Embraer Aircraft Maint. Servs., Inc. v. Aerocentury Corp.
| Decision Date | 27 November 2017 |
| Docket Number | No. M2016-00649-SC-R23-CV,M2016-00649-SC-R23-CV |
| Citation | 538 S.W.3d 404 |
| Parties | EMBRAER AIRCRAFT MAINTENANCE SERVICES, INC. v. AEROCENTURY CORP. |
| Court | Tennessee Supreme Court |
Derek W. Edwards, Nashville, Tennessee, for the petitioner, Embraer Aircraft Maintenance Services, Inc.
Samuel P. Funk and David Gilbert Schuette, Nashville, Tennessee, for the respondent, AeroCentury Corp.
Holly Kirby, J., delivered the opinion of the court, in which Jeffrey S. Bivins, C.J., Cornelia A. Clark, Sharon G. Lee, and Roger A. Page, JJ., joined.
In this case, the petitioner had a repairman's lien on personal property and filed an action in federal district court to enforce the lien by original attachment of the lien-subject property. During the pendency of the federal court action, the lien-subject property was sold to a purchaser and was no longer available for attachment, so the lienholder sought to reach the proceeds from the sale of the lien-subject property. The federal court then sought certification under Tennessee Supreme Court Rule 23 of two questions: (1) May a repairman's lien arising under Tennessee Code Annotated section 66-19-101 (2015) be enforced by a method other than attachment of the lien-subject property itself? and (2) In Tennessee, under what circumstances, if any, may a court attach the proceeds of the sale of lien-subject property, or otherwise reach them with a judgment, where the owner has rendered attachment of the lien-subject property impracticable or impossible after the initiation of a foreclosure proceeding? We answer the first question by interpretation of Tennessee Code Annotated section 66-21-101 (2015), which addresses enforcement of a statutory lien by original attachment where the lien statute does not specify a method to enforce the lien. The lienholder has no statutory lien on the proceeds from the sale of the lien-subject property, and section 66-21-101 addresses only enforcement of a statutory lien. Accordingly, section 66-21-101 is not a statutory vehicle for the lienholder to reach the proceeds from the sale of the lien-subject property. Section 66-21-101 neither provides for nor excludes other remedies that may be available to the lienholder to reach the proceeds from the sale of the lien-subject property. The second question certified by the federal district court in this case is not a defined question of unsettled Tennessee law, but it is more in the nature of an open-ended inquiry regarding other remedies that might enable the lienholder to reach the proceeds from the sale of the lien-subject property. Such an open-ended inquiry is not suitable for certification under Tennessee Supreme Court Rule 23, and there is ample Tennessee case law available to the parties on other possible remedies, so we respectfully decline to address the merits of the second certified question.
The certified questions in this case come from the United States District Court for the Middle District of Tennessee ("District Court") pursuant to Rule 23 of the Rules of the Supreme Court of the State of Tennessee.1 Because this is a certified question from a federal district court, we have no record.2 Consequently, our recitation of the facts and the procedural background is taken from the District Court's order certifying the questions to our Court. See Allmand v. Pavletic , 292 S.W.3d 618, 621 (Tenn. 2009). We assume the facts as recited in the District Court order to be true. Yardley v. Hosp. Housekeeping Sys. , 470 S.W.3d 800, 802 n.2 (Tenn. 2015).
When the events giving rise to this case began, Respondent AeroCentury Corp. ("AeroCentury"),3 a California corporation, owned the property that is the subject of this case, a SAAB-SANIA Model SAAB 340B aircraft ("Aircraft"). AeroCentury had leased the Aircraft to a regional airline, Colgan Air, Inc. ("Colgan"). In late 2011, Colgan's lease on the Aircraft was close to expiring and Colgan was scheduled to return the Aircraft to AeroCentury upon expiration of the lease. The terms of the lease required Colgan to complete a lease return inspection and perform certain maintenance service and repair work on the Aircraft before returning possession of it to AeroCentury.
