“Unclean Hands” in Debt Litigation
How does the equitable doctrine of “unclean hands” show up in debt litigation? Can you use it in your defense? Yes… sometimes. And it might be used against you, too – although rarely with effect. The basic idea behind unclean hands is that the party with the dirty hands did something specifically that would make court intervention on his or her behalf wrong. This often, but not always, translates into some action related to the claim in question that either profits the person bringing suit or prejudices the other’s right or ability to defend unfairly.
Introduction
Like laches, the doctrine of “unclean hands” it is an equitable doctrine that has its roots in English history. And like laches, it is rarely considered, but potentially useful, in defending debt litigation.
What are “Unclean Hands?
Unclean hands are hands (figuratively speaking) soiled by some sort of wrongdoing. If your hands are “unclean,” you may not ask the court to assist you because the court is supposed to maintain a higher integrity and will not be a party to immorality or injustice.
The doctrine of unclean hands as we know it got its start in England. In English law, the law was long considered a sort of absolute, and if you could comply with the absolute words of a statute (law), you could invoke the remedy of the law regardless of how the legal wrong had occurred. Over time, the courts became aware that simple adherence to the law could sometimes lead to serious injustice, and “equity” was born. That was the idea that the court could take a look at the overall situation and should not allow itself to be a pawn in someone’s immoral game even if that game fell within the letter of the law.
Considering the difficulty of applying “morality” uniformly or predictably in as large a country as ours, courts have striven to define uncleanliness more tightly, and this has tended to merge the concepts of law and equity considerably. But there are differences.
Unclean Hands in Modern Law
The most obvious application of “unclean hands” is the well-established notion that the court will not enforce an illegal contract. The Mafia would not be able to sue a hitman for damages for failing to carry out an assassination, for example. Their remedies, if any, would be strictly “extrajudicial”–not necessarily an advantage for the incompetent hitman.
Unclean Hands in Debt Law
The doctrine of unclean hands comes up often in foreclosure law, as a party is supposedly not entitled to profit from a wrong it caused itself. Suppose you have a mortgage you’re paying which includes an escrow for taxes, for example. This is very common, and the mortgage provides that the bank will, according to certain formulas, determine that escrow and add an appropriate amount to the loan payment amount. Mortgage agreements often also provide that partial payments need not be accepted by a bank and that there is no “legal” defense to foreclosure for failure to make payments as required by contract.
If the bank wrongly increases the escrow by miscalculating the taxes, it could raise the payments due to a level beyond your ability to pay. If you then continued making the correct payments, the bank might refuse to accept those payments and put you into foreclosure. Unclean hands might be the doctrine that could stop that foreclosure: the bank itself caused the inability to make payments. Because the courts have not always applied the doctrine, Congress stepped up with various laws (e.g., the Truth in Lending Act, among others) to add to consumers’ protection.
Unclean Hands in Credit Card Debt Law
Another possible application of the doctrine might be the ways the banks apply what is called the “universal default” provision which they so often sneak into credit card applications. According to the universal default provision, a default in payment to one creditor can be, but does not have to be, considered a default on all creditors. In other words, if you are disputing a bill with one credit card and allow it to go into default, that default might trigger default in another, unrelated credit card. When that happens, the second bank might raise its interest rates from 9% to 30%. In theory this is to cover for the increased risk of default of a troubled debtor, but in reality it is intended, as so many aspects of the credit card agreements are, to profiteer from somebody’s mistake,
At some point, a court might consider that sort of exploitation “unclean” and deny a bank the use of the courts to carry it out. Because the doctrine might also equally apply to many of the fees and charges the banks heap onto delinquent accounts, a debt defendant should always consider adding the unclean hands defense. And this would be especially true where a debt collector’s illegal actions, for example a communication to an employer, actually hampered the consumer’s ability to make the payments supposedly owed.
For More Equitable Doctrines
Click here to read about what equitable doctrines are – estoppel, issue or claim preclusion (court doctrines that prevent you from relitigating issues you either have, or should have, argued in front of court) and how they might apply to your case.
Equitable Defense – Unclean Hands
“Unclean Hands” in Debt Litigation
How does the equitable doctrine of “unclean hands” show up in debt litigation? Can you use it in your defense? Yes… sometimes. And it might be used against you, too – although rarely with effect. The basic idea behind unclean hands is that the party with the dirty hands did something specifically that would make court intervention on his or her behalf wrong. This often, but not always, translates into some action related to the claim in question that either profits the person bringing suit or prejudices the other’s right or ability to defend unfairly.
