Scalise v. National Utility Service

• Citation: 120 F.2d 938
• Decision Date: 20 June 1941
• Docket Number: No. 9879.,9879.
• Parties: SCALISE et al. v. NATIONAL UTILITY SERVICE, Inc.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

120 F.2d 938 (1941)

SCALISE et al. v. NATIONAL UTILITY SERVICE, Inc.

No. 9879.

Circuit Court of Appeals, Fifth Circuit.

June 20, 1941.

Robt. R. Milam and E. T. McIlvaine, both of Jacksonville, Fla., for appellants.

Herman Ulmer and Charles H. Murchison, both of Jacksonville, Fla., for appellee.

Before FOSTER, HUTCHESON, and HOLMES, Circuit Judges.

HUTCHESON, Circuit Judge.

The suit, on allegations showing that considerably more than $3,000 was involved, was for injunction against the use by the corporate defendant of the plaintiff's corporate name, National Utility Service, Incorporated, and for $25,000 damages, actual and punitive, against all the defendants for having obtained a charter in, and for the use of, said name.

The claim was that plaintiff, a foreign corporation, with no permit to do business in Florida, having begun a suit in a Florida state court against defendant, Scalise, and defendant, having pleaded in abatement, plaintiff's want of permit, the suit was stayed to enable plaintiff to secure a permit by complying with Florida law, whereupon defendant, for the wrongful and malicious purpose of appropriating plaintiff's corporate name, in order to prevent plaintiff from obtaining a permit, and thereby to defeat plaintiff's suit, secretly and corruptly applied for, and obtained a corporate charter in plaintiff's name.

The defenses were; lack of jurisdictional amount; a denial that the charter was applied for with the intention of wrongfully appropriating plaintiff's corporate name, or for the purpose of wrongfully preventing plaintiff from securing a permit to do business in Florida; a denial that defendants had acted as conspirators or tortiously; and an affirmative insistence that plaintiff not having applied for a permit before defendant applied for a charter, the name was open for use by defendant for the purpose of doing business in Florida under it but not in competition with plaintiff; and that plaintiff's loss of its right to a permit was therefore, the result of its wrongful action in having done business in Florida without first securing one.

Under the direction of the court, the equitable issue, plaintiff's right to an injunction, was tried to the court; the law issue, plaintiff's right to damages, was tried to a jury. On facts substantially without dispute,¹ there was a verdict for $261.50 actual and $2,500 punitive damages, and a final judgment for the damages and for an injunction against the use of plaintiff's corporate name.

All of the defendants have appealed from and are complaining of the judgment, both as to its award of injunction and of damages. But, though there is no express abandonment here, of the complaint against the injunction on the merits, and there is an insistence that the jurisdictional amount was lacking, and the decree was too broad in its terms, the complaint seriously urged here is of the damage award. This is vigorously assailed on the ground, (1) that there was no jurisdictional basis for the claim, (2) that there was no basis for the recovery of any actual damages because (a) defendants were doing what they had a right to do, and (b) if they were not, there was no showing that any legally recoverable damages resulted therefrom. (3) There was no basis for the recovery of punitive damages because (a) the action was taken on advice of counsel, and action so taken cannot be the basis of a punitive award, and (b), there being no basis for actual damages, punitive damages may not be awarded.

It is the law in Florida that the issuance of a charter to the defendant corporation, in the corporate name used by plaintiff was prima facie, lawful and rightful, and plaintiff, until the charter was annulled or use of it enjoined, was prevented from obtaining a permit to do business and from doing business in Florida under its corporate name. The uncontradicted evidence as to the business of plaintiff in Florida, shows that the value to plaintiff of doing business under its corporate name there, was greatly in excess of $3,000, and it is therefore plain that there is no merit in appellants' point, that the claim for an injunction was without jurisdictional value basis. It is equally plain that there is no merit in their claim that the injunction was not warranted, or if warranted, was too broad.

It is the law in Florida too that; the failure of a foreign corporation to secure a permit to do business there, as required by Sec. 6029, CGL, 1927, does not affect the legality of contracts it makes in the state, Hogue v. Morrison Const. Co., 115 Fla. 293, 156 So. 377, 95 A.L.R. 357; that such failure can be remedied at any time even after suit is filed and objection of no permit is raised; that such objection merely stays the action until a permit is obtained, after which the suit may be prosecuted to a conclusion. Burton v. Oliver, etc., Co., 121 Fla. 148, 163 So. 468. It is the law too, not only in Florida but generally elsewhere that it is a wrongful act to organize a domestic corporation by the same name as that already known to be used in the state by a foreign corporation, although the foreign corporation is not domesticated, but is doing business, in the state without a permit, and an injunction will issue, not merely after the charter has been obtained to prevent the use of the name in unfair competition, but to restrain the procuring or issuing of the charter under the proposed name or if the charter has been issued, to restrain the use of the name. 13 Am.Jur., Sec. 135, page 273; Peck Bros. & Co. v. Peck Bros. Co., 7 Cir., 113 F. 291, 62 L.R. A. 81; General Film Co. v. General Film Co., 8 Cir., 237 F. 64; Children's Bootery v. Sutker, 91 Fla. 60, 107 So. 345, 44 A.L.R. 698.² The evidence showing that defendant applied for a corporate charter, not only with full knowledge that plaintiff was doing business in the state under the same name, but for the sole purpose of interfering with and preventing plaintiff from prosecuting its suit under that name against defendant in the state court, it is perfectly clear that the injunction restraining the use by defendants of plaintiff's corporate name was properly ordered.

Upon the question of damages, because of the different views prevailing in different jurisdictions,³ upon the question of when, and the extent to which, punitive damages will be allowed, and because there is, in the case, the question of the effect, upon the allowance, of the advice of counsel, there is more to be said for appellants than upon the injunctive action.

A careful consideration of the record however, in the light of Florida law, leaves us in no doubt that, defendants stand no better on their claim that plaintiff's damage suit fails for want of jurisdictional amount and if not, for want of proof. In Florida as in the federal courts, the giving of punitive damages is not dependent upon, nor must it bear any relation to, the allowance of actual damages. It is sufficient that there has been a deliberately wrongful act for which the plaintiff has a right of action and that the...