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UNIVERSITY
OF DETROIT MERCY
LAW REVIEW
VOLUME SEVENTY-FOUR ISSUE FOUR SUMMER 1997
Equitable Remedies and Principled
Discretion: The Michigan Experience
KEVIN C. KENNEDY"
I. INTRODUCTION
The term "equity" is often misunderstood and, as a consequence, often misapplied by courts when asked to grant an equitable remedy. In abroad jurispmdential sense, equity means the power to do justice in a particular case by exercising discretion to mitigate the rigidity of strict legal mles. In this broad sense, equity means the power to adapt the relief to the circumstances of the particular case, "individualized justice," in effect. However, equity jurispmdence is not an open- ended system of boundless discretion vested in a single judge. Professor Zechariah Chafee, one of the leading writers on equity, once remarked in the context of a court sitting in equity, "0, it is excellent [t]o have a giant's strength; but it is tyrannous [t]o use it like a giant."l In more prosaic terms, equity is not a roving commission that empowers a judge to dispense his or her own brand of justice in a
particular case as he or she sees fit. The Michigan Supreme Court
made this very point some 35 years ago: [N] 0 court of chancery would consciously attempt to correct the severity of the law, or to supply its defects, to any extent or under any circumstances, "beyond the already-settled principles of equity jurispmdence." Of course this is true. No one has ever suggested, so far as our reports disclose, that
'" Professor of Law, Detroit College of Law at Michigan State University. J.D. 1977, Wayne State University Law School; LLM. 1982, Harvard Law School.
- ZECHARIAH CHAFEE,jR., SOME PROBLEMS OF EQUI1Y 303 (1950).
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any chancellor of Michigan should step beyond or over the
settled principles of equity. 2
All writers on the subject of equity, regardless of their philosophi- cal persuasion, agree that the terms "equity" and "equitable" are difficult to define. The loose use of the terms "equity" and "equitable" to mean "fair," "compassionate," and "flexible" has resulted in decisions by equity courts whose rationale remains hidden when "equity" is offered as the reason for the decision. For a court to say that it has decided to relieve a party from a contract because the
bargain was too hard and rest that decision on the ground of "equity"
says nothing about equitable principles, equitable precedents, or equitable remedies. A decision that rests solely on "equity" is an analytically naked, and analytically suspect, decision. It is a decision that rests on nothing more than the judge's subjective feelings of what is fair under the circumstances. While one of the hallmarks of equity is its flexibility, it is a flexibility that is exercised against a backdrop of specific rules on fraud, misrepresentation, mistake, duress, undue influence, unreasonable delay, and estoppel. In Anglo-American law equity means the system of distinctive concepts, doctrines, rules, and remedies developed and applied by the court of Chancery in England and by American courts sitting in equity. In short, "equity" and "equitable" refer to the whole body of equitable precedent and practice which lawyers and judges can only understand once they know such precedent and practice. Thus, for example, when an equity court grants an equitable remedy, that term has a precise meaning. It refers to a remedy such as an injunction, an order reforming a contract, an order rescinding a contract, or an order requiring specific performance of a contract. To gain a better appreciation of modem equity, a helpful start would be to review the origins of equity.
II. WHAT ARE THE ORIGINS OF EQUI1Y? Two systems of courts once existed in Anglo-American law. One court system was the law courts presided over by judges. The other court system was the equity court presided over by the Chancellor. The Chancellor, who was a high minister of the king and often a bishop of the church, invented a body of substantive rules and remedies which in effect (but not in theory) could trump the decisions of the law courts. In attempting to define "equity," most commentators provide an historical answer-which is in effect no answer-that equity is the system ofjurisprudence originally adminis-
- Spoon-Shacket Co. v. Oakland County, 97 N.W.2d 25, 30 (Mich. 1959) (citation omitted).
