Court Opinion

ID: 9551107
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:47:52.560471+00
Date Added: 2024-06-11T15:23:04.567937
License: Public Domain

SLOAN, J.,
dissenting.
Research has failed to produce any case law or other authority parallel to the instant case. So it is necessary to apply the law as it has been found to exist in respect to other legally disabled persons; the mental incompetents and infants. Having done so, I am caused to believe that a guardian is not conclusively exempt from judicial review of his avoidance of the wards’ contracts.
The majority rely on the statute to conclude that only the guardian can decide when a claim against the wards’ estate should be avoidable. I do not think we should read that restriction into the statutes. “A just debt” — ORS 126.320 (3) should mean something more than an obligation for necessaries. The reasons for that conclusion, briefly stated, are these:
The first is that the ex parte process by which guardians-are appointed could enable a person, as in *439the case before us, to consent to the appointment of a guardian, place his property behind the wall of that protection, and continue to do business to the cost and detriment of his creditors. Even if the creditors could set aside the guardianship because of fraud upon the court, not necessarily easy to prove, it still would put the creditors to the cost and delay of doing so. The situation mentioned is somewhat analogous to a person attempting to place his own property in a spendthrift trust for his own benefit. The courts have never permitted such a spendthrift trust. 1 Scott, Trusts, (1939) § 156, 782.
This is not to say that the guardian here was fraudulently appointed. That issue is not before us. But we do know that Kaufman placed property of substantial value in the hands of his guardian and then, without any interference by the guardian, Kaufman proceeded to enter into business transactions of sizable proportions.
Equity has not permitted the statute of frauds to stand in its way when unconscionable conduct would otherwise prevail. 4 Pomeroy’s, Equity Jurisprudence, (5th ed 1941) § 1293. Although the present action is not in equity there is no reason why equitable principles should not apply. We should not read the statute so as to allow the unconscionable conduct present here.
Secondly, for more than 50 years the policy of the courts has been to impose more stringent limitations upon the right of an incompetent or an infant to avoid his contracts. This court has followed the trend. Petit v. Liston, 1920, 97 Or 464, 191 P 660, 11 ALR 487.
Authority always cited with confidence, verifies the above statement. Woodward, The Law of Quasi *440Contracts, (1913 ed) § 67, 108, has this to say about incompetents:
“A contract possessing all the internal elements of validity may be invalidated by the fact that one of the parties thereto is regarded by the law as incompetent to contract. If either party, however, in the honest belief that the contract is binding, performs it in whole or in part, a benefit resulting to the other party therefrom is a benefit conferred in mis'reliance upon a non-existent contract right. Assuming that the other elements of quasi contractual obligation are present, such a benefit should be restored.”
Williston, somewhat later said the same thing:
“In comparatively recent' times many courts have made a still further departure from the view that a lunatic’s contract is void because of his inability to give intelligent assent. In the leading case of Molton v. Camroux,* the rule was stated: ‘The modern cases show that when that state of mind was unknown to the other contracting party, and no advantage was taken of the lunatic, the defense cannot prevail, especially where the contract is not merely executory but executed in the whole or in part and the parties cannot be restored altogether to their original positions.’* This rule had, at the time, the support of decisions in equity,* but went beyond what had been decided previously by courts of law. The rule is, however, in line with the view now generally prevailing in regard to mutual assent as a requirement for the formation of contracts. According to the modern view actual mental assent is not material in the formation of contracts, the important thing being what each party is justified in believing from the actions and word's of the man he is dealing with.* Accordingly, if one dealing with a lunatic may reasonably suppose he is sane and makes a bargain with him on that assumption, there is no theoretical difficulty in the lack of mutual assent. Lunatics whose acts *441can deceive anybody are not so totally devoid of will that their words and acts can be compared to talking while asleep or signing a paper substituted by sleight of-hand. It is necessary,. however, for reasons of justice, that the lunatic should be privileged to avoid the contract if it is oppressive. As this is a personal privilege it may well be limited to cases where otherwise there would be hardship. It is so limited by the rule of Molton v. Camroux, for if a lunatic has received fair consideration, of which he has had the benefit, and which he cannot restore, there is no hardship in treating the transaction as valid. Accordingly, the' rule has not only been followed in England,* but has been much extended. In Molton v. Camroux the court confined its remarks strictly to the case of executed contracts, but in a later English case* all of the judges state without limitation that unless the mental incapacity was known to the other party insanity is no defense to an action on a contract; and Lord Esher says expressly ‘whether it is executory or executed.’ ” 1 Williston, Contracts (Eev. ed., 1936), § 254, 746, 747. (Footnotes omitted).
In respect to infants Professor Williston urged the rule already adopted by this court, Petit 'v. Liston, supra:
“Though the weight of authority still permits an infant vendee to recover the price paid merely upon offering to return the property, if any, remaining in his hands, without accounting to the vendor for its depreciation or use,* there is an increasing number of jurisdictions which allow the vendor to deduct for such depreciation and use.* In view of the general education and early sophistication of youth, when minors commonly transact a considerable volume of business on their own behalf, the latter view which rests upon the equitable basis that, if the contract is fair and reasonable, then the minor should not be permitted to overreach any more than the adult seems clearly the *442better. Some of these eases have emphasized the infant’s misrepresentation of age, but this would seem merely an incidental step toward the recognition of the broader underlying principle.*” 1 Williston, Contracts, §238, 705, 706, 707 (1936 ed). (Footnotes omitted).
The theory stated by Williston is not new. See 2 Kent, Commentaries, (14th ed, 1896), 356, Lecture XXXI.
When, as here, the victim of Kaufman’s deceit is without the taint of any fraud or overreaching upon his part, he should not be barred by judicial sanction of that deceit. The statute should be and is for the protection of those afflicted with a lack of ability to control their impulses. It should not be construed to be a license to commit fraud upon the innocent.