Would Excessive Garagekeeper’s Lien Trigger Conversion Claim
Peter May sued Steve’s Marine Service West, Inc. and its principal, Steven Stavracos, in a dispute arising out of services performed on the engines of his boat.
In April 2013, May brought the vessel to the Steve’s Marine boatyard to be repaired because it was not reaching maximum speed; the engine, which should have been performing at 3,600 or 3,800 revolutions per minute (rpm), was performing at 2,600 rpm. The parties offered differing versions of their agreement. According to May, Steve’s Marine guaranteed that repairs and adjustments to two components, the riser and the turbocharge, would fix the problem.
According to Steve’s Marine, no guarantee was made. The riser and turbo were in need of repair and adjustment, and the undertaking was to repair them, to which May agreed and averred that the repairs were made and the boat was reaching maximum speed when May took the boat. May was billed $4,700.83, which he paid on April 23, 2013.
According to May’s complaint, at that time Steve’s Marine represented and warranted to him that the boat’s mechanical issues were resolved, no further work was required, and the vessel was in good working order and fit for him to use – a statement which Steve Marine’s denied making in its entirety.
Approximately eleven months later, in March 2014, May returned, reporting that the engine was not repaired and that it continued to underperform. He left his boat for Steve’s Marine to work on, where it remained. May alleged that when he left the boat on that occasion, he and Steve Stavracos, a shareholder and the president of Steve’s Marine, agreed that any “additional work” would have to have “an estimate and a signed work order.”
Steve’s Marine and Stavracos acknowledged in their answering pleading that May wanted a written estimate. Thereafter, Stavracos prepared a paper on the letterhead of Steve’s Marine, captioned “Scope of Work” and dated September 29, 2014, outlining the work he believed was necessary. In part, it read: “At this time we feel removing and sending out the injection pump and injectors for rebuilding should solve the issues.” No prices appeared on the work outline, but it contained the following language: “Parts list and labor enclosed. This is an estimate. We will keep all parties informed as we go…If work is to be done we will do it as winter work there will be no charge for storage [sic].” That was the only express agreement concerning storage that the parties made.
According to Steve’s Marine, on or about January 2015, May raised an objection to the alleged failure to properly store the boat, and appeared to find in that objection an agreement to pay for storage. However, given the context in which May raised this objection, specifically the representation of free storage in the September 29, 2014 “Scope of Work” outline, May’s objection was capable of only one interpretation, a complaint that the promise to store the boat without charge was not being honored. It was not an agreement to pay for storage. The amount of the estimate attached to the September 29 outline was not clear from the record, but at his deposition, Stavracos testified to beginning an estimate on an invoice form dated October 14, 2014, and adding to it over time. He could not recall whether he started the repairs before presenting the invoice to May. The Court noted the record actually contained two invoice forms dated October 14, one numbered 604 and the other 605. Whether either one of these invoices was enclosed with the parts list and labor estimate referenced in the September 29 outline was unclear.
Little work, if any at all, was done on the boat that winter, because several absences throughout 2015 kept Stavracos away from the business for nearly 10 months. Most of the work for which May eventually was billed was not done until after March 25, 2015. The project remained incomplete, and the boat unrepaired, and May paid nothing beyond the $4,700.83 he paid in 2013.
A sharp disagreement arose between the parties about whether May owed anything for the 2015 work. The Court observed, however, that in a statement dated June 17, 2015, May wrote, with respect to one item, the removal and replacement of engine mounts, that “It was agreed that they would be paid for.” The Court also noted the position of Steve’s Marine that at least one repair, the replacement of two bilge pumps, became necessary to remove water from the boat.
Steve’s Marine claimed a garagekeeper’s lien on the boat. The computation of the amount of the lien was confusing. On or about November 17, 2015, May received a statement from Steve’s Marine dated November 1, 2015 in the amount of $14,653.34, for “Inv # 604 due 10/14/2014. Orig. Amount $11,705.48 — 2014 Summer Service Notice.” Another November 1 invoice, numbered FC 63, identified the remaining $2,947.86 as “Finance charges on overdue balance. Invoice # 604 for 11,705.48 on 10/14/2014.”
