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UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE UTAH AIRCRAFT ALLIANCE,

Debtor.

BAP No. UT-05-032

G & B AIRCRAFT MANAGEMENT

and GENE CURTIS,

Appellants,

Bankr. No. 04T-40205

 Chapter 7

v.

DAVID E. SMOOT, Trustee, UNITED

STATES TRUSTEE, and UTAH

AIRCRAFT ALLIANCE,

Appellees.

JUDGMENT

Filed March 20, 2006

Before CORNISH, BROWN, and McNIFF, Bankruptcy Judges.

This case originated in the United States Bankruptcy Court for the District

of Utah.

The judgment of that court is AFFIRMED.

For the Panel:

Barbara A. Schermerhorn, Clerk of Court

By:

Deputy Clerk

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 1 of 17
1 This bankruptcy proceeding was filed before enactment of the Bankruptcy

Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Because the

provisions of BAPCPA apply to only to those cases filed on or after its effective

(continued...)

FILED

U.S. Bankruptcy Appellate Panel

of the Tenth Circuit

March 20, 2006

Barbara A. Schermerhorn

Clerk PUBLISH

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE UTAH AIRCRAFT ALLIANCE,

Debtor.

BAP No. UT-05-032

G & B AIRCRAFT MANAGEMENT

and GENE CURTIS,

Appellants,

Bankr. No. 04T-40205

 Chapter 7

v. OPINION

DAVID E. SMOOT, Trustee, UNITED

STATES TRUSTEE, and UTAH

AIRCRAFT ALLIANCE,

Appellees.

Appeal from the United States Bankruptcy Court

for the District of Utah

Timothy Miguel Willardson, Salt Lake City, Utah, for Appellants.

Jennifer A. Brown of Mabey & Murray LC, Salt Lake City, Utah, (Steven J.

McCardell with her on the brief) for Appellees.

Before CORNISH, BROWN, and McNIFF, Bankruptcy Judges.

BROWN, Bankruptcy Judge.

G&B Aircraft Management (“G&B”) appeals an Order denying its motion

to lift the stay under 11 U.S.C. § 362(d)(1)1

 to allow it to enforce its rights as to

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 2 of 17
1 (...continued)

date of October 17, 2005, all future statutory references to “Section” will be to

Title 11 of the United States Code as it appeared before BAPCPA, unless

otherwise noted. 

-2-

five airplanes. Central to this dispute is the question of whether language in its

Purchase Agreements with the Debtor Utah Aircraft Alliance (“UAA”) is

effective that purports to retain G&B’s title to the airplanes until UAA has fully

paid for them. G&B contends that the bankruptcy court erred in finding that it

was not the owner, but held only an unperfected security interest in the planes. It

also appeals the court’s holding that it did not possess a valid repairman’s lien on

the aircraft. For the following reasons, we affirm. 

I. Background

The founders of UAA formed it as a club to provide licensed pilots with

cost-effective access to airplanes. Gene Curtis was a shareholder and officer of

UAA for most of UAA’s existence. He was also shareholder and officer of G&B. 

G&B managed UAA, sold five planes to UAA under a contract retaining title to

the planes until all payments were made, and provided maintenance for the

planes. 

G&B’s motion for stay relief claims that a balance remains due on the

purchase price for each of the five planes. Although G&B transferred title to one

of the planes to UAA, it alleges that the transfer was merely an accommodation to

help UAA secure funding. G&B asserts that it holds title to the four remaining

planes. G&B also claims that UAA did not pay for all of G&B’s maintenance

work on the planes. G&B sought relief from stay to recover the planes, alleging

that: (1) it held title to the planes; (2) the amounts due on the planes exceeded

the planes’ values; (3) G&B had received no payments since the bankruptcy

filing; and (4) the planes were deteriorating due to lack of use and maintenance. 

G&B’s motion limited its request for stay relief to 11 U.S.C. § 362(d)(1), for

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 3 of 17
2 Eddleman v. United States Dept. of Labor, 923 F.2d 782, 784-86 (10th Cir.

1991) overruled in part on other grounds, Temex Energy, Inc. v. Underwood,

Wilson, Berry, Stein & Johnson, 968 F.2d 1003, 1005 n.3 (10th Cir. 1992).

