A 1997 case from the California Court of Appeals adds a significant twist to storage operations in our state. For the first time, in Gonzales vs. Personal Storage, Inc., a California court has upheld an award of damages for emotional distress arising out of a tenant's claim for loss of stored goods. The California Supreme Court has refused to review the appellate court decision, leaving the Gonzales case as valid law in California. Before Gonzales, damages were limited to the fair market value of the stored property.
The plaintiff in the case, Ms. Gonzales, placed her property in a unit in National City's Personal Storage facility in 1989. In the summer of 1991, Ms. Gonzales was delinquent on the rents and her unit went into lien status. The facility sent the preliminary notice and the Notice of Lien Sale before Gonzales brought the unit current. In January of 1992 she again became delinquent on the unit. Sometime late in January the tenant's lock was cut, an inventory performed and the lock was replaced with a facility lock. Personal Storage did not send the required notices, but did send the tenant a copy of the advertisement to sell the property, along with a note saying the property would be sold on February 10, unless payment was received. The advertisement listed the tenant's full name, unit number and a detailed description of the contents of the unit. On February 4, 1992, and elderly 'thin man' and a woman claiming to be Gonzales appeared at the facility to pay the outstanding $336.00 and to vacate the unit. The facility personnel did not check the woman's identification. After collecting the balance due, the manager removed the facility lock on the unit and admitted her and her companion, who emptied the unit into a truck. Several days later Personal Storage received Gonzales' payment on the unit and contacted her to inform her that there had been a "mix-up."
The trial court found that Gonzales was emotionally traumatized by the loss of her property. She was unable to function and as a result had to close her office supply business. She was profoundly depressed and entered therapy. Over the next several years she withdrew from her usual activities and had difficulty leaving her home. Her property, collected from her travels around the world, was valued at approximately $60,000. In addition, the jury awarded Gonzales $232,000 for the emotional distress part of her claim. Personal Storage, Inc. appealed that portion of the judgment that awarded damages for emotional distress.
Personal Storage made two major mistakes in handling Gonzales' tenancy. First, the facility did not employ the proper notice procedures required by the Self Service Storage Facility Act. These incorrect lien procedures left the facility open to a claim for conversion of the tenant's property. Second, since the facility had assumed care, custody and control of the tenant's unit by cutting and replacing the lock, the facility was found to have liability for releasing the tenant's goods to the impostor. It appears that either one of these mistakes could have lead to the court's ruling in this case.
California law has never allowed emotional distress damages in a negligence action where the only other damage was limited to the loss or damage to property. Emotional distress damages have been awarded only where the damage was accompanied by a wrongful invasion of a protected right. Up to now, release clauses in the rental agreement have protected California storage facilities from most negligence exposure. However, where a facility has not followed the lien laws strictly, courts have awarded damages for the value of the property under the theories of negligence and conversion.
Conversion is an old, common-law tort that provides relief for the wrongful exercise of dominion and control over the property of another. Until the Gonzales case, conversion claims could not recover emotional distress damages. Because conversion is technically an intentional tort, releases in the rental agreement may be ineffective in shielding storage facilities from liability. Generally speaking, public policy concerns will not permit the contractual release of an intentional tort. While Gonzales will not affect tenant claims based on negligence or the wrongful acts of third persons (like fire or burglary claims), it will have a significant impact on those claims where a facility exercises control over the tenant's property. Anytime a storage operator cuts a tenant's lock, there is potential conversion exposure.
How can facilities adjust to this new level of risk? As always, the best defense to these types of claims is a clean lien process. All storage facilities should develop, and implement stringent pre-sale checklists to ensure that units sold have been properly processed. The checklist should include a review of the addresses used on the notices (for both the tenant and the alternate), the relevant dates on the notices, the advertisement, and the payment history. If there is any question about the validity of a lien, do not sell the unit. Beyond the usual lien precautions, facilities need to be careful about whom they admit to a tenant's unit. If anyone requests assistance getting into a unit, always check identification to be sure that the individual is authorized to enter. Make a copy of the identification. Check to see that signatures match the signature on the contract. While we cannot guarantee that there will not be improper access to a unit, we should be able to guarantee that we will not assist thieves!
In light of the Gonzales case, now is a good time to review your facility's level of risk. Review your rental agreement and check your insurance coverage. Consider this an opportunity to develop a self-audit program of on-site procedures that will protect your storage facility from unnecessary claims.
Copyright © Alta V. Walters 1998
The Law Offices of Alta V. Walters
Phone (510) 834-8750
Fax (510) 380-5188
Send your comments to:
Back to the front page!
Self-Service Storage Alert
