Summary
In Sharrock, the New York Court of Appeals found that the lien enforcement activities of a private entity were "entwined" with government action "so as to constitute significant and meaningful State participation which triggers the protections afforded by [the New York State] Constitution."
Summary of this case from Hernandez v. United StatesOpinion
Argued April 26, 1978
Decided July 11, 1978
Appeal from the Appellate Division of the Supreme Court in the Second Judicial Department, JAMES R. CARUSO, J.
James K. Levin and Daniel G. Levin for appellants.
Martin A. Schwartz and Alan Steiner for respondent. Louis J. Lefkowitz, Attorney-General (A. Seth Greenwald, Samuel A. Hirshowitz and John Farrar of counsel), in his statutory capacity under section 71 of the Executive Law.
Challenged here as violative of the due process clauses of the State Constitution (NY Const, art I, § 6) and the Fourteenth Amendment of the Federal Constitution is the statutory authorization afforded a garageman to foreclose his possessory statutory lien for repair and storage charges (Lien Law, § 184), by means of a public sale of the vehicle in his possession. We hold that sections 200, 201, 202 and 204 of the Lien Law, insofar as they empower a garageman to conduct an ex parte sale of a bailed automobile, fail to comport with traditional notions of procedural due process embodied in the State Constitution, as they deprive the owner of the vehicle of a significant property interest without providing any opportunity to be heard.
On October 12, 1975, plaintiff's husband took her 1970 Cadillac to Dell Buick-Cadillac, Inc. (Dell), for installation of a replacement engine he had purchased elsewhere. The husband signed a work authorization wherein it was agreed that Dell was to remove the defective engine and install its replacement for the sum of $225. The affidavits of plaintiff and her husband recite that the work authorization form contained no provisions with respect to storage charges which were subsequently unilaterally imposed by Dell. Approximately one week later, plaintiff's husband offered to pay the $225 to Dell, but was advised by its service manager to withhold payment until the engine was installed.
Unfortunately, the replacement engine proved to be defective and had to be removed. Delivery of a replacement engine was then arranged. When the new replacement engine arrived, Dell informed plaintiff's husband that it would not be installed until Dell was paid the $225 due for the installation of the original defective engine. Although he agreed to pay this sum, plaintiff's husband did not have that amount of money with him at the time and soon thereafter was hospitalized, rendering him incapable of continuing his business dealings with Dell.
On January 14, 1976 plaintiff received a "Notice of Lien and Sale" by certified mail, informing her that pursuant to section 184 of the Lien Law Dell had imposed a possessory lien against the Cadillac in the amount of $304.95. That notice further advised that if plaintiff did not tender this sum within 30 days, the automobile would be sold at public auction on March 15, 1976 (see Lien Law, § 200). Plaintiff was subsequently informed by one of the auctioneers listed on the notice of sale that, her belief to the contrary notwithstanding, included in the lien was the sum of $79.95, representing storage charges. However, the auctioneer did agree to contact Dell in order to ascertain whether they would "take off" the storage charge from the amount due.
Several days later, the auctioneer informed plaintiff that Dell refused to waive its storage charge and that the amount now due had been increased to $545. He also advised her that since the book value of the car was appreciably greater than $545, it would be to plaintiff's advantage to pay the charges since Dell "had her over a barrel" because her husband had taken the car there for repair. On the day of the auction, March 15, 1976, Dell again modified its claim and informed plaintiff that the amount due had been reduced to $502. Later that day, plaintiff's 1970 Cadillac, having an established resale value of between $1,200 and $1,400, was sold to Dell for the sum of $502.
Plaintiff then commenced the instant action for declaratory and injunctive relief, as well as damages, claiming that the sale provisions of the Lien Law are violative of her due process rights as they authorize public sale of her automobile without affording the opportunity for a hearing. Plaintiff's motion for summary judgment was denied by Special Term on the ground that the affidavits submitted presented triable issues of fact. The Appellate Division modified, granting judgment to plaintiff declaring sections 200, 201, 202 and 204 of the Lien Law unconstitutional and granted leave to appeal to this court, certifying the following question for our review: "Was the order of this court, dated March 28, 1977, properly made?" We affirm, and answer the certified question in the affirmative.
The threshold question in any judicial inquiry into conduct claimed to be violative of the due process clause of the Fourteenth Amendment is whether the State has in some fashion involved itself in what, in another setting, would otherwise be deemed private activity (see U.S. Code, tit 42, § 1983; Jones v Mayer Co., 392 U.S. 409, 422-424). That much is made plain by the express terms of the amendment which specifies that "nor shall any State deprive any person of life, liberty, or property without due process of law" (emphasis added). Purely private conduct, however egregious or unreasonable, does not rise to the level of constitutional significance absent a significant nexus between the State and the actors or the conduct (see Civil Rights Cases, 109 U.S. 3, 11). This nexus has been denominated "State action" and is an essential requisite to any action grounded on violation of equal protection of the laws or a deprivation of due process of law. Further, it is settled that where the impetus for the allegedly unconstitutional conduct is private, the State must have "significantly involved itself" in order for that action to fall within the ambit of the Fourteenth Amendment (Reitman v Mulkey, 387 U.S. 369, 380).