In August 2016, a notice of lien and sale was sent to May, with a sale date of September 2, 2016, although the sale was never held. At his deposition, Stavracos indicated the signature on the notice looked like his signature. The dollar figure of the lien on the notice was $18,784.30, which exceeded by about 50% the $11,705.48 billed on Invoice # 604 as the original amount and broke the figure down into summer service and storage in the amount of $11,705.48, the November 2015 service charges of $2,947.86, a December 2015 service charge of $3,178.76, a February 2016 service charge of $477.20, and a $475.00 lien fee.
The $11,705.48 item was the amount claimed to be due for all the work allegedly done on May’s boat. Stavracos identified the remaining four items as charges imposed for November, December, and February as interest, and the $475.00 lien fee as the charge of the lien company. Stavracos also acknowledged that the $11,705.48 included storage, but he did not know how much was for storage, and the invoice itself did not contain a discrete storage item.
Following May’s receipt of the notice and sale, his attorney sent Steve’s Marine a letter dated August 15, 2016. That appeared to be the last communication between the parties before the commencement of suit some five months later, in January 2017.
In addition to the conversion cause of action, May interposed five other causes of action. The first, third, fifth, and sixth were contractual, and the second sounded in fraud. Steve’s Marine’s counterclaims, both sounding in contract, were for the amounts due for the work, which was the subject of the first counterclaim, and for storage, which was the subject of the second.
May moved, and Steve’s Marine cross-moved, for summary judgment.
To recover on a cause of action for conversion, a party must show: (1) legal ownership or an immediate right to possession on the part of claimant; and (2) exercise of dominion over the subject property to the exclusion of claimant’s right. May’s ownership of the boat was not disputed. So the Court focused on the second requirement. The gravamen of May’s conversion cause of action was that Steve Marine’s invocation of the Lien Law resulted in the unlawful exercise of dominion of his boat to his exclusion as a matter of law.
Pursuant to the Lien Law, a person who keeps a place “for the storage, maintenance, keeping, or repair” of motor boats, and who in connection therewith repairs any motor boat “at the request or with the consent of the owner,” has a lien upon such boat “for the sum due for such… repairing” and may detain such boat until such sum is paid. Because the statute is in derogation of common law, its provisions are strictly construed. Departures from its requirements constitutes conversion as a matter of law. Although the computation of the lien amount was confusing, the undisputed facts established that the lien here was improper in at least one respect. The notice of lien included amounts, more than a third of the total sum in the notice, that were not for the maintenance or repair of May’s boat. On the basis of that departure from the requirements of the Lien Law alone, May established his conversion cause of action as a matter of law.
Steve’s Marine took the position that the conversion claim was a reiteration of the contractual claim interposed in the first cause of action, which alleged a breach of the contractual obligation to repair, and must be dismissed on that basis. Without more, a conversion claim cannot be based on a breach of contract. But the same conduct that constitutes a breach of contract may also be a breach of a separate obligation which, although arising out of the contractual relationship, is independent of both that relationship and of the contract itself, and which obligation can give rise to a claim for conversion. The Court found that the facts here presented breaches of a separate obligation independent of the contractual relationship. The contract, if proven, defined the obligation of Steve’s Marine to repair May’s boat and its right to payment. It also gave rise to, and defined, its independent statutory right to retain the vessel and limited that right to the garagekeeper’s lien for the value of the repairs. Consequently, both contractual and conversion causes of action could be maintained.
Stavracos asserted that he could not be liable in conversion because he acted only in his capacity as officer of Steve’s Marine. However, a corporate officer, although acting for the benefit of a corporation, could be held personally liable for a conversion in which he or she participated. Stavracos prepared and signed the notice of lien… He participated in the conversion. As imposition of liability on Stavracos personally for the conversion was proper, the motion to dismiss the fourth cause of action with respect to him was denied. May’s motion for summary judgment on his fourth cause of action on the issue of liability was granted.
