Baltimore Bedding Corp. v. Moses

Melvin, J., delivered the opinion of the Court. The bill of complaint in this case was filed by the appellees, Daniel J. Moses and Raymond W. Taylor, co-partners, trading as Baltimore Spring Bed Company, against Baltimore Bedding Corporation, appellant, charging the latter with unfair competition in the use of its corporate name, and seeking an injunction against such use. The defendant answered the bill in due course and after a hearing in open court, the chancellor granted the prayer of the bill and issued an injunction in these words: “That a writ of injunction be issued from this Court perpetually enjoining and restraining the Defendant, Baltimore Bedding Corporation, its agents, servants and employees, from the use by the said Defendant of the name ‘Baltimore Bedding Corporation’ in connection with the advertising for sale of mattresses or other bedding materials, or for renovating the same, or in soliciting or obtaining orders for sale or renovation of such mattresses or bedding materials on price lists or form orders, or other printed or written matter, except in such manner as to prevent the public from believing that the goods and services of the defendant are those of Daniel J. Moses and Raymond W. Taylor, co-partners trading as Baltimore Spring Bed Company. And such form of disclaimer as may be adopted by said defendant in compliance with this decree is hereby required to show clearly and amply the said absence of connection with complainants and their business.” It is from this decree that the present appeal is taken. ²³² The essential facts of the case are practically unquestioned.

Appellees are co-partners, trading as Baltimore Spring Bed Company, with their principal office in Baltimore City, and for over twenty-five years have been engaged in the bedding business under that trade-name. Their products are sold at wholesale to jobbers and retailers, principally throughout Maryland and adjacent territory, orders being received from their salesmen as well as by mail and telephone. According to both parties to the case, the term “bedding” is that generally used in the trade and covers “practically everything,” that is to say, mattresses, springs, cots, couches, quilts, cushions, and also the bed itself. Besides manufacturing and selling these products, the appellees’ business includes repairing and renovating them for their customers, and also, to a minor degree, in acting as distributor for bedding goods of other manufacturers, not located in Baltimore.

All, however, are advertised as coming from one commercial source — the appellees. Since the beginning of their operations over twenty-five years ago, appellees have extensively publicized their trade-name, “Baltimore Spring Bed Company,” built up a large patronage thereunder, and.have established good will and a reputation for fair dealing and excellence of products. The present worth of the firm is $200,000, and for the year 1941 it did a business of “close to $400,000.” Appellant was incorporated under the laws of Maryland in February, 1942, with its principal office in Baltimore City, and with the name of Ralph Pheterson being given as the resident agent. The business of the corporation was to be that of. manufacturing, renovating and selling mattresses and bedding in Baltimore City and elsewhere.

According to Pheterson, the corporation was originally set up to do a wholesale business. His associates at first, he testified, were Leonard L. Eisenberg, who represented himself to Pheterson to be a lawyer, and one Moe Snyder, both of whom were employees of ²³³ the Comfort Spring Company, located in Baltimore. Eisenberg was a salesman or foreman for that company, and, inferentially from the testimony, was familiar with the names and standing of those already engaged in the bedding business in Baltimore. The only money that was put in the business to start with was about 32,300, of which Eisenberg put up about |2,000, and Snyder 3300.

Pheterson put in no money but contributed “services and knowledge and machinery.” Eisenberg was made president and Pheterson became “production manager.” After the incorporation on February 2, 1942, operations were held up by the Maryland State Health Department “for some time,” during which interval appellees, through their counsel, wrote a letter to appellant under date of February 19,1942, stating: “We have noted the recent incorporation of the Baltimore. Bedding Corporation, and it is obvious that the use of this name by the corporation will result in considerable confusion with the business operated by our clients. Mr. Moses and Mr. Taylor have been conducting their business in Baltimore City for a number of years and have established a valuable trade-name in the Baltimore Spring Bed Company. We must, therefore, insist that you cease to use the name Baltimore Bedding Corporation or we shall be forced to take the necessary action to protect our clients’ interests.” This letter was received by Eisenberg, who threw it in the wastebacket, according to Pheterson.

