the relation of these parties to the corporation; the known opposition of Henderson and other Troy stockholders to the project of Woolfolk to construct the Montgomery, Tuscaloosa & Memphis Railroad out of the funds belonging to the Alabama Terminal & Improvement Company; the kiting operations indulged in by Woolfolk as president of the Alabama Terminal & Improvement Company, by which that company was enabled to get credit from the Farley Bank for an enormous sum of money; the valuable aid rendered by Henderson to Woolfolk in consummating these kiting operations by accepting, as treasurer, hundreds of drafts drawn on him as such for large amounts, which were discounted by the Farley Bank, when he had not one dollar in his possession belonging to the company, notwithstanding Henderson's claim to have been only nominally performing the function of his office as treasurer of the corporation at a salary of $900 per annum; the absolute want of any necessity for the drawing of these drafts in due course of business, as Woolfolk was clothed with full power to check upon any depository in which the corporation had funds without Henderson's consent; the failure of Henderson to make known to the business world, and especially to the Farley Bank, whom he knew was discounting Woolfolk's drafts upon him, that he had no funds, as treasurer, subject to draft, and that he was simply filling the office in a perfunctory way to accommodate Woolfolk. Also to bear in mind the further fact that Henderson accepted money in part payment of his alleged debt against Woolfolk and Saportas, known to him to be funds belonging to the corporation, of which he was a director and its treasurer, whose duty as an officer required him to protect its assets against the spoliations of Woolfolk; and the fact that Woolfolk and Saportas were insolvent, especially the former, who had been since the organization of the company its debtor in a large sum on account of stock subscriptions, which he never paid. But these facts are not all which legitimately tend strongly to show that the stock was sold by Henderson to the company, and not to Woolfolk and Saportas, and that he knew he was receiving money belonging to the company in payment of their alleged indebtedness to him. The most potent probative evidence tending to establish a sale by Henderson to the corporation, and a knowledge by him that he was being paid out of its assets, is to be found in the books of the corporation,-entries upon the cash book of the company. We repeat, the most potent probative evidence tending to establish these facts are to be found in these books, for the reason that, if the facts disclosed by them stood alone, in connection with the admitted fact that Henderson was a director and treasurer of the corporation at the time the entries were made, the facts as disclosed by those en

A record of the renewal and extension notes executed by Woolfolk and Saportas, as well as all payments made by the corporation to Henderson, appear in the entries upon this cash book. Henderson says to all this that he did not keep this book, and had no knowledge of its contents. It was presumptively his duty as treasurer to have kept this book, or to have had some one to do so for him. He cannot, under the facts of this case, avoid, as against creditors of the corporation, the probative effect of these entries by invoking his own dereliction of duty. Especially is this true when taken in connection with the fact that he was accepting drafts drawn upon him as treasurer, known by him to have been discounted upon the faith of his acceptance of them, and that he had funds of the corporation with which to pay them. The doctrine is stated by Thompson on Corporations (section 5308) to be: "It is a sound view, at least in so far as the question respects the rights of third par ties, that the directors of a corporation are in law conclusively presumed to know its condition, its business, its receipts and expenditures, and all the general facts which go to make up that condition and business, as shown by the entries on its regular books. The reason of this is that it is their duty to know these things in the exercise of their official functions. This doctrine is said to be one founded in public policy, essential to the safety of third parties in their dealings with corporations, and to the protection of the stockholders interested in the welfare and safe management of corporations." Justice Brewer, now of the supreme court of the United States, while a member of the supreme court of Kansas, in the case of Bank v. Drake, 29 Kan. 326, said: "The directory, as has been said, is the visible representative of the bank. Persons dealing with it meet only this visible representative, and have a right to presume that it knows all of the affairs of the bank, all that the bank as a principal ought to know of its condition and business. On the other hand, the stockholders and depositors-the persons who are pecuniarily interested in the safe management

