Opinion
40357099.
Decided November 3, 2004.
Defendant Chrysler Financial Company, L.L.C., ("Chrysler") as successor by merger to Chrysler Financial Corporation, moves, inter alia, for the return of the total proceeds received by plaintiff Property Clerk, New York City Police Department ("plaintiff" or "Property Clerk") from the auction of a vehicle in which Chrysler had a security interest. The vehicle, a 1998 Jeep Grand Cherokee, was seized from defendant Ann L. Aquino ("Aquino"), following her arrest on charges of Driving While Intoxicated (VTL §§ 1192.2 and 1192.3) and forfeited pursuant to NYC Admin. Code § 14-140. The Property Clerk opposes this motion to the extent that it seeks to retain a ten percent (10%) "administrative fee" from the sale proceeds. It is undisputed that Chrysler is entitled to at least ninety percent (90%) of the auction proceeds. Background
Although the parties agree that Chrysler is minimally entitled to ninety percent (90%) of the auction proceeds, the Property Clerk has purportedly withheld payment of same pending Chrysler's execution of a General Release with Indemnification form. See Zalantis Letter, dated August 2, 2004 and exhibits annexed thereto. In light of the Property Clerk's admission to Chrysler's entitlement to said proceeds there is simply no justification for plaintiff's self-imposed "stay" impediment to the immediate payment to of $9,630.00 to Chrysler, the undisputed share of the auction proceeds.
Aquino purchased the subject vehicle from Speed Auto Sales ("Speed") and entered into a retail installment contract ("contract") to finance $24,290.01 of the purchase price. In accordance with the terms of the contract, Speed assigned the contract to Chrysler's predecessor by merger and Chrysler perfected its security interest in the vehicle in accordance with Vehicle and Traffic Law § 2118. Aquino failed to make payments as required under the contract leaving a balance due of $19,206.82. (Jurban Aff. annexed to motion). This non-payment and the Property Clerk's seizure of the vehicle constituted a default under the terms of the contract. Upon such default, the contract allows Chrysler to repossess the vehicle, sell it and utilize the proceeds, less "allowable expenses," to pay off the balance, if any, due under the contract.
A security interest in a motor vehicle is perfected by delivery of the existing certificate of title (' title") if one exists, together with the name and address of the lienholder to the Department of Motor Vehicles ("DMV"). The DMV then either endorses the title or issues a new title with the name and address of the lienholder.
"Allow[able] expenses are those reasonable expenses incurred as a direct result of retaking the Vehicle, holding it, preparing it for sale and selling it. In addition, if [Chrysler] hires an attorney who is not a salaried employee of [Chrysler] to collect what [Aquino] owes, you agree to pay reasonable attorney's fees including, without limitation, on appeal and in bankruptcy proceedings, not to exceed fifteen percent (15%) of the unpaid balance of this contract after such default. If the proceeds of the sale, less allowed expenses, are not sufficient to pay the net amount still owed on this contract, [Chrysler] may recover the deficiency with interest . . . if there is money left over it will be paid to [Aquino]." (Bracketed matter added) (Contract annexed as Exh. P to Motion).
Following Aquino's arrest and subsequent demand for the return of the vehicle the Property Clerk commenced this action against her. Chrysler successfully moved to intervene in this action, was added as a co-defendant to this action and the court issued an order enjoining the Property Clerk from releasing the vehicle to Aquino. (February 16, 2000 Decision and Order of the Hon. W. McCooe, J.S.C.).
Chrysler's motion to intervene was granted on consent of the Property Clerk.
Chrysler, asserting that N.Y.C. Administrative Code § 14-140 was constitutionally infirm, moved for: (1) summary judgement directing the return of the vehicle;
(2) declaratory judgment that any administrative fee imposed by the Property Clerk was a disguised forfeiture violating its rights to due process, the protections afforded by the Takings clause and constituted an excessive fine; (3) a judgment declaring Chrysler's right to the vehicle superior to defendants; (4) or in the alternative, an order directing the Property Clerk to immediately auction the vehicle and allow Chrysler to "credit bid" up to the full amount of its lien.
