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FOMCO, INCORPORATED (a Corporation), Respondent, v. JOE MAGGIO, INC. (a Corporation), et al., Appellants.*
This cause was transferred to this court after decision by the District Court of Appeal, Second Appellate District, Division Two. Upon further examination of the record, we adopt the opinion of that court prepared by Mr. Justice Ashburn, with such omissions and additions as hereinafter appear, as and for the decision of this court. As modified, it reads:
Appeal from judgment for damages growing out of breach of a contract for sale of certain crops of carrots. The judgment runs against Joe Maggio, Inc., a corporation, and Joe Maggio, an individual, in the sum of $30,395.64, plus a $5,000 attorney fee assessed in favor of plaintiff against the corporate defendant only. It was held liable for breach of contract, and Joe Maggio individually for the inducement of said breach.
A written agreement was made on October 1, 1957, between Joe Maggio, Inc., as seller, and Fomco, Inc., as buyer, which provides that Joe Maggio, Inc., agrees to sell and Fomco agrees to buy, during the 1957-1958 carrot season in Imperial County, approximately 4,000 tons of carrots for the sum of $40,000, payable $20,000 down, $10,000 on or before November 1, 1957, and $10,000 on or before December 1, 1957; seller represents that it has the right of exclusive possession of all fields in said county which are to be harvested; agrees that the carrots shall be delivered by seller to buyer in the field unharvested, at a specified rate of delivery and that seller will notify buyer immediately upon the beginning of the harvesting season; that buyer shall have the right to enter any of seller's fields and to do harvesting therein; seller warrants and represents that it has title to all carrots to be delivered under the agreement; buyer shall cause the carrots to be harvested and shall pack and sell the same. It is develops that more than 4,000 tons have been delivered to buyer during the season, it shall pay for tthe additional tonnage at the rate of $10 per ton. If the crop proves to be less than 4,000, rebate shall be made to buyer at the rate of $10 per ton. Net proceeds shall be divided equally between buyer and seller; buyer to keep and submit itemized accounts. Packing charges are fixed and specified. Risk of loss on the crop shall rest with seller until same has been actually harvested; seller to share no losses incurred through sales of carrots. Provision is made for award of a reasonable attorney fee against the losing aprty in any action brought to enforce the terms of the agreement. This contract was signed on behalf of Joe Maggio, Inc., by Joe Maggio, who was president of the corporation. Carrots proved to be scare and the price very high that season (as high as $90 a ton for topped carrots) and Maggio deliberately refused to permit, and prevented, plaintiff from harvesting more than 2312.3 tons. The court awarded judgment for profits thus lost by plaintiff.
Defendants make two points, (1) plaintiff cannot recover because it did not have a license as ‘dealer’ or ‘cash buyer’ as required by section 1263, Agricultural Code,1 (2) the evidence is insufficient to support the finding that the written contract of October 1, 1957, signed by both parties, was in fact the contract agreed upon.
The court found: ‘The only contract entered into between the parties hereto was the contract dated October 1, 1957, a copy of which is attached to plaintiff's complaint herein and marked Exhibit A.’
Upon motion for new trial the judge referred to Maggio as ‘leading carrot grower in Imperial Valley’ and the claim of insufficiency of the evidence as ‘a last minute gesture to overthrow a case which was painstakingly tried and * * * I will say that the Court at first was inclined to give some credence to the Maggio position, but when Mr. Maggio testified, there isn't the slightest doubt in the mind of this Court that he never intended when market situations and weather situations changed his original idea as to what would happen, he never intended to go through with this contract and did the utmost that he possibly could to prevent these people from getting the carrots which they under their contract would be entitled to.’ Defendant's claim that he could not read and did not know the contents of the contract was said to be one ‘you have to take with a very large grain of salt’ indicating ‘that the justice on the part of the position of the defendant here is of minimal character if at all.’
There is abundant evidence to support these views of the trial judge, and the argument of this question of sufficiency of the evidence is one looking toward a reweighing of the evidence, which requires no further consideration.
The fact of absence of a license was established, but the claim was first raised on motion for new trial by counsel newly substituted. Neither the pleadings nor the pretrial conference proceedings reflect it. Want of a requisite license of plaintiff was presented as newly discovered evidence. Confined to that narrow ground the action of the court in denying the motion is easily justified by the record. But the claim is one of illegality of a sort which must challenge the attention of the court whenever and however raised.
