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Kauffman-Harmon v. Kauffman12/3/2001
or her property to be transferred to another for the purpose of defrauding creditors. The evidence in this case reveals that Dr. and Mrs. Kauffman knowingly transferred assets to the family corporation, in part, to circumvent judgment creditors and in part, to avoid estate taxes. Here, the evidence also establishes that Dr. Kauffman failed to carry insurance on his medical practice and subsequently protected his corporate assets from judgment creditors by transferring his ownership interest in the corporation to his wife. Further, when Dr. Kauffman transferred his stock to Mrs. Kauffman, the stock certificates were backdated to appear that the stock transfer occurred significantly prior to the medical malpractice judgment to prevent his victims in that case from levying those assets. Subsequently, Dr. Kauffman specifically testified that he had no control or ownership over the assets of the corporation to prevent the judgment creditors from reaching those assets. Consequently, Dr. and Mrs. Kauffman's willful actions are sufficient to invoke the clean hands doctrine.
Moreover, Elizabeth and Rebecca will not be unjustly enriched by the utilization of the clean hands doctrine. Elizabeth and Rebecca were gifted stock in the corporation, accepted the stock ownership and have relied on their ownership over the past number of years. As shareholders, Elizabeth and Rebecca have expended substantial amounts of personal time and finances. Dr. and Mrs. Kauffman cannot now attempt to controvert their previous actions which disposed of their assets to defraud Dr. Kauffman's creditors and prevent execution on their property.
We thus conclude that Dr. and Mrs. Kauffman are barred from asserting their claims by the clean hands doctrine. To deny such relief would permit Elizabeth and Rebecca, as well as the other shareholders of the corporation, a gross wrong at the hands of Dr. and Mrs. Kauffman who brought about this condition. See ยง 1-3-208, MCA.
Because Dr. and Mrs. Kauffman's claims are barred we need not address subsequent issues. We remand this case for a full trial on the remaining claims.
Reversed and remanded for further proceedings consistent with this Opinion.
JIM REGNIER
We Concur:
TERRY N. TRIEWEILER
W. WILLIAM LEAPHART
JAMES C. NELSON
PATRICIA COTTER
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