Case ID: ill-app_110/html/0182-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Presiding Justice Freeman", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

McFell Electric and Telephone Company et al. v. McFell Electric Co.
    1. Trade Names—Stockholder Who Has Given His Name to a Corporation is Estopped to Question its Right to Use the Same upon Transferring His Stock. —Where a stockholder who has conferred on a corporation the right to use his name in the firm name, afterward sells his stock in such corporation for a valuable and adequate consideration, he can not thereafter resume the use of his own name in carrying on the same business during the lifetime of the corporation, in such a way as to mislead the public, but is equitably estopped from questioning the right of the corporation to the use of its corporate name. ’
    2. Same—Court of Equity Will Give Relief in Such Cases.—Where a person sets up business under such a designation as is calculated to lead, and does lead other people to suppose that his business is the business of another person, a court of equity will give relief.
    3. Same—Upon What Grounds Relief is Given.—Relief in such cases is given, not upon the ground of a property right in a name, but because the public are entitled to protection from being misled to trade with parties not known to them, under the impression that they are doing business with an established firm or person with whom they have been accustomed to deal.
    Bill for am Injunction.—Appeal from the Superior Court of Cook County; the Hon. Axel Chytraus, Judge presiding. Heard in the Branch Appellate Court at the October term, 1902.
    Affirmed.
    Opinion filed October 30, 1903.
    Appellee filed its bill of complaint and obtained an injunction restraining appellant and two of its employes from doing business as electricians, etc., under the name of the “ McFell Electric and Telephone Company,” or under any other name so similar as to be misleading to the public.
    It appears that in December, 1890, a corporation was created under the name “ The McFell Electric Company,” to carry on the usual business of electricians, the duration of the corporation to be ten years. The incorporators principally interested were Judson McFell and William J. McWade. The company carried on its business from the time of its creation until the expiration of its charter in December, 1900. In April, 1900, McWade had become the owner of McFell’s interest in the company and its business. The latter, however, continued in the company’s service as a salaried employe. The business was carried on as before under the same name after the expiration of the charter in December, 1900, and in April following an application for a license to form a new corporation under the - name “ McFell Electric Company,” appellee herein, was forwarded to the secretary of state. The license was duly issued and a certificate of incorporation was recorded May 24, 1901. The application for said license was signed and acknowledged April 16, 1901, by Judson McFell as one of the incorporators, but shortly after signing the application said McFell left his employment with the said company and began business for himself in the same line of work. Within a few days thereafter, May 16,1901, he made application for a license to form a corporation under the name 41 McFell Electric and Telephone Company,” and a certificate of incorporation of such company, appellant herein, was recorded June 16,1901. Thereupon McFell proceeded to carry on business in the name of the new company, in rivalry and competition with appellee.
    Appellee’s business had been conducted for about six years preceding the expiration of the original charter and is still conducted in the Marquette Building, Chicago. When appellant McFell quit his former employment apd obtained a charter for the appellant corporation, a place of business for the latter was secured in the same building upon the floor below that occupied by appellee, access to which was had by the same stairway. The names of the two corporations appeared thereafter in close relation upon the same bulletin board. Both companies were carrying on the same kind of business.
    The appellant corporation filed a cross-bill in which it prayed for an injunction against appellee. The prayer of the cross- bill was denied and that bill dismissed for want of equity.
    William B. Moss, attorney for appellants.
    Except by statute, the stockholders of a corporation which has ceased to exist, have no right to the name of the corporation. Where the ñame of a person is a part of the corporate name, this right to the name would revert to him and no one could use it without his consent. Starr & Curtis Rev. Stat., Chapter 32, Section 28a; Frazer & Frazer Lubricator Co., 121 Ill. 147; Hazelton Boiler Co. v. Hazelton Tripod Boiler Co., 142 Ill. 494; Horton Mfg. Co. v. Horton Mfg. Co., 18 Fed. Rep. 817.
    If a person, without consideration, permit another to use his name in his business, such other person will be deemed to have but a mere license to use said name, which license is revocable at pleasure. McGowan Brothers Pump & Machine Co. v. McGowan, 2 Cin. Sup. Ct. 313; 22 Ohio St. 370; Fite v. Dorman, 57 S. W. Rep. 129; Horton Mfg. Co. v. Horton Mfg. Co., 18 Fed. Rep. 817; Bagby & Rivers Furniture Co. v. Rivers, 40 Atl. Rep. 171.
    The doctrine of trade-mark cases has no application here, as no goods were manufactured by either corporation. Hazelton Boiler Co. v. Hazelton Tripod Boiler Co., 142 Ill. 507; Browne on Trade-mark, Sec. 91.
    Arnott Stubblefield, attorney for appellee.
    Defendants’ act in choosing the same name, with a trifling addition, the same building, the same portion of the building, the same bulletin-board on the same stairway between the floors, to transact the same sort of business, causes confusion, as it must have been designed to do, and called for the relief granted by the decree. International Committee of Young Women’s Christian Associations v. Young Women’s Christian Association of Chicago, 194 Ill. 194; VanAuken Company v. VanAuken Steam Specialty Co., 57 Ill. App. 240; Merchants’ Detective Assn. v. Detective Mercantile Agency, 25 Ill. App. 250; Mossler v. Jacobs, 66 Ill. App. 571; Nokes v. Mueller, 72 Ill. App. 431.
    In answer to the contention that inasmuch as these corporations do not sell an article of merchandise, the complainant is not entitled to the relief sought, the court will note the character of enterprise involved in Merchants’ Detective Assn. v. Detective Mercantile Agency, 25 Ill. App. 250, and in Int. Com. Y. W. C. A. v. Y. W. C. A., 194 Ill. 194.
   Mr. Presiding Justice Freeman

