(113 Fed. 291.)

THE PECK BROTHERS & COMPANY v. PECK BROS. CO. et al.

(Circuit Court of Appeals, Seventh Circuit. January 21, 1902.)

No. 818.

1. UNFAIR TRADE-ADOPTING SIMILAR CORPORATE NAME-RIGHT TO INJUNCTION. "Peck Brothers & Co.," a Connecticut corporation, conducted business in that state as a manufacturer of brass and plumbers' goods for over 30 years, during which time its goods became widely known over the country, and attained a high reputation. Becoming embarrassed, a suit was instituted by stockholders for a dissolution and receivership, for the purpose of reorganization. The receivers continued the business until by order of the court the entire property, good will, trade-marks, etc., of the company, were sold to a committee representing all the stockholders, who reorganized under the name of "The Peck Brothers & Company" and the old corporation was dissolved. Prior to the receivership the company maintained a branch house for the sale of its goods in Chicago, which was in charge of three stockholders, one of whom, whose name was Peck, was vice president of the company, and one of the complainants in the receivership suit. Another of the number was appointed ancillary receiver of the Chicago property. Pending the receivership such parties, with the possible exception of the receiver, and joined by the attorney for the receiver and one other, procured a charter from the state of Illinois for a corporation under the name of "Peck Bros. Co." to engage in the same business, in which company the ancillary receiver also became a stockholder and officer prior to his resignation as receiver. The Eastern receiver, having learned such facts from outside sources, protested against the use of the name before the organization of the new company was completed, and directed the Western receiver not to recognize it. The new company purchased the Chicago stock of the old, but not its good will. There was but one person named Peck interested in the new company. Both companies continued in business in the same territory, and a considerable confusion of goods resulted, even with experienced purchasers, owing to the similarity of the names with which such goods were stamped. Held, that the name of the new company, which was unwarranted in fact, because there were no "Peck brothers" interested therein, was clearly adopted for the fraudulent purpose of obtaining the advantage of the reputation and established trade of the old company, and in violation of the duty which its organizers owed to the old company as stockholders, and that the carrying on of business thereunder in the manner shown constituted unfair competition, against which the old company was entitled to an injunction.

2. TRADE-NAMES-TRANSFER BY SALE OF GOOD WILL OF CORPORATION-RIGHTS OF SUCCESSOR.

The sale under a decree of court of all the property of a manufacturing or commercial corporation, including "its franchises, name, and good will," to a reorganization committee representing all its st ckholders, passes to the purchasers and the reorganized company the right to the old company's trade-name, and to protection in its exclusive use to the same extent that such protection could have been invoked by the old company, had it continued in business.

3. SAME-SUIT AGAINST CORPORATION FOR INFRINGEMENT

CHARTER.

EFFECT OF STATE

The fact that a corporation has been chartered by a state under a certain name, which it selected, does not afford it immunity from a suit in a federal court by a corporation of another state to enjoin it from prosecuting its business under such name, where the name was deliberately adopted by its incorporators in imitation of complainant's for the fraudulent purpose of deceiving the public and appropriating complainant's good will and reputation.

Appeal from the Circuit Court of the United States for the Northern District of Illinois.

The appellant, a corporation of the state of Connecticut, filed its bill against the corporation "Peck Bros. Co." and the individual defendants, who are its officers and directors, to restrain (1) the use of the name "Peck Bros. & Co." or "Peck Bros. Co." or "Peck Bros." or names substantially identical therewith, in connection with the prosecution of the business of the manufacture, purchase, and sale of plumbing, gas and steam fitting materials and supplies, fixtures, brass and iron goods; (2) from holding out or representing that the goods manufactured by them are the same as those manufactured by the complainant; and (3) from using or interfering with the paramount right of the complainant to the name of "Peck Brothers & Co.," or "Peck Bros.," or "Peck Bros. Co.," in connection with the manufacture and sale of goods of the character stated; and seeking also to recover damages sustained by reason of the alleged unauthorized interference with the complainant's paramount right in the use of the names stated. The bill was answered to, and upon the evidence taken the court below on July 8, 1901, dismissed the bill for want of equity.

