#### E. A. HELSABECK v. H. F. VASS, J. B. McCREARY, Sheriff, et al.

(Filed 13 February, 1929.)

1. Judgments — Entry, Record, and Docketing — Liens.

A judgment of the Superior Court is a lien upon the lands of the judgment debtor that he may own in the county at the time the judgment was docketed, but not upon lands which had been previously conveyed bona fide either by registered deed or mortgage upon which foreclosure has been made, or under execution sale of a prior docketed judgment of the Superior Court. C. S., 614.

*6042. Corporations — Corporate Powers and Inabilities — Liability to Employees for Services Rendered — Liens.

Tbe provisions of O. S., 1140, that mortgages of a corporation will not exempt tbe mortgaged property from execution for tbe satisfaction of any judgment obtained in tbe courts of tbe State against sucb corporation for labor and clerical services performed, etc., creates a priority in favor of those performing labor or rendering clerical services only from tbe time a judgment bas been entered by a court of competent jurisdiction ascertaining tbe amount and declaring tbe priority, and when so established it relates back and becomes prior to that of general creditors of the corporation under a prior registered judgment.

3. Same — Officers.

C. S., 1140, is for tbe protection of employers of a corporation and not to its officers, tbe latter being deemed to be in position to know its financial condition when continuing to perform their duties.

4. Same — Evidence—Questions for .Jury.

Where corporate property bas been mortgaged and tbe mortgage foreclosed, and an execution is sought on this property by those claiming a priority under tbe provisions of C. S., 1140, for services and clerical work performed as employees of tbe corporation, and in a suit to restrain this execution it is denied that they were employees within tbe intent of tbe statute, but performed their duties as officers thereof: Held, reversible error for tbe trial judge to bold that they would be entitled to execution if they were officers of the corporation.

5. Mortgages — Foreclosure by Action — Sale—Rights of Purchaser Thereunder — Notice—Corporations—Execution.

A notice at a foreclosure sale of tbe property of a corporation under a mortgage that the employees of tbe corporation claim a priority under tbe provisions of C. S., 1140, does not affect tbe title conveyed to tbe purchaser at the sale, but tbe claimants after obtaining judgment against the corporation may maintain tbe superiority of their claims to those of tbe purchaser, but tbe purchaser is entitled to be beard, and may bring suit to restrain tbe execution.

Appeal by plaintiff from MacRae, Special Judge, at May Term, 1928, of Eoesyth.

New trial.

Action to enjoin sale of land and other property under an execution issued at tbe request of defendant, H. E. Yass, to tbe sheriff of Forsyth County. At the date of the commencement of this action, the said sheriff had advertised the said land and other property for sale under said execution.

The execution was issued for the satisfaction of a judgment in favor of defendant, H. E. Vass, and against the Alderman Manufacturing Company, a corporation, for the sum of $2,589.91, with interest thereon from 31 October, 1927. Said judgment was rendered on 5 December, 1927, in an action begun in the County Court of Forsyth County on 1 November, 1927, in which defendant, H. E. Yass, was the plaintiff and *605tbe Alderman Manufacturing Company was the defendant. Since the commencement of said action, and prior to the rendition of the judgment therein, plaintiff has become the owner of the land and other property which the sheriff has advertised for sale under the execution issued to him on said judgment. At the date of the docketing of said judgment, the Alderman Manufacturing Company, the judgment debtor, was not the owner of said land and other property, or of any interest therein.

On 15 April, 1926, the Alderman Manufacturing Company, on that date the owner thereof, conveyed the said land and property to a trustee to secure the payment of certain bonds recited in the deed of trust. Default having been made in the payment of said bonds, the said trustee, after fully complying with the terms of the power of sale contained in said deed of trust, offered the said land and other property for sale on 31 October, 1927. At said sale, the plaintiff in this action was the purchaser of said property; the sale was duly confirmed and on 12 November, 1927, the trustee conveyed the said property to the plaintiff, who had fully complied with his bid, by deed which was duly recorded. Plaintiff at once entered into possession of said land and other property, and at the date of the commencement of this action was the owner of the same.

On or about 1 February, 1927, defendant, H. F. Vass, entered into a contract with the Alderman Manufacturing Company, under which he performed certain services for said company, which he alleges were clerical in their nature. At the sale on 31 October, 1927, the said defendant caused notice to be given to all persons present, that he had a claim against the Alderman Manufacturing Company for the sum of $2,589.91, the same being the amount due for salary and wages for clerical services, and that he claimed a lien on the property of the said Alderman Manufacturing Company, for said sum, superior to any mortgages or deeds of trust, executed by said company on said land and •property. On the next day after the sale, to wit, on 1 November, 1927, the said H. F. Vass instituted an action in the County Court of Forsyth County against the Alderman Manufacturing Company on said claim. This action pended in said county court until 5 December, 1927, on which day judgment was rendered in favor of said H. F. Vass and against said Alderman Manufacturing Company for the sum of $2,589.91, with interest thereon from 31 October,- 1927. This judgment was rendered by default, defendant in said action having failed to file an answer to the verified complaint therein.

