Claire v. Rue De Paris, Inc.
236 S.E.2d 272, 239 Ga. 191, 1977 Ga. LEXIS 857 (1977)
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Rule of Law:
Under the 'unclean hands' doctrine, a shareholder who has participated in or acquiesced to the illegal or fraudulent corporate acts of which they complain is barred from seeking equitable remedies, such as corporate dissolution.
Facts:
- The plaintiff was a shareholder, owning 33 1/3 percent of the outstanding shares in two restaurant corporations, Rue de Paris, Inc. and another.
- The plaintiff and two other principals organized the corporations, and the plaintiff was initially in charge of the day-to-day operations of one restaurant.
- The corporations engaged in several illegal practices, including selling alcoholic beverages on Sundays, serving 'watered down' drinks to customers, and voiding cash sales on the register to conceal income.
- The plaintiff admitted to participating in wrongful conduct alongside the other principals, including taking $50 in cash from the business each week.
- The plaintiff also admitted to taking money from the cash register for his friends' drinks, charging personal expenses to the company, taking food and liquor for personal consumption, and giving away a case of company wine.
Procedural Posture:
- The plaintiff, a shareholder, filed identical lawsuits against two corporations, Rue de Paris, Inc. et al., in the Superior Court of Fulton County, Georgia (a trial court).
- The plaintiff sought an injunction and the dissolution of the corporations based on alleged illegal and fraudulent acts by those in control.
- After discovery, the defendant corporations each filed a motion for summary judgment.
- The trial court granted summary judgment in favor of the defendant corporations in both cases.
- The plaintiff (appellant) appealed the trial court's grant of summary judgment to the Supreme Court of Georgia, with the corporations as appellees.
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Issue:
Does the 'unclean hands' doctrine bar a shareholder from seeking the equitable remedy of corporate dissolution when that shareholder has participated in the same illegal and fraudulent acts that form the basis of his complaint?
Opinions:
Majority - Bowles, Justice
Yes. The 'unclean hands' doctrine bars a shareholder from obtaining equitable relief when he has participated in the very wrongdoing that forms the basis of his complaint. The court reasoned that a party who seeks to use the court's equitable powers must come with 'clean hands.' The plaintiff readily admitted to taking money and property from the corporation for personal use, acting in concert with the other officers he now sues. Because the plaintiff participated in the performance of the acts he complains about, he is estopped from seeking equitable relief. The court will not intervene on behalf of a party who has violated conscience or good faith in his prior conduct related to the lawsuit.
Dissenting - Hall, Justice
The opinion notes that Justice Hall dissents but does not include a written dissenting opinion.
Analysis:
This case serves as a straightforward application of the 'unclean hands' maxim within corporate law. It solidifies the principle that a shareholder's right to sue for corporate dissolution due to fraud or illegal acts is not absolute. The decision establishes that a plaintiff's own complicity in the alleged wrongdoing is a complete defense to a suit seeking equitable relief. This precedent reinforces that courts of equity will not be used as a tool for co-conspirators to resolve disputes arising from their own mutual misconduct, thereby protecting the integrity of the judicial process.
