Drummond Tobacco Co. v. Randle

2 N.E. 536, 114 Ill. 412

• Court: Illinois Supreme Court
• Decided: September 25, 1885
• Status: Published

Opinion

Mr. Justice Scholfield

delivered the opinion of the Court:

It was incumbent on the complainant below (appellant here) to show, by such a preponderance of evidence as would reasonably satisfy the mind of the chancellor, that the incorporation of the Driunmond-Randle Tobacco Company would so injure it as to justify the issuing of a writ of injunction. The injury must be of a substantial character, and not merely fanciful or conjectural. The complainant is a domestic corporation, and as such seeks relief. Obviously, under this bill a foreign corporation, although of the same name, composed of the same stockholders and having precisely the same shares of stock, would not be entitled to relief, for it would still be another and entirely distinct and different corporation, existing under different laws, and if entitled to protection here, so entitled under different principles of law. It is not pretended that the mere process of manufacturing tobacco is in anywise affected by the name of the corporation. It is the business of buying, selling, exchanging, etc., only, that is claimed to be thus affected.

The defendants make the following among other allegations in their answer: “That the said complainant has, in effect, abandoned the city of Alton, as its place of.■ business1 and its principal office is no longer there, and it now carries on a nominal business there; that the fact is, that in the month of November, 1884, the said complainant sold its business establishment in the city of Alton, with all its machinery and business fixtures, to one Horatio N. May, of Chicago, Illinois, and finally, early in the month of January, 1885, the remaining stockholders in the complainant, after the withdrawal of the defendants Drummond, Handle and Hayner therefrom, with other persons unknown to these defendants, organized a corporation under the laws of the State of Missouri, with its principal office and place of business in the city of St. Louis, by the name of ‘Drummond Tobacco Companyand these defendants are informed and believe, and therefore charge it to be true, that the said complainant has sold and transferred to the Missouri corporation of the same name, all its property, with some trifling exceptions,—which last named property is only retained in order to preserve the existence of the complainant as an Illinois corporation, and to hinder, these defendants from engaging in the business of manufacturing plug chewing tobacco, by the name of ‘Drummond-Randle Tobacco Company’ or otherwise, while, in fact, for all business purposes the complainant has practically ceased to exist in Illinois.” The evidence preserved in the record, which consists in part of affidavits read upon the hearing by agreement of counsel, sustains at least so much of this allegation as relates to the entire business of buying, selling, trading, etc.

James T. Drummond, the principal stockholder in the complainant, in his affidavit admits the incorporation of the Drummond Tobacco Company, with its principal office or place of business in the city of St. Louis, under the laws of the State of Missouri, but seems to regard this as being in some way but a continuance of the Drummond Tobacco Company incorporated under the laws of this State, with its principal office or place of business in the city of Alton. He says: “Complainant has recently formally incorporated in the State of Missouri, under its own corporate name of ‘Drummond Tobacco Company,’ but not for the purpose of abandoning Alton as a manufacturing point by complainant, but for the purpose of convenience,” etc. A corporation created under the laws of one State, may, by virtue of inter-State comity, be permitted to do business as a corporation in another State; but the elements which are essential to a corporation are such that it is impossible that a corporation created under the laws of one State can be incorporated into another corporation created under the laws of another State, as an integral part thereof, as is here alleged. What was really meant is manifest by another portion of the affidavit, where he says, “that said. Missouri corporation really forms part and parcel of complainant, was organized by the same persons, with one exception, and the two corporations expect to work together in unison, as practically one and the same body, hereafter as heretofore known as ‘Drummond Tobacco Company,’ dealing in the same markets and with the same customers, and in the same class of goods. ” Fairly paraphrased, all the stockholders of the complainant but one, to facilitate the business of the complainant organized as a corporation, with the same name, and to carry on the same business, at St. Louis, under the laws of the State of Missouri,—making, in fact and in law, two entirely distinct and independent corporations. The only unity is in the ownership of the stock. But this is of no consequence, because there is nothing in the law to. prevent adverse ownership in this respect hereafter, and the moment the stock of the two corporations shall pass into different hands, the corporations will become independent, in fact as well as in legal contemplation. Beyond all question they may now lawfully contract with each other. They may acquire rights and transact business inimical to each other, and they may sue each other, and make defence thereto, just as different natural individuals may do.

The only real controversy in the case is, whether the business of buying and selling and exchanging with the public, in general, has been abandoned by the complainant since the creation of the Missouri corporation. James T. Drummond, in his affidavit, denies that such is the fact, though more stress is laid therein on the abandonment of Alton as a place of manufacture than we think is important, since if we shall concede that Alton is not abandoned as a place of manufacture, yet if all the buying and selling and trading done by the complainant is by, to and with the Missouri corporation of the same name, no injury is shown likely to result to the complainant by the incorporation of the defendant, for it is not claimed or pretended that the creation of that corporation will mislead or confuse, or otherwise injure, the" complainant in buying or selling or trading from, to or with the Missouri corporation. It is only the public at large—those who would not understand the difference between the names'of the complainant and that of the Drummond-Bandle Tobacco Company, or who would fail to keep in mind that difference— that it is alleged would be misled and injured thereby.

