64

as to extinguish the original debt and discharge the liens.63 A statement in a contract between a railroad company and a construction company, that the former would pay the latter out of a certain fund, -the subscription of a particular county along the road,—is not such a taking by the latter company of a collateral security as to vitiate its mechanic's lien. An assignment to the lien claimant of a policy of insurance on the building has been held not to waive the lien, for the reason that the insurance could not become a security unless the building were destroyed by fire,—an event that might not happen.65 And receiving a conveyance of real estate as part payment for erecting buildings thereon is not a waiver of a mechanic's lien for the residue. Nor is the promise of a purchaser of land to pay a debt secured by mechanic's lien, which accrued before he bought, considered collateral security.67

66

68

$716. The acceptance of a mortgage on the property affected by the lien does not amount to taking collateral security unless so intended; s but a lien on a railroad is waived by taking a mortgage which covers the rolling stock as well as the roadbed." A sum of money deposited as security for the performance, on the part of a construction company, of a contract with a material man, and out of which the latter is to be paid on default of the other party, is such collateral security as will divest the material man of his right to a mechanic's lien. The execution of a trust deed to secure the lien debt does not constitute a waiver of the lien if the claimant does not accept the trust deed, or assent to it." When material is furnished to a tenant to make improvements on the landlord's farm, the fact that

6 Allis v. Distilling Co., 29 N. W. 543, 30 N. W. 300, and 67 Wis. 16.

64 Meyer v. Construction Co., 100 U. S. 457; Delaware R. Const. Co. v. Davenport & St. P. Ry. Co., 46 Iowa, 406.

65 Clark v. Moore, 64 Ill. 279.

66 Bayard v. McGraw, 1 Ill. App. 134.

67 Mervin v. Sherman, 9 Iowa. 331; Howe v. Kindred, 44 N. W. 311, 42 Minn. 433; St. Paul Labor Exchange Co. v. Eden, 50 N. W. 921, 48 Minn. 5; Furguson v. Ellis, 6 Humph. (Tenn.) 268.

68 Gilcrest v. Gottschalk, 39 Iowa, 311.

69 Hale v. Railway Co., 2 McCrary, 558, 13 Fed. 204.

70 Shickle, Harrison & Howard Iron Co. v. Council Bluffs Waterworks Co., 33 Fed. 13; Harrison & Howard Iron Co. v. Council Bluffs City Waterworks Co., 25 Fed. 170.

71 Graham v. Holt, 4 B. Mon. (Ky.) 61.

72

a material man, in a complaint to enforce a lien on the improvements, alleges that the landlord is personally liable for the material, will not amount to a waiver of the lien by taking collateral security therefor, when before trial he dismisses his claim of personal liability against the landlord without prejudice. It seems that, while a mechanic's lien may be lost by accepting a contract for a security inconsistent with the existence of a lien, such waiver is only conditional upon the performance of the contract. Thus, a provision in the building contract that the owner shall give the contractor notes secured by mortgage would not waive the lien if the notes and mortgage were not given.74

73

Taking Mortgage on Same Property.

§ 717. A mortgage to the mechanic upon the very property subject to his lien can hardly be said to be collateral security; 75 but it may be argued that taking it shows that the mechanic does not rely upon bis lien, and has therefore waived it. The authorities on this point, however, are in a state of hopeless contradiction. All that can be said is that in some states such a mortgage is a waiver of the lien, and in others it is not. It is held in Illinois that a material

76

72 National Lumber Co. v. Bownan, 42 N. W. 557, 77 Iowa, 706.

73 Central Trust Co. v. Richmond, N., I. & B. R. Co., 15 C. C. A. 273, 68 Fed. 90.

74 Gardner v. Hall, 29 Ill. 277; Chicago & A. R. Co. v. Union Rolling-Mill Co., 3 Sup. Ct. 594, 109 U. S. 702; Van Stone v. Manufacturing Co., 12 Sup. Ct. 181, 142 U. S. 128; Kingsland & Douglas Manuf'g Co. v. Massey, 13 South. 269, 69 Miss. 296; Barnard & Leas Manuf'g Co. v. Galloway, 58 N. W. 565, 5 S. D. 205. Contra, Barrows v. Baughman, 9 Mich. 213; Weaver v. Demuth, 40 N. J. Law, 238.

