Maryland National Bank v. United Jewish Appeal Federation of Greater Washington, Inc.

Orth, J., delivered the opinion of the Court. The issue in this case is whether a pledge to a charitable institution survives the death of the pledgor and is an enforceable obligation of his estate. I Milton Polinger pledged $200,000 to the United Jewish Appeal Federation of Greater Washington, Inc. (UJA) for the year 1975. He died on 20 December 1976.

His last will and ²⁷⁶ testament was admitted to probate in the Orphans’ Court for Montgomery County and letters were issued to Melvin R. Oksner and Maryland National Bank as personal representatives. 1 At the time of Polinger’s death $133,500 was unpaid on his pledge. The personal representatives disallowed the claim for the balance of the pledge. UJA filed a petition praying that the claim be allowed and moved for summary judgment. 2 The personal representatives answered and filed a cross-motion for summary judgment. The court granted UJA’s motion for summary judgment, denied the personal representatives’ motion for summary judgment, allowed UJA’s claim against the estate in the amount of $133,500, and assessed the costs against the personal representatives.

The personal representatives noted an appeal to the Court of Special Appeals and petitioned this Court to issue a writ of certiorari to that court before decision by it. We did so. II The facts before the court were undisputed in material ²⁷⁷ part. 3 They showed the nature of UJA and its relationship with its beneficiaries. UJA, chartered in the District of Columbia, is a public non-profit corporation.

In general, its objective is to solicit, collect and receive funds and property for the support of certain religious, charitable, philanthropic, scientific and educational organizations and institutions, and it enjoys tax exempt status federally and in Maryland, Virginia and the District of Columbia. Based on monies received and pledged, it makes allocations to tax exempt organizations. No formal commitment agreement is executed with respect to the allocations, but UJA undertakes to pay pursuant to the allocation and the beneficiary organizations “go ahead to act as though they are going to have the money and they spend it.” In other words, UJA makes allocations to various beneficiary organizations based upon pledges made to it, and the beneficiary organizations incur liabilities based on the allocations. Historically 95% of the pledges are collected over a three year period, and allowance for the 5% which may be uncollected is made in determining the amount of the allocations.

So, according to Meyer Brissman, Executive Vice-President Emeritus of UJA: “We always pay [the allocated amount], I don’t know of any case where we haven’t paid.” Pledges to “emergency funds” are not paid on the basis of an allocation by UJA. All monies actually collected on those pledges are paid to the emergency funds. The facts before the court showed the circumstances surrounding the pledge of Polinger with which we are here concerned. It was evidenced by a card signed by Polinger under date of 9 November 1974.

It recited: In consideration of the obligation incurred based upon this pledge, I hereby promise to pay to the United Jewish Appeal the amount indicated on this card. The amount indicated as his “1975 pledge” was $100,000 for ²⁷⁸ “UJA including local national and overseas,” and $100,000 for “Israel Emergency Fund.” UJA organized a “mission” to Israel in the fall of 1974. The mission was in no sense a tour. It was at the time of the missile crisis in Israel, and the members of the mission were to meet with Golda Meir, then Prime Minister, and with other government leaders to be briefed on the problems the country faced.

It was to be involved with “people in the troubled settlements.” Certain community leaders, including Polinger, went on the mission. Polinger had been active in the affairs of UJA and had regularly made substantial contributions to it. “Pre-solicitation” is a process whereby it is determined who can be expected to make large pledges and specifically who will likely substantially increase their pledges of previous years. Pre-solicitation is part of a well conceived plan to obtain large contributions. It leads to a “high-pressure meeting” at which, according to Brissman, [t]here is no question that the technique is the interchange and people knowing everyone else in the room, and if this one is thinking of a need of being so great as to be willing to do something unusual, the others thought it was similarly important for them to 'demonstrate it.

The idea is that “if somebody thought it was important enough to give more than he gave before, [others would think] that they ought to give more, and they [give] more money----[W]e get together and discuss reactions to what they have seen, what the needs are, and people sometimes make a speech before they decide what they are going to say about the money, and it is a free-flowing thing, and nobody knows in advance what anybody is going to say, but some of the people are talked to one by one privately to condition them to make some kind of a special response to influence the group. The whole purpose of fund raising is to get an example.” Polinger was selected to be an example on the Israel ²⁷⁹ mission. He had pledged $65,000 for 1973. He had “participated willingly” in such a meeting in connection with the 1974 fund raising campaign and had pledged $150,000.

