Industrial Finance Corporation v. Community Finance Co.

• Decision Date: 24 November 1923
• Docket Number: 4065.
• Citation: 294 F. 870
• Parties: INDUSTRIAL FINANCE CORPORATION v. COMMUNITY FINANCE CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

294 F. 870

INDUSTRIAL FINANCE CORPORATION v. COMMUNITY FINANCE CO. et al.

No. 4065.

United States Court of Appeals, Fifth Circuit.

November 24, 1923

W. L Coley, of Fort Worth, Tex., for appellees.

Before WALKER and BRYAN, Circuit Judges, and GRUBB, District Judge,

BRYAN Circuit Judge.

This suit presents the question of the right of appellees to represent that they are organizing a bank on the 'Morris Plan' of industrial banks, or industrial banking.

According to the allegation of appellant's bill in March, 1910, A J. Morris organized in the city of Norfolk, Va., a company for the purpose of conducting a loan and savings business for the accommodation of industrial workers, small tradesmen and craftsmen of different kinds, who had no standing for credit in commercial banks, and who for that reason theretofore had been compelled to apply for credit to pawnbrokers and others, who exacted high rates of interest, with the result that it was difficult and often impossible for such borrowers to repay the loans extended to them. The plan incorporated by Morris contemplated the issuance of debenture certificates, usually in the amount of $50, to be matured by the payment of weekly installments; that loans would be made at 6 per cent. per annum and be evidenced by notes payable one year after date; and that borrowers would be required to assign the debenture certificates as collateral. The purposes of the plan were to enable the company organized by Morris to make reasonable profits, and also to enable a borrower to create a fund by weekly deposits on his indebtedness, and thus to meet his obligation. The plan proved to be successful.

In 1911 Morris organized a company at Atlanta, and in 1912 two additional companies, one at Baltimore, and the other at Washington. In organizing these companies Morris found it necessary to take stock in them, and soon found that the development of his plan was beyond his financial means. In 1912 he organized a company with an authorized capital of $300,000, to which he and his associates conveyed all their rights, including copyrights of literature, stock in companies already organized, and all rights to the trade-names by which such companies were becoming known, which were 'Morris Plan of Industrial Banks,' 'Morris Plan of Industrial Banking,' or simply 'Morris Plan.' In 1914 it was found advisable, on account of the growth of the plan in the establishment of banks in various cities under it, to incorporate the appellant company, with a capital stock of $1,500,000, to which was transferred all of the assets, including the trade-names and the good will of the earlier company. The capital stock of the appellant is now more than $4,000,000.

The appellant has spent large sums in advertising and establishing the names by which banks organized under this plan became known, has built up a profitable business, has protected the public investing in such institutions from being misled and deceived, has established such institutions on a firm basis in the business world, enjoys the confidence of the public, and has carefully avoided creating the impression that such institutions can be organized as 'get rich quick' concerns, or as returning more than reasonable profits. By reason of the designation given to banks organized by the appellant, it is profitable to it to organize banks in cities of...