Press v. AGC Aviation LLCÂ

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA17-9
Filed: 5 June 2018
Guilford County, No. 14 CVS 10097
CLIFFORD PRESS, as authorized representative of the fractional owners of that
certain aircraft bearing tail number N132SL; AIRCRAFT VENTURES, LLC;
ROBERT BURT; LYNN C. BURT; CORPORATE HEALTH PLANS OF AMERICA,
INC.; GREENSPRING ASSOCIATES, LLC III; HEELBUSTER, LLC;
INTERNATIONAL REAL ESTATE HOLDING COMPANY, LLC; M&T
ENTERPRISE GROUP, LLC; MESQUITE AIR COMPANY, LLC; SAMOLOT, LLC;
SUN FINANCIAL, LLC; TRIO TRAVEL, LLC; TUDOR COURT FARM, LLC; and
WALSH WILLETT AVIATION, LLC, Plaintiffs,
v.
AGC AVIATION, LLC; ALTERNATIVE VENTURES, LLC; BEECHWOOD
ASSOCIATES, LP; CATHERINE T. CALLENDER; DOUGLAS AND MAUREEN
COHN; DMGAAIR LLC; FINS & FEATHERS, LLC; FRANKLIN RESEARCH
GROUP, INC.; DAVID HAYES, JV PLANE PARTNERS LLC; MRS AIR LLC;
N724DB LLC; NICK’S PLANE LLC; VERNON AND SHERIAN PLASKETT, as
Trustees of THE PLASKETT FAMILY TRUST; DAVID SCHULMAN; MICHAEL C.
SLOCUM; TRAVIS PARTNERS, LLC; TRIAD FINANCIAL SERVICES, INC.; and
GREG WENDT, Defendants.
Appeal by defendants from order entered 21 September 2016 by Judge Richard
S. Gottlieb in Superior Court, Guilford County. Heard in the Court of Appeals 8
August 2017.
McGuireWoods LLP, by Brian Kahn, Terrence M. McKelvey, Robert A.
Muckenfuss, and Joshua D. Whitlock, for plaintiffs-appellees.
Aero Law Center, by Jonathan A. Ewing, pro hac vice, and Smith, James,
Rowlett & Cohen, by Seth R. Cohen, for defendants-appellants.
STROUD, Judge.
PRESS V. AGC AVIATION, LLC
Opinion of the Court
This case started when the music stopped, in an aviatic version of the game of
musical chairs -- or musical engines -- Avantair was playing with its airplanes. The
music stopped when Avantair was forced into bankruptcy, and at that moment,
defendants’ airplane had no engines, while plaintiffs’ airplane had two engines that
were originally on defendants’ airplane. Plaintiffs filed this declaratory judgment
action to resolve the parties’ dispute over who gets to keep the engines. Because the
controlling contracts allowed Avantair to play musical chairs, plaintiffs get to keep
the engines, so we affirm the trial court’s order granting summary judgment in
plaintiffs’ favor and denying defendants’ request for summary judgment.
Background
Plaintiff Clifford Press is an authorized representative for the 14 other
plaintiffs; the 15 plaintiffs are the fractional owners of a certain Piaggio Avanti P-180
aircraft (“Plaintiffs’ Airplane”).1 The plaintiffs acquired their interests in Plaintiffs’
Airplane by purchasing a fractional interest from Avantair, Inc. (“Avantair”), as part
of its “Fractional Aircraft Ownership Program” (“the Program”). The plaintiffs were
all parties to an “Amended and Restated Interest Ownership Agreement” dated 14
January 2014 (“the Agreement”), although the individual plaintiffs each purchased
their fractional interests in Plaintiffs’ Airplane on different dates. Under the
1 This aircraft was specifically identified in the Ownership Agreement and Aircraft Purchase
Agreements as “a Piaggio Avanti P-180, bearing tail number N132SL, together with engines,
components, accessories, parts, equipment and documentation installed thereon or attached thereto
or otherwise pertaining thereto.” For ease of reading, we will simply call it “Plaintiffs’ Airplane.”
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Opinion of the Court
Program, each plaintiff was the owner of an undivided interest in Plaintiffs’ Airplane,
and the plaintiffs were registered with the Federal Aviation Administration (“FAA”)
as the owners.
