Opinion
A17-0408
01-16-2018
William WOISCHKE, et al., Appellants, v. STURSBERG & FINE, INC., et al., Respondents, John Doe, et al., Defendants.
Christopher J. Heinze, Anthony D. Johnson, Kirsten J. Libby, Libby Law Office, P.A., St. Paul, Minnesota (for appellants) Nicole M. Moen, Pari I. McGarraugh, Kyle W. Ubl, Fredrikson & Byron, P.A., Minneapolis, Minnesota (for respondents Stursberg & Fine, Inc., Henry Stursberg, Jeremy Stursberg, and Joel Zimmerman)
Christopher J. Heinze, Anthony D. Johnson, Kirsten J. Libby, Libby Law Office, P.A., St. Paul, Minnesota (for appellants)
Nicole M. Moen, Pari I. McGarraugh, Kyle W. Ubl, Fredrikson & Byron, P.A., Minneapolis, Minnesota (for respondents Stursberg & Fine, Inc., Henry Stursberg, Jeremy Stursberg, and Joel Zimmerman)
Considered and decided by Ross, Presiding Judge; Johnson, Judge; and Bratvold, Judge.
ROSS, Judge
A Pennsylvania corporation contracted with the owner of a Minnesota mobile-home park to provide services "as a mortgage broker and financial consultant," introducing the owner to a prospective buyer or, in the alternative, brokering the refinancing of the park. After the corporation arranged for the refinancing, the park owner refused to pay for the corporation's services and sued, claiming that the broker agreement was void as a matter of law because the corporation lacked a broker's license required by statute. The district court held that the contract was not void as a matter of law. We hold that the legislature has expressed or implied its intent that, when a person lacks the statutorily required license to broker a real-estate sale or refinancing, a contract entitling that person to compensation for those services is void as to that person as a matter of law. We therefore reverse and remand for additional proceedings.
FACTS
Woischke Enterprises LLC, owner of a mobile-home park in Pine County, entered into an agreement with Pennsylvania corporation Stursberg & Fine under which Stursberg & Fine would act "as a mortgage broker and financial consultant" and "introduce [Woischke to] an interested party who is a client of [Stursberg & Fine] ... to purchase Woischke's Mobile Home and RV Park." Under the contract, if Woischke failed to sell the park, Woischke "has agreed to move forward with the refinance" of the park and "agree[d] to grant Stursberg & Fine an exclusive right to refinance" the park. A sale did not occur, and Woischke refinanced the park through Stursberg & Fine. Woischke's owners (William and Shirley Woischke) discovered that no Stursberg & Fine employee was a real-estate broker, mortgage broker, or loan broker licensed in Minnesota. After they informed Stursberg & Fine of this discovery, Stursberg & Fine contacted the Minnesota Department of Commerce, which advised Stursberg & Fine that a limited mortgage-broker's license was indeed required for the work it had performed. Stursberg & Fine applied for a limited broker's license. The department granted the license about a week later.
Woischke refused to pay the contracted fee. It filed a seven-count complaint in district court against Stursberg & Fine and some of its current and former employees. The suit centered on Woischke's claim that the agreement was void because Stursberg & Fine was not licensed to provide the services rendered under the agreement. Stursberg & Fine did not answer the complaint. Instead it commenced arbitration proceedings in Pennsylvania under an arbitration clause in the agreement.
Woischke moved the district court for a partial default judgment for Stursberg & Fine's failure to answer. Stursberg & Fine moved the district court to dismiss the case and compel arbitration. The district court considered the "sole question" to be whether the fee agreement "entered into by [the parties was] void as a result of [Stursberg & Fine's] lack of a limited mortgage broker's license." The district court held the agreement valid, compelled the parties to arbitrate, and dismissed the complaint. Woischke appeals.
ISSUE
Is the agreement between Woischke and Stursberg & Fine void as a matter of law?
