# FILED
October 31, 19 97 Cecil W. Crowson Ap pellate Cou rt Clerk IN THE COU RT OF A PPEA LS OF TENN ESSEE WESTERN SECTION AT NA SHVILLE
VOLUNTEERBEER, INC ., ) ) Plaintiff/Appellant, ) Dav idson Chan cery N o. 96-13-III ) VS. ) A ppeal No. 01A 01-9703-CH- 00126 ) ) RA LPH W. JOHNS ON, JR., ) ) Defendant/Appellee. )
APPEAL FROM THE CH ANCERY COU RT OF D AVIDSO N COU NTY

AT NASHVILLE, TENN ESSEE THE HONORABLE ROBERT S. BRA NDT, CHANC ELLOR

G. KLINE PR ESTON, IV Nashvil le, Tennessee Attorney for Appellant

LAURENCE M. McMILLAN, JR. CU NN IN GH AM, MI TC HE LL , H IC KS & M cM IL LAN Clarksv ille, Tennessee Attorney for Appellee

REVERSED A ND REMA NDED

ALAN E. HIGHERS , J.

CONCUR: W. FRA NK CRA

WFORD, P.J., W.S. DAVID R. FA RMER, J.2

Plai ntiff Volunteer Beer, Inc. (VBI), appe als t he trial c ourt’s final j udgment dismis sing its claim for fraudulen t registration of trademark against De fe n d a n t/ A p p e l l e e R a l p h W. Johnson, Jr. The trial cour t granted summar

y judgment

to Johnson based on the court’s conclusion that Johnson did not intend to dec eive anyone when he made a false statement on his trademark application. We reverse because we conclude that Johnson’s af fidavit regardinghis state of mind at the time he compl eted the tradem ar k applicatio n was an insufficient basis

upon which to grant summar y judgment.

This lawsuit began in January 1996, when VBI filed a complaint against Joh nson seeking declaratory

and other rel ief. Specificall y, VBI’s complaint a l leged that Joh nson submitted an application to register the tradema rk Volunteer Beer t o th e Tennessee Secretaryof State’s off ice in August 1989; that Johnso n falsely represented on his application that the mark was first used i n Tennessee on A ugust 18, 1989, the date of application; that the trad emark Volunteer Beer, in fact, never w as used in Tennessee by Johnson; that Johnson fraud ulentlyprocured registration of such tradem ark; and that VBI
was the rightful owner

of the Volunteer Beer

mark. The complai nt sought cancel lation of Johnson’s registr

ation of the trademar k, a declarat ion thatVBI was t he lawful reg istrant of the mark, and an award of damag es pursuant to s ection 47-25-510 of Tennessee’ s Model Trademark Act.

John son filed an answer and counterc laim in w hich he sought damages for trademark infringement, a n injunction against VBI’s further use of the Volunteer Beer mark, and other reli ef.

VBI subsequently

filed a motion forsummary judg ment contending, inter alia , that the undisputed facts s howed that Joh nson fraudulently obtained reg istrati on of t he trademark Volunt eer Beer.

Johnson also moved for summary judgment. Johnson’s answers to interrog atories indicated that he had neither brewed Vol unteer Beer nor made any sales

of Volunteer Beer3

in Tennessee. Accor

dingly , in opposing VBI’s motion for summary judg ment, Johnson conceded that his registration of the Volunte er Beer mark was subject to cance llatio n because Johnson never had sold goods

under the mark. To rebut VBI’s claim that he had fraudulently register

ed the Volunteer B eer trademar k, however, Johnson filed a sworn affidavit in w hich he explained w hy he wr ote August 18, 1989, as the date of first use on his trademark

application: 2. In 1989, I submitted an app l ication to the Tennessee Secretary

of St a te for registration of the ma rk VOLUN TE E R BEER for use on Class 48 goods, malt beverages

and liquors. Originally , whe n I completed the blanks on the application fo rm, I left blank the date of first use on the applicati on. . . . 3. Upon my inqui ry reg arding w hat was mea n t by the date offirst use of the VO LUNTEER BEER mar k, a female employee of the Ten nessee Secretary of State’s of fice instructed me to fill in the app lication date of August 18, 1989, this being the date I made this inq uiry (which was in person at the Tennessee Secreta ry of State’s office). Based on this instruction , I wrote August 18, 1989, on the application as the date of first use. .

. .

