1

In Parnell v. Dean (1900) 31 Ont. whom it was assigned. I am satisfied Rep. 517, supra, a covenant of this that that is the correct conclusion." character by a retiring member of a A very similar case is Roper v. Hoppartnership, with the remaining mem- kins (1898) 29 Ont. Rep. 580. In this bers of the firm and a third person, case the sellers of shares in a trading who was taken into the firm at the company covenanted with the pur. time of the transaction, is held en- chaser that if his employment by the forceable by a joint stock company or- company as manager of the business ganized by the new firm to operate the should be terminated, he would not business, and to which the business

become connected in any way in a sim

a and good will were transferred. It is

ilar business carried on by any person also held enforceable by the surviving

or persons, corporation or corporamember of the firm after the other

tions. After the termination of the partners had retired.

agreement for the employment, it was In Fleckenstein Bros. Co. v. Fleck

claimed that he indirectly engaged in enstein (1903) N. J. Eq.

a competing business. While it was

held that the evidence did not show a 1043, decree settled in (1904) 66 N.

breach of the covenant, the question J. Eq. 252, 57 Atl, 1025, in the sale of

was also raised as to the right of the a one-half interest in a manufacturing

covenantees to enforce the covenant business, the covenantor agreed not

on the ground that they had disposed to undertake to engage in a competing of their shares in the company after business. This interest and the other commencing the action. On this one-half interest were subsequently ground the right of the plaintiffs to acquired by a corporation, and there- maintain the action was denied the after the covenantee assigned the cov- court apparently favoring the concluenant to this corporation. It was held sion that the covenant was assignable to be enforceable in behalf of the cor- along with the shares. poration. In the opinion as reported In Welstead v. Hadley (1904) 21 in 53 Atl. 1044, the court said that Times L. R. (Eng.) 165, a covenant not “such covenants have all their vitality to engage in a similar business, enand value from their association with tered into by the covenantors upon the business. They are intended to selling their business to a limited comprotect a business, to keep it, and pany, of which they became managing make it valuable to the purchaser; directors, was held to have passed to and, even if the transfer by the pur- the purchaser of the company's busichaser to the company was not ac- ness and good will upon a receiver's companied by a transfer of this cove- sale thereof. nant, the corporation might well rely And, upon this point, attention is upon their getting the benefit of the also called to a class of cases not covenant as long as it remained in the strictly within the scope of the note, hands of the purchasers,—the original which hold that covenants by persons purchasers. These purchasers be- united to form a corporation, not to came interested in the corporation, - engage in a competing business, may undoubtedly took stock in the corpora

be enforced either by the person to tion. I think they took stock in ex

whom the covenant runs, or the corpochange for their interest, or at least

ration after it has been formed. in exchange for a part of their inter

Bloom v. Home Ins. Agency (1909) 91 est. The corporation got all the bene

Ark. 367, 121 S. W. 293; Anchor Elecfit of it without an actual assignment.

tric Co. v. Hawkes (1898) 171 Mass. Subsequently, in my judgment, it was

101, 41 L.R.A. 189, 68 Am. St. Rep. 403, entirely competent to complete the

50 N. E. 509; McCausland v. Hill whole transaction by a transfer to (1896) 23 Ont. App. Rep. 738. the corporation of this covenant; and

And see McCausland v. Hill (Ont.) the covenant was assignable in that supra, which holds that where several way, and for the purpose for which it persons dealing in a certain class of was assigned, and to the party to goods combine to form a company to take over the business of each of them, viving partner upon his purchase of and they each covenant not to engage the business from the other partners. in a competing business with this new To the same effect is Beard v. Dennis, company when it is formed, the cove- (1855) 6 Ind. 200, 63 Am. Dec. 381. nant is enforceable against one of the In Hillman v. Shannahan (1871) 4 covenantors by the remaining parties Or. 163, 18 Am. Rep. 281, one partner, thereto.

in selling out his business to a third V. Transfer to partnership.

