## Facts

- Morton Shoe Company, Inc. was a debtor in bankruptcy; Combined Jewish Philanthropies of Greater Boston (CJP) was a creditor asserting a $20,000 claim.
- Morton Shoe previously pledged and paid $10,000 annually to CJP for 1976–1978.
- During CJP’s 1979 and 1980 campaign drives, Morton Shoe pledged $10,000 per year but did not pay either pledge.
- Donors executed pledge cards stating that the subscription was “in consideration of the pledges of others.”
- After pledge drives, CJP used estimated subscriptions to set an operating budget, decide distributions and recipients, hire personnel, and borrow from banks to make distributions before collecting pledges.
- CJP filed a proof of claim for the unpaid $20,000; Morton Shoe objected, arguing the pledges were gratuitous and lacked consideration under Massachusetts law.
- The court decided the claim objection on an agreed statement of facts.

## Issues

1. Whether, under Massachusetts law, Morton Shoe’s charitable pledges were enforceable obligations (supported by consideration or reliance) such that CJP’s $20,000 claim was allowable in bankruptcy.

## Decision

- The court applied Massachusetts contract law to determine the validity of the claimed debt.
- The court overruled Morton Shoe’s objection and allowed CJP’s claim in the full amount of $20,000.
- The court found the pledges enforceable because they were supported by consideration and, independently, by CJP’s reliance.

## Legal Principles

- In bankruptcy, the existence and enforceability of an asserted debt are generally determined by applicable state substantive law.
- Under Massachusetts law, a charitable subscription may be enforceable where consideration exists, including the charity’s acceptance accompanied by an obligation to appropriate funds consistent with the subscription and charitable purposes.
- A charitable pledge may also be enforced where the charity changes its position in reliance on the pledge by undertaking obligations or incurring costs (a promissory estoppel-type rationale).
- Concrete reliance such as budgeting, committing to distributions, hiring personnel, and borrowing funds based on expected subscriptions supports enforcement of the pledge.

## Conclusion

The court allowed CJP’s $20,000 bankruptcy claim because Massachusetts law treats charitable pledges as enforceable when supported by the charity’s reciprocal obligations in accepting and applying subscriptions and when the charity materially relies on pledged amounts in its financial planning and commitments.


In re Morton Shoe Co., 40 B.R. 948 (Bankr. D. Mass. 1984)