Repossessions—The Law, The Hazards, The Adjusters

YOUR LEGAL RIGHTS OF REPOSSESSION

Pertinent Cases and Legal Precedents

by Jack S. Barnes, CCRS

The following are actual court cases and decisions, but cases may be different and law may vary from state to state. Consult your attorney for specific advice.

As state the Uniform Commercial code (UCC 9-503), a secured party has the right to take possession of the debtor's collateral on default without judicial process if breach of peace does not result from the action.

Actual Wording in Many UCC Contracts

DEBTOR AGREES THAT, IN THE EVENT OF ANY DEFAULT, SECURED PARTY OF ANY SHERIFF OR OTHER OFFICER OF THE LAW MAY TAKE IMMEDIATE POSSESSION OF SAID PROPERTY WITHOUT DEMAND AND WITHOUT PROCESS, INCLUDING IMMEDIATE EQUIPMENT OR ACCESSORIES THERETO; AND FOR THIS PURPOSE SECURED PARTY MAY ENTER UPON THE PREMISES WHERE SUCH PROPERTY MAY BE AND REMOVE THE SAME. IF SUCH PROPERTY SHOULD BE A MOTOR VEHICLE, SECURED PARTY MAY ALSO TAKE POSSESSION OF ANY OTHER PROPERTY THEREIN AT ANY TIME OF REPOSSESSION, AND HOLD THE SAME FOR DEBTOR WITHOUT LIABILITY ON THE PART OF SAID SECURED PARTY.

Does UCC 9-503 violate due process of law? The due process clause of the Fourteenth Amendment to the U.S. Constitution states, in part, as follows:

“Section 1:…nor shall any State deprive any person of life, liberty, or property, without due process of law.”

Consider the case of Northside Motors of Florida, Inc. v. Brinkley, 282 So. 2nd (Fla. 1973). In that case the Trial Court had determined the self-help provision of §9-503 to be unconstitutional, basing its decision on the authority of Fuentes v. Shevin, supra. The Florida Supreme Court reversed, holding the self-help provision of §9-503 did not violate the due process clause of the Fourteenth Amendment because the due process clause was inapplicable to a factual situation presenting an individual invasion of individual rights, noting at page 620:

“***The Supreme Court of the United States has since emphasized and reemphasized that state action will not be found in the purely private conduct of an individual voluntarily engaged in without some form of active assistance or cooperation on the part of the state.”

The Florida Court adopted the language of Greene v. The First National Bank of Virginia, 348 F. Suppl. 672 (W.D. Va. 1972), which determined §9-503 did not involve the State action and was not violative of the Fourteenth Amendment, and went on to say:

“We hold that self-help repossession by a creditor does not constitute state action. Florida Statutes, Section 679 503, F.S.A., is no more than a codification or restatement of a common law right and a contract right recognized long before the promulgation thereof and creates no new rights. 2 Pollock & Maitland, The History of English Common Law (2nd ed. 1968), 574, 2 Blackstone, Commentators on the Laws of England, 1856–858, Messenger v. Sandy Motors, Inc., 121 N.J. uper. 1,295 A 2d 402 (1972), Kipp v. Cozens, 11 O.C.C. Reporting Service 1067. Conditional sales or retain title contracts with self-help repossession provisions as the one entered into by the parties presently before us existed in this state long before statutes were enacted to regulate them.”

The Superior Court of New Jersey determined in Messenger v. Sandy Motors, Inc., supra, that codification of self-help repossession by enactment of §9-503 cannot give that practice the color of state action so as to take it out of the private area and to make it subject to the Fourteenth Amendment. Therein, the Court quoted with approval the following statement by Professor Mentshikoff on behalf of the permanent editorial board for the Uniform Commercial Code:

“Section 9-503 simply recognizes the common knowledge of buyers on time that repossession follows default and makes unnecessary its statement in the contract. It cannot be that codifying a generally understood practice of ancient and honorable lineage and surrounding it with safeguards renders the practice unconstitutional.”