He was one of those it was “felt was ready to do something unusual....” He was pre-solicited by three or four individuals and went up to two hundred thousand dollars for 1975. It was agreed that his pledge would be made in a “caucus” at the King David Hotel in Jerusalem. The caucus was held and Polinger “came into the caucus,” as Brissman said, “so we could announce all the gifts and influence other people of different levels.” Polinger was to be a “pacesetter.” There were about thirty men at the caucus. About four of them had pledged an amount as large as $200,000 before Polinger made his announcement.

Brissman thought that “there was an emotional impact that develops when a man has seen things that influence him to believe that there is something desperate and earth-shaking going on and he could do something about it beneficially, and he responds.” When Polinger said he would give $200,000, he indicated that he wanted everybody to give as much as they could. He thought he was giving the greatest amount that he possibly could find himself able to so do. Of course, Polinger was only one of many people who spoke and made a pledge. Whether anyone in fact increased his pledge because of Polinger was never discussed at the meeting, and Brissman was unable to say whether anyone was influenced by Polinger’s pledge.

It is just a dynamics of an involvement where after two weeks of being together night and day in a setting of that kind after a major war, meeting with individuals who lived through three or four such wars, that everybody is strung out and you are like a family, and in the process of interchange, speeches are made, and maybe somebody made a gift of $5,000.00 influenced people just as much as the man who gave $200,000.00 because of what the money meant in their view of this person’s ability to give. It is just not the biggest number, but it is the concept of response to a need that these people are ²⁸⁰ reacting to. And I don’t know that you verbalize it in that way necessarily, but it does come out that one influences another in the interchange, because you are going around a room and everybody is talking about how they were moved by what they were into. So there is no question one influences another.

Brissman was asked “whether aside from the specific group of people who were present in Israel with Mr. Polinger, are there any other people here in the Washington area or anywhere else that you are aware of who made pledges, gifts, or increased gifts as a result of Mr. Polinger’s gift?” He could not say. He could only give the procedure followed: I solicited personally hundreds of people, some face to face, some by telephone, some by appointment with two or three people talking to an individual. And frequently I, personally, and I know of others who do likewise, start to tell people what kind of response we are getting when we get to the question of what is a standard for giving, or what you ought to consider as your share, and in the process I have used Milton Polinger as an example talking to individuals. They know who Milton is.

And I would tell them what Milton had done in 1973 and in 1974 in trying to get them to respond in some way to move further ahead in their extension as far as they can, because we are talking of stretching. If you can give so much, can you give a little bit more type of thing, and I frequently would use Milton as an illustration. There is no question in my mind when I do it I know others do it, and I have seen at the time that we are talking about people reporting on the mission to others who were not there, soliciting gifts at meetings or in individual confrontations, telling what happened at the mission, and they would go down line by line everybody who made gifts, they had a list in front of them as a tool. So it was used.

There is no question about it. I ²⁸¹ cannot tell you this one increased his gift only because of that one’s response, but it is part of a package. That is how you raise money. Ill We find that the law of Maryland with regard to the enforcement of pledges or subscriptions to charitable organizations is the rule thus expressed in the Restatement of Contracts § 90 (1932): 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.

We reach this conclusion through opinions of this Court in four cases, Gittings v. Mayhew, 6 Md. 113 (1854); Erdman v. Trustees Eutaw M. P. Ch., 129 Md. 595 , 99 A. 793 (1917); Sterling v. Cushwa & Sons, 170 Md. 226 , 183 A. 593 (1936); and American University v. Collings, 190 Md. 688 , 59 A.2d 333 (1948). Gittings concerned the building of an Atheneum. The subscription contract authorized the calling of payment of installments by the subscribers when a certain amount had been pledged. The amount was reached, installments were called for and paid, contracts to erect the building were made and the Atheneum was completed.

