author: GREENHILL, Chief Justice. BARROW, Justice,

text:
    TWIN CITY FIRE INSURANCE COMPANY, Petitioner, v. Anita CORTEZ et al., Respondents.
    No. B-7576.
    Supreme Court of Texas.
    Dec. 20, 1978.
    Rehearing Denied Feb. 28, 1979.

      Gibson, Ochsner & Adkins, Mac W. Hancock, III, Amarillo, Strasburger & Price, Royal H. Brin, Jr., Dallas, for petitioner.
    Mike Millsap and Tom West, Lubbock, for respondents.
   GREENHILL, Chief Justice.

The main question presented in this workers’ compensation case is whether the beneficiaries of an award of weekly death benefit payments are entitled to mature such an award and recover a lump sum payment on the entire award when the insurance carrier fails, without justifiable cause, to make timely payments. The second question is whether, in the event that the lump sum payment is allowable, the payment is to be calculated without a discount for early payment of future benefits. The trial court rendered judgment for the beneficiaries, giving them a lump sum payment, without discount, on the entire award. The Court of Civil Appeals affirmed. 562 S.W.2d 940. We agree with the lower courts’ conclusion that a lump sum payment is proper in this case. We disapprove, however, of the refusal to allow a discount. We therefore reverse the judgments of both courts below and remand the cause to the District Court for the rendition of judgment in accordance with this opinion.

On November 19, 1973, Pedro Cortez, while acting in the course of his employment, suffered accidental injuries resulting in his death. On March 18,1975, the Industrial Accident Board awarded workers’ compensation benefits to Anita Cortez, the surviving widow, and to the six minor children of Pedro and Anita Cortez. The Board ordered Twin City Fire Insurance Company to pay benefits of $63.00 per week. These benefits were apportioned among Mrs. Cortez, her minor children, and her attorneys. The order directed that the weekly payments be continued until Mrs. Cortez’s death or remarriage. By subsequent agreement of the parties and approval of the Board, the attorney’s fee portion of the award was paid in a lump sum, discounted at four per cent; and no point regarding the attorney’s fee is before us.

Pursuant to the order of the Board, the company began making weekly payments to Mrs. Cortez. Due to a bookkeeping error, however, the company failed to make payments to Mrs. Cortez, either individually, or for the use and benefit of her minor children, during the period from June 14 to July 25 of 1976. The trial court found this failure to be “without justifiable cause,” and Twin City does not here complain of that conclusion.

On July 21, 1976, Mrs. Cortez and her children brought this suit against Twin City Fire Insurance Company, seeking to mature the death benefits award into a lump sum and to collect a twelve per cent penalty on the sum together with attorney’s fees.

Lump Sum Payment

The statute on which this suit is based, article 8307, section 5a, provides, in part:

Where the board has made an award against an association requiring the payment to an injured employé or his beneficiaries of any weekly or monthly payments, under the terms of this law, and such association should thereafter fail or refuse, without justifiable cause, to continue to make said payments promptly as they mature, then the said injured em-ployé or his beneficiaries, in case of his death, shall have the right to mature the entire claim and to institute suit thereon to collect the full amount thereof, together with twelve per cent penalties and attorney’s fees, as herein provided for. Suit may be brought under the provisions of this section, either in the county where the accident occurred, or in any county where the claimants reside, or where one or more of such claimants may have his place of residence at the time of the institution of the suit. [Emphasis added].

It will be noted that this provision specifically provides for the maturing of an award in the case of the death of a worker. Moreover, the enforcement statute entitles a claimant to recover both past-due installments and future benefits. See Home Indemnity Co. v. Mosqueda, 473 S.W.2d 456 (Tex.1971); Vestal v. Texas Employers Insurance Association, 285 S.W. 1041 (Tex.Com.App.1926, judgmt adopted); Middlebrook v. Texas Indemnity Insurance Co., 112 S.W.2d 311 (Tex.Civ.App.—Dallas), writ dism’d w. o. j. per curiam, 131 Tex. 163, 114 S.W.2d 226 (1938).

Twin City contends, however, that such a lump sum recovery of both past and future benefits is impermissible as to an award of death benefits. Under article 8306, section 8, of the Workers’ Compensation Act, the widow or widower of a deceased employee receives an award of weekly benefits that continues until either the death or remarriage of the beneficiary. The benefits payable to a child of the deceased may continue, under certain circumstances, until the child reaches twenty-five years of age, or for as long as the child is “actually dependent.” Article 8306, section 8(d), places the following limitation on an award of death benefits to a widow, widower, or children:

The benefits payable to a widow, widower, or children under this section shall not be paid in a lump sum except in events of remarriage or in case of bona fide disputes as to the liability of the association for the death. Any settlement of a disputed case shall be approved by the board or court only upon an express finding that a bona fide dispute exists as to such liability.

It is Twin City’s contention that this provision, which was enacted subsequent to the enforcement provision of article 8307, section 5a, either limits or partially repeals the enforcement statute so as to prevent lump sum awards of future death benefits.

We do not agree. As noted, the enforcement provision of article 8307, section 5a, explicitly applies to death benefits. In order to hold that the recent amendment to the statute, which limits the payment of a lump sum pursuant to an original award, also limits the payment of a lump sum under the enforcement statute, this court would be required to find that the newer statute has impliedly repealed the older provision. Repeal of laws by implication is not favored. Wintermann v. McDonald, 129 Tex. 275, 102 S.W.2d 167, 171 (1937). Unless a contrary intent is clearly shown, the Legislature is presumed to have enacted new or revised statutes with knowledge of the existing state of the law and with the intent that the new law be subject to the old. Allen Sales & Servicenter, Inc. v. Ryan, 525 S.W.2d 863, 866 (Tex.1975). Thus, when there is no clear repugnance between the provisions of old and new statutes, the duty of this court is to reconcile them and to construe both statutes so as to give effect to each. Wintermann v. McDonald, supra. In the absence of a clear conflict, each provision of the Workers’ Compensation Act is to be construed with every other provision to produce a harmonious whole. No single portion of the Act should be read as if standing alone. See Black v. American Bankers Insurance Co., 478 S.W.2d 434 (Tex.1972).

An analysis of the function and legislative history of these statutes, as well as related provisions, leads to a conclusion that there is no real conflict between the two statutes in question. Article 8306, section 8, sets out the means of compensating the beneficiaries of a deceased worker. It provides that these benefits are to be paid weekly. Other provisions of the Act similarly prescribe weekly payments to an injured worker. Thus, weekly, rather than lump sum payments, are the usual method of compensating both injured workers and beneficiaries under the Act.

The Act does contain, however, a general provision allowing parties to agree to a lump sum settlement. This provision also allows the Industrial Accident Board or a court, on appeal from a Board award, to award a lump sum payment if manifest hardship or injury would otherwise result. Although the statute specifically refers only to the authority of the Board, it has long been construed to apply to a court in which a trial de novo is held pursuant to an appeal from the Board’s decision. See Lumbermen’s Reciprocal Association v. Behnken, 112 Tex. 103, 246 S.W. 72 (1922).

Until the 1973 amendment of article 8306, section 8, this general statute on lump sum payments governed both injury and death benefits. In that year, the Legislature restricted lump sum awards of death benefits to two situations: when the widow or widower remarries, and when a bona fide dispute exists as to the liability of the insurance carrier for the death. A major reason for this special limitation on death benefit awards is, apparently, the fact that in 1973 the Legislature also removed the 360-week maximum time limit on the payment of death benefits so as to allow the benefits to continue until either the death or remarriage of the widow or widower. At present, death benefits are the only benefits recoverable under this Act that are not subject to a maximum time period.

Twin City contends that the limitations placed on lump sum payments of death benefits under article 8306, section 8, render a judgment for a lump sum under the enforcement statute impermissible. A comparison of the purpose of article 8306, section 8, the statute on awards of death benefits, and the purpose of enforcement provisions of article 8307, section 5a, however, shows that such is not the case. As stated earlier, the purpose of an original death benefit award is compensation, which the Legislature has indicated is, in most cases, best effected by weekly payments rather than a lump sum award. The main purposes of article 8307, section 5a, however, are to discourage insurance carriers from defaulting on their payments and to provide claimants with an effective, complete remedy in the event of such defaults. As indicated by the express language of the statute, the Legislature has chosen a lump sum award as the best means of fulfilling the purposes of the enforcement provision of article 8307, section 5a.

The limitations placed on lump sum awards by the death benefits statute no more apply to an enforcement proceeding under article 8307, section 5a, than do those limitations found in article 8306, section 15, the general lump sum statute. The lump sum statute limits the granting of an original lump sum award to those cases in which the parties agree or in which “manifest hardship and injury would otherwise result.” See Western Fire & Indemnity Co. v. Bradshaw, 356 S.W.2d 832, 835 (Tex.Civ.App.—Amarillo 1962, writ ref’d n. r. e.). These limitations, however, apply only to either a board award or an award by a court after a trial de novo. Their purpose is the same as the purpose of the death benefits statute: to encourage weekly payments rather than lump sum awards. The purpose of either the death benefits statute or the lump sum statute has no relevance in an enforcement proceeding brought under article 8307, section 5a, which functions as a swift, effective penalty against non-complying insurance carriers.

