Court Opinion

ID: 4142180
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:19:01.720667+00
Date Added: 2024-06-11T14:30:42.476584
License: Public Domain

Honorable Will I&innRichardson
AaUatant S&retary of State
Austin, Texas

Dear Sir:              Cpinion No. O-4173
                       Re: Corporations -- similarity of
                            names.
          Your request for opinion has been received and care-
fully considered by-this department. We quote from your re-
Guest as follows:
         "We have'an application for a charter for
   a corpoiiatloii
                 wishing to uae'.thename @S&Xfe-Wag
   Auto Loan Plan, Inc., of Hazston'. The charter
   application la in the proper form and Is accom-
   panied by the written consent of a corporation
   operatiiigln'Dallaa, using the'name 'Safe-Wag
   Auto LoariPlan, Inc.'/. We have had a protest .~
   filed by another Texas corporation to our grant-
   ing of the charter on the grounds that the time
   would conflict with the name 'Safewag Stores,
   Inc.,'.
         "There are only two corporations in Texas
   at the present t.imeusing the name 'S&f+ Way'.
   You will note that one of them has consented to
   the new corporation's use of the name and the
   other corporation Is objecting to it. It is the
   contetitlonof Safeway Stores, Inc., that even
   though;;thegdo a grocery business and even though
   they are not doing business in Houston at the
   present time they still have the right to protest
   our granting the charter to a corporation using
   a similar name.
         '?iewould apprectate an opinion from your
   department as:to whether the fact that a company
   is not operating in a certain locality should be
   sufficient to render a similar name available for
   corporate use in that loc~llty.
          "Counsel for both parties have lfidicated
    their desire,to submit a brief on the question
Honorable Will Mann Richardson, page 2         o-4173

    and the briefs will be forwarded to you for your
    consideration in determining this point."
          "Supplementing our letter of December 8th
    we wish to state that Safeway Stores Inc.; of
    Texas was incorporat-edon January 18, 1916, and
    that Safeway Auto Loan Plan Inc., was incorporated
    on June 19, 1941. 'The'former company has a capl-
    tal stock of $100,000.00, whereas the Loan Corn--
    pang has a capital stock of $2,000.00.
          "When the charter for the loan company was
    granted the grocery corporation was not notified
    but immediately after the~charter was granted the
    grocery corporation protested any further charter
    using that name.
          "Attorneys for the Safeway Stores Inc., of
    Texas have submitted a brief on the subject which
    ia attached to this letter for your convenience.'
We have also carefully considered the briefs submitt.eoby the
applicant for charterand by Safeway 'Stores,.Inc., of Texas.
          The applicant for charter, states in .lts brief,,after
citing authoritie'a:
          "We~~respectf&.lysubmit that under the facts
    In the particular controversy the foregoing au-'
    thorltles compel a ruling by your Department that
     the Secretary of States should grant the requested
    &barter. Certainly Is this true when it is real-
    ized that the corporations involved are doing
    businesa,ln different cities and a different liner
    of bus%nesa, and with a pro,posedcorporate name
    substantially.and materially.di&ferent from the
    existing,,objectingcorporation.
          Safeway'Stores, Inc., of Texas, ,statea in its brief,
after citing author:tles.:
          "Already Safeway operates more than 160
    stores in Texas, stores from El Paso to Texarkana
    and fromDenlson South,to Austin. New stores,go
    into operation each year in new counties. In the
    normal operation and expansion of Safeway's busi-
    ness it will develop that small area of South Texas,
    not now served by Safeway.
          "It is a matter of common knowledge that Safe-
Honorable Will Mann Richardson, page 3         o-4173

   way Stores, Inc. of Texas has spent many thousands
   of dollars all over the State in advertising to
   build up and put Its name before the public. And
   that through,:manyyears of merchandising high grade
   products has built up an enviable reputation so
   that Its trade name 'Safeway' is a valuable enaigna
   and symbol of tts reputation and good-will. Through
   its conduct and through its advertising it has built
   a well established mercantile reputation and its
   trade name Is of considerable value to it. Safeway
   operates in every section of ,the State and we do
   not feel that a corporation whether in the business
   of merchandising groceries or in any other type of
   business should be allowed to capitalize upon the
   well established mercantile reputation built up by
   Safeway Stores over many years of fair dealing and
   the expenditure of large sums of money for advertising."
          The case of Board of Insurance Commissioners vs. Na",
Mona1 Aid Life (Austin Court of Civil'Appeals) 73 S.W. (2nd)
671, writ of error refused by the Texas Supreme Court, holds:

