



Attorneys for Appellant                            Attorney for Appellees
Michael H. Michmerhuizen                           David Van Gilder
Patrick G. Murphy                                  Fort Wayne, Indiana
Fort Wayne, Indiana

____________________________________________________________________________
__


                                   In the
                            Indiana Supreme Court

                      _________________________________

                            No. 02A03-0204-CV-112

Wedgewood Community Association, Inc.,
                                             APPELLANT (PLAINTIFF BELOW),

                                     v.

Robert O. Nash and Barbara Nash,
                                             Appellees (Defendants below).
                      _________________________________

         Appeal from the Allen Superior Court, No. 02D07-0003-CP-470
                  The Honorable Nancy Eshcoff Boyer, Judge
                      _________________________________

 On Petition To Transfer from the Indiana Court of Appeals, No. 02A03-0204-
                                   CV-112
                      _________________________________

                                June 17, 2004


Rucker, Justice, dissenting from denial of transfer.

      The Wedgewood Community Association is a non-profit  corporation  that
operates as a homeowners’ association.  The Association is comprised of  the
homeowners in the Wedgewood subdivision, and its Board of Directors are  all
elected  volunteers.   Homeowners  are  bound  by  a  restrictive   covenant
providing that no shack,  barn,  or  other  unattached  outbuilding  may  be
constructed on any lot without  the  prior  approval  of  the  Association’s
Board of Directors or its Architectural Control Committee.

      Robert Nash, his wife Barbara, and their four children reside  on  one
of the 161 lots in the Wedgewood subdivision.  In  February  of  2000,  Nash
erected an eight-foot by  ten-foot  garden  shed  in  his  backyard  without
receiving approval from the board of  directors  or  the  committee.   After
preliminary negotiations proved  unsuccessful  the  Association  sued  Nash,
seeking declaratory and injunctive relief alleging that  the  shed  violated
the  restrictive  covenant.   Nash  filed  a  counterclaim  alleging  racial
discrimination in the Association’s enforcement of the covenant.   Following
a bench trial, the trial court rejected Nash’s counterclaim and  found  that
his shed was in violation of the  restrictive  covenant.   However,  finding
that structures in the yards of two other homeowners—including the  yard  of
one of the members of the Association’s  Board  of  Directors—were  also  in
violation of the covenant, the trial  court  entered  judgment  denying  the
Association’s request for  an  injunction  and  attorney  fees  of  $28,000.
According to the trial court the equitable doctrine of “unclean  hands”  was
fatal to the Association’s claim.


      On review, the Court of Appeals reversed the trial court’s judgment on
grounds that the unclean hands doctrine was not applicable to the  facts  of
this case.   In  the  court’s  view,  because  the  Association  was  not  a
homeowner and did not itself violate the covenant, its own  hands  were  not
unclean.  See Wedgewood Cmty. Ass’n, Inc. v. Nash,  781  N.E.2d  1172,  1179
(Ind. Ct. App. 2003), reh’g granted, 789 N.E.2d  495,  496  (Ind.  Ct.  App.
2003).  I  believe  we  should  grant  transfer  in  this  case  to  correct
substantial error.


      The trial court entered special findings  pursuant  to  Indiana  Trial
Rule 52(A) which prohibits a reviewing court on appeal  from  setting  aside
the trial court's judgment "unless  clearly  erroneous."   A  trial  court’s
judgment is "clearly erroneous” only if (i) its  findings  of  fact  do  not
support its conclusions of law  or  (ii)  its  conclusions  of  law  do  not
support its judgment.  Dunson v. Dunson, 769 N.E.2d 1120, 1123 (Ind.  2002).



