Donnell v. Herring-Hall-Marvin Safe Co., 208 U.S. 267 (1908)

U.S. Supreme Court

Donnell v. Herring-Hall-Marvin Safe Co., 208 U.S. 267 (1908) Donnell v. Herring-Hall-Marvin Safe Company

No. 10

Argued January 14, 15, 1908

Decided February 3, 1908

208 U.S. 267

CERTIORARI TO THE CIRCUIT COURT OF

APPEALS FOR THE ELEVENTH CIRCUIT

Syllabus

A stockholder, even though also an officer, of a corporation bearing his family name does not necessarily lose his right to carry on the business of manufacturing the same commodity under his own name because that corporation sold its goodwill, tradename, etc., and as a stockholder and officer he participated in the sale. He is not entitled, however, to use, and may be enjoined by the purchaser from using, any name, mark or advertisement indicating that he is the successor of the original corporation or that his goods are the product of that corporation or of its successor, nor can he interfere in any manner with the goodwill so purchased.

The facts are stated in the opinion.

Page 208 U. S. 270

MR. JUSTICE HOLMES delivered the opinion of the Court.

This suit was brought in the Superior Court of Cook County, Illinois, by the Hall Safe & Lock Company against the Herring-Hall-Marvin Safe Company, and was removed by the latter to the United States circuit court. The bill sought to enjoin the defendant from representing itself to be the successor of the Hall Safe & Lock Company and otherwise, as need not be stated in detail. The defendant answered, denying the plaintiff's rights and setting up its own. At the same time, it filed a cross-bill to which it made the petitioner, Donnell, the president of the plaintiff company, a party, and by which it sought to enjoin the plaintiff and Donnell from carrying on the safe business under any name of which the word "Hall" is a part, or marking or advertising their safes with any such name, etc., unless made by the defendant or its named predecessors in business. The bill was dismissed by the circuit court, no appeal was taken, and it is not in question here. On the cross-bill, an injunction was issued as prayed, and an account of profits ordered. This decree was affirmed by the circuit court of appeals. 143 F. 231. Subsequently an injunction was granted by the Circuit Court of Appeals for the Sixth Circuit, but in much more limited form, after a consideration of the present case. 146 F. 37. Later still, a certiorari was issued by this Court.

The facts are as follows: about sixty years ago, Joseph L. Hall started a business of constructing safes, and in time attached

Page 208 U. S. 271

a reputation to his name. In 1867, he and his partners organized an Ohio corporation by the name of Hall's Safe & Lock Company, which went on with the business. (This was not the plaintiff, which is an Illinois corporation of much later date.) Hall was the president a part or the whole of the time, until he died in 1889. He owned the greater part of the stock, and his children the rest. In 1892, the Ohio company sold all its property, including trademarks, trade rights, and goodwill, and its business as a going concern, to parties who conveyed on the same day to the Herring-Hall-Marvin Company. Subsequently this company's property was sold to the Herring-Hall-Marvin Safe Company, the party to this suit. In its conveyance, the Ohio company agreed to go out of business and get wound up, which it did, with the assent, it may be assumed, of all the stockholders. The stock belonged to the Hall family and connections, and they, of course, ultimately received the consideration of the sale. A part consisted of stock in the new company, which was distributed to them at once, and a part was money paid to the selling company about to be dissolved . By election, and under a contract made on the day of the sale, Edward C. Hall, a son of the founder, became president of the purchasing corporation, the contract reciting that it was made as part of the inducement to the purchase, and he agreeing in it to hold the office until May 2, 1897, to devote all his time to the interests of the corporation, and, so long as it might desire to retain his services as stipulated, not to engage in any competing business east of the Mississippi River. Another son became treasurer under a nearly similar contract, and a son-in-law secretary.

