Kistler v. Wilmington Development Co.

Adams, J. The Ham Estates, Incorporated, holds one of three notes executed and delivered on the first day of November, 1929, to David J. White, trustee, by the Wilmington Development Company and secured by a deed of trust on real property situated in the city of Wilmington. On 2 February, 1933, this company went into the hands of receivers duly appointed by the Superior Court and on 14 February, 1933, the Ham Estates, Incorporated, filed its petition for the segregation of the income and rents of the property described in the deed of trust. In the absence of a stipulation to the contrary a mortgagor of real property who is permitted to retain possession is entitled to the rents and profits. Credle v. Ayers, 126 N. C., 11. As between the mortgagor and the mortgagee equity makes the mortgage a charge upon the rents and profits when the mortgagor is insolvent and the security is inadequate (Carr v. Dail, 114 N. C., 284), but the prevailing rule is that a mortgagee is not entitled to rents until entry is made or a suit for foreclosure is begun. Killebrew v. Hines, 104 N. C., 182; Parker Co. v. Bank, 204 N. C., 432. In the latter case it was held that the mortgagee’s right to collect the rents and income of mortgaged property arises only after the mortgagee or trustee has taken possession either by consent or by an order or decree of the court. There a receiver had been appointed in an action for the foreclosure of the mortgage and as the amount realized from a sale of the property was not sufficient to pay the mortgage debt the rents were properly applied in payment of the deficiency. In the present case the facts are entirely different. The petitioner had the right to institute an action on 1 November, 1930, for' the foreclosure *758 of the deed of trust by which its note was secured but it has never made entry or brought suit for this purpose and therefore is not entitled as a legal right to the segregation of the rents. Furthermore, it is expressly provided in the order of the court that the receivers of the Wilmington Development Company may in their discretion authorize any party holding a mortgage or deed of trust on real estate to collect the rent from such property and apply it in payment of overdue interest. It does not appear that the petitioner has requested leave to make such collection or that permission has been denied. The appellant insists that the court may not refuse a foreclosure of the deed of trust securing its note when the company which executed the deed is in the hands of receivers. In the order appointing the receivers it is found that defendants in the action could not protect the property and pay the claims of unsecured creditors; and that for the benefit of all parties it was necessary to protect assets and preserve equities, to prevent interference with the property by foreclosure or by-suits against the receivers except by leave of the court, to collect rents, to perform other prescribed duties, and to file an itemized and detailed list of the assets of the Development Company and the encumbrances thereon. The facts found by the court justify the conclusion that its order was essential to the promotion of justice and to the protection of legal and equitable rights and that no other remedy was adequate to the attainment of these ends. In these circumstances the action of the court was apparently governed by a sound, judicial discretion with which the courts are reluctant to interfere. Judgment Affirmed.