National Shoe Stores Co. v. National Shoes of N.Y., Inc.

• Decision Date: 10 May 1957
• Docket Number: No. 178,178
• Citation: 131 A.2d 909,213 Md. 328
• Parties: , 113 U.S.P.Q. 380 The NATIONAL SHOE STORES COMPANY v. The NATIONAL SHOES OF NEW YORK, Inc., and National Shoes, Inc.
• Court: Maryland Court of Appeals

Page 328

213 Md. 328

131 A.2d 909, 113 U.S.P.Q. 380

The NATIONAL SHOE STORES COMPANY v. The NATIONAL SHOES OF NEW YORK, Inc., and National Shoes, Inc.

No. 178.

Court of Appeals of Maryland.

May 10, 1957.

William Saxon, Baltimore, Md., for appellant.

David Ross, Baltimore (Ober, Williams, Grimes & Stinson, Baltimore, on the brief), for appellees.

Before BRUNE, C. J., and COLLINS, HENDERSON, HAMMOND and PRESCOTT, JJ.

HENDERSON, Judge.

This appeal and cross-appeal are from a decree of the Circuit Court of Baltimore City enjoining the appellees from using, in a trading area comprising Baltimore City and adjoining counties, the words 'National Shoes' unless accompanied by a disclaimer of any connection with the appellant, or accompanied by the words 'The' and 'of New York, Inc.' The scope of the injunction was limited to the trading area mentioned, and to exterior display signs and window displays. The decree dismissed that part of the bill which prayed an accounting and damages. The appellant contends that it is entitled to the exclusive use of the name. The cross-appellant contends that no ground for relief was shown.

The appellant corporation was organized by the Stein brothers in Maryland in 1940, and has since used its corporate name in connection with various stores. It succeeded a partnership formed in 1938 that had adopted the same name. It presently operates four stores in the Baltimore area and another store in Alexandria, Virginia. The appellee, National Shoes, Inc., was incorporated in New York in 1938, succeeding a partnership trading as National Shoe Market that began business in Newark, New Jersey, in 1923, and had stores in New York as early as 1930. The appellee, the National Shoes of New York, Inc., is a wholly owned subsidiary that was incorporated in Maryland in August, 1955. The parent company, National Shoes, Inc., and its subsidiary and affiliated corporations, operate 116 retail shoe stores in New York, Massachusetts, Connecticut, New Jersey and Maryland as one integrated chain.

National Shoes, Inc. sought to expand its operations into Maryland in 1954. Upon discovery of the appellant's use of the name National Shoes, Mr. Siegel, an officer of the New York corporation, negotiated for the purchase of the appellant's stores. He testified he wished to make the purchase to avoid any controversy over the use of the name, to obtain outlets for its product more quickly, and to avoid benefiting the appellant by the national advertising of his company. A tentative agreement was reached on the basis of book value which showed a net worth of some $38,000, but negotiations fell through when the officers of the appellant placed a value of $100,000 on the good will or use of the name. In November, 1955, the appellees opened their first store in the Ritchie Highway Shopping Center in Anne Arundel County, south of Baltimore City. Since that time the store has been selling the full line of appellees' merchandise, including low to medium priced shoes and accessories in the same price range as those sold by the appellant. The sign on the outside of this store emphasizes the words of the corporate name, 'National Shoes', in somewhat larger letters than the words 'The' and 'of New York, Inc.' The appellees plan to pen another store in the Mondawmin Shopping Center, in the northwest section of the City.

While, as we have stated, the appellant and its predecessor partnership began the use of the name 'National Shoes' in 1938, it was brought out that one of its stores was discontinued and others turned over in 1954 to one of the Stein brothers who continued the business in the name of Murray Shoe Store Company. The appellant had a very small profit in 1954, and did business at a loss during the first six months of 1955. Of the five stores now in operation, three are located in the estern part of the City, or Baltimore County, in Highlandtown, Essex and Dundalk, which were opened between 1947 and 1952. The fourth store is located at 2003 West Pratt Street, and was opened in 1941. The store in Alexandria, Virginia, was opened in 1953. It was brought out that while the appellant used its corporate name on its stores, it featured on its signs and displays certain maufacturers' trade names of shoes, such as 'Poll Parrot', 'Red Goose' and 'Debenette'. It sells about 50 different brands in all. For the appellant, it was claimed that about 50% of the boxes on its shelves bore the name 'National Shoes'. For the appellees, it was claimed that the percentage was only 5%. There was also testimony that one of the Stein brothers prior to 1938 had been a factory superintendent of the Muskin Shoe Company, a manufacturer making shoes for National Shoe Market and stamping the name National Shoes on the product. It was also shown that some of the shoes sold by the corporation controlled by the Stein brothers had actually been manufactured for National Shoes, Inc. and purchased by the appellant from jobbers.