Defendants are the fractional owners of another airplane, a Piaggo P-180
aircraft bearing the tail number N106SL (“Defendants’ Airplane”). Defendants each
purchased fractional interests in Defendants’ Airplane from Avantair, in the same
manner and under the same terms as plaintiffs did for Plaintiffs’ Airplane.
Plaintiffs and defendants participated in the Avantair Program. The parties
all signed identical Management & Dry Lease Exchange Agreements (“Lease
Agreement”) with Avantair. Under the Lease Agreements, Avantair was engaged as
the “Manager” of the Program. Avantair leased both Plaintiffs’ and Defendants’
Airplanes (as well as other airplanes owned by other owners) from their respective
owners and was obligated to “provide or procure certain administrative and aviation
support services with respect to each Program Aircraft, including, without limitation,
scheduling, maintenance, insurance, record keeping, flight crew training and
scheduling, and fuel for or with respect to any Program Aircraft.”
In In re Avantair, Inc., 638 F. App’x 970, 2016 U.S. App. LEXIS 1758 (11th Cir.
2016) (unpublished) (per curiam), the Eleventh Circuit explained what happened
next:
When Avantair began experiencing financial troubles, the
quality of its maintenance operations took a nose dive. To
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Opinion of the Court
keep as many planes as possible flying, Avantair
cannibalized parts from other planes in the fleet, effectively
grounding the donor planes. In addition, Avantair failed to
keep adequate safety records of the part transfers. When
the Federal Aviation Administration caught wind of
Avantair’s activities, it grounded Avantair’s fleet, forcing
the company to cease operations and eventually enter
bankruptcy.
Id. at 971, 2016 U.S. App. LEXIS 1758 at *3.
On 25 July 2013, creditors forced Avantair into involuntary Chapter 7
bankruptcy, which was still pending in the United States Bankruptcy Court for the
Middle District of Florida, Tampa Division when this declaratory judgment action
was filed.2 During the bankruptcy proceedings, the parties learned that Avantair
had removed the engines originally installed on Defendants’ Airplane and installed
those engines on Plaintiffs’ Airplane, leaving Defendants’ Airplane with no engines
as of the bankruptcy.3 A dispute developed between plaintiffs and defendants
regarding the ownership of the engines. Defendants claimed that they never
consented to the removal of the engines from Defendants’ Airplane and that plaintiffs
had no ownership interest in the engines, so plaintiffs should return the engines to
defendants.
2 On 3 November 2014, the bankruptcy court granted plaintiffs relief from automatic stay and
allowed them to proceed with this action.
3 Defendants’ Airplane’s original engines had been removed in 2007 to be overhauled, so those
specific engines were not installed on Defendants’ Airplane as of the dates on which some of the
defendants purchased their fractional interests.
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Opinion of the Court
The specific engines installed as original equipment as of 2003 on Defendants’
Airplane bore serial numbers PCE-RK0088 on Engine A and PCE-RK0087 on Engine
B4. In addition, maintenance records for Defendants’ Airplane showed both Engines
A and B were removed in 2007 to be overhauled because they had used up almost all
of the flying hours allowed by FAA regulations. In November 2007, the refurbished
Engine A was installed on one Program airplane and refurbished Engine B was
installed on another; the engines were not on either Plaintiffs’ Airplane or
Defendants’ Airplane. The engines were again removed and refurbished in 2011, and
both Engines A and B were installed on Plaintiffs’ Airplane in February 2012.
On 4 November 2014, plaintiffs filed a complaint seeking a “declaratory
judgment pursuant to N.C. Gen. Stat. § 1-253, et seq., . . . granting them possession
of, control over, and marketable title to [Plaintiffs’ Airplane][.]” In the alternative,
plaintiffs sought “a declaration, pursuant to the Court’s equitable power to quiet title
to personal property, granting them possession of, control over, and marketable title
to [Plaintiffs’ Airplane].” Defendants filed an amended counterclaim on 20 May 2016
for conversion, trespass to chattel, and unjust enrichment, to which plaintiffs filed an
answer on 31 May 2016.