Introduction
Like laches, the doctrine of “unclean hands” it is an equitable doctrine that has its roots in English history. And like laches, it is rarely considered, but potentially useful, in defending debt litigation.
What are “Unclean Hands?
Unclean hands are hands (figuratively speaking) soiled by some sort of wrongdoing. If your hands are “unclean,” you may not ask the court to assist you because the court is supposed to maintain a higher integrity and will not be a party to immorality or injustice.
The doctrine of unclean hands as we know it got its start in England. In English law, the law was long considered a sort of absolute, and if you could comply with the absolute words of a statute (law), you could invoke the remedy of the law regardless of how the legal wrong had occurred. Over time, the courts became aware that simple adherence to the law could sometimes lead to serious injustice, and “equity” was born. That was the idea that the court could take a look at the overall situation and should not allow itself to be a pawn in someone’s immoral game even if that game fell within the letter of the law.
Considering the difficulty of applying “morality” uniformly or predictably in as large a country as ours, courts have striven to define uncleanliness more tightly, and this has tended to merge the concepts of law and equity considerably. But there are differences.
Unclean Hands in Modern Law
The most obvious application of “unclean hands” is the well-established notion that the court will not enforce an illegal contract. The Mafia would not be able to sue a hitman for damages for failing to carry out an assassination, for example. Their remedies, if any, would be strictly “extrajudicial”–not necessarily an advantage for the incompetent hitman.
Unclean Hands in Debt Law
The doctrine of unclean hands comes up often in foreclosure law, as a party is supposedly not entitled to profit from a wrong it caused itself. Suppose you have a mortgage you’re paying which includes an escrow for taxes, for example. This is very common, and the mortgage provides that the bank will, according to certain formulas, determine that escrow and add an appropriate amount to the loan payment amount. Mortgage agreements often also provide that partial payments need not be accepted by a bank and that there is no “legal” defense to foreclosure for failure to make payments as required by contract.
If the bank wrongly increases the escrow by miscalculating the taxes, it could raise the payments due to a level beyond your ability to pay. If you then continued making the correct payments, the bank might refuse to accept those payments and put you into foreclosure. Unclean hands might be the doctrine that could stop that foreclosure: the bank itself caused the inability to make payments. Because the courts have not always applied the doctrine, Congress stepped up with various laws (e.g., the Truth in Lending Act, among others) to add to consumers’ protection.
Unclean Hands in Credit Card Debt Law
Another possible application of the doctrine might be the ways the banks apply what is called the “universal default” provision which they so often sneak into credit card applications. According to the universal default provision, a default in payment to one creditor can be, but does not have to be, considered a default on all creditors. In other words, if you are disputing a bill with one credit card and allow it to go into default, that default might trigger default in another, unrelated credit card. When that happens, the second bank might raise its interest rates from 9% to 30%. In theory this is to cover for the increased risk of default of a troubled debtor, but in reality it is intended, as so many aspects of the credit card agreements are, to profiteer from somebody’s mistake,
At some point, a court might consider that sort of exploitation “unclean” and deny a bank the use of the courts to carry it out. Because the doctrine might also equally apply to many of the fees and charges the banks heap onto delinquent accounts, a debt defendant should always consider adding the unclean hands defense. And this would be especially true where a debt collector’s illegal actions, for example a communication to an employer, actually hampered the consumer’s ability to make the payments supposedly owed.
For More Equitable Doctrines
Click here to read about what equitable doctrines are – estoppel, issue or claim preclusion (court doctrines that prevent you from relitigating issues you either have, or should have, argued in front of court) and how they might apply to your case.
Conducting Discovery in Debt Cases
This video discusses the things you need to know – and how you find them – as you begin the discovery process. Things like interrogatories, requests for production and requests for admissions, and even depositions. These are the things you need in order to prove that the debt collector doesn’t have a case.
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Denying Requests for Admission
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Preparing for Deposition Part 1
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Preparing for Deposition Part 2
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Discovery – Interrogatories
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Rule-Mandated Discovery
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Three Questions and Answers about Discovery Part 2
When Does the Process Begin, What Is the Court’s Role, and How Do the Methods of Discovery Relate to One Another?
Click Here for Part One of this Article.
I get certain basic questions about the discovery process quite often.
The answers aren’t always clear, but this article will answer these questions to the extent they can be answered.
What Is the Relationship between Interrogatories, Requests for Documents, and Requests for Admissions?
