FILED

May 19, 1998

Cecil Crowson, Jr.

Appellate C ourt Clerk

 IN THE COURT OF APPEALS

AT KNOXVILLE

STEVEN A. WAKEFIELD, ) BLOUNT CHANCERY

 ) C. A. NO. 03A01-9707-CH-00290

 Plaintiff-Appellee )

 )

 )

 )

 )

 )

vs. ) HON. CHESTER S. RAINWATER

 ) CHANCELLOR

 )

 )

 )

 )

 )

MICHAEL F. CRAWLEY, MACTENN )

VALVE COMPANY, a Tennessee )

Corporation and MCCAWBER ) AFFIRMED AND REMANDED

SYSTEMS, INC., a Tennessee )

Corporation, )

 )

 Defendants-Appellants )

WILLIAM S. LOCKETT, JR., Kennerly, Montgomery & Finley, P.C.,

Knoxville, for Appellants.

H. ALLEN BRAY, Paine, Garrett & Bray, Maryville, for Appellee.
2

O P I N I O N

McMurray, J.

T h e plaintiff instituted this action to recover two s toc k

certificates which represented eig hty percent (80%) ownership of

the two corporate defendants. Both certificates were either in the

possession of the defendant, Crawley, or the defendant corporations. After a bench trial, the court resolved the issues in favor

o f the plain tiff and rendered judgment accordingly. This appeal

resulted. We affirm the judgment of the trial court.

The appellant presents the following issues for our review:

1 . Whether t he plaintiff's claims are barred by the

statute of frauds set forth in T.C.A. § 47-8-319?

2 . Whether the evidence wa s sufficient to prove the

existence of an enforceable oral contract?

3 . Whether the alleged stock transfer can be compelled

absent proof of endorsement and delive ry of the

stock certificates?

4 . Whether the plaintiff's demand for relief is barred

by the doctrine of unclean hands?

Our standard of review is de novo upon the record, with

a presumption of correctness of the findings of fact by the trial

court. Unless the evidence otherwise preponderates against the
3

findings, we must affirm, absent an error of law. See Rule 13(d),

Tennessee Rules of Appellate Procedure. If the plaintiff is

entitled to a judgment, appellate courts have a duty to render

judgments which the lower court should have rendered. S e e e . g . ,

Toomey v. Atyoe , et al, 32 S.W. 254 (Tenn. 1895), and Perry v.

Carter , 219 S.W.2d 905 (Tenn. 1949). See also Rule 36(a),

Tennessee Rules of Appellate Procedure.

I n this case the trial court found that a valid enforceable

contract existed between the parties and that it was the intent of

the parties that the plaintiff receive the stock certi ficates as

compensation for his services. He further found that the Statute

of Frauds (T.C.A. § 47-8-319) and the doctrine of "unclean hands"

were inapplicable under the facts of the case. He applied the

standard rules for interpretation of contracts and in his findings

o f fact and conclusions of law made the observation that the

evidence is "conflicting, contradictory, con fusi ng, and in major

instances absolutely irreconcilable." The court indicated that its

findings were based upon the credibility, or the lack thereof, of

all the witnesses who testified.

We first note that sufficient evidence exists in the record,

i f accredited by the trier of fact, to s uppor t either a finding:

(1) that there was a contract; or, (2) that there was not a
4

contract. The same may be said for determining the intention of

the parties. The trial court found that there was an oral contract

and that it was the intention of the parties that the plaintiff was

t o receive the stock as compensation for his services. Obviously,

the trial court based his findings of fact, in large part, on the

credibility of the witness which he saw and heard. A trial court

"on an issue which hinges on witness credibility, will not be

reversed unless, other than the oral testimony of the wi tnesses,

there is found in the record clear, convincing evidence to the

contrary." Tennessee Valley Kaolin Corp. v. Perry , 526 S.W.2d 488,

490 (Tenn. App. 1974).

