Caseflicks

Washington Supreme Court • 1954

Sinnar v. LeRoy

270 P.2d 800 | 44 Wash. 2d 728 | 1954 Wash. LEXIS 336

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Takeaway

In short, this case holds that courts will not enforce or provide restitution for a bargain that contemplates corrupting a state licensing process, even when illegality was not formally pleaded.

Background

LeRoy, who operated a Seattle grocery store, had unsuccessfully applied to the Washington State Liquor Control Board for a beer license. After the denial, Sinnar, LeRoy's friend and customer, told LeRoy that he thought he could obtain a license through a man named Lewis. Sinnar told LeRoy it would cost $450, and LeRoy delivered that amount in cash.

LeRoy testified that Sinnar promised either to obtain the license or return the money, calling the arrangement "as good as in the bank." Sinnar said he gave the cash to Lewis, an otherwise unidentified third party. LeRoy never received a license and sued Sinnar to recover the $450. The trial court entered judgment for LeRoy. Sinnar appealed, arguing that the agreement was illegal because it contemplated improper means of obtaining a state-issued liquor license.

Issues

Issue #1

Whether Sinnar could raise the defense of illegality on appeal even though he had not pleaded it as an affirmative defense.

Holding

Yes. Because the alleged illegality implicated serious public-policy concerns, it could not be waived and had to be considered once the evidence disclosed it.

Reasoning

Ordinarily, facts showing illegality may need to be pleaded by the defendant unless they are necessary to the plaintiff's prima facie case. But the rule changes when the illegality is serious and public policy or a statute clearly calls for denying judicial relief. In that setting, a court may recognize the issue on its own initiative, and even a defendant who prefers not to assert it cannot waive it.

The transaction concerned a beer license obtainable only through the Washington State Liquor Control Board. Because state liquor licensing is a matter committed to governmental regulation and public policy, an agreement involving purported private procurement of such a license raised a serious illegality question. The Court therefore could consider that question despite Sinnar's failure to plead it.

Issue #2

Whether LeRoy could recover money paid under an agreement in which Sinnar promised to obtain a beer license or return the money.

Holding

No. The evidence showed that the parties contemplated using unlawful or improper means to obtain a state beer license, so the court would not enforce the arrangement.

Reasoning

Washington law allowed licenses to be assigned or transferred only under rules prescribed by the Liquor Control Board, and only to qualified persons. The record did not describe a lawful board-approved transfer, payment of a statutory transfer fee, or legitimate professional services. Instead, Sinnar proposed obtaining the license through an unidentified person, Lewis, for $450.

The Court concluded that the arrangement did more than present a speculative or merely irregular bargain. Its circumstances and the reasonable inferences from the evidence showed that the parties expected means other than lawful administrative procedures to secure the license. At minimum, the agreement contained the "germ of possible corruption" that public policy forbids courts from facilitating.

A court will not knowingly assist either party in carrying out or unwinding an illegal transaction. Because LeRoy and Sinnar were in pari delicto—equally implicated in the improper arrangement—the court left them where it found them. The judgment for LeRoy was reversed, and the action was ordered dismissed, with each party bearing his own costs.