It was shown that the advertising of the appellant was of a very limited character. For the year 1955, the advertising bill of the four Baltimore stores was only $1,166.98, for the year 1954, $850. Almost all of the advertising was in the form of handbills, or in neighborhood newspapers. On the other hand, it was shown that the appellees spent over $3,000 on advertising for their Ritchie Highway store subsequent to its opening in November, 1955, and since 1949, they have spent over $2,000,000 on newspaper, radio and television advertising. All of their shoes are manufactured to their specifications and sold under the trade name of 'National Shoes', whereas all of the shoes sold by the appellant are purchased through wholesalers or jobbers.

The appellant contends that it has rights entitled to protection in the name 'The National Shoe Stores Company' under Code (1951), art. 23, sec. 5(a)(3), and to the use of the name 'National Shoes' under the law of trade-marks and unfair competition. The section provides that the name of a corporation organized in Maryland 'Shall not be the same as the name of any corporation of this State, * * * or so similar to any such name as to be misleading.' Code (1951), art. 23, sec. 124(a), provides that 'The [State Tax] Commission shall not accept for record any charter paper of a corporation of this State, which is not in conformity with law.' Section 127(b) provides that upon acceptance for record by the Commission of any articles of incorporation, 'Such acceptance for record shall be conclusive evidence of the formation of the corporation except in a direct proceeding by the State for the forfeiture of the charter.' Section 5(a)(3) had its statutory genesis in the 1951 revision of Article 23 (Acts 1951, ch. 135) and was based on a prior administrative practice. It was taken practically verbatim from the Model Corporation Act drafted by a committee of a section of the American Bar Association. A committee note states that its purpose is to protect the right of a corporation to its own name. See also Brune, Maryland Corporation Law and Practice (Rev. ed.), p. 679. The purpose of the practice, and now of the statute, was doubtless to avoid confusion by the general public and also by the Commission itself in carrying out its administrative duties. However, it does not in terms give a pre-existing corporation the right to object to the acceptance of a charter either before or after acceptance. It has been held that such a right is not created under similar statutory provisions. American Order of Scottish Clans v. Merrill, 151 Mass. 558, 24 N.E. 918, 8 L.R.A. 320 (per Holmes, J.). The State Tax Commission is not a party to the instant case and its action cannot be reviewed in this proceeding. Cf. Motor Club of America v. Curran, 193 Misc. 157, 83 N.Y.S.2d 733, affirmed 274 App.Div. 1083, 85 N.Y.S.2d 552. Investors Syndicate of America v. Hughes, 378 Ill. 413, 38 N.E.2d 754, 758, relied on by the appellant, was an action of mandamus against the custodian of charter records.

In any event, giving the widest scope to the new section, it would appear to merely restate the common law rule relating to protection of corporate names. See Brune, supra, pp. 23, 24. In Drive It Yourself Co. v. North, 148 Md. 609, 614, 130 A. 57, 59, 43 A.L.R. 206, Judge Walsh, for the Court, said: 'There is no statute in Maryland governing the right of a corporation to the exclusive use of its own name, but such right exists at common law, and it includes the further right to prohibit another from using a name so similar to the corporate name as to be calculated to deceive the public. Afro-American [Order of] Owls [etc.] v. Talbot, 123 Md. 465, 91 A. 570.' In 6 Fletcher, Cyclopedia of Corporations, § 2423, p. 31, it is said in regard to relief based on a statute rather than on the common law rule: 'The matter is not of vital importance, for the corporate name will, in any event, be protected on the same principles as a trade name or trade-mark. * * *.'

The cases dealing with name protection tend to fall into three categories. See Nims, Unfair Competition and Trade-Marks (4th ed.), §§ 10, 11. The first of these involves the protection of a name consisting of distinctive, unique or fanciful words. Such names are generally referred to as technical trade-marks and, usually, the appropriation of such words alone is sufficient to give rise to a protectible right in the name. The trial court found that the words 'National Shoes' are not fanciful or distinctive and thus not subject to exclusive appropriation as a technical trade-mark. In National Shoe Corporation v. National Shoe Mfg. Co., 302 Mass. 449, 19 N.E.2d 734, 736, the court observed that 'there is nothing peculiar or distinctive in the words 'National Shoe'.' See also National Grocery Co. v. National Stores Corporation, 95 N.J.Eq. 588, 123 A. 740,...