Hook, Skinner & Co. v. Fentress, 62 N.C. 229, 1 Phil. Eq. 229 (1867)

June 1867 · Supreme Court of North Carolina

62 N.C. 229, 1 Phil. Eq. 229

HOOK, SKINNER & CO. v. THOMAS R. FENTRESS and others.

One effect of the doing away with execution hy ca. m. is to originate a jurisdiction in equity to compel the application of legal choses in action to the satisfaction of debts. As preliminary to its exercise in any case the court will require: 1st, That the debt shall be established by a judgment ' at law, and Snd, That the want of property subject to fi. fa. shall be shown by a retwn of nulla Iona, or by other sufficient proof.

Whether in exercising this jurisdiction other creditors will be allowed to come in and make themselves parties, and take a share of the fund, quart). A vendor of land who retains the title and allows the vendee to go into possession, may at any time take possession, or on notice given may require those in possession to pay the rents to him, to be applied to keep down the interest and, if any surplus, to the discharge of the principal.

Where the tenant of one who claimed under a bond for title from A, had, by virtue of a sub-lease, become entitled to certain rents which he had promised to transfer to the obligee in the bond, in order to be by him applied in discharging the debt still owing to A for the purchase money, SeU that a bill filed after such promise had been made, would not enable A to intercept these rents and appropriate them to a debt owing by the tenant to himself.

Bill filed in 1865, before Foivle, Provisional Judge, under an Ordinance oí tbe Convention of tbat year, and at Spring Term, 1866, transferred to tbe Court of Equity for "VVake. Judgment pro confesso bad previously been taken against tbe defendants Eandall and Bowen.

At Fall Term, 1866, tbe cause was set for bearing upon tbe bill tbe answer of Fentress and tbe proofs, and transferred to tbe Supreme Court by consent.

Tbe facts were tbat tbe complainants bad sold a valuable bouse and lot in Ealeigb to one Eobson, a resident of Mississippi, and bad given bim a bond for title, a considerable part of tbe purchase money being unpaid; Eobson bad purchased for tbe benefit of tbe wife and family of tbe defendant Fentress, who was insolvent, and tbe Fentress family resided in it; also tbat Eobson was willing at tbe time of bis purchase tbat Mrs. Fentress, if she chose, might be substituted to the advantages of his bargain; in 1865 Fentress leased a portion of the house to Randall and Bowen the other defendants, and at the time when this bill was filed they owed several hundred dollars for rent; this rent by contract -was made payable to Fentress, but he testified that he had always considered himself as acting for Robson in that matter; and it was shown that afterwards, and before the bill had been filed, an authorized agent of Robson’s had called upon him and demanded that the rents when paid should be turned over to him to be applied towards the purchase money, and that hé had promised that they should be; to the same effect was a correspondence by letter between Robson and Fentress, which also occurred before the bill was filed.

Haywood, for the complainants.

1. The allegation that a fi. fa. had been taken out and returned nulla bona, is not indispensable in a bill filed to subject equitable property to a judgment at law. Other allegations are equivalent. Tabb v. Williams, 4 Jon. Eq. 352; Rountree v. McKay, 6 Jon. Eq. 87.

2. When this bill was filed (Dec. 28, 1865,) there was no remedy by ca. sa. against the defendant. Act of Sept. 11th, 1861, s. 8.

3. Therefore by this bill a legal chose in action may be subjected to the judgment of the complainant, even though dormant. Brotan v. Long, ? D. & B. Eq. 138; Brown v. Long, 1 Ire. Eq. 190; Hough v. Oress, 4 Jon. Eq. 295.

4. A bare delivery of choses in action not negotiable, by a debtor to the agent of his creditor, will not in equity prevail over the lien obtained by filing a bill to_ subject them to a judgment at law. To make such transfer available there must be a disiinci appropriation and delivery over of such choses for the benefit of the preferred creditor. Thigpen v. Horne, 1 Ire. Eq. 20; 1 Pars. Cónt. 228.

5. The notification by. Robson to pay the rents to Mm would have served his purpose in a case of legal mortgage, but the numerous decisions as to the rights of a mortgagee in this respect are rules of law. only, whilst in equity the mortgagor is regarded as the owner of the land, and under ordinary circumstances entitled to the rents and profits:

(a.) If the mortgagee has actually received these, equity will not take them away, but will compel him to apply them to the debt, for the benefit of the mortgagor.

(b.) If the mortgagor has received them, the mortgagee is never entitled in equity, to a retrospective account of rents and profits. Higgins v. York Building Co., 2 Atk. 107; Coleman v. Duke of St. Albans, 3 Yes. 25; Drummond v. Duke of St. Albans, 5 Yes. 433.

