tract which neither they nor the corporation had ever entered into, and of which they may not even have had notice. Such a result could only be justified on the ground of bad faith in the creation of the company. To thus hamper a bona fide corporation, would be inequitable, and have the effect of establishing a doctrine fraught with much danger to corporate rights, powers and property.

Question 638: (1) If A in selling his business to B, agrees with B that he will not compete, and then forms or enters a competing corporation, is he violating his contract?

(2) What does the Court say would be necessary to put this case in line with the case of Beal v. Chase?

(Note: A contract that the sellers of a business will not compete with the buyers ought to be so drawn as to preclude the organization of a corporation by the sellers to engage in competition. The above case, it seems to the editor, may well be questioned. It looks like an obvious evasion of the agreement not to compete.)

§ 641. (Corporations, Sec. 5.) Corporations distinguished from partnerships.

(Note: See Sec. 568 supra.)

§ 642. (Corporations, Sec. 6.) Reasons for incorpora tions of business companies.

(Note: The main reasons for incorporation may be tabulated as follows:

1. To secure limitation of personal liability.

2. To avoid liability for acts of associates.

3. To effect a permanent organization unaffected by death or transfer.

4. To obtain capital and credit.

5. To bring about a more convenient method of holding property, entering into contracts, suing and being sued, etc.)

§ 643. (Corporations, Sec. 7.) Kinds of corporations.

(Note: Corporations may be classified as follows:

(A) Public corporations, or those which are founded by the government for public purposes.

(1) Municipal corporations, as cities and towns. (2) Quasi-municipal, as counties, boards of education, park boards, etc.

(B) Private corporations, or those which are owned by private individuals, even though of a public nature. (1) Stock corporations, or those which are or

ganized for purposes of financial profit. Here we place corporations of a strictly private nature as well as railroads, and all public service corporations having privately owned capital stock.

(2) Non-stock corporations, or those not organized for private profit.

(a) Religious corporations.

(b) Charitable corporations. Lodges,

institutes of learning, pleasure clubs, etc.)

Question 638: A partnership must be for financial profit; must a corporation? Is a railroad a private or public corporation?

§ 644. (Corporations, Sec. 8.) Purposes for which corporations may be formed.

(See the classification in the last section.)

Case 639. Re Co-Operative Law Co., 198 N. Y. 479. Facts: Proceedings to determine whether the CoOperative Law Company was legally formed as a corporation to engage in the practice of law.

Point Involved: Whether the practice of law is a legitimate object of incorporation; generally, of the objects for which companies may be incorporated.

VANN, J.: The practice of law is not a business open to all, but a personal right, limited to a few persons of good moral character, with special qualifications ascertained and certified after a long course of study, both general and professional, and a thorough examination by a state board appointed for that purpose.

"The right to practice law is in the nature of a franchise from the state conferred only for merit. It cannot be assigned or inherited, but must be earned by hard study and good conduct. It is attested by a certificate of the Supreme Court and is protected by registration. No one can practice law unless he has taken an oath of office and has become an officer of the court, subject to its discipline, liable to punishment for contempt in violating his duties as such and to suspension or removal. It is not a lawful business except for members of the bar who have complied with all the conditions required by statute and the rules of the courts. As these conditions cannot be performed by a corporation, it follows that the practice of law is not a lawful business for a corporation to engage in. As it cannot practice law directly, it cannot indirectly by employing competent lawyers to practice for it, as that would be an evasion which the law will not tolerate. Quando aliquid prohibetur ex directo, prohibetur et per obliquim. (Co. Lit. 223.)

"A corporation can neither practice law nor hire lawyers to carry on the business of practicing law for it any more than it can practice medicine or dentistry by hiring doctors or dentists to act for it. (People v. Woodbury Dermatological Institute, 192 N. Y. 454; Hannon v. Siegel-Cooper Co., 167 N. Y. 244, 246.) The legislature in authorizing the formation of corporations to carry on 'any lawful business' did not intend to include the work of the learned professions. Business in its ordinary sense was aimed at, not the business or calling of members of the great professions, which for time out of mind have been given exclusive rights and subjected to peculiar responsibilities.

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"These remarks are not intended to cover title guaranty companies, organized under the insurance law and authorized to examine titles, guarantee the correctness of searches and insure against loss by reason of defective titles. (Sec. 170.) The searching of titles is open to all and guaranty companies may employ either lawyers or laymen to transact their business. It is not claimed that they prosecute or defend the rights of others, but only their own, including such as the contract to indemnify gives them."

Question 639: (1) Can a corporation be organized to practice law? Why?

(2) Can a corporation be organized to examine titles to real estate and issue guarantee policies, etc.?

(3) Do you think it is practicing law for a trust company to hire lawyers to draw wills for patrons?!

CHAPTER 80

PRELIMINARY OBSERVATIONS IN ORGANIZA

TION OF CORPORATIONS

§ 645. Whether to incorporate.

§ 646. Where to incorporate.

§ 647.

Adoption of name.

§ 648. Questions of financing.

§ 649. Compliance with blue sky laws.

§§ 645 to 649. (Corporations, Secs. 9 to 13.)

(Note: See general discussion Chapter 2 in Commercial Law Series, Volume on Corporations.)