Twin City’s further contention that the indefinite nature of the present death benefit award renders maturing of the award an impossible task is not well founded. The Legislature itself, in creating special limitations on original lump sum awards in death benefits cases, specifically allows original lump sum awards when there is a bona fide dispute as to liability. Thus, even in original proceedings, both the Board and the courts may face the problem of calculating an award based on the life and remarriage expectancy of a widow or widower. The means of calculating the remarriage expectancy of a widow or widower admittedly create problems for the Board and for the courts. Nevertheless, the Legislature has expressly provided that lump sums of death benefits may be awarded when liability is disputed and has given no indication of an intent to abolish the right to a lump sum award under the enforcement statute. The fact that the Legislature has provided no specific guidelines for calculating remarriage expectancy in the event of a lump sum award is no basis for refusing to award a lump sum when the propriety of such an award is specifically provided for by the Act.

The problems of computing a lump sum death benefit award, although admittedly greater than those in injury cases, are not so great as to warrant denying beneficiaries’ enforcement rights under article 8307, section 5a. Cf. Middlebrook v. Texas Indemnity Insurance Co., 112 S.W.2d 311, 313 (Tex.Civ.App.—Dallas), writ dism’d w. o. j. per curiam, 131 Tex. 163, 114 S.W.2d 226 (1939). The need for protection of beneficiaries’ rights to timely payment of death benefits, which frequently are a primary means of support for a family, outweighs the inconvenience encountered in computing a lump sum. The Legislature will soon be in session; and if this opinion does not comport with its intent, it may, of course, clarify the matter.

DISCOUNT

In allowing a lump sum award in this enforcement proceeding, neither the trial court nor the Court of Civil Appeals allowed a discount of the award because of an early payment of future benefits. We hold that the following provision of article 8306a of the Workers’ Compensation Act requires a discount whenever an award is matured pursuant to an enforcement proceeding:

In all cases when the payments of weekly compensation due an injured employee or beneficiary coming within the provisions of the Workmen’s Compensation Act are accelerated by increasing the amount of compensation by correspondingly decreasing the number of weeks for which the same is to be paid, and when the liability of the insurance company is redeemed by the payment of a lump sum, by agreement of parties interested, or as a result of an order made by the Industrial Accident Board or a judgment rendered by a court of competent jurisdiction, and when advanced payments of compensation are made, and in all cases when compensation is paid before becoming due, discount shall be allowed for present payment at four (4%) per cent, compounded annually.

The statute specifically refers to the situation present in this case — i. e., when the liability of the insurance carrier is redeemed by a lump sum payment as a result of a court judgment.

Although this court has not before ruled on this particular point, we have previously ruled on the applicability of another provision of article 8306a to enforcement proceedings under article 8307, section 5a. In Home Indemnity Co. v. Mosqueda, 473 S.W.2d 456 (Tex.1971), this court held that the provisions of article 8306a with respect to interest on past-due installments applied to a suit by a beneficiary to mature a death benefit award. The court did not discuss the applicability of the discount provision of the statute. No point of error was raised on that issue. Nevertheless, the result in Mosqueda is consistent with the application of the discount provision to this suit and with the rule that the various provisions within an act are to be construed together so as to give effect to each. See Black v. American Bankers Insurance Co., 478 S.W.2d 434 (Tex.1972); Wintermann v. McDonald, 129 Tex. 275, 102 S.W.2d 167 (1937).

Applying the discount statute to a lump sum recovery granted in an enforcement proceeding results in no conflict with the language of article 8307, section 5a, the enforcement statute. The latter statute gives the claimant the right to “mature” “the entire claim” and to recover “the full amount thereof.” Recovery of the “full amount” does not necessarily mean that a discount of the recovery so as to approximate its present value is prohibited. Plaintiffs cite Vestal v. Texas Employers Insurance Association v. Harrington, 285 S.W. 1041 (Tex.Comm’n App.1926, judgmt adopted) and Texas Employers Insurance Association v. Harrington, 61 S.W.2d 167 (Tex.Civ.App.—Eastland 1933, writ dism’d by agr.), as authority for the proposition that no discount is permitted in an enforcement proceeding. Because both of these cases were decided prior to the enactment of the discount statute, we consider them inapplicable to the discount issue present in this case. In enacting the discount provision of article 8306a, the Legislature has provided a definition of a lump sum recovery of an “entire claim” — i. e., the present value of the award computed by allowing a discount of four per cent, compounded annually.

We agree with the judgment of the Court of Civil Appeals as to the lump sum recovery of the beneficiaries’ entire claim. We disagree, however, with its refusal to discount the recovery pursuant to the provisions of article 8306a. The record shows that the twelve per cent penalty and the attorney’s fees recovered under the enforcement statute were calculated by relying on the undiscounted lump sum award. The entry of a proper judgment calls for calculations that we think could best be made by the trial court with the assistance of counsel. Accordingly, the judgment of the courts below are reversed, and the cause is remanded to the District Court for the entry of a judgment in accordance with this opinion.

Dissenting opinion by BARROW, J., in which STEAKLEY, POPE and DANIEL, JJ., join.

BARROW, Justice,

dissenting.

I respectfully dissent.

The 1973 amendment to Article 8306, section 8, which provides death benefits under the Texas Workers’ Compensation Act made a significant change in the benefits which the surviving beneficiaries may recover. This progressive legislation provides extensive substitute income for the surviving beneficiaries in lieu of the limited and fixed weekly benefits provided under the former statute. In carrying out the legislative intent that the beneficiaries have the substitute income on a regular basis, the statute expressly limits the conditions wherein a lump sum payment can be made to two situations which are not applicable here.

Prior to 1973, Article 8306, section 8, provided for payment to the beneficiaries for the specific period of 360 weeks. Now there is no fixed or limited number of weekly payments, but rather the statute provides for weekly benefits until the surviving widow dies or remarries; and the minor children are provided for during their minority, until they reach the age of 25 years if attending school, or so long as they are dependent. To further this legislative intent of providing substitute income to the surviving widow and dependent children, the 1973 amendment expressly provides that the benefits payable to a widow or children shall not be paid in a lump sum except (1) in the event of remarriage, or (2) where there is a bona fide dispute as to the liability of the association. The latter provision requires that any settlement of such a disputed case must be approved by the Industrial Accident Board or court upon an express finding that a bona fide dispute exists as to such liability.

It is established that the maxim expressio unius est exclusio alterius applies to the construction of statutes. Harris County v. Crooker, 112 Tex. 450, 248 S.W. 652 (1923). Application of this rule here shows the legislative intent that the benefits not be paid in a lump sum in other than the two stated situations. This legislative intent is further demonstrated by the fact that the two situations wherein a lump sum payment can be made are both situations where the amount of benefits to be received by the beneficiaries is fixed in a certain amount or can be determined precisely. The intent that surviving beneficiaries be paid only in weekly benefits is further illustrated by the fact that the legislature did not provide any means for determining the amount of future benefits recoverable. Life expectancy tables, although not mentioned in the statute, do give a guide for the life expectancy of a surviving spouse. However, there probably is nothing more uncertain than the chances of, or the time for, the remarriage of a widow or widower. Furthermore, as long as there are minor children there is a possibility that one child might become dependent and thus entitled to benefits for the balance of that dependent child’s life. A prior lump sum payment would deprive that child of benefits it otherwise would receive.

The majority opinion correctly points out that the statute does not expressly repeal Article 8307, section 5a. This statute, which was enacted in 1917, authorizes an injured employee or his beneficiaries to mature the entire claim where the association fails or refuses, without justifiable cause, to make the weekly or monthly payments promptly. This statute is thus inconsistent with those provisions of Article 8306, section 8, which limit lump sum payments to the two stated exceptions.

It is a well-recognized rule of construction that in the event of inconsistency between two statutes, the statute enacted more recently must control since it is the latest expression of legislative will and intent. Allied Finance Company of Bay City v. Falkner, 397 S.W.2d 846 (Tex.1965). This rule is particularly applicable here in that the more recent statute deals specifically with the death benefits payable under a new scheme of providing substitute income to cover the lack of income caused by the death of the employee. It is a fundamental rule of construction that a general provision must yield to a succeeding specific provision. Forwood v. City of Taylor, 147 Tex. 161, 214 S.W.2d 282 (1948). This rule has particular significance where, as here, the specific statute makes a substantial change from the compensation scheme in effect since the general statute was enacted in 1917.

Although this Court has never construed this 1973 revision, I believe what was said in Texas Employers Insurance Association v. Motley, 491 S.W.2d 395 (Tex.1973) is applicable to the question before us. There the Court was considering the power of the trial court, as opposed to the power of the Industrial Accident Board, to order attorney’s fees paid in a lump sum although the employee was required to be paid in weekly installments after the jury failed to find a manifest hardship as required by Article 8306, section 15. This Court held that the trial court had the power although the Board did not and said:

“One reason for this is that when there is no death claim and when recovery is based on an award of the Board for a general injury, the total amount that the insurance company is to pay in installments may not be definitely ascertainable at the time of the award. The Board retains the right to modify the award. Moreover, if the employee dies before he receives all of the compensation awarded him in weekly payments, the cases say that the liability of the insurance company ceases; i. e., the unmatured portions of the claim are extinguished by his death. Texas Employers Ins. Assn. v. Phillips, 130 Tex. 182, 107 S.W.2d 991 (1937). Since this is so, the portion recoverable by the attorney may not be ascertainable with certainty at the time of the Board’s award. Hence a lump sum recovery to the attorney would present problems.
“On the other hand, if the compensation is based upon a judgment in court, which judgment has either become final or is affirmed, the amount awarded by the court does survive the workman’s death and is not subject to modification or reduction. Bailey v. Travelers Insurance Co., 383 S.W.2d 562 (Tex.1964). The attorney’s fees, therefore, may be fixed or approved with certainty by the trial court in the light of the amount which will be recovered by the workman or those claiming under him.” (Emphasis added).

