Court Opinion

ID: 7825192
Source: CourtListenerOpinion
Date Created: 2022-09-07 18:05:16.436397+00
Date Added: 2024-06-11T16:30:50.446082
License: Public Domain

Robert H. Dudley, Justice. The issue in this case is whether the buyers of a business purchased the trade name and are entitled to protect that trade name. The issue is primarily a factual one, and we affirm since the chancellor’s findings of fact are not clearly erroneous. In 1932, Mr. Vowels started a business in Jonesboro named “Vowels Printing.” The printing business was apparently successful, and about twenty years later Mr. Vowels expanded the business to include the sale of office supplies. At that time, in the early 1950’s, the name of the business was changed to “Vowels Printing and Office Supply.” In 1984, the name was changed to “Vowels Printing and Supply.” Preston Williams, whose wife Gayle is the daughter of Mr. Vowels, became involved in the business in 1984. In 1987, the Williamses began to physically separate the office supply section of the business from the printing section, and, by May, 1988, they had moved the printing part of the business across the street from the office supply business. The two sections of the business were operated as one proprietorship. They both had the same tax identification number, and if either or both sections did work for a customer, the account receivable was payable to the one business, Vowels Printing and Supply. A real estate broker contacted the buyers, Richard and Barbara Spelic, and asked if they would be interested in buying “Vowels.” The husband, buyer Richard Spelic, knew “Vowels had an excellent reputation in town, and I thought buying Vowels would be a good opportunity for us to continue in the community and keep the Vowels’ name to go on.” The husband had been inside the business twice and the wife only once, when, on May 13, 1988, they signed an agreement to purchase “Vowels Office Supply.” They testified that they were told that the Williamses would retain the printing business across the street, but, they were not told that the sellers would try to retain the name “Vowels.” At the time of the sale, the sign on the front of the building housing the printing business across the street did not contain the name “Vowels;” it reflected only “The Printing Factory.” The sales agreement, a form with blank lines that were filled in by the real estate agent, provided a sales price of $80,000.00 with $3,000 being allocated to a covenant not to compete. Under this covenant, the sellers, the Williamses, were not to engage in the sale of office supplies for seven years, and the buyers, the Spelics, were not to engage in printing for seven years. More important, the agreement provided that the buyers paid $1,500 for goodwill and $1,500 for the business trade name. The Bill of Sale provides that the buyers purchased the “business trade name, goodwill and any and all other assets, tangible or intangible, belonging or used in connection with or otherwise pertaining to the operation of Vowels Office Supply. . . .” At the time of the sale, the sellers had listed the office supply business in the telephone directories as “Vowels Office Supply” and had separately listed the printing business as “Vowels Printing Factory.” The sellers, in contradiction of the testimony of the buyers, testified that they told the buyers of the telephone book listings. The office supply building was being remodeled at the time of the sale, and soon after the sale was completed, a dispute arose over the cost of some of the remodeling. The buyers testified that at that time, the sellers placed a large sign on the front of their printing business that read “Vowels Print Supply” and began answering their phone by saying “Vowels.” The buyers were also answering their phone by saying “Vowels.” Customers, suppliers, and creditors were confused, and the sellers’ mail was sometimes delivered to the buyers and vice versa. The buyers later violated the covenant not to compete by taking a printing order for a local bank. A complaint and counterclaim was eventually filed. Ultimately, the chancellor enjoined the buyers from violating the covenant not to compete and enjoined the sellers from using the name “Vowels” in their printing business. The chancellor’s findings of fact included the following: [T]he name “Vowels” has . . . been an accepted and acknowledged local synonym for office supplies and/or printing. As such, “Vowels” has a special significance and meaning and to permit the continued use of the name “Vowels” in . . . [sellers’] business can only result in hopeless confusion for the general public. The chancellor then applied Ark. Code Ann. § 4-71-113 (Repl. 1991), which provides: Likelihood of injury to . . .a trade name valid at common law, shall be grounds for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.  The sellers make four assignments of error, the first of which is that the trial court erred because the parties were not in competition with each other. The argument overlooks the plain language of the statute. The statute recognizes the value of a trade name in its own right and affords protection to the owner against its unauthorized use. Neither competition nor confusion on the part of customers is required. The issue is not one of competition, but of the likelihood of dilution of the value of the trade name as an asset by its use by someone other than the owner.  