Avionics News June 2013 - 83

important when a series of liens are
being satisfied through the value of
the aircraft, for example, through
a sale of the aircraft at a public
auction. If the total of the liens is
greater than the value of the aircraft,
then holders of superior liens may
get paid when holders of junior liens
do not. Of course, the sale generates
proceeds in excess of the liens and
encumbrances against the aircraft,
and then the excess usually goes to
the aircraft owner.
For example, let us assume an
aircraft has three liens against it
from three different repair stations
for $8,000 each (and no other
encumbrances). Let us also assume
the aircraft is seized through judicial
process and sold at public auction.
Assume the aircraft sells at auction
for a net value of $15,000 (after all
expenses, such as the auctioneer’s
fees, are paid off). In such a case,
the holder of the first lien would be
paid his full value of $8,000, and
the holder of the second lien would
get the remaining $7,000 against
his $8,000 lien. The second lien
holder would continue to be owed
an unsecured debt of $1,000 by the
original debtor. The third lien holder
would get nothing from the sale of
the aircraft, and in most cases, his
lien would be extinguished, although
he would still continue to be owed
an unsecured debt of $8,000 by the
original debtor.
This is another area where
state law can be important to the
interpretation, as variations in
state law can affect the priority of
liens relative to each other. For an
example, let’s turn, once again, to
Florida law.
Florida law specifies that liens
are valid from their date of filing
in the FAA registry and not from

their date of execution. Assume
lien instrument “A” is executed
on Monday, and a subsequent lien
instrument “B” is executed against
the same aircraft on Tuesday. If
the “B” lien is filed with the FAA
registry before the “A” lien is
filed, then the “B” lien will take

precedence over the “A” lien under
Florida law, because the “A” lien
was not valid until it was filed in the
FAA registry.
One lesson to be learned from
Florida law is to always file lien
documents (when filing necessary)
as soon as possible. q

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avionics news

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june

2013

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Avionics News June 2013

Table of Contents for the Digital Edition of Avionics News June 2013