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petItIoners. Equity in its early days was indeed a "roguish thing." The Chancellor gradually became a judicial officer and his department, the Chancery, a court for dispensing remedies not available in the law courts. The remedies available in the courts oflaw had narrowed. Relief was inevitably retrospective and in the form of damages. No prospective relief of any kind was available. For example, reformation of contracts for mutual mistake was not available. The contract either was enforced as written or was completely invalidated. As the number of appeals to the king grew, so too did the court of Chancery. The court of Chancery rose to the meet the exigencies of the day by providing preventive (injunctive) relief and specific relief. That this court was attempting to do "equity," that is to accomplishjustice, gave rise to the term "equity" as the designation for the system of jurisprudence involved, and the court that dispensed it as a court of equity. In court systems such as Michigan's that have merged legal and equitable procedure into one form of civil action in a single court with both legal and equitable powers, the term "a court of equity" means the merged court exercising its equity powers. Over time, law courts were perceived as being "writ-bound." The effect was that the less rigid equity courts became increasingly popular with litigants. A rivalry soon developed between the law courts and chancery,7 reaching a point where the two court systems often issued contradictory rulings in the same matter. 8 This state of affairs finally came to a head in the seventeenth century when King James I ordered the Lord Chancellor Ellesmere and the Lord Chief Justice Coke to submit their dispute to the Attorney General, Sir Francis Bacon. 9 The crux of the dispute was that Coke attempted to prohibit the Chancel- lor, Ellesmere, from enjoining enforcement ofjudgments rendered by the law courts. King James I, an autocrat of the highest order, naturally favored his Chancellor over the Chief Justice, much to the contrary, Coke was a supporter of Parliament and believed that the King was subject to common law. To no one's great surprise, Bacon recommended that, in the event of a conflict, equity should prevail. 10 The King accepted Bacon's recommendation, and the attractiveness of equity has persisted ever since.
6. Id. at 61 (quotingJ. Selden, Table Talk (Pollock Ed. 1927».
- John J. Farley, III, Rabin Hood Jurisprudence: The Triumph ofEquity in American Tort Law, 65 ST.JOHN'S L. REv. 997,1001 (1991). _8. Id.
- Id.
- See_ John P. Dawson, Coke and Ellesmere Disinterred: The Attack on the Chancery in 1616, 36 ILL. L. REv. 127, 137 n.43 (1941).
1997] EQUITABLE REMEDIES IN MICHIGAN 613
A. When a Court is Asked to Grant Equitable Relief, What Factors Guide
the Court in the Exercise of Its Discretion?
During the period of its greatest development, Chancery viewed the chief function of equity as a vehicle for mitigating the harshness and smoothing the rough edges of the common law in those cases where the Chancellor believed that such mitigation was required by conscience or natural law. From equity's earliest days, one can find biting criticisms about the flexibility of equity, probably the most famous of these being John Selden's indictment that the chancellor's conscience varied with the length of his foot. In a similar vein in this country many years later, Chief Justice Fuller was quoted as saying, "Brother B. would codify all laws in an act of two sections: 1st, All people must be good; 2d, Courts of equity are hereb~ given full power and authority to enforce the provisions of this act." 1 Many commentators would argue that even in Selden's day the criticisms of equity courts were probably overblown. In any event, Selden's and Fuller's shaft eventually went home, but the message reached the brain of the beast only after years and years of equity decisions. Their criticisms are clearly inaccurate today. The develop- ment of a court system with unbridled discretion would have been intolerable in any free society such as the United States, and no court of equity would have survived had it exercised the kind of unfettered, free-wheeling power of which Selden and Fuller complained. Even in the early days of equity's development, a court of equity did not exercise unfettered discretion. The equity courts insisted on citation of legal authorities. In that sense, "equitable" referred simply to the body or precedent and practice of equity courts and the remedies administered by those courts, and not to some vague, subjective notion of fairness, morality, or justice. The single most important characteristic of equitable relief to emerge as the system of equity developed was-and to this day still is-that such relief is deemed extraordinary, not ordinary. The first corollary to this axiom is that equitable relief was, and is, considered a matter of judicial discretion, not a matter of right. Thus, a party who sought equitable relief could not demand it as a matter of right simply upon a showing of specific facts that would fit the case into one for equitable relief. This is what commentators mean when they say that granting or denying equitable relief is within the discretion of the court. They do not mean that the court has the power to grant equitable relief in every type of case presented as the spirit moves the
- Charles Nobel Gregory, Government by Injunction, 11 HARv. L. REv. 487, 510 (1898).
