Marine Contractors Co., Inc. v. Hurley

• Decision Date: 08 May 1974
• Citation: 310 N.E.2d 915,365 Mass. 280
• Parties: MARINE CONTRACTORS CO., INC. v. Thomas F. HURLEY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 915

310 N.E.2d 915

365 Mass. 280

MARINE CONTRACTORS CO., INC. v. Thomas F. HURLEY.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 8, 1974.

Decided May 8, 1974.

Mary F. Fitzgerald, Boston, for defendant.

William F. Looney, Jr., Boston (Laurence J. Hoch, Boston, with him), for plaintiff.

Before TAURO, C.J., and QUIRICO, BRAUCHER, HENNESSEY and KAPLAN, JJ.

TAURO, Chief Justice.

The plaintiff, Marine Contractors Co., Inc. (Marine), seeks to enjoin the defendant Thomas F. Hurley (Hurley), from competing with Marine in the business of marine specialist until March 31, 1976, within 100 miles of Boston, in accordance with a written agreement executed by the parties on April 1, 1971. Hurley appeals from a final decree granting Marine the injunctive relief sought.

The case was referred to a master who conducted a hearing and submitted a report. On objection by Hurley to the report the case was rrcommitted to the master for summaries of certain portions of the evidence and for the inclusion in the report of a copy of the 'Employee Retirement Plan and Trust.' After the inclusion of this evidence, a second motion by Hurley to recommit the case to the master was denied. The judge confirmed the master's report and entered a final decree as stated above, from which Hurley appeals. ¹ There was no error.

We are bound by the master's subsidiary findings of fact unless they are plainly wrong or mutually inconsistent, and we must determine only whether the final decree is supported by those facts found by the master and proper inferences therefrom. Rose v. Homsey, 347 Mass. 259, 260, 197 N.E.2d 603 (1964). See Minot v. Minot, 319 Mass. 253, 66 N.E.2d 5 (1946); White v. White, 346 Mass. 76, 190 N.E.2d 102 (1963).

We summarize the facts as found by the master. Since 1946, Marine has been engaged in the business of performing various specialized types of marine repair work, principally in the greater Boston area but as far away as Newport, Rhode Island, and Portland, Maine (each of which is within approximately 100 miles of Boston). Marine is one of a very few companies in the greater Boston area which engages primarily in such specialized repair work, although there are shipyards which compete for such work. Marine conducts it business by retaining only two or three permanent supervisors and by hiring crews of part time workers as necessary for particular jobs. It relies on the ability of its supervisors to assemble workers with the particular skills which are needed for each job.

In 1958, Marine created an 'Employee Retirement Plan and Trust' (the trust) for the benefit of its permanent employees. The sole trustee of the trust, Norman C. Thomas (Thomas), is also the president, treasurer, sole stockholder and a director of Marine. The trust agreement provides for annual contributions by Marine to the trust based on the company's net income. All questions concerning construction of the trust agreement, including those involving the powers and duties of the trustee, are to be decided by an administrative committee appointed by Marine. Funds accumulated under the trust accrue solely to the benefit of the participants, and can never revert to or be used for the benefit of Marine. As to distribution of benefits, the trust agreement provides in relevant part that when a participant leaves the employ of the company for reasons other than disability or retirement at age sixty-five, then an amount equal to his vested share of the trust is required to be segregated into a separate savings account and held by the trustee for a five-year period. Only after the expiration of the five-year period may the trustee distribute those benefits (plus accumulated interest) to the participant. The purpose of the waiting period, as stated in the trust agreement, is to 'encourage all employees to become and to remain Participants in the . . . (trust).'

Hurley was a permanent employee of Marine from 1963 until April 1, 1971. He was the general superintendent of the business, and his duties included estimating and preparing bids, in addition to the supervision of ongoing work. As a result of this employment Hurley became skilled in marine contracting both as a field supervisor and as an estimator and bidder. As a permanent employee Hurley was a participant in the trust, and by 1971 his vested share amounted to approximately $12,000. Sometime in March, 1971, Hurley notified Thomas of his plan to leave Marine's employ as of April 1 in order to return to his hometown of Stewartstown, New Hampshire. Thomas offered to make immediate payment to Hurley of his vested share of the trust in return for Hurley's promise not to compete with Marine. Hurley agreed to this proposal. On April 1, Hurley and Marine (represented by Thomas) signed an 'Agreement Not to Compete' in which Hurley, 'in consideration of ONE DOLLAR (1.00) and other good and valuable consideration,' promised not to compete with Marine, directly or indirectly, within 100 miles of Boston for five years. On the same date Hurley received the full amount of his share in the trust.

