Salsbury v. Northwestern Bell Telephone Co.
221 N.W.2d 609 (1974)
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Rule of Law:
An unequivocal charitable subscription is an enforceable contract that is not dependent on a showing of traditional consideration or detrimental reliance.
Facts:
- Efforts were underway to establish Charles City College, and John Salsbury was the chairman of its board of trustees.
- A professional fundraiser, Peter Bruno, solicited a donation from Northwestern Bell Telephone Company.
- Daryl V. Winder, Northwestern Bell's local manager, received corporate approval for a donation and, in lieu of a standard pledge card, sent a letter to Bruno.
- The letter stated, 'the contribution from Northwestern Bell Telephone Co. to the Charles City College has been approved' and that 'The $15,000 contribution will be made over a three year period.'
- The college treated the letter as a pledge and assigned it, along with other subscriptions, to a material supplier as security for credit.
- John Salsbury also executed a personal guaranty to the supplier, which was secured by the college's subscription pledges.
- The college subsequently failed before any payments from Northwestern Bell were due.
- After settling debts, Salsbury became the assignee of the pledges, including the one made in Northwestern Bell's letter.
Procedural Posture:
- John Salsbury brought a declaratory judgment action against Northwestern Bell Telephone Company in an Iowa trial court.
- The trial court found for Salsbury, holding that the letter from Northwestern Bell constituted a binding contractual obligation.
- Northwestern Bell Telephone Company, as appellant, appealed the trial court's judgment to the Supreme Court of Iowa.
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Issue:
Does an unequivocal written promise to make a charitable contribution create a legally binding obligation without proof of consideration or detrimental reliance?
Opinions:
Majority - Harris, J.
Yes, an unequivocal written promise to make a charitable contribution creates a binding obligation without proof of consideration or detrimental reliance. The court rejects the need to find consideration through strained legal fictions, such as mutual promises among subscribers. It also declines to adopt promissory estoppel as the sole basis for enforcement, as doing so would require detrimental reliance, which was not present here and would defeat the enforcement of many such pledges. Instead, the court adopts the position of the Restatement (Second) of Contracts § 90(2), which makes charitable subscriptions enforceable as a matter of public policy. This approach recognizes the important function of philanthropy in society and holds that when a pledge is unequivocal, the promisor should be bound by their word.
Dissenting - LeGrand and Reynoldson, JJ.
The judges dissented without a written opinion.
Analysis:
This decision marks a significant departure from traditional contract doctrine for the enforcement of charitable subscriptions. By adopting the Restatement (Second) § 90(2), the court carves out a special exception for charitable pledges, eliminating the requirements of consideration or detrimental reliance. This holding substantially lowers the barrier for non-profits to enforce pledges, reflecting a public policy judgment that philanthropic promises should be honored to support vital community projects. The ruling simplifies litigation over such pledges and provides charities with a more reliable legal basis for their fundraising campaigns.
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