Lead Opinion
With respect to complainant’s showing and prayer for injunctive relief against the mortgagors’ action at law, it is clear that, if the complete settlement made by agreement between the parties on November 27, 1913, as еvidenced by the note and mortgage executed by respondents to complainant on that date, were conclusive and binding upon them as to the amount then due, complainant would have no difficulty in presenting his legal defense to that action, viz. that a balance remained due on the mortgage at the time he carried away and sold or stored the chattels subject to the mortgage.
[1] But that_ settlement, however deliberately made, is not cоnclusive on the parties. It is strong presumptive evidence that the amount agreed upon is correct, and that the obligation to pay it is valid; and it imposes upon the party who would avoid it the burden of showing its falsity by reason of fraud or mistake. But such a showing the mortgagors in this case would be entitled to make, even in a collateral proceeding at law. First Nat. Bk. v. Allen,
In 1 R. C. L. p. 218, § 17, it is said:
“A stated account may be impeached for fraud, mistake, or error in an original prоceeding in equity brought for that purpose. It may also be impeached when interposed as a defense to an action, either at law or in equity, for a preliminary proceeding to set it aside is never necessary to enable a plaintiff to make his principal cause of action available. Wherever it is thrust forward, in whatever form of action it is pleaded, it may be impeached.” Gutshall v. Cooper,37 Colo. 212 ,86 Pac. 125 , 6 L. R. A. (N. S.) 820; Dickerson v. Nabb, Sneed, Ky. Dec. 320,2 Am. Dec. 725 ; White v. Thompson (Cal. App.)180 Pac. 953 ; Perkins v. Hart,11 Wheat. 237 , 256,6 L. Ed. 463 .
“An account stated is an account balanced and rendered, with an assent to the balance, express or implied; so that the demand is essentially the same as if a promissory note had been given for the balance.” (Italics supplied.) Comer & Co. v. Way,107 Ala. 300 ,19 South. 966 ,54 Am. St. Rep. 93 ; Loventhal v. Morris,103 Ala. 332 , 336,15 South. 672 .
AYe do not understand the cases of Paulling v. Creagh,
In its last analysis, the question is simply whether the maker of such a note may inquire into its consideration in a court of law *667 by showing fraud or mutual mistake with respect therеto; and the authorities hold, without apparent dissent, that—
“A mistake of fact in executing a bill or note, as where it is given in settlement of a balance mistakenly supposed to exist, is a defense to an action by the payeе or holder, other than a holder in due course, provided the mistake is mutual.” 8 Corp. Jur. 797, § 1053.
The bill shows that they have repudiated the settlement in question, thereby opening their account from beginning to end and extending the issue in the action аt law to the question of the balance actually due upon all of their business transactions. This would involve such a multitude of items of debit and credit and such a variety of mixed and overlapping securities, as would defy any clear аnd intelligent solution at the hands of a jury in a collateral proceeding at law.
It results that the trial court erred in sustaining the demurrer, and the decreе thereto will be reversed and one here rendered overruling the demurrer to the bill as amended.
Reversed and rendered.
Concurrence Opinion
I cannot concur in that part of the foregoing opinion indicated below. As tо the general result, I am not prepared to hold that the reversal should not enter.
The majority of the court have proceeded to their conclusion upon a legal premise^ stated in the foregoing opinion, whiсh appears to me manifestly unsound, and attribute to First National Bank v. Allen,
“When parties who are sui juris make a final settlement between themselves, such settlement is as binding on them in many respects as a decree of a court. Such settlement may be opened for fraud, accident or mistake.”
In the former case (
“There had been mutual dealings between him and Creagh, of which an account was rendered ; he had full opportunity of examining, and full knowledge, or the means of acquiring it, of the correctness or incorrectness of the itеms composing the account. The account was closed by the execution of promissory notes for the balance claimed, and more than two years after executing them, and after Creagh’s death, a deed of trust is executed to secure their payment.
“This settlement is not conclusive on the complainant; does not estop him from being relieved in equity from any fraud or imposition which may have been practiced on him in making it; or from оbtaining the correction of. any errors or omissions which may be found to have entered into it. A court of equity has ample authority to open and re-examine an account stated, if there has been mistake, accidеnt, fraud or undue advantage, by which the account is vitiated and the balance incorrectly fixed. 1 Story, Eq. § 523. The jurisdiction is cautiously exercised; only on clear and precise allegations, supported by proof of fraud, undue advantage, accident or mistake. * * *
“In Drew v. Power, supra (1 Sch. & Lef. 192), it was said by Lord R'edesdale, ‘One rule material to observe in all cases of account is, that where there has been a settlement of accounts and either the account hаs been signed or a security taken on the footing of the account, a court of equity does not open that transaction and throw it again between the parties as if no such transaction had happened, unless the evidence which is produced (and that evidence founded on charges in the bill) shows the whole transaction to be so iniquitous that it ought not to be brought forward at all to affect the party Sought to be bound. If the account impeаched be a settled, account, or if an instrument has been executed on the foot of it, the court expects that the errors should be specified in the bill and proved as specified; otherwise it would be easy to ovеrturn the fairest accounts and those settled in the most solemn manner when there happens to be any complication in their nature.’ When an account is stated and settled by the giving of an independent security, that security becomes prima facie a debt owing according to its terms. It cannot *668 be overturned on merely doubtful or probable testimony that errors intervened in the accounts which wore settled, without imparting to all business transactions inseсurity and uncertainty.”
It appears indisputable from these and other authorities that the matter of impeaching a settled account and of destroying or impairing the independent security given upon the basis of the settlement so made because of fraud, accident, of mistake in respect of items of the account agreed upon and settled and security for the net sum given, as here, can only be effectually asserted in a court of equity, аnd not in a court of law, as the majority of this court have held in the foregoing opinion. It is unnecessary to elaborate the statement at this time, in view of the full opinions in the cases of Paulling v. Creagh and Scheuer v. Berringer, supra, among others.
I therefore disagree with the opinion in the particular indicated. Upon the result— reversal—it is not necessary to express a conclusion.
Concurrence Opinion
(concurring specially). I concur in the conclusion reached by Judge SOMERVILLE, but for different reasons. As for the point of difference between Judge MCCLELLAN and those members of the court who concur in the opinion of Judge SOMERVILLE, there is no doubt that a stated account may be impeached for fraud or mistake by an original proceeding in equity brought for the purpose. There is no disagreement as to that. But—
“It [an account stated] may also be impeached when interposed as a defense to an-action, either at law or in equity, for a preliminary proceeding to set it aside is never necessary to enable, a plaintiff to make his principal cause of action available. Wherever it is thrust forward, in whatever form of action it is pleaded, it may be impeached.” 1 R. C. L. p. 218, § 17, citing Gutshall v. Cooper,37 Colo. 212 ,86 Pac. 125 , 6 L. R. A. (N. S.) 820; Dickerson v. Nabb, Sneed, Ky. Dec. 320,2 Am. Dec. 725 .
The equity оf the bill, in my judgment, rests upon the proposition that, in addition to its legal aspect, the controversy involves an equitable estate or interest, viz. the right to a foreclosure if any part of the indebtedness comprised within the stated аccount is justly due, and the court of equity will intervene to restrain the action at law and decide the whole controversy, since foreclosure is an equitable remedy, and in order to exclude the remedy in equity the remedy at law must be as complete, as practical, and as efficient to the ends of justice and its prompt administration as a remedy in equity. Boone v. Byrd,