Alsaedi v. Alsaedi

177 Misc. 2d 440, 676 N.Y.S.2d 778, 1998 N.Y. Misc. LEXIS 307
CourtCivil Court of the City of New York
DecidedMay 22, 1998
StatusPublished
Cited by2 cases

This text of 177 Misc. 2d 440 (Alsaedi v. Alsaedi) is published on Counsel Stack Legal Research, covering Civil Court of the City of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alsaedi v. Alsaedi, 177 Misc. 2d 440, 676 N.Y.S.2d 778, 1998 N.Y. Misc. LEXIS 307 (N.Y. Super. Ct. 1998).

Opinion

OPINION OF THE COURT

Rolando T. Acosta, J.

This action, tried before the court without a jury, arises from [441]*441the sale of a grocery store in Brooklyn in 1995. The case requires the court to resolve the question of whether an oral contract which purports to temporarily transfer a lottery agent’s license in violation of law is enforceable, especially in light of the standard recently set forth by the Appellate Division, Second Department, in Wowaka & Sons v Pardell (242 AD2d 1 [2d Dept]).

The Contentions of the Parties

The only fact which was not contested during the trial of this case was that the parties entered into a written contract for the sale of a Brooklyn store named Rainbow Minimart on or around April 25, 1995, plaintiff being the seller and defendant being the buyer. Plaintiff, however, is not suing defendant for a breach of the terms of the written contract. Instead, plaintiff is suing defendant for a breach of, inter alia, an oral agreement, which, according to plaintiff, addressed issues left unresolved by the written contract.

During the trial, plaintiff contended that, pursuant to the oral agreement, plaintiff, a duly licensed lottery agent, agreed to leave his lottery machine at the store following the sale. Defendant agreed, according to plaintiff, that he would make weekly payments, for the cost of the tickets sold, directly to plaintiff or to a bank account from which the New York State Division of Lottery could make regular withdrawals.

This arrangement — pursuant to which plaintiff effectively transferred his lottery license to defendant in violation of law— was expected to continue until plaintiff was able to attempt to officially transfer the lottery license to defendant. The arrangement ended abruptly, however, when, according to plaintiff, defendant failed to make several sizable payments. Plaintiff is now suing defendant for the amount which defendant failed to pay pursuant to their alleged agreement. Although plaintiff’s counsel concedes that the agreement was illegal, he argues that it is nevertheless enforceable because none of the provisions in the applicable regulatory scheme provides that a party may not recover for a breach of such contracts.

Defendant does not deny that, following his purchase of the store, the lottery machine remained at the store. He contends, however, that he never entered into an agreement with plaintiff regarding the machine and that the proceeds of the machine were controlled exclusively by one of plaintiff’s own employees — the same employee who had operated the machine prior [442]*442to the sale of the store. Finally, defendant’s counsel argues that even if there were such an agreement between the parties, it would have been illegal and, thus, unenforceable.

Discussion

It is well settled that contracts which violate statutory provisions are, as a general rule, unenforceable on public policy grounds where the statute which is violated is enacted to protect the public health and safety (Richards Conditioning Corp. v Oleet, 21 NY2d 895, 896-897 [1968]), or where the statute’s “ ‘purpose [is] the protection of public * * * morals or the prevention of fraud’ ”. (Benjamin v Koeppel, 85 NY2d 549, 553 [1995], quoting Galbreath-Ruffin Corp. v 40th & 3rd Corp., 19 NY2d 354, 363-364 [1967]; see also, Gutfreund v DeMian, 227 AD2d 234, 235 [1st Dept 1996].)

The rationale for refusing to enforce such contracts is not based upon a “desire to relieve a party from the obligation which he has assumed, but rather is based upon the theory that such an agreement is injurious to the interests of society in general, and that the only way to stop the making of such contracts is to refuse to enforce them”. (Village of Upper Nyack v Christian & Missionary Alliance, 143 Misc 2d 414, 421 [Sup Ct, Rockland County 1988]; see, McConnell v Commonwealth Pictures Corp., 7 NY2d 465, 469 [1960] [“ ‘ “a party to an illegal contract cannot ask a court of law to help him carry out his illegal object * * * No one shall be permitted to profit by his own fraud * * * or to found any claim upon his own iniquity” ’ ”] [citations omitted].)

Contracts which violate a statute may be enforced, however, “ ‘[i]f the statute does not provide expressly that its violation will deprive the parties of their right to sue on the contract’ ” (Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124, 127 [1992], quoting Rosasco Creameries v Cohen, 276 NY 274, 278 [1937]), and if the “loss of judicial recourse would * * * be out of proportion to the requirements of public policy or appropriate individual punishment”. (Wowaka & Sons v Pardell, 242 AD2d 1, 5 [2d Dept], supra.) Courts are also more amenable to enforcing such contracts “where there are [other] regulatory sanctions and statutory penalties in place to redress violations of the law” (Lloyd Capital Corp. v Pat Henchar, Inc., supra, 80 NY2d, at 128), or where the party who is alleged to have breached the contract is attempting to improperly use public policy “ ‘as a sword for personal gain rather than a shield for the public good.’ ” (Supra, at 128, quoting Charlebois v Weller Assocs., 72 NY2d 587, 595 [1988].)

[443]*443Thus, whether a particular contract is unenforceable on illegality grounds depends upon the nature of the statutory provision which is violated by the contract, and the legislative purpose for which it was enacted. Accordingly, in resolving the question of whether a particular contract is enforceable, courts “should * * * examine the particular regulatory scheme involved and decide how to further the proposes of the statute compatibly with what is fair.” (Todisco v Econopouly, 155 AD2d 441, 447 [2d Dept 1989] [Rosenblatt, J., concurring]; see also, Benjamin v Koeppel, supra, 85 NY2d, at 553-556; Thistle v Englert, 103 AD2d 268, 270-272 [4th Dept 1984].)

Here, the statutory provisions relating to the temporary transfer of the lottery machine are contained in article 34 of the Tax Law (see, § 1600 et seq.) and 21 NYCRR part 2801. Although plaintiff admits that he temporarily transferred the lottery machine in violation of the foregoing statutes, he argues that his oral contract with defendant regarding the transfer should nonetheless be enforced because none of the statutory provisions in the regulatory scheme expressly provides that such contracts are void or are otherwise unenforceable. Relying upon Rosasco Creameries v Cohen (276 NY 274, 278 [1937], supra), which was recently relied upon by the Appellate Division in Wowaka & Sons v Pardell (242 AD2d 1 [2d Dept], supra), plaintiff contends that this fact alone renders the contract here immune from challenges that it is unenforceable.

Plaintiff is correct that none of the statutory provisions contained in Tax Law § 1600 et seq., or 21 NYCRR part 2801, expressly provides that a violation of its provisions “deprive [s] the parties of their right to sue on the contract.” (Supra, at 6.) Plaintiff is wrong, however, regarding the dispositive effect of that fact in the circumstances of this case.

Although the presence of a provision which expressly renders a contract unenforceable may always be dispositive (in defendant’s favor) since it would clearly evince the legislative intent that such contracts are void (see, Bendell v De Dominicis,

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177 Misc. 2d 440, 676 N.Y.S.2d 778, 1998 N.Y. Misc. LEXIS 307, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alsaedi-v-alsaedi-nycivct-1998.