Case Title: Brian Pipkin v. Sun State Oil, Inc., et al.

Citation: 

Docket Number: 1160850

State: alabama

Court: Alabama Supreme Court

Date: 2018-09-21T00:00:00Z

Document:
REL: September 21, 2018
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
SPECIAL TERM, 2018
____________________
1160850
____________________
Brian Pipkin
v.
Sun State Oil, Inc., et al.
Appeal from Mobile Circuit Court
(CV-14-902643)
MENDHEIM, Justice.
Brian Pipkin appeals from the Mobile Circuit Court's
summary 
judgment 
in 
favor 
of 
Sun 
State 
Oil, 
Inc.
("Sun State"), on Pipkin's claims of conversion, negligence,
and/or wantonness, and trespass with regard to Sun State's
1160850
removal of gasoline pumps from Pipkin's property.  We reverse
and remand.
I.  Facts
On January 21, 2011, IMAS Partnership, LLC ("IMAS"),
purchased from William Rivers and Sybil Rivers a parcel of
real property located at 15065 Highway 43 North, Bucks,
Alabama ("the property"), on which was situated a convenience
store and gasoline station.  IMAS intended to operate the
business as "Bucks Country Store."  
On September 13, 2010, in anticipation of its acquisition
of the property, IMAS entered into a "Petroleum Supply
Agreement" with Sun State to procure a supply of gasoline to
sell to customers of the store ("the PSA").  The PSA provided
that Sun State would lease two gasoline pumps to IMAS for
10 years in exchange for IMAS purchasing a minimum of
6 million gallons of petroleum from Sun State over the 10-year
term.  Specifically, the PSA provided, in part:
"1.
"TERM AND PREMISES
"The Agreement shall be effective for a term of
Ten (10) years from and after the date of execution
by [IMAS].  During the term hereof, [Sun State]
shall supply and [IMAS] will purchase all of the
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1160850
supplies which [IMAS] needs to serve [IMAS's]
customer[s] at the Business Premises.  [IMAS] shall
be responsible to furnish the Business Premises with
all buildings and equipment necessary for the
operation of a service station, with the exception
of the equipment to be furnished by [Sun State] as
set forth herein.  ...
"2.
"PRODUCTS AND QUALITY
"Commodity Schedule
"Total gallons to be purchased during term --
6,000,000, and all requirements of Supplies to be
sold from the Business Premises.
"(a) [Sun State] agrees to sell to [IMAS] and
[IMAS] agrees to purchase from [Sun State] the
product(s) 
covered 
by 
this 
Contract 
in 
the
quantities shown on the Commodity Schedule indicated
above.  ...
"....
"3.
"LOANED EQUIPMENT AND BRANDING
"(a) [Sun State] agrees to furnish and lend to
[IMAS] and [IMAS] agrees to lease from [Sun State]
the following items of equipment and branding,
delivered and installed at [IMAS's] location.
Pending the receipt of the following new equipment
by [Sun State] for installation on the Business
Premises, [Sun State] shall be permitted to install
used or reconditioned equipment:
"Quantity
Description
"....
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"2
New Gasoline MPDs with card
readers
"....
"(b) [IMAS] agrees to use the said equipment
only for the purpose of advertising, handling,
storing, or otherwise facilitating the marketing at
the stated delivery address of petroleum or other
products 
purchased 
from 
[Sun 
State] 
and 
in
compliance with all laws and requirements of all
authorities having jurisdiction thereof.
"(c) The value of the equipment as determined by
[Sun State] shall be amortized over a Ten (10) year
period with interest rate of 10% per annum.  So long
as [IMAS] is not in default of this Agreement, the
Total Agreed Value shall be amortized and reduced
pro-rata over the term of this Agreement based upon
the percentage of the minimum gallons purchased by
[IMAS] as of the date of expiration or termination
of this Agreement.  In the event of a breach of this
Agreement, or the failure of [IMAS] to satisfy its
minimum 
gallons, 
the 
balance 
due 
shall 
be
immediately due and payable from [IMAS] to [Sun
State], and shall bear interest at the rate of 18%
per 
annum 
thereafter, 
both 
prejudgment 
and
postjudgment.  ...
"(d) The equipment, which term includes any
replacements 
and 
additions, 
shall 
remain 
the
personal property of [Sun State], and shall have
displayed thereon such markings, colors and/or
trademarks as [Sun State] designates.  [IMAS] shall
execute a UCC-1 Financing Statement governing the
loaned equipment for filing with the Florida
Secretary of State.[1]  Upon breach or termination of
1A 
Sun 
State 
representative, Richard 
E. 
Blow 
II, 
testified
by deposition that he believed the reference to "the Florida
Secretary of State" was a typographical error and it should
have stated "the Alabama Secretary of State."  
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this Agreement, [IMAS] agrees to redeliver said
equipment detached from the Business Premises in the
same condition as when received, reasonable wear and
tear excepted, to [Sun State] at [Sun State's]
address or any address designated hereafter by [Sun
State].  A failure to do so shall authorize [Sun
State] to enter [IMAS's] Business Premises and,
without liability for damages or trespass, use all
reasonable means to remove said equipment.  [IMAS]
shall then pay [Sun State] any cost incurred in
detaching the equipment and the cost of transporting
such equipment to [Sun State's] designated address.
Upon the successful completion of the requirements
of this Agreement, [Sun State] shall transfer title
to the loaned equipment to [IMAS] by Bill of Sale.
"....
"11.
"TERMINATION
"(a) 
This 
Contract 
shall 
terminate 
upon
expiration of the term stated in Paragraph one (1)
above.
"(b) This Contract may be terminated by [Sun
State]:
"....
"(ii) If [IMAS] fails to pay in a
timely manner any sums when due hereunder;
"(iii) If [IMAS] defaults in any of
its obligations under this Contract;
"....
