Diamond Drill Contracting Co. v. International Diamond Drill Contracting Co.

• Decision Date: 10 March 1919
• Docket Number: 14649.
• Parties: DIAMOND DRILL CONTRACTING CO. v. INTERNATIONAL DIAMOND DRILL CONTRACTING CO. et al.
• Court: Washington Supreme Court

179 P. 120

106 Wash. 72

DIAMOND DRILL CONTRACTING CO. v. INTERNATIONAL DIAMOND DRILL CONTRACTING CO. et al.

No. 14649.

Supreme Court of Washington, En Banc.

March 10, 1919

Appeal from Superior Court, Spokane County; Wm. A. Huneke, Judge.

Action by the Diamond Drill Contracting Company against the International Diamond Drill Contracting Company and others. From decree for plaintiff, defendants appeal. Decree canceled, and action dismissed.

Chadwick C.J., and Fullerton, J., dissenting.

Guy B. Groff, Wm. Hatch Davis, and White & Randall all of Spokane, for appellants.

Voorhees & Canfield, of Spokane, for respondent.

MACKINTOSH, J.

The respondent was incorporated under the laws of the state of Washington in the year 1900, the incorporators being Knight and Stone, who organized their company under the name of 'Diamond Drill Contracting Company.' The appellant was incorporated under the laws of this state in 1913, the incorporators being one Mitchell, his wife and son the name under which they incorporated being 'International Diamond Drill Contracting Company.' The respondent commenced this action to permanently enjoin the appellant from the use of the latter name, or any name containing the words 'Diamond Drill' or 'Diamond Drill Contracting Company.' For many years prior to 1900 the tool known as the diamond drill had been in use throughout the world, the feature which distinguishes the diamond drill from other drills being the use of a cutting surface set with carbon diamonds, the drill being used to secure a core of the rock in the line of the drill hole, this core being brought to the surface through the drill for examination. Prior to 1900 Knight and Stone had been employed by the Sullivan Machinery Company, which was engaged in the manufacture and sale of mining supplies, among them the diamond drill, and incidentally, was contracting to drill with diamond drills for different individuals or companies desiring to have their properties prospected. Knight and Stone, leaving the employ of the Sullivan Machinery Company, engaged as partners in the business of drilling by contract with diamond drills for owners of property desiring to have mineral prospecting done by means of drilling. They then incorporated the respondent, 95 per cent. of the activity of which is contracting business, the other 5 per cent. consisting of the manufacture and sale of diamond drills. Since 1904 these drills had been known as the 'double tube return water core barrel drills,' patent for which was issued to Knight and Stone. The respondent in its business had acquired a reputation for ability and reliability, and had paid out large sums of money in advertising its business under the name of 'Diamond Drill Contracting Company,' and had become well known in the diamond drill contracting business by the name of 'Diamond Drill Contracting Company.' Mitchell for some years had been a diamond driller in the employ of the Sullivan Machinery Company, and, after leaving that company, had been employed by the respondent for a few months in the year 1911 as a drill foreman. After he had organized the appellant company it engaged in Spokane, within a very few blocks of the main office of the respondent, in the diamond drill contracting business. It also, as a minor portion of its business, engaged in the manufacture and sale of diamond drills of a design similar to that manufactured by the respondent, but made under what is known as the Jenkins' patent. The appellant for some time conducted its operations with drills manufactured by the respondent and purchased from it, but a few months before the beginning of this action the appellant began to engage in the manufacture and sale of machines on its own account under the Jenkins' patent.

At the time of the trial there were in the United States and Canada some half a dozen or more firms or corporations which were taking contracts to drill with diamond drills, but only one or two of these companies other than the two involved in this litigation included in their names the words 'Diamond Drill Contracting Company,' one company so doing being the Smith & Travers Diamond Drill Contracting Company of Canada. Respondent predicates its right to enjoin the use of the words 'Diamond Drill Contracting Company,' first, upon section 3680, Rem. Code, and, second, upon the fact which it alleges that the name 'Diamond Drill Contracting Company' had acquired a secondary meaning, and respondent had therefore a right to its exclusive use as a trade-name, and should be protected from the use of a similar and misleading name by the appellant.

