Court Opinion

ID: 9885047
Source: CourtListenerOpinion
Date Created: 2023-10-06 03:28:24.341815+00
Date Added: 2024-06-11T07:48:43.478475
License: Public Domain

FOLEY, Judge
(dissenting).
I respectfully dissent. Although I agree that the provisional order for a new trial was unwarranted, particularly in light of Brubaker’s failing health, it is my considered opinion that the trial court should be affirmed based on the doctrine of in pari delicto.
The majority correctly recites the doctrine of in pari delicto: “Generally, anyone who engages in a fraudulent scheme forfeits all right to protection, either at law or in equity.” State v. AAMCO, 293 Minn. 342, 347, 199 N.W.2d 444, 448 (1972). However, the analysis need not proceed any further. By engaging in a scheme to defraud taxing authorities, the parties forfeited their right to court protection.
Instead of applying the doctrine of in pari delicto as stated in AAMCO to the facts of this case, the majority finds the doctrine is limited to cases where performance of the contract is itself illegal. I respectfully submit the majority’s decision undercuts the strong public policy considerations upon which the doctrine is grounded.
The doctrine of in pari delicto is based upon judicial reluctance to intervene in disputes where both parties are wrongdoers in equal fault. Id. The doctrine is designed to both punish the wrongdoer and keep courts out of the awkward position of being thrust into the middle of a fraudulent scheme, “forced to sort out truths and untruths in a make-believe land.” Long v. Smead Manufacturing Co., 383 N.W.2d 452, 455 (Minn.Ct.App.1986), pet. for rev. denied (Minn. May 29, 1986).
The parties are certainly wrongdoers, having created an instrument to further the Brubakers’ scheme to evade taxation. And indeed, the trial court was in the awkward position of delving into the parties’ make-believe world of falsified records, having to award judgment to the Brubak-ers if they sufficiently proved their own fraudulent intent in falsifying the records. This is a prime example where public policy is best served by our refusal to hear the dispute and leave the conspiring parties where they stand.
I appreciate the majority’s struggle to determine how closely related a contract must be to a “fraudulent scheme,” as the phrase is used in AAMCO, before a court should invoke the doctrine of in pari delic-to. I suggest the court in Kansas City Operating Corp. v. Durwood, 278 F.2d 354 (8th Cir.1960), from which the rule in AAM-CO derives, has articulated a fair and workable standard. This standard provides that where the contract is only remotely related to the unlawful transaction, a court should enforce the contract if the plaintiff can make out its case without having to rely on the unlawful transaction. Durwood, 278 F.2d at 359 (quoting Missouri Fidelity & Casualty Co. v. Art Metal Construction Co., 242 F. 630, 632 (8th Cir.1917)).
In this case, the unlawful transaction is the parties’ falsifying records in furtherance of a tax avoidance scheme. The oral contract of sale is, of course, a separate transaction. However, the only way to prove the oral contract is to first argue that the written contract was invalid because it was intended only to deceive the taxing authorities. See Hield v. Thyberg, 347 N.W.2d 503, 508 (Minn.1984) (parol evidence generally inadmissable to alter terms of written contract except where written contract was created merely to deceive a third party). By so arguing, the Brubakers are relying on the unlawful transaction to prove the oral contract. Therefore, the oral contract would be unenforceable under the standard set forth in Durwood.
For the reasons stated, I would affirm the trial court’s order for judgment notwithstanding the verdict.