Allegheny College v. National Chautauqua County Bank

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Allegheny College v. National Chautauqua County Bank
Court Court of Appeals of New York
Citation 159 N.E. 173
Date decided November 22, 1927
Appealed from New York Supreme Court, Appellate Division

Facts

Defendant promised to donate to plaintiff college, and they relied on her promise.

About 90% of college student receive student loans and grants. Some students receive endowed named scholarships from donors.

In the 1920s, Allegheny College conducted a fundraising drive.

In 1921, Ms. Johnston promised to have $5,000 out of her estate given to Allegheny College (College) (plaintiff) after her death in order to create the Mary Yates Johnston Memorial Fund. In 1923, she gave $1,000. In spite of this, in 1924, she repudiated her promised pledge.

Upon her death, the executor of Mrs. Johnston, National Chautauqua County Bank of Jamestown, New York, ("Chautauqua") didn't pay the balance of the pledged donation.

Procedural History

The College sued Chautauqua for the remaining $4,000 ($70,000 in 2023).

Chautauqua won in the trial court.

Issues

May endowed named college scholarships from donors form the basis on an enforceable contract?

Does a party's acceptance of a portion of a pledged donation constitute sufficient consideration to enforce the promise to pay the remainder of the donation?

Holding

A party's acceptance of a portion of a pledged donation constitutes sufficient consideration to enforce the promise to pay the remainder of the donation.

Reasons

Cardozo: Charitable promises aren't enforceable without consideration. A promise must induce the promisee (the College) to sustain a detriment.

Courts have used promissory estoppel in charitable donation cases. In this case, the NY court didn't need to apply the doctrine of promissory estoppel, though.

Rule

When a charitable subscription is made, and the charity relies on the promise, a promissory estoppel may result from the assumption of duty to apply the fund as a substitute for consideration.

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