Mississippi man admits fraud, but wants property back
Mississippi Court refuses to return property hidden for purposes of fraud
This week the Mississippi Court of Appeals upheld the decision of a Jones County Chancellor who refused to transfer property back to the original owner given the man transferred the property to his live-in friend for the purposes of defrauding Medicaid.
Rickey Ellzey and Sherry James started living together in Jones County, Mississippi in 1979. Later, Ellzey inherited some land in Jones County after his father died. In 1994, Ellzey had a heart transplant. He qualified for Medicaid assistance from the State of Mississippi which helped pay his medical bills. However, he learned an oil well on his inherited property would soon produce royalty checks. Fearing this newfound wealth would terminate his Medicaid benefits, he deeded the property to Jones with the intent to get the property back once his medical bills decreased.
Unfortunately for Ellzey, when he asked for the property back, Jones refused to return it. Shortly thereafter, she moved out and Ellzey sued. Although a partial copy of the deed (the original was destroyed and never recorded) was admitted into evidence transferring the property back from Jones to Ellzey, the chancellor refused to recognize it as a valid transfer. Normally, a chancery court could exercise equity and validate the transfer, but in this case it refused. The reason? The property was transferred to another with the intent to defraud a third party--the State of Mississippi.
In affirming the chancellor's opinion, the Mississippi Court of Appeals noted the chancellor applied the maxim that
"he who doeth fraud, may not borrow the hands of the chancellor to draw equity from a source his own hands hath polluted."This maxim is applied when a party seeks the court's assistance in retrieving property which had been transferred for the "purpose of defrauding a third party."
A classic example is a divorce case where a husband conveys property to his girlfriend to conceal the assets from his wife in the divorce. After the girlfriend refuses to return the property following divorce, don't expect the chancery court, a court of equity, to assist in its return--you have "unclean hands."
The amazing thing about this case is that the oil well must be producing some serious royalty checks. Otherwise, I have a hard time understanding why Mr. Ellzey would come into court and admit he defrauded the State of Mississippi in hopes the courts of Mississippi would assist him in recovering his property.