I believe this reasoning when applied to the question before us explains why the legislature expressly provided that the death benefits could not be paid in a lump sum unless the widow remarried or a disputed liability case was settled. Prior to the 1973 revision of the death benefits, these benefits were fixed at 360 weeks. Now they are indefinite, uncertain, and not capable of precise determination. Death benefits are the only benefits recoverable under the Worker’s Compensation Act that are not subject to a maximum time period. This could explain why the legislature limited the authority for a lump sum payment under the new statutory scheme for death benefits.

I agree wholeheartedly with the legislative intent of Article 8307, section 5a, that the association should be penalized for failing to make the weekly payments on time. However, if the 12% penalty on the weekly payments which were not timely paid plus reasonable attorney’s fees is not an adequate penalty, the legislature should amend the statute to increase the penalty. I do not believe we should attempt to do so by a judicial construction of the death benefits statute contrary to the expressed intent of the legislature in Article 8306, section 8. I would limit the penalty and attorney’s fee to the weekly payment benefits which were not timely paid by petitioner.

STEAKLEY, POPE, and DANIEL, JJ., join in this dissent.

ON MOTION FOR REHEARING

STEAKLEY, POPE and SPEARS, JJ., join in this dissent.

      . All statutory references are to Texas Revised Civil Statutes Annotated.

      . Article 8306, section 8, provides:
      (b) The weekly benefits payable to the widow or widower of a deceased employee shall be continued until the death or remarriage of the beneficiary. In the event of remarriage a lump sum payment equal in amount to the benefits due for a period of two (2) years shall be paid to the widow or widower. The weekly benefits payable to a child shall be continued until the child reaches eighteen (18) years of age, or beyond such age if actually dependent, or until twenty-five (25) years of age if enrolled as a full-time student in any accredited educational institution. All other legal beneficiaries are entitled to weekly benefits for a period of three hundred and sixty (360) weeks.
      (c) Upon the termination of the eligibility of any child to receive benefits, the portion of compensation paid to such child shall thereafter be paid to any remaining child or children entitled to benefits under the provisions of this Act. If there is no other eligible child then such benefits shall be added to those being paid to the surviving spouse entitled to receive benefits under the provisions of this Act.

      . See, e. g., article 8306, sections 10 (total incapacity) and 11 (partial incapacity).

      . Article 8306, section 15, provides:
      In cases where death or incapacity in any degree results from an injury, the liability of the association may be redeemed by the payment of a lump-sum by agreement of the parties thereto subject to the approval of the Industrial Accident Board. Where in the judgment of the Board manifest hardship and injury would otherwise result, the Board may compel the association to redeem the liability by payment of the award of the Board in a lump-sum, and a discount shall be allowed for present payment in accordance with Article 8306a, of the Revised Civil Statutes of 1925, as amended.

      . Some states have provided for the use of remarriage tables to calculate the remarriage expectancy of a widow or widower. See Miss. Code Ann. § 71-3-37(10); N.Y.Work. Comp.Law art. 2, § 27, (1, 5) (McKinney).

      . Mrs. Cortez and her children, our Respondents, do not here claim the “full amount” of the original award. Some payments have been made, and the prayer is for the “full amount” of the unpaid benefits.

      . All statutory references are to Texas Revised Civil Statutes Annotated.

      . Article 8306, section 8, provides that in the event of remarriage a lump sum payment equal in amount to the benefits due for a period of two (2) years shall be paid to the widow or widower.


source: Caselaw Access Project

author: SAM D. JOHNSON, Justice.

license: Public Domain

text:
    DIVERSIFIED MORTGAGE INVESTORS, Petitioner, v. LLOYD D. BLAYLOCK GENERAL CONTRACTOR, INC., et al., Respondents.
    No. B-6725.
    Supreme Court of Texas.
    Dec. 20, 1978.

      Saner, Jack, Sallinger & Nichols, T. Rick Frazier, Alfred Sallinger and H. Louis Nichols, Dallas, for petitioner.
    Smith, Smith, Dunlap & Canterbury, George C. Dunlap and Bowen L. Florsheim, Dallas, for respondents.
   SAM D. JOHNSON, Justice.

ON MOTION FOR REHEARING

We grant the motion for rehearing filed by DMI only insofar as it deals with that part of our previous opinion relating to the issue of equitable subrogation. We therefore set aside our former judgment, withdraw our former opinion, and substitute the following in its place.

This case requires determination of the relative priorities of mechanic’s and materi-alman’s liens, deed of trust liens, and a vendor’s lien to which the mortgagee may be equitably subrogated. Lloyd D. Blaylock General Contractor, Inc. and Lloyd D. Blay-lock, individually, (hereinafter collectively referred to as “Blaylock”) hold duly perfected mechanic’s liens on certain properties pursuant to a construction contract with Dollar Inns of America, Inc. (“Dollar Inns”) and K. R. Riley. Diversified Mortgage Investors (“DMI”) holds deed of trust liens on these properties through financing arrangements whereby it provided permanent financing to Dollar Inns for the purchase of land, the purchasing of a prior vendor’s lien, and the construction of two motels on these properties. All parties sought a declaration of the priorities of their claims. In addition, Blaylock sought to recover the balance due on the construction contract and to foreclose the mechanic’s liens on the properties. In the alternative, Blaylock sought the right to follow the proceeds of the deed of trust foreclosure sales to acquire payment of the construction contract. The trial court rendered judgment against Dollar Inns and Riley, holding them liable on the construction contract; however, the trial court ruled that Blaylock take nothing from DMI because the deed of trust liens were superior to the mechanic’s liens. The court of civil appeals reversed and rendered, holding that DMI’s deed of trust mortgages were superior to the mechanic’s liens only to the extent such mortgages secured the purchase money, not the construction loans. Furthermore, the intermediate court held that Blaylock could recover $204,776.29 from DMI out of the proceeds of the deed of trust foreclosure sales. 548 S.W.2d 924. We reverse the judgment of the court of civil appeals as to the Fort Worth property and affirm the judgment of the trial court. We modify the judgment of the court of civil appeals as to the Irving property and, as modified, such judgment is affirmed.

The liens involved in the instant case arise from the financing and construction of two Dollar Inns motels — one in Fort Worth and one in Irving. Although the facts are similar as to each location, the lien priorities must be determined independently for each piece of property; therefore, the facts relative to construction and financing on the two pieces of property will be discussed separately.

FORT WORTH PROPERTY

Construction:

In the fall of 1972 Blaylock and Dollar Inns began negotiations for construction of two motels. Thereafter, on December 29, 1972, Dollar Inns and Blaylock entered into a preliminary agreement whereby Blaylock agreed to construct motels on both the Fort Worth and Irving sites pursuant to a general construction contract to be executed at a later date. At this time, Dollar Inns further directed Blaylock to proceed with construction on the land as much as possible until the building permit could be obtained. Pursuant to such an agreement, subcontractors of Blaylock began subsurface investigation of the site on January 24, 1973. Such work involved the drilling of core bor-ings and analysis of the content of the soil. Thereafter, between January 25, 1973 and March 1, 1973, another subcontractor of Blaylock performed job site engineering and topographical survey work upon the site, which entailed the placing of various stakes and iron rods to locate drives, grades, and building sites upon the land. By March 1, 1973 approximately one hundred fifty stakes and eight iron rods were placed on the land and stood visibly one to three feet above the ground. During this period, on February 21,1973, Blaylock and Dollar Inns finalized their agreement in a written construction contract. On March 5, 1973 lumber for batter boards was delivered, and delivery of fill dirt was begun. Erection of the batter boards was begun on the same day as delivery and such work was completed by March 9, 1973. Batter boards are L-shaped structures which stand two feet off the ground and extend five feet in each direction. Such boards define the corners of the building and are preparatory to building the foundation. At the same time the batter boards were being erected, and continuing for approximately forty-five days, Blaylock began spread operations with the fill dirt being delivered. Such operations entailed the moving of dirt upon the land to prepare the ground for the foundation and the grading of the lot and involved six trucks and front-end loaders working on the property. Excavation for a retaining wall was also begun. As of March 9, 1973 all batter boards were erected, and a sign was placed at the job site indicating that construction of a Dollar Inns motel was in progress. Thereafter, on March 16, 1973, a building permit was obtained for the Fort Worth project. After the permit was received, foundation work was begun by a subcontractor of Blaylock. Such foundation work required the subcontractor to excavate for perimeter beans around the foundation and to lay the concrete foundation upon the dirt pad formed during the spread operations. After the completion of construction, on January 19, 1974, Blaylock filed its mechanic’s lien pursuant to Article 5453, Texas Revised Civil Statutes Annotated, to secure the unpaid portion of the construction contract relative to the Fort Worth project, amounting to $68,009.29.

