Courts Cracking Down on Wrongful Lien Sales

March 6, 2013 15
Courts Cracking Down on Wrongful Lien Sales

When a Georgia woman went to Walker Mountain Storage to retrieve things from her self-storage locker last week, she was appalled to find it completely empty. The facility accidentally auctioned off the woman’s possessions, and the manager is currently trying to buy her items back.

Calls to Walker Mountain Storage were answered by a manager who provided The Storage Facilitator with a particularly ironic statement: “Lien laws? What are lien laws? I don’t have any idea what you’re talking about.”

According to police, this accidental auction at Walker Mountain was due to a “computer error.” This is not the first time a facility has accidentally auctioned off the wrong unit, and state courts are increasingly more inclined to levy harsh penalties on facilities who let this happen.

Dubey v. Public Storage
After an Illinois Public Storage auctioned off the wrong unit in 2008, yoga instructor Vartika Dubey sued the company for breach of contract, conversion of goods, and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.

Although Dubey checked the box that said the value of her property “does not contain more than $5,000 worth of goods,” ostensibly limiting Public Storage’s liability to $5,000, Dubey claimed in her complaint that she had stored over $150,000 worth of goods.

Dubey testified that she did not have time to read everything on the rental agreement, as onsite property manager Lindsey Jarock took less than five minutes to explain the details of the agreement. Moreover, Dubey said she never paid attention to her exact locker number and was not stressed to do so by Jarock during the signing process.

As things unfolded, there was a paperwork mix-up, and Public Storage managers confused Dubey’s unit with that of a delinquent tenant, resulting in a lien sale. It is important to note that Dubey paid her rent on time via credit card every month.

An Illinois jury rewarded Dubey with $5,000 for breach of contract, $5,000 for conversion, and $745,000 in punitive damages for conversion.

In regard to the third count of Dubey’s complaint, the violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, the court once again ruled against Public Storage. Dubey received $69,145 in compensatory damages, $207,435 in punitive damages, and $185,849 in attorney fees and costs. All told, Dubey was awarded $1,217,429.

Although these verdicts were initially upheld in appeals court, two judges later remanded that the compensatory and punitive damages be reduced. That being said, Dubey still received a substantial payout.

Takeaway: Liability limits on rental agreements will usually protect the storage facility owner during instances of theft. However, when it comes to breach of contract, negligence, and conversion of goods, the courts are increasingly more likely to inflict severe punitive damages. This is why it’s important to make sure the tenant understands the rental agreement. Using videos and translators during the tenant’s signing can be helpful.

Cook v. Public Storage
A Milwaukee Public Storage leased a locker to Zachary Luckett, who lived with his parents James and Quincle Cook at the time. According to the rental agreement, Luckett was the lessee, but the Cooks were allowed to access his unit.

The manager incorrectly recorded Luckett’s address and then later failed to update the rental agreement after Luckett’s mom provided an alternate address.

Public Storage sent a notice of default and a notice of lien and sale, both of which were returned as undeliverable. After they auctioned Luckett’s unit, Public Storage was hit with a lawsuit in 2008.

In the opinion of the Wisconsin court, the provision in the rental agreement stating that “the lessee shall only store property that belongs to the lessee” was ambiguous due to another provision that granted Luckett’s parents access to the locker.

Public Storage was forced to pay $100,000 in punitive damages, as the court ruled that the sale of Luckett’s goods was “not commercially reasonable.” Cook, who brought the suit to court, received another $18,375 in damages and $282,154 in attorney fees and costs.

In total, the Cooks took home $400,529 as a result of the wrongful lien sale.

Takeaway: It is important that you only allow one name and signature on a rental agreement. You should also install methods of verifying tenants’ addresses and updating antiquated data. Having these methods in place will help you convince a court that you made reasonable efforts to reach delinquent tenants.

Milwicz v. Public Storage
Back in 2004, Tom Milwicz rented a storage unit at a Shurgard Storage, which was subsequently acquired by Public Storage. They sold his goods without any notice via email, telephone, or U.S. mail, and Milwicz sued for $250,000, alleging negligence and conversion of goods.

Milwicz cited his wife and daughter throughout his claim, and the court ruled that because Public Storage had no knowledge that anyone other Tom Milwicz was using the unit, the case was thrown out.

Milwicz appealed in Los Angeles county and the ruling was reversed. Although Milwicz did not recover the entire $250,000, he was still able to sue for gross negligence and recoup all of his costs.

Takeaway: Again, it is vital to only allow one name and signature on a rental agreement. You should also purchase wrongful sale and disposal insurance, as it no longer seems sufficient to rely on rental agreement provisions to limit the value of your tenants’ contents. Self-storage attorney Jeff Greenberger is a huge proponent of wrongful sale and disposal insurance. “There’s little your attorney can do to protect you if you commit a wrongful sale,” Greenberger has said.

In Greenberger’s newest venture, Late2Lien, he provides self-storage operators with “default notice compliance and automation software” that streamlines the lien notice process. As of today, Late2Lien only runs on SiteLink and Sentinel’s WinSen platforms–however, Greenberger said it will run on other platforms soon as well.

