Mullaly v. Carlisle Chemical Works, Inc.

• Decision Date: 02 June 1960
• Docket Number: Civ. A. No. 58-59.
• Citation: 184 F. Supp. 701
• Parties: Arthur B. MULLALY, Plaintiff, v. CARLISLE CHEMICAL WORKS, INC., a corporation of Ohio, Defendant.
• Court: U.S. District Court — District of New Jersey

184 F. Supp. 701

Arthur B. MULLALY, Plaintiff, v. CARLISLE CHEMICAL WORKS, INC., a corporation of Ohio, Defendant.

Civ. A. No. 58-59.

United States District Court D. New Jersey.

June 2, 1960.

Sidney H. Smith, East Orange, N. J., Roger Hinds, East Orange, N. J., of counsel, for plaintiff.

O'Mara, Schumann, Davis & Lynch, Jersey City, N. J., Edward J. O'Mara, Jersey City, N. J., and Cravath, Swaine & Moore, New York City, of counsel, for defendant.

WORTENDYKE, District Judge.

Defendant's present motion for summary judgment "dismissing the amended complaint" follows the denial of plaintiff's motion for summary judgment upon defendant's counterclaim. See D.C.1959, 177 F.Supp. 588. The case was removed to this Court from the Superior Court of New Jersey upon diversity jurisdictional grounds.

Plaintiff was chief executive officer and a controlling stockholder of Advance Solvents & Chemical Corporation (Advance), a New Jersey corporation, which was acquired by defendant Carlisle Chemical Works, Inc., (Carlisle), an Ohio corporation a wholly owned subsidiary of the Cincinnati Milling Machine Company (Cincinnati Milling), also an Ohio corporation. Carlisle acquired the stock of Advance on April 18, 1955,¹ under the terms of a written purchase agreement dated March 21, 1955, for $1,400,000. Collateral with this acquisition plaintiff contracted in writing with defendant to serve as chief executive officer of Advance (which became a division of Carlisle through defendant's purchase of its stock) for three years succeeding the sale, at a monthly salary of $2,750, effective throughout that period, notwithstanding Carlisle's reserved right to remove him from that position within that employment period. Both before Carlisle's acquisition of Advance and thereafter until his removal from the position of chief executive officer of Carlisle's Advance division on February 9, 1957, plaintiff performed the duties of his employment in New York City.

On November 30, 1953 Advance had entered into Group Annuity Contract No. GA-783 with State Mutual Life Assurance Company (State Mutual) which provided a non-contributory retirement plan for Advance employees, including plaintiff. This annuity contract permitted discontinuance by Advance of its premium payments thereunder, as of November 30 of any year. This option was exercised by Carlisle as of November 30, 1955 and on February 8, 1956 the board of directors of Cincinnati Milling, by resolution, included both Carlisle Division (of Cincinnati Milling) and Advance Division (of Carlisle) in the Cincinnati Milling Machine Company Retirement Trust Plan, as of January 1, 1956. This trust plan rests upon irrevocable annual payments by Cincinnati Milling to an independent trustee, the Central Trust Company, to provide employee retirement benefits commencing at age 65 after 15 years of service, with the further proviso that an employee could retire at an earlier age "after 25 years of service or, with the approval of the company in the event of disability or other hardship, after 15 years of service."

Plaintiff here sues upon an alleged oral promise, made to him in New York City on November 17, 1955, by Karl L. Schanbacher, president of Carlisle, that the Cincinnati Milling Trust Plan would apply to plaintiff, and that, if he were discharged or involuntarily retired before he had completed 25 years of service, he would be certified for "hardship" retirement under the proposed plan.² On April 18, 1958, when plaintiff's $2,750 monthly salary payments under his written employment contract of March 21, 1955 ceased, his aggregate service to Advance and Carlisle amounted to 24 years and 10 months, but his application for benefits under the "hardship" proviso of the Cincinnati Milling Trust Plan was rejected. In this action plaintiff seeks to establish his right to those benefits.³

By its present motion, Carlisle impugns the validity of the oral agreement in suit upon the grounds that it (1) lacked consideration, and (2) is within the Statute of Frauds of the State of New York.

Assuming that Schanbacher did make the oral promise which plaintiff alleges, but which defendant emphatically denies, we must face the preliminary question of what law applies to the determination of its enforceability. This Court's jurisdiction rests upon the diversity of citizenship of the parties. New Jersey's law of conflicts applies. Klaxon Co. v. Stentor Electric Mfg. Co., Inc., 1941, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; Specialties Development Corp. v. C-O-Two Fire Equipment Co., 3 Cir., 1953, 207 F.2d 753. The validity of a contract is determined by the law of the place of contracting. Colozzi v. Bevko, Inc., 1955, 17 N.J. 194, 110 A.2d 545; Naylor v. Conroy, App.Div.1957, 46 N.J.Super. 387, 134 A.2d 785, 67 A.L.R.2d 689. See also Restat. Conflict of Laws, § 332. The promise here sued upon was made in New York. The validity of the asserted agreement is to be tested by the law of that State.