ANALYSIS
Woischke Enterprises argues that the fee agreement is void as a matter of law because neither Stursberg & Fine nor its employees were licensed real-estate brokers in Minnesota under Minnesota Statutes chapter 82 (2016). Stursberg & Fine counters that this court should not reach the contract-validity issue on the merits because of the contract's arbitration clause. It maintains that the arbitration clause requires us to reverse and remand the case to the district court with instructions to compel arbitration and stay the underlying action pending the arbitration result. But Stursberg & Fine presented this procedural argument to a special-term panel of this court, which considered and rejected the argument. We will not revisit that issue here. Cf. Minn. R. Civ. App. P. 140.01 ("No petition for rehearing shall be allowed in the [c]ourt of [a]ppeals."). We will address the merits of whether the contract is void as a matter of law, an issue we decide de novo. Isles Wellness, Inc. v. Progressive N. Ins. Co. , 725 N.W.2d 90, 92 (Minn. 2006). For the following reasons, our de novo review generally substantiates Woischke's argument that the contract is void.
The parties approach the issue relying on different legal theories. So we begin by clarifying the principle we must apply to a claim that a contract to pay for services is void when the service provider lacked a statutorily required license to perform the services. Put succinctly, when a party contracts to perform services that are prohibited and penalized by statute, whether the contracted duty to pay for those services is void depends entirely on whether the legislature intended that a contract imposing the duty to pay should be void, and that intent is inferred if the objective of the law is to protect the public rather than merely to raise revenue.
This essential principle on which a court may hold a contractual-payment duty void was adopted in Minnesota almost 160 years ago, borrowing particularly from established law in New York. In Solomon v. Dreschler , the supreme court considered an unlicensed liquor seller's claim that a liquor buyer owed him damages for breaching a purchase agreement. 4 Minn. 278, 279 (1860). The Solomon court considered whether the state's 1855 statutory liquor-license requirement was intended merely to raise revenue and held instead that "the object of the act is in the main to protect the public against the evils which are generally supposed to result from the unrestrained traffic in spirituous liquors." Id . at 281. The court rejected the unlicensed liquor seller's damages claim as a matter of law, saying, "We think that a violation of the Statute is an act contra bonos mores , and that a court of justice should not lend its aid to help a party to enforce a contract thus tainted." Id . ; see also Griffith v. Wells , 3 Denio 226, 227 (N.Y. 1846) ("But if the [licensing] statute looks beyond the question of revenue, and has in view the protection of the public health or morals, or the prevention of f[ra]uds by the seller, then, though there be nothing but a penalty, a contract which infringes the statute cannot be supported."). The Solomon court established the legal standard on which Minnesota courts decide whether a contractual-payment duty is void as to an unlicensed vendor.
Solomon was partly limited on other grounds in Langworthy v. Garding , 74 Minn. 325, 330, 77 N.W. 207, 208–09 (1898), but its standard for whether to void a contract has not been materially altered to this day. For example, in the 1888 case of De Mers v. Daniels , the supreme court echoed the general rule that "when the object of ... an enactment [that includes a prohibition and a penalty] is deemed to have been the protection of persons dealing with those in respect to whose acts the penalty is declared, or the accomplishment of purposes entertained upon grounds of public policy, not pertaining to mere administrative measures, such as the raising of a revenue, the act thus impliedly prohibited will, in general, be treated as unlawful and void as to the party who is subjected to the penalty." 39 Minn. 158, 159, 39 N.W. 98, 99 (1888).
And 80 years after Solomon , in another case inferring legislative intent about the validity of a contract when the service provider lacked a statutorily required license, the supreme court repeated that "it is the prerogative of the legislature to declare what acts constitute a violation of public policy and the consequences of such violation." In re Peterson's Estate , 230 Minn. 478, 483, 42 N.W.2d 59, 63 (1950). Unlike in this case and Solomon , however, the Peterson's Estate court was not directly considering simply whether a person without a required license to perform services or provide goods could lawfully contract to do so for a fee, which is the issue we face. This essential distinction seems to be overlooked by the dissent today. The Peterson's Estate court was instead considering the extended question of whether a will drafted by a person without a law license was itself invalid by operation of the law-license requirement. Id. at 480, 42 N.W.2d at 61. Most helpful here, the court expressly announced how to answer the simpler question, which mirrors the question we face: "Undoubtedly , this amendment [making it unlawful for an unlicensed practitioner ... to hold himself out as competent to ... perform any legal services for a consideration] by its application generally to the practice of law made it unlawful for a layman to prepare another's will for a fee ." Id. at 484, 42 N.W.2d at 63 (emphasis added). So while the Peterson's Estate court held that the will itself could stand despite the preparer's lack of a law license (a holding that would be relevant here only if a party were claiming that the mortgage itself was void), following Solomon precisely, the supreme court also indicated in dicta that an unlicensed practitioner could not enforce a contract for compensation for the unlicensed services performed. This analysis directly informs our decision in this case, where Stursberg & Fine seeks to enforce a contract for compensation for services its employees performed without the statutorily required license.
