A must read for leasing companies

A must read for leasing companies

Issue #12, January 2014

Important new case means better protection for you

Does the idea that someone could transfer your car to someone else without your consent seem wrong? For years, that is exactly what lessees have been doing to secure payment for garage repairs; they allow the garage to put a lien on the vehicle, without the knowledge of the leasing company, the titled owner. Often, unscrupulous garages conceal the car and pile on thousands in storage fees, effectively holding the car hostage until the titled owner pays off the inflated lien.

Although New York Law has always protected leasing companies from such tactics, there was never any appeals level court decision directly addressing their rights — until now.

On December 12, 2013, a New York Appellate Court ruled in the case of DCFS v SG Auto that leasing companies are not required to pay repair and storage charges incurred by a lessee customer. The case is important because it clarifies leasing company rights and sets a precedent that lower courts must follow.

The case began in June of 2012 when a garage named SG Auto attempted to lien sale a 2010 Mercedes-Benz in order to collect $28,000 in repair and storage charges, which were incurred by a consumer lessee. The Meola Law Firm filed a lawsuit against SG Auto on behalf of the leasing company that owned the vehicle. We stopped the sale and recovered the vehicle by posting a bond. We then argued that the leasing company had no obligation to pay the garage because New York law allows a garage lien only where the vehicle owner consents to the charges. In this case, the vehicle’s owner, the leasing company, did not consent.

In fact, the leasing company did not know that repairs were performed on the vehicle until it received the garage’s lien sale notice. The trial court agreed with our argument and dismissed all claims against the leasing company.

The garage filed an appeal. The Appellate Court upheld the decision ruling that a garage cannot obtain a garage keeper’s lien unless the leasing company, the titled owner, agrees to the garage’s charges.

The Appellate Court’s ruling follows a basic tenet of due process, which is that before a person can have his property taken from him he must be given the opportunity to defend his rights. Allowing a lessee, a non-owner, to create a garage keeper’s lien without the owner’s knowledge denies the owner the opportunity to protect his vehicle. The bottom line is that New York law will not allow a garage lien to be created without the titled owner’s consent.

What does this case mean to the New York leasing industry?

The days of being forced to pay unauthorized repair and storage fees are over. Garages may still resist the law, but now with the Appellate Court precedent, leasing companies should win the cases that go to court.

If you would like a copy of the Appellate Court decision, please send an email to rudy@meolalaw.com