Farmers Banking & Trust Co. v. Tarboro Leaf Tobacco Co.

Adams, J. The Farmers Tobacco Company excepted to the judgment, and contended that by virtue both of the lease and of the chattel mortgage it held a lien on certain property which went into the hands of the receivers. It is therefore necessary to ascertain the legal effect of each of these instruments. The purported lease was dated 28 August, 1920, and the chattel mortgage which was intended to secure payment of the rental due the Farmers Company was dated 1 February, 1922. It was admitted that the chattel mortgage included all the property of the defendant; that the -defendant was insolvent when the mortgage was executed; that it owed other creditors, and that the law in regard to assignments for the benefit of creditors had not been complied with. C. S., 1609, et seq. This Court has held that where a person who is insolvent makes an assignment of practically all his property to secure a preexisting debt, there being also other creditors, such instrument will be treated as an assignment for the benefit of creditors and subject to the statutes relating thereto, and that neither the omission of a small part of the debtor’s property nor a defeasance clause in the instrument will change this result. Everything appears which is necessary to bring the mortgage in question within this principle. It is apparent, then, that it is ineffective, either as a mortgage or an assignment, and that it created no lien on the property which it purported to convey. Bank v. Gilmer, 116 N. C., 685; S. c., 117 N. C., 416; Glanton v. Jacobs, 117 N. C., 427; Cooper v. McKinnon, 122 N. C., 447; Brown v. Nimocks, 124 N. C., 417; Odom v. Clark, 146 N. C., 544, 552; Powell v. Lumber Co., 153 N. C., 52. The appellant contends that it acquired a lien on certain property in the possession of. the receivers by virtue of the following clause in the alleged lease: “It is further mutually agreed that such property, machinery and material as may be placed in said building by the Leaf Company belong to and are their property; and upon satisfaction of any and all indebtedness or liens that may be due to the Farmers or *180 their assigns, the Leaf may, at the expiration of their lease, move such fixtures or equipment that they may have placed in said building.” The written “lease” purports to have been executed on behalf of the defendant company by its president and secretary. In response to the second issue the jury found that these officers had not been authorized in a meeting of the board of directors to execute such instrument; and the appellees say that the clause hereinbefore set out was not a part of the contract and was never ratified by the corporation. These questions we need not consider', for if it be granted that the alleged lease was duly executed, the clause relied on by the appellant is not sufficient to constitute a lien on the property therein described, it being nothing more than a personal covenant on the part of the lessee. A stipulation in a lease that the lessee shall not remove or dispose of certain property upon the demised premises until the rent or any indebtedness due the landlord is paid is a personal covenant and not a lien. In the instant case no lien exists by reservation, estoppel, or ratification. Marshall v. Luiz, 115 Cal., 622; Bleakley v. Sullivan, 140 N. Y., 175; Beers v. Field, 69 Vt., 533; Kaufman v. Underwood, 119 A. S. R., 121, note; 16 R. C. L., 978, sec. 490; 24 Cyc., 1245. Exception was noted to the admission of certain evidence on the ground that it tended to vary the written agreement; but as the instrument,' if accepted as a whole, is not sufficient to create a lien, we are unable to see that the appellant has been prejudiced in this respect. If, as we have said, the chattel mortgage was void and the lease created no lien on the property described in it, the appellant’s prayers for instruction to the jury were properly refused. "We find No error.