Ten years after Peterson's Estate , the supreme court repeated the standard in Dick Weatherston's Associated Mechanical Services, Inc. v. Minnesota Mutual Life Insurance Company , 257 Minn. 184, 191, 100 N.W.2d 819, 824 (1960). The Weatherston's court dealt with the statutory license requirement for architects and engineers. Id . at 189–90, 100 N.W.2d at 823. It again declared "the general rule that a contract executed in violation of a statute imposing a prohibition against the carrying on of a business ... without first having secured a license is void" and that the "rule is ... to be applied ... [by] examining the statute as a whole to determine whether or not the legislature intended such contract to be illegal." Id . at 191, 100 N.W.2d at 824. Because it was dealing with a statute that did not expressly declare whether the legislature intended to invalidate contracts involving unlicensed service providers, the supreme court looked to prior cases and observed favorably that those cases had inferred on public-policy grounds that the legislature intended such contracts to be invalid. Id . at 190 n.3, n.4, 100 N.W.2d at 823.
We now apply this framework to this case. We ask first whether the real-estate-licensing statute prohibits specified conduct and applies to the parties' contract. By Stursberg & Fine's admission, the answer is yes. Among other things, a real-estate broker is someone who charges a commission or fee to attempt to negotiate a real-estate sale or a loan to be secured by a mortgage. Minn. Stat. § 82.55, subd. 19 (2016). By the terms of the contract, these are the primary services Stursberg & Fine agreed to perform for a fee. Performing these broker services in Minnesota requires a license. Minn. Stat. § 82.81, subd. 1 (2016). And performing the services without a broker's license is a crime. Minn. Stat. § 82.83 (2016) ("Any person who violates any provision of this chapter, or any rule or order of the commissioner, shall be guilty of a gross misdemeanor."). The real-estate-licensing statute prohibits persons from performing specified, unlicensed real-estate services for a fee and applies to Stursberg & Fine's contract.
We ask second whether the purpose of the licensing statute is to advance public policy, because if it is, we can infer the legislative intent to void the contract as to the party who violates the statute. Weatherston's , 257 Minn. 184 at 191, 100 N.W.2d at 824 ; In re Peterson's Estate , 230 Minn. 478 at 483, 42 N.W.2d at 63 ; De Mers , 39 Minn. at 159, 39 N.W. at 99 ; Solomon , 4 Minn. at 280–81. The supreme court has already explained that the licensing requirement of chapter 82 rests on public-policy concerns and does not merely fulfill an administrative objective. Similar to the liquor-license requirements enacted by the legislature "to protect the public against the evils which are generally supposed to result from the unrestrained" liquor sales, Solomon , 4 Minn. at 281, the supreme court has explained that chapter 82's provisions "were enacted in the public interest to prevent abuses by unqualified or unreliable real estate brokers and salesmen." Albers v. Fitschen , 274 Minn. 375, 376, 143 N.W.2d 841, 843 (1966).