"(v) If [IMAS] fails to purchase the
minimum gallonage requirements outlined in
paragraph 
2, 
the 
Commodity 
Schedule, 
[IMAS]
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shall be permitted 
to apportion 
and
allocate 
the 
minimum 
gallonage 
requirements
over a quarterly basis to determine if
[IMAS] is meeting its minimum requirement
(i.e., 150,000 gallons per quarter).  In
the event of termination by [Sun State]
pursuant to this provision, [IMAS] shall
make payment in full of any amounts due
from [IMAS] to [Sun State] pursuant to the
equipment loan as described herein; shall
make repayment in full of the rebates
received 
by [IMAS] according 
to the
following table, any damages or charges
incurred by [IMAS] from Citgo or such other
supplier as directed by [Sun State], and
payment in full by [IMAS] of the lost
profits of [Sun State] for the remaining
and unused full term of this Agreement as
calculated by [Sun State] based upon the
average sales of [IMAS] to the date of
termination all of which amounts shall be
then accelerated and immediately due and
payable.
"....
"(c) This Contract may not be terminated by
[IMAS], nor may it be assigned, without the express
written consent of [Sun State].  In the event of
such consent by [Sun State], such termination shall
only be effective upon payment in full by [IMAS] of
any amounts due from [IMAS] to [Sun State] pursuant
to the equipment loan and/or promissory note as
described herein, the payment in full by [IMAS] of
any rebates received by [IMAS], and payment in full
by [IMAS] of the lost profits of [Sun State] for the
remaining and unused full term of this Agreement as
calculated by [Sun State] based upon the average
sales of [IMAS] to the date of termination, or the
minimum 
gallonage 
requirements, 
whichever 
is
greater.
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"....
"(e) Termination of 
this Contract for 
any 
reason
shall not relieve the parties of any obligation
there[to]fore accrued under this Contract.  In the
event of the termination of this Agreement for any
reason, [IMAS] shall additionally make payment in
full of any amounts due from [IMAS] to [Sun State]
pursuant to this Agreement, the equipment loan as
described herein, the lost profits of [Sun State] as
set forth herein, any unamortized equipment loan or
lease payments, any damages or charges incurred by
[IMAS] from Citgo or such other supplier as directed
by [Sun State], and repayment in full of the rebates
received by [IMAS], all of which amounts shall be
then accelerated and immediately due and payable.
Such payments shall be due immediately upon
termination of this Agreement.  However, should [Sun
State] cancel this Agreement due to [Sun State's]
inability to supply petroleum products to [IMAS] ...
due to [Sun State's] inability to procure such
products from Citgo or such other supplier as
determined by [Sun State] on terms agreeable to [Sun
State], then [IMAS] may make repayment of equipment
loan on a monthly basis.
"...."
(Emphasis added.)
In January and February 2011, Sun State installed two new
gasoline pumps on the property.  At some point in 2012, Sun
State stopped doing business with IMAS because, according to
Sun State representative Richard E. Blow II, "[w]hat I was
told by one of the members of IMAS was that they were not
7
1160850
making money at the store and they were going to have to give
the keys back to the Riverses."  
On July 20, 2012, IMAS executed a warranty deed in lieu
of foreclosure conveying the property back to the Riverses.
That deed contained no specific reference to the gasoline
pumps.  According to Blow, the reason Sun State did not
reclaim the gasoline pumps at that time was "[p]rimarily
because we had talked with the Riverses about leaving the
pumps at the facility for a period of time to let them get a
tenant in there ....  So we were trying to maintain the store
as a customer."
On December 13, 2013, the Riverses executed a vendor's
lien deed conveying the property to Pipkin for a purchase
price of $75,000.  Pipkin testified by deposition that William
Rivers made it absolutely clear when they negotiated the sale
of the property that the gasoline pumps were included in the
purchase price.  
Shortly after Pipkin purchased the property, he received
a telephone call from Blow in which Blow told Pipkin that Sun
State owned the gasoline pumps and that he wanted to know what
Pipkin intended to do with the property.  According to Pipkin,
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1160850
he told Blow that he had purchased the gasoline pumps along
with the rest of the property.  A few weeks later, in January
2014, Pipkin and Blow met in person to discuss the possibility
of Sun State supplying gasoline to Pipkin, but Pipkin stated
that he did not yet know what he wanted to do with the
property.
According to Blow, near the summer of 2014, he telephoned
Pipkin and told him that he had seen some "shady characters"
loitering around the property and that Sun State was concerned
about the gasoline pumps.  In June 2014, Sun State hired a
company to come onto Pipkin's property and remove the gasoline
pumps.  Blow testified that he told Pipkin that the reason the
gasoline pumps were being removed was that Sun State was
"concerned about vandalism [or] theft" but that the gasoline
pumps could be reinstalled once Pipkin "had a tenant ready,
willing, and able, or if he was going to operate the store." 
Blow testified that the gasoline pumps were moved to a
warehouse in Pensacola, Florida.  
In a letter dated June 20, 2014, addressed to Blow in his
capacity as a representative of Sun State, counsel for Pipkin
demanded that Sun State return the gasoline pumps to the
9
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property because, he said, counsel had "searched the UCC
records of the Alabama Secretary of State and [did] not see
where a UCC financing statement was filed regarding the
pumps."  Sun State declined to return the gasoline pumps.
On September 12, 2014, Pipkin sued Sun State and the
Riverses in the Mobile Circuit Court.  Against Sun State,
Pipkin asserted claims of conversion, negligence, and/or
wantonness for removing the gasoline pumps from the property. 
Pipkin 
asserted 
claims 
of 
breach 
of 
warranty 
and
misrepresentation against the Riverses, "[a]ssuming Sun State
is the legal owner of the gas pumps."  
In February 2015, Sun State filed an answer to Pipkin's
complaint in which it denied all material allegations.
On October 10, 2016, Pipkin filed an amendment to the
complaint in which he added a claim of trespass against
Sun State.  On November 8, 2016, Sun State filed an answer to
the amendment to the complaint in which it again denied all
material allegations.
On November 21, 2016, Pipkin filed a motion for a partial
summary judgment against Sun State in which he requested that
the trial court declare that Sun State was not the owner of
10
1160850
the gasoline pumps and that, therefore, Sun State had no right
to remove the gasoline pumps from the property.  In the
motion, Pipkin contended that Sun State, rather than owning
the gasoline pumps, had a security interest in the gasoline
pumps but that it had failed to perfect that security interest
by making a filing pursuant to Article 9 of the Uniform
Commercial Code ("the UCC").  The trial court set Pipkin's
motion for argument on February 10, 2017.  On February 8,
2017, Sun State filed a response in opposition to Pipkin's
motion for a partial summary judgment in which it contended
that it owned the gasoline pumps and that it had a right to
remove them from the property because the gasoline pumps were
"trade fixtures."
