UniBank for Savings v. SBK Holdings USA, Inc.

United States Court of Appeals
For the First Circuit
Nos. 19-1990, 21-1184
UNIBANK FOR SAVINGS,
Plaintiff, Appellee,
v.
999 PRIVATE JET, LLC.; ELINA SARGSYAN; EDGAR SARGSYAN,
Defendants, Appellees.
SBK HOLDINGS USA, INC.
Intervenor, Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Timothy S. Hillman, U.S. District Judge]
Before
Lynch, Kayatta, and Gelpí,
Circuit Judges.
Mark J. Geragos, with whom Geragos & Geragos APC, was on
brief, for appellant.
Eric Magnuson, with whom Gabriel Rossman and Nutter McClennen
& Fish, LLP were on brief, for appellee.
April 11, 2022
GELPÍ, Circuit Judge. Unibank for Savings ("Unibank")
originally brought this action against Edgar Sargsyan
("Sargsyan"), his spouse Elina Sargsyan, and 999 Private Jet, LLC
("999 Private Jet") for breach of their obligations under a
promissory note secured by a Gulfstream aircraft. After the
district court granted Unibank's unopposed motion for a
preliminary injunction to repossess the aircraft, SBK Holdings
USA, Inc. ("SBK") intervened, asserting an alleged superior
security interest in said aircraft. The district court entered
summary judgment against SBK and subsequently denied its motion to
set aside the judgment. SBK appeals both rulings. We affirm.
I. Background1
SBK is an investment company specializing in real and personal
property. Sargsyan was its president and legal counsel from
December 2013 until July 2016, when he was terminated for breaching
his fiduciary duties. Sargsyan's relevant actions date back to
2015, when SBK was negotiating the purchase of a 1997 Gulfstream
aircraft, Model G IV-SP, Serial No. 1315, FAA Registration No.
N999SE (the "aircraft"). Sargsyan was required to report all
current and potential investments and properties, as well as
compile a status account of all SBK transactions. Additionally,
On summary judgment review, we examine the evidence of
1
record in the light most favorable to the non-moving party, here
SBK. Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir. 2010).
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he was required to ensure that title to all property acquired by
SBK was held in its name. Sargsyan oversaw the purchase of the
aircraft with SBK funds, but as the negotiations for the same took
place, he created a new company independent from SBK. Instead of
transferring the aircraft to SBK, he registered its title in the
name of his newly created corporation, Regdalin Aviation LLC
("Regdalin"). Around February 2016, Sargsyan, on behalf of
Regdalin, obtained a loan from Huntington National Bank (the
"Huntington loan" and "Huntington Bank"), which perfected a
security interest in the aircraft.
In September 2016, SBK discovered that the aircraft's title
was registered to Regdalin rather than to itself. As a result, in
December 2016, SBK's Chief Executive Officer ("CEO"), Dan McDyre,
requested the Federal Aviation Administration ("FAA") to place a
preliminary lien on the aircraft in the amount of $6,227,250. The
FAA maintained the claim-of-lien letter in a suspense file.
On February 3, 2017, SBK brought an action in Los Angeles
Superior Court against Sargsyan, Regdalin, and others seeking
damages for breach of fiduciary duties, fraud, and embezzlement.2
After the California case had commenced, Sargsyan created yet
another new company, 999 Private Jet, and transferred the ownership
of the aircraft from Regdalin thereto. In May 2017, Sargsyan,
2 This action is currently ongoing.
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Elina Sargsyan, and 999 Private Jet issued a $4,348,334.01
promissory note payable to Unibank in order to refinance the
Huntington loan. Unibank, in turn, accepted the aircraft as a
security interest on the note and, on May 4, 2017, disbursed
$4,348,334.01 to Huntington Bank to discharge the aircraft lien.
On May 9, 2017, Unibank registered its security interest. By June
2018, Sargsyan, his spouse, and 999 Private Jet defaulted on their
obligations towards Unibank.
A. Procedural History
In August 2018, Unibank brought an action in the United States
District Court for the District of Massachusetts against Sargsyan,
his spouse, and 999 Private Jet, based on their nonpayment of the
May 2017 promissory note. On September 7, 2018, the district court
found that Unibank had a perfected secured interest in the
aircraft, and thus granted Unibank's unopposed motion for a
preliminary injunction authorizing it to repossess the aircraft.