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Beyond fundamental common law principles of deciding like cases in a like manner based on precedent, there is also a serious due process consideration that an equity court must factor into its
decision-making process. As noted by the 4th Circuit in Mattison v.
Dallas Carrier Corp.I4:
The first principle of due process embraces a rule of law which contains standards that can be known in advance, conformed to, and applied rationally. The doctrine of the supremacy of law is "a doctrine that the sovereign and all its agencies are bound to act upon principles, not according to arbitrary will; are obliged to follow reason instead of being free to follow caprice." Professor Dan Dobbs has made similar observations regarding the role of discretion in equity: The chancellor's discretion to deny relief is a peculiar tradition to encounter in a democratic society where citizens possess rights under the law, not merely the hope of indul- gence .... Few American citizens, however, would think of them- selves in court as humble petitioners, on their knees before the judge who may deny relief on grounds that cannot be stated as principles or applied even-handedly to all suitors. 16 Can the exercise of discretion by a judicial officer be reconciled with the concept that we hold as fundamental that we are a society whose members have rights under law? Only if the judge exercising that discretion is very wise, and the range of discretion is very narrowly circumscribed. Adherence to precedent and to the principles of equity will prevent courts from legislating through the exercise of equitable powers and will force them to reach decisions that have reasoned regularity.I
C. Why Shouldn't a Judge Reach a Decision That He Sincerely Believes is
Fair, Moral, and Just?
Why in all cases involving the exercise of equitable powers shouldn't a judge reach a decision that he sincerely believes is fair, moral, and just-in other words equitable-under the circumstances? A system of justice that permits an equity court to dispense justice as it sees fit in a given case without the constraints of legal rules and
- 947 F.2d 95 (4th Cir. 1991). 15. Id. at 101 (quoting ROSCOE POUND, THE SPIRIT OF THE COMMON LAw 183 (1963».
- !DOBBS, supra note 4, § 2.4(7), at 115. 17. See GEORGE KEETON,JUDGING 112 (1990).
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principles allows courts to decide cases as their biases and attitudes dictate, without analysis and without law. While it is true that judges do not generally act in bad faith, judges are not free to act without stated reasons. Without reliance on guidelines and meaningful rules, judges who instead reach decisions based merely on their intuitive feel of what the right thing to do is in a case will leave lawyers at a loss about the proper evidence to introduce and the legal arguments to make, one of the main advantages of rules and principles. More importantly, in a system of unlimited discretion judges do not have to explain themselves, either as to how they reached their decision or in public justification for what they do. By hiding the process ofjudging from public scrutiny under the rubric of "discretion," no member of the public or the legal profession can evaluate the judge. Unlimited discretion makes possible decisions that are devoid of analysis, decisions that are neither explained nor thoughtful. In this connec- tion it is well worth keeping in mind the origins of equity: Equity originated in a society where authority counted more than democracy, and where the wishes of the powerful counted more than sound explanations for judicial action. That society is not the one within which an equity court operates today. When commentators and courts speak of the discretion of an equity court, they are not referring to the broad discretion of a common law court in the many matters committed to the judge's discretion in the course of a trial and which can only be reviewed for an abuse of discretion. The discretion of an equity court to grant or refuse equitable relief is regulated by well-settled principles. As a consequence, in the setting of equity, the standard of appellate review is far less deferential and is usually de novo. I
III. WHAT ARE THE ESTABUSHED PRINCIPLES AND MAXIMS OF EQUI1Y?
Equity developed a number of substantive maxims. I9^ The
18. See Lenawee County Board of Health v. Messerly, 331 N.W.2d 203 (Mich. 1982); See also Attorney General v. Ankersen, 385 N.W.2d 658 (Mich. 1986).