and prosperity of the bank-look to the directors as the chosen guardians of their interests, and have a right to demand of them that they watch over all those interests in their minute details. So that all of these parties have a right to assume that the directors know all the transactions, business, and condition of the bank, because they ought to know them, and because otherwise they do not discharge their full duties to these various parties." The case of Society v. Underwood, 9 Bush, 609, was several actions of trover brought to recover of directors of an insolvent bank by those who had placed certain bonds in the custody of the bank on naked bailment, as a special deposit. The declarations charged that the bonds so deposited had been converted to the use and emolument of the bank; that they had been abstracted from the package of special deposit by officers of the bank, and sold, and the proceeds used in the business of the bank; that the defendants being directors, had notice of the fact of such conversion, or could, by the most ordinary diligence, have had notice, as well from the ledgers, books, and accounts of the bank as from its correspondence, etc. To the declarations a demurrer was sustained by the lower court. The supreme court, reversing the rulings of the lower court, said: "Bank directors are not mere agents, like cashiers, tellers, and clerks. They are trustees for the stockholders; and as to their dealing with the bank they not only act for it, and in its name, but, in a qualified sense, are the bank itself. It is the duty of the board to exercise a general supervision over the affairs of the bank, and to direct and control the action of its subordinate officers in all important transactions. The community have the right to assume that the directory does its duty, and to hold them personally liable for neglecting it. Their contract is not alone with the bank. They invite the public to deal with the corporation, and when any one accepts their invitation he has the right to expect reasonable diligence and good faith at their hands; and, if they fail in either, they violate a duty they owe not only to the stockholders, but to the creditors and patrons of the corporation. Hodges v. Screw Co., 1 R. I. 312. It is further objected that the allegation of notice is so far qualified as to render insufficient the averment of its existence. It is stated that appellees, and each of them, had, or could have had by the use of the most ordinary diligence and investigation, ample notice.' It is also alleged by Davenport that they each 'had notice, as well from the ledgers, books, and accounts of said bank as from its correspondence, reconcilements, and statements.' It is the duty of bank directors to use ordinary diligence to acquaint themselves with the business of the bank, and whatever information might be acquired by ordinary attention to their duties they

may, in controversies with persons transacting business with the bank, be presumed to have. They cannot be heard to say that they were not apprised of facts shown to exist by the ledgers, books, accounts, correspondence, reconcilements, and statements of the bank, and which would have come to their knowledge except for their gross neglect or inattention. It is not necessary, in many cases, to show directly that the directors actually had their attention called to the mismanagement of the affairs of the bank, or the misconduct of the subordinate officers. It is sufficient to show that the evidences of the mismanagement or misconduct were such that it must have been brought to their knowledge unless they were grossly negligent or willfully careless in the discharge of their duties. If it shall turn out upon the trial of these actions that the ledgers, books, etc., of the bank showed that the special de posits of these appellants were being sold, and that this fact would have been discovered by appellees by the use of ordinary dili gence, then the presumption of actual knowledge will arise. It follows, therefore, that the allegation of notice is sufficient." These principles are also declared in Martin v. Webb, 110 U. S. 7, 3 Sup. Ct. 428, 28 L. Ed. 49; Bank v. Rudolf, 5 Neb. 527; Bank v. Wulfekuhler, 19 Kan. 60; Arlington v. Peirce, 122 Mass. 270; President, etc., v. Dandridge, 12 Wheat. 64, 6 L. Ed. 552. The competency of the entries in the books as evidence against a director is recognized, though the presumption raised is not held to be conclusive or indisputable, in Bank v. Taylor, 21 Ga. 334; Hubbard v. Weare, 79 Iowa, 678, 44 N. W. 915; Bank v. Tisdale, 84 N. Y. 655; Huntington v. Attrill, 118 N. Y. 365, 23 N. E. 544; Bedford v. Sherman, 68 Hun, 317, 22 N. Y. Supp. 892; Electric Time Co. v. Geiger, 147 Pa. St. 399, 23 Atl. 547; Olney v. Chadsey, 7 R. I. 224; Lane v. Bank, 9 Heisk. 419. Under the facts of this case it is unnecessary to go to the length of holding the presumption raised against Henderson conclusive. According to these entries, the force of a disputable presumption of the truth of the facts stated in them, when taken and weighed in connection with the facts we have pointed out above, as shown outside of the book entries, our conclusion is that Henderson's statement, and that of Woolfolk, that the stock was sold to Woolfolk and Saportas, and not to the corporation, is insufficient to overcome their probative effect. The sale being to the corporation, it follows, as a matter of course, that Henderson knew that he was being paid by it, his vendee.