          "1. Trade-marks and trade-names and unfair
                 competition
         "Rule that equity will protect corporation
   In use of name applies where subsequent corpora-
   tion attempts to use aimllar name to that of ex-
   isting corporation.
          "2 . Trade-marks and trade-names and unfair
                  competition
         "In absence of statute, administrative agency
   granting charters, articles of incorporation, or
   permits to carry on business ~111 not permit use
   by subsequent corporation of name similar to or so
   nearly like that of another as would be likely to
   produce confusion.
          “3 .   Corporations
         "Under statute authorizing refusal of permit
   to do business to domestic insurance corporation
   if name Is 30 similar to existing corporation's as
   to be likely to mislead public, which provision
   subsequently was made condition upon which foreign
   insurance corporations should be permitted to do
   business, Board of Insurance Commissioners had
   power to refuse permit to foreign insurance cor-
Honorable Will Mann Richardson, page 4            o-4173

    poration where name similar to that of another
    foreign corporation was likely to cause confusion
    (Rev. St. 1925, arts. 4700, 5068).
          “4 .     Corporations
          "Statute authorlzlng refusal of permit to
    do business to Insurance corporation with name
    similar to 'any other Insurance company' applied
    where permit had already been issued to foreign
    insurance corporation with similar name and which
    was then engaged in business (Rev. St. 1925, arts.
    4700, 5068) .

          “5   .   Trade-marks and trade-names and unfair com-
                      petition
          "There is an unlawful appropriation where one
    corporation appropriates and uses distinctive por-
    tion of another corporation's name.
          “6   .   Corporations
          "Name 'National Aid Life-'held so similar to
    name 'National Aid Life Association'aa to justify
    Board of Insurance Commlasionera In refusing permit
    tb do business to the 'National Aid Life' on ground
    that similarity of names would be likely to mislead
    the public in that the dlatinctive portion of,two
    names was identical (Rev. St. 1925, arts. 4700,
    50.
          “7   .   Constitutional law
          "Statute authorizing Board of Insurance Com-
    missioners to refuse permit to do business to ln-
    surance corporation with name so similar to that
    of existing corporation as to be likely to mislead
    public held not unconstitutional as delegation of
    arbitrary power (Rev. St. 1925, arts. 4700, 5068).”
          We quote from the Court's opinion in said case as fol-
lows :
          "Article 4700 vests in the Board of Insurance
    Commissioners, whose duty It is to issue permits
    to both foreign and domestic life insurance corpora-
    tions to carry on such business in this state, the
    power to refuse a permi.twhere the name of the sub-
    sequent domestic corporation is 'so similar to that
Honorable Will Mann Richardson, Page 5        O-4173

   of any other insurance company as to be likely to
   mislead the public'. This statute merely adopts
   the universal rule that equity will protect a cor-
   poration in the use of a name selected and used by
   it, which rule likewise applies where a subsequent
   corporation attempts to use a similar name to that
   of an exist1   corporation. Thompson on Corpora-
               7 Vol. 1. pp. 85-87,
   tions (3d Rd.                      tii77; Holloway
   v. Memphis;~etc. R. Co., 23 Tex. 465, 76 Am. Dec.
   68.  The statutes of many states expressly adopt
   the rule, and it has been held, even where no such
   express statutory provision exists, the court, of-
   ficer, or administrative or i%histerlal board whose
   duty It is to grant or refuse charters, or articles
   of incorporation, or certificates of authority, or
   permits to transact or carry on business within a
   state, will not permit the use by any subsequent
   corporation of a name similar to or ao nearly like
   that of another corporation as would be likely to-
   produce mistake or confusion. Philadelphia Trust,
   etc., Co. v. Philadelphia Trust Co. (C.C.) 123 F.
534; Thompson on Corporations (3a Ea.) vol. 1, p.
   80, and cases there cited.
         I,
          . . . . . . . .
         It may be remarked that since the statute
   against similarity of names has merely adopted the
   equity rule aforementioned, cases construing such
   rule necessarily control.
         43
          . . . . . . .
         "Nor did the Board abuse its discretion In
   concluding that the names of the two corporations
   involved were ao similar as to likely mislead the
   public dealing with them. The general rule is
   that 'there is an unlawful appropriation where one
   corporation appropriates and uses the distinctive
   portion of another corporation's name'. . . . . .
          "It Is clear that the distinctive portion of
   ,the names ~of the two corporations in the Instant
   case Is 'National Aid Life', and the mere omission
   of the word 'Association' by appellee to Its name
   would not diatlnguLsh it from the other existing
   corporation.
          0. . . . . . .
Honorable Will Mann Richardson, page 6        o-4173

