Chapter 11

American Promissory Restitution Supported by Moral Obligation Alone

The continued judicial manipulation of consideration doctrine into the twentieth century in order to enforce promises made on account of the felt moral obligation generated by the prior receipt of a material benefit made a patent absurdity of the proposition that all enforceable promises must comply with the Hunt v. Bate bargain paradigm. As a consequence, prior to the middle of the twentieth century, a handful of American courts began enforcing such restitutionary promises as an open exception to the consideration construct. For one of the first times in the history of common law contract, some jurisdictions were beginning to say overtly that certain promises could be binding as contract obligations despite the absence of consideration. Legal realists supported this open refutation of the claim that the bargain paradigm encompassed the full gamut of definable consensual transactions which ought, in fairness, to be enforced.

INDEPENDENT GROUND OF MORAL OBLIGATION

In the face of the continuing opposition of conservative commentators like Williston,1 the drafters of the Restatement Second of Contracts followed the lead of those few courts that had departed from the consideration model and abandoned the charade of rationalizing a bargain present by stating in Section 86(1): ‘‘A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.’’2 The restaters incorporated the parameters found in the caselaw regarding which types of promises, grounded on moral obligation, should be enforceable. Section 86 constitutes an open recognition that these restitutionary promises do not fit the consideration construct but nevertheless are enforceable based on the

independent substantive ground of moral obligation.3 Eight of the eleven decisions cited by the restaters as illustrative of enforceable restitutionary promises were in fact cases rationalized within the confines of consideration doctrine; of the remaining five, three Wisconsin opinions supplied alternative rationales of consideration and moral obligation4 and only two rested their decisions solely on the independent ground of moral obligation.5 The restaters were urging growth in the law based on a smattering of precedent, much as the drafters of the first Restatement had done earlier in positing Section 90.

In the remainder of this section, an analysis will be provided of the caselaw developments available to the restaters in the 1960s in preparing their drafts of what became Section 86. The focus will be on those cases supporting an independent ground of moral obligation either as an alternative to manipulation of consideration doctrine or as the exclusive basis of support. A fair number of cases decided prior to 1960 can be found stating the alternative grounds for enforcing a restitutionary promise of consideration and moral obligation.6 As to the consideration logic in these cases, the courts finding consideration present were clearly basing their logic on a moral obligation to make restitution rather than on feigned bargain logic. Thus, opinions in the 1948 Oregon case Marnon v. Vaughan Motor Co. and the 1955 Oklahoma case Kaiser v. Fadem state that although the material benefit received was not moved by a previous request, it was conferred under such circumstances as to create a moral obligation to support a subsequent promise.7 Since this solution of moral obligation constituting sufficient consideration was analyzed above, attention is turned to the focus of this section, namely, moral obligation acting as an independent ground for enforcement of a subsequent promise.

Prior to the initial drafts of Section 86 in the mid-1960s,8 there had only been several decisions enforcing subsequent promises on the ground of moral obligation alone;9 and, even as to those, applicable statutory law could arguably have made the difference. In Muir v. Kane (1909),10 a broker rendered services for a buyer but failed to comply with the writing requirements of a Washington statute, which rendered such an oral contract void. The court enforced the buyer’s subsequent written promise to pay the broker for his services because ‘‘the better rule is with the cases holding the moral obligation alone sufficient to sustain the promise.’’11 The 1927 California case Coulter v. Howard cited and agreed with the logic in Muir v. Kane on substantially the same facts. In both cases the opinions equated a waiver of a statute of limitations with overcoming a writing deficiency without acknowledgment that a prior enforceable agreement had never existed in the oral brokerage transactions in contrast to a former contract barred by a statute of limitations.12 Both opinions seemed to be preoccupied with disposing of the formality question and made no reference to the doctrine of consideration one way or the other.13

In Old American Life Ins. Co. v. Biggers,14 a 1949 federal case decided under Oklahoma law, the appellate court said the trend was to enforce a promise made on account of a non-gratuitous conferment of a material benefit because ‘‘a moral obligation arises which will support a subsequent executory promise where there was originally no contract, perfect or imperfect, obligating the promisor.’’15 In this case, the plaintiff promoted the revival of a nearly moribund insurance company by infusing his own funds into the operation. The later resuscitated company agreed to reimburse the plaintiff’s advances. Since, unlike Muir v. Kane, there was no prior void or voidable obligation, this portion of the Old American Life Insurance rationale was a stronger statement than Muir v. Kane in support of moral obligation as an independent ground outside the bounds of the waiver and ratification precedents. The potency of the support for the moral obligation principle in the rationale in Old American Life Ins. Co. v. Biggers was diluted, however, by a secondary justification for the holding based upon an Oklahoma statute, which attempted to reform the rule along the lines of a few other state statutes by declaring that a moral obligation originating in a benefit conferred was good consideration for a subsequent promise.16 These several decisions constituted the sum total of the precedents available to the restaters where there was anything approaching unequivocal judicial support for the moral obligation principle as an independent ground. Having said that, the restaters also relied on the logic found in other decisions that supplied support, in the alternative to consideration, for moral obligation as an independent ground for liability.

