Moriarty v. Carlson

• Decision Date: 22 August 1960
• Court: California Court of Appeals Court of Appeals
• Parties: Hazel D. MORIARTY and Edward C. Moriarty, Plaintiffs and Respondents, v. Dagney Mork CARLSON, Defendant and Appellant. Civ. 6421.

Page 282

7 Cal.Rptr. 282

184 Cal.App.2d 51

Hazel D. MORIARTY and Edward C. Moriarty, Plaintiffs and Respondents, v. Dagney Mork CARLSON, Defendant and Appellant.

Civ. 6421.

District Court of Appeal, Fourth District, California.

Aug. 22, 1960.

Hearing Denied Oct. 19, 1960.

Arthur F. H. Wright and Edwin C. Jeffries, San Diego, for appellant.

James S. Marinos, San Diego, for respondents.

SHEPARD, Justice.

This is an appeal from a judgment for plaintiffs in an action for declaratory relief by which plaintiffs (respondents herein) seek a declaration of the respective rights of the parties under a written agreement of sale of real and personal property.

In general substance, the facts and contentions of the parties are as follows: On October 14, 1954, defendant (appellant herein), as seller, and plaintiffs, as buyers, entered into a written agreement for the sale by defendant to plaintiffs of certain real and personal property located in the city of San Diego, for the total purchase price of $38,000. Said agreement required, inter alia, that plaintiffs pay defendant $100 per week to be credited first on interest at 6 per cent and balance to unpaid principal; that plaintiffs pay taxes before delinquency, utilities, maintenance and repairs; that time is of the essence of the contract; that when the unpaid principal is reduced to less than $21,000, defendant will convey title to plaintiffs and take back a promissory note and deed of trust as security for the remaining unpaid balance.

Plaintiffs' complaint alleges the execution of said contract; continued occupancy of the premises thereafter under the contract; default in six weekly payments; continuance, after default, of payments and acceptance thereof by defendant; willingness of plaintiffs to pay all delinquent sums; initiation of escrow for payment of all unpaid principal down to a sum less than $21,000; notice thereof and request to defendant for a statement of unpaid balance, execution of grant deed and other necessary documents in accordance with the agreement; failure of defendant to make such statement of balance and to execute said documents for transfer of title; and asks determination of the rights of the parties.

Defendant's answer admits execution of the agreement of sale but alleges delinquent payments were discharged by bankruptcy proceedings filed by plaintiffs; that after the bankruptcy proceedings plaintiffs occupied the premises as tenants and all payments were paid and received as rent.

At the time the cause went to trial it appeared to the trial court that extensive accounting was necessary and the entire matter was, by stipulation of the parties and order of the court, referred to a referee. No shorthand reporter was requested by either party for the referee's hearings, and none was had. There is therefore no transcript of the evidence taken by the referee.

The referee found, inter alia, that the contract was executed as alleged; that plaintiffs made payments on the contract in the total sum of $24,474.80; that delinquency as of August 25, 1959, amounted to $925.20; that the unpaid balance on the contract as of September 29, 1959, was $22,781.79; that many payments were made late but defendant accepted same and never made a formal demand for payment of delinquent payments; that no notice of termination of contract was ever given by defendant to plaintiffs, nor did defendant ever attempt to retake possession of the premises; that plaintiffs did file petitions in bankruptcy October 15, 1957, and did not list on their bankruptcy schedules their interest in the real property, but did list $800 due defendant as rent; that defendant was present at the first meeting of the creditors at the bankruptcy court and did not inform the bankruptcy court that plaintiffs were purchasing the property from defendant under contract of sale; that plaintiffs assured defendant that she and the property would be protected respecting the bankruptcy; that plaintiffs continued to make and defendant continued to accept the same payments after the filing of petitions in bankruptcy and defendant recorded such payments in the same manner as she had recorded payments on the contract of sale prior to bankruptcy; that plaintiffs offered, prior to the filing of this action, to pay the payments then delinquent on the contract.

The referee concluded, inter alia, that the contract is still in full force and effect; that when the balance due on the contract shall be less than $21,000 plaintiffs will be entitled to conveyance of title from defendant upon tendering a promissory note and deed of trust securing the unpaid balance; that defendant, by her actions in accepting late payments, waived the requirement that payments on the contract by made on time; that no actions of plaintiffs during or in connection with the bankruptcy proceedings misled defendant so as to estop plaintiffs from claiming their interest in the contract and the real property which is the subject of this action. The referee's findings and conclusions were adopted by the court and judgment was entered in accordance therewith. Defendant appeals.