On or about 24 June 2016, plaintiffs moved for summary judgment, arguing
the court should enter a declaratory judgment that plaintiffs “are entitled to
4 We will refer to the engines as Engine A and Engine B for ease of reading.
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possession and control of, and marketable title to [Plaintiffs’ Airplane], including all
engines presently affixed to the aircraft[,]” and should dismiss defendants’
counterclaims. Plaintiffs asserted there was no genuine issue of material fact and
that they are entitled to judgment as a matter of law both on their affirmative claim
and on defendants’ counterclaims.
Defendants also moved for summary judgment on 24 June 2016 with an
incorporated memorandum. Defendants also alleged there were no genuine issues of
material fact and requested that the court deny the relief sought by plaintiffs and
enter summary judgment for defendants on their claims for conversion, trespass to
chattel, and unjust enrichment, and that the court require plaintiffs to return the
engines to defendants. Defendants argued that they were the owners of Engines A
and B and that they had not transferred ownership rights to plaintiffs. A series of
responses and replies ensued.
The trial court held a hearing on 2 September 2016 on the parties’ cross-
motions for summary judgment. Following the hearing, the trial court entered its
Order on Cross-Motions for Summary Judgment on 21 September 2016. In the order,
the court concluded:
1. The parties agree, and there is no issue of fact,
that the operative documents between parties and
Avantair, Inc. are identical in substance.
2. The language and terms of the Management
& Dry Lease Exchange Agreement and the Aircraft
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Opinion of the Court
Interest Purchase Agreement (collectively, the
“Agreements”) is plain and unambiguous. The effect to be
given unambiguous language in a contract is a question of
law for the Court. . . .
3. Based on the plain and unambiguous
language of the Agreements, Plaintiff is entitled to
Summary Judgment on its claim for declaratory judgment
and Plaintiff is entitled to summary judgment as against
Defendants’ counter-claims.
4. Having concluded that the language of the
Agreements is unambiguous, the Court need not consider
extrinsic evidence of the parties’ intent offered by each
party; however, even if the Court were to conclude the
Agreements were ambiguous and therefore consider
competent extrinsic evidence of the parties’ intent beyond
the language of the Agreements, the Court concludes that
the undisputed facts from such extrinsic evidence before
the Court establishes that there is no genuine issue of
material fact, and Plaintiffs would be entitled to Summary
Judgment as a matter of law as to its claim for declaratory
judgment and as against Defendants’ counter-claims.
(Citations omitted).
The trial court granted plaintiffs’ motion for summary judgment, denied
defendants’ motion for summary judgment, dismissed defendants’ counterclaims with
prejudice, and concluded that defendants “have no claim to the engines currently
attached to [Plaintiffs’ Airplane] and Plaintiffs are entitled to possession and control
of, and marketable title to, [Plaintiffs’ Airplane], including all engines presently
affixed to the aircraft.” Defendants timely appealed to this Court.
Discussion
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Opinion of the Court
On appeal, defendants contend that the trial court erred in granting plaintiffs’
motion for summary judgment and denying defendants’ summary judgment motion.
For the reasons that follow, we disagree.
I. Standard of Review
Defendants have appealed from the trial court’s order granting summary
judgment for plaintiffs, so we review the trial court’s determination de novo:
The standard of review for an order of summary
judgment is firmly established in this state. We review a
trial court’s order granting or denying summary judgment
de novo. Summary judgment is appropriate if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and
that any party is entitled to a judgment as a matter of law.
All facts asserted by the adverse party are taken as true,
and their inferences must be viewed in the light most
favorable to that party.
Variety Wholesalers, Inc. v. Salem Logistics Traffic Servs., LLC, 365 N.C. 520, 523,
723 S.E.2d 744, 747 (2012) (citations and quotation marks omitted).
The issues here arise from interpretation of the Lease Agreements and
Purchase Agreements. The parties agreed that Florida law would govern
interpretation of the Program documents. All of the documents designate Florida law
as the governing law for interpretation of the documents. For example, the MDLA
includes this provision: “Governing Law and Venue. The Program Documents shall
be interpreted and governed by the laws of the State of Florida, without regard to its
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conflict of laws principles.” Even though the parties have not mentioned Florida law,
under N.C. Gen. Stat. § 8-4 (2017) we must take judicial notice of Florida law and use
Florida law to resolve any substantive issues:
[T]he contracts expressly provided that “this contract shall
be construed according to the laws of the Commonwealth
of Virginia.” We, therefore, hold that the substantive
issues in the present case are to be resolved under the law
of Virginia, of which we are required to take judicial notice
by G.S. 8-4. North Carolina law, however, governs the
procedural matters.
