{ "id": 5309721, "name": "BRUCE STANCIL v. HOWARD STANCIL", "name_abbreviation": "Stancil v. Stancil", "decision_date": "1990-06-13", "docket_number": "No. 299PA89", "first_page": "766", "last_page": "771", "citations": [ { "type": "official", "cite": "326 N.C. 766" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "380 S.E.2d 424", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1989, "opinion_index": -1 }, { "cite": "94 N.C. App. 319", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8527113 ], "year": 1989, "opinion_index": -1, "case_paths": [ "/nc-app/94/0319-01" ] }, { "cite": "42 Vand. L. Rev. 579", "category": "journals:journal", "reporter": "Vand. L. Rev.", "year": 1989, "opinion_index": 0 }, { "cite": "305 N.W.2d 158", "category": "reporters:state_regional", "reporter": "N.W.2d", "case_ids": [ 8673852 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/wis-2d/101/0637-01" ] }, { "cite": "101 Wis.2d 647", "category": "reporters:state", "reporter": "Wis. 2d", "case_ids": [ 8673862 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/wis-2d/101/0647-01" ] }, { "cite": "776 P.2d 650", "category": "reporters:state_regional", "reporter": "P.2d", "case_ids": [ 10389123 ], "year": 1989, "opinion_index": 0, "case_paths": [ "/p2d/776/0650-01" ] }, { "cite": "346 Pa. Superior Ct. 47", "category": "reporters:state", "reporter": "Pa. Super.", "case_ids": [ 640121 ], "weight": 4, "year": 1985, "pin_cites": [ { "page": "53" }, { "page": "304" } ], "opinion_index": 0, "case_paths": [ "/pa-super/346/0047-01" ] }, { "cite": "391 N.Y.S.2d 325", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1977, "opinion_index": 0 }, { "cite": "715 S.W.2d 890", "category": "reporters:state_regional", "reporter": "S.W.2d", "case_ids": [ 9990504 ], "year": 1986, "opinion_index": 0, "case_paths": [ "/sw2d/715/0890-01" ] }, { "cite": "718 P.2d 1097", "category": "reporters:state_regional", "reporter": "P.2d", "year": 1986, "opinion_index": 0 }, { "cite": "6 Haw. App. 222", "category": "reporters:state", "reporter": "Haw. App.", "case_ids": [ 5628682 ], "year": 1986, "opinion_index": 0, "case_paths": [ "/haw-app/6/0222-01" ] }, { "cite": "395 A.2d 435", "category": "reporters:state_regional", "reporter": "A.2d", "case_ids": [ 8022453 ], "weight": 2, "year": 1978, "pin_cites": [ { "page": "441" } ], "opinion_index": 0, "case_paths": [ "/a2d/395/0435-01" ] }, { "cite": "654 S.W.2d 659", "category": "reporters:state_regional", "reporter": "S.W.2d", "case_ids": [ 9951089 ], "weight": 2, "year": 1983, "pin_cites": [ { "page": "664" } ], "opinion_index": 0, "case_paths": [ "/sw2d/654/0659-01" ] }, { "cite": "117 R.I. 535", "category": "reporters:state", "reporter": "R.I.", "case_ids": [ 3120039 ], "weight": 4, "year": 1977, "pin_cites": [ { "page": "538" }, { "page": "1227" } ], "opinion_index": 0, "case_paths": [ "/ri/117/0535-01" ] }, { "cite": "307 S.E.2d 551", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1983, "opinion_index": 0 }, { "cite": "309 N.C. 279", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4768399 ], "year": 1983, "opinion_index": 0, "case_paths": [ "/nc/309/0279-01" ] }, { "cite": "332 S.E.2d 51", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1985, "opinion_index": 0 }, { "cite": "314 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 4696910 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/nc/314/0001-01" ] }, { "cite": "380 S.E.2d 424", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1989, "pin_cites": [ { "page": "427" } ], "opinion_index": 0 }, { "cite": "94 N.C. App. 319", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8527113 ], "year": 1989, "pin_cites": [ { "page": "323" } ], "opinion_index": 0, "case_paths": [ "/nc-app/94/0319-01" ] } ], "analysis": { "cardinality": 552, "char_count": 11991, "ocr_confidence": 0.72, "pagerank": { "raw": 7.692054073874634e-08, "percentile": 0.4533136874003079 }, "sha256": "d31a714b6d7eeb8840e6abd37b4a9df7b7c05e081c7015f18b8874cf9e6b4da3", "simhash": "1:60356371746fc0b0", "word_count": 1933 }, "last_updated": "2023-07-14T18:38:26.587833+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "BRUCE STANCIL v. HOWARD STANCIL" ], "opinions": [ { "text": "MITCHELL, Justice.