Financing:

In November 1972 Dollar Inns began negotiations with DMI concerning permanent financing for the construction of two motels. Similar negotiations were conducted with Palomar Mortgage Investors in January 1973. On December 11, 1972 Dollar Inns, acting through K. R. Riley, contracted to purchase property in Fort Worth from J. M. Loffland, Jr., trustee. Under such contract of sale, Dollar Inns placed $5,000 earnest money in escrow. Later, Dollar Inns placed an additional $5,000 in escrow in order to extend the closing date beyond the January 15, 1975 closing date specified in the contract of sale. The $10,000 earnest money was later applied toward the total cost of closing. On February 16, 1973 Dollar Inns and Palomar executed a loan agreement by which Palomar agreed to provide interim financing for the purchase of the Fort Worth property and construction of a motel thereon. Palomar, in exchange for its funds, received Dollar Inns’ promissory note in the amount of $1,200,000 and secured the same through a deed of trust covering the Fort Worth property and improvements erected thereon. Such loan agreement incorporated by reference a commitment of DMI dated November 10, 1972 and a commitment of Palomar dated January 15, 1973. In such commitments and a tri-party agreement executed by Dollar Inns, DMI, and Palomar, it was agreed that Palomar would provide interim financing for the purchase of land and construction of the motel and that DMI would provide permanent financing after construction was completed. Thereafter, on March 8, 1973, Dollar Inns consummated the purchase of the Fort Worth property at a purchase price of $135,000. At that time the property was free and clear of any liens. Palomar, through the title company, paid Dollar Inns $598,352.45, $135,000 of which was used to purchase the Fort Worth property. On March 9, 1973 the deed of trust was filed and recorded. On February 5, 1974, after construction was completed on the Fort Worth motel, Palomar assigned its security interest in the Fort Worth motel and property, as well as to the Irving motel and property, to DMI for a total consideration of $2,757,150. After the assignment, Dollar Inns defaulted on its deed of trust. DMI foreclosed its deed of trust lien on the property with the motel located thereon and purchased the same at the foreclosure sale on December 3, 1974 for a price of $600,000.

IRVING PROPERTY

Construction:

As stated, Dollar Inns and Blaylock began negotiations concerning construction of two motels in the fall of 1972; they entered into a preliminary agreement on December 29, 1972 whereby Blaylock agreed to construct motels on both sites pursuant to a general construction contract to be executed at a later date. At this time, Dollar Inns directed Blaylock to proceed with construction on the land as much as possible until the building permit could be obtained. Thereafter, on January 25, 1973, wooden stakes were delivered to the property and topographical work and job site engineering were conducted, continuing until March 1, 1973. As a result of such work, the layout of the building was visibly staked on the property as of March 1, 1973. During this period, on February 21, 1973, Blaylock and Dollar Inns entered into a written construction agreement. On March 25,1973 lumber for the batter boards was delivered and erection of such batter boards began and was completed by April 2, 1973. On April 5, 1973 a subcontractor to Blaylock commenced general site clearance and excavation which included the removal of several large trees, the clearing of the land, and the removal of a swimming pool which had previously been located on the property. Also at this time fill dirt was delivered to the site and spreading operations were begun, involving truck haulers and a truck loader at the site. On April 7, 1973 concrete section pipe was delivered to the site. Thereafter, on April 11, 1973, a building permit was obtained and a subcontractor began work on the concrete foundation. Such foundation work required excavation for perimeter beams and the laying of the concrete foundation on the dirt pad formed by the spread operations. After construction of the motel was completed, on January 9, 1974, Blaylock filed his mechanic’s lien affidavit in accordance with Article 5453 to secure the unpaid portion of the construction contract relative to the Irving project, amounting to $136,767.

Financing:

As stated, as early as November 1972 Dollar Inns began negotiations with DMI and later, in January 1973, with Palomar Mortgage Investors concerning the financing for the purchase of land and construction of two motels. On January 18, 1973 Dollar Inns entered into a contract of sale with First Madison Corporation to purchase property in Irving, Texas. The total purchase price was $309,900, of which $200,000 was paid by Dollar Inns on January 18, 1973. On February 16, 1973 Dollar Inns and Palomar entered into a loan agreement wherein Palomar agreed to provide interim financing for the purchase of the Irving land and the construction of a motel thereon. Such loan agreement incorporated a previous commitment issued by Palomar dated January 15, 1973 and a commitment issued by DMI dated November 10, 1972. These commitments, in addition to a tri-party agreement executed by DMI, Palomar, and Dollar Inns, provided that interim financing was to be furnished by Palomar and that DMI agreed to provide permanent financing after completion of construction. Palomar, in exchange for its funds, received Dollar Inns’ promissory note in the amount of $1,665,000 and secured same through a deed of trust on the Irving property and improvements thereon. The closing of the sale of the Irving property to Dollar Inns was consummated on April 5, 1973 for a total purchase price of $309,900, of which $109,900 was used to pay off a prior vendor’s lien held on the land by First Bank and Trust of Richardson under a deed of trust dated July 26, 1972. As a result of the transaction, First Bank and Trust of Richardson executed a release of lien to the property. On April 12, 1973 the deed of trust on the Irving property was filed and such deed was recorded on April 13, 1973. On February 5, 1974, after completion of construction of the motel, Palomar assigned its interest in the deeds of trust to both the Fort Worth and the Irving properties to DMI for a total consideration of $2,757,150. Thereafter, Dollar Inns defaulted on its deed of trust and DMI conducted a foreclosure sale on the property under its deed of trust on December 3,1974. DMI purchased the property at such sale for a consideration of $1,200,000.

The instant suit was brought by Blaylock to recover the balance due under the construction contract, to foreclose the mechanic’s liens on the two properties, and to obtain an order of sale of the two properties. By amended petition, it further sought a declaration by the court that its mechanic’s liens were superior to the deed of trust liens on the properties and that DMI’s title to the two properties was burdened with the mechanic’s liens. In the event the court found that the mechanic’s liens were extinguished by the deed of trust foreclosures, Blaylock sought to recover the amount of the mechanic’s liens from the proceeds received by DMI at the foreclosure sales in excess of the purchase money loaned by Palomar, DMI’s assignor. DMI answered with a general denial and pleaded that the deed of trust liens against the properties were superior to the mechanic’s liens.

The trial court, in an interlocutory summary judgment on February 21,1975, ruled against Dollar Inns and K. R. Riley, holding them liable on the construction contract to Blaylock. This interlocutory judgment was later incorporated into the final judgment rendered on January 15,1976. Neither Dollar Inns nor Riley appealed the judgment to the court of civil appeals or to this court; accordingly the trial court judgment as to these parties is final. After rendering the interlocutory judgment, the trial court proceeded to conduct a non jury trial on the issues of priority of the mechanic’s liens and the deed of trust liens held by DMI. The trial court held that the deed of trust liens were superior to the mechanic’s liens; therefore, judgment was rendered that Blaylock take nothing against DMI. On appeal, the court of civil appear^ reversed the trial court. The court of civil appeals held that the mechanic’s liens had their inception prior to the deed of trust liens held by DMI. However, the intermediate court held that a purchase money lien on property is superior to a mechanic’s lien, regardless of the inception of the mechanic’s lien, because a mechanic’s lien cannot antedate ownership of the property. The court of civil appeals further noted that DMI’s deeds of trust secured both the purchase money and the construction loan funds and held that the deed of trust liens were senior only to the extent that they secured the purchase money loaned. Therefore, Blaylock could proceed against DMI to have its liens satisfied out of the foreclosure sales proceeds received by DMI, as mortgagee, in excess of the purchase money loaned by Palomar, DMI’s assignor. Both DMI and Blaylock have appealed, asserting that the court of civil appeals erred in its determination of the priority of the liens. DMI further urges that the intermediate court erred in its determination of the inception of the mechanic’s liens involved herein.

INCEPTION OF MECHANIC’S AND MATERIALMAN’S LIENS

As a general rule, a properly perfected mechanic’s lien “relates back” to a time referred to as the inception of the lien for the purpose of determining lien priorities. Therefore, the court of civil appeals held that the priority of the various liens involved in the instant case hinged upon the court’s determination of the inception of the mechanic’s liens held by Blaylock. In determining the inception of the mechanic’s liens, the court relied upon Section 2 of Article 5459, which provides:

“The time of the inception of the lien, as used in this article, shall mean the occurrence of the earliest of any one of the following events:
“(a) The actual commencement of construction of the improvements or the delivery of the material to the land upon which the improvements are to be located for use thereon for which the lien herein provided results, provided such commencement or material is actually visible from inspection of the land upon which the improvements are being made; . . ”

Subsections 2(b) and 2(c) further provide that the inception of the lien may be established by recordation of a written construction contract or recordation of an affidavit swearing to the existence of an oral contract for construction. However, in the instant case no party has contended that such a written construction agreement or affidavit was filed for the purposes of delineating the time of the inception of the liens. Therefore, determination of the inception of Blaylock’s mechanic’s liens depends upon this court’s construction of Article 5459, Section 2(a).

The court of civil appeals determined that the final proviso of Article 5459, Section 2(a), was controlling in determining the inception of a mechanic’s lien; this proviso states:

“[PJrovided such commencement or material is actually visible from inspection of the land upon which the improvements are being made; . . . ”

By placing its emphasis upon this clause, the court of civil appeals enunciated the following standard to be applied in determining the inception of the mechanic’s lien:

“Thus, we feel that the chief inquiry to be made by the courts is whether there was visibility of commencement of construction such that a person, upon inspection of the land, would be put on notice that construction work had commenced or, because of material delivered and resting on the land, work was to commence shortly thereafter.” 548 S.W.2d 924 at 931.

