This matter is before the Court on cross Motions for Summary Judgment. The plaintiff has filed a Response to the defendant's Motion. The issue here is the dischargeability of the defendant's debt to the plaintiff in the amount of $2,500.00. This Court has jurisdiction of this matter pursuant to 28 U.S.C. '1334(b); it is a core proceeding pursuant to 28 U.S.C. '157(b)(2)(I).

This matter was initiated by the filing of the plaintiff's Complaint on September 10, 1993. The plaintiff filed its Motion for Summary Judgment on November 30, 1993. It contends that the debt is non-dischargeable pursuant to 11 U.S.C. '523(a)(6) because the defendant sold collateral which secured the debt and did not pay the proceeds over to the plaintiff. The defendant filed his Motion for Summary Judgment on January 10, 1994. He contends that the debt must be discharged because the plaintiff cannot prove that it is a secured creditor. The plaintiff filed its Response on January 24, 1994.

The pertinent federal statute, 49 App. U.S.C.A. '1403, is concerned with the recordation of aircraft ownership, and provides in pertinent part:

The validity of such instruments is governed by 49 App. U.S.C.A. '1406 which states in part,

The defendant interprets the language of '1403 to mean that a security interest in an aircraft can only be perfected as set out above. The defendant goes further, however, in arguing that perfection of the plaintiff's security interest is the sole factor which determines whether or not an objection to discharge pursuant to '523(a)(6) may be sustained.

In order for the plaintiff to prevail it must demonstrate that the defendant's disposal of its collateral before perfection of the security interest and before the filing of the bankruptcy petition is a "willfull and malicious injury" within the meaning of '523(a)(6). Several cases support this proposition. The court in In re Ogden, 119 B.R. 277 (Bkrtcy.M.D.Fla. 1990), held that "[t]he law is well settled that the sale of collateral without the consent of the lienholder constitutes willful and malicious injury giving rise to an exception to discharge under '523(a)(6)". At page 279.

In In re Petsch, 82 B.R. 605 (Bkrtcy N.D. Fla. 1988), the court had earlier held that a security interest, even though unperfected, was "property" within the meaning of '523 (a)(6), and clarified that "the phrase `willful and malicious injury' covers a willful and malicious conversion". At 607. In re Cardillo, 39 B.R. 548, 550 (Bkrtcy D. Mass. 1984), held that

In In re Posta, 886 F.2d 364 (10th Cir. 1989), the court stated that the "malicious prong" of '523(a)(6) is satisfied by the debtor's "actual knowledge or the reasonable foreseeability that his conduct will result in injury to the creditor." Malicious intent may be shown "by evidence that the debtor had knowledge of the creditor's rights, and that, with that knowledge, proceeded to take action in violation of those rights." See also In re Imbody, 104 B.R. 830 (Bkrtcy N.D. Ohio 1989), wherein a debtor committed nondischargeable conversion by selling the bank's collateral and intentionally paying the IRS ahead of the bank to satisfy a personal tax obligation. The court opined that the element of maliciousness was satisfied by wrongful acts that lacked justification, even in the absence of personal hatred, spite, or ill-will.

In light of the above-stated principles, the defendant's argument concerning whether or not the plaintiff properly perfected its lien is irrelevant, as well. In addition, this Court is not convinced by the defendant's argument that all state law in this area is preempted by 49 App. U.S.C.A. '1403. One of the cases cited by the defendant in support of this proposition, In re Gelking, 754 F.2d 778 (8th Cir. 1985), ruled that the federal statute did preempt North Dakota law, but only because a state statute provided for such preemption.