Ritter v. Farrow

395 Wis.2d 787

955 N.W.2d 122

2021 WI 14

Ted RITTER and Carolyn Ritter d/b/a Ritter Enterprises, Inc., Plaintiffs-Respondents,

v.Tony FARROW and Arlyce Farrow d/b/a Farrow Enterprises, Inc., Defendants-Appellants-Petitioners,Bibs Resort Condominium, Inc., Intervenor-Respondent.

No. 2018AP1518

Supreme Court of Wisconsin.

Oral Argument: September 8, 2020

Opinion Filed: February 23, 2021

For the defendants-appellants-petitioners, there were briefs filed by Jennifer L. Gregor, Allison W. Reimann, and Godfrey & Kahn, S.C., Madison. There was an oral argument by Jennifer L. Gregor.

For the intervenor-respondent, there was a brief filed by John E. Danner and Harrold, Scrobell & Danner, S.C., Minocqua. There was an oral argument by John E. Danner.

KAROFSKY, J., delivered the majority opinion for the Court, in which REBECCA GRASSL BRADLEY, DALLET, and HAGEDORN, JJ., joined. ROGGENSACK, C.J., filed a dissenting opinion in which ANN WALSH BRADLEY and ZIEGLER, JJ., joined.

JILL J. KAROFSKY, J.

¶1 The subjects of this case are a logo depicting a pair of red bib overalls with a handkerchief hanging out of the back pocket and the names "Bibs Resort" and "Bibs." These designations relate to a lakefront resort in St. Germain, Wisconsin, and we are asked to determine their ownership.¹

¶2 The three parties involved in this case are: (1) Ted and Carolyn Ritter, original owners of Bibs Resort; (2) Tony and Arlyce Farrow, purchasers of the Ritters’ resort management business; and (3) Bibs Resort Condominium, Inc., the condominium association at Bibs Resort ("Association"). The Farrows claim that they assumed ownership of the Bibs Resort marks when they purchased the Ritters’ resort management business, and that the Ritters subsequently infringed on those marks. The Ritters and the Association disagree with the Farrows.

¶3 The circuit court granted summary judgment to the Ritters and the Association and denied the Farrows’ motion.² The circuit court concluded that the Bibs Resort marks "became part of" the Association in 1998 when the resort was converted to a condominium form of ownership.

Finding that no one exclusively owned the Bibs Resort marks after that conversion, the circuit court ruled that the Farrows could not have become exclusive owners of the marks when they purchased the Ritters’ resort management business in 2006. The court of appeals affirmed on other grounds, ruling that the 1998 resort-to-condominium conversion resulted in the Ritters impliedly transferring the Bibs Resort marks to the Association. The court of appeals reasoned that because of that transfer, the Ritters no longer owned the marks and, as a result, could not have sold them to the Farrows in 2006.

¶4 It is a well-settled legal principle that trademarks and their associated goodwill pass with the sale of a business. Therefore, we conclude as a matter of law that: (1) the Association did not acquire the Bibs Resort marks in 1998; and (2) the Farrows became the exclusive owners of the Bibs Resort marks in 2006 when they purchased the resort management business from the Ritters. Consequently, since the circuit court did not apply the well-settled principles surrounding trademarks and trade names, we reverse the grant of summary judgment to the Ritters and the Association and remand to the circuit court to reconsider the Farrows’ summary judgment motion in light of our legal conclusions.

I. FACTUAL BACKGROUND AND PROCEDURAL POSTURE

¶5 In the spring of 1986, the Ritters³ purchased a lakefront resort in St. Germain, Wisconsin and named it "Bibs Resort." The property included a permanent residence, 11 rental units, and an on-site bar. Ted and Carolyn Ritter lived in the permanent residence while renting the other units to the public and operating the bar. To represent the resort, the Ritters created a logo depicting a pair of red bib overalls with a handkerchief hanging out of the back pocket. The name "Bibs Resort" was incorporated into the logo.

¶6 Under the Bibs Resort marks, the Ritters provided resort management services to guests and patrons of the resort. These services included marketing rental units to the public, collecting payments, tracking expenses, maintaining the grounds, cleaning the units, operating the on-site bar, and organizing activities such as picnics, waterskiing lessons, volleyball tournaments, campfires, and fishing lessons for guests.

