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Associates Commercial Corp. v. Wallia

Decided: June 20, 1986.


On appeal from the Superior Court of New Jersey, Law Division, Camden County.

King, O'Brien and Simpson. The opinion of the court was delivered by King, P.J.A.D.


This case involves the issue of priority between a perfected security interest under the Uniform Commercial Code and a garage-keeper's or common-law artisan's lien. We conclude that the perfected security interest has priority over the claim of the garage-keeper and affirm Judge Tomlin.

This is the procedural and factual background. In June 1984 plaintiff Associates Commercial Corporation (Associates) filed a complaint against Johnson & Tower's, Inc. (J & T) alleging these facts. Defendant Wallia was the owner of a 1980 Ford tractor used to pull trailers. Associates previously had acquired a perfected security interest in this vehicle under Article 9 of the UCC. On November 16, 1983 Wallia brought the

tractor to J & T for repairs. By December 14 the repairs had been completed but Wallia failed to pay for them so J & T retained possession of the tractor. Then Wallia defaulted on the monthly payments due Associates for March, April and May of 1984. Under the financing agreement these defaults entitled Associates to immediate payment of the unpaid balance and to possession of the vehicle. Associates demanded possession from J & T which refused to comply. Associates sued for replevin or alternatively for damages of $33,276.96 for conversion. After filing of the answer, the parties agreed that Associates would post a $8,500 bond and obtain possession of the tractor and the parties would settle the priority dispute on cross-motions for summary judgment. R. 4:46. On the cross-motions, Judge Tomlin ruled in Associates favor and J & T now appeals.

On this appeal J & T raises a number of issues: it claims that (1) the entire garage-keeper's lien act, N.J.S.A. 2A:44-20 to 31, has previously been held unconstitutional in all respects, (2) even if not unconstitutional in its entirety, the lien-priority provisions in N.J.S.A. 2A:44-21 should be declared invalid, (3) it is entitled to an artisan's common-law lien, (4) if so, it claims that an artisan's common-law lien enjoys priority over a recorded, perfected security interest under the UCC, and (5) that Associates have been unjustly enriched at J & T's expense.


Associates contends that the Garage Keeper's Lien Act, N.J.S.A. 2A:44-20 to 31, has previously been held unconstitutional "in its entirety" by both the New Jersey and federal courts. The lien priority issue centers around N.J.S.A. 2A:44-21, which provides

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, 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.

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.

J & T contends that in Whitmore v. N.J. Div. of Motor Vehicles, 137 N.J. Super. 492 (Ch.Div.1975), Judge Furman declared the "entire" Garage Keeper's Lien Act unconstitutional because of what he said in the final sentence of his opinion

N.J.S.A. 2A:44-20 et seq. is held to be unconstitutional under the Fourteenth Amendment in failing to afford to all automobile owners the opportunity to be heard judicially prior to divestment of title [by public sale of the automobile]. [137 N.J. Super. at 500,].

Defendant focuses exclusively on Judge Furman's use of the phrase N.J.S.A. 2A:44-20 " et seq. " to support its contention that Whitmore declared the entire Garage Keeper's Lien Act (i.e., N.J.S.A. 2A:44-20 to 31) unconstitutional. We disagree. A close analysis of Whitmore reveals that the lien priority provision of N.J.S.A. 2A:44-21 were not encompassed within Judge Furman's unconstitutionality holding.

At the outset of his opinion, Judge Furman specifically said that the constitutionality of the "public sale provisions of the Garage Keepers Lien Act, N.J.S.A. 2A:44-20 et seq. " 137 N.J. Super. at 494-495 was "at issue" because the plaintiff-motor vehicle owners attacked the "validity of N.J.S.A. 2A:44-29, 30, 31 which provide for a public sale [of a motor vehicle] after 30 days' retention by the garage keeper." Further, Judge Furman specifically said the garage keeper's "possessory lien until payment for repairs made to a motor vehicle" was "not challenged in this action." Id. at 495. Finally, while Judge Furman noted that in Lee v. Cooper (unreported 1974 opinion in the United States District Court for New Jersey) Judge Barlow had "specifically adjudicated the unconstitutionality of N.J.S.A. 2A:44-20 et seq., both as to its possessory lien and public sale provisions," Judge Furman held that the Chancery Division of the New Jersey Superior Court was "not compelled to adhere to

that decision, even on a federal constitutional issue." Id. at 498.

Judge Furman then noted that, if the motor vehicle's owner wanted to avoid the consequences of the public sale provisions of the act (i.e., N.J.S.A. 2A:44-29, 30 and 31), he had to utilize the "alternative procedure prior to the expiration of 30 days . . . under N.J.S.A. 2A:44-23, 24, 25, 26 and 27", which procedure in essence required the owner to post "the entire disputed garage keeper's bill or a double bond, with court costs, prior to a public sale." Id. at 495, 499. However, Judge Furman found that the alternative statutory remedy in N.J.S.A. 2A:44-23 to 27 was "blocked to the owners of automobiles who dispute their garage bills in good faith and are without sufficient funds to advance the disputed excess in cash or to pay the premium on a double bond." Id. at 499-500. Therefore, Judge Furman ruled that the entire-bill or double-bond posting "prerequisite" in the ...

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