The discovery methods have no necessary connection, although you might notice that most requests for documents ask the other side to produce all documents “identified in your responses to interrogatories,” and many interrogatories from debt collectors ask you to explain why you denied any request for admission. I don’t usually suggest the question about requests for admissions because the only reason for denying a request for admission is that you don’t know it to be true. Period. But maybe a more sculpted question: “for every request for admission you denied, if you believe it to be untrue, state every reason…” Worth a shot, maybe.
In any event, all the methods of discovery are aimed at the same goals – to learn from the other side any information they have that either helps their case; hurts their case; helps your case; or hurts your case. Since you want them to tell you what that information is and how you can get it, or you want them to give you any of that information that is in their possession, it does make sense to connect your interrogatories and requests to make them do that.
What is the Court’s Involvement in the Discovery Process?
No Real Involvement in Most Jurisdictions
In most jurisdictions, there is no court involvement in the discovery process unless and until a motion to compel becomes necessary. Even in those jurisdictions, a lot of people will send a “notice of service of discovery” which simply informs the court of the date and type of service certain discovery was served on the other side: “On this date, defendant served his first set of interrogatories, requests for admissions, and requests for production on plaintiff by first class mail, postage prepaid, at the address noted below as the service address.” You can find an example in the document bank.
In Rare Jurisdictions
In a very few courts – I just heard of one last week for the first time – the courts still take copies of the discovery. That’s a question you could ask a court clerk and probably get an answer, because if they don’t want it, they really don’t want it.
How Most Courts Oversee Discovery
What happens is simple. You serve discovery and the other side answers or objects. In debt law cases, the debt collector will always object to everything, or almost everything, you ask. If you take no further action, nothing will happen. No one looks out for you! If you want to force the debt collector to answer, you must file a motion to compel (and typically you have to send them a “good-faith” letter to try to get them to agree to answer, first). Then you attach all your discovery requests and their answers and objections, and file it with the court. That’s the first time the court will see it, so your motion to compel has to be thorough and complete.
And there’s more. After the other side responds, you will need to “call” (schedule your motion with the court) and argue it in front of the judge in order to get the court to rule. The court will either sustain their objections or overrule them and order them to answer the requests. If it orders them to produce answers, it will usually give them a little time to do that.
Three Questions and Answers about Discovery
When Does the Process Begin, What Is the Court’s Role, and How Do the Methods of Discovery Relate to One Another?
I get certain basic questions about the discovery process quite often.
The answers aren’t always clear, but this article will answer these questions to the extent they can be answered.
When Does Discovery Begin?
The simplest answer to this question is no answer at all: Discovery begins when the Rules of Civil Procedure for your jurisdiction say it begins. I have discovered that the discovery process begins at very different times for different courts.
Federal Courts
In the federal courts, the defendant can serve discovery immediately upon being served with the summons, whereas the plaintiff must wait for some time before beginning the discovery process. I guess this is a way of allowing a defendant to focus on investigating the complaint and filing an answer.
Most State Courts
In most state courts, the parties can begin discovery at the same time, either immediately or after some period of time, usually thirty days after service. In debt law cases, though, I have rarely observed that debt collectors begin discovery as quickly as they could. My guess is that they are hoping everybody will default (and most defendants do), so it would be wasteful to start the discovery process before the time for default has passed. This gives a defendant an advantage to begin the discovery process before the debt collector does, and this advantage should not be allowed to slip away.
Some State Courts
In some state courts, most often courts of limited jurisdiction (i.e., for smaller amounts, as most debt cases are), the parties are not allowed to begin discovery without an order of the court that allows it. I think this is a terrible rule. But regardless of my opinion, you need to know if that’s the rule in your jurisdiction, and if it is you need to seek an order permitting discovery as quickly as possible. Remember that discovery is an important part of your defense. There is even one jurisdiction of which I am aware where no discovery is allowed at all. In this jurisdiction, though, you can seek a trial “de novo” if you are not happy with the result. That is, you can start the whole case over in a higher up court that does allow discovery. In Maryland, on the other hand, discovery begins immediately upon service of the suit – and ends about a month later – unless you receive permission from the court.
The important “take-away” from all this is that state laws vary, and you need to know your state’s law as soon as possible. Not finding this out is asking for trouble.
Click here for the rest of this article
Motions for Summary Judgment
Responding to Motions for Summary Judgment
Motions for Summary Judgment are among the most lethal weapons facing you as a pro se debt defendant. This video discusses what they are, how to protect yourself from them, and how you could use them to your advantage.
Click here for a related series of articles.