and seek any deficiency balance or early termination liability plaintiff might owe. There had not yet been any

Transcription

1 SUPREME COURT SHORT FORM OIR STATE OF NEW YORK Present: HON. ROBERT ROBERTO, JR. Justice TRIAL/AS PART 1 NASSAU COUNTY PETER MILUK, il Plaintiff( s), Index No /03 -against- Motion Date: 5/6/04 CHASE AUTOMOTNE FINANCE Cal. No. SEQ. # Defendant( s). The following papers read on this motion Notice of Motion, with supporting papers... Affirmation in Opposition Replying Affirmations... Upon the foregoing papers it is ordered that the motion by the defendant for summary judgment dismissing the complaint and severance and continuation of its counterclaim is of this order. denied with leave to renew pursuant to the terms It is undisputed that the plaintiffs leased automobile, a 2002 Mercedes Benz, was seized by the New York City Police Department (hereinafter "NYPD") in Ju y of 2003, incident to plaintiff s arrest for violation of V ehicle and Traffic Law (driving while intoxicated). It also is undisputed that the NYPD returned the car to the lessor s assignee, defendant Chase Automotive Finance (hereinafter return it to the plaintiff. Chase" or "lessor ), on condition that it not By letter dated October 31, 2003, Chase notified the plaintiff that it had the car, and further notified him that confiscation of the Vehicle constitutes a default." Chase stated that it would proceed to sell the car at auction and seek any deficiency balance or early termination liability plaintiff might owe. There had not yet been any adjudication of the propriety of the underlying seizure, nor resolution of the criminal case. The plaintiffthen started an action sounding in conversion, which seeks return of the automobile from Chase and money damages. Chase answered the complaint, and asserted counterclaims based on the alleged default. It seeks money damages, including repossession expenses and attorney s fees. Chase now moves for summary

2 MILUK v CHASE INDEX #18247/03 judgment dismissing the complaint, and severing and continuing its counterclaims. The relevant portion of the lease that defines a default is as follows: You will be in default if. d) you lose possession of the vehicle by confiscation, forfeiture or other involuntarytransferregardless of whether the vehicle is the subject of judicial or administrative proceedings; The central question to be decided on this motion is whether the plaintiff was in default of the lease under this provision, no other form of default having been asserted by Chase. Before reaching that issue, however, the Court must address certain preliminar contentions the plaintiffhas raised. First, he claims that the defendant waived its rights under the lease. He points to a letter written by one of defendant's employees to the NYPD, dated September 8, 2003, in which such person stated that "the above mentioned (plaintiff s) account is current and in good standing. Chase Auto Finance has no objections that the above mentioned vehicle be returned to Mr. Peter Miluk II. Plaintiff asserts that this constitutes a waiver of Chase s right to take the car, and that under such circumstances its later act of accepting the vehicle from the NYPD was an act of conversion, giving the plaintiff a cause of action under that theory, and the right to seek replevin of the vehicle. He also asserts that the default clause referred to above violates public policy and is unconscionable, in that it disables the plaintiff from challenging the propriety of the initial seizure, which he has a right to do under the Fourteenth Amendment of the United States Constitution. Relatedly, he points to a decision of the Second Circuit Court of Appeals in which NYPD procedures under the Administrative Code of the City of New York were held constitutionally infirm (see, Krimstock v Kelly, 306 F3d 40). The defendant responds that under NYPD policy, as outlined in a notice it received from the New York City Law Deparment dated September (after Chase sent its letter), it was forced to agree not to return the car. to the defendant. To do otherwise would have meant that it would have lost its ability to obtain the release ofthe automobile as the titled owner. Chase claims that upon its receipt of the City' s notification, it was entitled to terminate the lease, take possession of and sell the car. as follows: The plaintiffs waiver argument is without merit. Under the paragraph entitled "General ") the lease states If we waive or delay enforcing any of our rights, it wil not affect our ability to enforce any of our rights afterwards. " 1 The Court has deduced this title from the very small-tye copy provided on this motion the left margin of which has been cut off. In any event, the terms, if not the heading, are clear - with the aid of a magnifyng glass. The lease agreement is found as exhibit "A" to the Paehr affdavit.