Execution having been issued on said judgment, at the request of defendant, H. F. Vass, the sheriff of Forsyth County has advertised said land and property, formerly owned by the Alderman Manufacturing *606Company, and now owned by plaintiff, for sale to satisfy said judgment. This action was thereupon begun to enjoin said sale.

At tbe trial tbe only issue submitted to tbe jury by tbe court, was answered as follows:

“Did tbe defendant, H. E. Vass, give notice of bis claim against Alderman Manufacturing Company, as alleged in tbe answer ? Answer: Yes.”

From judgment dissolving tbe temporary restraining order entered herein, and dismissing tbe action, plaintiff appealed to tbe Supreme Court.

W. L. Wilson and, Ghas. B. Helsabeck for plaintiff.

J. E. Alexander and L. M. Butler for defendant.

CoNNOR, J.

At tbe date of tbe docketing of tbe judgment on which execution has been issued to tbe sheriff of Forsyth County, to wit: 5 December, 1927, tbe judgment debtor was not tbe owner of the land and other property which has been advertised for sale by tbe said sheriff, under said execution. Tbe judgment debtor, a corporation, bad theretofore conveyed its legal title to said property by a deed of trust to secure creditors, which bad been duly recorded prior to tbe rendition of said judgment; its equitable title bad been foreclosed, and tbe said land and other property bad been conveyed by tbe trustee to tbe plaintiff, by deed recorded on 12 November, 1927. Tbe judgment is, therefore, not a lien on tbe said land by virtue of C. S., 614.

A docketed judgment for tbe recovery of a sum of money is a lien on land, situate in tbe county in which tbe judgment was docketed, and owned by tbe judgment debtor at tbe date on which tbe judgment was docketed, or on such land as has been acquired by tbe judgment debtor at any time within ten years from tbe date of tbe rendition of tbe judgment. It is not a lien on land which has been conveyed by tbe judgment debtor by deed duly registered prior to tbe docketing of tbe judgment; nor is it a lien on land conveyed by tbe judgment debtor by mortgage or deed of trust, prior to tbe docketing of said judgment, where tbe mortgage or deed of trust has been foreclosed, under a power of sale contained therein, and tbe land conveyed to tbe purchaser at tbe foreclosure sale prior to tbe docketing of tbe judgment. In tbe instant case, tbe judgment on which tbe execution was issued was not a lien on tbe land which tbe sheriff has advertised for sale, by virtue of C. S., 614. Neither tbe said land nor tbe other property, now owned by tbe plaintiff, and acquired by him by deed duly recorded prior to tbe docketing of tbe judgment is subject to sale by tbe sheriff *607under execution on said judgment, unless tbe same is subject to sucb sale, by reason of tbe provisions of C. S., 1140, wbicb is as follows:

> “Mortgages of corporations upon tbeir property or earnings cannot exempt said property or earnings from execution for tbe satisfaction of any judgment obtained in courts of tbe State against sucb corporation for labor and clerical services performed, or torts committed whereby any person is killed, or any person or property injured.”

A claim against a corporation, not reduced to judgment, wbetber for labor and clerical services performed in bebalf of, or for damages arising from a tort committed by tbe corporation, is not a lien on its property by virtue of tbe foregoing statute. It was so beld by tbis Court in Clement v. King, 152 N. C., 456, 67 S. E., 1023. In tbe opinion for tbe Court in tbat case, Manning, J., cites with approval Coal Co. v. Electric Light Co., 118 N. C., 232, 24 S. E., 22, where it is said tbat tbe statute creates no lien, but undertakes to afford tbe creditor protection by disabling a corporation from conveying its property by mortgage freed from liability upon a judgment obtained against sucb corporation 'on a claim included within tbe provisions of tbe statute. Tbis protection is afforded only when judgment has been obtained on tbe claim in a court of tbis State. When tbis has been done, tbe property of tbe corporation, although theretofore conveyed by tbe corporation by mortgage or deed of trust to secure creditors, is not exempt from sale under execution on tbe judgment. Tbe effect of tbe statute is to make a mortgage or deed of trust to secure creditors, executed by a corporation, void as to judgments recovered upon claims for labor and clerical services performed in bebalf of, or for damages, arising from a tort committed by tbe corporation. As to sucb judgment creditors, tbe mortgage or deed of trust is nonexistent. It has therefore been beld by tbis Court tbat where tbe judgment was obtained after tbe foreclosure of tbe mortgage or deed of trust, and after tbe registration of tbe deed by wbicb tbe mortgagee or trustee conveyed tbe property of tbe corporation to tbe purchaser, sucb property is subject to sale under execution issued on tbe judgment. Williams v. R. R., 126 N. C., 918, 36 S. E., 189; R. R. v. Burnett, 123 N. C., 210, 81 S. E., 602; Belvin v. Paper Co., 123 N. C., 183, 31 S. E., 655.