Despite its outward simplicity as a concept, State action is in fact an elusive principle, one which cannot be easily discerned by resort to ritualistic incantations or precise formalisms (see Burton v Wilmington Parking Auth., 365 U.S. 715, 722). Instead, a number of factors must be considered in determining whether a State is significantly involved in statutorily authorized private conduct. These factors include: the source of authority for the private action; whether the State is so entwined with the regulation of the private conduct as to constitute State activity; whether there is meaningful State participation in the activity; and whether there has been a delegation of what has traditionally been a State function to a private person (Melara v Kennedy, 541 F.2d 802, 805). As the test is not simply State involvement, but rather significant State involvement, satisfaction of one of these criteria may not necessarily be determinative to a finding of State action.
In the series of cases in which the Supreme Court has imposed the requirements of procedural due process in situations in which a creditor sought to deprive a debtor of a significant property interest (Sniadach v Family Fin. Corp., 395 U.S. 337; Fuentes v Shevin, 407 U.S. 67; Mitchell v Grant Co., 416 U.S. 600; North Ga. Finishing v DiChem, 419 U.S. 601), State action was manifest since the seizure was effected by officers of the State or by judicial process. In contrast, here the involvement of the State is concededly less direct (see Burke Reber, State Action, Congressional Power and Creditors' Rights: An Essay on the Fourteenth Amendment, 47 S Cal L Rev 1, 53; Note, Procedural Due Process — Post- Fuentes Constitutionality of Garagemen's Liens, 54 BU L Rev 542, 550-551).
We need not address plaintiff's contention that the actions taken by Dell are attributable to the State of New York for purposes of the due process clause of the Fourteenth Amendment. Recently, in Flagg Bros. v Brooks ( 436 U.S. 149), the Supreme Court rejected the argument that a private sale of property subject to a warehouseman's possessory lien pursuant to section 7-210 of the Uniform Commercial Code constitutes State action. The similarities between section 7-210 and the statutes at issue here might preclude any contrary finding by this court.
There are, of course, substantial differences between the private sale of goods authorized by the warehouseman's lien law and the private sale authorized by sections 200, 201, 202 and 204 of the Lien Law. Critical to the determination in Flagg Bros. that the private sale did not constitute State action was the "total absence of overt official involvement" (436 US, at p 157). Here, that overt governmental involvement absent in Flagg Bros. is present to some degree. In this State, title to an automobile cannot be transferred, and thus a sale cannot be accomplished under the Lien Law, without registration of the vehicle by the Department of Motor Vehicles and its issuance of a certificate of title (Vehicle and Traffic Law, §§ 401, 420, 2104, 2107, 2113-2115, 2117). Thus, the fact that initiation of the sale stems from a private source does not detract from the necessity that the garageman invoke both the power of the sovereign and the participation of public officials to bring about the involuntary transfer of title. The power of the State utilized to implement the involuntary transfer of title pursuant to the Lien Law may be sufficiently analogous to the issuance of a writ by a court clerk in Sniadach v Family Fin. Corp. ( 395 U.S. 337), Fuentes v Shevin ( 407 U.S. 67) and North Ga. Finishing v Di-Chem ( 419 U.S. 601) to support a finding of overt State involvement in the garagemen's sale. However, in view of our determination that the challenged provisions of the Lien Law are violative of the due process clause of the State Constitution, it is unnecessary for us to decide that question.
But the mere fact that an activity might not constitute State action for purposes of the Federal Constitution does not perforce necessitate that the same conclusion be reached when that conduct is claimed to be violative of the State Constitution (see Ives v South Buffalo Ry. Co., 201 N.Y. 271, 317; Oregon v Hass, 420 U.S. 714, 719; Sibron v New York, 392 U.S. 40, 60-61; Minnesota v National Tea Co., 309 U.S. 551, 556-557). Indeed, on innumerable occasions this court has given our State Constitution an independent construction, affording the rights and liberties of the citizens of this State even more protection than may be secured under the United States Constitution (see, e.g., People v Isaacson, 44 N.Y.2d 511; People ex rel. Walsh v Vincent, 40 N.Y.2d 1049; People v Hobson, 39 N.Y.2d 479, 483-484; People v Donovan, 13 N.Y.2d 148, 151; Ives v South Buffalo Ry. Co., 201 N.Y. 271, 317, supra). This independent construction finds its genesis specifically in the unique language of the due process clause of the New York Constitution as well as the long history of due process protections afforded the citizens of this State and, more generally, in fundamental principles of federalism (see Johnson v Louisiana, 406 U.S. 356, 376; New State Ice Co. v Liebmann, 285 U.S. 262, 311 [BRANDEIS, J., dissenting]).
In contrast to the due process clause of the Fourteenth Amendment, which is phrased in terms of State deprivation of life, liberty or property, section 6 of article I of the New York Constitution guarantees that "[n]o person shall be deprived of life, liberty or property without due process of law." Conspicuously absent from the State Constitution is any language requiring State action before an individual may find refuge in its protections. That is not to say, of course, that the due process clause of the State Constitution eliminates the necessity of any State involvement in the objected to activity (see Stuart v Palmer, 74 N.Y. 183, 188). Rather, the absence of any express State action language simply provides a basis to apply a more flexible State involvement requirement than is currently being imposed by the Supreme Court with respect to the Federal provision.
