Opinion ID: 6330494
Heading Depth: 2
Heading Rank: 1

Heading: FAA Registration

Text: We begin with the federal-law issue of the interpretation of 49 U.S.C. §§ 44107-44108, which governs the recordation and validity of conveyances, leases, and security interests for civil aircraft in the United States. As the Supreme Court stated concerning the predecessor statute5 in Philko Aviation, Inc. v. Shacket, 462 U.S. 406, 413 (1983), [a]lthough state law determines priorities, all interests must be federally recorded before they can obtain whatever priority to which they are entitled under state law. Aiming for a clear and uniform registration system for civil aircraft, Congress codified the procedure for perfecting an 5Philko Aviation addresses section 503(c) of the Federal Aviation Act of 1958, 49 U.S.C. § 1403(c), which effectively mirrors the provision contained in 49 U.S.C. § 44108(a). - 6 - interest in aircraft, requiring interest holders to duly record any such interest with the FAA. 49 U.S.C. §§ 44107-44108; see also Philko Aviation, 462 U.S. at 411. Congress's purpose was to give uniformity to the 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. Philko Aviation, 462 U.S. at 411 (quoting To Create a Civil Aeronautics Authority: Hearing on H.R. 9738 Before the H. Comm. on Interstate and Foreign Com., 75th Cong. 407 (1938) (statement of F. Fagg, Director of Air Commerce, Department of Commerce)). Therefore, unless the interest is recorded with the FAA, the conveyance is valid only against (1) the person making the conveyance, lease, or instrument; (2) that person's heirs and devisees; and (3) a person having actual notice of the conveyance, lease, or instrument. 49 U.S.C. § 44108(a). The FAA outlines the requirements for recording an interest in aircraft, as delegated to the agency under 49 U.S.C. § 44107(a), in its Aircraft Registration and Recordation Processes guide. See U.S. Dep't of Transp., Fed. Aviation Admin., Aircraft Registration and Recordation Processes (2018) (Aircraft Registration and Recordation Guide). We take judicial notice of the Aircraft Registration and Recordation guide, and SBK does not dispute that we should follow that guide. See, e.g., Or. Nat. Desert Ass’n v. - 7 - Bureau of Land Mgmt., 625 F.3d 1092, 1112 & n.14 (9th Cir. 2010) (taking judicial notice of agency handbook).6
SBK admits that it presented the district court with only two pieces of evidence in support of its claim of recordation. The first was a declaration from its CEO, Dan McDyre, asserting that [i]n December 2016, [he] contacted the FAA by letter (the 'Aircraft Claim of Lien Letter') and requested a lien in the amount of $6,227,250 be placed on the Aircraft (which, at the time, had tail number N580KF). On or about December 30, 2016, the FAA Aircraft Registration Bureau filed the Aircraft Claim of Lien Letter. 6 Per the guide, a security conveyance, such as using the aircraft as collateral for a loan, see Aircraft Registration and Recordation Guide § 4.1.1, is eligible for recording where: (a) [i]t affects aircraft registered under 49 U.S.C. 44103; (b) [i]t describes the aircraft by name of manufacturer, model, manufacturer's serial number, and U.S. registration number or in sufficient detail to identify it; (c) [i]t shows [the] legal name of the debtor; (d) [i]t is an original, a duplicate original, or a certified true copy; (e) [i]t shows title of the signer, if appropriate; (f) [i]t is (1) executed by the registered owner, (2) executed by the owner of record, (3) accompanied by the debtor's evidence of ownership, (4) accompanied by an accommodation agreement (hypothecation), or (5) signed by the lessee and the described lease agreement qualifies as a conditional sales contract and is either previously recorded or accompanies the security agreement, in which case the lease agreement is recorded first; (g) [i]t (1) contains sufficient words to convey a security interest in the aircraft or a security interest in the leasehold interest, (2) includes [a] sales and title retention clause for a contract of conditional sale, or (3) contains a purchase option which qualifies a lease as a conditional sales contract or statement that the bailee becomes the owner upon compliance with the terms of a bailment lease; and (h) [i]t is accompanied by the recording fee. Id. § 4.1.8 (emphases omitted). - 8 - The FAA filed said claim-of-lien letter in a suspense file. The second was a purported title-search document that referred to the claim-of-lien letter given to the FAA. The aircraft title-search was not conducted by the FAA but rather a third party. No letter was attached to the title-search document submission to the district court. For a number of reasons, SBK's submissions do not satisfy its burden of showing that its claim-of-lien letter met the recordation requirements to perfect a security interest under Philko Aviation. 462 U.S. at 413. SBK never presented the claim-of-lien letter to the district court. Further, according to the Aircraft Registration and Recordation Guide, any letter that remains in a FAA suspense file holds unrecorded status, and thus is invalid until all recording requirements are met. See Aircraft Registration and Recordation Guide §§ 4.6.2, 5.12 (2018); see also In Re Tomlinson, 347 B.R. 639, 645 (Bankr. E.D. Tenn. 2006) (The Supreme Court has held that the statute invalidates unrecorded title transfers, not just unrecorded title instruments, so that a claimant cannot 'prevail against an innocent third party by establishing his title without relying on an instrument.') (quoting Philko Aviation, 462 U.S. at 409). And even more significantly, SBK never put into evidence a Notice of Recordation -- Aircraft Security Conveyance, which under the FAA guide, it - 9 - would have received had the interest been recorded. See Aircraft Registration and Recordation Guide § 4.1.22 (When a security conveyance is recorded, a Notice of Recordation -- Aircraft Security Conveyance is sent to the secured party.).
Under 49 U.S.C. § 44108(a), SBK can overcome its failure to record if it can show that Unibank received actual notice of SBK's interest in the aircraft before Unibank issued its loan. SBK alleges that Unibank had actual notice of its interest in the aircraft because phone calls were held between SBK and Unibank employees that gave the latter notice of SBK's interest in the aircraft. On May 12, 2017 CEO McDyre called Unibank's call center and informed Unibank about the lawsuit against Sargsyan in the Los Angeles Superior Court. However, this information was provided to Unibank eight days after the bank had disbursed over $4.3 million on May 4, 2017 to 999 Private Jet to pay the Huntington loan and obtain full discharge of Huntington Bank's lien on the aircraft. Also, by May 9, 2017, Unibank had already registered its security interest in the aircraft with the International Registry. By the time McDyre contacted Unibank's call center, the transaction was already completed. Thus, SBK's argument that Unibank had actual knowledge before engaging in the transaction fails.7 7SBK also points to another phone call by an unknown employee of it to Unibank. However, the evidence of said call is not - 10 - SBK further claims that the absence of the aircraft's logbook was sufficient to put Unibank on inquiry notice of its interest in the aircraft. We disagree. That argument is at odds with the criteria articulated by Congress in 49 U.S.C. § 44108(a), which unambiguously establishes that actual notice, rather than inquiry notice, is required for a conveyance to be valid. We thus reject SBK's argument because it falls short of the required actual notice standard. Because SBK has not met its burden of presenting sufficient evidence of recordation or actual notice to Unibank, SBK does not have a perfected security interest.