A decree will be here entered affirming the decree upon the appeal prosecuted by Henderson, and reversing the decree upon the appeal of Hall and Farley. A decree will also be here rendered in favor of Hall and Farley, as trustees, for all the money paid to Henderson on account of this sale.

(127 Ala. 39) KYLE et al. v. PERFECTION MATTRESS CO.

(Supreme Court of Alabama. June 23, 1900.) TRADE-MARKS AND TRADE-NAMES-INJURIES FROM INFRINGEMENT-INJUNCTION.

A manufacturer operating under the style of the "Perfection Mattress Company," and producing a mattress well known to the trade as the "Perfection Mattress," after he has sold out such business may be restrained from carrying on a rival business manufacturing mattresses exactly similar to the Perfection mattress under the label of "Kyle Perfection Mattress," though such mattress was not protected by patent; since his purchaser had a right to the exclusive use of the term "Perfection Mattress," both as a trade-mark and under the sale of the good will of the Perfection Mattress Company.

Appeal from chancery court, Jefferson county; John C. Carmichael, Chancellor.

Bill by the Perfection Mattress Company against J. C. Kyle and others. From the refusal of motions to dissolve an injunction previously granted, and to dismiss the bill, defendants appeal. Affirmed.

E. J. Smyer, for appellants. Cabaniss & Weakley, for appellee.

TYSON, J. In this cause the appellee filed its bill for an injunction against the appellants to restrain an appropriation by them of its trade-mark and infringement of its good will. The injunction being granted, and the bill answered, motion was made to dissolve the former and dismiss the latter. These motions being refused, this appeal is prosecuted to review the rulings of the court in that respect. There is practically no dispute about the facts, or as to the abstract principles of law involved. The difficulty arises out of the application of the principles to the facts admitted. The facts are, in short, these: J. C. Kyle, operating in the name of and for his wife, started the business of manufacturing by a peculiar process mattresses in the city of Birmingham, giving to the mattress a peculiar form and dress, which he called and labeled the "Perfection Mattress," and which he sold in that city and other markets. Afterwards one Dixon bought a half interest in the business, and it was continued and extended under the name of the Perfection Mattress Company, J. C. Kyle being the active manager. Some time after this the parties interested formed the corporation the present appellee to carry on the same business, and paid up their stock subscriptions by a conveyance and transfer of the partnership business, which had been previously carried on under the same name. Mrs. Kyle owned a half interest in the capital stock, and her husband was secretary and treasurer, and continued the active manager. Largely by his efforts, the name and reputation of the Perfection mattress was extended and became known throughout the country, and was the basis of a profitable business to the corporation. After this, Mrs. Kyle, having disposed of her stock in the

28 So.-35

corporation, set up a rival establishment in the same city in the manufacture of mattresses, managed and operated exclusively by her husband. By design, or by some unaccountable accident or freak of fancy, the mattress made was called "Kyle's Perfection Mattress," and assumed the exact shape, form, and peculiar dress of that manufactured by the appellee. The mattress made by appellee had for its cover a ticking of an unusual pattern or design, and made by a particular factory. Kyle was careful to obtain this same ticking, and when a sale of it was refused to him by the manufacturer of it he obtained it through third parties, showing an anxiety to dress the new mattress in imitation of the old. The new mattress could not be distinguished in appearance from that made by the appellee, which, being singular and peculiar, could only result from design. The new product and the old were each labeled, exact copies of which are set out as exhibits to the bill, and admitted by the answers. The similarity between the two is such and so remarkable, notwithstanding their differences, as to make it reasonably certain that the later one was a designed imitation of appellee's label, and intended and calculated to induce buyers to purchase the new product as the genuine Perfection mattress marketed by the appellee.