The historical differences between the Federal and State due process clauses make clear that they were adopted to combat entirely different evils (see Schwartz, The Bill of Rights: A Documentary History, pp 161, 165, 387, 855-856). Prior to the Civil War, the Federal Constitution had as its major concern governmental structures and relationships. Indeed, prior to the enactment of the Fourteenth Amendment, the Bill of Rights delimited only the power of the National Government, imposing few restrictions on State authority and offering virtually no protections of individual liberties (see Barron v Mayor City Council of Baltimore, 7 Pet [32 US] 243). The Fourteenth Amendment was a watershed — an attempt to extend and catalogue a series of national privileges and immunities, thereby furnishing minimum standards designed to guarantee the individual protection against the potential abuses of a monolithic government, whether that government be national, State or local (see Kurland, The Privileges or Immunities Clause: "Its Hour Come Round at Last"?, 1972 Wn. U LQ 405; Brennan, State Constitutions and the Protection of Individual Rights, 90 Harv L Rev 489, 501). In contrast, State Constitutions in general, and the New York Constitution in particular, have long safeguarded any threat to individual liberties, irrespective of from what quarter that peril arose. Thus, as early as 1843, Justice BRONSON, in speaking of the due process clause of our State Constitution, noted: "The meaning of the section then seems to be, that no member of the state shall be disfranchised, or deprived of any of his rights and privileges, unless the matter be adjudged against him upon trial and according to the course of the common law. It must be ascertained judicially that he has forfeited his privileges, or that some one else has a superior title to the property he possesses, before either of them can be taken from him" (Taylor v Porter, 4 Hill 140, 146; see, also, Wynehamer v People, 13 N.Y. 378, 394).
Examination of the indicies of State participation in nonjudicial foreclosure pursuant to the provisions of the Lien Law at issue here compels the conclusion that New York has so entwined itself into the debtor-creditor relationship as to constitute sufficient and meaningful State participation which triggers the protections afforded by our Constitution.
The garageman's lien is a statutory declaration of the common-law artisan's lien. At common law, a workman who by his labor enhanced the value of a chattel, obtained a lien upon it for the reasonable value of the work performed. That lien endowed the artisan with the exclusive right to possession of the repaired article until his charges were satisfied (1 Jones, Law of Liens, §§ 731, 749; Brown, Personal Property [2d], § 107, pp 505-511). The possessory nature of the garageman's lien is not in issue here, and in any event, does not constitute State action (see IDS Leasing Corp. v Hansa Jet Corp., 51 A.D.2d 536, affg 82 Misc.2d 741). For State action purposes, there is a fundamental distinction between a statute which, in regulating previously lawful conduct, does nothing more than merely acknowledge its lawfulness (Adams v Southern Cal. First Nat. Bank, 492 F.2d 324, 333, n 24, cert den 419 U.S. 1006), and one which authorizes otherwise impermissible or unconstitutional conduct (Tedeschi v Blackwood, 410 F. Supp. 34, 41-42 [three-Judge court]).
As noted, common law afforded the garageman only the right to possession; it was the State which authorized enforcement of the lien by means of ex parte sale of the vehicle without first affording its owner an opportunity to be heard (see L 1909, ch 38, as amd). Thus, New York has done more than simply furnish its statutory imprimatur to purely private action. Rather, it has entwined itself into the debtor-creditor relationship arising out of otherwise regular consumer transactions. The enactment of substantive provisions of law which authorize the creditor to bypass the courts to carry out the foreclosure sale encourages him to adopt this procedure rather than to rely on more cumbersome methods which might comport with constitutional due process guarantees. Indeed, not only does the State encourage adoption of this patently unfair procedure, it insulates the garageman from civil or criminal liability arising out of the sale and requires one of its agencies, the Department of Motor Vehicles, to recognize and record the transfer of title (see Vehicle and Traffic Law, § 401), thus enabling the garageman to transfer title to a vehicle he would not otherwise be deemed to own (Adams v Department of Motor Vehicles, 11 Cal.3d 146, 150-151; cf. Caesar v Kiser, 387 F. Supp. 645; Barber v Rader, 350 F. Supp. 183; Dielen v Levine, 344 F. Supp. 823).
Even more fundamentally, the underlying purpose of the sale provisions of the Lien Law — that of conflict resolution — has always been deemed one of the essential attributes of sovereignty. Absent consent of the debtor, the power to fashion the means to order legally binding surrenders of property has always been exclusively vested in the State. Implementation of dispute settlement, irrespective of the strength of the competing interests of the parties, is the function of the judiciary, and is not dependent "on custom or the will of strategically placed individuals, but on the common-law model" (Boddie v Connecticut, 401 U.S. 371, 375). But by permitting the possessory lienor to take those steps necessary to foreclose his lien in a nonjudicial setting where the power of sale is premised on possession alone, the State has permitted the garageman to arrogate to himself the exclusive power of the sovereign to resolve disputes. However strong the interest of the garageman in the vehicle may be, his power of foreclosure has no vitality until it is sanctioned by the State. It follows, then, that such a person vested by the State with the power to resolve unilaterally an otherwise judicially cognizable controversy, is nothing more than a delegate of an exclusively governmental function (cf. North Ga. Finishing v Di-Chem, 419 U.S. 601, supra; Fuentes v Shevin, 407 U.S. 67, 93, supra). For this reason, the debtor must be provided with that measure of due process as would be afforded in a court of law.
Additionally, as we held in Blye v Globe-Wernicke Realty Co. ( 33 N.Y.2d 15, 20), the execution of a lien, the sale of the property affected thereby and the conclusiveness of the sale, has endowed private individuals with the same authority as has been traditionally vested with the Sheriff. This grant of power to a private individual to perform a public function is attributable to the State in these circumstances (cf. Parks v "Mr. Ford", 556 F.2d 132, 141; Hall v Garson, 430 F.2d 430, 439; Ann., 64 ALR3d 814). The instant sale was made under the provisions of the Lien Law, the absence of which would have required Dell to go into court to prove both the validity of its lien and the charges due thereunder. Instead, by permitting the garageman to hold the sale ex parte, "the state has delegated the traditional roles of judge, jury and sheriff to [Dell] without providing for any judicial supervision or other safeguards" (Cox Bakeries of N.D. v Timm Moving Stor., 554 F.2d 356, 358).
