Case ID: nc_204/html/0432-01.html
Source: Caselaw Access Project
Author: {"author": "ConNoe, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

S. B. PARKER COMPANY, and Others as Interveners, v. THE COMMERCIAL BANK OF HIGH POINT, N. C., THE CENTRAL TRUST COMPANY OF CHARLESTON, W. VA., THE UNION MORTGAGE AND INVESTMENT COMPANY, and EAST CAROLINA MOTOR COMPANY.
    (Filed 29 March, 1933.)
    Mortgages O d — Under facts of this case mortgagee is held entitled to rents and profits collected from land by receiver.
    While ordinarily a mortgagee is not entitled to the rents and profits from the mortgaged lands even after default, where the foreclosure of the land has been restrained, and a commissioner to sell the land has been appointed by the court, and the iand, pending the sale, has been placed in the hands of a receiver, the rents and profits from the land collected by the receiver pending the action should be applied to the payment of the mortgage debt as against the other creditors of the mortgagor where the sale by the commissioner brings an amount insufficient to discharge the mortgage indebtedness.
    Appeal by the defendant, the Union Mortgage and Investment Company, from Frizzdle, J., at October Term, 1932, of OeayeN.
    Reversed.
    This action was begun by the plaintiff, S. B. Parker Company, a judgment creditor of the defendant, East Carolina Motor Company, to restrain the sale of land conveyed by said defendant to its codefendants, the Commercial Bank of High Point, N. 0., and the Central Trust Company of Charleston, W. Ya., as trustees, to secure the payment of its note for the sum of $28,000, payable to bearer, and now owned by the defendant, the Union Mortgage and Investment Company. Default having been made in the payment of said note, the land conveyed by the deed of trust had been advertised for sale by the defendant trustees, under the power of sale contained in said deed, on 13 October, 1930.
    The action was begun in the Superior Court' of Craven County on 11 October, 1930, and thereafter, on motion of the plaintiff, Geo. H. Roberts was appointed by the court as receiver of the defendant, East Carolina Motor Company. The said receiver took possession of the land described in the deed of trust, and of the building located thereon, and under the orders of the court collected the rents for said land and building during the pendency of the action.
    At May Term, 1932, of the Superior Court of Craven County, judgment was rendered in the action, by consent, that the defendant, the Union Mortgage and Investment Company, recover of the defendant, East Carolina Motor Company, on the note secured by the deed of trust, the sum of $12,000, with interest from the date of said judgment. It was ordered and decreed in said judgment that the land described in the deed of trust, together with the building located thereon, be sold by the commissioner appointed by the court for that purpose, and that the proceeds of said sale, when tbe sale bad been reported to and confirmed by tbe court, be applied to tbe payment (1) of tbe costs and expenses of tbe sale, and tbe unpaid costs of tbe action; (2) of tbe unpaid taxes on said land and building due to tbe city of New Bern, and tbe county of Craven; and (3) of tbe judgment in tbe action. It was further ordered tbat tbe remainder of tbe proceedsj of said sale, if any, should be paid to tbe receiver of tbe defendant, East Carolina Motor Company.
    Pursuant to tbe order and decree of tbe court, tbe commissioner appointed therein, sold tbe land described in tbe deed of trust, together with tbe building located thereon, on 5 September, 1932, to tbe Metropolitan Realty Company, tbe last and highest bidder at said sale, in tbe sum of $12,000. This sale was duly reported to and confirmed by tbe court, and thereafter tbe commissioner conveyed tbe said land and building to tbe Metropolitan Realty Company, upon its compliance with its bid. After tbe payment of tbe costs and expenses of tbe sale, and tbe costs of tbe action, and of tbe unpaid taxes due tbe city of New Bern and tbe county of Craven, tbe commissioner paid tbe remainder of tbe proceeds of tbe sale, to wit: tbe sum of $3,200.59, on tbe judgment for $12,000, rendered in tbe action in favor of tbe defendant, tbe Union Mortgage and Investment Company and against tbe defendant, East Carolina Motor Company.
    There is now in tbe bands of Geo. H. Roberts, receiver of tbe defendant, East Carolina Motor Company, tbe sum of $1,219.05, which sum is tbe balance of tbe amounts collected by him, during tbe pendency of tbe action, as rents for tbe land described in tbe deed of trust and for tbe building located thereon. These amounts were collected by said receiver under orders of tbe court. He has paid out of said amounts, under orders of tbe court, sums due for fire insurance premiums, and for repairs to tbe building, while tbe same was in bis possession.
    At October Term, 1932, of tbe Superior Court of Craven County, tbe motion of tbe defendants, other than East Carolina Motor Company, tbat tbe receiver be ordered to pay tbe said sum of $1,219.05 on tbe judgment rendered in this action at May Term, 1932, was beard by Judge Erizzelle and denied. It was ordered by the court tbat tbe receiver distribute said sum among tbe general creditors of tbe East Carolina Motor Company, whose claims bad been filed and approved.
    From this order, tbe defendant, tbe Union Mortgage and Investment Company appealed to tbe Supreme Court.
    
      H.. P. Whitehurst, B. E. Whitehurst 'and W. B. B. Guión for plaintiff.
    
    
      W. H. Lee and Moore & Durni for defendant.
    
   ConNoe, J.

There was error in tbe order denying tbe motion of tbe defendant, tbe Union Mortgage and Investment Company, and directing the receiver appointed by the court in the action to distribute the sum of money now in his hands and collected by him during the pendency of the action, as rents from the property conveyed to trustees by the defendant, East Carolina Motor Company, to secure its note recited in the deed of trust, among the general creditors of the East Carolina Motor Company.

Ordinarily, a mortgagee or creditor secured by a deed of trust, has no right to collect the rents or other income from property conveyed by the mortgage or deed of trust, even after default in the payment of the secured indebtedness. This right arises only after the mortgagee or trustee has taken possession of the property conveyed by the mortgage or deed of trust, by consent or pursuant to an order or decree of a court of competent jurisdiction; but, where, as in the instant case, a receiver appointed by the court in an action involving the right to foreclose the mortgage or deed of trust, has taken possession of the property and collected the rents or income from the property during the pendency of the action, under the orders of the court, such rents or income should be applied as a payment on the secured indebtedness, when the amount realized from the sale of the property is not sufficient to pay the indebtedness or the judgment for the same.

If the law were otherwise, a grave injustice to the creditor would result.

On the facts appearing on the record in this appeal, the rents cpl-lected by the receiver, should be applied as a payment on the judgment. The order to the contrary is

Reversed.