Juan F. Portuondo Cigar Manufacturing Co. v. Vicente Portuondo Cigar Manufacturing Co. ( 1908 )

Opinion by

Mr. Justice Stewart,

Neither party to this controversy is satisfied with the result reached in the court below, and as a consequence we have here two appeals from the same decree. We shall consider first that of the defendants in the proceeding below. Separate reference to each of the seventy-seven assignments of error would be impracticable. Fortunately the case does not require it. More than three-fourths of them relate to the findings of fact by the court, and the complaint with respect to each is, that it is not supported by the evidence. Following closely the line indicated by each assignment we have very carefully examined the evidence in the case. From the specific findings, seventy-one in number, the learned court reached the general conclusion that there was on the part of Vicente Portuondo a studied effort to imitate the markings, labels and general method of dressing his goods, that had been pursued by Juan F. Portuondo, with a view to profit on the magic that had already been given to the name of Portuondo by his brother; and that his course of dealing was such as constituted what is known in law as unfair trade competition, coupled with an infringement of the business name, and in some instances infringement of trade-marks to such extent as to entitle the plaintiff to relief. This general finding can be understood and applied only as certain facts connected with the history of the case are made known. Juan F. Portuondo engaged in the manufacture of cigars in the city of Philadelphia as early as 1869. In 1885 in order that his product might be distinguished from that of other cigar manufacturers, he adopted certain labels which being duly registered became his peculiar trade-marks, and these he used upon the goods made in his establishment. The cigars manufactured by him came to be known to the trade throughout the United States as La Flor de Portuondo, after one of the adopted trade-marks, or Portuondo cigars, and are so generally referred to by the purchasing public. In January, 1893, the Juan F. Portuondo Cigar Manufacturing Company, plaintiff having been incorporated, Juan F. Portuondo assigned to it the manufacturing business conducted by him, together with all the rights therein, including trade-marks, copyright labels and everything else connected therewith. Up to the time of his death in 1906 Juan F. Portuondo was president of this company, and owned a very large majority of stock interest therein. The company has continued uninterruptedly to the present in the business for which it was organized. Yicente Portuondo, a brother of Juan F. Portuondo, had been employed by the latter in his factory up to 1900, when, quitting his employment there, he engaged in the cigar business with a partner under the trade name of Yicente Portuondo. Four years later, in 1904, Yicente Portuondo filed a voluntary petition in bankruptcy and, having been adjudged a bankrupt, his property passed to the trustee. Within three days thereafter, by agreement in writing, he sold to the individual appellants for the use of the Yicente Portuondo Cigar Manufacturing Company the other appellant, a corporation to be formed later, and which was duly incorporated under the laws of New Jersey, April 28, 1904, the right to use the name Yicente Portuondo in the title of the proposed corporation. In May, 1904, defendant corporation purchased from the receiver in bankruptcy the entire stock and fixtures, including the labels and stationery of the business of Yicente Portuondo. The bill filed in the case charged an improper and illegal use by defendants of labels on their manufactured goods which infringed upon trade-marks of the plaintiffs, an improper use of the name Portuondo, and a general course of unfair trade on their part towards the plaintiff, resulting in great loss to the latter.

It may be conceded that some of the specific facts found by the court are fairly disputable; but none are without support in the evidence, certainly none which might be regarded as material. The findings with respect to those disputable are not open to review, except as manifest error is shown, and that is not the case with respect to any of them. Were these to be passed by without consideration, there would be still enough facts in the case clearly established to sustain the final conclusion of the court as above stated. The trade-marks, labels and indices employed by Yicente Portuondo speak for themselves. They were not a servile and exact reproduction of those used by Juan F. Portuondo, of whom the plaintiffs are the successors in right, but they bear such resemblance that it is impossible to reach any other conclusion than that they were designed from them, with not too much variation to prevent them from being accredited by the unobservant and unwary as the proper marks and labels of Juan F. Portuondo, intended to identify the goods of his own special manufacture, and with just enough variation to distinguish one from the other when comparison was made between them. Except as both were exposed to one at the same time, so that opportunity for comparison was afforded, either could readily be taken for the other. This was not accidental, could not have been, but was evidently the result of careful and studied effort. It is wholly immaterial in this connection that the labels and marks used by the defendants were the same that had been devised and used by Vicente Portuondo. The fact that he had not been enjoined from using them conferred no right upon appellants to use them. They were- as much infringement under his use as under theirs.

