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Philko Aviation, Inc. v. Shacket (1983)

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Philko Aviation, Inc. v. Shacket (1983)

Citation: 462 U.S. 406 (1983) · Court: Supreme Court of the United States · Argued: April 20, 1983 · Decided: June 15, 1983 · Opinion: White, J.; O’Connor, J., concurring in part and concurring in the judgment.

Case page. Legal information, not legal advice. Last verified: 2026-10-16.

Facts

On April 19, 1978, at an Illinois airport, a corporation operated by Roger Smith sold a new airplane to the Shackets, who paid in full and took possession. Smith gave them only photocopies of the bills of sale and said he would “take care of the paperwork.” The Shackets never recorded their title with the FAA. Smith then purported to sell the same airplane to Philko Aviation, which, with its financing bank, examined the original bills of sale and checked FAA records; Philko’s bank recorded the title documents with the FAA. The Shackets sued for a declaration of title. The district court and the Seventh Circuit (681 F.2d 506 (7th Cir. 1982)) ruled for the Shackets, holding that § 503(c) of the Federal Aviation Act did not pre-empt Illinois law, under which an oral sale is valid against third parties once the buyer takes possession. (Source: https://www.law.cornell.edu/supremecourt/text/462/406 , retrieved 2026-10-16.)

Holding

“State laws, such as the Illinois law, allowing undocumented or unrecorded transfers of interests in aircraft to affect innocent third parties are pre-empted by the federal Act.” (Syllabus.)

“[Section] 503(c) means that every aircraft transfer must be evidenced by an instrument, and every such instrument must be recorded, before the rights of innocent third parties can be affected.” (Opinion of the Court.)

The Seventh Circuit’s judgment was reversed and the case remanded.

Reasoning

  • Congressional purpose. The recording provision was meant to create “a central clearing house for 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” (quoting 1938 House committee testimony). A state rule validating an unrecorded, undocumented transfer against third parties would defeat that purpose.
  • Statutory definition of “conveyance” not applied mechanically. Read literally, the definition would invalidate only unrecorded instruments, not unrecorded transfers; the Court declined that reading because it “would render the recording system ineffective.”
  • Recording validates; it does not set priority. The Court said it was “inclined to agree” with Matter of Gary Aircraft Corp., 681 F.2d 365 (5th Cir. 1982), that priority is determined by state law, but added: “Although state law determines priorities, all interests must be federally recorded before they can obtain whatever priority to which they are entitled under state law.” It quoted commentary that “recordation itself merely validates; it does not grant priority.”
  • Open questions left for remand. Actual notice by Philko, or a failure by Philko to acquire its interest under state law for unrelated reasons, could still defeat Philko. The Court also noted there “may be situations in which the transferee has used reasonable diligence to file and cannot be faulted for the failure of the crucial documents to be of record.” Justice O’Connor declined to join any suggestion that a reasonably diligent effort to record earns the protection of a recorded interest.

The statute construed (Federal Aviation Act § 503(c), then 49 U.S.C. § 1403(c)) is now codified at 49 U.S.C. § 44108(a), which provides that until a recordable conveyance, lease, or security instrument “is filed for recording,” it “is valid only against” the person making it, that person’s heirs and devisees, and “a person having actual notice.” (Source: https://www.law.cornell.edu/uscode/text/49/44108 , retrieved 2026-10-16.) The correspondence between the 1983 provision and the current section is drawn from the text of both; a formal recodification note was not separately retrieved.

Practical impact

  • Buyer / operator at a forced sale. A purchaser’s protection runs through the FAA Aircraft Registry record. A sheriff’s, auctioneer’s or lienholder’s bill of sale that is never filed is valid against the parties and persons with actual notice, but not against an innocent third party who records. Prompt filing of the forced-sale evidence of ownership with the Registry is therefore part of closing, not an afterthought. See aircraft-title-liens-and-the-faa-registry and buying-an-aircraft-at-a-forced-sale.
  • Lienholders. A mechanic’s or storage lienor, judgment creditor or secured lender whose interest is not of record at the Registry risks subordination to a recorded purchaser or lender without actual notice. Some state aircraft-lien statutes build FAA filing into the lien (see aircraft-mechanics-liens-and-non-judicial-sales).
  • Priority remains a state-law question for interests outside the Cape Town Convention; for “aircraft objects” within the Convention, priority among international interests is governed by registration at the International Registry (see cape-town-convention-aircraft).
  • Owner / debtor. An owner whose purchase was never recorded can lose the aircraft to a later recorded buyer without notice.

Good-law status

No overruling decision was retrieved this session. A citator check was not run; needs_verification.

Applies in →

All U.S. jurisdictions (federal pre-emption) — e.g., texas, florida, california, arizona, washington. Related: aircraft, faa-aircraft-registry, good-faith-purchaser.

Sources

Disclaimer. This page is legal information, not legal advice. It summarizes a court decision that may have been limited, distinguished, or affected by later law, and its application is fact-specific. Nothing here creates an attorney-client relationship. Verify every statute and holding against the current primary source and consult a licensed attorney before acting.

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