[Federal Register: November 17, 2006 (Volume 71, Number 222)]
[Notices]
[Page 67007-67009]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17no06-97]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
Acceptance of Transfer Statements Under UCC 9-616, for Recording
in Aircraft Records
ACTION: Notice.
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SUMMARY: This notice is issued by the Federal Aviation Administration
(FAA) Chief Counsel to advise interested parties of the FAA's
acceptance of transfer statements filed with the FAA Aircraft Registry
that are executed under the Uniform Commercial Code, section 9-619, as
adopted by the various states.
[[Page 67008]]
FOR FURTHER INFORMATION CONTACT: Joseph R. Standell, Aeronautical
Center Counsel, AMC-7, Federal Aviation Administration, P.O. Box 25082,
Oklahoma City, OK 73125-4904, or call (405) 954-3296.
SUPPLEMENTARY INFORMATION: By Memorandum dated September 7, 2006, Mr.
Dean Gerber, Vedder, Price, Kaufman & Kammholz, P.C., wrote to the FAA
about a default on a secured transaction which resulted in foreclosure
of the owner/lessor's interest in several aircraft. In addition to the
secured transaction, the aircraft are subject to leases from the
defaulting owner, as lessor to a third party certificated air carrier.
The foreclosing party wants the FAA aircraft records to reflect its
interest in the leases so that transfer of lessor's rights to a new
owner/lessor can be accomplished. The defaulting party is unwilling to
deliver an assignment of the leases to the foreclosing party. Absent an
assignment of lessor's rights in the leases, the foreclosing party has
been unable to cause FAA aircraft records to reflect its rights in the
leases.
The Administrator of the FAA is charged in 49 U.S.C. 44107 with
establishing a system for recording conveyances that affect an interest
in a U.S. civil aircraft. Part 49 of the Federal Aviation Regulations--
Recording of Aircraft Titles and Security Documents provides that
leases are conveyances (see 49 U.S.C. 40101(a)(19), 14 CFR
49.17(a)(1)). Section 39.17(d) of the Regulations provides for
recording of consensual assignments of conveyances such as security
documents and leases. However, in default situations, the Regulations
only provide for recording of a Certificate of Repossession, FAA Form
8050-4, or its equivalent, addressing ownership of an aircraft (14 CFR
47.11(b)). When the repossessed aircraft remains subject to a lease,
there is no apparent way for a repossessing party to record its
interest in the lease. To address this problem, Mr. Gerber's memorandum
included a proposed transfer statement under the Uniform Commercial
Code (UCC) section 9-619 as a mechanism by which a foreclosing secured
party can cause the record to reflect its rights in leases.
Section 9-619 of the UCC provides that a properly presented
transfer statement ``entitles the transferee to the transfer of record
of all rights of the debtor in the collateral specified in the
statement in any official filing, recording, * * * system * * *''
Further, section 9-619 provides that upon proper presentation, the
official responsible for maintaining the system shall accept the
transfer statement and promptly amend its records to reflect the
transfer. That ``official'' in the context of Mr. Gerber's request
would be the FAA Aircraft Registry.
The FAA has determined that in appropriate circumstances, transfer
statements may be recordable instruments. However, users are reminded
that the validity of transfer statements is determined under the
applicable state law, i.e., State adoptions of Section 9-619 of the
UCC.
Accordingly, the FAA publishes, as an attachment, its response to
Mr. Gerber.
Issued in Washington, DC, on November 13, 2006.
Rebecca MacPherson,
Assistant Chief Counsel for Regulations.
Attachment
October 6, 2006.
Dean A. Gerber, Esq.
Vedder, Price, Kaufman & Kammholz, P.C., 222 North LaSalle Street,
Chicago, IL 60601.
Dear Mr. Gerber:
Legal Opinion--Lease Assignments Through the Use of Transfer Statements
This responds to your request for an opinion whether the Federal
Aviation Administration (FAA) will consider utilization of a transfer
statement for purposes of assigning (on the record) the rights of the
aircraft owner in existing leases to the Indenture Trustee; and whether
a transfer statement under Uniform Commercial Code section 9-619 is
eligible for recording as a stand-alone document.
As an attachment to your request, you provided a draft proposed
Transfer Statement and its Attachment A. The proposed Transfer
Statement appears to contain all of the provisions required by Uniform
Commercial Code Section 9-619 including the statement ``By reason of
such past-default remedies, the Indenture Trustee has acquired the
rights of the Owner Trustee as lessor under the Existing Lease and is
now considered the `Lessor' under the Existing Lease * * *.''
Briefly, the facts underlying your request are as follows: The
registered owner of the aircraft has defaulted under a recorded
security agreement. The collateral under that security agreement is the
aircraft and various leases of the aircraft to a certificated air
carrier, as lessee. You acknowledge that ownership of the aircraft can
be affected by repossession and foreclosure evidenced by the filing of
a Certificate of Repossession under 14 CFR Sec. 47.11. However, your
client seeks a way to evidence of record its accession to the rights of
the registered owner (the Lessor) in the leases and subsequently be
able to record an assignment of that interest from the Indenture
Trustee to the new aircraft owner.
