artisan,” because it “purchased materials

from various manufacturers and furnished the materials to Bigler without performing any work

or labor installing them or putting them in place; indeed, it was Shaw who installed the Boiler

system.”114

107 Id. (citing Warner Mem’l Univ. v. Ritenour, 56 S.W.2d 236, 237 (Tex. Civ. App.—Eastland 1933, writ ref’d)).

108 Id.

109 Id. (citing Huddleston v. Nislar, 72 S.W.2d 959, 962 (Tex. Civ. App.—Amarillo 1934, writ ref’d)).

110 Id. at 360-62.

111 Id. (emphasis added).

112 Id. at 354.

113 Id. at 378.

114 Id. at 375.

In this case, SDI qualifies as an artisan, mechanic, and a materialman. Like Shaw, who

qualified as an artisan and mechanic because it installed a piping system into the building, SDI

qualifies as an artisan and mechanic not only because Mr. Bomer is “skilled in some mechanical

craft” and “skilled in the practical use of tools,” but also because the unpaid invoices giving rise

to a lien in this case stem primarily from the 800 hours that Mr. Bomer spent installing and

repairing complex industrial machines at the Debtor’s business.115 And just as Halgo qualified as

a materialman because it “purchased materials from various manufacturers and furnished the

materials to Bigler,” SDI also qualifies as a materialman because the invoices that Mr. Bomer

submitted include many line items reflecting the cost of specialized materials he had to order to

service the Debtor’s machines.116 The evidence here further supports that SDI qualifies as all three

of an artisan, mechanic and materialman because, unlike Bigler, which hired two separate

contractors to furnish and install a piping system, the summary-judgment evidence indicates that

Mr. Bomer was truly a one-man show, ordering parts, repairing the machines and installing them

over the course of several months spent at the Debtor’s facility. Accordingly, the court concludes

that SDI qualifies as an artisan, mechanic and materialman for purposes of claiming a

constitutional lien.

2. SDI Furnished Labor and Materials to “Repair” an “Article.”

Artisans, mechanics and materialmen can only claim a constitutional lien if they “made”

or “repaired . . . articles” or “buildings.”117

Halgo did not repair the equipment that Shaw incorporated into the boiler system, so Judge

Bohm had to determine whether Halgo “made articles” and could claim a constitutional lien for

115 See id.

116 See id.

117 See id. at 374 (emphasis added) (quoting TEX. CONST. art. XVI, § 37).

the value of his labor and materials.118 To answer this question, Judge Bohm had to first define the

operative terms. Looking to “to the usual and ordinary definition of ‘articles’ and ‘made’ because

they are not technical terms,” Judge Bohm observed that “made” means “‘produced or

manufactured artificially’ and ‘put together of various ingredients,” while “article” means a

“‘particular object or substance, a material thing or a class of things.’”119 Halgo ran an “equipment

packager integrator” business, “which means that it sizes and packages the boiler units to meet the

customer’s system demands.”120 Contrast Halgo, who “bought all of the pieces from various

companies,” to Shaw, who “put the parts together to make it whole,” and one can see how it was

Shaw’s work, alone, that rose to the level of “made.”121 Of particular relevance here, Judge Bohm

noted a “‘constitutional lien attaches to buildings and special-order articles,’” which he defined as

“articles made especially for a purchaser pursuant to a special order and in accordance with the

purchaser’s plan or specifications.”122 Ultimately, Judge Bohm concluded that Halgo did not make

the articles it furnished because “[e]ven if Halgo had put parts together . . . merely connecting

completely manufactured articles is not ‘making’ a final article.”123

SDI is entitled to claim a constitutional lien because it was hired not only to install the

machines, but it was also required to repair them, and these machines rise to the level of special-

order articles. The uncontroverted evidence was that the Debtor bought the machines used and

they were in a nonfunctional state when Mr. Bomer started working on them. That SDI did not

“make” the machines Mr. Bomer repaired does not matter. It matters only that Mr. Bomer either

118 See id. at 377.

119 See id. at 375-76 (citing Ball v. Davis, 18 S.W.2d 1063, 1067 (1929); In re: HYDRO-ACTION, INC., Debtor, 2004

WL 3104500, *11 (Bankr. E.D. Tex. 2004)).

