Opinion
G031693.
10-29-2003
J & R TOWING, INC., Plaintiff and Appellant, v. DEPARTMENT OF MOTOR VEHICLES et al., Defendants and Respondents.
Mark S. Rosen for Plaintiff and Appellant. Bill Lockyer, Attorney General, Jacob Appelsmith, Senior Assistant Attorney General, Sylvia M. Diaz and Thomas Scheerer, Deputy Attorneys General, for Defendant and Respondent Department of Motor Vehicles. No appearance for Defendant and Respondent Enterprise Fleet Services.
J & R Towing appeals the judgment in its action seeking to compel the Department of Motor Vehicles (the DMV) to consummate a lien sale of a vehicle. The DMV authorized the sale, but subsequently refused to process the buyers certificate of title or registration application when it discovered the true legal owner, Enterprise Fleet Services (Enterprise), had not been notified of the sale by the DMV. Applying the doctrine of unclean hands, the trial court denied all requested relief. J & Rs owner, who was the purchaser of the vehicle, had filed false and fraudulent documents with the DMV claiming ownership under a fictitious name so as to conceal his assets from creditors. The trial court concluded the lien sale was a sham and void because the buyer was a nonexistent person. J & R contends the unclean hands doctrine was improperly applied. We disagree and affirm.
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James Fine owns J & R Towing and is its president. In December 1999, J & R towed a 1998 GMC Savanna van from where it had been abandoned and stored the vehicle for a few days.
On December 22, 1999, J & R, through its agent Western Auto Clearance, filed an application with the DMV to conduct a lien sale pursuant to Civil Code section 3071. The application stated the registered owner was U-Haul Co. of East Bay, located in "Phoenix, CA" (at the time the registered owner was U-Haul located in Phoenix, Arizona.)
On January 28, 2000, the DMV mailed notice to all interested parties (i.e., the registered owner) about the application for lien sale. On February 28, 2000, when no opposition to the lien sale had been received, DMV sent J & R a letter authorizing the lien sale. The authorization letter noted the registered owner, U-Haul, had been given notice of the application.
Apparently, U-Haul no longer had an interest in the van because it had been sold to Enterprise in September 1999. In November 1999, Enterprise had instructed its agent, Sacramento Registration Services, to process the title and registration documents. For reasons unknown, Enterprises agent did not submit those documents to the DMV until February 14, 2000, after the lien sale notices were sent but before the letter authorizing the lien sale was sent to J & R.
On April 5, 2000, Fine executed a certificate of lien sale, under penalty of perjury, stating J & R held a lien sale and the buyers true name was "John Peters." On April 24, an application for title and registration, signed under penalty of perjury by John Peters, was filed seeking to register title to the vehicle in the name John Peters. The DMV was not aware at the time there was no such person as John Peters, rather, the name was a fictitious name used by Fine.
In June 2000, a DMV lien sale technician was processing John Peters registration application when she noticed two problems: (1) Enterprise (who now showed up on title) had never been notified of the lien sale; and (2) the lien sale notice to U-Haul stated U-Haul was located in "Phoenix, California instead of Phoenix, Arizona." On August 16, 2000, the DMV notified John Peters that it could not process his registration application because the interested parties had not been properly notified. On December 7, 2000, the DMV sent Enterprise a notice of the application for lien sale and Enterprise filed opposition to the lien sale on December 15. On December 26, 2000, DMV notified J & R that its application for lien sale had been denied.
J & R filed its original complaint in January 2001. It alleged the vehicle had been sold at the April 2000 lien sale to John Peters and stated four causes of action aimed at obtaining judicial enforcement of the sale to John Peters and/or damages. At his deposition conducted on October 18, 2001, Fine admitted he was John Peters, a fictitious name he frequently used. Although he later filed a declaration denying he used the alias to conceal assets, at his deposition he specifically testified he often put assets in the name John Peters to protect those assets in the event someone were to ever obtain a judgment against him: "In the industry that I have chosen to be in, there are people that see your name on the side of a tow truck and no matter what you do or how you do it, they are going to try to take advantage of that, and we get sued quite a bit. And all it takes is one mistake by one driver, by one person and I could lose everything. [& para;] So I put . . . some things in John Peters name to protect myself . . . and come up with something if anything ever does happen." Fine admitted he had been using the name John Peters for about five years and when he signed documents in the Peters name, he deliberately altered his signatures.
In a declaration filed November 5, 2001, Phyllis A. Lindroth, a manager in the DMV Registration Operations Division, declared that had the DMV known Fine was using a false name in connection with the sale and registration of the vehicle, it would have immediately cancelled title and registration on the vehicle. She pointed out that under the Vehicle Code it is illegal to use a false or fictitious name on any document filed with the DMV (Veh. Code, § 20), the DMV must refuse to register or transfer registration if the application contains any false or fraudulent information (Veh. Code, § 4750, subd. (a)), and the DMV may revoke the registration or certificate of title if it was fraudulently obtained or erroneously issued (Veh. Code, § 8800, subd. (a)).
