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Southern Jersey Airways Inc. v. National Bank of Secaucus

Decided: January 27, 1970.

SOUTHERN JERSEY AIRWAYS, INC., PLAINTIFF-APPELLANT,
v.
NATIONAL BANK OF SECAUCUS, DEFENDANT-RESPONDENT



Conford, Collester and Kolovsky. The opinion of the court was delivered by Conford, P.J.A.D. Kolovsky, J.A.D., (concurring).

Conford

This appeal presents a complex legal problem concerning priority of interest in respect of an aircraft as between the lien of a security agreement thereon held by defendant bank and a statutory possessory lien (N.J.S.A. 2A:44-1 et seq.; L. 1934, c. 121) (hereinafter referred as an "aircraft mechanic's or artisan's lien") for services and materials subsequently furnished to the owner in relation to the aircraft by plaintiff, which is engaged in the business of servicing, supplying and storing aircraft. In particular, we are concerned with the effect of the recording provisions of § 503 of the Federal Aviation Act of 1958, 49 U.S.C.A. § 1403, as applied to the instant facts.

Defendant bank recorded its security agreement at the office of the Federal Aviation Agency (FAA) in Oklahoma City pursuant to the federal act; plaintiff did not record its statutory lien until after the bank purported to seize and sell the aircraft (to itself) after default on the loan by the owner. The combination of these facts was held by the Atlantic County Court to warrant entry of summary judgment in favor of the bank declaring its interest in the plane to enjoy priority over that of the aircraft mechanic and awarding the bank possession. Reliance was had upon Smith v. Eastern Airmotive Corp. , 99 N.J. Super. 340 (Ch. Div. 1968). We conclude this was error, and reverse.

The material facts are undisputed. On August 11, 1967 the New York law firm of Saxe, Bacon and Bolan, owner, borrowed $32,500 from defendant bank and executed

a note and "security agreement" covering the aircraft in favor of the bank as collateral for the loan. This was recorded with the FAA on October 3, 1967. Thereafter the plane was stored and maintained at plaintiff's hangar at Bader Field, Atlantic City. During a period of time in 1968 the owner incurred unpaid charges to plaintiff for storage, repairs, maintenance and fuel amounting to some $4,515.*fn1 The aircraft remained in plaintiff's possession. The owner having defaulted on its loan to the bank, the latter on December 9, 1968 appointed a bailiff to take possession of the plane. The bailiff on December 16, 1968 purported to take possession and posted a notice of public sale thereof on the aircraft. On December 30, 1968 the bailiff sold the plane at public sale, and the bank purchased it as the highest bidder. However, plaintiff refused to surrender possession, having physically retained possession at all times, relying upon its statutory aircraft mechanic's lien. After preliminary legal skirmishes involving a futile attempt by the bank to obtain possession by posting a bond under the New Jersey aircraft mechanic's lien law, cited above, plaintiff instituted this action to establish its prior interest in the plane. In the interim, on January 8, 1969, plaintiff filed with the FAA a "Notice of Aircraft Lien" on a form apparently of its own devising, the paper containing no signature or acknowledgement by the owner.

Preliminarily, to the extent that recording vel non under the federal act of plaintiff's lien affects its position on the merits, we agree with the trial court's conclusion that the recording of that interest by plaintiff, coming after sale by defendant under its security agreement, was too

late. But, as will be seen, the absence of a valid filing was not here material.

Plaintiff's lien claim is founded upon N.J.S.A. 2A:44-1 et seq. , which grants a possessory lien for sums due for the storage, maintenance, keeping or repair of aircraft or the furnishing of gasoline, accessories, materials and supplies therefor, in favor of persons engaged in the business of supplying such goods or services. N.J.S.A. 2A:44-2. "The lien shall be superior to all other liens, except liens for taxes, and the operator of such aircraft shall be deemed the agent of any owner, mortgagee, conditional vendor or other lienor thereof for the creation of such superior lien." Id.

The lien under the cited statute gains emphatic confirmation from the Uniform Commercial Code. Adopted in New Jersey in 1961, effective in 1963 (L. 1961, c. 120) the immediately pertinent code provision (N.J.S.A. 12A:9-310) reads:*fn2

When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.