. . . . 5. I am not an attorney, nor wasI represented by an attorney durin g the appli catio n and regis trati on of thema r k VOLUNTEER BEER. I wa s unfami liar with the pr ovisions of Tennessee’s trademark law and statutes at t he ti me that I submitted my application. In connec tion wit h the applicati on process, I made no representations or declarations, verball y or in writi ng, that were false or fraudulent, nor was it my intenti on to mislead anyone in any way. To the contrary , in statingthe date of my first useof the mark VOLUN TEER BEER , I act ed upon the advice of the representati ve of the Tennessee Secretary

of State’s office.
Based on the undisp uted evidence that Johnson never used the trademark within the meaning of secti on 47-25-501(b) (1) of the Model Trademar k Act, the tr ial court ent ered
a judgment canceling Johnson’s regist ration o f the mark Voluntee r Beer. The trial court further ruled that VBI had priorit y in all of its trademar ks bearing the Volunteer Beer mark byvirtue of VBI’s prior use of such mark. Lastly, the trial court dismissed all of Johnson’s counterclaims

.4

In its final judgment, the trial court dismissed VBI’s remainin g cla im f or damages under section 47-25- 510 of the Model Tradem ark Act based on VBI’s failure to submit any proof that Johnson made a false or frau dulent misrepresentation in hi s August 1989 trademark appli cation. The tri al court rea soned:

The Model Trademark Act establishe s liability against one who procur

es the filing or regi stration of a[trademark] “ by knowingly

making any

false or fraudulent

[representati on].” [T.C.A.] § 47-25-510. The as serted misrep resentation i s the insertion of “8-18-89" on theform where i t asks for the date the applicant first used the m ark. Johnson’s version of how that happened is undisputed. He typed in t he i nformation requested by the fil l-in-the- blank form and took it to the Secretary of State’s office. He did not fil l out the “first used” blank as he was unsu re what “ used” meant. When he asked someone i n t he Secretary of State’s office what was meant by “first used,” Johnson was instructed to insert the then current dat e. He did so. Use, according to the Act, means that the goods were sold or otherw ise distri buted. [T.C.A.] § 47-25-50 1(b )(1). Johnson’s version of the beer had never been sold or distributed, so when he fil led in the blank with a date, he made a false statement. The q uestion is .

. . whe ther the false statement [was ] made “know ingly. ” The Model Trademark Act does no t describe “knowing ly.”Courts defini ng the term haveusually done so in the c ontext o f criminal statutes that req uire that acts be committed “know ingly ” before they constitute cr imes. In that context, knowingly

means that the pers on charged pos sessed facts which made him aware he could not lawfully do the act charged. State v. Summers , 692 S.W.2d 439, 446 (Tenn. Crim. App. 1985). The damage section of the Model Trademark Act is captioned “fra udulent regi stration” an d refers to “any other fraudulentmeans.” This i mplies tha t for a false statement to have been mad e kno wingly, it must have been done w ith so me intent to deceiv

e someone. There is no evi dence thatJohnson’s mis representation that he had used the [tr ademark] was

done with a nyintent to dece ive anyone. To th e con trary, he did not know what to put down and only followed the instruction or s uggesti on of someone in the Secretaryof Sta te’s office. Johnso n was obviouslyuncertain w hat “used” meant. His misrepresentation made out of ignorance was not made knowing ly.

On appeal, the sol e issue for thi s court’s consideration i s wheth er th e trial court erred in dismiss ing VB I’s cla im for fraudulent re gistrati on of trademark under section 47-25-510 of the Mode l Trademark Act

.5

We first address

the trial court’s inter pretation of the st atut oryrequirements of section 47-25- 510. That section provides that

Any person who , on behalf of such pers on or any oth er person, procures the filing or r egistrati on of any

mark in the office of the secretary of state under the pr ovisions hereof, by knowingly

making any false or frau dulent represe ntation or declaration, verball y or in w riting, or by any other fraudulent means, shall be liable to pay all damages sustained in consequence of such filing or registr ation, to be recovered by or on behalf of the par t y injured thereby i n any court of competent juris diction. T.C.A. § 47-25-510 (198 8).

