Artisans Liens

MEMORANDUM To: From: Date: Re: Commission Staff May 5, 2003 Auto Repair Liens The Commission requested a memorandum outlining the key issues involved in revising the law on garage keepers’ liens. Text shown in the “Issues Presented” section below in bold is proposed statutory language. We have also attached both current statutes on the subject. Issues Presented The first required provision of a new auto repair lien law is one establishing the lien, which could read as follows: a. A person who receives possession of a motor vehicle owned by another under contract to service it during which time the owner does not have access to the vehicle, has a lien on: (1) the vehicle serviced by the lienor while it is in the lienor's possession, and (2) any other goods of the owner in the lienor's possession. This provision is based on the Commission’s old report on artisans’ liens. It merely creates a lien for auto repair. It does not create a lien for storage not connected to repair nor for supply of fuel. There is no similar provision in the Abandoned Vehicle Act (39:10A-8 through 20). The equivalent provision of the existing garage keeper’s lien is part of 2A:44-21: A garage keeper who shall store, maintain, keep or repair a motor vehicle or furnish gasoline, accessories or other supplies therefor, at the request or with the consent of the owner or his representative, shall have a lien upon the motor vehicle or any part thereof for the sum due for such storing, maintaining, keeping or repairing of such motor vehicle or for furnishing gasoline or other fuel, accessories or other supplies therefor, and may, without process of law, detain the same at any time it is lawfully in his possession until the sum is paid. A motor vehicle is considered detained when the owner or person entitled to possession of the motor vehicle is advised by the garage keeper, by a writing sent by certified mail return receipt requested to the address supplied by the owner or person entitled to possession of the motor vehicle, that goods or services have been supplied or performed, and that there is a sum due for those goods or services. The second required provision must address the amount of the lien. There are two separate amounts that may be involved, repair and storage. First is the cost of repair, which can be established as the value of service performed. This would require a Court to establish the value. An alternative is the easier approach set forth in the Artisans’ Lien Report which sets the -1- amount of a lien as equal to the amount agreed between the parties. Auto mechanics are required to give a written estimate and obtain authorization before beginning work. N.J.A.C. 13:45A26C.2. It seems appropriate to assume the law is followed, and to limit liens to cases where there is agreement on the cost of repairs. Such language could read: b. The amount of the lien is equal to the unpaid balance of the amount agreed between the owner and the lienor for the services provided This approach differs from existing law. Both the Abandoned Vehicle Act and the Garage Keepers’ Lien Act are based on reasonable rather than agreed cost. 39:10A-14; 2A:4423. Cost of storage is a harder issue. A repair shop should have a claim for storage when the vehicle is not claimed and the repairs paid for a significant period of time. However, amounts claimed for storage should not be excessive when compared with local parking charges. Storage charges could be left to agreement of the parties, but most repair shops are not in the business of storing cars, so there will not be any established rate. As a result, an “agreed storage cost” will be set by form contract language that is likely not to be read or understood. Proposed language could read: with reasonable cost of storage of a vehicle not paid for and taken within two days after repairs are completed. Note that this provision needs to reflect a decision as to which storage charges should be enforced by a lien. As drafted, the provision begins storage charges two days after the car is ready. That may be too soon. The third required provision of any new statutory language must identify the party or parties against whom a lien will be effective. The Commission tentatively decided that the lien should be superior to claims of secured creditors and lessors, and that secured creditors and lessors should be treated equally. Certainly, the cost of repair adds to the value of the car and should be enforceable against any kind of financing party. Once again, however, the cost of storage is a harder issue. Should all storage be a charge to the secured creditor or lessor or only storage after the party has an opportunity to pay for repair and take the vehicle? The following provision is drafted assuming the second option: As used in this act, “owner of a motor vehicle” includes: a person in possession of the vehicle who owns the vehicle subject to the security interest of another, and a lessee of the vehicle who, under the terms of the lease, has the duty to maintain the vehicle. A lien for the cost of repair shall be superior to the claim of a creditor with a security interest in the motor vehicle and to the interest of a lessor of the motor vehicle. A lien for the cost of storage shall be superior to the claim of a creditor with a security interest in the motor vehicle and to the interest of a lessor of the motor vehicle provided that the creditor or lessor has been given notice of the lien, has not paid for the repairs and claimed the motor vehicle within seven days after notice, and the storage charged for occurred more than seven days after notice. Existing law, of course, does not deal with the rights of a lessor. Auto leases, as an alternative to auto loans, are too recent a phenomenon. Current law is also not fully consistent as -2- to the rights of secured creditors. The Garage Keepers’ Lien Act, at 2A:44-29, provides that the vehicle: be sold at public auction, subject to any prior lien, title or interest held by virtue of a prior conditional sale or a prior chattel mortgage properly recorded. The Abandoned Vehicle Act, however, contains two provisions and it is not clear how they can be read together. 