Checket-Columbia Co. v. Lipman

• Decision Date: 11 February 1953
• Docket Number: CHECKET-COLUMBIA,No. 76,76
• Citation: 201 Md. 494,94 A.2d 433
• Parties: CO. v. LIPMAN et al.
• Court: Maryland Court of Appeals

Page 494

201 Md. 494

94 A.2d 433

CHECKET-COLUMBIA CO. v. LIPMAN et al.

No. 76.

Court of Appeals of Maryland.

Feb. 11, 1953.

Solomon Liss, Baltimore, for appellant.

Ellis Peregoff, Baltimore (Gilbert I. Friedel, Baltimore, on the brief), for appellees.

Before SOBELOFF, C. J., and DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.

DELAPLAINE, Judge.

This suit was instituted by Checket-Columbia Company, a Maryland corporation operating three retail stores in Baltimore, to enjoin Maurice S. Lipman and his co-conspirators from violating a covenant that he would not engage in a competing business 'within a radius of ten city blocks,' and to recover damages for violations of the covenant.

Complainant was incorporated in August, 1949, when the stockholders of two corporations--Checket Company, which operated a retail furniture store at 18 North Howard Street, and Columbia Sales Company, which operated two furniture and clothing stores, one at 1642 Pennsylvania Avenue, the other at 561 1/2 North Gay Street--entered into an agreement to dissolve them and form a new corporation. Lipman owned the capital stock of Checket Company, while Jacob, Max and Joseph Gersh and Abraham J. Cohen owned the capital stock of Columbia Sales Company. Lipman transferred the assets of Checket Company to complainant for $41,720.44, while the Gersh brothers and Cohen transferred the capital stock of Columbia Sales Company to complainant for $32,157.44. Joseph Gersh was elected president of the corporation, and Lipman was elected treasurer.

Attached to the agreement was a bill of sale executed by Lipman and complainant's president in compliance with the Sales in Bulk Act. The covenant in controversy was included in the bill of sale. Lipman recites in the bill of sale that he sells to complainant all the listed assets and 'all other fixtures not specifically mentioned * * * but used in the conduct of the retail furnishing store located at 18 North Noward Street.' Then appears the following covenant: 'I, Maurice S. Lipman, do further agree that I will not engage, either directly or indirectly, as owner, agent, servant or employee, either gratuitously or for hire, in a like or competing business within a radius of ten city blocks for a period of ten years, except as an officer, agent or employee of the Checket-Columbia Company.'

Since August, 1949, complainant has been operating the three stores. Lipman, however, became dissatisfied with the operation of the business, and on December 1, 1950, he sold all his capital stock in the company to his four associates for $20,000.

In January, 1951, Sidney Turchin, one of complainant's employees in its store at 1642 Pennsylvania Avenue, left its employ and entered the employ of Stanley Macklin in the Greer Dress Shop at 1644 Pennsylvania Avenue. In September Macklin sold the store to Lipman. Several weeks later Lipman invited Turchin and also Morris Rombro and Harold Oreman, who were then employed by complainant in the store on North Howard Street, to join with him in forming a corporation to operate the business. Accordingly on September 26 Lipman, Turchin, Rombro and Oreman incorporated the Shirl Company. On the next day Rombro and Oreman left the employ of complainant and started to work for the Shirl Company.

Complainant alleged that Lipman conspired with Rombro and Oreman while they were still employed by it to enter into competition with it in violation of the covenant. It alleged that he arranged for the organization of the Shirl Company and its occupancy of the store on Pennsylvania Avenue next door to complainant's store. It also alleged that Rombro and Oreman made disparaging remarks about it and its merchandise and attempted to dissuade customers from entering its store. It prayed the Court of enjoin defendants from engaging in a competitive business within a radius of ten city blocks from each of complainant's stores for the period of ten years; to enjoin defendants from continuing their malicious and unlawful competitive methods; to require defendants to make an accounting of the profits of the Shirl Company; and to award damages for the breach of covenant.

The chancellor passed a decree (1) enjoining Lipman from engaging directly or indirectly in any business similar to that formerly conducted by the Checket Company within a radius of ten blocks from 18 North Howard Street for a period of ten years from August 1, 1949; (2) similarly enjoining the Shirl Company as long as Lipman has any interest in it; (3) similarly enjoining Turchin, Rombro and Oreman as long as they are employed by Lipman or by the Shirl Company as long as Lipman has any interest in it; and (4) granting complainant leave to apply to the Court to refer the case to an auditor to take proof to determine what damages have been sustained by complainant as a result of the breach of covenant. Complainant and all defendants appealed here from the decree.

We affirm the first paragraph of the decree enjoining Lipman from engaging in business in competition with complainant within a radius of ten blocks from 18 North Howard Street. While it is true that he had not opened a store within that area, there was evidence that he had directly or indirectly solicited business within that area. In some States, as in New Jersey, the courts have followed the rule established in England in Trego v. Hunt, 65 L.J.Ch. 1, that a person who has sold the good will of his business may, unless he has otherwise covenanted, set up a rival business but he may not solicit the custom of those who previously dealt with him. Snyder Pasteurized Milk Co. v. Burton, 80 N.J.Eq. 185, 83 A. 907. In 1912 the Maryland Court of Appeals made the distinction in Brown v. Benzinger, 118 Md. 29, 40, 84 A. 79, that where there is a sale by a physician or other professional man of his business, an injunction may be issued to prevent him from setting up in the same profession in competition with the buyer, even though there is no express covenant to that effect; but where there is a sale of a mercantile establishment, an injunction may not be issued for such a purpose, unless the seller made an express covenant that he would not enter into competition with the buyer.

The case before us presents an express covenant of the seller of a business that he will not engage in a competing business within a certain area. The importance of enabling the owner of a business to dispose of it in such a way as to secure to the purchaser the good will of the business, by...