Volunteer Beer, Inc. v. Johnson, Jr. ( 1997 )

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT NASHVILLE
VOLUNTEER BEER, INC., )
)
Plaintiff/Appellant, ) Davidson Chancery No. 96-13-III
)
VS. ) Appeal No. 01A01-9703-CH-00126
)
)
RALPH W. JOHNSON, JR., )
)
Defendant/Appellee. )
APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
THE HONORABLE ROBERT S. BRANDT, CHANCELLOR
FILED
October 31, 1997
Cecil W. Crowson
G. KLINE PRESTON, IV Appellate Court Clerk
Nashville, Tennessee
Attorney for Appellant
LAURENCE M. McMILLAN, JR.
CUNNINGHAM, MITCHELL, HICKS & McMILLAN
Clarksville, Tennessee
Attorney for Appellee
REVERSED AND REMANDED
ALAN E. HIGHERS, J.
CONCUR:
W. FRANK CRAWFORD, P.J., W.S.
DAVID R. FARMER, J.
Plaintiff Volunteer Beer, Inc. (VBI), appeals the trial court’s final judgment dismissing
its claim for fraudulent registration of trademark against Defendant/Appellee Ralph W.
Johnson, Jr. The trial court granted summary judgment to Johnson based on the court’s
conclusion that Johnson did not intend to deceive anyone when he made a false statement
on his trademark application. We reverse because we conclude that Johnson’s affidavit
regarding his state of mind at the time he completed the trademark application was an
insufficient basis upon which to grant summary judgment.
This lawsuit began in January 1996, when VBI filed a complaint against Johnson
seeking declaratory and other relief. Specifically, VBI’s complaint alleged that Johnson
submitted an application to register the trademark Volunteer Beer to the Tennessee
Secretary of State’s office in August 1989; that Johnson falsely represented on his
application that the mark was first used in Tennessee on August 18, 1989, the date of
application; that the trademark Volunteer Beer, in fact, never was used in Tennessee by
Johnson; that Johnson fraudulently procured registration of such trademark; and that VBI
was the rightful owner of the Volunteer Beer mark. The complaint sought cancellation of
Johnson’s registration of the trademark, a declaration that VBI was the lawful registrant of
the mark, and an award of damages pursuant to section 47-25-510 of Tennessee’s Model
Trademark Act.
Johnson filed an answer and counterclaim in which he sought damages for
trademark infringement, an injunction against VBI’s further use of the Volunteer Beer mark,
and other relief.
VBI subsequently filed a motion for summary judgment contending, inter alia, that
the undisputed facts showed that Johnson fraudulently obtained registration of the
trademark Volunteer Beer.
Johnson also moved for summary judgment. Johnson’s answers to interrogatories
indicated that he had neither brewed Volunteer Beer nor made any sales of Volunteer Beer
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in Tennessee. Accordingly, in opposing VBI’s motion for summary judgment, Johnson
conceded that his registration of the Volunteer Beer mark was subject to cancellation
because Johnson never had sold goods under the mark. To rebut VBI’s claim that he had
fraudulently registered the Volunteer Beer trademark, however, Johnson filed a sworn
affidavit in which he explained why he wrote August 18, 1989, as the date of first use on
his trademark application:
2. In 1989, I submitted an application to the
Tennessee Secretary of State for registration of the mark
VOLUNTEER BEER for use on Class 48 goods, malt
beverages and liquors. Originally, when I completed the
blanks on the application form, I left blank the date of first use
on the application. . . .
3. Upon my inquiry regarding what was meant by
the date of first use of the VOLUNTEER BEER mark, a female
employee of the Tennessee Secretary of State’s office
instructed me to fill in the application date of August 18, 1989,
this being the date I made this inquiry (which was in person at
the Tennessee Secretary of State’s office). Based on this
instruction, I wrote August 18, 1989, on the application as the
date of first use. . . .
....
