MacKie v. State Farm Mutual Automobile Insurance

164 N.W.2d 777, 13 Mich. App. 556, 1968 Mich. App. LEXIS 1093, 1969 Trade Cas. (CCH) 72,718

Opinions

J. H. G-illis, J.

On or about January 1, 1949, plaintiff and defendants entered into an employment agreement whereby plaintiff was appointed to represent defendants as a local agent. Plaintiff’s employment terminated on October 16, 1961. The question before this Court is whether plaintiff was, under the agreement, entitled to receive certain special benefits when his employment terminated. The amount of these benefits is not in issue.

Tbe provisions of tbe employment agreement wbicb give rise to the dispute between tbe parties are set out below.

Footnotes

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* Plaintiff agrees that be bas not met tbe latter condition of paragraph 4 but contends that bis right to the benefits described in paragraph 1 vested by bis performance of tbe employment agreement and that tbe receipt of those benefits cannot be made conditional upon tbe signing of an agreement wbicb bas been declared by tbe legislature to be illegal and against public policy.

CL 1948, § 445.761 (Stat Ann 1962 Rev § 28.61) provides as follows:

“All agreements and contracts by wbicb any person, co-partnership or corporation promises or agrees not to engage in any avocation, employment, pursuit, trade, profession or business, whether reasonable or unreasonable, partial or general, limited or unlimited, are hereby declared to be against public policy aud illegal and void.”

Relying on the above statute, the trial court granted summary judgment for plaintiff. We affirm.

There are statutory exceptions to CL 1948, § 445-.761, supra. We are also aware that similar statutes have been held not to apply to all agreements restricting the conduct of employees after the termination of their employment. See State Farm Mutual Automobile Insurance Company v. Dempster (1959), 174 Cal App 2d 418 (344 P2d 821).

However, no claim is made and there is nothing-in the record to indicate that the condition sought to be imposed by the agreement contemplated in paragraph 4 is either not covered by the statute or falls within the exceptions. The agreement calls for the agent not to service policyholders, not to compete with the company and not to interfere with the company’s business for one year after the termination of the agent’s employment.

The record indicates only that plaintiff competed. How he did so we are not told. Both parties, however, agree that plaintiff’s competition alone breached the conditions sought to be imposed by the agreement. The 3 conditions are thus treated as really only variations of the same theme, i.e., the agent was not to compete. To this extent the agreement comes within the statute and is void. If we were to find, therefore, as defendants would have us do, that plaintiff’s right to the special benefits was entirely conditioned on his entering into an illegal and, therefore, unenforceable agreement, defendants could simply refuse to make any payments under the agreement and plaintiff would be left without a remedy.

In our opinion, plaintiff’s right to receive the special benefits of paragraph 1 was not conditioned on the agreement not to compete. In Knox v. Knox (1953), 337 Mich 109, 118, the Court stated:

“Whether a provision in a contract is a condition the nonfulfillment of which excuses performance depends upon the intent of the parties, to he ascertained from a fair and reasonable construction of the language used in the light of all the surrounding circumstances when they executed the contract.”

With the exception of entering into and performing the agreement not to compete, plaintiff had fully complied with the terms of his employment agreement with defendants. It is clear from the language of paragraph 1 that the special benefits would be greater the longer plaintiff remained with the company and the more productive he was as an agent. The method of computation clearly suggests the benefit to be derived by defendants while its agents attempt to maximize their benefits. The first payment was to be made within 90 days following the date of termination. Presumably the payments would stop whenever it was established that plaintiff was thereafter competing with defendants. With these considerations in mind, the trial court concluded, “I do not believe that entering into an illegal and void agreement can be made a condition precedent to the payment of benefits which plaintiff was otherwise entitled to receive.” In the Knox Case, supra, the Court stated (p 117):

“While parties to a contract may by specific provision, or by necessary implication, make performance by one party a condition precedent to liability on the part of the other, courts are not disposed, in the absence of specific provisions or reasonable implications, to give such construction to an agreement, especially if so doing brings about an unfair result.”

Two years later, the Court clarified its position in MacDonald v. Perry (1955), 342 Mich 578, 586:

“Plaintiff cited Knox v. Knox (1953), 337 Mich 109, in favor of the proposition that it is the law of Michigan that where the language * * * is such that there is a doubt whether the condition expressed therein is a condition precedent, the presumption is that the condition is not a condition precedent. We consider more complete and accurate statement to be that courts are disinclined to construe the stipulations of a contract as conditions precedent, unless compelled by the language of the contract plainly expressed. The reason of this disinclination is that such a construction prevents the court from dealing out justice to the parties according to the equities of the case.”

The condition here was not to become operative until after the employment agreement terminated. We are convinced that the condition calling for an agreement by plaintiff not to compete was a condition subsequent to the performance of the employment agreement, the nonperformance of which could only relieve defendants from their obligation to pay the benefits in question. The effect of such a condition if illegal, is discussed in 5 Williston on Contracts (3d ed), § 677, p 224. If the condition precedent is void or impossible to be performed, the estate never vests. If the condition subsequent is void or impossible the estate, already vested, remains undisturbed.

Affirmed. Costs to appellees.

Fitzgerald, P. J., concurred with J. H. Gtllis, J.

“B. Termination Other Than by Death

“I. If at the time of termination of the local agent as a representative of the company, other than by death, and [sic] the agent has continuously represented the company as a local agent for 24 months immediately preceding sueh termination, the company will pay him a percentage of his local ageney annual earnings of $2,000 or more, as shown by the company records, for each of the calendar years after 1953 preceding the year of termination and prior to the year of his attaining age 66. The percentage payable on all sueh allowable annual earnings shall be based on his total years of service as a local agent as shown in the table following:

“Years of Service Percentage

as local agent Payable

“Less than 10 2%

“10 and less than 15 3%

“15 and less than 20 4%

“20 or more 5%

“4. Payment to the agent under the provisions of B may be made in 5 annual installments or less, at the option of the company, the first payment to be made within 90 days following the date of termination provided all records and files used by the agent in his representation of the company and all unused materials and supplies furnished to him by the company have been surrendered to the company or its authorized representative and provided the agent has agreed in writing not to service policyholders of the company or to compete with the company or interfere with its business for one full year from the date of termination.’’ (Emphasis supplied.)