Elnathan Peck and his two sons, J. M. Peck and Henry F. Peck, under the firm name of E. Peck & Sons, in the year 1859, commenced the business of the manufacture of brass goods for plumbers and gas and steam fitters at New Britain, in the state of Connecticut. In the year 1862, the corporation "Peck Brothers & Co." was organized, and became the successor in business of the firm of E. Peck & Sons. This corporation was composed, in part, at least, of the two sons of Elnathan Peck, and the plant of the business at that date had been removed to the city of New Haven. The capital stock of the corporation was originally $35,000. This was increased from time to time until in March, 1896, it was $750,000. The business had greatly grown in volume, and its product had become well and thoroughly known to the trade throughout the country as "Peck Brothers' Go. ds." Branch offices for the sale of its product were established in the cities of New York, Boston, and Chicago,-in the latter city in the spring of 1889. The office in Chicago was placed in the charge and management of the defendants Oliver D. Peck and Albert D. Sanders. The former was then a stockholder in, and the secretary of, the Connecticut corporation, and was its vice president from 1894 to 1896, and is now the president of the defendant corporation. The latter was a stockholder in the Connecticut corporation, and conducted the branch on a salary, and is now the general manager of the defendant corporation. The defendant William A. Ratcliffe was also a stockholder in the Connecticut corporation, and was the principal salesman in the Chicago branch, and is now the secretary of the defendant corporation. On the 14th day of March, 1896, the corporation became embarrassed; and a bill was filed in the superior court of the county of New Haven, Conn., by the owners of a majority of the stock, against the corporation, for the appointment of a receiver. Oliver D. Peck, one of the defendants in this suit, was a plaintiff in that suit. Receivers were duly appointed, who took charge of the corporation and managed its business. On March 16, 1896, the defendant Oliver D. Peck, with others, filed an ancillary bill in the circuit court of the United States for the Northern district of Illinois, upon which the defendant Albert D. Sanders was appointed ancillary receiver of the corporation with respect to its property in the state of Illinois, for the benefit of the principal receivers, appointed by the superior court for the county of New Haven, Conn. On June 25, 1896, Henry D. Coghlan, W. J. Naughton, and George C. Morton filed with the secretary of state of the state of Illinois a certificate signed by them, respectively, in which they proposed to form a corporation under the name of "Peck Bros. Co.," for the manufacture and sale of plumbing, gas fitting, steam fitting, sewer pipe, sewer building materials and supplies, also hardware, brass, and iron goods, metals, and machinery, with a capital stock of $75,000, divided into 750 shares; the principal office of the company to be located in the city of Chicago. A license was thereupon issued to them as commissioners to open books for subscription for the capital stock. On August 21, 1896, they re

ported to the secretary of state that the stock was fully subscribed as follows: Oliver D. Peck, 100 shares, amounting to $10.000; Henry D. Coghlan, 200 shares, $20,000; William A. Ratcliffe, 72 shares, $7,200; James L. Ratcliffe, 378 shares, $37,800,-and that there had been elected as directors the four subscribers to the capital stock and George C. Morton, whereupon on that day the secretary of state issued his certificate "that the said Peck Bros. Co. is a legally organized corporation under the laws of this state." Mr. Coghlan, who subscribed for 200 shares, was the attorney of the Chicago branch and was one of the attorneys of the defendant Sanders as receiver, and is one of the solicitors of record for the defendants in this suit. The bill charges the fact to be "that, although the name of the defendant Albert D. Sanders does not appear as one of the incorporators of the defendant 'Peck Bros. Co.,' he was directly interested and contributed toward the payment upon the shares of its capital stock, and that as your orator is informed and believes, the two hundred shares of capital stock of said corporation subscribed by Henry D. Coghlan were in reality a subscription in trust for and in behalf of the defendant Albert D. Sanders; that the said Henry D. Coghlan was the confidential attorney of the said Albert D. Sanders both before and after his appointment as ancillary receiver; that said Albert D. Sanders immediately upon resigning his said receivership became the general manager of the defendant 'Peck Bros. Co.,' and has continued to be such general manager up to this time, and has taken an active part in the conduct and management of the affairs of said corporation from the time of its creation." To this allegation the defendant Albert D. Sanders answered that he "denies that on the 25th day of June, 1896, he conspired with the defendants William D. Peck and William A. Ratcliffe for the purpose of obtaining the name and good will and business of the firm of Peck Bros. & Company. He denies that he had anything to do with the organization of Peck Bros. Company, the defendant company. He denies that the subscription of Henry D. Coghlan to the capital stock of Peck Bros. Company was a subscription in trust for this defendant. He denies that the said Henry D. Coghlan was his confidential attorney, either before or after his appointment as ancillary receiver, but represents the fact to be that Henry D. Coghlan was the attorney for Peck Bros. & Company of New Haven, Conn., for years prior to its insolvency, and after its insolvency acted in connection with E. A. Otis as attorneys of the receivers in winding up the affairs of Peck Bros. & Company, and that everything done by the said Henry D. Coghlan in the organization of Peck Bros. Company was done for purposes and reasons unknown to this defendant, and in no way connected with him." All the defendants, except the defendant James L. Ratcliffe, "further answering, deny that the plaintiff has the exclusive right to the use of the name 'Peck Bros. & Co.,' 'Peck Bros. Co.,' or 'Peck Bros.,' or the name of 'Peck,' in connection with its said business. These defendants aver and charge that the defendant Peck Bros. Company is alone entitled to the use of the said name or names; that it was duly incorporated under the laws of the state of Illinois long prior to the complainant; that it purchased the assets and good will of the Western branch of Peck Bros. & Co.; that its company is headed by Oliver D. Peck, of the original firm of Peck Bros. & Co., who acts as its president; and that it had been in existence and doing business since June, 1896, and under the name adopted has built up a large business, which it alone is entitled to share and enjoy." No evidence was taken on behalf of the defendants below, except the deposition of one Wilson, the representative of the defendant corporation in the city of New York, touching the location of its office in that city.

