In re Greene – Case Brief
In re Greene, 45 F.2d 428 (S.D.N.Y. 1930).
Facts: Greene was married and had an affair with the plaintiff. The affair was terminated in 1926 and the parties entered into an agreement under seal whereby Greene agreed to pay the plaintiff $1,000 per month, assigned to her a $100,000 insurance policy, promised to make a payment of $100,000 in the event the premiums were to lapse, and promised to pay the rent on the plaintiff’s apartment for four years. In exchange the plaintiff agreed to release all claims against Greene. The instrument recited that the agreement was made in exchange for $1 and other good and valuable consideration.
P sued Greene’s bankrupt estate (D) and sought $375,000. The referee held the claim valid and the estate appealed on the grounds that the agreement was unenforceable because it was founded upon past illicit intercourse and therefore lacked consideration.
Issue: 1) Is past illicit intercourse valid consideration? 2) What is the legal significance of placing an agreement under seal?
Holding and Rule: 1) No. Past illicit intercourse is not valid consideration. 2) Placing an agreement under seal gives rise to a rebuttable presumption that valid consideration has been exchanged.
The court held that the one dollar recited was nominal and therefore not valid consideration. The other good and valuable consideration recited was not supported by any exchange of value at the time the parties entered into the agreement. Releasing a party from imaginary claims is not valuable consideration.
The agreement merely recited Greene’s intent to make a financial gift to the plaintiff for past activities and therefore lacks consideration. A promise to make a gift generally does not create a binding contract absent an exception such as promissory estoppel or in the case of charitable subscriptions. That the agreement was made under seal merely creates a presumption of consideration which has been effectively rebutted under these facts.
Notes: Courts are reluctant to enforce these sorts of agreements because there is a risk that parties may anticipate bankruptcy and attempt to transfer property in order to withhold it from creditors.