75 Gilcrest v. Gottschalk, 39 Iowa, 311.

76 The following cases hold that a mechanic who accepts a mortgage on the property subject to his lien waives his lien, the two securities being inconsistent: Barrows v. Baughman, 9 Mich. 213; Gorman v. Sagner, 22 Mo. 137; Weaver v. Demuth, 40 N. J. Law. 238; Trullinger v. Kofoed, 7 Or. 228; Kendall Manuf'g Co. v. Rundle, 47 N. W. 364, 78 Wis. 150.

The following cases hold that the acceptance of a mortgage by a mechanic's lien holder, covering the property to which the lien has attached, does not operate as a waiver of the lien, where such was not the intention of the parties: Roberts v. Wilcoxon, 36 Ark. 355; Gilcrest v. Gottschalk, 39 Iowa, 311; Parberry v. Johnson, 51 Miss. 291; Chapman v. Brewer, 62 N. W. 320, 43 Neb. 890; Hall v. Pettigrove, 10 Hun (N. Y.) 609; Boyle v. Robbins, 71 N. C. 130.

77

man does not waive his statutory mechanic's lien by attempting to reserve a contractual lien on the materials furnished, since such reserved lien would be void; and in Tennessee the retention by a seller of title to machinery placed on land until the price is paid, with a reservation of the right, in case of default in payment, to take possession of and remove such machinery without process, is not a waiver of the lien given by the statute on any lot of ground for the price of machinery furnished or erected thereon.78 In Michigan the furnisher of mill machinery who has taken a bill of sale of the machinery to secure his account may disclaim any rights under the bill of sale, and enforce his lien.79

Estoppel.

§ 718. A lien claimant may estop himself from asserting his lien. Thus, a lienholder who induces a third person to buy the property by representing to him that there are no liens upon it is estopped to assert his lien as against such purchaser. 80 So, too, a subcontractor who stands by and consents to the owner's payment to the original contractor of all that was owing by him cannot afterwards complain and subject the owner's property to a lien. 81 And a mechanic who has a lien upon real estate, for work and materials furnished in the erection of houses thereon, and who releases it for the purpose of enabling the owner to secure a new loan, cannot afterwards claim to enforce the same lien as against the party making such loan upon the security of the property. But a material man is not estopped from enforcing his lien because he is surety on the contractor's bond to the owner to secure him from loss on account of the default or negligence of the contractor. 83 Nor is a material man estopped from seeking to foreclose his lien for materials furnished by him to the con

82

77 Clark v. Moore, 64 Ill. 279; Chicago & A. R. Co. v. Union Rolling-Mill Co.. 3 Sup. Ct. 594, 109 U. S. 702.

78 Case Manuf'g Co. v. Smith, 40 Fed. 339.

79 Marinette Iron-Works Co. v. Cody (Mich.) 66 N. W. 334.

so Hinchley v. Greany, 118 Mass. 595; White Lake Lumber Co. v. Stone, 27 N. W. 395, 19 Neb. 402.

