Bristol-Goodson Elec. Light & Power Co. v. Bristol Gas, Elec. Light & Power Co.

• Decision Date: 30 September 1897
• Parties: BRISTOL-GOODSON ELECTRIC LIGHT & POWER CO. et al. v. BRISTOL GAS, ELECTRIC LIGHT & POWER CO.
• Court: Tennessee Supreme Court

42 S.W. 19

99 Tenn. 371

BRISTOL-GOODSON ELECTRIC LIGHT & POWER CO. et al. v. BRISTOL GAS, ELECTRIC LIGHT & POWER CO.

Supreme Court of Tennessee.

September 30, 1897

Appeal from chancery court, Sullivan county; Hugh G. Kyle Chancellor.

Bill by the Bristol-Goodson Electric Light & Power Company and others against the Bristol Gas, Electric Light & Power Company. From certain parts of the decree of the chancellor an appeal was taken to the court of chancery appeals, and from the decree of that court it is again appealed. Modified.

Curtin & Haynes and C.J. St. John, for appellants.

C. R Vance, for appellee.

CALDWELL J.

The proceedings in this cause were commenced by a general creditors' bill, brought to settle and wind up the affairs of the Bristol Gas, Electric Light & Power Company on the ground of corporate insolvency. Upon appeal from certain parts of the chancellor's decree the cause was transferred to the court of chancery appeals, and from the decree of that court it is again appealed to this court. Without a recital or discussion of the cause at large, the particular matters now open will be stated and considered separately.

1. As to Bartlett, Hayward & Co.: This firm, located at Baltimore Md., contracted to furnish and erect certain apparatus for gas works for the Bristol Gas, Electric Light & Power Company, at Bristol, Tenn., at the price of $17,400, to be paid in two installments,-$8,700 in cash, upon delivery of the materials at Bristol, and $8,700 in a six-months note, to be executed on completion of the apparatus, and accompanied by a collateral consisting of $10,000 of the first mortgage bonds of the company, such bonds to be a part of a total issue of $60,000 of bonds to be made thereafter. A written proposition, embodying these terms, was submitted by Bartlett, Hayward & Co. on the 26th of February, 1891; and it was accepted, in writing, by the Bristol Gas, Electric Light & Power Company, April 8, 1891. Shipments were soon commenced, and all or about all of the materials embraced in the contract were delivered by the 1st day of August, 1891. On the 4th day of August, 1891, the Bristol Gas, Electric Light & Power Company caused to be registered a mortgage upon its entire plant, to secure an issue of $60,000 of first mortgage bonds. Bartlett, Hayward & Co. went on and completed their work in due time and according to contract. But the company made default as to the agreed cash payment, and in lieu thereof, on the 5th of August, 1891, gave its 60-days note for the $8,700 due, and later, in the same month, it deposited with Bartlett, Hayward & Co. $10,000 of its first mortgage bonds, as collateral for that note. After the note matured and was protested for nonpayment, the company deposited, as additional collateral therefor, a note for $2,500 on the Bristol Land Company. The balance of the indebtedness to Bartlett, Hayward & Co. was not closed by note and secured, as specified in the contract, but remained in open account and without collateral. The other $50,000 of bonds passed into the hands of other parties to this litigation, and, like those transferred to Bartlett, Hayward & Co., are unpaid. In March, 1892, Bartlett, Hayward & Co., having received nothing on their note or account, filed a bill against the Bristol Gas, Electric Light & Power Company to enforce a furnisher's and mechanic's lien on the property improved, being the same covered by bond mortgage. The relief sought in that bill was granted by decree entered in August, 1892. Thereafter, in September, 1892, and before the order of sale could be executed, the bill in the present cause was filed in the same court, and injunction obtained. The complainants are creditors of the Bristol Gas, Electric Light & Power Company, and some of them are holders of its mortgage bonds. They impeach the claim of Bartlett, Hayward & Co. to a lien on the mortgaged property, and allege that they waived, or estopped themselves from claiming, the lien that they might otherwise have had, by their contract and action in connection with the bonds of the company and the other collateral given and accepted. Both the chancellor and the court of chancery appeals adjudged the continuing existence of the lien claimed, and, by decree, gave it preference over all the mortgage bonds.

