Daily Telegram v. Ocean View Oil Co.

California Court of Appeal Feb 18, 1924 No. Civ. No. 3945.Published

Before: Houser

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Holding. The court held that the defendant corporation was liable for advertising expenses incurred by its agent, as the parties' interpretation of their contract authorized the agent to incur such debt on the corporation's behalf. Furthermore, the court found that the corporation's permit limitations did not invalidate the debt owed to an innocent third-party creditor.

Issues

Whether the defendant corporation is liable for advertising expenses incurred by its agent under the terms of their contract.
Whether a permit limitation on stock sale commissions renders a contract for advertising expenses void as against public policy regarding third-party creditors.
Whether the agent's use of a publicity agency constituted an unauthorized delegation of power.
Whether the plaintiff relied on the credit of the defendant corporation in extending credit.

Disposition. affirmed

Quotations verified verbatim against the opinion

“The interpretation placed upon the contract by the parties thereto clearly appears to have been that such expenditures as are here in question were to be included in the agreement, with the necessary agency in Martin to incur indebtedness”

“Such a contention might possibly avail as between the parties to the contract, but it would seem inequitable that innocent third persons should be made to suffer pecuniary loss for such a reason.”

HOUSER, J.

This is an appeal from a judgment in favor of plaintiff and against the defendant, Ocean View Oil Company, on a cause of action arising out of certain adver

[610]

tising in the newspaper of plaintiff and its assignor, alleged to have been done at the instance and request of said defendant.

In accordance with certain provisions of the Corporate Securities Act defendant procured a permit to sell 100,000 shares of its stock on the condition that not more than twenty per cent of the selling price thereof should be paid as a commission for its sale. The defendant then entered into a contract with one C. F. Martin iby which it was agreed, among other things, in substance, that Martin, party of the second part, was appointed the “fiscal agent” of the defendant, party of the first part, to sell the said 100,000 shares of stock for a compensation of twenty per cent commission “wholly in accordance with the permit.”

Also, “In addition to the above commission, the party of the first part agrees to raise by subscription not to exceed 5,000 shares of the capital stock of said corporation which shall be sold by the party of the second part without commission.

“Said party of the second part shall make an accounting to the party of the first part for all moneys expended by him in overhead and should said overhead be less than said $5,000, then said money remaining shall be and belong to the party of the first part. In the event that the overhead shall exceed said $5,000, said expense shall be borne by said party of the second part.

“It is further agreed that the party of the first part shall immediately advance towards said overhead expense the sum of $600 which shall be credited by the said party of the second part as a credit on said $5,000.

“It is further stipulated and agreed that the party of second part shall have the use free of expense of two of the offices in the Stock Exchange Building now being occupied by the party of the first part, for the uses in this agreement set forth.”

For the purpose of carrying on the sale of the stock on behalf of defendant, Martin entered into a contract with a publicity agency to “plan, write and, place advertising campaign as may be directed.” The advertising was done by plaintiff and its assignor, and no payment having been made therefor, an action was commenced wüich resulted in a judg

Daily Telegram v. Ocean View Oil Co.

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HOUSER, J.

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