Enforceability of Illegal Contracts - Jackson v. Brewer


Jackson v. Brewer, [Ms. 2160099, June 23, 2017] __ So. 3d __ (Ala. Civ. App. 2017). The court affirms a judgment entered by the Covington Circuit Court awarding damages and attorney's fees in a breach-of-contract case. The appellant asserted the contract was illegal and void because it violated municipal subdivision regulations and §§ 11-52-30 and former 11-52-33(a), Ala. Code 1975.

The court first notes a party can raise the alleged illegality of a contract at any time. Ms. *4 (citing Kilgore Dev., Inc. v. Woodland Place, LLC, 47 So. 3d 267 (Ala. Civ. App. 2009)). This principle is so strong that a party can raise the issue even after a jury returns an adverse verdict based on the contract. Ms. *6 (citing Pacific Wharf & Storage Co. v. Standard Am. Dredging Co., 184 Cal. 21, 192 P. 847 (1920) (holding that the illegality of a contract can be raised in a post-trial motion); Taylor v. Riley, 157 Idaho 323, 336 P.3d 256 (2014) (alleged illegality of a contract may be raised at any stage of the litigation, including for the first time on appeal)). Further, a party cannot be prevented from asserting the illegality of a contract based on a theory of estoppel. Ms. *6 (citing Cooper v. Johnston, 283 Ala. 565, 219 So. 2d 392 (1969)).

"[T]he judicial system may not be used to enforce illegal contracts. See, e.g., Ex parte W.D.J., 785 So. 2d 390, 393 (Ala. 2000) ('Moreover, this Court has held that "[a] person cannot maintain a cause of action if, in order to establish it, he must rely in whole or in part on an illegal or immoral act or transaction to which he is a party." Hinkle v. Railway Express Agency, 242 Ala. 374, 378, 6 So. 2d 417, 421 (1942). In Oden v. Pepsi Cola Bottling Co., 621 So. 2d 953 (Ala. 1993), this Court stated that the purpose of the Hinkle rule is to ensure that "'those who transgress the moral or criminal code shall not receive aid from the judicial branch of government.'" 621 So. 2d at 955....' (emphasis omitted)). See also Kilgore Dev., Inc. v. Woodland Place, LLC, 47 So. 3d 267, 271 (Ala. Civ. App. 2009) (holding that subdivision-control statutes were implemented to protect the public, not to raise revenue, and that contracts violating those statutes are accordingly void).

"Indeed, the policy behind this principle has been deemed to be of such importance that contracts found to violate the law will not be enforced even if, as has been alleged in this case, the defaulting party failed to properly plead the affirmative defense of illegality. Brown v. Mountain Lakes Resort, Inc., 521 So. 2d 24, 26 (Ala. 1988) (' " 'It is the rule ... in Alabama and a few other jurisdictions to not enforce a contract in violation of the law and to deny the plaintiff the right to recover upon a transaction contrary to public policy, even if the invalidity of the contract or transaction be not specially pleaded and is developed by the defendant's evidence.' " ' (quoting National Life & Accident Ins. Co. v. Middlebrooks, 27 Ala. App. 247, 249, 170 So. 84, 86 (1936), quoting in turn Shearin v. Pizitz, 208 Ala. 244, 246, 94 So. 92, 93 (1922)))."

Ms. *5-6 (quoting Limestone Creek Developers, LLC v. Trapp, 107 So. 3d 189, 193-94 (Ala. 2012)).

Here, upon review of the record, the court concludes the appellant failed to present facts establishing that the contract was indeed illegal. Given the principle that an appellate court can affirm a trial court's judgment on any valid legal ground presented in the record (Ms. *13 (citing Liberty Nat'l Life Ins. Co. v. University of Alabama Health Servs. Found., 881 So. 2d 1013 (Ala. 2003)), the Covington Circuit Court's judgment awarding damages and attorney's fees is affirmed.

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