In re Dixon, Bankrupt.

the evidence whether the original debt was evidenced by more than one note or not; but it does appear that in January, 1878, by agreement of parties, the said indebtedness was divided into five parts and five new notes were given by the bankrupt for sums ranging from $100 to $150.

This was done, as the record shows, for the purpose of bringing the notes within the jurisdiction of a justice of the peace, prior to the time of the filing of Dixon's petition in bankruptcy. Suit was brought on them and judgments obtained before a justice of the peace, but no part of the judg ments has been paid. The new notes were given long after the acquisition by the bankrupt of the full title to his home

stead.

Was the taking of the new notes for different amounts for the purpose of enabling the bank to sue upon them before a justice of the peace an accord and satisfaction of the original debt and the making of a new contract within the meaning of homestead act? If the giving of the new notes was another agreement between the parties, differing in any material respect from the original, then the old contract was extinguished and merged in the new. Whether the new agreement shall have the effect of satisfying the original claim depends upon the terms and especially upon the question whether the new promise is founded upon any new consideration.

The question is whether there was an agreement, upon sufficient consideration, to cancel the old and enter into a new contract.

It is not necessary that there should be an express agreement on the part of the creditor to proceed in case of default upon the new and not upon the old indebtedness. It is sufficient if such appears from all the facts and circumstances to have been the intent of the parties. In the present case such. intent is sufficiently shown by the cancellation of the original note; by the execution of new notes in small amounts; by the agreement to make new and different notes for different sums so as to enable the bank to sue in a justice's court, which it

Hale, Ayer & Co. v. The B., C. R. & N. R. R. Co.

could not do on the original claim; by the bringing of suits on the new notes and by proving them, and failing to make any proof of the original debt against the bankrupt's estate. Babcock v. Hawkins, 23 Vt. 561.

Was there a sufficient consideration for the new agreement? It is not claimed that any part of the original debt was actually paid, but it appears that the bank desired to divide the debt into a number of parts and to take a new note for each part, so as to bring the claim within the jurisdiction of a justice of the peace.

The agreement on the part of Dixon to make five new notes in accordance with the request of the bank and for the purpose named was an agreement upon sufficient consideration, and it must be held to have been an agreement to cancel the original contract and substitute for it the five new contracts, for otherwise the purpose of the contracting parties to bring the claims within the jurisdiction of a justice of the peace would have been defeated. Upon this ground the decree of the district court must be affirmed without considering the other questions argued by counsel.

So ordered.

HALE, AYER & COMPANY v. THE B., C. R. & N. RAILROAD

COMPANY.

(District of Iowa. October, 1881.)

1. MECHANIC'S LIEN-WAIVER BY TAKING COLLATERAL SECURITY – STATUTE CONSTRUED.-Section 2129 of the code of Iowa of 1873 provides that "no person is entitled to a mechanic's lien who takes collateral security on the same contract." Under this statute, as construed by the supreme court of Iowa, the holder of a claim for labor or materials for a building, erection or improvement upon land, does not waive his right to a mechanic's lien by taking security upon the same contract and upon the same property, unless it appear affirmatively that it was his intention to look to such security and not to his mechanic's lien.

2. SAME SAME - SECURITY ON OTHER PROPERTY.- If, however, the security taken be upon other property besides that upon which the mechan

Hale, Ayer & Co. v. The B., C. R. & N. R. R. Cɔ.

ic's lien rests, it is collateral security within the meaning of the statute, and the mechanic's lien is waived. Accordingly, held, that a party who had furnished material to be used in the construction and repair of a railroad, and who took as collateral security certain bonds secured by mortgage upon one division of said railroad, including the rolling stock, had waived his mechanic's lien.

3. FORECLOSURE

SALE ON EXECUTION - NOTICE TO PURCHASER.— Where in a suit to foreclose a mortgage upon a railroad, a party who had furnished materials to be used in the construction and repair of the road intervened and filed a claim to be paid for said materials out of the earnings of the road, but stated in his intervening petition that "no mechanic's lien is claimed:" Held, that a purchaser at the foreclosure sale was not bound to take notice of any claim for mechanic's lien upon the road on account of said materials.

Hubbard & Clark, for complainants.

James Grant and J. Tracy, for respondents.