It is true, as the Attorney-General and others have suggested, that the facts in Blye are distinguishable from those involved here. Blye involved the constitutionality of New York's innkeeper's lien (Lien Law, § 181), which permitted the summary seizure of the property of a guest. In contrast, the possessory lien of a garageman (Lien Law, § 184), arises out of a voluntary bailment by the owner of the vehicle, and in any event is not in issue here. Whatever the relative interests of the garageman or the innkeeper might be, the fact remains that whether the debtor's property is summarily seized or is sold ex parte, the individual doing so is performing the traditional functions of the Sheriff and his actions are attributable to the State for purpose of section 6 of article I of the New York Constitution.
Having determined that enforcement of the garageman's lien constitutes meaningful State participation inasmuch as New York has delegated to private parties functions traditionally associated with sovereignty, we therefore reach the substantive constitutional question. Fundamental notions of procedural due process require that before the State may deprive a person of a significant property interest in aid of a creditor, that person be given notice and an opportunity to be heard prior to deprivation of that interest (Wynehamer v People, 13 N.Y. 378, 392-393, supra; Stuart v Palmer, 74 N.Y. 183, 191, supra; Memphis Light, Gas Water Div. v Craft, 436 U.S. 1; Armstrong v Manzo, 380 U.S. 545, 552). Tested by this requirement, the statutes do not pass muster in light of the due process standards articulated in analogous circumstances by the Supreme Court. Sniadach v Family Fin. Corp. ( 395 U.S. 337, supra) and Fuentes v Shevin ( 407 U.S. 67, supra) teach that even a temporary deprivation of property is entitled to due process protection. Although the implications of these holdings were left somewhat in doubt after Mitchell v Grant Co. ( 416 U.S. 600), in North Ga. Finishing v Di-Chem ( 419 U.S. 601, supra), the Supreme Court made clear that it was the peculiar features of the Louisiana sequestration statutes that insulated them from due process infirmity. Viewed in this context, enforcement of the garageman's lien is as objectionable as the remedies struck down in Sniadach, Fuentes and North Ga. Finishing because it is executed without even a modicum of judicial intervention or supervision.
The statutory scheme relating to the garageman's lien and its foreclosure is relatively simple. Section 184 of the Lien Law grants a garageman a possessory lien against a motor vehicle for charges incurred in connection with its maintenance, repair or storage. The constitutionality of the possessory lien was upheld by the Appellate Division in IDS Leasing Corp. v Hansa Jet Corp. ( 51 A.D.2d 536, affg 82 Misc.2d 741), and is not in issue here. Section 200 of the Lien Law permits the possessory lien of the garageman to be satisfied by the ex parte sale of the vehicle. Section 201 provides that prior to the sale of the vehicle, the garageman shall serve a notice of sale upon the owner. Section 202 specifies that the sale of the vehicle take place at a previously advertised public auction. Finally, section 204 provides that the garageman shall retain an amount sufficient to satisfy his lien and the expenses incurred in connection with the sale from the proceeds; any balance remaining to be held by the garageman subject to the demand of the now-former owner of the vehicle.
In reaching this conclusion, we do not write on a clean slate. A significant number of courts have reached and decided the merits of procedural due process challenges to garageman's lien foreclosure acts, striking down statutes virtually indistinguishable from those at issue here (see Parks v "Mr. Ford", 556 F.2d 132; Hernandez v European Auto Collision, 487 F.2d 378; Caesar v Kiser, 387 F. Supp. 645; Mason v Garris, 360 F. Supp. 420, mod 364 F. Supp. 452; Straley v Gassaway Motor Co., 359 F. Supp. 902; Cockerel v Caldwell, 378 F. Supp. 491; Ford v Dean's O.K. Tire Store, CCH Poverty L Rep, par 16,856; Adams v Department of Motor Vehicles, 11 Cal.3d 146, supra; Whitmore v New Jersey Div. of Motor Vehicles, 137 N.J. Super. 492; Ann., 64 ALR3d 814; cf. Blye v Globe-Wernicke Realty Co., 33 N.Y.2d 15, supra; Cox Bakeries of N.D. v Timm Moving Stor., 554 F.2d 356, supra; Culbertson v Leland, 528 F.2d 426; Johnson v Riverside Hotel, 399 F. Supp. 1138; Ragin v Schwartz, 393 F. Supp. 152; Isbel v County of Sonoma, 21 Cal.3d 61; Barry Props. v Frick Bros. Roofing Co., 277 Md. 15). Although the holdings of a number of the Federal cases cited above have been undermined by the "State action" determination of the Supreme Court in Flagg Bros. v Brooks ( 436 U.S. 149, supra), their substantive determinations remain unimpaired, viz., that ex parte foreclosure of an artisan's lien is constitutionally infirm inasmuch as it affords no opportunity to be heard prior to the final deprivation of a significant property interest.
Moreover, the statutes challenged here display none of the "saving characteristics" (North Ga. Finishing v Di-Chem, supra, at p 607) of the provisions sustained in Mitchell. Twenty-four days after notice of sale is served, the garageman may proceed with the sale without having even approached a court or consulted the debtor, without filing a bond or affidavit, and without affording the owner a hearing in which he may contest the amount due. Even more objectionable is the fact that the statutes at issue here result in a permanent deprivation of what is today a necessity of life, not a temporary deprivation as would be occasioned by attachment, sequestration or replevin.
