Court Opinion

ID: 9586472
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:11:43.782917+00
Date Added: 2024-06-11T17:31:46.983589
License: Public Domain

Neill, J.
(concurring) — I agree with the result in this case, but believe that a concurrence is necessary to assure understanding of the limited scope of this decision.
The sole issue presented by this appeal is whether an unlicensed contractor may avoid the bar of RCW 18.27.080 in his action for compensation by suing on a check given as conditional part-payment rather than on the underlying obligation for which it was issued. The record contains nothing to indicate that the check was anything more than the usual conditional payment. See Lincoln County v. Gibson, 143 Wash. 372, 255 P. 119 (1927). Cf., Hartmeier v. Eiseman, 34 Wn.2d 225, 208 P.2d 918 (1949). Thus our decision has no bearing on issues as to the existence and effect of full and actual payment on the statutory defense. Also, it is conceded by plaintiffs that their action on the underlying obligation represented by the check is one for compensation, an action clearly proscribed by the statute. RCW 18.27.080. Accordingly, this decision does not pertain to the extent of the defense established by RCW 18.27.080.
The language of the majority opinion should not be taken as implying that an obligation rendered unenforceable by RCW 18.27.080 is void ab initio. Such an implication would be inaccurate as completely unnecessary to the decision in this case. Also the implication would be inherently unsound in that it ignores the distinction between real and personal defenses to a negotiable instrument. The defense asserted is the illegality of the underlying obligation — a defense which may be real or personal depending on whether the law declares that the illegality renders the underlying obligation entirely null and void or merely unenforceable. If the former, then the defense to the instrument is “real” and may be asserted even against a holder in due course. *840If the latter, then the defense is “personal” to the parties and those with- knowledge of it, and cannot be asserted against a holder in due course. This elementary distinction has long been recognized by our court. See Gray v. Boyle, 55 Wash. 578, 104 P. 828 (1909) (illegal insurance rebate); Ash v. Clark, 32 Wash. 390, 73 P. 351 (1903) (gambling debt). The distinction is not altered by the Uniform Commercial Code, which refers to local law for a characterization of the particular illegality. RCWA 62A.3-305, Official Comment 6. See 11 Am. Jur. 2d Bills and Notes § 687 (1963). Nowhere in RCW 18.27 is there a statement or necessary implication that any illegality of the underlying obligation renders it, or a negotiable instrument given in payment, null and void. Nor should we read such effect into the statute. Gray v. Boyle, supra. Neither would such an implication conform with the direct statement in the majority opinion that the statute does not allow for recoupment once payment has been made.
Defendants avoid liability on their check, not because the underlying obligation is void ab initio, but because plaintiffs do not enjoy the status of holders in due course. To the contrary, plaintiffs and defendants are the original parties who participated in the underlying transaction and are not ignorant of the defenses arising therefrom. Thus, plaintiffs are subject to personal as well as real defenses. RCW 62A.3-802(1) (b), which provides for an action on either the instrument or the underlying obligation, does not immunize an original party to the instrument from otherwise valid defenses. Here, plaintiffs are subject to the defense provided by RCW 18.27, the validity and effectiveness of which they do not otherwise contest. This defense to the underlying obligation is also a defense to plaintiffs’ action on the check. See RCWA 62A.3-305, Washington Comment (2) (b), Official Comment 6. Accordingly, I join the affirmance of the trial court.
Stafford, J., and Donworth, J. Pro Tern., concur with Neill, J.