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order of sale leaves the lien of the excutions as they were, valid or invalid, affecting only a change of the thing upon which they might be liens. That order does not render valid judgments and executions which, but for its making, would be invalid. Let judgment be entered vacating the judgments and executions, turning over the property to the receivers, requiring Herman L. Ensign and Lewis N. Seaver to account for all moneys coming to their hands through said judgments and executions, with costs to the plaintiffs against Seaver and Herman L. Ensign.

Ordered accordingly.

(27 App. Div. 219.)

NATIONAL GUM & MICA CO. v. BRAENDLY.

(Supreme Court, Appellate Division, First Department. March 25, 1898.) 1. CONTRACTS-CONSIDERATION-TRADE SECRETS.

A manufacturing business was purchased on the strength of promises by the former manager that he would enter the purchaser's employ at a stated salary, in addition to an interest in the profits of the business; would dis close secret formulas necessary to the conduct of such business, as well as any new processes he might discover while so employed; and would not disclose such secrets to any competitor, nor employ them in a similar business, should be leave their employment. Held, that such promises were a valid contract, resting on the consideration of such purchase, and on the employment so given.

2. SAME-EMPLOYMENT.

A party who received employment as long as he desired. in consideration of his promise to disclose secret processes, is not released from his obligation because the contract failed to specify a particular time of employment. 3. SAME-BREACH--JUSTIFICATION.

To justify nonperformance of a contract for failure to share profits as agreed, it should appear that profits were made, and that such failure was the basis of refusal to perform.

4. SAME-WHAT CONSTITUTES BREACH-INFERENCE.

A party contracted to enter a certain employment, to disclose secret formulas, and, if he relinquished his employment, not to engage in the same or a similar business, nor to use or communicate to business competitors such formulas. He refused to make such disclosure, and, leaving his employment, organized a new corporation, in competition with which the old business could not be carried on. Held, that a viclation of the contract must be inferred.

5. SPECIFIC PERFORMANCE-DISCLOSURE OF TRADE SECRETS.

A court has jurisdictional power to enforce an agreement to disclose secret processes, and to that end may restrain their disclosure or use to the detriment of the party entitled thereto.

6. INJUNCTION AGAINST DISCLOSURE OF TRADE SECRETS.

A business was purchased in reliance on a promise of the manager that he would enter the purchaser's employ at a certain salary, and disclose secret formulas necessary to the conduct of such business, and would not disclose such secrets to any competitor. Held, that the purchaser could enjoin the manager from disclosing the secrets in violation of the contract.

7. SAME.

Knowledge of secret trade processes, acquired in the service of their owner, will be protected by injunction from disclosure.

Barrett and Ingraham, JJ., dissenting.

Appeal from special term.

and 85 New York State Reporter.

Action by the National Gum & Mica Company against John J. Braendly. From a judgment for defendant, plaintiff appeals. Reversed.

Argued before VAN BRUNT, P. J., and BARRETT, RUMSEY, MCLAUGHLIN, and INGRAHAM, JJ.

Edward A. Alexander, for appellant.
David S. Myers, for respondent.

RUMSEY, J. The appellant is a domestic corporation organized for the purpose of making mica pulp, flour paste, gums, and like articles, which are extensively used in the manufacture of wall paper, and other business of that kind. It is alleged in the complaint that on the 14th day of September, 1895, one Delery was the sole owner of a manufacturing business of that kind, which was carried on in the city of New York. The plant was worth but little, the value of the business consisting almost entirely in the secret processes for making the different articles in which Delery dealt. These secret processes, although owned by Delery, were known only to the defendant, who was at that time Delery's manager. At the time above mentioned the defendant approached the president of the plaintiff, and endeavored to induce him to buy the business carried on by Delery. It was agreed between the plaintiff and the defendant that if the plaintiff would purchase the business from Delery, and carry it on, and would engage the defendant as its agent, at a salary of $25 a week, and give the defendant an interest in the profits of the business, the defendant would work as the agent of the plaintiff; would disclose and show to the plaintiff the secret processes which the plaintiff was about to purchase from Delery; would agree not to communicate said processes to anybody else, and would agree not to manufacture the articles from said processes himself, should he thereafter leave the plaintiff's employ; nor would he engage in the same line of business. Relving upon that agreement, the plaintiff purchased the business from Delery at the price of $2,500. It engaged the defendant at the agreed salary, which was paid to him so long as he saw fit to stay with the plaintiff, and proceeded to carry on the business in which Delery had been engaged, and which it had bought from him. The defendant remained in the plaintiff's employ a comparatively short time, but he refused to disclose to the plaintiff or to its agents the secret processes for making the articles in which it dealt, and finally, without any reason, left the plaintiff, and organized a corporation for the purpose of carrying on the same business, and the manufacture of the same class of articles. For a second cause of action it was alleged that, as a part of the same contract, the defendant agreed that any improvements which he made in the process of manufacture while he was in the employ of the plaintiff as its agent, and any secret processes he might discover, should belong to the plaintiff and that he would not disclose them to any other person, but that he had disclosed them, or was about to disclose them, to the corporation which he had organized to compete with the plaintiff's business. For a third cause of action it was alleged that it was agreed that the defendant would not disclose any secrets or secret process which he should learn from other