3 28 U.S.C. § 158(c)(1); Fed. R. Bankr. P. 8001; 10th Cir. BAP L.R. 8001-1.

4 Franklin Sav. Ass’n v. Office of Thrift Supervision, 31 F.3d 1020, 1023

(10th Cir. 1994).

5 Moothart v. Bell, 21 F.3d 1499, 1504 (10th Cir.1994) (quoting McEwen v.

(continued...)

-3-

“cause,” including a lack of adequate protection. 

At the hearing on the motion for relief from stay, G&B alleged for the first

time that it also held a repairman’s lien for unpaid maintenance work. Although

he had not raised the issue in his opposition to the motion, the Trustee argued for

the first time at the hearing that G&B held only an unperfected security interest in

the planes. Following an evidentiary hearing, the bankruptcy court found in the

Trustee’s favor, holding that G&B had only a security interest in the planes,

which had not been perfected, and had no repairman’s lien. Since the court found

G&B held only an unperfected security interest, it held that G&B was not entitled

to adequate protection and denied G&B’s request for relief from the stay. 

II. Appellate Jurisdiction

This appeal timely followed. An order denying relief from stay is a final

order.2

 The parties have consented to this Court’s jurisdiction because they did

not elect to have the appeal heard by the United States District Court for the

District of Utah.3

III. Standard of Review

Ordinarily, we review a bankruptcy court’s determination of “cause” under

Section 362(d)(1) for an abuse of discretion.4

 “Under the abuse of discretion

standard: ‘a trial court’s decision will not be disturbed unless the appellate court

has a definite and firm conviction that the lower court made a clear error of

judgment or exceeded the bounds of permissible choice in the circumstances.’”5

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 4 of 17
5 (...continued)

City of Norman, 926 F.2d 1539, 1553-54 (10th Cir. 1991) (further quotation

omitted)).

6 Kiowa Indian Tribe v. Hoover, 150 F.3d 1163, 1165 (10th Cir. 1998). 

7 Elder v. Holloway, 510 U.S. 510, 516 (1994). 

8 Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401 (1990). 

-4-

An abuse of discretion, however, may exist when a ruling is premised on an

erroneous conclusion of law or on clearly erroneous fact findings.6

 We review the

bankruptcy court’s conclusions of law under the de novo standard.7

 “When an

appellate court reviews a [trial] court’s factual findings, the abuse-of-discretion

and clearly erroneous standards are indistinguishable . . . .”8

IV. Discussion

A. The Scope of a Ruling on a Motion for Stay Relief

With certain exceptions not relevant here, 11 U.S.C. § 362(e) provides that

the automatic stay in bankruptcy automatically terminates within thirty days from

the filing of a request for stay relief to bring an action against property of the

estate, unless the court expressly orders the stay continued in effect pending the

conclusion of, or as a result of, a final hearing and determination on a stay relief

motion. Because the statute requires bankruptcy courts to rule quickly on stay

motions, a relief from stay proceeding is by its nature a cursory or summary

proceeding. It does not replace the need for filing an adversary proceeding in

order to obtain a final determination as to the validity, extent or priority of a

creditor’s lien. 

The legislative history on § 362 analogizes a preliminary hearing on the

stay to a preliminary injunction hearing.

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 5 of 17
9 United Cos. Fin. Corp. v. Brantley (In re Brantley), 6 B.R. 178, 187-88

(Bankr. N.D. Fla. 1980) (citing H. Rep. 95-595, at 344 (1977) reprinted in 1978

U.S.C.C.A.N. 5787, 6300-01). 

10 Id. (citing S. Rep. 95-989, at 55, reprinted in 1978 U.S.C.C.A.N. 5787,

5841)

11 Id. at 188; See also Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 32-33

(1st Cir. 1994); In re Tally Well Serv., Inc. 45 B.R. 149, 152 (Bankr. E.D. Mich.