The following day, February 9, 2017, Sun State filed its
own motion for a summary judgment in which it provided a more
extensive argument that the gasoline pumps were trade fixtures
and also that the UCC did not apply to the PSA.  The trial
court did not expressly set Sun State's motion for a summary
judgment for argument.  On February 10, 2017, oral argument
was held on Pipkin's motion for a partial summary judgment.  
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1160850
On May 19, 2017, the trial court entered an order in
which it granted Sun State's motion for a summary judgment and
denied Pipkin's motion for a partial summary judgment.  At the
outset of the order, the trial court explained that, "[d]ue to
the fact that the issues presented by Defendant Sun State's
Motion [for a summary judgment] are substantially the same as
those presented in [Pipkin's] Motion [for a partial summary
judgment], oral argument was not granted on Defendant Sun
State's Motion."  After detailing the facts of the dispute,
the order provided the trial court's reasons for its
disposition:
"6. It is clear and unambiguous that IMAS breached
the terms of the PSA when it failed to uphold its
obligations thereunder for the entire ten-year term.
Although IMAS performed for a short period of time
under the PSA, full performance for the entire ten-
year term was a condition precedent to any transfer
of ownership of the gas pumps from Sun State to
IMAS.
"7. This Court finds that no transfer of ownership
of the pumps from Sun State to IMAS occurred as a
result of the PSA by sale or otherwise.  Therefore,
at all times, Sun State remained the legal owner of
the gas pumps. 
"8. Sun State placed the pumps on the Property with
the sole purpose of facilitating IMAS's retail sale
and delivery of petroleum that IMAS had agreed to
purchase from Sun State.  Therefore, this Court
finds that the gas pumps were trade fixtures of Sun
12
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State and, consequently, did not become part of the
Property when affixed thereto by Sun State. 
Contrary to [Pipkin's] argument, [Pipkin] did not
become the owner of the gas pumps at the time that
he purchased the Property from Mr. and Mrs. Rivers
merely because the gas pumps were affixed to the
Property. 
"9. Because Sun State retained ownership of the
pumps at all times as trade fixtures, Sun State had
the right to peaceably enter the Property to
peacefully reclaim the gas pumps at the time that
IMAS breached the PSA and at all times thereafter.
Sun State's recovery of the gas pumps from the
Property was carried out in a reasonable and
peaceful manner consistent with its rights."
The trial court further concluded that, because Sun State was
the legal owner of the gasoline pumps when it had them removed
from the property, Sun State could not be liable for
conversion, 
negligence 
and/or 
wantonness, or 
trespass 
based 
on
that removal.  The trial court certified its judgment in favor
of Sun State as final pursuant to Rule 54(b), Ala. R. Civ. P. 
Pipkin appeals.
II.  Standard of Review
"We review the trial court's grant or denial of
a summary-judgment motion de novo, and we use the
same standard used by the trial court to determine
whether the evidence presented to the trial court
presents a genuine issue of material fact.  Bockman
v. WCH, L.L.C., 943 So. 2d 789 (Ala. 2006).  Once
the summary-judgment movant shows there is no
genuine issue of material fact, the nonmovant must
then present substantial evidence creating a genuine
13
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issue of material fact.  Id.  'We review the
evidence 
in 
a 
light 
most 
favorable 
to 
the
nonmovant.' 943 So. 2d at 795.  We review questions
of law de novo.  Davis v. Hanson Aggregates
Southeast, Inc., 952 So. 2d 330 (Ala. 2006)."
Smith v. State Farm Mut. Auto. Ins. Co., 952 So. 2d 342, 346
(Ala. 2006).
III.  Analysis
Pipkin contends that the trial court committed reversible
error when it concluded that the gasoline pumps were trade
fixtures, which gave Sun State the right to peaceably reclaim
the gasoline pumps even lacking his permission to enter the
property.  Pipkin further argues that the PSA was not a lease,
but was, in fact, a secured sale agreement for the gasoline
pumps, and that, because Sun State never perfected its
security interest in the gasoline pumps through a fixture
filing, his purchase of the gasoline pumps are free from Sun
State's security interest.
Pipkin's argument that the PSA is actually a disguised
security transaction is based upon § 7-1-203, Ala. Code 1975,
a part of the UCC titled "Lease distinguished from security
interest."  Before we address the issue whether the PSA is a
lease or a sale of goods disguised as a lease, however, we
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must evaluate the trial court's conclusion that the gasoline
pumps were trade fixtures.  Unlike fixtures generally, a trade
fixture retains its status as personal property and does not
become part of the real property to which it is affixed.  See,
e.g., Walker v. Tillis, 188 Ala. 313, 326–27, 66 So. 54, 58
(1914) (explaining that trade fixtures "remain the personal
property of the tenant without the consent of the landlord"). 
As a comment to § 7-9A-334, Ala. Code 1975 -- which addresses
the priority of security interests in fixtures -- notes:
"In 
considering 
priority 
problems 
under 
this
section, 
one 
must 
first 
determine 
whether
real-property claimants per se have an interest in
the ... fixtures as part of real property.  If not,
it is immaterial, so far as concerns real property
parties as such, whether a security interest arising
under this Article is perfected or unperfected.  In
no event does a real-property claimant (e.g., owner
or mortgagee) acquire an interest in a 'pure'
chattel just because a security interest therein is
unperfected.  If on the other hand real-property law
gives real-property parties an interest in the
goods, a conflict arises and this section states the
priorities."
Comment 4 to § 7-9A-334, Ala. Code 1975.  In other words, a
fixture filing is not necessary to preserve an owner's
interest in personal property located on real property owned
by another.  Thus, even if Pipkin is correct that the PSA
created a security interest in the gasoline pumps rather than
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being a mere lease of those items, IMAS -- and Pipkin as a
subsequent purchaser of the property -- would not have
acquired an ownership interest in the gasoline pumps if they
were simply personal property owned by Sun State, i.e., trade
fixtures.  Only if the trial court erred in categorizing the
gasoline pumps as trade fixtures will it be necessary to
assess whether the PSA was a lease or a disguised sale of
goods under § 7-1-203.