of the plaintiff's employés while he was so engaged as plaintiff's agent. It is further alleged that the plaintiff had in its employ certain persons, who discovered other secret processes and improvements in the processes used by the plaintiff in its business; that these were disclosed to the defendant, to enable him to carry on the business, but the defendant, after leaving the plaintiff, had disclosed or threatened to disclose these processes to the competitor of the plaintiff, in whose employ he had entered. Upon the trial the defendant was not called upon to give evidence, but the complaint was dismissed at the close of the plaintiff's case. There was practically no dispute about the facts, and the only questions presented are whether the contract was a valid one, and one which can be enforced by the courts, and, if it was, whether the plaintiff had proved facts from which the court should have inferred that the defendant was violating his agreement not to disclose the secret processes, or to make use of them. The contract was established by the testimony of the general manager of the plaintiff, who stated, in substance, that the defendant, being in the employ of Delery, came to the witness, and asked him to purchase Delery's business; giving the reasons hy he desired him to do so. After some negotiation with Delery, the general manager told the defendant that they were about to close a bargain with Delery for the purchase of the business, but that they would be practically powerless to carry on the business, because none of them knew anything about it, unless the defendant would stay with them and show them the business; and it was agreed between the witness and the defendant that if plaintiff bought the business from Delery, and employed him as manager, and paid him $25 a week as a salary, he would show them all the formulas, and would not go out and start another business, or disclose those secrets to anybody else. The defendant said, also, in the same conversation, by way of further inducement to the purchase of the property, that there were other things which he thought he could make, and which he would make, for the benefit of the business. This is a concise statement of the agreement in that behalf, which was sworn to by the general manager of the plaintiff. It is not denied that after that agreement was made, and in reliance upon it, the plaintiff bought the business of Delery, entered upon it, and hired the defendant as its agent, at a salary of $25 a week, which was regularly paid to him so long as he saw fit to stay in the plaintiff's employ.

It is objected by the defendant that there was no consideration for his entering into this contract, because there was no agreement on the part of the plaintiff to employ him for any particular time, or, indeed, to employ him at all, but that the plaintiff was at liberty to discharge him whenever it saw fit. To this objection there are two sufficient answers, each one of which is based upon an elementary rule of the law of contracts: In the first place, it is conceded by the evidence that the plaintiff was induced to enter into this bargain by the promise of the defendant to do the things which are alleged in the complaint. The purchase from Delery by the plaintiff at the request of the defendant was of itself a

and 85 New York State Reporter.

sufficient consideration from the plaintiff to make this a binding contract. It hardly needs the citation of authority to establish the proposition that the consideration of a contract may be furnished, not only by a benefit moving to the promisor, but by the fact that the promisee will be injured if the promisor does not keep his promise. Rector of St. Mark's Church v. Teed, 120 N. Y. 586, 24 N. E. 1014. It is quite clear that the investment of the plaintiff's money in this business at the request of the defendant, which would prove practically worthless unless the defendant kept the promise which he made, was, in a legal sense, an injury to the plaintiff. It is complained that there was no obligation on the part of the plaintiff to employ the defendant for any particular time, and, because of the lack of an agreement to that effect, the defendant received no consideration. But it appears, without dispute, that although the plaintiff did not agree to keep the defendant in its employ for any particular time, yet it did employ him, and pay him the agreed salary, and kept him there until he saw fit to leave; and the performance of the condition supplied the lack of a previous obligation, if there was one. The thing which the defendant expected to get, in addition to the plaintiff's purchase, was employment. That, it is conceded, he did get, and kept just so long as he desired. Although there might have been no obligation on the plaintiff to keep him for any particular time, yet, so long as it did keep him, and was willing to keep him, and paid the salary which it had agreed to pay him, it performed its part of the contract, and he was bound to perform his. Miller v. McKenzie, 95 N. Y. 575; Beckwith v. Brackett, 97 N. Y. 52.

