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Central New York Telephone & Telegraph Co. v. Averill

Supreme Court of New York, Appellate Division

January 6, 1909


Edwin Nottingham, for appellant.

A. H. Cowie, for respondents.

Argued before McLENNAN, P. J., and SPRING, WILLIAMS, KRUSE, and ROBSON, JJ.


The allegations in the complaint are admitted. The plaintiff is a corporation carrying on the telephone business in the city of Syracuse and elsewhere, and the defendants are the proprietors of the Yates Hotel in that city. On the 8th day of August, 1902, the said parties entered into a written contract whereby the plaintiff agreed to install in the said hotel " a private telephone exchange," comprising suitable wires, switchboards, apparatus, and 120 stations connecting with the various rooms, and making a complete telephone exchange equipment, and uniting with its main office in the city. The amount of rentals and other payments therefor by the defendants are set out in the agreement. The telephone system was to be completed for use by September 9, 1902; the contract was to continue in force for nine years from that day.

The gist of the controversy is over the following provisions:

" It is understood and agreed by both of the parties hereto that the switch-board apparatus, wires, cables and fixtures furnished under this contract shall be and remain the property of the said Central New York Telephone and Telegraph Company, and that the instruments and apparatus are placed in said Yates Hotel for the purpose herein named, and that no instruments or wires other than those furnished by the first party are to be placed or maintained in said hotel or connected with or maintained in connection with said switch-board apparatus, or fixtures, and that said instruments, apparatus, lines or fixtures of the first party are not to be connected with or used in connection with any exchange office or telephone except those of the first party or its connections and only by lines connecting said switch-board with the company's exchange office and switch-board as within provided."

The system was installed at an approximate expense of $2,700, and operated and carried on by the plaintiff in full compliance with the agreement. On the 12th day of April, 1906, the defendants caused a written notice, duly signed, to be served on the plaintiff notifying it-

" that the undersigned have decided to terminate said contract, and that the same will be no longer in force or binding between the parties thereto, after the expiration of thirty days from the service of this notice."

At the time of the service of such notice the plaintiff was performing its agreement in a satisfactory manner, and intended in good faith to continue such performance during its entire life, and the defendants were indebted to it for rentals and telephone service in pursuance of said agreement for over $1,600. The defendants threatened and intended to discontinue wholly the use of said telephone system, and to equip said hotel throughout with another private telephone exchange [114 N.Y.S. 101] furnished by a rival telephone company. The admission in the answer is:

" That it is the intention of the defendants to place in said Yates Hotel other telephone instruments besides those of the plaintiff herein, and are about to discontinue and abandon the use of the private hotel exchange with which said hotel is now equipped belonging to the plaintiff."

The alleged justification for this repudiation of the agreement by the defendants is that the clause by which it was agreed that the telephone instruments or wires of no other company were to be placed or maintained in said hotel during the life of said contract is in contravention of public policy, and therefore avoided the agreement in its entirety, and the court below has so held.

The contract was voluntarily made. It is not claimed that the charges in pursuance of it have been unreasonable or extortionate, or that the service has been in any way inefficient or unsatisfactory. There is no suggestion that the plaintiff has refused to furnish a similar system to any other hotel at the same rates charged the defendants, or that the guests of the Yates Hotel, or the people of Syracuse, or the public generally have ever complained of or suffered from the exclusive use of the plaintiff's telephone system in said hotel. In fact, it is not the purpose of the defendants to maintain two telephone systems in their hotel. If they can terminate this agreement with five years or more of life in it, they intend to substitute another telephone exchange, and there is no pretense that the public or the guests of the hotel would be better served by the competing exchange than by the one now in use.

The defendants, in addition to strangling the life of the agreement, intend, and so far have succeeded, to avoid the payment of over $1,600 fairly and justly due the plaintiff for services performed in strict compliance with the agreement, and to inflict a further pecuniary loss upon the plaintiff of $2,700 expended in such equipment, as the court below has found. In addition, it must lose the revenues and the profits of its contract for the five years in which it was intended to be effective. It is also to be observed that it is admitted in the answer the inducement for expending the large sum in the placing of the local telephone exchange in the hotel was the so-called " exclusive clause" in said agreement, and such expenditure would not have been incurred except for such provision.

Practically the only persons to be benefited by this summary cutting short of this agreement are the defendants. As a concrete fact the public, whether that term is to be inclusive of guests of the hotel, the citizens of Syracuse, or the more intangible public generally, are not interested in the question of the validity of this agreement. It may be necessary on the principle of public good to aid the defendants in their unjust disavowal. In this particular instance the assertion of the principle of public policy is to aid the defendants, and for no other purpose. In these circumstances, therefore, the necessity for uphold-in this decision must be clear and convincing, when its only real effect is to enable the defendants to avoid liability on an agreement willingly made, and the premature ending of which will result so disastrously to [114 N.Y.S. 102] the plaintiff. It is not every contract in restraint of trade, or every exclusive privilege granted by a corporation, which runs counter to public policy. The test of its validity generally is whether the restricting provision is unreasonable, or in its scope will operate to the injury of the public which may be affected by it. In the early stages of judicial decisions on this subject, the courts, in their delirium to enshrine public policy, overrode liberty of ...

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