S. B. Parker Co. v. Commercial Bank of High Point

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.