An aircraft maintenance company went about fixing a Boeing 767 brought in for service. Because it was familiar with the customer, the shop returned the jet to its owners along with a bill for the repairs after completing its work. When, however, in a few months, the shop didn’t get paid, it placed a repairman’s lien on the plane - recording notice of the monies it was owed. Suit was eventually filed to foreclose the lien; an open and shut case thought the repair shop. But in what should be a wake up call for all whose business practice has been to release items before being paid, the court denied the lien enforcement action.
Such claims for labour or services on personal property – a boat, a car, a plane – are possessory in nature. The court therefore found that the repairman’s right to claim a lien was extinguished when it relinquished possession of the repaired property. The shop needed to hold on to that jet until it received payment, at least if it expected to protect its lien rights. This is true in many jurisdictions – a repairman’s lien is one strictly dependent upon possession. Once the repaired equipment is released, the lien is extinguished.
Even an agreement by the repair shop and the customer to allow the customer to retrieve its equipment before payment and to establish a lien in the event of non-payment will have little impact. And those who acquire title to the repaired item, where repairs have yet to be paid for, will actually do so free of the repairman’s lien. Having filed a lien while still in possession of the item, a repairman can legally notice the sale of the repaired item to recoup unpaid fees for services rendered. Notice must be given, usually by certified mail, to the registered owner, to the customer (if different than the owner) and to all other interested parties (banks with recorded loans where the item was listed as collateral).The notice must be specific in describing the item, the lienor and the lien as well as the intended disposition through sale. If done properly, the liened item can be sold and the sale proceeds equivalent to the costs of repair retained by the lienor.
Remember, possession is still 9/10’s of the law.
Mr. Barthet is founder and President of The Barthet Firm, a seasoned 10 lawyer commercial law practice located in Miami, Florida (www.barthet.com). He was appointed Honorary Consul of Malta in 2008 and regularly represents entrepreneurs and established concerns in all manner of contract law, intellectual property issues and business disputes. He can be reached at email@example.com.