Court Opinion

ID: 9383320
Source: CourtListenerOpinion
Date Created: 2023-03-30 15:00:53.40868+00
Date Added: 2024-06-11T17:17:44.961025
License: Public Domain

USCA11 Case: 22-10073   Document: 40-1    Date Filed: 03/30/2023   Page: 1 of 17

                                                 [DO NOT PUBLISH]
                                 In the
                 United States Court of Appeals
                        For the Eleventh Circuit

                         ____________________

                               No. 22-10073
                         ____________________

        IN RE:
        JAMES DANIEL WISNER,
                                                              Debtor.
        ___________________________
        JAMES DANIEL WISNER,
                                                    Plaintiff-Appellee,
        versus
        THE PIEDMONT BANK,

                                                 Defendant-Appellant.

                         ____________________
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        2                      Opinion of the Court                 22-10073

                   Appeal from the United States District Court
                      for the Northern District of Georgia
                      D.C. Docket No. 1:20-cv-03782-ELR
                            ____________________

        Before WILSON, JILL PRYOR, and HULL, Circuit Judges.
        PER CURIAM:
               This case arises from an adversary bankruptcy proceeding
        brought by Piedmont Bank against James Wisner. Piedmont al-
        leged that Wisner’s debt to Piedmont was non-dischargeable in
        bankruptcy under 11 U.S.C. § 523(a)(6). The district court con-
        cluded that Piedmont lacked a sufficient interest in the injured
        property to support a non-dischargeability claim. This appeal re-
        quires us to consider whether, under Georgia law, the initiation
        and service of an action seeking to levy on corporate stock—with-
        out actual seizure of the stock certificate—establishes an interest in
        the stock sufficient to support a non-dischargeability claim under
        § 523(a)(6). After careful review, and with the benefit of oral argu-
        ment, we conclude that it does not. We affirm in part, vacate in
        part, and remand for further factual findings.
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        22-10073                   Opinion of the Court                             3

                                  I.      BACKGROUND 1

               In 1987, Wisner acquired 90 percent of the outstanding
        shares of stock in Atlanta Arms & Ammo, Inc. (“AA&A”). The
        stock shares were evidenced by a stock certificate.
               Decades later, Wisner guaranteed a debt owed to Piedmont
        by a third party. When the third party defaulted and Wisner failed
        to perform under the guarantee, Piedmont sued Wisner in Georgia
        state court for breach of contract to enforce the guarantee. In Au-
        gust 2013, the Superior Court of Newton County entered a final
        judgment against Wisner and other defendants for the outstanding
        debt (the “Judgment”).
               Following entry of the Judgment, Piedmont filed a collateral
        action in state court seeking to levy on Wisner’s shares in AA&A.
        Specifically, Piedmont sought “charging orders against Wisner’s fi-
        nancial interests in” AA&A and “an order compelling Wisner to
        turn over and assign all shares of all corporations that he own[ed]
        to the Court to be sold at auction.” Doc. 6-1 at 11. 2 Wisner was
        served with the petition and summons in the levy action in October
        2013. Despite filing an action intended to do so, Piedmont never
        levied on the stock.

        1 Because we write for the parties, we assume their familiarity with the facts
        and issues.
        2 “Doc.” numbers refer to the district court’s docket entries.
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        4                      Opinion of the Court                22-10073

               After receiving the summons in the collateral action, Wisner
        and AA&A entered into an agreement to sell many of AA&A’s
        physical assets to another company, Hairy & Baxter, LLC. Central
        to this appeal, the parties dispute when the sale of assets was con-
        summated. Wisner maintains that it occurred on February 6, 2014,
        whereas Piedmont argues it was not completed until April 1, 2014.
        The agreement had a closing date of April 1, 2014, but it specified
        that “[n]otwithstanding the foregoing, the purchase and sale of the
        Acquired Assets under this Agreement shall be deemed to have
        taken place on the Effective Date” of February 6, 2014. Doc. 5-12
        at 47.
               On February 27, 2014, Piedmont filed a motion for injunc-
        tive relief and expedited hearing in the pending levy action, re-
        questing the court’s assistance in reaching Wisner’s AA&A stock.
        Piedmont also asked the court to enjoin Wisner from transferring
        or encumbering the stock until the matter was resolved. The next
        day, the state superior court issued an order enjoining Wisner from
        “transferring, encumbering, selling, concealing, assigning, with-
        drawing, conveying, gifting, wasting, or otherwise disposing in any
        way, any of the certificated securities in his possession or control,
        related to or held in [AA&A]” (the “Injunction”). Doc. 5-22 at 39.
        In the same order, the superior court scheduled a hearing on Pied-
        mont’s motion for March 13, 2014, to resolve Piedmont’s request
        for a court order requiring Wisner to relinquish his shares in
        AA&A. The court ordered Wisner to appear at the hearing and be
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        22-10073               Opinion of the Court                       5

