Opinion
6 Div. 650.
April 18, 1918. Rehearing Denied May 30, 1918.
Appeal from Circuit Court, Jefferson County; Hugh A. Locke, Judge.
Allen, Bell Sadler, of Birmingham, for appellant. B. J. Dryer and A. G. E. D. Smith, all of Birmingham, for appellee.
The adjudicated cases dealing with the particular phase of unfair competition here involved are quite numerous, and the general principles of the law seem to be well settled, though their application to concrete instances is often not free from difficulty.
We think it is quite clear that the complainant, by its purchase of the assets, name, and good will of the bankrupt corporation, acquired the undoubted right of that concern to the use of its corporate name, including the word "McVay" as an essential element thereof, and as a conduit for the passage of the good will of the original business, with which it was indissolubly connected. As remarked by an able writer on this subject, "corporations may acquire good will, just as natural persons, and an assignee of the corporate good will and business may use the old corporate name, either with or without an incorporation." Hopkins on Trade-Marks, etc., 221. Nor was that right lost or impaired by the formation of a new corporation as the successor of the old, with a modification of its original name — the main distinctive features of which were fully retained.
As a general rule, every person has a natural right to the use of his own name for the designation of his business; and when he does this honestly and fairly, any injury that may result to another, doing business under the same or a similar name, is regarded as damnum absque injuria, for which there is no legal remedy. Singer Mfg. Co. v. June Mfg. Co., 163 U.S. 169, 16 Sup. Ct. 1002, 41 L.Ed. 118; Higgins Co. v. Higgins Soap Co., 144 N.Y. 462, 39 N.E. 490, 27 L.R.A. 42, 43 Am. St. Rep. 769; Thaddeus Davids Co. v. Davids, 233 U.S. 461, 34 Sup. Ct. 648, 58 L.Ed. 1046, Ann. Cas. 1915B, 322, note, 352-358; Hopkins on Trade-Marks, etc., § 77; Nims on Unfair Competition, § 68. What precautions to distinguish the newer business and its goods or products from the older, so as to prevent deception and injury, may be required to meet the demands of honesty and fair dealing in the case of individuals, we need not now consider, for the case before us is materially different.
Here both parties are corporations, and the respondent corporation has deliberately chosen a trade-name in which appears the name of G. B. McVay, Sr., which, though without the initials, was and is an essential element in the trade-name and good will of complainant and its predecessor; and G. B. McVay, Sr., a promoter and stockholder of the original corporation, has no interest in nor connection with the respondent corporation. It appears also that G. B. McVay, Jr., the son, though he has been made president of the respondent corporation, has a purely nominal interest in the concern, in fact, only $10 out of $5,000, or one five-hundredth part.
In a very comprehensive and valuable note to the case of Thaddeus Davids Co. v. Davids, 233 U.S. 461, 34 Sup. Ct. 648, 58 L.Ed. 1046, Ann. Cas. 1915B, 322, 353, the editor summarizes the law as follows:
"It is undoubtedly true, as a general proposition, that a person has a right to use his own name in connection with any business which he honestly desires to carry on. But where a personal name has become associated in the minds of the public with certain goods or a particular business, it is the duty of a person of the same or a similar name, subsequently engaging in the same business or manufacturing or dealing in like goods, to take such affirmative steps as may be necessary to prevent his goods or business from becoming confused with the business or goods of the established trader. The same principles forbid a corporation to adopt a name so similar to that of an existing corporation as to deceive the public and permit it to deal on the reputation of the existing corporation."
Scores of illustrations appear in the cited cases. See, also, the note to Martell v. St. Francis Hotel Co., 16 Ann. Cas. 596.
In Hopkins on Trade-Names, etc., § 80, the author says:
"The general rule governing the supervision of equity over the names of corporations has been comprehensively stated as follows: 'In respect to corporate names, an injunction lies to restrain the simulation and use by one corporation of the name of a prior corporation which tends to create confusion, and to enable the later corporation to obtain, by reason of the similarity of names, the business of the prior one. The courts interfere in these cases * * * to prevent fraud, actual or constructive.' " Higgins Co. v. Higgins Soap Co., 144 N.Y. 462, 39 N.E. 490, 27 L.R.A. 42, 43 Am. St. Rep. 769; Martell v. St. Francis Hotel Co., 51 Wn. 375, 98 P. 1116, 16 Ann. Cas. 563, and note.
In Nims on Unfair Competition, § 90, the author observes:
"One of the most common ways of naming a corporation is to use the personal name of one or more of the incorporators. The rules applicable to it are practically the same as those relating to the use of personal names in other trade-names. * * * There is, however, this difference, as has already been observed, and it is a substantial one. As the law now stands, when a natural person starts business under his own name, a duty rests upon him to so use that name as to prevent confusion between his house and goods and the house and goods of any other person by the same family name in the same business. When, however, a person causes the organization of a corporation, a much greater burden and duty rests upon him. (Italics ours.) If his use of his surname as a part of the corporate name will cause confusion between his new corporation and its rivals, he may not use his name in the corporate name at all."