There were negotiations in the spring of the year 1896, between the Connecticut receivers and Mr. Sanders, the ancillary receiver, on the one hand, and William A. Ratcliffe, representing a syndicate for the purchase of the property of the Connecticut corporation located in the city of Chicago. It was unknown to the Connecticut receiver who composed that syndicate. After some negotiation a price was fixed for the goods, and the sale was finally consummated in the month of September. The Connecticut receivers heard of the pr. posed new corporation in Illinois, not from the parties, but from some person on the outside, and on August 8th wired Mr. Sanders

as follows: "We object to title of new company. Avoid recognizing in any way," and on the same day addressed to him the following letter:

"New Haven, C nn., August 8, 1896.

"Mr. A. D. Sanders, Receiver, Chicago-Dear Sir: Since we heard of the organization of the new company to succeed to our business in Chicago, we have seriously considered the matter of allowing them to use the name Peck Bros. in any way, and in conversation with one of our prominent stockholders, Mr. W. H. Hart, he decidedly objected to it. While the intentions of the projectors might be all right, I can readily see where serious complications might arise from any company doing business in the same line under the name of Peck Bros., and we shall be under the necessity of refusing to recognize this company by making any sale of goods to them. I have just wired you to this effect, and I think, if you will stop to consider the matter, you will readily see the necessity of our entering the protest. I presume there may be some way by which the use of this name might be permitted under restrictions and limitations, but have not had an opportunity, as yet, of consulting our attorney in reference to the matter. I thought best to enter the protest, and will notify you and write you further after consultation with our attorney.

"Yours truly,

J. M. Peck. Receiver."

On August 14, 1896, he addressed a letter to "Mr. W. A. Ratcliffe, Agent for the Peck Bros. Co.," which contains the following: "We have talked over the matter of the name of the new company, viz., "The Peck Bros. Co.,' and we could see where it could and might be used by you to the detriment of the business of Peck Pros. & Co., but I had your assurance when in conversation with you that your idea in taking the before-mentioned name was to preserve the present channels of trade for Peck Bros. & Co.'s goods so far as possible, and so far as it could be made mutually advantageous. To this we can see no objection, but if at any time in the future Peck Bros. & Co. should find that goods were on the market not of their manufacture but marked The Peck Eros. Co.' we have no doubt but the name of the new company is, in our opinion, so near like the old that it would at least warrant a trial of the matter in the courts. As no such case is likely to arise during the receivership, we think the matter can probably be left to the future board of directors of Peck Bros. & Co. In the meantime we shall consider that you are to sell Peck Bros. & Co.'s goods in Chicago and vicinity, and that all orders for goods shall be referred to you, and that we will not give competing prices against you." On August 24th he addressed a letter to Mr. Sanders, receiver, with reference to an inventory of the property at Chicago, in which he stated: "I did say to both you and Mr. Rateliffe that I did not think it best for you to have any connection with the new firm until the matter was fully closed out, and I distinctly said that this was for your own interest." The negotiations seem to have at first contemplated the acquirement of the good will and name of the Connecticut corporation. On September 23, 1896, the Connecticut receiver wired Mr. Sanders: "Receivers have no authority to sell good will nor make contracts extending beyond the receivership. Instructions of August 14th cover all we can do. If those terms are not sufficient, call the deal off, and we will advise you further."