        prepared to turn over the AA&A stock certificate to Piedmont or
        to the court pending final disposition of the motion.
               The hearing never took place, however. Before the hearing
        was held, Wisner agreed to surrender the stock certificate to Pied-
        mont, and Piedmont had the hearing removed from the court cal-
        endar. A senior vice president for Piedmont testified that the bank
        cancelled the hearing with the intention that the stock would be
        held by Piedmont in pledge against the Judgment. He further testi-
        fied that had Piedmont known about the pending sale to Hairy &
        Baxter, the bank would not have agreed to cancel the hearing. Wis-
        ner turned over the AA&A stock certificate to Piedmont on March
        14, 2014.
                When Piedmont learned of the sale of AA&A’s assets to
        Hairy & Baxter, it filed a motion in the pending levy action to hold
        Wisner in contempt for violating the Injunction. In response, Wis-
        ner argued that he was not in contempt of the Injunction because
        the sale to Hairy & Baxter had concluded on February 6, before the
        Injunction’s entry. The court nonetheless held Wisner in contempt
        and then entered the parties’ consent order to resolve the motion
        for contempt. The consent order required Wisner to make a lump
        sum payment to Piedmont as well as ongoing monthly payments
        to satisfy his debt. Wisner paid the lump sum and the monthly pay-
        ments until he filed for Chapter 7 bankruptcy about two years later.
              In bankruptcy court, Piedmont brought an adversary pro-
        ceeding against Wisner, alleging that his debt to Piedmont was
        non-dischargeable under 11 U.S.C. § 523(a)(6), which excepts from
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        6                         Opinion of the Court                    22-10073

        discharge “any debt . . . for willful and malicious injury by the
        debtor to . . . the property of another entity.” Specifically, Pied-
        mont alleged that Wisner had willfully and maliciously injured the
        AA&A stock by “transferring and allegedly selling all of [AA&A’s]
        assets to Hairy & Baxter, LLC.” 3 Doc. 8-1 at 8.
               Wisner moved for summary judgment in the adversary pro-
        ceeding, arguing that Piedmont lacked a sufficient property interest
        in AA&A at the time of the alleged injury to support a § 523(a)(6)
        non-dischargeability claim. The bankruptcy court denied summary
        judgment, explaining that although Piedmont was not the owner
        of the AA&A stock, it had a sufficient property interest:
               [C]onsidering the particular circumstances of this
               case, where a collateral proceeding is pending and
               where Piedmont ha[d] possession of the stock with
               [Wisner’s] consent, which was given in the face of an
               order in the AA&A Action that evidenced the intent
               of the Newton County Court to protect Piedmont’s
               ability to levy on the stock, there exists a sufficient in-
               terest to satisfy the interest requirement under
               § 523(a)(6).

        Doc. 5-26 at 12. Thus, the bankruptcy court concluded, “Pied-
        mont’s judgment lien attached to the stock upon service of the
        summons in the AA&A Action and Piedmont ha[d] an interest in