By way of background, the Administrator of the Federal Aviation
Administration is charged with establishing a system for recording
conveyances, including leases that affect an interest in a U.S. civil
aircraft. (See 49 U.S.C. 40102(a)(19), 44107; 14 CFR 49.17(a)(1).)
Part 49 of the Federal Aviation Regulations contains provisions for
recording assignments of those conveyances. However, where such
assignment is not feasible as sometimes occurs in a default situation,
there are no regulatory provisions to provide notice to system users of
the transfer when the collateral involved is a lease. Although a
transfer statement has definite structure and effect it is not the type
of assignment contemplated by 14 CFR 49.17(d)(3).\1\
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\1\ 14 CFR 49.17(d)(3)--The following rules apply to conveyances
executed for security purposes and assignments thereof: An
assignment of an interest in a security agreement must be signed by
the assignor and, unless it is attached to and is a part of the
original agreement, must describe the agreement in sufficient detail
to identify it, including its date, the names of the parties, the
date of FAA recording, and the recorded conveyance number.
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Recognizing that dilemma, the drafters of the Uniform Commercial
Code (UCC) introduced a mechanism by which a repossessing party can
evidence its rights in collateral such as leases. UCC section 9-619
Transfer of Record or Legal Title,\2\ introduces the transfer statement
as follows:
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\2\ The 2000 revisions to Article 9 have been adopted by all 50
states, the District of Columbia and the Virgin Islands (ULA UCC
Refs & Annos, Westlaw).
(a) [``Transfer statement.''] In this section, ``transfer
statement'' means a record authenticated by a secured party stating:
(1) That the debtor has defaulted in connection with an
obligation secured by specified collateral;
(2) That the secured party has exercised its post-default
remedies with respect to the collateral;
(3) That, by reason of the exercise, a transferee has acquired
the rights of the debtor in the collateral; (emphasis added) and
(4) The name and mailing address of the secured party, debtor,
and transferee.
(b) [Effect of transfer statement.] A transfer statement
entitles the transferee to the transfer of record of all rights of
the debtor in the collateral specified in the statement in any
official filing, recording, registration, or certificate-of-title
system covering the collateral. If a transfer statement is presented
with the applicable fee and request form to
[[Page 67009]]
the official or office responsible for maintaining the system, the
official or office shall:
(1) Accept the transfer statement;
(2) Promptly amend its records to reflect the transfer;
(emphasis added) and
(3) If applicable, issue a new appropriate certificate of title
in the name of the transferee.
(c) [Transfer not a disposition; no relief of secured party's
duties.] A transfer of the record or legal title to collateral to a
secured party under subsection (b) or otherwise is not of itself a
disposition of collateral under this article and does not of itself
relieve the secured party of its duties under this article.
I have also considered the Official Comments of the UCC drafters
wherein they explain the intent of UCC 9-916:
Transfer of Record or Legal Title. Potential buyers of
collateral that is covered by a certificate of title (e.g., an
automobile) or is subject to a registration system (e.g., a
copyright) typically require as a condition of their purchase that
the certificate or registry reflect their ownership. In many cases,
this condition can be met only with the consent of the record owner.
If the record owner is the debtor and, as may be the case after the
default, the debtor refuses to cooperate, the secured party may have
great difficulty disposing of the collateral. (emphasis added)
Subsection (b) provides a simple mechanism for obtaining record
or legal title, for use primarily when other law does not provide
one. (emphasis added) Of course, use of this mechanism will not be
effective to clear title to the extent that subsection (b) is
preempted by federal law. Subsection (b) contemplates a transfer of
record or legal title to a third party, following a secured party's
exercise of its disposition or acceptance remedies under this Part,
as well as a transfer by a debtor to a secured party prior to the
secured party's exercise of those remedies. Under subsection (c), a
transfer of record or legal title (under subsection (b) or under
other law) to a secured party prior to the exercise of those
remedies merely puts the secured party in a position to pass legal
or record title to a transferee at foreclosure. A secured party who
has obtained record or legal title retains its duties with respect
to enforcement of its security interest, and the debtor retains its
rights as well.
3. Title-Clearing Systems Under Other Law. Applicable non-UCC
law (e.g., * * *, federal registry rules, or the like) (emphasis
added) may provide a means by which the secured party may obtain or
transfer record or legal title for the purpose of a disposition of
the property under this Article. The mechanism provided by this
section is in addition to any title-clearing provision under law
other than this Article.
After due consideration of these facts, provisions and comments, it
is my opinion that the FAA will consider utilization of a transfer
statement as contemplated by Section 9-619 of the Uniform Commercial
Code for purposes of transferring the rights of the aircraft owner, as
Lessor, to the Indenture Trustee in existing leases.
Further, your proposed transfer statement is eligible for recording
as a stand-alone document because it is a conveyance affecting an
interest in a civil aircraft of the United States in that it affects an
interest in a recorded lease between Wells Fargo Bank and Northwest
Airlines concerning operational control of aircraft.
Be advised that for purposes of transferring ownership of an
aircraft FAA will not consider a transfer statement a substitute for a
Certificate of Repossession or its equivalent under 14 CFR 47.11
Sincerely,
Joseph R. Standell
Aeronautical Center Counsel
[FR Doc. 06-9250 Filed 11-16-06; 8:45 am]
BILLING CODE 4910-13-M