The court further entered default judgment on September 14, 2018
in favor of Unibank. Since then, Unibank has been in possession
of the aircraft.
On October 31, 2018, SBK moved to intervene, claiming
ownership of the aircraft by virtue of an alleged senior security
interest in the same.3 The district court allowed SBK's
3 In its motion to intervene SBK informed of its pending
California state court action against Sargsyan and others.
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intervention. Unibank subsequently moved for summary judgment as
to SBK, arguing that it, rather than SBK, had the senior perfected
interest in the aircraft. On September 12, 2019, the district
court granted Unibank's motion. SBK next filed a motion on
November 12, 2020 under Fed. R. Civ. P. 60(b) to set aside the
judgment and conduct discovery, based on Sargsyan's criminal
felony plea in the United States District Court for the Central
District of California for conspiracy to commit identity theft and
fraud against several national and multinational banks.4 The
district court determined that Sargsyan's criminal case was
unrelated to the controversy before it, and thus, denied SBK's
motion. SBK timely appealed.
II. Standard of Review
"We review an order granting summary judgment de novo." Perea
v. Ed. Cultural, Inc., 13 F.4th 43, 50 (1st Cir. 2021) (quoting
Irobe v. U.S. Dep't of Agric., 890 F.3d 371, 377 (1st Cir. 2018)).
We will affirm the entry of summary judgment only if the record
discloses no genuine dispute of material fact and demonstrates
that the moving party is entitled to judgment as a matter of law.
See Fed. R. Civ. P. 56(a). A fact is material when it has the
potential to change a case's outcome. See Cherkaoui v. City of
Quincy, 877 F.3d 14, 23 (1st Cir. 2017). "A dispute is 'genuine'
4 The case is United States v. Edgar Sargsyan, No. 2:20-cr-
00190 (C.D. Ca. Apr. 27, 2020).
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when 'the evidence about the fact is such that a reasonable jury
could resolve the point in favor of the nonmoving party.'" Doe v.
Trs. of Bos. Coll., 892 F.3d 67, 79 (1st Cir. 2018) (quoting
Rivera-Muriente v. Agosto-Alicea, 959 F.2d 349, 352 (1st Cir.
1992)). We now turn to the record before us. We first address
the issue of FAA registration, examining whether Unibank had record
or actual notice of SBK's claim to the aircraft. We then discuss
the state law issues as to the validity of Unibank's interest in
the aircraft. Lastly, we examine SBK's Rule 60(b) motion.
III. Discussion
A. FAA Registration
We begin with the federal-law issue of the interpretation of
49 U.S.C. §§ 44107-44108, which governs the recordation and
validity of conveyances, leases, and security interests for civil
aircraft in the United States. As the Supreme Court stated
concerning the predecessor statute5 in Philko Aviation, Inc. v.
Shacket, 462 U.S. 406, 413 (1983), "[a]lthough state law determines
priorities, all interests must be federally recorded before they
can obtain whatever priority to which they are entitled under state
law." Aiming for a clear and uniform registration system for civil
aircraft, Congress codified the procedure for perfecting an
5Philko Aviation addresses section 503(c) of the Federal
Aviation Act of 1958, 49 U.S.C. § 1403(c), which effectively
mirrors the provision contained in 49 U.S.C. § 44108(a).
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interest in aircraft, requiring interest holders to duly record
any such interest with the FAA. 49 U.S.C. §§ 44107-44108; see
also Philko Aviation, 462 U.S. at 411. Congress's purpose was to
give uniformity to the recordation of titles "so that a person,
wherever he may be, will know where he can find ready access to
the claims against, or liens, or other legal interests in an
aircraft." Philko Aviation, 462 U.S. at 411 (quoting To Create a
Civil Aeronautics Authority: Hearing on H.R. 9738 Before the H.
Comm. on Interstate and Foreign Com., 75th Cong. 407 (1938)
(statement of F. Fagg, Director of Air Commerce, Department of
Commerce)). Therefore, unless the interest is recorded with the
FAA, the conveyance is valid only against "(1) the person making
the conveyance, lease, or instrument; (2) that person's heirs and
devisees; and (3) a person having actual notice of the conveyance,
lease, or instrument." 49 U.S.C. § 44108(a).