        3 Piedmont also alleged that Wisner’s debt was non-dischargeable under 11
        U.S.C. § 523(a)(2)(A) and 523(a)(2)(B). The bankruptcy court granted Wisner’s
        motion for summary judgment on these claims.
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        22-10073                Opinion of the Court                         7

        the stock.” Id. The court scheduled a trial to determine whether
        Piedmont could establish the remaining elements of its § 523(a)(6)
        claim: namely, whether the sale of AA&A’s assets amounted to
        willful and malicious injury to Piedmont’s interest in the AA&A
        stock.
                After a two-day trial, the bankruptcy court issued an oral rul-
        ing. In its oral ruling, the bankruptcy court identified the issue at
        trial as whether Wisner “had willfully and maliciously injured the
        bank’s interest in the stock of [AA&A] . . . by his conduct in selling
        the assets of [AA&A] prior to the hearing in the state court sched-
        uled for March 13th, 2014.” Doc. 7-15 at 6. The bankruptcy court
        concluded that “any debt that the Newton County Court deter-
        mined is attributable to Mr. Wisner’s actions in selling [AA&A] and
        taking distributions of the remaining value of the company is non-
        dischargeable, pursuant to Section 523(a)(6).” Id. at 21.
               Regarding the timing of the asset sale, the bankruptcy court
        found that Hairy & Baxter paid for the equipment and inventory
        on the asset sale agreement’s effective date—February 6th, 2014—
        and received a bill of sale to that effect. But despite the February 6
        effective date and consummated sale of equipment and inventory
        on that date, the bankruptcy court stated that “the sale was con-
        summated on February 26, 2014.” Doc. 7-15 at 19. The court fur-
        ther found that when the bank removed the March 13 hearing from
        the state court calendar, “Mr. Wisner had already consummated
        the sale and admitted that [AA&A] had become worthless through
        the sale and distributions taken.” Id. at 20. The bankruptcy court
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        8                       Opinion of the Court                22-10073

        did not address the significance of the sale agreement’s closing date
        of April 1. Nor did the bankruptcy court explicitly distinguish be-
        tween allegedly injurious acts that occurred before or after the
        turnover of the stock certificate on March 14.
                Wisner appealed the bankruptcy court’s ruling to the district
        court. On appeal, Wisner reiterated his argument that Piedmont
        lacked a sufficient property interest in the AA&A stock to support
        a § 523(a)(6) claim. The district court agreed, concluding that a
        judgment lien did not attach to the AA&A stock upon the filing and
        service of the levy action. The district court further concluded that,
        regardless of whether Piedmont gained a property interest after the
        turnover of the stock certificate on March 14, the alleged injurious
        acts, including the sale of assets to Hairy & Baxter, occurred before
        the turnover. The district court noted that it was unclear whether
        the bankruptcy court found that the asset sale took place on Febru-
        ary 6 or February 26. “Nonetheless,” the district court concluded,
        “it is clear that the Bankruptcy Court found that the Sale Agree-
        ment was consummated during February 2014, before Wisner
        turned over the AA&A stock certificate to Piedmont.” Doc. 17 at
        27. Thus, Piedmont could not establish a § 523(a)(6) claim. Pied-
        mont timely appealed.
                          II.    STANDARD OF REVIEW

              We review de novo conclusions of law, whether by the
        bankruptcy court or the district court. In re Jennings, 670 F.3d 1329,
        1332 (11th Cir. 2012). We review the bankruptcy court’s factual
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        22-10073                   Opinion of the Court                               9

        findings for clear error. Id. “If the bankruptcy court is silent or am-
        biguous as to an outcome determinative factual question, the case
        must be remanded to the bankruptcy court for the necessary fac-
        tual findings.” In re JLJ Inc., 988 F.2d 1112, 1116 (11th Cir. 1993).
                                     III.    DISCUSSION

                A discharge in bankruptcy “does not discharge an individual
        debtor from any debt . . . for willful and malicious injury by the
        debtor to another entity or to the property of another entity.” 11
        U.S.C. § 523(a)(6). The issue on appeal is whether Piedmont had a
        sufficient interest in the AA&A stock to assert a § 523(a)(6) non-
        dischargeability claim.4 Piedmont makes two arguments on appeal
        for why it had such an interest. First, Piedmont contends that it
        acquired a sufficient property interest in the AA&A stock when it
        initiated and served the collateral action seeking to levy on the
        stock. Second, Piedmont argues that it gained a property interest
        in the stock when Wisner voluntarily turned over the stock certifi-
        cate and that the sale of AA&A’s assets took place after it had
        gained this interest. We address each argument in turn.

        4 On appeal to the district court, Wisner argued for the first time that his ac-
        tions in selling AA&A’s assets did not create a debt to Piedmont under
        § 523(a)(6). The district court properly determined Wisner had waived this is-
        sue, and thus we do not address it.
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        10                     Opinion of the Court                 22-10073

                  A. The Initiation and Service of the Levy Action Did
                     Not Give Piedmont a Sufficient Property Interest
                     in the AA&A Stock.