  • Mr.Richard & Mrs.Tammy Parker

    Thanks John that was some VERY IMPORTANT INFORMATION… being in the self storage business myself it’s a heads up kind of thing, I dread having to put someone’s belonging up for auction but it’s something that comes with the territory, but before I do I make every attempt to contact them, the procedure should always be to phone first, trying at least 3 times to contact them, assuming that the number you have on file is good and the phone number is not disconnected. Then send out certified mail which require that someone sign for it and if no one does, make sure that you have in your possession the return certified letter or the signed accepted card if it was delivered, after doing that run an ad in the local paper placing it under public auction or public announcements, and finally never hold the auction yourself, hire a professional auctioneer do the job for you so that they can double check that all of your paper work is in order to insure that you can legally auction a customer’s belongings, and then if something does go wrong the person that is responsible is not the facility, it’s the auctioneer because he was paid for a service that was to be conducted legally and lawfully the purpose of hiring him was to make sure that everything that was being done, was correct and in order, his job was to insure that everything was, so all liability, if anything go wrong, will rest on the shoulders of the auctioneer. Not the self storage facility… Thanks Again John :)
    Rich (Property Manager)

    • Bill Cole

      The auctioneer is hired to sell the unit. Period. They may advise you but the liability is with you and the owner.

      • Scott

        I had automatic payment for a unit, that was debited from same account for months. Got lien notice that my bank account was closed, which it wasn’t. Storage unit operator stating not responsible for bank error. Keep in mind it was their error. Contact with bank indicates that Storage unit never attempted to withdraw funds. Moreover, Storage unit indicating that in lien process, and cannot retract lien process. Got letter on 27 and advised that contents will be sold on 30. I received lien notice. Bluntly, will NEVER store in Storage unit again. It is my opinion that Storage units depend on their own clerical mistakes to sell your stuff. Bad, bad business practices.

        • roberta

          not all storage companies are jerks. find a family owned property. large companies don’t take care of their employees so the employees don’t take care of the property. I have been with a private owner for over 13 years. we do everything we can to make sure the customer is notified. we also wait a greater length of time required by law before we auction the goods.

        • Usmc Girl

          I agree. Public Storage did the same thing to my husband & I & sold every bit of our Marine Corps gear that we needed for war and had to pay for replacement gear out of our own pocket because they typed my voided check number in wrong for the monthly debit doesn’t even send anything to base and then illegally sells all the gear. I know they did that on purpose. Two sets of full battle rattle flaks kevlars Weapons Parts For Our Specialized Customized rifles… You’re Talking About A Lot Of Money. That’s why they didn’t bother contacting us first.

          • C. Hill

            Military should have been protected by SCRA Act,

    • Distressed tenant

      hi – read your post here about how you hate to dispose of someone’s elses property. Hallelujah1 I have been storing for over 10 years and they have collected a BUNDLE on me. Now, with 2 mo. late – they never called me, although had my number, but sent me a certified letter dated June 24th stating I had untill the 27th ONLY to pay IN FULL or have all my locks cut and go to auction. this is everything I own and they show NO regrets. Isn’t there a law that required more time be given to the tenant to gather up all the money(to get what is owed together)? this is in Oklahoma. Please write soon and let me know – Candy candyd@gmail.com
      PS they also just “remodled” – rather changed all the doors to ones requiring a special key only management has -so If you are late it is totally impossible to get any of your goods out – the locks are recesssd.

  • AZSA

    I hope owners and managers are paying attention to these news stories. One or two data points do not necessarily make a trend line. However, when these rulings are added to the notoriety brought to our industry by reality tv, we are attracting public (and judicial) attention that needs our attention.

  • Pter

    What is surprising is that nobody is complaining about courts being so fickle. Is it the job of the Judicial system to make law? Setting aside the cases of gross negligence, If there is an executed contract, with clear stipulations, why does the Judge have to change the rules? Why do we even bother with contracts?

  • Andrew

    It is a must to double and triple check all lien documents, count the actual days for the lien process against the ledger and verify all names and middle names are spelled correctly. Double check all addresses and unit numbers are correct noted in any publication including the date and time of sale. Always sell a unit 5 to 10 minutes after the published time, so a tenant cannot claim the auction started earlier than published thus exposing the site to a wrongful sale.

    Review all comments on the computer for any possible change of address and any other important comments that may lead to a tenant contact. Call all emergency numbers found whether with a name or not.

    On the day of the auction, double check the ledger for any full or partial payments made on the managers day off if the day off falls the week of the auction. Verify that no online payment has been made up to the minute the auction is to begin, unless the parameters have been set as to not accept any payment over 30 days ect.

    Evaluate the value of the items in the unit, if the unit is for sale for $300 but you know the contents will bring $1000+ its better to hold off one month than to be unsure when the Judge asks why you sold a unit that could have easily paid off the unit with another month of holding it to see if the tenants makes contact.

    Last and most important, if in doubt, DO NOT SELL, better to hold off another month than be sued and facing a Judge asking why you missed a important lien step?

  • lbgarvin

    It has been almost a year since my items were sold. I have had two insurance adjusters call to set up an apor to view what they got back but no appt ever made. They won’t even let me see what they got back. No one returns my calls and I am not sure what to do from here. I believe the manager they fired sold it in purpose although they say it was an accident. Help. What kind if lawyer should I look for? I have called a couple and they did not know what to do.

  • June Q

    Computers don’t make errors. Humans inputting information into the computers are responsible for the errors.

  • david

    Today my sons storage space was auctioned off they said I had until the 18 th of feb.2014 to pay up well if I had until today to pay up why were they selling our stuff at 3:00 pm should i have had up to closing time to pay and second my son died on aug.26 th 2013. They didnt send notices and if it was under his name why were they charging me and then not letting me have access to the storage space all his personal things were in there his and my pictures birth certificates his clothes things I can never replace I begged the manager to please allow me to pay on the 28 th of feb.she said no ive been with public storage five years the only things I had left of my son and best friend are gone forever how was it going to hurt this company to wait eight more days.

  • jon

    just happened to me. also public storage theivery

  • jon

    what about the people who lose their belongings due because of sorry business practices by the companies. especially the military towns that these are robbing blind and getting away with it? no concern for them just the quick bucks from the sales of their lives and memories.