Court Opinion

ID: 9575548
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:14:41.874051+00
Date Added: 2024-06-11T12:48:22.141222
License: Public Domain

Given, Judge,
dissenting:
The trial court found that “the plaintiff and defendant, Mervin Curtis, were equally guilty of conceiving and executing a scheme or plan whereby the defendant Mervin Curtis was successful in securing a F. H. A. loan in violation of the Federal statutes relative thereto.” I deem the evidence conclusive as to this finding, and do not understand that the majority opinion questions its correctness. In addition to the illegality of this scheme, its fraudulent character is clearly established. Plaintiff admits that the “pretended contract” was made for the purpose of deceiving the loan company into making a loan that would not have been otherwise made, and the loan was actually made, on false representations, to the effect that Curtis was the true owner of the property, and that he had a clear equity in the property over and above the amount of the loan, and that he actually paid $700.00 for that equity. Thus because of the false and fraudulent representations the loan company was induced to make a loan to Curtis, who had no equity whatsoever in the property, and which loan certainly would not have been made except for the false and fraudulent representations made by both the plaintiff and defendant.
I think it no answer to say that the conveyance itself was not tainted with fraud. The whole scheme must be considered. The “pretended” contract was part of the illegal and fraudulent scheme and the plaintiff could not recover herein except by proving the same was “pretended”, together with the oral agreement to recon-vey. The false representations made by both parties to *752the effect that Curtis was the owner of an equity of $700.00 and had actually paid $700.00 therefor was another step in the scheme. The execution and delivery of the deed sought to be set aside were only further steps in the fraudulent scheme, made for the purpose of placing Curtis in position where he could falsely represent that he was the absolute owner of the property, thus inducing the loan company to make a loan that it would not. otherwise have made. It seems clear, therefore, that the whole scheme was permeated with fraud as well as with illegality. I do not believe the fraud or illegality to be trivial or insignificant. The plaintiff obtained that for which the scheme was devised, the F. H. A. loan. The loan having been obtained, the plaintiff was content to remain silent until the property had practically doubled in value due to economic conditions, and until the statute of limitations had barred prosecution of the criminal violation committed by him, a violation of such serious nature that he could have been subjected to long imprisonment and to a fine equal to the then probable value of the property.
The majority opinion seems to place reliance upon the provisions of Code, 36-1-4. Those provisions deal only with the right to prove the existence of a trust and do not attempt to say what does or what does not constitute fraud. I presume that the majority would not go so far as to say that the statute has abolished the “clean hands” maxim. Neither is it any answer to say that no one has suffered loss because of the illegal and fraudulent transaction or scheme, if such a conclusion be justified by the record. I find no authority to justify the position that the “clean hands” maxim will be applied by a court of equity only in situations where loss has resulted from the fraud or illegality.
In 30 C. J. S., Equity, Section 93, it is stated that “The clean hands maxim bars relief to those guilty of improper conduct in the matter as to which they seek relief. It is invoked to protect the integrity of the court.” I cannot bring myself to the view that such fraud and illegality, including the violation of a criminal statute, constituting *753a felony, is not “improper conduct”. In 19 Am. Jur., Equity, Section 471, it is stated that “relief will be denied where it appears that the right upon which the complainant relies has grown out of a wrong, a breach of duty,. or a violation of law (Italics supplied.) This Court held in Jones v. Evans, 123 W. Va. 394, 15 S. E. 2d 166, Point 1, Syllabus, that:
“Equity will not, at the suit of a wrongdoer, lend its aid in extricating him from a position where his own fraudulent or illegal conduct has placed him.”
I think that the case of The Raleigh County Bank v. Bank of Wyoming, 100 W. Va. 342, 130 S. E. 476, cited in the majority opinion, is controlling in the instant case. In the Bank of Wyoming case the parties had agreed to> exchange certain securities and carry certain loans in. order that one of them would be in position to grant a loan to one of its customers in violation of the statute-making it illegal for a bank to loan one person more than twenty per cent of its capital, surplus and undivided' profits, a violation certainly not more serious than the.criminal violation in the instant case. The Court held:
“A contract, either executory or executed, between two banks for the exchange of securities, made for the purpose of enabling one of them to carry a loan to its customer in violation of the banking law prohibiting a bank to loan to one person not more than 20% of its capital, surplus and undivided profits, is an illegal contract, and equity will not afford injunctive relief to either party on complaint of the other that the contract is being violated.”
In Kokernot v. Gilstrop, 143 Tex. 595, 187 S. W. 2d 368, the false statement made to the Federal Housing Administration for the purpose of obtaining a loan was to the effect that there existed no second lien indebtedness, against the property offered as security for the loan. The: Court, in deciding the case, stated:
“It follows that, insofar as recovery of title or the enforcement of any lien against the property *754are concerned, the transaction evidenced by the contract and the deed under which respondents claim title falls' within that class of contracts which are held to be illegal and void and upon which a plaintiff cannot recover when it is necessary for him to prove his own illegal acts as a part of his cause of action. The law leaves the parties to such contracts where it finds them.”
See also Hartwell v. United States, 107 Fed. 2d 359; Barnsdall v. Owen, 200 Fed. 519; Haymond v. Hyer, 80 W. Va. 594, 92 S. E. 854; Wheeling Dollar Savings and Trust Company v. Hoffman, 127 W. Va. 777, 35 S. E. 2d 84.
Being of the opinion that the circuit court was right in its finding, and in applying the “clean hands” maxim and refusing relief to the parties, and should be affirmed, I respectfully dissent.