               Piedmont contends that the district court erred by conclud-
        ing that the initiation and service of the levy action upon Wisner
        did not give Piedmont a sufficient interest in the AA&A stock to
        support a § 523(a)(6) claim. To determine whether the initiation
        and service of the levy action vested Piedmont with a sufficient
        property interest in the stock, we look to Georgia state law. See
        Butner v. United States, 440 U.S. 48, 55 (1979) (“Property interests
        are created and defined by state law.”).
               Under Georgia law, judgments “bind all the property of the
        defendant in judgment, both real and personal, from the date of
        such judgments except as otherwise provided” by statute.
        O.C.G.A. § 9-12-80. Notably, a judgment lien does not automati-
        cally attach to a chose in action such as the corporate stock at issue
        here unless specifically provided by statute. See O.C.G.A. § 9-13-57
        (“Choses in action are not liable to be seized and sold under execu-
        tion, unless made so specially by statute.”); Fourth Nat. Bank of
        Macon v. Swift & Co., 127 S.E. 729, 731 (Ga. 1925) (noting that cor-
        porate stock is a chose in action). Rather, “to reach the property of
        the debtor in such choses in action, some other additional proceed-
        ing is necessary to fix the lien of such judgments.” Fid. & Deposit
        Co. of Md. v. Exch. Bank of Macon, 28 S.E. 393, 395 (Ga. 1897). As
        the Georgia Supreme Court has explained, the property “must be
        reached either by process of garnishment, or by some collateral
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        22-10073               Opinion of the Court                        11

        proceeding instituted for the purpose of impounding it so that it
        can be applied in satisfaction of the judgment.” Id. Significantly,
        “[u]ntil it has been so seized by the courts for the purpose of appro-
        priating it to the payment of the judgment, it is still subject to the
        dominion and control of the debtor.” Id.
               Piedmont concedes that it never levied on the stock but ar-
        gues that the initiation of the levy action targeting the AA&A stock
        vested it with a sufficient interest. However, “[t]he interest of a
        debtor in a certificated security may be reached only by actual sei-
        zure of the security certificate by the officer making the attachment
        or levy.” O.C.G.A. § 11-8-112. Thus, as the district court explained,
        “a judgment lien on corporate shares in the possession of a debtor
        can only attach through the actual seizure of a stock certificate by
        a levying officer.” Doc. 17 at 20 (emphasis in original).
                Piedmont contends that this reading of Georgia law errone-
        ously conflates possession with the attachment of an interest. It fur-
        ther argues that nothing in Georgia law forecloses the possibility
        that a judgment lien may attach before a debtor is divested of pos-
        session through actual seizure. We reject its contention. As noted
        above, Georgia law is clear that corporate stock is a chose in action,
        and judgments do not automatically attach to choses in action. See
        O.C.G.A. § 9-13-57. “Choses in action are not liable to be seized and
        sold under execution, unless made so specially by statute.” Id. The
        absence of law prohibiting the attachment of a judgment lien based
        solely on the initiation of an action seeking to levy on the stock
        therefore cannot support Piedmont’s position. The only
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        12                         Opinion of the Court                        22-10073

        mechanism in Georgia law for the seizure of and levy on stock is
        O.C.G.A. § 11-8-112, which provides that in these circumstances5
        the debtor’s interest in a certificated security may only be reached
        by actual seizure of the security certificate. See id. § 11-8-112(a).
                Piedmont further argues it was asserting its present interest
        in the AA&A stock by seeking judicial aid to which it is entitled
        under O.C.G.A. § 11-8-112(e). Georgia law provides that “[a] cred-
        itor whose debtor is the owner of a certificated security . . . is enti-
        tled to aid from a court of competent jurisdiction . . . in reaching
        the certificated security.” Id. § 11-8-112(e). Although this language
        entitles a creditor to judicial aid “in reaching the certificated secu-
        rity,” it does not establish that the interest is reached by the request
        for aid. The request for judicial aid, by itself, does not give the cred-
        itor an interest in the certificated security necessary to support a §
        523(a)(6) claim. Thus, the district court correctly concluded that

