Possessory Liens\land-lord liens that can trump the lessors' right to equipment - Issue 1

A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise. A “possessory lien” means an interest, other than a security interest or an agricultural lien: (1) which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person's business; (2) which is created by statute or rule of law in favor of the person; and (3) whose effectiveness depends on the person's possession of the goods. (810 ILCS 5/9-333)

"Illinois recognizes common law possessory liens. Ally Fin. Inc. v. Pira, 2017 IL App (2d) 170213, ¶ 39, 96 N.E.3d 61, 69 (citing Nat Bank of Joliet v. Bergeron Cadillac, Inc., 361 N.E.2d 1116, 1117 (Ill. 1977)). The Illinois Supreme Court in Bergeron Cadillac based its holding on Section 9-310 of the UCC, but Illinois has since codified Section 9-333 of the UCC pursuant to 810 ILCS 5/9-333, and, given the pertinent language of Section 9-333 of the UCC (as adopted in Illinois) closely follows Section 9-310 of the UCC, the Bergeron Cadillac holding remains applicable. Ally Fin., 2017 IL App (2d) at 41. A possessory lien is defined as ""an interest, other than a security interest or agricultural lien: (1) which secures payment or performance of an obligation for services or materials furnished with respect to goods by a person in the ordinary course of the person business; (2) which is created by statute or rule of law in favor of the person; and (3) whose effectiveness depends on the person's possession of the goods. A possessory lien on goods has priority over a security interest in the goods unless the lien is created by a statute that expressly provides otherwise."" 810 ILCS 5/9-333. If the statute creating the possessory lien is silent as to its priority relative to a security interest, Section 9-333 of the UCC (as adopted in Illinois) provides a rule of interpretation that the possessory lien takes priority, even if the statute has been construed judicially to make the possessory lien subordinate. UCC Section 9-333 cmt. 2.

In Navistar Financial Corp. v. Allen's Corner Garage & Towing Service, Inc., the Appellate Court of Illinois discussed the rights of a holder of a common law possessory lien in Illinois. 153 Ill. App. 3d 574, 106 Ill.Dec. 530, 505 N.E.2d 1321 (1987). In Navistar, the court noted possessory liens (i) are ""fundamentally consensual in nature and can be created only by agreement, some fixed rule of law, or by usage of trade or commerce""; (ii) only gives the holder the right of possession of the chattel until the debt is paid; and (iii) is only available to ""artisans who impart added value"" and ""common carriers who are bound by law to accept and carry the goods."" Id. at 576. In Illinois, a common carrier must hold itself out to provide its services to the general public and undertake to transport people or goods from place to place on behalf of those who hire them. Ally Fin., 2017 IL App (2d) at ¶ 46 (citing Browne v. SCR Medical Transportation Services, Inc., 356 Ill. App. 3d 642, 646, 292 Ill.Dec. 594, 826 N.E.2d 1030 (2005) (quoting Illinois Highway Transportation Co. v. Hantel, 323 Ill. App. 364, 374, 55 N.E.2d 710 (1944)) and Holland Motor Express, Inc. v. Illinois Commerce Comm'n, 165 Ill. App. 3d 703, 714, 117 Ill.Dec. 331, 520 N.E.2d 682 (1987)).

Navistar involved a towing company who towed a truck (and its cargo) to its garage after removing it from a ditch in the ordinary course of its business in response to a request from the Illinois state police. The plaintiff contacted the towing company demanding possession of the truck given the owner defaulted on the relevant purchase agreement, but the towing company refused to surrender the truck until such time as the towing and storage fees that had accumulated were paid. The court held that the towing company had a possessory lien with regards to the towing charges, but was not entitled to the storage fees. This holding was based on the fact that the towing company was seen as a common carrier (as opposed to an artisan that added intrinsic value to the truck) and the storage fees were only accumulated given the towing company refused to deliver possession of the truck until the fees were paid. If the storage fees were accrued due to the towing company experiencing an inconvenience or expense by storing the truck until the owner could come to collect it, the towing company likely would have been entitled to the storage fees. A main lesson to take-away from Navistar is that common carriers may be entitled to a common-law possessory lien for storage fees if the storage fees are incurred in a manner other than holding the collateral for the purpose of preserving its lien rights, but artisans do not have this same claim whatsoever. Ally Fin., 2017 IL App (2d) at ¶ 39 - 47 (citing Navistar, 153 Ill. App. 3d at 576 - 77)."