In the second amended complaint, filed December 26, 2001, J & R changed its allegation regarding the vehicle having been sold to Peters. It alleged the vehicle had been sold to Fine, "who originally bought [it] in the name of John Peters and then instructed J & R to reissue the title to him in the name of James Fine." In a declaration dated May 16, 2002, Fine declared (under penalty of perjury) that on December 31, 2001, he attempted to file a new certificate of lien sale indicating he (Fine) was the buyer, but the DMV refused to accept the filing or to permit him to register the vehicle in his own name.
The parties submitted to a court trial based on written evidence and the trial briefs. The court ruled in favor of the defendants. In its statement of decision, the court declared that any merits to J & Rs action seeking to compel the DMV to consummate the April 2000 lien sale had been "dramatically altered" when Fine revealed under oath there was in effect no sale to consummate because the buyer, John Peters did not exist. The court noted that "to approve the lien sale would sanction what amounts to a fraud. . . . [The trial court] cannot validate a lien sale or order DMV to register a vehicle to someone who does not exist. Nor can this court validate a lien sale or order DMV to register a vehicle where the sellers and purported buyers signatures on the Bill of Sale, made under penalty of perjury, are admittedly not truthful. Plaintiffs unclean hands so permeate this action that it provides a defense to both the legal and equitable causes of action." The court found the certificate of lien sale (bill of sale) executed in connection with the lien sale, was a sham and the bill of sale was void. Judgment was entered in favor of Enterprise and DMV, and J & R timely appealed.
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J & R contends the trial court erred in applying the unclean hands doctrine to this action. We disagree.
The relevant legal principles are stated in Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978-979: "The defense of unclean hands arises from the maxim, `"`He who comes into Equity must come with clean hands." [Citation.] The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim. [Citations.] The defense is available in legal as well as equitable actions. [Citations.] Whether the doctrine of unclean hands applies is a question of fact. [Citation.] [¶] The unclean hands doctrine protects judicial integrity and promotes justice. It protects judicial integrity because allowing a plaintiff with unclean hands to recover in an action creates doubts as to the justice provided by the judicial system. Thus, precluding recovery to the unclean plaintiff protects the courts, rather than the opposing partys, interests. [Citations.] The doctrine promotes justice by making a plaintiff answer for his own misconduct in the action. It prevents `a wrongdoer from enjoying the fruits of his transgression. [Citations.] [¶] Not every wrongful act constitutes unclean hands. But, the misconduct need not be a crime or an actionable tort. Any conduct that violates conscience, or good faith, or other equitable standards of conduct is sufficient cause to invoke the doctrine. [Citations.] [¶] The misconduct that brings the unclean hands doctrine into play must relate directly to the cause at issue. Past improper conduct or prior misconduct that only indirectly affects the problem before the court does not suffice. The determination of the unclean hands defense cannot be distorted into a proceeding to try the general morals of the parties. [Citation.]"
Kendall-Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal.App.4th 970, and other courts have followed a three-pronged test articulated in Blain v. Doctors Co. (1990) 222 Cal.App.3d 1048, to determine the effect to be given to a plaintiffs unclean hands conduct: "Whether the particular misconduct is a bar to the alleged claim for relief depends on (1) analogous case law, (2) the nature of the misconduct, and (3) the relationship of the misconduct to the claimed injuries." (Kendall-Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal.App.4th at pp. 971-972; accord, CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 641-643; Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612, 618-621.)
The trial courts decision to enter judgment for the defendants because of J & Rs unclean hands conduct is supported by substantial evidence and we will not disturb its ruling. J & Rs owner and president, Fine, apparently desired to acquire the vehicle subject to J & Rs lien for himself. Then, in what he admitted was his practice to avoid possible judgment creditors, he knowingly submitted false documents to the DMV declaring under penalty of perjury the vehicle had been purchased by the nonexistent John Peters. Fine submitted an application for registration of the vehicle in the name of John Peters, again a document signed under penalty of perjury. He dummied the signature of John Peters on documents submitted to the DMV, deliberately trying to make them look different from his normal signature.
Fines conduct was illegal. Vehicle Code section 20 provides, "It is unlawful to use a false or fictitious name, or to knowingly make any false statement or knowingly conceal any material fact in any document filed with the Department of Motor Vehicles or the Department of the California Highway Patrol." His falsification of the DMV documents could easily have landed him misdemeanor charges under Vehicle Code section 20, or perjury charges under Penal Code section 118. (See People v. Molina (1992) 5 Cal.App.4th 221.) Furthermore, he acted with an intent to deceive creditors.
When the DMV refused to consummate the lien sale and register the vehicle, because of the notice issue, Fine came into court seeking a judicial declaration that certificate of title and registration of the vehicle be issued to John Peters. Fine continued the John Peters subterfuge throughout this proceeding until at his deposition Fine admitted there was no such person. The trial court was well within its discretion to refuse to let the judicial system to be so used. If the unclean hands doctrine is to protect judicial integrity (Kendall-Jackson Winery, Ltd. v. Superior Court, supra, 76 Cal.App.4th at p. 978), then regardless of the merits of J & Rs underlying claim that the DMVs alleged error in noticing the lien sale should not be used to invalidate the sale, the judicial system should not be used to condone or perpetuate Fines fraud.