          In the case of The Grand Temple, etc. vs. Independent
Order, K. &.D. of T., 44 S.W. (2nd) 973 (Texas Commission of
Appeals), It was held that the name "Knights and Daughters of
Tabor of the International Order of Twelve" and Independent Order
of Knights and Daughters of Tabor of America", were similar as
a matter of law, entitling the former corporation to injunctive
relief against the latter. This case further holds that a cor-
poration may be enjoined from using a name similar to that of
another corporation or association, regardless of the character
of the corporations. We quote from the Court's opinion in said
cause as follows:
          "A corporation cannot lawfully adopt either
   the same name as that of an existing corporation
   created by or under the laws of the state, or of
   an unincorporated association or partnership there-
   in, or a name so similar to that of an existing
   dorporation or association that Its use is calcu-
   lated to deceive the public and result in confu-
   sion or unfair and fraudulent competition (14 C.J.
   p. 3l2), and may be enjoined from such use, what-
   ever may be the character of the corporations, and
   whether or not they are formed for profit, to the
   aame extent and upon the same principles that ln-
   divlduals are protected in the use of trade-marks
   and trade-names (14 C.J. p. 326).   And there can
   be no distinction in prlnclple between taking the
   entire name of the prior corporation and taking
   so much of it as will mislead Into the belief
   that the two concerns are the aame. The mischief
   1s of precisely the same character, differing
   only In degree. Slmilarlty, and not Identity, Is
   the usual recourse where one corporation seeks to
   benefit Itself by the name of another. 7 R.C.L.
   p. 134."
          We quote from the case of Wall vs. Rolls-Royce of
America, 4 F. (2nd) 333, as follows:
          II
           . . . that by reason of the high standard
    of its product and the volume and spread of its
    trade the name Rolls-Royce has become associated
    all over the world with the excellence of Its
    product, and is associated in the public mind
    with high-grade work, and gives its owners an
    established, distinctive, and valuable business
    asset; . . e .
          ,s       it is clear that the purpose of Wall
    was to tace'al;duse the good will, fair name, and
Honorable Will Mann Richardson, page 7       o-4173

