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Illegality, if of a serious nature, need not be pleaded. If it appears in evidence the trial court of its own motion will deny relief to the plaintiff. The defendant cannot waive the defense if he wishes to do so. Indeed, if the trial court suspects illegality, it may examine witnesses and develop facts not brought out by the parties, and thereby establish illegality that precludes recovery by the plaintiff. 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 defendant.
Plaintiff grocery store owner brought the present action to recover four hundred fifty dollars which he delivered to defendant customer upon the latter’s promise either to get a beer license for plaintiff or to return the money. The trial court ruled in favor of the plaintiff. On appeal, the defendant customer argued that the transaction between the parties was illegal and, thus, unenforceable. On the other hand, the plaintiff averred that the defendant was foreclosed from raising the question because he did not plead the defense of illegality.
Under the circumstances, was there a necessity to plead the defense of illegality before the court could consider evidence of the same?
The court reversed the trial court's judgment with instructions to dismiss the action. The court held that the only place that a license to sell beer could have been secured was from the Washington state liquor control board. Although a license could be assigned to another person, an assignment could not be made if it resulted in both a change of licensee and change of location. The court found that the illegality that was claimed was of a serious nature. The situation involved a beer license, which could be secured only from an agency of the state. It purported to deal with a matter that was exclusively within the realm of public policy. The customer could not waive his right to set up the defense of illegality. The court found that because the evidence established the illegality of the transaction, the trial court should have considered the evidence, although illegality had not been pleaded as a defense.