REASONS JUSTIFYING MORAL OBLIGATION AS AN INDEPENDENT GROUND

American judicial opinions have articulated a variety of reasons to justify the law shifting to afford support for moral obligation as an independent ground for enforcing promises. The reasoning can be found in the few cases basing their decisions solely on the moral obligation principle and in the more numerous cases supplying the alternative grounds of moral obligation and consideration. These reasons also reflect to a degree the parameters for actionability under the moral obligation principle. These reasons include: one, the moral obligation generated by receipt of a benefit should be treated as an exception to the consideration construct; two, the conferment of the benefit must not have been intended as a gift; three, the Wennall v. Adney Note requirement of a prior legal obligation is simply too narrow; four, the moral obligations in the traditional exceptions are of no higher force than a variety of other moral obligations; and five, one ought to honor promises to pay for non-gratuitous, non-officious benefits received.

Under the first factor above, modern courts began to point out that Holt’s waiver and ratification precedents were really exceptions to the bargain paradigm and had been enforced on account of the moral obligation generated by receipt of a benefit rather than due to compliance with the reciprocity requirements of the doctrine of consideration.17 The Wisconsin court in Park Falls State Bank v. Fordyce (1931) asserted that in none of the cases refusing enforcement of a subsequent promise, under the Wennall Note’s strict rule, did the promisor originally receive something of value.18 The moral obligation engendered by receipt of the benefit was the sine qua non for actionability of the subsequent promise, irrespective of notions of inducement and bargain. Indeed, if you strip away the traditional, but inconsistently applied, requirement of a prior legal obligation, the Wennall Note itself recognized the compelling force of receipt of a benefit when the Reporters stated that in all earlier cases enforcing subsequent promises, ‘‘[t]he party bound by the promise had received a benefit previous to the promise.’’19

Second, decisions recognizing the applicability of the moral obligation principle often emphasize that the plaintiff did not intend a gift when he or she conferred the benefit. When the benefit is provided in a business setting, the stronger language that ‘‘the promisee expected to be compensated’’20 is usually used. When the benefit is provided by a friend or relative, the plaintiff has more of a challenge in overcoming the presumption of a gift. Nevertheless, courts have regularly enforced the subsequent promise despite the fact that a gift may have at first glance seemed intended, so long as clear donative intent is not proven. In In re Hatten’s Estate (1939),21 the plaintiff provided extraordinary hospitality to a lonely millionaire bachelor friend over an extended period, and the Wisconsin court found no gift was intended. The cases involving relatives have to be considered some of the more liberal applications of the moral obligation principle when they enforce such promises. In In re Schoenkerman’s Estate (1940),22 the court rejected the defendant’s argument that a gift was intended when the mother-in-law and a sister-in-law cared for the promisor’s house and his children over a ten-year period before he made the promise. A 1902 Pennsylvania decision found no gift intended when a son and daughter provided services for their father and mother over a fifteen-year period; the father executed a $4,000 promissory note to each child when they later told him that he ought to pay them.23 However, some judges are inclined to find a gift from the friend or relative and refuse enforcement of the promise. In the above-discussed case In re Hatten’s Estate, a dissenting opinion characterized the long term hospitality as a gift or a courtesy to a friend and opposed enforcement.24 And in Jensen v. Anderson (1970),25 a Utah court ruled that the services provided around the promisor’s property by the promisee-bachelor friend were intended as a gift and refused to enforce the subsequent promise.

