A Strict Liability Tort

By D. Carlos Kaslow

According to an article that appeared in the July/August 1997issue of The Self Storage Legal Review, the tort ofconversion is the most dangerous claim storage operators face. Itcan be likened to civil theft of property and is the one tortclaim in which storage operators face a realistic likelihood ofpunitive damages. Understanding this tort and how it can beavoided is important for both the storage- facility owner andsite personnel.

The legal definition of conversion is fairly straightforward.A conversion is "Any distinct unauthorized act of dominionor ownership exercised by one person over personal propertybelonging to another" (7A Am. Jur 2d. Pleading and PracticeForms 164).

Self-storage operators become vulnerable to allegations ofconversion when they exercise their remedies against customerswho fail to pay rent by the due date. Whenever a self-storageoperator interferes with a customer's access to his property, thespecter of conversion materializes.

When a space is overlocked or a customer is denied access tothe premises, conversion becomes a possibility. A wrongful saleof tenant property is a classic example of the conversion ofgoods. A storage operator's primary defense to an allegation ofconversion is compliance with rights granted by state law orcontract. However, the law generally requires strict compliancewith the law for these protections to apply.

A Strict Liability Tort

Conversion is a tort of strict liability. Unlike criminaltheft, where intent is an element of the crime, intent isirrelevant in the tort of conversion. The fact that the storageoperator had reason to believe he had a right to take control ofthe property does not matter. If the belief was wrong, aconversion has taken place.

This makes strict compliance with the law very important.Under the self-storage lien law enacted in most states, thestorage operator is permitted to deny a delinquent customeraccess to his goods. However, the states vary as to when thisright occurs. For instance, in Florida and New Mexico the lienlaw specifically authorizes denial of access when rent is sixdays past due. California and Nevada permit denial of access 14days after sending a notice to the customer that such action willbe taken. This translates into 30 or more days after the customermisses a rental payment. Jumping the gun can lead to a successfulconversion claim.

Storage operators in states that do not permit denial ofaccess for 30 or more days frequently ask, "Can we code themout of the gate just to get them in the office so we can discussthe rent situation with them?"

The answer depends on your risk tolerance. The lien laws instates like California and Nevada are quite specific as to whenyou are legally permitted to deny access. A court could concludethat any interference not authorized by the statute is aconversion. This suggests that if the storage operator permitsaccess to the property after "getting the customer'sattention" about the payment problem, a conversion has notoccurred.

A policy of denying your customers access before it ispermitted by statute, even if it is simply to get the customer'sattention, can still be dangerous. It is unlikely that theself-storage operator will ever be sued for merely denying acustomer access to the storage unit. Early overlocking becomes aproblem when a suit for wrongful sale is brought. The plaintiffattorney will closely examine your delinquent tenant procedures.Early overlocking may seem rather trivial to you, but it will beused at trial to show your craven disregard for the rights ofyour customers.

What makes conversion claims especially difficult for storageoperators are the damages that are typically available tosuccessful claimants. Under most state laws, the customer canrecover the full value of the property. Even with items that havelittle market value, courts are very liberal in valuing convertedproperty, interest and in many states, punitive damages that canmake conversion suits especially risky for storage operators.

Tenant Can Collect Punitive Damages

Punitive damages are available when the storage operator'sconduct is "outrageous because of defendant's evil motivesor his reckless indifference to the rights of others"(Restatement 2d. Of Torts ß 980(2) (1977)). While this mayappear to be a very high standard that no responsibleself-storage operator would ever breach, experience demonstratesotherwise. Juries have shown a willingness to find landlords'behavior outrageous when they have made technical errors inimplementing their legal remedies for failure to pay rent.Appellate courts will give great deference to jury findings andfrequently affirm such awards.

Nearly every self-storage operator will face claims ofconversion at some point., so a working understanding of itsconsequences are vital to the development of operating proceduresthat will make missteps less likely. It usually becomes an issuewhen customers fail to pay rent and a storage operator begins toexercise his legal remedies. If you strictly comply with the law,a customer's conversion claims generally fail. A successful claimrequires the storage operator to forget that the property in"his" storage unit belongs to someone else andcavalierly disregards the legal rights of his customer.

The following article was excerpted from The SelfStorage Legal Review, a bimonthly newsletter on legal issuespertaining to the self-storage industry. For more information orto obtain a subscription, contact D. Carlos Kaslow at 2203 LosAngeles Ave., Berkeley, CA 94707; (510) 528-0630.

Opinions on legal matters are those of the editors andothers; professional counsel should be sought before any actionbased on this material is taken.