A.  Are the Gasoline Pumps Trade Fixtures?
Pipkin contends that there is a glaring problem with the
trial court's conclusion that the gasoline pumps are trade
fixtures.  Pipkin argues that the law applicable to trade
fixtures applies only in the context of a landlord-tenant
relationship and that Sun State was neither a landlord nor a
tenant as to the property.  
"[A] trade fixture is an article annexed to realty by a
tenant for purposes of carrying on the tenant's trade or
business."  Sycamore Mgmt. Grp., LLC v. Coosa Cable Co., 42
So. 3d 90, 94 (Ala. 2010); see also Walker, supra.  This Court
previously has expounded on the trade-fixtures doctrine in
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LaFarge Building Materials, Inc. v. Stribling, 880 So. 2d 415,
419 (Ala. 2003):
"Under the general rule of the common law,
everything annexed to the freehold estate was
treated as a part of it.  However, tenants placing
trade fixtures on the property to be used in
connection with trade or manufacturing were excepted
from the operation of the foregoing general rule.
Walker v. Tillis, 188 Ala. 313, 66 So. 54 (1914).
"Black's Law Dictionary 652 (7th ed. 1999)
defines trade fixtures as '[r]emovable personal
property that a tenant attaches to leased land for
business purposes.'  Black's defines an improvement
as '[a]n addition to real property whether permanent
or not; esp., one that increases its volume or that
enhances its appearances.'  Black's Law Dictionary
761 (7th ed. 1999).  A tenant can remove trade
fixtures at the end of a lease term even when the
lease states that improvements and fixtures are not
to be removed.  See Walker, 188 Ala. at 327, 66 So.
at 58.
"'It seems to be the result of all
these cases that covenants to redeliver,
with all improvements, do not include trade
fixtures of the tenant, but do cover all
fixtures or improvements of the landlord
which were intended, when placed upon the
premises, to become a part of, or an
improvement of, the freehold.'
"Walker, 188 Ala. at 336, 66 So. at 60.
"In Walker, this Court discussed the governing
intention 
of 
the 
tenant 
in 
determining 
the
availability 
of 
the 
exception 
applicable 
to
improvements attached to land in the form of trade
fixtures, noting:
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"'[T]hat the intention of the tenant making
the annexation was to serve the convenience
of his trade, and not to enhance the
freehold; that it was the reasonable
intention of the tenant to place such trade
fixtures upon the land for the purpose of
better enjoying the articles annexed, or of
using them in his trade as chattels, and to
remove them at his pleasure.'
"188 Ala. at 325, 66 So. at 57 (emphasis added). 
Walker emphasizes that a tenant's intent in
'serv[ing] the convenience of his trade,' rather
than the method by which the article is attached to
the land, is critical when determining whether the
article is an improvement or a trade fixture."
(First emphasis added.)
The doctrine of trade fixtures generally appears within
the context of a landlord-tenant relationship. This is not
surprising, given that the general understanding is that
"[t]he doctrine of trade fixtures is limited in its
application to situations in which a landlord and tenant
relationship exists, and is not applicable in case[s] in which
the owner of land attaches fixture to realty."  35A Am. Jur.
2d Fixtures § 33 (2010) (citing Young Elec. Sign Co. v. Erwin
Elec. Co., 86 Nev. 822, 827, 477 P.2d 864, 867 (1970)).  It
must be remembered that trade fixtures constitute an exception
to the common-law rule that items affixed to real property
become part of that property.  See Walker, 188 Ala. at 326, 66
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So. at 57–58 ("'The general rule at common law that whatever
was annexed to the freehold became a part of it seems always
to have been subject to an exception in favor of tenants who
placed fixtures on property to be used in connection with
trade or manufacturing.'" (quoting 84 Am. St. Rep. 884)). 
This exception arose from a desire to encourage the businesses
and industries of tenants.  Under the general common-law rule,
such tenants -- and third-party suppliers of their business
instruments -- would lose ownership of instruments essential
to the tenants' businesses by virtue of attaching those
instruments to real property the tenants did not own.  The
trade-fixture exception allowed such business instruments to
be affixed to real property not owned by a tenant without fear
that the tenant who installed his own instruments, or a third-
party supplier who provided such instruments to the tenant,
would lose ownership of the instruments to the landlord.2 
See, e.g., Rosemary Williams, 136 Am. Jur. Proof of Facts 3d
2Some courts have held that third parties have the same
right as the tenant to enter the property of the landlord in
order to remove trade fixtures.  See MOCO, Inc. v. Gaines, 484
So. 2d 470 (Ala. Civ. App. 1985); Ilderton Oil Co. v. Riggs,
13 N.C. App. 547, 550, 186 S.E.2d 691, 693 (1972) ("The
plaintiff in this case had the same right to remove the
underground storage tank, pump and accessory equipment that
CLC, the lessee would have had, had it owned them.").
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357, Proof That Item of Personal Property Has Become Fixture
of Real Property or Trade Fixture § 3 (2013) (explaining that
"[l]essors 
are 
understandably 
desirous 
of 
retaining
improvements which could enhance the rental value of the
leasehold, particularly where the lessor has participated in
adapting 
the 
leasehold 
to 
the 
tenant's 
particular
requirements.  But tenants generally want to preserve the
business use of the personalty for sale or use in future
business operations.  Lenders in the situation of advancing
monies against machinery and equipment placed in leased
property want to be able to realize the value of the
collateral.  The recovery of any one will be a loss to the
other, and from these conflicts, the doctrine of the trade
fixture was created").
As Walker explains, the history of the trade-fixture
exception dates back to England:
"In Poole's Case, 1 C. 368, decided in the year
1703, Holt, C.J., held that a tenant who was by
trade a soap boiler, and had, for the convenience of
his trade, put up vats, copper boilers, partitions,
etc., and paved the back yard, had the right during
the term of his lease to remove such fixtures.  This
is probably the first case that put the question of
trade fixtures of a tenant upon a clear and
satisfactory basis; and the rule was stated to be in
favor of trade, and to encourage industry, and has
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ever since been regarded as the original ground for
the exceptions as to trade fixtures made by
tenants."
188 Ala. at 324–25, 66 So. at 57.  
With this background, it becomes clear that the purpose
behind the trade-fixture exception does not exist in this
case.  As Pipkin observes:  "It is undisputed that when Sun
State entered into the [PSA] with IMAS to install the gasoline
pumps, IMAS was the owner of the Property, not a tenant."