May demanded the imposition of costs against Steve’s Marine for interposing what he characterized as two frivolous counterclaims and for the assessment of punitive double damages, insurance costs, and attorney’s fees for the conversion. The relevant provision of the Civil Practice Law and Rules applied to claims for “damages for personal injury, injury to property, or wrongful death, or an action brought by the individual who committed a crime against the victim of the crime.” The only potential qualifying basis for costs in this case was “injury to property.” However, that phrase is defined in the General Construction Law as “an actionable act, whereby the estate of another is lessened, other than a personal injury, or the breach of a contract.” Since both counterclaims were contractual, the statute was inapplicable. So May’s request for an assessment of costs for interposing those counterclaims was denied and those demands were dismissed.
No statute authorized punitive double damages for a conversion based on the violation of the garagekeeper’s lien. But, in a proper case, punitive damages could be awarded in the absence of an authorizing statute. The New York State Court of Appeals has offered the following guidelines for the imposition of punitive damages in a tort action: “[T]he defendant’s wrongdoing is not simply intentional but evinces a high degree of moral turpitude and demonstrate[s] such wanton dishonesty as to imply a criminal indifference to civil obligations… [P]unitive damages may be sought when the wrong was deliberate and has the character of outrage frequently associated with crime… The misconduct must be exceptional as when the wrongdoer has acted maliciously, wantonly, or with a recklessness that betokens an improper motive or vindictiveness… has engaged in outrageous or intentional misconduct or with reckless or wanton disregard of safety of rights.”
The gravamen of the conversion was the assertion of a garagekeeper’s lien in an excessive amount and the retention of May’s boat. Such conduct did not meet the standards to warrant an award of punitive damages. Consequently, the demand for punitive double damages on the fourth cause of action for conversion was denied and that demand was dismissed.
May’s demand for insurance costs also was dismissed, as his obligation to insure his boat was not a consequence or incident of the conversion. Attorney’s fees were not recoverable unless an award was expressly authorized by agreement between the parties, by statute, or by court rule. Conversion being a tort, fees had not been authorized by agreement of the parties, and they were not authorized by statute or court rule in an action for conversion. Consequently, May’s demand for attorney’s fees was dismissed.
A hearing would be scheduled to determine all other damages issues – but held in abeyance pending resolution of the parties’ contractual claims.
Steve’s Marine and Stavracos cross-moved for dismissal of May’s complaint for failure to state a cause of action or, in the alternative for summary judgment. Dismissal of the conversion claim was effectively denied with respect to the fourth cause of action by the grant of May’s motion for summary judgment with respect to that claim. However, the cross-motion was granted to the extent of dismissing the second cause of action in its entirety, dismissing the first, third, fifth, and sixth causes of action, which sounded in contract, against Stavracos, and dismissing May’s demands that his damages on the remaining contractual claims include an award for punitive double damages, the cost of his boat insurance, and attorney’s fees, plus costs.
The first, third, fifth, and sixth causes of action actually stated a single cause of action sounding in contract, with each specifying a different theory of the breach. The elements of a cause of action to recover damages for breach of contract are: (1) the existence of a contract; (2) the plaintiff’s performance pursuant to the contract; (3) the defendant’s breach of its contractual obligations; and (4) damages resulting from the breach. May pled the existence of a contract between Steve’s Marine and himself, his performance of his obligations, the breach by Steve’s Marine of its alleged obligation to repair his boat, and damage. Those claims stated all the elements of a contractual cause of action. To the extent summary judgment was sought dismissing them on the ground that they lacked merit, Steve’s Marine and Stavracos failed to establish their entitlement to judgment as a matter of law. Critical questions of fact, including the terms of the agreement of the parties and to what extent the parties satisfied those terms, were in dispute. Consequently, the motion to dismiss the contractual causes of action against Steve’s Marine in its entirety was denied.
Stavracos was a shareholder and the president of Steve’s Marine. None of the allegations in May’s papers reflected that Stavracos was a party to the alleged agreement between Steve’s Marine and May. The contracting parties were May and Steve’s Marine. With respect to the contracts of a corporation, there is generally no individual liability for principals of a corporation for actions taken in furtherance of the corporation’s business. The party seeking the imposition of liability against corporate principals for breach of the corporation’s contract must show that the corporation was a sham—a shell used by the principals to conduct their own personal business—and that they exercised complete dominion and control over the corporation. Such an evidentiary showing often includes, for example, proof that the corporation lacked a board of directors or shareholders, or corporate minutes, books, records, or bank accounts.