In Property Clerk v. Aquino, NYLJ, October 2, 2000, p. 26, col. 1 (Sup.Ct., NY County, McCooe J.), the court reiterated the holding in Molomo and found that Chrysler's sole remedy was to receive the proceeds of the forfeiture action and obtain a deficiency judgment, if any, against the owner. Concerning the 10% administrative fee, the Justice McCooe logically concluded "Chrysler will not suffer any loss unless the deficiency cannot be recovered from Aquino. Therefore any opinion by this Court as to the 10% administrative fee would be advisory since the event may never take place.
Nor would Chrysler suffer a loss unless the 10% administrative fee exceeded its contractual repossession expenses-which are not to exceed 15% of the sale proceeds. The point is that since neither event may occur, any opinion would be advisory." Parenthetically, by Order date May 22, 2000 the court granted the Property Clerk a default judgement as to Aquino.
The Property Clerk and Chrysler entered into a stipulation whereby the Property Clerk agreed to release the vehicle to Chrysler in exchange, inter alia, for a One Thousand Dollar ($1,000.00) payment, a duly executed "hold harmless" agreement and an agreement not to re-lease the vehicle to Aquino (Stipulation annexed as Exh. E to Motion). When Chrysler attempted to retrieve the vehicle, it learned that approximately six months before the date of the stipulation, the vehicle had been sold at auction for $10,700.00 (Bill of Sale annexed as Exh. G to Motion).
Chrysler' Rights as a Lienholder
As a secured lienholder, Chrysler is "merely entitled to satisfy its lien from the proceeds of the property after the forfeiture has been adjudicated against the guilty party." Property Clerk v. Molomo, 179 AD2d at 21 ().
In rejecting Ford Motor Credit Corp's. "Nor, should Ford's status as a lienholder, not an owner, be glossed over." Vehicle and Traffic Law § 128 defines owner as follows "A person, other than a lienholder, having, the property in or title to a vehicle or vessel. The term includes a person A lienholder benefits by not sharing liability Vehicle and Traffic Law § 338 provides for vicarious liability for "every owner of a vehicle" for personal injuries or property damage cause by the negligence of any driver operating the vehicle with the express or implied permission of the owner. "An owner includes a person or entity having title to a vehicle (other than a lienholder) . . ."
Administrative Fees
The parties are in agreement that Chyrsler is entitled to the proceeds of the auction but differ only as to whether proceeds is defined as the gross amount received, up to the amount of Chrysler's lien, or the net proceeds after the Property Clerk has recovered its incurred expenses.
Significantly, Justice McCooe noted, albeit in dicta, that "Chrysler as a lienholder has no legal right to object to any administrative fee imposed by the Property Clerk and that is the sole right of the owner of the vehicle." Id.
Chrysler asserts that because the Property Clerk has auctioned off the vehicle and seeks to retain 10% of the administrative fees any ruling on the validity of the administrative fee would no longer be an advisory opinion. Chrysler has already obtained a judgment against Aquino for the full value of its lien, allowable costs and interest. Even at this late juncture, Chrysler has not demonstrated that it is unable to enforce its judgement against Aquino.
Pursuant to an Order dated March 13, 2002, this Court granted summary judgement in Chrysler's favor as to its first and second cross-claims against Aquino (Decision and Order annexed as Exh. K to Motion). By Judgment, dated April 5, 2002, Chrysler was granted a judgment against Aquino in the amount of $26,994.57 representing the deficiency amount due under the contract, $19,206.82, interest in the amount of $4,631.73, costs and disbursements in the amount of $275.00 plus attorneys' fees in the amount of $2,881.02 (Judgment annexed as Exh. L to Motion).
In this discussion, it is pointed out that Courts have addressed the issue of proceeds. In Property Clerk v. Bauman, 146 Misc2d 874 (Sup.Ct., NY County, 1990 J ____)
If the police Property Clerk elects not to sell the vehicle, he is directed to pay the balance due to the secured party under the retail installment contract with defendant; if there is a sale and the net proceeds are less than such balance, such proceeds shall be paid to the lienholder; if the proceeds are more than such balance, the balance shall be paid to the lienholder.
In Property Clerk v. Molomo, 179 AD2d 210, 583 N.Y.S.2d 251 (1st Dept., 1992) the issue before the court was the lienholder, Ford Motor Credit Company's ("Ford), right to replevin the forfeited vehicle prior to auction. In detailing the circumstance surrounding the forfeiture action, the Appellate Division, First Department noted that "[t]he Property Clerk plans to sell the vehicle at auction and retain 10% of the proceeds for its administrative expenses and remit the remainder to Ford. . . . and the proceeds from the sale" Id. at 212.
