American Fence Co. of the Midwest, Inc. v. Gestes

• Decision Date: 03 November 1962
• Docket Number: No. 42820,42820
• Citation: 190 Kan. 393,375 P.2d 775
• Parties: AMERICAN FENCE COMPANY OF THE MIDWEST, INC., a Corporation, Appellee, v. Raymond GESTES, d/b/a All-American Fence Company; W. E. Charles; and Southwestern Bell Telephone Company, Inc., a Corporation, Appellants.
• Court: Kansas Supreme Court

Page 775

375 P.2d 775

190 Kan. 393

AMERICAN FENCE COMPANY OF THE MIDWEST, INC., a Corporation, Appellee, v. Raymond GESTES, d/b/a All-American Fence Company; W. E.

Charles; and Southwestern Bell Telephone Company,

Inc., a Corporation, Appellants.

No. 42820.

Supreme Court of Kansas.

Nov. 3, 1962.

Syllabus by the Court.

1. A plaintiff corporation doing business under the trade name 'American Fence Company' in Wichita, Kansas, and the surrounding trade area brought suit to enjoin a rival doing business as 'All-American Fence Company' from using the word 'American' in its trade name on the ground of unfair competition. The trial court on facts more particularly set forth in the opinion granted the injunction. On appeal it is held: The trial court did not err. The plaintiff by its prior adoption of the name 'American Fence Company,' and its continued use for a period of years, acquired trade name rights therein and is entitled to protection under the doctrine of unfair competition; and the defendants' use of the name 'All-American Fence Company' is likely to cause confusion in the trade, deceive the public, and substantially prejudice the rights of the plaintiff dealing in similar products in the same trade area.

2. Where a word or term selected for a name used in connection with a business is arbitrary or fanciful, and by long or extensive use in the business the name has become descriptive of the goods produced or handled, it acquires a secondary significance in connection with the business, and the user is held to have acquired what amounts to a proprietary right to it, so that he may prevent a competitor from using it.

3. Ordinarily a geographical term used in connection with a name in a business, which indicates the boundaries of activity or location of the business, and thus has a relation to the matter involved, is merely a descriptive term and does not entitle the user to protection; but a distinction must be recognized between different geographical terms, according to their descriptive quality, the desirability of their use, and their connection to the subject with which they are applied. Where the word 'American' is indefinite, when translated in terms of a business, its location and area of activity, its classification as a descriptive or geographical term is unwarranted.

4. Nowhere in the corporation code (G.S.1949, 17-2501, et seq.), or anywhere else in our statutes, is there a requirement that a corporation should use its entire corporate name, as registered with the Secretary of State, in its advertising or in the general conduct of its business, outside of legal contracts, conveyances and similar matters. Thus, where the registered name of a corporation is 'American Fence Company of the Midwest, Inc.,' the use of a contraction of its full name, 'American Fence Company,' in an honest manner in its advertising and ordinary business transactions is sufficient to establish a trade name.

Bernard V. Borst, Wichita, and Ralph E. Gilchrist, Carl L. Buck and Warner Moore, Wichita, on the brief, for appellants.

Kent Frizzell, Wichita, and J. R. Hannah, Wichita, on the brief, for appellee.

SCHROEDER, Justice.

This is an action to enjoin and restrain the use of a word in a trade name brought by a corporate plaintiff engaged in business under the trade name of 'American Fence Company' against an individual doing business as the 'All-American Fence Company.' The trial court entered judgment for the plaintiff and enjoined the defendant from using the word 'American' in its trade name in the area of Sedgwick County, Kansas. Appeal has been duly perfected to this court.

The question presented is whether on the facts in this case the trial court properly issued the injunction.

The American Fence Company of the Midwest, Inc., a corporation (plaintiff-appellee), is a foreign corporation, incorporated under the laws of Oklahoma, and authorized to conduct business in Kansas, pursuant to G.S.1949, 17-501 et seq. It has been engaged in the fence business in states other than Kansas since 1950. In July, 1957, it commenced business in Kansas as a sole proprietorship and, since June 25, 1958, has been authorized to do business in this state as a corporation, engaging in the sale and installation of domestic and industrial fences. It is a subsidiary of a parent corporation with offices in Phoenix, Arizona, having ten separate corporations doing business in eight different states, all being titled under varying corporate names depending on the geographical area, such as 'American Fence Company of the Southwest, Inc.' or 'American Fence Company of the Midwest, Inc.' etc. The distinctive part of the name being used in this and other corporations is the word 'American.'