Tbe first question presented for decision by tbis appeal is wbetber tbe judgment in favor of H. E. Yass and against tbe Alderman Manufacturing Company, recovered in tbe County Court of Forsyth County, after tbe execution and registration of tbe deed, under wbicb plaintiff claims, was conclusive upon tbe plaintiff in tbis action, as to tbe amount of defendant’s claim against said corporation, and also as to tbe cause of action upon wbicb tbe judgment was rendered. Tbe trial court ruled tbat tbe judgment was conclusive not only upon tbe Alderman Manu*608facturing Company, but also upon tbe plaintiff, wbo was not a party to tbe action in wbicb tbe judgment was rendered. In tbis there was error. Tbe principle tbat a judgment is conclusive botb as to parties and as to tbeir privies bas no application upon tbe facts of tbis case. Tbe.judgment of tbe county court did not affect or purport to affect, tbe property advertised for sale by tbe sheriff, wbicb was formerly owned by tbe Alderman Manufacturing Company, and wbicb is now owned by tbe plaintiff. It was a judgment for tbe recovery of money. There was neither allegation in tbe complaint nor adjudication in tbe judgment tbat said judgment was or should be a lien on specific property, or tbat any specific property should be subject to execution for tbe satisfaction of said judgment. Although by virtue of C. S., 1140, tbe property of tbe Alderman Manufacturing Company did not become exempt from execution on tbe judgment, if for labor and clerical services, by reason of tbe conveyance of said property by tbe trustee to tbe plaintiff, as tbe purchaser at tbe foreclosure sale, tbe judgment may be attacked by plaintiff, in tbis action, botb as to tbe amount wbicb defendant H. E. Yass is entitled to recover under bis contract with tbe Alderman Manufacturing Company, and as to tbe cause of action upon wbicb said judgment was recovered. Plaintiff is entitled to be beard before bis property can be sold for tbe satisfaction of tbe judgment, even if under C. S., 1140, it is subject to such sale, upon bis. ■allegation tbat tbe services performed by defendant, H. F. Yass, were not for clerical services, within tbe meaning of tbe statute.

Tbe second question presented for decision by tbis appeal is whether under C. S., 1140, a mortgage or deed of trust by a corporation exempts its property conveyed thereby from execution for tbe satisfaction of a judgment against tbe corporation for labor and clerical services performed by an officer of tbe corporation.

It is alleged in tbe complaint tbat defendant, H. E. Yass, was an officer of tbe Alderman Manufacturing Company, and tbat tbe services for wbicb tbe judgment was recovered by him in tbe county court, were performed as such officer; tbis allegation is denied in tbe answer. Defendant alleges tbat be was an employee of said corporation, and performed‘clerical services as such employee. Tbe trial court was of opinion tbat it was immaterial whether tbe judgment creditor was an officer or an employee of tbe corporation, and therefore, upon motion of defendant, struck said allegation from tbe complaint and declined to submit an issue to tbe jury, raised by tbis allegation and denial. In tbis there was error.

Tbe statute manifestly, we think, applies only to judgments recovered against a corporation by an employee for labor and clerical services; it does not apply where tbe judgment was for salary due to or *609compensation earned by an officer of tbe corporation. The purpose of the statute is to protect employees, and not officers, who have recovered judgment against the corporation for labor and clerical services performed. An employee of a corporation has no power or authority to manage or control the corporation, nor has he ordinarily any knowledge of the financial condition of the corporation. He is merely a creditor to the extent of the amount due him for labor and clerical services. An officer, however, has both power and authority, certainly within the scope of his official duties, to manage and control the business of the corporation. The corporation conducts its business through its officers, who necessarily have full knowledge of its financial condition. They manifestly do not need the protection which the statute undertakes to afford to employees. The statute cannot be construed as affecting judgments recovered by officers of a corporation, even if such officers perform labor and clerical services for the corporation, for which judgments have been recovered.

If the jury shall find that defendant, H. F. Yass, was an officer of the Alderman Manufacturing Company, to wit, its secretary, the plaintiff will be entitled to judgment in this action, enjoining the sale of the land and other property which has been advertised by the sheriff, for sale, under the execution now in his hands, even if said defendant, as such officer, performed labor and clerical services for said corporation. If, however, said defendant was an employee of said corporation, and as such employee performed labor and clerical services, for which he has recovered judgment against the corporation, the property now owned by plaintiff, but owned by said corporation at the time such labor and services were performed, is not exempt from execution on said judgment, and the sale should not be enjoined by judgment in this action.

The issue submitted to the jury at the trial of this action in the Superior Court, and answered in the affirmative, is not determinative of the controversy between the parties to this action. The notice of defendant’s claim at the sale of the property by the trustee did not affect the title which the plaintiff acquired to said property as purchaser at said sale, upon its confirmation. The property is subject to sale under execution on the judgment, upon the admitted facts in this case, if defendant, H. F. Yass, performed labor and clerical services for the Alderman Manufacturing Company, as its employee. It is not subject to such sale, if he performed labor and services for said corporation, as an officer. This is the determinative question in this action.

Plaintiff is entitled to a new trial. It is so ordered.

New trial.