The molomo court, sub silento, ratified the Property Clerk's retention of the 10% administrative fee for its expenses in auctioning a seized vehicle.
"Finally, harsh as forfeiture may seem, the risks inherent in [the lienholder's] position as a secured creditor are no greater in this instance, where the value of its lien is diminished by the unlawful conduct of the defendant." Id. at ___.
"Whatever other steps a lienor might take to protect its interests from loss, e.g., the retail installment contract herein required the buyer to insure the vehicle and gave him the option of credit life and credit disability insurance, Ford could conceivably insure itself for any loss it might sustain in the event the buyer violated a law thus triggering the seizure and forfeiture provisions of the Administrative Code." ( Molomo A.D. at 216).
By adopting
Storage Fees
Chrysler asserts that there is no legal that would allow the Property Clerk to impose a storage fee for vehicles seized for forfeiture.
Although NYC Administrative Code § 14-140 is silent on the issue of administrative expenses and storage fees, analogous provisions of the New York City Administrative Code allow the imposition of storage fees. By way of example, NYC Administrative Code § 20-468 allows, in relevant part, the seizure and forfeiture of vehicles utilized unlicensed vending. "If a forfeiture proceeding is not commenced the owner or other person lawfully entitled to the possession of such . . . vehicle . . . may be charged with the reasonable cost for removal and storage payable prior to the release of . . . [the] vehicle." (NYC Administrative Code § 20-468(c).
Chrysler's Status as Defendant
Generally, under the doctrine of law of the case, "a court should not ordinarily reconsider, disturb or overrule an order in the same action of another court of co-ordinate jurisdiction.' Matter of Dondi v. Jones, 40 NY2d 8, 15, 386 N.Y.S. 2d 4 (). However as noted by the Appellate Division, Second Department in Foley v. Roche et al., 86 A.D.2d 887, (2nd Dept., 1982)
"The law of the case doctrine is part of a larger family of kindred concepts, including res judicata, or claim preclusion, and collateral estoppel, or issue preclusion, which broadly speaking, are designed to limit relitigation of issues. While doctrines of res judicata, or claim preclusion, are rigid rules of limitation, doctrine of law of the case is a judicially crafted policy that expresses the practice of courts generally to refuse to reopen what has been decided." People v. Evans, 94 NY2d 499, 706 N.Y.S.2d 678 (2000). It is self-evident that the law of the case doctrine applies only to courts of coordinate jurisdiction and has no binding force on an appellate court. Martin v. City of Cohoes, 371 NY2d 162, 371 NYS2d 687 (1975).
In Foley v. Roche, the lower court granted defendant's motion to dismiss notwithstanding an earlier decision by the Appellate Division, First Department denying such relief. In that ruling, the Appellate Division, First Department relied on a New York State Court of Appeals decision that had subsequently been overruled by the United States Supreme Court. In affirming the lower court decision, the Appellate Division, Second Department viewed defendant's motion to dismiss essentially as a motion to reargue the prior decision and noted that "[t]he prior determination of the First Department [issued prior to a change of venue to Nassau County] is plainly in error when viewed — retrospectively [internal citations omitted]. . . . [w]ere this court to reverse Special Term [the lower court] for its bold practicality, would be unnecessarily subjecting defendants to the expense of trial and further appeals to obtain a preordained outcome. The law cannot be so unyielding. Id, at ___.
"[t]he doctrine of law of the case is not an absolute mandate on the court," since it may be 'ignored' in 'extraordinary circumstances' vitiating its effectiveness as a rule fostering orderly convenience ( Politi v. Irvmar Realty Corp., 13 AD2d 469; Walker v. Gerli, 257 App Div 249, 251; see Barrett v. State Mut. Life Assur. Co., 58 AD2d 320, 322, affd 44 NY2d 872, cert den 440 U.S. 912), such as a change in the law or a showing of new evidence affecting the prior determination ( Matter of Yeampierre v. Gutman, 57 AD2d 898, 899). The error sought to be corrected must, however, be so 'plain . . . [that it] would require [the] court to grant a reargument of a cause' ( Eaton v. Alger, 47 NY 345, 348)."
