St. John Farms, Inc. v. D.J. Irvin Co.

• Decision Date: 08 April 1980
• Docket Number: Nos. 3296-III-5,3394-III-5,s. 3296-III-5
• Citation: 25 Wn.App. 802,609 P.2d 970
• Parties: ST. JOHN FARMS, INC., a Washington Corporation, Respondents, v. D. J. IRVIN CO., a Washington Corporation; D. J. Irvin Individually, and the marital community composed of D. J. Irvin and Jane Doe Irvin, husband and wife; James Irvin Individually, and the marital community composed of James Irvin and Sally Irvin, husband and wife, Appellants. SIEVEKE FARMS, INC., a Washington Corporation; Steven C. Johnson, Jim Thomas and Harry Harp; Sam Tyler and Gary French, d/b/a Tyler Farms; Rogada Farms, Inc., an Idaho Corporation; Robert E. Wolf, J. T. Brandon and Fred Sienknecht, d/b/a Brandon and Sienknecht; Roy E. Bartlett; Tom Rambo; Ray Fox, d/b/a Fox and Fox, and Fox Estate; Ronald and Donald McHargue, d/b/a McHargue Bros.; and Charles McHargue, Respondents, v. D. J. IRVIN COMPANY, INC., a Washington Corporation; and Gerald Fletcher and Mrs. Gerald Fletcher, husband and wife, Appellants.
• Court: Washington Court of Appeals

Page 802

25 Wn.App. 802

609 P.2d 970

ST. JOHN FARMS, INC., a Washington Corporation, Respondents, v. D. J. IRVIN CO., a Washington Corporation; D. J. Irvin

Individually, and the marital community composed of D. J.

Irvin and Jane Doe Irvin, husband and wife; James Irvin

Individually, and the marital community composed of James

Irvin and Sally Irvin, husband and wife, Appellants.

SIEVEKE FARMS, INC., a Washington Corporation; Steven C.

Johnson, Jim Thomas and Harry Harp; Sam Tyler and Gary

French, d/b/a Tyler Farms; Rogada Farms, Inc., an Idaho

Corporation; Robert E. Wolf, J. T. Brandon and Fred

Sienknecht, d/b/a Brandon and Sienknecht; Roy E. Bartlett;

Tom Rambo; Ray Fox, d/b/a Fox and Fox, and Fox Estate;

Ronald and Donald McHargue, d/b/a McHargue Bros.; and Charles McHargue, Respondents, v. D. J. IRVIN COMPANY, INC., a Washington Corporation; and Gerald Fletcher and Mrs. Gerald Fletcher, husband

and wife, Appellants.

Nos. 3296-III-5, 3394-III-5.

Court of Appeals of Washington, Division 3, Panel One.

April 8, 1980.

Reconsideration Denied May 9, 1980.

Robert B. Henderson, Sharpe, Ganz & Henderson, Spokane, for appellants.

Kelly N. Brown, Irwin, Friel & Mykelbust, Pullman, Gary J. Libey, Nuxoll, McBride & Libey, Colfax, J. D. Frazier, Tekoa, for respondents.

GREEN, Chief Judge.

In two separate actions, plaintiff growers sought to recover amounts allegedly owed for lentils delivered to D. J. Irvin Co. Irvin counterclaimed for damages based on breach of contract. All parties appeal from portions of the summary judgment entered by the trial court. We have consolidated the appeals.

Two issues are presented: (1) Does Irvin's failure to obtain a license as a dealer in agricultural products allow the growers to avoid their contracts with Irvin? and (2) If the contracts may be avoided, what does Irvin owe plaintiffs for the delivered lentils?

D. J. Irvin Co. is a corporation that deals in agricultural commodities. In early 1977, it contracted with plaintiffs for the purchase of specified amounts of lentils for future delivery at a price of $18 per hundred pounds. Based on those contracts, Irvin committed itself on future contracts with others for delivery of that amount of lentils. Due to drought, the lentil crop failed that year, and plaintiffs delivered only a fraction of the promised amount. With few exceptions, Irvin never paid for the lentils that were delivered. It refused to pay claiming that, since plaintiffs did not deliver the promised quantity of lentils, they breached their contracts and owed Irvin the difference between the contract price and the higher price Irvin had to pay for lentils on the market to cover its resale agreements. Consequently, Irvin reduced the amount claimed to be owed by plaintiffs for breach of their contracts by the value of the delivered lentils.

About this time, plaintiffs discovered that Irvin was not a licensed dealer as required by RCW 20.01.040. ¹ Although Irvin had engaged in the business of buying and selling agricultural products for several years, it was not aware of this statute. Therefore, when plaintiffs instituted this action for the value of the delivered lentils, they alleged that their contracts with Irvin were illegal and not enforceable because the corporation failed to comply with the licensing requirements. Each plaintiff sought to be compensated for the delivered lentils at the market price on the day of delivery, i. e., $45 per hundred pounds instead of the contract price of $18. Irving answered, admitted it was unlicensed, but denied plaintiffs' allegations and counterclaimed for damages based on plaintiffs' failure to deliver the amounts promised in their contracts.