Superficially considered, Lewis & Queen v. N. M. Ball Sons, 48 Cal.2d 141, 148 (308 P.2d 713), seems to lend support to defendants' position. It deals with a statute, section 7031, Business and Professions Code,2 which forbids maintenance of an action for collection of compensation by a contractor who cannot allege and prove the possession of a license. The opinion treats this type of statutory noncompliance as one of illegality of the same quality as a corrupt bargain. But, as will presently appear, it recognizes, in the absence of legislative indication to the contrary, the propriety of different treatment of illegal acts which are malum prohibitum and those which are malum in se. Essentially the decision rests upon said section 7031, Business and Professions Code. The Agricultural Code contains no such penalty as that of said section 7031, and we hare deal with malum prohibitum only, that is to say, the failure to procure the license required by section 1263, Agricultural Code, is punishable as a misdemeanor or affords ground for a prohibitory injunction or for a civil penalty of $500 for each violation (Agr.Code, s 1273), but there is no inhibition upon maintaining an action upon transactions had by one who has failed to procure the required license.
Restatement of the Law of Contracts, section 600, page 1115: ‘If neither the consideration for a promise nor the performance of the promise in an illegal bargain involves serious moral turpitude, and the bargain is not prohibited by statute, it is enforceable unless the plaintiff's case requires proof of facts showing the illegality, or they are pleaded by the defendant, and even in that event recovery may be allowed of anything that has been transferred under the bargain, or its fair value, if necessary to prevent a harsh forfeiture.’ Comment a: ‘* * * If, however, the illegality is not serious, and neither public policy nor statute clearly requires denial of relief, courts refuse to give effect to facts showing illegality unless those facts are essential to establish a prima facie right of recovery or are pleaded by the defendant.’ (P. 1115.) Illustration 3: ‘A, a corporation, is prohibited by the law of State B from doing business in that State without securing a license. A does business therein by entering into a bargain with C for the sale of an automobile. A transfers the automobile to C in performance of the bargain, but C fails to pay as agreed. A can rescind the bargain and recover the automobile or its value.’ (P. 1116.)
5 Williston on Contracts (rev. ed.), section 1630A, page 4567: ‘Yet, if the illegality was not serious or if public policy does not clearly require denial of relief, the court may refuse thus to take notice of illegality which is not pleaded, but appears from the evidence given or offered. Such diversity of treatment would be inexplicable if all unlawful agreements were of necessity void.’ Section 1632, page 4575: ‘It should also be noticed that an executed illegal transaction though originating by agreement is effectual. If illegality made contracts void in a literal sense, it is hard to see how a transfer based on an illegal bargain could stand. Doubtless a statute may make an attempted contract or sale absolutely void, and instance of such statutes may be found, but such a construction will not be adopted unless plainly required by express language or public necessity.’
The Lewis & Queen opinion, supra, 48 Cal.2d 141, says at page 151, 308 P.2d 713, at page 719: ‘In some cases, on the other hand, 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 unenenforceable; 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 unenforceability is disproportionately harsh considering the nature of the illegaility. 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 Wilson v. Stearns, 123 Cal.App.2d 472, 481-482, 267 P.2d 59; John E. Rosasco Creameries, Inc. v. Cohen, 276 N.Y. 274, 278-280, 11 N.E.2d 908, 118 A.L.R. 641; 6 Corbin, Contracts 964-967 (1951); 2 Pomeroy, Equity Jurisprudence 137 (5th ed. 1941); Grodecki, In Pari Delicto Potior Est Conditio Defendentis, 71 L.Q.Rev. 254, 268. But we are not free to weigh these considerations in the present case.’
Volume 6, Corbin on Contracts, section 1512, page 966: ‘The statute may be clearly for protection against fraud and incompetence; but in very many cases the statute breaker is neither fraudulent nor incompetent. He may have rendered excellent service or delivered goods of the highest quality, his non-compliance with the statute seems nearly harmless, and the real defrauder seems to be the defendant who is enriching himself at the plaintiff's expense. Although many courts yearn for a mechanically applicable rule, they have not made one in the present instance. Justice requires that the penalty should fit the crime; and justice and sound policy do not always require the enforcement of licensing statutes by large forfeitures going not to the state but to repudiating defendants.
