Gooch v. . Vaughan Barnes

MekriMON, J. (after stating the facts). The defendants admit that they are mortgagees with power of sale in themselves, and that they are about to execute that power in their own behalf by-selling the mortgaged property, which embraces all the real estate owned by the mortgagor at the time the mortgage was executed. Courts regard such powers with suspicion and watchfulness, and never fail to scrutinize the exercise of them, when it appears that there is ground to apprehend that injustice in any respect is done, or about to done to the mortgagor. The mortgagor is, in an important sense, completely in the power of the mortgagee and besides, the latter is a trustee, first to control the property and apply the proceeds of it when sold to the payment of the mortgage debt, and secondly, for the mortgagor, as to any surplus, and he is held to a strict account. The power thus conferred is intended to be a summary, cheap and expeditious method of foreclosing a mortgage without action, when the debt secured is a plain one, unattended by complicated accounts and confusion incident to it. The courts have yielded to it with reluctance, because of the largely superior advantages and opportunity afforded by it in a variety of ways to the mortgage creditor as against the debtor. Indeed, it is allowed to be *616 exercised without the supervision and direction of the court, only in plain cases, such as give rise to no controversy as to the sum of monej’- due upon the debt secured, or in other respects. If there is, in good faith, a controversy in respect to the debt, or as to the credits to which it is justly subject, however they may arise, or if the credits are greatly confused and require complicated accounts necessary to show what balance is due, in such and like cases, the court will restrain the exercise of the power until such matters, properly put in issue, can be determined by the court, and the mortgagee required to account in all respects as to the exercise of the power, and how he has applied any funds that may have come into his hands on account of his debt. The court will be prompt to grant relief by injunction, when it appears that there is probable ground in support of the plaintiff’s alleged equity. It is but common justice that a creditor thus having his debtor within his power, shall account with him under the just and protective authority and supervision of the court. Kornegay v. Spicer, 76 N. C., 95; Mosby v. Hodge, Ibid, 387; Pritchard v. Sanderson, 84 N. C., 299; Bridgers v. Morris, 90 N. C., 32. It is not denied that the plaintiff James T. Gooch and the defendants, in the course of about fourteen months, had a great number of current business transactions, involving much mutual dealing and large sums of money. The defendants, from time to time, supplied Gooch with “advancements,” and to secure them, he at sundry times, delivered and pledged to them as collateral security, evidences of debt, consisting of notes, bonds and judgments, in amount about $20,000, which they were to collect and apply to his credit. He alleges, that at the time he executed the mortgage, he believed that the notes and bonds specified iu it represented truly his indebtedness to the mortgagees, that, however, in fact they did not, but exceeded it in amount by from $600 to $800, the excess being made up mainly of interest improperly charged, and failure to give him credit for a bale of cotton and other small items of charge. *617 The defendants, on the other hand, allege that this is not true, that before the notes were executed they delivered to him a detailed statement of his account with them, accompanied with the request that he should examine it and point out any errors; that he did not for many mouths object to it, further than to insist that he was not credited with a bale of cotton, as he ought to have been; that this credit was afterwards allowed, and that- after he had ample opportunity to examine the account he executed the notes, manifesting his satisfaction with the account as stated. The account rendered, and the long delay in objecting to it on account of suggested errors therein, do not necessarily conclude Gooch. The strong presumption is that he examined and accepted it as correct, and he is bound by it, and it ought not to be disturbed, unless he shall allege and prove some substantial error, mistake, omission, or fraud, vitiating it. This he has the right to do, if he can, and in case of success, to have the just correction made. The burden is on him to prove such allegation. It is contended that the allegation of error in respect to interest is so vague and indefinite that it ought not to be considered. It certainly would have been better to have made it more definite, and it may yet be made so when the pleadings shall be regularly filed. But for the purpose of the motion before us, we think it sufficient. It points and has reference to the account stated. That account must have been a long and complicated one, embracing many items and different classes of items. The error, if it exists, upon proper scrutiny will appear in it, and thus the allegation may be made certain. There are certain data pointing to it, if indeed it exists. - Another and more important allegation of the plaintiff James T., is, that of the notes, bonds and judgments he delivered to the defendants as collateral security as above mentioned they have collected since the execution of the mortgage, from $7,500 to $8,000, and they still have of those uncollected, but which may be collected, from $8,000 to $10,000, and some of these have been sued upon, and that upon the statement of a fair account between *618 himself and them, it will appear that he owes them not more than $3,000. The defendants admit that of such securities they collected, as alleged, $6,565.69, and aver that they have credited that sum, less $656.57, paid to counsel, on the mortgage debts, but they omit to state at what time they entered such credit. They 'likewise admit that they have the collateral securities not collected. Upon some of these they have brought suit, but for causes assigned, they have not been able to collect the money due upon them. As to the balance of them, they say “that many of said collaterals are worthless, and .most of them worth far below par.” They do not offer to surrender them, nor do they suggest what they intend to do with them. Without adverting to the other matters in the record before us, not necessary to be considered here, we think it manifest that the defendants should be restrained from selling the land until the action shall be heard upon its merits. They are mortgagees with power of sale. In addition to, and apart from the mortgaged property, they have, as security for the mortgage debt, many thousands of dollars of the mortgagor’s rights and credits; some of them from time to time, they have collected and applied, while they have failed to collect others, and have made no final disposition of them. They insist that there is no error in the mortgage debt, as alleged, and. that they have faithfully collected such of the collateral securities as they could, and applied the money. But the mortgagor has been within their power, he has had to accept their statement and representations without free opportunity to scrutinize them. Pie is not satisfied with what they have done, and the accounts they give, moré or less complicated, under the power ■ they have exercised over the mortgaged property and himself, and he assigns reasons, not frivolous, but more or less urgent, why they should account with him under the supervision and control of the court. Under such circumstances, the law allows the mortgagor the relief sought by the present motion. *619 The defendants’ counsel insisted on the argument, that the plaintiffs could .not have relief by injunction until they paid the sum of money they admit to be due. They did not admit that any definite sum was due. But the rule of law involved does not apply in cases like this, because, as was said, by Smith, C. J., in Pritchard v. Sanderson, supra, “the mortgagor ought to know definitely what sum he is required to pay, and have an opportunity to redeem without a sale.” It may turn out when the definite sum of money due to the defendants, and for which the land is liable, is ascertained, that the plaintiffs can and will pay it. Cases like this go largely upon the ground that the mortgagor has not had a free and fair opportunity to be informed and help himself — that he has been within the power of the mortgagee, and is therefore entitled to have full and satisfactory information from the trustee, the mortgagee, so that he can act intelligently in respect to the mortgage debt and the property mortgaged to secure it. We do not pass upon the merits of the controversy, further than to determine that there is probable ground for the plaintiffs’ motion before us. In view of the proofs, we cannot conclude that the plaintiffs’ cause of action is frivolous and unfounded. It is serious and fit to be considered, and it may turn out that it has substantial merit. There is error. The injunction demanded must be allowed. To that end, let this opinion be certified to the Superior Court of Halifax county. Error. Reversed.