STOLL v. STOLL (1935)

The plaintiff has appealed from a judgment which was rendered against him pursuant to an order sustaining separate demurrers of the defendants and denying leave to amend a complaint for damages based on the termination of an employment to manage the business and properties of John T. Stoll for a definite period of time at a fixed salary.

The complaint alleges that for many years the plaintiff had been employed as division manager of the Remington Arms Company, with headquarters at San Francisco, at a salary of $350 a month, and that his prospect for continued services with that company was excellent. He was an experienced business manager. John T. Stoll, his father, who was aged, was possessed of a business and valuable properties at Sacramento which required the attention of an experienced manager. The family of John T. Stoll consisted of his wife, Jennie T. Stoll, who was not the mother of his children, and four sons, besides the plaintiff. John T. Stoll persuaded his son Edwin to give up his employment with the Remington Arms Company and abandon his prospects of advancement with that corporation to become the manager of his business and property at an agreed salary of $350 a month until “final distribution of the estate of said second party (John T. Stoll) has been made.” That contract was executed October 26, 1929. It also provided that in consideration of the employment the plaintiff should receive from the estate of his father at least his proportionate share as an heir at law. That contract was signed and approved by the wife of John T. Stoll and by each of his sons in which they specifically “agree to be bound by the terms and conditions thereof in so far as said terms and conditions affect the rights and interest of each or any of us and each hereby agrees * * * that such employment shall continue for the period provided for in said agreement and at the compensation therein provided with all the powers, authority and duties therein provided.” This ratification amounts to a guaranty on the part of each heir that the terms of the contract would be fulfilled, including the payment of $350 a month until the estate was finally distributed.

The plaintiff thereupon abandoned his employment with the Remington Arms Company and efficiently managed the property and business of his father until January, 1932, for which service he was paid the sum of $350 a month according to the terms of the contract. On December 2, 1931, John T. Stoll was adjudged to be incompetent, and, upon proceedings duly had, the defendant, Capital National Bank, was appointed and qualified as guardian of his estate. In the former case of Capital National Bank of Sacramento v. Stoll, 220 Cal. 260, 30 P.(2d) 411, 414, the Supreme Court held that the employment of this plaintiff, as agent, was terminated by the subsequent incompetency of John T. Stoll, under the provisions of sections 1996 and 2355, 2356 of the Civil Code. In the last-mentioned case it was specifically held that the contract, as distinquished from the mere agency which it created, remains in full force and that “whatever right the agent may have to recover damages or to protect his expectant interest in the estate is not involved in this action.” Thereupon this suit for damages was instituted against the bank individually and as guardian of the incompetent person and against his wife, who were alleged to have repudiated the contract and to have procured the discharge of the plaintiff from his employment contrary to the express terms of the executory agreement, to which they were also principals. Pending the trial of this case, John T. Stoll died on September 3, 1934, and his wife, Jennie T. Stoll, was duly appointed and qualified as administratrix of his estate. By stipulation, she, as administratrix of his estate, was subsequently substituted as a party defendant in this action, and it was agreed that her demurrer should also stand of record as the demurrer of Jennie T. Stoll, as administratrix of the estate of the deceased person. The several separate demurrers to the complaint were sustained, and the plaintiff was denied the privilege of amending his pleading. A judgment was accordingly rendered against the plaintiff that he take nothing by that action. From that judgment the plaintiff has appealed.

We are of the opinion the demurrer was properly sustained as to the Capital National Bank of Sacramento, both individually and as guardian of the estate of the incompetent person, for the reason that they were not parties to the contract and were not interested therein except in the representative capacity of the bank as guardian of the estate. It may not be held that the bank, either individually or as guardian of the estate, procured the discharge of the plaintiff or the repudiation of the contract. It follows that the bank would not be liable for damages for the termination of the contract.