1984); In re Vitreous Steel Prods. Co., 911 F.2d 1223, 1234 (7th Cir. 1990). The

Tenth Circuit has not published any decisions on the scope of a stay relief

proceeding, but in In re Rexotech Cal., Inc., Nos. 91-1323 & 91-1324, 1992 WL

168932, at *2 (10th Cir. July 17, 1992), the court dismissed an appeal for lack of

jurisdiction where the district court had remanded a stay lift order to the

bankruptcy court for further proceedings. In so doing, the Tenth Circuit

discussed the scope of stay hearing, citing Vitreous Steel for the proposition that

stay relief considerations are “limited in scope” and that the party seeking relief

need only show a “colorable claim.” 

-5-

The filing of the petition which gives rise to the automatic stay is

similar to a temporary restraining order. . . . 

At the expedited hearing under subsection (e), and at all hearings on

relief from the stay, the only issue will be the claim of the creditor

and the lack of adequate protection or existence of other cause for

relief from the stay. This hearing will not be the appropriate time at

which to bring in other issues, such as counterclaims against the

creditor on largely unrelated matters. Those counterclaims are not to

be handled in the summary fashion that the preliminary hearing under

this provision will be. Rather, they will be the subject of more

complete proceedings by the trustees to recover property of the estate

or to object to the allowance of a claim.9

 

. . . However, this would not preclude the party seeking continuance

of the stay from presenting evidence on the existence of claims

which the court may consider in exercising its discretion. What is

precluded is a determination of such collateral claims on the merits at

the hearing.10

At a stay hearing, the court merely determines whether the movant has a

colorable claim, i.e., a facially valid security interest. It then should consider

whether the objector has raised a colorable defense that, not merely offsets the

movant’s claim, but actually would defeat the movant’s claim. In this context,

the bankruptcy court limits its consideration of defenses to those which strike at

the heart of the creditor’s lien or that bear on the debtor’s equity in the property.11

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 6 of 17
-6-

The Trustee’s theory that G&B held only an unperfected security interest in

the planes aimed at the heart of G&B’s ownership claim and bore directly on

UAA’s equity in the property. Thus, it is the type of defense that a bankruptcy

court may properly exercise its discretion to hear and consider. G&B complains 

that this defense or theory was not raised in the Trustee’s objection to the motion

and, as a result, it has been denied due process. In truth, the Trustee surprised

G&B with this legal argument in closing at the final evidentiary hearing. 

UAA filed its Chapter 7 petition immediately before the holidays, on

December 20, 2004. G&B filed its motion seeking stay relief little more than one

month later, on January 31, 2005. Before the Trustee had even had his counsel

employed in this case, he had to defend this motion. Not uncommonly, trustees

must be prepared to defend stay motions before they have an opportunity to fully

apprise themselves of the facts and various theories available to them. Some

defenses become clear only after the witnesses have testified or the documents

have been introduced as exhibits. This fast pace of litigation occurs because the

statute requires the bankruptcy court to hear and rule on such motions within

thirty days or else the stay terminates as a matter of law. Unlike debtors and

trustees, a creditor always has the ability to waive the 30-day period and request

additional time for briefing or discovery. G&B did not request a further

opportunity to brief the legal issues raised by the Trustee in closing. Following

the court’s denial of its motion, G&B did not request subsequent reconsideration

from the bankruptcy court. 

Furthermore, G&B has not had its lien interests avoided without due

process. The court’s ruling constitutes only a finding that the Trustee had a

colorable basis to dispute both G&B’s claim to ownership of the aircraft and its

claim of a properly perfected lien. The parties admitted at oral argument before

this Court that the bankruptcy court’s ruling did not relieve the Trustee of the

need to file an adversary proceeding to determine the nature, extent and validity

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 7 of 17
12 Butner v. United States, 440 U.S. 48, 55 (1979), quoted in Nobelman v. Am.

Sav. Bank, 508 U.S. 324, 329 (1993); see also, e.g., In re Wise, 346 F.3d 1239,

1241 (10th Cir. 2003); Bailey v. Big Sky Motors, Ltd. (In re Ogden), 314 F.3d

1190, 1197 (10th Cir. 2002) (quoting In re Taylor, 133 F.3d 1336, 1341 (10th Cir.

1998) (“The existence and extent of [the debtor’s interest in the property] is

determined by state law.”)); In re Stat-Tech Int’l Corp., 47 F.3d 1054, 1057 (10th

Cir. 1995); In re Busch, 294 B.R. 137, 142 (10th Cir. BAP 2003).

