Beneficial Industrial Loan Corporation v. Kline

• Decision Date: 12 January 1943
• Docket Number: No. 12336.,12336.
• Parties: BENEFICIAL INDUSTRIAL LOAN CORPORATION et al. v. KLINE et al.
• Court: U.S. Court of Appeals — Eighth Circuit

132 F.2d 520 (1942)

BENEFICIAL INDUSTRIAL LOAN CORPORATION et al. v. KLINE et al.

No. 12336.

Circuit Court of Appeals, Eighth Circuit.

December 11, 1942.

Rehearing Denied January 12, 1943.

J. R. McManus, of Des Moines, Iowa (M. H. Johnson, of Des Moines, Iowa, and D. M. Kelleher, of Fort Dodge, Iowa, on the brief), for appellants.

Edward E. Baron, of Sioux City, Iowa (A. H. Bolton, of Sioux City, Iowa, on the brief), for appellees.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge.

This is a civil action brought by Beneficial Industrial Loan Corporation and Personal Finance Company of Iowa, corporations organized under the law of Delaware, against Earl L. Kline, doing business under the name and style of Personal Finance Company, Melvin W. Ellis, Superintendent of Banking of the State of Iowa, Personal Loan Society, Inc., and Mutual Loan Company, corporations organized under the law of Iowa, to enjoin all defendants, except Ellis, from using the name "Personal Finance Company" within the State of Iowa and for an accounting for any profits derived by defendants for using such name in connection with Earl L. Kline's small loan business and for damages sustained by plaintiffs by reason of defendants' use of such name. All defendants, except Ellis, joined in a motion: first, that Personal Finance Company of Iowa be dropped because of misjoinder; second, to dismiss as to Beneficial Industrial Loan Corporation for the reason that that company is not using the name "Personal Finance Company"; third, to dismiss as to Personal Finance Company of Iowa because it is not in competition with defendant Kline; and fourth, to dismiss as to the two corporate defendants because no cause of action is stated as to either. After submission of this motion, the trial court on his own motion dismissed the complaint for want of jurisdiction on the ground that it appeared to the court from the allegations of the complaint that the sum in controversy did not exceed $3,000. This appeal is taken from the consequent judgment of dismissal.

Plaintiffs' complaint is detailed and voluminous and includes allegations that: Beneficial Industrial Loan Corporation, referred to as B. I. L. C., is a corporation owning all of the stock of more than two hundred and fifty subsidiary corporations through which it conducts a nationwide small loan business. Most of these subsidiaries are incorporated under the name Personal Finance Company, or have that name as part of their corporate name. The Personal Finance Company of Iowa is one of such subsidiaries and has since December 10, 1940, under license issued by the Superintendent of Banking, operated a small loan business in Iowa with offices at Davenport.

Plaintiff B. I. L. C. and its predecessors have since about 1924 used the name Personal Finance Company as the base of the corporate name of the subsidiaries now owned by plaintiff. Through its advertising and business methods the B. I. L. C. and its subsidiaries have built up good will and a reputation of service, financial responsibility and fair dealing throughout the United States. It has expanded so that today, through its subsidiaries, B. I. L. C.'s volume of business is in excess of $100,000,000 per annum and its total capital is approximately $75,000,000. It is one of the largest small loan corporations in the world. It appears that B. I. L. C. has expended large sums of money, running into millions of dollars, in promoting the name "Personal Finance Company" in connection with its small loan business. This advertising was done through newspapers, magazines, by direct mail, and by network radio broadcasting, and has covered the State of Iowa as well as the rest of the United States. In addition, some 500,000 credit cards have been issued to customers throughout the United States whose course of dealing with plaintiff and subsidiaries justified the extension of credit, many of such customers being migratory.