        5 The statute provides exceptions to the actual-seizure requirement where the
        security certificate has been surrendered to the issuer or is in the possession of
        a secured party. See O.C.G.A. § 11-8-112(a), (d). In such circumstances, the
        debtor’s interest in the certificated security may be reached by legal process
        upon the issuer or the secured party in possession of the security certificate.
        See id. The existence of these exceptions underscores that the initiation and
        service of the levy action here was insufficient to reach the AA&A stock. In
        the exceptions, the Georgia legislature contemplated scenarios where a
        debtor’s interest in a certificated security may be reached without actual sei-
        zure of the security certificate, but the legislature declined to provide for an
        exception in the circumstances present here. Actual seizure is required unless
        the certificate has been surrendered to the issuer or is in the possession of a
        secured party.
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        22-10073               Opinion of the Court                        13

        Piedmont did not have a sufficient property interest in the AA&A
        stock based on the initiation and service of the collateral action
        seeking to levy on the stock.
                   B. Questions of Fact Remain as to Whether Pied-
                      mont Had a Security Interest in the AA&A Stock
                      and Whether the Sale of AA&A Assets Occurred
                      After Piedmont Acquired that Interest.

               Alternatively, Piedmont argues that it obtained either an
        ownership interest or a security interest in the AA&A stock when
        Wisner turned over the stock certificate on March 14. It argues fur-
        ther that Wisner’s actions after he turned over the stock certificate
        injured this interest. Specifically, it contends that the sale of
        AA&A’s assets to Hairy & Baxter was not consummated until the
        closing date of April 1, after Piedmont had gained a security interest
        in the stock by obtaining possession of the certificate.
                The bankruptcy court did not determine whether Piedmont
        acquired a sufficient interest in the AA&A stock when the stock
        certificate was turned over because the court concluded instead
        that Piedmont gained an interest in the stock upon the initiation of
        the levy action. For the same reason, the bankruptcy court made
        no factual findings concerning the timing of the asset sale to Hairy
        & Baxter. Because the bankruptcy court’s findings are ambiguous
        on these outcome-determinative factual questions, we must re-
        mand. See In re JLJ Inc., 988 F.2d at 1116.
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        14                        Opinion of the Court                     22-10073

               A security interest in a certificated security attaches and be-
        comes enforceable when (1) “value has been given[,] (2) [t]he
        debtor has rights in the collateral or the power to transfer rights in
        the collateral to a third party[,]” and (3) “the security certificate has
        been delivered to the secured party . . . pursuant to the debtor’s
        security agreement.” O.C.G.A. § 11-9-203(b)(1)–(3).
               Here, the latter two elements are satisfied. First, it is undis-
        puted that Wisner owned the stock and had the power to transfer
        rights in the stock to Piedmont. Second, as the bankruptcy court
        concluded, Wisner’s turnover of the stock certificate was voluntary
        and the product of a consensual agreement between the parties.
        See Barton v. Chem. Bank, 577 F.2d 1329, 1333–34 (5th Cir. 1978) 6
        (concluding that a valid oral security agreement existed where the
        secured party had possession of the collateral and circumstances
        supported that the asset was held in pledge). After obtaining the
        Judgment against Wisner, Piedmont brought a collateral proceed-
        ing seeking to levy on the AA&A stock. Wisner understood that
        Piedmont was trying to acquire his shares in AA&A through the
        pending levy action. The order of the superior court setting a hear-
        ing on Piedmont’s motion for an injunction was intended to pro-
        tect Piedmont’s ability to levy on the stock. As the bankruptcy
        court explained, under these circumstances “the only conceivable