Pipkin's brief, p. 23.  The gasoline pumps were installed to
further IMAS's business, not the business of a tenant.  As the
owner of the property, IMAS had no reason to fear losing
ownership of the gasoline pumps, because under the general
common-law rule, items an owner affixed to his or her property
became part of the property.  On the other hand, Sun State had
no relationship to the property either by ownership or by
possession; it was simply a supplier of gasoline and materials
to IMAS.  Thus, Sun State's avenue for preserving its interest
in the gasoline pumps could not be through the common-law
doctrine of trade fixtures, but rather through the PSA -- its
contract with IMAS -- which is precisely what occurred.
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That the presence of a landlord-tenant relationship is
integral to the application of the trade-fixture exception is
well illustrated by Sycamore Management Group, LLC v. Coosa
Cable Co., supra.  Sycamore concerned the ownership of a
cable-television-distribution system in an apartment complex
known as Maple Village.  The Court's opinion detailed the
undisputed facts:
"Maple Village was constructed in 2004; EYC
Companies ('EYC') owned the property and managed the
apartment 
complex 
after 
the 
construction 
was
completed.  During the construction phase, Coosa
Cable installed, at its own expense, a full
cable-distribution plant at the Maple Village
complex, including wiring and other equipment. 
Coosa Cable and EYC never entered into a contract
for the provision of cable service to residents of
Maple Village, nor did Coosa Cable pay EYC a fee for
the privilege of serving the residents of Maple
Village.  The residents of Maple Village had the
option to contract on a month-to-month basis with
Coosa Cable for individualized service plans,
including cable television, Internet services, and
primary telephone service -- including 911 service.
Coosa Cable dealt directly with its customers at
Maple Village; i.e., it billed the customers
individually.  Coosa Cable's arrangement with the
residents at Maple Village was nonexclusive in that
the residents there were free to contract with other
cable and/or communications providers.
"Sycamore acquired Maple Village from EYC in
March 2007.  On August 12, 2008, Sycamore entered
into a written agreement with DirecPath whereby
DirecPath would have the exclusive right to provide
video-programming services (and a nonexclusive right
22
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to provide Internet and telephone services) to the
residents of Maple Village.  Debbie Taylor, the
owner/manager of Sycamore, testified that Sycamore
would receive approximately $700 to $1,100 per month
under the agreement.  Both Sycamore and DirecPath
were aware of Coosa Cable's business relationships
with many of the Maple Village residents."
42 So. 3d at 92.  
Coosa 
Cable 
sued 
Sycamore 
and 
DirecPath 
seeking
injunctive relief preventing them from "'interfering with
Coosa 
Cable's 
access 
to 
its 
equipment'" 
and 
from
"'misappropriating Coosa 
Cable's 
personal 
property 
in 
the 
form
of its distribution plant, wiring, and equipment.'"  42 So. 3d
at 92-93.  Coosa Cable contended that "the cable wiring and
related equipment are 'trade' fixtures and are, therefore, the
personal property of Coosa Cable."  42 So. 3d at 94.  The
trial court granted Coosa Cable's request for injunctive
relief.
On appeal, this Court agreed with Sycamore and DirecPath
that "the wires and equipment were fixtures attached to real
property but not trade fixtures," stating: "Coosa Cable's
argument that the wires and equipment are 'trade' fixtures
does not apply in this fact situation because Coosa Cable does
not have a landlord-tenant relationship with Sycamore, nor did
23
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it have such a relationship with Sycamore's predecessor, EYC."
42 So. 3d at 94–95.  Thus, in Sycamore, Coosa Cable was a
third-party supplier that installed the cable-distribution
system for the property owner -- just as Sun State installed
the gasoline pumps for IMAS -- and the Court concluded that
the trade-fixture exception was not available to Coosa Cable
to establish continued ownership of the cable-distribution
system because no landlord-tenant relationship existed.  
Sun State attempts to distinguish the principle that the
trade-fixture exception applies only in landlord-tenant
relationships by highlighting a statement from MOCO, Inc. v.
Gaines, 484 So. 2d 470, 474 (Ala. Civ. App. 1985):
"Generally, where the owner of the realty permits
persons with no interest in the realty to attach
articles onto the realty, as in this case, the right
of the person annexing the articles to remove them
is implied.  5 American Law of Property § 19.10
(A.J. Casner 1952).  A licensee, tenant, or
tenant-at-will may remove fixtures attached for the
purpose of carrying on his trade or business.  See
American Law of Property § 19.1–23.66, supra.  See
also, Milford v. Tennessee River Pulp & Paper Co.,
[355 So. 2d 687 (Ala. 1978)]."
(Emphasis added.)  Without citation to any other authority,
Sun State argues:  "While a landlord-tenant relationship may
be the most frequently seen form of a relationship sufficient
24
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to support a trade fixture finding, it is not, contrary to
Pipkin's 
assertions, 
necessary. 
 
A 
licensor-licensee
relationship also supports a trade fixture finding."  Sun
State's brief, p. 17.  
MOCO, however, is inapplicable because it involved a
third-party supplier of gasoline pumps and tanks to tenants
for the tenants' business on a landlord's property.  In MOCO,
the third-party supplier sued the tenants seeking possession
of the gasoline pumps and tanks after an arrangement between
the third-party supplier and the tenants had ended.  The
tenants contended that the gasoline pumps and tanks belonged
to the landlord because they were affixed to the property. 
See MOCO, 484 So. 2d at 473.  In response to that argument,
the Court of Civil Appeals provided the statement quoted in
the previous paragraph.  Thus, the reason for the application
of the trade-fixture exception in MOCO was clear:  A landlord-
tenant relationship was involved.  The court's reference to a
"licensee" was not to the third-party supplier but to one who,
like a tenant, is an occupier, but not an owner, of the real
property in question.3  No such person exists in the present
3The MOCO court's citation to Milford v. Tennessee River
Pulp & Paper Co., 355 So. 2d 687 (Ala. 1978), in support of
25
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case; IMAS was the owner and the party ultimately purchasing
the gasoline pumps that were installed on its property.