The FAA outlines the requirements for recording an interest
in aircraft, as delegated to the agency under 49 U.S.C. § 44107(a),
in its Aircraft Registration and Recordation Processes guide. See
U.S. Dep't of Transp., Fed. Aviation Admin., Aircraft Registration
and Recordation Processes (2018) ("Aircraft Registration and
Recordation Guide"). We take judicial notice of the Aircraft
Registration and Recordation guide, and SBK does not dispute that
we should follow that guide. See, e.g., Or. Nat. Desert Ass’n v.
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Bureau of Land Mgmt., 625 F.3d 1092, 1112 & n.14 (9th Cir. 2010)
(taking judicial notice of agency handbook).6
1. Record Notice
SBK admits that it presented the district court with only two
pieces of evidence in support of its claim of recordation. The
first was a declaration from its CEO, Dan McDyre, asserting that
[i]n December 2016, [he] contacted the FAA by letter
(the 'Aircraft Claim of Lien Letter') and requested a
lien in the amount of $6,227,250 be placed on the
Aircraft (which, at the time, had tail number N580KF).
On or about December 30, 2016, the FAA Aircraft
Registration Bureau filed the Aircraft Claim of Lien
Letter.
6 Per the guide, a security conveyance, such as using the
aircraft as collateral for a loan, see Aircraft Registration and
Recordation Guide § 4.1.1, is eligible for recording where: (a)
"[i]t affects aircraft registered under 49 U.S.C. 44103";
(b) "[i]t describes the aircraft by name of manufacturer, model,
manufacturer's serial number, and U.S. registration number or in
sufficient detail to identify it"; (c) "[i]t shows [the] legal
name of the debtor"; (d) "[i]t is an original, a duplicate
original, or a certified true copy"; (e) "[i]t shows title of the
signer, if appropriate"; (f) "[i]t is (1) executed by the
registered owner, (2) executed by the owner of record,
(3) accompanied by the debtor's evidence of ownership,
(4) accompanied by an accommodation agreement (hypothecation), or
(5) signed by the lessee and the described lease agreement
qualifies as a conditional sales contract and is either previously
recorded or accompanies the security agreement, in which case the
lease agreement is recorded first"; (g) "[i]t (1) contains
sufficient words to convey a security interest in the aircraft or
a security interest in the leasehold interest, (2) includes [a]
sales and title retention clause for a contract of conditional
sale, or (3) contains a purchase option which qualifies a lease as
a conditional sales contract or statement that the bailee becomes
the owner upon compliance with the terms of a bailment lease"; and
(h) "[i]t is accompanied by the recording fee." Id. § 4.1.8
(emphases omitted).
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The FAA filed said claim-of-lien letter in a suspense file. The
second was a purported title-search document that referred to the
claim-of-lien letter given to the FAA. The aircraft title-search
was not conducted by the FAA but rather a third party. No letter
was attached to the title-search document submission to the
district court.
For a number of reasons, SBK's submissions do not satisfy its
burden of showing that its claim-of-lien letter met the recordation
requirements to perfect a security interest under Philko Aviation.
462 U.S. at 413. SBK never presented the claim-of-lien letter to
the district court. Further, according to the Aircraft
Registration and Recordation Guide, any letter that remains in a
FAA suspense file holds unrecorded status, and thus is invalid
until all recording requirements are met. See Aircraft
Registration and Recordation Guide §§ 4.6.2, 5.12 (2018); see also
In Re Tomlinson, 347 B.R. 639, 645 (Bankr. E.D. Tenn. 2006) ("The
Supreme Court has held that the statute invalidates unrecorded
title transfers, not just unrecorded title instruments, so that a
claimant cannot 'prevail against an innocent third party by
establishing his title without relying on an instrument.'")
(quoting Philko Aviation, 462 U.S. at 409). And even more
significantly, SBK never put into evidence a "Notice of Recordation
-- Aircraft Security Conveyance," which under the FAA guide, it
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would have received had the interest been recorded. See Aircraft
Registration and Recordation Guide § 4.1.22 ("When a security
conveyance is recorded, a Notice of Recordation -- Aircraft
Security Conveyance is sent to the secured party.").