In the Capital National Bank Case, supra, the Supreme Court held that the employment of Edwin P. Stoll was terminated by the subsequent incompetency of his father, for the reason that the agency of the son was not coupled with a present interest in the property involved. It will be observed the case does not specifically determine whether the written approval of that contract by each of the heirs of John T. Stoll, who subsequently inherited the entire estate, also created a separate contract of employment and a separate liability on their part which was not terminated with respect to their separate liability, since no such incapacity may be charged against any of them. 1 Mechem on Agency (2d Ed.) p. 1173, §§ 1567, 1568. This question does not appear to have been an issue in that case. But, assuming that the effect of the above decision amounts to a complete termination of the entire employment with respect to all of the parties to the contract, it is a mere determination that the agency created by the contract is terminated by operation of law, and the contract still remains intact. It is specifically held in that case that the contract itself was not terminated by the incompetency of the father, and that “whatever right the agent may have to recover damages or to protect his expectant interest in the estate is not involved in this action.” This is in accordance with the uniform rule of law that a contract, as distinguished from the mere creation of an agency, which is executed in good faith, without fraud or imposition and for a fair consideration, and which contract is not void, but merely voidable, may not be rescinded unless the parties can be restored to their original position and be placed in status quo. 1 Elliott on Contracts, p. 594, § 384; 32 C. J. p. 733, § 510; 2 C. J. p. 555, § 197; Doty v. Mumma, 305 Mo. 188, 264 S. W. 656, 657, 34 A. L. R. 1399. In the case last cited it is said: “It is undoubtedly the rule that, where a contract with an insane person has been entered into in good faith, without fraud or imposition, for a fair consideration, without notice of the infirmity, and before an adjudication of insanity, and has been executed in whole or in part, it will ordinarily not be set aside, and in no event, unless the parties can be restored to their original positions.”

That is an equitable rule which is based on common justice. It follows that the contract which is involved in this case may not be set aside without first restoring the plaintiff to the position which he occupied prior to the execution of that instrument by paying to him whatever damages he has suffered thereby. That is exactly what the plaintiff sought to accomplish by his complaint in this action.

Moreover, it specifically appears from the language of the contract that it was the intention of the parties thereto, including the wife and sons of John T. Stoll, who ratified the contract and bound themselves by the terms thereof, that it should not terminate at the death of the father, and on the contrary that it was to continue in force until “final distribution of the estate * * * has been made.” Where the employment does not necessarily require the personal supervision of the principal and is of such a nature that it may be continued without detriment to him, his subsequent incompetency may not terminate the contract, as distinguished from the mere agency, when it appears to have been the intention of the parties that it would remain in full force for a specified time beyond the incompetency or death of the principal. In 18 Ruling Case Law, p. 514, § 24, it is said: “If the parties stipulate in the contract of employment that the death of the employer before the expiration of the term of service is not to terminate the relation, the happening of such event will have no effect on the contract, and the employee will be entitled to recover his wages until the term expires. The employee will also be entitled to recover full wages where it is apparent from the subject matter and nature of the contract that the parties intended that it should be completely performed, whether the master should die or not.”

It may reasonably be held that the contract of employment which was separately signed and approved by each and all of the heirs of John T. Stoll, and which provides that each of them shall “be bound by the terms and conditions thereof in so far as said terms and conditions affect the rights and interests of each or any of us,” creates a separate agreement of employment on their part which was not terminated by the subsequent incompetency of the father, and that they are still liable for damages for their voluntary disaffirmance of the employment without cause. But, even though it be deemed that the agency created by the employment was also terminated as to these heirs, by the incompetency of one of the principals to the contract, still the contract itself remains intact, and it may not be rescinded without placing the plaintiff in statu quo. We are therefore of the opinion the plaintiff stated a good cause of action against the estate of the deceased and against Jennie T. Stoll, who were parties to the action, for damages which may have accrued to him on account of the termination of the agency of employment, although that result was created solely by operation of law.

It follows that the demurrers to the amended complaint of Jennie T. Stoll individually and as administratrix of the estate of John T. Stoll, deceased, were erroneously sustained.

That portion of the judgment in favor of the Capital National Bank of Sacramento, a corporation, individually, and as guardian of the estate of John T. Stoll, an incompetent person, is affirmed, and that portion of the judgment in favor of Jennie T. Stoll, individually, and as administratrix of the estate of John T. Stoll, deceased, is reversed, and the court is directed to overrule the demurrers of the last-mentioned parties and permit them to answer the complaint.

Mr. Justice THOMPSON delivered the opinion of the court.

We concur: PULLEN, P. J.; PLUMMER, J.