39:10A-17 provides: Upon the sale of a motor vehicle, or the issuance of a junk title certificate pursuant to the provisions of this act, all claims of interest in the motor vehicle of the former owner, any other person formerly having legal right thereto and any holder of a security interest shall be forever barred, except as provided for in section 10 of this act. Section 10 of the Act, 39:10A-20, provides: This act provides an additional remedy and shall not be construed to supersede procedures provided under any other act, and shall not be deemed to supersede or alter the priority of any perfected lien or security interest on an abandoned motor vehicle, which lien or security interest shall have priority over the amounts due to the motor vehicle repair facility. Existing Law I. Abandoned and Unclaimed Motor Vehicles (referred to as Abandoned Vehicle Act above) 39:10A-8. Motor vehicle abandoned at repair facility For purposes of this act a motor vehicle shall be deemed to be abandoned if it is left at a motor vehicle repair facility without an attempt by the owner, a person on the owner's behalf or any other person having a legal right thereto to regain possession thereof: a. For a period in excess of 60 days without the consent of an authorized representative of the motor vehicle repair facility; b. For a period of 60 days in excess of the period for which consent has been given by an authorized representative of the motor vehicle repair facility; or c. For a period in excess of 60 days after being notified by an authorized representative of the motor vehicle repair facility that service or repairs to the motor vehicle have been completed. -3- 39:10A-9. Removal and storage, sale or obtaining junk title certificate; inapplicability if dispute between repair facility and owner on amount due a. An authorized representative of a motor vehicle repair facility may take one or more of the following actions with respect to an abandoned motor vehicle: (1) Remove and store, or hire another person to remove and store the motor vehicle pursuant to section 3 of this act; (2) Sell or cause the motor vehicle to be sold, at public or private sale, pursuant to section 4 of this act; or (3) Cause a junk title certificate to be issued for the motor vehicle pursuant to section 5 of this act. b. No motor vehicle shall be sold and no junk title certificate shall be issued pursuant to this act where the cause for a motor vehicle being left in the possession of a motor vehicle repair facility for a period in excess of that set forth in section 1 of this act is a dispute between the motor vehicle repair facility and the owner of the motor vehicle or other person having a legal right thereto regarding the amount to be paid in order to regain possession of the motor vehicle. 39:10A-10. Notice to owner of intent to remove and store Prior to the removal and storage of a motor vehicle pursuant to section 2. a.(1) of this act, an authorized representative of a motor vehicle repair facility shall give the owner of the motor vehicle or other person having a legal right thereto 30 days' notice of the intent to remove and store the motor vehicle. 39:10A-11. Notice of intent to and of date, time, place and manner of sale Prior to the sale of a motor vehicle pursuant to section 2. a.(2) of this act, an authorized representative of a motor vehicle repair facility shall: a. Give the owner of the motor vehicle or other person having a legal right thereto, the holder of any security interest in the motor vehicle filed with the Director of the Division of Motor Vehicles and the Director of the Division of Motor Vehicles 30 days notice of the intent to sell the motor vehicle or cause it to be sold; and b. Give the owner of the motor vehicle or other person having a legal right thereto and the holder of any security interest in the motor vehicle filed with the Director of the Division of Motor Vehicles at least five days notice of the date, time, place and manner of the proposed sale. 39:10A-12. Junk title certificate; issuance; notice If a motor vehicle repair facility determines that a motor vehicle subject to the provisions of this act is incapable of being operated safely or of being put in safe operational condition except at a cost in excess of the value thereof, an authorized representative of the motor repair facility shall so certify to the Director of the Division of Motor Vehicles, on an application prescribed by him, and the Division of Motor Vehicles shall thereupon, without further certification or verification, issue to the motor vehicle repair facility, for a fee of $10.00, a junk title certificate for the vehicle; but no title certificate shall be issued unless the motor vehicle -4- repair facility first gives 30 days notice of its intention to obtain a junk title certificate to the owner of the motor vehicle or other person having a legal right thereto and to the holder of any security interest in the motor vehicle filed with the Director of the Division of Motor Vehicles. 