When asked “how much advertising had you done up to that time” (the receipt of the letter), Pheterson’s reply was “I wouldn’t know.” Continuing the testimony: “Q. You wouldn’t know? A. No, sir, it wasn’t in my part. “Q. Had it done 350 of advertising? A. I wouldn’t know. “Q. It had not done any business up to that time, had it? A. I wouldn’t know. ²³⁴ “Q. Didn’t you just tell his Honor that for the first few weeks you didn’t do any business because the Health Department wouldn’t let you?

A. Yes. But you know all that. Why ask it again, I wonder? “Q. Having got that notice and request from us, what did you do about it? A. You heard that, too. “Q. You did nothing about it, is.that it?

A. No, sir.” Appellees made further protests to appellant, through telephone calls and correspondence, against the adoption and use of the name “Baltimore Bedding Corporation,” but the appellant persisted in its refusal to heed any of these protests and went ahead despite them. Some time “around June or July,” according to Pheterson, both Eisenberg and Snyder ceased to have any connection with the corporation, since which time the business has belonged to Pheterson “entirely.” He modified this statement later by saying that: “This isn’t my own individual business. This is a corporation. It belongs to the stockholders. “Q. Who are the stockholders?

A. Myself, my son-in-law. “Q. Who are the officers of the corporation now? A. Myself, my son-in-law, my wife and my daughter. “Q. And they are also the stockholders ? A. Yes, sir.” The record shows that'Pheterson moved to Baltimore from his home town, Rochester, New York, via Norfolk, “over two years” before this suit. He was “looking for a job,” he said — “and I contácted the Sanitary Mattress Company and they engaged me.” He was foreman in that employ and left the company in September, 1941.

About a month or so later he set up in business in Baltimore as “Acme Mattress Company” but had not gotten under way in this when he and Eisenberg and Snyder incorporated the Baltimore Bedding Corporation. These details give a definite idea of the background of the appellant and of the man who was practically the sole operator of it, although, according to him, it was the salesman-lawyer Eisenberg who conceived the plan ²³⁵ of incorporating Pheterson and setting him up in that form as a dealer in bedding. Pheterson denies that he was the one who selected the name “Baltimore Bedding Corporation.” However, on cross-examination he undertook to tell the chancellor why he preferred the name in question to any other name. His answer is: “Well, from my forty years’ experience, Your Honor, I have found that people like to deal with a local concern, and it is worth while to make it known that we are a local concern.” That was at the beginning of the corporate life of the appellant when, Pheterson said, “we were set up to go in the wholesale business.” Ever since his partners left him, he continued, he turned more to ward renovating and the business of second-hand and rebuilt mattresses.

He had been in this business in Rochester under the name “Best Grade Mattress Company,” and thereafter chose “Acme Mattress Company” for his next venture, and did not hit upon the name “Baltimore Bedding Corporation” until after he had gotten in touch with Eisenberg. Since the principal acts which form the basis of this suit were directed in large part by Eisenberg and his colleague Snyder, it is significant to note that neither one of them was called as a witness in the case and no explanation given for failure to do so. This recital of facts focuses attention, therefore, on the conduct of appellant’s officers in two particulars: (1) Their persistence in the use of the name Baltimore Bedding Corporation, which was admittedly set up in the beginning for a line of business in competition with appellees, after formal protest had been made against the use of that trade-name because of the confusion likely to arise therefrom; and (2) their action in resorting to inaccurate and misleading advertisements, notably in the Baltimore Telephone Directory, under the head “Baltimore Bedding Company” “39 years experience,” etc., without mention of the name of Pheterson or any other person who may have had that much experience indi ²³⁶ vidually, it being a fact of record that the Baltimore Bedding Corporation had only been in existence less than one year. The chancellor summarized his findings of fact from the case and therefrom drew the two conclusions of law upon which the decree is based: (1) That the trade-name which the appellees have used for over twenty-five years in connection with their business has acquired a secondary meaning which entitles appellees to the protection of the court in the exclusive use of that term, including particularly the geographical name “Baltimore”; and (2) that appellant’s conduct in connection with the use of the name Baltimore Bedding Corporation. after being warned beforehand of the claim of the appellees that confusion would probably arise, and its refusal to adopt any distinguishing features to avoid confusion, show a wrongful intent to trade on appellees’ good reputation, long established.