It cannot be denied that the appellants, after the sale of their business to the corporation, and after the sale of the stock in that company, had the right to engage in the business of making and vending mattresses in the same city, and, so far as the manufacture was not protected by patents, of the same kind and quality as those made by the appellee. It is under this right the appellants seek to justify their conduct. Williams v. Farrand, 88 Mich. 473, 50 N. W. 446, 14 L. R. A. 161. But they cannot make this principle cover this case. The appellants themselves first, and the appellee afterwards, built up, it must be presumed, at the cost of time, trouble, and expense, the reputation of a mattress of a particular type as to quality, form, style, and dress, under the name and label of "Perfection Mattress." The appellants, first, in the sale to the partnership and afterwards to the corporation, and, still later, in the sale of the stock in the corporation, are presumed to have received a full consideration for the transfer to the appellee of the exclusive right to this good will and trade-mark. Certainly, to deceive the public, and take the hard-earned patronage which an artisan or dealer has attached to a particular brand employed to designate the origin and quality of his goods, is a double wrong, in that it is a deception of the public and an injury to the individual. In this case it is insisted that the word "Perfection," in the connection in which it was used, is not and cannot be a trade-mark. The law on this subject is clearly stated in the case of Lawrence Mfg. Co. v. Tennessee Mfg. Co., 138 U. S. 537, 11 Sup. Ct. 396, 34 L. Ed. 997. It is

there shown "that "the office of a trade-mark is to point out distinctly the origin or ownership of the article to which it is affixed; or, in other words, to give notice who was the producer. This may, in many cases, be done by a name, a mark, or a device well known, but not previously applied to the same article. Hence the trade-mark must either by itself or by association point distinctly to the origin or ownership of the article to which it is applied. The reason of this is that, unless it does, neither can he who first adopted it be injured by any appropriation or imitation of it by others, nor can the public be deceived.'" Without quoting more, let us apply this to the facts of this case. What does "Perfection Mattress" mean? Grammatically, it is nonsense, unless we regard "Perfection" as a fanciful name to mark the peculiar goods of some person (in this case, of the Perfection Mattress Company). The word has the same significance in each of these collocations. In the latter phrase, though a general word of the language, it is applied and appropriated to designate a corporation in connection with the words "Mattress Company." In this connection it would be useless to look into a dictionary for its meaning. In the former phrase it likewise was a fanciful name given to the goods manufactured by the Kyles, and afterwards by the co-partnership and the corporation. It was clearly so intended, because it could have no other meaning, and by the law of association it has now become an established designation with the public of the product of the appellee. Waterman v. Shipman, 130 N. Y. 301, 29 N. E. 111; O'Rourke v. Soap Co. (C. C.) 26 Fed. 576; Oil Tank Co. v. Scott, 33 La. Ann. 946; Baking Powder Co. v. Raymond (C. C.) 70 Fed. 376; Menendez v. Holt, 128 U. S. 514, 9 Sup. Ct. 143, 32 L. Ed. 526; Bennett v. McKinley, 13 C. C. A. 25, 65 Fed. 505. By the production of a superior article answering to this originally fanciful name, the word may acquire a new meaning indicative of quality. But this is the natural and desired result of a trade-mark, making it more valuable; and it would be strange that this should make it common property. Lawrence Mfg. Co. v. Tennessee Mfg. Co., supra. It is reasonably certain that the appellants well understood the value of the name "Perfection" as a mere name in its use in connection with the mattress, as indicating a product which had been manufactured by them originally, and afterwards and now by their vendees and successors in business, and which had come to indicate a mattress of high esteem and reputation. If it was used awkwardly and ungrammatically in the first instance to express a grade or quality, how was it that they fell into the same error in reference to their product? It cannot be seriously doubted from the facts that the appellants intended. by adopting the name. to delude the public, and to secure the patronage which appertained to its use in the particular connection belonging to the appel