¶7 In 1998, the Ritters converted the resort to a condominium form of ownership. Pursuant to Wis. Stat. ch. 703 (2017-18),⁴ the "Condominium Ownership Act," the Ritters recorded a condominium declaration⁵ and plat with the Vilas County Register of Deeds. The "Declaration of Condominium" ("Declaration") specifically excluded any transfer of the resort management services the Ritters had provided since 1986, stating that "nothing in the paragraphs in these Declarations shall be construed to prohibit [the Ritters] from continuing to operate the property, or any part thereof, as a resort, or to prohibit any of the units [sic] owners from renting out the unit or units." Said differently, the Ritters would continue to provide resort management services after the condominium conversion in the same manner as they had before the conversion.

¶8 The Declaration identified the newly established condominium's legal name as "Bibs Resort Condominium." The Declaration referenced the transfer of the "real property" of Bibs Resort and described the condominium as consisting of 13 units (12 dwellings and the on-site bar) and 15 garage units. It also established that each unit owner had exclusive rights to use certain limited common elements and owned a fractional interest in the condominium's common elements.

Included within the Declaration's description of the common elements was "[a]ll the tangible personal property required for the operation of the condominium." (Emphasis added.) The Declaration did not contain any reference to the conveyance of intangible personal property.⁶

¶9 The Declaration also recognized the Association as the entity responsible for the operation of the condominium, in compliance with the Condominium Ownership Act. See Wis. Stat. § 703.15(1).⁷ At the time of the condominium conversion, the Ritters were the sole members of the Association because they owned all 13 units of the condominium. Additionally, they continued to rent out 11 units and, as noted above, provide resort management services to guests and patrons under the Bibs Resort marks.

¶10 Between May 1998 and September 2005, the Ritters sold four of the condominium units. The Ritters entered into rental management agreements with each of the new unit owners, renting and marketing these units on the new owners’ behalf. At the time of the sale of each unit, the Bibs logo, which prominently displayed the associated unit number, was affixed to the exterior wall of the unit.

¶11 In April 2006, the Farrows⁸ sought to purchase the entirety of the Ritters’ resort management business and presented them with an offer to purchase "the Business known as Bibs" and Unit 13, the on-site bar. The offer to purchase stated that the sellers, the Ritters, "shall include in the purchase price and transfer ... goodwill ... and business personal property ...." The offer defined "business personal property" as "all tangible and intangible personal property and rights in personal property owned by Seller and used in the business as of the date of [the] Offer, including ... trade names ...."⁹ An "Amendment to Offer to Purchase" similarly described the sale as including "Unit 13 Bibs Resort Condominiums and the business known as Bibs Resort."

¶12 The Ritters accepted the Farrows’ offer, and the sale closed on June 23, 2006. The Ritters executed a document that "authorize[d] the sale of BIB's [sic] Resort, Inc. property management, its management contracts, listed inventory, all associated equipment and Unit #13." The Ritters also signed a bill of sale that conveyed to the Farrows the personal property necessary for resort management, including fishing boats, canoes, paddle boats, a golf cart, bedding supplies, and cleaning supplies.

That bill of sale also conveyed to the Farrows the business equipment needed to manage the resort, including a computer, business records, business licenses/registration, the website, and office supplies.

¶13 Additionally, the Ritters filed a "Report of Business Transfer" with the Wisconsin Department of Workforce Development, as required by Wisconsin's unemployment insurance law. This report indicated that there was a "total transfer" of the Ritters’ business, which the Ritters described as "management of vacation resort." Included within the list of "assets" transferred, the Ritters selected the box titled "Goodwill." This report also identified the former owner/operator's trade name as "Bibs Resort" and the new owner/operator's trade name as "Bibs Resort."

¶14 In September 2006, the parties also sent a joint letter to the Wisconsin Department of Revenue ("DOR"). In that letter, the Ritters and the Farrows explained the change in business names as follows:

In June of this year, the management of the resort and some of the buildings were sold to Farrow Enterprises, Inc. .... Anthony and Arlyce Farrow, corporate officers of Farrow Enterprises, Inc., would like to use the name BIBS Resort as a trade name since they are handling advertising, reservations and payments under that name. Ted and Carolyn Ritter are amenable to that change.

BIBS Resort, Inc. ... still owns business property (some rental cottages) at the resort. Corporate officers Ted and Carolyn Ritter wish to maintain the business corporate status but change the current name of BIBS Resort, Inc. to Ritter Enterprises, Inc. ...

Anthony and Arlyce Farrow wish to keep Farrow Enterprises, Inc. as their legal entity and use BIBS Resort as their trade name ....

¶15 After the sale, the Farrows stepped into the role of resort managers and provided services to guests and patrons under the Bibs...