While the owner of a vehicle ordinarily understands that a garageman expects payment upon completion of the work, the contested provisions of the Lien Law afford him little redress to the garageman's retention and ex parte sale if the charges demanded exceed the previous estimate or there is a dispute as to the quality of workmanship. Instead, pursuant to his statutory grant of authority, a garageman may sell any vehicle, no matter how valuable, to satisfy any lien, no matter how small (Parks v "Mr. Ford", 556 F.2d 132, 143, supra). To be sure, it is a reasonable exercise of the State's police power to give the garageman a security interest in vehicles which he has enhanced in value. However, it is unreasonable and constitutionally impermissible to provide absolutely no safeguards against unauthorized or unnecessary repairs or storage charges which may underlie the whole transaction, especially where an ownership interest hangs in the balance. By permitting a creditor to hold and sell a debtor's property unless his demands are met, the State empowers the garageman to engage in conduct which is tantamount to blackmail. In these circumstances, it is essential that the debtor be provided a forum to air his defenses.
Notwithstanding these patent inequities, it is urged that the vehicle owner may still enjoin an impending sale (CPLR art 63), maintain an action for a judgment declaring the charges imposed unreasonable (CPLR 3001) or initiate a replevin action to recover the vehicle (CPLR art 71; see Dininny v Reavis, 100 Misc. 316, affd 178 App. Div. 922). However, when viewed from the standpoint of the persons involved this suggestion borders on the ludicrous (cf. Matter of B.T. Prods. v Barr, 44 N.Y.2d 226, 233, n 2). Not only does it ask us to adopt a holding specifically rejected by the Supreme Court (Fuentes v Shevin, 407 U.S. 67, 83, and n 13, supra), it fails to take into account the delays and uncertainties inherent in any judicial proceeding and the fact that one whose automobile is subject to an impending sale is frequently poor, unrepresented by an attorney and unschooled in legal niceties. Moreover, as replevin and injunction are extraordinary remedies, they lack the certainty necessary to insure a hearing prior to permanent deprivation (see Caesar v Kiser, 387 F. Supp. 645, 649, supra). Even assuming that these procedures could be deemed effective, the creditor's duty to afford the debtor an opportunity to be heard prior to the deprivation of a significant property interest would not be abrogated. The point is that by requiring a hearing prior to sale there would be assurance that all will have the opportunity to assert their claims.
Nor may the summary sale here be justified on the ground that the initial retention of the vehicle arose out of a voluntary transaction. At most, voluntary delivery of the automobile created a bailor-bailee relationship, which relationship could not divest the bailor of his continuing interest and title, irrespective of whether the bailee has a possessory lien on the bailed chattel (Hernandez v European Auto Collision, 487 F.2d 378, 385 [concurring opn]). Since that possessory lien is merely a security interest, the State may not constitutionally permit a garageman to extinguish the owner's interest without adherence to minimum due process standards. To be rejected also is the assertion that the statutes here may be justified because of the extraordinary circumstances present. The property of a debtor may be summarily seized or sold only in a truly unusual situation and only "to secure an important governmental or general public interest or where the need for prompt action is paramount" (Blye v Globe-Wernicke Realty Co., 33 N.Y.2d 15, 21, supra). But, as the Supreme Court has noted, where "no more than private gain is directly at stake" (Fuentes v Shevin, supra, at p 92), the opportunity to be heard is an indispensable bulwark against an arbitrary, and final, deprivation of property.
We are not unmindful of the stake that a garageman has in the prompt enforceability of his lien. However, this interest should not be deemed inconsistent with the vehicle owner's right to be afforded the opportunity for some sort of prior judicial determination of the existence and scope of the lien. In this regard, we do not pass on the form of the hearing which the due process clause requires (see Friendly, Some Kind of Hearing, 123 U of Pa L Rev 1267, 1275). As the Supreme Court has aptly noted, "we deal here only with the right to an opportunity to be heard. Since the issues and facts decisive of rights * * * may very often be quite simple, there is a likelihood that many defendants would forgo their opportunity, sensing the futility of the exercise in the particular case. And, of course, no hearing need be held unless the defendant, having received notice of his opportunity, takes advantage of it" (Fuentes v Shevin, supra, at pp 92-93, n 29).
It must be concluded, therefore, that the sale provisions of sections 200, 201, 202 and 204 of the Lien Law violate the due process clause of the New York Constitution inasmuch as they fail to provide the owner of a vehicle an opportunity to be heard prior to permanent deprivation of a significant property interest. The garageman's right to retain his possessory lien is unaffected by this decision, but he may not sell the vehicle to satisfy his claim unless and until a method is devised, consistent with due process, of affording the owner some opportunity to be heard.
There are a number of statements in the dissenting opinion which merit comment. Most importantly, we do not hold or even intimate that the statutes at issue here are not violative of the due process clause of the Federal Constitution (dissenting opn, at p 168). Rather, when tested by the dictates of the State due process clause, the statutes fail to pass constitutional muster thus rendering any inquiry of State action for purposes of the Fourteenth Amendment wholly academic (at pp 158-160, and n 2). Noticeably, the dissenters do not address the issue of whether the deprivation of a motor vehicle under the questioned statutes accords with fundamental concepts of justice and fairness.