‘It must be remembered that in most cases the statute itself does not require these forfeitures. It fixes its own penalties, usually fine or imprisonment of minor character with a degree of discretion in the court. The added penalty of non-enforceability of bargains is a judicial creation. In most cases, it is wise to apply it; but when it causes great and disproportionate hardship its application may be avoided.’
The case of John E. Rosasco Creameries v. Cohen, 276 N.Y. 274 (11 N.E.2d 908, 909, 118 A.L.R. 641) (cited in Lewis & Queen v. N. M. Ball Sons, supra), is illuminating. ‘Illegal contracts are generally unenforcible. Where contracts which violate statutory provisions are merely malum prohibitum, the general rule does not always apply. If the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract, and the denial of relief is wholly out of proportion to the requirements of public policy or appropriate individual punishment, the right to recover will not be denied. See Williston on Contracts, vol. 3, s 1789; vol. 5 (2d Ed.) s 1630. Cf. American Law Institute, Restatement of the Law of Contracts, ss 548, 600 * * *. Quoting from Sajor v. Ampol, Inc., 275 N.Y. 125 (9 N.E.2d 803): ‘This penalty provided for the violation is the exaction which the law makes, and no other. We should not read into the provisions of the statute that which other State legislators have found necessary to insert, in order to reach the transactions between the parties. Our Legislature * * * did not intend to make void or voidable any and every contract made with a corporation dealer, otherwise valid, simply because it had failed to comply with the many administrative provisions of this law * * *.’ (Emphasis by court.)
‘We have here a statute which provides that milk dealers shall not sell milk unless duly licensed. The statute imposes penalties for its violation by way of fine and imprisonment, but it does not expressly provided that contracts made by milk dealers shall be unenforceable. Nothing in this statute reveals an implied intent to deprive unlicensed dealers of the right to recover the reasonable value of the milk sold by them, and where the wrong committed by the violation of the statute is merely malum prohibitum, and does not endanger health or morals, such additional punishment should not be imposed unless the legislative intent is expressed or appears by clear implication.’ (11 N.E.2d at pages 909-910.)
Fraenkel v. Bank of America, 40 Cal.2d 845, 848 (256 P.2d 569, 571), states the purpose of the Contractor's License Law as follows: ‘That law was enacted for the safety and protection of the public against imposition by persons inexperienced in contracting work, and for the prevention of fraudulent acts by contractors * * *. Loving & Evans v. Blick, 33 Cal.2d 603, 609, 204 P.2d 23; Franklin v. Nat. C. Goldstone Agency, 33 Cal.2d 628, 632, 204 P.2d 37.’ Moreover, “The invasions it makes on constitutional rights are not (to) be carried farther than is necessary to protect the public from the evils intended to be removed, unless the language compels such meaning and such effect is reasonably calculated to secure the legitimate objects for which the power is exercised.” (Joseph v. Drew, 36 Cal.2d 575, 581 (225 P.2d 504, 508).) Indeed, the statute is to be strictly construed. (Oddo v. Hedde, 101 Cal.App.2d 375, 383 (225 P.2d 929).)
Cases which uphold the right of one partner to recover his share of moneys earned in a venture conducted without the required license are: Denning v. Taber, 70 Cal.App.2d 253, 257 (160 P.2d 900); Norwood v. Judd, 93 Cal.App.2d 276, 286 (209 P.2d 24); Galich v. Brkich, 103 Cal.App.2d 187, 191 (229 P.2d 89); Wold v. Luigi Consentino & Sons, 109 Cal.App.2d 854, 857-858 (241 P.2d 1032); Wilson v. Stearns, 123 Cal.App.2d 472, 481 (267 P.2d 59). (In each of them, except the Wold case, a hearing was denied by the Supreme Court; no application was made in Wold.) The Dening and Norwood cases proceed upon the basis that the illegality has spent its force when the point of dissolution and accounting is reached and that enforcement of a promise, express or implied, to divide the partnership assets does not require the court to lend its aid to enforcing the illegal feature of the partnership. The Galich decision marks a departure from the concept that there must be an express or implied promise to divide. That was an action for dissolution of a partnership or joint venture. In rejecting the claim that the relation between the parties was completely illegal because of absence of a license, the court, 103 Cal.App.2d at page 191, 229 P.2d at page 91, quoted from the Norwood case and added: ‘The contract in question was not per se contrary to any statute; public welfare and safety were not threatened, and public policy would not be protected or served by denying one partner relief against the other.’