39:10A-13.Notices; writing; method of delivery; publication Any notice required to be given by this act shall be in writing and sent by certified or registered mail, return receipt requested, to the last known address of the person to whom the notice is to be given. In the event that the notice is unclaimed by the addressee, or if the address of the person to whom the notice is to be given is unknown to the person giving the notice and cannot be ascertained from the records on file with the Division of Motor Vehicles, the notice shall be given by publishing it twice in at least one newspaper published in this State and circulating in the municipality in which the motor vehicle is left. 39:10A-14.Reclamation of possession by owner prior to sale or issuance of junk title certificate At any time prior to the sale of the motor vehicle or the issuance of a junk title certificate therefor, the owner of the motor vehicle may reclaim possession of the motor vehicle from the motor vehicle repair facility or other person with whom the motor vehicle is stored pursuant to this act, upon payment of the reasonable costs of removal and storage of the motor vehicle, the expenses incurred pursuant to the provisions of this act, and the charges for the servicing or repair of the motor vehicle. 39:10A-15. Sale of motor vehicle; certificate of ownership; application; issuance; fee Upon the sale of a motor vehicle for which no junk title certificate has been issued, an application for a certificate of ownership on a form prescribed by the Director of the Division of Motor Vehicles shall be submitted to the director. The application, in addition to containing any information required by the director, shall set forth the name and address, if known, of the former owner and shall contain a certification from the motor vehicle repair facility selling the motor vehicle that the sale was in conformity with the provisions of this act. The application shall be accepted by the director for issuance of a certificate of ownership for a fee of $10.00. 39:10A-16.Bar of claims of former owner, other person formerly having legal right and holder of security interest Upon the sale of a motor vehicle, or the issuance of a junk title certificate pursuant to the provisions of this act, all claims of interest in the motor vehicle of the former owner, any other person formerly having legal right thereto and any holder of a security interest shall be forever barred, except as provided for in section 10 of this act. 39:10A-17.Claims allowable against repair facility in compliance with act only for balance of proceeds of sale No claim of any kind may be asserted against a motor vehicle repair facility that complies with the provisions of this act by the owner of a motor vehicle for damages arising out of the storage, removal, sale or issuance of a junk title certificate for a motor vehicle except for the -5- balance of the proceeds of the sale of the motor vehicle, if any, after deduction of the expenses of the sale, the costs and expenses incurred in the removal and storage of the motor vehicle and the charges of the motor vehicle repair facility for the servicing and repair of the motor vehicle. 39:10A-18.Pattern or practice of knowingly violating act or aids or advises such pattern or practice; penalty A motor vehicle repair facility, or any employee, officer or agent thereof, which or who engages in a pattern or practice of knowingly violating any of the provisions of this act or aids or advises in such a pattern or practice is guilty of a crime of the third degree. 39:10A-19. Rules and regulations The Director of the Division of Motor Vehicles shall promulgate rules and regulations pursuant to the "Administrative Procedure Act," P.L. 1968, c. 410 (C. 52:14B-1 et seq.), to implement the provisions of this act. 39:10A-20. Act as additional remedy; priority of perfected lien or security interest This act provides an additional remedy and shall not be construed to supersede procedures provided under any other act, and shall not be deemed to supersede or alter the priority of any perfected lien or security interest on an abandoned motor vehicle, which lien or security interest shall have priority over the amounts due to the motor vehicle repair facility. II. Liens - Garage Keepers and Automobile Repairmen (referred to as Garage Keepers’ Lien Act above) 2A:44-20. Definitions As used in this article: "Owner" includes a conditional vendee or a mortgagor remaining in possession or otherwise of the motor vehicle. "Garage" means a place or structure used in the business of storing, maintaining, keeping or repairing motor vehicles. "Garage keeper" means a person or corporation engaged in the business of keeping a garage as above defined. 2A:44-21 Garage keeper liens; detention of vehicles; notice; priority. A garage keeper who shall store, maintain, keep or repair a motor vehicle or furnish gasoline, accessories or other supplies therefor, at the request or with the consent of the owner or his representative, shall have a lien upon the motor vehicle or any part thereof for the sum due for such storing, maintaining, keeping or repairing of such motor vehicle or for furnishing gasoline or other fuel, accessories or other supplies therefor, and may, without process of law, detain the same at any time it is lawfully in his possession until the sum is paid. A motor vehicle is considered detained when the owner or person entitled to possession of the motor -6- vehicle is advised by the garage keeper, by a writing sent by certified mail return receipt requested to the address supplied by the owner or person entitled to possession of the motor vehicle, that goods or services have been supplied or performed, and that there is a sum due for those goods or services. The lien shall not be superior to, nor affect a lien, title or interest of a person held by virtue of a prior conditional sale or a prior chattel mortgage properly recorded or a prior security interest perfected in accordance with chapter 9 of Title 12A of the New Jersey Statutes. 