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Steinfeld v. National Shirt Waist Co.

99 A.D. 286 Court N.Y. App. Div. English

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Solomon Steinfeld and Ferdinand Seligmann, Trading under the Name and Style of The National Shirt Waist Company, Appellants, v. The National Shirt Waist Company, Respondent, Impleaded with Bernard Broads and Others, Defendants.

Headnote

Action by the successor of a firm to enjoin the use of the firm name — injunction pendente lite, granted without considering the plaintiff’s right to the exclusive use of Ola name — unfair competition enjoined.
Upon a motion for an injunction pendente lite, in an action brought to restrain the defendants from using the name National Shirt Waist Company and from selling or offering for sale goods under that name, it appeared that prior to July,
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1902, tlie defendant Bernard Broads and one Nathan Steinfeld were copartners doing business under the name of the National Shirt Waist Company and had complied with the statute entitling them to use such name; that in July, 1902, Broads sold all his interest in the business to Steinfeld, who continued to carry on the business under the same name, having also complied with the statute entitling him to use that name; that in May, 1903, Steinfeld sold the business, including the good will thereof, to the plaintiffs, who continued, having filed the necessary certificate, to use the same name.
It further appeared that in 1904 the defendant, the National Shirt Waist Company, was incorporated under the laws of the State of New York; that such corporation embarked in the same business as the plaintiffs and in the same city; that the capital stock of said corporation was one hundred shares, two of which were owned by the defendant Bernard Broads, one by the defendant Hertz, and the remaining ninety-seven by the defendant David Broads, who was a brother of Bernard Broads; that at the time of the formation of the corporation all of the defendants were aware of the fact that the plaintiffs then and for some time prior thereto had been carrying on business under the name of the National Shirt Waist Company, and that such name was taken by the defendant corporation for the purpose of injuring the plaintiffs by misleading and confusing their customers and the public generally; that such confusion had actually taken place, and that by reason thereof the plaintiffs had been annoyed and their business has been seriously damaged.
The application for the injunction pendente lite was denied upon the ground that the agreement by which the firm of Broads & Steinfeld was dissolved did not give to the succeeding partner the exclusive right to use the name National Shirt Waist Company.
Upon an appeal from the order denying the motion for the injunction pendente lite, it was
Held, that upon the dissolution of a firm, where one of the partners purchases and succeeds to the business, the exclusive right to the use of the firm name, even as against the retiring partners, passes to the purchasing partner, even though no express mention of such right is made in the dissolution agreement;
That it was unnecessary, for the purposes of the appeal, to determine whether the plaintiffs had the exclusive right, as against the defendants, to the use of the name National Shirt Waist Company;
That it was only necessary to determine whether or not, upon the facts presented, the court should have exercised the equitable power possessed by it, to prevent, during the pendency of the action, unfair competition or trade;
That the court should have exercised such power and that the order appealed from should consequently be reversed.
Appeal by the plaintiffs, Solomon Steinfeld and another, trading under the name and style of The National Shirt Waist Company, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of
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New York on the 17th day of October, 1904, denying the plaintiffs’ motion for an injunction pendente lite.
Edward W. S. Johnston, for the appellants.
Arthur H. Parkhurst, for the respondent.

This action was brought to restrain the defendants from using the name National Shirt Waist Company, and from selling or offering for sale goods under that name. • After the action had been commenced the plaintiffs, upon the complaint and affidavits, moved for an injunction during the pendency of the action. The motion was denied, and the plaintiffs have appealed.

It appears from the papers used upon the motion that in and prior to July, 1902, the defendant Bernard Broads and one Nathan Steinfeld were copartners doing business in the city of New York, under the name of the National Shirt Waist Company, they having complied with the statute (Penal Code, § 363b, added by Laws of 1900, chap. 216) entitling them to use such name; that the copartnership in July, 1902, was dissolved by Broads selling all his interest therein to Steinfeld, who continued to carry on the business theretofore carried on by the firm under the same name, he also having complied with the statute entitling him to use such name, until May, 1903, when he sold all his interest therein, including the good will, to the plaintiffs, who filed the certificate required by statute and continued to do business under the same name, the National Shirt Waist Company ; that the defendant the National Shirt Waist Company is a corporation organized under the laws of the State of New York in August, 1904, and is engaged in doing the same kind of business in the city of New York that the plaintiffs are, under that name; that, the capital stock of such corporation is of the par value of $10,000, divided into one hundred shares of $100 each, two of which are owned by the defendant Bernard Broads; one by the defendant Hertz and the remaining ninety-seven by the defendant David Broads, a brother of Bernard; that at the time of the formation of the corporation all of the defendants were aware of the fact that the plaintiffs then and for some time prior thereto had been carrying on business under the name of the National Shirt Waist Com

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pany, and that according to the allegations of the complaint such name was taken by the defendant corporation for the purpose of injuring the plaintiffs by misleading and confusing their customers and the public generally, and that such confusion has actually taken place, and by reason thereof the plaintiffs have been annoyed and their business has been seriously damaged.

The application for an inj unction pendente lite was denied upon the ground, as appears from a memorandum handed down by the learned justice sitting at Special Term, that the dissolution agreement of Broads and Steinfeld did not give to the partner succeeding to the business the exclusive right to use the name National Shirt 'Waist Company under which the firm did business.

The general rule is that upon the dissolution of a firm, where one of the partners purchases and succeeds to the business, the exclusive right to the use of the firm name passes to the purchaser, although no express mention is made of such name in the agreement of dissolution. (Merry v. Hooves, 111 N. Y. 415 .) The purchaser acquires the good will of the firm, and this includes, as against the retiring partners, the exclusive right to use the name under which the firm did business. (Menendez v. Holt, 128 U. S. 514 ; Listman Mill Co. v. William Listman Milling Co., 88 Wis. 334 ; Slater v. Slater, 175 N. Y. 143 . See, also, Fisk v. Fisk, Clark & Flagg, 77 App. Div. 83 .)

It is unnecessary, however, to determine at this time whether the plaintiffs have the exclusive right, as against the defendants, to the use of the name National Shirt Waist Company. All that it is necessary to determine is whether or not upon the facts presented the court should exercise the equitable power which it possesses to prevent, during the pendency of the action, unfair competition or trade as detailed in the record before us. We think it should. The facts would seem to indicate that the name of the corporation was selected for the sole purpose of appropriating, if possible, a portion of the plaintiffs’ business by misleading customers who dealt with them. Whether this were the purpose or not it has that result and ought not to be permitted until the merits of the action have been passed upon. If the defendant corporation, by reason of the name which it has selected, is not procuring a portion of the plaintiffs’

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business, by misleading or deceiving would-be customers, it could easily right the wrong of which the plaintiffs complain by selecting another name. It certainly ought not to be permitted, in advance of a trial, to mask under the name under which the plaintiffs and its successors have been doing business for a long time, when it is at least inferable that the incorporators of the defendant corporation had actual knowledge that the name selected for the corporation was the same one under which the plaintiffs were doing business.

The order appealed from, therefore, should be reversed, with ten dollars costs and disbursements, and the motion granted, with ten dollars costs, upon the plaintiff giving an undertaking, the amount and sufficiency of which to be determined upon the settlement of the order.

Van Brunt, P. J., O’Brien, Ingraham and Hatch, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs, on plaintiff giving undertaking as stated in opinion.

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