Dixon v. Murphy

385 S.E.2d 408, 259 Ga. 643

• Court: Supreme Court of Georgia
• Decided: November 22, 1989
• Docket: S89A0231, S89X0249
• Status: Published

Opinions

Weltner, Justice.

Dixon conveyed twelve acres of land to Chapman. Chapman obtained a loan on the property, and later conveyed the land to Murphy. Dixon and Murphy assumed Chapman’s loan and paid it.

It was at that point that Dixon and Murphy — who are mother and son — fell out. Dixon claims that the land was to be reconveyed to her when the loan was paid. Murphy, however, refused to convey, whereupon Dixon and Chapman filed an action to cancel and set aside the deed.¹ After hearing the evidence, the jury returned a verdict for Dixon and Chapman. The trial court granted to Murphy a judgment n.o.v., except for two acres on which a house was located. That parcel was awarded to Dixon. Dixon and Chapman appeal the judgment n.o.v., and Murphy cross-appeals the portion of the judgment that concerns the two acres.

1. While the property was still titled in Chapman, Dixon declared bankruptcy. Her petition disclosed no interest, of any kind, in the questioned property. Before Dixon was discharged of all of her scheduled debts by bankruptcy, Chapman conveyed the property to Murphy. Four months intervened between Chapman’s conveyance to Murphy and Dixon’s discharge in bankruptcy. At no time did Dixon amend her petition to disclose her claimed interest in the twelve acres.

2. Murphy’s defense includes his contention that his mother is barred by the doctrine of unclean hands from seeking equitable relief.² We agree.

The evidence is undisputed that Dixon has completed a fraud upon her creditors, by:

(a) swearing in the bankruptcy court that she owned no interest in the property;

(b) failing to amend her bankruptcy petition to disclose the interest that she now claims; and

(c) obtaining the discharge of all of her scheduled debts —notwithstanding that, according to her, she owned twelve acres of land during the pendency of the bankruptcy proceeding.³

3. (a) What is presented here is more than a case of silence and inaction evidencing intent to defraud; it is a case of success in defrauding. By extending to her the relief that equity reserves for those whose hands are clean, we can only serve to encourage others to make (or to say that they have made) hidden trusts, and then deny their existence in bankruptcy.

(b) The justice system cannot permit itself to become an implement of fraud. The judgment in Case No. S89A0231 is affirmed insofar as it vests title to any of the property in Murphy.

4. As to Murphy’s cross-appeal (Case No. S89X0249), we are aware of no authority that vests in a trial court the power to make equitable distribution in a case of unclean hands. Accordingly, that portion of the judgment awarding the smaller parcel of property to Dixon is reversed.

Judgment affirmed in Case No. S89A0231.

All the Justices concur, except Gregory and Bell, JJ., who dissent.

Judgment reversed in Case No. S89X0249.

All the Justices concur.

1 The relief sought is governed by OCGA § 53-12-26, relating to implied trusts. See Harrell v. Harrell, 249 Ga. 170 (290 SE2d 906) (1982), and note the comments of now Chief Justice Marshall:

Finally, hidden beneficial ownership can be pernicious, and often used to evade or avoid just obligations, creating uncertainty and prolonged litigation (such as this very case). Observers might justifiably view with suspicion the veracity of one who says, “My hand and seal solemnly attest it, but that is not at all the way it was!” Nonetheless, the Code sections we have cited appear to sanction hidden trusts, and we must be guided by the law as given by the General Assembly. [Id. at 172.]

2 “He who would have equity must do equity and must give effect to all equitable rights of the other party respecting the subject matter of the action.” OCGA § 23-1-10. See Fuller v. Fuller, 211 Ga. 201, 202 (84 SE2d 665) (1954) and Sewell v. Norris, 128 Ga. 824 (58 SE 637) (1907). See also Sparks v. Sparks, 256 Ga. 788, 789 (353 SE2d 508) (1987):

The unclean-hands doctrine does not bar a litigant from seeking equitable relief unless the misconduct relates directly to the transaction concerning which relief is sought. . . . [Cits.] John is thus barred from seeking a resulting trust in the residence, because his misconduct of fraudulently transferring the house to Nancy [for the purpose of shielding the home from a potential judgment creditor] relates directly to the transaction from which he seeks relief — the transfer of the house placing title in Nancy.

3 That asset, of course, should have been devoted to paying Dixon’s creditors.