J & Rs specific arguments relating to the three-pronged test of Blain are unavailing. It first contends the analogous case law does not support application of the unclean hands doctrine. It argues that because the unclean hands conduct involved a minor violation of a merely "ministerial statute," we must look at cases involving similar simple licensing or regulatory violations. Furthermore, he argues that because he could have easily cured the violation, the defense should not apply. (J & R argues it attempted to cure the violation by reissuing a certificate of sale in the name of Fine and attempting to register the vehicle in Fines name. Of course, none of that was done until well into this litigation, after Fines subterfuge was discovered, and the DMV raised the unclean hands defense.)
The cases J & R relies upon Bret Harte Inn, Inc. v. City and County of San Francisco (1976) 16 Cal.3d 14, Heiner v. Kmart Corp. (2000) 84 Cal.App.4th 335, and South Coast Regional Com. v. Higgins (1977) 68 Cal.App.3d 636, are easily distinguished as none involved appellate review of the trial courts application of unclean hands to deny relief. Rather, each affirmed the trial courts refusal to apply the defense because in each key facts were missing. (Bret Harte Inn, Inc. v. City and County of San Francisco, supra, 16 Cal.3d at p. 28 [no showing in trial court that taxpayer had any improper motive in filing deficient tax returns]; Heiner v. Kmart Corp., supra, 84 Cal.App.4th at p. 345, fn. 4 [in dentists personal injury against department, no showing dentists noncompliance with certain state dental licensing regulations had anything to do with the defendant store or transaction at issue]; South Coast Regional Com. v. Higgins, supra, 68 Cal.App.3d at p. 647 [no showing Coastal Commissions failure to follow its regulations bore any relationship to transaction at issue].) J & Rs heavy reliance on Willard H. George, Ltd. v. Barnett (1944) 65 Cal.App.2d Supp. 828, is also misplaced. That case did not even consider the unclean hands defense. J & R has also failed to explain any possible relevance of Evidence Code section 669, pertaining to use of evidence of a defendants violation of a statute as a basis for finding negligence in assessing the sufficiency of evidence to support a trial courts application of an equitable defense.
Next, J & R argues the nature of the misconduct did not justify application of the defense. It argues it is "unclear whether it is even improper for James Fine to take the vehicle in the name of John Peters[,]" since there is no published case affirming a conviction under Vehicle Code section 20. Huh? Vehicle Code section 20 is clear. "It is unlawful to use a false or fictitious name, or to knowingly make any false statement or knowingly conceal any material fact in any document filed with the [DMV]." Fine knowingly filed documents with the DMV using a false name and signed those documents under penalty of perjury. J & Rs argument that the conduct is not improper when there was "no victim, no intent to hurt," is disingenuous. He specifically testified at his deposition he filed the false documents with the intent to conceal his assets from creditors!
Finally, we reject J & Rs argument the unclean hands conduct bore no relationship to the transaction at issue or the injuries. The argument is that the only injury here was to Enterprise, which lost its vehicle at the lien sale. J & R asserts Enterprise lost the vehicle because of the lack of notice by the DMV, and Fines subsequent filing of perjured documents in connection with the lien sale did not affect Enterprise. But in applying the unclean hands defense, the trial court was not bound to take such a narrow point of view. The trial courts conclusion Fines unclean hands conduct was related to the transaction is supported by the evidence. While Fines conduct did not directly affect Enterprise, it certainly directly affected the DMV. J & Rs suit was aimed at forcing the DMV to process fraudulent lien sale documents pertaining to the vehicle that is the subject of the litigation. The DMV submitted evidence that had it known at the outset there was no such person as John Peters it would have invalidated the lien sale and registration. This case is akin to those upholding the defense in wrongful termination actions, where in the course of discovery it is revealed that the plaintiffs lied on job applications. Even though the plaintiffs conduct did not directly involve the defendants wrongful firing of them, "Since [the plaintiffs] were not lawfully qualified for their jobs, they cannot be heard to complain that they improperly lost them." (See, e.g., Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 639.)
In conclusion, the record supports the trial courts refusal to permit the court system to be used to condone Fines fraudulent and illegal conduct. Fine filed perjurious documents with the DMV claiming the vehicle had been sold to a nonexistent person. He attempted to have the vehicle registered in a fictitious name for the express purpose of concealing his assets from creditors. He then filed this action seeking the courts order that the DMV register the vehicle under the fictitious name. The court was not required to approve an illegal transaction and entry of judgment in favor of the defendants was appropriate. Accordingly, we need not address J & Rs argument the lien sale was valid and the lack of notice to Enterprise was an improper basis for the DMVs refusal to consummate the sale.
The judgment is affirmed. The Respondents are awarded their costs on appeal.
WE CONCUR: ARONSON, J., IKOLA, J.