Great Western Live Stock Commission Co. v. Great Western Commission Co. , 1914 Ill. App. LEXIS 651 ( 1914 )

Mr. Justice Brown

delivered the opinion of the court.

This is a case in which two corporations in the same business and with very similar names find, naturally, that confusion has resulted, which each party insistently alleges is to its peculiar detriment. Concerning this confusion and its results, conflicting evidence is to be found in the record. We do not think it necessary to say more of this phase of the matter than that we are satisfied that such confusion exists and is detrimental to the business interests of each party.

But the theories which underlie the remedy which each party is seeking against the other cannot be so easily disposed of, nor can rights which each party claims as legally belonging to it be reconciled.

On the one hand, the older corporation, formed many years ago, under the laws of another State, and with its principal place of business in another State, maintains that with the purpose of absorbing its business not only unjustly and unfairly, but by actual deception and fraud, persons possessing knowledge of the good-will and enviable reputation which it had acquired, conspired to appropriate them for their personal pecuniary advantage,—a manifestly inequitable proceeding, if no worse, and one to which no court of equity should, if escape is possible, lend its aid.

But while suffering from the partially successful attempt which the unfair competitors were making through the organization under the laws of this State of a corporation with a very similar name to do the same business—business originating in identical territories and finished in territories that are certain to overlap—this older corporation is confronted with the strenuous contention of its newly organized competitor that it should be restrained by the. power of the courts from so acting as to minimize its loss and retain some of the business intended for it, but which, in default of such action, would go to its competitor. The ground of this demand is that the junior corporation alone can be recognized in this State as having any rights as to business intended for either corporation, inasmuch as it has a license to do business within the State, while its competitor has none and is violating the law in asserting one.

The situation suggests to us the speech of Hamlet to the gravedigger: “Here’s fine revolution an’ we had the trick to see it.”

'The master and the chancellor did “see” the matter in this light; nor is the argument for the position that they have taken without force and plausibility.

The majority of this court, however, are constrained to a different conclusion after a full consideration of the facts which they think the evidence shows, and the application to those facts of the rules of law which they believe relevant.

The evidence to our minds establishes not only the fact found by the master, that the subscribers for eighty per cent, of the stock of the Great Western Live Stock Commission Company on its organization, who were also its promoters and incorporators, knew of the existence of the Great Western Commission Company as an incorporated Company, but also negatives and establishes the reverse of the findings of the decree, that “the incorporators of the complainant Company in no manner intended to use the name or to derive any benefit from the advertising of the defendant Great Western Commission Company,” and that “their conduct was entirely free from any purpose to obtain any undue advantage by reason of the name or good-will of the said Great Western Commission Company.” •

To go over the evidence, oral and documentary, from which we draw what we deem these legitimate inferences, would be useless. They are conclusions reached after a study of the record.

To the further finding of the decree, that “the incorporators acted strictly within their legal right in making application for the name of the Great Western Live Stock Commission Company,” we accede; but “legal rights” are not always identical with “clean hands,” required in a court of equity when its extraordinary powers are invoked to coerce and restrain a competitor. We think the complainant in this case did have a legal right to secure from the State of Illinois incorporation under the name which its incorporators selected, as we believe, for the purpose of securing an unfair advantage over a foreign corporation with a very similar name; and for that reason we cannot hold that to grant the prayer of the cross-bill of the Great Western Commission Company and of the cross-bill of the Ward Commission Company would have been justifiable. The portion of the decree which dismissed the cross-bills we think correct.

But this was not the main effect of the decree. By a sweeping injunction it restrained the Great Western Commission Company from transacting any business whatever under its own name, and also restrained the Ward Commission Company from transacting any business in the State of Illinois under the name of its alleged principal, the Great Western Commission Company, and enjoined both companies, the one incorporated in Illinois as well as the Nebraska one, “from shipping any live stock in the State of Illinois under said name or appellation, and from receiving any stock shipped into the State of Illinois under said name or appellation.”

It is in the words of the injunction order which we have italicized that its chief force lies. If the prohibition contained in them is not a proper relief for the complainant to be given, its bill might as well, it was in argument conceded by the appellee, be dismissed.

We do not think it is proper relief. First. We do not think that the complainant corporation has “clean hands” with which to pray for it or receive it. Not only do we disagree with the finding of the court below that the conduct of the incorporators was free from the purpose's of obtaining an inequitable advantage of the Great Western Commission Company, but we disagree also with the conclusion of law formulated by the master that “the Great Western Live Stock Commission Company is not chargeable with the knowledge possessed by certain of its incorporations nor liable for the actions of said incorporators prior to its actual incorporation. ’ ’

The theory of a corporation as an entity distinct from any of its corporators or all of them together has been carried far, but in our opinion it stops short of such an unlimited statement of it as this.

We think in this case, where, as we believe, the persons who subscribed for eighty per cent, if not for all of the stock of the new corporation, and who became at once its officers and managers, knew certain things and acted in the incorporation under the influence of that knowledge to effect certain purposes for the unfair advantage of the corporation when formed, that the corporation is affected with that knowledge and must be debited with those purposes. Equity in such a case will disregard forms and ignore to some extent and pro hac vice the corporate entity by attributing to the corporation any disability in suing that the promoters would be under. It would be a halting jurisprudence which could not do this.

