Koob v. Koob

195 S.E.2d 552 (1973) 283 N.C. 129

Marilyn S. KOOB
v.
William M. KOOB, Defendant, Joseph P. Shore, Additional Defendant.

No. 7.

Supreme Court of North Carolina.

April 11, 1973.

Turner, Rollins & Rollins by Elizabeth O. Rollins, Greensboro, for plaintiff appellant.

Atty. Gen. Robert Morgan and Asst. Atty. Gen. Christine Y. Denson for additional defendant Joseph P. Shore, appellee.

BOBBITT, Chief Justice.

The summons, and the application and order for extending the time for filing complaint, constitute the only process and pleading served personally on defendant. The only service of the complaint and amendment thereto was made by publication of the notice set forth in our preliminary statement. Assuming this service met all the requirements of G.S. § 1A-1, Rule 4(j)(9)c, the court acquired jurisdiction to award the plaintiff whatever relief she was entitled to obtain in an action for "alimony without divorce" under G.S. § 50-16.2.

The order of 4 January 1972 discloses that the court made the findings of fact set forth therein after "reading the plaintiff's verified complaint, offered as an affidavit in support of her motion, and hearing witnesses presented in open Court on behalf of the plaintiff. . . ." The record does not contain the testimony of the witnesses or disclose their identity. For present purposes, we assume the sufficiency of the evidence to support the court's findings of fact. Moreover, we accept the findings of fact as sufficient to support the pendente lite allowances for plaintiff's support and for the support of Martin. We pass, without discussion, whether those portions of the order of 4 January 1972 which relate to the alleged appropriation by defendant of certain bonds and the alleged removal by defendant of certain household furniture and appliances without plaintiff's consent are within the purview of an action for "alimony without divorce." On this appeal, we are concerned solely with the portions of the order of 4 January 1972 which relate to the jointly owned real estate then being foreclosed by Douglas, Trustee, and to the portions thereof and of the subsequent orders of 10 March 1972, 13 April 1972 and 14 April 1972 which relate to the disposition of the surplus arising from the foreclosure by Douglas, Trustee, of the jointly owned real property.

On 4 January 1972 the real property at 3210 West Market Street, Greensboro, North Carolina, referred to hereafter as the subject realty, was owned by William M. Koob and wife, Marilyn S. Koob, as tenants by the entirety, subject to the deed of trust executed by the Hills to Douglas, Trustee. Prior to 4 January 1972 Douglas, Trustee, had advertised that a foreclosure sale of the subject realty under the Hill deed of trust would be conducted on 17 January 1972. A resale on 13 March 1972 became final when no upset bid was submitted within ten days and an order of confirmation was entered on 27 March 1972.

The "properties and incidents of an estate by the entirety" in real property are summarized by Justice (later Chief Justice) Stacy in the oft-cited case of Davis v. Bass, 188 N.C. 200, 124 S.E. 566 (1924).

"[T]he husband is entitled during the coverture to the full possession, control and use of the estate, and to the rents and profits arising therefrom to the exclusion of the wife." Nesbitt v. Fairview Farms, Inc., 239 N.C. 481, 486, 80 S.E.2d 472, 477 (1954). However, "the rents and profits therefrom, which belong to the husband, may be charged with the support of his wife." Porter v. Bank, 251 N.C. 573, 577, 111 S.E.2d 904, 908 (1960), and cases there cited. In this respect, such rents and profits have the same status as other income and assets owned exclusively by the husband. In re Estate of Perry, 256 N.C. 65, 70, 123 S.E.2d 99, 102 (1961).

Although the rents and profits therefrom and the actual possession thereof may be made available for the support of the wife, the court does not have the power to order the sale of land owned by husband and wife as tenants by the entirety in order to procure funds to pay alimony to the wife or to pay her counsel fees. Holton v. Holton, 186 N.C. 355, 119 S.E. 751 (1923); Porter v. Bank, supra.

Under the legal principles stated above, those provisions of the orders of 4 January 1972 and 10 March 1972 which purport to determine the respective rights of plaintiff and defendant in the surplus, if any, which might be available for them upon completion of the foreclosure by Douglas, Trustee, were invalid because in excess of the court's authority. As of 4 January 1972, and as of 10 March 1972, the court's only authority in respect of the subject realty was to award to plaintiff the actual possession thereof or the rents and profits therefrom.