13 Butner, 440 U.S. at 55; accord Nobelman, 508 U.S. at 329.

14 49 U.S.C. § 101 et seq. The registration provisions of the Act, which are

the provisions relevant to this discussion, are set forth in Chapter 441 of the Act,

§§ 44101-44113. When first enacted, these sections were designated as different

section numbers. Technical amendments to the Act renumbered the sections, but

have not altered the content of the registration provisions. Cases interpreting the

prior Act, therefore, are used to interpret the same provisions in the current Act. 

See, e.g., In re Equipment Leasors of Pa., 235 B.R. 361, 364 n.5 (E.D. Pa. 1999).

-7-

of G&B’s interest in the planes. G&B will still have its day in court on the

Trustee’s legal theories.

B. Adequate Protection of G&B’s Security Interest

1. State Law Determines the Nature of G&B’s Property Interest;

Federal Law Governs Perfection

According to G&B, the bankruptcy court’s denial of its motion was

premised on an erroneous conclusion that the Debtor acquired an ownership

interest in four of the planes. G&B contends that it remains the owner of the

planes because of either its title-retaining Purchase Agreements or because it

remains the registered owner with the FAA. In order to address these issues, we

must first determine what law applies. 

“Property interests are created and defined by state law.”12 “Unless some

federal interest requires a different result,” state law determines the nature of a

debtor’s interest.13 Thus, state law defines G&B’s interest in the airplanes, unless

some federal interest compels a different result. G&B refers to the registration

provisions of the Federal Aviation Act (the “Act”) as a compelling federal

interest.14 Nothing in the Act’s registration provisions, however, attempts to

define property interests in aircraft. There is no reason to believe, therefore, that

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 8 of 17
15 See Chicago & N. W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311,

317 (1981) (preemption of state law by federal law is not favored “in the absence

of persuasive reasons . . . , or that the Congress has unmistakenly so ordained.”).

16 49 U.S.C. § 44107(a)(1).

17 Philko Aviation, Inc. v. Shacket, 462 U.S. 406, 411 (1983)(quoting

Hearings Before the H. Comm. on Interstate and Foreign Commerce, 75th Cong.,

3d Sess. 407 (1938) (testimony of F. Fagg, Director of Air Commerce, Dept. Of

Commerce).

18 State Sec. Co. v. Aviation Enters., Inc., 355 F.2d 225, 229 (10th Cir. 1966).

19 Utah Code Ann. § 70A-9a-311(1)(a) (2005); see Official Comment to

U.C.C. § 9-311 (2000), at ¶ 2 (financing statement need not be filed to perfect

interest in property when a federal statute, such as the Act, creates national

registry system. Perfection in such instances may be “achieved only through

compliance with that system (i.e., filing under this Article is not a permissible

alternative.”))

20 49 U.S.C. § 44108(c)(1).

-8-

Congress intended to preempt state law that creates or defines interests in

personal property, such as aircraft.15

The Act establishes a federal recording system for registration of

conveyances and liens affecting title to aircraft.16 The Act creates “‘a central

clearing house for recordation of titles so that a person, wherever he may be, will

know where he can find ready access to the claims against, or liens, or other legal

interests in an aircraft.’”17 According to the Tenth Circuit, “Congress has

preempted that field and state recording statutes are not applicable to such title

instruments.”18 In the Official Comment to Utah Code Ann. § 70A-9a-311(1)(a),

the commentators acknowledged that perfection of an interest in aircraft is

governed by the Act, not by Utah’s Uniform Commercial Code.19

The Act itself expressly states that state law will govern issues such as the

validity of a conveyance. “The validity of a conveyance . . . that may be recorded

under section 44107 of this title is subject to the laws of the State . . . at which

the conveyance . . . is delivered . . . .”20 As a result, many courts, including the

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 9 of 17
21 State Sec. Co., 355 F.2d at 229 (“questions of the validity of [aircraft] title

documents, actual notice, good faith purchaser status, and the like, must be

resolved under state law”); see also, e.g., Philko, 462 U.S. at 413, 414 n.8 (Court

holds that “state law determines priorities” of interests recorded and perfected

under the Act, and also recognizes that property interests in aircraft are

determined under state law), quoted in Equipment Leasors of Pa., 235 B.R. at 365

(determining validity of security interest in aircraft under state law); Aircraft

Trading & Servs., Inc. v. Braniff, Inc., 819 F.2d 1227, 1231-32 (2d Cir. 1987)

(recognizing that priority and validity of interest are determined under state law;

perfection as to third parties governed by federal law); In re Gelking, 754 F.2d

778, 780-81 (8th Cir. 1985) (debtor’s “rights” in aircraft collateral determined

under state law); South Shore Bank v. Tony Mat, Inc., 712 F.2d 896, 898 (3rd Cir.