Tanglewood Land Co. v. Wood, 40 N.C. App. 133, 137, 252 S.E.2d 546, 550 (1979)
(citation omitted). See also Arnold v. Charles Enterprises, 264 N.C. 92, 96, 141 S.E.2d
14, 17 (1965) (“Throughout, neither party has made any reference to the law of New
York or that of Virginia, yet we are required to take judicial notice of foreign law.
G.S. § 8-4.”). Florida’s rules of contract interpretation are essentially the same as
North Carolina’s, but since the controlling Program Documents are entered under
and to be interpreted under Florida law, we will use Florida law.
Just as in North Carolina, under Florida law, we consider questions of contract
interpretation de novo. SCG Harbourwood, LLC v. Hanyan, 93 So. 3d 1197, 1200
(Fla. Dist. Ct. App. 2012) (“We may consider de novo whether contract terms are
unambiguous.”).
Contract interpretation begins with a review of the plain
language of the agreement because the contract language
is the best evidence of the parties’ intent at the time of the
execution of the contract. In construing the language of a
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contract, courts are to be mindful that “the goal is to arrive
at a reasonable interpretation of the text of the entire
agreement to accomplish its stated meaning and purpose.”
When the terms of a contract are ambiguous, parol
evidence is admissible to explain, clarify or elucidate the
ambiguous terms. However, a trial court should not admit
parol evidence until it first determines that the terms of a
contract are ambiguous. If parol evidence is properly
admitted and the parties submit contradictory evidence
regarding their intent, then the trial court’s factual
findings regarding the parties’ intent are reviewed for
competent, substantial evidence.
Taylor v. Taylor, 1 So. 3d 348, 350-51 (Fla. Dist. Ct. App. 2009) (citations and
quotation marks omitted).
It is never the role of a trial court to rewrite a
contract to make it more reasonable for one of the parties
or to relieve a party from what turns out to be a bad
bargain. A fundamental tenet of contract law is that
parties are free to contract, even when one side negotiates
a harsh bargain.
Barakat v. Broward Cnty. Hous. Auth., 771 So. 2d 1193, 1195 (Fla. Dis. Ct. App. 2000)
(citations omitted).
II. Language of the Subject Agreements: Plain and Unambiguous
Defendants first argue that the language in the Agreements was “not
unambiguous,” so the trial court erred in granting summary judgment because
extrinsic evidence must be used to show the intent of the parties and this presents a
jury question.
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Opinion of the Court
An interpretation of a contract which gives a reasonable,
lawful and effective meaning to all of the terms is preferred
to an interpretation which leaves a part unreasonable,
unlawful or of no effect. Furthermore, a contract’s
language is ambiguous only if it is susceptible to more than
one reasonable interpretation. A true ambiguity does not
exist in a contract merely because the contract can possibly
be interpreted in more than one manner. Indeed, fanciful,
inconsistent, and absurd interpretations of plain language
are always possible.
Nabbie v. Orlando Outlet Owner, LLC, 237 So. 3d 463, 466-67, 2018 Fla. App. LEXIS
2023, at *5-6 (Fla. Dis. Ct. App. 2018) (citations, quotation marks, and brackets
omitted).
Extrinsic evidence may be considered only if the contract terms are ambiguous.
Florida courts have consistently declined to allow the
introduction of extrinsic evidence to construe such an
ambiguity because to do so would allow a trial court to
rewrite a contract with respect to a matter the parties
clearly contemplated when they drew their agreement.
The end result would be to give a trial court free reign to
modify a contract by supplying information the contracting
parties did not choose to include.