lee. What other purpose could the appellants have had in using this substantive noun “Perfection" as an adjective? The motive is disclosed in the care taken to give their mattresses the peculiar dress of the appellee's, and in the similarity of their label in other respects than in the adoption of the name "Perfection" to that of the appellee, and in the false recitals of their former connection with the appellee. All these things point to the formed design of imitation in aid of the adopted name. McLean v. Fleming, 96 U. S. 245, 24 L. Ed. 828; Colgate v. Adams (C. C.) 88 Fed. 899; Partridge v. Menck, 47 Am. Dec. 296; Hutchinson v. Blumberg (C. C.) 51 Fed. 829; Carroll v. Ertheiler (C. C.) 1 Fed. 688; Medicine Co. v. Wenz (C. C.) 14 Fed. 250.

It may be said, however, that a careful observer would not be deceived by the label; that it expressly gives notice that the Kyle Mattress Company was the manufacturer. But why use "Perfection" at all as a name? Was there any necessity arising from the paucity of language which required the use of this name? Or, if the word described the quality, why make the same grammatical blunder as that made in describing the mattresses manufactured by the appellee? Copying mistakes dispels all claims to originality. The differentiation from appellee's label found in appellants' was evidently put in to found an argument on in case of suit, while the similitude was inserted to obtain the public patronage by deception. "This is the usual artifice of the unfair trader." Collinsplatt v. Finlayson (C. C.) 88 Fed. 693. The case of Williams v. Farrand, 88 Mich. 473, 50 N. W. 446, 14 L. R. A. 161, contains a number of cases illustrative of this. It is there said, "No man has a right to sell or advertise his own business or goods as those of another person." It is also further said, "that an assignment of all of the stock, property, and effects of a business carries with it the exclusive right to use a fictitious name in which such business has been carried on, and such trade-marks and trade-names as have been used in such business." The authorities cited in this case, as well as many in the briefs of counsel, bring the case under consideration within the influence of these principles. In Myers v. Buggy Co., 54 Mich. 215, 19 N. W. 961, 20 N. W. 545 (the opinion delivered by Judge Cooley), it was held that parties doing business under the name of Kalamazoo Wagon Company having sold out could not carry on a rival business under the name of Kalamazoo Buggy Company. Says he: "The good will was a substantial part of the purchase, and purposely to take any steps to prevent his [the vendee's] receiving the benefit of it was a wrong of the same nature as would have been the retention of some portion of tangible property." Here, then, is a right to the exclusive use of the term "Perfection Mattress." both as a trade-mark and under the sale of the good will of the Perfection Mattress Company. In Lee v. Haley, 5 Ch. App.

155, the defendant, who had been manager of a firm doing business under the artificial name of "Guinea Coal Company," set up a rival business at a different stand under the name of "Pall Mall Guinea Coal Company." His envelopes and business cards resembled the plaintiff's. He was held a cheat. In Glenny v. Smith, 2 Drew. & S. 476, defendant, who had been employed by plaintiffs, printed his sign and arranged his awnings so as palpably to attract the public on the idea that they were trading with plaintiffs. He used his own name, "from" in small letters, "Thrasher and Glenny," plaintiffs' firm name, In large letters. He had an awning, which, when let down, would cover his name, and expose only the plaintiffs' firm name. The court held that defendant was deceiving the public. The purpose to appropriate what belongs to others is not veiled by calling the new mattress "Kyle's Perfection Mattress," or by asserting that it was the "Improved Perfection Mattress," or other weak differentiations. When there is a marked similarity in the labels, signs, literature, and devices for attracting custom, but little weight is attached to precautionary differences, or denials of a purpose to deceive the public. Collinsplatt v. Finlayson, supra. We are constrained to hold that the lower court committed no error in refusing to dismiss the bill for want of equity, or to dissolve the injunc tion. Affirmed.

(125 Ala. 673)

SAVAGE et al. v. JOHNSON. (Supreme Court of Alabama. Jan. 19, 1899.)

