Friday, November 22, 2013

MM Companies, Inc. v. Liquid Audio, Inc. case brief

MM Companies, Inc. v. Liquid Audio, Inc. case brief summary
741 P.2d 840 (1987)

Defendant old trucking company appealed the judgment of the District Court of Lea County (New Mexico), which found in favor of plaintiff oil company based upon a determination that defendant new trucking company was the old trucking company's agent when the new trucking company incurred indebtedness with the oil company.

The old and new trucking companies contracted for the new company to use the old company's certificate of public convenience and necessity in the operation of a business. The old company collected all charges due for the new company's transportation, deducted a clerical fee and a percent of profits, and remitted the balance to the new company. It was responsible for paying its operating expenses, but all operations utilizing fuel were under the old company's control, and all billing was under its name. The new company filed for bankruptcy. The old company set up an escrow account and assured the oil company that it would be paid. Instead, the old company paid other creditors and took an administrative fee. The trial court found for the oil company in its action to recover its indebtedness.


  • The court affirmed and held that a principal could be held liable for the unauthorized acts of its agent if the transaction was ratified after knowledge was acquired of the material facts concerning the transaction. 
  • Where the old company retained the benefits of its business relations with the new company with knowledge of the material facts, the old company ratified the debt to the oil company.

The court affirmed the decision for the oil company in the oil company's action against the new and old trucking companies for payment of the indebtedness to the oil company.

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