Indeed, the Supreme Court put it more bluntly in
Hamilton Constr. Co. v. Bd. of Pub. Instruction of Dade
Cty., 65 So. 2d 729, 731 (Fla. 1953): The parties selected
the language of the contract. Finding it to be clear and
unambiguous, we have no right -- nor did the lower court -
- to give it a meaning other than that expressed in it. To
hold otherwise would be to do violence to the most
fundamental principle of contracts.
Clayton v. Poggendorf, __ So. 3d __, __, 2018 WL 992316, at *4-5 (Fla. Dist. Ct. App.
Feb. 21, 2018) (No. 4D17-488) (citation and quotation marks omitted).
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Opinion of the Court
Defendants argue that the Lease Agreements are not “plain and unambiguous”
because the Agreements “do not clearly and unambiguously state that ownership of
the subject engines is transferred upon affixation to another owners’ aircraft.” (All
caps in original). Defendants argue that
The plain reading of paragraph 7 allows the Manager (of
the now defunct Avantair) to “upgrade, alter, or modify” to
comply with FAA regulations, and provide for consistency
among the Program aircraft. “At the owner’s expense,” at
the very least, implies that the Manager would need to
purchase “new” parts to replace the ones that needed to be
replaced, or repair what needed to be repaired and the
owner would be responsible for the cost of doing so, which
would logically be . . . for the benefit of the owner. It does
not provide Avantair with an authorization to “cannibalize”
parts from one aircraft, and install them onto another
aircraft and then call it theirs.
We first note that defendants do not argue that the Lease Agreements are
ambiguous but instead that the Agreements are “not plain and unambiguous.” In
addition, “[a] true ambiguity does not exist in a contract merely because the contract
can possibly be interpreted in more than one manner. Indeed, fanciful, inconsistent,
and absurd interpretations of plain language are always possible.” Id. at 467, 2018
Fla. App. LEXIS 2023 at *6 (citation, quotation marks, and brackets omitted)
Defendant’s double negative argument -- “not unambiguous” -- could be read as an
argument that the Agreements are ambiguous, so we will address it on that basis.
But their argument is only that the Agreements do not “state” that engines can be
removed from one Program Aircraft and installed on another. That is not so much
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an ambiguity but a lack of specificity -- or omission of a term that could have been
included, but was not. Defendants focus on the phrase “at the Owner’s expense” and
interpret it to mean that new parts must always be purchased to replace old parts,
including engines. But we may “not read a single term or group of words in isolation.”
Am. K–9 Detection Servs., Inc. v. Cicero, 100 So. 3d 236, 238 (Fla. Dis. Ct. App. 2012).
Defendants’ interpretation of “at the Owner’s expense” is not convincing, particularly
since airplane maintenance involves much more than purchasing new parts. And
under the MDLA, Owners must pay for all maintenance, upgrades, alterations, or
modifications. Defendants’ argument also ignores the other provisions of the Lease
Agreement and the requirements of the FAA specifically referenced by the
Agreements. We must consider the Agreement as a whole.
The Ownership Agreements “set forth [the Owners] understanding and
agreement as to Interests and the ownership of the Aircraft.” The purpose of the
Ownership Agreements was to “set forth the agreement of the Owners regarding the
management of the Aircraft[.]” The parties were all part of the Avantair Program
and were subject to the same Lease Agreement. The Lease Agreement sets forth the
terms for use of the Program Aircraft and includes a section entitled “Covenants,
Representations and Warranties of Manager;” Avantair was the Manager. The Lease
Agreement includes several relevant provisions regarding maintenance of the
Program Aircraft:
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2. Maintenance. Manager shall (i) maintain the
airworthiness certification of the Aircraft in good standing,
(ii) arrange for the inspection, maintenance, repair and
overhaul of the Aircraft in accordance with maintenance
programs and standards established by the manufacturer
of the Aircraft and approved by the FAA, (iii) keep the
Aircraft in good operating condition, and (iv) maintain the
cosmetic appearance of the Aircraft in a similar condition,
except for ordinary wear and tear, as when delivered to the
Owner. Manager agrees to maintain the enrollment of the
specified engines in an FAA approved engine program.
....