1983) (per curiam) (priority of lien perfected under the federal Act is determined

by state law); Sanders v. M.D. Aircraft Sales, Inc., 575 F.2d 1086, 1088-89 (3rd

Cir. 1978) (state law determines validity of instruments subject to recording under

Act); Bank of Lexington v. Jack Adams Aircraft Sales, Inc., 570 F.2d 1220, 1224

(5th Cir. 1978) (same); Fitzgerald v. Id. First Nat’l Bank (In re Disney, Inc.), 24

B.R. 155, 156 (Bankr. D. Id. 1982) (“While the validity of security interests in

airplane or airplane parts is governed by state law, the perfection of those

interests is governed by federal law.” (citation omitted)); Norris v. Ins. Co. of N.

Am., 215 S.E.2d 379, 388 (N.C. Ct. App. 1975) (state law governs validity of

ownership and interests); Idabel Nat’l Bank v. Tucker, 544 P.2d 1287, 1290-91

(Okla. Civ. App. 1975) (same); J.C. Equip., Inc. v. Sky Aviation, Inc., 498 S.W.2d

73, 77 (Mo. Ct. App. 1973) (same).

22 Utah Code Ann. § 70A-1-201 (37)(a) (2005). 

-9-

Tenth Circuit, have concluded that state law determines the nature of the property

interest and the Act governs issues of perfection.21

2. Applicable Uniform Commercial Code Provisions

The Purchase Agreements in this case expressly provide that title to the

aircraft would not pass to the buyer until the Debtor had fully performed its

obligations. G&B contends that this language is sufficient to retain its ownership

interest. Accordingly, it did not record a security interest in the planes with the

Federal Aviation Agency (the “FAA”). Unfortunately for G&B, however, Utah’s

Uniform Commercial Code provides that the “retention or reservation of title by a

seller of goods notwithstanding shipment or delivery to the buyer (Section 70A-2-

401) is limited in effect to a reservation of a ‘security interest.’”22

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 10 of 17
23 Utah Code Ann. § 70A-2-401(1)(2005)(emphasis added).

24 G&B contends it did not transfer possession of the aircraft to the Debtor

and we address this argument separately below.

25 See, e.g., Uni-Products, Inc. v. Bearse (In re Uni-Products, Inc.), 153 B.R.

764, 768 (Bankr. E.D. Mich. 1993) (applying the same U.C.C. provision under

Michigan law and holding that title retention language created only a security

interest); In re U.I.P. Engineered Prods. Corp., 43 B.R. 480, 482 (Bankr. N.D. Ill.

1984) (same, Illinois law); Brockbank v. Best Capital Corp., 534 S.E.2d 688, 693

(S.C. 2000) (same, South Carolina law); Am. Aviation, Inc. v. Aviation Ins.

Managers, Inc., 427 S.W.2d 544, 547-48 (Ark. 1968) (same, Arkansas law). 

26 1A Anderson on the Uniform Commercial Code § 1-302:16 (3rd ed. rev.

2006) (footnotes omitted). 

-10-

Section 70A-2-401 provides:

(1) Title to goods cannot pass under a contract for sale prior to their

identification to the contract (Section 70A-2-501), and unless otherwise explicitly

agreed the buyer acquires by their identification a special property as limited by

this act. Any retention or reservation by the seller of the title (property) in goods

shipped or delivered to the buyer is limited in effect to a reservation of a security

interest. Subject to these provisions and to the provisions of the chapter on

Secured Transactions (Chapter 9), title to goods passes from the seller to the

buyer in any manner and on any conditions explicitly agreed on by the parties.23

Consequently, under Utah law, G&B’s attempt to retain title to the planes was

ineffective. Title passed to the Debtor when G&B delivered the planes.24 G&B

then held only a security interest.25

G&B further argues that the parties’ agreement overrides this statutory

provision on the effect of title retention language. We do not agree.

