Morris Oil Co. v. Rainbow Oilfield Trucking, Inc.
New Mexico Court of Appeals
741 P.2d 840 (1987)
Rainbow Oilfield Trucking, Inc. (Rainbow) (defendant) and Dawn Enterprises, Inc. (Dawn) (defendant) entered into a series of agreements through which Dawn acquired full control over Rainbow’s operations. Dawn agreed to collect all monies owed to Rainbow, keep a percentage, and return the rest to Rainbow. They further agreed that Rainbow would not function as Dawn’s agent, and that Rainbow was not authorized to incur debt in Dawn’s name outside the ordinary course of business. In the course of its operations, Rainbow agreed to purchase diesel fuel from Morris Oil Company (Morris) (plaintiff). Rainbow did not disclose its relationship with Dawn to Morris. Rainbow’s business then failed and it declared bankruptcy, still owing Morris $25,000. At that time Dawn still held $73,000 which it had collected from Rainbow’s operations. When Morris discovered Dawn’s involvement, Dawn assured Morris that it would pay the debt but later declined to do so. Morris sued Rainbow and Dawn to collect the debt. The trial court found against both defendants, holding that Dawn was vicariously liable because Rainbow acted as Dawn’s agent. Dawn appealed.
Rule of Law
Holding and Reasoning (Garcia, J.)