May submitted no proof reflecting that Steve’s Marine was a sham corporation. He had the opportunity to question Stavracos on the point at the deposition, as well as to explore the issue through other forms of discovery, yet he did not do so. The only record evidence did not support his position. For example, the April 23, 2013 check he wrote was made out to Steve’s Marine Service. The endorsement was a stamp consisting of three lines. The top line was “For Deposit Only.” The line below it read “Steve’s Marine Service West,” and the bottom line was an account number. In addition, the September 29, 2014 outline Stavracos wrote was on the letterhead of Steve’s Marine, as were the invoices. The record established May only did business with Steve’s Marine, not Stavracos. Consequently, the cross-motion to dismiss the complaint with respect to him, except for the fourth cause of action, was granted.
May’s second cause of action sounded in fraud. The complaint alleged that Steve’s Marine and Stavracos represented to him that the repairs had been done and his boat was in good working order. Based on those allegations, May paid the repair price, the representations were false, known to Steve’s Marine and Stavracos to be false, and May relied on these representations, resulting in damage.
Yet a cause of action for fraud may not be maintained when the fraudulent statement duplicates the alleged breach of contract. To maintain a separate cause of action sounding in fraud, the fraudulent statement must be collateral or extraneous to the terms of the agreement forming the basis of the contract claim. Here, the allegedly fraudulent representation was not collateral or extraneous to the agreement. The alleged misrepresentation in the fraud cause of action was that May’s boat was repaired. The contract cause of action was for the breach of duty to repair that boat and the alleged fraud was based on the nonperformance of the contractual duty to repair the boat. Consequently, the cross-motion to dismiss the second cause of action was granted with respect to both Steve’s Marine and Stavracos.
Steve’s Marine interposed two counterclaims but failed to establish its entitlement to summary judgment on either of them. Both counterclaims were contractual. In the first, Steve’s Marine alleged a contract existed with May to perform work, labor, and services consisting of mechanical work and materials for a specified price; it performed its obligations under the contract; May breached his contractual obligation by failing to make full payment; and Steve’s Marine was damaged to the extent it was not paid for its services. As the Court observed in denying the motion to dismiss May’s contractual claims, critical questions of fact, including the terms of the agreement, and the extent to which the parties satisfied those terms, were in dispute.
The second counterclaim was for the costs of storage of May’s boat. Steve’s Marine alleged that the boat was stored at May’s request and May had not paid for the storage in the amount of $9,000. However, despite those allegations, in making out his conversion claim, May established the fact that he never agreed to pay a storage fee. The only reference to storage was in the September 29, 2014 writing outlining the repairs the boat needed – and it was to the effect that Steve’s Marine would not charge May for storage if the work were done over the winter. No express agreement was made thereafter pursuant to which May agreed to be liable for storage fees if the work was not done then.
The notice of lien reflected that the $11,705.48 item included storage. Absent an express agreement for storage, a garagekeeper’s lien cannot be employed to recover storage charges. If a garagekeeper cannot recover storage charges asserted in a lien because of the absence of an express agreement, it cannot recover them in contract either. As a matter of law, Steve’s Marine could not recover the storage fees on a contract theory. Summary judgment was granted dismissing the second counterclaim.
To the extent Steve’s Marine sought to dismiss May’s demand for the imposition of costs for what he characterized as its interposition of frivolous counterclaims, the motion effectively was granted earlier by the denial of May’s demand for an assessment of costs and the dismissal of that demand.
Steve’s Marine also sought dismissal of May’s demand for double punitive damages on its contract claims. May did not base its demand on a statute. Absent a statutory basis for the imposition of punitive damages, the rule was that punitive damages were not recoverable for an ordinary breach of contract as their purpose was not to remedy private wrongs but to vindicate public rights. The allegations of the complaint reflected nothing more than an ordinary breach of contract—and so punitive damages could not be recovered by May.
The question of the dismissal of May’s demands for his insurance costs and attorney’s fees remained for consideration. The reasons for dismissal of those demands with respect to May’s conversion claim applied with equal force to his contract claims. Consequently, those demands were dismissed.