Wilson v. Henderson

California Supreme Court Jan 12, 1899 No. S. F. No. 842Published

Before: Henshaw

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Holding. The court held that the complaint sufficiently stated a cause of action against the defendants as joint principals for the acts of their common agent, regardless of whether a partnership existed. The court further held that the insolvency court's order did not nullify the defendants' personal liability under their agreement.

Issues

Whether the complaint stated facts sufficient to constitute a cause of action against the defendants as joint principals.
Whether the existence of an insolvency court order authorizing the business operation precluded personal liability for the defendants.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“The pleading sufficiently charges that the defendants, for their mutual interest and advantage, as joint principals, employed a common agent to conduct a certain business”

“The facts thus pleaded are certainly sufficient as a declaration in assumpsit, and state a cause of action against the defendants as joint principals.”

Synopsis

Insolvency—Agreement of Creditors to Carry on Business—Agency of Assignee—Assumpsit.—A mutual written agreement of the creditors of an insolvent corporation authorizing and directing the assignee for his, their and each of their joint and several interest and advantage to carry on the usual business of the corporation, and authorizing, empowering and directing him to employ the necessary labor and buy the necessary supplies for that purpose, creates an agency of the assignee for such creditors as joint principals, who are liable as such to an action of assumpsit for supplies sold to the assignees on faith thereof.

Id.—Partnership not Involved.—Such agreement does not involve any question of partnership or sharing of profits among the creditors, or of engaging in business on their part The question is simply one of agency, and of the liability of principals for acts done by their authority.

Id.—Pleading—Agency for Creditors—Order of Court—Lien upon Assets.—In an action of assumpsit against the creditors as principals, for supplies furnished to the assignee as their agent, where the complaint specifically alleged that they were furnished under and in pursuance of the authority conferred upon the assignee by the terms of the agreement of the creditors, an allegation in the complaint that the defendants obtained an order of court authorizing the assignee to carry on the business, and directing that the costs of labor and supplies should be a first charge upon the assets, without, alleging that the supplies were furnished upon the authority of the order, does not show upon its face that the order is available to defeat the cause of action pleaded, or to relieve the creditors from their liabiity as principals, under the agreement, and to cast the whole liability upon the assignee.

Id.—Consent to Order—Defensive Matter—Exhaustion of Lien.— The contention that plaintiff consented to be bound by the terms of the order, in seeking payment for his supplies, is affirmative matter of defense; and the utmost that could be claimed under such defense, from the terms of the order, would be, that having been given a preferred claim in the nature of a lien upon the assets of the insolvent, he ought to exhaust such lien before seeking recourse against the creditors.

Id.—Powers of Assignee — Continuance of Business — Ineffective Order—Estoppel.—The assignee has no power under the Insolvent Act to continue the business of the insolvent, and there is no authority given in the Insolvent Act to the court to order that the business shall be carried on; and such order cannot operate merely by force of its terms, or be enforced otherwise than upon the equitable principles of estoppel.

HENSHAW, J. Plaintiff, for cause of action, alleged that

the defendant the Vallejo Electric Light and Power Company was an insolvent debtor, and that the defendant O. L. Henderson was its assignee. All of the other defendants, thirty or more in number, were creditors of the insolvent corporation, and entitled to share ratably in the distribution of its property and assets. On the twenty-fourth day of July, 1893, all of the defendants entered into a mutual agreement that it would be to their joint and several interests that the plant and business of the insolvent should not be shut down, but should be operated and maintained as it had before the corporation’s insolvency. Defendants thereupon “authorized and directed the said O. L. Henderson, for his, their, and each of their joint and several benefit and advantage, to carry on, maintain, operate, and run said plant in all respects as it should be run .... and further authorized and empowered and directed him to employ the necessary labor for said purpose and to buy the necessary supplies for said purpose.” Following this authorization, it is next alleged that the defendants applied for and obtained an order of the insolvency court, in which order the court found that it was for the best interest of all concerned that the plant of the corporation should be kept in operation, and that the creditors consented thereto, and by which order it was declared that Henderson, the assignee, “shall have power and it shall be his duty to employ the necessary labor for said purpose and to buy the necessary supplies for said purpose, and the costs of the same shall be paid out of the assets of said estate of said insolvent in preference to any other claim.”

Afterward defendant Henderson, “acting on his own behalf and as agent for the other defendants under and in pursuance of the power and authority conferred upon him according to the terms of the agreement made as aforesaid, and for the purpose of carrying out the objects of the same, and none other,” took from plaintiff and plaintiff sold and delivered to him certain supplies necessary for the purposes of the agreement and [261]for the conduct of the business. For the unpaid part of the purchase price of these supplies judgment was demanded against all of the defendants, who were each and all sued in their individual capacities.

To this complaint pleas by demurrer were presented, and the demurrers were sustained. Plaintiff declining to amend, judgment was entered for certain of the defendants, and plaintiff appeals. There were many special grounds of objection raised by the demurrers of the different defendants, but every one tendered the issue of law that the complaint did not state facts sufficient to constitute a cause of action. While some of the special grounds of demurrer have been adverted to in the briefs, none has been argued, and, upon consideration of them, we do not think that any one of them was well taken. The general ground of demurrer is the only one which has received attention from counsel, and is the only one which, therefore, need be considered here.

Wilson v. Henderson

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