The function LINEOUT never deletes the output file. To rewrite a file, you must delete it with DEL (or SysFileDelte, if using REXXUTIL) and than recreate it.
To empty the file without deleting it you can use the OS/2 commad
type nul >filename
In Object-Oriented REXX you can use a new option for the STREAM to open a file in "overwrite" mode (see also The function LINEOUT() in Object REXX).