First, section 3680, Rem. Code, reads, so far as material to this controversy, as follows:

'No corporation shall take the name of a corporation theretofore organized under the laws of this state, * * * nor one so nearly resembling the name of such other corporation as to be misleading. The secretary of state shall refuse to file said articles of incorporation of any association or corporation violating the provisions of this section.'

The secretary of state, having accepted the filing of the articles of appellant, has exercised his discretion, and determined that the two names are not misleading. The appellant argues therefrom that the respondent is bound by that determination, and in this action cannot collaterally attack the action of the secretary of state, and that such action can only be reviewed in a direct proceeding, and then only for mistake, abuse, or want of jurisdiction, and, if there was a ground for an honest difference of opinion, the secretary of state having exercised his judgment, that exercise cannot be here reviewed. State v. Forrest, 13 Wash. 268, 43 P. 51. It is probably true that the action of the secretary of state in allowing the filing of the appellant's articles cannot be brought into question in this proceeding, and in a direct action against the secretary of state for the purpose of securing the cancellation of such filing the court would not interfere with the exercise of his discretion, for, as we said in State ex rel. Progressive M P. Co. v. Howell, 96 Wash. 163, 164 P. 917:

'It may also be true that had the names of these corporations, instead of being exactly alike, only resembled each other with a difference such as to furnish room for honest difference of opinion as to whether they so resembled each other 'as to be misleading,' thus presenting a question for the exercise of judgment on the part of the secretary, * * * we would not award relator relief by mandamus.'

But this view of the action of the secretary of state does not exclude the consideration of the other phase of section 3680, which provides that no corporation shall take the name of a corporation theretofore existing nor a name so closely resembling the name of such other corporation as to be misleading. In other words, the section provides that no corporation shall take a misleading name, and that the secretary of state shall not allow the filing of the articles of incorporation of such company. As we have said, we cannot in this action interfere with the filing which has already taken place, but if the second company has taken the name of a corporation theretofore existing or taken a name which is so similar thereto as to be misleading, we can prevent in this action the second company from continuing to use such name. G. L. of A. O. U. W., etc., v. W. R. Graham, 96 Iowa, 592, 65 N.W. 837, 31 L. R. A. 133; Soc. of War 1812 v. Soc. of War 1812, etc., 46 A.D. 568, 62 N.Y.S. 355; Edison Stor. Bat. Co. v. Edison Auto Co., 67 N. J. Eq. 44, 56 A. 861.

This presents to us a question of fact as to whether the prefixing of the word 'International' to the name theretofore used by the respondent is the adoption by the respondent of a name 'so clearly resembling the name of' the respondent 'as to be misleading.' It may be that the use of these two names would result in some confusion. The testimony disclosed by the record on the question of the confusion that arose by reason of the similarity of names of the two companies is embraced in these incidents: The officers of the respondent testify that the appellant, so far as they know, has never obtained any business that was intended for respondent, and that the appellant made no effort to represent itself as the respondent, nor did it make any fraudulent representations to secure contracts. They further testify that at numerous times telegrams addressed to Mitchell were delivered to respondent and that a great many local and long-distance calls, telegrams, invoices, and express packages intended for appellant had been delivered at respondent's office. The employés of the appellant testified that from the time of appellant's organization until the time of trial two letters, one telegram, but no telephone calls, had been received at the office of appellant which were intended for the respondent; that the attention of the mail carrier having been called to the misdelivery of these letters no trouble of that character thereafter occurred. There was no evidence produced showing that there had been any loss of business to the respondent by reason of this confusion which has been shown, nor has the appellant obtained any information concerning the respondent's business, nor has the appellant taken advantage of the confusion, such as it was, to benefit thereby. But confusion is not what is inhibited by the statute; 'misleading' is the term, and that means calculated to lead astray or lead into error, and must refer, not to casual mistakes as to identity, but to the leading into error of persons contemplating or engaged in transactions with the respondent. In determining whether names are misleading by reason of similarity, attention must be paid...