Johnston & Larimer Dry Goods Co. v. Helf
| Decision Date | 22 December 1936 |
| Docket Number | 26241. |
| Parties | JOHNSTON & LARIMER DRY GOODS CO. v. HELF et al. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
1. Where the maker of a negotiable promissory instrument executes an assignment of his property for the benefit of his creditors, in lieu of resorting to a discharge in bankruptcy in consideration of the oral promise of the holder to release the maker from liability on the note, the same constitutes a sufficient legal consideration to enforce the promise of the holder to release, and discharges the debt and bars an action on the note.
2 O.S.1931, § 11421, providing that the holder of a negotiable instrument may renounce his rights thereunder against any party thereto, and requiring such renunciation to be in writing unless the instrument is delivered up to the person primarily liable thereon, contemplates a discharge without consideration, and has no application to the fourth subdivision of O.S.1931,§ 11418, which provides that a negotiable instrument may be discharged: "By any other act which will discharge a simple contract for the payment of money."
Appeal from District Court, Tillman County; Frank Mathews, Judge.
Action by the Johnston & Larimer Dry Goods Company, a corporation against Paul Helf and others for money judgment on note. Judgment for defendants, and plaintiff appeals.
Affirmed.
Robinson & Oden, of Altus, for plaintiff in error.
Wilson & Roe, of Frederick, for defendants in error.
For convenience, plaintiff in error will be referred to as plaintiff, and defendants in error as defendants, as the parties appeared in the trial court.
This appeal presents the single proposition of law: Where the maker of a negotiable promissory note executes an assignment of his property for the benefit of his creditors in lieu of resorting to a discharge in bankruptcy, in consideration of the oral promise of the holder of the note to release the maker from all liability upon the note, can such oral promise of the holder be shown in defense of an action on the note? Plaintiff contends that it cannot, first, because the execution of an assignment for the benefit of creditors is not sufficient consideration to discharge the obligation of a note; and, secondly, that such an agreement cannot be proven by parol evidence. Defendants, on the other hand, contend that the transaction constituted an accord and satisfaction and thereby discharged the note.
1. Plaintiff asserts that the execution of an assignment for the benefit of creditors is not sufficient consideration to discharge the obligation of a note for the reason that under O.S.1931, § 10029, such an assignment is void as against any creditors of the assignor not assenting thereto where "it tend [s] to coerce any creditor to release or compromise his demand," but does not indicate the applicability thereof to the facts, nor is the assignment in evidence. In the absence of a showing to the contrary, it will not be assumed that the assignment contained any stipulation exacting from creditors a release or compromise of their claims as a condition to participating in a distribution of the fund obtained under the assignment, or that it otherwise reserved any portion of such fund to the assignor. Moreover, the assignment was obtained through plaintiff's solicitation and under its direction, the assignment was apparently made to an assignee of plaintiff's selection and under its direction, and plaintiff purchased the stock under the sale thereof by the assignee, filed a claim with the assignee, and received and accepted a dividend thereunder. Having accepted the assignment and having recognized it for the purpose of obtaining those benefits, it would seem that it ought not to be thereafter heard to attack its validity. First National Bank v. Richburg, 75 Okl. 1, 181 P 145; McLaughlin v. Park City Bank, 22 Utah, 473, 63 P. 589, 54 L.R.A. 343; 2 R.C.L. p. 722, § 72. If plaintiff by its oral promise released defendants from liability on the note, it did not do so as a condition to sharing in a distribution under the assignment, but as consideration for obtaining the assignment. The question therefore resolves into whether the execution by defendant of the assignment of his property for the benefit of his creditors in lieu of resorting to a discharge in bankruptcy constituted a sufficient legal consideration to enforce plaintiff's oral promise to release defendants from liability on the note.
