what is mr. johnson talking about when he says legally obtain and morally obliged? what does he decide to do?

Mr Johnson is talking about the life insurance policy that Mr Clutter took out I believe on the day he died. The company hadn't even cashed Clutter's check yet. He knew that the company had legally obtained the business, but he hadn't yet put through the paperwork....... thus, they could have chosen not to pay (legally). On the other hand, there was a moral obligation to do what Mr Clutter had signed and paid for. They of course took the moral route.