Raymond Gestes, the principal defendant and appellant, is an individual doing business as the 'All-American Fence Company.' He is a resident of Oklahoma City, Oklahoma, and began operations under his trade name in that city in 1954. He also operates under the same trade name in St. Louis, Missouri; Indianapolis, Indiana; Louisville, Kentucky; Chicago, Illinois; and Wichita, Kansas.

Mr. Gestes entered into competition with the plaintiff in January or February, 1961, in the sale and installation of fences of all kinds in the Wichita area. His agent and branch manager in Wichita is W. E. Charles, defendant-appellant. Mr. Charles negotiated for a listing and advertising space in the classified section of the Greater Wichita telephone directory to appear in the April, 1961, edition of the directory.

This action was brought in equity against Raymond Gestes, d/b/a All-American Fence Company; W. E. Charles; and Southwestern Bell Telephone Company, Inc., a corporation, to restrain and enjoin Gestes and Charles from using the word 'American' in conjunction with their fence business, and the telephone company from publishing any such name in their telephone directory in the city of Wichita, Kansas, and for damages for the infringement of the plaintiff's rights and other equitable relief.

Upon joinder of issues by the pleadings, the case went to trial where the damage phase of the litigation was virtually abandoned by the parties. No cross appeal has been taken from the failure of the trial court to award damages.

In addition to the foregoing facts the evidence established considerable confusion between the two fence companies. Telephone calls were misdirected; mail was misdirected; and on one occasion a contract was brought into the wrong office by a customer. Customers experienced considerable confusion because the word 'American' was in both names. One woman testified that a brochure used by the All-American Fence Company in advertising led her to think she was dealing with the American Fence Company. The calling card was clipped over the word 'All' in the brochure so it appeared that she was dealing with the American Fence Company.

The plaintiff's Wichita manager indicated that the name 'American Fence Company' was substantially advertised for three years in newspapers, telephone directory, stationery and at plaintiff's business establishment, and that prior to the defendants' coming to Wichita in January, 1961, there had been no confusion with any other company in Wichita, but that subsequent to the defendants' arrival and advertising, the plaintiff had received numerous misdirected telephone calls and had encountered confusion in calling upon customers. He testified the plaintiff had experienced a business decrease in the amount of $6,000 during the three or four months after the defendant commenced competing, based on a comparable period of the past three years. The plaintiff had decreased its number of employees during this period as a result of the loss of business. Both companies advertised in the classified section of the telephone directory, the All-American Fence Company being listed ahead of the American Fence Company.

The plaintiff's Wichita manager further testified that the term 'American' was stressed in its advertising, and that it had for several years used the abbreviated form of its corporate title, 'American Fence Company,' to its customers and the general public, which has become generally well known and accepted. On its letterhead stationery and other literature to prospective customers, the plaintiff, however, used its registered corporate designation, 'American Fence Company of the Midwest, Inc.'

The defendants, Gestes and Charles, took the position in their pleadings that the term 'All-American' was a separate and distinctive term as defined in Webster's Dictionary and as understood by the public. By their evidence they attempted to show that all their advertising material, except their post card, bears a distinctive representation of a figure in a football uniform in position to throw a pass. It appears, however, that in some of the defendants' newspaper advertising copy the football player was omitted.

The appellants specify that the trial court erred (1) in overruling their demurrer to the plaintiff's evidence; (2) in finding the evidence sufficient to support the judgment; and (3) in overruling the defendants' motion for a new trial. All resolve into the ultimate question whether the trial court on the facts in this case properly issued the injunction (also specified as error).

Each case of this type necessarily depends upon its own peculiar facts. (Kansas Milling Co. v. Kansas Flour Mills Co., 89 Kan. 855, 133 P. 542.)

In Powell v. Valentine, 106 Kan. 645, 189 P. 163, it was said 'that it is the duty of a subsequent trader, coming into an established trade, not to dress up his goods or market them in such a way as to cause confusion between his goods or business and that of a prior trader.' (p. 648, 189 P. page 164.)

The Federal Court in Florence Mfg. Co. v. J. C. Dowd & Co., 2 Cir., 178 F. 73, had a case from New York in which it was sought to prevent the use of the name 'Sta-Kleen' in the sale of tooth...