5. I am not an attorney, nor was I represented by an
attorney during the application and registration of the mark
VOLUNTEER BEER. I was unfamiliar with the provisions of
Tennessee’s trademark law and statutes at the time that I
submitted my application. In connection with the application
process, I made no representations or declarations, verbally or
in writing, that were false or fraudulent, nor was it my intention
to mislead anyone in any way. To the contrary, in stating the
date of my first use of the mark VOLUNTEER BEER, I acted
upon the advice of the representative of the Tennessee
Secretary of State’s office.
Based on the undisputed evidence that Johnson never used the trademark within
the meaning of section 47-25-501(b)(1) of the Model Trademark Act, the trial court entered
a judgment canceling Johnson’s registration of the mark Volunteer Beer. The trial court
further ruled that VBI had priority in all of its trademarks bearing the Volunteer Beer mark
by virtue of VBI’s prior use of such mark. Lastly, the trial court dismissed all of Johnson’s
counterclaims.
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In its final judgment, the trial court dismissed VBI’s remaining claim for damages
under section 47-25-510 of the Model Trademark Act based on VBI’s failure to submit any
proof that Johnson made a false or fraudulent misrepresentation in his August 1989
trademark application. The trial court reasoned:
The Model Trademark Act establishes liability against
one who procures the filing or registration of a [trademark] “by
knowingly making any false or fraudulent [representation].”
[T.C.A.] § 47-25-510. The asserted misrepresentation is the
insertion of “8-18-89" on the form where it asks for the date the
applicant first used the mark.
Johnson’s version of how that happened is undisputed.
He typed in the information requested by the fill-in-the-blank
form and took it to the Secretary of State’s office. He did not
fill out the “first used” blank as he was unsure what “used”
meant. When he asked someone in the Secretary of State’s
office what was meant by “first used,” Johnson was instructed
to insert the then current date. He did so.
Use, according to the Act, means that the goods were
sold or otherwise distributed. [T.C.A.] § 47-25-501(b)(1).
Johnson’s version of the beer had never been sold or
distributed, so when he filled in the blank with a date, he made
a false statement. The question is . . . whether the false
statement [was] made “knowingly.”
The Model Trademark Act does not describe
“knowingly.” Courts defining the term have usually done so in
the context of criminal statutes that require that acts be
committed “knowingly” before they constitute crimes. In that
context, knowingly means that the person charged possessed
facts which made him aware he could not lawfully do the act
charged. State v. Summers, 692 S.W.2d 439, 446 (Tenn.
Crim. App. 1985).
The damage section of the Model Trademark Act is
captioned “fraudulent registration” and refers to “any other
fraudulent means.” This implies that for a false statement to
have been made knowingly, it must have been done with some
intent to deceive someone.
There is no evidence that Johnson’s misrepresentation
that he had used the [trademark] was done with any intent to
deceive anyone. To the contrary, he did not know what to put
down and only followed the instruction or suggestion of
someone in the Secretary of State’s office. Johnson was
obviously uncertain what “used” meant. His misrepresentation
made out of ignorance was not made knowingly.
On appeal, the sole issue for this court’s consideration is whether the trial court
erred in dismissing VBI’s claim for fraudulent registration of trademark under section
47-25-510 of the Model Trademark Act.
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We first address the trial court’s interpretation of the statutory requirements of
section 47-25-510. That section provides that
Any person who, on behalf of such person or any other
person, procures the filing or registration of any mark in the
office of the secretary of state under the provisions hereof, by
knowingly making any false or fraudulent representation or
declaration, verbally or in writing, or by any other fraudulent
means, shall be liable to pay all damages sustained in
consequence of such filing or registration, to be recovered by
or on behalf of the party injured thereby in any court of
competent jurisdiction.
T.C.A. § 47-25-510 (1988).