Rather than "clear, convincing evidence to the contrary" the

record contains what w e would deem to be "clear convincing

evidence" to support the findings of the trial court on the issue

o f the existence of the oral contract. Specifically, in unrelated

litigation, in the case of Bunch v. Macawber Engineering, Inc. , No.

91-1374, in the United States District Court for t he Western

District of Pennsylvania, the defendant, Crawley, testified under

oath, by deposition, that the plaintiff he re, Wa kefield, was the

owner of eighty percent (80%) of the stock in the defendant

corporation, Macawber Systems, Inc. Specifically, he testified as

follows:
5

* * * *

Q . Are you the sole shareholder in Macawber S yste ms,

Inc.?

A . No.

Q . Who else is a shareholder?

A . Stephen Wakefield.

Q . What percentage does he own?

A . 80 percent.

Q . Do you own the other 20 percent.

A . Yes.

* * * *

Mr. Crawley's testimony in this case attempting to explain his

testimony in the previous litigation is less than convincing. His

explanation is as follows:

* * * *

Q . I f you would, explain to the court wh y you testified that Mr. Wakefield owned 80 percent of Systems

and MacTenn and you owned 20 percent when you gave

your deposition in the Dwayne Bunch Case.

A . That deposition took place v e r y soon after the

preparation of the docu men ts. I was of the view

that they were most likely going to be used, and so

I guess when he asked me the question, I guess I

was speaking for the future rather more than for

the present, because in my view it had not happened

and it would not happen until I passed over the

stock certificates and I signed the agreements.

But I was of the view that things were so bad that

it's quite likely that this cont ingen cy plan or
1

T.C.A. §§ 47-8-308 - 47-8-321 were repealed effective January 1, 1998.

6

bogus transfer, or whatever you'd like to call it,

would actually take place.

* * * *

O n its face, the explanation given by Mr. Craw ley seems

incredible. We are not called upon, however, to weigh this

testimony but, as required, will defer to the trial court's

jud gmen t regarding credibility of witnesses. We note this

testimony simply to confirm and affirm the findings of the trial

court that the evidence is "conflicting, contradictory, confusing,

and in major instances absolutely irreconcilable." 

W e conclude, that the issue concerning the sufficiency of the

evidence relating to the finding that an oral contract existed is

without merit. The enforceability of the contract, however, is a

matter of law and is not subject the presumption of correctness

that accompanies a finding of fact by the trial court.

W e will first examine the applicability of the Statute of

Frauds relied upon by the defendants. T.C.A. § 48-8-319 provided

as follows: 1
7

47- 8-319. Statute of Frauds. — A contract for t h e

sale of securities is not enforceable by way of action or

defense unless:

(a) there is some w r iting signed by the party

a g ainst whom enforcement is sought or by h i s

authorized agent or broker sufficient to

indicate that a contrac t has been made for

sale of a stated quantity of described securities at a defined or stated price; or

(b) delivery of a certificated security or transfer instruction has been accepted, or transfer

o f an uncertified security has been registered

and the transferee has failed to send written

objection to the issuer wit hin ten (10) days

after receipt of the initial transaction

statement confirming the registration, or

payment has been made, but the contract is not

enforceable under this provision only to the

extent of the delivery, registration or payment; or

(c) within a reasonable time a wr iting in confirmation of the sal e or purchase and sufficient against the sender under paragraph (a)

h a s been received by the party against whom

enforcement is s ought and he has failed to

send written objection to its contents within

ten (10) days after its receipt; or

(d) the party against whom enforcement is sought

admits in his pleadings or otherwise in court

that a contract was made for the sale of a

stated quantity of described securities at a

defined or stated price.

The plaintiff in his complaint alleges that he is the owner of

80,0 0 0 shares of stock in each of the corporate defendan ts. H e

further alleges that the defendants are in physical possession of

the certificates, which among other things, the plaintiff seeks to
8

recover. Copies of the certificates, apparently properly executed

by the defendant, Crawley, are attached to the complaint.