Stursberg & Fine argues that, although the statutes required it to have a license before brokering the refinancing of the Woischke mobile-home park, its contract is not void because "[c]hapter 82 does not provide that a contract for brokerage services is void if the person providing the services was unlicensed." It insists that "[t]here is no language in the text of [c]hapter 82 from which that intent may be derived." The argument is unavailing. The chapter has all the elements leading us to render the contract unenforceable as to the unlicensed party who seeks to collect under the contract: a prohibition against specified unlicensed conduct and a purpose to protect the public from harm. And unlike in the cases we have discussed, in this case the legislature has gone further. It did not merely prohibit and penalize the challenged conduct, leaving courts to discern legislative intent only inferentially. In addition to prohibiting and penalizing the unlicensed brokering of real estate sales and mortgage loans, it also has expressly declared that "[n]o person shall bring or maintain any action in the courts of this state for the collection of compensation for the performance of any of the acts for which a license is required under this chapter without alleging and proving that the person was a duly licensed real estate broker, salesperson, or closing agent at the time the alleged cause of action arose." Minn. Stat. § 82.85, subd. 1 (2016) (emphasis added). The primary obligation that the agreement places on Woischke is to compensate Stursberg & Fine for its service in negotiating a real-estate sale or a mortgaged loan. The legislative intent about contractual enforceability in this context is explicit and unmistakable: persons who engage in this service without a license cannot enforce their contractual right to compensation in court. Given the statutory language, we have no difficulty concluding that the legislature has expressly declared its intent that contracts under which unlicensed persons broker real-estate sales or mortgage loans for compensation be held invalid as to the violating party.
Stursberg & Fine stresses that section 82.85 expressly prohibits an unlicensed party from "bring[ing] or maintain[ing] any action in the courts of this state" to collect on compensation due under an agreement that requires a license, and it emphasizes that it did not "bring or maintain any action in the courts of this state" but instead sought to collect on the contract through arbitration in Pennsylvania. But contrary to the argument and the dissent's theory, this appeal does not concern a future case; Stursberg & Fine has already sought relief in a Minnesota court, seeking to compel arbitration to collect compensation for its unlicensed services. The argument also overlooks the fact that the real estate and Woischke are situated in Minnesota and that "bring[ing] or maintain[ing] any action in the courts of this state" will be necessary for "the collection of compensation" under any arbitration award. Minn. Stat. § 572B.27 (2016) (declaring that all post-arbitration motions "must be filed in the court hearing the initial motion unless the court otherwise directs"). As Stursberg & Fine has acknowledged in briefing to this court, the district court in Minnesota "will be the venue for any post-arbitration motions." It has recognized that, "[b]ecause the District Court in Minnesota heard the initial motion regarding arbitration ... both Minnesota and Pennsylvania law provide that the District Court in Minnesota is the proper forum in which to seek confirmation of the arbitration award." And it observes accurately that "all future motions regarding the arbitration must also be brought in the District Court in Minnesota." More fatally, the argument overlooks the fact that our role here is only to discern whether the legislature intended to treat any contracts to collect compensation as valid or invalid as to the service provider when the service provider lacked a broker's license. Stursberg & Fine does not point to any language in the statute that counters the clear implication from the statute's conduct prohibition, the statute's criminal penalty, the statute's judicial-enforcement prohibition, and the supreme court's expression of the statute's purpose to protect the public.
Stursberg & Fine highlights the Weatherston's opinion and argues that, just as the Weatherston's court declined to declare a services contract void on public-policy grounds, so should we. It bases the argument on that court's expression, "Justice and sound public policy do not always require the literal and arbitrary enforcement of a licensing statute." Weatherston's , 257 Minn. at 191, 100 N.W.2d at 824. This reliance on Weatherston's misses two key distinctions between Weatherston's and this case. The first is that the Weatherston's court faced a threshold question of whether the licensing statute was even required for the work actually performed. And the second is that the Weatherston's court dealt with a licensing statute that said nothing about the right to recover fees for services performed illegally without a license.Regarding the first distinction, the Weatherston's court was addressing a breach-of-contract claim that involved services that may not have required a license at all. 257 Minn. at 190–92, 100 N.W.2d at 823–25. That dispute arose from an agreement that was allegedly void as a matter of law because it called for services that supposedly required an architect or engineering license. Id. at 189–91, 100 N.W.2d at 823–24. The Weatherston's court first considered whether the services really fell under the license requirement. Id . Then it considered by inference whether the legislature intended to void a contract that covered engineering work where, in the unique situation of that case, the complaining company had sought out the contractor to serve as an air-conditioner installer and not an engineer, the contractor had repeatedly stated that he was not an engineer, and the contractor submitted his plans to the complaining company's contracted and licensed engineer for its approval. Id . at 191–93, 100 N.W.2d at 824–25.