Starting in August, 1971, Hurley began to perform marine work similar to the work of Marine. The jobs he performed were within 100 miles of Boston and at least some were performed for customers known by Hurley to be customers of Marine. During this time counsel for Marine put Hurley on notice that he was violating the agreement not to compete. Hurley responded that he did not intend to comply with the terms of that agreement. In January, 1972, Hurley formed his own corporation to undertake the work which he had been doing as an individual. By that time the other two key supervisory employees who had been working for Marine as of April 1, 1971, had quit Marine and were working for Hurley. Owing to the loss of the services of Hurley and other key employees, Marine was unable to bid on or accept much work until April, 1972. Between August, 1971, and June 5, 1972 (the date on which the hearing before the master began), Hurley earned more than $24,000 from business done in violation of the agreement not to compete.

Marine filed its suit in September, 1971, and the injunction issued on June 5, 1973. By the terms of the injunction Hurley is barred until March 31, 1976, from engaging in the business of general maritime specialist, within 100 miles of Boston, either individually, as a member of a firm, or as a stockholder in a corporation, or a certificate holder in a business trust.

Although Hurley urges several grounds for vacating the injunction, his principal arguments are two: first, that there was no sufficient consideration to support his promise not to compete; and second, that his agreement with Marine constitutes an 'unreasonable restraint of trade' as defined in the Restatement: Contracts, § 515 (1932). We disagree for the reasons stated below, and we hold that Hurley was properly enjoined from violating the terms of his agreement not to compete.

We consider first the question of consideration. The master found that the requirement of consideration was satisfied in two respects. First, because the agreement was, in legal effect, a sealed instrument, ² no consideration was necessary to make it a binding contract. Second, the acceleration by five years of the payment to Hurley of his $12,074.64 trust share amounted to consideration in fact.

As to the effect of a sealed instrument, Hurley concedes that the rule at law is that consideration is conclusively presumed for a promise under seal. Kaplan v. Suher, 254 Mass. 180, 182, 150 N.E. 9 (1926). He argues, however, that that rule should not be applied in a suit for specific performance which is addressed to the sound discretion of the court. See Economy Grocery Stores Corp. v. McMenamy, 290 Mass. 549, 552, 195 N.E. 747 (1935). Hurley cites Restatement: Contracts, § 366 (1932), to the effect that a 'contract that is binding solely by reason of its being under seal . . . or having a nominal consideration will not be specifically enforced, unless some performance constituting a fair exchange is a condition of the defendant's duty.' See Corbin, Contracts, § 252 (1963). The short answer to this argument, however, is that the rule of the Restatement is not the law of Massachusetts. 'The principal defendants contend that their guaranties are void because of lack of consideration, and that in equity, despite a recital of consideration in a sealed instrument, actual consideration or lack of it may be determined. These contentions are without merit.' Lawrence H. Oppenheim Co. v. Bloom, 325 Mass. 301, 302, 90 N.E.2d 7 (1950). The rule that consideration is unnecessary when an instrument is under seal has been applied in both actions at law and suits in equity. See Western R.R. v. Babcock, 6 Met. 346, 353 (1843); Morad v. Silva, 331 Mass. 94, 98, 117 N.E.2d 290 (1954). ³

Apart from the seal we hold that the five-year acceleration of the trust benefit payment to Hurley was sufficient consideration to support specific performance of his promise not to compete. The requirement of consideration is satisfied if there is either a benefit to the promisor or a detriment to the promisee. Williston, Contracts (3d ed.) § 102 (1957). See Cottage St. Methodist Episcopal Church v. Kendall, 121 Mass. 528, 529--530 (1877); Graphic Arts Finishers, Inc. v. Boston Redevelopment Authy., 357 Mass. 40, 42--43, 255 N.E.2d 793 (1970). Having the use of more than $12,000 five years earlier than it would otherwise have been available was a substantial benefit to Hurley, especially in light of his expressed intention to start his own business in his hometown in New Hampshire. Hurley argues that, while the accelerated payment might have been a benefit to him, it was no detriment to Marine since the money was paid not by Marine but by the trust from funds in which Marine had no beneficial interest whatsoever. But, as was said in Palmer Sav. Bank v. Insurance Co. of No....