Wilson v. Stearns, supra, 123 Cal.App.2d 472, 267 P.2d 59, takes a step in advance of the partnership rulings and upholds the right to recover on the contract when equity and good conscience so dictate, notwithstanding the absence of a required license. That was an action to recover a real estate broker's commissions upon a written contract with a subdivider. Defendant resisted plaintiff's claim on the ground that he had violated subdivision (f) of section 10176, Business and Professions Code. The court first held that plaintiff had not been engaged in the proscribed ‘practice’ (123 Cal.App.2d at page 479, 267 P.2d at page 64), then turned to the question of alleged illegality on the part of a violator of that law, and upheld plaintiff's right of recovery though assuming his transgression of the statute. At page 481 of 123 Cal.App.2d, at page 66 of 267 P.2d, it said that ‘unjust enrichment results for respondent Stearns if appellant Wilson is barred from recovering commissions on executed sales.’ At page 480 of 123 Cal.App.2d, App.2d, at page 65 of 267 P.2d: ‘In determining whether a contract is invalid the courts should strive to deal with the transaction so as to give effect to the fundamental purpose of the legislature and to a wise public policy. And, in determining whether a reql estate broker may be deprived of the value of his services, already admittedly earned, his contract will not be declared invalid upon the basis of anything not embraced within the terms of the applicable statute.’ And at page 481 of 123 Cal.App.2d, at page 66 of 267 P.2d: ‘This court has, on previous occasions enunciated the doctrine that law and good morals should be one and inseparable. Based on this philosophy it must be assumed that statutes such as the one now engaging our attention are enacted, as heretofore stated, for the protection and safety of the public. The are not adopted for the benefit of a greedy and avaricious participant in a venture or enterprise who seeks to keep for himself the fruits of the enterprise to the exclusion of a real estate broker who has fully performed all of his obligations under the agreement, and is entitled to share therein. Where, as here, the alleged illgal transaction has been terminated, public policy is not served or public policy protected by denying one party to the contract relief against the other. Rather than permit the unjust enrichment of respondent George Stearns, we are disposed to apply the rule announced in the case of Norwood v. Judd, 93 Cal.App.2d 276, 288, 209 P.2d 24, wherein, as Mr. Presiding Justice Peters, speaking for the court, in a well reasoned and considered opinion, said: ’* * * The fundamental purpose of the rule must always be kept in mind, and the realities of the situation must be considered Where, by applying the rule, public cannot be protected because the transaction has been completed, where no serious moral turpitude is involved, where the defendant it the one guilty of the greatest moral fault, and where to apply the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be applied.“ As to Stearns and his alter ago, Alamo Development Company, the judgment was reversed with instructions to enter judgment for plaintiff. The court relied in part upon Gatti v. Highland Park Builders, Inc., 27 Cal.2d 687 (166 P.2d 265), which does support the Wilson ruling.
Any inference to the contrary in Owen v. Off, 36 Cal.2d 751, 227 P.2d 457, is overruled. Any statements in Kennerson v. Salih Bros., 123 Cal.App.2d 371, 266 P.2d 871, or Mansfield v. Hyde, 112 Cal.App.2d 133, 245 P.2d 577, which appear to announce a rule contrary to that stated here are disapproved.3
Holland v. Morgan & Peacock Properties, 168 Cal.App.2d 206 (335 P.2d 769) Appeal from judgment for plaintiff in an action to recover upon an agreement for sharing by brokers of commission for sale of realty. ‘But appellants point to the fact that only appellant Morgan is a licensed real estate broker. Appellant Agostini is licensed as a salesman, and their partnership has no separate license. To the extent that enforceability of their contract with responents depends upon their acting as brokers it is, they contend, illegal, and therefore void.’ (168 Cal.App.2d at page 210, 335 P.2d at page 772.) The court said at page 211 of 168 Cal.App.2d, at page 772 of 335 P.2d: ‘Also relevant is the rule that where the illegality consists in the failure to secure a license and the transaction has been wholly consummated as concerns the parties designed to be protected by the licensing statute, the culpable party cannot rely upon the licensing requirement to retain the proceeds of the transaction and avoid payment to the innocent party. Norwood v. Judd, 93 Cal.App.2d 276, 209 P.2d 24; Denning v. Taber, 70 Cal.App.2d 253, 160 P.2d 900. We are satisfied that to permit recovery under the circumstances of this case is consistent with the purpose of the statute, and that to deny recovery would unreasonably enrich appellants by leaving them in possession of gains which the jury has found to stem from misrepresentations by them.’