- The maxims have been formulated in different ways by different authors. This monograph deals with nine of the maxims that have been discussed in the Michigan case law. In his treatise, INTRODUCTION TO EQUITY, George Keeton lists fourteen maxims of equity: 1. Equity does not suffer a wrong without a remedy. 2. Equity regards substance rather than form. 3. Equity regards as done that which ought to be done. 4. Equality is equity. 5. Where the equities are equal, the first in time will prevail. 6. Where the equities are equal, the law will prevail. 7. Equity follows the law. 8. One who comes into equity must come with clean hands. 9. One who seeks equity must do equity. 10. Equity aids the vigilant not those who sleep on their rights. 11. Delay defeats equity. 12. Equitable remedies are given as a matter of grace or discretion, not right. 13. Equity acts in personam, not in rem. GEORGE KEETON, INTRODUCTION TO EQUIlY 87-117 (6th ed. 1965).
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estoppel, discussed below. Illustrative is Kent v. Klein,24 where the Michigan Supreme Court imposed a constructive trust on property given by a mother to her daughter for the benefit of her incompetent son, the defendant's brother. The Court observed: [C] hancery will not permit one to enrich himself at the expense of another by closing its eyes to what is clear to the rest of mankind. Equity, to paraphrase, regards that as seen which ought to be seen, and, having so seen, as done that which ought to be done .... It is enough, to compel the surrender [of the property] , that one feed and grow fat on that which in good conscience belongs to another, that he enjoy a windfall resulting in his unjust enrichment, that he reap a profit in a situation where honor itself furnishes rich reward .... 25
B. Equity Looks to the Intent, Rather Than to the Form Illustrative is Charles E. Austin, Inc. v. KeUy.26 There, the Michi- gan Supreme Court disregarded the distinct corporate form of two entities that had common ownership where the two corporations were created as devices to violate and evade state tax law. 27
C. He "'Who Seeks Equity Must Do Equity This maxim of equity simply means that a plaintiff who seeks equitable relief must be prepared to return the defendant to the status quo ante, or be barred from such relief. Where the plaintiff is unable to restore the defendant to the status quo ante, rescission or cancella- tion of an agreement will be denied. This maxim-which is designed to prevent the u~ust enrichment of the plaintiff at the expense of the defendant-has found expression in several reported Michigan cases. Most of these deal with quiet title actions, foreclosure actions, and suits for rescission of contracts induced by defendant's fraud. Illustrative are Grabendike v. Adix,28 and Michigan Mobile Homeowners Ass'n v. Bank of the Commonwealth. 29 In Grabendike, the plaintiffs delayed in seeking rescission of mineral leases until after the leased property proved to have no oil. The value of the leases was thus drastically reduced. The Michigan Supreme Court denied the plaintiffs' request for rescission of the leases because the plaintiffs
- 91 N.W.2d 11 (Mich. 1958). 25. [d. at 13-14. See also Warren Tool Co. v. Stephenson, 161 N.W.2d 133 (1968).
- 32 N.W.2d 694, cm. denied, 335 U.S. 828 (1948). 27. [d. at 697. ACCQTd Duro Steel Products, Inc. v. Neubrecht, 6 N.W.2d 474, 476 (Mich. 1942).
- 55 N.W.2d 761 (Mich. 1952).
- 223 N.W.2d 725 (Mich. 1974).