person, executed a bond to such third

person conditioned against his re-enA covenant of this character run

gaging in a similar business within a ning to a partnership as an incident

designated period of time. Some time to the sale of the business of the part

thereafter, this third person sold out nership, either by a third person or by

his interest to the remaining partner, a member of the partnership in trans

and it was held that the latter could ferring his interest therein to other

not enforce the covenant, since it was members, has been held to inure to the

executed for the personal protection benefit of the partnership. For exam

and indemnity of the original purple, in Gompers v. Rochester (1867)

chaser while carrying on the business 56 Pa. 194, a covenant of this charac

in person. ter running to a partnership was held

And see upon this point Linn County to pass to the surviving partner as an

Abstract Co. v. Beechley (1904) 124 incident of the business, where he pur

Iowa, 146, 99 N. W. 702, holding that chased the interest of the other part

where a contract for the sale by one ners.

partner of his interest in the partnerIn Jenkins v. Eliot (1906) 192 Mass.

ship business, and also an abstract 474, 78 N. E. 431, a covenant of this

business, contained a covenant by the character in the sale of a business to

seller that he would not enter into a partnership was held not defeated

making and selling of abstracts in and by a subsequent sale by one partner

for a certain company within a desigto the other, and the assignment of the.

nated time, either in person or indi. covenant was limited to the provision : rectly, by or through or in connection that if the purchaser should cease to

whatsoever with any third party, firm, carry on the business at the place des

or corporation, a partnership was subignated, the covenantor might then

sequently formed by the purchasers, re-engage in such business.

and this was thereafter merged in a In Smith v. Hawthorne (1897) 76

corporation, and stock therein was L. T. N. S. (Eng.) 716, a covenant not

transferred to third persons. This to carry on a school within a desig- corporation was held not to be entinated distance of a school carried on

tled to enforce the covenant. It was by the covenantee entered into at the

pointed out that the original seller had time of the employment of the cove

not been shown to have violated the nantor by the covenantee, was held en

covenant by re-engaging in the abforceable in behalf of the surviving

stract business. But it was also held partner of a partnership subsequently

that the covenant related to an enformed by the covenantee with a third person, although the surviving part

gagement for personal servces which

required skill and science, and pecul. ner was such third person.

iar qualifications, hence, the contract A covenant by a retiring partner not to engage in a competing business was

was not assignable. The court also held to pass to a subsequent purchaser

stated that when the partership disof the partnership business in Town

continued the abstract business, the send v. Jarman [1900] 2 Ch. (Eng.)

consideration for their exclusive em698, 69 L. J. Ch. N. S. 823, 83 L. T. N. ployment by the defendant failed and S. 366, 49 Week. Rep. 158.

the plaintiff took nothing by the asIn Bauwens v. Goethals (1914) 187

signment. Hl. App. 563, such a covenant made to In Bagby & R. Co. v. Rivers (1898) a partnership and the sale of the busi- 87 Md. 400, 40 L.R.A. 632, 67 Am. St. ness to it were held to pass to the sur- Rep. 357, 40 Atl. 171, one partner purchased the partnership business, in- and afterwards selling and assigning cluding the right to use the partner- to the person subsequently acquiring ship name and also the good will. He the property the business and good subsequently sold the business to a will, together with the covenant. corporation of which he became a

VII. As affected by limitations in scope member, and it was held that the cove

of covenant. nant did not pass to the benefit of the corporation. The covenant in this

It is clear that a covenant not to case, however, was limited in its

engage in a competing business may

be so framed as to be personal to the scope, providing merely that the covenantor should not engage in a similar

covenantees. In such case it is not asbusiness so long as the purchaser con

signable and is enforceable only by tinued such business. The court said

the covenantees. Hence, a sale by

them of the business to which the covethat when the corporation was formed

nant relates does not have the effect and there were assigned to it all rights of the old firm, the old business

of carrying with it the covenant. For was no longer conducted and contin

example, in Bagby & R. Co. v. Rivers ued within the meaning of this cove

(1898) 87 Md. 400, 40 L.R.A. 632, 67 nant.