The intermediate court applied this “visibility” standard in determining that Blaylock’s mechanic’s liens on both the Fort Worth and Irving projects were incepted prior to the execution or recordation of the deeds of trust. The court of civil appeals determined that the staking, fill dirt, and batter boards were visible from an inspection of the land and would indicate that “construction of improvements” had commenced upon the land. The intermediate court further determined that the delivery of stakes, iron rods, concrete pipe, and lumber for batter boards constituted the visible “delivery of material” to the land. As such construction activities and delivery of material occurred prior to the execution and recordation of the deed of trust liens, the court of civil appeals held that Blaylock’s mechanic’s liens were incepted prior to the deed of trust liens held by DMI, as assignee of Palomar.

DMI urges that the court of civil appeals erred in relying solely upon a “visibility” standard in determining the inception of the mechanic’s liens. DMI maintains that Blaylock’s activities prior to execution and recordation of the deeds of trust were only preparatory and preliminary to construction and did not constitute “actual commencement of construction of the improvements” as required by Article 5459, Section 2(a). Furthermore, DMI contends that the material delivered to the sites prior to execution and recordation of the deeds of trust do not constitute “material” as that term is defined in the statutes relating to mechanic’s and materialman’s liens: specifically, Article 5452, Section 2(b), which defines “material” as those items “consumed in the direct prosecution” of construction or “incorporated in the work.” Therefore, DMI urges that Blaylock’s activities on the projects prior to execution and recordation of the deeds of trust were not of the necessary degree or character to delineate the inception of a mechanic’s lien.

This court does not place reliance solely upon a “visibility” standard to determine the inception of mechanic’s liens under Article 5459. Article 5459, when read in conjunction with the other statutes governing mechanic’s liens, clearly provides additional standards or conditions which must exist before a mechanic’s lien is incepted. Article 5459, Section 2(a), specifies two categories of activities which delineate the inception of a mechanic’s lien: (1) the actual commencement of construction of the improvements; or (2) the delivery of material to the land upon which the improvements are to be located. This court must construe these provisions of the statute in order to determine what types of activities these inception-creating categories entail.

Central to the construction of the phrase “commencement of construction of the improvements” is a definition of the term “improvement.” Under the Texas mechanic’s and materialman’s lien statutes, the term “improvement” is given an extended meaning, including more than a building, an addition to a building, or a fixture. Under Article 5452, “improvement” is defined as:

“The word ‘improvement’ as used herein shall be construed so as to also include: abutting sidewalks and streets and utilities therein; clearing, grubbing, draining or fencing of land; wells, cisterns, tanks, reservoirs or artificial lakes or pools made for supplying or storing water; all pumps, siphons, and windmills or other machinery or apparatus used for raising water for stock, domestic use or for irrigation purposes; and the planting of orchard trees, grubbing out of orchards and replacing trees, and pruning said orchard trees. . . . ”

Therefore, under the Texas statute, the term “improvement” has been expanded to encompass certain types of work or activity, as well as structures. Accordingly, the activities encompassed by the “commencement of construction” category is similarly enlarged. Where the activity defined as an “improvement” has been commenced or is being performed, such activity is sufficient to constitute commencement of construction of an improvement under Article 5459.

On the other hand, where a building or a structure is the principal “improvement” involved, the statutory provisions of Article 5459, Section 2(a), are less definitive in establishing the inception of the mechanic's lien. The issue becomes whether construction of the structure itself is necessary or whether on-site preparation for such construction is sufficient. The majority of other jurisdictions dealing with statutes with similar wording has held that preliminary or preparatory activities are not sufficient to constitute commencement of construction. Specifically, these courts have held that such preliminary work as staking, measuring, filling, or making test holes is insufficient to define the inception of the lien. New Hampshire Savings Bank v. Varner, 216 F. 721 (8th Cir. 1914), affirmed, 240 U.S. 617, 36 S.Ct. 409, 60 L.Ed. 828 (1916); Kiene v. Hodge, 90 Iowa 212, 57 N.W. 717 (1894); Rupp v. Earl H. Cline & Sons, Inc., 230 Md. 573, 188 A.2d 146 (1963); National Lumber Company v. Farmer & Son, Inc., 251 Minn. 100, 87 N.W.2d 32 (1957); North Shaker Boulevard Co. v. Harriman Nat. Bank, 22 Ohio App. 487, 153 N.E. 909 (1924); Annot., 1 A.L.R.3d 822. The majority of other jurisdictions has held that commencement of construction of a structure does not occur until there is a beginning of substantial excavation for or the laying of the foundations, footings, or bases of the new structure. Mortgage Associates, Inc. v. Monona Shores, Inc., 47 Wis.2d 171, 177 N.W.2d 340 (1970); Annot., 1 A.L.R.3d 822. Kiene v. Hodge, supra; Carr-Cullen Co. v. Deming, 176 Minn. 1, 222 N.W. 507 (1928); North Shaker Boulevard Co. v. Harriman Nat. Bank, supra. See also cases cited in Annot., 1 A.L.R.3d 822, 830-35.

It appears to this court that the approach taken by the majority of other jurisdictions is sound in that both the mechanic or mate-rialman and other lienholders will be best served by a definitive measure for lien inception, rather than the case-by-case analysis enumerated by the court of civil appeals in the instant case. Such a standard would be a valid interpretation of Article 5459, which requires the “actual commencement of construction of the improvements.” This court interprets the term “actual” as to require the placing of something of permanent value on the land, as opposed to preliminary or preparatory activities or structures. Therefore, under most circumstances, the commencement of construction of the improvements in the form of a building or a structure must entail the excavation for or the laying of the foundation. Accordingly, under the commencement of construction category in Article 5459, the inception of the mechanic’s and material-man’s lien occurs only when the activity: (1) is conducted on the land itself; (2) is visible upon the land; and (3) constitutes either (a) an activity which is defined as an improvement under the Texas statute or (b) the excavation for or the laying of the foundation of a building or a structure.

The second category of activities under Article 5459, Section 2(a), which can give rise to the inception of a mechanic’s lien is “the delivery of material to the land upon which the improvements are to be located.” Central to a construction of this category is the definition of the term “material” as used in the mechanic’s and mate-rialman’s lien statutes. “Material” is defined in Article 5452, Section 2 b, as follows:

“b. The words ‘material,’ ‘furnish material,’ or ‘material furnished’ as used in this Act are to be construed to mean any part or all of the following:
“(1) Material, machinery, fixtures or tools incorporated in the work, or consumed in the direct prosecution of the work, or ordered and delivered for such incorporation or such consumption. . . ”

Accordingly, under such a definition only the delivery of certain types of material will constitute the inception of a mechanic’s lien: specifically, either material which will be incorporated into the permanent structure or material which will be consumed or used up during the construction of the permanent structure. Therefore, in order for the delivery of material to constitute the inception of a lien, the court must find: (1) that there has been a delivery of material to the site of construction; (2) that such material is visible upon inspection of the land; and (3) that such material constitutes either (a) material which will be consumed during construction or (b) material which will be incorporated in the permanent structure.

The instant case must now be viewed under these standards and guidelines. The facts indicate that Blaylock’s activity on the Fort Worth project was insufficient to constitute commencement of construction or delivery of material prior to recordation of the deed of trust on March 9, 1973. The construction activities performed by Blaylock prior to March 9 consisted of the following: subsurface investigation, topographical survey work, the spreading of fill dirt, staking, erection of batter boards, excavation for a retaining wall, and erection of a sign. Such activities constitute merely preliminary or preparatory work for construction and do not constitute the actual commencement of construction. Actual construction began after March 16, 1973 when foundation work was begun on the property. Similarly, the material delivered to the site is not of the character to give rise to the inception of a lien. Such material included bundles of stakes and fill dirt. None of this material ultimately formed part of the permanent structure or was consumed in such construction, but was merely preliminary or preparatory material used prior to actual construction. Therefore, the inception of Blaylock’s mechanic’s lien on the Fort Worth project was after March 16, 1973 and after recordation of the deed of trust lien on the property held by DMI, as assignee of Palomar.

On the other hand, the work performed by Blaylock on the Irving project was sufficient to constitute the inception of a mechanic’s lien prior to the recordation of the deed of trust on April 13, 1973. At least three aspects of Blaylock’s activities on the Irving project were sufficient to constitute inception of the mechanic’s lien. First, a subcontractor to Blaylock performed excavation, clearing, and work in the nature of grubbing activity on the land commencing on April 5,1973. Such activity included: general site clearance, the digging up and removal of several large trees, and the digging up and removal of a swimming pool which was previously located on the site. This character of activity is encompassed under the expanded definition of “improvement,” which includes “clearing, grubbing, draining or fencing of land.” Therefore, as such clearing activity was performed on the Irving site, was visible upon inspection of the land, and was the performance of an activity included as an “improvement” under the mechanic’s lien statutes, it is sufficient to constitute inception of the mechanic’s lien as of April 5, 1973. In addition, affidavits and testimony indicate that concrete section pipe was delivered to the Irving site on April 7, 1973. Such material was to be incorporated in the permanent structure and was not material used for merely preparatory or preliminary activities. Therefore, as the concrete pipe was delivered to the site, was visible upon inspection of the site, and constitutes a material which will form part of the permanent structure, its delivery is sufficient to constitute inception of the lien on April 7, 1973. Finally, the trial court found that foundation work was begun on the property after April 11, 1973. The laying and excavation of a foundation clearly constitute commencement of the construction of an improvement under the standard enunciated by this court previously in this writing; therefore, such foundation work was sufficient to constitute inception of the lien on April 11,1973. Accordingly, the delivery of material and construction activity on the Irving project were sufficient to constitute inception of the mechanic’s lien prior to the April 13, 1973 recordation of the deed of trust held by DMI, as assignee of Palomar.