To fulfill these lease obligations, Colgan contracted with Petitioner Embraer Aircraft Maintenance Services, Inc. ("Embraer"), headquartered in Nashville, Tennessee, to perform the inspection, the maintenance, and any needed repairs. On October 29, 2011, Colgan delivered the Aircraft to Embraer's Nashville facility. Embraer inspected the Aircraft and identified the service and repairs that would be necessary to put the Aircraft in a condition that complied with the terms of the lease. Over the next three months Embraer worked with representatives of both Colgan and AeroCentury to develop and revise a "Bill of Work" detailing the service and repairs to be done on the Aircraft.4
In January, 2012, Embraer completed the service and repairs listed in the Bill of Work and released the Aircraft to Colgan. When Embraer completed its work on the Aircraft, a repairman's lien secured by the Aircraft ("Lien") automatically arose under Tennessee Code Annotated sections 66-19-101 and 66-19-102.
On January 25, 2012, Embraer issued an invoice to Colgan for the work completed, in the amount of $351,465.20. Colgan never paid the invoice. On April 1, 2012, Colgan filed a Chapter 11 bankruptcy petition. In re Pinnacle Airlines Corp. , 483 B.R. 381, 396 (Bankr. S.D.N.Y. 2012). Soon afterward, Embraer perfected its Lien by filing a notice with the Register of Deeds for Davidson County, Tennessee on April 9, 2012, and also filing a separate notice with the Federal Aviation Administration on April 10, 2012. Embraer notified Colgan and AeroCentury of the Lien. See Tenn. Code Ann. § 66-19-301 (2015) ().
On January 25, 2013, Embraer initiated an action in the District Court to foreclose on the Aircraft.5 Embraer asked the District Court to direct the sale of the Aircraft, order AeroCentury to surrender possession of the Aircraft and its title to the new owner, and then apply the proceeds of the sale to the debt owed by Colgan to Embraer.
Despite the pending foreclosure proceedings, in July 2013, AeroCentury leased the Aircraft to Private Corporation International Joint Stock Aviation Company URGA ("URGA"), an aviation company located in Ukraine. Pursuant to the new lease, the Aircraft was exported from the United States to Ukraine and removed from registration in the United States.
AeroCentury also gave URGA an option to purchase the Aircraft. On March 25, 2014, URGA exercised its option and purchased the Aircraft from AeroCentury. The Purchase Agreement with URGA stated that AeroCentury conveyed title to the Aircraft "free and clear" of encumbrances, except for the Lien, which would purportedly be "removed by [AeroCentury] post-Closing." AeroCentury did not notify Embraer of the lease to URGA or URGA's purchase of the Aircraft.
On November 24, 2015, Embraer filed a motion in the District Court seeking summary judgment against AeroCentury, asking the District Court to grant the relief it had requested. On January 5, 2016, AeroCentury filed a response in opposition to Embraer's summary judgment motion. The response claimed that "any foreclosure order from the Court, related to AeroCentury, is of no value to Embraer," because AeroCentury had sold the Aircraft and thus could not deliver it to the District Court for sale.
AeroCentury's response to Embraer's summary judgment motion was its first notice to the District Court and to Embraer that AeroCentury had sold the Aircraft. In light of this turn of events, Embraer asked the District Court to order AeroCentury to deliver the proceeds of the sale of the Aircraft to the District Court, so that the proceeds could be applied to satisfy the debt to Embraer for the work it performed on the Aircraft. At that juncture in the proceedings, the District Court entered its certification order, asking this Court to address the issues listed in its order.
The District Court's certification order is premised on enforcement of the Petitioner's section 66-19-101 Lien under the "catch-all" enforcement provision contained in Tennessee Code Annotated section 66-21-101 (2015). Section 66-21-101 provides that statutory liens for which no specific method of enforcement is prescribed by statute "may be enforced by original attachment issued by any court having jurisdiction ... to be levied on the property upon which the lien exists, be it either in the hands of the creditor, owner, or other party not an innocent purchaser." Tenn. Code Ann. § 66-21-101. Noting that section 66-21-101 uses the permissive word "may" in connection with enforcement of a lien by original attachment, the District Court questioned whether Tennessee courts "recognize methods other than attachment of the lien-subject property for the enforcement of a lien that arises under Tennessee law." Neither the District Court nor the parties identified any Tennessee cases that used the section 66-21-101catch-all enforcement provision to enforce a lien in a manner other than by attachment of the lien-subject property. The District Court concluded from this that the issue was "unsettled" under Tennessee law and also concluded that it was dispositive of Embraer's motion for summary judgment. Based on these conclusions, the District Court certified the two questions stated above and asked our Court to accept certification to address them. We accepted certification and heard oral argument on the certified questions.
Tennessee Supreme Court Rule 23 provides that this Court "may, at its discretion, answer questions of law...
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