Under N.J.S.A. 2A:44-2 and the Code section quoted, taken together, a qualified aircraft mechanic's lien-holder having possession would clearly take priority over a security interest perfected under Article 9 of the Code. See New Jersey Study Comment, Note 3, under N.J.S.A. 12A:9-310, p. 472. In other words, apart from the effect of the Federal Aviation Act, plaintiff herein would prevail over defendant under New Jersey law. The here crucial inquiry is

whether the recording provisions of the federal act were intended or should be construed to effect a different result.

The present federal statute respecting recordation of titles and security interests in aircraft stems from § 503 of the Civil Aeronautics Act of 1938, 52 Stat. 1006 (1938) -- as of then, 49 U.S.C.A. § 523. After first requiring the registration of all certificates of ownership of aircraft by the Civil Aeronautics Administration (now the Federal Aviation Agency) it directed the agency to maintain a system for recording "any conveyance which affects the title to, or any interest in, any civil aircraft of the United States." The statute was superseded in 1958 by the Federal Aviation Act (now 49 U.S.C.A. § 1403). Its recording provisions here material read:

(a) The Administrator shall establish and maintain a system for the recording of each and all of the following:

(1) Any conveyance which affects the title to, or any interest in, any civil aircraft of the United States;

(b) The Administrator shall also record under the system provided for in subsection (a) of this section any release, cancellation, discharge or satisfaction relating to any conveyance or other instrument recorded under said system.

(c) No conveyance or instrument the recording of which is provided for by subsection (a) of this section shall be valid in respect of such aircraft, aircraft engine or engines, propellers, appliances, or spare parts 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 instrument is filed for recordation in the office of the Administrator: * * *

(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 * * *.

Under the act the FAA maintains an office in Oklahoma City both for registration of ownership of aircraft (49 U.S.C.A. § 1401) and for recordation (under § 1403) of conveyances of aircraft and of security instruments therein.

Thorough study of the matter convinces us that Congress did not intend by adoption of the cited recordation procedure

necessarily to displace and preempt all state law otherwise applicable bearing upon priorities of lien and title interests in aircraft. Rather it was the intent, in relation to aircraft, to substitute for the multiplicity of state registration or recording systems a single preemptive federal system for registering (1) instruments of title, comparable to state registration of titles to motor vehicles, and recording (2) security documents of the kinds commonly comprehended by state recording laws concerning written consensual security interests affecting personal property. The reason was that the ready mobility of aircraft and their common use across state lines made it cumbersome and burdensome for persons having concern with title to or incumbrances on aircraft to have to record or search in all states or localities which could arguably be claimed to constitute the proper recording situs in relation to the specific owner or incumbrancer of a particular aircraft. See Scott, "Liens in Aircraft: Priorities," 25 J. Air L. & Com. 193, 200, 203 (1958); Case Note, 48 Colum. L. Rev. 1248 (1948). Thus, failure to federally record a recordable instrument would entail the specific consequences declared by § 1403(c), but no other. Federal recording would validate a title or incumbrance as against any claim of invalidity based upon absence of state recording, but would not necessarily create affirmative priority as against competing rights declared by applicable state law.

And so, referring to all the provisions of the federal act in entirety, including that declaring immunity to tort claims in the holder of a security interest, Professor Gilmore's authoritative text states:

The several provisions summarized above obviously amount to a good deal more than a recording system (like the patent and copyright provisions) but are still a good deal less than a comprehensive coverage of security interests in aircraft; they are much less comprehensive than the Ship Mortgage Act, which goes into great detail on the formal requisites and priorities of ship mortgages and includes sections on foreclosure and on the status of mortgages on foreign flag ships. There is of course no plenary federal power over air transportation comparable to the patent and copyright powers or

even to the extention [ sic ] of the "judicial power of the United States" to admiralty and maritime cases. Here Congress acts under the interstate commerce and the bankruptcy powers -- which have, however, become so extensive that there is not likely to be any constitutional challenge to anything Congress has done or may do in the future. A truly comprehensive security statute for aircraft -- or indeed a statute covering security interests in transportation equipment of any kind, by air, rail, road and water -- would undoubtedly be within the power of Congress to enact; there is, however, little likelihood ...


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