   trade record which the two companies had, through
   years of business integrity, given to the name
    'Rolls-Royce', and thereby create in the minds of
   the public the impression that his mail order tubes
   bore some connection with the real Rolls-Royce
   companies. Upon no other theory than a purposed
   appropriation to himself, and an intentto convey
   to the public a false Impression of some supposed
   connection with the Rolls-Royce industries, can
   Wall's actions and advertisements be explained.
   Seeing, then, that by putting his individual busi-
   ness under the name 'Rolls-Royce', and utilizing
   its trade reputation and earned good will, Wall
   could greatly benefit himself, the converse of
   the proposition follows: That this veiling of his
   business under the name 'Rolls-Royce' might, and
   indeed almost surely would, injure the real Rolls-
   Royce industries, and substantially detract from
   their good will and fair name. It is true those
   companies stade.automobFlesand aeroplanea, and
   Wall sold radio tubes, and no one could think,
   when he bought a radio tube, he was buying an auto-
   mobile nor.
             an aeroplane. But that Is nct':Chetest
   and gist of this case. Electricity Is one of the
   vital elements In automobile and aeroplane con-
   struction, and, having built up a trade&name and
   fame In two articles of which electrical appll-
   antes were all Important factors, what would more
   naturally come to the mind of a man wlth a radio
   tube In his receiving set, on which i?asthe name
   'Rolls-Royce', with nothing else to Indicate Its
   origin, than for him to suppose that the Rolls-
   Royce Company had extended its high grade of elec-
   tric product to the new, electric-using radio art
   as well. And if this Rolls-Royce radio tube proved
   unsatisfactory, it would sow in his mind at once
   an undermining and distrust of the excellence of
   product which the words 'Rolls-Royce' had hither-
   to stood for.
         "In addition to what has been said, it Is
   quite possible that the use of such a name might
   lead'third parties to credit the plaintiff's bual-
   ness, on account of Its name of 'Rolls-Royce',
   with an unwarranted financial reliability, and if
   such assumptions eventually prove unfounded the
   name of 'Rolls-Royce' would suffer accordingl.y.
   Indeed, from the atandpolnt of comme??clalintegrity,
   fair business, and'trade equity, we feel the court
   below, sitting in equity, was justified in pre-
Honorable Will Mann Richardson, page 8        o-4173

    venting the defendant from veiling his business
    under the name of 'Rolls-Royce', for he had, and
    could have had, but one object in view, namely,
    to commercially use as his own a commercial asset
    that belonged to others, the continued use and
    abstraction of which is so fraught with such pos-
    sibilities of irremediable injury that the only
    way to remedy It la to stop It at the start."
          In the case of L. E. Waterman Co. vs. Gordon, 72.Fed.
(2nd) 272, the owner of a trade name "Waterman" who manufactured
fountain pens and pencils was allowed to enjoin the junior use
of the same name by a corporation manufacturing electric razors.
          In the case of Armour.& Company vs. MasterTire and
Rubber Company, 34 Fed. (2nd) 201, it was held that a meat
packer was entitled to enjoin the Uefendant'a use of the word
"Armour" as a trade name in the business of manufacturing and
selling tires. The Court held In this case that in a suit for
injunction based on unfair competition in using a trade name,
direct competition In plaintiff's field is not a necessary
element. We quote from said case as follows:
          ,I
           ........ The Armour family, through various
   and successive representatives thereof, was con-
   tlnuously identified with the business, and through
   the successive  years large sums of money were ex-
   pended for thenbuilding up of the good will and
   reputation of the company's products. . . . .
          'Defendants claim the selection of the word
    'Armour' was for the purpose of signifying the
   tough, stable, and hardy aharacter of the automo-
   bile tires; that is, that the product was in some
   unaccountable way 'armoured', and was calculated
   to In some way create the Impression of strength.
   The reasonableness of this contention la not‘suf-
   ficlently persuasive to even require comment.
          "The inescapable conclusion, drawn from the
   tenor of the entire record, la that the use of
   .the word 'Armour' In the corporate name of the aell-
    ing company, and as a brand and trade-name to the
   product, was selected for the purpose of taking
   advantage of the business reputation of the plain-
   tiff company, the family name of the organizer,
   and of those prominently Interested in that com-
   pany throughout Its existence, In the good will
    of that company gained by years of ingenims ad-
   vertising and the expenditure of vast sums of money
Honorable Will Mann Richardson, page 9           O-4173