That the course of dealing pursued by Vicente Portuondo and the defendant company, in the manufacture and sale of their goods, was unfair trade competition, coupled with infringement of business name and trade-marks, is made equally evident. This finding is not dependent upon any fact open to question. The appropriation of name, the use of simulated labels, marks and designs, would in themselves be sufficient to warrant this finding; but it has far more to rest upon. The advertisements and circulars addressed to the trade by the defendants, in which claims are made calculated to create the belief that the cigars manufactured by the defendant company are the original, if not the only, Portuondo cigars, furnish convincing proof that however excellent in quality defendants’ manufactured product was, for their general acceptance in the market defendants depended far more upon the Portuondo association than upon the excellence of the goods. Value was given the name Portuondo in association with cigars, and the trade-marks and labels adopted by Juan F. Portuondo were used to distinguish cigars of his manufacture from others in the general market. The general rule is that anything done by a rival in the same business by imitation or otherwise, designed or calculated to mislead the public in the belief that in buying the product offered by him for sale, they were buying the product of another’s manufacture, would be in fraud on that other’s rights, and would afford just ground for equitable interference. That is the case here. "With respect to the measure of relief afforded the plaintiff by the restraining decree of the court, the defendants in the bill have no ground for complaint. It deprives them of nothing that they are entitled to; it simply protects the plaintiff company in the exclusive enjoyment of what it has shown itself to lawfully own.

The exceptions in this appeal, No. 397, January Term, 1907, are overruled.

We come now to consider the appeal of the plaintiff company. Here the complaint is that the decree comes short of giving the plaintiff the full measure of protection to which it is fairly and justly entitled under the evidence. The bill asked that defendants “ be restrained from using on cigars, or in relation thereto, or in connection therewith, or in the advertisement or sale thereof, the words Yicente Portuondo or Portuondo Cigar Manufacturing Company, or any colorable imitation thereof, either alone or in connection with other words or phrases.” The decree while enjoining defendants from using any of the distinctive trade-marks of the plaintiff, or devices colorably simulating them, restrains with respect to the use of the name “ Portuondo” no further than to require that when used, it shall be immediately preceded by the name “ Yicente,” in the same size and style of letters as the word “ Portuondo.” It is quite evident from the opinion filed by the learned judge who sat as chancellor, that but for supposed equitable considerations having regard to the delay on the part of the plaintiff to assert its claim to the exclusive use of the name, and the amount expended by the defendants in establishing their business under the corporate name of the Yicente Portuondo Cigar Manufacturing Company, the full measure of protection asked by the plaintiff would have been afforded. While defendants claim a legal right to use the name Portuondo under and by virtue of their agreement with Yicente Portuondo, the court bases its denial of the relief asked for by plaintiff on no such grounds, but upon purely equitable considerations. Since the appeal in all such cases is to the discretionary jurisdiction of the chancellor, such considerations as these have their proper place in the inquiry; but the question must always be as to the weight to be allowed these under the facts of the particular case.

The findings show an exclusive original right to the use of the name, in connection with the manufacture of cigars, in Juan F. Portuondo; a legal transfer of that right to the plaintiff company ; and continued prejudicial infringement of such right by the defendants. The 32d finding is as follows: “ The name adopted for this defendant corporation, to wit: The Yicente Portuondo Cigar Manufacturing Company, is so similar to the title of the plaintiff corporation, that it is likely to and has deceived the public, and thereby created a confusion between the goods of the plaintiff and of the defendants, and has thereby enabled the defendants to profit by the good reputation of the plaintiff and its predecessors, and at the expense of the plaintiff in the cigar trade. The combination of words used in this name constitutes an infringement upon the business name of the plaintiff corporation.” A very careful review of all the evidence in the case has satisfied us of the correctness of the findings of the learned judge. We have been aided much in our investigation of the case by the orderly and logical manner observed in stating these and the clearness and conciseness with which they are expressed. Accepting the facts as found, we are to inquire only into these considerations which influenced the court to deny the plaintiff the full measure of relief, which upon the facts as we have stated them above, it would seem to be entitled to. These considerations are of a purely equitable nature. They are, first, laches on the part of the plaintiff in asserting its right to the exclusive use of the name Portuondo in its business; and, second, the loss that would result to the defendants in view of the large expenditure made relying upon their right to the use of the name.