Other states have adopted virtually the identical provision from the Model
Trademark Act. See Gragg v. Rhoney, 884 P.2d 443, 446-47 (Kan. Ct. App. 1994) (citing
K.S.A. 81-120); Vance v. Huff, 568 So. 2d 745, 750-51 (Ala. 1990) (citing Ala. Code 1975,
§ 8-12-15); Brewer v. Egyptian Sports, Inc., 462 N.E.2d 520, 525 (Ill. App. Ct. 1984) (citing
Ill. Rev. Stat. 1981, ch. 40, par. 18). Our research, however, has revealed only one
decision in which a state court interpreted the statute’s requirement of “knowingly making
any false or fraudulent representation or declaration.” In Gragg v. Rhoney, 884 P.2d 443,
449 (Kan. Ct. App. 1994), the court indicated that, in order to be fraudulent within the
meaning of the statute, “an untrue statement of fact must be known to have been untrue
by the party making it and must have been made with the intent to deceive or recklessly
made with disregard for the truth.” In accordance with this construction, we hold that the
imposition of liability under section 47-25-510 requires proof of three elements: (1) that the
applicant’s representation or declaration was false; (2) that the applicant knew the
representation or declaration was false; and (3) that the applicant made the representation
or declaration either with the intent to deceive or with reckless disregard for the truth.
In interpreting the statute, the trial court ruled that, in order for a false or fraudulent
representation to be actionable, the representation must have been made with intent to
deceive. We conclude that this ruling was not entirely correct because, under the
foregoing standard, the imposition of liability under section 47-25-510 does not depend
upon a showing of intent to deceive; it is sufficient if the representation or declaration was
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made with reckless disregard for the truth, a lesser standard than that applied by the trial
court.
Our delineation of the proper standard to be applied under section 47-25-510,
however, does not end our inquiry because we still must determine, in light of the
appropriate standard, whether the trial court erred in granting Johnson’s motion for
summary judgment. We begin our analysis of this issue with the premise that
[W]here a claim of fraud is presented, ordinarily only upon a
full trial of the action can the issue properly be developed. As
a general rule, summary judgment is not an appropriate
procedure for the disposition of such an issue.
Fowler v. Happy Goodman Family, 575 S.W.2d 496, 49 (Tenn. 1978). This is because
“[t]he issue of fraud, by its nature, is one which requires for determination the actual
hearing and viewing of witnesses whose credibility is of paramount concern for the trier of
facts.” Long v. State Farm Fire & Cas. Co., 510 S.W.2d 517, 519 (Tenn. App. 1974).
For similar reasons, summary judgment also is inappropriate “in cases where the
outcome hinges squarely upon the state of mind, intent, or credibility of the witnesses.”
Knapp v. Holiday Inns, Inc., 682 S.W.2d 936, 941-42 (Tenn. App. 1984). As one court
explained,
The court should be cautious in granting a motion for summary
judgment when resolution of the dispositive issue requires a
determination of state of mind. Much depends upon the
credibility of the witnesses testifying as to their own state of
mind. In these circumstances the jury should be given an
opportunity to observe the demeanor, during direct and cross-
examination, of the witnesses whose states of mind are at
issue.
Croley v. Matson Navigation Co., 434 F.2d 73, 77 (5th Cir. 1970), quoted in McDowell v.
Moore, 863 S.W.2d 418, 421 (Tenn. App. 1992); Knapp v. Holiday Inns, Inc., 682 S.W.2d
936, 942 (Tenn. App. 1984). In particular, summary judgment should not be granted based
upon the affidavit of an interested witness if the finder of fact would be at liberty to
disbelieve the assertions contained in the affidavit. Knapp, 682 S.W.2d at 942.
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In McDowell v. Moore, 863 S.W.2d 418 (Tenn. App. 1992), for example, the
defendant was sued for defamation. The defendant filed a motion for summary judgment,
citing evidence which, he argued, conclusively established that the plaintiff was a public
figure and that the matters complained of were published without malice. Id. at 419. In
support of his motion, the defendant attached an affidavit in which he asserted that he
believed the incidents described by him to be true. Id. at 420. The trial court granted the
motion, but this court reversed. Citing Knapp and Croley, supra, this court reasoned:
[W]e are called upon to determine whether the affidavit of the
defendant, . . . wherein he deposed that he believed and
continues to believe that the incidents described by him were
true, is sufficient to establish a lack of malice. While such
testimony, if accredited by a trier of fact, would be sufficient to
support such a finding, we cannot agree that, without more,
such a finding is appropriate on motion for summary judgment.
