Opinion
(Decided 18 October, 1898.)
Mortgages — Rents — Foreclosure.
1. Rents and profits, until entry by the mortgagee, belong to the mortgagor, and are assignable by him.
2. Right of possession of the mortgagor is not terminated by an action simply to foreclose, until some order of the court affecting the right, or demand in pais.
3. The holder of a first, third and fourth mortgage, who takes possession under an agreement with the mortgagor to apply the rents and profits to the debts secured by his mortgages, without other specification, is not accountable to the holder of the second mortgage for rents and profits, and under such agreement he may apply a portion as a payment on one of debts, about to become barred by the statute of limitations.
CIVIL ACTION for foreclosure of mortgage, tried before Norwood, J., at Spring Term, 1898, of the Superior Court of HALIFAX County. Action commenced 10 December, 1891.
The complaint asked for a foreclosure of a land mortgage executed by defendants Curtin and wife, and no other relief. The Brownings were included as defendants, as claiming some interest in the land. W. R. Curtin and wife had made four mortgages on the land on different dates: (1) 9 November, 1880 — a first mortgage to Browning Son, to secure $422.46; (2) 15 February, 1881 — a second mortgage to Leach Company, plaintiffs, to secure $500; (3) 6 April, 1881 — a third mortgage to B.R. Browning to secure $800; (4) 4 January, 1885 — a (86) fourth mortgage to Browning Son to secure $338.29.
Shortly after executing the last mortgage, Curtin and wife, by a paper-writing under seal, dated 10 January, 1885, and executed and delivered to Browning Son, surrendered to them the possession of the mortgaged land, who were to keep possession and rent it out and collect the rents until they should pay off all the debts which Curtin and wife owed to B.R. Browning Son and to B.R. Browning — the possession to be returned when the mortgage debts were paid. Under this instrument the defendant Browning Son took possession of the land and collected the rents up to and including the year 1897, which they applied first to the note dated 4 January, 1885, for $338.29, and the surplus to the note dated 6 April, 1881, for $800, except that the rents of 1885 were credited on the mortgage debt of 9 November, 1880, for $422.46.
At Fall Term, 1893, there was a consent order of reference to David Bell., Esq., for trial under The Code of all issues of law and fact.
The referee having made his report, exceptions to the report were filed by the plaintiffs and by B.R. Browning Son, defendants.
His Honor, at the present term, tried the case upon the exceptions. Those of the plaintiffs were overruled; those of B.R. Browning Son were sustained, except one, No. 5, which was withdrawn.
The plaintiff excepts, because the court overruled his exceptions. He also excepts because the court sustained the exceptions of the defendants, and rendered judgment in accordance therewith.
The plaintiff appealed to the Supreme Court.
(87) Thomas N. Hill for plaintiffs (appellants).
R. O. Burton and E. L. Travis for appellees.
This case is before us on the appeal of the plaintiffs to the rulings of the court below on exceptions filed by both the plaintiffs and the defendants to the findings of the referee. The referee reported, without exception on the part of either side, that the defendants Curtin and wife made four mortgages of different dates on their land; the first to secure Browning Son a debt of (three notes of $140.82 each) $422.46; the second to secure a debt due to the plaintiffs of $500; the third to secure the defendant B.R. Browning a debt of $800, and the fourth to secure a debt due to the defendants Browning Son in the sum of $338.29. On 10 January, 1885, the defendants Curtin and wife executed and delivered to the defendants Browning Son a paper-writing in which they surrendered to them the possession of the mortgaged tract of land. Browning Son were to keep possession of the land and rent it out, and collect the rents until they should collect enough to pay off and discharge all the debts which Curtin and wife owed to B.R. Browning Son and B.R. Browning, the possession of the land to be returned when the mortgage debts should have been paid. Under that instrument the defendants Browning Son took possession of the land at once, and collected the rents up to and including the year 1897. The present action was begun on 10 December, 1891, and the complaint shows that it was for a simple foreclosure of the plaintiff's mortgage without any demand for a receiver to take charge of the rents. The defendants Browning Son were brought into the action on the simple allegation in the complaint that they had an interest in the land. The defendants Browning Son applied the rents, with the exceptions of (88) small credits placed upon the debts secured in the first mortgage, toward the payment of the debts secured in the mortgages junior to the plaintiff's mortgage. The referee found that the defendants Browning Son had the right to apply the rents which were collected up to the bringing of this suit in that way, but that the rents collected after the commencement of this action should have been applied to the debt of Browning Son secured in the first mortgage, until it was paid off, then to the plaintiffs' mortgage. His Honor held that the defendants Browning Son had the right to apply the whole of the rents as they had applied them.
There was no error in the ruling of his Honor. The rents did not belong to the plaintiffs. They could only get them as incident to their right of possession, and possession was not asked for nor demanded by the plaintiffs either in pais or in the complaint. As we have said, the complaint was one simply for foreclosure.
If Curtin and wife, then mortgagors, had been in possession they would have been entitled to receive the rents and profits without liability to account to any person until entry made by the mortgagee. Certainly then it follows that the plaintiffs cannot hold to account for the rents, the assignees of the defendants Curtin and wife. Killebrew v. Hines, 104 N.C. 182. The referee found that the notes dated 9 November, 1880, due to the defendants Browning Son under the first mortgage were not barred by the statute of limitations, and his Honor sustained the finding. That ruling of his Honor constitutes one of the plaintiffs' exceptions. Out of the rents of 1885 the defendants Browning Son in that year made a small payment upon each of the notes secured in the first mortgage. This they had the right to do. The debtors, Curtin and wife, had given them no instructions as to the (89) particular manner in which the rents were to be applied.
There is no error in the rulings of his Honor, and the judgment is
Affirmed.
Cited: Credle v. Ayers, 126 N.C. 15.