[Federal Register Volume 65, Number 55 (Tuesday, March 21, 2000)]
[Notices]
[Pages 15188-15191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6702]


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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration


Notice and Opinion; Certificate of Repossession of Encumbered 
Aircraft (AC Form 8050-4)

AGENCY: Federal Aviation Administration, DOT.
SUMMARY: This provides notice of a revised Certificate of Repossession 
of Encumbered Aircraft (AC Form 8050-4), and a legal opinion concerning 
certificates of repossession and their impact on aircraft registration.

FOR FURTHER INFORMATION CONTACT: Joseph R. Standell, Aeronautical 
Center Counsel (AMC-7), Post Office Box 25082, Oklahoma City, OK 73125 
or telephone (405) 954-3296.

SUPPLEMENTARY INFORMATION: This is to provide notice of a revised 
Certificate of Repossession of Encumbered Aircraft (AC Form 8050-4) 
incorporating various changes and revisions to versions of the form 
dated 6/99 and earlier. A copy of the new form follows this opinion and 
is available to the public at http://registry.faa.gov/ or linked 
through http://www.mmac.jccbi.gov/MMAC/
    The revised form dated 02-00, supersedes and replaces all 
previously dated versions of the form. Prior versions of the form will 
be accepted through the end of the regular business day on the 90th day 
after the date of publication of this Notice in the Federal Register.
    The superseding form and the opinion cotnained herein are in 
response to general concerns about specific language contained in 
Certificate of Repossession of Encumbered Aircraft (AC Form 8050-4, 6/
99 and earlier) and industry practices involving use of that form.
    This opinion addresses the comments expressed by attorney John I. 
Karesh in a letter dated January 19, 1998, to Aeronautical Center 
Counsel.
    This opinion also provides information concerning certificates of 
repossession and their impact on aircraft registration.
    Although it is recognized that certain rights to repossess on 
default may exist in leases and other transactions, this opinion is 
limited to repossessions (whether physical or constructive to the 
extent permitted by applicable local law) and foreclosures which effect 
a change in ownership of an aircraft.
    Opinion--Change of Ownership: An aircraft is eligible for 
registration only if, among other things, it is owned by a citizen of 
the United States (49 U.S.C. 44102(a)(1)(A)). Only the owner of an 
aircraft is eligible to make application for registration of that 
aircraft (49 U.S.C. 44103(a)).
    Each person who submits an Aircraft Registration Application (AC 
Form 8050-1) must also submit evidence of ownership as required by 
Sec. 47.11 of the Federal Aviation Regulations (14 CFR Part 47) (the 
Regulations). Where the applicant relies upon repossession as evidence 
of ownership, Sec. 47.11(b) provides:

    The repossessor of an aircraft must submit--
    (1) A certificate of repossession on FAA Form 8050-4, or its 
equivalent, signed by the applicant and stating that the aircraft 
was repossessed or otherwise seized under the security agreement 
involved and applicable local law:
    (2) The security agreement (unless it is already recorded at the 
FAA Aircraft Registry), or a copy thereof certified as true under 
Sec. 49.21 of this chapter; and
    (3) When repossession was through foreclosure proceedings 
resulting in sale, a bill of sale signed by the sheriff, auctioneer, 
or other authorized person who conducted the sale, and stating that 
the sale was made under applicable local law.

    Based on information provided by the office of the National 
Conference of Commissioners on Uniform State Laws, it appears that all 
50 states have adopted Article 9 of the Uniform Commercial Code 
(U.C.C.), albeit with some variations. Therefore, for purposes of this 
discussion, U.C.C. Article 9, as adopted, is cited as the applicable 
local law.
    In his letter of January 19, 1998, Mr. Karesh states that ``it is 
standard practice for the repossessing Lender to file for recordation 
with the FAA the certificate of repossession at the time of 
repossession, in order to vest title to the aircraft in the name of the 
Lender.'' This practice is referred to in the aviation legal practice 
as a ``protective filing.''
    Apparently this protective filing practice stems from reliance upon 
the following language contained in the earlier versions of the 
Certificate of Repossession of Encumbered Aircraft (AC Form 8050-4) 
which is typically submitted by a repossessor to the Civil Aviation 
Registry:

by virtue of such act of repossession he divested the said debtor, 
and any and all persons claiming by, through or under him, of any 
and all claims they hand or may have had, and now holds title to the 
aforesaid aircraft, free and clear * * *.