That the plaintiff here is chargeable with laches, is an inference derived by the chancellor from certain facts which admit of no dispute. Yicente Portuondo in the conduct of his separate business, until bankruptcy overtook him in 1904, persistently made use of the name Portuondo in a way that was clearly an infringement of the rights of Juan F. Portuondo. This was well known to the Tatter, who made no attempt by legal proceeding to restrain such, continued use by Yicente. It does not appear that the defendant company has to any considerable degree, if at all, enlarged upon the use of the name; but it does clearly appear, that it has continued to do all that Yicente did in this regard. Were this a proceeding by Juan F. Portuondo to restrain Yicente from using the name a chancellor might be justified in calling upon the former for some excusing explanation of his inactivity in asserting his exclusive right during all this time. We do not say that a failure in this regard would necessarily defeat his right to the protection asked, but it would certainly be a circumstance to be considered in adjusting the equities of the parties. Suppose, however, it did so result, the refusal of the court to interfere could not be construed into a recognition of any right on the part of Yicente to the use of the name. Any discussion of this case must start with the accepted fact that thé original, exclusive right, was in Juan F. Portuondo. This right in him was property, as much entitled to protection as any other species of property. He and he alone could invest another with any right in connection therewith. He might by indifference and inactivity forfeit his right to claim the protection of the law against someone’s invasion* and this incidentally would result in an unearned advantage to the invader, but it would invest the latter with no right in the property itself. While the latter would be secured against legal interference with his use of another’s property, he would have no right in the property itself which he could sell or assign to another, or which he could assert against another attempting to make common use of it with himself. His exemption from legal interference would be purely incidental to the owner’s forfeiture of right, and would be personal to himself. The mere fact that the right to protection against all other infringers would remain with the original owner, and no such right against anyone in the world could be claimed by the infringer, shows in a most conclusive way that no right of property could have been acquired by the latter. So that even though Juan F. Portuondo must have failed in any attempt to restrain Yicente from using the name in connection with his business, that fact, accepting it as a fact, establishes no right in Yicente to the thing itself. When he went into bankruptcy, and later when he attempted to sell to the defendant company the privilege of using the name in its business, the sole and exclusive ownership of the property was in those who had acquired it from and through Juan F. Portuondo, without other qualification than that the right to exclusive enjoyment of the thing as against Vicente might not be enforcible at law, because of laches on the part of the former owner. The defendants are here claiming not an immunity from interference, but a right to property derived through purchase from Vicente Portuondo. As we have tried to show, the latter had no property right in the business name, and, therefore, could convey none. By what principle of law or equity could anyone succeed to his immunity from interference by the lawful owner ? His was no right, and, therefore, was not anything that • could be transferred. It results, we think necessarily, that the defendant company is in no better position to claim advantage from plaintiff’s laches with respect to Vicente, than any other infringer would be. It will not be contended that the indulgence shown his brother in this regard interfered with Juan F. Portuondo’s right to protection against other infringers; and yet if one could have succeeded to the immunity allowed Vieente, because of an assignment from him, why not a dozen, or for that matter a hundred or more, to the utter destruction of all value in the plaintiff’s rights ? We allow the tacking of an adverse possession of the land by an occupant without right, to the subsequent possession of a purchaser, to form a bar by the statute of limitation ; and this may have suggested the application of like method here by analogy; but we are not dealing with the statute of limitations, but with an exemption from legal disturbances which, no matter how long enjoyed, could never ripen into a legal right or title. For the reasons stated we are of opinion that however guilty of laches Juan F. Portuondo may have been in allowing his brother Vicente to continue undisturbed in the use of the business name Portuondo, such laches can avail the defendants nothing, and ought not to be considered in connection with their present claim.

