Opinion
No. 81-2120.
Submitted January 11, 1982.
Decided January 18, 1982. Rehearing and Rehearing En Banc Denied March 9, 1982.
Richard Hipp, Fayetteville, Ark., for appellee.
Appeal from the United States District Court for the Western District of Arkansas.
Before HEANEY, HENLEY and McMILLIAN, Circuit Judges.
Plaintiff Ardie McBrearty seeks reversal of the district court's order dismissing his breach of contract action. The district court concluded that the portion of the agreement which McBrearty sought to have enforced was void as against public policy and dismissed the suit with prejudice. We affirm.
The Honorable Paul X Williams, Chief Judge, United States District Court for the Western District of Arkansas.
McBrearty alleged that in 1977 he became a member of the United States Taxpayers Union (USTU). In the "Declaration of Client Membership Agreement," USTU guaranteed, inter alia, "that . . . in the event a client member should be incarcerated for a time, the United States Taxpayers Union shall meet all necessary personal and family obligations of said individual as determined by the [USTU Board]." Additional language indicated that "all costs incurred in the defense of a client member" would be paid by the Union. In 1979, following his conviction for violations of the federal tax laws, McBrearty was incarcerated for a period of four months. After his "necessary personal and family" expenses during his incarceration were not paid by USTU, McBrearty initiated this action, naming as defendants both USTU and several individual members of its Board. The defendants moved to dismiss the suit on various grounds; following a hearing, the district court, sua sponte, found the purported contract to be "void as against public policy." The court reasoned that USTU's promise to pay defense and other expenses during a member's incarceration for tax violations amounted to an agreement to insure against the results of a criminal act. Such a bargain, the court concluded, contravened public policy and was therefore unenforceable.
Our review of the record convinces us that the district court was correct. As a general rule, an agreement which contravenes some recognizable public policy is void. Cf. Sachs v. Commissioner, 277 F.2d 879, 883 (8th Cir.), cert. denied, 364 U.S. 833, 81 S.Ct. 63, 5 L.Ed.2d 59 (1960) (agreement to pay penalty which might be imposed upon person found guilty of violating the law would be tainted with illegality and unenforceable) (dictum). See generally J. Calamari J. Perillo, The Law of Contracts ch. 22 (2d ed. 1977); Restatement (Second) of Contracts § 320 et seq. (Tent. Draft No. 12, 1977). Like the district court, we conclude that the McBrearty-USTU contract encouraged violations of the federal tax laws through the "guarantees" to pay defense and family expenses during a member's imprisonment for tax violations. The overall tenet of USTU implies such an objective; while the membership agreement does not expressly urge members to violate the tax laws, it does provide in part that "all client members are encouraged to refuse payment of all unconstitutional taxes." In short, we agree with the district court's conclusion that the agreement's promise to pay defense and family expenses is unenforceable. The order of dismissal is therefore affirmed.
We also find no error in the district court's unwillingness to order the refund of the annual dues paid by McBrearty to USTU. As a general rule, courts will leave the parties to an illegal contract where it finds them. This result generally obtains even where performance by one party to the agreement has been entered. See generally J. Calamari J. Perillo, The Law of Contracts § 22-5 et seq. (2d ed. 1977).