\nThe plaintiff filed this action on 29 October 1986 to compel the specific performance of an alleged oral agreement between the plaintiff and the defendant. The plaintiff alleged that the agreement gave him the right to purchase the defendant\u2019s shares of stock in Bruce Stancil Refrigeration, Inc. The defendant raised as an affirmative defense that article 8 of the Uniform Commercial Code \u2014 Investment Securities (hereinafter, article 8), codified in Chapter 25 of the General Statutes of North Carolina, makes such oral agreements for the sale of investment securities unenforceable and moved for summary judgment. The trial court granted the motion and entered summary judgment for the defendant. On appeal, the Court of Appeals reversed and remanded. Thereafter, this Court granted the defendant\u2019s petition for discretionary review. We now conclude that the trial court\u2019s judgment was correct and reverse the decision of the Court of Appeals.\nThe pleadings and the parties\u2019 forecasts of evidence tended to show that the plaintiff incorporated Bruce Stancil Refrigeration, Inc. as a North Carolina close corporation in 1973. The defendant, the plaintiffs brother, became associated with the corporation in 1980. The plaintiff sold fifty percent of the stock in the corporation to the defendant for $35,000. In his complaint, the plaintiff alleged that the defendant orally agreed to sell his shares to the plaintiff in the event that the defendant (1) could not perform his duties at the company, (2) left the business, or (3) could not work with the plaintiff in an agreeable manner. Thereafter, the brothers\u2019 professional relationship deteriorated, and the defendant left the company on 12 October 1984. The plaintiff now contends that the defendant\u2019s departure gave the plaintiff the right under the oral agreement to purchase the defendant\u2019s shares of stock. The defendant has refused to sell his shares of stock in the closely held corporation to the plaintiff.\nBefore the trial court, the defendant moved for summary judgment arguing that N.C.G.S. \u00a7 25-8-319 makes oral contracts for sales of investment securities, including shares of stock of a closely held corporation, unenforceable. The trial court granted the defendant\u2019s motion. The Court of Appeals held that shares of stock in a closely held corporation, such as the shares of Bruce Stancil Refrigeration, Inc., are not investment \u201csecurities\u201d as that term is defined in N.C.G.S. \u00a7 25-8-102 and, therefore, article 8 \u2014 including N.C.G.S. \u00a7 25-8-319 \u2014 does not apply to this case. We disagree.\nWith respect to the applicability of article 8, the Court of Appeals focused on the fact that the corporation involved here was closely held. Relying upon Penley v. Penley, 314 N.C. 1, 332 S.E.2d 51 (1985), and Meiselman v. Meiselman, 309 N.C. 279, 307 S.E.2d 551 (1983), the Court of Appeals concluded that shares of stock in the closely held corporation were not suitable for trading on a securities exchange or market. While this may be true, the Court of Appeals\u2019 reliance on Penley and Meiselman in this regard was misplaced. Since both of those decisions involved questions arising under the North Carolina Business Corporations Act, N.C.G.S. Chapter 55, they are inapposite to the central question in this case \u2014 whether shares of a closely held corporation are investment \u201csecurities\u201d for purposes of article 8.\nUnder article 8, an investment security is an instrument which:\n(i) is issued in bearer or registered form; and (ii) is of a type commonly dealt in upon securities exchanges or markets or commonly recognized in any area in which it is issued or dealt in as a medium for investment; and (iii) is either one of a class or series or by its terms is divisible into a class or series of instruments; and (iv) evidences a share, participation or other interest in property or in an enterprise or evidences an obligation of the issuer.\nN.C.G.S. \u00a7 25-8-102(l)(a) (1986).\nThe Court of Appeals indicated that shares of stock in a closely held corporation are not securities, because they are not suitable for trading on a securities exchange. 