Source: https://alanarmstronglaw.com/a-primer-on-aircraft-mechanics-liens/
Timestamp: 2020-07-07 16:01:15
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A Primer on Aircraft Mechanic's Liens - Alan Armstrong Law
Aircraft mechanic’s liens are the bane of aircraft repair facilities and lawyers. Unlike a lawsuit on account, a mechanic’s lien affords the repair facility or aircraft mechanic leverage. An unpaid lien asserted against an aircraft may prevent the aircraft owner from selling the aircraft until and unless he pays the mechanic’s lien. The proper assertion and prosecution of a mechanic’s lien presents a host of complexities both to the aircraft repair facility and to counsel. For purposes of this article we will review the legal requirements in Georgia for giving notice of a claim of lien and will consider to the procedures to follow to foreclose on a mechanic’s lien. These procedures are very detailed and require strict compliance with the mechanic’s lien statute.
The Process Of Filing And Serving A Notice Of A Claim Of Lien
A mechanic’s lien is not a lien until a court enters an order granting the mechanic or repair facility a lien against the aircraft. Before that takes place, the document is merely a notice of a claim of lien. In order to give a notice of a claim of lien in Georgia, the notice must be sworn to under oath, give a just and true account of the amounts claimed to be due, a description of the aircraft, and the name of the owner of the aircraft; and the notice must be served by personal delivery, certified mail, or statutory overnight delivery, return receipt requested to the address of the registered owner or others holding a recorded interest in the aircraft or aircraft engines; provided, however, if the owner is not a United States citizen, then the notice should be dispatched to the owner’s last known address or to the person to whom the repair or maintenance or contracts of indemnity were furnished.[1] It is important to note that the notice of mechanic’s lien must state the name of the owner in the body of the document and not merely on the caption of the notice. In Fidelity Storage Corporation v. Trussed Concrete Steel Co.,[2] the mechanic’s lien stated the name of the owner on the caption of the document, but it did not appear in the body of the document. The Court of Appeals for the District of Columbia found that the mechanic’s lien was invalid because there were three essential elements in complying with the applicable statute consisting of: (1) stating the amount due, (2) describing the property against which a lien was asserted, and (3) stating the name of the party against whose interest a lien was claimed. Because the mechanic’s lien did not state the name of the party against whom a lien was claimed, a lower court decision upholding the mechanic’s lien as valid was reversed.[3] In reversing the decision of the lower court upholding the mechanic’s lien, the Court of Appeals for the District of Columbia noted:
A mechanic’s lien has no existence outside the statute creating it. It was not recognized at common law, nor was it allowed in equity. It was founded upon the just and natural consideration that a party who has enhanced the value of property by contributing thereto labor and materials shall be entitled to a preferred claim on such property to the extent of his contribution. While the statute creating such a lien is to be reasonably construed so as to effectuate, if possible, the legislative intent, we are not at liberty to excuse those who would claim its protection from the performance of precedent conditions…[4]
Similarly, in Trench Shoring Services of Atlanta, Inc. v. Westchester Fire Insurance Company, Inc.,[5] a company that connected a public sewer system to a residential owner’s sewer system was not entitled to a mechanic’s lien, since all of the work was performed on a public right-of-way and not on the property of the landowner. In rendering this decision, the Georgia Court of Appeals noted that mechanic’s liens are creatures of statute in derogation of the common law and are therefore strictly construed in favor of the property owner and against the materialman.[6]
The law is clear that in the event a mechanic or repair facility does not comply with each and every element of the mechanic’s lien statute, the notice of claim of lien will be invalid giving rise to the suggestion that the mechanic improperly slandered the title of the aircraft owner. For this reason, it is desirable that the aircraft mechanic properly formulate the notice of claim of lien or retain counsel to do so. In addition to serving the notice of claim of lien on the aircraft owner or person to whom the repair facilities were provided, the mechanic must also record the notice of claim of lien with the Federal Aviation Administration Aircraft Registry.[7] In addition to the foregoing, the notice of claim of lien must be served and filed “within ninety days after such repair, storage, service, supplies, accessories, or contracts of indemnity are furnished.”[8] If the aircraft mechanic is not diligent and fails to timely serve and file his notice of claim of lien, his efforts will be in vain.
