Terrell v. Terrell

• Decision Date: 08 June 1956
• Citation: 200 Tenn. 289,292 S.W.2d 179,4 McCanless 289
• Parties: Johnny S. TERRELL et al. v. Lucy TERRELL. 4 McCanless 289, 200 Tenn. 289, 292 S.W.2d 179
• Court: Tennessee Supreme Court

Page 179

292 S.W.2d 179

Johnny S. TERRELL et al. v. Lucy TERRELL.

4 McCanless 289, 200 Tenn. 289, 292 S.W.2d 179

Supreme Court of Tennessee.

June 8, 1956.

Privette & Morton, Knoxville, for petitioner.

Dannel & Fowler, Loudon, for respondent.

NEIL, Chief Justice.

This suit had its origin in the Chancery Court of Loudon County wherein Johnny Terrell by his mother as next friend, June Terrell, filed his original bill to set up a lost deed to a house and lot in Lenoir City, Tennessee. The bill charges that the property was formerly owned by Dr. L. L. Terrell and wife, June Terrell, who executed a deed to said property to the defendant, Lucy Terrell, a sister of Dr. Terrell, who, on the same day, executed her deed to Johnny Terrell. The bill charged that the grantors had a verbal understanding with Lucy that she would convey the property to Johnny, and that she did so, but that said deed was lost before it was put to record and could not be found after diligent search. Complainant further charged that notwithstanding the oral agreement between the grantors and Lucy Terrell, the grantee, she refused to execute her deed, resulting in this suit. The bill further alleges that Dr. Terrell until his death on April 10, 1952, exercised complete control over the property, collecting rents, and for several months after his death the rent was paid to June Terrell.

The bill prayed that upon the hearing the lost deed from the defendant be set up by decree of the court and that the defendant be required to re-execute and deliver another deed conveying said property to complainant; or, that the defendant be adjudged as holding title to said property in trust for said complainant; or, that the title be divested out of the said Lucy Terrell and vested in the complainant.

The defendant answered the bill and denied that she had ever executed a deed reconveying the property to Johnny Terrell, denied that she had any oral agreement to do so, denied she was holding the property in trust for complainant, and denied that June Terrell, as guardian for her son, Johnny, had made diligent search for the lost deed. She specifically plead (1) judicial estoppel; (2) statute of frauds; and (3) unclean hands of the grantors. She further averred that the conveyance to her by complainant's parents, Dr. Terrell and June Terrell, was for the specific purpose of defrauding his creditors, and particularly to avoid the payments of alimony due by Dr. Terrell to his former wife, Martha Terrell, whom he divorced on January 14, 1941, only 26 days before marrying June, his second wife.

The evidence before the Chancellor was voluminous. After due consideration of the facts he held that the proof was insufficient to establish a lost deed, holding specifically that there was no showing that a diligent search had been made for it; that the conveyance to Lucy Terrell was made in fraud of creditors and that the complainant was in court 'with unclean hands'; that the fraud of complainant's parents was imputable to their son, Johnny Terrell, and the latter's claim could rise no higher than those through whom he claimed. For the foregoing reasons the bill was dismissed.

The complainant was granted an appeal to the Court of Appeals and that court reversed the Chancellor for the following reasons:

'After reviewing the record, we are constrained to reverse the decree of the learned Chancellor on grounds that complainant is not seeking to set aside a conveyance made by grantors for the purpose of defrauding creditors, as insisted by the defendant, but to set up a lost deed to property to which complainant, a minor, already had a vested title by reason of a deed executed by the defendant; that complainant's hands being clean with respect to the immediate transaction, and no creditors claiming that the conveyance was for a fraudulent purpose, the maxim of unclean hands would be inapplicable.'

We granted certiorari, and the issues have been ably argued by counsel for the respective parties.

