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Carl Springer, Inc. v. Carl Springer Supply Co., Inc.

Court of Chancery of Delaware, Sussex County

April 21, 1954

CARL SPRINGER, Inc.
v.
CARL SPRINGER SUPPLY CO., Inc.

Action to enjoin use of name of former president of plaintiff corporation as part of corporate name of defendant. The Court of Chancery, Bramhall, Vice-Chancellor, held that when minority stockholder and president severed his association with plaintiff corporation bearing his full name, and acquired practically all outstanding stock in and became president of defendant corporation engaged in similar business in the same locality in competition with plaintiff, defendant corporation had the right to use name of such individual as a part of its corporate name, but that defendant corporation must make every reasonable effort to avoid confusion which might be caused by use of such name.

Order in accordance with opinion.

Where minority stockholder and president severed association with corporation bearing his full name and acquired practically all outstanding stock in and became president of competitor corporation, second corporation had right to use name of such individual as part of its corporate name, but must make every reasonable effort to avoid resulting confusion and call attention of public specifically to fact that corporations were entirely separate and that neither second corporation nor its president was in any manner connected with first corporation.

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[34 Del.Ch. 375] Robert W. Tunnell and Arthur Dean Betts, of Tunnell & Tunnell, Georgetown, for plaintiff.

David Snellenburg II, of Killoran & Van Brunt, Wilmington, for defendant.

BRAMHALL, Vice-Chancellor.

Plaintiff was incorporated under the laws of this State on March 3, 1949. It is engaged in the business of selling building supplies and materials. At the time of plaintiff's incorporation until January 26, 1954, Carl Springer was a minority stockholder and president of plaintiff corporation.

Defendant was incorporated on May 9, 1952, under the name of United Supply Co., Inc. It is also engaged in the business of selling [34 Del.Ch. 376] building supplies and materials and is in competition with the plaintiff in the City of Wilmington and vicinity. On January 28, 1954, two days after Springer left the employ of plaintiff, the name of defendant was changed from United Supply Co., Inc. to Carl Springer Supply Co., Inc. Springer, who had entered into an agreement for the purchase of practically all of the capital stock of defendant, became president of defendant. At approximately the same time the following notice was sent to members of the trade in general, including customers of plaintiff:

‘ Effective immediately Carl C. Springer is taking control of United Supply Co., Inc.

‘ The name of the new company will be Carl Springer Supply Co., Inc.

‘ Mr. Springer will be President, William F. Roane, formerly Warehouse Manager for United Supply, will be Vice-President and Ernest H. Laker, formerly Salesman for Carl Springer, Inc., will be Secretary and Treasurer.

‘ Temporary headquarters will be at 1100 Grant Avenue, but arrangements are being made for larger quarters so we can give real service and stock a much larger supply of materials.

‘ Your inquiries and orders are solicited.

‘ Messrs. Springer and Laker will be visiting you personally as soon as they can cover our very large territory.’

It is conceded that the name of Carl Springer was well known in the trade. Springer testified that in changing the name of defendant to Carl Springer Supply Co., Inc. it was his expectation that he would capitalize on the good will of plaintiff. Considering the shortness of the time involved there were a number of instances of considerable confusion in the trade as to whether or not Springer was connected with plaintiff or with defendant or with both. There were also evidences of confusion in the placing and delivery of orders. There was further testimony that telephone calls, correspondence and bills had been missent to both plaintiff and defendant and that confusion existed as to the identity of the parties.

[34 Del.Ch. 377] Is plaintiff prevented from enjoining defendant relative to the use of the name ‘ Carl Springer’ as a part of its corporate name by reason of the fact that a person has the right to use his individual name in the conduct of his business? The question of similarity of names will not be disputed. It is true that plaintiff and defendant are engaged in the same type of business, in the same general locality and are in competition with each other. There was considerable confusion on the part of those dealing with plainitff and defendant as to the identity of the parties, particularly as to the company with which Springer was associated. Defendant relies upon the contention that Springer has the right to use his own name in the formation of the corporation with which he is actively connected and that in the absence of fraud on the part of defendant, plaintiff cannot

Page 639

complain, even though it is injured thereby. Defendant specifically denies that there was any fraudulent intent on the part of defendant in changing its corporate name.

Springer had the right to use his own name when changing the name of defendant and the fact that plaintiff was injured thereby would avail plaintiff nothing unless the confusion caused by the change was aggravated in some manner by artificial means leading to a confusion beyond that arising by the mere similarity of names. Sellers v. McCormick,19 Del.Ch. 238, 165 A. 569. Springer negotiated for the purchase of the stock of defendant prior to severing his connection with plaintiff, of which he was president. Immediately upon severing his connection with plaintiff, Springer notified plaintiff's customers, among others, that he had taken over defendant; that he would be president of defendant, and that one Ernest H. Laker, formerly a salesman for plaintiff, would be secretary and treasurer of defendant. Nowhere in this notice did Springer state that he had severed all connections with plaintiff or that the corporation with whom he was becoming associated was actually a different corporation from that of plaintiff. Springer admitted that in using his own name as a part of the corporate name of defendant he had hoped to secure the benefit of the good will which plaintiff had built up. In the short space of time during which this condition has existed, there have been a number of instances of confusion as to the identity of the two companies, and confusion in orders, telephone calls and deliveries. Since [34 Del.Ch. 378] plaintiff and defendant are engaged in similar lines of business in the same general locality, considerable confusion under such circumstances was inescapable. It is also apparent that Springer must have realized that such confusion would occur. The sequence of events immediately prior to and after Springer severed his association with plaintiff, coupled with his admission as to his purpose, point clearly to the fact that the name of the defendant was changed for the purpose of acquiring the benefit of the good will of plaintiff. Defendant owed a duty to plaintiff to do everything reasonably necessary to avoid confusion in the mind of the public and those in particular dealing with plaintiff and defendant. Defendant must not use its name in the business in which plaintiff is engaged without using every means reasonably possible to distinguish his business from that of ...


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