Court Opinion

ID: 6330494
Source: CourtListenerOpinion
Date Created: 2022-04-13 07:00:33.187384+00
Date Added: 2024-06-11T09:23:01.887844
License: Public Domain

United States Court of Appeals
                        For the First Circuit

Nos. 19-1990, 21-1184

                        UNIBANK FOR SAVINGS,

                        Plaintiff, Appellee,

                                 v.

     999 PRIVATE JET, LLC.; ELINA SARGSYAN; EDGAR SARGSYAN,

                        Defendants, Appellees.

                        SBK HOLDINGS USA, INC.

                        Intervenor, Appellant.

          APPEALS FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. Timothy S. Hillman, U.S. District Judge]

                               Before

                   Lynch, Kayatta, and Gelpí,
                        Circuit Judges.

     Mark J. Geragos, with whom Geragos & Geragos APC, was on
brief, for appellant.
     Eric Magnuson, with whom Gabriel Rossman and Nutter McClennen
& Fish, LLP were on brief, for appellee.

                           April 11, 2022
       GELPÍ,       Circuit    Judge.      Unibank    for   Savings   ("Unibank")

originally          brought     this      action     against     Edgar      Sargsyan

("Sargsyan"), his spouse Elina Sargsyan, and 999 Private Jet, LLC

("999 Private Jet") for breach                of   their obligations under         a

promissory note secured by a Gulfstream aircraft.                          After the

district          court   granted      Unibank's     unopposed    motion     for   a

preliminary injunction to repossess the aircraft, SBK Holdings

USA,       Inc.    ("SBK")    intervened,    asserting      an   alleged    superior

security interest in said aircraft.                The district court entered

summary judgment against SBK and subsequently denied its motion to

set aside the judgment.             SBK appeals both rulings.       We affirm.

I. Background1

       SBK is an investment company specializing in real and personal

property.          Sargsyan was its president and legal counsel from

December 2013 until July 2016, when he was terminated for breaching

his fiduciary duties.            Sargsyan's relevant actions date back to

2015, when SBK was negotiating the purchase of a 1997 Gulfstream

aircraft, Model G IV-SP, Serial No. 1315, FAA Registration No.

N999SE (the "aircraft").                Sargsyan was required to report all

current and potential investments and properties, as well as

compile a status account of all SBK transactions.                   Additionally,

       On summary judgment review, we examine the evidence of
       1

record in the light most favorable to the non-moving party, here
SBK. Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir. 2010).

                                          - 2 -
he was required to ensure that title to all property acquired by

SBK was held in its name.       Sargsyan oversaw the purchase of the

aircraft with SBK funds, but as the negotiations for the same took

place, he created a new company independent from SBK.             Instead of

transferring the aircraft to SBK, he registered its title in the

name of his newly created corporation, Regdalin Aviation LLC

("Regdalin").     Around     February   2016,   Sargsyan,    on   behalf    of

Regdalin, obtained a loan from Huntington National Bank (the

"Huntington    loan"   and   "Huntington   Bank"),   which    perfected      a

security interest in the aircraft.

     In September 2016, SBK discovered that the aircraft's title

was registered to Regdalin rather than to itself.           As a result, in

December 2016, SBK's Chief Executive Officer ("CEO"), Dan McDyre,

requested the Federal Aviation Administration ("FAA") to place a

preliminary lien on the aircraft in the amount of $6,227,250.              The

FAA maintained the claim-of-lien letter in a suspense file.

     On February 3, 2017, SBK brought an action in Los Angeles

Superior Court against Sargsyan, Regdalin, and others seeking

damages for breach of fiduciary duties, fraud, and embezzlement.2

After the California case had commenced, Sargsyan created yet

another new company, 999 Private Jet, and transferred the ownership

of the aircraft from Regdalin thereto.           In May 2017, Sargsyan,

     2   This action is currently ongoing.

                                  - 3 -
Elina    Sargsyan,      and    999       Private   Jet    issued       a    $4,348,334.01

promissory note payable to Unibank in order to refinance the

Huntington loan.         Unibank, in turn, accepted the aircraft as a

security interest on the note and, on May 4, 2017, disbursed

$4,348,334.01 to Huntington Bank to discharge the aircraft lien.

On May 9, 2017, Unibank registered its security interest.                            By June

2018, Sargsyan, his spouse, and 999 Private Jet defaulted on their

obligations towards Unibank.

     A. Procedural History

     In August 2018, Unibank brought an action in the United States

District Court for the District of Massachusetts against Sargsyan,

his spouse, and 999 Private Jet, based on their nonpayment of the

May 2017 promissory note. On September 7, 2018, the district court

found    that    Unibank      had    a    perfected      secured   interest          in   the

aircraft,   and    thus       granted      Unibank's      unopposed        motion     for   a

preliminary injunction authorizing it to repossess the aircraft.

The court further entered default judgment on September 14, 2018

in favor of Unibank.           Since then, Unibank has been in possession

of the aircraft.

