Northern Illinois Corp. v. Bishop Distributing Co.

• Decision Date: 25 March 1968
• Docket Number: Civ. A. No. 5317.
• Citation: Northern Illinois Corp. v. Bishop Distributing Co., 284 F.Supp. 121 (W.D. Mich. 1968)
• Parties: NORTHERN ILLINOIS CORPORATION, a Delaware corporation, Plaintiff, v. BISHOP DISTRIBUTING COMPANY, a Michigan corporation, Marion F. Shields, and Union Bank and Trust Company, N. A., a National banking association, Defendants.
• Court: U.S. District Court — Western District of Michigan

284 F. Supp. 121

NORTHERN ILLINOIS CORPORATION, a Delaware corporation, Plaintiff, v.BISHOP DISTRIBUTING COMPANY, a Michigan corporation, Marion F. Shields, and Union Bank and Trust Company, N. A., a National banking association, Defendants.

Civ. A. No. 5317.

United States District Court W. D. Michigan, S. D.

March 25, 1968.

Varnum, Riddering, Wierengo & Christenson, Grand Rapids, Mich., for plaintiff; Peter Armstrong, Grand Rapids, Mich., of counsel.

Stephen A. Bryant, Grand Rapids, Mich., for defendantUnion Bank and Trust Co.

Renihan & Goolian, Grand Rapids, Mich., for defendantMarion F. Shields; Joseph A. Renihan, Grand Rapids, Mich., of counsel.

Kingston, Porter & Day, Grand Rapids, Mich., for defendantBishop Distributing Co.; Robert W. Sawdey, Grand Rapids, Mich., of counsel.

OPINION

FOX, District Judge.

This matter involves cross-motions for summary judgment brought by plaintiff and defendants in an action in which plaintiff seeks a declaration of its rights with respect to one Mooney aircraft in which it holds a purchase money security interest.

The facts as stipulated by the parties stand as follows.

In September of 1965, Mich-Air Mooney, Inc., a Michigan corporation engaged in selling retail airplanes in Muskegon, Michigan, financed the purchase of one new 1965 Mooney aircraft, Model Super 21 M20E, SerialNo. 819, LicenseNo. N5908Q, through plaintiff, a Delaware corporation having its principal place of business in DeKalb, Illinois.The security agreement covering the transaction was executed by plaintiff and Mich-Air Mooney, Inc. on September 21, 1965, in Illinois, and delivered to plaintiff on that date.

Plaintiff filed the security agreement for recordation with the Federal Aviation Agency on September 24, 1965.On October 4, 1965, the Federal Aviation Agency recorded the agreement.

Defendants, Bishop Distributing Company and Marion F. Shields, purchased the aircraft from Mich-Air Mooney, Inc. in the ordinary course of its business on September 29, 1965.

Shields paid cash for his interest in the airplane, while Bishop Distributing Company financed its interest through defendantUnion Bank and Trust Company.At the time Mich-Air Mooney, Inc. sold the aircraft to Bishop Distributing Company and Shields, none of the defendants had either knowledge or actual notice of plaintiff's security interest in the aircraft, or of Mich-Air Mooney's lack of authority to sell the aircraft in the same manner as any other retailer.

The bill of sale of Bishop Distributing Company and Shields was filed for recordation with the Federal Aviation Agency on October 8, 1965, and recorded on October 27, 1965.

Union Bank and Trust Company's security agreement was initially filed for recordation with the Federal Aviation Agency on October 8, 1965, refiled for recordation on November 1, 1965, and recorded on November 2, 1965.

Subsequent to the above transactions, Mich-Air Mooney, Inc. went into bankruptcy, precipitating the present controversy.

Plaintiff contends that since its security agreement (which is apparently valid under either Michigan or Illinois law)¹ with Mich-Air Mooney, Inc. was duly filed for recordation prior to the time when defendantsBishop Distributing Company and Shields purchased the aircraft, its lien is superior to any interests of the defendants, including that of defendantUnion Bank and Trust Company, by virtue of 49 U.S.C. § 1403, which provides in part:

(c)Validity of conveyances or other instruments; filing.

No conveyance or instrument the recording of which is provided for by subsection (a) of this section shall be valid * * * 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)Effect of recording.

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 * * *

Plaintiff has cited numerous cases, including Marsden v. Southern Flight Service, Inc., 227 F.Supp. 411(M.D.N.C.1961), International Atlas Services Inc. v. Twentieth Cent. Airport Co., 59 Cal. Rptr. 495(Cal.App.1967), cert. den.389 U.S. 1038, 88 S.Ct. 775, 19 L.Ed.2d 827(1968), andPope v. National Aero Finance Co., 236 Cal.App.2d 722, 46 Cal. Rptr. 233(1965), as authority for holding that the Federal Aviation Act of 1958 pre-empts all other laws regarding the validity and effect of recordation of instruments affecting title to or any interest in any civil aircraft in the United States.

Although none of these cases dealt with the precise issues presented in the instant case, we recognize that Congress has the power to legislate with respect to the registration of conveyances and liens affecting title to aircraft.We acknowledge that federal law rather than state law governs the rights of claimants to aircraft to the extent that these rights are dependent upon the fact or time of recordation of conveyances.Texas National Bank of Houston v. Aufderheide, 235 F.Supp. 599(E.D.Ark., 1964).

The rights of Bishop Distributing Company and Shields are, however, not solely dependent upon recording, for as the court in Texas National Bank of Houston, supra, observed:

It does not follow, however, that section 1403 has repealed or abolished the general rule of chattel mortgage law that when a mortgagee consents to the sale of a mortgaged chattel free of lien by the mortgagor, the purchaser takes free of the mortgage lien and his rights are superior to those of the mortgagee.15 Am.Jur.2d, Chattel Mortgages, §§ 150, 151 and 153;14 C.J.S.Chattel Mortgages, § 262.And a provision in a chattel mortgage prohibiting a sale of the mortgaged chattel without the mortgagee's consent is waived if the mortgagee knowingly permits the violation of such provision.15 Am.Jur.2d, p. 324, 235 F.Supp. at 603.

Again in State Securities Company v. Aviation Enterprises, Inc., 355 F.2d 225, 229(C.A.10, 1966), the court said:

By providing a federal system for registration of conveyances and liens affecting the title to aircraft, Congress has preempted that field and state recording statutes are not applicable to such title instruments.1 However, questions of the validity of such title documents, actual notice, good faith purchaser status, and the like, must be resolved under state

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