Am. St. Rep. 357, 40 Atl. 171, the coveSo in Barron v. Collenbaugh (1901)

nant provided merely that the cove. 114 Iowa, 71, 86 N. W. 53, where the

nantor should not engage in a similar covenant not to engage in a competing

business so long as the purchaser con

tinued in such business. This covebusiness was limited to the time dur

nant was held limited in its scope to ing which the purchasers of the partnership were engaged in such busi

the time during which the covenantee ness, it was held that where one of the

was personally engaged in business in

his own behalf. partners sold out his business to the

And in Barron other partners, the identity of the firm

v. Collenbaugh was thereby destroyed and the cove

(1901) 114 Iowa, 71, 86 N. W. 53, a nantor was released from the obliga

very similar covenant not to engage

in a competing business during the tion of his covenant.

time the purchasers of the business, VI. Where sale of property and business a partnership, were engaged in such not contemporaneous.

business, was held limited in its scope A covenant follows the business and to the time during which this partnergood will rather than the property ship was actually engaged in the busiused in carrying on the business to ness, and not to continue after the which the covenant relates. For ex- identity of the partnership was deample in Francisco v. Smith (1894) stroyed by the sale by one of the part143 N. Y. 488, 38 N. E, 980, the origi- ners to the other partners of his innal buyer of a business, good will, etc., terest in the business. the property used in connection there- In Guerand v. Dandelet (1872) 32 with, together with a covenant by the Md. 561, 3 Am. Rep. 164, as part of seller not to engage in a competing the lease of a dyeing and scouring esbusiness, sold the property without tablishment and the sale of the custhe business, and the purchaser subse- tom and good will thereof, a covenant quently resold it. The latter pur- was entered into by the lessor and selchaser later acquired from the origi- ler not at any time thereafter to exernal purchaser an assignment of the cise or conduct the trade or profession business and good will, and he was of dyer or scourer, nor directly or inheld entitled to enforce the covenant. directly to compete with the business The court said in effect that since the of the lessee and purchaser. This right was conceded to the original covenant was held enforceable, notbuyer to sell the property and busi- withstanding that the purchasers enness together and assign the covenant, tered into a partnership and subsethere was nothing in reason or princi- quently one of the partners retired, ple to preclude him from disposing of selling and conveying his interest in the property and place of business, the partnership and property to his copartners. Upon the specific ques- (Eng.) 698, 69 L. J. Ch. N. S. 823, 83 tion as to the effect of the dissolution L. T. N. S. 366, 49 Week. Rep. 158. In of the original partnership it was held this case it appeared that, upon the that such dissolution did not release formation of a partnership to carry on the covenantor from his obligation to a designated business, one of the partobserve the covenant. The court said ners covenanted not to engage in a that the persons continuing the busi- similar business should he withdraw ness were entitled to the benefit of the from the partnership, or should it be covenant both by virtue of the articles terminated by lapse of time, death of of copartnership and the subsequent one of the partners, or in any other assignment by the one partner of his manner; subsequently the business interest therein.

and good will were transferred to a In Davies v. Davies (1887) L. R. 36 corporation, and thereafter upon the Ch. Div. (Eng.) 359, 56 L. J. Ch. N. S. winding up of the corporation, the 962, 58 L. T. N. S. 209, 36 Week. Rep. covenantor repurchased the business 86, the covenant was in effect that the and re-engaged therein. It was held covenantor would not engage in any that he was entitled to continue in the trade, company, or deal which would business as one of the partners to either directly or indirectly affect the whom the original covenant ran, the covenantees. This was held to be a court taking the view that the covepurely personal covenant and limited nant was not personal to the covenantin its scope to the covenantees, and, ee, but passed as an incident to the hence, it would not pass upon the sale successive transfers of the business by the latter of the business and good so that it finally became vested in the will to which the covenant related. covenantor. Cotton, J., pointed out that the cove- In Gompers v. Rochester (1867) 56 nant was not absolute, and it appar- Pa, 194, a covenant not to engage in a ently pointed to the personal benefit competing business was made as an of the covenantees rather than to the incident of sale of the business to a protection of the good will of the busi- partnership composed of three memness to which it related.

bers, two of whom subsequently sold

to the third, and the latter afterwards VIII. Effect of retransfer of covenant to

resold the property to the original selloriginal covenantee or covenantor.