7. Aircraft Modifications. Manager may, in its sole
discretion, at Owner’s expense, upgrade, alter or modify
the Aircraft to (i) comply with Manager’s interpretations of
FAR; (ii) be consistent with industry standards, (iii) comply
with, or otherwise permit the Aircraft to be operated under
FAR Part 135, (iv) maintain the marketability of the
Aircraft, or (v) provide for consistency in equipment,
accessories or parts with respect to the Aircraft and any
other program Aircraft.
....
9. Compliance of Program with FARs. Manager shall be
responsible for ensuring that the Program conforms to all
applicable requirements of the FAR.
Under these provisions, Avantair had to maintain all program aircraft in
accord with the Federal Aviation Regulations (FAR) and specifically, to operate the
aircraft in compliance with FAR Part 135. FAR Part 135 is 14 CFR Part 135, entitled
“OPERATING REQUIREMENTS: COMMUTER AND ON DEMAND OPERATIONS
AND RULES GOVERNING PERSONS ON BOARD SUCH AIRCRAFT.” Defendants
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do not dispute that the FAR require routine engine maintenance and after a certain
number of flying hours, engines must be entirely overhauled. Although the Program
documents do not have a definition of “maintenance,” they require compliance with
the FAR (“Manager shall be responsible for ensuring that the Program conforms to
all applicable requirements of the FAR.”). FAR Part 1 includes a definition of
“maintenance:” “Maintenance means inspection, overhaul, repair, preservation, and
the replacement of parts, but excludes preventive maintenance.”5 14 CFR 1.1 -
General definitions. Refurbishing an engine is “maintenance” under this definition.
On defendants’ argument that the Agreements require, or at least that the
parties actually intended, that specific engines must remain on Defendants’ Airplane,
we note that the Lease Agreements for each airplane specifically identified the
aircrafts only by the make, model, and tail number. The Ownership Agreements
identified each aircraft by make, model, and tail number “together with engines,
components, accessories, parts, equipment and documentation installed thereon or
attached thereto or otherwise pertaining thereto (collectively, “the Aircraft”).”
Neither the Lease Agreements nor Ownership Agreements mention any specific
serial numbers or other identifying information for any engine or other component of
Plaintiffs’ and Defendants’ Airplanes.
5 “Preventive maintenance means simple or minor preservation operations and the
replacement of small standard parts not involving complex assembly operations.” 14 CFR 1.1.
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Defendants presented affidavits, including one from the Chief Operation
Officer of Avantair which states his understanding of the Program Documents. They
argue that “the program documents did not allow for the transfer of ownership of any
aircraft component parts.” But because the Program Documents are unambiguous,
the trial court correctly did not consider extrinsic evidence of how various people
interpreted the documents.
Defendants additionally argue that Section VI, Paragraph 7 of the Lease
Agreement regarding “Modifications” was not clear or unambiguous and that it did
not include the right to swap engines, as done in the Avantair Program. Paragraph
7 allowed Avantair “in its sole discretion, [to] upgrade, alter or modify the Aircraft to
(i) comply with Manager’s interpretations of FAR; (ii) be consistent with industry
standards, (iii) comply with or otherwise permit the Aircraft to be operated under
FAR Part 135.” We must read this provision of the Lease Agreement in conjunction
with other provisions of the lease which required Avantair to “(i) maintain the
airworthiness certification of the Aircraft in good standing, (ii) arrange for the
inspection, maintenance, repair and overhaul of the Aircraft in accordance with
maintenance programs and standards established by the manufacturer of the
Aircraft and approved by the FAA.” Defendants do not dispute that the engines must
be removed from an airplane when they have depleted their allowed flying hours and
the engines must be overhauled. When engines are removed for maintenance,
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Avantair could either leave an airplane with no engines or install other engines on
the airplane so it could continue to be used. And the Lease Agreement contemplated
that the Program Airplanes would be properly maintained and available for use; that
was the purpose of the Program.