While the parties’ agreement may vary the operation of the UCC,

they may do so only when “it is not otherwise expressly provided” in

the UCC. 

The parties cannot, by agreement, vary the effect of a seller’s

reservation of title. Any agreement concerning the passage of title,

whether oral or written, is subject to the provision in UCC § 2-401

limiting retention of title by the seller in goods delivered to the buyer

to a reservation of a security interest.26

G&B is bound by the language of Utah’s statute, which expressly provides that

title retention language creates only a security interest.

3. Factual Disputes Regarding Delivery of the Planes

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 11 of 17
-11-

Next, G&B argues that title never passed to UAA because it never

delivered the planes. It claims that the planes were at all times stored at hangars

owned and operated by G&B. Accordingly, it argues that title did not pass to the

Debtor under Utah Code Ann. § 70A-2-401. 

This argument does not acknowledge the explicit provisions of that statute. 

Its later subsections (2) and (3) further provide: 

(2) Unless otherwise explicitly agreed title passes to the buyer at the

time and place at which the seller completes his performance with

reference to the physical delivery of the goods, despite any

reservation of a security interest and even though a document of title

is to be delivered at a different time or place; and in particular and

despite any reservation of a security interest by the bill of lading

(a) if the contract requires or authorizes the seller to send the

goods to the buyer but does not require him to deliver them at

destination, title passes to the buyer at the time and place of

shipment; but

(b) if the contract requires delivery at destination, title passes

on tender there.

(3) Unless otherwise explicitly agreed where delivery is to be made

without moving the goods,

(a) if the seller is to deliver a document of title, title passes at

the time when and the place where he delivers such

documents; or

(b) if the goods are at the time of contracting already identified

and no documents are to be delivered, title passes at the time

and place of contracting.

Subsections 1, 2, and 3 read together state that if a contract purports to retain title

until all payments are made, that provision is ineffective. If a contract is

otherwise silent as to when title passes, title passes at the time the seller commits

to performing the contract. If the contract anticipates shipment of goods, the

seller commits at the time of shipment. If the contract requires delivery, title

passes on delivery. If the contract does not anticipate delivery of goods but

anticipates that title documents will be conveyed, the seller commits at the time

of conveyance of title documents. If the contract does not anticipate delivery of

goods and title documents will not be conveyed, the seller commits at the time of

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 12 of 17
27 See Utah Code Ann. § 70A-2-401 cmt. 4 (2005) (“The factual situations in

subsections (2) and (3) upon which passage of title turn actually base the test

upon the time when the seller has finally committed himself in regard to specific

goods. Thus in a ‘shipment’ contract he commits himself by the act of making

the shipment. If shipment is not contemplated subsection (3) turns on the seller’s

final commitment, i.e. the delivery of documents or the making of the contract.”) 

28 U.I.P. Engineered Prods. Corp., 43 B.R. at 483-84 (footnotes omitted).

-12-

contracting.27 Thus, whatever act demonstrates the seller’s commitment serves to

transfer title, regardless of whether the contract contains title retention language. 

G&B’s delivery argument not only contradicts the language of the Uniform

Commercial Code, but it also contradicts its underlying policies. Rejecting a

similar argument, one court explained:

We cannot think of, nor does [the Appellant] offer, any UCC policy

reason why the creation of a security interest should hinge on

whether the goods were physically moved or not. To the contrary,

policies behind the [Uniform Commercial] Code counsel against such

a distinction. One other court besides the Bankruptcy court below

has addressed this issue, reaching the same result we do. See In re

Happy Jack’s Restaurant, 29 UCC Rep. Serv. 653 (Bankr. Me.1980)

(title retention agreement created security interest even though goods

were not moved). This holding is rooted in part in the policy

underlying Article 9 that “secret liens” are to be avoided. 29 UCC

Rep. Serv. at 657; see also Harney, 113 Ill. App. 2d at 466; 251

N.E.2d at 26 (relying on same policy in a physical delivery case). 