In granting the injunction the chancellor adopted the usual procedure in such cases, where injunctive relief is sought, of giving the offending party the opportunity of disclaiming any unfair competition by adopting such form thereof as will show clearly and amply the absence of connection with appellees and their business. In reviewing the facts and the principles of law applicable to this case, it is of first importance that the doctrine of unfair competition be examined as to the high purpose which it was intended to serve. Expressed in simple words, this was to prevent dealings based on deceit and dishonesty, and was, at first, — approximately a hundred years ago, — applied only to what were then termed “trade-mark cases.” Since that time the gradual tendency of the courts has been to extend the scope of the law to all cases of unfair competition in the field of business. This law, both in letter and spirit, is laid upon the premise that, while it encourages fair trade in every way and aims to foster, and not to hamper, competition, ²³⁷ no one, especially a trader, is justified in damaging or jeopardizing another’s business by fraud, deceit, trickery or unfair methods of any sort.

This necessarily precludes the trading by one dealer upon the good name and reputation built up by another. Two Centuries Growth of American Law, p. 436, W. K. Townsend; Nims on Unfair Competition and Trade Marks, 3rd Ed., 6-15. What constitutes unfair competition in a given case is governed by its own particular facts and circumstances. Each case is a law unto itself, subject, only, to the general principle that all dealings must be done on the basis of common honesty and fairness, without taint of fraud or deception.

Wherever, in any case, these elements of fair trade are found to be lacking equity will grant protection against the offending party. Foss v. Culbertson, 17 Wash. 2d. 610, 623, 136 P. 2d 711, 717 . In the case at bar, the first ground advanced by appellees for relief in equity is that the word “Baltimore” has become so associated in the minds of the purchasing public with their products that this name has acquired a secondary meaning which would prohibit its use by a subsequent competitor. If sustained, this would entitle appellees to an injunction against the appellants on that ground alone, for it would amount to a kind of unfair competition which is clearly recognized in law, and forbidden.

However, we hold that this is not a ease where the doctrine of secondary meaning applies. An enlightening summary of that doctrine is found in Merriam Co. v. Saalfield, 198 F. 369, 373 , and quoted in Nims, supra, 107: “Primarily, it would seem that one might appropriate to himself for his goods any word or phrase that he chose; but this is not so, because the broader public right prevails, and one may not appropriate to his own exclusive use a word which already belongs to the public and so may be used by any one of the public. Hence comes the rule, first formulated in trade-mark cases, that there can be no exclusive appropriation of ²³⁸ geographical words or words of quality. This is because such words are, or may be, aptly descriptive, and one may properly use for his own product any descriptive words, because such words are of public or common right.

It soon developed that this latter rule, literally applied in all cases, would encourage commercial fraud, and that such universal application could not be tolerated by. courts of equity; hence came the ‘secondary meaning’ theory. There is nothing abstruse or complicated about this theory, however difficult its application may sometimes be. It contemplates that a word or phrase originally, and in that sense primarily, incapable of exclusive appropriation with reference to an article on the market, because geographically or otherwise descriptive, might nevertheless have been used so long and so exclusively by one producer with reference to his article that, in that trade and to that branch of the purchasing public, the word or phrase had come to mean that the article was his product; in other words, had come to be, to them, his trademark. So it was said that the word has come to have a ‘secondary meaning’ * * Or, as stated elsewhere in the text by this authority: “It (secondary meaning) exists only in the minds of those of the public who have seen or known or have heard of a brand of goods by some name or sign and have associated the two in their minds.” Nims, supra, 105. ■ Secondary meaning, therefore, imports association in the mind of the purchasing public of a geographical name and a particular product as identifying a certain trader’s goods.

When appellees established their business in Baltimore some twenty-seven years ago, and not only manufactured beds, mattresses, bedding, etc., but