Opinion
Decided July 7, 1931.
Contracts — Consideration — Promise, inducing forbearance, binding on promisor, when.
A promise, which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, and which does induce such action or forbearance, is binding if injustice can be avoided only by enforcement of the promise.
APPEAL: Court of Appeals for Cuyahoga county.
Messrs. Stearns, Chamberlain Royon, for plaintiff.
Messrs. McConnell, Blackmore, Cory Griffith, for defendants.
The plaintiff, W.B. Saunders Company, brought its action in the court of common pleas of Cuyahoga county seeking to foreclose a second mortgage upon two pieces of real estate the legal title of which was in Mary F. Galbraith. Among other things a defense of want of consideration was interposed by the defendants. From the decree of the common pleas court an appeal was taken to this court, and the sole question here is whether or not there was any consideration for the notes and mortgage in question.
The evidence shows that Dr. W.T. Galbraith, husband of the defendant, died February 27, 1928. For many years Dr. Galbraith had been acting as agent for the plaintiff in selling medical books published by the plaintiff. At the time of his death, Dr. Galbraith owed the plaintiff a large amount of money, of which something like $4,000 was then due and payable. By his will Dr. Galbraith devised all his property to his wife, Mary F. Galbraith. His estate consisted of one of the parcels of real estate in the mortgage now in controversy, and this property was then subject to mortgage.
About ten days after the death of Dr. Galbraith an agent of the plaintiff visited the defendant and her son, F.L. Phipps, a stepson of Dr. Galbraith, who had been associated with the doctor in the book selling agency. This agent was interested in realizing for the plaintiff a large amount owed it by the estate of Dr. Galbraith. Mrs. Galbraith and Mr. Phipps desired the business to continue with Mr. Phipps as agent and desired time for the payment to the plaintiff of the amount that they acknowledged the estate owed the plaintiff. Mr. Phipps and Mrs. Galbraith as well as the plaintiff knew that the estate could pay the plaintiff only by selling the property that the decedent owned and probably realized that it would be necessary as well to sell the second piece of property which Mrs. Galbraith owned in her own right. Mrs. Galbraith assured the agent that she would sell the properties in order to see that the indebtedness was paid. The plaintiff never filed any statement of its claim against the estate of Dr. Galbraith. Mr. Phipps expressly agreed to pay the indebtedness of the estate to the plaintiff, and was given the agency desired by him and his mother. Phipps did not prosper in the agency which he took over, and instead of paying off the old indebtedness, accumulated additional indebtedness on his own account. The plaintiff's agent returned to Cleveland in February, 1929, and later on Mr. Phipps wrote the plaintiff agreeing that his mother would give a mortgage for the indebtedness owed, such mortgage to cover the property devised her by her husband and the separate property that she owned. Following this, on March 19, Mrs. Galbraith executed the notes and mortgage sued upon, and concurrently therewith signed a written memorandum confirming her oral agreement to pay all of the debts owing by the estate to the plaintiff and to pay the debts of Phipps to the plaintiff, and reciting that the mortgage and notes in question were executed and delivered to secure the performance of this agreement, and as a consideration further expressed that it was from her desire to have a further extension of time in which to pay the debts of her deceased husband to the plaintiff.
The record does not show that Phipps was the agent of his mother. If he were such agent what he said and what he signed would clearly establish the requisite consideration for the instruments in controversy. The position of the defendant now is that in the absence of any proof that Phipps was authorized to speak for his mother there is no evidence of any consideration for the memorandum of March 19, 1929, by which the mother undertook to assume the debts of her husband, that, while she expressed her desire for an extension of time, the plaintiff never expressly agreed to such extension, and that, while she proposed to personally pay the debts, the plaintiff never expressly agreed to release the estate. The defendant insists that the absence of mutual promises rendered her own promise nudum pactum.
While it is well understood as an elementary principle of the law of contracts that a consideration must exist to render a promise enforceable, there are several varieties of obligations that have long been held to be valid in which it is difficult to see any consideration. Among these are new promises to pay debts extinguished by a discharge in bankruptcy, or barred by the statute of limitations. Sometimes it has been said that these old obligations create a moral liability sufficient to stand as a consideration, although a mere moral obligation of itself is no consideration at all. Sometimes it has been said that this moral obligation is sufficient when joined with a prior legal obligation, but if that prior legal obligation has been extinguished it is not easy to see how it adds anything to the valueless moral obligation. When those responsible for the new monumental Restatement of the Law of Contracts approached this problem, they swept away the ingenious efforts to locate and define the consideration underlying such obligations, and laid down the broad proposition that no consideration was required in such obligations. Section 85 et seq., Restatement of the Law of Contracts. Carrying out the same plan as to those obligations where the correlative promise of a promisee might not be disconcerned to constitute the consideration for the first promise, but the conduct of the parties was such as to estop the promisor from asserting a want of consideration, the Restatement laid down the law in Section 90 as follows: "A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise."
By following the admirable notes of Professor Ferson it would not be difficult to sustain the soundness of Section 90 as the boiled-down essence of the law of Ohio. We are content, however, to take the restatement as the law of this state without exploring its soundness, and hold that of its own vigor it is adequate authority. This is not to say that the restatement is of necessity perfect, and that in it is to be found the law's last word. We only hold that he who would not have it followed has the burden of demonstrating its unsoundness.
The facts of the case at bar come squarely within the terms of the section referred to. Mrs. Galbraith's promise was reasonably expected to and did induce the plaintiff to forbear asserting its claim against the estate at a time when such assertion could have been effective. If her promise, so acted upon by the plaintiff, is not enforced the plaintiff has lost its right to realize from the estate on an admittedly just claim, and this unjust loss can be avoided only by the enforcement of the defendant's promise. Mrs. Galbraith, in the light of the facts as now known, made an unfortunate bargain, but her promise was legal and enforceable.
We find it unnecessary to go into the other interesting questions discussed by counsel.
A decree will be entered for the plaintiff as prayed.
Decree for plaintiff.
MIDDLETON and FARR, JJ., concur.
MAUCK and MIDDLETON, JJ., of the Fourth Appellate District, and FARR, J., of the Seventh Appellate District, sitting by designation in the Eighth Appellate District.