I. & I. Holding Corp. v. Gainsburg

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Appellant signed and delivered to Beth Israel Hospital Association a pledge or subscription agreement reading as follows: "To aid and assist the Beth Israel Hospital Association in its humanitarian work, and in consideration of the promises of others contributing for the same purposes, the undersigned does hereby promise to pay to the order of the Beth Israel Hospital Association at the Hospital Building, Stuyvesant Park East, New York City the sum of * * * $5,000 payable in 4 year installments, $1,250 cash. The undersigned further requests each and every other contributor to make his contribution in reliance upon the contribution of the undersigned herewith made."

Respondent is now the holder and owner thereof. The allegation of the complaint, as to consideration, is as follows:

"Seventh. That upon the said subscription and agreement, the said Beth Israel Hospital Association proceeded in its humanitarian work, obtained other like subscriptions, expended large sums of money and incurred large liabilities, and has otherwise duly performed all the conditions on its part to be performed."

The Appellate Division, by a divided court, reversed the judgment of Special Term which dismissed the complaint, found the allegation of consideration sufficient, and struck out the fifth affirmative defense, which was:

"14. That upon information and belief the pledge and agreement described in and alleged in the complaint, copy of which is thereto annexed, was by reason of the nature thereof unassignable in law on the part of the said Hospital Association or corporation."

The appeal to this court is on certified questions, namely:

"1. Does the complaint herein state facts sufficient to constitute a cause of action?

"2. Does the fifth defense contained in the answer state facts sufficient to constitute a defense to the action?"

It is unquestioned that the request that other subscribers make contributions in reliance on appellant's contribution, stated as a consideration in the subscription agreement, is not consideration which will support appellant's promise. (Presbyterian Church v. Cooper, 112 N.Y. 517; Twenty-thirdSt. Baptist Church v. Cornell, 117 N.Y. 601; Cutwright v.Preachers' Aid Society, 271 Ill. App. 168; Dalhousie College v. Boutilier, [Can., 1934] S.C.R. 642; College St. M.E.Church v. Kendall, 121 Mass. 528; 1 Williston on Contracts [Rev. ed.], § 116.)

The respondent's complaint alleges that the hospital association "has * * * duly performed all the conditions on its part to be performed."

The question presented is whether the subscription agreement, which recites that it is made "to aid and assist" a hospital in carrying on "its humanitarian work," when relied upon by the hospital by proceeding in its work, securing other subscribers, expending large sums of money and incurring large liabilities, is binding upon the subscriber and enforceable. We believe that the allegations of the complaint are broad enough to permit proof as to the conditions upon which the subscription was made and the extent of fulfillment. Evidence may be given, under the allegations in question, that the hospital, after the subscription was given, relying thereon, "altered its position to the knowledge of the promisor and in the reasonable belief that the promise would be kept." (Matter of Taylor, 251 N.Y. 257,263.) Consideration in such a case may be shown from facts outside the subscription agreement. (Presbyterian Church v.Cooper, supra; Dougherty v. Salt, 227 N.Y. 200; Matter of Stack, 164 Minn. 57; Lasar v. Johnson, 125 Cal. 549;Keuka College v. Ray, 167 N.Y. 96.)

The subscription agreement need not on its face require the hospital to do or refrain from doing any particular thing, as urged by the appellant. The reliance is not upon a request, but upon the subscription agreement made, as recited, "to aid * * * the hospital * * * in its humanitarian work." The agreement can be read as though it said "to aid and assist the hospital in carrying on its humanitarian work, I agree to pay." Relying on the agreement to aid and assist by paying, the hospital acted. The subscription agreement is not a contract, but an offer to contract, which, when acted upon by incurring liability, becomes a binding obligation. (1 Williston on Contracts [Rev. ed.], § 116.) It is a unilateral contract unenforceable until acted upon by the promisee. An invitation or request to carry on its work need not be expressed in the subscription agreement — it may be implied. "Nor need a request to the promisee to perform the services be expressed in the instrument; it may be implied." (Keuka College v. Ray, 167 N.Y. 96, at p. 100.) True it is that, under our law, there must be consideration in contracts in order to make them valid.

We realize that the principles upon which courts of differing jurisdictions have placed their decisions sustaining subscriptions for charitable purposes are all subject to criticism from a legalistic standpoint. Nevertheless we feel that we should follow the decisions of our own courts, extending, as they do, over a long period. The principle controlling our decisions has "been too firmly established in this State to be disturbed by judicial decision." (Glennan v. Rochester Trust S.D. Co., 209 N.Y. 12, 19.) Our courts have definitely ruled that such subscriptions are enforceable on the ground that they constitute an offer of a unilateral contract which, when accepted by the charity by incurring liability in reliance thereon, becomes a binding obligation. (12 Cornell Law Review, 467; Selected Readings on the Law of Contracts, p. 559.) The view that a subscription is an offer to contract which becomes binding as soon as work has been begun in reliance on the promise is strengthened by the adoption of the following statement in the Restatement of Contracts:

"§ 45. If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time." (American Law Institute, Restatement of the Law of Contracts, vol. 1.)

Courts, in passing on subscription agreements for charitable purposes, have sustained them under the rule of promissory estoppel in cases where the promisee has acted on the promise to pay by incurring liability. We need not go so far as to base our decision on the doctrine of promissory estoppel, as stated inAllegheny College v. National Chautauqua County Bank (246 N.Y. 369). That doctrine need not be applied to save a subscription where a request or invitation that the promisee go on with its work can be implied from the subscription agreement. It is only when a request or an invitation to carry on cannot be implied in fact that it is necessary to invoke that doctrine. In the complaint there is alleged some consideration. It must be remembered that this case involves only a motion on the pleadings. The cases cited by appellant, where there has been a trial and failure of proof, are not in point. The argument of appellant that the parol evidence rule applies and that under it no new or different consideration can be proved, has no application on this motion on the pleadings.

That the agreement or pledge was assignable in law is also clear. It is a promise to pay "to the order of the Beth Israel Hospital Association." There is no statutory restriction against the assignability of such a subscription and we are referred to no decision tending to deny the assignability of an instrument of this character. This court has indicated the rule applicable in Rosenthal Paper Co. v. National Folding B. P. Co. (226 N.Y. 313).

Section 41 of the Personal Property Law (Cons. Laws, ch. 41) provides:

"Any claim or demand can be transferred, except in one of the following cases: * * *

"(3) Where a transfer thereof is expressly forbidden by a statute of the state, or of the United States, or would contravene public policy."

The order should be affirmed, with costs, the first question certified answered in the affirmative, and the second in the negative.