Summary
suggesting that the grantee "may defend an action against him by showing defects in the proceedings"
Summary of this case from DFS Secured Healthcare Receivables Trust v. Caregivers Great Lakes, Inc.Opinion
13751.
NOVEMBER 14, 1941.
Equitable petition. Before Judge Dickerson. Coffee superior court. March 1, 1941.
Heath Heath, for plaintiffs.
Wilson, Bennett, Pedrick Bennett, R. A. Moore, Mingledorff Roberts, G. Stokes Walton, Harry D. Reed, and J. S. Averill, for defendants.
Upon application to the facts of the present case, as found by the auditor, of the principle that he who comes into equity must come with clean hands, the plaintiff was entitled to none of the relief prayed for.
No. 13751. NOVEMBER 14, 1941.
The controversy between the parties is of long standing. See Tanner v. Wilson, 180 Ga. 694 ( 180 S.E. 614); 183 Ga. 53 ( 187 S.E. 625); 184 Ga. 628 ( 192 S.E. 425); 58 Ga. App. 229 ( 198 S.E. 77).
Wilson sued Mrs. Tanner on three promissory notes secured by a mortgage to realty (the subject of the present controversy), which he held as transferee. A verdict was returned in his favor, and a judgment overruling Mrs. Tanner's motion for new trial was affirmed by this court. 180 Ga. 694. There was an outstanding senior security deed on the property, executed by Mrs. Tanner in favor of the Federal Land Bank, and in order that he might have the execution issued on his judgment levied on the property as provided for in the Code, § 39-201, Wilson paid the bank the amount due thereunder, with interest to the date of payment, and the bank marked the note and deed satisfied and canceled, and executed a quitclaim deed to Mrs. Tanner. Thereupon the execution was levied. An affidavit of illegality filed by Mrs. Tanner was unavailing. 183 Ga. 53. While her writ of error, excepting to the overruling of her motion for a new trial after verdict on the notes, was pending in this court. Mrs. Tanner executed to her son, G. J. Tanner, a warranty deed to the property; and on the same date that she filed her affidavit of illegality, he filed the present suit in equity, naming as defendants Wilson, the Federal Land Bank, and the sheriff. In his petition as finally amended the plaintiff contended, in substance, that the judgment on the notes was void, for the reason that it was entered while a supersedeas was in force; that the verdict created no lien against the property of Mrs. Tanner and constituted no notice to the plaintiff as lis pendens; that he was a bona fide purchaser on a valuable consideration, without notice of Wilson's claim, and his rights as grantee of Mrs. Tanner were superior thereto; that because of the fact that Wilson had no valid judgment, and for other reasons, the Federal Land Bank had no authority to terminate the loan and security deed and to execute a quitclaim deed to Mrs. Tanner; and that the voluntary payment of the loan by Wilson constituted a satisfaction thereof, as a result of which "neither . . Wilson nor the Federal Land Bank . . have any recourse, legal or equitable, against the petitioner or said lands, for the collection of the money thus voluntarily paid." The action as originally brought sought an injunction against the sale; but since, after the dissolution of a temporary restraining order, the sale was held, it was amended to set the sale aside, to recover possession of the property from Wilson who was the purchaser, and to declare the note and security deed to the Federal Land Bank satisfied. The judge sustained the demurrers of Wilson and the Federal Land Bank, and dismissed the action. This judgment was reversed. 184 Ga. 628. Thereupon Wilson had allowed an amendment to his answer seeking affirmative equitable relief. He alleged, in part, that notwithstanding the invalidity of the judgment on the notes they were secured by a mortgage to the property, and the mortgage, having been duly recorded, was superior to any rights of plaintiff by virtue of the subsequent deed executed to him by Mrs. Tanner; that Wilson was entitled to be subrogated to the rights of the Federal Land Bank under the security deed which he had paid in order that he could levy his execution. He prayed, that Mrs. Tanner be made a party; that his mortgage be foreclosed in equity; that a lien be established in his favor for the amount paid to satisfy the security deed in favor of the Federal Land Bank; and that the property be sold to satisfy his liens. In his original answer and amendment thereto Wilson alleged that the deed from Mrs. Tanner to the plaintiff was executed for the purpose of hindering, delaying, and defrauding creditors, all of which was known by the plaintiff. The plaintiff demurred to Wilson's amendment seeking equitable relief, on numerous grounds, all of which were overruled, and this constitutes one of the exceptions made in the present writ of error.