3 MILUK v CHASE. INDEX #18247/03 Therefore, the contract gave the defendant the right, in effect, to "change its mind" in view of the circumstances wrought by the NYPD notice, even assuming that the September 8 notice constituted a waiver. Nor does the Court find that a default provision such as the one at issue violates public policy and is unconscionable. The Court of Appeals noted in County of Nassau v Canavan (1 NY3d 134) that the forfeiture of an automobile to the government resulting from drinking and drving is not an "excessive fine "under the-united States Constitution. It therefore is no great leap to decide that a lessee, who cannot lose title in such forfeiture because it was not his to lose, cannot be heard to complain when the very same act of drinking and drving leads to a significant financial loss under a lease contract. Moreover, as the titled owner of the vehicle, a lessor certainly is entitled to declare a breach if an act of its lessee could lead to the loss of its propert, as it is the lessee s obligation to return that propert at the end of the lease term. To the extent that the delivery of the car to Chase moots any attempt by the plaintiff to seek its return by challenging the seizure and retention of the vehicle, the plaintiff overlooks the fact that the NYD voluntarly returned it to the defendant -- it was the government's decision and Chase canot be faulted for protecting its interest by accepting the government's terms. The real question is whether Chase s interpretation of the default provision-- e., that the initial seizure constituted a default -- is correct, giving it a right to the remedies that flow from such default. The automobile can stil be returned to the plaintiff. The Court finds that the default provision reproduced above is ambiguous. Confiscation and forfeitue refer to a taking under color of law, generally by the government (see, Black' s Law Dictionar, 5 ed). As drafted, the provision can refer to the initial seizure, the mere holding of the vehicle while proceedings are pending, or to the outcome of proceedings, and the implications of each such interpretation var. For example, if it is the last, there canot be a "confiscation" or "forfeiture" or "involuntary transfer" of a motor vehicle until the government obtains a judgment permitting it to transfer title out of the owner and into it. Thus, if no final judgment permitting such a change in title is obtained, there arguably has been no loss of possession by confiscation or forfeitue. If one assumes that "confiscation" or "forfeiq.re" or "involuntar transfer" means a mere holding of the vehicle against the lessee s will, the right to such temporar possession by the government wil be in play. Under these circumstances, the government cannot retain the vehicle absent judicial permission. It must establish a prima facie right to retain the vehicle by demonstrating the same at a hearing shortly after seizue, something the Court of Appeals has indicated must occur as a constitutional matter (County of Nassau v Canavan, supra). Therefore, it is possible that the lessee may not "lose possession" even while confiscation/forfeiture proceedings are pending. There is also the interpretation Chase obviously advances - that the moment the police took the car a default has occurred. However, an absurd result can follow: a retention hearing is held a few weeks later, the lessee prevails

4 MILUK v CHASE INDEX #18247/03 p.r1 the car is returned, and the lessee continues to make his lease payments and is in possession. Nevertheless, under Chase s interpretation the lessee would be in default by dint of the initial seizue, and can suffer the significant consequences of such a default at the whim of the lessor, who has had absolutely no damage. Contracts are not to be interpreted so as to leave one par wholly at the mercy of the other (Components Direct v European Am. Bank & Trust Co. 175 AD2d ). In view ofthis ambiguity in the language of the default clause, which should be constred against the drafter (see generally, Guardian Life Ins. Co. v Schaefer 70 NY2d 288), the Court holds that the "confiscation" or forfeitue" or "other involuntary transfer" ofthe vehicle that can trigger a default means that the seizing government entity has established a right to continued possession, either by way of a retention hearing, or by plea or conviction of a charge that would form a predicate for taking the vehicle under the applicable forfeiture law - here, the local N ew York City forfeiture statute (see Administrative Code of the City of New Y ork ~ ). In this case possession has already been given to the defendant by the City of New York, rendering a retention hearng moot. Accordingly, the first chance the plaintiff/criminal defendant would have to demonstrate that the seizure was wrongful would be in the context of the underlying criminal proceedings. Until that happens, it canot be known if the seizure was anything more than a mistaken act by the police. In view ofthe constitutional issues raised, that seizure, standing alone, should not cause the potentially significant financial consequences of a default under the lease until an adjudication of the criminal case is had. Finally, into each contract must be read an implied covenant of good faith and fair dealing (see, Van Valkenburgh, Nooger Nevile v Hayden Pub. Co., 30 NY2d 34; Sterling National Bank v Goldberg, 277 AD2d 45; Components Direct v European Am. Bank Trust Co., supra). What Chase asks for here would be contrar to this authority, because if the plaintiff prevails as a defendant in the criminal case against him (or already has pre:ailed), it would mean that the factual basis for the government' s seizure, and/or the procedures utilized by the government, was or were wrong, and that the vehicle should not have been taken from him. In such a case, the plaintiff could demonstrate that, as a matter of good faith and fair dealing, the lessor should not declare that this wrongful seizure constitutes a default with which the lessee should be charged. In view ofthe foregoing, and the silence ofthe present record regarding an adjudication of plaintiff s criminal case, the motion is denied, inasmuch as there has been no prima facie showing of defendant's entitlement to judgment as a matter oflaw (see, e.g., Winegrad v New York Univ. Med. Ctr. 64 NY2d ). However, if a guilty plea or conviction has occurred, so has a default under the lease, and the defendant may be entitled to dismissal of the plaintiff s complaint, which seeks return of the automobile; if the case has been dismissed or the plaintiff acquitted, there has been no default on the grounds of loss of possession to the City of New York, and the plaintiff may be entitled to possession under the terms of the lease.

5 p.tl MILUK v CHASE INDEX #18247/03 Accordingly, Chase may renew this motion, should it be so advised, upon the outcome of the criminal case. Counsel for the plaintiff is to serve notice of any such disposition upon counsel for the defendant herein promptly upon obtaining knowledge thereof. Date:. July l lOl l'li. J. ""Ji,-.u i.unty COUNTY CLERK' S OFFIC