Page 1 2

Lien Law Application

Do you Have a Good Stay?

The New York Lien Law provides a mechanism to avoid or reduce a garageman’s lien where the repair or storage facility has possession of the collateral. The lender or creditor must move promptly as the statute provides that a special proceeding must be commenced within ten days of notice of the lien sale.

Typically when the lien does not exceed $25,000.00, the creditor will bring on an application in the Civil Court, which is a court of limited jurisdiction, by way of Order to Show Cause containing a stay of the sale pending a disposition of the proceeding. However, recently the Civil Courts in the City of New York have refused to issue a stay of the sale in the belief that the Civil Court lacked authority to stay the sale. Without a stay the collateral would normally be sold before a proceeding could be concluded.

The denial of the stay forces a creditor to bring the proceeding in the Supreme Court, a court of unlimited jurisdiction, where the expenses of doing so are much higher. The Civil Court was relying on the 1992 decision of Judge Michael Stallman in Maloney v. Rincon, 153 Misc.2d 162; 581 N.Y.S.2d 120 (1992). There, Judge Stallman reviewed the history of the applicable provisions of the lien law, and concluded that the statute did not confer upon the Civil Court the power to enjoin or stay the pending sale of collateral.

The problem with Judge Stallman’s analysis is that it effectively negates the purpose of the statute, which is to give the claimant or creditor an opportunity to avoid the lien and recover possession of the collateral if such relief is appropriate. If the sale of the collateral can go on in spite of the pendency of the special proceeding, then the return of possession of the collateral to the creditor will no longer be possible.

Fortunately, this issue has recently been revisited in another Civil Court case decided on May 20, 2002 by Judge Nelson Roman in the Bronx Civil Court. In McGreen v. On Point Collision, Inc., N.Y.L.J., July 11, 2002, page 19, column 6, Judge Roman had before him a case factually similar to Maloney v. Rincon. Nevertheless, Judge Roman, in a well-reasoned decision, reached a different conclusion. Here the garagekeeper, relying on Maloney v. Rincon, contended that the Court lacked authority to stay the sale and that the proceeding should be dismissed. Judge Roman held that in order to restore possession to a petitioner, the “power to enjoin the sale…is not only inferred, but inherent within the statutory theme.”

In the absence of any appellate authority, it is unclear which decision other Civil Court Judges will follow. However, it is likely that the more recent decision, will be followed, which gives a more effective and practical application to the statute. It would, of course, be wise to check with the Court before presenting papers since time is of the essence.