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South Shore Bank v. Tony Mat Inc.

July 29, 1983

SOUTH SHORE BANK
v.
TONY MAT, INC. AND H & H HAIRCRAFT SALES INC. TONY MAT, INC., APPELLANT



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA (SCRANTON). Held C.A.V. for Philko Aviation, Inc. v. Shacket, decided June 15, 1983, 462 U.S. 406

Hunter, Weis, Circuit Judges, and Gerry,*fn* District Judge.

Author: Per Curiam

Opinion OF THE COURT

1. Tony Mat, Inc. ("Tony Mat") appeals from an order of the United States District Court for the Middle District of Pennsylvania granting summary judgment in favor of appellee South Shore Bank ("South Shore"). Tony Mat is a buyer who paid full price upon delivery of an airplane but who did not record its title with the Federal Aviation Administration ("FAA") until after the institution of this lawsuit. After the sale to Tony Mat, South Shore acquired a security interest in the same plane which it recorded immediately with FAA. This appeal requires us to decide which of the two conflicting interests in the airplane is superior. We agree with the district court and with the parties that there are no facts in dispute. Relying on the Supreme Court's decision in Philko Aviation, Inc. v. Shacket, 462 U.S. 406, 103 S. Ct. 2476, 76 L. Ed. 2d 678 (1983), we will affirm.

I.

2. In May of 1980, Tony Mat purchased a 1979 Piper airplane, Model No. PA 28-201T, Serial No. 28-7921063, from H & H Aircraft Sales, Inc. ("H & H"). Tony Mat paid full price for the airplane upon delivery. H&H indicated that it would do all the paperwork required in connection with the sale of the airplane. However, neither H&H nor Tony Mat recorded the sale with the FAA pursuant to the Federal Aviation Act of 1958 (the "Act"), 49 U.S.C. §§ 1301-1542 (1976 & Supp. V 1981), until after the institution of this lawsuit in February of 1982.

3. On June 30, 1980, South Shore made a loan to H&H and received a security interest in H&H's inventory, including the airplane. South Shore had previously checked the FAA registration system, and FAA records had indicated that H&H was the owner of the plane.*fn1 After South Shore made the loan it recorded its lien on the airplane with the FAA on July 20, 1980. Sometime thereafter H&H defaulted on the loan.

4. South Shore then instituted an action in district court seeking recovery from H&H of all amounts that H&H owed to the bank pursuant to the loan agreement. South Shore also sought a declaratory judgment that its rights to the airplane were superior to those of Tony Mat. The clerk of the court entered a default judgment against H&H after it failed to defend.

5. South Shore thereafter filed a motion for summary judgment against Tony Mat. It argued that its title to the plane was superior to that of Tony Mat because Tony Mat had not recorded its interest in the airplane with the FAA prior to South Shore's recordation of its lien on the plane. South Shore relied on section 503(c) of the Act, 49 U.S.C. § 1403(c) (1976), which provides that no conveyance or instrument affecting the title to any civil aircraft is valid against third parties without notice of the sale until such conveyance or instrument is filed for recordation with the FAA. The district court granted South Shore's motion for summary judgment, and this appeal followed.

6. On appeal Tony Mat argues that failure to comply with section 503 would not defeat its ownership interest in the plane as against South Shore's security interest. It relies on section 506 of the Act, 49 U.S.C. § 1406 (1976), which provides that the validity of an instrument, the recording of which is provided for in the Act, is governed by the laws of the state where the instrument is delivered. Tony Mat argues that, regardless of any failure to record with the FAA, it acquired rights in the airplane under state law that are superior to those of South Shore.

II.

7. Section 503(a)(1) of the Act directs the Secretary of Transportation to establish and maintain a system for recording "any conveyance which affects the title to, or any interest in, any civil aircraft of the United States." 49 U.S.C. § 1403(a)(1) (1976). Section 503(c) provides that

No conveyance or instrument the recording of which is provided for by [§ 503(a)(1)] shall be valid in respect of such aircraft . . . against any person other than 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 such conveyance or other ...


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