Also disturbing is the dissent's suggestion that our holding is afflicted with "hasty embrace" or "novelty" or of a single State court (dissenting opn, at p 168). This is so, especially in view of the number of well-respected courts of other jurisdictions, notably those of commercially active States such as California and New Jersey, which have struck down statutes similar to those in issue here (see n 5, supra). This case was argued over two months ago and the subject has been before courts for years (see Ann., 64 ALR3d 814).
Moreover, it is difficult, if not impossible, to imagine that the lengthy list of horribles posed by the dissenters (dissenting opn, at p 172), will relegate the economy of this State into a Brobdingnagian "quagmire". For all that appears, no disastrous aftermath followed in those States whose courts saw fit to invalidate similar statutes. Even assuming that the dire consequences which so alarm the dissenters could somehow come to pass, to exalt economic considerations over the rights of our citizens is nothing more than abdication of this court's constitutional responsibility (cf. Brooklyn Union Gas Co. v New York State Human Rights Appeal Bd., 41 N.Y.2d 84, 90). This is not a case involving merchants where commercial considerations might necessitate a greater degree of deference to legislative judgment (cf. Uniform Commercial Code, § 2-104). Involved here are consumers, frequently poor and unrepresented by counsel, who cannot be deemed to have forfeited their constitutional rights simply because they have engaged the services of someone in the commercial sector. We hold only that a garageman with a possessory lien on a repaired motor vehicle must afford its owner an opportunity to be heard before his ownership interest may be extinguished. The dissenters' concerns notwithstanding, this court has yet to shirk its responsibility and deprive persons of their constitutional rights because of unwarranted fears of overburdened court calendars. Moreover, nothing prevents the garageman from securing the owner's knowing waiver of his opportunity for a hearing when possession is initially transferred as many artisans and merchants are wont to do.
Nor have we expressed any opinion as to the constitutionality of statutes not here in issue. It may very well be that in some instances the significance of the property interest involved does not rise to constitutional proportions. However, we do not fall back from our position that where a garageman, with the blessing of the State, purports to deprive a person of an economic necessity such person be afforded an opportunity to be heard.
Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.
The majority holds today that the private sale on notice to the owner of a vehicle to satisfy a garageman's lien, as regulated by statute (Lien Law, §§ 200, 201, 202, 204), is violative of the due process clause of the State Constitution. I disagree and would sustain the constitutionality of the challenged statutes on the ground that the statutory scheme does not involve State action and, therefore, may not properly be measured against due process standards applicable only when State action is present.
Confronted by a controlling decision of the United States Supreme Court, the majority declines, as indeed it must, to hold these statutes violative of the due process clause of the Federal Constitution. In Flagg Bros. v Brooks ( 436 U.S. 149), the argument was rejected that a private sale of goods subject to a warehouseman's lien as authorized by section 7-210 of the Uniform Commercial Code, a statute strikingly similar to those challenged in this case, constitutes State action. The court observed that it is immaterial that a warehouseman's lien is statutory, emphasizing that the statute does not encourage the warehouseman to engage in any activity. "Here", the court said, "the State of New York has not compelled the sale of a bailor's goods, but has merely announced the circumstances under which its courts will not interfere with a private sale." (Flagg Bros. v Brooks, supra, at p 166.) The court concluded that the realm of private commercial transactions is inappropriate for an expansive application of the sovereign function doctrine of State action.
In Jones v Gordon (76 Civ 1430, U.S. Dist Ct, EDNY, June 21, 1978), the court held that the Flagg decision precludes a finding that sections 200-202 and 204 of the Lien Law involve State action since they are functionally and conceptually identical to section 7-210 of the Uniform Commercial Code, the statute challenged in Flagg.
Particularly paradoxical is that the present overturning of commercial legal principles occurs in a court noted throughout its history for its sensitivity and leadership in the commercial field. In doing so, the majority refers to the State action doctrine, the ground for its holding, as an "elusive principle" at p 158). Significant, too, is that the principles now being applied so hastily and with such novelty will proliferate similar litigation and by analogy propagate similar applications in parallel commercial lien transactions. This hasty embrace of novel doctrine follows on the heels of the rejection of the same attempted extension of the State action doctrine by the very court which gave initial impetus to the doctrine in more appropriate contexts. Moreover, this rejection by the Supreme Court undermines the reasoning and the authorities upon which the Appellate Division relied and respondent also relied until their repudiation by the Supreme Court.
I believe the analysis in Flagg applies with equal force to the statutes challenged today. Not only is a private commercial transaction involved here, but the interest of the garageman in a chattel, having stored it and having enhanced its value, is more substantial than the interest of a warehouseman, who merely stores a chattel.
The majority, however, asserts that "the mere fact that an activity might not constitute State action for purposes of the Federal Constitution does not perforce necessitate that the same conclusion be reached when that conduct is claimed to be violative of the State Constitution." (At p 159.) Particularly in a case such as this involving commercial transactions, I would be reluctant to hold, as the majority does, that State and Federal due process protections are not coextensive. "The clauses", we said in Central Sav. Bank v City of New York ( 280 N.Y. 9, 10), "are formulated in the same words and are intended for the protection of the same fundamental rights of the individual and there is, logically, no room for distinction in definition of the scope of the two clauses." There is little difference of constitutional dimension for State action purposes between the two clauses. Both clauses are aimed directly at limiting the ability of State government to deal unfairly with its citizens. Clearly, then, the due process clauses are limited in their operation to situations where there is State involvement. This emphasis on State action ensures that citizens are protected from arbitrary and capricious action by the State.