Other states haveadopted vir tually theidentical pr ovision fro m the Model Trademark Act. See Gragg v . Rhoney , 884 P.2d 443, 446-47 (Kan. Ct. App. 1994) (citing K.S.A. 81-120); Vanc e v. Huff , 568 So. 2d 745, 750- 51 (Ala. 1990) (citing Ala. Code 1975, § 8-12-15); Brewe r v. Egyptian Sports, Inc. , 462 N.E.2d 520, 5 25 (Ill. App. Ct. 1984) ( citing Ill. Rev. Stat. 1981, ch. 40, par . 18). Our re search, however, has r evealed only

one decision in which a state court int erpreted the statute’s requirement of “knowing ly making any false or fraudulent

representati on or declarat ion.” In Gragg v. Rhoney , 884 P.2d 443, 449 (Kan. Ct. App. 1994), the cour t indicated that , in order t o be fraudulent w ithin the meaning of the statute, “an untrue statement of fac t mus t be k nown t o have been untrue bythe p arty m akin g it an d mu st ha ve been made with the intent to deceive or recklessly made with disregard for the truth.” In accordance with this constr uction, wehold that the imposition of liability

under section 47-25-510 requires proof of three elements: (1) that the
a pplicant’s representati on or declarat ion was fals e; (2) that th e applicant knew th e representation or declarat ion was fals e; and (3) that the applicant madethe representat ion or declarati on either w ith the intent t o deceive or with reckless dis regard for th e truth.

In interpreti ng the statute, the tr ial court r uled that, in order for a false or fraudulent representation to be actionabl e, the represent ati on m ust have been made with int ent to deceive. W e con clud e tha t thi s ruli ng wa s not entirely correct because, under the foregoing standard, the imposition o f liability under section 47-25-510 do es not depe nd upon a showingof intent to deceiv e; it is suffici ent if the repres entation or declaration was6

made with reckless disregard for the truth, a lesser standa rd than that appl ied by the t rial court.

Our

delineation of the proper standar d to be applied unde r

section 47-25-510, however, does not end our i nquiry because we still must determine, in l ight of th e appropr iate stan dard, whether the trial court erred i n granting Johnson’s moti on for summary judg ment. We begin our analys is of this is sue with t he premise that

[W ]here a claim of fraud is presente d, o rdinarily

only upon a full trial of the ac

tion can the is sue properly be developed. As a gener al rule, summary judgment is not an appropriate procedure for the disposition of such an issue. Fowle r v. Happy Goodman Family , 575 S.W.2d 496, 49 (Tenn. 1978). This is be caus e “[t]he issue of fraud, by its nat ure, is one w hich requi res for determin ation the actual hearing and view ing of wi tnesses whose credibility is of paramount concern for the trier of facts.” Long v. St ate Farm Fire & Cas. Co. , 510 S.W .2d 517, 519 (Tenn . App. 1974).

For similar reasons, summary judgment also is inapp ropriate “i n cases wh ere the outcomehinges sq uarely upon the state of mind, in te nt, or cr edibility of the witnes ses.” Knapp v. Holiday Inns, Inc. , 682 S.W.2d 936, 941 -42 (Tenn . App. 1984). As one court explained, The court should be cautiousin granti ng a motion for summary

judgmentwhen resolutio n of t he dispositive issue requires a determ ina tion of state of mind. Muc h depends upon the credibili ty

of the witnesses test ifying as to their ow n state of mi nd. In th ese c ircum stan ces t he ju ry sho uld b e give n a n opportunity

to observethe demeanor, duringdirect and crossexamination, of the witnes ses whose states of mind are at issue. Croley v. Matson Navigation Co. , 434 F.2d 73, 77 ( 5th Cir. 1970) , quoted in McDowe ll v. Moore , 863 S.W.2d 418, 421 (Tenn. App. 1992) ; Knap p v. Holiday Inns, Inc. , 682 S.W.2d 936, 942 (Tenn. App. 1984). In particul ar, summary judgment should not be granted bas ed upon the affidavit of an i nterested w itness if the finder of fact would be at

liberty to disbelieve the asserti ons contained in the affidavit. Knapp , 682 S.W.2d at 942.7

In McDowell v. Moore , 863 S.W.2d 418 (Tenn. App. 1992), for ex ample, t he defendant wassued for defamation. The defendant filed a motion for summary judgment, citing evidence which, he argued, conclusiv el y established that the plaintif f was a public figure and that the matte rs complained of w ere published w ithout malice. Id . at 419. In support of his motion, the d efendant a tt ached an affidavit i n which he asserted that he believed the incidents des cribed by him to be true. Id . at 420. The trial cour t granted the motion , but th is court re versed. Cit ing Knapp and Croley , supra , this court reasoned: [W]e are called u pon to determine w hether the affidavi t of the defendant, . . . wher

ein he deposed that he believed and continues to believe thatthe incidents described by

him were true , is sufficient to esta blish a lack of malice. W hile such test imon y, if accredited by a trier of fact, would be suffici ent to support su ch a finding, we cannot agree that, with out more, such a finding is

appropriate on motion for summary judgment.

. . . . In this case, t he credibil ity of the affiant, .

. . is clearly in issue. . . . [H]e is a par ty and his testimony

must be wei ghed in the balance against his natural bias, prejudice or interest in the outcome of the case.

