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Acceptance of Transfer Statements Under UCC 9-616, for Recording in Aircraft Records

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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.

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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.

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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.

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Issued in Washington, DC, on November 13, 2006.

Rebecca MacPherson,

Assistant Chief Counsel for Regulations.

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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 § 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]

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:

(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 Start Printed Page 67009the 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


Joseph R. Standell

Aeronautical Center Counsel

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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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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).

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[FR Doc. 06-9250 Filed 11-16-06; 8:45 am]