The sellers’ second assignment is that under the case of Howe Scale Co. v. Wyckoff, 198 U.S. 118 (1905), a family name may be used in the absence of fraud or deceit unless the exclusive right to the family name is contracted away. Again, the argument overlooks the statute. The chancellor impliedly found that the sellers sold the trade name “Vowels,” that there is a likelihood of injury to it, and that proof was sufficient for the issuance of an injunction under the statute.  A part of the argument on this point is that the sellers did not convey the trade name “Vowels” used in the printing business. The proof shows the buyers paid $ 1,500 to the sellers for the business trade name. The proof showed that the name “Vowels” had been used in Jonesboro for over fifty years, first in 1932 as “Vowels Printing,” then, in the early 1950’s as “Vowels Printing and Office Supply,” and then, in 1984 as “Vowels Printing and Supply.” There was substantial testimony, essentially undisputed testimony, from which the chancellor could find that the name “Vowels” carried a good reputation in the community in both office supplies and printing and that the name had acquired a secondary meaning to the purchasing public of quality in both office supplies and printing. The predominant word in the Vowels’ trade name used for over fifty years is “Vowels.” The buyers testified they were asked by the real estate agent if they wanted to buy “Vowels,” that they thought they were buying “Vowels,” and that the sellers never disclosed they had any intention of retaining any part of the “Vowels” trade name. To the contrary, the sellers testified that they told the buyers they were going to use the name “Vowels Printing Factory,” and, in addition, the contract provides that the buyers purchased only the name “Vowels Office Supply.” The chancellor heard and observed the witnesses and found in favor of the buyers. We cannot say the finding of fact was clearly erroneous. In his letter opinion, the chancellor wrote, “[T]he existing confusion will ultimately detract from the otherwise separate businesses of the parties, to the detriment of each,” and when one considers that three years from now, or seven years from the date of the contract, both parties can compete in both of the businesses, no other conclusion could reasonably have been reached.  The sellers’ next assignment of error is based on the law of unfair competition, and, again, the argument overlooks the statute. Contained in this assignment is a sub-argument that the chancellor erred in ruling that “the name, ‘Vowels’ has for many years to my personal knowledge been an accepted and acknowledged local synonym for office supplies and printing.” They contend that the chancellor should not have taken judicial notice of the secondary meaning. See A.R.E. Rule 201. The sellers are correct. The chancellor should not have taken judicial notice of the secondary meaning, but it is immaterial in this case because there was sufficient independent proof of the matter. Thus, the error was harmless. See Arkansas Sav. & Loan Ass’n v. Mack Trucks of Ark., Inc., 263 Ark. 264, 566 S.W.2d 128 (1978).  The sellers’ final argument of error is that the trial court erred in granting the injunction because Vowels is the maiden name of Gayle Vowels Williams. The general rule is that prohibiting an individual from using his or her true surname is to take away his identity, and courts will avoid doing that, if possible. Societe Vinicole de Champagne v. Mumm, 143 F.2d 240 (2d Cir. 1944). Here, the general rule has no application at all to seller Preston Williams, and seller Gayle Williams did not lose either her surname or her individual identity by the court’s ruling. Even if she lost some part of her business name identity, we would not reverse. When a surname is used as a trade name, it risks becoming a symbol of the business and losing its individual identity. Levitt Corp. v. Levitt, 593 F.2d 463, 468 (2d Cir. 1979) (citing R. Callman, Unfair Competition, Trademarks and Monopolies, § 85.2 (d)(1) (3d ed. 1969)). This is especially true when the name is conveyed as goodwill, and, if confusion is likely, there must be some limitation on a seller’s unrestricted use of his or her name. Taylor Wine Co. v. Bully Hill Vineyards, Inc., 569 F.2d 731, 734 (2d Cir. 1978). In a situation in which an infringer has previously sold his business name with its goodwill, a sweeping injunction is more likely to be an appropriate remedy. Id. at 735. When a business purchases goodwill and a trade name, it acquires a valuable property right, and that is the right to inform the public that it possesses the experience and skill symbolized by the original concern. Levitt Corp. v. Levitt, 593 F.2d 463, 468 (2d Cir. 1979). If the public is confused, the value of the goodwill is diluted. Courts will be especially alert to foreclose attempts by a seller to “keep for himself the essential thing he sold, and also keep the price he got for it.” Guth v. Guth Chocolate Co., 224 F. 932, 934 (4th Cir. 1915), cert. denied, 239 U.S. 640 (1915). Thus, the chancellor could validly issue the sweeping injunction against the use of the maiden name of the sellers. Affirmed. Holt, C.J., Glaze, and Brown, JJ., dissent.