Marshall v. Von Zumwalt, 120 Cal.App.2d 807, 810 (262 P.2d 363), 364; ‘It is to be noted that the statute merely prohibits a contractor from maintaining or bringing an action upon a contract which he has entered into pertaining to the contracting business. It does not prohibit him when sued from setting up as a defense any sums which may be equitably due him from the plaintiff upon such illegal contract. Such a contract is not malum in se but merely malum prohibitum.
‘The applicable rule is thus stated in 12 American Jurisprudence (1938), Contract, sec. 158, page 654, as follows: ‘Contracts made in violation of statutes , if not malum in se, are sometimes held valid, and generally so, notwithstanding the infraction of law, whenever it becomes necessary to save from injury persons for whose protection the violated statutes were enacted or whenever the public interests require that such contracts shall be enforced.’
‘It is clear that equity and justice require that plaintiff he charged for the benefits which he has received from defendant and defendant be credited with the value of services and materials which he has furnished to plaintiff. There is no question of public interest or public policy involved in the instant case. It is purely a matter of balancing the rights and equities between the parties.’
The contract now under consideration covered all fields controlled by defendant corporation in Imperial County, aggregating some 1200 acres. They were separated by as much as 24 miles in some instances. The defendant was required ‘to notify Buyer immediately upon the beginning of the said harvesting season’ and the carrots were to be delivered for harvesting ‘at the rate of two truck loads per day, six days a week from the beginning of Seller's harvesting season to the end of Seller's harvesting season.’ That season began about January 6, 1958, but no notice was given to plaintiff. Defendant harvested on its own behalf but prevented plaintiff from obtaining more than 143.3 tons prior to February 4th, upon which date a temporary restraining order was issued in this cause. The court found: ‘Between February 4, 1958 and June 1, 1958 defendants, and each of them, continued to prevent plaintiff form taking two (2) truck loads per day by various subterfuges and acts including: (a) Refusing to give plaintiff specific information as to the location of its carrot fields. The latter were scattered over a large area with fields separated from each other by as many as 24 miles. The fields themselves contained no identification, such as signs or markers to distinguish them from the carrot fields of third parties; (b) Harvesting available matured carrots, to the exclusion of plaintiff; (c) Assigning plaintiff poor stands, and when plaintiff reached good stands, defendants would cut in and themselves harvest most of the remaining matured carrots in a particular field; (d) Harvesting fields at night, unbeknown to plaintiff and thereby depleting the supply of available matured carrots; (e) Wetting down fields containing matured carrots which plaintiff was harvesting or about to harvest; and (f) Jumping from one field to another and harvesting the portions of said fields containing matured carrots.
‘By reason of the foregoing acts on the part of defendants, and each of them, plaintiff was able to secure only the aforesaid two thousand three hundred twelve point three (2,312.3) tons in lieu of at least four thousand (4,000) tons it could have obtained from defendant corporation's carrot fields, had it not been prevented from so doing as outlined above.’ In denying a new trial the judge remarked that Joe Maggio (the president of the corporation) ‘did the utmost that he possibly could to prevent these people from getting the carrots which they under their contract would be entitled to’; thereby defendant reaped a profit of $30,395.64 which in equity and good conscience belonged to plaintiff. Although the judgment took the form of damages, it was measured (so we were told in oral argument without any contradition) by the profits which plaintiff would have made had defendant delivered the 1687.7 tons that it withheld, which profits accrued to defendants who were industriously harvesting and selling at the top of the market ($90) while holding plaintiff off until it had declined very substantially. To permit defendant to retain this profit merely because plaintiff did not have a license to do business would impose upon plaintiff a hardship out of all proportion to the technical violation of law committed by it.