. . . McDowell , 863 S.W.2d at 420-21.

Althou gh this case pr

esents a closequestion, we conclude that t he trial cour t erred in granting summary judg ment based on Johnson’ s affidavit. In his affidavit, Johnson
swore that he was

unfamiliar w ith the provisions of Tennesse e’s trademark statutes at the time he submitted his application; that he was acting upon th e advice of an empl oyee of the Secretary of State’s of fice when he wrote August 18, 1989, on the appli cation as the date of first use; and th at he did not in tend to mislead anyone in any way. If ultimately believed by

the finder

of fact, these a ssertions well might establish a defense to VB I’s claim forfraudulent reg istration of tr ademark under sec

tion 47-25-510 of the Model Trademark Act. Neverthel ess, we conclude that theseassertions did not entitl e Johnson tosummary judgment.

As w e explained previousl y, in ord er to succeed o n its clai m for fraud ulen t registr ation of tr adema rk, VBI ulti mately must pr ove that Johns on acted either with the intentto deceive or

with reckless dis regard for th e truth. The foreg oing authori ties reveal1 In the tria l co ur t, V BI c ha llen ge d th is a ss er tion by filin g th e a ffid av it of Mary E. Costner, the manager

of the St atut oryFil ing Dep artment at t he Secret aryof Sta te’ s offi ce in Nashvil le. In her affi davi t, Costner ass erted that It is t he poli cy ofour Depart ment not t o giv e lega l adv ice or to i nter pret the meaning or req uir emen t s of t he appl icat ion f or pot enti al r egist rant s. Our poli cy is t o advi se a regi stran t t o consul t wi th an attorn ey as t o any questi ons they may have. W e do not giv e lega l adv ice or suggest ho w to compl e te trad emark applica ti ons. Costner, however, did not wor k at t he Secret aryof Stat e’s of fi ce in Augu st 1989, when Johnson complet ed his tra dem ark app lication. C ostn er be gan wor king at that o ffice in Oc tobe r 199 0.

2 Under the Model Trademark Act, a tr ademark is deemed to be “used” on goods “when itis pl aced in any manner on t he goods or t heir contai ners orthe di splay s associat ed ther ewit h or on t he tag s o r lab els affi xed ther eto and su ch goods are sol d or ot herwi se dist ri buted i n the st ate. ” T.C.A. § 47 -25- 501(b)( 1) (1988). 8 that summary judgment is particularly inappropriate in fraud casessuch as this where the outcomehinges upon t he def e ndant’s state of mind , intent, or c redibilit y. The cri tical assertionscontained in Johnson’s affidavit all relate to Johns on’s subjecti ve state of mind
or intent at the ti me he made the false repr esentat ion on his trademark application. Moreover, Johnson, as thedefendant to this act ion, is by definition an intereste d witness whose testimony the finder of fact would b e entitled to di sbelieve. The fact-finder, for example, might reject Johnson’s testimony that he was unf amiliar w ith Tennessee trademark law, as well as his testimony that he was unaware that he had made a false statement on the tr

ademark applicat ion.

For p urpos es of these summary judgment proceedings, we accept as tr ue Johnson ’s sw orn fact ual asse rti on th at an empl oye e of t he Se cre tar y of Stat e’soffi c e instructed him to fil l i n August 18, 1989, as the da te of first use on the trademark application. 1 Even if accepted as tr ue, however, this fact i s not determinati ve ofJohnson’s state of mind or intent

when he completed the appl ication. The ev idence was undisputed that Johnson never sold goods under t he Volunteer Beer mark. It i s possible, therefore, that Johnson initially left blank the date of f irst use on the application becau se he knew he
never had used the mark. 2 Issues reg arding Johns on’s state of mind and credibility should be resolved by

the finder of fact in an ev identiary hearing and not by summary disposition

.

In conclusion, we reiter ate that, if believed by t he fact-find er, the asser tions contained in Johnson’s affidavit well might p rovide a de fense to VBI’s cl aim for fraudulent9

registr ation of trademark. At

this point in the pr

oceedings, however, it was prematur e to grantsummary judg ment based on Johnson’ s sworn assertions as to his stateof mind at the time he complete d the trademark a pplication.

The judgmentof the trial court is hereby reverse d, and this caus e is remanded for further pr oceedings co nsistent w ith this opi nion. Costs of this appeal are taxed to Appe llee , fo r which execu tion may is sue i f ne cess ary.

HIGHERS, J.

CONCUR:

CRAWFORD, P.J., W.S.

FARMER, J.