Both sons resigned and left the service of the corporation August 1, 1896, and both were released, in writing, from their obligations under their contract. The next month, the sons organized an Ohio corporation, under the name of Hall's Safe Company, which is party to the litigation in the Sixth Circuit, but is not a party here. The petitioner, Donnell, had been a selling agent of the original company, and afterwards of the

Page 208 U. S. 272

company that bought it out, having a place in Chicago with a large sign, "Hall's Safes," on the front. In 1898, he, with others, organized the plaintiff, Hall Safe & Lock Company, the name differing from that of the original corporation only by not using the possessive case. This company does business in the petitioner's old place, with the old sign, and sells the safes of the present Ohio corporation as Hall's safes. It has accepted a decree forbidding it to go on under the above name. The question before us is upon the scope of the injunction finally issued, as we have stated, upon the cross-bill. That, the petitioner contends, is too broad, while the Herring-Hall-Marvin Safe Company contends that, as against the Hall family and anyone selling their safes or standing in their shoes, it has the sole right to the very valuable name "Hall" upon or for the sale of safes.

It no longer is disputed that the Herring-Hall-Marvin Safe Company is the successor of the original Hall's Safe & Lock Company, or that it has the right to use the word "Hall." But it is denied that it has the exclusive right. The name does not designate a specific kind of safe, and yet may be assumed to have commercial value as an advertisement even when divorced from the notion of succession in business -- a sort of general goodwill owing to its long association with superior work. So far as it may be used to convey the fact of succession, it belongs, of course, to the Herring-Hall-Marvin Safe Company, and the narrower decree, made in the Sixth Circuit, was intended to prevent the present Ohio company from using any name or mark indicating that it is the successor of the original company or that its goods are the product of that company or its successor, or interfering with the goodwill bought from it. But, as we have said, we presume that the word may have value, even when that idea is excluded and when there is no interference with the goodwill or the tradename sold.

The goodwill sold was that of Hall's Safe & Lock Company. There is nothing to show that, while that company was

Page 208 U. S. 273

going, the sons of Joseph L. Hall could not have set up in business as safe makers under their own name, and could not have called their safes by their own name, subject only to the duty not to mislead the public into supposing, when it bought from them, that it was buying their father's safes. Therefore it could not be contended that, merely by a sale, the father's company could confer greater rights than it had. But it was said that, if a partnership had sold out by a conveyance in like terms, the members would have given up the right to use their own names if they appeared in the firm name, that in this case the Halls received the consideration for the goodwill they had attached to their name, that they ratified the sale and necessarily assented to it, since otherwise the corporation could not have sold its property or have carried out its agreement to dissolve, and that, under such circumstances, a court ought to look through the corporation to the men behind it.

Philosophy may have gained by the attempts in recent years to look through the fiction to the fact and to generalize corporations, partnerships, and other groups into a single conception. But to generalize is to omit, and, in this instance, to omit one characteristic of the complete corporation, as called into being under modern statutes, that is most important in business and law. A leading purpose of such statutes and of those who act under them is to interpose a nonconductor through which, in matters of contract, it is impossible to see the men behind. However it might be with a partnership, Russia Cement Co. v. Le Page, 147 Mass. 206, 211, when this corporation sold its rights, everybody had notice and knew in fact that it was not selling the rights personal to its members, even if, as always, they really received the consideration, or, as usual, they all assented to its act. That it contracted for such assent, if it did, by its undertaking to dissolve does not make the contract theirs. But the case does not stop there. The purchasing company had the possibility of competition from the Halls before its mind, and gave

Page 208 U. S. 274

the measure of its expectations and demands by the personal contracts that it required. Those contracts were limited in time and scope, and have been discharged.

A further argument was based on the confusion produced by the petitioner through his use of signs and advertisements calculated to make the public think that his concern was the successor of the first corporation, and otherwise to mislead. This confusion must be stopped, so far as it has not been by the decree in force, and it will be. But it is no sufficient reason for taking from the Halls the right to continue the business to which they were bred and to use their own name in doing so. An injunction against using any name, mark, or advertisement indicating that the plaintiff is the successor of the original company, or that its goods are the product of that company or its successors, or interfering with the goodwill bought from it, will protect the right of the Herring-Hall-Marvin Safe Company, and is all that it is entitled to demand. See Howe Scale Co. v. Wyckoff, Seamans & Benedict, 198 U. S. 118; Singer Manufacturing Co. v. June Manufacturing Co., 163 U. S. 169.

Decree reversed.