In that setting, the Weatherston's court held that the contract for services was not void as a matter of law. It reasoned first that the extraneous services were not the kind for which a contract without a license was at all "inimical to life, health, property, or public welfare." Id . at 191, 100 N.W.2d at 824. It also reasoned that any work resembling engineering services was merely "incidental to and part of a contract for an entire job" and was outside the public-policy purpose of the licensing law "in protecting the public from misrepresentation and deceit." Id . at 192, 100 N.W.2d at 825. This setting frames the court's maxim that "[j]ustice and sound public policy do not always require the literal and arbitrary enforcement of a licensing statute." Id. at 191, 100 N.W.2d at 824. And that setting differs substantially from the setting of this case. In this case, it is not disputed that Stursberg & Fine violated the statute by engaging specifically in the precise kind of financial brokering for which chapter 82 requires a license. The licensing statute here advances public policy, it applies to the services performed by Stursberg & Fine, and the legislature intended to bar recovery of damages for the breach of contracts made in violation of the statute.
Regarding the second distinction, the Weatherston's court dealt with a licensing statute that was silent about the right to recover compensation in court for services performed without a license. Not so here. We have already shared our view that the legislature has indicated its intent expressly, leaving us no need to mine the text for legislative inferences. We add that, even if we needed to find inferences indicating whether the licensing requirements of chapter 82 rest on public-policy concerns and not merely administrative duties, as we have already said, the supreme court has already found those inferences and declared that the provisions of chapter 82 "were enacted in the public interest to prevent abuses by unqualified or unreliable real estate brokers and salesmen." Albers , 274 Minn. at 376, 143 N.W.2d at 843. Again, the statutory language makes it impossible for us to miss the legislature's intent not "only to punish the offending party," De Mers , 39 Minn. at 159, 39 N.W. at 99, in the form of a gross-misdemeanor penalty, but also "to make the transaction void," id ., by closing the courtroom to claims for recovery of the contracted fees. We conclude that, even if the legislature had not expressly declared that unlicensed real-estate brokers may not collect compensation in court for their contracted broker services, the legislature's public-policy reasons for requiring licensing imply the same result: the contract here is apparently void to the extent it entitles an unlicensed person to compensation for real-estate-broker services.
Our conclusion is buttressed by the Weatherston's court's observation about the nature of that case and the jury instructions issued. The supreme court remarked, "[I]t is necessary to keep in mind that this is not a suit to collect for an architectural or engineering fee" but instead "a suit to recover damages as a result of the defendant's alleged breach of contract." Weatherston's , 257 Minn. at 143, 100 N.W.2d at 825. And the supreme court emphasized that the trial court had "correctly" informed "the jury that under the laws of Minnesota ‘an unregistered person is not permitted to practice professional engineering’ and that ‘plaintiff would not be permitted to recover for the engineering services ... standing alone because plaintiff is not a registered engineer in this state.’ " Id . (emphasis added). It is clear that, if the contract had been for engineering services, to the extent the contractor had sought to collect compensation for engineering work the contract was unenforceable.
We are not compelled to a different conclusion by Stursberg & Fine's reliance on Isles Wellness . In Isles Wellness the supreme court decided only "whether operating a chiropractic clinic in violation of the corporate practice of medicine doctrine voids all contracts between the plaintiffs and the insurers." 725 N.W.2d at 92. That is, the question in Isles Wellness was whether the disputed contracts were void as a matter of public policy under a common-law doctrine , not under the expressions of the legislature. That case, which did not involve or discuss any statutory restriction on business arrangements, falls far afield of the Solomon line of cases we have discussed. The Isles Wellness court concluded "that categorically voiding the contracts would not serve the public policy reasons underlying the corporate practice of medicine doctrine." Id . at 95. The holding and rationale have no bearing here. Here we apply the general rule that contracts made in violation of a licensing statute are void as a matter of law when the legislature has expressly or impliedly directed this outcome. And while the dissent reads language in the 2006 Isles Wellness opinion as if it "applies to any illegal contract, regardless whether the illegality is due to a statute, a municipal ordinance, or the common law," the supreme court did not say so. We are confident it would have said so plainly and unmistakably if it really intended to unsettle the black-letter law that it has been applying to statutory-license cases since two years after Minnesota was admitted into the Union.