[The Appellant’s] interpretation of § 1-201(37) would create the odd

situation that secret liens would be damned when the goods are

physically delivered but blessed when goods did not have to be

moved. We decline to construe the Code to generate this anomaly

which would frustrate one of the policies underlying it. See

§ 1-201(1) (Code “shall be liberally construed and applied to

promote its underlying purposes and policies”).28

4. No Cause Exists for Relief Due to Lack of Adequate

Protection of an Unperfected Security Interest

G&B’s motion is predicated on its assertion that it is the owner of these

planes. According to G&B, its ownership interest is not adequately protected

and, therefore, “cause” exists to grant stay relief. Having rejected its ownership

claim, and finding its security interest unperfected, the bankruptcy court found no

basis for a finding of lack of adequate protection. We find no abuse of discretion

in this holding. 

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 13 of 17
29 See, e.g., United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assoc.,

Ltd., 484 U.S. 365, 370 (1988).

30 11 U.S.C. § 361; see also New England Dairies, Inc. v. Dairy Mart

Convenience Stores, Inc. (In re Dairy Mart Convenience Stores, Inc.), 351 F.3d

86, 90 (2d Cir. 2003) (“The adequate protection provision of 11 U.S.C. § 361

protects only secured creditors.”). 

31 Omega Envtl. Inc. v. Valley Bank NA, 219 F.3d 984, 986 n.1 (9th Cir. 2000)

(per curiam) (“A creditor holding an unperfected security interest is not entitled

to relief from an automatic stay imposed under Bankruptcy Code § 362.”); First

Nat’l Bank of Denver v. Turley, 705 F.2d 1024, 1027 (8th Cir. 1983) (same); In re

Eagle Enters., Inc., 265 B.R. 671, 680 (Bankr. E.D. Pa. 2001) (same). Cf.

Timbers, 484 U.S. at 371 (observing that “Section 362(d)(1) is only one of a

series of provisions in the Bankruptcy Code dealing with the rights of secured

creditors.”). 

32 In re Sonnax Industries, Inc. 99 B.R. 591, 595 (D. Vt. 1989) (an unsecured

creditor is not entitled to relief from stay except in extraordinary circumstances),

aff’d, 907 F.2d 1280 (2d Cir. 1990); In re Leibowitz, 147 B.R. 341, 345 (Bankr.

S.D.N.Y. 1992) (finding that the general rule is that unsecured claims should not

be granted relief from stay unless extraordinary circumstances justify such relief);

In re Stranahan Gear Co., 67 B.R. 834, 837-38 (Bankr. E.D. Pa. 1986) (same).

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The Bankruptcy Code does not define the phrase “adequate protection of an

interest in property.” In attempting to define it, federal courts, including the

Supreme Court, have looked for guidance to Section 361 which provides three

methods by which adequate protection may be rendered to a creditor.29 All three

of these sections presume that the creditor requesting adequate protection has a

secured interest in the property at issue.30 Consequently, the majority of courts

have concluded that Section 362(d)(1) also addresses only the rights of secured

creditors.31 A minority of courts have concluded that unsecured creditors may be

protected by the provisions of Section 362(d)(1) in extraordinary circumstances.32

The Tenth Circuit has not ruled on this issue. We need not determine which

approach is more appropriate because G&B has not established entitlement to

adequate protection under either approach. 

As set forth more fully above, G&B did not perfect its security interest in

the aircraft because all interests in aircraft must be recorded at the FAA’s national

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 14 of 17
33 See 49 U.S.C. §§ 44107, 44108; Philko, 460 U.S. at 412-13.

34 Under § 544(a), a Chapter 7 Trustee may avoid liens on the debtor’s

property that could have been avoided as of the date the bankruptcy petition is

filed by a hypothetical lien claimant without notice under applicable law. 11

U.S.C. § 544(a); Pearson v. Salina Coffee House, Inc., 831 F.2d 1531, 1532 (10th

Cir. 1987). Generally, we would look to state law to determine whether a security

interest was properly perfected. Id. at 1533. However, as we have previously

observed, federal law preempts state law with respect to perfection of interests in

aircraft. State Sec. Co., 355 F.2d at 229. Section 544(a), in tandem with the

FAA’s recording requirements, authorizes the Trustee to avoid unperfected liens

on aircraft. 11 U.S.C. § 544; see also Octagon Gas Sys., Inc. v. Rimmer, 995 F.2d

948, 955 n.6 (10th Cir. 1993) (“Accordingly, the trustee prevails over an Article 9

claimant whose interest is unperfected as of the date of filing of bankruptcy.”). 