er and released him from the covenant The revesting of the business in the

"so far as he had power to do it.” Unoriginal purchaser also revests in him

der these circumstances it was held in the covenant. This is the holding in

an action for the use of the two memSwanson v. Kirby (1896) 98 Ga. 586,

bers of the firm that the covenantor 26 S. E. 71. The facts were that in

did not violate the covenant by contransferring a business, a covenant

tinuing the business. The court pointwas entered into not to engage in a ed out that there was no covenant to similar business; the business was

prevent the partners selling back to subsequently transferred, and the the covenantor, and since none existed subsequent purchasér again trans

as to them, none existed as to their ferred it, and the latér purchaser assignee; and it is said that the faltransferred a one-half interest therein lacy of a position to the contrary conto the original purchaser. A partner- sisted "in regarding the covenant as ship having been formed between the attaching, or incident to, them persontwo, it was held that the covenant was ally; whereas it was alone an incident enforceable in behalf of this partner- to property which they had parted ship.

with and the business also. It would But the revestment of the business not have been binding for want of a and covenant in the original covenant- consideration, unless as incident to or merges and defeats the covenant, the property sold at the time of the and it is no longer enforceable against relinquishment covenanted for. I the covenantor. This is the holding doubt if any case can be found in in Townsend v. Jarmen (1900] 2 Ch. which such a covenant has been enforced, where it had no effect to pro- public policy, and every principle uptect the business or trade of the cove- on which such contracts are susnantee. Indeed it would be against ·tained.”

A. G. S.

GERRY L. BROOKS

v. VOLUNTEER HARBOR, NO. 4, AMERICAN ASSOCIATION OF

MASTERS, MATES, AND PILOTS.

Massachusetts Supreme Judicial Court - June 18, 1919.

Attorney and client - right to recover for services — right to practise.

An attorney admitted to practise in one state is not precluded from recovering for services performed in another state where he was not admitted, because of a statute imposing a penalty for unlawfully holding oneself out as qualified to practise in the courts of that state, if he informed his clients that he was not entitled to practise in that state and for court proceedings would have to secure local counsel.

[See note on this question beginning on page 1087.]

EXCEPTIONS by defendant to rulings of the Superior Court for Suffolk County (McLaughlin, J.) made during the trial of an action brought to recover for legal services rendered by plaintiff to defendant, which resulted in a verdict for plaintiff. Overruled.

The facts are stated in the opinion of the court.

Mr. Clarence W. Rowley, for defend- Carroll, J., delivered the opinion ant:

of the court: In an action for services as an at

The plaintiff, a member of the torney at law no recovery can be had for services in conducting a case in

bar of the state of Maine but not court rendered by one who is not ad

admitted to practise in the courts mitted to the bar, unless he is specially

of this commonwealth, sued to reauthorized.

cover for legal services rendered to Browne v. Phelps, 211 Mass. 376, the defendant. There was evidence 97 N. E. 762; Ames v. Gilman, 10 Met. that he had acted, to a limited ex239.

tent, as attorney of the National The charge that plaintiff was a mem- Association of Masters, Mates, and ber of the bar of the state of Maine and

Pilots, and while so acting had busithat he rendered certain legal services failed to cover the subject-matter of

ness relations with the defendant, a the requests, and was erroneous.

local harbor or chapter of the NaBrowne v. Phelps, supra; Creditors

tional Association. Nat. Clearing House v. Bannwart, 227 The plaintiff testified that, at the Mass. 579, 116 N. E. 886, Ann. Cas. request of the defendant's secre1918C, 130; Whitney v. Wellesley & B. tary, he came to Boston and met Street R. Co. 197 Mass. 495, 84 N. E. some of its officers, who sought his 95; Maxwell v. Massachusetts Title Ins.

advice respecting a suit brought Co. 206 Mass. 197, 92 N. E. 42.

against the defendant and some of Messrs. Blodgett, Jones, Burnham, &

its members, pending in the supeBingham and Charles L. Favinger, for plaintiff :

rior court for the county of SufPlaintiff is entitled to recover.

folk; that he informed the defendOrdway v. Newburyport, 230 Mass. ant he was not admitted to practise 306, 119 N. E. 863.

in the courts of this state and it