Sun State subsequently states in its brief that "[t]he
pumps were placed on the Property by Sun State (as licensee)
pursuant to a contract with IMAS."  Sun State's brief, p. 18. 
But the PSA did not state that it granted Sun State a license:
The PSA was either a lease or a secured sale agreement.  Thus,
any "license" to install the gasoline pumps would have to be
implied.  As Pipkin notes, even if such a license could be
implied, 
"such a license came from IMAS, not from the
Rivers[es] and not from Pipkin.  ...  Sun State was
no longer a licensee (if it ever was) after IMAS
deeded the Property back to [the] Rivers[es]....
IMAS cannot grant a license to Sun State to access
real property it no longer owns.  The license, if
the quoted legal proposition reinforces what the Court of
Civil Appeals intended in referencing a "licensee."  Milford
concerned a plaintiff, Floyd Milford, who contended that he
was a "licensee" on the property of the defendant, Tennessee
River Pulp & Paper Company, and that therefore certain
equipment he had left on the property after he ceased doing
business on the property belonged to him as trade fixtures.
This Court observed that Milford could not have been a
licensee because "[h]e neither sought nor obtained permission
to remain on the land."  355 So. 2d at 690.  The Court
therefore concluded that Milford was a trespasser, and "[a]s
a trespasser, one has no claim to fixtures attached to the
realty of another."  Id.  Thus, the "licensee" referred to the
occupier of the property, not a third-party with no possessory
or ownership interest in the property.
26
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any, is extinguished with IMAS's loss of ownership
in the property."
Pipkin's reply brief, pp. 11-12.  In sum, the assertion that
the gasoline pumps were trade fixtures based on Sun State's
status as a licensee is without merit.
Because the trade-fixture exception is available only to
a landlord-tenant or one with a similar property owner-
occupier relationship, and 
Sun 
State's contract was with IMAS,
the owner of the property upon which the gasoline pumps were
installed, the trial court erred in applying the trade-fixture
exception to the gasoline pumps in this case.  Therefore, any
claim of ownership of the gasoline pumps by Sun State must be
based upon the PSA rather than the common-law doctrine of
trade fixtures.
B.  Was the PSA a True Lease or a Secured-Sale Agreement?
As we noted at the outset of this analysis, Pipkin
contends, based upon § 7-1-203, that the PSA was not a true
lease but was a disguised secured sale agreement.  Such a
secured sale agreement would have required Sun State to file
a UCC-1 financing statement to perfect its security interest
in the gasoline pumps.  It is undisputed that no such filing
occurred.  Sun State contends, however, that the PSA does not
27
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meet the criteria provided in § 7-1-203 to qualify as a
secured sale agreement and that, therefore, the filing of a
UCC-1 financing statement was not required to perfect its
interest in the gasoline pumps as against a subsequent
purchaser of the property.
Section 7-1-203 provides, in pertinent part:
"(a) Whether a transaction in the form of a
lease creates a lease or security interest is
determined by the facts of each case.
"(b) A transaction in the form of a lease
creates a security interest if the consideration
that the lessee is to pay the lessor for the right
to possession and use of the goods is an obligation
for the term of the lease and is not subject to
termination by the lessee, and:
"(1) The original term of the lease is
equal to or greater than the remaining
economic life of the goods;
"(2) The lessee is bound to renew the
lease for the remaining economic life of
the goods or is bound to become the owner
of the goods;
"(3) The lessee has an option to renew
the lease for the remaining economic life
of 
the 
goods 
for 
no 
additional
consideration or for nominal additional
consideration upon compliance with the
lease agreement; or
"(4) The lessee has an option to
become the owner of the goods for no
additional consideration or for nominal
28
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additional consideration upon compliance
with the lease agreement.
"....
"(d) Additional consideration is nominal if it
is less than the lessee's reasonably predictable
cost of performing under the lease agreement if the
option is not exercised.
"Additional consideration is not nominal if:
"(1) When the option to renew the
lease is granted to the lessee, the rent is
stated to be the fair market rent for the
use of the goods for the term of the
renewal determined at the time the option
is to be performed; or
"(2) When the option to become the
owner of the goods is granted to the
lessee, the price is stated to be the fair
market value of the goods determined at the
time the option is to be performed.
"(e) The 'remaining economic life of the goods'
and 'reasonably predictable' fair market rent, fair
market value, or cost of performing under the lease
agreement must be determined with reference to the
facts and circumstances at the time the transaction
is entered into."
We begin this portion of our analysis by observing that
"the interpretation of an unambiguous contract is a
question of law.  '[W]hen the terms of a contract
are unambiguous, the construction of the contract
and its legal effect become questions of law for the
court, and when appropriate, may be decided by
summary judgment.'  Dill v. Blakeney, 568 So. 2d
774, 777-78 (Ala. 1990).  Therefore, whether an
agreement is a lease or a secured sale agreement is
29
1160850
a question of law when the decision is based upon
construction of the agreement and not on extrinsic
facts.  See LMV Leasing, Inc. v. Conlin, 805 P.2d
189, 193 (Utah App. 1991)."
Sharer v. Creative Leasing, Inc., 612 So. 2d 1191, 1193–94
(Ala. 1993).  The parties dispute certain facts in this case,
but those disputed facts do not bear on the interpretation of
the PSA.
It is also important to note that, as a comment to
§ 7-1-203 explains,
"[p]rior to enactment of the rules now codified
in this section, the 1978 Official Text of Section
1-201(37) provided that whether a lease was intended
as security (i.e., a security interest disguised as
a lease) was to be determined from the facts of each
case; however, (a) the inclusion of an option to
purchase did not itself make the lease one intended
for security, and (b) an agreement that upon
compliance with the terms of the lease the lessee
would become, or had the option to become, the owner
of the property for no additional consideration, or
for a nominal consideration, did make the lease one
intended for security.
"Reference to the intent of the parties to
create a lease or security interest led to
unfortunate results.  In discovering intent, courts
relied upon factors that were thought to be more
consistent with sales or loans than leases.  Most of
these criteria, however, were as applicable to true
leases as to security interests."
Official Comment 2 to § 7-1-203, Ala. Code 1975.  
30
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Because of the confusion caused by the reference to the
intent of the parties, the UCC was revised to "draw[] a
sharper line between leases and security interests disguised
as leases to create greater certainty in commercial
transactions."  Id.  It sought to do this by devising "tests
[that] focus on economics, not the intent of the parties." 