    therefor, and for the purpose of confusing the
    public and leading defendant's patrons to believe
    by the use of the word 'Armour'; that its product
    was of a superior standard and quality, and to
    induce other members of the public to become patrons
    under such a belief. Fraud, or the attempt at
    fraud, Is discernible as the underlying and appeal-
    In conclusion.
          II
           . . . . . . .
          "And the court furthermore says:
          "'With a practically unlimited field of dis-
    tinctive names open to It for choice, when the de-
    fendant lately entered the automobile industry,
    the fact that it chose to take a name that had no
    connection or association with the automobile trade,
    except the good will and association which the plaln-
    tiff had given it, shows conclusively that the name
    was given to this new venture in the automobile
    field because of its established high regard in
    that industry, which had been given It by the
    plaintiff.'
          II
           . . . . . .,,
          In the case   of Alfred Dunhill of London, Inc. vs.
Dunhill Shirt Shop, 3 F. 3. 487, a corporation making pipes and
smoker's supplies was   allowed to enjoin a corporation selling
shirts from using the   same name.
          The case of Great Atlantic & Pacific Tea Co. vs. A. &
P. Radio Stores, 20 Fed. Supp. 703, held that the owner of a
nationally known and valuable trade-name could restrain third
party use of trade-name in connection with a noncompeting busi-
ness even though custom and trade was not divided by such use,
since the owner's reputation mlnht be tarnished thereby. We
quote from said case,.asfollows:
          "The plaintiff seeks to restrain the de-
    fendant from using its trade-name 'A &~P' in con-
    nection with Its business of selling radios, waah-
    ing machines, and electric refrigerators. None
    of these articles is sold by the.plaintiff. Con-
    sequently the first question presented is whether
    the owner of a nationally known and valuable trade-
    name may restrain its use by a third party in con-
    nection with a noncompeting business. It is quite
    clear that in such a case the defendant is not ac-
Honorable Will Mann Richardson, page 10        o-4173

   tually diverting custom and trade from the plaln-
   tiff. Such an injury, however, Is not the only
   one which may result. As was said by Mr. Justice
   Shientag In Philadelphia Storage Battery Co. v.
   Mlndlln, 163 Misc. 52, 296 N.Y.S. 176, 178:   'The
   normal potential expansion of the plaintiff's
   business may be forestalled. * * * His remtation
   may be tarnished by the use"of his mark upon an
   inferior DrOdUCt. * + * A false imoreasion of a
   trade connection between the parties mav be created,
   possibly subjecting the plaintiff to liability or
   to the embarrassments of litigation, or causing
   Fniury to his credit and financial standing.'
         "The underlying prlnclple involved in these
   cases was well put by Circuit Judge Learned Hand
   in Yale Electric Corporation v. Robertson (C.C.A.)
   26 F:(2d) 972, 974, as follows: -'However,It has
   of recent years been recognized that a merchant
   may have a sufficient economic interest in the use
   of his mark outside the field of his own exploita-
   tion to justify Interposition by a court. His
   mark is his authentic seal; by it he vouches for
   thedgoods which bear it; it carries his name for
   good or ill. If another uses It, he borrows the
   owner's reputation, whose quality no longer lies
   within his own control. This is an injury, even
   though the borrower does not tarnish it, or divert
   any sales by its use; for a reputation, like a
   face, is the symbol of Its possessor and creator,
   and another can use it only as a mask.'
         "It Is on the basisof this developing concep-
   tion of unfair competition that the courts have
   repeatedly restrained the use of similar trade-
   marks on noncompeting goods. See Walter v. Ashton,
   1902, 2 Ch. 282; Aunt Jemina Mills Co. v. Rlgney
   zezt".&C.A.)    247 F. 407, L.R.A. lg18C, 1039,
              245 U.S. 672, 38 3. Ct. 222; 62 L. Ed.
   540;'Alum;num Cooking Utensil Co. v. Sargoy Bros.
   & Co. (D.C.) 276 F. 447; Vogue Co.'v. Thompson-
   Hudson Co. (C.C~;A.)300 F. 509; Wall v. Rolls-
   Royce of America (C.C.A.) 4 F. (2d) 333; Hudson
   Motor Car Co. v. Hudson Tire Co. (D.C.) 21 F. (2d)
   453; Duro Co. v. Duro Co. (C.C.A.) 27 F. (2d) 339;
   Standard Oil Co. v. California Peachy& Fig Growers
   (D.C.) 28 F. (26) 283; Del Monte Special Food Co.
   v. California Packing Corporation (C.C.A.) 34 F.
   (2d) 774; Waterman Co. v. Gordon (C.C.A.) 72 F. 272';
   Alfred Dunhill of London vi Dunhill Shirt Shop
Honorable Will Mann Richardson, page 11                                O-4173