PRIORITY OF LIENS

Having determined the inception date of the mechanic’s liens relative to the recordation of the deed of trust liens, this court must now determine the priorities of such liens. The court of civil appeals determined that regardless of the inception date of the mechanic’s liens, a purchase money lien has priority. The court of civil appeals relied upon Irving Lumber Company v. Alltex Mortgage Company, 468 S.W.2d 341 (Tex.1971), which the intermediate court interpreted as holding:

“[WJhere a purchase money deed of trust was executed contemporaneously with the vesting of title in the mortgagor, then the purchase money deed of trust lien would have priority over a mechanic’s lien since the title of the mortgagor was burdened instantly with the purchase money deed of trust lien before the mechanic’s lien attached to the mortgagor’s title.” 548 S.W.2d 924 at 932.

However, the court of civil appeals restricted the priority of the deed of trust liens such that they were superior only to the extent of the purchase money loaned on the properties. The intermediate court followed the rule that a lien is impressed with the character of the debt it is given to secure. National Western Life Insurance Co. v. Acreman, 415 S.W.2d 265 (Tex.Civ.App.—Beaumont 1967), modified, 425 S.W.2d 815 (Tex.1968); C. D. Shamburger Lumber Co. v. Holbert, 34 S.W.2d 614 (Tex.Civ.App.—Amarillo 1931, no writ); Thompson v. Litwood Oil & Supply Co., 287 S.W. 279 (Tex.Civ.App.—Waco 1926, no writ). Therefore, it held that the deed of trust liens held by DMI were impressed with the character of both a purchase money mortgage lien and a construction loan mortgage lien. The court of civil appeals, therefore, determined that the portion of the deed of trust liens which secured the construction loan was not superior to a mechanic’s lien incepted prior to such deed of trust. The court of civil appeals further held that although the foreclosure sales extinguished all inferior liens on the properties, Blaylock was entitled to pursue a portion of the proceeds of the foreclosure sales in the hands of DMI, relying upon Habitat, Inc. v. McKanna, 523 S.W.2d 787 (Tex.Civ.App.—Eastland 1974, no writ).

Under Article 5459, a properly perfected mechanic’s lien has priority over all other liens, encumbrances, or mortgages upon the land. However, Article 5459 further states that such mechanic’s liens will not affect liens, encumbrances, or mortgages on the land at the time of inception of the mechanic’s lien. Specifically, Article 5459 provides:

“Section 1. The lien herein provided for shall attach to the house, building, improvements or railroad for which they were furnished or the work was done, in preference to any prior lien or encumbrance or mortgage upon the land upon which the houses, buildings or improvements, or railroad have been put, or labor performed, and the person enforcing the same may have such house, building or improvement, or any piece of the railroad property, sold separately; provided, any lien, encumbrance or mortgage on the land or improvement at the time of the inception of the lien herein provided for shall not be affected thereby, and holders of such liens need not be made parties in suits to foreclose liens herein provided for.”

Article 5459 was amended in 1971 in reaction to the first opinion rendered in Irving Lumber Company v. Alltex Mortgage Com pany, 14 Tex.Sup.Ct.J. 212 (July 2, 1971), which allowed oral construction contracts to indicate the inception of a mechanic’s lien thereby in effect allowing the creation of silent or secret mechanic’s liens. Therefore, the amendment to Article 5459 was aimed at defining “inception of a lien” and created the system whereby mortgagors could rely upon notice in the county records or by visual inspection of the property as to any existing liens on the property. The first opinion in Irving Lumber Company was withdrawn on motion for rehearing and the second opinion substituted. The second opinion did not deal with the issue of secret mechanic’s liens, but rather dealt with the issue of attachment and priority of mechanic’s liens. In the second opinion the court held that a mechanic’s lien must attach to the interest of the person contracting for construction; where such person owns no interest in the property, there is no interest to which the mechanic’s lien may attach. Accordingly, such lien could not attach until the person contracting with the mechanic or the materialman owned an interest in the land, which in Irving Lumber was at the time of purchase.

Our courts have long held that a mechanic’s and materialman’s lien attaches to the interest of the person contracting for construction. Thus, if a lessee contracts for construction, the mechanic’s lien attaches only to the leasehold interest, not to the fee interest of the lessor. Grube v. Nick’s No. 2, 278 S.W.2d 252 (Tex.Civ.App.—El Paso 1955, writ ref’d n. r. e.); Penfield v. Harris, 7 Tex.Civ.App. 659, 27 S.W. 762 (Tex.Civ.App.1894, writ ref’d). Similarly, the courts have held that a mechanic’s lien may attach to an equitable interest of one holding an option on land, but that such lien is extinguished if the fee is not obtained by the optionee. Kelly v. Heimer, 312 S.W.2d 430 (Tex.Civ.App.—San Antonio 1958, writ ref’d n. r. e.). It should be noted that there is also a line of Texas cases which holds that mere contemplation of acquisition of title is sufficient for attachment of the mechanic’s lien. Breckenridge City Club v. Hardin, 253 S.W. 873 (Tex.Civ.App.—Fort Worth 1923, no writ); Schultze v. Alamo Ice & Brewing Co., 2 Tex.Civ.App. 236, 21 S.W. 160 (1893). However, the majority of jurisdictions and the better rule generally require that the person contracting with a mechanic or a materialman must have some interest in the property either legal or equitable upon which the lien may attach. Sebastian Building & Loan Ass’n v. Minten, 181 Ark. 700, 27 S.W.2d 1011 (1930); Mansfield Lumber Co. v. Gravette, 177 Ark. 31, 5 S.W.2d 726 (1928); Sontag v. Abbott, 140 Colo. 351, 344 P.2d 961 (1959); Society Linnea v. Wilbois, 113 N.W.2d 603 (Iowa 1962); Wayne Building & Loan Co. of Wooster v. Yarborough, 228 N.E.2d 841 (Ohio 1967); and Paget v. Peters, 133 Or. 608, 286 P. 983 (1930). Proceeding on this principle, the majority of the courts generally applies the doctrine of “after-acquired title” or the “relation back” doctrine. These doctrines hold that the lien attaches to whatever legal or equitable interest the contracting party had when the work was begun, and thereafter attaches to any other or greater interest whenever acquired before the lien is enforced: provided that the after-acquired title enlarges an estate or interest to which the lien has already become attached. Jones v. Mawson-Peterson Lumber Co., 112 Colo. 493, 150 P.2d 795 (1944); Service Lumber & Supply Co. v. Cox, 98 Fla. 40, 123 So. 820 (1929); Paget v. Peters, supra. See also Annot., 52 A.L.R. 693. Accordingly, the priority of a mechanic’s lien not only depends upon the inception of the lien, but also upon whether the party contracting with the mechanic or the materialman has a legal or equitable interest in the property at the time of contracting.

In the instant case this court found that the inception of the mechanic’s lien on the Fort Worth property was not prior to the March 9,1973 recordation of the deed of trust held by DMI. As a consequence, under Article 5459, all liens or mortgages existing upon the land prior to the time of the inception of the mechanic’s lien do not become subordinate to such mechanic’s lien. Therefore, DMI’s deed of trust lien, both as to the purchase money mortgage and the construction loan mortgage, is superior and senior to Blaylock’s mechanic’s lien on the Fort Worth property. Accordingly, the foreclosure sale of the senior lien extinguished the junior lien, Irving Lumber Company v. Alltex Mortgage Company, supra.

On the other hand, this court has determined that the inception of Blaylock’s mechanic’s lien on the Irving site was prior to the April 13, 1973 recordation of DMI’s deed of trust on such property. To further determine the priority of the mechanic’s lien, this court must decide whether Dollar Inns, the party contracting with Blaylock, held any legal or equitable interest in the property at the time of inception of this mechanic’s lien. Dollar Inns, on January 18, 1973, prior to the inception of the mechanic’s lien, had executed a contract to purchase the Irving property from First Madison Corporation. Pursuant to such contract, Dollar Inns paid First Madison Corporation $200,000. Therefore, at the time of inception of Blaylock’s mechanic’s lien, Dollar Inns held an equitable right or interest in the land under a contract of purchase to which such mechanic’s lien could attach. Under the doctrine of after-acquired title, the security for such mechanic’s lien was later expanded to include the legal title to the property acquired by Dollar Inns when the sale was consummated on April 5, 1973 for a total price of $309,900. Accordingly, in the instant case the date of the inception of the mechanic’s lien and the date of attachment of such lien are concurrent. This is distinct from the fact situation in Irving Lumber Company wherein the date of inception of the mechanic’s lien arose prior to the attachment of such lien. In the instant case where there exist concurrent dates of inception and attachment of the mechanic’s lien, the date of inception of the mechanic’s lien will determine its priority over other liens. The date of inception of the mechanic’s lien preceded both the execution and recordation of DMI’s deed of trust lien on the Irving property; therefore, if there was no other factor involved, such mechanic’s lien would be senior and superior.