James T. Drummond is, to some extent, sustained by William Ague, book-keeper and cashier of the Drummond Tobacco Company, and by George T. Bailey, shipping clerk of that company, in his assertion that the business of the complainant in buying, selling, etc., has been carried on with the public since the creation of the Missouri corporation the same that it was before; but he is directly contradicted by the affidavits of John N. Drummond, Charles H. Randle and John E. Hayner, who each and all swear therein: “That in the year 1880 the Drummond Tobacco Company started a manufactory in St. Louis, Mo., and the business there was called the St. Louis branch; that the object in starting the St. Louis factory was, that it was supposed that St. Louis possessed superior advantages for manufacturing tobacco, and selling it to those at Alton, Illinois, where, previous to that time, the manufacturing business of the company had been carried on; that it was also the intention to gradually cease doing business in Alton, Illinois, and transfer the entire business to St. Louis, Mo.; that the capacity of the factory in St. Louis, which was started in 1880, Avas about equal to the capacity of the factory at Alton, Illinois, and in carrying out the intention of ultimately transferring the entire business to St. Louis, the Drummond Tobacco company purchased the block of ground in St. Louis, Mo., bounded by Third, Fourth, Spruce and Almond streets, known as the Sisters’ Hospital block, for which it paid $75,000, and erected on the said block a large stemery and warehouse for the storage of the raw material, which greatly increased the facilities for manufacturing and carrying on the business in St. Louis; that further carrying out the intention, a large building, which was intended to be used as a factory, was also erected on said block, said building, in connection with the said stemery and warehouse, when in running order as a factory, having a capacity to make from twelve to fifteen million pounds of plug chewing tobacco per year; that further carrying out said intention, the business done at Alton was gradually transferred to the St. Louis branch, so that in the year 1883 the factory at Alton, Illinois, was only run to about half its capacity, while the St. Louis factory was increased and run to its fullest capacity; that in the year 1884 the Alton factory only made about two hundred and seventy-five thousand pounds, while the St. Louis factory made all the rest of the tobacco the company manufactured and sold that year, amounting to about six million pounds, and while the St. Louis branch and factory that year made large profits, the factory in Alton, Illinois, lost money to the company; that further carrying out said intention, James T. Drummond, the .principal and largest stockholder in the company, and its general manager, removed his residence from Alton, Illinois, to St. Louis, Mo., and purchased a palatial home there, he doing so, so as to better enable him to manage and increase the business in St. Louis; that further carrying out said intention, James T. Drummond, as general manager of the said Drummond Tobacco Company, negotiated with Horatio N. May, of Chicago, Illinois, for the sale of the factory at Alton, Illinois, which belonged to the company there, and sold said factory and machinery to said May for $10,000, said factory and machinery having cost the company, first and last, about $40,000, and James T. Drummond’s act was confirmed by the company, and a deed made by its officers to said May for said property, for the reason that it was considered that as the business was now in shape to and would soon be carried on in St. Louis, it was best to sell the Alton factory while an opportunity existed; that in January, 1885, the undersigned were offered by said James T. Drummond a price for their stock in the Drummond Tobacco Company, which they accepted; that they transferred their stock in said company to the said James T. Drummond; that at the time Charles H. Randle and John N. Drummond were directors of said company, and, with James T. Drummond, formed the board of directors of said company; that James T. Drummond then stated to them that he desired and intended to wind up the business of the company at once ; that he would organize a corporation under the laws of Missouri, and the Drummond Tobacco Company of Alton, Illinois, would then transfer and sell out to the said Drummond Tobacco Company of St. Louis, and the Drummond Tobacco Company of Alton, Illinois, would then dissolve by surrendering its organization or charter; that said James T. Drummond requested Charles H. Randle, as he was familiar with the business of said company, and being its secretary, to continue to act as secretary and director until the business of the said Drummond Tobacco Company of Alton, Illinois, was wound up, and the corporation dissolved; that said Charles H. Randle declined so to act; that said James T. Drummond then requested said Charles H. Randle and John N. Drummond not to both resign at once as directors of said Drummond Tobacco Company of Alton, Illinois, as it would leave him without a quorum in the board of directors, but for him (Charles H. Randle) to resign first, and he (James T. Drummond) would then transfer to Levi Davis, Jr., of Alton, Illinois, two shares of stock, so as to enable him to be a director, and also to act as secretary of the company until its dissolution ; and then, when Levi Davis, Jr., had been elected a director in place of said Charles H. Randle, John N. Drummond could resign, and J. L. Curby, of St. Louis, Mo., would be elected in his (John N. Drummond’s) place, as director, and thus he would have a board of directors to enable him (James T. Drummond) to make the necessary transfers to the Drummond Tobacco. Company of St. Louis, Mo., as soon as incorporated, and to dissolve the corporation at Alton, Illinois ; that to please said James T. Drummond, they (Charles H. Randle and John N. Drummond) did as he, the said James T. Drummond, desired in that respect, and that programme was carried out, and the board of directors of said company is now composed of James T. Drummond, Levi Davis, Jr., and J. L. Curby; that Levi Davis, Jr., owns two shares, or $200, J. L. Curby fifty shares, or $5000, and James T. Drummond nine hundred and forty-eight shares, or $94,800; that in accordance with that intention to close up the business of the Drummond Tobacco Company of Alton, Illinois, and to incorporate another company of the same name in the city of St. Louis, State of Missouri, said James T. Drummond and others did organize, and have incorporated under the laws of the State of Missouri, the Drummond Tobacco Company of St. Louis; that after the incorporation of the Drummond Tobacco Company of St. Louis, Mo., the Drummond Tobacco Company of Alton, Illinois, bargained and sold to the Drummond Tobacco Company of St. Louis, Mo., all the property it then owned at St. Louis, Mo., including all its trade-marks, brands, devices, patents, and licenses under patents, retaining only its corporate name, two brands, and some manufactured tobacco at Alton, Illinois, which tobacco was not sold, because, if sold and removed, the government stamps would at once have to be placed on each box, while it could remain unstamped until sold; that the Drummond Tobacco Company of Alton, Illinois, to-day has no factory in Alton, Illinois, or elsewhere,—is a mere shadow,, the substance having been transferred to the Drummond Tobacco Company of St. Louis, Mo.; that it never was the intention to have two Drummond Tobacco Companies, each, having the same name, one in St. Louis, Mo., and one in Alton, Illinois, but it -was the intention to have all that belonged to the Drummond Tobacco Company of Alton, Illinois, transferred to its namesake in St. Louis, Mo., and the only reason why, as affiants believe, the Drummond Tobacco Company of Alton, Illinois, is still kept alive, instead of being dissolved, as was intended and agreed, is for the purpose of annoying and vexing affiants, and for the purpose of trying, without reason or justice, by this vexatious proceeding to prevent, if possible, these affiants from completing the organization of the Drummond-Bandle Tobacco Company, of which they are stockholders. ”

