Parente v. Pirozzoli
87 Conn. App. 235, 2005 Conn. App. LEXIS 25, 866 A.2d 629 (2005)
Rule of Law:
A contract is unenforceable as contrary to public policy if its inherent purpose is to violate the law or circumvent statutory requirements, and a court may address such illegality even if not specially pleaded when evidence supporting the defense is introduced by the plaintiff or when the matter concerns serious public policy.
Facts:
- Sometime in 1992, the owners of the Speak Easy Cafe in Berlin offered Andrew Parente the opportunity to run their establishment.
- Andrew Parente was interested and reached an agreement with the owners to purchase their liquor stock, pay weekly rent, and allow them to generate revenue from amusement machines.
- Due to a prior felony conviction, Andrew Parente was unable to secure a liquor license.
- Andrew Parente asked Mario Pirozzoli, Jr. to join him in the undertaking because Mario Pirozzoli, Jr. would be able to obtain the necessary liquor license.
- In April 1993, Andrew Parente and Mario Pirozzoli, Jr. agreed to work together in a joint venture.
- On June 8, 1993, the business was incorporated as Centerfolds, Inc., with all legal documentation, including the real estate lease and incorporation papers, solely in Mario Pirozzoli, Jr.'s name to conceal Andrew Parente's involvement.
- In early 1995, Andrew Parente and Mario Pirozzoli, Jr. executed a partnership agreement, providing for the equal division of profits from their joint business venture.
- In August 1998, Mario Pirozzoli, Jr., without consulting Andrew Parente, formed a holding company that purchased the real estate on which Centerfolds, Inc. was located.
Procedural Posture:
- On January 25, 2000, Andrew Parente filed a four-count complaint against Mario Pirozzoli, Jr. in the trial court, alleging breach of contract, unjust enrichment, breach of implied contract, and conversion.
- Mario Pirozzoli, Jr.'s answer to the complaint set forth only general denials of Andrew Parente's allegations.
- A trial to the court was held on October 22 and 30, 2003.
- In his posttrial brief, Mario Pirozzoli, Jr. argued, among other things, that the agreement between the parties was illegal and unenforceable because its purpose was to circumvent state liquor control statutes.
- The trial court declined to consider Mario Pirozzoli, Jr.'s illegality argument, stating it was a special defense that, pursuant to Practice Book § 10-50, must be specially pleaded, and Mario Pirozzoli, Jr. had not done so.
- The trial court concluded that the 1995 partnership agreement constituted a valid contract and, according to its terms, Andrew Parente was entitled to 50 percent of the business's value, which the court found to be $300,000.
- The trial court rendered judgment in favor of Andrew Parente in part, awarding him $138,000 on the breach of contract count, and judgment in favor of Mario Pirozzoli, Jr. on the other three counts.
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Issue:
Is a contract enforceable when its underlying purpose is to circumvent state liquor control laws, even if the defense of illegality was not specially pleaded by the defendant?
Opinions:
Majority - Lavery, C.J.
No, a contract whose inherent purpose is to violate the law is not enforceable, especially when it contravenes strong public policy, and a court may consider such an illegality argument even if not formally pleaded. The court first determined that the trial court abused its discretion by not addressing Mario Pirozzoli, Jr.'s illegality argument. It reasoned that when a plaintiff introduces the evidence that reveals the illegal nature of a contract (as Andrew Parente did through his attorneys' testimony regarding his felony conviction and inability to obtain a liquor license), the plaintiff effectively waives any objection to the defendant's use of that evidence to argue illegality. Furthermore, matters of serious public policy, such as contract illegality, can and should be noticed by a court on its own motion if the evidence supports it, regardless of pleading technicalities, as established in precedents like McCarthy v. Santangelo. On the merits, the court concluded that the 1995 partnership agreement was illegal and unenforceable as contrary to public policy. Citing principles that courts will not assist in carrying out illegal contracts, the court noted that agreements designed to evade statutory requirements are routinely held unenforceable (e.g., Homami v. Iran-zadi, Flynn Bros. Inc. v. First Medical Associates). Connecticut, like Massachusetts in Zenon v. R.E. Yeagher Management Corp., has a strong public policy reflected in its liquor control statutes concerning who may sell alcoholic beverages. These statutes (General Statutes §§ 30-39(b)(1) and 30-47) require disclosure of felony convictions for applicants and backers and grant the Department of Consumer Protection discretion to refuse permits to unsuitable individuals. The partnership agreement in this case had the ulterior purpose of allowing Andrew Parente to act as an owner-backer of Centerfolds, Inc. and share profits while concealing his felony record and involvement from the department, thus circumventing the law. This directly substituted the parties' judgment for that of the regulatory authority. While this result meant Mario Pirozzoli, Jr. received a windfall, the court affirmed that this is a necessary consequence to effectuate overriding public policies and deter parties from entering into illegal arrangements.
Analysis:
This case significantly clarifies the principle that courts will not enforce contracts whose fundamental purpose is to evade regulatory statutes designed for public protection, irrespective of whether the illegality defense was formally pleaded. It underscores the judiciary's inherent authority to address serious public policy concerns when evidence revealing a contract's illegality comes to light, even if introduced by the plaintiff. The ruling provides important guidance on the balancing act between procedural rules and substantive public policy, reinforcing that the latter can, in certain circumstances, override strict pleading requirements. This decision aims to protect the integrity of licensing schemes and prevent individuals from benefiting from arrangements that undermine legislative intent and public welfare.