    (;,z.&o3 z. Supp. 487; Great Atlantic & Pacific
                 A. & P. Cleaners &Dryers (D.C.) 10
    F. Supp: 450.
               81
                    .   .   .   .   .   .   .   " (Underlining ours)
          In the case of Sweet Sixteen Co. vs. Sweet"l6" Shop,
15 Fed. (2nd) 920, the plaintiff In 1916 opened a dress shop
using the name "Sweet Sixteen" in San Francisco and by 1921 had
five stores in states touching the Pacific ocean. In 1923 the
defendant started a dress shop in Salt Lake City, Utah, using
the name "Sweet 16" despite the protest of plaintiff. The
evidence in this case also showed that Utah was the natural
sphere of expansion for plaintiff. The Court held that the
plaintiff was entitled to enjoin the defendant from using the
name "Sweet 16" even though the plaintiff did not have any
&res in Utah. We quote from said case as follows:
         "'It may be suggested whether, In these days
   of rapid and constant intercommunication and ex-
   tended commerce between nations;any narrow line
   of demarkation should be established, on the one
   side of which should stand moral wrong with legal
   liability, and upon the other moral wrong with
   legal immunity. If, however, the courts of a par-
   ticular government can, with respect to the subject
   In hand, take cognizance only of wrongs committed
   within the geographical boundaries of the country,
   it is still not necessary, In our judgment, that
   a trade in an article should be fully established,
   in the sense that the article be widely known,
   before the proprietor of its trade-mark or trade-
   name may be entitled to the protection of 'equity
   for the preservation of his rights. Otherwlae.it
   might be impossible, with respect to a valuable
   and desirable article or product of manufacture,
   designated by a particular brand or in a partlcu-
   lar manner, ever to establish a trade. Craft and
   cunning, discerning the value of the product, and
   the profit to be acquired, would, at the inception
   of the business, flood the market with spurious
   and cheaper articles or preparations of the simlll-
   tude of the genuine, and strangle the trade in the
   genuine at Its birth. It is enough, we think, If
   the article with the adopted brand upon it is ac-
   tually a vendible article in the market, with in-
   tent by the proprietor to.continue its production
   and sale. It is not essential that Its use has
   been long continued, or that the article should
   be widely known, or should have attained great
                                                                    .

Honorable WI11 Mann Richardson, page 12          O-4173

    reputation. The wrong done by piracy of the trade-
    mark la the same in such case as in that of an
    article of high and general reputation, and of
    long-continued use. The difference is but one
    of degree, and in the quantum of injury. A pro-
    prietor is entitled to protection from the time
    of commencing the user of the trade-mark."'
          We quote from the case of United Brotherhood, etc. vs.
Carpenters and Joiners, etc., 110 S.W. (2nd) 1209, aa follows:
          "We are impressed with the language of the
    Court in Barton vs. Rex-011 Company;.C.C.A. 2 F.
    (2nd) 402, 40 A.L.R. 424: Why with all the words
    of the English Language at Its disposal (appellee
    here) it should adhere to these particular words?"
           The distinctive portFon,,ofthe name of Safeway Stores,
Inc. of Texas 1s clearly "Safewag . It is undoubted~lytrue, as
represented in the brief for Safeway Stores, Inc., that it has
expended large sums of money for advertising and now has built
up a splendid and honorable business reputation and that Houston
is undoubtedly within its normal sphere of business expansion.
On the other hand, applicant for charter, has never used the
naine "Safeway", has never created any good will for or added any
luatre to the name "Safeway". We pose this question: "Why it
is, with thousands of other words in the English Language at
applicant's disposal, It should determine on the use of the word
"Safe-way" (which Is idems sonans with "Safeway") in its pro-
posed corporation?"
          You are, therefore, respectfully advised that It is
the opinion,of this department that your question should be
answered in the negative. It is our further opinion that under
the facts related the Secretary of State in the exercise of his
discretion would be justified In refusing to allow the applicant
touse the name "Safe-way" in Its charter.
                                  Very truly yours
                               ATTORNEYGENERAL   OF TEXAS
                                  By s/Wm. J. Fanning
WJF:mp:wc                              Wm. J. Fanning
                                       Assistant
APPROVED JAN 23, 1942
s/Grover Sellers
FIRST ASSISTANT
ATTORNEYGENERAL
Approved Opinion Committee By s/BWB Chairman