2A:44-22. Removal of vehicle from keeper's control; seizure A garage keeper acquiring a lien under this article shall not lose the same by reason of allowing the motor vehicle or part thereof to be removed from his control, and if so removed, he may, after demand of payment of claim either personally or by registered mail if the owner's address is known, and without further process of law, seize without force and in a peaceable manner the motor vehicle or part thereof, wherever found in this state. 2A:44-23 Statement of amount claimed; offer by owner of reasonable amount and demand for possession; fees. The owner or the person entitled to the immediate possession of the motor vehicle or part thereof so detained, may, on learning of the detention of the same, immediately demand from the garage keeper or the person in charge thereof, a statement of the true amount claimed to be due for the storing, maintaining, keeping or repairing of such motor vehicle, or for furnishing gasoline or other fuel, accessories or other supplies therefor. If upon receiving such statement he considers the amount thereof excessive, he may offer what he considers to be reasonably due and demand possession of the motor vehicle or part thereof so detained. If possession is refused, he may immediately bring an action for possession thereof in the Superior Court, Law Division, Special Civil Part or in any other court. The owner or person entitled to immediate possession thereof shall pay the appropriate court fees and costs prior to the hearing; except that the owner or the person may seek relief from the payment of court fees and costs as provided in the Rules Governing the Courts of the State of New Jersey. The application for the waiver of fees shall be determined prior to or in conjunction with the summary hearing for possession of the motor vehicle. 2A:44-24 Entitlement to possession upon payment to garage keeper. When the amount determined by the court to be due to the garage keeper is paid in cash or by certified or cashier's check to the garage keeper and the court costs, if any, are deposited with the clerk of the court the owner or person entitled to possession of the motor vehicle or part thereof shall be entitled to possession of the motor vehicle or part thereof, pursuant to process out of said court. 2A:44-26 Action brought for possession; assertion of claim by garage keeper; procedure. In an action brought for possession by the motor vehicle owner or person entitled to possession of the motor vehicle, the garage keeper shall assert his claim for a lien in the court in the manner prescribed by the Rules Governing the Courts of the State of New Jersey. The court -7- may hear and determine the matter in a summary manner, and shall determine the amount due to the garage keeper, if any, and the amount of court costs, if any, due to the court clerk. 2A:44-27 Determination of amount of damages. If judgment is rendered for the motor vehicle owner or person entitled to possession of the motor vehicle, the court may fix and determine the amount of damages suffered by the motor vehicle owner or person entitled to possession of the motor vehicle for the seizure and detention of the motor vehicle or part thereof, and render a judgment for such amount against the garage keeper. 2A:44-29 Sale of motor vehicle by garage keeper. If no proceedings are taken for the repossession of the motor vehicle or part thereof by the motor vehicle owner or person entitled to possession of the motor vehicle, such property so held by the garage keeper shall, after the expiration of not less than 30 days from the date of the detention, be sold at public auction, subject to any prior lien, title or interest held by virtue of a prior conditional sale or a prior chattel mortgage properly recorded. If an action has been brought under N.J.S.2A:44-26 and the court has ordered payment of money to the garage keeper, the garage keeper shall, upon payment to the garage keeper in cash or by certified or cashier's check of the amount ordered by the court, surrender the motor vehicle or part thereof immediately. If the amount in the court order has not been paid in accordance with this act within 15 days from the date of the order, the property held by the garage keeper may then be sold at public auction, subject to any prior lien, title or interest held by virtue of a prior conditional sale or a prior chattel mortgage properly recorded. 2A:44-30 Notice of sale. Notice of the sale, under section 2A:44-29 of this title shall be published for two weeks at least once in each week, in some newspaper circulating in the municipality in which the garage is situate and not less than five days' notice of such sale shall be given by posting the notice at the garage keeper's place of business. 2A:44-31 Application of proceeds of sale. The proceeds of the sale shall be applied to the payment of the lien or the amount specified in the order of court and the expenses of the sale. The balance, if any, shall be paid to the owner of the motor vehicle, or part thereof. The balance, if not claimed by the owner within 60 days after sale, shall be paid to the municipality, in which the garage is situated, to provide financial support for social programs for the indigent. -8-