Opinion ID: 1852466
Heading Depth: 1
Heading Rank: 4

Heading: The Clean Hands Maxim.

Text: Although the mortgage lacked consideration, we think for reasons that follow the facts here call for the application of the equity maxim of clean hands. A. Applicable law. The equity maxim of clean hands expresses the principle that where a party comes into equity for relief he or she must show that his or her conduct has been fair, equitable, and honest as to the particular controversy in issue. A complainant will not be permitted to take advantage of his or her own wrong or claim the benefit of his or her own fraud or that of his or her privies. 27A Am.Jur.2d Equity § 126, at 605 (1996). The maxim means that whenever a party who seeks to set the judicial machinery in motion and obtain some equitable remedy has violated conscience or good faith, or another equitable principle in prior conduct with reference to the subject in issue, the doors of equity will be shut, notwithstanding the defendant's conduct has been such that in the absence of circumstances supporting the application of the maxim, equity might have awarded relief. Id. What underlies the maxim is the principle that equity will not aid an applicant in securing or protecting gains from wrongdoing or in escaping its consequences. Id. at 605-06 (emphasis added). The maxim is ordinarily invoked to protect the integrity of the court where granting affirmative equitable relief would run contrary to public policy or lend the court's aid to fraudulent, illegal or unconscionable conduct. Myers v. Smith, 208 N.W.2d 919, 921 (Iowa 1973). The clean hands maxim need not be pleaded; the district court may apply the maxim on its own motion. Id. Here, as mentioned, M. & I. pled the maxim as an affirmative defense and the district court discussed the maxim in its ruling. Courts have generally applied the maxim in situations where there has been a conveyance to hinder, delay, or defraud creditors. See, e.g., Shaw v. Addison, 239 Iowa 377, 395-99, 28 N.W.2d 816, 826-27 (1947) (where decedent during his lifetime transferred farm to his sister to escape a possible deficiency judgment he was fearful would be rendered against him in foreclosure action involving another farm, conveyance was in fraud of creditors, and would not be set aside upon suit by administratrix of his estate); Pursifull v. Interstate Oil & Gas Corp., 293 Ky. 152, 168 S.W.2d 363, 365-66 (1942) (corporation created to take title to general manager's property to put it beyond reach of creditors was precluded by clean hands maxim from maintaining an action to cancel assignment of such property by general manager to general manager's brother); Moore v. Carter, 356 Mo. 351, 201 S.W.2d 923, 929-30 (1947) (where wife intentionally had legal title to realty placed in name of her husband to protect realty from her own creditors, and, after her husband's death, she intentionally permitted record to continue to show ownership of realty in her husband's name while waiting for claims of her creditors to be barred by statute of limitations, she was precluded by clean hands maxim from prevailing in a cross action in equity to quiet title in her-self under a resulting trust); Wickham v. Simpler, 198 Okla. 580, 180 P.2d 171, 175 (1946) (where plaintiffs' decedent during his lifetime entered into agreement with defendants' decedent concealing knowledge of notes and mortgage for purpose of putting them out of reach of creditors of plaintiffs' decedent, plaintiffs were precluded from obtaining money judgment on the notes and foreclosing the mortgage under the clean hands maxim); Nyswanger v. Roberts, 67 S.D. 362, 293 N.W. 187, 187-88 (1940) (woman who transferred homestead to defraud creditors and who thereafter falsely testified in creditor's action that the conveyance was for consideration, could not subsequently admit falsity of the testimony given in the creditor's action and have conveyance set aside on ground it was made without consideration because clean hands maxim was applicable). In such situations, a court of equity will leave the parties in the position in which they have placed themselves, refusing affirmative aid to either of the fraudulent participants. Shaw, 239 Iowa at 398, 28 N.W.2d at 827 (citation omitted); accord England v. England, 243 Iowa 274, 277, 51 N.W.2d 437, 439 (1952). This applies not only as to the original parties to the fraudulent transaction, but also as to their heirs and all other persons claiming under them. Shaw, 239 Iowa at 398, 28 N.W.2d at 827. B. Analysis. As mentioned, shortly after Delray transferred the Manning property to Ivan, one of Ivan's unsecured creditors threatened to collect Ivan's outstanding debt to it by pursuing Ivan's interest in the Manning property. The evidence is clear that this threat prompted the note and mortgage. The inescapable conclusion is that the parties simply wanted to hinder the creditor from collecting on the debt Ivan owed to it by pursuing Ivan's interest in the property. Ivan and Elizabeth executed the note and mortgage on June 1, 1995. The note and mortgage were recorded on June 8. The same day Ivan quitclaimed the Manning property to Elizabeth. The subject matter of the present suit is the mortgage on the Manning property. Elizabeth is seeking affirmative relief to rescind and cancel the mortgage. She is claiming the Manning property under Ivan. The clean hands maxim would bar Ivan from any affirmative relief to cancel the mortgage because it was given to hinder his creditor. The same maxim likewise bars Elizabeth who claims the Manning property under Ivan. The mortgage in question was given to M. & I., the alter ego of John, who was a party to the scheme to hinder Ivan's creditor from collecting the debt Ivan owed to it. M. & I. should therefore be barred from any relief. M. & I. has not asked for any affirmative relief relative to the mortgage other than attorney fees as provided for in the mortgage. We apply the clean hands maxim to bar M. & I. from collecting attorney fees. The district court therefore erred in awarding such fees.