It is also alleged that for several years prior to 1934, B. I. L. C. had subsidiaries operating in Iowa under the following names: Personal Finance Company of Cedar Rapids, Personal Finance Company of Council Bluffs, Personal Finance Company of Dubuque, and Personal Finance Company of Sioux City. In 1934 these subsidiaries were liquidated and B. I. L. C. withdrew from the state of Iowa until 1940, when the plaintiff Personal Finance Company of Iowa obtained a license to and did engage in the small loan business in Iowa.

The gist of this portion of the complaint is that B. I. L. C. and its subsidiaries had acquired through long usage, advertising and promotion, the exclusive right to the trade-name "Personal Finance Company", and that such name was identified with B. I. L. C. and its subsidiaries, and that the plaintiffs have the exclusive right to the use of said name throughout the United States and in Iowa.

It is alleged that defendant Earl L. Kline is an individual who since January 2, 1941, has been engaged in the small loan business in Iowa under the name Personal Finance Company, with offices at Sioux City. As to the two corporate defendants, Personal Loan Society and Mutual Loan Company, it is alleged that though they have no interest in the trade name "Personal Finance Company" they wrongfully assert such interest in themselves and have assumed to authorize Mr. Kline to use that name in his business.

Plaintiffs allege that Mr. Kline chose the name "Personal Finance Company" with the intent and purpose of attempting to appropriate to his own use the value of plaintiffs' good will and reputation by leading the borrowing public to believe that he was identical with or identified with plaintiffs and their business. This conduct, it is asserted, constitutes unfair competition, has inflicted injury upon plaintiffs and will continue to do so unless Mr. Kline is restrained from further use of the trade name.

Plaintiffs in seeking reversal of the trial court's order, contend that the complaint stated facts disclosing that the amount in controversy exceeded the sum of $3,000. The bill also alleges directly that the sum in controversy exceeds the jurisdictional amount. Such a general allegation when not traversed is sufficient, unless it is qualified by other facts which so detract from it that the court must dismiss on its own or on defendants' motion. Gibbs v. Buck, 307 U.S. 66, 59 S.Ct. 725, 83 L.Ed. 1111; KVOS, Inc., v. Associated Press, 299 U.S. 269, 57 S.Ct. 197, 81 L.Ed. 183. Though the allegations of jurisdictional facts are not challenged by the defendant, the court may insist that such facts be established, and for that purpose the court may demand that the party alleging jurisdiction justify his allegations by a preponderance of evidence. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 56 S.Ct. 780, 80 L.Ed. 1135. In this case the trial court was of the opinion that the plaintiffs' claim as stated was one which they could neither jointly nor severally be legally permitted to sustain by evidence, and therefore the general allegation of a jurisdictional sum in controversy was of no avail.

Though the case is here on the issue of jurisdiction, a determination of that issue requires an inquiry into the question of whether the use by the defendant Kline of the name "Personal Finance Company" would establish a cause of action in favor of the plaintiffs because of any right previously acquired in the use of that name. In order for such a cause of action to arise, the term "Personal Finance Company" must be a term subject to appropriate and exclusive use and a proper subject of property right which has a value recognized by law and which the law will protect.

That a corporate name or trade name may become a property right is well established by authority. Standard Oil Co. of New Mexico v. Standard Oil Co. of California, 10 Cir., 56 F.2d 973; Standard Oil Co. of New York v. Standard Oil Co. of Maine, D.C., 38 F.2d 677; American Steel Foundries v. Robertson, 269 U.S. 372, 46 S.Ct. 160, 70 L.Ed. 317; Iowa Auto Market v. Auto Market & Exchange, 197 Iowa 420, 197 N.W. 321. The concept is well stated in Standard Oil of New York v. Standard Oil of Maine, supra 38 F.2d 679:

"The good will in business is a valuable asset, and in modern commercial life it is frequently built upon a trade-name. Any trade-mark or name not unlawful in itself nor against public policy, which has become of a pecuniary value or a business advantage, becomes a property right, and, as such, is entitled to the protection afforded by the courts....