Lewistown Propane Co. v. Ford
2002 MT 27, 42 P.3d 229, 308 Mont. 243 (2002)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A conveyance of an aircraft must be federally recorded to affect the rights of innocent third parties, and a judgment creditor is entitled to rely on the Federal Aviation Administration's (FAA) ownership records when levying on an aircraft.
Facts:
- Lewistown Propane Company sold products to Tom Ford and his family members, for which Ford did not pay.
- On September 8, 1999, Tom Ford executed a Promissory Note and Agreement, agreeing to pay Lewistown Propane $28,503.62 within six months.
- On February 11, 2000, Tom Ford sold three pieces of farm machinery and a 1974 Super Piper Cub Aircraft PA18-150 (the "Piper aircraft") to Raymond Becky.
- Neither Tom Ford nor Raymond Becky notified the State of Montana or the FAA that Ford had transferred the airplane to Becky.
- As consideration for the transfer of assets, Ford was to receive an interest in a business venture in British Columbia, Canada, and Becky pledged the assets as collateral for a loan, with funds wired to Canada.
- Tom Ford retained possession of the aircraft and farm machinery in Fergus County.
- Lewistown Propane inquired with the Montana Department of Transportation Aeronautics Division and the FAA, determining that the Piper aircraft was registered in Ford’s name with no liens or encumbrances.
Procedural Posture:
- Lewistown Propane Company filed a complaint against Tom Ford and his family members in the Tenth Judicial District Court, Fergus County (trial court/court of first instance), on December 14, 1999, for collection of the Promissory Note and payment of its account receivable.
- Tom Ford filed a Confession of Judgment with the District Court on March 7, 2000, for $28,503.62 plus interest.
- Lewistown Propane obtained a Writ of Execution on July 7, 2000, and seized the Piper aircraft about a week later.
- Lewistown Propane filed a Notice of Execution Levy on July 17, 2000, advising Ford of the seizure and its intent to sell the plane.
- Raymond Becky moved for permission to intervene in the case, which the District Court granted on July 24, 2000.
- The District Court also granted Becky's motion for a stay of execution of judgment.
- The District Court entered an Order Permanently Granting Ex Parte Motion to Stay Execution of Judgment as it Relates to a 1974 Super Piper Cub Aircraft PA18-150 on October 23, 2000.
- The District Court ordered Lewistown Propane to return the aircraft to Becky.
- Lewistown Propane appealed the District Court's order to the Supreme Court of the State of Montana (appellant Lewistown Propane Company; respondents Tom H. Ford and Raymond Becky).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does an unrecorded conveyance of an aircraft to a third party, made prior to the entry of judgment against the debtor, prevent a judgment creditor from levying on the aircraft when the creditor relied on FAA records showing the debtor as the owner?
Opinions:
Majority - Justice Jim Regnier
Yes, the District Court erred. A judgment creditor's right to levy on an aircraft is not cut off by an unrecorded conveyance to a third party, as the creditor is entitled to rely on the FAA's ownership records. Section 503(c) of the Federal Aviation Act of 1958 mandates that every aircraft transfer must be evidenced by an instrument and recorded to affect the rights of innocent third parties, a scheme designed to provide a central clearinghouse of recorded titles for easy discovery of legal interests. While state law determines priorities, all interests must be federally recorded to achieve such priority. The court analogized to Kovacich v. Norgaard, a case involving an unrecorded transfer of a truck, where a judgment creditor was entitled to rely on ownership records. Applying this principle, Lewistown Propane, as a judgment creditor, was entitled to rely on FAA records showing Ford as the owner. Since Becky's ownership interest was unrecorded at the time Lewistown Propane executed the levy, Becky's interest was invalid as to Lewistown Propane and could not defeat its right to levy. The subsequent recording by Ford and Becky after the levy was ineffective because they were aware of Lewistown Propane's levy and thus not 'innocent third parties' under the federal recording statute.
Analysis:
This case reinforces the paramount importance of federal recording statutes for aircraft, affirming that such records provide the authoritative source for establishing ownership rights against third parties. It establishes that a judgment creditor, when relying on official records, qualifies as an 'innocent third party' whose rights are protected against unrecorded transfers. The decision underscores a key distinction between real and personal property conveyance rules under Montana law when federal statutes mandate specific recording requirements, emphasizing the notice function of publicly available records for federally regulated assets. This ruling promotes transparency and predictability in commercial transactions involving aircraft by ensuring that creditors can reliably assess a debtor's assets based on official governmental registries.