The relief in this case given to the complainant corporation was recommended by the master and given by the court solely on the ground that any business transacted by the Great Western Commission Company in Illinois was so transacted in violation of the laws of this State because it had no charter or license 'from the State. But to justify the right of the complainant to an injunction on that ground it seems plain to us it must be acting in good faith, with clean hands, and not in pursuance of a purpose and design to use the good-will and prestige of the foreign and older corporation for its own advantage. The chancellor finds by his decree that the complainant was thus acting in entire good faith. The report of the master leaves it open whether he was of this opinion. We are not, and think that on this account the bill of the complainant, equally with the cross-bills, should have been dismissed even if the conclusions of the master and chancellor are correct that the Great Western Commission Company was, through the Ward Commission Company, doing business in Illinois, and that said business was not interstate commerce, which the State of Illinois could not forbid nor render unlawful.

We are not, however, in accord with either of these conclusions. In other words, we do not think the evidence shows that the business done by the Ward Commission Company (an Illinois corporation) under the “open order” system described in the testimony, was business done by the Great Western Commission Company. But if it is to be considered the business of the Great Western Commission Company, then, so far as that Company is concerned, it is interstate commerce.

There are findings in the master’s report and in the decree, which we may concede there was evidence sufficient to justify, that advertisement to some extent of the Great Western Commission Company, and of its being able to deal with shipments of live stock made to Chicago, was made after the organization of the complainant Company; but it was not this advertising which was enjoined, nor was this advertisement “doing business” in Illinois.

The course of events which the master and the court found constituted doing business by the Great Western Commission Company in Illinois was this: Although the Great Western Commission Company was a Nebraska corporation and had its principal office in South Omaha in that State, stock was sometimes consigned to it at Chicago by its clients in the Western cattle raising country, in order that it might be sold in Chicago, and sometimes stock consigned to it at South Omaha was by it diverted and sent on to Chicago for sale upon the market here, if it could not sell it satisfactorily to itself or to the owner in South Omaha. Such a course of dealing, it appears, is a concomitant of the cattle raising and selling business, because of variations and changes, more or less sudden, in the market prices at different points. But something must be added to this to show that the Great Western Commission Company did business in Illinois. It must be also shown that when the stock airrived in Chicago it was handled and sold by the Great Western Commission Company. This the master and chancellor found happened, because an “open order” had been given by the Great Western Commission Company to deliver to the Ward Commission Company, an Illinois corporation, for handling and sale, all stock received at the Chicago Yards consigned to it. This, in their view, made the Ward Commission Company the agent of the Great Western Commission Company, and its acts in relation to said stock the acts of the Great Western Commission Company. We do not agree with this. The Ward Commission Company did not account to the Great Western Commission Company for any compensation received by it for such handling or sale. That went directly to the Ward Commission Company and was retained by it. So far as these shipments go, the evidence shows that the only compensation the Great Western Commission Company gets is the moral one of feeling that the interests of its customers which it cannot satisfactorily further in Omaha are well taken care of in Chicago. This does not make an agency. Nor in our opinion is it made an agency, nor is the connection of the Great Western Commission Company with this course of things made the doing of business by it in Illinois because, in return for the favor shown by it to the Ward Commission Company, that Company gave a similar “open order” to the Great Western Commission Company in relation to shipments to the Ward Commission Company consigned or directed to Omaha. This was a mere interchange of orders, analogous in principle to that which might take place between lawyers of different States in regard to local business they could not attend to, or to reciprocal recommendations of hotels in different cities, or interchange of services between newspapers in different cities, or a thousand other examples of reciprocal recommendations or service. We do not think it merits the importance evidently attached to it in the theory of the appellee.

The considerations we have indicated lead us to the conclusion that the Great Western Commission Company is not, in the transactions that we have detailed, doing business in Illinois, and for that reason, irrespective of the one already given and that which will follow, the injunction which prevents the Illinois corporation, the Ward Commission Company, “from receiving any stock shipped into the State of Illinois under the name” of the Great Western Commission Company, is necessarily erroneous and oppressive.

But even if we should be held wrong in this, we cannot see why, if this course of dealing constitutes the doing of business by the Great Western Commission Company in Illinois, it is not “interstate commerce” that it is transacting. We shall not dwell on this phase of the case, so conclusive seem the others to our minds. But it is beyond doubt that if it be an interstate commerce that the Great Western Commission Company is doing, it cannot be prevented or interfered with under the pretext of enforcing the law of Illinois. Lehigh Portland Cement Company v. McLean, 245 Ill. 326.

It is 'maintained by the appellee that the case of Hopkins v. United States, 171 U. S. 578, is conclusive against the position that the business involved is an interstate commerce. We do not so consider it. All that that case decides is that selling on commission live stock received from one -State at stock yards in another State is not that kind of interstate commerce which is affected by the - Federal Antitrust Act. The case has nothing to do with an interchange of orders between brokers or commission men of different States of business coming primarily to each. Such an interchange frequently takes place in connection with other kinds of “stock,” as well as with live stock. We do not think it makes the interchange brokers transactors of business in the State foreign to them; but if it does, it is in our opinion an interstate business they do.

The decree of the Circuit Court is reversed and the cause remanded to that court, with instructions to dismiss both the bill of the Great Western Live Stock Commission Company and the cross-bills of the Great Western Commission Company and of the Ward Commission Company for want of equity.

Reversed with instructions.

Mr. Justice McSurelt, dissenting.