81 Chilton v. Lindsay, 38 Mo. App. 57..

82 Phillips v. Gilbert, 2 MacArthur, 415.

83 Blyth v. Torre (Cal.) 38 Pac. 639. See post, § 753.

tractor by reason of his giving a false receipt for the amount due him, to enable the contractor to obtain a payment from the owner, where the owner has paid out no money, and suffered no loss on account of such receipt.84

§ 719. The mere declaration of a material man in the second degree that he looks to the contractor alone, and does not hold the owner of the building responsible, is simply a parol relinquishment, without consideration, of a valuable right, and is altogether ineffectual to constitute an estoppel.85 A railroad contractor is not estopped from asserting that his lien is superior to a mortgage on the road by the fact that he is a stockholder in a corporation that has guarantied the mortgage bonds.86 In an action to foreclose a subcontractor's lien, it appeared that the supervising architect, before giving the principal contractors an estimate for payment, asked one of the subcontractors if they were satisfied with the principal contractors, and he answered that they were perfectly good. The owner of the building then paid the principal contractors the full amount of the contract price, but he was not misled by statements of the subcontractor, nor induced thereby to make such payment. It was held that such statements did not operate as an estoppel in pais against the subcontractors.87 In another case the owner testified that he had gone to the agent of plaintiff, a subcontractor, and asked him if the principal contractors were paying their bills, and if they were owing plaintiff any amount; and that the agent replied that they were not owing anything of any account, and that they were all right. It appeared that this conversation occurred at a place where the agent did not have access to his books, and that there was no reason why the latter should have desired to mislead the owner, and there was some conflict as to what the agent did say. On this showing it was held that the owner could not resist foreclosure on the ground that, relying on the agent's representation, he had paid the principal contractors all he owed them.88 The fact that the contractor has estopped himself from claiming a lien will not affect a subcontractor's

84 Washburn v. Kahler, 31 Pac. 741, 97 Cal. 58.

85 Sodini v. Winter, 32 Md. 130.

86 Meyer v. Hornby, 101 U. S. 728.

87 Simonsen v. Stachlewicz, 52 N. W. 310, 82 Wis. 338.

88 Gull River Lumber Co. v. Keefe, 41 N. W. 743, 6 Dak. 160.

89

right to lien for work and material furnished by him, in states where the subcontractor's right thereto is not derived from or dependent on the existence or nonexistence of the lien of the contractor. In a Nebraska case it appeared that a mortgagee advanced money on land on the faith of an agreement by a material man, who was entitled to a lien thereon, that he would release his right to claim a lien prior to the mortgage on payment to him of a part of his account, and the execution by the owner of the land of a note for the balance. It was held that, while this agreement subordinated the lien of the material man to that of the mortgagee, neither the acceptance of the owner's note, nor the giving of a receipt in full for the demand, by the material man, operated as an abandonment of his lien.**

DIVISION II. LACHES LIMITATIONS.

General Limitation Laws.

§ 720. In discussing the loss of mechanics' liens through delay in enforcing them, it is to be noticed in the first place that, as a general rule, the ordinary statutes of limitations do not apply to suits to enforce mechanics' liens." Thus, it is held that a statute declaring that, when a suit is dismissed on a ground other than the merits, a second suit may be brought within a certain time, does not apply to mechanic's lien suits unless the second suit is begun within the time limited by the mechanic's lien act; 92 that the section of the statute of limitations which excepts persons who are out of the state from the operation of the statute has no application to the mechanic's lien law; and that an act making the statute of limitations begin to

93

89 Green v. Williams, 21 S. W. 520, 92 Tenn. 220.

90 Hoagland v. Lusk, 50 N. W. 162, 33 Neb. 376.

91 Dunning v. Stovall, 30 Ga. 444; Walker v. Burt, 57 Ga. 20; Clark v. Manning, 4 Ill. App. 649; Hayes v. Railroad Co., 6 Atl. 144, 113 Pa. St. 380. Contra, Seaton v. Hixon, 12 Pac. 22, 35 Kan. 663.

92 Walker v. Burt, 57 Ga. 20. But in Kansas such a provision is held applicable to mechanic's lien suits by virtue of a clause in the mechanic's lien act declaring that the practice, pleadings, and procedure in mechanic's lien suits "shall be in conformity with the rules prescribed by the Code so far as the same are applicable." Seaton v. Hixon, 12 Pac. 22, 35 Kan. 663.

93 Clark v. Manning, 4 Ill. App. 649.