94 N.C. App. 319, 323, 380 S.E.2d 424, 427 (1989). We disagree. Under N.C.G.S. \u00a7 25-8\u2018-102, it is inconsequential whether the shares of stock in question are in fact suitable for trading or have ever been traded on an exchange or market. The statutory definition only requires in this regard that instruments be \u201cof a type\u201d that is dealt in on securities exchanges or markets in order to be deemed investment securities. Since stock exchanges and markets generally facilitate the trading of shares of corporate stock, it is our conclusion that the shares of a corporation \u2014 whether publicly or closely held \u2014are instruments \u201cof a type\u201d commonly dealt in on securities exchanges or markets.\nA few courts construing language analogous to that of N.C.G.S. \u00a7 25-8-102 have held that shares of stock of a closely held corporation are not investment \u201csecurities.\u201d E.g., Rhode Island Hospital v. Collins, 117 R.I. 535, 368 A.2d 1225 (1977); Blasingame v. American Materials Inc., 654 S.W.2d 659 (Tenn. 1983). In Rhode Island Hospital, the Supreme Court of Rhode Island reasoned that shares of a closely held corporation were not investment securities because they did not exhibit a reasonable expectation that dividends would be derived from the profits of the corporation. Rhode Island Hospital, 117 R.I. at 538, 368 A.2d at 1227. In Blasingame, the Supreme Court of Tennessee concluded that shares of a closely held corporation were not investment \u201csecurities,\u201d because there was no available market for them. Blasingame, 654 S.W.2d at 664. Neither of those specific conditions is required by N.C.G.S. \u00a7 25-8-102. Therefore, we conclude that neither the reasoning of Rhode Island Hospital nor the reasoning of Blasingame is applicable to this case.\nBefore this Court, the plaintiff argues that shares of a closely held corporation are not instruments \u201cof a type\u201d commonly dealt in upon securities exchanges or markets and, therefore, are not investment \u201csecurities\u201d for purposes of article 8 of the U.C.C.\u2014 Investment Securities. In Zamore v. Whitten, 395 A.2d 435 (Me. 1978), the Supreme Court of Maine accepted such an argument and stated that \u201cstock in [a] close family corporate business is not of a type \u2018commonly dealt in upon securities exchanges or markets,\u2019 nor is it commonly recognized in any area as a medium for investment.\u201d 395 A.2d at 441. We simply disagree.\nOther courts have held that shares of stock in a closely held corporation should be treated as investment \u201csecurities\u201d under article 8. See United Independent Insurance Agencies Inc. v. Bank of Honolulu and Ramil, 6 Haw. App. 222, 718 P.2d 1097 (1986); Smith v. Baker, 715 S.W.2d 890 (Ky. Ct. App. 1986); Pantel v. Becker, 391 N.Y.S.2d 325 (N.Y. Sup. Ct. 1977); Jennison v. Jennison, 346 Pa. Superior Ct. 47, 499 A.2d 302 (1985); Associates Financial Services Company of Utah, Inc. v. Sevy, 776 P.2d 650 (Utah App. 1989); Wamser v. Bamberger, 101 Wis.2d 647, 305 N.W.2d 158 (1981). For example, the Superior Court of Pennsylvania in Jennison concluded that \u201c[s]hares of stock in a closely held corporation are, after all, shares of stock, which are clearly instruments \u2018of a type\u2019 commonly dealt in on securities exchanges or markets.\u201d Jennison, 346 Pa. Superior Ct. at 53, 499 A.2d at 304. It is our opinion that cases such as Jennison represent the better view. See Note, Stock in a Closely Held Corporation: Is It a Security for Uniform Commercial Code Purposes? 42 Vand. L. Rev. 579 (1989). Stock certificates for shares of any corporation \u2014 whether publicly or closely held \u2014are instrumentalities of trade and commerce which are \u201cof a type\u201d commonly dealt in on securities exchanges or markets. Further, although not controlling on the issue, we note that the comments to the amended version of N.C.G.S. \u00a7 25-8-102 state:\nInterests such as the stock of closely held corporations, although they are not actually traded upon securities exchanges, are intended to be included within the definitions ... of interests \u2018of a type\u2019 commonly traded in those markets.\nN.C.G.S. \u00a7 25-8-102, Commentary (Cum. Supp. 1989).