The case was submitted to an auditor. In his report the auditor submitted a brief of the evidence adduced before him, together with objections to evidence and motions made and rulings thereon. His findings of fact were: "1. Mrs. Lora Tanner was indebted to A. W. Wilson, as transferee, of certain notes she had executed to Mrs. Sheba Davis secured by mortgage on the lands in controversy. This indebtedness had not been discharged when, on September 17, 1934, Mrs. Lora Tanner executed to her son, G. J. Tanner, at a time when she was insolvent and her insolvency was known to her said son, a warranty deed to the lands described; and A. W. Wilson was, at that time, one of several creditors of Mrs. Lora Tanner. The badges of fraud surrounding the execution of said deed by Mrs. Tanner to her son are such that they sustain, by their consistency, a finding of fact that said warranty deed was made by the grantor and accepted by the grantee without any valuable consideration and for the purpose, jointly chargeable to grantor and grantee alike, of hindering, delaying, or defrauding Mrs. Tanner's creditors and specifically her creditor, A. W. Wilson. 2. The auditor further adopts as his findings of fact, every material allegation of fact in the amended cross-bill of A. W. Wilson in this case." His findings of law were: "1. The foregoing findings of fact invoke the maxim in equity: `He who seeks equitable relief must come with clean hands.' It follows, therefore, that plaintiff G. J. Tanner is not entitled to any consideration in a court of equity, and it is needless to examine any claim by him made in his equitable bill. 2. As a further conclusion of law, each and every prayer in the cross-bill of A. W. Wilson, as amended, seeks relief abundantly supported by the evidence and in harmony with the foregoing findings of fact, and the auditor gives effect thereto by this conclusion." The plaintiff filed a motion to recommit the case to the auditor, and exceptions of law and fact to the auditor's report. The court entered a decree: (1) denying the motion to recommit the case to the auditor; (2) overruling all exceptions of law and fact; (3) granting foreclosure of the mortgage; (4) establishing a lien in the defendant's favor for the amount paid out in settling the security deed held by the Federal Land Bank, and directing cancellation of entry of satisfaction on the security deed; (5) establishing lien in favor of the defendant for improvements made on the property in the amount of $997; (6) appointing a commissioner to sell the property, requiring that he report his actions and doings for confirmation or rejection; and (7) ordering cancellation of the deed from Mrs. Tanner to the plaintiff, as being in fraud of creditors "so far as the prior liens in favor of A. W. Wilson are concerned, growing out of the mortgage and the deed to secure debt previously held by the Federal Land Bank of Columbia." The plaintiffs excepted.
He who comes into equity must come with clean hands, "is . . a universal rule guiding and regulating the action of equity courts in their interposition on behalf of suitors for any and every purpose, and in their administration of any and every species of relief." Under this maxim, "whenever a party, who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience, or good faith, or other equitable principle, in his prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere on his behalf, to acknowledge his right, or to award him any remedy." 1 Pomeroy's Equity Jurisprudence, 737, 738, § 397; Coleman, Burden Warthen Co. v. Dannenberg Co., 103 Ga. 784 ( 30 S.E. 639, 41 L.R.A. 470, 68 Am. St. R. 143); Whittington v. Summerall, 20 Ga. 345; Peacock v. Terry, 9 Ga. 137; May v. Huntington, 66 Ga. 208; Deen v. Williams, 128 Ga. 265 ( 57 S.E. 427); Tune v. Beeland, 131 Ga. 528 ( 62 S.E. 976); Bagwell v. Johnson, 116 Ga. 464 ( 42 S.E. 732); Sewell v. Norris, 128 Ga. 824 ( 58 S.E. 637, 13 L.R.A. (N.S.) 1118); State Highway Board v. Baxley, 190 Ga. 292 ( 9 S.E.2d 266). In the present case the auditor found, and this finding is abundantly supported by the evidence adduced, that the plaintiff's deed from Mrs. Tanner, under which he claims, was made for the purpose of defrauding her creditors, and especially Wilson in respect to the notes on which he sued, and that this unlawful purpose was knowingly participated in by him. While, under these facts, the plaintiff's title would be good as against Mrs. Tanner, and even as against the creditor "to the extent that he may defend an action against him by showing defects in the proceedings" (27 C. J. 666; Leonard v. Bryant, 2 Cush. (Mass.) 32; 2 Moore on Fraudulent Conveyances, 672), under a proper application of the above principle he is in no position to attack the judgment obtained by Wilson against Mrs. Tanner, and invoke the equitable powers of the court to set aside the sale thereunder, basing his rights on this deed which was made to him for the unlawful purpose of defrauding the very person against whom he now seeks relief. Especially is this true in the absence of a tender by the plaintiff to Wilson of the amount of his debt. "He who would have equity must do equity, and give effect to all equitable rights in the other party respecting the subject-matter of the suit." Code, § 37-104.
The decision by this court on the former appearance of the case did not adjudicate that the plaintiff was a bona fide purchaser for a valuable consideration, as contended. It was simply ruled that, taking as true his own allegation that he was a bona fide purchaser for value, his petition stated a cause of action against general demurrer. Nor is it a sound argument that the defendant Wilson is estopped from contending that the plaintiff is not a bona fide purchaser for value, because he had made a motion to dismiss Mrs. Tanner's affidavit of illegality to the levy of the execution on the ground that it appeared from the allegations of her affidavit that she had executed a warranty deed conveying to the present plaintiff her interest in the property, and accordingly had no interest to protect, which motion was sustained by the lower court; and further, because he had alleged in his answer to the affidavit of illegality that she had executed a warranty deed to the present plaintiff conveying all of her interest in the property. The position taken by Wilson in that case that Mrs. Tanner, according to her own allegation, had conveyed her interest in the property by warranty deed to the present plaintiff, and accordingly could not maintain an affidavit of illegality to the levy of the execution on the property, is in no wise inconsistent with his present contention that the plaintiff was a fraudulent grantee and had no standing to seek affirmative equitable relief in reference thereto against him.
It follows from the above view of the case that the plaintiff is not entitled to any of the relief sought; and since the judgment and payment of the security deed thereunder are to be taken as valid as against the plaintiff in the present case, it is not necessary for the defendant Wilson to obtain the affirmative equitable relief prayed for in his cross-bill, and accordingly no such relief should have been granted. It is therefore directed that the court amend its decree by simply denying to the plaintiff the relief sought, eliminating the grant of any relief to Wilson on his cross-bill.
Judgment affirmed, with direction. All the Justices concur.