In addition, nothing in the Lease Agreement or the other Program documents
requires that a particular engine must stay on a particular aircraft. The engines
could have been identified by serial number in the Purchase Agreements or Lease
Agreements, but they were not. The dispute here arose only because at the moment
of the bankruptcy of Avantair, Defendants’ Airplane had no engines. Defendants
purchased their fractional interests at different times, between the years of 2004 and
2013, so different engines -- or even no engines -- were installed on Defendants’
Airplane when some defendants actually acquired their interests in that aircraft. If
the parts actually installed on Defendants’ Airplane at the moment of purchase were
required to stay the same, the defendants who acquired a fractional interest in
Defendants’ Airplane when it had no engines at all would, by this logic, not be entitled
to re-installation of Engines A and B; they would be entitled only to an airplane with
no engines.
Both parties cite In re Avantair, Inc., an unpublished decision of the Eleventh
Circuit Court of Appeals involving the same fractional-owner aircraft program, where
the Eleventh Circuit affirmed an order of the Bankruptcy Court that “concluded that
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the program documents unambiguously designed a fractional-ownership program,
with each shareholder necessarily owning a share of a specific plane.” In re Avantair,
Inc., 638 Fed. Appx. at 972, 2016 U.S. App. LEXIS 1758 at *5 (emphasis added). In
In re Avantair, Inc., the proposed plan required that each Program Aircraft be sold
and the proceeds distributed to each plane’s fractional owners. Id. at 971-72, 2016
U.S. App. LEXIS 1758 at *2-4. As in this case, some of the Program Aircraft were
operational and in good repair at the time of the bankruptcy, while others were
missing parts and of greatly reduced value. Id., 2016 U.S. App. LEXIS 1758 at *3-4.
Some of the Program Aircraft owners whose planes were missing parts at the time of
the bankruptcy contended that all of the Program Owners had an interest in all of
the Program Aircraft, so all of the planes should be sold and the total proceeds from
all of the planes be distributed to all of the Owners in accord with their fractional
interests. Id. This manner of distribution would increase the value distributed to
the Owners whose planes lacked parts at the time of bankruptcy. Id. at 972, 2016
U.S. App. LEXIS 1758 at *4. The bankruptcy court rejected this argument, finding
that the program documents executed by the participant-owners -- exactly the same
documents as in this case -- “authorized Avantair to swap parts between planes to
maximize the efficiency of the program.” Id., 2016 U.S. App. LEXIS 1758 at *5. The
Eleventh Circuit affirmed and found no error with the Bankruptcy Court’s conclusion
that “[t]o the extent that Avantair failed to replace parts or maintain the donor
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planes, . . . the owners of such planes have a claim against Avantair (or the estate)
for breaching its obligations to replace parts or maintain the donor planes but . . . the
authorized swapping of parts did not and could not commingle the participants’
ownership interests.” Id.
An unpublished opinion from the Eleventh Circuit has no precedential effect
even in the Eleventh Circuit, nor is it binding authority over this Court. See Eleventh
Circuit Rule 36-2, Unpublished Opinions (“Unpublished opinions are not considered
binding precedent, but they may be cited as persuasive authority.”); Enoch v. Inman,
164 N.C. App. 415, 420, 596 S.E.2d 361, 365 (2004)) (“[T]he North Carolina Supreme
Court has . . . held that North Carolina appellate courts are not bound, as to matters
of federal law, by decisions of federal courts other than the United States Supreme
Court.”). But In re Avantair, Inc. is helpful to our analysis. Defendants contend that
it differs from the this case because it involved the limited issue of how to distribute
aircraft sale proceeds through bankruptcy, rather than the ownership of aircraft
parts. Although the ultimate issue was not identical, as defendants claim in their
brief on appeal, the Eleventh Circuit ultimately concluded that the subject program
documents “unambiguously designed a fractional-ownership program, with each
shareholder necessarily owning a share of a specific plane.” In re Avantair, Inc., 638
Fed. Appx. at 972, 2016 U.S. App. LEXIS 1758, at *5. And defendants further concede
“the Bankruptcy Court found that, under certain circumstances, the program
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documents authorized Avantair to swap parts between planes to maximize the
efficiency of the program[.]” The Eleventh Circuit’s analysis of the Program
documents is in accord with ours. The trial court correctly determined that the Lease
Agreement is plain and unambiguous and that based on the Agreement, plaintiffs are
“entitled to Summary Judgment on [their] claim for declaratory judgment[.]”