Inability to recover compensation for services because of failure to procure a professional license (e. g., real estate brokers and building contractors) has occupied such a conspicuous place in the jurisprudence of this state that failure to include a like provision in a given statute, the Agricultural Code, argues not inadvertence but a studied withholding of that drastic penalty from application to a situation such as is presented at bar. Section 1273, agricultural Code, was amended in 1933, 1935, 1937, 1939, 1943, 1945 and 1947. But in none of those changes did the Legislature incorporate a provision similar to section 7031, Business and Professions Code. Section 120 of the Agricultural Code has provided, since 1933, that it is unlawful to sell any nursery stock without first having obtained an annual license so to do; and section 321 has declared it unlawful to sell any foreign cold storage meat without having first obtained a license from the director so to do. Since its enactment in 1947, section 660 has required a license to deal in milk products, but the statute does not brand sales illegal; it provides in sections 705 and 706 for punishment as a misdemeanor and injunction against further violations. The same is true of processors of farm products (see ss 1300.1 and 1300.6) with an added civil penalty of $500. A dealer in ‘commercial feeding stuffs' without a license is subject to prosecution for a misdemeanor (ss 1083.1 and 1089). This difference of treatment found within a single code emphasizes a persistent legislative intention to impose no such severe penalty for violation of section 1263 as is claimed by defendant to be applicable to one situated as was the plaintiff herein.
( )4 Plaintiff in this instance was not required to have a license to deal with defendant Joe Maggio, Inc. (Any statements in La Rosa v. Glaze, 18 Cal.App.2d 354, 359, 63 P.2d 1181, contrary to the rule announced in this decision are disapproved.)5
Plaintiff is engaged in business as a packer and shipper of carrots, having a processing plant at Vernon, California. The contract requires it to sell defendants' crop and divide the proceeds. Plaintiff falls within the definition of dealer or cash buyer under Agricultural Code, s 1261 above quoted. The contract likewise obligates Joe Maggio, Inc. to grow carrots and sell them to plaintiff for resale and a division of the profits. The trial judge upon motion for a new trial amended the findings to say that Joe Maggio, rather than Joe Maggio, Inc., planted and grew the carrots during the 1957-1958 season. That findings is not questioned by defendants, and it is supported by ample evidence, illustrated by the following: Joe Maggio testified, ‘I was the grower.’ His bookkeeper, Mr. Lockett: ‘Joe Maggio, the individual, grows all of the carrots. The corporation harvests, packs, and sells them, and then after the cost of packing is taken out, any income from them is credited back to the Joe Maggio Company.’ The affidavit of Joseph G. Shabouh, president of Fomco, in opposition to new trial: ‘The contract entered into with Joe Maggio, Inc., was entered into with the processor and packer of carrots and not with the grower thereof. Joe Maggio Personally, as well as his sons, owned the carrot fields and carrot crops. This was so represented in the pleadings and repeatedly in testimony at the trial.’ Attached to the answer of Joe Maggio, Inc., and Joe Maggio herein is a copy of amended complaint for declaratory judgment in an action field January 31, 1958, by Joe Maggio, Inc., and Joe Maggio against Fomco, Inc., et al., which amended complaint, verified by Joe Maggio, says: ‘That Joe Maggio is engaged in the business of growing and raising farm produce of various kinds in the county of Imperial, State of California, and plaintiff Joe Maggio, Inc., is employed by plaintiff Joe Maggio as sales agent for the purpose of harvesting, packing, shipping and selling said farm produce grown by plaintiff Joe Maggio.’
This finding leaves Joe Maggio, Inc., in the position of one who (to use the wording of s 1261, subd. (e)) becomes a commission merchant, which term covers any person who ‘shall accept any farm product in trust from the producer thereof for the purpose of resale * * * or who shall in any way handle for the account of or as an agent of the producer thereof any farm product’; or one who becomes a dealer under subdivision (f), namely, ‘any person other than a commission merchant or cash buyer who solicits, contracts for or obtains from the producer thereof title, possession or control of any farm product, or who buys or agrees to buy any farm product from the producer thereof.’ If plaintiff was required to have a license, defendant Joe Maggio, Inc., was equally obligated to have one. Hence, neither corporation was within the class for whose protection the statute was passed.