If plaintiff by the assignment received only what it was previously entitled to under the terms of the note, without other consideration, the agreement would not be binding upon plaintiff, Sherman v. Pacific Coast Pipe Co., 60 Okl. 103, 159 P. 333, L.R.A.1917A, 716; Ness v. Minnesota & Colorado Co., 87 Minn. 413, 92 N.W. 333; Demeules v. Jewel Tea Co., 103 Minn. 150, 114 N.W. 733, 14 L.R.A. (N.S.) 954, 123 Am.St.Rep. 315; Ward v. Coleman, 170 Okl. 201, 39 P.2d 113; Gasper v. Mayer, 171 Okl. 457, 43 P.2d 467, for the reason that there would be a lack of legal consideration to support plaintiff's promise to release the excess due it under the terms of the note beyond the amount received. However, if by the transaction plaintiff received something other or different from what it was, or considered itself entitled to by the terms of the note, Houston Bros. v. Wagner, 28 Okl. 367, 114 P. 1106; Continental Gin Co. v. Arnold, 52 Okl. 569, 153 P. 160; Gentry v. Fife, 56 Okl. 1, 155 P. 246; Perin v. Cathcart, 115 Iowa, 553, 557, 89 N.W. 12; 1 R.C.L. p. 177, § 1; something to which it had no previous right, or defendant was thereby deprived of something that he was not bound to part with before, as the delivery of property, Reeves & Co. v. Phillips, 53 Okl. 375, 156 P. 1179; an article of personal property or a conveyance of real property, First National Bank v. Latham, 37 Okl. 286, 132 P. 891; Lilly v. Verser, 133 Ark. 547, 203 S.W. 31; Page on Contracts (2d Ed.) Vol. 4, p. 4427, § 2509; the forbearance of the prosecution of an action, Stuart v. Edwards, 84 Okl. 207, 202 P. 1032; extinguishment of a bona fide disputed claim, First National Bank v. Harkey, 63 Okl. 163, 163 P. 273; the surrender of a legal right, a benefit to one or a detriment to the other, Page, p. 4416, § 2501; or the doing or suffering of something not required to be done or suffered by the terms of the note, Walker Drilling Co. v. Carlew Drilling Contractors, 109 Okl. 7, 234 P. 598, 599; Saab v. Clawson, 138 Okl. 126, 280 P. 598, 599, 600; such new or additional consideration would constitute sufficient legal consideration to enforce the oral promise of plaintiff to release the debt, and would discharge the note and bar any further action thereon, Bradley & Metcalf Co. v. McLaughlin, 87 Okl. 34, 208 P. 1032; Gasper v. Mayer, supra; Savage v. Edgar, 86 N.J.Eq. 205, 98 A. 407, 3 A.L.R. 1021; 1 R.C.L. p. 201, § 38; our inquiry being as to the existence of any such additional consideration and not as to the adequacy thereof, First National Bank v. Latham, supra; 4 Page on Contracts (2d Ed.) p. 447, § 2509; 1 R.C.L. p. 184,§ 14; First Nat. Bank v. Shook, 100 Tenn. 436, 45 S.W. 338; Lamberton v. Harris, 112 Ark. 503, 166 S.W. 554.
The note evidenced a liquidated money demand: "The substantial essence of a contract evidenced by a promissory note is the undertaking by the makers to pay the principal sum of money named," 3 R.C.L. p. 1282, § 513, and thereunder plaintiff was entitled to exact, and defendants obligated to pay "a sum certain in money," O.S.1931, § 11483, and plaintiff was not bound to accept, nor could defendants legally tender in satisfaction of the obligation of the note anything other than money, Continental Gin Co. v. Arnold, supra; Howe v. Mittelberg, 96 Mo.App. 490, 70 S.W. 396; 3 R.C.L. p. 1284, § 516. Upon default by defendants of payment in money of the amount evidenced by the note, plaintiff was entitled to have its right to payment in money established by judicial proceedings, and thereunder to have property of defendants that was liable to levy and sale under execution levied upon and sold and the money derived from such sale applied to payment of the debt; but it could not, except by becoming the purchaser of such property at a judicial sale thereof, acquire title to or take possession of said property or any part thereof without defendants' consent, and without defendants' consent plaintiff or third parties acting in its behalf could not forthwith take possession of or sell said property in a summary or expeditious manner. Neither could plaintiff through legal proceedings have compelled the execution by defendant of the assignment or have prevented defendant from seeking a distribution of his property by a bankruptcy court. Defendant within his legal rights could have refused to do the one or to forego the other. Accordingly, by the execution by defendant of an assignment of his property for the benefit of his creditors and his forebearance from seeking a distribution thereof in a bankruptcy proceeding, plaintiff received something other or different from what it was, or considered itself entitled to, under the terms of the note, and the same constituted a sufficient legal consideration to enforce plaintiff's oral promise to release defendants from liability on the note. The transaction constituted an accord and satisfaction and discharged the debt.
2. Plaintiff further contends that its promise to release defendants from liability on the note in pursuance of the foregoing transaction could not be proven by parol evidence that under O.S.1931, § 11421 (Neg.Inst.Law, § 122), which provides, ...
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