## Facts

- Robert Bovard sold American Horse Enterprises, Inc. to James T. Ralph in 1978.
- As consideration for the purchase, Ralph and the corporation executed promissory notes payable to Bovard.
- Ralph defaulted on the notes, and Bovard sued to collect; claims against Ralph and the corporation were consolidated.
- After an earlier appeal concerning an improperly entered settlement judgment, the case returned to the trial court and Bovard filed a supplemental complaint seeking to enforce the notes.
- Evidence developed on remand showed the corporation’s principal business was manufacturing items used to smoke marijuana (e.g., bongs and roach clips).
- At the time of contracting, California did not specifically criminalize manufacturing such paraphernalia, though marijuana possession and use were illegal.
- The trial court concluded the sale contract was void as contrary to public policy and dismissed the supplemental complaint; Ralph sought costs.

## Issues

1. Whether the contract selling a business primarily manufacturing marijuana-related paraphernalia was void and unenforceable as contrary to public policy, rendering the promissory notes unenforceable.
2. Whether the law-of-the-case doctrine barred the trial court from deciding the public policy/illegality question on remand based on the earlier appeal.

## Decision

- The Court of Appeal affirmed dismissal of Bovard’s supplemental complaint.
- The court held the sale contract was void as contrary to public policy, so the promissory notes given for that sale were unenforceable.
- The court rejected Bovard’s law-of-the-case argument because the prior appeal did not decide the contract’s legality.
- The court affirmed the postjudgment costs order in Ralph’s favor.

## Legal Principles

- A contract may be unenforceable as against public policy even if the contracted-for activity is not expressly criminal, when enforcement would materially support conduct the law condemns.
- Under California Civil Code provisions requiring lawful consideration and voiding agreements with unlawful consideration or objects, courts may deny enforcement where the contract’s purpose or subject matter is closely linked to illegal conduct.
- Whether a contract violates public policy is a question of law determined from the circumstances of the case.
- Law of the case binds later proceedings only on issues actually decided in the prior appeal; procedural reversals do not decide unresolved merits questions.
- When enforcement would offend public policy, courts may leave the parties without a judicial remedy on the bargain.

## Conclusion

The court refused to enforce promissory notes arising from the sale of a business principally engaged in manufacturing marijuana-use paraphernalia, holding the sale contract void as contrary to public policy and concluding that no prior appellate ruling precluded the trial court from reaching that illegality determination.


Bovard v. Am. Horse Enters., Inc., 201 Cal. App. 3d 832 (Cal. Ct. App. 1988)