\nWe conclude that the defendant\u2019s shares of stock in Bruce Stancil Refrigeration, Inc. are investment \u201csecurities\u201d under the definition of that term in N.C.G.S. \u00a7 25-8-102(l)(a). We note, however, that, although this statute defines the term \u201csecurity\u201d broadly, the North Carolina comments suggest that the definition in the statute only applies under article 8 and does not limit the definition of \u201csecurity\u201d in police statutes or other special statutes. See N.C.G.S. \u00a7 25-8-102, Commentary (1986).\nWe now turn to the defendant\u2019s statute of frauds argument. In response to the plaintiff\u2019s efforts to enforce the alleged oral agreement, the defendant has argued that his shares of stock in Bruce Stancil Refrigeration, Inc. are \u201csecurities\u201d for purposes of article 8, and that the pertinent statute of frauds, N.C.G.S. \u00a7 25-8-319, renders oral agreements for the sale of such securities unenforceable. As we conclude that shares of stock in a closely held corporation are investment \u201csecurities\u201d for such purposes, we also conclude that the pertinent statute of frauds, N.C.G.S. \u00a7 25-8-319, is applicable to this case.\nN.C.G.S. \u00a7 25-8-319 provides in part the following:\nA contract for the sale of securities is not enforceable by way of action or defense unless\n(a) there is some writing signed by the party against whom enforcement is sought or by his authorized agent or broker sufficient to indicate that a contract has been made for sale of a stated quantity of described securities at a defined or stated price; ....\nN.C.G.S. \u00a7 25-8-319 (1986). Before this Court, the plaintiff conceded that there was no writing reflecting the defendant\u2019s alleged oral agreement to sell his shares. By its terms then, the applicable statute of frauds, N.C.G.S. \u00a7 25-8-319, renders the defendant\u2019s alleged oral contract for the sale of those securities unenforceable in this action. Therefore, we hold that the trial court properly granted summary judgment for the defendant, and the decision of the Court of Appeals to the contrary is reversed.\nReversed.\n. Even though 1989 N.C. Sess. Laws ch. 588, \u00a7 1, which took effect on 1 October 1989, amended this statute to classify \u201cinvestment securities\u201d as \u201ccertificated\u201d or \u201cuncertificated\u201d securities, the operative definitions still deem \u201csecurities\" to be instruments \u201cof a type commonly dealt in on securities exchanges or markets.\u201d N.C.G.S. \u00a7 25-8-102 (Cum. Supp. 1989).\n. 1989 N.C. Sess. Laws ch. 588, \u00a7 1, effective 1 October 1989, made minor amendments to this statute which are not pertinent to this case. N.C.G.S. \u00a7 25-8-319 (Cum. Supp. 1989).", "type": "majority", "author": "MITCHELL, Justice." } ], "attorneys": [ "Lee, Reece & Weaver, by W. Earl Taylor, Jr. and Cyrus F. Lee; and Lane & Boyette, by Wiley L. Lane, Jr., for the plaintiff-appellee.", "Narron, Holdford, Babb, Harrison & Rhodes, P.A., by Elizabeth B. McKinney and William H. Holdford, for the defendant-appellant." ], "corrections": "", "head_matter": "BRUCE STANCIL v. HOWARD STANCIL\nNo. 299PA89\n(Filed 13 June 1990)\nCorporations \u00a7 18 (NCI3d); Uniform Commercial Code \u00a7 37.5 (NCI3d) \u2014 investment securities \u2014 shares of closely held corporation-oral agreement for sale unenforceable\nShares of stock in a closely held corporation are instruments \u201cof a type\u201d commonly dealt in on securities exchanges or markets within the meaning of N.C.G.S. \u00a7 25-8-102(l)(a) and are thus investment \u201csecurities\u201d for purposes of article 8 of the U.C.C. Therefore, the pertinent statute of frauds, N.C.G.S. \u00a7 25-8-319, renders an oral agreement for the sale of such shares unenforceable.\nAm Jur 2d, Commercial Code \u00a7\u00a7 113-115; Corporations \u00a7 681.\nOn discretionary review of the decision of the Court of Appeals, 94 N.C. App. 319, 380 S.E.2d 424 (1989), reversing a judgment entered by Watts, J., in the Superior Court, WILSON County, on 13 June 1988. Heard in the Supreme Court on 13 March 1990.\nLee, Reece & Weaver, by W. Earl Taylor, Jr. and Cyrus F. Lee; and Lane & Boyette, by Wiley L. Lane, Jr., for the plaintiff-appellee.\nNarron, Holdford, Babb, Harrison & Rhodes, P.A., by Elizabeth B. McKinney and William H. Holdford, for the defendant-appellant." }, "file_name": "0766-01", "first_page_order": 802, "last_page_order": 807 }