#### J. C. SPRINGS et al. v. THE ATLANTIC REFINING COMPANY.

(Filed 22 November, 1933.)

1. Landlord and Tenant D b—

Where a lessee parts with his entire interest in the leased premises to another the transaction is an assignment of the lease and not a subletting.

2. Same—

Where an assignment of a lease is made with the knowledge and consent of the lessor, the assignee takes under the original lease and has the same rights in regard to the removal of fixtures as his assignor.

3. Fixtures B a; Injunctions D b—

In an action by a lessor to restrain the lessee’s assignee from removing improvements, the allegations in the assignee’s answer that it was the owner of the property in dispute and had the right of removal, ordinarily entitles the assignee to show such right if it can.

4. Landlord and Tenant C b—

During the continuance of the relationship of landlord and tenant under a lease contract the tenant will not be allowed to dispute the landlord’s title either by setting up an adverse claim or by showing title in a third person.

5. Same—

The principle that a tenant is estopped to deny his landlord’s title does not apply where the tenant’s claim of title to fixtures placed upon the premises and the right to remove same is based upon the provisions of the lease contract between the parties.

6. Fixtures B a—

The right of a tenant to remove trade fixtures upon the expiration of the lease between the parties is governed by a more liberal rule than the one determining the right of a mortgagor or vendor to fixtures and improvements upon land.

7. Fixtures B c—

The trend of our decisions is to the effect that a tenant does not lose his right to remove trade fixtures by failing to remove them before the expiration of the term of the original lease between the parties where a *445renewal lease is executed by tbe parties, although the renewal lease contains no reservation of thé right of removal, especially if the lessee can show the intention of the parties to allow such removal upon the expiration of the second lease.

8. Fixtures B b: Injunctions D b — Held: order restraining removal of fixtures should not have been made permanent, but continued to hearing.

The owner leased certain land as a filling station site, the lessee being authorized to build a filling station thereon, and the lease providing that the lessee should have the right to remove filling station and fixtures upon the expiration of the term of the lease. The lessee constructed the filling station and subsequently assigned the lease and sold the filling station to defendant, and at the expiration of the term of the lease the lessor executed a renewal lease to the assignee, containing like provision for removal of the building and fixtures but no' reservation of the right to remove fixtures placed on the land during the life of the first lease. At' the expiration of the term of the second lease the lessor obtained a temporary order restraining the lessee in the second lease, the assignee of the first lease, from removing the building and fixtures. The defendant filed answer setting up title to the filling station and fixtures, and asserting the right to remove them as trade fixtures. Upon the return of the temporary restraining order it was made permanent: Held, the temporary order should have been continued to the hearing, and the order of the court making it permanent without a hearing was error.

9. Fixtures B b—

What constitutes a “trade fixture” removable by the tenant upon the expiration of the term of his lease, either as a matter of right or by special agreement, is to be determined by the facts of the particular case.

10. Injunctions D b—

Where upon the return of a temporary restraining order the pleadings and evidence raise serious issues of fact, which, if established, would entitle plaintiff to the permanent injunction demanded, the temporary order will ordinarily be continued to the hearing.

Appeal by defendant from Harding, J., at July Term, 1933, of MECKLENBURG.

Civil action to restrain tbe defendant from removing “any buildings, structures, equipment and appliances placed or installed upon tbe premises of tbe plaintiffs at tbe northeast corner of West Trade and Pine streets in the city of Charlotte prior to the first day of July, 1932.”

Tbe facts alleged are these:

1. On 17 June, 1929, tbe plaintiffs leased tbe iiremises in question to John F. Boyd and C. E. B. Mendenhall as a filling-station site for a period of three years beginning 1 July, 1929, and ending 30 June, 1932. Said lease which is in writing and duly registered contains the following stipulation:

*446“Lessors hereby agree that the lessees may erect on said property such buildings, structures, or equipment as they may desire for carrying-on tbeir business and the lessees shall have the right to remove said buildings from said property at the termination of this lease.”

2. On 27 July, 1929, Boyd and Mendenhall assigned their lease to the Red “0” Oil Company, a wholly owned subsidiary of the Atlantic Refining Company. These two companies were later merged and were in continuous possession of said premises up to 30 June, 1933. At the time of the merger the lease was again assigned to the present defendant.

3. On 21 August, 1929, Boyd and Mendenhall, by “Bill of Sale,” -sold and delivered to the Red “0” Oil Company, its successors and assigns, for a. consideration of $4,500, “the building, cement driveway and cement wash-pit,” which, they had erected on plaintiffs’ premises in accordance with the terms of the original lease, with the same right of removal as assignors had, etc.

