Curtis Bridgeman, who teaches at Florida State University Law School, recently published an article criticizing those who assert that underwater borrowers (i.e., folks whose debt exceed the value of the property) have no moral obligation to pay their mortgages even when they have the economic ability to do so. Most people, I suspect, would think that words like “I hereby promise to pay,” found at the beginning of every promissory note, create at least a prima facie moral obligation, not merely a legal one.
Not so fast, asserts Adam Levitin here where he writes that “I don't see why there's necessarily any more moral content to the mortgage contract than there is to my typing or changing the toner cartridge.” One might observe that there is moral content to typing when we compare typewritten words “I love you” with “Your money or your life,“ but I’ll let that pass.
While not incorrect, it’s also a bit unusual that Levitin refers to a mortgage “contract” since one party, the lender, has fully performed while the borrow has simply promised to repay what she has received with interest. The moral principle of unjust enrichment (and the remedy of restitution) should come into play here but this point is irrelevant to Levitin’s moral conclusion so I’ll ignore it for now.
With a little fleshing out, Levitin’s reasoning suggests the following moral argument: corporations are not moral beings; thus, a corporation creates no moral obligation when it makes a promise (let us call this the principle of non-morality). Consider the following example of the principle of non-morality in action: an avalanche caused by a thunderstorm kills a hiker. Few would assert that either the falling rocks or the cumulonimbus clouds acted wrongfully; thus, they are examples of non-moral entities. On the other hand, persons who are moral beings can create moral obligations by a promise (I think Levitin would affirm this). However, Levitin asserts that a promise by a moral being to a non-moral entity creates no moral obligations (let’s call this one the principle of reciprocity). Do these two principles hold?
For my money, the validity of the principle of non-morality is a close call. A corporation’s promissory moral obligation can arise, if at all, only by its derivation from human activity. In other words, if (since) humans can create moral obligations out of thin air, so to speak (contra Hobbes), by promising, then so can certain human instrumentalities. Unlike, say, rocks and clouds, corporations are moral agents. They choose ends and means; they exercise agency. Consider the following theological analogy: just as God created human beings in his image (which, whatever else the imago dei entails, includes moral agency) so too humans can create non-biological entities in their image that likewise are moral agents. I suspect most people believe that corporations are moral agents and, although moral intuitions don’t prove much, they should count for something. (For more, check the Stanford Encyclopedia of Philosophy here for an even-handed discussion of the contested notion of group rights.)
Even if this argument is unpersuasive, how does the principle of reciprocity fare? In other words, even if “soulless” corporations cannot create self-imposed moral obligations, is an individual’s promise to such an entity likewise bereft of moral significance? If I promise a rock to protect it from the rain, have I wronged it when I leave outdoors in the next storm? I don’t think even Immanuel Kant would buy that. But as I argued above, I believe there is a morally significant distinction between a rock and a corporation. One is natural and the other is artificial but the corporation is a human artifact. As I noted here, a corporation’s final cause must (should, anyway) be something other than its efficient cause (profitability). The ability to select the end or good of corporate activity not only cuts against the principle of non-morality but makes morally significant illocutionary acts (such as promises) that persons make to corporations. Keeping one’s promise to a corporation contributes to the good of that entity just as keeping one’s promise to another person contributes to hers. Promises to repay a loan, even if made to the big, bad bank, carry with them moral obligations. Even granting the principle of non-morality, the principle of reciprocity does not follow.
One might object to my claim that corporations have good ends, or at least that all corporations have a cause other than profitability. It cannot be doubted that the goal of many (most?) large corporations is little more than profit. Of course, the same might be said of many (most?) individuals. Does such an observation entail that there is no moral obligation to keep any promise? I hope not. Or that moral obligations exist only when someone (who?) adjudges that something other than profit motivated this promisee? I doubly hope not.
Finding morality in all promises need not make one a moralist of duty. (Hat tip to colleague Tom Folsom for his observation that Gilbert and Sullivan’s The Pirates of Penzance is a hilarious send-up of Kant’s notion of the categorical imperative.) There is a flip side to the morality of promising, and I will address it soon. I promise.
Not so fast, asserts Adam Levitin here where he writes that “I don't see why there's necessarily any more moral content to the mortgage contract than there is to my typing or changing the toner cartridge.” One might observe that there is moral content to typing when we compare typewritten words “I love you” with “Your money or your life,“ but I’ll let that pass.