2. Actual Notice
Under 49 U.S.C. § 44108(a), SBK can overcome its failure to
record if it can show that Unibank received actual notice of SBK's
interest in the aircraft before Unibank issued its loan. SBK
alleges that Unibank had actual notice of its interest in the
aircraft because phone calls were held between SBK and Unibank
employees that gave the latter notice of SBK's interest in the
aircraft. On May 12, 2017 CEO McDyre called Unibank's call center
and informed Unibank about the lawsuit against Sargsyan in the Los
Angeles Superior Court. However, this information was provided to
Unibank eight days after the bank had disbursed over $4.3 million
on May 4, 2017 to 999 Private Jet to pay the Huntington loan and
obtain full discharge of Huntington Bank's lien on the aircraft.
Also, by May 9, 2017, Unibank had already registered its security
interest in the aircraft with the International Registry. By the
time McDyre contacted Unibank's call center, the transaction was
already completed. Thus, SBK's argument that Unibank had actual
knowledge before engaging in the transaction fails.7
7SBK also points to another phone call by an unknown employee
of it to Unibank. However, the evidence of said call is not
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SBK further claims that the absence of the aircraft's logbook
was sufficient to put Unibank on inquiry notice of its interest in
the aircraft. We disagree. That argument is at odds with the
criteria articulated by Congress in 49 U.S.C. § 44108(a), which
unambiguously establishes that actual notice, rather than inquiry
notice, is required for a conveyance to be valid. We thus reject
SBK's argument because it falls short of the required actual notice
standard. Because SBK has not met its burden of presenting
sufficient evidence of recordation or actual notice to Unibank,
SBK does not have a perfected security interest.
B. Validity of Unibank's Security Interest
SBK next posits that Unibank lacks a valid security interest
in the aircraft altogether, arguing that 999 Private Jet
fraudulently obtained title to the aircraft and thus had no rights
to convey to Unibank. As such, SBK asserts that its interest--
even if unperfected--trumps Unibank's valid interest, which as
discussed in pages 6-11, infra, fully complied with federal law
and regulations. Massachusetts law dictates otherwise because
even if 999 Private Jet procured its interest by fraud, it retained
at least voidable title and thus could transfer good title to
substantiated by the record. There were no phone records, no
employee identification, and no date or time of the call. SBK has
not provided any evidence to show that this call, which may or may
not have occurred, demonstrated actual notice.
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Unibank as a good faith purchaser for value. See Mass. Gen. Laws
ch. 106, § 2-403(1)(d).
The perfection and registration of personal property is
governed by state law, to wit, the Uniform Commercial Code ("UCC").
See Mass. Gen. Laws ch. 106, § 9-301; 49 U.S.C. § 44108(c)(1); see
also Stern v. Marshall, 564 U.S. 462, 495 (2011) ("[P]roperty
interests are created and defined by state law." (alteration in
original) (quoting Travelers Cas. & Sur. Co. of Am. v. Pac. Gas &
Elec. Co., 549 U.S. 443, 451 (2007))). However, as previously
discussed, aircraft must be federally recorded in order to obtain
"whatever priority to which they are entitled under state law."
Philko Aviation, 462 U.S. at 413. Massachusetts law8 provides that
a party must enjoy rights in a particular property to grant a valid
security interest in the same. Mass. Gen. Laws ch. 106, § 9-203("[A] security interest is enforceable against the debtor and third
parties with respect to the collateral only if . . . [inter alia,]
the debtor has rights in the collateral." (emphasis added)); see
also Baystate Drywall, Inc. v. Chicopee Sav. Bank, 429 N.E.2d 1138,
1140 (Mass. 1982). The UCC allows a creditor to perfect its
security interest, thereby achieving priority over all other
unperfected interests in the property. See Mass. Gen. Laws ch.
106, § 9-322(2).
8The parties to this appeal do not dispute that Massachusetts
law governs resolution of this issue.
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Massachusetts law also delineates the power to transfer title
to good faith purchasers. "A person with voidable title has power
to transfer good title to a good faith purchaser for value."
Evergreen Marine Corp. v. Six Consignments of Frozen Scallops, 4
F.3d 90, 96 (1st Cir. 1993) (emphasis omitted) (quoting Mass. Gen.