Apparently the majority concedes that under the State Constitution due process may not be invoked absent "State involvement". I would add that the State involvement must be significant, rather than incidental. Traditionally, an inquiry into whether the State is significantly involved in private activity has focused on the nexus between the government and the private conduct. A close entwinement between the two has resulted in a finding of State action. Thus, where the State reaps some benefit from the private conduct (Phillips v Money, 503 F.2d 990, cert den 420 U.S. 934), or where the State encourages the private activity (Reitman v Mulkey, 387 U.S. 369), State action has been found. To be sure, participation of government agents or officials may signal the presence of State action (Fuentes v Shevin, 407 U.S. 67; Sniadach v Family Fin. Corp., 395 U.S. 337).
But the presence or absence of State action may not be determined simply by tallying the number of connections between the State and a particular private activity. Nor can it be said that the mere statutory authorization of an activity signals that the State has become a participant or has encouraged the activity. (Flagg Bros. v Brooks, 436 US, at pp 164-166, supra; Moose Lodge No. 107 v Irvis, 407 U.S. 163; Davis v Richmond, 512 F.2d 201.) A fundamental role of government is to provide rules for private persons in private transactions which will lend guidance to those whose private interests are in conflict. Such is the mechanism for preserving an orderly and viable society. Exercise of this governmental regulatory and rule-making power alone in an otherwise free society does not necessarily manifest State action, for of paramount concern is how the acts of government impact on the ordering of private rights and interests. Vindication of a substantial private interest by law may not constitute State action, while State action is more readily found in a law which propels an insubstantial interest of one individual over a more substantial interest of another. (Note, State Action and the Burger Court, 60 Va L Rev 840, 841; Burke and Reber, State Action, Congressional Power and Creditors' Rights: An Essay on the Fourteenth Amendment, 47 S Cal L Rev 1, 52.) Application of the concept of State action by the courts indicates the validity of this approach. The concept was originally developed and greatly expanded in racial discrimination cases involving denials of equal protection, an area of intense judicial concern and substantive constitutional interest. (Shelly v Kraemer, 334 U.S. 1, 23.) Where racial discrimination has not been at issue, however, courts have construed the State action concept more narrowly. (Adams v Southern Cal. First Nat. Bank, 492 F.2d 324, 333, cert den 419 U.S. 1006; Coleman v Wagner Coll., 429 F.2d 1120, 1127 [FRIENDLY, J., concurring].)
Since the garageman's lien (Lien Law, § 184) is merely a modern statutory codification of the ancient artisan's lien, a proper application of the indices of State action to the case before us may be made only after reviewing the common-law artisan's lien. At common law, a workman who, with the consent of the owner, enhanced the value of a chattel, obtained an artisan's lien on the chattel for the reasonable value of the work performed. (Morgan v Congdon, 4 N.Y. 552, 553; 1 Jones, Liens [2d ed], § 731, p 480.) The equity of this fundamental principle of law is readily grasped, for a workman having invested his labor, time and materials in repairing or maintaining another's personal property must be extended some means of securing just compensation. (Brown, Personal Property [3d ed], § 13.2, p 398.) No one contends in this case, nor could one seriously contend, that the common-law creation of the artisan's lien involved State action. Such a lien reflected the legal mechanism fashioned to accommodate the competing interests of the artisan and the owner of personal property. Both the private nature of the interests and the lack of governmental participation in the resolution of the conflict removed the artisan's lien from the ambit of State action. Likewise, statutory codification of the common-law lien is equally unsuited to State action classification, legislative enactments having altered merely the form, rather than the substance, of the artisan's lien. (IDS Leasing Corp. v Hansa Jet Corp., 51 A.D.2d 536, affg 82 Misc.2d 741; Melara v Kennedy, 541 F.2d 802; see Lien Law, §§ 180, 184, 185, 186.)
While the challenged statutory scheme authorizes more than a mere possessory lien, permitting the lienor to conduct a foreclosure sale of the chattel (Lien Law, § 200) subject to strict notice requirements (Lien Law, §§ 201, 202), such an expansion of rights is merely an exercise of the State's regulatory powers to provide guidelines for the resolution of legitimate divergent interests. The garageman, having enhanced the value of the chattel, has obtained a significant property interest in it. This interest served as the springboard for the creation of the common-law artisan's lien, and it similarly supports statutory authorization for the lienor to foreclose the lien. Indeed, a mere possessory lien without the right to sell would offer little benefit to the garageman who might ultimately bear the expense and inconvenience of storage of the vehicle indefinitely. Such a burden could defeat the very purpose sought to be achieved by the lien. The right to foreclose, upon proper prior notice to the owner, is therefore both a reasonable and necessary means of insuring that the lien will serve its intended purpose. By contrast, the rights of the owner of the chattel are affected only minimally by the sale, since the lienor's right to possession continues indefinitely until satisfied. The substantial interests of the garageman in the chattel, and the lesser impact that these statutes have on the interests of the owner, compel the conclusion that these statutes have not worked a significant reordering of the interests involved. The challenged private conduct should therefore not be attributed to the State.
Moreover, the other indices of State action are not present to any significant degree. No benefit inures to the State by operation of these statutes, nor is the State encouraging the lienor to take any action whatever; the initiative rests with the lienor. As to governmental participation, it cannot be argued persuasively that the purely incidental involvement of a licensed auctioneer, who conducted the sale, or of the Department of Motor Vehicles, which transfers title of vehicles, rises to the level of State action, any more than that the use of the post office to mail the notice of sale constitutes Federal action. Indeed, the majority agrees that the State involvement must be more than just that and that it must be a "rather significant State involvement." (At p 158.)