We first face defendant's contention that the New York statute of frauds applies to the promise. Failure of compliance with the requirements of the statute is fatal to the validity of a contract. Silverman v. Indevco, Inc., Sup. 1951, 106 N.Y.S.2d 669, affirmed 279 App.Div. 573, 107 N.Y.S.2d 542. The statute relied upon by Carlisle for this contention is Section 31 of the New York Personal Property Law (40 McKinney, Consol. Laws of N.Y. § 31). That section provides in part:

"Every agreement, promise or undertaking is void, unless some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, * * * if such agreement, promise or undertaking;

"1. By its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime;

* * * * *

"8. Is a contract to establish a trust * * *."

Plaintiff asserts that the promise which he seeks to enforce was made on November 17, 1955. There was no note or memorandum thereof in writing signed by or in behalf of the defendant. Was the alleged promise to be performed within one year from the date of the making thereof? Both parties are in accord in stating that § 31 of the statute does not render unenforceable promises which are capable of being, although not required to be, performed within one year from the making thereof. Nat Nal Service Stations v. Wolf, 1952, 304 N.Y. 332, 107 N.E.2d 473. Sed cf. Droste v. Harry Atlas Sons, Inc., 2 Cir., 1944, 145 F.2d 899, rehearing denied 2 Cir., 147 F.2d 675, certiorari denied 325 U.S. 891, 65 S.Ct. 1408, 89 L.Ed. 2003. See cases cited in Farmer v. Arabian American Oil Company, D.C.S.D.N.Y.1959, 176 F.Supp. 45. Mullaly's employment by Carlisle became effective on April 18, 1955. Therefore, at the time of the alleged oral agreement, Mullaly had been performing services for Carlisle under that employment contract for a period of seven months. By the terms of that contract Carlisle reserved the right to terminate Mullaly's employment at any time, subject to its obligation to continue payment of the agreed salary for the full term of three years prescribed therein. That contract recited that it constituted the entire agreement between the parties. When certification of Mullaly for "hardship" retirement benefits under the subsequent oral promise would have to be made, if at all, is not disclosed. His discharge from employment under the written agreement could occur at any time within one year from the making of the oral promise. The promise, therefore, could be performed in less than a year. Carlisle concedes that on the date of the alleged promise (November 17, 1955) Mullaly had served Advance since June 23, 1933, and Carlisle from April 18, 1955 to November 17, 1955; an aggregate period of over 22 years. He was, therefore, eligible for the allegedly promised approval for "hardship retirement" on the basis of total time served on the date the promise was made. The alleged promise was not, therefore, within subdivision 1 of the New York statute.

I disagree with defendant's contention that the promise in suit was to establish a trust. On the contrary, it was merely an undertaking to approve Mullaly's eligibility for "hardship" retirement after fifteen years of service, as a beneficiary of a trust to be created inter alios. Cf. Blanco v. Velez, 1945, 269 App.Div. 133, 54 N.Y.S.2d 217, reversed on other grounds 1946, 295 N.Y. 224, 66 N.E.2d 171. The promise in suit is not rendered unenforceable either by subdivision 1 or subdivision 8 of the New York statute of frauds.

We turn now to the defendant's primary attack upon the oral agreement in suit, based upon the alleged lack of consideration therefor. What, if any, was the consideration for the alleged promise, if it was made? Consideration which will support a contract is an advantage to the promisor or a forbearance or relinquishment by the promisee; in other words, a "benefit to the promisor or detriment to the promisee." Walton Water Co. v. Village of Walton, 1924, 238 N.Y. 46, 49, 143 N.E. 786, 787. It imports the idea of a "trade of one valuable thing for another," Hammond Oil Co. v. Standard Oil Co. of New Jersey, 1932, 259 N.Y. 312, 323, 181 N.E. 583, 587, or the giving of "something of real value," Mencher v. Weiss, 1953, 306 N.Y. 1, 8, 114 N.E.2d 177, 181. See also Restat. Contracts § 75, com. b. We search, therefore, for some advantage, benefit or valuable thing accruing or passing, or to accrue or pass to Carlisle from plaintiff, which may serve as consideration for the alleged promise to approve retirement eligibility for Mullaly at an age below 65 and after less than 25 years of service. Carlisle had already bought Mullaly's stock in Advance, and that of his family, for $1,400,000. It had employed him as executive officer of its newly acquired Advance Division for a term to expire April 18, 1958, at $2,750 per month. By that contractual limitation upon his employment p...