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General Electric Capital Auto Lease v. Violante

180 N.J. 24, 848 A.2d 732 (2004)

LIENS; GARAGE KEEPER’S; LEASED VEHICLES—Where a vehicle lease requires the lessee to maintain the vehicle, the lessee becomes the leasing company’s representative for that purpose and the leasing company’s interest in the vehicle is then subject to a garage keeper’s lien if service or storage charges are unpaid.

A lessee leased a car from a dealer. The dealer assigned the lease to a leasing company. The lease required the lessee to service the car regularly and to maintain the car in “good working order and condition.” The car was vandalized and the lessee had the car towed to a garage for repairs. The garage stored the car for several months, but did not repair it because the lessee claimed his insurance company had to inspect the damage first. The leasing company demanded that the garage release the car and the garage refused, claiming that it was entitled to its towing and storage fees. The leasing company sued for the release of the car and the garage countersued. The garage claimed that it had a lien claim under the Garage Keeper’s Lien Act for the services the lessee was required to make under its lease with the leasing company. The Garage Keeper’s Lien Act states that a garage has the right to place a lien on a car for services rendered at the request or with the consent of the “owner or the [owner’s] representative.” The leasing company claimed that the lessee was neither the owner of the car nor the leasing company’s representative and was therefore not authorized to incur the storage charges on its behalf. The garage claimed that because the lease agreement required the lessee to maintain the car in good working order and condition, the lessee was the owner’s representative and had the authority to bind the leasing company.

The lower court found that the Garage Keeper’s Lien Act was silent regarding the lessor-lessee relationship and therefore it did not apply to leased vehicles. On appeal, the Appellate Division affirmed the lower court’s decision, but on different grounds. The Appellate Division found that the lessee had no authority to incur the storage charges and repair costs on behalf of the leasing company. It noted that the lease prohibited the lessee from creating a lien or letting a lien continue on the car without its written consent. The court interpreted that to mean that the lessee could not incur the storage charges without the leasing company’s consent, and since it failed to obtain the leasing company’s consent, there was no valid lien.

On further appeal, the Supreme Court reversed. It found that the lessee had the authority, as the leasing company’s representative, to have the car towed and repaired. The Court found that the lease specifically required the lessee to have the car serviced regularly and maintain the car in good working order. It held that by requiring the lessee to maintain the car, the lessee was its representative with respect to the maintenance of the car. Therefore, the leasing company was responsible for the storage charges. The Court did note, however, that the statute was not clear as to when or whether the garage needed to notify the leasing company, as owner of the car, that it was being stored. It held that, within a reasonable time, the garage needed to notify the leasing company of the car’s location and the daily storage charges being incurred to give it the opportunity to avoid escalating storage charges. It believed that seven days would be a reasonable time for the garage to determine the extent of the damage and arrange for repairs. Therefore, the garage should have notified the leasing company within seven days, not several months. Since it did not notify the leasing company, the Court held that the garage was only entitled to reimbursement for storage charges for seven days.

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