[1] O.C.G.A. §44-14-518(b)(1)(A), (B).
[2] 35 App. D.C. 1 (1910).
[3] 35 App. D.C. at 8.
[4] 35 App. D.C. at 7.
[5] 274 Ga.App. 850, 619 S.E. 2d 361 (2005).
[7] O.C.G.A. §44-14-518(b)(2).
[8] O.C.G.A. §44-14-518(b).
Foreclosing Upon A Notice Of Claim Of Lien
In the event the aircraft owner elects to ignore the notice of claim of lien, the aircraft mechanic must initiate an action to foreclose on the notice of claim of lien “within one year from the time the lien is recorded or asserted by retention.”[9] The foregoing language about retention is significant. The aircraft mechanic or repair facility may assert a claim of lien by retention. In other words, the repair facility may elect not to release the aircraft to the owner until the owner has paid for the repair work or maintenance.
In the event the aircraft owner refuses to pay for the repairs or maintenance on the aircraft, the aircraft mechanic may initiate an action in a court of competent jurisdiction to foreclose on the notice of lien and convert it into a mechanic’s lien by filing a verified statement under oath asserting a demand on the owner or agent or lessee of the property and a refusal to pay and an assertion in the verified pleading that the demand for payment was refused.[10] If the mechanic retained possession of the aircraft, then the owner has ten (10) days to demand that the mechanic initiate foreclosure proceedings; and if the mechanic fails to do so, the lien is forfeited.[11] If the mechanic relinquished possession of the aircraft, then the owner has 30 days to demand that the mechanic initiate foreclosure proceedings; and if the mechanic fails to do so, the lien is forfeited.[12] To be clear, foreclosure proceedings must be brought by the mechanic within one year from the time the lien is recorded or asserted by retention; and if possession of the aircraft is retained, the owner can force the mechanic to initiate foreclosure proceedings within ten days of the service of the notice if the mechanic is in possession of the aircraft and can force the mechanic to initiate foreclosure proceedings within thirty (30) days of receipt of the notice if the mechanic has relinquished control of the aircraft.[13] If the mechanic fails to comply with the owner’s demand that foreclosure proceedings be initiated, the mechanic’s lien is forfeited.[14]
Proceedings to foreclose on a notice of claim of lien are on a fast track. The mechanic’s verified statement under oath must be filed in a court of competent jurisdiction.[15] After the verified statement under oath is filed, the court must serve a notice on the owner, recorded lienholders and lessee of the property giving them notice to the right to a hearing to determine “if reasonable cause exists to believe that a valid debt exists.”[16] After the court serves the aircraft owner, the recorded lienholders and the lessee of the property with the notice, if they wish to contest the assertion of a lien, they must petition for a hearing “within five days after receipt of the notice.”[17] If the owner, lienholders or lessee of the aircraft does not petition for a hearing within five days after receipt of the notice, “…the lien will be conclusively deemed a valid one and foreclosure thereof allowed.”[18]
Assuming the aircraft owner or lienholders or lessee of the aircraft petitions within five days after receiving the notice and demands a hearing, “The court shall set the hearing within ten days of the filing of the petition.”[19] With regard to the probable cause hearing, the statute provides as follows:
…If at the probable cause hearing the court determines that reasonable cause exists to believe that a valid debt exists, the person asserting the lien shall be given possession of the property or the court shall obtain possession of the property as ordered by the court. The defendant may retain possession of the property by giving bond and security for the amount determined to be due and the costs of the action.[20]
After the court conducts the probable cause hearing, there is a process whereby the debtor may ask for a full evidentiary hearing on the validity of the debt above and beyond the proof presented at the probable cause hearing. Specifically, the statute provides as follows:
Within five days of the probable cause hearing, the defendant must petition the court for a full hearing on the validity of the debt if a further determination of the validity of the debt is desired. If no such petition is filed, the lien on the amount determined reasonably due shall conclusively be deemed a valid one and foreclosure thereof allowed. If such a petition is filed, the court shall set a full hearing thereon within thirty days of the filing of the petition. Upon the filing of the petition by the defendant, neither the prosecuting lienholder nor the court may sell the property, although possession of the property may be retained.[21]