1997] EQUITABLE REMEDIES IN MICHIGAN 619
could not restore to defendant the leases 'with the same value they had as when the plaintiffs received them, stating: The mere inability of the plaintiff to make restoration does not relieve him of his obligation to do so, or permit the court to grant him relief.... Where the circumstances of the case are such that the parties cannot be placed in substantially the same situations they occupied when the contract was made, as a general rule a court of equity will not rescind the contract .... 30 In the Michigan Mobile Homeowners Ass'n decision, the plaintiffs sought rescission of installment purchase contracts that provided for an allegedly usurious rate of interest. The Michigan Court of Appeals refused to rescind the sales contracts because, inter alia, the plaintiffs had failed to do equity, namely, tender the unpaid balance plus interest at the legal rate. 31
D. He Who Comes Into Equity Must Come With Clean Hands
The "clean hands" maxim, together with the doctrine of laches and estoppel (both of which are discussed below), is one of the three principal defenses to requests for equitable relief. The clean hands ma."'(im is most often cited in contract cases. 32 It requires that plaintiffs seeking equitable relief must themselves be free of any unconscionable conduct. Application of the maxim is thus not restricted to illegal, void, or voidable transactions only.33 At the other end of the misconduct spectrum, however, mere negligence on plaintiff's part will not trigger the application of the clean hands maxim.^34 The clean hands defense exists not so much for the benefit of the defendant who will, of course, directly benefit if the defense is successful in blocking a plaintiff's request for equitable relief, but rather is for the protection of the court to ensure that it does not expend its time and public resources in determining how the proceeds of an inequitable transaction should be awarded. An equity court "must decline to lend its aid to either party to a transaction that in its inception offends concepts of decency and honest dealing.,,35 Since the clean hands maxim is designed to preserve the integrity of the
30. Grabimdike, 55 N.W.2d at 767 (citation omitted).
- Mich. Mobile Homeover Ass'n, 223 N.W.2d at 731. 32. See EDWARD YORIO, CONTRACT ENFORCEMENT: SPECIFIC PERFORMANCE AND INJUNCTIONS § 5.9 (1989).
- Stanchik v. Winkel, 230 N.W.2d 529,534 (Mich. 1975). 34. See Attorney General v. Ankersen, 385 N.W.2d 658, (Mich. Ct. App. 1986).
- New York Football Giants, Inc. v. Los Angeles Chargers Football Club, Inc., 291 F.2d 471, 472 (5th Cir. 1961).
1997] EQUITABLE REMEDIES IN MICHIGAN 621
"equality is equity.,,
R Where There Are Equal Equities, The First In Time Shall Prevail This equitable maxim is so time honored and well understood that the courts have seen little need to expound on it (as reflected in the dearth of reported cases that discuss or analyze the maxim). The principle is simple: As between two equally innocent persons, both of whom have acted in good faith, to whom should a remedy be given? Equity employs the "first-in-time" rule as the tie-breaker. 44
G. Where the Equities Are Equal, The Law Must Prevail
If two parties have equal, but conflicting, equities with regard to the same subject matter, and one of them also obtains legal right to that subject matter, an equity court will not upset that legal right. 45 The most commonly cited illustration of this maxim in operation involves cases where legal title to property that is subject to an equitable right (such as property held in trust) is sold to a bona fide purchaser for value without notice of the outstanding equity. As between the two parties holding the equitable right, the bona fide purchaser prevails because he holds legal title to the transferred property. Differences in time in the origin of the respective equities do not render them unequal. Consequently, this maxim trumps the maxim that where the equities are equal, the first in time shall prevai1. 46
H. Equity Aids the Vigilant, Not Those Who Slumber on Their Rights This eighth equitable maxim expresses the equitable doctrine of laches which is the policy in equity against delay in the assertion of rights, analogous to the common law policy embodied in the statute of limitations. Laches differs from limitations, however, in that
"limitations are concerned with the fact of delay," while "laches [is
concerned] with the effect of delay.,,47 The linchpin of the laches
defense is prejudice to the defendant as a result of plaintiff's lack of due diligence in bringing her claim. 4s^ For example, if all the
43. ld. at 105. 44. See Commercial Investment Trust v. Bay City Bank, 62 F.2d 735 (6th Cir. 1933).
- Hudson v. Village of Homer, 87 N.W.2d 72,76 (Mich. 1957).
