The opinion of the court was delivered by: WILLIAM B. BRYANT
Defendants counter that plaintiff's title was void, and not voidable; that section 203(d) of the FPASA does not apply to property that the General Services Administration (GSA) did not determine to be surplus property; and that the government may not be estopped from denying the unauthorized and illegal acts of its agents. Defendants have in turn moved for summary judgment.
This court finds that section 203(d) of the FPASA protects plaintiff's title to the planes, and it therefore grants plaintiff's motion for summary judgment.
The United States Forest Service contracts with several companies for airtanker support of forest fire fighting. To reduce future contract costs and replace grounded and obsolete planes in the contractors' fleets, the Forest Service initiated its Historic Aircraft Exchange Program, whereby it would exchange planes that it had received from the Department of Defense (DOD) one for one for historic planes held by airtanker contractors, who would then modify the planes for use as airtankers.
In 1988 and 1989, pursuant to this program, the Forest Service exchanged several C-130 and P-3A airplanes for historic airtankers with five airtanker contractors. The Forest Service transferred six of these planes to contractor TBM, Inc., and executed bills of sale documenting the transfer of title, which were recorded in the Federal Aviation Administration (FAA) Registry. On June 21, 1989, and January 7, 1991, TBM transferred two of the C-130s to Roy Reagan as payment for his having acted as broker of the aircraft exchanges. Mr. Reagan sold these planes to T&G, another airtanker contractor. Based on assurances that Mr. Reagan would pass clear title in the planes to T&G, on January 22, 1991, the plaintiff in this case, PHC, loaned T&G $ 2.4 million so that T&G could purchase the two C-130s and eight planes that PHC had repossessed from a previous borrower. All ten planes secured the loan, about $ 1.1 million of which was earmarked for purchase and modification of the two C-130s. On January 25, 1993, T&G turned the two C-130s over to PHC after it had defaulted on the loan. PHC then attempted to sell the aircraft.
Meanwhile, in December 1989, the USDA Office of General Counsel issued a letter in which it questioned the legality of the aircraft exchanges. The USDA did not make the letter public, nor did it attempt to recover the airplanes. The Forest Service did cease further exchanges, however. In October 1992, after PHC had acquired a security interest in the two C-130s, the USDA Office of Inspector General published an audit of the aircraft exchange program that concluded that the Forest Service had no authority to exchange the planes. No agency or department of the government made any effort to recover the planes. On February 28, 1993, after T&G had relinquished its rights in the two planes to PHC and PHC offered the planes on the market for sale, the Forest Service wrote PHC a letter in which it advised PHC that the United States claimed an interest in the planes and that PHC should do nothing to prejudice the government's interest. The letter stated that the Forest Service was not authorized to exchange the C-130s and that the United States was not bound by the unauthorized acts of its agents.
The Forest Service's transfers of the planes were unauthorized because they were not in compliance with GSA regulations regarding exchanges and disposal of government property. First, the C-130s are arguably not historic to the Forest Service, 41 C.F.R. § 101-46.001-4 (1988), and the regulations require that both items exchanged be historic, id. § 101-46.203(b). Second, the Forest Service acquired the planes as excess property from DOD in order to exchange them immediately, and the regulations require that an agency, first, use property obtained as excess from another agency for one year before exchanging it, id. § 101-46.202(c)(10), and, second, acquire property in order to use it and not in order to exchange it, id. § 101-46.202(b)(6). Finally, GSA never determined the planes to be surplus property pursuant to 41 C.F.R. § 101-43.311 (1988) and as required by 40 U.S.C. § 472(g) 1988).
Section 203(d) of the Federal Property and Administrative Services Act (FPASA) protects bona fide grantees and transferees for value who receive government property and can point to an instrument documenting the transfer:
A deed, bill of sale, lease, or other instrument executed by or on behalf of any executive agency purporting to transfer title or any other interest in surplus property under this subchapter shall be conclusive evidence of compliance with the provisions of this subchapter insofar as concerns title or other interest of any bona fide grantee or transferee for value and without notice of lack of such compliance.
40 U.S.C. § 484(d) (1988).
In accepting the planes as security for its loans to T&G, the plaintiff relied on various assurances, including from counsel, that Roy Reagan would vest title to the planes in T&G. Plaintiff argues that the bills of sale, which were executed on behalf of the USDA and the Forest Service, are conclusive evidence that the USDA and the Forest Service complied with all provisions of the FPASA and that, pursuant to 40 U.S.C. § 484(d), its title to the planes is protected. See United States v. Mailet, 294 F. Supp. 761, 765-66 (D. Mass. 1968) (holding that 40 U.S.C. § 484(d) protects second and third purchasers as bona fide transferees for value); East Tennessee Iron & Metal Co. v. United States, 218 F. Supp. 377, ...