When is a promissory note not valid?

“A moral obligation is not necessarily a legal one and it alone is not a valid consideration for a promise to pay.”

Superior Court Associate Judge John Manglona used this jurisprudence in issuing an award judgment favoring a woman who was “misled” into paying her deceased mother’s debts.

The court’s order was a response to a complaint by Vivian Sablan against Isla Financial Services and Pacific Life Insurance, Ltd.

The case arose from the loan secured in July 1994 by Sablan’s mother, Paulina A. Sablan, from Isla Financial in the amount of $2,539.95.

Paulina died a few months after securing the loan.

Isla later approached Sablan to collect payment for her mother’s loan.

Pacific Insurance told Sablan that the company would not cover payment of Paulina’s loan on grounds that her medical condition was not revealed in the Statement of Good and Health and Instability.

Sablan, not wanting to leave her mother’s loan unpaid, signed a promissory note for Isla.

She started sporadic payments of the loan plus interest.

By October 1995, she had paid a total of $805. 90.

But when she resigned from her job, Sablan stopped paying, prompting Isla to file a complaint.

The Micronesian Legal Services Corp., which represented Sablan, said its client had no legal obligation to pay her deceased mother’s loan, and that she was “misled” into paying what the credit insurance should have paid off.

The Superior Court agreed, and ruled that Sablan is entitled to be paid for damages representing the loan payment she had made.

As for the promissory note, Manglona said it was one of those contracts that bear “moral obligation” which is “binding only the conscience.”

Breach of this kind of contract, Manglona said, “is not redressible in the courts.”

“A moral obligation will not furnish a consideration for a new contract where there is no legal obligation in the first place.” the court’s decision stated.