- MCCLINTOCK, supra note 12, at 70.
- Lothian v. City of Detroit, 324 N.W.2d 9,14 (Mich. 1982) (quoting Sloan v. Silberstein, 141 N.W.2d 332, 340 (Mich. Ct. App. 1966»; See also Great Lakes Gas Transmission Co. v. MacDonald, 485 N.W.2d 129, 133 (Mich. Ct. App. 1992).
- Eberhard v. Harper-Grace Hospitals, 445 N.W.2d 469, 475 (Mich. Ct. App. 1989); See also City of Holland v. Manish Enterprises, 436 N.W.2d 398, 400 (Mich. Ct.
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witnesses to an event have died, or memories have faded, due to plaintiff's lack of due diligence, laches will be found to exist. McClintock succinctly summarizes the defense of laches as follows: Where a party has unreasonably delayed the assertion of an equitable claim until the other party has acted, or the circumstances have changed, so as to result in prejudice because of the delay, equity will hold the party claiming the right to be guilty of laches, and will deny relief to him. Along with the unclean hands doctrine discussed above, laches is the chief defense to equitable claims brought by a plaintiff who has unreasonably delayed his claim. It is closely related to the doctrine of estoppe1. 50 Historically, equity usually foreclosed a plaintiff from bringing a claim after the period equal to the analogous statute of limitations. The Michigan legislature codified the traditional rule by providing that the same limitations period applies equally to legal and equitable actions, thus eliminating a trial court's discretion to entertain an equitable claim after the applicable period of limitations has run. 51 This change is a reflection of the familiar principle that equitable relief will not be granted where there is an adequate remedy at law. Prejudice to the defendant is conclusively presumed if the plaintiff brings an action for equitable relief beyond the limitations period. By the same token, even though the analogous limitations period has not run, a trial court retains the discretion to dismiss a claim on the ground of unreasonable and prejudicial delay in bringing it.
L Equity Follows the Law Of all the equitable maxims discussed, the maxim that equity follows the law is perhaps the most important because it expresses a significant barrier to the grant of equitable relief: Equity cannot be used to deprive a person of a legal right. While equity in a proper case may reform a contract on the ground of mutual mistake of fact, or rescind a contract for fraud in the inducement or duress, equity cannot impose a new contract on the parties or supply deliberate omissions. According to the Michigan Supreme Court, "[i]t is fundamental that equity follows the law. The purpose of the rule is to prohibit vexatious litigation."52 An even more compelling explanation for this
App.1988).
- MCCLINTOCK, supra note 12, at 71.
- Seaman v. Ironwood Amusement Corp., 278 N.W. 51, 59 (Mich. 1938). 51. See MICH. COMPo LAWS ANN. § 600.5815 (West 1987).
- La Bour V. Michigan Nat'l Bank, 55 N.W.2d 838, 840 (Mich. 1952).
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always be raised when the facts warrant. Besides these three defenses that have across-the-board application, other specific defenses also exist. For example, defenses that are specific to the contract setting are mistake, misrepresentation, and unconscionability. These defenses will be discussed below. The three common defenses-equitable estoppel, unclean hands, and laches-are close relations of each other. For example, estoppel means that a party is "stopped" from claiming or saying something, even if it is the truth or a lawful claim, because of some prior inconsistent statement or activity that the other party relied on to his detriment. Similarly, the equitable doctrine of laches, as previously mentioned, bars a plaintiff who has unreasonably delayed asserting a claim where prejudice to the defendant would result. On the other hand, unlike the estoppel or laches defense, reliance or prejudice is not required to successfully raise the unclean hands defense.