Moreover, in accord with the Court of Appeals, we hold that G.S. § 45-21.31(b)(3) authorized Douglas, Trustee, upon completion of the foreclosure, to pay the surplus to the Clerk. The surplus of $25,853.23 was paid by Douglas, Trustee, to the Clerk on or prior to 19 April 1972. We hold that this fund was received and is held by the Clerk as having been paid to him under G.S. § 45-21.31(b)(3). With reference thereto, "The clerk is liable on his official bond for the safekeeping of money so received until it is paid to the party or parties entitled thereto, or until it is paid out under the order of a court of competent jurisdiction." G.S. § 45-21.31(e).

Plaintiff and defendant are the owners of the fund of $25,853.23. The Clerk is simply a stakeholder, having no interest therein other than to protect himself from liability on his official bond.

The Clerk contends that this fund of $25,853.23 represents real property owned by plaintiff and defendant as tenants by the entirety and is subject to the law applicable to an estate by the entirety. He cites Highway Commission v. Myers, 270 N.C. 258, 154 S.E.2d 87 (1967), where, with reference to compensation paid into the clerk's office in a condemnation proceeding, the court said: "Unless otherwise provided by their joint and voluntary agreement, and in the absence of an absolute divorce, we are of [the] opinion and so decide that such involuntary transfer of title does not destroy or dissolve the estate by the entirety . . . and that the compensation paid by the Commission therefor has the status of real property owned by husband and wife as tenants by the entirety." Id. at 262, 154 S.E.2d at 90. Cf. Perry v. Jolly, 259 N.C. 305, 130 S.E.2d 654 (1963). If real property, the authority of the court would extend no further than to provide for the investment of the fund and the application of the income therefrom to the payment of an alimony award.

Plaintiff contends, and Judge Alexander ruled, that the $25,853.23 is personal property, owned in equal shares by plaintiff and defendant; that plaintiff is entitled to one-half as owner; and that defendant's one-half is subject to impoundment and payment of alimony until exhausted. Plaintiff relies largely on Porter v. Bank, supra, which involved conflicting rights in a fund of $9,382.34 deposited by Frank Banzet, Trustee, with the Clerk of the Superior Court of Warren County, under G. S. § 45-21.31. In Porter, the plaintiff-wife had obtained an award of alimony pendente lite and counsel fees prior to completion of the foreclosure by Frank Banzet, Trustee. It was held that a creditor of defendant-husband who had levied on the husband's interest in the surplus had priority over the wife's claim under the order providing for the payment of alimony to her. The plaintiff-wife, the judgment creditor of the defendant-husband and the court proceeded on the assumption that the $9,382.34 was personalty rather than realty. It being to the interest of the plaintiff-wife and of the judgment creditor of the defendant-husband that the fund be regarded as personalty, no question was raised or argument presented with reference to whether it was personalty or realty.

Without appraising the legal significance thereof, we note this factual difference between Porter v. Bank, supra, and the present case: In Porter v. Bank, the surplus fund of $9,382.34 was the result of the foreclosure by Frank Banzet, Trustee, of a deed of trust which had been executed by the defendant-husband and the plaintiff-wife. In the present case, the surplus fund of $25,853.23 resulted from the foreclosure by Douglas, Trustee, of a deed of trust which had been executed by Harry J. Hill and wife, Mary H. Hill, prior owners of the subject realty, and not by William M. Koob and wife, Marilyn S. Koob.

North Carolina does not recognize an estate by the entirety in personal property. Wilson v. Ervin, 227 N.C. 396, 399, 42 S.E.2d 468, 470 (1947), and cases cited therein. Also, see cases cited in Anno. 64 A.L.R. 2d 8, 28.

"An absolute divorce . . . converts an estate by the entirety into a tenancy in common." Davis v. Bass, supra 188 N.C. at 207, 124 S.E. at 570; Smith v. Smith, 249 N.C. 669, 107 S.E.2d 530 (1959); Lanier v. Dawes, 255 N.C. 458, 121 S.E.2d 857 (1961). Also, see Carter v. Insurance Co., 242 N.C. 578, 89 S.E.2d 122 (1955).

An estate by the entirety can be destroyed and dissolved by the voluntary joint acts of the husband and wife. Wilson v. Ervin, supra. Hence, where husband and wife sell and convey real property owned by them as tenants by the entirety, the proceeds of sale, including a balance purchase-money note and security therefor, are considered personal property, and the husband and wife are tenants in common in respect of the ownership thereof. Shores v. Rabon, 251 N.C. 790, 793, 112 S.E.2d 556, 559 (1960), and cases there cited. Decisions in other jurisdictions relating to the effect of such sales are cited in Anno. 64 A.L.R. 2d 8, 47 et seq.

A critical question is whether the foreclosure by Douglas, Trustee, is to be considered as having effected the destruction and dissolution of the estate by the entirety by the voluntary joint acts of husband and wife. Defendant is entitled to specific notice of plaintiff's claim with reference thereto before this question is decided.

