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You are the manager of an FBO. A customer purchases a new airplane through your business. A bank finances that purchase, obtains a security interest in the aircraft through a written security agreement signed by the purchaser, and files that security agreement with the FAA Aircraft Registry and the International Registry. Later, the customer has your shop install upgraded avionics, including a full “glass cockpit” set of multifunction displays (MFD) integrating flight, navigation, engine, and sensor data.
a. Do you have the right to require the customer to pay the bill for the equipment and installation in full before you release the aircraft back to the customer? Explain.
b. If the aircraft owner went bankrupt at that point (when the work has been done, the bill has not been paid, and the FBO still has the aircraft), who will be paid first from the sale of the aircraft, the FBO or the bank? Why?
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c. In initial discussions over the price of the equipment and installation, the customer indicates that she wants to buy the unit and have your shop install it, but she would like to pay the price for the equipment and installation in three equal monthly payments, rather than all at once. This is acceptable to you. Is there anything you can require as a condition of releasing the aircraft back to its owner before the debt is paid in full to protect the FBO’s security interest in the aircraft for this installation? If so, describe.
d. After the transaction described in c, above, your shop installs the equipment in the aircraft and releases it to the owner. Before the bill is paid, the aircraft owner files bankruptcy. Now who is in the superior position to be paid first out of the proceeds of the sale of the aircraft: the FBO or the bank? Explain