Case Name: Joseph W. Stover, Respondent, v. The Gamewell Fire Alarm Telegraph Company, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1914-11-06
Citations: 164 A.D. 155
Docket Number: 
Parties: Joseph W. Stover, Respondent, v. The Gamewell Fire Alarm Telegraph Company, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 164
Pages: 155–159

Head Matter:
Joseph W. Stover, Respondent, v. The Gamewell Fire Alarm Telegraph Company, Appellant.
First Department,
November 6, 1914.
Pleading—complaint — agreement to pay annuity to officer of corporation if he refrained from engaging in competing business — demurrer — Statute of Frauds.
A complaint states a cause of action when it sets out a written contract between the plaintiff and the defendant corporation, of which he was president, whereby the plaintiff agreed, if he severed his connection with the corporation, not to engage in a competing business for ten years, and further sets forth an agreement by the corporation, made in consideration of the fulfillment by the plaintiff of his part of the agreement, to pay him a certain sum of money annually so long as he should live, and further alleging that the relations of the plaintiff with the corporation having been severed, it made said payments for a certain time, but subsequently refused to pay installments which are now due and owing. The Statute of Frauds, being an afffrmative defense, is not available to the defendant on a demurrer to said complaint.
Appeal by the defendant, The Gamewell Fire Alarm Telegraph Company, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 22d day of June, 1914, overruling a demurrer to the amended complaint upon the decision of the court after a trial at the New York Special Term.
Arnold L. Davis, for the appellant.
Allen S. Wrenn, for the respondent.

Opinion:
Ingraham, P. J.:
The complaint alleges that for a period of over twenty-five years and until on or about the 20th of October, 1909, the plaintiff was in the employ of the defendant corporation as its president; that on or about the 20th of October, 1907, the defendant corporation and the plaintiff entered into an agreement in writing, a copy of which is annexed to the complaint; that the agreement recited that the plaintiff was the president of the defendant corporation and had acquired familiarity and experience with the business in which it is and has been engaged; that the corporation was desirous of "assuring unto itself" that said plaintiff, should his connection with said company be severed at any time thereafter, would not engage directly or indirectly in a business competing with that of said company, and that in consideration of one dollar and of other good and valuable considerations plaintiff covenanted and agreed that, should his employment by said company be terminated at any time after the execution and delivery thereof, he would not, during the period of ten years next succeeding after such date, directly or indirectly engage or become interested in the manufacture, use or sale of -municipal telegraph or signaling systems or apparatus, or in any enterprise com peting with the business carried on down to the time of such severance of employment by said company. The complaint then alleged that at the time of entering into the agreement, and as part of the consideration therefor, it was further mutually covenanted and agreed between the parties to said agreement that, should the plaintiff's said employment by the said defendant company be in any way at any time thereafter severed, the defendant should pay to the plaintiff a money consideration tó be fixed and determined at a subsequent date by the parties to said agreement; that thereafter and pursuant to the conditions bf said agreement the plaintiff and defendant corporation did fix and determine the money consideration to be paid to the plaintiff by defendant under said contract at the sum of $5,000 per annum, payable in equal monthly installments of $466.66 each, to be paid to the plaintiff by the defendant company, commencing with the date of the severance of the plaintiff's said employment by the defendant, and to continue so long as the plaintiff should live; that thereafter and on or about the 20th of October, 1909, said employment of the plaintiff by the defendant was severed, and that the installments which became due and payable from the termination of said employment up to and including the month of November, 1913, have been paid; that the plaintiff has duly performed to date all the terms and conditions of said agreement on his part to be performed; that there became due and payable to the plaintiff from the defendant, for the months of December, 1913, January and February, 1914, the sum of $466.66 per month, no part of which has been paid. And the complaint then demands judgment for the three installments. The defendant demurred to the complaint on the ground that the complaint does not state facts sufficient to constitute a cause of action, which demurrer was overruled at Special Term, and from the interlocutory judgment' entered thereon the defendant appeals.
We agree with the Special Term that the Statute of Frauds, being an affirmative defense, is not available to defendant on demurrer to the complaint. The question presented, therefore, is whether the complaint states facts sufficient to constitute a cause of action. There is no allegation as to the age of the plaintiff, or how long the payment of $5,000 a year would under ordinary circumstances be expected to continué. The complaint alleges that the installments which became due and payable from the 20th of October, 1909, up to and including the month of November, 1913, for a period of four years, had been paid. The only consideration mentioned in the complaint for the making of this rather unusual contract to pay the plaintiff $5,000 a year during his life for no services rendered, is the making of this agreement which is annexed to the complaint. This contract upon its face would be a unilateral contract. By it the defendant agreed to do nothing, assumed no obligation of any kind or description, but plaintiff, being president .of the defendant corporation, agreed that should his employment by said company be terminated at any time after the execution and delivery thereof, he would not, during the period of ten years next succeeding after such date, engage or become interested in any business which competed with the defendant corporation. When the contract was made the plaintiff had been connected with the defendant for many years and was, therefore, at that time familiar with all the secrets of the defendant's business and with all of its customers and agents. It was a unilateral agreement not to engage in any competing business for ten years next after the severance of his employment by the defendant, and it is plain upon the face of the agreement that it could not be enforced. Neither plaintiff nor defendant, however, seeks to enforce that contract. Plaintiff comes into court, alleging that part of the consideration for that contract was the agreement that the corporation would pay him a money consideration to be fixed . and determined at a subsequent date, and that it was subsequently fixed and determined at $5,000 a year, to continue so long as the plaintiff should live. There is no allegation whether the contract on which this action was based was made by the officers, directors or stockholders of the corporation, or whether it was in writing. It is simply alleged that the defendant corporation and the plaintiff entered into the agreement. We, therefore, have, in effect, an allegation that the plaintiff agreed not to engage in any business competing with the defendant corporation for ten years next after the severance of his employment with the defendant, and that in consideration therefor it agreed to pay him $5,000 for the rest of his life.
The question is whether this contract is enforcible. I suppose there is no objection to a corporation making a contract to pay a person a specified sum of money every year during his life. All contracts of annuities are of this character. I also suppose that there is no legal objection to a contract by which an officer of a corporation agrees for a sufficient consideration that he will not engage in any business competing with the business done by the corporation while he was employed by it, for a fixed term of ten years after he severs his connection with it. We have in this complaint the simple allegation that these two contracts were made, the consideration for the promise in one contract being the promise in the other. There was no allegation in the complaint on which to base a determination that this contract was ultra vires or was not made by the corporation, and the question, therefore, presented in the case of Beers v. N. Y. Life Ins. Co. (66 Hun, 75), and in Carney v. N. Y. Life Ins. Co. (19 App. Div. 160; affd., 162 N. Y. 453), is not presented. I can see no reason, on the allegations of this complaint, for the court to declare the contract void as against public policy or void as being ultra vires, or otherwise unenforcible.
It follows, therefore, that the judgment must be affirmed, with costs, but with leave to the defendant to withdraw the demurrer and to answer within twenty days upon payment of costs in this court and at the Special Term.
Laughlin, Scott, Dowling and Hotchkiss, JJ., concurred.
Judgment affirmed, with costs, with leave to defendant to withdraw demurrer and answer on payment of costs.