35 Sonnax Industries, Inc., 99 B.R. at 595.

36 In re U.S. Physicians, Inc., 236 B.R. 593, 605 (Bankr. E.D. Pa. 1999)

(concluding that relief from stay is available to unsecured creditors only if the

movant makes a “strong showing” that the “balance of hardships” tips in the

movant’s favor).

37 Am. Aviation, Inc., 427 S.W.2d at 547; In re Air Vermont, Inc., 45 B.R. 820

(D. Vt. 1984) (security interest that was not filed with national clearinghouse was

not valid against debtor in possession).

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clearinghouse in Oklahoma City in order to be valid against third parties.33 Not

surprisingly, G&B took no steps to perfect the security interest it did not realize it

held.34 But its failure to perfect its security interest relieves the Trustee from

having to show adequate protection of a secured interest. 

 It also failed to show any “extraordinary circumstances” justifying

adequate protection of an unperfected lien. Those courts which have considered

granting adequate protection of an unperfected lien have done so under

circumstances that include morally culpable conduct35 or a showing that the

balance of the hardships tip in the creditor’s favor.36 Because G&B did not offer

any such evidence, we conclude that the bankruptcy court did not abuse its

discretion in denying relief from stay.37

C. Adequate Protection of G&B’s Repairman’s Lien 

At the stay relief hearing, G&B also asserted an interest in the planes by

virtue of a repairman’s lien. The Trustee countered by arguing that continuous

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 15 of 17
38 Utah Code Ann. § 38-2-3 (2005).

39 Utah Code Ann. §§ 38-13-101-206 (2005). 

40 Pursuant to § 38-13-103(2), “This chapter supersedes Sections 38-2-3 and

38-2-4 as it relates to a lien for a repairman making, altering, repairing, or

performing labor on an aircraft.” Utah Code Ann. § 38-13-103(2) (2005). 

41 Utah Code Ann. § 38-13-201 (2005).

42 Utah Code Ann. § 38-13-201(3)(a) (2005).

43 Utah Code Ann. § 38-13-201(4) (2005). 

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possession is mandatory for a repairman’s lien. The bankruptcy court agreed with

the Trustee. G&B asserts that it had maintained continuous possession because,

after every flight, the planes returned to a hangar owned and controlled by G&B. 

Alternatively, G&B argued that continuous possession is not required under the

Utah statute governing repairman’s liens on personal property.38 We need not

decide whether a repairman’s lien in personal property requires continuous

possession because this statute is inapplicable to a repairman’s lien on aircraft.

G&B’s repairman’s lien is governed by Utah’s Aircraft Lien Act.39 By its

terms, the Aircraft Lien Act supersedes the statute governing repairman’s liens on

personal property.40 The Aircraft Lien Act provides that a repairman who repairs

or performs labor on aircraft “shall have a lien upon the aircraft for the reasonable

value” of the repairman’s labor and materials.41 Under this statute a repairman

may retain possession of the aircraft until the lien is paid. However, before such

a lien is valid, the repairman “shall file the lien with the Federal Aviation

Administration within 90 days of the last day on which the repairman makes,

alters, repairs, or performs labor on the aircraft.”42 The repairman must also send

notice of the lien to the person against whom the notice of the lien is filed.43 The

record is silent as to whether G&B ever sent notice to UAA of its intent to file a

repairman’s lien, but the record indicates that G&B never filed notice of any lien

with the FAA. Thus, G&B did not hold a valid repairman’s lien on the date of the

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 16 of 17
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bankruptcy filing. Accordingly, G&B has demonstrated no “cause” for relief

from the automatic stay.

V. Conclusion

For the reasons stated, we AFFIRM the bankruptcy court’s Order denying

G&B’s request for relief from stay. 

BAP Appeal No. 05-32 Docket No. 47 Filed: 03/20/2006 Page: 17 of 17