     On    October      31,    2018,       SBK   moved    to    intervene,       claiming

ownership of the aircraft by virtue of an alleged senior security

interest    in    the    same.3           The    district      court       allowed    SBK's

     3 In its motion to intervene SBK informed of its pending
California state court action against Sargsyan and others.

                                           - 4 -
intervention.      Unibank subsequently moved for summary judgment as

to SBK, arguing that it, rather than SBK, had the senior perfected

interest in the aircraft.        On September 12, 2019, the district

court granted Unibank's motion.           SBK next filed a motion on

November 12, 2020 under Fed. R. Civ. P. 60(b) to set aside the

judgment   and   conduct   discovery,   based    on   Sargsyan's   criminal

felony plea in the United States District Court for the Central

District of California for conspiracy to commit identity theft and

fraud against several national and multinational banks.4                  The

district   court    determined   that   Sargsyan's    criminal     case   was

unrelated to the controversy before it, and thus, denied SBK's

motion.    SBK timely appealed.

II. Standard of Review

     "We review an order granting summary judgment de novo." Perea

v. Ed. Cultural, Inc., 13 F.4th 43, 50 (1st Cir. 2021) (quoting

Irobe v. U.S. Dep't of Agric., 890 F.3d 371, 377 (1st Cir. 2018)).

We will affirm the entry of summary judgment only if the record

discloses no genuine dispute of material fact and demonstrates

that the moving party is entitled to judgment as a matter of law.

See Fed. R. Civ. P. 56(a).        A fact is material when it has the

potential to change a case's outcome.           See Cherkaoui v. City of

Quincy, 877 F.3d 14, 23 (1st Cir. 2017).         "A dispute is 'genuine'

     4 The case is United States v. Edgar Sargsyan, No. 2:20-cr-
00190 (C.D. Ca. Apr. 27, 2020).

                                  - 5 -
when 'the evidence about the fact is such that a reasonable jury

could resolve the point in favor of the nonmoving party.'"            Doe v.

Trs. of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018) (quoting

Rivera-Muriente v. Agosto-Alicea, 959 F.2d 349, 352 (1st Cir.

1992)).     We now turn to the record before us.            We first address

the issue of FAA registration, examining whether Unibank had record

or actual notice of SBK's claim to the aircraft. We then discuss

the state law issues as to the validity of Unibank's interest in

the aircraft.     Lastly, we examine SBK's Rule 60(b) motion.

III. Discussion

      A. FAA Registration

      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

     1. Record Notice

     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.").

     2. Actual Notice

     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.

     B. Validity of Unibank's Security Interest

     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

      C. Rule 60(b)

      SBK lastly argues that the district court erred in denying

its Rule 60(b) motion to set aside judgment and reopen discovery.

SBK claims that the grant of summary judgment was improvident

because it did not have "the benefit of discovery to fully develop

evidence."        SBK further advanced that Sargsyan's plea agreement in

his   2020    criminal    fraud      case,    involving       major    national     and

international banks, would likely shed light on his actions with

Unibank.      Before     us,   SBK    asserts        that    discovery      would   help

determine whether Unibank acted in good faith regarding SBK's

alleged ownership of and rights to the aircraft.                      SBK's claim is

unavailing.

      Rule 60(b) provides several grounds for relief from a final

judgment.     Relevant to our analysis, it permits a final judgment

to be set aside based on "newly discovered evidence that, with

reasonable diligence, could not have been discovered in time to

      9Because we hold that Unibank has a perfected security
interest in the aircraft and SBK does not, we find it unnecessary
to reach the issue of equitable subrogation.

                                       - 14 -
move for a new trial under Rule 59(b)."            Fed. R. Civ. P. 60(b)(2).

It also allows a final judgement to be set aside based upon an

opposing party's "fraud (whether previously called intrinsic or

extrinsic), misrepresentation, or misconduct."                Fed. R. Civ. P.

60(b)(3).        Relief under Rule 60(b) "is extraordinary in nature"

and,     thus,    "motions      invoking   that   rule     should    be   granted

sparingly."       Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st Cir.

2002).      We review the denial of a motion brought under Rule 60(b)

for abuse of discretion.              Cintron-Lorenzo v. Departamento de

Asuntos del Consumidor, 312 F.3d 522, 527 (1st Cir. 2002).                     As

such, when considering Rule 60(b) motions, we give deference to

the district court's "first-hand knowledge" of the facts of the

case.    Id. (quoting Karak, 288 F.3d at 19).

       We   note,    as   did   the   district    court,   that     "neither   the

Information nor the Plea Agreement name Unibank, SBK, the FAA, the

aircraft, or the promissory note and aircraft security agreement

at issue in this case." We further note that Sargsyan's conviction

is entirely unrelated to the present case.

       Moreover, SBK has failed to demonstrate that the fraud or

misrepresentation prevented it from a "full and fair preparation

of [its] case."           Karak, 288 F.3d at 21 (quoting Anderson v.

Cryovac, Inc., 862 F.2d 910, 923 (1st Cir. 1988)); see also Fed.

R. Civ. P. 60(b)(3).             Such misconduct must occur "during the

course" of the litigation, which is not the case here.                      Roger

                                      - 15 -
Edwards, LLC v. Fiddes & Son Ltd., 427 F.3d 129, 134 (1st Cir.

2005).   Accordingly, we discern no abuse of discretion by the

district court in denying the Rule 60(b) motion.

     IV. Conclusion

     We need go no further.    After reviewing the record in the

light most favorable to SBK, the district court's order granting

summary judgment and subsequently denying SBK's Rule 60(b) motion

is

     AFFIRMED

                              - 16 -