Where No Transcript, Evidence Presumed Sufficient

First, it should be noted that since no transcript of the evidence taken before the referee was made available to the trial court nor to this court, and since the referee's findings were adopted by the trial court, such findings must be presumed to have been supported by sufficient evidence. Code Civ.Proc. § 644; Vaughan v. Caldwell, 200 Cal. 572, 575, 253 P. 929; Brodie v. Barnes, 56 Cal.App.2d 315, 319 [1b], 132 P.2d 595; Klein v. Maddox, 59 Cal.App.2d 141, 144 , 138 P.2d 28.

'Unclean Hands' Rule Applied Only Where Cause Of Action Infected

Defendant first contends that plaintiffs, by filing their petition in bankruptcy and accepting the protection of the bankruptcy court abandoned any interest they had in the property in question. In this connection, she advances the argument that he who seeks relief from a court of equity must do so with clean hands; that the relief here sought is essentially equitable in nature and that plaintiffs, by their failure to report the property as an asset in the bankruptcy proceedings, are practicing a fraud on both the bankruptcy court and this trial court. It is true that, as was said in Lynn v. Duckel, 46 Cal.2d 845, 850 , 299 P.2d 236, 239:

'The rule is settled in California that whenever a party who, as actor, seeks to set judicial machinery in motion and obtain some remedy, has violated conscience, 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 afford him any remedy.'

Defendant cites also Katz v. Karlsson, 84 Cal.App.2d 469, 474 , 191 P.2d 541; DeGarmo v. Goldman, 19 Cal.2d 755, 764 , 123 P.2d 1; Stone v. Lobsien, 112 Cal.App.2d 750, 756-757 [6a-6], 247 P.2d 357; Potter v. Boisvert, 117 Cal.App.2d 688, 256 P.2d 625; McDougall v. O'Hara, 129 Cal.App.2d 12, 14 , 276 P.2d 6; Thibodo v. United States, D.C., 134 F.Supp. 88, 101 .

Each authority must, of course, be read in the light of the facts there before the court. In Lynn v. Duckel, supra, appellant had unlawfully bulldozed earth from an alley dedicated to pedestrian use. City authorities, learning of the danger to pedestrians, closed the alley to vehicular use, and erected barriers. When appellant sought mandatory injunction to compel removal of the barriers, the court held he was guilty of 'unclean hands' on the very matter about which he sought relief, and denied injunction. In Katz v. Karlsson, supra, an order vacating a divorce decree was reversed where the record showed fraud by the movant in securing the very decree he sought to have vacated. In DeGarmo v. Goldman, supra, the rule of 'unclean hands' was applied to the president of a corporation in an attempt by him to remove allegedly dishonest directors when it was shown that the president himself had defrauded the corporation of many thousands of dollars. In Potter v. Boisvert, supra, the rule of 'unclean hands' was applied because plaintiff and defendant had deserted their respective spouses, come to California as husband and wife, and plaintiff deeded to defendant the realty subject of the action for the purpose of defrauding his lawful wife. In McDougall v. O'Hara, supra, the 'unclean hands' rule was applied when plaintiff attempted to quiet title where he had falsely represented to defendant that a note given by plaintiff to defendant was, in fact, a deed of trust lien on the property in dispute. From Thibodo v. United States, supra, appellant quotes the maxim ex turpi causa non oritur actio, meaning that 'from a base cause, no action arises'. There the owner of street improvement bonds whose lien had been destroyed by condemnation proceedings by the United States without notice to said owner, sought to recover the value of the bonds. Judgment was rendered against the United States by whose unconscionable action the owner's lien had been destroyed.

It will be noted that in the case at bar there is no finding that at the time the report to the bankruptcy court was made plaintiffs' equity had any liquidatable value to the creditors, nor that plaintiffs' failure to report the contract as an asset was from any intent to defraud the creditors. Furthermore, a perusal of the arguments of counsel before the trial court indicates there was evidence before the referee that plaintiffs' failure to report was due to an innocent misunderstanding by plaintiffs of the nature of their interest in the property. Had the trial court been convinced that there was actual or intentional fraud on the part of plaintiffs toward their creditors, the views of that court may well have been different.

In Stone v. Lobsien, supra, cited by appellant, plaint...