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Creative Machining Systems, Inc. v. Anthracite Leasing Co., Inc.

A-3512-03T1 (N.J. Super. App. Div. 2005) (Unpublished)

LANDLORD-TENANT; WAREHOUSES; CONVERSION —The landlord of a warehouse has no right to withhold its evicted tenant’s customer’s property and has no right to demand a storage fee from its tenant’s customer; further, it has an obligation to exercise due care to prevent the property from being damaged.

A customer delivered a large piece of industrial equipment for repair. The repair shop defaulted in payment of rent under its lease and was evicted. The customer contacted the landlord to arrange to get its equipment back. The landlord refused to release it unless the customer paid a storage fee to the landlord. The landlord then attempted to move the equipment, but did not use a qualified contractor to do so. Its contractor should have used a specialized rigger to move the equipment so as to avoid damage. Even though the landlord’s contractor was unable to remove the equipment, it succeeded in damaging it. The customer obtained a court order to retrieve its equipment, but when it got to the premises, it noticed the damage. It also demanded that the landlord return several component parts that were removed when the landlord attempted to move the equipment. The landlord refused. The lower court found that the landlord was a bailee and had a obligation to exercise due care not to damage the equipment while it was in its possession. Since the landlord failed to exercise due care by attempting to move it (and then moving it improperly), the landlord was guilty of conversion. The proper measure of damages in the case of a conversion is the value of the equipment at the time of conversion. The lower court determined the value of the equipment as being equal to the amount the customer paid the repair shop to fix the equipment. The landlord appealed, but the Appellate Division affirmed. It found that by moving the equipment, the landlord exercised control over the equipment that was inconsistent with the customer’s property rights to that equipment. The Court also noted that the landlord had no right to withhold the equipment, and that it had no right to demand a storage fee from the customer. Further, while the equipment was under its control, the landlord had an obligation to exercise due care to prevent the equipment from being damaged. The Court also upheld the lower court’s determination of value. The lower court had determined that since the equipment was broken at the time it was forwarded to the repair shop, it had no value at that time. It determined the value of the equipment to be the cost the customer agreed to pay to have the equipment fixed.

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