The applicable rule is stated in Kennoy v. Graves (Ky.), 300 S.W.2d 568, an action brought by an unlicensed consulting engineer against another member of his own profession. In upholding plaintiff's right to recover for services rendered the court said, at page 570: ‘The statute involved, and similar ones, are designed to protect the public from being imposed upon by persons not qualified to render a professional service. The reason for the rule denying enforceability does not exist when persons engaged in the same business or profession are dealing at arms length with each other. In the case before us appellant was in a position to know, and did know, the qualifications of appellee. No reliance was placed upon the existence of a license, as presumptively would be the case if appellee was dealing with the general publice.
‘Some of the cases take the view that the professional employer should be estopped to invoke the statute, and others point out the aspect of unjust enrichment. Without invoking specific equitable principles, it seems to us that the technical requirements of the licensing statute play no part in the determination of just claims between persons in the same business field who have contracted with knowledge of each other's respective professional qualifications. Appellant had no valid defense to this claim, and the trial court correctly adjudged recovery.’
This case was quoted with approval and followed in Edmonds v. Fehler & Feinauer Construction Co., 6 Cir., 252 F.2d 639, 642, a case involving a real estate broker's license.
To the same effect is Dow v. United States, 154 F.2d 707, 710 (10th Cir.), which involved the necessity of holding a building contractor's license. Plaintiff was an unlicensed subcontractor upon a construction project. In sustaining his right to recover against the general contractor the court said (at page 710) with respect to the general rule that an unlicensed contractor cannot recover for services rendered: ‘But that general rule does not have application in a case of this kind in which an unlicensed member of a profession or trade seeks to recover from a licensed member for services rendered or labor performed pursuant to a contract entered into by them. Martindale v. Shaha, 51 Okl. 670, 151 P. 1019; White v. Little, 131 Okl. 132, 268 P. 221; Ferris v. Snively, 172 Wash. 167, 19 P.2d 942, 90 A.L.R. 278; cf. John E. Rosasco Creameries v. Cohen, 276 N.Y. 274, 11 N.E.2d 908, 118 A.L.R. 641.’
The Dow case was applied in Matchett v. Gould, 131 Cal.App.2d 821, 830 (281 P.2d 524), to an action by a subcontractor against the general contractor, the right of recovery being upheld notwithstanding plaintiff's lack of a license and the provisions of section 7031, Business and Professions Code, forbidding suit for recovery of compensation by an unlicensed contractor. This was held in Lewis & Queen v. N. M. Ball Sons, supra, 48 Cal.2d 141, at pages 153-154, 308 P.2d 713, at pages 720-721, to be erroneous and the Matchett ruling was disapproved. But the rejection of that decision was based upon the proposition that the phrasing of the statute is such that a suing subcontractor is a ‘contractor’ subject to all the statutory penalties for failure to procure a license. Concerning the doctrine of the Kennoy and similar cases above quoted the Lewis & Queen opinion says, 48 Cal.2d at page 154, 308 P.2d at page 721: ‘Cases from other jurisdictions cited by plaintiff, e. g., Dow v. United States, for Use and Benefit of Holley, 10 Cir., 154 F.2d 707, 710, do not involve statutory prohibitions like section 7031.’
We conclude that the Lewis & Queen decision is not opposed to the principle that persons engaged in the same profession or business and standing upon an equality cannot take advantage of lack of a license of one party to a deal between them, that they are not within the protection of the statute with respect to each other.
Finally, it should be noted that plaintiff made out a cause of action without relying, or the the necessity of relying upon the illegal feature of the transaction (assuming illegaility arguendo); the contract was fully excuted on its part so far as possible and defendant had refused to perform. Under such circumstances the aggrieved party is entitled to recover.