The defendants deny that the plaintiff is the owner of the

stock claimed by him and in addition rely upon the p rovis ions of

T.C.A. §§ 47-8-101, et seq ., Uniform Commercial Code — Investment

Securities. We should point out that T.C.A. § 47-8-102 which

contains definitions applicable to Chapter 8 was amended in 1995.

W e are, therefore, required to examine T.C.A. § 47-8-102 as it

existed prior to the 1995 amendment in resolving the issue relating

to the Statute of Frauds in this case.

Prior to the 1995 Amendment T.C.A. § 47-8-102 provided in

pertinent part as follows:

47-8-102. Definitions and index of defini tions. —

(1) In this chapter unless the context othe rwis e requires:

(a) A "certificated security" is a share, participation, or other interest in property of an

enterprise of th e is suer or an obligation of

the issuer which is:

(i) represented by an instrument issued in

bearer or registered form;

(ii) o f a type commonly dea lt in on securities exchanges or markets or commonly

recognized in any area in which it is

issued or dealt in a s a m edium for

investment; and
2

Blasingame v. American Materials, Inc. , supra, apparently gave birth to the

1995 amendment to T.C.A. § 47-8-102. See Compiler's Notes to T.C.A. § 47-8-102.

W e also note that at the conclusion of the plaintiff's proof in this case, the

defendants moved the court to dismiss the case. In their argument in favor of the

motion the defendants asserted that Blasing ame had been statutorily overruled.

Assumi n g for th e purposes of argument that this is true, it cannot be applied

retrospectively.

9

(iii) either one (1) of a class or series or

b y its terms divisible into a clas s o r

series of shares , participation, or

other interests or obligations.

* * * *

T.C.A. § 47-8-102 as it existed prior to the 1995 amendment

(1995 Public Chapter 86) has been addressed by our Supreme Court

relative to the definition of a security. In Blasingame v.

American Materials, Inc. , 654 S.W.2d 659 (Tenn. 1983), the court in

addressing an issue relating to the applicability of T.C.A. § 47-8-

319 concluded that the stock of the defendant corporation did not

fall within the definition of a security as found in T.C.A. § 47-8-

102 and, therefore, T.C.A. § 47-8-319 was not applicable. 2 The

court in reaching its conclusion made the following observation:

... there is no proof in this record that the stock

o f American Materials, Incorporated [the defendant

corporation], "is of a type commonly recognized in any

area in which it is issued or dealt in as a medium for

investment." T.C.A. § 47-8-102(1)(a)(ii). ... The proof

adduced on the value of the stock makes it clear that

there was no market available for this stock.

I n Kennedy v. Porter , 557 S.W.2d 589 (Tex. Civ. App.

1977), the defendant sought to rely upon the Statute of

Frauds in Article 8, U.C.C., in resisting an oral

contract to sell stock in a closely held corporation.
1 0

The Texas Court said that it was a question of fact

whether the stock of a corporation was dealt in upon

securities exchanges or commonly recognized as a medium

for investment, or otherwise came within the definition

o f a securi ty; th at it was incumbent upon the party

relyi n g upo n Article 8 of the U.C.C. to produce sufficient evidence to satisfy the definitional requirement of

section 8-102 as a prerequisite to its application. See

also Zamore v. Whitten , 396 A.2d 435 (Me. 1978) and Rhode

Island Hospital v. Collins , 117 R.I. 535, 368 A.2d 1225

( 1977) where stock in closely held corporations wa s

denied classification as a "security" because it was not

dealt in by securities exchanges or commonly recognized

as a medium for investment.

Blasingame , at 664.

W e are of the opinion that Blasingame is the contro llin g

authority on the issue of the Statute of Frauds at the times of the

t r ansact ions involved in this action. In this case, evidence

relating to the value of the stock in the defendant corporations is

found in the testimony of Mr. Wakefield.

Mr. Wakefield testified as follows:

Q . Both of them [agreements] recite that you had been

fairly s ucce ssful in your efforts for the company

and that you were owed $200,000.00. Is it a one

$200,000 debt, or is it —

A . It's two $200,000 debts, because it was establishing the value of the shares of each company.

