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Texaco, Inc. v. Kane County Oil

JUNE 27, 1968.




Appeal from the Circuit Court of Kane County, Sixteenth Judicial Circuit; the Hon. JOHN S. PETERSEN, Judge, presiding. Judgment affirmed.


The plaintiff, Texaco, Inc., brought this suit against the defendant, Kane County Oil, Inc., to enjoin it from, among other things, using the name "McCornack Oil Co." or "McCornack Oil Company." The trial court granted summary judgment for the plaintiff.

The questions raised on appeal may be distilled into three basic issues:

(1) Was there a valid assignment to the plaintiff of the trade name, "McCornack Oil Co." or "McCornack Oil Company"?;

(2) If so, did the plaintiff subsequently abandon this trade name?;

(3) Were there material issues of fact which precluded the right to a summary judgment?

The McCornack family, under the corporate name of McCornack Oil Company, had been a distributor for Texaco in St. Charles since 1934. It was also a Firestone Tire distributor under this corporate name. In the testimony, St. Charles was called a "Texaco town" in that Texaco enjoyed good sales in the area. It is also apparent that the names "McCornack" and "Texaco" were associated by the people in the community because of the long duration of the distributorship, the method of operation, and the joint use of the names in advertising and on equipment.

In the fall of 1962, Elmore McCornack, the president of McCornack Oil Company, decided to sell the oil business, and approached Texaco. An agreement was reached and signed on December 22, 1962, and McCornack Oil Company transferred the business to Texaco on December 28, 1962, for a total consideration of $500,000. Texaco wanted the use of the McCornack name for obvious reasons, and it was agreed that Texaco would be assigned all trade names used by McCornack in the business. The consideration for the goodwill and trade names was $54,629.

On December 28, 1962, pursuant to its agreement, McCornack Oil Company assigned to Texaco "the right, but only in connection with the sale and distribution of petroleum and related products, to use and to do business under the names, `McCornack Oil Company' and `McCornack Oil,' excepting and reserving, however, to the Assignor the right to use said names in connection with its Firestone dealer store operation."

The new distributorship was set up at the same time with Herb Borman, who had been an officer of McCornack Oil Company. Warren Munson, Texaco's representative in that area, participated in negotiating this agreement, which described the new distributorship as "Herb Borman, d/b/a McCornack Oil Co., Not Inc."

Borman testified that he had been at negotiations regarding the sale of the McCornack business to Texaco, and was aware of the transfer of the McCornack name to Texaco; that Mr. Krueger, a representative of Texaco, was one of the persons who suggested that the new distributorship operate under the McCornack name; and that Krueger's conversation was that he could use the McCornack name as long as he sold Texaco products.

During these negotiations, Munson had arranged to join Borman in the distributorship, which fact was known to Elmore McCornack, but unknown to Texaco. Munson did join Borman in January of 1963, and assumed a leading role in the business at that time. Subsequently, in September of 1964, he incorporated the distributorship under the name "Kane County Oil, Inc." — the defendant. The business continued to operate under the McCornack name until August of 1965, when the distributorship was cancelled. At that time, Texaco appointed a new distributor, conferring upon it the right to use the McCornack name. The defendant claimed that it had the right to use the name in its gasoline and oil operation, and this suit followed.

[1-3] The defendant claims that the assignment to Texaco by McCornack of the right to use the name "McCornack Oil Company" in connection with the distribution of Texaco products in this area was void as an assignment in gross, in that McCornack did not transfer all of its business to Texaco. It is patent that this contention is without merit. While it is true that a trade name may not be transferred apart from the business to which it is related (Goodman v. Motor Products Corp., 9 Ill. App.2d 57, 79-82 incl., 132 N.E.2d 356 (1956)), it is equally well recognized that business entities may in fact operate distinct and separable businesses and transfer such a distinct and separable portion of the entity, together with the goodwill, trade names and trademarks connected therewith. Maola Ice Cream Co. of North Carolina, Inc. v. Maola Milk & Ice Cream Co., 238 N.C. 317, 77 S.E.2d 910, 914 (1953); Andrew Jergens Co. v. Woodbury, Inc., 273 F 952, 959 (DC Del 1921), affd 279 F 1016 (3rd Cir 1922); Ph. Schneider Brewing Co. v. Century Distilling Co., 107 F.2d 699, 703, 704 (10th Cir 1939); 87 CJS, Trade Marks, etc., § 171, pp 501, 502. Such an assignment is not an assignment in gross.

McCornack Oil Company had operated two separable businesses — the Texaco petroleum distributorship and the Firestone tire dealership. All of the assets of the petroleum business were transferred to Texaco, and the transfer of the trade names, "McCornack Oil Company" and "McCornack ...

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