4. On 22 June, 1932, the plaintiffs leased to the defendant, Atlantic Refining Company, already in possession under the prior assigned lease, the premises in question for a period of one year, beginning 1 July, 1932, and ending 30 June, 1933. Said lease, which is in writing and duly registered, also contains a stipulation with respect to removing buildings, structures, equipment and appliances placed thereon by the lessee for filling station purposes, “at the termination of this lease, and for a period of ten days thereafter.”

5. It is alleged by the defendant that the assignment of the Boyd and Mendenhall lease to the Red “O” Oil Company, “was made with the knowledge and express consent of the plaintiffs,” and that the said buildings and other improvements placed thereon by Boyd and Mendenhall are now .“the sole and exclusive property of the defendant and it has the right to remove the same from said premises.”

6. It is further alleged by plaintiffs that the defendant is attempting to remove the buildings and improvements erected on said premises by Boyd and Mendenhall.

Wherefore, plaintiffs pray that defendant be permanently enjoined from removing said buildings and improvements. The temporary restraining order was made permanent on the return hearing, and from the order,-thus entered, the defendant appeals, assigning errors.

J. G. Newell and H. L. Taylor for plaintiffs.

Edgar W. Pharr for defendant.

Stacy, C. J.

It is alleged in the complaint that Boyd and Mendenhall sublet the premises in question to the Red “C” Oil Company, but as they parted with their entire interest in the demised premises, what really *447took place was an assignment or sale of tbe lease. Millinery Co. v. Little-Long Co., 197 N. C., 168, 148 S. E., 26. And as tbis was done witb tbe knowledge and express consent of tbe plaintiffs, it would seem tbat tbe assignees were in under tbe original lease witb tbe same rights wbicb tbeir assignors bad witb respect to removing buildings and improvements placed tbereon by Boyd and Mendenhall. Causey v. Orton, 171 N. C., 375, 88 S. E., 513.

It is further alleged in tbe answer tbat tbe buildings and other improvements erected or placed upon tbe demised premises by Boyd and Mendenhall are now “tbe sole and exclusive property of tbe defendant and it has tbe right to remove tbe same from said premises.” Under tbis allegation, it would seem tbe defendant is entitled to show, if it can, its right to remove tbe said buildings and improvements. Belvin v. Paper Co., 123 N. C., 138, 31 S. E., 655; R. R. v. Deal, 90 N. C., 110.

Tbe injunction was made permanent — not simply continued to tbe bearing — upon tbe theory tbat tbe defendant, being a tenant in possession, is estopped to deny tbe plaintiffs’ title to tbe buildings and improvements placed tbereon prior to tbe beginning of defendant’s present lease, 1 July, 1932.

It is undoubtedly a well settled principle of law, tbat where tbe conventional relation of landlord and tenant exists, and tbe latter takes possession of tbe demised premises under a lease from tbe former, tbe tenant will not be permitted to dispute tbe title of the landlord, either by setting up an adverse claim to tbe property or by undertaking to show tbat it rightfully belongs to a third person, during tbe continuance of such tenancy. Hobby v. Freeman, 183 N. C., 240, 111 S. E., 1; Clapp v. Coble, 21 N. C., 177. But tbis wholesome and salutary principle, supported both by authorities and considerations of public policy, we apprehend is not necessarily controlling in a case like tbe present, where tbe removal of buildings and improvements placed upon tbe premises by tbe tenant is expressly provided for in tbe agreement between tbe parties. Causey v. Orton, supra; Freeman v. Leonard, 99 N. C., 274, 6 S. E., 259; Feimster v. Johnson, 64 N. C., 259.

Speaking to tbe subject in Insurance Co. v. Totten, 203 N. C., 431, 166 S. E., 316, it was said: “Tbat a tenant who takes possession of demised premises under a lease from tbe landlord, or being in possession unconditionally agrees to bold as such (Riley v. Jordan, 75 N. C., 180), will not be permitted to dispute tbe landlord’s title, during tbe continuance of tbe tenancy, is established by all tbe authorities on tbe subject. Hobby v. Freeman, 183 N. C., 240, 111 S. E., 1; Clapp v. Coble, 21 N. C., 177. But tbis principle, founded upon reasons of public policy, applies only in cases where tbe simple relation of landlord and tenant exists (Abbott v. Cromartie, 72 N. C., 292), and does not extend *448to instances where title to the property is brought in question or equities are to be adjusted between the parties. Hughes v. Mason, 84 N. C., 473; Hauser v. Morrison, 146 N. C., 248; Turner v. Lowe, 66 N. C., 413.”