* * * *

Q . Mr. Wakefield, you and Mr. Crawley never reached an

agreement on the value of wha t you contend to be

your stock, did you?
1 1

A . That's an interesting characterization. We had

reached about five agreements tha t were broken by

him.

* * * *

W e are of the opinion that the evidence is grossly inadequate

to establish a value of the stock. Further, there is no evidence

i n this record that the stock of the defendant corporations, "is of

a type commonly recognized in any area in which it is issued or

dealt in as a medium for investment" or that there is a market

available for the stock. Accordingly, we conclude, that here, as

i n B lasi ngame the defendants have failed to produce sufficient

evidence to satisfy the definition requirement of section 8-102 as

a prerequisite to its application, therefore, T.C.A. § 47-8-319 is

not applicable.

Having concluded that T.C.A. § 47-8-319 is inapplicable, we

must next determine if the oral agreement is unenforceable for any

other reason. The appellants advance the equitabl e m axim of

"unclean hands" to defeat the plaintiff's claim.

This equitable maxim [unclean hands] prevents

parties from using the courts to enforce agreements "that

arise out of unc onscio nable, immoral or just plain

'crooked' conduct." Farmers & Merchants Bank v.

Templeton , , 646 S.W.2d 920, 924 (Ten n. App. 1982). The

operation of the maxim is confined to misconduct connected with the subject matter of the litigation. Greer

v . Shelby Mut. Ins. Co. , 659 S.W.2d 627, 630 (Tenn. App.
1 2

1983) (citing Henry R. Gibson, Gibson's Suits in Chancery

§ 18, at 20-21 (William H. Inman ed., 6th ed. 1982)).

Prism Ptnrs., L.P. v. Figlio , 1997 Tenn. App. LEXIS 777.

The trial court found that the maxim of unclean hands had no

application to the case. He gave no reasons for his conclusions,

however, upon review of the record, we concur with his conclusion.

The acts relied upon by the appellants to constitute unclean hands

stem from the original purpose of incorporating the defendant

corporations. The intent and purpose of bot h the appellant,

Crawley, and the appellee, Wakefield, was for the defendant

corporations to acquire the assets of another corporation, Macawber

Engineering, Inc., for the purpose of attempting to put its assets

beyond the convenient reach of creditors. As between the parties

hereto, we believe that the misconduct, if any, by the parties was

not so connected with the subject matter of this litigation as to

require the application of the doctrine of unclean hands. We find

no merit in the "unclean hands" defense.

In view of the finding of the trial court and our concurrent

finding that there was an enforceable oral contract, the issue

relating to endorsement and delivery is moot.

W e affirm the judgment of the trial court. Costs are assessed

to the appellants and this case is remanded to the trial court.
1 3

 ________________________________

 Don T. McMurray, J.

CONCUR:

_______________________________

Herschel P. Franks, Judge

_______________________________

Charles D. Susano, Jr., Judge
 IN THE COURT OF APPEALS

AT KNOXVILLE

STEVEN A. WAKEFIELD, ) BLOUNT CHANCERY

 ) C. A. NO. 03A01-9707-CH-00290

 Plaintiff-Appellee )

 )

 )

 )

 )

 )

vs. ) HON. CHESTER S. RAINWATER

 ) CHANCELLOR

 )

 )

 )

 )

 )

MICHAEL F. CRAWLEY, MACTENN )

VALVE COMPANY, a Tennessee )

Corporation and MCCAWBER ) AFFIRMED AND REMANDED

SYSTEMS, INC., a Tennessee )

Corporation, )

 )

 Defendants-Appellants )

JUDGMENT

This appeal ca me on to be heard upon the record from the

Chancery Court of Blo unt County, briefs and argument of counsel.

Upon consideration thereof, this Court is of opinion that there was

no reversible error in the trial court.

W e affirm the judgment of the trial court. Costs are assessed

to the appellants and this case is remanded to the trial court.

PER CURIAM