Federal Secur. Co. v. Federal Secur. Corp., 129 Or. 375 (OR 4/23/1929)

• Decision Date: 23 April 1929
• Citation: 276 Pac. 1100,129 Or. 375
• Parties: FEDERAL SECURITIES CO. v. FEDERAL SECURITIES CORPORATION.
• Court: Oregon Supreme Court

Page 375

129 Or. 375

276 Pac. 1100

FEDERAL SECURITIES CO. v. FEDERAL SECURITIES CORPORATION.

Supreme Court of Oregon.

Argued February 19, 1929.

Affirmed April 23, 1929.

Rehearing denied May 28, 1929

Corporations—Right to Use of Name.

1. Foreign corporation by its incorporation was legally invested with its name.

Corporations—Name is Property Right.

2. Corporation's right to its name should not be injuriously affected nor destroyed, unless it is unjustifiably interfering with a like possession of another,

Corporations—Similarity of Names Deceiving Public Ground for Equitable Relief.

3. A second comer into the field cannot employ a name so similar to an already established concern that deception of the public and diversion of first appropriator's business will be the result, but a change of name or the use of an explanatory phrase will be required.

Corporations—Where Deception Results, Motive and Intent Immaterial.

4. Where deception results from use of business name similar to prior appropriator's, motive and intent are immaterial, but their presence may quicken application of a remedy by lessening need of proof of injury.

Corporations—Use of Name to Which Others have Common Right, not Enjoined.

5. One corporation cannot restrain another from using in its corporate title a name or word to which all others have a common right.

Corporations—Deceptive Use of Corporate Name Justifies Equitable Relief.

6. To justify enjoining use of trade name, circumstances must be such that it appears that plaintiff's business will suffer from a deceptive use of its name or that by reason of a similar act of unfair competition the public will be imposed on, since it is not the name but the business which is guarded against injury through a fraudulent traffic of its name by later comer, whether conducted in name of individual or corporation, and whether name is fanciful or not.

Corporations—Similarity of Names Alone Insufficient for Injunctive Relief but Deception and Injury must Result.

7. When it has been found that there is a similarity of names, a court does not cease its inquiries and at once grant relief, but proceeds to ascertain whether the other facts are such that deception and injury are likely.

Corporations—Community Served and Extent of Business Considered in Enjoining Use of Similar Name.

8. Where a business offers its services only to a small highly specialized group capable of close discrimination, a greater degree of similarity of names will be tolerated than where business offers itself generally to all comers, most of whom will respond to similarity of names and not investigate identity, particularly where articles are commonplace and are purchased without a careful scrutiny of seller's identity.

Corporations—Facts Held not to Justify Enjoining of Use of Similar Corporate Name.

9. Plaintiff incorporated in Oregon under name "Federal Securities Corporation" for purpose of buying and selling securities and title reservation installment contracts, and principal part of whose business was retaining such securities, held not entitled to enjoin use of name "Federal Securities Corporation of Illinois," by defendant incorporated in Illinois for similar purposes, but approximately 90 per cent of whose business was wholesaling its issues, and which was given dealer's permit under Laws of 1923, page 271, on condition that it add to its name "of Illinois," and which complied with Sections 7777-7782, Or. L., since, though there was some confusion which might perhaps never entirely cease, no probability of deception was shown.

Corporations—Explanatory Matter in Name Held Sufficient to Prevent Deception and Injury.

10. Where words selected for a corporate name are chosen from public domain and imply a national business, and territory in which corporation operates is one that will probably be reached through national expansion of established institution which is in fact national in scope, earlier appropriator cannot demand a complete exclusion when later one bids entry, but must be content with such explanatory matter as will prevent deception, though it may not entirely eliminate confusion by the careless.

From Multnomah: JOHN H. STEVENSON, Judge.

Department 1.

AFFIRMED. REHEARING DENIED.

For appellant there was a brief over the name of Messrs. Malarkey, Seabrook & Dibble, with oral arguments by Mr. W. W. Banks and Mr. E. B. Seabrook.

For respondent there was a brief and oral arguments by Mr. Thos. G. Green and Mr. John K. Kollock.

