Tennessee Supreme Court Answers Question from Federal Court on Collection of Airplane Repair Bill

November 28, 2017

The Tennessee Supreme Court addressed a certified question from a federal district court on an aircraft maintenance company’s effort to collect its bill for work done on a commercial airplane.

AeroCentury Corporation owned a commercial airplane, which it leased to a regional airline, Colgan Air, Inc. Near the end of the lease, Colgan took the airplane to a Nashville-based company, Embraer Aircraft Maintenance Services, Inc., for inspection, maintenance, and repairs. Embraer completed the work, and its bill was approximately $350,000. Under Tennessee law, Embraer acquired a legal claim called a “repairman’s lien” on the airplane. The lien meant that, if Embraer’s bill was not paid, Embraer had the right to take possession of the airplane and sell it to collect its bill.

Colgan never paid Embraer. Less than three months after Embraer’s work was complete, Colgan filed for bankruptcy. Colgan’s bankruptcy filing meant that Colgan was unable to pay Embraer for the work done on the airplane.

With no practical way to get payment from its debtor Colgan, Embraer filed a lawsuit against AeroCentury in Tennessee federal district court. The lawsuit asked the federal court to enforce Embraer’s repairman’s lien against the airplane, in other words, to order the airplane sold in order to pay Embraer’s bill.

After the federal lawsuit was filed, unbeknownst to Embraer, AeroCentury sold the airplane to a company located in the Ukraine. This put the airplane out of Embraer’s reach; Embraer could not get possession of the airplane in order to sell it to pay off the debt. Frustrated, Embraer asked the federal court to order AeroCentury to pay the proceeds from its sale of the airplane into court so they could be applied to Embraer’s bill.

After receiving Embraer’s request, the federal district court was unclear on a point of Tennessee law. Under Tennessee Supreme Court Rule 23, the federal district court sent the Tennessee Supreme Court a “certified” question, that is, it asked the Court to answer a question on Tennessee law without taking the entire case. This can be done when there are no Tennessee cases to guide the federal court in applying Tennessee law.

The federal district court asked whether a repairman’s lien under the statute can be enforced by a method other than allowing the creditor to take possession of the property and sell it to pay the debt. Specifically, it asked whether Embraer’s lien would follow the proceeds of AeroCentury’s sale of the airplane.

The Supreme Court looked at the plain language of the statute and held that it only allows creditors to enforce a repairman’s lien by sale of the lien-subject property—here, the airplane. The statute does not say how a creditor might reach the proceeds from the sale of lien-subject property. Consequently, the particular Tennessee statute the federal court asked about does not authorize Embraer to reach the proceeds of AeroCentury’s sale of the airplane.

The federal district court certified a second question about other remedies for a creditor when the owner has made it impractical to take possession of a lien-subject property. Under Rule 23, this certified question was not answered because there are adequate Tennessee cases to guide the parties and the federal court on the issue.    

To read the unanimous opinion in Embraer Aircraft Maintenance Services, Inc. v. AeroCentury Corporation, authored by Justice Holly Kirby, go to the opinions section of TNCourts.gov.