....
In this case, the credibility of the affiant, . . . is clearly in
issue. . . . [H]e is a party and his testimony must be weighed
in the balance against his natural bias, prejudice or interest in
the outcome of the case. . . .
McDowell, 863 S.W.2d at 420-21.
Although this case presents a close question, we conclude that the trial court erred
in granting summary judgment based on Johnson’s affidavit. In his affidavit, Johnson
swore that he was unfamiliar with the provisions of Tennessee’s trademark statutes at the
time he submitted his application; that he was acting upon the advice of an employee of
the Secretary of State’s office when he wrote August 18, 1989, on the application as the
date of first use; and that he did not intend to mislead anyone in any way. If ultimately
believed by the finder of fact, these assertions well might establish a defense to VBI’s claim
for fraudulent registration of trademark under section 47-25-510 of the Model Trademark
Act. Nevertheless, we conclude that these assertions did not entitle Johnson to summary
judgment.
As we explained previously, in order to succeed on its claim for fraudulent
registration of trademark, VBI ultimately must prove that Johnson acted either with the
intent to deceive or with reckless disregard for the truth. The foregoing authorities reveal
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that summary judgment is particularly inappropriate in fraud cases such as this where the
outcome hinges upon the defendant’s state of mind, intent, or credibility. The critical
assertions contained in Johnson’s affidavit all relate to Johnson’s subjective state of mind
or intent at the time he made the false representation on his trademark application.
Moreover, Johnson, as the defendant to this action, is by definition an interested witness
whose testimony the finder of fact would be entitled to disbelieve. The fact-finder, for
example, might reject Johnson’s testimony that he was unfamiliar with Tennessee
trademark law, as well as his testimony that he was unaware that he had made a false
statement on the trademark application.
For purposes of these summary judgment proceedings, we accept as true
Johnson’s sworn factual assertion that an employee of the Secretary of State’s office
instructed him to fill in August 18, 1989, as the date of first use on the trademark
application.1 Even if accepted as true, however, this fact is not determinative of Johnson’s
state of mind or intent when he completed the application. The evidence was undisputed
that Johnson never sold goods under the Volunteer Beer mark. It is possible, therefore,
that Johnson initially left blank the date of first use on the application because he knew he
never had used the mark. 2 Issues regarding Johnson’s state of mind and credibility should
be resolved by the finder of fact in an evidentiary hearing and not by summary disposition.
In conclusion, we reiterate that, if believed by the fact-finder, the assertions
contained in Johnson’s affidavit well might provide a defense to VBI’s claim for fraudulent
1
In the trial court, VBI c hallenged this assertion by filin g the affidavit of Mary E. Costner, the manager
of the Statutory Filing Department at the Secretary of State’s office in Nashville. In her affidavit, Costner
ass erted that
It is the policy of our Department not to give legal advice or to interpret the
meaning or requiremen ts of the application for potential registrants. Our
policy is to advise a registrant to consult with an attorney as to any questions
they may have. W e do not give legal advice or suggest how to complete
trademark applications.
Costner, however, did not work at the Secretary of State’s office in August 1989, when Johnson completed
his tradem ark app lication. C ostn er be gan working at that o ffice in Oc tobe r 199 0.
2
Under the Model Trademark Act, a trademark is deemed to be “used” on goods “when it is placed
in any manner on the goods or their containers or the displays associated therewith or on the tags or lab els
affixed thereto and such goods are sold or otherwise distributed in the state.” T.C.A. § 47-25-501(b)(1)
(1988).
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registration of trademark. At this point in the proceedings, however, it was premature to
grant summary judgment based on Johnson’s sworn assertions as to his state of mind at
the time he completed the trademark application.
The judgment of the trial court is hereby reversed, and this cause is remanded for
further proceedings consistent with this opinion. Costs of this appeal are taxed to
Appellee, for which execution may issue if necessary.
HIGHERS, J.
CONCUR:
CRAWFORD, P.J., W.S.
FARMER, J.
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