Id.  See, e.g., Excel Auto & Truck Leasing, L.L.P. v. Alief
Indep. Sch. Dist., 249 S.W.3d 46, 51 (Tex. App. 2007) ("This
two-part test focuses on the economics of the transaction
rather than the intent of the parties or the label of the
document."); Fangio v. Vehifax Corp. (In re Ajax Integrated,
LLC), 554 B.R. 568, 578 (Bankr. N.D. N.Y. 2016) ("The Bright
Line Test looks to the substance of the transaction and not
the parties' intent.").  Consequently, the fact that the PSA
uses lease terminology, which could be used to argue that Sun
State and IMAS intended the PSA to be a lease, is not
controlling.  What matters are the economic realities of the
transaction.  
The test stated in § 7-1-203(b) provides the criteria for
distinguishing between a true lease and a secured sale
agreement.  
31
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"Subsection (b) of Ala. Code [1975,] § 7–1–203[,]
creates a 'bright line' test to determine 'when a
transaction in the form of a lease creates a
security interest as a matter of law based upon the
terms of the transaction.'  [In re Warne, [No. 09-
13941, April 4, 2011] (Bankr. D. Kan. 2011) [not
selected for publication in B.R.].]  If a security
interest is not created per se under § 7–1–203(b),
then the court must consider 'the "facts of each
case" to determine if an economically meaningful
interest was reserved to the lessor at the end of
the lease term.'  [Id.]"
In re HB Logistics, LLC, 460 B.R. 291, 303 (Bankr. N.D. Ala.
2011) (applying Alabama law). 
"In general, the essential distinction between a
true lease and a conditional sale is that in a
lease, the lessee never owns the property.  Rather,
the lease grants the lessee the right to use
property for a period less than its economic life
with the concomitant obligation to return the
property to the lessor while it retains some
substantial economic life.  At the end of the lease
term, the lessor has the absolute right to retake
and use the property.
"Where 
the 
purported 
lease 
is 
really 
a
conditional sale agreement, the lessor holds only a
security interest in the goods and has no other
rights in the goods.  Thus, where a transaction in
the form of a lease creates a security interest, the
lessor would not reasonably expect to receive back
anything of value at the end of the lease since by
that time, the goods would have reached the end of
their economic life or the lessee would be
compelled, 
contractually 
or 
economically, 
to
purchase the goods or renew the lease to the end of
the economic life of the goods.
"....
32
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"The Code contains a two-part analysis, often
referred 
to 
as 
the 
'bright-line 
test,' 
for
determining whether a lease is actually a disguised
security arrangement.  Under the first prong of that
test, a lease transaction creates a security
interest if the consideration that the lessee pays
for the right to possess and use of the goods is an
obligation for the term of the lease that is not
subject to termination by the lessee.  Thus, the
focus is on whether a lessee has the right to
terminate the consideration that he or she owes
under the agreement, not whether the lessee may
terminate the agreement itself.
"Under the second prong of the test, one of the
four following conditions, referred to as 'residual
value factors,' must also be true:  the original
term of the lease is equal to or greater than the
remaining economic life of the goods; the lessee is
bound to renew the lease for the remaining economic
life of the goods or is bound to become the owner of
the goods; the lessee has an option to renew the
lease for the remaining economic life of the goods
for no additional consideration or for nominal
additional consideration upon compliance with the
lease agreement; or the lessee has an option to
become the owner of the goods for no additional
consideration 
or 
for 
nominal 
additional
consideration 
upon 
compliance 
with 
the 
lease
agreement.  One determines the 'remaining economic
life of the goods' based upon the facts and
circumstances at the time when the parties enter
into the transaction."
79 C.J.S. Secured Transactions § 23 (2017) (footnotes omitted
and emphasis added).
In evaluating the first prong of the "bright-line test,"
Sun State focuses on whether IMAS had a right to terminate the
33
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agreement.  Sun State expressly argues that "the plain
language of Section 11(c) [of the PSA] clearly indicates that
IMAS did indeed have the ability to terminate the PSA.  The
fact that Sun State had to consent to a termination by IMAS
did not render the PSA 'not subject to termination.'"  Sun
State's brief, p. 22.  As Pipkin points out, however, this
argument is illogical.  "Every contract can be terminated by
mutual agreement, whether written into the contract or not.
The issue is not whether Sun State could allow termination of
the agreement, but whether IMAS had a true right to terminate
the agreement."  Pipkin's reply brief, p. 16.  
More importantly, as the wording of § 7-1-203(b) and the
summary of this UCC provision quoted above indicate, though,
the real test is not just whether IMAS had a right to
terminate the PSA, but whether IMAS had a right to terminate
the consideration to be paid under the PSA.  Sun State
contends that this is not the case "[b]ecause IMAS's
obligation under the PSA ended before September 13, 20[2]0." 
Sun State's brief, p. 21. Sun State further explains: 
"The term of the lease provision in the PSA was for
a ten year period, which began on September 13,
2010.  Less than two years later, however, in July
2012, IMAS stopped doing business with Sun State....
34
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IMAS unilaterally ended its relationship with Sun
State and currently has no obligation to purchase
fuel from Sun State or to perform in any other
manner under the PSA."
Sun State's brief, pp. 20-21.  
There are several problems with this argument.  First, 
this is not an accurate statement of the facts.  IMAS did not
"unilaterally end[] its relationship with Sun State"; about
two years into the agreement IMAS informed Sun State that it
was not making money operating the store on the property and
that it was going to sell the property back to the Riverses. 
As Section 11(c) of the PSA makes clear, Sun State could have
objected to IMAS's termination and could have required IMAS to
pay the remainder of the consideration due under the PSA, but
it chose not to do so.
More importantly, as Pipkin notes, Sun State is
"argu[ing] that because IMAS breached the agreement, the lease
is automatically a lease and not a security interest."
Pipkin's reply brief, p. 14.  In other words, Sun State argues
that because IMAS did not pay the consideration remaining for
the life of the agreement and because Sun State did not force
IMAS to do so, IMAS had a right to terminate the consideration
to be paid under the PSA.  This does not follow.  As Pipkin
35
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observes, what matters is whether the terms of the PSA meet
the requirements of § 7-1-203(b), not whether the PSA was
actually enforced as written.  See id.  
