from Jefferson Circuit Court, Bessemer Division
THOMPSON, Presiding Judge.
Bank & Trust ("Citizens") appeals from a
judgment of the Bessemer Division of the Jefferson Circuit
Court ("the trial court") determining that a
security interest Citizens held in certain stock was
subordinate to the rights Piggly Wiggly Alabama Distributing
Company, Inc. ("Piggly Wiggly"), had in that same
stock as a lien creditor. Because the amount of the lien far
exceeded the value of the stock, the trial court found,
Citizens had no rights in the stock.
record indicates the following facts relevant to this appeal.
James David White was the president of DP Families, LLC
("DP Families"), and his brother, Patrick E. White,
was its secretary. According to the affidavit of Matthew C.
Peters, vice president and finance director of Piggly Wiggly,
Piggly Wiggly entered into an agreement in November 2005 with
DP Families to supply DP Families with inventory for resale
at its retail grocery stores. The Whites executed guaranty
agreements in favor of Piggly Wiggly in November 2005 and
again in November 2012.
April 3, 2014, DP Families obtained a loan in the amount of
$180, 000 from Citizens to buy into a grocery cooperative
owned by Associated Wholesale Grocers ("AWG"). AWG
is a wholesaler of grocery and supermarket products. In his
affidavit, Patrick White said that the loan was primarily for
the purchase of stock in AWG and to purchase inventory. He
said that the stock purchase was a requirement under the
membership agreement between AWG and DP Families ("the
membership agreement"), allowing DP Families to become
an AWG retail member. The Whites, in their respective roles
with DP Families, signed a promissory note and a security
agreement as collateral for the loan. The security agreement
specifically defined the collateral as "Certificate
Number 9945: 15 Shares of Class A Capital stock issued by
April 4, 2014, DP Families and AWG executed the membership
agreement. One of the terms of the membership agreement
provided that AWG would retain possession of the stock
purchased by DP Families as security for all DP Families'
obligations under the membership agreement. The provision
also stated: "No third party shall be given any security
interest in any [AWG] equity without the prior written
consent of [AWG]." In their respective affidavits, the
Whites testified that on April 4, 2014, they gave handwritten
instructions to Citizens to wire $26, 550 to AWG for DP
Families' purchase of the 15 shares of stock represented
by Stock Certificate Number 9945 ("the stock
certificate"). AWG then provided DP Families with a
receipt ("the receipt") for the stock certificate.
The receipt provided that it was given in lieu of the stock
certificate, that the stock certificate was pledged to secure
DP Families' obligations to AWG, and that it would be
held by AWG.
affidavit, David White testified that he took the receipt and
delivered it to Citizens. He and his brother, Patrick White,
both testified that it was their understanding that the AWG
stock was to serve as the collateral for the loan from
Citizens to DP Families. Danny Riggs, vice president of
Citizens, testified by affidavit that he received the receipt
and that he, too, understood that the AWG stock was to serve
as collateral for the loan to DP Families.
DP Families defaulted on its financial obligations to Piggly
Wiggly. By a letter dated February 6, 2014, counsel for
Piggly Wiggly gave notice of default and demand for payment
to DP Families and to the Whites as guarantors of DP Families
for the failure to pay the amounts owed to Piggly Wiggly.
After failing to receive the payment demanded, Piggly Wiggly
filed a civil action against DP Families and the Whites.
Ultimately, Piggly Wiggly obtained a default judgment against
DP Families in the amount of $477, 569.26. On December 5,
2014, Piggly Wiggly recorded the default judgment.
Wiggly filed a process of garnishment directed to AWG to
collect the judgment against DP Families. AWG, as the
garnishee, answered, stating that it was in possession of the
"Stock value upon redemption in January 2015:
approximately $21, 802.73; Patronage: (I) cash portion
payable in March 2015: approximately $2, 309.35, (ii)
patronage certificate with estimated maturity in 2020 (or as
determined by garnishee's Board of Directors):
approximately $1, 539.57."
Wiggly then filed a motion for an order on the garnishment.
On December 15, 2014, the trial court entered an order on
that motion, directing AWG to pay into court the amounts AWG
had from the stock redemption in January 2015 and the cash
otherwise due to DP Families for patronage value.
Families also defaulted on its financial obligations to
Citizens. In his affidavit, Riggs said that Citizens began
collection efforts of its own and that, in February 2015, he
contacted AWG to inquire about redeeming the stock. That was
when he learned that Piggly Wiggly had garnished the stock.
On April 17, 2015, Citizens moved to intervene in Piggly
Wiggly's action against DP Families, asserting that it
had a security interest in the stock. The motion to intervene
February 10, 2016, after a hearing to determine who had
priority, the trial court entered a final judgment in which
it found that Citizens had not filed a filing statement on
the stock, it had not taken "control" of the stock
pursuant to § 7-9A-314, Ala. Code 1975, and it had not
taken delivery of the stock certificate pursuant to
§§ 7-9A-313 and 7-8-301, Ala. Code 1975. As to the
issue of whether Citizens took delivery of the stock
certificate, the trial court found that Citizens presented no
evidence to support that AWG was holding the stock
certificate for Citizens. In fact, the trial court found that
"the undisputed facts support the conclusion that AWG
held the Stock Certificate for its own benefit as a secured
creditor" and concluded that AWG did not acknowledge
that it held the stock certificate for Citizens. The trial
court pointed out that the date of service of a writ of
garnishment is the date on which priority among various
claimants is determined. Accordingly, the trial court
determined, Citizens did not perfect its security interest as
required by § 7-8-301 and, thus, its rights were
subordinate to Piggly Wiggly's rights as a lien creditor.
The trial court then denied Citizens any portion of the value
of the stock.
filed a timely motion to alter, amend, or vacate the
judgment, which the trial court denied on April 19, 2016.
Citizens then appealed to this court.
appeal, Citizens contends that the trial court erred in
finding that Piggly Wiggly's security interest in the
stock was superior to its own security interest.
Specifically, Citizens asserts that it had perfected its
security interest in the stock because, it says, it was a
purchaser of the ...