The dissent suggests that by deeming the contract to collect compensation for unlicensed real-estate broker's services unenforceable, we are failing to "give proper respect to the legislature's intent." We see legislative intent differently. We are convinced that we cannot ignore either the legislature's general disapproval of unlicensed real-estate broker's services or the specific restrictions through which the legislature expressed this disapproval. That is, because the legislature has expressly declared it a crime for any person to provide unlicensed real-estate broker's services for compensation and has also expressly forbidden any party to bring or maintain "any" action in any Minnesota court to collect compensation for providing "any" unlicensed real-estate broker's services, we are giving proper and specific respect to the legislature's intent by applying 160-year-old precedent and holding the contract for the collection of fees unenforceable as to the offending party.
Stursberg & Fine argues finally that the agreement also covered "financial consultant services," which, according to Stursberg & Fine, did not require a license under the mortgage-broker-license statute. The argument implicitly invites us to sever the terms of the agreement and hold void only those provisions that cover services for which Stursberg & Fine cannot lawfully contract under the statute. This approach is consistent with the caselaw. While Weatherston's guides courts to "examin[e] the particular facts in each case so as to determine whether or not there is a violation of the [licensing] statute" in situations where the statute clearly implicates public policy but where contracted duties only incidentally implicate the licensing statute, 257 Minn. at 192 n.8, 100 N.W.2d at 824 n. 8, here we lack the information to complete that sort of examination. Stursberg & Fine does not define or describe the asserted distinction between "financial consultant services" that allegedly fall outside the statute and the "commercial mortgage broker services" that are clearly covered by it. Stursberg & Fine refers to an affidavit in which it identifies the alleged "financial consultant services" it performed. And the record informs us that Stursberg & Fine did present this argument to the district court but that the court decided the case on grounds that left the issue undecided as moot. We generally will not decide issues raised in the district court but not addressed there. See Thiele v. Stich , 425 N.W.2d 580, 582 (Minn. 1988). On remand, the district court should determine which, if any, of the services provided and billed by Stursberg & Fine fall outside the identified statutory license requirements of chapter 82. We offer no opinion as to whether the district court should rely only on the current record for its decision. If it determines that the alleged financial consultant services are covered by the statutory license requirements, the district court should conclude that the contract is void in its entirety.
DECISION
A contract involving illegally conducted business is itself void and unenforceable if the legislature has expressly or implicitly declared its intent that such a contract be illegal. The legislature has both expressly and implicitly indicated that it intends that, when a person contracts to receive a commission or fee for negotiating a real-estate sale or a loan secured by a mortgage under Minnesota Statutes sections 82.55, subdivision 19, and the person lacks a broker's license required by section 82.81, subdivision 1, that person has entered an illegal contract. Stursberg & Fine contracted to provide these prohibited services here. We remand for the district court to determine whether Stursberg & Fine also contracted to perform services that did not require a license under the statute.
Reversed and remanded.
Dissenting, Johnson, Judge
JOHNSON, Judge (dissenting)
I respectfully dissent from the opinion of the court. I would conclude that the agreement between the parties is not void as contrary to public policy.
A.
"[T]he general rule is that a contract executed in violation of a statute which imposes a prohibition and a penalty for the doing of an act—such as the pursuit of an occupation, business, or profession without being possessed of a license as required by law for the protection of the public—is void." In re Peterson's Estate , 230 Minn. 478, 482, 42 N.W.2d 59, 62 (1950). But a court should not apply the general rule "without first examining the statute as a whole to find out whether or not the legislature so intended." Id. at 482, 42 N.W.2d at 62.The majority reasons that the legislature intended that a contract made in violation of section 82.81, subdivision 1, must be declared void as contrary to public policy. See supra at 588–92. I would reason that the legislature's expressed intent does not compel or allow a court to void such a contract. To be sure, section 82.85, subdivision 1, reflects the legislature's disapproval of real-estate broker services that are performed without the proper license. But the statute is nuanced. The statute does not express a legislative intent that contracts made in violation of the statute should have no effect whatsoever. Rather, the statute expresses the legislature's intent that a more particular and limited consequence should flow from such a contract: "No person shall bring or maintain any action in the courts of this state for the collection of compensation for the performance of any of the acts for which a license is required under this chapter without alleging and proving that the person was a duly licensed real estate broker, salesperson, or closing agent at the time the alleged cause of action arose." Minn. Stat. § 82.85, subd. 1.