The purpose of attachment is to bring the property of a defendant within the legal custody of the court. G.S. § 1-440.1. The fund of $25,853.23 is now within the legal custody of the court and is subject to the court's orders in respect of its ownership and disposition. As far as the record discloses, no person other than plaintiff and defendant has or claims any interest therein. The respective rights of plaintiff and defendant depend in large measure upon whether the fund is to be considered as real property and subject to the law applicable to an estate by the entirety or as personal property. The Clerk's only concern is that the adjudication of this question be made by a court of competent jurisdiction.

In our opinion, the process served on defendant was insufficient to confer jurisdiction on the court to adjudge the respective rights of plaintiff and defendant in the $25,853.23 fund. This fund was not in existence when the action was instituted or when the original complaint was filed. Nor was it in existence when the amendment to complaint was filed. Moreover, the fact that an action for "alimony without divorce" had been instituted did not constitute notice that plaintiff was seeking a determination of the respective rights of plaintiff and defendant in a surplus that might result in the event of a foreclosure by Douglas, Trustee. Nor do we consider that the publication in November 1971 of the notice quoted in our preliminary statement was sufficient notice to confer jurisdiction for such determination. We note that this notice to defendant was published prior to the first advertisement by Douglas, Trustee, of a foreclosure sale.

Prerequisite to a determination of the respective rights of plaintiff and defendant in the fund of $25,853.23, a notice must be served on defendant setting forth with particularity plaintiff's claim with reference thereto and requiring defendant to appear at a designated time and place to show cause, if any he has, why the relief sought by plaintiff should not be granted. When service by publication is permissible, the procedure therefor is prescribed in Rule 4(j)(9)c. We note that Rule 4(k) provides: "In any action commenced in a court of this State having jurisdiction of the subject matter and grounds for the exercise of jurisdiction in rem or quasi in rem as provided in G.S. 1-75.8, the manner of service of process shall be as follows: (1) Defendant known.—If the defendant is known, he may be served in the appropriate manner prescribed for service of process in section (j)." G.S. § 1-75.8 in part provides: "A court of this State having jurisdiction of the subject matter may exercise jurisdiction in rem or quasi in rem on the grounds stated in this section. A judgment in rem or quasi in rem may affect the interests of a defendant in a status, property or thing acted upon only if process has been served upon the defendant pursuant to Rule 4(k) of the Rules of Civil Procedure. Jurisdiction in rem or quasi in rem may be invoked in any of the following cases: (1) When the subject of the action is real or personal property in this State and the defendant has or claims any lien or interest therein, or the relief demanded consists wholly or partially in excluding the defendant from any interest or lien therein. . . . (5) In any other action in which in rem or quasi in rem jurisdiction may be constitutionally exercised." Obviously, jurisdiction in rem may be constitutionally exercised in respect of property which is in the legal custody of the court.

The Clerk does not except to the awards made to plaintiff as alimony pendente lite or otherwise. Nor does he challenge the award made pendente lite for the benefit of Martin. However, we note that only pendente lite allowances have been awarded. The factors for consideration in making pendente lite allowances are discussed in Rickert v. Rickert, 282 N.C. 373, 193 S.E.2d 79 (1972).

There has been no trial in respect of the allegations upon which plaintiff bases her claim for alimony. In Hicks v. Hicks, 275 N.C. 370, 375, 167 S.E.2d 761, 764 (1969), the Court, in an opinion by Justice Branch, said: "This Court has held that suits for alimony without divorce are within the analogy of divorce laws, Rector v. Rector, 186 N.C. 618, 120 S.E. 195, and that an action under N.C.Gen.Stat. § 50-16 was a divorce action within the purview of that portion of N.C.Gen.Stat. § 50-10 which controverted all material facts in every divorce action. Rouse v. Rouse, 258 N.C. 520, 128 S.E.2d 865; Blankenship v. Blankenship, 256 N.C. 638, 124 S.E.2d 857; Schlagel v. Schlagel, 253 N.C. 787, 117 S.E.2d 790."

The foregoing leads to this conclusion: The portions of the orders of 4 January 1972, 10 March 1972, 13 April 1972 and 14 April 1972, which purport to adjudge the respective rights of plaintiff and defendant in the fund of $25,853.23, are vacated and stricken therefrom. The cause is remanded to the Court of Appeals for remand to the District Court with direction that it defer adjudication of the respective rights of plaintiff and defendant in the fund of $25,853.23 until explicit notice in respect of plaintiff's claim has been served on defendant as set forth herein. Except as modified herein, the decision of the Court of Appeals is affirmed.

Modified and affirmed.