The errors assigned in the petition for certiorari complain (1) that the decree of the Court of Appeals is erroneous because 'the law and the facts are not as found by said Court, in these particulars'; the court should have held that original complainant is judicially estopped to assert and claim title to the property in controversy; that the original complainant can rise no higher than the grantors, since his predecessors and ancestors would be judicially estopped, etc. (2) 'The Court erred in holding that the equitable doctrine of unclean hands has no application unless the alleged wrongful conduct of complainant appears to have injured, damaged or prejudiced the party invoking the doctrine.'

Assignments 3 and 4 are practically a repetition of the foregoing assignment relating to the maxim of 'unclean hands'.

In the fifth assignment of error contention is made that the court erred in holding that the evidence relating to the oral agreement that Lucy Terrell would reconvey the property to Johnny 'was clear, cogent and convincing'.

Before proceeding to a discussion of the merits of these assignments of error we will briefly mention some undisputed facts which have a bearing upon the principal controversial issues. Dr. L. L. Terrell was divorced from his wife, Martha, in 1941. She had a claim against him for unpaid alimony in the sum of $13,000. This was compromised by Dr. Terrell paying her $10,000. He paid no further alimony, and no steps were taken by Martha Terrell to collect any further monthly payments of alimony. Martha Terrell is not a party to the present action. All the parties herein reside in the State of Kentucky where Dr. Terrell practiced medicine. He at one time resided with his second wife, June, in Lenoir City, Tennessee, at which time they purchased the house and lot in question and owned it as tenants by the entireties.

There can be no difference of opinion on the question of Dr. Terrell having trouble with his former wife, Martha, with regard to the payment of alimony. However, this trouble seems to have ceased upon the payment of $10,000 above mentioned. No effort was made thereafter by Martha Terrell to subject any property owned by Dr. Terrell to the satisfaction of any judgment she may have had against him. She filed no intervening petition in the present action claiming that the deed to Lucy Terrell was for the purpose of defrauding her of any right as a creditor.

We granted certiorari because the Court of Appeals and the Chancellor were in sharp disagreement upon both questions of law and fact. A memorandum was filed requesting counsel to discuss the following determinative issues:

(1) Is the doctrine of judicial estoppel applicable to this case?

(2) Whether or not the maxim of unclean hands is applicable?

(3) Was the deed from Dr. Terrell and wife to Lucy Terrell a fraudulent conveyance, and, if so, what about its legal effect upon the rights of Martha Terrell to have her decree of divorce fully satisfied? In other words, why should she not be adjudged a judgment creditor of her former husband?

The defendant invokes the doctrine of judicial estoppel on the ground that Dr. Terrell in his divorce proceeding testified he had sold the Lenoir City property for $10,000 and hence had no title to it. In support of this insistence the counsel relies upon Melton v. Anderson, 32 Tenn.App. 335, 222 S.W.2d 666, 670, and more especially upon the following quotation from the opinion: 'The general rule is that when parties, if living, would be estopped, their heirs and privies in estate are likewise estopped.' (Emphasis supplied by counsel.)

The fatal weakness of the foregoing contention is found in the fact that complainant, Johnny S. Terrell, 14 years of age, is not prosecuting this case as the heir of his deceased father, Dr. Terrell. But it is being prosecuted pursuant to a trust agreement between his father and mother on one hand and Lucy Terrell on the other. He had no part in the foregoing agreement. June Terrell joined in the deed to the property in question, and she, being a tenant by the entirety with Dr. Terrell, is not estopped. The complainant is as much the heir of his mother as of the father. But aside from this question of relationship, we hold that the doctrine of estoppel cannot be invoked by one who is a party to a fraudulent transfer of property for the purpose of protecting his title as grantee. It seems to be settled law in this State that 'Estoppel can never be relied on to create right, although it may be urged for the protection of right.' Henry County v. Standard Oil Co., 167 Tenn. 485, 71 S.W.2d 683, 93 A.L.R. 1483.

'The doctrine of estoppel is for the protection of innocent persons, and only the innocent may invoke it. * * * A person may not predicate an estoppel in his favor on, or assert such estoppel for the purpose of making effective, obtaining the...