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United States Fidelity & Guaranty Co. v. Michigan Bank
Citations: 27 Ariz. App. 478; 556 P.2d 326; 1976 Ariz. App. LEXIS 648Docket: No. 1 CA-CIV 2931
Court: Court of Appeals of Arizona; November 4, 1976; Arizona; State Appellate Court
The case revolves around the interpretation of "sales contracts or agreements" in A.R.S. 2-153, which mandates that aircraft dealers file a bond for the faithful performance of these contracts. An aircraft dealer is defined as any person involved in the sale or brokerage of new or used aircraft with an established place of business. The dispute arose when Michigan Bank sought to recover a bond issued by United States Fidelity and Guaranty Company (U.S.F.&G.) after DML Aviation, Inc., which defaulted on a loan for a used aircraft purchase, was named as the principal on the bond. Michigan Bank argued that the bond protected it from losses incurred due to DML's default. The trial court ruled in favor of Michigan Bank, granting its Motion for Summary Judgment, stating that DML did not perform its obligations, allowing the Bank to recover under the bond. U.S.F.&G. appealed, asserting that the bond does not extend to protect lenders financing aircraft purchases made by dealers. The court emphasized the importance of statutory interpretation, aiming to ascertain the legislature's intent while adhering to the statute's plain language. It concluded that the bond requirement specifically protects consumers engaged in sales transactions with aircraft dealers, not lenders. The court reasoned that lenders have sufficient means to protect themselves against losses and that interpreting the bond to cover lenders would unjustly require the surety to guarantee the dealer's financial solvency. Ultimately, the court determined that "sales contracts or agreements" refer exclusively to transactions between aircraft dealers and consumers involving sales or brokerage, excluding financing agreements. The trial court's decision was reversed, and Michigan Bank's claim against U.S.F.&G. was dismissed. Judges Eubank and Froeb concurred with the opinion.