Defendants next contend that the trial court should not have granted plaintiffs’
summary judgment motion and denied defendants’ motion, and argue that the court
“also erred in determining that even if the language of the contract was ambiguous,
the extrinsic evidence established there was no genuine issue of fact, and that
Plaintiffs were entitled to judgment as a matter of law.” As we have concluded that
the trial court correctly determined that the contract was plain and unambiguous, we
need not address this argument.
We hold that the trial court properly granted summary judgment for Plaintiffs
based on the plain and unambiguous terms of the Program Documents.
III. Counterclaims
Defendants argue that the trial court erred in dismissing their counterclaims
for conversion, trespass to chattels, and unjust enrichment. Although all these claims
have slightly different elements, all require some form of unlawful or unauthorized
taking of Engines A and B. Defendants argue that
Avantair removed the original [Defendants’ Airplane]
engines without authorization, and affixed them to
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[plaintiffs’] aircraft as the company began to become
insolvent, presumably in order to save costs. The transfer
of possession was not subject to a sale or any form of
consideration through Avantair’s program documents.
Those engines are the original component parts to the
[Defendants’ Airplane] aircraft belonging to [defendants].
Defendants also argue that “[a]s is the case with tires on an automobile, the
original [Defendants’ Airplane] engines did not become part of [Plaintiffs’ Airplane]
by virtue of their affixation thereto. In fact, aircraft engines can be quickly removed
and swapped, in order to avoid delay and prolonged grounding. They too are easily
identifiable and serialized, and can be removed without damaging the donee aircraft.”
Their argument focuses on “ownership” of the engines as opposed to the ownership of
the plane as a whole and contends that plaintiffs have done something wrongful or
unjust by keeping the engines that had been on Defendants’ Airplane.
According to defendants’ argument, defendants own every part of Defendants’
Airplane as it existed when it was originally acquired from the manufacturer by
Avantair -- engines, tires, seats, cup holders, and everything else -- and each and
every part that was on that plane must be returned to them because they own it. As
the Eleventh Circuit noted in Avantair, defendants “invite[ ] us to resolve this
variation on the Paradox of Theseus’s Ship by answering a resounding ‘yes’ to [the
question ‘is your airplane now my airplane after my airplane’s parts have been
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installed on yours?’]”6 In re Avantair, Inc., 638 F. App’x at 971, 2016 U.S. App. LEXIS
1758 at *2. The Eleventh Circuit “decline[d the] invitation to drift into this
philosophical turbulence,” and so do we. Id. Whatever the answer to the Paradox of
Theseus’s Ship, the Program documents controlled the maintenance of the Program
Airplanes, so defendants have not shown that plaintiffs did anything unlawful,
unauthorized, in bad faith, or inequitable by having the engines that had been on
Defendants’ Airplane at the moment Avantair was forced into bankruptcy. Avantair
was performing its job as Manager -- perhaps poorly, since it led to bankruptcy -- in
compliance with the Program Documents by removing the engines from Defendants’
Airplane for maintenance and by later installing them on Plaintiffs’ Airplane. When
bankruptcy was filed, the music stopped in Avantair’s game of musical chairs -- or
musical engines -- and defendants ended up without a chair. Defendants have not
shown that plaintiffs acted in any way not authorized by the program documents, so
their counterclaims for conversion, trespass to chattels, and unjust enrichment must
fail. The trial court did not err by denying defendants’ motion for summary judgment
and dismissing their counterclaims.
6 The Paradox of Theseus’s Ship was first described by Greek historian Plutarch: “The ship
wherein Theseus and the youth of Athens returned from Crete had 30 oars, and was preserved by the
Athenians down even to the time of Demetrius Phalereus, for they took away the old planks as they
decayed, putting in new and stronger timber in their places, in so much that this ship became a
standing example among the philosophers, for the logical question of things that grow; one side holding
that the ship remained the same, and the other contending that it was not the same.” Plutarch,
Theseus, as translated by John Dryden.
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Conclusion
We affirm the trial court’s order granting summary judgment for plaintiffs and
denying defendants’ request for summary judgment.
AFFIRMED.
Judges BRYANT and CALABRIA concur.
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