Hood v. Hood , 46 N.C. App. 298 ( 1980 )

264 S.E.2d 814 (1980)

Wilford HOOD
v.
Grace L. HOOD.

No. 7918SC825.

Court of Appeals of North Carolina.

April 15, 1980.

Morgan, Post, Herring & Morgan by J. V. Morgan, High Point, for plaintiff-appellant.

Wyatt, Early, Harris, Wheeler & Hauser by William E. Wheeler, High Point, for defendant-appellee.

WELLS, Judge.

We affirm the trial court's granting of defendant's motion for a directed verdict under G.S. 1A-1, Rule 50(a) on grounds that plaintiff's unclean hands barred him from maintaining this equitable action for a resulting trust based on an alleged parole agreement. When a husband purchases realty and causes it to be conveyed to his wife, the law presumes the property is a gift to the wife, and in order to overcome this presumption and establish the existence of a resulting trust, the husband must produce clear, cogent and convincing proof. Bass v. Bass, 229 N.C. 171, 48 S.E.2d 48 (1948). An action to establish the existence of a resulting trust is equitable in nature. Bowen v. Darden, 241 N.C. 11, 84 S.E.2d 289 (1954).

We do not reach plaintiff's argument that his evidence was sufficient to meet this burden, since plaintiff's complaint and testimony unquestionably shows that the trust had the unlawful purpose of shielding plaintiff's illegal income, derived from his bootlegging activities, from forfeiture by the State. "An intended trust to carry on an unlawful business, such as that of selling intoxicating liquor in violation of law . . is invalid." Restatement (Second) of Trusts § 61, Comment a (1959). In Penland v. Wells, 201 N.C. 173, 159 S.E. 423 (1931) the plaintiff had conveyed land to his daughter for the admitted purpose of defeating certain threatening litigation which he alleged was without merit. The plaintiff sought equitable relief on the theory that a trust had been created in the property in his favor. Our Supreme Court held that the doctrine of "clean hands" precluded plaintiff's resort to equity:

In York v. Merritt, supra [77 N.C. 213, 215 (1877)], the court said: "[W]here both parties have united in a transaction to defraud another, or others, or the public, or the due administration of the law, or which is against public policy, or contra bonos mores, the courts will not enforce it in favor of either party." The entire doctrine is based upon the "clean hands" concept of equity. The plaintiff alleges "that prompt action was necessary in order to defeat such litigation and thereby preserve his property for his own use and benefit." While the plaintiff denies that there was any merit in the threatened litigation, it is quite obvious that he was attempting to get his fodder out of the field before the storm broke.

201 N.C. at 175-176, 159 S.E. at 424.

In the case at bar plaintiff's evidence unquestionably shows that the funds used to purchase the property were derived from his sale of illegal liquor and that his purpose of shielding the property from possible seizure by the State was against the public policy of the State, and contra bonos mores. The trial court properly prohibited plaintiff from invoking the equity jurisdiction of the court to enforce the alleged resulting trust.

Affirmed.

HEDRICK and WEBB, JJ., concur.