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explaining that "the unclean hands doctrine may be asserted by a defendant who claims that the plaintiff acted toward a third party with unclean hands with respect to the matter in litigation"
Summary of this case from Highway 1 Hosp. v. AndrisOpinion
No. 2D22-119
06-30-2023
Richard PERRY, Appellant/Cross-Appellee, v. Donna TURNER, Appellee/Cross-Appellant, and D&R Spaces, Inc., Appellee.
Jesse R. Butler of Dickinson & Gibbons, P.A., Sarasota, for Appellant/Cross-Appellee. John G. Beggan of Farr, Farr, Emerich, Hackett, Carr & Holmes, P.A., Punta Gorda, for Appellee/Cross-Appellant. No appearance for Appellee D&R Spaces, Inc.
Jesse R. Butler of Dickinson & Gibbons, P.A., Sarasota, for Appellant/Cross-Appellee.
John G. Beggan of Farr, Farr, Emerich, Hackett, Carr & Holmes, P.A., Punta Gorda, for Appellee/Cross-Appellant.
No appearance for Appellee D&R Spaces, Inc.
LABRIT, Judge.
"It is the general rule that when one purchases property and causes the title to be taken by another for the purpose of thwarting his creditors, a court of equity will not aid him in extricating himself from the situation he has created." Scott v. Sites , 41 So. 2d 444, 445 (Fla. 1949). While much has changed since our supreme court uttered these words, this general rule has not. And it directly applies here.
This case arose after Richard Perry and Donna Turner ended their relationship. They never married but dated for more than a decade. During the relationship, Mr. Perry transferred considerable sums of money to Ms. Turner's bank account, which she used to purchase multiple rental and other properties in her name or in the name of D&R Spaces, Inc.—an entity for which Ms. Turner was the sole shareholder. By design, Mr. Perry's name was not on the property records. Mr. Perry also made significant cash transfers to Ms. Turner during their relationship, which Ms. Turner held in a safe deposit box or somewhere other than an established financial institution.
The parties' relationship ended in 2019. Ms. Turner sued Mr. Perry to evict him from the home where the two had resided, which was titled in Ms. Turner's name. Mr. Perry filed a counterclaim against Ms. Turner, asserting equitable causes of action through which he sought to recoup the properties Ms. Turner purchased with his money, and the other funds and assets he transferred to Ms. Turner while the two were dating. In support, Mr. Perry testified that the parties had an oral agreement whereby the properties and other assets would be held in Ms. Turner's name or possession, but they "would still be [his]" because he was the sole source of the funding.
Mr. Perry asserted claims for constructive trust, equitable lien, accounting, and unjust enrichment.
Pertinent here, Ms. Turner asserted the defenses of unclean hands and in pari delicto to Mr. Perry's counterclaim. She alleged that these equitable doctrines barred Mr. Perry's equitable claims because he made the transfers to evade his creditors, including Mr. Perry's ex-wife. Ms. Turner presented evidence in support showing that Mr. Perry divorced his ex-wife in 2004 and since then had a court-ordered obligation to pay child support. And the amount of child support Mr. Perry owed his ex-wife under the order was at least partially dependent on the amount of Mr. Perry's income. So, in effect, the less income Mr. Perry reported, the less child support he owed. Mr. Perry also notably testified that it was an understatement to say his ex-wife had been "persistent" in pursuing child support since their divorce.
After hearing the evidence at a three-day nonjury trial, the trial court applied the doctrines of unclean hands and in pari delicto , and it entered final judgment for Ms. Turner on Mr. Perry's counterclaim. The trial court explained that it had "little doubt that the bulk of the money transferred by [Mr. Perry] to [Ms. Turner] over the years was part of a continuing scheme by [Mr. Perry] to hide his money from his ex-wife and/or other creditors." The trial court likewise found that Ms. Turner "was fully aware of [Mr. Perry's] plan and willfully and knowingly participated in his effort to conceal money and property." Accordingly, the trial court denied Mr. Perry any equitable relief.
