STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HAIR CONTEMPO, INC., Charter ) No. F22352, )

)

Petitioner, )

)

vs. ) CASE NO. 81-1098

) HAIR CONTEMPO, INC., Charter ) No. F22428, and STATE OF ) FLORIDA, DEPARTMENT OF STATE, ) DIVISION OF CORPORATIONS, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on 17 June, 1981, at Miami, Florida.

APPEARANCES

For Petitioner: Steven Squire, Esquire

500 Northeast Third Avenue

Fort Lauderdale, Florida 33065

For Respondent, Mayer Gattegno, Esquire Hair Contempo, Inc., Post Office Drawer 8310

Charter No. F22428: Coral Springs, Florida 33065

For Respondent, William J. Gladwin, Jr., Esquire Secretary of Assistant General Counsel

State: Secretary of State The Capitol

Tallahassee, Florida 32301

By letter dated March 26, 1981, Hair Contempo, Inc., Charter No F22352, Petitioner, by and through its attorney, requested a hearing to resolve the entitlement to the corporate name, "Hair Contempo, Inc." which has also been issued in Charter No. F22428. Petitioner alleges that the sole shareholder of Charter No. F22352 has operated under the name "Hair Contempo" for the past five years.

At the hearing, one witness was called by Petitioner, one witness was called by Respondent and five exhibits were admitted into evidence. There was no real dispute as to the facts involved.

FINDINGS OF FACT

1. In June, 1976, Dorothy Deedrick obtained a Certificate of Registration from the Florida State Board of Cosmetology to operate a cosmetology salon under the name "Hair Contempo" at 2926 North State Road 7, Margate, Florida (Exhibit 5). She also obtained an occupational license from Broward County to operate this salon (Exhibit 4). She has continuously operated a salon under the name "Hair Contempo" in Margate for the past five years. For the past two years this salon has been located at 2722 North State Road 7, Margate, Florida.

   
   

2. In June and July, 1976, Ms. Deedrick complied with the "fictitious name" statute and published for four successive weeks in the Fort Lauderdale News a notice that she was operating under the fictitious name of "Hair Contempo."

   
   

3. In January, 1981, David Aaronson and Luba Aaronson purchased a beauty salon in Margate doing business under the name "Ultissima." After learning that Ms. Deedrick's "Hair Contempo" was not incorporated, they formed a corporation called "Hair Contempo, Inc.," and in March, 1981, applied for a corporate charter. Since there was no corporation registered with the Secretary of State under that name, Charter No. F22428 was issued, effective 6 March 1981, to the Aaronsons for the name, "Hair Contempo, Inc."

   
   

4. In the meantime, Ms. Deedrick learned Aaronson was attempting to take the corporate name "Hair Contempo, Inc.," and she called the Secretary of State, Division of Corporations, to reserve the name. When told that "Hair Contempo, Inc." was still available but she could reserve the name, Ms. Deedrick had Articles of Incorporation prepared for a corporation to be called "Hair Contempo, Inc." She then flew to Tallahassee to file the Articles of Incorporation and obtain a charter. On 15 March 1981, she was issued Charter No. F22352 for the corporation, Hair Contempo, Inc.

   
   

5. The beauty salon which has operated under the name "Hair Contempo" since 1976 has approximately one thousand regular customers. During this period numerous advertisements have been placed in the local newspaper by Hair Contempo, thereby giving it recognition in the area.

   
   

6. The beauty salon, "Ultissima," is located in Margate, some ten miles from the location of Ms. Deedrick's salon. The main sign on the salon reads "Ultissima" but, shortly after obtaining his corporation charter, Aaronson placed a sign in the window of the salon reading "Hair Contempo, Inc."

   
   

   CONCLUSIONS OF LAW

   
   

7. The division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

   
   

8. Section 607.027, Florida Statutes (1979), provides:

   
   

   1. The exclusive right to the use of a corporate name may be reserved by any person or corporation, foreign or domestic, by filing with the Department of State an application, executed by the applicant, to reserve a specified corporate name. If the Department of State finds that the name is available for corporate use, it shall reserve the same for the exclusive use of the applicant for a period of 120 days, and the

      reservation may be renewed.

   2. The right to the exclusive use of a special corporate name so reserved may be transferred to any other person or corporation by filing with the Department of State a notice of such transfer, executed by the applicant for whom the name was reserved and specifying the name and address of the transferee.