120 Id.

121 Id. at 377-78.

122 Id. (emphasis original) (citing In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 741-42 (Tex. 2005); Whirlpool,

517 S.W.2d at 268) (concluding the boilers Halgo furnished were not special-made because they could “easily” be re-

used by another company).

123 See id.

“made” or “repaired” a building or article. Furthermore, unlike the boilers in Bigler, which were

ordered to specification but otherwise could be “easily” reused by another business, the machines

in this case needed to be fine-tuned to the Debtor’s specifications. Unlike Bigler, where Halgo

simply sourced two boilers for Bigler and then handed them over to Shaw to install, in this case,

the Debtor sought out someone qualified to remanufacture the machines to specification and then

install and integrate them into the rest of the Debtor’s floorplan to create a functional machine

shop. And unlike Halgo, who simply sourced the boilers and maybe purchased parts for

installation, SDI purchased parts that were necessary to repair the machines to specification. As

a result, SDI is entitled to claim a constitutional lien for the value of its labor and materials on the

machines he repaired.

C. The Amount of SDI’s Allowable Claim Remains an Open Question.

Circumstances that bar collection of the underlying debt may prevent enforcement of a

lien.124 At the current juncture, the parties are disputing whether or not SDI is secured without

having first addressed the (arguably preliminary) issue of whether SDI is even a creditor. In other

words, the Debtor has alleged that it has a $150,000 counterclaim that eliminates SDI’s entire

secured claim. Thus, the Debtor should file an Original Complaint to open an Adversary

Proceeding so that the parties may present additional evidence and fully adjudicate the issue of the

Debtor’s alleged counterclaim and whether SDI has an allowable claim as to which its mechanic’s

lien is enforceable.125

124 50 Tex. Jur. 3d Liens § 44; see also Sec. Lumber Co. v. Weighard Constr. Co., 413 S.W.2d 745, 748 (Tex. Civ.

App.—Texarkana 1967), aff’d sub nom. Univ. Sav. & Loan Ass’n v. Sec. Lumber Co., 423 S.W.2d 287 (Tex. 1967)

(observing materialman’s liens are “inseparable from the debt”).

125 See Fed. R. Bankr. P. 7001.

VI. Conclusion

SDI has presented sufficient summary judgment evidence to demonstrate that there is no

genuine dispute of material fact as to whether it is entitled to both a statutory mechanic’s lien and

a constitutional lien. In its Debtor’s MSJ and Debtor’s Response, the Debtor has failed to present

any evidence to create a material fact issue regarding SDI’s purported mechanic’s lien. Instead,

the Debtor’s argument stands almost entirely on the notion that any lien SDI asserts could have

attached only to the real property (i.e. the Debtor’s leased premises) and, thus, was terminated

when SDI filed its Partial Release of Lien, which released Turner’s Machinery, Inc. (i.e. the real

property owner) from SDI’s purported liens.126 However, bankruptcy case law interpreting the

relevant sections of the Texas Property Code clearly demonstrates that mechanic’s liens can attach

to a debtor’s trade fixtures even though the trade fixtures are affixed to leased premises.127 Given

that the machines in this case fit squarely within the definition of “trade fixtures,” and that SDI

perfected its lien according to statute in a timely fashion, SDI has demonstrated that there is no

genuine dispute of the material fact it is entitled to a statutory mechanic’s lien. Alternatively, SDI

has also shown it is entitled to a constitutional lien, pursuant to Article XVI of the Texas

Constitution.

WHEREFORE, SDI is granted summary judgment as to its secured status and partial

summary judgment to the Debtor is denied.

#### END OF MEMORANDUM OPINION AND ORDER ####

126 See ECF 91, 98.

127 See discussion supra Part V.A.4.