The trial court granted summary judgment in favor of plaintiffs and allowed a recovery for lentils delivered computed at about $21 per hundred pounds, the price at which Irvin had resold the lentils. Irvin's counterclaims were dismissed. Plaintiffs and Irvin appeal.

First, Irvin contends that its violation of RCW 20.01.040 does not render its contracts with the plaintiffs unenforceable. We disagree.

In Fisher v. Thumlert, 194 Wash. 70, 75, 76 P.2d 1018, 1021 (1938), the court reached a contrary conclusion in construing the predecessor statute. ² The court said:

Disobedience of the act is made a misdemeanor, and, as we have seen, the law will not enforce contracts made in violation of it at the suit of either of the parties.

The present statute was similarly construed in Kilthau v. Covelli, 17 Wash.App. 460, 463, 563 P.2d 1305, rev. den. 89 Wash.2d 1010 (1977). ³

This rule tends to discourage illegal bargains and encourages compliance with the comprehensive regulatory scheme. Fisher v. Thumlert, supra 194 Wash. at 73, 76 P.2d 1018. That statutory scheme was intended to regulate in the public interest those dealing in agricultural products, not to raise revenue. RCW 20.01; State v. Bowen & Co., Inc., 86 Wash. 23, 149 P. 330 (1915). Since the Fisher court construed RCW 20.01, the legislature has rewritten and reenacted the statute several times. These reenactments, without substantial change, evidence the legislature's agreement with the holding in that case. 2A Sutherland, Statutory Construction § 49.09, pp. 256-57 (C. Dallas Sands, 4th ed. 1973); Yakima Valley Bank & Trust Co. v. Yakima County, 149 Wash. 552, 556-57, 271 P. 820 (1928). Consequently, until Fisher is overturned, it remains the law in this State and Irvin's counterclaim was properly dismissed.

We are aware, as Irvin points out in its brief, that some jurisdictions have reached a different conclusion in construing similar statutes relating to architects. For example, Robken v. May, 84 Nev. 433, 442 P.2d 913, 914 (Nev.1968), and Wilson v. Kealakekua Ranch, Ltd., 57 Haw. 124, 551 P.2d 525, 530 (Haw.1976), hold that if a statute provides for sanctions other than the forfeiture of a right to sue, an unlicensed architect is not barred from enforcing a contract for his services. However, the Washington rule as to unlicensed architects is to the contrary. Sherwood v. Wise, 132 Wash. 295, 232 P.2d 309, n.2 (1925). If the rule is to be changed and applied to dealers in agricultural commodities, as urged by Irvin, it must be done by our Supreme Court or the legislature.

Irvin urges that equitable principles be applied to deny plaintiffs' defense of illegality, as illustrated by the court's language in Southfield v. Barrett, 13 Cal.App.3d 290, 91 Cal.Rptr. 514, 516 (1971):

Despite the illegality of the contract, plaintiff should not be denied relief. The rule requiring courts to withhold relief under the terms of an illegal contract is based on the rationale that the public importance of discouraging such prohibited transactions outweighs equitable considerations of possible injustice as between the parties. . . . However, the rule is not an inflexible one to be applied in its fullest rigor under any and all circumstances. A wide range of exceptions has been recognized. . . . Where the public cannot be protected because the transaction has already been completed, no serious moral turpitude is involved, defendant is the one guilty of the "greatest moral fault," and defendant would be unjustly enriched at the expense of plaintiff if the rule were applied, the general rule should not be applied. . . . In such circumstances, equitable solutions have been fashioned to avoid unjust enrichment to a defendant and a disproportionately harsh penalty upon the plaintiff.

(Italics ours.) In that case, plaintiff had advanced $40,000 to defendant and agreed to market defendant's hay crop on commission. After partial performance, defendant refused to make further deliveries of hay and plaintiff brought an action for the return of some of the advanced money. Defendant raised the defense of illegality. While recognizing the continued viability of the defense, the court, under the quoted equitable principles, allowed plaintiff to recover. Unlike the instant case, defendant would have been unjustly enriched because he would have retained a substantial benefit about $20,000. Similar applications of this principle are found in Rosasco Creameries, Inc. v. Cohen, 276 N.Y. 274, 11 N.E.2d 908 (1937); Hiram Ricker & Sons v. Students International Meditation Society, 342 A.2d 262, 268 (Me.1975); Nevada Equities, Inc. v. Willard Pease Drilling Co., 84 Nev. 300, 440 P.2d 122 (1968); Ryan v. KVL, Inc., 198 Wash. 459, 469-70, 88 P.2d 836 (1939); Restatement of Contracts, §...