1. Equitable Estoppel
Equitable estoppel seeks to prevent one person from gaining an advantage over another by misleading conduct. No single definition can govern every case, but at its core the doctrine of estoppel has four key elements. First, the actor, with knowledge of the facts, communi- cates something to another in a misleading way, either by words, conduct, or silence. Second, the other person reasonably relied on that communication. Third, the other person would be materially harmed if the actor is permitted to assert a claim inconsistent with his earlier conduct. Fourth, the actor should have known that the other party would rely on the misleading communication. 58 Although equitable and promissory estoppel share in common the element of inducement, what distinguishes equitable from promissory estoppel is
that with the latter there is detrimental reliance on a promise, whereas
with the former there is detrimental reliance on representations.
Because estoppel is so easy to invoke, and so likely to proceed without analysis, the use of estoppel may actually work an injustice. It is worth emphasizing that estoppel is not meant to put either party in a better than rightful position. And what is the rightful position of the parties? That cannot be judged without analysis, which should include an assessment of all the remedies available. Equitable estoppel should be applied only in cases where the facts calling for it and the wrong to be prevented are both unquestionable. 59
- 1DoBBS, supra § note 4, § 2.3(5) at 85. See, e.g., Dellar v. Frankenmuth Mutual Ins. Co., 433 N.W.2d 380 (Mich. Ct. App. 1988).
- 1 DOBBS, supra note 4, § 2.3(5), at 90.
1997] EQUITABLE REMEDIES IN MICHIGAN 625
2. Unclean Hands
The unclean hands defense has been discussed above. The defense is closely related to other equitable defenses, such as unconscionability in contracts. Like most of the equitable maxims, the term "unclean hands" can too easily become a substitute for analy- sis. 60 Its limitations must be clearly understood: it is a defense to equitable relief only, and not a bar to legal claims. In the words of Professor Dobbs: If judges had the power to deny damages and other legal remedies because a plaintiff came into court with unclean hands, citizens would not have rights, only privileges .... The merger of law and equity ... does not suggest that a judge has discretion to bar [legal] rights as well as to limit [equitable] remedies. 61 Dobbs suggests a three-step analysis to guide courts when asked to determine whether the plaintiff has unclean hands. 62 First, a court should ask whether the defense being invoked is really legal rather than equitable. For example, if the plaintiff attempts to enforce an illegal contract, then the analysis should proceed on the basis of the illegality defense not unclean hands. Second, if the defense is really the equitable one of unclean hands, then it should only bar equitable relief, not legal relief. Third, if the defense is purely the equitable one of unclean hands, then three subsidiary questions should be asked: (a) Is the misconduct serious? (b) Is the misconduct closely related to the claim such that it injured the defendant, or is it merely collateral to the claim? (c) Will invocation of the unclean hands defense interfere with the vindication of legal goals, such as support obligations? The plaintiff's misconduct need not rise to the level of a crime to successfully invoke the clean hands doctrine,63 although many cases in which the unclean hands defense is invoked are cases where the plaintiff's conduct was illegal. At the least, the plaintiff's improper conduct must be substantially and significantly related to the claim being asserted. Equitable relief is not reserved exclusively for saints. Sinners are also entitled to equitable relief. Moreover, to further corral the discretionary element inherent in ruling on the defense, the wrongdoing must have been directed against the defendant himself
- See Zechariah Chafee,jr., Coming Into Equity with Clean Hands (pts. 1 & 2), MICH. L. REv. 877, 1065 (1949) [hereinafter Chafee].
- !DOBBS, supra note 4, § 2.4(2), at 94. 62. Id. § 2.4(2), at 97-99. 63. Stachnik, 394 Mich. 375, 230 N.W.2d 529,534 (Mich. 1960).
1997] EQUITABLE REMEDIES IN MICHIGAN (^) 627
B. Generally, What Remedies Are Available From an Equity Court?
Equitable remedies can be divided into two kinds: coercive and
restitutio nary. Coercive, or injunctive, remedies are the most
common. Injunctions can be prohibitory, enjoining a defendant from
doing specific acts either permanently or provisionally pending the
outcome of the litigation; or mandatory, commanding a defendant to
perform specific acts. Examples of prohibitory injunctions include
ordering a defendant to cease a repeated trespass or to desist from
acts that constitute a nuisance. The classic mandatory injunction is,
of course, an order requiring the seller of land to specifically perform
the contract by conveying the land as promised. An injunctive order
always carries with it the implicit threat of being held in contempt of
court for violating the order.