While not incorrect, it’s also a bit unusual that Levitin refers to a mortgage “contract” since one party, the lender, has fully performed while the borrow has simply promised to repay what she has received with interest. The moral principle of unjust enrichment (and the remedy of restitution) should come into play here but this point is irrelevant to Levitin’s moral conclusion so I’ll ignore it for now.
With a little fleshing out, Levitin’s reasoning suggests the following moral argument: corporations are not moral beings; thus, a corporation creates no moral obligation when it makes a promise (let us call this the principle of non-morality). Consider the following example of the principle of non-morality in action: an avalanche caused by a thunderstorm kills a hiker. Few would assert that either the falling rocks or the cumulonimbus clouds acted wrongfully; thus, they are examples of non-moral entities. On the other hand, persons who are moral beings can create moral obligations by a promise (I think Levitin would affirm this). However, Levitin asserts that a promise by a moral being to a non-moral entity creates no moral obligations (let’s call this one the principle of reciprocity). Do these two principles hold?
For my money, the validity of the principle of non-morality is a close call. A corporation’s promissory moral obligation can arise, if at all, only by its derivation from human activity. In other words, if (since) humans can create moral obligations out of thin air, so to speak (contra Hobbes), by promising, then so can certain human instrumentalities. Unlike, say, rocks and clouds, corporations are moral agents. They choose ends and means; they exercise agency. Consider the following theological analogy: just as God created human beings in his image (which, whatever else the imago dei entails, includes moral agency) so too humans can create non-biological entities in their image that likewise are moral agents. I suspect most people believe that corporations are moral agents and, although moral intuitions don’t prove much, they should count for something. (For more, check the Stanford Encyclopedia of Philosophy here for an even-handed discussion of the contested notion of group rights.)
Even if this argument is unpersuasive, how does the principle of reciprocity fare? In other words, even if “soulless” corporations cannot create self-imposed moral obligations, is an individual’s promise to such an entity likewise bereft of moral significance? If I promise a rock to protect it from the rain, have I wronged it when I leave outdoors in the next storm? I don’t think even Immanuel Kant would buy that. But as I argued above, I believe there is a morally significant distinction between a rock and a corporation. One is natural and the other is artificial but the corporation is a human artifact. As I noted here, a corporation’s final cause must (should, anyway) be something other than its efficient cause (profitability). The ability to select the end or good of corporate activity not only cuts against the principle of non-morality but makes morally significant illocutionary acts (such as promises) that persons make to corporations. Keeping one’s promise to a corporation contributes to the good of that entity just as keeping one’s promise to another person contributes to hers. Promises to repay a loan, even if made to the big, bad bank, carry with them moral obligations. Even granting the principle of non-morality, the principle of reciprocity does not follow.
One might object to my claim that corporations have good ends, or at least that all corporations have a cause other than profitability. It cannot be doubted that the goal of many (most?) large corporations is little more than profit. Of course, the same might be said of many (most?) individuals. Does such an observation entail that there is no moral obligation to keep any promise? I hope not. Or that moral obligations exist only when someone (who?) adjudges that something other than profit motivated this promisee? I doubly hope not.
Finding morality in all promises need not make one a moralist of duty. (Hat tip to colleague Tom Folsom for his observation that Gilbert and Sullivan’s The Pirates of Penzance is a hilarious send-up of Kant’s notion of the categorical imperative.) There is a flip side to the morality of promising, and I will address it soon. I promise.
Interesting, and I agree, for the most part. I had an opportunity to mediate a residential mortgage foreclosure case recently that didn't fit the typical mold at all. The borrower had tried to continue paying the original amount of the mortgage and the bank began refusing payment because they had raised the escrow requirements. The question is, why had they raised the escrow, had the property taxes gone up? No, they had dropped. The property insurance had gone up, but less than the taxes had dropped, so the bank had raised the escrow amount simply because they could.
ReplyDeleteArguably, the borrower had agreed to the applicable clause that allowed the bank to manage the escrow amounts, but I doubt they would have anticipated the bank raising them arbitrarily.
Among the interesting facts in this case was that the borrower had maintained an escrow account where they had kept the entire ($80k+) back payments while the legal process went its course. The bank had already gained, although it was likely to be overturned for other unusual reasons, Summary Judgement in the amount of $450,000. The borrower had tried to settle the case for the back payments, but the bank was insisting on an additional $16k in extra interest. I was a little surprised that the bank was unwilling to negotiate considering the value of the property is currently in the $250k range.
One would hope that the bank would be a little more moral in their business, but I suppose it goes both ways.