Under the third and fourth factors listed above, courts began to question the traditional logic of limiting the range of enforceable moral obligations to Holt’s waiver and ratification exceptions. As to the third factor listed above, modern courts began rejecting the fundamental precept in the Wennall Note that a subsequent promise could only revive a prior enforceable legal obligation now barred by a positive rule of law.26 A number of earlier-discussed nineteenth century cases effectively rejected this proposition by enforcing promises ratifying prior transactions which were void because of usury or coverture.27 In the twentieth century some courts began rejecting in toto the narrowness of the general proposition that a legal obligation must have originally existed. Judges pointed to the hole in the logic of the Wennall Note itself because the Note approved of Holt’s enforcement of an adult ratification despite the fact that the minor’s original promise was not binding.28 If the prior legal obligation requirement did not apply to adult ratifications, why should it apply to other promises made in recognition of a moral obligation to pay for a benefit received?

Fourth, courts began to question why the moral obligation in the traditional exceptions to the past consideration rule, such as in statute of limitations waiver cases, should be considered of a higher force than promises prompted by other moral obligations. Just as with other moral obligations recognized by modern courts, at the time of a statute of limitations waiver or an adult ratification, only a moral obligation exists. The Wisconsin court in In re Estate of Gerke (1955) saw no valid distinction between a subsequent promise related to an original obligation, now barred by a statute of limitations, and a subsequent promise to pay for a benefit received when there was no legal obligation originally.29 There seemed no logical justification for elevating the waiver to a higher moral plane. Along the same line, in Muir v. Kane (1909) the original contract was unenforceable because of a writing deficiency; the Washington court declared that the moral obligation to pay for services under an oral contract, which was required to be written, is just as binding as the moral obligation to pay for services now barred by a statute of limitations.30 The preference given waivers and ratifications over other promises made on account of the receipt of benefits made no sense to these twentieth century courts.

Fifth, a theme found in judicial opinions supportive of the moral obligation principle, either expressly or impliedly, was that one who promised to pay for a non-officious benefit accepted is only doing what an honest man ought to do and thus he should be bound. This notion has long constituted an underlying justification for enforcing promises to make restitution; it is an adaptation of Mansfield’s oft-quoted statement in Hawkes v. Saunders that: ‘‘[t]he promise is only to do what an honest man ought to do, the ties of conscience upon an upright man are a sufficient consideration.’’31 Enforcement of restitutionary promises permits enforce-

ment of obligations of honor arising in circumstances otherwise possibly falling short of qualifying for pure restitutionary relief in the absence of a promise.

Although it may have been possible to rationalize the presence of some form of benefit in Hawkes v. Saunders, Mansfield didn’t limit his announced moral obligation principle to cases of promises that an honest man ought to make for past benefits received. Mansfield’s failure to delimit boundaries for his moral obligation ideas by restricting it to promises made on account of the receipt of a non-gratuitous, non-officious conferment of a benefit meant that it was incumbent on modern courts to place parameters on Mansfield’s idea in order for this field of obligation to be administrable. Nonetheless, Mansfield’s proposition that promissory liability be grounded in conscience and morality has long been a part of the justification cited in support of fashioning a workable American moral obligation principle.

In the 1809 decision Greeves v. McAllister, the fused Pennsylvania court of law and equity found relevant the ‘‘morality and honesty of the promise on the part of the defendant.’’32 Three years later, in the curious republican Pennsylvania case Clark v. Herring, the court paid obeisance to Mansfield’s moral obligation ideas and declared that it was not bound by the House of Lords’s 1778 repudiation of Mansfield’s broad moral obligation principle because the House of Lords’s repudiation in Rann v. Hughes came after July 4, 1776; in Pennsylvania, British decisions dated subsequent were denied the status of precedent by a Pennsylvania statute.33 Other jurisdictions did not catch up with the equitable approach of Pennsylvania’s early republican fused court of law and equity until their courts were fused later in the nineteenth century. Twentieth century American restitutionary promise cases have continued Pennsylvania’s premature modern approach to support their decisions by employing Mansfield’s verbiage regarding what an honest man ought to do.34

An honest man was not bound under Mansfield’s principle, however, if he made no promise. In Atkins v. Hill (1775), Mansfield said that the promise on the past obligation was ‘‘made upon a good and valuable consideration. . . . It is so in cases of obligation which, without such promise, he could not be compelled to pay.’’35 Thus, under the facts of Boothe v. Fitzpatrick (1864),36 had the owner of a stray bull not promised to pay the farmer who found, protected and fed the bull until the owner located it, the owner would not have been bound on a moral obligation implied- in-law. There is no Roman or civil law doctrine of negotiorum gestio37 in the common law binding a defendant for receipt of a benefit short of restitution, in the absence of a promise. Additionally, any promise made is binding only to the extent that it is proportionate to the value of the benefit received;38 this limitation favors the restitution interest over the consent and expectation interests and underlines the restitutionary nature