(c.) If by any means the rents have come into the hands of a third person, (as an assignee in bankruptcy, the court, or its officers,) equity will not give them to the mortgagee in preference to the mortgagor. Exparte Wilson, 2 Yes. & Bea. 252; Cresley v. Adclerly, 1 Swan. 579; Thomas v. Brigstocke, 4 Russ. (3 Cond. Ch.) 64; Powell Mort. 231-2.

(d.) Plere the rents have in effect been paid into court by Randall & Bowen, and the complainants by the lien of their equitable fi. fa. are substituted to Fentress’ right to the rents.

4. Note also that this is a case of contest as to the rents between an equitable mortgagor and equitable mortgagee. The thing mortgaged is an equity of redemption, and a notice to the tenants from such a [mortgagee to pay the rents to him does not entitle him to them. Miller’s Law of Eq. Mort. p. 66, (Law Lib. 47.)

Moore, for the defendant Fentress.

1. Supposing Fentress to be the real creditor as regards the contract for rent, the complainants are without remedy, either in equity (Smitherman v. Allen, 6 Jon. Eq. 17) or at law as the writ of ca. sa. had been, done away with. Courts of Equity are not invested with the power of subjecting equitable interests for debts, merely because courts of law cannot. Besides, the judgment here was dormant.

2. Mrs. Fentress had no estate. Mr. Robson’s promise gave her none. There was not the requisite distinctness in the trusts. Abernathy v. Hohe, 2 Ire. Eq. 157; Foulce v. Slaughter, 1 A. K Marsh. 56; or any consideration, Thompson v.' Branch, Meigs 390.

3. If she had any estate, then by the principles of Rev. Code, c. 56, Fentress had none; and no power to lease, except as her agent.

4. If as between Robson and Fentress and wife, the former had an absolute estate, then Fentress was in possession by sufferance, and could make no valid lease, unless as Robson’s agent, and for his benefit.

5. If as between them, Mrs. F. had an equitable claim to redeem, then Robson held for her sole use, subject to be reimbursed for his advances, i. e., she was mortgagor as regards him. In such case the rent is payable, after a demand, to the mortgagee. Moss v. Gallimore, 1 Doug. 279; Coote on Mort. 69, Law Lib. 339; Trent v. Hunt, 22 Eng. L. & E. 546; Pope v. Garbett, 17 Com. Law 368; Johnson v. Jones, 36 Com. Law 292; Hoe v. Benton, 39 ib. 101; Woodf. L. & T. 82, s. 16.

6. As between Hook, Skinner & Co. and Robson, the latter is mortgagor and the former are mortgagees, therefore whatever profits from the house are diverted by the former from the pockets of the latter, must go as a credit on the mortgage debt.

Pearson, C. J.

We agree to the proposition assumed by Mr. Haywood, that the effect of the act of the Legislature which takes from creditors the right to have execution by writ of capias ad satisfaciendum, is to originate a jurisdiction in equity by which debtors will be compelled to apply legal choses in action to the discharge of their debts. This jurisdiction rests on the ground that there would “ otherwise be a failure of justice.” "Wherever there is a right there is a remedy, and if a party be “ remediless at law,” it is the province of courts of equity to give relief. Two things are necessary to induce the court to take jurisdiction. The fact of indebtedness must be eptablished by a judgment at law; for that is a pure legal question. The fact that the debtor has no property which can be reached by the writ of fieri facias must be established by the return of nulla bona, or, under special circumstances, by some other sufficient proof. (See the authorities cited on the argument.) Whether in the exercise of this jurisdiction the court, on the maxim “ equality is equity,” will allow other creditors to be made parties, and come in for a distribution of the fund, is a question well worthy of consideration.

We also agree to the proposition assumed by Mr. Moore, that a vendor of land, who has let the purchaser into possession and retains the legal title as a security for the payment of the purchase money, occupies the relation of a mortgagee when the mortgagor is in possession, and has the right to take possession at any time and go into the pernancy of the profits, and may, on notice given, require the tenants to pay the rent to him to be applied to keep down the interest, and any surplus to the discharge of principal. (See the authorities cited on the argument.) Whether there is a distinction in cases of imperfect mortgage: that is, the mortgage of an equitable estate, or a sale by a vendor who has not obtained the legal title, is a question not presented by this case, even supposing that Eobson is under obligations to allow Mrs. Fentress to have the property on payment of the purchase money with interest. And upon this we are not at liberty to intimate an opinion; for we put our decision on the ground that Fentress, in renting the property, either acted as the agent of Robson, or, if acting then for himself and intending to put the rents to his own use, that his subsequent letters to Robson and his admissions and assurances to the agent of Robson, before the plaintiffs filed their bill, had the effect of an equitable assignment of the rents and an appropriation of them to the liquidation oí the balance of purchase money due by Robson to the plaintiffs; and consequently that they have no right to intercept the fund and apply it to another debt owing by Fentress to them, as is the object oí this bill.

Per Curiam.

Bill dismissed with costs.