    This language may be causing some confusion; therefore, FAA has 
revised the form. The revisions emphasize that it is repossession and 
foreclosure under the applicable local law not the filing of the 
Certificate of Repossession of Encumbered Aircraft and the Aircraft

[[Page 15189]]

Registration Application which vests ownership of the aircraft for 
purposes of registration.
    In that regard, U.C.C. 9-503 provides that ``unless otherwise 
agreed a secured party has on default the right to take possession of 
the collateral * * *'' This right of repossession refers to the taking 
back of an item, not displacement of all legal rights in and to the 
collateral (see Official Comment, U.C.C. 9-503).
    Section 47.41(a)(4) of the Regulations provides that ``each 
Certificate of Aircraft Registration * * * is effective * * * until the 
date upon which ownership of the aircraft is transferred * * *.''
    Repossession alone does not effect a change in or transfer of 
ownership of the aircraft for purposes of Sec. 47.41(a)(4) of the 
Regulations. A creditor or secured party who has merely repossessed an 
aircraft without effecting foreclosure is not the owner and is not 
eligible to make application for registration of the aircraft (see 49 
U.S.C. 44103(a)).
    On the other hand, foreclosure for aircraft registration purposes 
effects a change of ownership.
    Foreclosure, the process by which the ownership rights of a debtor 
in the collateral are terminated, may generally be accomplished in two 
ways:
    The first, sometimes referred to as strict foreclosure, U.C.C. 9-
505(2), after due process as required by the applicable local law, 
allows retention of the collateral by the creditor as follows:

(i)n any other case involving consumer goods or any other collateral 
a secured party in possession may, after default, propose to retain 
the collateral in satisfaction of the obligation.

    The second, sometimes referred to as statutory foreclosure, U.C.C. 
9-504(1), after due process as required by the applicable local law, 
allows foreclosure to be accomplished by sale of the collateral as 
follows:

    A secured party after default may sell, lease or otherwise 
dispose of any or all of the collateral in its then condition or 
following any commercially reasonable preparation or processing.

    Either way, fully divesting the debtor's rights in collateral 
requires both repossession and foreclosure, either by retention of the 
collateral or by sale to a third party, thereby resulting in a change 
of ownership under Sec. 47.41(a)(4) of the Regulations.
    In both situations, the repossessor must certify that he or she 
``has performed all obligations imposed upon him by the terms of the 
financing agreement and all local laws * * *.'' (AC Form 8050-4, 6/92)
    Evidence of Change in Ownership: When foreclosure has been 
accomplished by the repossessor's retention of the collateral, 
submission of a completed certificate of repossession or its 
equivalent, and an Aircraft Registration Application by the repossessor 
will support registration in the repossessor. FAA presumes that 
repossession and retention are in accordance with local law (i.e., 
foreclosure by retention process described in U.C.C. 9-505(2) et seq.).
    When foreclosure has been accomplished by sale of the collateral, 
submission of a completed certificate of repossession or its 
equivalent, a bill of sale stating that ``the sale was made under 
applicable local law'' (14 CFR 47.11(b)(3)), and an Aircraft 
Registration Application will support registration in the name of the 
buyer.

    Dated: March 7, 2000.
Joseph R. Standell,
Aeronautical Center Counsel.
BILLING CODE 4910-13-M

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[FR Doc. 00-6702 Filed 3-20-00; 8:45 am]
BILLING CODE 4910-13-C