The second broad category of equitable remedies is restitutionary
in nature. Restitutionary remedies prevent the defendant's unjust
enrichment at the expense of the plaintiff by requiring the defendant
to restore to the plaintiff something that belongs to him. When a
contract is rescinded, for example, each party must make restitution
of what she received under the contract. Reformation is also a form
of restitution: the defendant is required to return to the plaintiff the
agreement the parties actually entered into but for a mutual mistake
of fact.
Most equitable remedies and the manner in which they are
granted or denied can be illustrated in the contract setting. The
American legal system has a number of remedies that may be granted
for breach of contract. Most often, the injured party receives
compensation in the form of money damages. Specific performance
or an injunction is an alternative equitable remedy to an award of
money damages as a method of enforcing contracts. An order of
specific performance usually directs the party in breach to render the
promised performance. In the context of contract law, injunctions
usually take the form of an order directing a party to refrain from
doing a specified act. An example would be enforcing a covenant not
to compete throu~h an injunction directing the promisor to refrain
from competition. 0
Rescission, cancellation, and reformation of contracts are the
other alternative, and mutually exclusive, equitable remedies.
Rescission nullifies a contract completely and returns the parties to the
position they would have been in had no contract been made.
Rescission is the term generally used to void a contract that is
executory. Cancellation describes the remedy for rescinding wholly
- The subject of injunctions is discussed below.
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executed contracts, or voiding legal instruments such as deeds. The same rules apply to both remedies. Reformation may be granted if a contract contains a term that was the product of a mutual mistake of fact or of fraud. An equity court has the power to reform a contract to make it conform to the agreement the parties actually made, but the court cannot make a new contract for the parties.
1. When Should a Court Order Specific Performance?
It is axiomatic that the remedy of specific performance is an extraordinary remedy; that it is not available as a matter of right, unlike the legal remedy of money damages; and that the grant of the remedy is within the discretion of the court. Nevertheless, the exercise of that discretion must be based on established equitable principles 71 and can be reviewed de novo on appeal. In that respect, the discretion exercised by an equity court in granting or denying equitable relief must be carefully distinguished from the discretion the trial judge exercises in such matters as are committed to his discretion at the trial and which can be reviewed only for abuse of discretion, such as orders permitting the amendment of pleadings and discovery orders. These two kinds of discretion are a far cry from one another. While the deference accorded the trial judge is great in such matters, that same level of deference does not exist in the context of an equity court's grant or denial of equitable remedies. The less deferential standard of review in equity cases is based on the principle that the appellate court in equity is to render the decree that should have been rendered below. In short, equity discretion is not as wide ranging as some of the reported cases would lead the casual reader to believe. Moreover, to say that the remedy of specific performance is not available as a matter of right because it is an equitable remedy is too facile of a conclusion. That assertion overlooks a consistent line of cases involving the enforcement of contracts for the purchase ofland. In those cases, specific performance is routinely granted. Specific performance of a contract relating to personal property, on the other hand, is generally denied because of the adequacy of the legal remedy of damages. An exception exists where the property is unique, rare, or has sentimental value. 72 Section 716(2) of the Uniform Commer- cial Code authorizes specific performance where goods are unique, and cryptically adds that specific performance can also be granted in
- See Continental & Vogue Health Studios, Inc. v. Abra Corp., 120 N.W.2d 835 (Mich. 1963); Blackwell v. Keyes, 91 N.W.2d 190, 192 (Mich. 1958); MCCLlNfOCK, supra note 12, at 129.
- Bayer v.Jackson City Bank & Trust Co., 55 N.W.2d 746, 751 (Mich. 1952); Kent v. Bell, 132 N.W.2d 601,604 (Mich. 1965).