The other question while not one of estoppel, is closely akin to it, since it is allowed a determining effect in measuring the relief the plaintiff is entitled to, by the application of like principles. The defendant corporation in its attempt to acquire a right to the use of the name Portuondo, and in various ways enlarging its manufacturing facilities and expanding its trade, has expended large sums of money. These expenditures have been made' in the honest belief that their right to employ the name Portuondo was absolute, and by its use of the name the business of the company has increased to a profitable degree. A denial of this right at this time would most probably result in loss to the company, hardly, however, to the extent apprehended by the learñed judge, of driving it out of business. But these facts alone can create no equity in the defendants. They can avail to this end only as it is shown that the plaintiff was guilty of such negligence, in failing to assert its adverse title to the exclusive use of the name, as to lead the defendants into a mistaken belief, and that in making their expenditure defendants acted upon such mistaken belief to their prejudice. Open, affirmative encouragement on the part of the plaintiff is not pretended; encouragement by silence is what is relied upon. But what was there in the situation that imposed' on the plaintiff any duty to speak out. It was an established corporation, doing an extensive business, employing the name of Portuondo, not only in its corporate title, but on the several brands of its manufactured product. All this must have been known to the defendants who were proposing to establish a like business in the same city, through a corporation to be chartered in a foreign state, under a corporate title which would give marked prominence to the name Portuondo. Plainly here was duty resting on the defendants to make inquiry as to their rights with respect to a name thus publicly and widely employed by another. ¥e find no corresponding duty resting on plaintiff to give warning to the defendant, for the sufficient reason, if for no other, that it does not appear, certainly there is no finding to that effect, that plaintiff had any knowledge of the contract between defendants and Yicente Portuondo until after it had been formally executed, or any knowledge of defendants’ purpose to purchase the stock of Yicente, or to establish a rival. corporation with title liable to be confused with its own. Not only was there no duty on plaintiff to speak out any more distinctly than it was doing through the fact of its incorporation, but no opportunity was afforded it. Besides, it is very evident that this silence on the part of the plaintiff was not at all considered by the defendants, and in no wise induced their action. Having discussed these equitable considerations which influenced the court to deny the plaintiff the full measure of relief it asked, and having concluded that too much weight was given them, we might rest the case here; but it presents a feature which seems to have been overlooked, and which, because to our mind it outweighs every consideration of the prejudice that would result to defendant from a restraining decree, calls for some reference. Briefly, it is this,— the use by the defendant company of the name Portuondo is consistent with no honest purpose that we can discover. Defendants rest their right to the use of it on their contract with Vicente, now deceased. That contract did not introduce him as a party in the proposed business enterprise, nor did it pretend to do more than give to the defendants the right to use the ndme Portuondo in the corporate title. It gave to the defendants no trade secret, nothing that would require or enable them to manufacture for the market a product corresponding in peculiar quality to the cigar made by Vicente Portuondo, and which had given that cigar its special value, and made for it a distinct market. To what end did the defendants desire the name % What that peculiar quality in the Vicente Portuondo cigar was, we of course do not know; but that it characterized and distinguished this cigar from others is manifest from the extent of the public demand for it. The name stood as a pledge for this particular quality so long as Vicente was engaged in the manufacture, and equally a pledge that the cigars bearing his name were of his own manufacture. Neither in the contract, nor in any part of all this voluminous testimony, is there even a suggestion that defendants could produce cigars with this distinguishing quality. And yet they are to-day engaged in marketing a product of their own which the public is given to understand are Portuondo cigars. If the cigars manufactured by them have any claim to be called Portuondo cigars, other than because they are made by a corporation under a corporate name which includes the word Portuondo, we have failed to discover it. The facts are pregnant with suspicion that the purpose in acquiring the name, was to mislead and deceive the public into the belief that the cigars made by the company were made, if not under the supervision of Yicente Portuondo, at least after a formula adopted and used by him, and to which the company had succeeded. In this connection it is to be borne in mind that the doctrine of estoppel is only applied to promote justice and fair dealing; never to aid a fraudulent purpose.' Before defendants would be entitled to any benefit whatever of this doctrine to save them from loss, they would at least have to acquit themselves of the suspicion of fraudulent purpose which their transactions naturally excite. Apart from the circumstance here considered, our conclusions as to the equities 6f the case would be the same. We have referred to it only as a matter calling for at least equal consideration with those relied upon by the court. In our judgment it makes largely against the defendants in any attempt to balance the equities between the parties.

For the reasons stated in the opinion the appeal of the defendants to No. 397, January Term, 1907, is dismissed at the cost of appellants. The appeal of plaintiff, No. 306, January Term, 1907, is sustained ; and it is ordered that the record be remitted to the court below with the instructions that it be amended and enlarged so as to restrain the defendant from making any use whatever of the name Portuondo in connection with the manufacture and sale of cigars. The cost on both appeals to be paid by the defendants.

Elkin, J., dissents in No. 306, January Term, 1907.