   3. The Department of state may revoke any reservation if, after a hearing, it finds that the application therefor or any transfer thereof was not made in good faith.

      
      

9. Section 607.031(5), Florida Statutes, provides:

   
   

   The Department of State may revoke any registration if, after a hearing, it finds that the application therefor or any renewal thereof was not made in good faith.

   
   

10. On the evidence presented, it is clear that the name "Hair Contempo" has been used by Ms. Deedrick in the Margate area for approximately five years. Accordingly, she has acquired a property right in this name.

    
    

11. "Hair Contempo" is not a common name that one might, without some special connotation, determine to be appropriate as a business name. This is certainly not a common corporate name that relates to the locality or geographic area, or a name denoting excellence such as A-I, Acme, Elite, etc. Furthermore, it is inconceivable that Aaronson would purchase a beauty salon without first learning of the number and locations of the businesses with which the salon must compete. By taking the name of an existing salon, Respondent has attempted to deprive Petitioner of the good will and public awareness of its existence that Petitioner has developed over the past five years.

    
    

12. A similar issue was considered by the Supreme Court of Florida in Children's Bootery, et al. v. Sutker, 107 So. 345 (Fla. 1926) where the Court held that the purchaser of a bankrupt's merchandise, fixtures and trade name acquired a property right to the trade name and could enjoin someone from using a similar name as a corporate name. At p. 347, the Court stated:

    
    

    Trade-names, when lawfully acquired and properly identified with the physical properties and good will of a business, are generally recognized as property which may be lawfully transferred by its owner in connection with the business with which they are so identified.

    
    

13. In discussing the corporate name, the Court stated at p. 349:

    
    

    The selection of a corporate name is largely controlled by those who seek that

    form of business organization. It is chosen with a view to the business in which the corporation is presently to engage. In assuming its name, a corporation acts at its

    peril. Its organizers are charged with the duty of selecting a name which will not result in material deception. It is settled that such deception may be practiced by the fraudulent use of a corporate name, and the good faith of its incorporators is immaterial if that name too closely resembles that of any other previously established corporation, partnership, or individual engaged in the same line of business, and material confusion or injury results therefrom. A corporate name, although derived through authority of the state, cannot be used in a manner which will result in fraud or deception. If so used, the fact that the charter was obtained from the state does not deprive a court of equity of its power to prevent fraud and protect property rights by enjoining that use. The grant of a corporate charter by the state can confer no power to perpetrate wrong. The act of sovereignty in allowing incorporation under a particular name is permissive only. It sanctions the act of incorporation under the name chosen and for the business proposed, if that name and that business be otherwise lawful, but in granting a corporate charter the sovereign adjudges neither the legality of the business nor of the name chosen. That is a matter for judicial determination by a court of competent jurisdiction. An individual will be enjoined, in proper cases, from the fraudulent or deceptive use of his own natural name. With even greater justification will an artificial person, a corporation, be enjoined from such a use of a corporate name voluntarily chosen by it. (Citations omitted.)

    
    

14. While the concepts of doing business as a corporation in lieu of as a partnership or an individual have changed in the 45 years since Children's Bootery was decided, the equitable concepts embodied herein have not changed.

    
    

15. The combination of the Administrative Procedures Act and Sections 607.027(3) and 607.031(5), Florida Statutes, above quoted, gives the Secretary of State the power to correct mistakes made when similar corporate names are chartered at or about the same time.

RECOMMENDATION

From the evidence presented, it is clear that by filing for the corporate name of "Hair Contempo, Inc.," Respondent intended to defraud Petitioner of the good will and public awareness that had been acquired during the past five years of operations. Accordingly, the application of Aaronson for a corporate charter to be issued to "Hair Contempo, Inc." was not made in good faith and should be revoked.

It is, therefore,

RECOMMENDED that the charter of "Hair Contempo, Inc.," Charter No. 22428, be revoked.

Entered this 21st day of July, 1981.

K. N. Ayers Hearing Officer

Division of Administrative Hearings 2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 21st day of July, 1981.

COPIES FURNISHED:

Steven Squire, Esquire

500 Northeast Third Avenue

Fort Lauderdale, Florida 33065

Mayer Gattegno, Esquire Post Office Drawer 8310

Coral Springs, Florida 33065

William J. Gladwin, Jr., Esquire Assistant General Counsel Secretary of State

The Capitol

Tallahassee, Florida 32301

Docket for Case No: 81-001098

Orders for Case No: 81-001098