Laws ch. 106, § 2-403(1)); see also Dion v. Silver City Dodge,
Inc., 495 N.E.2d 274, 275 (Mass. 1986); Mass. Gen. Laws ch. 106,
§ 2-403(1)(d). A good faith purchaser is one who purchases assets
unaware of adverse claims. Oakville Dev. Corp. v. F.D.I.C., 986
F.2d 611, 614 (1st Cir. 1993); see also Dion, 495 N.E.2d at 275.
For purposes of determining whether one qualifies as a good faith
purchaser, the word "purchaser" includes parties who obtain a
security interest in the property. Mass. Gen. Laws ch. 106, § 1-
201(29)-(30).
Unibank obtained its interest in the aircraft as collateral
from 999 Private Jet, which in turn had acquired ownership of the
aircraft from Regdalin. Previously, Regdalin had changed the
registration and tail number of the aircraft and used it as
collateral in its transaction with Huntington Bank. SBK does not
dispute Huntington Bank's perfected security interest in the
aircraft. Rather, without any due elaboration, SBK contests
Unibank's security interest in the aircraft. Massachusetts law
grants protection to Unibank as a good faith purchaser despite 999
Private Jet's dubious prior acquisition of the loan with the
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aircraft as collateral. See Mass. Gen. Laws ch. 106, § 2-
403(1)(d). Unibank was unaware of 999 Private Jet's fraudulent
scheme. Accordingly, SBK's claim fails. Because Unibank qualifies
as a good faith purchaser for value, it has a perfected security
interest in the aircraft, while SBK does not.9
C. Rule 60(b)
SBK lastly argues that the district court erred in denying
its Rule 60(b) motion to set aside judgment and reopen discovery.
SBK claims that the grant of summary judgment was improvident
because it did not have "the benefit of discovery to fully develop
evidence." SBK further advanced that Sargsyan's plea agreement in
his 2020 criminal fraud case, involving major national and
international banks, would likely shed light on his actions with
Unibank. Before us, SBK asserts that discovery would help
determine whether Unibank acted in good faith regarding SBK's
alleged ownership of and rights to the aircraft. SBK's claim is
unavailing.
Rule 60(b) provides several grounds for relief from a final
judgment. Relevant to our analysis, it permits a final judgment
to be set aside based on "newly discovered evidence that, with
reasonable diligence, could not have been discovered in time to
9Because we hold that Unibank has a perfected security
interest in the aircraft and SBK does not, we find it unnecessary
to reach the issue of equitable subrogation.
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move for a new trial under Rule 59(b)." Fed. R. Civ. P. 60(b)(2).
It also allows a final judgement to be set aside based upon an
opposing party's "fraud (whether previously called intrinsic or
extrinsic), misrepresentation, or misconduct." Fed. R. Civ. P.
60(b)(3). Relief under Rule 60(b) "is extraordinary in nature"
and, thus, "motions invoking that rule should be granted
sparingly." Karak v. Bursaw Oil Corp., 288 F.3d 15, 19 (1st Cir.
2002). We review the denial of a motion brought under Rule 60(b)
for abuse of discretion. Cintron-Lorenzo v. Departamento de
Asuntos del Consumidor, 312 F.3d 522, 527 (1st Cir. 2002). As
such, when considering Rule 60(b) motions, we give deference to
the district court's "first-hand knowledge" of the facts of the
case. Id. (quoting Karak, 288 F.3d at 19).
We note, as did the district court, that "neither the
Information nor the Plea Agreement name Unibank, SBK, the FAA, the
aircraft, or the promissory note and aircraft security agreement
at issue in this case." We further note that Sargsyan's conviction
is entirely unrelated to the present case.
Moreover, SBK has failed to demonstrate that the fraud or
misrepresentation prevented it from a "full and fair preparation
of [its] case." Karak, 288 F.3d at 21 (quoting Anderson v.
Cryovac, Inc., 862 F.2d 910, 923 (1st Cir. 1988)); see also Fed.
R. Civ. P. 60(b)(3). Such misconduct must occur "during the
course" of the litigation, which is not the case here. Roger
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Edwards, LLC v. Fiddes & Son Ltd., 427 F.3d 129, 134 (1st Cir.
2005). Accordingly, we discern no abuse of discretion by the
district court in denying the Rule 60(b) motion.
IV. Conclusion
We need go no further. After reviewing the record in the
light most favorable to SBK, the district court's order granting
summary judgment and subsequently denying SBK's Rule 60(b) motion
is
AFFIRMED
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