To give proper respect to the legislature's intent, this court should observe not just the legislature's general disapproval of a contract for unlicensed services but also the legislature's specific statement of the effect of such a contract. In Peterson's Estate , the supreme court stated that "it is the prerogative of the legislature to declare what acts constitute a violation of public policy and the consequences of such violation ." 230 Minn. at 483, 42 N.W.2d at 63 (emphasis added). The supreme court also stated, "An inference of invalidity does not necessarily follow from the fact that a statute prescribes a penalty." Id. at 483, 42 N.W.2d at 63. To impose a remedy that goes beyond what the legislature has prescribed does not give proper respect to legislative intent.
This principle is well illustrated by De Mers v. Daniels , 39 Minn. 158, 39 N.W. 98 (1888). A statute required a person to sign and record a plat before selling real property. Id. at 158, 39 N.W. at 98 (citing Minn. Gen. Stat. ch. 29 (1878)). The statute required a person who sold property without doing so to pay a $25 fine " ‘for each and every lot or part of lot sold.’ " Id. at 159, 39 N.W. at 99 (quoting Minn. Gen. Stat. ch. 29, § 9). De Mers failed to comply with the statute before selling real property to Daniels, and Daniels later sought to avoid his contractual obligation to make payments on a promissory note that he had given to De Mers by arguing that the contract was void. Id. at 158-59, 39 N.W. at 98-99. The supreme court rejected Daniels's argument, stating, "The imposing of a penalty does not necessarily give rise to an implication of an intention that, where an act is done which subjects a party to the penalty, the act itself shall be void, and of no legal effect." Id. at 159, 39 N.W. at 99. The supreme court stated more specifically that "if it seems more probable , from the subject and the terms of the enactment, and from the consequences which were to be anticipated as likely to result from giving such an effect to the penal law, that it was not the intention of the legislature to make the transaction void, but only to punish the offending party in the manner specified, the law should be so construed ." Id. at 159, 39 N.W. at 99 (emphasis added). To be faithful to De Mers , this court should not declare the contract in this case void but, rather, should allow consequences to be imposed "in the manner specified" by the legislature. See id. at 159, 39 N.W. at 99.
The majority also reasons that the contract in this case is void because the Woischkes and their property are located in Minnesota such that a state-court action by Stursberg & Fine in Minnesota is inevitable. See supra at 591. I am not so sure of future events. Stursberg & Fine might succeed in recovering a fee without bringing and maintaining an action in the Minnesota state courts. The $60,000 fee presently is held in escrow, but the record in this appeal does not reflect the contractual arrangements that govern the escrow agent's handling of the funds. If the case were submitted to arbitration, an arbitrator might make findings concerning which of Stursberg & Fine's services were real-estate broker services and which were other types of services. Such findings might be pertinent because the statute limits "the collection of compensation for the performance of any of the acts for which a license is required under this chapter." See Minn. Stat. § 82.85, subd. 1. If a state-court action against the Woischkes or the escrow agent were necessary, Stursberg & Fine might succeed in arguing that a cause of action arose after the license was issued. See id . In any event, we should focus on the case before us, not on a future case in which we cannot fully anticipate the parties' evidence and arguments. In the case before us, the Woischkes do not seek to invoke the statute itself; rather, they invoke a common-law doctrine that depends on legislative intent. See Peterson's Estate , 230 Minn. at 483, 42 N.W.2d at 63 ; De Mers , 39 Minn. at 159, 39 N.W. at 99.
Thus, legislative intent does not require that a contract in violation of section 82.81, subdivision 1, be declared void as contrary to public policy. In the plain language of section 82.85, subdivision 1, the legislature expressed its intent that, in an action in a Minnesota state court, a person seeking to recover a fee for real-estate broker services must allege and prove the existence of the proper license. The consequence specified by the legislature does not apply to Stursberg & Fine's pending demand for arbitration.
B.