Suit to enjoin use of corporate name by defendant. From decree directing defendant to continue certain practices in use of its name and permitting the continued use thereof, plaintiff appeals.

ROSSMAN, J.

This is a suit to enjoin the defendant from the use of its corporate name, "Federal Securities Corporation," and also to prevent it from using the name which it assumed for engaging in business in Oregon, "Federal Securities Corporation of Illinois." Plaintiff was organized and incorporated in May, 1920, under the laws of this state; its articles of incorporation authorize it to engage in the business of buying and selling securities. Immediately following its incorporation the plaintiff began the transaction of business by purchasing and selling stocks and bonds and engaging in similar transactions in commercial paper consisting of the title reservation installment contracts executed by purchasers of automobiles; the latter, at that time, constituted a very substantial portion of its business. Until November of 1925 its customers were so limited in number and were so intimately identified with the plaintiff that it did not secure a permit as a dealer in securities under the provision of Section 6840, Or. L. In November of 1925 it organized itself for actively engaging in the sale of securities and in that month secured a dealer's permit. Its sales in the year prethe institution of this suit amounted to the sum of $2,000,000, one-fourth of that amount represented its transactions in commercial paper, the balance consisted of the sale of bonds. It was possessed of approximately 300 customers and twice a month circularized about 400 individuals consisting of the 300 just mentioned, and about 100 prospective customers. Following its organization the plaintiff established desirable connections with corporations which originated large offerings of securities; these connections enabled it to become a member of syndicates which participated in the sales of such issues. Due to the fact that the plaintiff confined itself to conservative methods and the sale of securities of very high standing, it was acquiring a favorable reputation. By advising its customers of opportunities to sell their securities to good advantage and of other opportunities to convert their holdings into some more desirable form of investment it maintained a very intimate contact with them. The plaintiff depended on such means for the development of its business, rather than advertising and an indiscriminate search among possible prospects. Its reputation and business was entirely local and confined to a comparatively small number. Its name had not come to import any secondary meaning.

The defendant Federal Securities Corporation was incorporated under the laws of Illinois in the year 1919 and immediately began the transaction of business. Its articles of incorporation described the nature of the business which it was authorized to transact in words similar to those found in the plaintiff's charter; however, it pursued a very different course in achieving its purpose. It at once became an originator of bond issues and did not attempt to gain a personal contact with buyers, but reached the latter by wholesaling its issues to retail dealers. In the year 1919 it originated issues to the amount of $3,500,000, the next year to the amount of $22,463,000; to and including the year 1927 issues originated by it amounted to more than $800,000,000. From the time that it opened its local office November 7, 1927, to some time in January, 1928, it sold bonds in this state in the amount of $1,300,000. Before it opened its local office it had sold bonds in this state by the process of correspondence. As we stated before, the defendant depended upon the wholesale method as the means of disposing of its bond issues; approximately 90 per cent of its business was of that type; on the other hand only 15 or 20 per cent of the plaintiff's business consisted of wholesaling. The latter originated no issues. In the period from 1919 to November 7, 1927, the defendant was authorized and actively pursued business in several other states. On the latter date it field with the Corporation Commissioner of this state an application for a dealer's permit, pursuant to the provisions of Chapter 189. When the Commissioner observed that confusion might arise through the similarity of the defendant's name with that of the plaintiff, the defendant readily acquiesced in the suggestion that the words "of Illinois" be added to its name; it thereupon complied with Section 7777 to Section 7782, Or. L., regulating the transaction of business under assumed names, and then filed the appropriate application to do business in this state under the name of "Federal Securities Corporation of Illinois," thereupon the permit was granted. The defendant at once opened an office in the City of Portland, five blocks distant from that occupied by the plaintiff.

Its stationery and business cards bore not only the phrase "of Illinois," but in addition carried the information that its main office was in Chicago. The evidence justifies the finding that it has confined itself to its assumed name in the transaction of all of its business in this state. On one occasion there appeared in a Portland newspaper an advertisement concerning a large bond issue offered by a syndicate of dealers, of which the defendant was a member; its corporate name appeared in that...