Hoevel Sand-Blast Mach. Co. v. Hoevel

The plaintiff is a Delaware corporation, and for something like two years has been engaged in selling sand-blast machines, having a place of business at 50 Church street, New York City. Up to April 25, 1914, the defendant Hoevel was president of the plaintiff, but about that time he resigned, and severed his connection with the company by selling all of his stock. Shortly thereafter he organized the defendant corporation to engage in a business similar to the plaintiff’s and having its principal place of business at 50 Church street, New York City. At the time of the commencement of this action the plaintiff had not procured a certificate from the state of New York, as provided in section 15 of the General Corporation Law, authorizing it to do business in such state, nor paid the tax provided in section 181 of the Tax Law. After the defendant was incorporated, however, it applied to the secretary of state for a certificate, which was refused for the reason that its name was similar to that of the defendant corporation. This action was then commenced to restrain the defendant corporation from using its name and compelling it to take the necessary steps to change it, by eliminating the words “Hoevel Sand-Blast Machine Company.” Upon the complaint and affidavits a motion was made to enjoin the defendants, during the pendency of the action, from doing business under the name of the defendant corporation. The motion was denied, upon the ground that the plaintiff had failed to comply with section 15 of the General Corporation Law and section 181 of the Tax Law. Plaintiff appeals.

[1] I am of the opinion the motion should have been granted. As I read the sections of the statute referred to, there is nothing in either which prevents an action of this kind being maintained. Section 15 is

“No foreign stock corporation doing business in this state shall maintain any action in this state upon any contract made by it in this state, unless prior to the making of such contract it shall have procured such certificate.”

This is not an action upon contract, nor is it to obtain relief by reason of any business transacted by it in the state of New York. Section 181 has no application, because that relates to the tax to be paid after the certificate has been issued. . In addition to this, the neglect to pay the tax assessed is a matter of defense, which must be alleged in • an answer. Halsey v. Jewett Dramatic Co., 190 N. Y. 231 , 83 N. E. 25 , 123 Am. St. Rep. 546 .

[2] There are numerous authorities to the effect that a corporation may restrain, by injunction, the use of its corporate name by another, on the ground that such use constitutes unfair competition. Chas. S. Higgins Co. v. Higgins Soap Co., 144 N. Y. 462 , 39 N. E. 490 , 27 L. R. A. 42 , 43 Am. St. Rep. 769 ; Metropolitan Telephone & Telegraph Co. v. Metropolitan Telephone & Telegraph Co., 156 App. Div. 577 , 141 N. Y. Supp. 598 . The papers used upon the motion clearly indicate that the defendant Hoevel organized the defendant corporation for the purpose of entering into competition with the plaintiff, and he did so under the name which he took because he knew that the plaintiff had not obtained the certificate required authorizing it to do business in the state of New York. The fact that it had not obtained such certificate'was principally due to his own neglect while acting as its president. I think, upon the proofs presented, the motion should have been granted.

The order appealed from, therefore, is reversed, with $10 costs and disbursements, and the motion granted, with $10 costs, order to be settled on notice. All concur.