Section 11(e) of the PSA unequivocally states:
"In the event of the termination of this Agreement
for any reason, [IMAS] shall additionally make
payment in full of any amounts due from [IMAS] to
[Sun State] pursuant to this Agreement, the
equipment loan as described herein, the lost profits
of [Sun State] as set forth herein, any unamortized
equipment loan or lease payments, any damages or
charges incurred by [IMAS] from Citgo or such other
supplier as directed by [Sun State], and repayment
in full of the rebates received by [IMAS], all of
which amounts shall be then accelerated and
immediately due and payable."
(Emphasis added.)  The plain language of the PSA provides that
IMAS did not have a right to discontinue the consideration it
owed under the agreement.  Therefore, the PSA satisfies the
first prong of the test in § 7-1-203(b) for qualifying as a
security interest.
Under the second prong of the test, the PSA must satisfy
one of four listed conditions.  Pipkin contends that the PSA
satisfies the conditions listed in § 7-1-203(b)(1) and § 7-1-
203(b)(4).  As Sun State observes, however, Pipkin did not
argue before the trial court that the condition listed in § 7-
1-203(b)(1) had been satisfied.  Therefore, we will not
36
1160850
consider that argument in this appeal.4  See, e.g., Andrews v.
Merritt Oil Co., 612 So. 2d 409, 410 (Ala. 1992) (stating that
"[t]his Court cannot consider arguments raised for the first
time on appeal; rather, our review is restricted to the
evidence and arguments considered by the trial court").
Section § 7-1-203(b)(4) provides that for a lease to
qualify as a security interest "[t]he lessee [must have] an
option to become the owner of the goods for no additional
consideration or for nominal additional consideration upon
compliance with the lease agreement."  Section 3(d) of the PSA
unequivocally states:  "Upon the successful completion of the
4Near 
the 
conclusion of 
his 
appellate brief, 
Pipkin 
argues
that the trial court erred by failing to hold a separate
hearing on Sun State's motion for a summary judgment because
not holding a separate hearing prevented Pipkin from
submitting a thorough response to the arguments Sun State
asserted in its motion.  Pipkin further contends that if such
a hearing had been held, he would have presented an argument
about the PSA satisfying the condition listed in § 7-1-
203(b)(1).  The argument is without merit.  First, we have no
record that Pipkin objected in the trial court to the failure
to hold a separate hearing on Sun State's summary-judgment
motion.  Second, Pipkin admits that Sun State did not make any
arguments in its summary-judgment motion that were not made in
its response to his motion for a partial summary judgment, and
he also admits that he was able to respond to all of Sun
State's arguments in the hearing that was held on his motion. 
Third, the trial court had discretion to 
consolidate arguments
from Pipkin's motion for a partial summary judgment and Sun
State's motion for a summary judgment in one hearing, given
that the two motions covered the same issues.
37
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requirements of this Agreement, [Sun State] shall transfer
title to the loaned equipment to [IMAS] by Bill of Sale."
Therefore, under the PSA, IMAS had the option of becoming the
owner of the gasoline pumps for no additional consideration. 
Sun State admits that "IMAS had the option to become the
owner of the pumps upon successful completion of all of its
obligations under the PSA."   Sun State's brief, p. 24.  But
Sun 
State 
contends 
that 
the 
condition 
listed 
in
§ 7-1-203(b)(4) nevertheless "is irrelevant to the question
whether the PSA created a security agreement as opposed to a
lease" because "IMAS did not have an absolute obligation for
the entire term of the PSA that was not subject to
termination."  Id.  
The fact that IMAS did not fulfill all of its obligations
under the PSA does not render the PSA a lease rather than a
security agreement.  Again, this argument confuses how Sun
State chose to treat IMAS when IMAS failed to meet its
obligations under the PSA with the actual stated terms of the
PSA.  As we have already determined, IMAS did have an
obligation to pay the full consideration, which obligation was
not subject to termination.  Further, the PSA clearly provided
38
1160850
that IMAS would become the owner of the gasoline pumps without
further consideration following the completion of the term of
the agreement.  Thus, the PSA satisfied both prongs of the
bright-line test in § 7-1-203(b) for "[a] transaction in the
form of a lease creat[ing] a security interest."
Moreover, the PSA all but expressly declares that it is
not a true lease but rather a disguised security agreement
given that section 3(d) of the PSA specifically provides that
"a UCC-1 Financing Statement governing the loaned equipment"
should be "fil[ed] with the Florida [sic] Secretary of
State,"5 a provision for which Sun State provides no
explanation and that was completely ignored in the trial
court's order.  
Section 7-9A-334, Ala. Code 1975, provides, in part:
"(a) Security interest in fixtures under this
article.  A security interest under this article may
be created in goods that are fixtures or may
continue in goods that become fixtures.  A security
interest does not exist under this article in
ordinary building materials incorporated into an
improvement on land.
"....
"(e) Priority of security interest in fixtures
over interests in real property.  A perfected
5See note 1, supra. 
39
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security interest in fixtures has priority over a
conflicting interest of an encumbrancer or owner of
the real property if:
"(1) the debtor has an interest of
record in the real property or is in
possession of the real property and the
security interest:
"(A) 
is 
perfected 
by 
a
fixture 
filing 
before 
the
interest of the encumbrancer or
owner is of record; and
"(B) has priority over any
conflicting 
interest 
of 
a
predecessor 
in 
title of 
the
encumbrancer or owner[.]
"...."
It is undisputed that no UCC-1 financing statement --
which would have protected Sun State's security interest in
the gasoline pumps -- was filed before Pipkin purchased the
property.  Therefore, Sun State's unperfected security
interest in the gasoline pumps did not have priority over
Pipkin's ownership interest in the property, including the
gasoline pumps affixed to the property.  Accordingly, Pipkin
acquired the gasoline pumps free and clear of Sun State's
interest in them, and Sun State did not possess an ownership
interest in the gasoline pumps when it had them removed from
Pipkin's property.
40
1160850
IV.  Conclusion
Based on the foregoing, we reverse the summary judgment
in favor of Sun State, and we remand the cause for further
proceedings.
REVERSED AND REMANDED.
Stuart, C.J., and Parker, Main, and Bryan, JJ., concur.
41