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

Heading: Validity of Unibank's Security Interest

Text: SBK next posits that Unibank lacks a valid security interest in the aircraft altogether, arguing that 999 Private Jet fraudulently obtained title to the aircraft and thus had no rights to convey to Unibank. As such, SBK asserts that its interest-- even if unperfected--trumps Unibank's valid interest, which as discussed in pages 6-11, infra, fully complied with federal law and regulations. Massachusetts law dictates otherwise because even if 999 Private Jet procured its interest by fraud, it retained at least voidable title and thus could transfer good title to substantiated by the record. There were no phone records, no employee identification, and no date or time of the call. SBK has not provided any evidence to show that this call, which may or may not have occurred, demonstrated actual notice. - 11 - Unibank as a good faith purchaser for value. See Mass. Gen. Laws ch. 106, § 2-403(1)(d). The perfection and registration of personal property is governed by state law, to wit, the Uniform Commercial Code (UCC). See Mass. Gen. Laws ch. 106, § 9-301; 49 U.S.C. § 44108(c)(1); see also Stern v. Marshall, 564 U.S. 462, 495 (2011) ([P]roperty interests are created and defined by state law. (alteration in original) (quoting Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 451 (2007))). However, as previously discussed, aircraft must be federally recorded in order to obtain whatever priority to which they are entitled under state law. Philko Aviation, 462 U.S. at 413. Massachusetts law8 provides that a party must enjoy rights in a particular property to grant a valid security interest in the same. Mass. Gen. Laws ch. 106, § 9-203 ([A] security interest is enforceable against the debtor and third parties with respect to the collateral only if . . . [inter alia,] the debtor has rights in the collateral. (emphasis added)); see also Baystate Drywall, Inc. v. Chicopee Sav. Bank, 429 N.E.2d 1138, 1140 (Mass. 1982). The UCC allows a creditor to perfect its security interest, thereby achieving priority over all other unperfected interests in the property. See Mass. Gen. Laws ch. 106, § 9-322(2). 8The parties to this appeal do not dispute that Massachusetts law governs resolution of this issue. - 12 - Massachusetts law also delineates the power to transfer title to good faith purchasers. A person with voidable title has power to transfer good title to a good faith purchaser for value. Evergreen Marine Corp. v. Six Consignments of Frozen Scallops, 4 F.3d 90, 96 (1st Cir. 1993) (emphasis omitted) (quoting Mass. Gen. Laws ch. 106, § 2-403(1)); see also Dion v. Silver City Dodge, Inc., 495 N.E.2d 274, 275 (Mass. 1986); Mass. Gen. Laws ch. 106, § 2-403(1)(d). A good faith purchaser is one who purchases assets unaware of adverse claims. Oakville Dev. Corp. v. F.D.I.C., 986 F.2d 611, 614 (1st Cir. 1993); see also Dion, 495 N.E.2d at 275. For purposes of determining whether one qualifies as a good faith purchaser, the word purchaser includes parties who obtain a security interest in the property. Mass. Gen. Laws ch. 106, § 1- 201(29)-(30). Unibank obtained its interest in the aircraft as collateral from 999 Private Jet, which in turn had acquired ownership of the aircraft from Regdalin. Previously, Regdalin had changed the registration and tail number of the aircraft and used it as collateral in its transaction with Huntington Bank. SBK does not dispute Huntington Bank's perfected security interest in the aircraft. Rather, without any due elaboration, SBK contests Unibank's security interest in the aircraft. Massachusetts law grants protection to Unibank as a good faith purchaser despite 999 Private Jet's dubious prior acquisition of the loan with the - 13 - aircraft as collateral. See Mass. Gen. Laws ch. 106, § 2- 403(1)(d). Unibank was unaware of 999 Private Jet's fraudulent scheme. Accordingly, SBK's claim fails. Because Unibank qualifies as a good faith purchaser for value, it has a perfected security interest in the aircraft, while SBK does not.9