There is an additional factor, however, and that is the doctrine of equitable subrogation. It will be remembered that First Bank and Trust of Richardson held a vendor’s lien on the Irving property under a July 26, 1972 deed of trust. This vendor’s lien preceded any interest of any of the parties to this action. At the April 15,1973 closing of the sale of the Irving property, this lien was purchased by Dollar Inns with funds provided by Palomar for $109,900. At such time, First Bank and Trust of Richardson executed a release of the lien. Palomar, in exchange for its funds, received Dollar Inns’ promissory note in the amount of $1,665,000, which was secured through a deed of trust on the Irving property and improvements thereon. These funds covered both the purchase price and construction costs on the Irving site. Later, Palomar assigned all of its interest in the deeds of trust to DMI. Under these facts both the trial court and the court of civil appeals found that DMI was equitably subrogated to the vendor’s lien rights of First Bank and Trust of Richardson. We are in accord with this determination.

As long ago as 1895 this court recognized the favorable view afforded the doctrine of equitable subrogation. As stated in Faires v. Cockrill, 88 Tex. 428, 31 S.W. 190, 194 (1895):

“Perhaps the courts of no state have gone further in applying the doctrine of subro-gation than has the court of this state, of which we cite a few instances. One who discharges the vendor’s lien upon lands— even the homestead, — either by paying as surety, or at the request of the debtor, or at a judicial sale, which, for irregularities in the process, fails to convey the title, is entitled to be subrogated to the lien of the creditor to the extent of the payment so made.” [Citations omitted.]

We recognize the importance of this doctrine to lenders in this state. It serves to protect a lienholder from intervening liens, at least to the amount of the initial lien, when the lienholder has discharged a prior superior lien.

It might be argued that the doctrine of after-acquired title as enunciated in this opinion should serve to establish the priority of Blaylock’s lien. It might be asserted that since Blaylock’s lien incepted and attached at a time when Dollar Inns had an equitable interest in the land (by virtue of its contract of sale), the Blaylock lien should be expanded to include the subsequently acquired legal interest free from the burdens of DMI’s liens. The flaw in this reasoning is that First Bank and Trust of Richardson’s vendor’s lien existed prior to the time of either Dollar Inns’ equitable or legal interest in the land. To borrow from another decision by this court:

“By virtue of its subrogation to the first lien, [DMI] occupied the same position as [First Bank] with respect to that lien. Its deed of trust did not create an entirely new lien but preserved the existing lien and prescribed new terms and conditions for foreclosure.” Providence Insti-tntion for Savings v. Sims, 441 S.W.2d 516, 520 (Tex.1969).

If Blaylock is to reap the benefits of Dollar Inns’ subsequently acquired legal title, then it must also accept the burdens on that title; specifically, the preexisting vendor’s lien held by First Bank and Trust of Richardson.

To put the matter more clearly, let us suppose that at the time of closing on the Irving property Dollar Inns had not purchased and the Richardson bank had not sold and released its vendor’s lien. This would result in the Richardson bank holding a vendor’s lien, Blaylock having a mechanic’s and materialman’s lien, and DMI having a deed of trust lien. Under those circumstances, it could not be doubted but that the Richardson bank would hold the senior lien, superior to both Blaylock’s and DMI’s liens. That being the case, it also cannot be gainsaid that DMI stepped into the shoes of the Richardson bank, at least to the extent of the Richardson bank’s lien, by virtue of the doctrine of equitable subrogation. By foreclosing its deed of trust lien, DMI foreclosed the preexisting vendor’s lien secured thereby and it may now assert the priority of the bank’s lien.

The result of this holding is that the liens stand in the following order of priority: (1) the Richardson bank’s vendor’s lien in the amount of $109,900, to which DMI was sub-rogated ; (2) Blaylock’s mechanic’s lien in the amount of $136,767; and (3) the balance due on the note secured by the deed of trust held by DMI. The fundamental essence of this holding is that all proceeds received at the foreclosure sale of December 3, 1974 in excess of $109,900 (the extent of DMI’s subrogation) were excess proceeds. It will be recalled that the Irving property sold at the foreclosure sale for the sum of $1,200,-000. The total amount of consideration received by DMI in excess of the preexisting vendor’s lien to which it is subrogated was thus $1,090,100. The unpaid portion of the construction contract relative to the Irving property was $136,767. Under these circumstances, we are squarely faced with the precise question on which this court reserved judgment in Irving Lumber Company, supra: whether Blaylock may pursue the excess proceeds of the foreclosure sale. We agree with the court of civil appeals’ holding that Blaylock may pursue the excess proceeds. See L. M. Sullivan Co. v. Essex Broadway Sav. Bank, 380 A.2d 1087 (N.H.1977); New Jersey Building, Loan & Investment Co. v. Bachelor, 54 N.J.Eq. 600, 35 A. 745 (1896). See also East Atlanta Bank v. Limbert, 191 Ga. 486, 12 S.E.2d 865 (1941); Boeschenstein v. Burde, 284 S.W. 202 (Mo.App.1926). See generally Westinghouse Elec. Co. v. Vann Realty Co., 568 S.W.2d 777 (Mo.1978). This is the logical result inasmuch as DMI’s right of subrogation extends only to the amount of the preexisting vendor’s lien. See W. C. Belcher Land Mortgage Co. v. Taylor, 212 S.W. 647 (Tex.Com.App.—1919, jdgmt. adopted).

In summary, this court holds that DMI’s deed of trust lien on the Port Worth property was senior and superior to Blaylock’s mechanic’s lien; therefore, the deed of trust foreclosure extinguished the junior mechanic’s lien. As to the Irving property, DMI’s deed of trust lien is senior and superior to Blaylock’s mechanic’s lien only to the extent of the Richardson bank’s preexisting vendor’s lien in the sum of $109,900. Beyond that amount, Blaylock has a valid and subsisting lien in the amount of $136,767; however, the sale by the trustee under the deed of trust transferred the land itself free of all liens; therefore, Blaylock’s security interest has transferred to the excess proceeds from the sale, which stand in the place of the property and may be reached by Blaylock. Jeffrey v. Bond, 509 S.W.2d 563 (Tex.1974); Pearson v. Teddlie, 235 S.W.2d 757 (Tex.Civ.App.—Eastland 1950, no writ). Whatever remains thereafter goes to DMI on the balance due on the note. Since DMI bid in the land at its own foreclosure sale, no cash actually changed hands. Instead, DMI took title to the land in cancellation of part of the loan. Consequently, we are of the opinion that the court of civil appeals correctly determined that Blaylock’s proper remedy was in the form of money judgment against DMI for the unpaid amount of its lien on the Irving property. Habitat, Inc. v. McKanna, supra; L. M. Sullivan Co. v. Essex Broadway Sav. Bank, supra.

The judgment of the court of civil appeals relative to the Fort Worth property is reversed and the judgment of the trial court is affirmed. The cause of action relative to the Irving property is severed. As severed, the judgment of the court of civil appeals relative thereto is modified to allow Blaylock to recover a judgment against DMI in the amount of $136,767. As modified, such judgment is affirmed.

      . The parties stipulated that K. R. Riley executed the contract on behalf of and as nominee for Dollar Inns of America, Inc.

      . The $598,352.45 paid to Dollar Inns by Palomar at the time of closing was advanced to cover both the purchase price of the Fort Worth property and the Irving property. The combined purchase price of the properties was $434,900. The remainder of the loan proceeds advanced was to be used toward construction of the motels. The record does not indicate when if ever Dollars Inns received the balance of the loan; however, the court of civil appeals held:
      “These instruments [checks representing purchase money, loan agreements, promissory notes, and deeds of trust], together with the fact that the motels were completed, gives us no hesitancy in finding, as the trial court did, that Palomar at the closings advanced the purchase money and, according to the loan agreements, made periodic advancements of the entire loan proceeds as the construction of the motels progressed and was completed stage by stage.” 548 S.W.2d 924 at 934.

      . See footnote 2 concerning advancement of funds by Palomar to Dollar Inns to cover purchase price and additional construction costs.

      . Article 5452, Section 2b, states:
      “b. The words ‘material,’ ‘furnish material,’ or ‘material furnished’ as used in this Act are to be construed to mean any part or all of the following:
      “(1) Material, machinery, fixtures or tools incorporated in the work, or consumed in the direct prosecution of the work, or ordered and delivered for such incorporation or such consumption. . . . ”

      . Irving Lumber Company v. Alltex Mortgage Company, 14 Tex.Sup.Ct.J. 212, was first rendered on July 2, 1971. In reaction to the first opinion, the 62d Legislature drafted Senate Bill 733; the Bill Analysis to Senate Bill 733, prepared March 22, 1971, indicated that the purpose of the Bill was:
      “To amend Article 5459, VTCS, to define the term ‘time of inception of a lien’ to clarify when the lien or [sic] the land attaches.”
      The Bill was passed and became immediately effective on May 17, 1971 under an emergency clause, which provided:
      “Sec. 2. The importance of this legislation and the crowded condition of the calendars in both Houses and the problems and confusion created by the Texas Supreme Court’s recent decision in the case of Irving Lumber Company v. AUtex Mortgage Company create an emergency and an imperative public necessity that the Constitutional Rule requiring bills to be read on three several days in each House be suspended, and this Rule is hereby suspended; and this Act shall take effect and be in force from and after its passage, and it is so enacted.” 1971 Tex.Sess.Law Serv., ch. 231, § 1, at 1082 (Vernon). [Emphasis added.]
      Simultaneous to the Legislature’s action, the Supreme Court was considering the motion for rehearing in Irving Lumber. Pursuant to such motion, the court withdrew the first opinion and substituted the second opinion on May 19, 1971, recorded at 468 S.W.2d 341. The second opinion does not construe or refer in any way to the amendment to Article 5459.