On September 23, 1896, the defendant Albert D. Sanders, the ancillary receiver, filed his petition in the ancillary suit, representing that the stock of goods in Chicago was valued at $37,665.60, and that the Illinois c rporation, "Peck Bros. Co.," had offered to purchase the same for $18.830.80 in cash; that he submitted the proposition to the principal receiver of the Connecticut corporation, and had been instructed to procure authority of the court to consummate the sale.-and an order was entered by the court authorizing the sale of the goods, which sale was consummated. The order did not authorize the sale of any good will or trade-name, but simply all the stock on hand. In December, 1896, Mr. Porter, the Connecticut receiver, visited Chicago, and called at the office of the defendant corporation. He then found the defendant Sanders engaged in the service of that corporation. Subsequently, and on December 31, 1896, Sanders resigned as ancillary

receiver, and on the same day Joseph Porter was appointed ancillary receiver in his place. The reports of the ancillary receiver showed payments of $500 to Henry D. Coghlan for services as solicitor of the receiver. On December 17, 1897, the New Haven court entered a decree, upon the application of the Connecticut receiver, for the sale of the property of the New Haven corporation, and directed "that Joseph Porter, the receiver of Peck Erothers & Company, be, and he is hereby, authorized and empowered to sell all of the property of said company, of every kind and wheresoever situated, including its franchises, name and good will," in such manner as, in the judgment of the receiver, would realize the greatest amount. The decree further provided that creditors and stockholders might bid at the sale. The report of the receiver, filed March 11, 1898, declares that the receiver offered for sale at public auction to the highest bidder at the designated date the entire property of the corporation, including its "franchises, name, and good will, and all other assets of every kind, and wheresoever situated." At that sale, P. N. Welch, F. C. Hollins, and H. C. Warren, who were agents for the committee of stockholders of the corporation, purchased the property, good will, etc., for the sum of $265,520. The report of the sale was on the same day confirmed, and the receiver was ordered to execute and deliver to such person or persons as shall be designated in the written request of the agents of the committee of stockholders who purchased said property a proper deed of conveyance. On the 4th day of April, 1898, Welch, Warren, and Hollins, as trustees of the stockholders in the original corporation, uniting with others, entered into articles of organization of the "Peck Brothers & Company," the appellant here, which was filed with the secretary of state of the state of Connecticut on the 5th day of May, 1898. The number of shares of the corporation was 24,000, of the par value of $25 each, and were fully subscribed for. Welch, Warren, and Hollins, as trustees of all the stockholders, subscribed for 23,836 shares. On May 5, 1898, the receivers of "Peck Brothers & Co.," the original Connecticut corporation, having received a written request from the trustees of all the stockholders to deliver a bill of sale to the new corporation "Peck Brothers & Company," conveyed to the last-named corporation all the property of the old company, "together with the franchises, name, and good will, and all trade-names, trade-marks, and patents and all other assets of every kind, and wheresoever situated, belonging to said Peck Brothers & Company, or to me as receiver thereof." On May 10, 1898, the receiver reported to the court, among other things, that he had received the final payment for the property and franchises sold; "that a committee representing all of the stockholders of said defendant corporation has purchased all of the property and franchises and name of said company, and has caused a new corporation to be organized for the benefit of the stockholders of the defendant company, and has transferred all of the property and franchises and the name of the defendant company to said new corporation; and that said committee, representing all of the stockholders of said defendant company, desires that said defendant company shall be dissolved, and has requested the undersigned to apply to this court for an order of dissolution." Thereupon on that date an order was entered by the court reciting the report of the receiver, "and the committee representing all stockholders of said defendant company, appearing by their attorneys, Alling, Webb & Morehouse, and joining in the prayer for dissolution, and, the facts recited in said report having been found to be true," it was ordered that the corporation in that case be dissolved, and its corporate existence terminated.

The record is replete with evidence touching the question of confusion of goods, and in the sales thereof. The defendant corporation, having its headquarters in Chicago, reaches out for its trade throughout the East and throughout the territory covered by the complainant corporation. Its goods are stamped, "Peck Bros. Co. Chicago." The stamp of both corporations upon their goods is necessarily in small letters, requiring close inspection to distinguish. The evidence discloses that in repeated instances experienced plumbers had purchased the goods made by the defendant corporation, supposing them to be the goods manufactured by the complainant corporation; and much confusion is proven to have occurred in the delivery of letters,