Cohn v. Duntley

• Decision Date: 14 February 1933
• Citation: Cohn v. Duntley, 142 Or. 186, 19 P.2d 87 (Or. 1933)
• Parties: COHN et al. v. DUNTLEY. [*]
• Court: Oregon Supreme Court

19 P.2d 87

142 Or. 186

COHN et al. v. DUNTLEY. ^[*]

Supreme Court of Oregon

February 14, 1933

Department 2.

Appeal from Circuit Court, Multnomah County; Robert Tucker, Judge.

Suit by Eugene Cohn and others against Fern Duntley.From a judgment of dismissal, plaintiffs appeal.

Reversed and remanded.

J. LeRoy Smith, of Portland, for appellants.

Louis Schnitzer, of Portland (S. J. Bischoff, of Portland, on the brief), for respondent.

CAMPBELL J.

This is a suit to reform a written instrument.

Plaintiffs allege that in the month of December, 1931, they were engaged in business in Portland, under the firm name of Cohn Brothers.Finding themselves financially embarrassed, they consulted with their chief creditors and offered to assign all of their individual, joint, and partnership property not exempt from execution, provided they would be released from further liability.Thereupon, as a result of such offer and at request of their creditors, they made such an assignment to one Homer Goehler, as trustee and for the benefit of all of their creditors, including defendant, Fern Duntley relying on the condition, so stated, that said assignment would terminate all of their liabilities; that said Homer Goehler accepted said trust and immediately went into possession of said property for the purpose of liquidation and immediately notified all of the creditors of plaintiffs including Fern Duntley, of such assignment together with a statement of assets and liabilities; that the trustee with the full knowledge and understanding and consent of all the creditors, including Fern Duntley, who filed her claim with the trustee, proceeded with liquidation and paid a total of 50 per cent. of all the claims of the creditors, including this defendant, Fern Duntley, who accepted and retained such dividends with full knowledge of all the facts pertaining to said assignment.

Plaintiffs further alleged that the claim of defendant, Fern Duntley was "an alleged promissory note made jointly by plaintiffs to defendant, as Cohn Brothers, to said defendant," and that there were certain payments made thereon.That thereafter, said Fern Duntley, as plaintiff, brought an action to recover the unpaid balance on said claim in the district court of Multnomah county and recovered a judgment for $712 with interest and attorney fees and costs; that plaintiffs have no speedy or adequate remedy at law, and defendant is threatening to enforce said judgment.

They further allege that they intrusted the preparation of the written instrument of assignment to the officers of the Portland Association of Credit Men and the said Homer Goehler after giving them full and complete information as to what it should contain; but through mistake of the persons preparing the instrument, there was omitted therefrom any mention of the provision releasing plaintiffs from further liability on any and all debts owing by them at that time; that it was intended and understood between said creditors, including defendant herein, that such a provision should have been inserted in said instrument; that they would not have executed said instrument had they known of such omission.

Plaintiff's ask for a restraining order against said judgment and that the instrument of assignment be reformed by inserting a clause relieving them of further liability.On this showing, a temporary restraining order was issued.

Defendant, Fern Duntley, filed a demurrer, on the grounds that the complaint failed to state facts sufficient to constitute a cause of suit, and a motion to dissolve the injunction.No appearance on the part of defendant Goehler.

The demurrer was sustained, and the plaintiffs refusing to further plead, the court dismissed the complaint and dissolved the injunction.Plaintiffs appeal.

Since the enactment of the Bankruptcy Act by the federal government (11 USCA), by virtue of the Constitution of the United States, article 1, § 8, there can be no assignment for the benefit of creditors without the express agreement and consent of both the debtor and each creditor.Nor can such an assignment operate as a release of unpaid balances without the express consent of the creditor.Debtors and creditors may mutually compromise their obligations in a lawful manner and the court will uphold such an express agreement.There is nothing unlawful in a debtor transferring his property to a trustee for the purpose of having the proceeds therefrom applied pro rata on his debts, and if the creditors expressly agree to accept the same in full satisfaction of their individual claims, the debtor would be released from further liability.The fact that a creditor may have participated in the proceeds...