But it is said that the plaintiff did not give to the defendant the interest in the profits which it had agreed. The answer to this is twofold: In the first place, it did not appear that any profits had been made; and, in the second place, it was quite clear from the testimony that the defendant did not base his leaving the employ of the plaintiff, and his threatened disclosure of these processes to the other corporation, upon any such ground, so far as the evidence showed. The reasons which he had for leaving the plaintiff's employ were not based upon any complaint that its contract with him had been violated. So far as the contract, therefore, is concerned, it is quite clear that it was a valid contract; that the plaintiff had performed its part of it, so far as the evidence shows that it was capable of performance; and that the defendant had refused to perform.

It is said by the defendant, however, that there was no evidence that he had violated his contract. It is proved that the defendant had left the employ of the plaintiff, and had organized another corporation for the purpose of competition with the plaintiff, and which did compete with the plaintiff, and that he had refused to furnish to the plaintiff the secret processes which were within his knowledge while he was in Delery's employ, so that, after he had left the employment of the plaintiff, it was not able to carry on the business in competition with the new corporation with which he was engaged. All these facts were made to appear

from the testimony, and there is no doubt that, upon the case as it was finally presented to the court at the trial, there had been on the part of Braendly a violation of his contract, to the serious injury of the plaintiff in its business.

There is no doubt that so much of the contract as agreed to disclose to the plaintiff the secret processes used in the manufacture of its goods, and not to disclose those secrets to anybody else, and not to use them in the business of any other person, was valid, and could be enforced. Jarvis v. Peck, 10 Paige, 118; Alcock v. Giberton, 5 Duer, 76. It is said that the court cannot compel the disclosure of these secret processes. In one sense, that may be very true; but, as a step towards compelling the defendant to perform that part of his agreement, it certainly has the power to restrain him from disclosing those processes to anybody else, and to punish him if he violates an injunction imposing that restraint. It may do this, not only in performance of the contract by which he agreed not to disclose these secrets, but also, in the absence of that negative stipulation, by way of compelling him to perform the contract which he made, to disclose those processes to the plaintiff. Lumley v. Wagner, 1 De Gex, M. & G. 604; Catt v. Tourle,

Ch. App. 654; Peabody v. Norfolk, 98 Mass. 452. As to the power of the court, therefore, there can be no question. Neither is there, as we apprehend, any doubt that the plaintiff made a case entitling it to some portion, at least, of the relief which it demanded. These trade secrets were the most valuable portion of the business which the plaintiffs bought from Delery. They constituted practically all there was of it. While they were known to the defendant, they were owned by Delery; and the plaintiff was induced to buy them from Delery upon the promise of the defendant, not only that he would disclose those secrets to the plaintiff, but that he would not disclose them to anybody else. Relying upon this agreement, the plaintiff was induced to expend a substantial sum of money in the purchase of this business. When that business was purchased the defendant assumed towards the plaintiff, with regard to these processes, a confidential relation. He had in his hands all that was of substantial value to the business which he had induced the plaintiff to buy; and one essential part of the transaction was that these processes, which constituted this large proportion of that valne, should be disclosed to the plaintiff, and should not be disclosed to anybody else. The effect of this disclosure, as is quite apparent, and as appears from the testimony, would be to materially depreciate the value of the property which the defendant had induced the plaintiff to buy. Although the processes were not patented, yet, as they were secret, and as their secrecy was protected by the contract between the defendant and the plaintiff, the plaintiff is in a situation to insist that the defendant, who agreed to protect the secrecy of these processes, and thus preserve their value, should not be permitted to disclose them, and thus deprive the plaintiff of the valuable property which he had induced it to purchase. Baldwin v. Van Mischeroux, 5 Misc. Rep. 386, 25 N. Y. Supp. 857; Id., 83 Hun,

51 N.Y.S.-7

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