Full title: IN RE VICTOR L. GELKING, DEBTOR. PHILLIP D. ARMSTRONG, TRUSTEE OF THE…
Court: United States Court of Appeals, Eighth Circuit
Date published: Feb 12, 1985
Facts
From 1969 to January 1981, the debtor operated a business in Minot, North Dakota, known as Minot Aircraft Sales. On September 27, 1979, the debtor obtained a loan from the bank for the purchase of two airplanes. Subsequently, the debtor exchanged the two airplanes for a 1978 Piper Lance airplane owned by D.D.C., Inc. The bank released its liens on the two exchanged airplanes upon the debtor’s execution of a new security agreement granting the bank a security interest in the 1978 Piper.
This security agreement was then mailed, along with the debtor’s bill of sale from D.D.C., Inc. and an application for registration, to the Federal Aviation Administration (FAA). These documents were filed for recordation with the FAA on May 12, 1981. The security agreement was filed a second time on July 20, 1981. Actual recordation of the security agreement, however, did not occur until November 17, 1981. This delay in recordation was partially caused by the bank’s failure to supply evidence of the debtor’s complete chain of ownership (i.e., bill of sale from initial owners to D.D.C., Inc. and the original bill of sale to the initial owners).
Issue
Decision
The trustee admits that the debtor had an equitable interest in the airplane before filing for bankruptcy. The trustee argues, however, that the debtor’s rights in the airplane were not sufficient to satisfy the “rights in the collateral” requirement. He bases this argument on the contention that, before the recordation of his and D.D.C., Inc.’s interest in the airplane, he could not convey an interest that would be indefeasible and valid against third parties. We find no language in the North Dakota statutes or caselaw, however, which would support a conclusion that a debtor must possess such rights to have “rights in the collateral.” Instead, we conclude that the rights that the debtor possessed in the airplane before filing were sufficient to meet the “rights in the collateral” requirement. See 1 G. Gilmore, Security Interests in Personal Property § 11.5 at 353 (1965) (“less than full `legal title'” will satisfy the “rights in the collateral” requirement).
In conclusion, we find that the bank’s security interest in the debtor’s airplane was perfected before the date the debtor filed for bankruptcy. Accordingly, the judgment of the district court is affirmed.