Sanders v. M.D. Aircraft Sales, Inc.

575 F.2d 1086 (1978)

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Sanders v. M.D. Aircraft Sales, Inc.

United States Court of Appeals for the Third Circuit
575 F.2d 1086 (1978)

  • Written by Sheryl McGrath, JD

Facts

M.D. Aircraft Sales, Inc. (Aircraft Sales) (defendant) was in the business of selling airplanes in Pennsylvania. Aircraft Sales borrowed money from General Electric Credit Corporation (GECC) and executed a security agreement that granted GECC a security interest in Aircraft Sales’ inventory. This type of security interest was sometimes referred to as a floor-plan lien. The security agreement allowed Aircraft Sales to sell inventory in the ordinary course of business and gave GECC a security interest in proceeds from inventory sales. The security agreement required Aircraft Sales to hold the sale proceeds in trust for GECC. Under the security agreement, if Aircraft Sales failed to hold sale proceeds in trust, GECC could exercise remedies available in the Pennsylvania Uniform Commercial Code (UCC). GECC recorded the security agreement with the Federal Aviation Administration Aircraft Registry in Oklahoma. About a month after GECC recorded the security agreement, Aircraft Sales sold a Piper Arrow airplane in the ordinary course of business to Charles Sanders (plaintiff). Aircraft Sales failed to hold the proceeds of the Piper Arrow sale in trust, so GECC informed Sanders that GECC had a lien on the Piper Arrow airplane. Sanders then filed a declaratory-judgment action to establish that his title to the airplane was superior to GECC’s title. Both parties moved for summary judgment on the relativity-of-title issue. The district court reasoned that federal aviation law—including the federal aircraft-lien system—wholly preempted the Pennsylvania UCC. Applying federal law, the court found that GECC had superior title to the airplane and granted summary judgment in favor of GECC. Sanders appealed.

Rule of Law

Issue

Holding and Reasoning (Gibbons, J.)

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