        6 Decisions of the former Fifth Circuit handed down prior to October 1, 1981,
        are binding on this Court. See Bonner v. City of Prichard, 661 F.2d 1206, 1209
        (11th Cir. 1981) (en banc).
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        22-10073                   Opinion of the Court                               15

        purpose for transferring the stock was to provide security for satis-
        faction of the judgment.” Doc. 5-26 at 10 (alteration adopted) (in-
        ternal quotation marks omitted). Thus, the court concluded, Wis-
        ner agreed to “turn[]the stock over to Piedmont . . . with the likely
        exchange being cancellation of the March 13 hearing.” Id.
                Although the evidence suggested that Wisner turned the
        stock over to Piedmont in exchange for cancellation of the impend-
        ing hearing, and the bankruptcy court characterized this scenario
        as “likely,” the court never made explicit factual findings to that
        effect. Despite having concluded in its order denying Wisner’s mo-
        tion for summary judgment that “a question of fact exists as to
        whether Piedmont holds a consensual lien in the stock,” id. at 11,
        the court never resolved the underlying fact question whether
        value had been given to Wisner in exchange for turning over the
        stock certificate. Therefore, an issue of fact remains as to whether
        Piedmont acquired a security interest in the stock after Wisner sur-
        rendered the certificate to Piedmont on March 14. 7

        7 Piedmont also argues that it obtained an interest as a “purchaser” of the stock
        under O.C.G.A. § 11-8-104(a)(1). Georgia law defines “purchase” with refer-
        ence to the creation of an interest in the property. See O.C.G.A. § 11-1-201(29)
        (defining “purchase” as “taking by sale, discount, negotiation, mortgage,
        pledge, lien, security interest, issue or reissue, gift, or any other voluntary
        transaction creating an interest in property”). The bankruptcy court deter-
        mined that “Piedmont may be a purchaser . . . if it can establish at trial that
        value was given in exchange for possession of the stock certificate.” Doc. 5-26
        at 11. As discussed above, the bankruptcy court did not resolve the factual
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        16                       Opinion of the Court                    22-10073

                Assuming that Piedmont acquired a property interest in the
        AA&A stock after gaining possession of the stock certificate, it must
        also show that the stock was injured after Piedmont acquired that
        interest. This question about the timing of the injury turns on
        whether the sale of AA&A’s assets to Hairy & Baxter was consum-
        mated on February 6, as Wisner contends, or on April 1, as Pied-
        mont contends. The district court concluded that it did not matter
        whether Piedmont gained an interest in the AA&A stock after ac-
        quiring the stock certificate in March because the bankruptcy court
        found that the sale of AA&A’s assets to Hairy & Baxter was con-
        summated in February 2014. Because the sale—and thus the injury
        to the AA&A stock—took place before Piedmont acquired the
        stock certificate, the district court determined that Piedmont
        lacked a sufficient interest in the AA&A stock to support a non-dis-
        chargeability claim at the time of the alleged injury. Thus, the dis-
        trict court concluded, remand to the bankruptcy court for factual
        findings was unnecessary.
                We disagree. Because the bankruptcy court concluded that
        Piedmont had a sufficient property interest in the AA&A stock after
        its initiation of the levy action in October 2013, the court had no
        reason to—and did not—make factual findings distinguishing be-
        tween conduct that occurred before or after the surrender of the

        question of whether value had been given to Wisner in exchange for the cer-
        tificate.
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        22-10073                  Opinion of the Court                            17

        stock certificate on March 14. 8 Although the bankruptcy court’s
        oral ruling suggests that the sale was completed in February 2014
        before the surrender of the stock certificate, the timing of the sale
        was not directly at issue. At best, the bankruptcy court’s factual
        findings are ambiguous as to when the asset sale to Hairy & Baxter
        took place. If the sale occurred after Piedmont gained possession of
        the stock certificate, the injury to the AA&A stock caused by the
        sale may support a non-dischargeability claim if Piedmont had a
        property interest in the stock at that time. Accordingly, we remand
        to the district court with instructions to remand to the bankruptcy
        court for further findings of fact.
                                   IV.     CONCLUSION

               For the above reasons, we affirm in part, vacate in part, and
        remand with instructions to remand to the bankruptcy court. On
        remand, the bankruptcy court should consider (1) whether Pied-
        mont gained a property interest in the stock after Wisner surren-
        dered the stock certificate and (2) if so, whether the asset sale injur-
        ing the AA&A stock occurred after Piedmont acquired that inter-
        est.
               AFFIRMED in part, VACATED in part, and REMANDED.

        8 Piedmont asserts that additional injurious transactions occurred after it
        gained possession of the stock certificate on March 14. However, these trans-
        actions were independent of the asset sale agreement with Hairy & Baxter,
        which formed the basis for Piedmont’s § 523(a)(6) non-dischargeability claim.