Philko Aviation, Inc. v. Shacket, 462 U.S. 406 (1983)

Philko Aviation, Inc. v. Shacket

No. 82-342

Argued April 20, 1983
Decided June 15, 1983
462 U.S. 406

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE SEVENTH CIRCUIT

Syllabus

A corporation in Illinois, operated by Roger Smith, sold a new airplane to respondents, who paid the sale price in full and took possession of the plane. Smith, however, did not give respondents the original bills of sale reflecting the plane’s chain of title, but gave them only photocopies and an assurance that he would "take care of the paperwork." Subsequently, Smith purported to sell the plane to petitioner, giving it the title documents, which petitioner’s financing bank later recorded with the Federal Aviation Administration (FAA). Respondents filed an action in Federal District Court to determine title to the plane. Petitioner argued that it had title because respondents never recorded their interest in the plane with the FAA, relying on § 503(c) of the Federal Aviation Act of 1958, which provides that "[n]o conveyance or instrument" affecting title to civil aircraft shall be valid against third parties not having actual notice of the sale, until such conveyance or instrument is recorded with the FAA. But the District Court awarded summary judgment in respondents’ favor, and the Court of Appeals affirmed, holding that 503(c) did not preempt Illinois state law under which no documentation for a valid transfer of an aircraft is required and an oral sale is valid against third parties once the buyer takes possession of the aircraft.

Held: State laws, such as the Illinois law, allowing undocumented or unrecorded transfers of interests in aircraft to affect innocent third parties are preempted by the federal Act. Although if § 503(c) were interpreted literally in accordance with the federal Act’s definition of "conveyance" -- "a bill of sale, contract of conditional sale, mortgage, assignment of mortgage, or other instrument affecting title to, or interest in, property" -- it would invalidate only unrecorded title instruments, and not unrecorded title transfers, thus enabling a claimant to establish title against an innocent third party without relying on an instrument, it is apparent that Congress did not intend § 503(c) to be interpreted in this manner. Rather, § 503(c) means that every aircraft transfer must be evidenced by an instrument, and every such instrument must be recorded before the rights of innocent third parties can be affected. Because of these requirements, state laws permitting undocumented or unrecorded transfers are preempted, for there is a direct conflict between § 503(c) and such state laws. These conclusions are dictated by the federal Act’s legislative history. Any other construction would defeat Congress’ purpose in enacting § 503(c) of creating a "central clearing house" for recordation of title so that a person could have "ready access" to information about an aircraft’s title. Pp. 409-414.

681 F.2d 506, reversed and remanded.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, MARSHALL, BLACKMUN, POWELL, REHNQUIST, and STEVENS, JJ., joined. O’CONNOR, J., filed an opinion concurring in part and concurring in the judgment, post, p. 414.