Assuming the defendant petitions for a full hearing within five days of the probable cause hearing and the court conducts the final hearing within thirty days of the filing of the petition, the following provisions of the statute apply:
If after a full hearing the court finds that a valid debt exists, the court shall authorize the foreclosure upon and the sale of the property subject to the lien to satisfy the debt if the debt is not otherwise immediately paid.[22]
The time limitations imposed upon the defendant and the court are short. The defendant has five days after receiving the notice of lien to petition for a probable cause hearing.[23] The probable cause hearing is held within ten days of the defendant’s filing of its notice.[24] Within five days of the probable cause hearing, the defendant must petition for a full hearing which must be held within thirty days of the filing of the petition.[25] Proceedings to foreclose upon mechanic’s liens are expedited for several reasons. If the mechanic’s lien is valid, there should be no delay in the mechanic being allowed to foreclose upon the property. Conversely, if the notice of claim of lien is invalid, then the aircraft owner is entitled to possession of his property and to have the title to his aircraft cleared from the claim of lien. If the court affirms the mechanic’s assertion and finds the claim of lien is valid, then the court authorizes the foreclosure upon and sale of the aircraft to satisfy the lien if the debt is not otherwise immediately paid.[26]
The court has the authority to order the aircraft mechanic or repair facility to pay damages to the aircraft owner or lessee to compensate them for deprivation of the property if the mechanic did not act in good faith.[27]
[9] O.C.G.A. §44-14-550(8).
[10] O.C.G.A. §44-14-550(1), (2).
11] O.C.G.A. §44-14-550(1).
[15] O.C.G.A. §44-14-550(2).
[16] O.C.G.A. §44-14-550(3).
[19] O.C.G.A. §44-14-550(4).
[21] O.C.G.A. §44-14-550(5).
[22] O.C.G.A. §44-14-550(6).
[23] O.C.G.A. §44-14-550(3).
[24] O.C.G.A. §44-14-550(4).
[25] O.C.G.A. §44-14-550(5).
[26] O.C.G.A. §44-14-550(6).
[27] O.C.G.A. §44-14-550(7).
Recommendations For Aircraft Mechanics And Repair Facilities
Any aircraft mechanic or repair facility should have a standard form completed by an aircraft owner or lessee or agent for aircraft owner to authorize repair work or maintenance on the aircraft. The document should define the scope of the work to be performed. If the scope of the work permits it, the repair facility should provide a quote for the cost of the work and a time required to complete the work. If permitted by local law, some consideration should be given to the repair facility requesting a retainer to be applied towards the work. For example, if the repair facility is going to have to go out of pocket for expensive aircraft parts or radio equipment, the mechanic or repair facility may request a one-half cash advance payment towards the estimated cost of the work. Any authorization to perform work on an aircraft should tell the owner that if the owner does not pay the invoice, the aircraft mechanic or repair facility will retain possession of the aircraft if the repair invoice is not timely paid. Finally, before beginning work, the mechanic should check the FAA Aircraft Registry to find out who or what owns the aircraft. Too often mechanics assume the owner of the aircraft is the pilot authorizing the work when the aircraft is owned by a corporation. This assumption may prove fatal if the name on the invoice does not correspond to the name of the owner set out in the notice of claim of lien.
A mechanic or repair station undertaking to serve and file a notice of claim of lien must be careful to comply with all statutory requirements with regard to the content of the claim of lien. Otherwise, the claim of lien may be invalid and constitute nothing more than a slander on the title of the aircraft owner thereby giving rise to potential liability of the aircraft mechanic or repair facility. If the decision is taken to foreclose on the claim of lien, at least in Georgia we know that the time limitations for the foreclosure proceedings are accelerated giving the court and parties little time to prepare for the probable cause hearing and the full hearing.
With a contracting economic climate and aircraft owners who may be in economic distress, a complete appreciation about mechanic’s liens and how to assert them may be an essential requirement for survival of aircraft mechanics and aircraft repair facilities in the foreseeable future.