Alexander v. . Farrow

MANNING, J. The Sheriff of Forsyth County and the tax collector, Farrow, of the city of Winston are not entitled to priority of payment before the creditors in whose favor judgments were taken and execution levied, before the deed of assignment was executed and recorded. The officers did not levy for the taxes due them, respectively, and the property of the corporation consisted entirely of personalty. Revisal, sec. 2863; Shelby v. Tiddy, 118 N. C., 792. The claim of those judgment crditors, whose executions were levied before the registration of the deed of assignment, to priority of lien and payment, before all creditors claiming under and through the deed of assignment, is not contested. Fitch and Howard, however, claim priority for their demands of $40 each, under section 1206, Revisal. Under the facts found by his Honor, jve do not think they are included within the provisions of that section. They were officers of the corporation and directors; they controlled, not only in the stockholders’ meetings, but in the meetings of the directors, and thereby controlled and managed the corporation. Their interest as stockholders and directors and officers was sufficient to induce them, in-every way possible, to make the business of the corporation profitable; they were familiar with its entire business and its financial condition. By whom they were employed, or that they were regularly employed at all, is not found by his Honor, nor is there any allegation or evidence upon either of these matters; all that is found by his Honor is that they performed the services mentioned. It may well be that these were performed with a view to make the business of the corporation profitable to themselves, as stockholders, and were rendered to prevent the bankruptcy of the corporation in which they were so largely interested and which they controlled. In New-Jersey, which State has a statute substantially of the same meaning and language as ours, the Chancery Court of that State says, in Weatherby v. Woolen Co., 29 Att. Rep., 326 : “The preference given by the sixty-third section of the corporation act is in derogation of the right of creditors to be paid equally, and must not be extended by construction. Officers can only be included in the phrase, laborers and employees,’ by construction, *323 and that, too, of a very strained character. It cannot be that the Legislature, in any of the enactments respecting preferences, meant to include officers in the words ‘laborers’ or ‘employees,’ for there has been no period in the history of legislation upon this subject when these different classes have not been broadly distinguished.” England v. Organ Co., 41 N. J. Eq., 470; Coal Co. v. Railroad, 29 N. J. Eq., 252; In re Stryker, 158 N. Y., 526. In Bruce v. Mining Co., 147 N. C., 642, this Court said: “To constitute a lien for work and labor done, it must not only be actual work and labor done, but it must be done under a contract for actual work and labor. Moore v. Railroad, 112 N. C., 236; Cook v. Ross, 117 N. C., 193; Broyhill v. Gaither, 119 N. C., 443; Nash v. Southwick, 120 N. C., 459.” While in the present case no contract for work and labor is found, and although some of the work actually done by the claimants was the work of ordinary laborers or employees, we think it more in accordance with the policy of the statute to hold that officers of a corporation are not embraced within the words “laborers” and ‘.‘workmen,” used therein. To hold otherwise would be to open wide the door for frauds upon creditors who extend credit to the corporation and deal with it upon their faith in its management by its officers. For the reasons given, the judgment of his Honor is erroneous, and the appellants, judgment creditors, are entitled to be paid their judgments before distribution to the sheriff, tax collector and Fitch and White. Error.