Aaker v. Smith, 87 Cal.App.2d 36, 47 (196 P.2d 150, 157): ‘The true rule applicable to this situation was stated in Wayman Inv. Co. v. Wessinger & Wagner, 13 Cal.App. 108, 110, 108 P. 1022, 1023, as follows: ‘Although there may be some illegal features indirectly connected with a transaction involved in a suit, yet the plaintiff may recover if his cause of action is otherwise legitimate, and he can make out his case without calling to his aid the illegal agreement. The test of whether the demand can be enforced at law is whether the plaintiff requires the aid of the illegal contract to establish his case.’ See, also, McAllister v. Drapeau, 14 Cal.2d 102, 112, 92 P.2d 911, 125 A.L.R. 800; Warner v. Marchetti, 52 Cal.App.2d 172, 177, 125 P.2d 838; Wagner v. Worrell, 76 Cal.App.2d 172, 179, 172 P.2d 751.' (See also Sparks v. Richardson, 141 Cal.App.2d 286, 290 (296 P.2d 892); 12 Cal.Jur.2d, s 98, p. 298; and quotations from Restatement of Law of Contracts, s 600 (supra), and 5 Williston on Contracts, s 1630A (supra).)
The judgment is affirmed.
FN1. Agr.Code, s 1263: ‘No person shall act as a commission merchant, dealer, broker, cash buyer, or agent without having obtained a license as provided in this chapter * * *.’Agr.Code, s 1261 (1957): ‘* * * (b) The term ‘producer’ means any person engaged in the business of growing or producing any farm product.‘(d) The term ‘consignor’ includes any person who ships or delivers to any commission merchant or dealer any farm products for handling, sale or resale.‘(f) The term ‘dealer’ means any person other than a commission merchant or cash buyer who solicits, contracts for or obtains from the producer thereof title, possession or control of any farm product, or who buys or agrees to buy any farm product from the producer thereof.‘(g) The term ‘broker’ means any person, other than a commission merchant, or dealer, or cash buyer, who negotiates the purchase or sale of any farm product; provided, however, that no broker may handle either the farm product involved or the proceeds of a sale.‘(h) The term ‘cash buyer’ means any person other than commission merchant, or dealer, or broker who obtains from the producer thereof title, possession or control of any farm products, or who contracts for the title, possession, or control of any farm products, or who buys or agrees to buy any farm products, by paying to the producer at the time of obtaining possession or control, or at the time of contracting for the title, possession, or control of any farm products, the full agreed price of such farm products in coin or currency, lawful money of the United States.'. FN1. Agr.Code, s 1263: ‘No person shall act as a commission merchant, dealer, broker, cash buyer, or agent without having obtained a license as provided in this chapter * * *.’Agr.Code, s 1261 (1957): ‘* * * (b) The term ‘producer’ means any person engaged in the business of growing or producing any farm product.‘(d) The term ‘consignor’ includes any person who ships or delivers to any commission merchant or dealer any farm products for handling, sale or resale.‘(f) The term ‘dealer’ means any person other than a commission merchant or cash buyer who solicits, contracts for or obtains from the producer thereof title, possession or control of any farm product, or who buys or agrees to buy any farm product from the producer thereof.‘(g) The term ‘broker’ means any person, other than a commission merchant, or dealer, or cash buyer, who negotiates the purchase or sale of any farm product; provided, however, that no broker may handle either the farm product involved or the proceeds of a sale.‘(h) The term ‘cash buyer’ means any person other than commission merchant, or dealer, or broker who obtains from the producer thereof title, possession or control of any farm products, or who contracts for the title, possession, or control of any farm products, or who buys or agrees to buy any farm products, by paying to the producer at the time of obtaining possession or control, or at the time of contracting for the title, possession, or control of any farm products, the full agreed price of such farm products in coin or currency, lawful money of the United States.'
2. Bus. & Prof.Code, s 7031: ‘No person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action in any court of this State for the collection of compensation for the performance of any act or contract for which a license is required by this chapter without alleging and proving that he was a duly licensed contractor at all times during the performance of such act or contract * * *.’
3. Brackets enclosing material (other than editor's added parallel citations) are used to denote insertions or additions by this court.
4. ( ) Brackets together in this manner are used to indicate deletions from the opinion of the District Court of Appeal.
5. See footnote 3, p. 15.
GIBSON, C. J., and TRAYNOR, SCHAUER, PETERS, WHITE and DOOLING, JJ., concur.
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Docket No: L. A. 25514.
Decided: October 27, 1960
Court: Supreme Court of California
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