The general statute (Code, § 1981; Mill. & V. Code, § 2739; Shannon's Code, § 3531) creates a lien on the lot or land improved, in favor of persons who, by special contract with the owner or his agent, construct, build, or repair any house, fixtures, or machinery, or improvements thereon, or furnish fixtures, machinery, or materials for the same. Undoubtedly, the materials furnished and work done by Bartlett, Hayward & Co. were of such character as to fall within the provision of this law. Nevertheless, the fact that they received $10,000 of the company's mortgage bonds, and also the $2,500 note on the Bristol Land Company, as security for the $8,700 of their debt first maturing, raises a presumption of an intention to waive the statutory lien for that $8,700. A vendor selling land on time is presumed, in the first place, to intend to retain his lien on the premises conveyed, to secure the payment of the purchase money, and, if the vendee assert the nonexistence of such intention, the burden is upon him to show it; and, if the vendor take other security for the purchase money, he is presumed, in the second place, to intend to waive his lien, and, to rebut this presumption, the burden of proof is on him. Campbell v. Baldwin, 2 Humph. 248, 258; Marshall v. Christmas, 3 Humph. 616; Fogg v. Rogers, 2 Cold. 290; Burson v. Dosser, 1 Heisk. 759; Brevard v. Summar, 2 Heisk. 97; Hines v. Perkins, Id. 401; Sehorn v. McWhirter, 6 Baxt. 311; Whitehurst v. Yandall, 7 Baxt. 228; Sehorn v. McWhirter, 8 Baxt 205; Irvine v. Muse, 10 Heisk. 477; Swingle v. Wilkinson, 94 Tenn. 246, 28 S.W. 1096; Cordova v. Hood, 17 Wall. 6; Hagar v. Hagar, 2 Tenn Ch. 76; 2 Story, Eq. Jur. § 1226; 3 Pom. Eq. Jur. § 1252; 28 Am. & Eng. Enc. Law, 163, 176-178; 2 Jones, Liens, §§ 1064, 1086, 1090. The mechanic's lien is attended by the same presumptions, and is subject to the same rules of evidence. 2 Jones, Liens, §§ 1500, 1519, 1520; Phil. Mech. Liens, p. 492, § 280. It follows, therefore, as already stated, that a prima facie case of waiver by Bartlett, Hayward & Co., as to that part of their claim represented by the $8,700 note, arises from their acceptance of collateral security therefor; and the presumption of waiver to that extent is the stronger, perhaps, because the $10,000 of mortgage bonds so received purported to be secured by a first lien on the same property, and in that way were inconsistent with the existence of a prior mechanic's lien.

The presumed waiver is limited to the $8,700 for whose security the collateral was deposited, and does not extend to the balance of the debt for which no security was given. Jones says: "An agreement to receive a conveyance or mortgage of real estate as part payment is a waiver of the lien only so far as the payment goes. It is not a waiver of lien as to the residue not paid, any more than the acceptance of money as part payment would be. An agreement to take a mortgage upon the same property in part payment for the materials furnished for a house is a waiver of a right of lien for such part, if the mortgage is duly tendered; but it is no waiver of a lien for the balance of the lien claim." 2 Jones, Liens, § 1524. Phillips says: "Receiving a conveyance of real estate as part payment of a claim for erecting buildings thereon is not a waiver of the lien for the residue, any more than the acceptance of money as part payment would be." Phil. Mech. Liens, pp. 500, 501, § 286. Waiver of the lien as to the whole debt cannot be presumed from the acceptance of collateral security for a specific part of it. The original contract in this case, it will be remembered, provided that Bartlett, Hayward & Co. should have $10,000 of the company's bonds as collateral security for the latter half of their debt; yet that provision, of itself and without more, did not raise a presumption that they waived their lien as to that part of the debt. Compliance on the part of the company-a delivery or tender of the bonds-was necessary to produce that result. No delivery or tender was made, and consequently the presumption did not arise. "All the cases agree that there will be no waiver when the agreement to give the note or other security has not been performed by the promisor." Phil. Mech. Liens, pp. 498, 499, § 285. An agreement to accept security does not impair the lien if the agreement to furnish the security be not fulfilled. 2 Jones, Liens, § 1525. Therefore the presumption of waiver arose as to the first half of the debt only, it alone, and not the other half, having been secured by an actual deposit of collaterals.

A presumption of waiver, as such, is rebuttable, and may be overcome by satisfactory evidence to the contrary. Concerning the presence of such evidence in this cause, the court of chancery appeals, in its opinion delivered by Judge Wilson said: "The explicit testimony of the members of the firm of Bartlett, Hayward & Co., as well as of Mr. Laftwich, the president of the defendant gas company, is to the effect that it was expressly understood and agreed, in all the negotiations between the firm and the gas company, represented by its president, that the firm was not to release its mechanic's lien, and that it was understood and agreed that their lien was not to be released or affected by the agreement to accept the bonds as collateral security. There is no evidence to the contrary in this record; so that, the fact is established, by the evidence in the record, that the firm, in the contract it entered...