Mr. Perry timely appealed the final judgment. He argues that the evidence presented below was legally insufficient for the trial court to apply the doctrines of unclean hands and in pari delicto . We disagree. "It is a fundamental principle of equity that no one shall be permitted to profit from his own fraud or wrongdoing, and that one who seeks the aid of equity must do so with clean hands." Leila Corp. of St. Pete v. Ossi , 138 So. 3d 470, 473 (Fla. 2d DCA 2014). Consistent with this principle, the unclean hands doctrine "may be asserted by a defendant who claims that the plaintiff acted toward a third party with unclean hands with respect to the matter in litigation." Id. This is precisely what Ms. Turner did in this case. She alleged that Mr. Perry acted toward his creditors—and particularly toward his ex-wife—with unclean hands as to the properties and assets Mr. Perry sought to recover in the litigation.
Even so, Mr. Perry argues there was no evidence that his actions hindered or delayed his ex-wife or any other creditors, so Sponholtz v. Sponholtz , 190 So. 2d 572 (Fla. 1966), requires us to reverse. But this case is a far cry from Sponholtz . In that case, the record did not show that the property transfers were done with an intent to defraud creditors. Id. at 573. "Nor [did] it appear from the record that the judgment creditor ... was in anywise hindered or delayed by the transactions ...." Id. The record in this case disclosed otherwise, i.e., that Mr. Perry transferred funds and assets to Ms. Turner to hide money from his ex-wife, which in turn reduced the amount of child support Mr. Perry had to pay his ex-wife while he was dating Ms. Turner. Thus, Sponholtz does not preclude the application of the unclean hands doctrine here, and the trial court correctly applied this doctrine in denying equitable relief.
The other doctrine the trial court applied—in pari delicto —is a corollary to the unclean hands doctrine. O'Halloran v. PricewaterhouseCoopers LLP , 969 So. 2d 1039, 1044 n.3 (Fla. 2d DCA 2007). The in pari delicto defense "refers to ‘[t]he principle that a plaintiff who has participated in wrongdoing may not recover damages resulting from the wrongdoing." Earth Trades, Inc. v. T & G Corp. , 108 So. 3d 580, 583 (Fla. 2013) (alteration in original) (quoting Black's Law Dictionary 806 (8th ed. 2004)). This principle is "grounded on two premises: first, that courts should not lend their good offices to mediating disputes among wrongdoers; and second, that denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality." Id. (quoting Bateman Eichler, Hill Richards, Inc. v. Berner , 472 U.S. 299, 306, 105 S.Ct. 2622, 86 L.Ed.2d 215 (1985) ).
This case falls squarely within the principle and purpose of in pari delicto . The trial court found that both parties knowingly and willfully participated in wrongdoing. They schemed to transfer Mr. Perry's money and assets to Ms. Turner to conceal them from Mr. Perry's ex-wife to whom Mr. Perry owed child support. "Child support is a right belonging to the child." Wendel v. Wendel , 852 So. 2d 277, 285 (Fla. 2d DCA 2003) (citing Fox v. Haislett , 388 So. 2d 1261, 1266 (Fla. 2d DCA 1980) ). And any agreement, whether express or implied, that purports to relieve a father of his duty to support his children offends public policy. See Lester v. Lester , 736 So. 2d 1257, 1259 (Fla. 4th DCA 1999).
Mr. Perry argues that this is not enough; he contends that proof of illegal—and not just wrongful—conduct is required for the doctrine of in pari delicto to apply. Nothing in the case law or the doctrine's definition requires evidence of illegality or criminality. Further, Florida courts have long held that an agreement "offensive to public policy is void and unenforceable" if "the parties to such an agreement are in pari delicto." Patterson v. Law Office of Lauri J. Goldstein, P.A. , 980 So. 2d 1234, 1237 (Fla. 4th DCA 2008). In such cases, "the law will leave [the parties] where it finds them" and "relief will be refused in the courts because of public interest." Id.
In this case, the trial court left Mr. Perry and Ms. Turner where it found them. It refused to "aid [Mr. Perry] in extricating himself from the situation he has created." Scott , 41 So. 2d at 445. We conclude that the trial court appropriately applied the doctrines of unclean hands and in pari delicto , and we affirm the final judgment on Mr. Perry's counterclaim. We also affirm the remainder of the final judgment without comment.
Affirmed.
MORRIS, C.J., and KELLY, J., Concur.