MCCRARY, Circuit Judge.-The complainants bring this suit for the purpose of establishing and enforcing a mechanic's lien against the lines of railway now run and operated by the defendant, the Burlington, Cedar Rapids & Northern Railway Company, the main line extending from Burlington, Iowa, to Postville, Iowa; the Pacific division extending from Vinton to Traer; the Muscatine division extending from Muscatine to Riverside; and the Milwaukee extension from Linn to Postville. A lien is also claimed upon the rolling stock of said road, upon the right of way, road-bed, station houses, car and engine houses, machine shops and all property or things whatsoever belonging or in any way appertaining to said lines of railway. It appears in proof that the plaintiffs, who are iron merchants at Chicago, Illinois, during the year 1873, and between the first of March and the last of December of said year, sold and delivered to the Burlington, Cedar Rapids & Minnesota Railway Company, then owning and operating said lines, material for use in the construction and repair of its lines, or some of them, as shown by the bill set out as a part of the petition in this case. That in May, 1875, proceedings were commenced to foreclose certain mortgages upon the said

Hale, Ayer & Co. v. The B., C. R. & N. R. R. Co.

Burlington, Cedar Rapids & Minnesota Railway, and for the appointment of a receiver thereof.

In that case, the complainants, Hale, Ayer & Co., filed their petition of intervention, wherein they prayed that the court would order the receiver of said railway to pay their said claim out of the earnings of said railway, but not claiming a mechanic's lien.

Such proceedings were had in the foreclosure cases that at the October term, 1875, of this court, a decree was rendered and the sale of the railway was ordered, subject, however, to the claims of parties who had intervened in the case, including the said Hale, Ayer & Co. From the said decree an appeal was prosecuted to the supreme court of the United States, where it was held that the intervenors (plaintiffs herein) were entitled to payment out of the earnings of the road of so much of their claim as was shown to be in the nature of supplies, but that for all that part which was for construction, they were not entitled to payment from such earnings. After the decree in the court below, and pending said appeal, these proceedings were instituted under the statute of Iowa for the purpose of enforcing a mechanic's lien for so much of the claim as was for materials furnished for construction purposes.

At the time of furnishing the supplies in question, Hale, Ayer & Co. took the notes of the railway company for the amount due them, and also received as collateral security twenty of the bonds of the said railway company, secured by mortgage upon what was known as the Pacific division of said railroad.

At the sale, under the decree of foreclosure, the entire line of railroad was purchased by the defendant herein, the Burlington, Cedar Rapids & Northern Railway Company.

Upon these facts, several questions have been discussed by counsel, two of which only will be considered. These are: First. Whether a mechanic's lien was waived by taking collateral security.

Second. Whether the defendant, the Burlington, Cedar

Hale, Ayer & Co. v. The B., C. R. & N. R. R. Co.

Rapids & Northern Railway Company, purchased the road with notice of the complainant's claim of a mechanic's lien.

A decision of the first question requires a construction of 2129 of the code of Iowa of 1873, which declares that "no person is entitled to a mechanic's lien who takes collateral security on the same contract." This statute has been several times considered and construed by the supreme court of Iowa, whose ruling upon the question of its construction we are bound to follow. In several cases that court has held that the acceptance of promissory notes for work and labor performed or materials furnished in the erection of a building or other improvement will not divest the right of a party to a mechanic's lien, unless such is the agreement of the parties. Bonsall v. Taylor, 5 Iowa, 546; Scott v. Ward, 4 G. Green,.

112.

The taking of notes is not the taking of collateral security.

It has also been held, that where a party has done work or furnished materials in erecting a building under a contract with the owner, he does not waive his lien upon such building by accepting the promise of a subsequent purchaser of the building, made in consideration of forbearance to sue, to pay for such work or materials. Mervin v. Sherman et al. 9 Iowa, 331.

The court in that case, per Wright, chief justice, defines the words "collateral security" to mean "either a separate obligation attached to the contract named, to guaranty its performance, or it may be the transfer of property or other contracts to insure the performance of the principal agreement, and in any event, the contract, promise or property. taken must have been intended and accepted as collateral security, before the lien could be said to be waived or defeated."

The latest case upon the subject is that of Gilchrist v. Gottschalk, 39 Iowa, 311, where it is held that the acceptance of a mortgage for the same debt upon the same property covered. by a mechanic's lien is not the taking of collateral security,

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