Although no appeal was taken from the Decision Order dated, February 18, 2000 allowing Chrysler to intervene in this action, subsequent thereto, the Appellate Division, First Department addressed the identical issue in a forfeiture action captioned Property Clerk v. Foley et al., 282 AD2d 221 (1st Dept., 2001). The First Department unanimously affirmed lower court decisions denying motions by appellants/vehicle finance companies, including Chrysler, for leave to intervene in forfeiture actions and for preliminary injunctions prohibiting the Property Clerk from releasing the vehicle to defendants, finding that
[a]ppellants' security interest in the subject vehicles will not be adversely affected by any judgments to be entered in these actions. . . . [a]ppellants have no present possessory right in the vehicles (Property Clerk of NY City Police Dept. V. Molomo, 81 NY2d 936). Their remedy, in the event of forfeiture, is to receive the proceeds from the City's forfeiture sale and to seek any deficiency from the defendant vehicle owners (id.), and In the event of noforfeiture, to sue defendants for return of the vehicles or for such other relief as might be provided in their contracts with defendants. In Foley, Chrysler, represented by its present counsel, had a full and fair opportunity to be heard on a lienholder's right to intervene.
As the Court of Appeals has noted, the "law of the case doctrine is designed to eliminate the inefficiency and disorder that would follow if courts of coordinate jurisdiction were free to overrule one another in an ongoing case." People v. Evans, 94 NY2d 499, 706 N.Y.S.2d 678 (2000).
However in this instance, blind adherence to the law of the case doctrine would compel this court to adhere to a prior ruling by a court of coordinate jurisdiction, rather than a subsequent ruling set forth by the Appellate Division, First Department. The First Department has determined, as a matter of law, that a lienholder has no right to intervene in a civil forfeiture action. Compelling the Property Clerk to move to reargue the Decision and Order dated ____ promotes neither efficiency or order.
Ordinarily in instances where there is a change in the law that would alter a court's prior determination a party may move for renewal pursuant to CPLR § 2221(e) (2). The Appellate Division, First Department has explicitly recognized that under these circumstances a party's right may move for CPLR § 2221 relief even after the period within which to appeal the prior order has expired. Irizarry v. New York City Health abd Hospitals Corp., 268 AD2d 321 (1st Dept., 2000).
Chrysler has failed to demonstrate that the Property Clerk's turnover of the proceeds of the auction, less 10% administrative fee violates constitutional protections.
In Bennis v. Michigan, 516 U.S. 442 (1996), the United States, Supreme Court allowed the forfeiture of the wife's interest in a vehicle when the husband had been convicted of gross indecency for using the vehicle to engage in illicit sex with a prostitute. Obviously, there was no allegation that the wife consented to her husband's illicit use of the seized vehicle. The Supreme Court rejected constitutional challenges based on the Fifth, Eighth and Fourteenth amendment and found that under the Michigan statute, the lack of culpability on the part of an owner of a seized vehicle used as the instrumentality of a crime did not serve as a bar to forfeiture. In an amicus curiae brief filed in support of Bennis, the American Bankers Association ("Lenders") ( 1995 WL 782837 [US]), argued that the Michigan statute violated the due process and takings protections of the Fifth and Fourteenth Amendments, despite provisions of the Michigan statute allowing liens to be satisfied from the net proceeds (full proceeds less expenses) of the auto auction. At oral argument counsel for plaintiff wife asserted that the state could forfeit the seized vehicle provided that it fully compensated Bennis for her interest in the vehicle but that "that so-called administrative expense, attorney's fees, prosecutorial attorney fees and court costs, [and] Detroit police costs are not properly assessable against her interest, [and] that as a matter of constitutional law that is improper to assess those costs against her." ( 1995 WL 712350 at p. 7 [US)]. Implicit in the Bennis decision allowing complete forfeiture of the wife's interest in the vehicle is the U.S. Supreme Court's recognition that the imposition of administrative fees and expenses on "innocent owners" and leinholders does dos not run afoul of federal constitutional protections.
This court has examined Chyrsler's remaining contentions and finds them to be without merit.
Accordingly, it is hereby
ORDERED that Chrysler's motion for the return of the entire auction proceeds from the sale of the seized vehicle is denied; and it is further
ORDERED that the Property Clerk shall pay Chrysler Nine Thousand Six Hundred and Thirty Dollars ($9,630.00), representing ninety-percent (90%) of the auction proceeds of $10,700.00 within ten (10) days of service of this Decision and Order with notice of entry; and it is further
This constitutes the Decision and Order of this Court.