delivered the opinion of the court.

Appellants insist that the court erred in finding the equities with appellee and granting it the relief prayed for in the original bill. The contention seems to be that upon the expiration of the charter of the original corporation having substantially the same name as that adopted byappellee, the right to use the name reverted to Judson McFell, who was one of its original incorporators, and who had previously sold out to McWade, another of its incorporators, all his stock in the company and all interest in its business. The transfer of McFelPs stock to McWade occurred in March, 1900. When, with McFelPs consent, he being one of the incorporators and stockholders, the original company was created with the name “The McFell Electric Company,” there can be no doubt that he conferred on such corporation the right to use his name in that manner; and when he sold out his stock in the company and his interest in its business to McWade for a valuable consideration, as he did, he could not afterward resume the use even of his own name in.carrying on the same business during the lifetime of the corporation, in such a way as to mislead the public. By the sale and transfer of his stock in the company for a valuable and adequate consideration he equitably estopped himself from questioning its right to the use of its corporate name. See Frazer v. Frazer Lubricator Co., 121 Ill. 147-157. Under the statute, moreover, the said corporation had the exclusive privilege of becoming re-incorporated under the same name within thirty days from and after the expiration of its original-charter. (R. S., Chap. 32, Sec. 28½.) It did not avail itself of this right, but its stockholders did continue to carry on the business with McFelPs consent in the same name, he remaining in their employment. Later he joined with two of the stockholders in making application for a license to enable them to obtain a new charter under substantially the same name, the only difference being an omission of the article “the” and an abbreviation of the word “company.” He appears thus to have recognized the existence of an equitable right in the stockholders of the old company to continue to do business in, and for that purpose to re-incorporate under, the old name, for the use of which he had received a valuable consideration in the purchase price paid for his stock and his interest in the business.

It is said, however, that before the application for the new license was forwarded to the secretary of state he revoked bis consent. As to that the testimony is conflicting. The alleged revocation is by no 'means established by the evidence. McFell himself does not even now seek to interfere with the use by appellee of its corporate name. .

It appears that after signing and acknowledging the application for a license to re-incorporate appellee’s business under substantially the old name, McFell concluded to give up his salaried position in its service, and go into business for himself. Reaching this conclusion he promptly took steps to incorporate under the name which he has selected for the appellant corporation. Obtaining its charter, the name indicating that its business was the same as appellee’s, it was located in the same building, in close proximity to the place where appellee’s business had been conducted for more than six years. That the conditions were such as to deceive the public and lead persons to suppose they were dealing with appellee when in fact they were employing appellant, is, we think, apparent. The name of the new company was placed on the bulletin-board of the building immediately above that of appellee, so as to readily give the impression that they were one and the same company. The circumstances justify the inference that it was for' some such purpose the location was selected. This is not open and honest competition. It has every appearance of an attempt to mislead the public and-to obtain by deception the benefit of the patronage and clientage enjoyed by appellee. Courts of equity give relief against such violations of the rules of honesty and fair dealing. See Merchants’ Detective Ass’n v. Detective Mercantile Agency, 25 Ill. App. 250, 259. If appellants’ new business was established and conducted with the fraudulent and wrongful intention of attracting to themselves the custom intended for appellee, this is clearly a fraud upon the rights of the latter. Allegretti v. Chocolate Cream Co., 177 Ill. 129-133. In Imperial Mfg. Co. v. Schwartz, 105 Ill. App. 525-529, we said: “The public are entitled to protection from being misled to trade with parties not known to them, under the impression that they are doing business with an established firm or person with whom they have been accustomed to deal.” What is said in Internat’l Com. Y. W. C. A. v. Y. W. C. A., 194 Ill. on page 200, is applicable in this case; namely,that though there may be no property in a name, the principle in these cases is that it is a fraud on a person who has an established trade and carries it on under a given name, that another person should assume the same name with a slight alteration, so as to induce people to deal with him in the belief that they are dealing with those who have given a reputation to the name in the particular line of business.

The judgment of the Superior Court must be affirmed.