The doctrine of fixtures has been the subject of much consideration by the courts. A number of interesting cases appear in our own Reports, and they abound with many niceties and distinctions.

For example, in Smithwick v. Ellison, 24 N. C., 326, speaking of the right of a tenant to remove manure made on a farm during the tenancy, it was said: “Whatever things the tenant has a right to remove ought to be removed within the term; for, if the tenant leave the premises without removing them, they then become the property of the reversioner. But where the tenant holds over, even so as to become a trespasser, he will not be considered as having abandoned the things he had a right to remove.” Compare 11 R. C. L., 1080.

Likewise, in Feimster v. Johnson, 64 N. C., 259, where it was held that a still “set up and encased in masonry in the usual way” did not become a part of the realty, contrary to the intention of the parties, the Court taking occasion to say: “As a general rule, whatever is attached to land is understood to be a part of the realty; but as this depends, to some extent, upon circumstances, the rights involved must always be subject to explanation by evidence. Whether a thing attached to land be a fixture or chattel personal depends upon the agreement of the parties, express or implied. Naylor v. Collins, 1 Taunt., 19; Pervy v. Brown, 2 Stark., 403; Wood v. Hewitt, 55 E. C. L., 913. A building, or other fixture which is ordinarily a part of the realty, is held to be personal property when placed on the land of another by contract or consent of the owner.”

Again, in Sanders v. Ellington, 77 N. C., 255, holding that a crop cultivated by a tenant and left standing in the field after the expiration of his term becomes the property of the landlord, the Court observed: “A tenant for years may remove fixtures and anything put there by himself, provided he does so before his term expires; but after that, all of such things belong to the owner of the land, and the quondam tenant has no right to put his foot upon the land except by license of the owner. All of the cases agree that such is the law.” See, also, Chauncy v. R. R., 195 N. C., 415, 142 S. E., 327.

But coming nearer to the subject in hand, it was said in Horne v. Smith, 105 N. C., 322, 11 S. E., 373, that as between landlord and tenant, the intent with which fixtures are attached to the freehold becomes material, and if it appear that they were for the better temporary use of the premises, they may be treated as “trade fixtures,” and hence removable. Causey v. Plaid Mills, 119 N. C., 180, 25 S. E., 863.

*449The liberality extended a tenant, in favor of trade and to- encourage industry, may not apply as between vendor and vendee or mortgagor and mortgagee. Pritchard v. Steamboat Co., 169 N. C., 457, 86 S. E., 171; Overman v. Sasser, 107 N. C., 432, 12 S. E., 64; Foote v. Gooch, 96 N. C., 265, 1 S. E., 525; Bond v. Coke, 71 N. C., 97; Latham v. Blakely, 70 N. C., 368. The reason for the rigid enforcement of the rule in the one case and its relaxation in the other is clearly pointed out by Pearson, C. J., in Moore v. Valentine, 77 N. C., 188. When fixtures are annexed to the land by the owner, actual or potential, the purpose is to enhance the value of the freehold, and to be permanent. But with the tenant a different purpose is to be served, hence for the encouragement of trade, manufacturing, etc., the tenant is allowed to remove what has apparently become affixed to the land, if affixed for the purposes of trade, and not merely for the better enjoyment of the premises. Pemberton v. King, 13 N. C., 376; Basnight v. Small, 163 N. C., 15, 79 S. E., 269.

Our present consideration is limited to the relative rights of landlord and tenant. See Overman v. Sasser, supra, where the subjects are classified and distinguished and the rules applied to the different classes.

It is the position of the plaintiffs that the defendant cannot now avail itself of any right of removal given to Boyd and Mendenhall, for even though at one time the said defendant may have stood in the shoes of Boyd and Mendenhall, as assignee of their lease, having failed to remove said building and improvements at or before the end of the term, or to reserve said right in the new lease, the fixtures thereby passed by operation of law to the plaintiffs as owners of the property. Precht v. Howard, 187 N. Y., 136, 79 N. E., 847.

