Interstate Distilleries, Inc. v. Sherwood Distilling & Distributing Co.

Bond, C. J. delivered the opinion of the Court. The contest in the case is one over the use of the name and trade-mark of the former manufacturers of Sherwood Whiskey. In the year 1924, while the Eighteenth Amendment to the Federal Constitution and the Act of Congress (National Prohibition Act, 27 U. S. Code Ann. sec. 1 et seq.) prohibiting the manufacture and sale of whiskey for beverage purposes were in force, Louis Mann bought all the whiskey distilled and owned by the Sherwood Distilling Company, an old corporation, and acquired the right to use in the resale of it the name and identifying mark used on that whiskey since 1890. The original company then discontinued all business, its plant was dismantled, and its land, sold, and ultimately its charter was forfeited under the laws of Maryland for nonpayment of taxes.

Code, art. 81, sec. 103. Mann subsequently caused a Sherwood Distilling & Distributing Company to be incorporated for the disposal of the whiskey purchased, and as the stock diminished that corporation extended the business, and the use of the mark and name, to other whiskey of a variety of kinds and origins, and has since, to some extent, sold gin, brandy, and rum, under the Sherwood name and mark. Some time after the repeal of the Prohibition Amendment in 1933, the appellants, more particularly Haim, claiming succession to the right and title of the original Sherwood Company by virtue of ownership of all its capital stock, started to put on the market 'a rye whiskey under the same name and mark; and the appellees, denying the succession, and asserting, first, ownership by transfer to themselves, and, then, by amendment, asserting that there had been an abandonment of the mark and name by the original company, throwing them open to their appropriation, were granted an injunction to restrain the threatened use. The defendants and appellants, in addition to making claim to the right of the original company, ¹⁷⁶ urge that, whatever their own right or lack of right, the complainants are guilty of fraud in some misstatements of ownership, and in the promiscuous, misleading use of the name and mark, and are not entitled to the protection of a court of equity in it.

The whiskey had been manufactured by members of a Wight family at Cockeysville, Baltimore County, since 1868. It was known as a straight rye, or a pure rye and malt whiskey, and was distilled upon a secret formula from a mixture of grains at least eighty per cent, of which were rye, had some advantages from water at the site, was one of the best, possibly the best, of rye whiskies in the country, and the highest priced; and it was sold in large quantities. The distillery was the largest in the state. In 1882, 'the owners were incorporated under the name of Sherwood Distilling Company, and in 1890 the distinctive trade-mark was adopted. .

It need not be described here in detail, for the labels subsequently used continued the distinguishing features of the original ones, and despite some differences would all, in the opinion of the court, certainly strike ordinary observers as the same. Only close examination would have given notice of words altered or inserted. We understand it to be conceded, indeed, that if the right to use the original mark remained in another, the labels subsequently used by the appellees would constitute an infringement, and there would be a case for an injunction to restrain it. The mark was registered by the original company in 1913.

Distilling was stopped, and, as it proved, finally stopped, under orders of the federal government in 1917, during the war; the industry being classed as a nonessential one. Three years later, in 1920, national prohibition intervened. Harry B. Wolf, of Baltimore, acting for clients, bought from the Wights a majority of the capital stock of the company, and Haim testifies that he acquired first that majority, and later the remaining capital stock outstanding, so that he became the sole owner of all of it. Under the new ownership the sale of the whiskey was continued until 1924, to supply the demand ¹⁷⁷ for medicinal liquor.

The whole of the whiskey remaining was, however, concentrated in a warehouse under governmental supervision, and the new owners then made the sale to Louis Mann of all they owned, specifying it in a list of barrels, and with the sale gave the privilege of using on.the whiskey the Sherwood name and mark, as stated. With the purpose of facilitating Mann’s sales under an existing federal permit to the original company, the shares of stock of that company were placed in escrow, new directors were elected, and the books and records were turned over to them. But litigation by a creditor interfering, this supplemental arrangement was abandoned, and the shares were returned. The books and records, except the stock book, were returned in 1926.

The directors of the original company held their last meeting on December 11th, 1924. And shortly after the sale of the whiskey, the distillery and warehouse at Cockeysville were dismantled, and the equipment sold; and the land was sold in 1926. It was in 1927 that the charter of the original company .was forfeited for failure to pay taxes. Reports to the State Tax Commission by a former officer, in 1925, 1926, and 1927, declared that the business had been discontinued.

In 1924, Mann formed his new corporation, the Sherwood Distilling & Distributing Company, to dispose of his whiskey. And under that name registration of the trade-mark was applied fot and obtained, upon representations that the new company was the owner, and that the mark had been used by it and by its predecessor from whom it derived its title for ten years next preceding February 20th, 1905. The expansion of the business and use of the marks began then, whiskey of any kind, purchased from any source, some of it distilled mainly from corn, being sold under the same name and mark, with the addition of the word “Brand,” in small type, to the name Sherwood, in conformity with a requirement of the Federal Prohibition Bureau. Upon the repeal of prohibition, in 1938, the new com ¹⁷⁸ pany had the trade-mark registration to the original company renewed in the new company’s name.

In 1934, another new corporation, a Sherwood Distillery Company, was formed by Mann under the laws of - Delaware for distilling whiskey to be distributed by his Distilling & Distributing Company, and the Delaware corporation has now, beginning shortly after the institution of this suit, large distilleries in operation. Mann testifies that it produces a whiskey made from the secret formula of the original company, a copy of which was found in the books turned over to Mann in 1924. The defendant and appellant Haim, who -testifies that he became the actual owner of the capital stock of thé original company, does not appear after 1924 in the records of the company introduced in evidence, and others do appear as the owners. There is evidence of a claim of ownership of all the stock in a Nathan Curson, one who appears as president of the company.

The stock book was not produced in evidence, nor was summons issued for those who may have had it. Haim testifies, however, that he placed the stock in the names of others, who were his agents, and that the certificates were all indorsed for transfer to him as might be needed. Apparently, then, he is not a stockholder of record, and is not one of the directors who might be trustees of the remaining assets on dissolution. Code, art. 23, sec. 92; American-Stewart Distillery v. Distilling Co., 168 Md. 212, 220 , 177 A. 473 .

An act of the Maryland Assembly, Laws 1931, -ch. 381, having provided the necessary extension of time for revival of forfeited charters, Haim, after engaging in the sale of other whiskies, took up with Mr. Wolf in 1933 a question of revival of the old Sherwood charter. This brought on a conference with Mann’s attorney, in which Mr. Wolf threatened resistance to the continued use of the name and mark by Mann’s company. No action was taken by Haim, however, -until 1935, when his attorney submitted to the State Tax Commission articles for the revival. These were withdrawn for amendment, and the ¹⁷⁹ name Sherwood Company, Inc., was reserved for Haim’s use until January of 1936.

In September, 1936, shortly before the hearing of this case below, after some months of inaction, the amended articles for revival were submitted to the commission, and October, 1936, the franchise taxes were paid for the years intervening since the last previous payment. But the revival was never completed. Haim, in 1935, began selling whiskey under the old Sherwood label, or a label substantially the same, bearing the words, “Bottled by Interstate Distilleries Inc. Baltimore, Md.” The whiskey was