Court Opinion

ID: 5049762
Source: CourtListenerOpinion
Date Created: 2021-10-01 07:47:23.68982+00
Date Added: 2024-06-11T08:18:56.537113
License: Public Domain

DROWOTA, Judge,
dissenting.
I respectfully dissent from the conclusion reached in the majority opinion that the purchaser of an aircraft who qualifies as a “buyer in ordinary course of business under T.C.A. § 47-9-307 is protected by that statute from the claim of one holding a security interest recorded under 49 U.S.C. § 1403 prior to the sale. While the issue is obviously not free from doubt and while the force of many of the policy considerations espoused by the majority in favor of the U.C.C. rule cannot be gainsaid, I believe that Congress intended in § 1403 to set up a rule of priority that controls the instant situation, and that we should follow Dowell v. Beech Acceptance Corp., Inc., 3 Cal.3d 544, 91 Cal.Rptr. 1, 476 P.2d 401 (1970).
The Court in Dowell furnishes a reasoned explanation of its conclusion that 49 U.S.C. § 1401 et seq. pre-empt state priority rules and render the rights of the holder of a security interest recorded under § 1403 pri- or to the sale of an aircraft superior to those of one who buys the aircraft in the “ordinary course of business” within the meaning of U.C.C. § 9-307. In addition, a reading of the federal provisions themselves seems to me to require this result. Section 1403(a) sets out the types of interests recordable under the statute, and its language encompasses the security interest involved in the instant case. Section 1403(c) provides that no instrument recordable under the statute shall be “valid” except against “the person by whom the conveyance or other instrument is made or given, his heir or devisee, or any person having actual notice thereof” until it is recorded as provided in the statute. The effect of proper recording is stated by § 1403(d) to be as follows:
(d) Each conveyance or other instrument recorded by means of or under the system provided for in subsection (a) or (b) of this section shall from the time of its filing for recordation be valid as to all persons without further or other recordation . . . . (Emphasis added.)
That “valid” does not refer to the inherent validity of the recorded instrument itself is shown by the express commitment of that issue to state law in § 1406. The most logical explanation of § 1403(d), then, is that recording an instrument makes it “val*160id as to all persons” in the sense that its holder acquires rights superior to those acquired by subsequent persons such as purchasers.
The priority conferred by recording under § 1403 is very similar to that given recorded deeds of real property under the theory of constructive notice. The similarity is brought out by a description of the effect of § 1403 recording in the legislative history of the 1964 amendment to § 1401 et seq. It is there stated that, when an instrument has been properly recorded under the statute,
. all persons are deemed to have notice of its existence and its effect on title to the property covered thereby. Consequently, to determine whether there are any encumbrances on the aircraft, it is only necessary to consult the central file.
1964 U.S.Code Cong. & Admin.News, pp. 2319, 2320. In my view, this strengthens the conclusion that the rights of one who has recorded a security interest under § 1403 are superior to those of a subsequent purchaser of the encumbered aircraft.
Much of the policy in favor of protecting one who purchases in the ordinary course of business is sound, and has been widely accepted by state courts and by state legislatures adopting the U.C.C. Nevertheless, 49 U.S.C. § 1403 evidences Congress’s intent to reverse this rule in the case of security interests in aircraft which are recordable under the statute. Congress has chosen to give priority to the secured party rather than the buyer in such cases by applying its own uniform rule, a rule not subject to change by the legislatures of the several states. This uniform federal rule simply removes the priority question from determination under the U.C.C. when certain aircraft are involved, rather than “grafting exceptions” onto the Code as the majority suggest. The principle of federal supremacy, recognized in T.C.A. § 47-9-104, requires that this federal priority rule replace conflicting state rules of priority with regard to aircraft.
Further, the buyer’s burden of checking the federal record in such cases is a light one. This is especially so when it is compared to the steps a secured party would have to take, such as locking up the aircraft, to protect himself under the majority’s approach. Far from being “secret,” any interest recorded under § 1403 is readily available for anyone to see. Finally, it is again pointed out that the similar system of “constructive notice” in real property recording, under which a subsequent purchaser would not take free of previously recorded instruments in his chain of title, has worked reasonably well and is not generally considered to be unfair.
In sum, I find in 49 U.S.C. § 1401 et seq. an intent to prefer the rights of a secured party such as plaintiff over those of a buyer in the ordinary course of business such as defendant in the circumstances of the instant case. The Dowell Court was correct in saying that
[t]he federal policy to foster recordation and to protect recorded interests is eviscerated by a rule which relies on state laws to protect the buyer in the ordinary course of business even though he fails to undertake a simple title search which would have readily revealed all encumbrances.
91 Cal.Rptr. at 6, 476 P.2d at 406. We should not frustrate the federal purpose of encouraging recording of interests in aircraft and disregard the intent of Congress by reading state laws of priority such as U.C.C. § 9-307 into the federal scheme.