In concluding that no State action is present in this case, I am mindful that in Blye v Globe-Wernicke Realty Co. ( 33 N.Y.2d 15), we found that the seizure of property by an innkeeper pursuant to section 181 of the Lien Law constituted State action. The rationale of that decision was that the innkeeper, in seizing a guest's property, has executed his own seizure under the lien. This procedure resembles a seizure in satisfaction of a judgment, a traditional function of the Sheriff. But in Blye, we did not hold that the performance of any governmental function is necessarily State action. Implicit in that decision we recognized the nature of the competing interests of the parties. The interest of the guest to be free from the forcible seizure of his personal property was exalted above the interest of the innkeeper to satisfy a lien for use of premises and incidental services, by seizing property bearing no relationship to the lien. The statutes challenged today stand in a significantly different posture, since the property subject to the lien, having been voluntarily delivered to the garageman, is seized by neither the lienor nor the Sheriff. Moreover, in contrast to the innkeeper, the garageman, in enhancing the value of the chattel, has acquired a substantial interest in the detained property.
The majority, however, strains to reject this analysis so that it may nullify the challenged Lien Law provisions. However laudable the intentions of the majority may be, its ruling can only glut the commercial realm with pointless and trivial litigation. Surely, in the vast majority of cases where a garageman's lien goes unsatisfied, the value of the lien is uncontested and insufficient to warrant litigation. Our Legislature, apparently aware of this problem, enacted the statutes in question merely to extend to all lienors the right of sale, recognized at common law in a pledge of personal property, with certain added stringent provisions as to notice of the impending sale to the owner inserted for his protection. These notice requirements were imposed to insure that the owner of the vehicle is informed of the proposed sale and has ample opportunity to take action to protect his interests. We should not interfere with this reasonable regulation of private conduct.
The majority opinion states that "[a]bsent consent of the debtor, the power to fashion the means to order legally binding surrenders of property has always been exclusively vested in the State" (at p 162). I assume that the majority refers, among other things, to the classic pledge of personal property in which the pledgor expressly or impliedly "consents" to private sale of the pledged chattel in the event of default. The distinction, if that it be, from the statutory right to private sale in the event of a default in the obligation which gave rise to the lien is verbalistic. It is just as correct to say that the owner who gives possession of property for purposes of repair or other enhancement consents to the statutory right to execute the lien. He certainly does so impliedly, in the same way that innumerable other private transactions imply, as a matter of law, statutory obligations and conditions which affect property interests. (E.g., insurance policies, negotiable instruments [especially if collateralized], leases of real property, powers of attorney, general releases, covenants not to sue, rights of entry and rights to notice of termination in leaseholds [whether for a term or at will], contracts of employment, and the like.) The shallowness of the distinction is exposed by the fact that any garageman who, at the behest of a lawyer, added a pledge of the vehicle to secure the service charges for repair or storage would avoid what the court today holds to be a violation of constitutional due process.
Moreover, the court has severely afflicted the sphere of private commercial transactions, for this ruling applies equally to the numerous other liens on personal property which were enforceable by the provisions now declared unconstitutional. (Lien Law, § 180 [artisan's lien on personal property]; § 183 [veterinarians and bailees of animals]; § 185 [manufacturers and throwsters of silk goods]; § 188 [persons engaged in the business of a motion picture film laboratory]; § 186 [jewelers who perform work on watches or jewelry]; § 187 [truckmen and draymen].) Thus, a shoemaker with a lien on a pair of shoes he has repaired or a tailor with a lien on a jacket he has mended will have to seek judicial sanction before satisfying his lien for services performed, even though the debtor has voluntarily relinquished possession of the goods in question and agreed to pay the lienor for the services rendered. In addition, should section 7-210 of the Uniform Commercial Code, the very warehouseman's lien foreclosure provision recently upheld by the Supreme Court in Flagg Bros. v Brooks ( 436 U.S. 149, supra) be challenged in State court, stare decisis impels that we declare it unconstitutional. A constitutional attack on section 7-308 of the Uniform Commercial Code, which similarly provides for the foreclosure of a carrier's lien without a prior judicial hearing, must now likewise be successful. Such results would be particularly distressing where commercial dealings between merchants are involved. Transactions of this nature, essential to the economic vitality of our State, should be free from a judicially inflicted procedural quagmire.
Troublesome, too, is that this court's ruling, applicable only in this State, will affect the uniformity of commercial lien law as it exists in most of the States. To the extent it may affect the Uniform Commercial Code, it undermines a part of that statute on the basis of a single State's constitutional vagary in interpretation. Quite a different matter would have been presented if the Supreme Court had accepted, rather than rejected, the novel extension of the State action doctrine.
It is noteworthy that no decision, including those mentioned in footnote 5 of the majority opinion, which invalidated statutes similar to those at issue here, relied strictly on State, as opposed to Federal, due process grounds. Because all these cases preceded Flagg, their continued viability is questionable.
Due process of law is a constitutional mandate, not an excuse for the imposition of one's predilections. Rejecting sound analysis, the majority insists on voiding a reasonable statutory framework in the name of due process, when this decision will deal another blow to the economic welfare of the State. I cannot concur in such a result, and vote for reversal of the order of the Appellate Division.
Judges GABRIELLI, WACHTLER and FUCHSBERG concur with Judge COOKE; Judge JASEN dissents and votes to reverse in a separate opinion in which Chief Judge BREITEL and Judge JONES concur.
Order affirmed, etc.