      For the regulation and government of judicial action, courts of equity
have formulated certain rules or principles which are described by the  term
“maxims.”  There are a number of equitable maxims that involve the  question
of whether the conduct of a party  seeking  equitable  relief  entitles  the
party to the court’s assistance.  “Where it appears that  the  litigant  has
not acted in accordance with these maxims, as a general rule relief will  be
denied.”  27A Am. Jur. 2d Equity § 119 (1996).  One such maxim is  that  “he
who seeks equity must  come  into  court  with  clean  hands.”   This  maxim
“closes the door of a court of equity to one  tainted  with  inequitableness
or bad faith relative to the  matter  in  which  he  seeks  relief,  however
improper may have been the behavior of the defendant.”   ABF  Freight  Sys.,
Inc. v.  N.L.R.B.,  510  U.S.  317,  330  (1994)  (Scalia,  J.,  concurring)
(quotation omitted).  As one treatise has  observed,  “Almost  any  kind  of
conduct the [court] may consider to be unethical or improper  might  suffice
to bar the plaintiff’s claim, even if the conduct is not actually  illegal.”
 1 Dan B. Dobbs Law of Remedies § 2.4(2) (2d  ed.  1993).   Thus  the  maxim
“necessarily gives wide range to the equity court’s  use  of  discretion  in
refusing to aid the unclean litigant.”  Precision  Instrument  Mfg.  Co.  v.
Auto. Maint. Mach. Co., 324 U.S. 806, 816 (1945);  Packers  Trading  Co.  v.
Commodity Futures  Trading  Comm’n,  972  F.2d  144,  149  (7th  Cir.  1992)
(observing that the Court is “not bound by  formula  or  restrained  by  any
limitation that tends to trammel the free and just exercise of  discretion”)
(quotation omitted).


      In  this  case  focusing  on  Nash’s  claim  that  “[i]t  is   clearly
inequitable for Wedgewood to bring a suit based on Nash’s alleged  violation
of a restrictive covenant when Wedgewood’s board member  is  in  violation,”
Wedgewood, 781 N.E.2d at 1178 (quoting Appellee’s Br. at 10), the  Court  of
Appeals reasoned that the Association itself did not  violate  the  covenant
because it is not a resident of the neighborhood.   Thus  according  to  the
court “the unclean hands doctrine is not applicable to this  case,  and  the
trial court’s decision is clearly erroneous.”   Id.   Although  the  opinion
does not say so  in  express  terms,  implicit  in  the  Court  of  Appeals’
reasoning is that the conduct of a board member cannot  be  imputed  to  the
corporation for purposes of applying the equitable  maxim  of  clean  hands.
First, I am not so sure about the correctness  of  this  proposition.   See,
e.g., Traylor v. By-Pass 46 Steak House, Inc.,  259  Ind.  224,  285  N.E.2d
820,  822  (1972)  (declaring  unclean  hands  doctrine   would   apply   to
corporation if directors’ misconduct had been intentional).


      In any event, the fact that the Association is  not  a  homeowner  and
could not have violated the restrictive covenant is beside the  point.   The
trial court recognized that the Association was  seeking  by  injunction  to
enforce a covenant against one homeowner, while at the same  time  declining
to enforce against two other homeowners a near-identical  violation  of  the
same covenant.  One of the violators just happened to be  a  member  of  the
Association’s Board of Directors.  It  may  indeed  be  the  case  that  the
“[a]lleged selective enforcement of restrictive covenants is clearly  not  a
violation of the restrictive covenant forbidding  outbuildings  and  may  be
remedied  by  the  ballot  box  of  the   association   officer   election.”
Wedgewood, 781  N.E.2d  at  1179.   The  question  however  is  whether  the
selective enforcement in  this  case  was  inequitable  and  improper,  thus
barring the Association’s claim for equitable relief.   Declining  to  grant
the Association’s complaint for injunction, the trial  court  answered  yes.
The denial of an injunction lies within the sound discretion  of  the  trial
court and will not be overturned unless it was arbitrary or amounted  to  an
abuse of discretion.  Stewart v. Jackson, 635  N.E.2d  186,  189  (Ind.  Ct.
App. 1994).  Here the trial court’s judgment was not clearly  erroneous  and
its decision was neither arbitrary nor an abuse of  discretion.   We  should
grant transfer and say so.

Dickson, J., concurs.