The apparent majority-holding is to the effect that where, at the expiration of a lease during which trade fixtures have been erected on the premises by the tenant, a new lease is taken of the same premises containing no reservation of any right or claim of the tenant to the fixtures placed thereon during the life of the first lease, such fixtures are not removable by the tenant during or at the expiration of the second lease, notwithstanding his continuous possession of the premises. 11 R. C. L., 1072; 26 C. J., 708. There is, however, a strong line of authority to the contrary. Thomas v. Gayle, 134 Ky., 330, 120 S. W., 290, 20 Ann. Cas., 766, and note. And many courts hold that the execution of a new lease without a reservation of the right of the tenant to remove fixtures placed on the demised premises under a prior lease does not ipso facto deprive the tenant of the right of removal at the expiration of the new lease. Ogden v. Garrison, 82 Neb., 302, 117 N. W., 714, 17 L. R. A. (N. S.), 1135; Kerr v. Kingsbury, 39 Mich., 150, 33 Am. St. Rep., 362; Radey v. McCurdy, 209 Pa., 306, 103 Am. St. Rep., 1009, *450 58 Atl., 558, 67 L. R. A., 359; Bergh v. Herring-Hall-Marvin Safe Co., 136 Fed., 368, 70 L. R. A., 756.

Tie precise question seems not to have been heretofore presented in this jurisdiction, but tie trend of our decisions apparently favors tie minority view, or at least tie right of tie tenant to show tie intention of tie parties, if contrary to tie strict rules of tie common law. Bank v. Cox, 171 N. C., 76, 87 S. E., 967; Finance Co. v. Weaver, 199 N. C., 178, 153 S. E., 861; Cox v. Lighting Co., 151 N. C., 62, 65 S. E., 648; Feimster v. Johnson, supra.

Thus, in R. R. v. Deal, 90 N. C., 110, we find Merrimon, J., animadverting on tie subject as follows :

> “It is tie policy of tie law to encourage trade, manufactures, and transportation, by affording them all reasonable facilities. Buildings, fixtures, machinery, and such things, certainly intended and calculated to promote them, are treated, not as part of tie land, but distinct from it, belonging to tie tenant, to be disposed of or removed at iis will and pleasure. Hence if a house, or other structure, is erected upon land only for tie exercise of trade or tie mixed purpose of trade and agriculture, no matter how it may be attached to it, it belongs to tie tenant, and may be removed by him during iis term, and in some classes of cases, after it is ended. . . . There are authorities which decide that tie tenant may remove tie buildings while he remains in possession of tie land, but not after he has yielded possession thereof. These go upon tie ground that if tie tenant neglect to avail himself of iis right within tie period of iis term, tie law presumes that he voluntarily relinquished or abandoned iis claim in favor of tie landlord, but such presumption cannot arise, where tie facts and circumstances, and tie nature of tie property, and tie uses to which it is devoted, combine to rebut such a presumption. If tie tenant yields possession and leaves tie structure standing, this fact may be evidence that it was not used or intended only for tie purpose of trade or manufacture, or of abandonment of it, but it could not change tie established character of the property. The character of the structure, its purpose and tie circumstances under which it was erected, tie understanding and agreement of the parties at tie time tie erection was made, must all be considered in determining whether it became a part of tie freehold or not.”

Finally, it may be said that what constitutes a “trade fixture,” which is attached to tie demised premises by a tenant and removable by him at tie end of his term, either as a matter of right, or by special agreement, depends upon the facts of the particular ease. 11 R. C. L., 1070-1082-1083. The general principles applicable to the question are well settled, but the courts have experienced much difficulty in applying them to variant fact situations. 11 R. C. L., 1075. “What are fixtures and *451wbat are not has become to be a very important question. It is presented in so many ways and under so many different circumstances that it is not always easy to determine what are and what are not such fixtures as to become a part of the realty and pass as a part thereof under a conveyance or a transmission of the real estate” — Furches, J., in Woodworking Co. v. Southwick, 119 N. C., 611, 26 S. E., 253.

In the present state of the record, which seems somewhat meager and might have been prepared more in conformity to the rules (Carter v. Bryant, 199 N. C., 704, 155 S. E., 602), we think the court erred in doing more than continuing the injunction to the hearing.

Where the main purpose of an action is to obtain a permanent injunction, and the evidence raises serious questions as to the existence of facts, which, if established, would entitle the plaintiff to the relief demanded, the usual practice is to continue the temporary restraining order to the hearing. Proctor v. Fertilizer Works, 188 N. C., 153, 110 S. E., 861; Sutton v. Sutton, 183 N. C., 128, 110 S. E., 777; Tise v. Whitaker, 144 N. C., 508, 57 S. E., 210.

Error and remanded.