The same author says further (page 175):
"The sum of the whole matter is this: If a plaintiff can demonstrate that the defendant's use of its corporate name is causing unfair competition as against the plaintiff, the defendant must change its name, even though it contain the personal name of an incorporator, and inasmuch as an affirmative duty to differentiate itself from the plaintiff rests upon defendant, the failure so to do is an evidence of fraud."
And again (page 179):
"It has been said that the very fact that a body of associates organizing a company take, as part of the name of the company, the name of one of their number which is the same or nearly the same as that of some rival who has an established business, in most cases gives rise to a presumption of fraud. The presumption may be rebutted; but the fact remains that despite the laudable desire of a promoter or incorporator to make his own name a part of the company, despite his common-law right to use his own name as he will, the trader who enters a court of equity with the greatest claim on its aid is he who has striven to differentiate his goods and his company as much as possible from all rivals, and to sell his goods on their merits, and advertise himself and his house in as individual a manner as possible."
In L. Martin Co. v. L. Martin, etc., Co., 75 N.J. Eq. 39, 71 A. 409, the New Jersey Court deal with this subject very pointedly, and say:
"I think we have got beyond the notion, if it ever prevailed, that a man has an absolute right to use his name in his business, shutting his eyes to the inevitable effect of such use to deceive the public generally, and to injure some other dealer in the market. The maxim. 'Sic utere tuo ut alienum non lædas,' applies to everything a man has, including his name. Confusion seems to have sometimes arisen from the failure to recognize the difference between the name with which a man finds himself incumbered and perhaps cursed when embarking in business, and which perhaps to a very large extent he is practically obliged to use in such business, with the name of a corporation which he creates for the purpose of carrying on his business. He is not responsible for his individual name — had no chance in its selection; he is wholly responsible for the corporate name, having had a wide field within which to make any selection as he might see fit."
With respect to the use by respondent of the name of G. B. McVay, Sr., as part of its corporate name, the bill shows clearly that it is without justification, calculated to deceive the public, and in fraud of the rights of complainant in the premises. It is no sufficient answer to this to point to the differentiation of the corporate names. The similarity is prima facie sufficient to deceive the public and appropriate more or less of complainant's trade; and its adoption by respondent is, under the circumstances, sufficient evidence of respondent's belief in its efficacy for that purpose.
In the language of Bradley, J., in Celluloid Mfg. Co. v. Cellonite Mfg. Co. (C. C.) 32 Fed. 94:
"The defendant's name was of its own choosing, and if an unlawful imitation of complainant's is subject to the same rules of law as if it were the name of an unincorporated firm or company. It is not identical with the complainant's name. That would be too gross an invasion of the complainant's right. Similarity, not identity, is the usual recourse when one party seeks to benefit himself by the good name of another. (Italics ours.)"
And, as remarked by Mr. Nims:
"The choice of a name colorably similar to that used by a competitor is evidence of fraud, especially if it is likely that the new corporation will profit by the confusion that will result from the similarity between its name and that of a competitor." Nims on Unfair Competition, p. 163.
We think the bill alleges facts which support the conclusion of actual fraud. But the better view is that actual fraud in unfair competition need not be alleged or proved, and that constructive fraud is sufficient, and this is the rule in this state. Grand Lodge K. P. of N. S. America v. Grand Lodge K. P., 174 Ala. 395, 56 So. 963; Boston Shoe Shop v. McBroom Shoe Shop, 196 Ala. 262, 72 So. 102. Nor is it necessary to show, in a bill for injunctive relief only, that any persons have been actually deceived. Boston Shoe Shop v. McBroom Shoe Shop, supra. We have stated that the allegations of the bill show that respondent's use of the name of G. B. McVay in its corporate or trade-name is unfair competition, against which injunctive relief should be granted. It follows that the demurrer to the bill of complaint was properly overruled.
We may as well add, also, that such use by respondent of the name "McVay," even if qualified by the word "Junior" affixed thereto — the name having been voluntarily given to the older corporation by its senior owner, and having acquired a special and secondary significance in its relation to seeds and plants in that business in Birmingham and the neighboring territory — would equally offend against fair trade, and entitle complainant to the same injunctive relief. This is especially true in view of the merely nominal character of McVay, Jr.'s, connection with respondent, which strengthens the conclusion that the use of the name is but a colorable device to accomplish an unfair, if not a fraudulent, purpose to appropriate the reputation, and with it the trade, of the complainant company.
Let the decree of the circuit court be affirmed.
Affirmed.
ANDERSON, C. J., and MAYFIELD and THOMAS, JJ., concur.