      . “Whether Irving was then entitled to pursue a portion of the proceeds of the sale in the hands of Alltex is not raised in this case . . .” 468 S.W.2d 341 at 344.


author: GREENHILL, Chief Justice. McGEE, Justice,

text:
    HARRIS COUNTY, Relator, v. Honorable George E. MILLER, Judge, Respondent.
    No. B-7887.
    Supreme Court of Texas.
    Jan. 24, 1979.
    Rehearing Denied March 7, 1979.

      Joe Resweber, County Atty., David R. Hurley, Asst. County Atty., Houston, for relator.
    Thurlow & Hennessy, Nicholas E. Zito, Ira D. Watrous, William B. Portis, Jr., Houston, Frank W. Elliott, Lubbock, Ralph E. Gustafson, Houston, for respondent.
   GREENHILL, Chief Justice.

In this original mandamus proceeding, Harris County has petitioned this court to order the trial judge to vacate an order reinstating a case on the ground that the trial court has lost jurisdiction to do so under Rule 165a.

The question before us is whether a trial court has jurisdiction to reinstate a case previously dismissed for want of prosecution, when more than thirty days have elapsed since the signing of the dismissal order and when the plaintiff has received notice of the court’s intention to dismiss before the expiration of twenty days after dismissal. We hold that, under those circumstances, the trial court has no jurisdiction to reinstate a case. We therefore conditionally grant the mandamus.

This proceeding arises out of an action brought by Leon Vogtman against Harris County to recover damages for personal injuries received in an automobile collision. Vogtman filed the suit on August 14, 1974, in Harris County.

Some three and a half years later, in 1978, the Vogtman suit was placed on the automatic dismissal docket. On March 1, 1978, Vogtman’s attorney received actual notice of the trial court’s intention to dismiss the case. The attorney claims that, in response to this notice, he timely filed a motion and order to retain the case on the docket. Although the transcript contains no such motion, we will assume, for purposes of this opinion, that the motion was filed and was subsequently lost through clerical error. Believing that his motion to retain had been granted, Vogtman’s attorney filed a trial setting request on April 11, 1978, and on that date caused the ease to be set on the trial docket for May 15, 1978.

On April 12, 1978, the trial judge, who apparently had not been informed of the actions taken by Vogtman’s attorney, signed an order dismissing Vogtman’s case for want of prosecution. Vogtman and his attorney, in turn, were unaware of the dismissal until May 12, 1978, when the attorney for Harris County delivered to Vogtman’s attorney a copy of a motion to strike Vogtman’s trial setting. On the same day, Vogtman’s attorney filed a motion to reinstate the case. On May 15,1978, the court heard Vogtman’s motion to reinstate and on that same day entered an order granting the motion.

The question of the trial court’s jurisdiction to reinstate the case on May 15,1978, is governed by Rule 165a of the Texas Rules of Civil Procedure, which sets out the procedure for dismissal of a case for want of prosecution and for any subsequent reinstatement. The rule provides in part:

Within thirty days after the signing of the order of dismissal, the court shall reinstate the case upon finding, after hearing, that the failure of the party or his attorney was not intentional or the result of conscious indifference but was due to an accident or mistake. Where after a hearing the court finds that neither the party nor his attorney received a mailed notice, or acquired actual notice in any manner, of either the court’s intention to dismiss or the order of dismissal prior to the expiration of twenty days after the signing of such order, the court may reinstate the case at any time within thirty days after the party or his attorney first received either a mailed notice or actual notice, but in no event later than six months after the date of signing the order of dismissal.

As this court stated in Danforth Memorial Hospital v. Harris, 573 S.W.2d 762 (Tex.1978), Rule 165a provides specific rules for three distinct situations: (1) when the party or his attorney receives mailed or actual notice prior to the expiration of twenty days after the dismissal order is signed, the court’s jurisdiction to reinstate the case is limited to thirty days from the date of dismissal; (2) when the party or his attorney does not receive either mailed or actual notice before the expiration of this twenty-day period but does receive such notice within six months from the date the dismissal order is signed, the court has jurisdiction to reinstate the case within thirty days after the party or his attorney received the notice; (3) after the expiration of six months from the date the dismissal order is signed, the court has no jurisdiction to reinstate the case under Rule 165a. The remedy, in that situation, is by way of a bill of review.

Vogtman’s case falls within the first of the three above-described situations, since he received actual notice of the court’s intention to dismiss the case prior to the expiration of twenty days after dismissal. The notice that a party or his attorney must receive before the expiration of this twenty-day period may be either notice of the court’s intention to dismiss or notice of the actual dismissal. That the rule renders either type of notice sufficient is made clear from the language of the rule itself. The rule specifically refers to both types of notice. Furthermore, the use of the term “prior to the expiration of twenty days [after the dismissal]” instead of language such as “within twenty days of the dismissal” indicates that notice may be received before the dismissal order is signed. Such notice would necessarily be notice of the court’s intention to dismiss rather than notice of the actual dismissal.

Thus, Rule 165a provides in substance that if the plaintiff or his attorney receives notice of either the court’s intention to dismiss the case or the actual dismissal before, or prior to, the expiration of twenty days after the dismissal order is signed, the trial court’s jurisdiction to reinstate the case is limited to thirty days after the signing of the dismissal order. See Danforth Memorial Hospital v. Harris, 573 S.W.2d 762 (Tex.1978). Filing of a motion to reinstate within the thirty-day period is not sufficient. The case must be actually reinstated during that period. See N-S-W Corporation v. Snell, 561 S.W.2d 798 (Tex.1977).

Although the rule provides that the plaintiff is to receive notice of dismissal as provided in Rule 306d, Rule 165a also stipulates that the failure to mail required notices will have no effect on the finality of any order of dismissal except in those situations specifically set out in the above-quoted paragraph. Thus, if a party receives timely notice of the court’s intention to dismiss, the fact that he does not also receive notice of the actual dismissal within twenty days after the signing of the dismissal order cannot serve as a basis for extending the thirty-day time limit on the court’s jurisdiction to reinstate the case.

Vogtman contends that his filing of a motion to retain, and his causing the setting of the case for trial in response to the notice of intent to dismiss, constitute actions sufficient to make the thirty-day time limit inapplicable. This contention is not well founded. Rule 165a makes no reference to a party’s right to extend the jurisdiction of the trial court simply by filing a motion to retain a case or by causing the case to be set on the docket for trial. Further, such actions do not deprive the trial court of its power to dismiss the case regardless of whether the filing of the motion and the setting of the case for trial are brought to the court’s attention. Vogtman was not entitled to presume that his motion to retain would be brought to the court’s attention and would be granted.

We, therefore, are of the opinion that the relief herein prayed for should be granted; i. e., that the trial court should vacate the order for reinstatement. We will presume that the trial court will comply with this opinion; and the writ of mandamus will issue only if the reinstatement order is not vacated.

Concurring opinion by McGEE, J.

McGEE, Justice,

concurring.

I concur in the majority’s disposition of this case. I do so reluctantly, however, because I believe Rule 165a of the Texas Rules of Civil Procedure, as presently written, leads to an unnecessarily harsh result.

Presently, the notice that a litigant or his attorney must receive before the expiration of the 20-day period may be either notice of the court’s intention to dismiss or notice of the actual dismissal. I believe that this case well illustrates the need for an additional device to protect the litigant’s cause of action. In my opinion the administration of justice would be better served if Rule 165a were revised to require both a notice of intention to dismiss the cause and a notice of the dismissal order. Under this revision the rule should be adapted to cover three situations: (1) when the litigant or his attorney receives mailed or actual notice of the signed dismissal order within 20 days of the dismissal, the trial court has 30 days from the day of dismissal to reinstate the case; (2) when the litigant or his attorney does not receive either mailed or actual notice of the signed dismissal order before the expiration of this 20-day period but does receive such notice within six months from the date the dismissal order was signed, the court has jurisdiction to reinstate the case within 30 days after the litigant or his attorney received the notice; (3) after the expiration of six months from the date the dismissal order is signed, the court has no jurisdiction to reinstate the case under Rule 165a, and the litigant is relegated to a remedy by bill of review.

In the present case it appears unjust to deny reinstatement of the case. Vogtman timely filed a motion to retain the case on the docket, but this instrument was apparently lost due to clerical error. The case was dismissed on April 12, 1978 and no notice of this dismissal order was mailed to Vogtman or his attorney. Exactly one month later when actual notice of the dismissal order was received, Vogtman immediately filed a motion to reinstate the case. Under these circumstances, Vogtman should have been allowed to reinstate the case under the second of the three above described situations.

      . All references to rules are to the Texas Rules of Civil Procedure.

      . The transcript does contain an affidavit signed by a law clerk for Vogtman’s attorney in which the law clerk states that he delivered the “motion to retain” to the Harris County District Clerk. There is no statement of facts available to us.