Unclean Hands is a legal principle that requires a good conduct on the part of a plaintiff seeking equitable relief. The plaintiff’s conduct must have been fair, equitable, and honest as it pertained to the controversy at issue. The Unclean Hands Doctrine is intended as a means of protecting the integrity of the Court and is based on the principle that courts should not provide relief to a party that acted unethically.
Within the context of foreclosures, the unclean hands doctrine has been subject to changing applicability. Traditionally, Unclean Hands was a defense to a foreclosure when the plaintiff’s actions were dishonest, unfair, or in bad faith. However, in such cases, Unclean Hands was only a defense when the dishonest conduct was attributed to the contract’s formation, validity, and enforcement. In other words, the defense was limited to allegations of bad conduct pertaining to the formation of the contract. Allegations attributed to the post formation stage could not be defended with a claim of Unclean Hands.
Over time, the applicability of Unclean Hands has expanded to allegations unrelated to the formation and validity of the contract. In such instances, the defense was available as long as the alleged conduct was directly and inseparably connected to the foreclosure action. An example of such post-formation bad conduct would be intentional misrepresentations made in bankruptcy proceedings
Even more recently, the Courts have clarified that, although post-formation conduct can be the basis of an unclean hands defense, the identified conduct must have prejudiced the defendant. In other words, the bad conduct must have been responsible for worsening the defendant’s positioning. This distinction is significant because, although there may have been some bad conduct or egregious mistake made by the plaintiff, the defendant cannot rely upon that bad conduct as a defense unless that defendant suffered from that bad conduct.