Kauffman created a corporation to hold certain assets in a manner intended to minimize tax liability. After creation of the corporation, a judgment was entered against Kauffman as a result of a lawsuit against him. In order to avoid paying the judgment, Kauffman transferred all of his stock into his spouse’s name. His spouse eventually transferred ownership of the stock to several Kauffman children. Several years later, a dispute developed between the children concerning the stock, and Kauffman intervened by filing a claim with the trial court requesting that all stock be transferred back to him on the basis that he was the rightful owner of the stock and that the transfer was nothing more than a temporary trust. The children contended that Kauffman is not the equitable owner of the stock and is not entitled to relief due to the clean hands doctrine.

CASE QUESTIONS 1. Should the court apply the clean hands doctrine here? Why or why not?

2. Do the children have clean hands? Didn’t they accept the stock to help their father perpetrate fraud?