Federal Securities Co. v. Federal Securities Corp.

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

276 P. 1100

129 Or. 375

FEDERAL SECURITIES CO. v. FEDERAL SECURITIES CORPORATION.

Supreme Court of Oregon

April 23, 1929

Department 1.

Appeal from Circuit Court, Multnomah County; John H. Stevenson Judge.

Suit by the Federal Securities Company against the Federal Securities Corporation, doing business under the name of Federal Securities Corporation of Illinois. From the decree plaintiff appeals. Affirmed.

W. W. Banks and E. B. Seabrook, both of Portland (Malarkey, Seabrook & Dibble, of Portland, on the brief), for appellant.

Thos G. Greene and John K. Kollock, both of Portland, for respondent.

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 preceding the 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 to 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 is filed with the corporation commissioner of this state an application for a dealer's permit, pursuant to the provisions of chapter 189, Laws 1923. 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 advertisement. However, that advertisement was contracted from its Chicago office, and the incident occurred shortly after its entry into this state. Those circumstances may authorize the inference that the omission of the qualifying phrase was inadvertent.

The evidence indicates that, after the defendant opened its office in Portland, some mail matter, telegrams, and packages intended for the one were delivered to the other. Instances occurred where telephone calls were misdirected, and upon two occasions the telegraph companies became confused in making charges for their services. We are satisfied, however, that much of this sort of confusion will disappear as the postal department, telegraph companies, and delivery men become acquainted with the two companies; such was the experience in Unpqua B. Exch. v. Um-Qua V. B. Growers, 117 Or. 678, 245 P. 324. The evidence is clear that the defendant has never taken advantage of the similarity of names, and has instructed its employees to make no misrepresentations concerning its identity; in fact, we seem to be warranted in concluding that the defendant is possessed of no desire to appear as the plaintiff. It has expressed itself as willing to continue the descriptive phrase "of Illinois" after its name, and to print those words in letters of the same size as "Federal Securities Corporation." While the defendant is apparently ready to adopt any reasonable suggestions which will distinguish the two corporations and avoid confusion, the plaintiff confines itself to an insistance that the defendant should be denied the use of its name, and that its assumed name is insufficient to prevent deception and confusion. The decree of the circuit court dismissed the complaint, but required that the words "of Illinois" should appear in type of the same size as "Federal Securities Corporation."

The problem before us is a practical one, attended with important consequences to both parties. Fortunately the principles of law applicable to it do not restrain the court from applying any remedy which is likely to be beneficial and avoid confusion; the only obstacle which prevents an easy and complete avoidance of confusion, is the facts themselves. By its incorporation in Illinois, the defendant was legally invested with its name. Newby v. Oregon Central Railway Co., F. Cas. No. 10144; Howe Scale Co. v. Wyckoff Seamans & Benedict, 198 U.S. 118, 25 S.Ct. 609, 49 L.Ed. 972. A name possessed by an active, responsible, and reputable organization becomes an asset of very great value in the course of time. It requires no argument to convince one that such a possession should not be injuriously affected nor destroyed unless it is unjustifiably interfering with a like possession of some other person. The plaintiff, through its creation under the laws of this state, and the defendant by virtue of its compliance with the laws regulatory of corporations of its kind, have each won the right to do business within this state; the sole interference to a full exercise of those rights is the similarity of corporate names. The problem now is the degree of similarity which exists and which will be tolerated, the likelihood of deception, and to what extent the practical needs of commerce demand that distinguishing features should be created. It no longer requires the citation of authority to buttress the proposition that 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 the first appropriator's business will be the result; a change of name, or the use of an explanatory phrase will be required. Where deception ensues, motive and intent are immaterial; their presence, however, may quicken the application of a remedy by lessening the need of proof of injury. Kansas Milling Co. v. Kansas Flour Mills Co., 89 Kan. 855, 133 P. 542. Counsel...