It was in these circumstances that the Court said: In whatever uncertainty the law concerning voluntary subscriptions of this character may be at this time, in consequence of the numerous decisions pronounced upon the subject, it appears to be settled, that where advances have been made, or expenses or liabilities incurred by others, in consequence of such subscriptions, before notice of withdrawal, this should, on general principles, be deemed sufficient to make them obligatory, provided the advances ²⁸² were authorized by a fair and reasonable dependence on the subscriptions----The doctrine is not only reasonable and just, but consistent with the analogies of the law. [ 6 Md. at 131-132 .] This statement of the law appeared to be obiter dictum in Gittings, 4 but if it were, it became the law in Erdman . Erdman dealt with a suit on a promissory note , whereby there was a promise to pay the Eutaw Methodist Protestant Church the sum of $500 four years after date with interest. The consideration for the note was a subscription contract made with the trustees of the church for the purpose of paying off a building debt, which had been incurred for the erection of a new church building. It had been entered on the books of the church, the trustees had subsequently borrowed $2,000 on that subscription and other subscriptions to pay off the indebtedness for the erection of the church building.

The Court held that in such circumstances the subscription contract was a valid and binding one and constituted a sufficient consideration to support the note, id. at 602 , observing that “[t]he policy of the law, to sustain subscription contracts of the character of the one here in question, is clearly stated by this Court, and by other appellate Courts, in a number of cases, id. at 600 . The only Maryland case cited was Gittings . The holding in Gittings was said to be “that as the party had authorized others by the subscription to enter into engagements for the accomplishment of the enterprise the law requires that he should save them harmless to the extent of his subscription.” Erdman, 129 Md. at 601 . One case in another appellate court was discussed, Trustees v. Garvey, 53 Ill. 401 (1870) and two cited as to like effect, McClure v. Wilson, 43 Ill. 356 (1867) and United Presbyterian Church v. Baird, 60 Iowa 237 , 14 N.W. 303 (1882).

In Garvey the court noted that “[a]s a matter of public policy, courts have been desirous of sustaining the legal obligation of subscriptions of ²⁸³ this character, and in some cases ... have found a sufficient consideration in the mutuality of the promises, where no fraud or deception has been practiced.” Id. at 403. “But,” the court continued, “while we might be unwilling to go to that extent, and might hold that a subscription could be withdrawn before money had been expended or liability incurred, or work performed on the strength of the subscriptions, and in furtherance of the enterprise,” the church trustees had, on the faith of the subscriptions, borrowed money, relying on the subscription as a means of payment and incurred a specific liability. Id. Thus, it seems that Erdman made law of the dictum in Gittings, but that law was that charitable subscriptions to be enforceable require reliance on the subscriptions by the charity which would lead to direct loss to the organization or its officers if the subscriptions were not enforced. This principle of the law was applied in Sterling .

In that case pledges were made to support a failing bank, to restore confidence in it and protect its depositors and creditors, to comply with demands of the bank commissioner so as to keep the bank open and to prevent impairment of its capital. There were, therefore, substantial considerations for the subscriptions. “Not only was every subscription expressly made in consideration of the agreement of other subscribers, who have fulfilled their pledges, but a prior subscription agreement was to be, and was, in fact, released to the specified extent, when the new one became binding, and consent of the bank commissioner to the continued functioning of the bank was thereby induced.” Id. at 236 . In such circumstances, the Court declared: “The sufficiency of such considerations cannot be doubted.” Id., citing Gittings and Erdman . 5 Gittings and Erdman were referred to in American University v. Collings, 190 Md. 688 , 59 A.2d 333 (1948), as cases “which hold that where one has made a subscription and thereby authorized the entering into engagements to ²⁸⁴ accomplish the purpose for which the subscription was made, the subscription was upon a valuable consideration.” Id. at 691 . The Court carefully pointed out that “[in those] cases, however, the promisee had actually incurred obligations relying upon the promises,” but that in the case it was considering there was no claim “that any such obligations had been entered into.” Id.

The case turned on the finding that the pledge was testamentary in nature. Id. at 692 . Compare the dissenting opinion of Delaplaine, J., 190 Md. at 694-697 . In summary, the rule announced in Gittings , referred to in Collings and applied in Erdman and Sterling , is in substance the rule set out in § 90