Court Opinion

ID: 9735856
Source: CourtListenerOpinion
Date Created: 2023-08-26 18:33:02.555098+00
Date Added: 2024-06-11T18:27:01.990851
License: Public Domain

STONE, J.
I dissent. If the broad language of the majority opinion obtains, all contracts wherein one party is unlicensed under a regulatory licensing statute are ipso facto illegal and unenforceable. Such a broad implication flies in the face of Lewis & Queen v. N. M. Ball Sons, 48 Cal.2d 141 [308 P.2d 713], one of the cases upon which the majority opinion rests.
Unless the question of enforceability is settled by a specific provision in the licensing act, such as section 7031 of Business and Professions Code, whether a contract is enforceable must be weighed in the light of a number of considerations, summarized in Lewis & Queen. There the court said, at page 151: “In some eases, on the other hand, the statute making the conduct illegal, in providing for a fine or administrative discipline excludes by implication the additional penalty in*644volved in holding the illegal contract unenforceable; or effective deterrence is best realized by enforcing the plaintiff’s claim rather than leaving the defendant in possession of the benefit; or the forfeiture resulting from unenforeeability is disproportionately harsh considering the nature of the illegality. In each such case, how the aims of policy can best be achieved depends on the kind of illegality and the particular facts involved.” (See also Keller v. Thornton Canning Co., 66 Cal.2d 963, at p. 967 [59 Cal.Rptr. 836, 429 P.2d 156].)
The import of this language is that in instances where the Legislature has not specified nonenforceability of a contract as a penalty for noncompliance with a licensing statute, the courts are vested with discretion to determine whether, in the light of the facts of a particular civil action, the harsh penalty of unenforceability of contract should be imposed in addition to the criminal and civil penalties available as punishment for a violation of the particular licensing statute involved.
The first of the criteria mentioned in the foregoing excerpt from Lewis & Queen is whether ‘ ‘ the statute making the conduct illegal, in providing for a fine or administrative discipline excludes by implication the additional penalty involved in holding the illegal contract unenforceable. ’ ’
This test is peculiarly applicable here. As recently as 1963 the Legislature added section 19.5 to the Agricultural Code, which provides: “It is hereby declared, as a matter of legislative determination, that the provisions of this code are enacted in the exercise of the power of this State for the purposes of promoting and protecting the agricultural industry of the State and for the protection of the public health, safety and welfare. In all civil actions the provisions of this code «ball be liberally construed for the accomplishment of these purposes and for the accomplishment of the purposes of the several divisions of this code, and in criminal actions the rule of construction set forth in Section 4 of the Penal Code shall be the rule of construction for this code. ’ ’
It is significant that section 19.5 was enacted somewhat later than Business and Professions Code section 7031, which expressly provides that a contractor failing to procure a contractor’s license cannot enforce a contract; it was also enacted long after-specific unenforceability under section 7031 was recognized by 4he courts. (Lewis & Queen v. N. M. Ball Sons, supra. ) Despite- this backdrop, the Legislature, in amending -the Agricultural- Code, has refrained from declaring a *645forfeiture by legislative fiat in addition to the criminal and civil sanctions for failure to obtain a license. Bather, the Legislature has left for judicial determination the question of enforceability of contracts where one or more of the parties has failed to obtain a license as required by the Agricultural Code.
Another of the Lewis & Queen criteria that must be weighed by a court in determining whether failure to obtain a license renders a contract unenforceable, is whether “the forfeiture resulting from unenforceability is disproportionately harsh considering the nature of the illegality. ’ ’
Here, we do not have a conventional contract between a farmer and a commercial buyer for the purchase of farm produce; we have a three-way arrangement between plaintiff, defendant and Albers Milling, the pivotal party being Albers. Indeed plaintiff was as much an agricultural producer and farmer as defendant in the overall transaction in that defendant delivered eggs to plaintiff, who caused them to be hatched, and delivered the one-day-old chicks to Albers. It is significant that both plaintiff and defendant were paid, not according to the number of eggs delivered to plaintiff by defendant but by the number of live one-day-old chicks delivered to Albers. Moreover, it was Mr. Fansler, president of plaintiff corporation, who told defendant over a cup of coffee that he had learned that a license was required in the kind of transaction plaintiff and defendant had agreed upon. But the most telling circumstance against a forfeiture is that in the same conversation Mr. Fansler told defendant he had taken steps to obtain the proper license. In fact, plaintiff received a license in less than three weeks after the conversation, while no delivery of eggs was scheduled under the contract for some two months.
Defendant called Mr. Fansler on the telephone approximately a week after the conversation, while plaintiff’s application for a license was pending, and notified him that he was cancelling the contract because plaintiff had no license. He ignored Fansler’s remonstrance that plaintiff was in the process of obtaining a license. He also overlooked that plaintiff had agreed, at defendant’s request, to modify the contract by deferring deliveries of eggs from September (when plaintiff obtained its license) until November. Defendant testified that he was concerned about plaintiff’s ability to pay, but the record reflects that if security was what defendant wanted plaintiff was in a position to furnish it through Albers Mill*646ing, the third party in the overall transaction. There is a strong indication that defendant wanted out of the contract because circumstances developed after the contract was executed that made sales of eggs to other outlets more desirable to him. This fact is significant here, not as an attempt to judge the ease on its merits, but to demonstrate that defendant, to benefit himself, took advantage of the statute and intentionally imposed a hardship upon plaintiff.
It was never intended that the licensing provisions of the Agricultural Code should be used by one farmer to his profit by working a forfeiture upon another farmer in a three-way transaction of this sort. To hold the contract unenforceable is “disproportionately harsh considering the nature of the illegality, ’ ’ in the light of the facts.
The concluding Lewis & Queen criterion for testing the propriety of invoking the drastic remedy of unenforeeability is: “In each such case, how the aims of policy can best be achieved depends on the kind of illegality and the particular facts involved.” (Italics added.)
Protection of the farmer-producer is certainly a matter of public concern, but under the facts of this case it does not appear that the interests of public welfare, health and safety delineated in section 19.5 will be enhanced by holding the contract is unenforceable. Plaintiff’s agreement to hatch eggs furnished by defendant, and to deliver one-day-old chicks to Albers, who matured them for the market, did not endanger public health and safety, nor did defendant’s obligation to furnish eggs for hatching; in short, there was no danger to public health or safety from the performance of the contract by either plaintiff or defendant, and, a fortiori, none resulting from permitting an action on the contract between the parties.
The foregoing discussion is based upon the facts and circumstances peculiar to this case. Sales of agricultural products that directly affect public health, safety and welfare readily come to mind, and in such instances public policy would undoubtedly impel a different result. In concluding that the special defense of illegality is untenable here, I go no further than the facts of this particular case require.
I would reverse the judgment.
Appellant’s petition for a hearing by the Supreme Court was denied November 15, 1967. Peters, J., was of the opinion that the petition should be granted.