The majority reasons that legislative intent is the only relevant consideration and that the equities of a particular transaction are irrelevant. See supra at 588–89, 592–93. I question whether a proper analysis of the Woischkes' argument is so limited. In Isles Wellness, Inc. v. Progressive Northern Ins. Co. , 725 N.W.2d 90 (Minn. 2006), the illegality was based on the common law (not on a statute), but the supreme court cited cases involving violations of statutes and municipal ordinances, thereby indicating that the same body of caselaw applies to any case involving an illegal contract. See id. at 93-95 (citing Lew Bonn Co. v. Herman , 271 Minn. 105, 135 N.W.2d 222 (1965) ; Dick Weatherston's Assoc. Mech. Servs., Inc. v. Minnesota Mut. Life Ins. Co. , 257 Minn. 184, 100 N.W.2d 819 (1960) ; In re Peterson's Estate , 230 Minn. 478, 42 N.W.2d 59 (1950) ). The Isles Wellness opinion appears to be a modern restatement of the supreme court's cases concerning all types of illegal contracts. In my view, the better interpretation of the supreme court's caselaw is that Isles Wellness applies to any illegal contract, regardless whether the illegality is due to a statute, a municipal ordinance, or the common law.
In Isles Wellness , the supreme court performed a case-specific analysis. See 725 N.W.2d at 91-92, 95. The supreme court stated, "we examine each contract to determine whether the illegality has so tainted the transaction that enforcing the contract would be contrary to public policy." See id. at 93. After reviewing the applicable caselaw, the supreme court summarized the rule of law as follows:
We will not void a contract unless it is established that the ... actions [of the party that violated the law] show a knowing and intentional failure to abide by state and local law. Such a rule is consistent
with public policy jurisprudence that requires the court to determine whether the illegality has so tainted the transaction as to make it void under public policy.
Id. at 95.
The facts and circumstances of this case do not satisfy these criteria. Henry Stursberg stated in an affidavit that the Woischkes "sought out the services of" Stursberg & Fine on multiple occasions. The parties entered into similar written agreements for similar services in 2005 and 2015. The parties apparently found mutual benefit in their business relationship because they entered into a third written agreement in 2016. The third agreement does not say that Stursberg & Fine is a licensed mortgage broker, and there is no evidence in the record that Stursberg & Fine ever made such a representation. Henry Stursberg stated in his affidavit that, when he entered into the 2016 agreement, he "did not know that Minnesota law may require Stursberg & Fine to hold a limited broker license to conduct certain types of commercial mortgage broker services." He further stated, "It was not my intent to violate Minnesota law."
After entering into the contract, Stursberg & Fine assisted the Woischkes by performing certain consulting services and by brokering a refinancing agreement. There is no allegation or evidence that Stursberg & Fine's services were deficient in any way. Henry Stursberg stated in his affidavit that he had "multiple conversations and email exchanges with [the Woischkes' attorney] in 2016 before the transaction closed" but that, throughout that period, the Woischkes' attorney "did not ask me if Stursberg & Fine had a mortgage broker license." Henry Stursberg stated that the Woischkes' attorney "waited to raise that issue until after the 2016 transaction closed." Stursberg & Fine then voluntarily contacted the department of commerce to disclose the services it had performed for the Woischkes and to request a license, which promptly was granted. As far as the record reveals, the department of commerce has not taken any enforcement action despite its finding that Stursberg & Fine was unlicensed when it engaged in services for which a license was required. Furthermore, there is no evidence in the record that Stursberg & Fine ever has performed or attempted to perform similar services for anyone else in Minnesota.
These facts and circumstances show that the illegality of the parties' contract did not "so taint[ ] the transaction that enforcing the contract would be contrary to public policy." See id. at 93. More importantly, there is no evidence that Stursberg & Fine had "a knowing and intentional failure to abide by state and local law." See id. at 95. Rather, it appears that the Woischkes and their attorney willingly accepted the services contemplated by the contract and then opportunistically sought to take advantage of Stursberg & Fine's unlicensed status to avoid paying the contractually required fee. As in Isles Wellness , "the interests of justice do not favor declaring the contract[ ] void." See id.
For either the reasons stated in part A, or the reasons stated in both part A and part B, I would conclude that the agreement between the parties is not void as contrary to public policy and, therefore, would affirm the decision of the district court.