William Ague also made another affidavit at the instance of defendants. In the first he had stated that he believed the Drummond Tobacco Company would start another factory at Alton. In his last affidavit he explains that that statement was made on the faith of what he had heard James T. Drummond say upon the subject after this suit was commenced. He then adds, “that the Drummond Tobacco Company has no machinery of any description to manufacture tobacco in Alton, Illinois; that the Drummond Tobacco Company, since the sale of its factory in Alton, Illinois, has kept no accounts on its books, here, with any customer except the Drummond Tobacco Company of St. Louis, Mo.; that the Drummond Tobacco Company of St. Louis, Mo., makes the sales of the remnant of the stock of tobacco now on hand, and the tobacco so sold is shipped or sent, when it has been ordered, by th'e Drummond Tobacco Company of St. Louis, Mo.”

We can not say that the court below erred in holding that the evidence in favor of the complainant did not preponderate over that of the defendants upon this issue. No authority cited by .the counsel for complainant holds, and we are aware of none not cited by them which holds, that the use of a name in a corporation will be enjoined unless it is made to appear, by all the circumstances, that the proposed use of the name will likely result in injury to the complainant. The postmaster at Alton is positive in his evidence that there is no reasonable liability of the mail’matter of the complainant being delivered to the proposed corporation, the Drummond-Randle Tobacco Company, and the evidence fails to satisfy us, that in telegraphing, expressing and shipping by the Drummond Tobacco Company at St. Louis to and from the complainant at Alton, there is likely to be confusion and annoyance, leading to injurious results, because of the Drummond-Randle Tobacco Company doing business at Alton. All the evidence showing the probability of injury resulting from the use of the word “Drummond” in the name “Drummond-Eandle Tobacco Company, ” is predicated upon the hypothesis that such name is to be used in the trade with the public, and that that company and the complainant will, in the future, be competitors before the same public for the same trade. But that hypothesis, we have seen, is effectually excluded by the affidavits of John N. Drummond, Randle, Hayner and. Agne.

The objection to the assessment of damages is not tenable.. The record was amended during the term', showing these damages to have been assessed at the proper time, and this amendment was within the power of the court. (Frink et al. v. King, 3 Scam. 144.) The amended record shows suggestions of damages filed before the question had passed beyond the control of the court, and the evidence authorized the amount decreed.

We perceive no ground upon which to reverse the decree below. We are of opinion that the appeal was properly prosecuted directly to this court. The creation of a corporation (and to be a corporation is itself a franchise) was sought to-be enjoined. All the steps taken to form a corporation were to form one by the name of the “Drummond-Randle Tobacco-Company.” If a corporation could not be formed by that name, none could be formed under the steps then taken to-form a corporation, there being no provision in the statute authorizing the Secretary of State to reject the proposed name: and substitute another. A new corporation could, of course, be formed by the same parties, but this would involve an abandonment of the first essay in that direction, and the-, initiating of new proceedings.

The decree is affirmed.

Decree affirmed.