CREDITORS' BILL-APPEAL AND ERROR-
EQUITY-FRAUD.

1. Complainant's bill averred that, a partnership being indebted to complainant on notes on which suits were brought, one of the partners consulted an attorney as to the best method of preventing the firm's stock of goods being sold at a sacrifice under execution; that the partner was advised that a receiver should be appointed, and he authorized the attorney to secure the receiver; that subsequently the attorney falsely informed the partner who had consulted him that he had secured a receiver in the person of the attorney's brother, and the partners, believing the statements, surrendered the firm's assets; and that the notes had been reduced to judgment. The bill prayed that the attorney and the alleged receiver might be held trustees ex maleficio, and compelled to account for moneys arising from sales of the assets. A decree was rendered that the complainant was entitled to the relief prayed, and that the account be referred to the clerk of the court, who should charge the alleged receiver and his brother with the value of the stock of goods, but the decree did not find an indebtedness by the partnership to the complainants. Held that, inasmuch as the decree did not find such indebtedness, it was not a final decree determining all equities of the bill, and hence assignments of error relating to that decree, taken on an appeal by the alleged receiver and the attorney from a decree subsequently entered on the coming in of the clerk's report, should be considered, though the appeal was taken more than 12 months after the rendition of the first decree.

2. Under Code 1896, § 818, providing that a creditor without a lien may file a bill to discover,

or to subject to the payment of his debt, any property that has been fraudulently transferred or conveyed, or attempted to be fraudulently transferred or conveyed, by the debtor, equity had no jurisdiction, since fraud which is directed against the debtor, and not against his creditors, is not within the statute.

3. Complainant's demand being a purely legal one, and it not being shown that any execution had ever been issued and returned unsatisfied, nor an excuse given for failure to issue an execution, showing an exhaustion of complainant's legal remedies, and complainants having no lien on the property, not being in privity with the partnership, and the legal title not having passed out of the partnership, equity had no jurisdiction to enforce the trust prayed for.

4. Where defendants fraudulently represented to the members of a partnership that one of them had been appointed receiver of the partnership assets, and thereby obtained possession thereof, and complainants, by a bill in chancery, sought to hold defendants trustees ex maleficio on the ground that complainants were judgment creditors of the partnership, but the judgments offered in evidence were judgments, not against the partnership, but against the persons composing the firm, as individuals, and against others not members of the firm, complainants could not recover under the bill.

Dowdell and Haralson, JJ., dissenting.

Appeal from city court of Anniston; James W. Lopsley, Judge.

Suit in equity by T. L. Johnson against J. H. Savage and another. From a decree in favor of plaintiff, defendants J. H. and D. C. Savage appeal. Reversed.

On May 10, 1894, T. L. Johnson filed a bill in the present case, in which he averred that during the summer of 1892, and prior to September 1st of said year, the firm of Pinson Bros. & Co. was engaged in the general retail hardware business in the city of Gadsden; that said firm was composed of R. T. Pinson, Thomas H. Amberson, and M. L. Hicks; "that during the month of April, 1892, said firm of Pinson Bros. & Co. became indebted to complainant in the sum of $2,650 for the purchase of a stock of hardware"; that, of this amount, $500 was paid at the time of the purchase, and for the balance of the purchase price ten promissory notes for $200 each, and one promissory note for $150, were signed by said R. T. Pinson, Thomas H. Amberson, and M. L. Hicks; that said notes were not paid at maturity, and judgment was recovered thereon against the makers of said notes, which judgments were owned by the complainant at the time of the filing of the bill. It was then averred in the bill that prior to September 1, 1892, after one or more of the notes given by said Pinson, Amberson, and Hicks had become due, and the makers thereof were sued, said Pinson became distrustful as to the management of the mercantile business, and feared the result of said claims being reduced to judgment, and apprehended that the stock of merchandise would be sold under execution issued on said judgment, which would result in great loss to the owners of said goods; that, meeting James H. Savage, who was an attorney at law, he