Creditors' Rights and Security Transactions -- 1960 Tennessee Survey

Two cases involving mechanic's liens were decided during the period under survey. Rowland v. Lowe' presented the question of the validity of a material men's lien against the owner of land subject to a contract of sale which required the purchaser to erect improvements on the land. In order to protect the vendor's lien, which was to be retained in the deed, the contract provided: "The purchaser obligates himself to pay all sums for labor and materials in the construction of the improvements on said lot, and in no event shall there be any lien on the lot of ground herein contracted to be sold, in favor of any laborer or furnisher of material to such construction." The purchaser entered into contracts for the construction of the improvements, which were completed. The purchaser defaulted both on the contract of purchase and on the contracts for improvements. Unpaid laborers and material men sued for enforcement of liens on the property. A chancery court decision in favor of the lien holder was affirmed. The general rule is that a vendor's lien has priority over mechanic's liens, but a recognized exception exists where the vendor has by contract imposed on the purchaser a duty to make improvements. Several decisions, including two Tennessee cases, are cited in the opinion in support of the exception. This result is bottomed upon two legal doctrines, estoppel and agency; both are referred to in the opinion in the instant case.