In the case of Messenger v. Sandy Motors, Inc., 295 A. 2d 502 (NJ 1972), which was an action to enjoin the sale of an automobile that the defendant had repossessed under a written sales contract authorizing the vendor to use self-help repossession upon default. The plaintiff urged that New Jersey's adoption of §9-503 violated the due process clause. In holding that there had been no violation of the due process clause under the Fourteenth Amendment of the Constitution of the State of New Jersey, the Court said:

“Thousands of cars are repossessed each year. It is difficult to believe the buying public is not well informed of the likelihood of repossession by the bank or finance company if installments are not paid. Plaintiff does not say that he lacked knowledge of such likelihood (of repossession) or that he was unaware of the express terms of his contract; the argument for him is that with or without knowledge of the consequences of default, he and those similarly situated are entitled by the Constitution to a hearing on notice before recaption. I think that argument must be rejected. A car buyer, having a wealth of experience all around him to draw upon and make him aware of the possibility of repossession, is not in a situation where he can properly claim that recaption of his car is a violation of his right to due process because, and only because, no prior hearing on notice to him took place.

My conclusion is that if the Fourteenth Amendment has any application at all to this case, there has been no violation of the due process clause.”

At least thirty Appellate Courts that have had the opportunity to consider the issue have upheld the constitutionality of self-help repossession. Some of the cases are:

Gary v. Darnell, 505 F 2d 741 (6th Cir. 1974)
Turner v. Impala Motors, 503 F 2d 607 (6th Cir. 1974)
Bichel Optical Lab., Inc. v. Marquette National Bank of Minneapolis, 487 F 2d 908 (8th Cir. 1973)
John Deere Co. of Kansas City v. Catalano, 525 P 2d 1153 (1974)

The lack of state action has been found primarily as a result of:

1). The common law origin of the right of self-help repossession…
2). The lack of any entwinement on the part of the state with the physical act of repossession…

“If the Debtor Says “No”

In Leedy v. General Motors Acceptance Corporation, 48 p. 2d 1074 (Okla. 1935) it is stated that:

The mere fact that the defendant told GMAC not to take possession, except by legal process, does not establish the defendant in error. GMAC, in securing possession of the automobile resorted to neither force, threat, violence, or even stealth.”

And in General Motors Acceptance Corporation, et al v. Vincent, 83 P 2d 539 (Okla. 1938), that:

“The fact that the owner of a car was not present when repossession was taken does not constitute a taking by stealth or fraud.”

Is It Trespass on Private Property?

More recently this Court held in Kroeger v. Ogsden 49 P 2d 781 (Okla. 1967) that:

“Where the mortgage provisions authorize the mortgagee, in the event of the mortgagor's default, to exercise the option, without notice, of foreclosing a mortgage and entering upon the premises where the mortgaged chattel may be, to remove it, this gives mortgagee a right practically amounting to a license, to go upon the mortgagor's private premises for that purpose, if this can be done in an orderly manner and without a breach of the peace. If the mortgagee does this as a licensee, then of course, he would not be a trespasser.”

Should I Take a Police Officer?

The Supreme Court of the United States has emphasized that state action will not be found in the purely private conduct of an individual without state assistance.

“The presence of a police officer, a patrol car accompanying the repossessor, or the showing of a badge may constitute “Color of Law” and take the repo out of the area of purely private conduct without state assistance.”

What About Personal Property?

In General Motors Acceptance Corporation v. Vincent 183 Okla. 547, 83 P 2d 539 (1938) the security agreement stated:

“Further in any such event (default), seller or any sheriff or other officer of the law may take immediate possession of said property without demand, and without process, including any equipment or accessories thereto: and for this purpose seller may enter upon the premises where such automobile may be and remove same.

Seller may take possession of any other property in the herein above described motor vehicle at any time of repossession, wherever such property may be therein and hold same for buyer at buyer's risk without liability on part of seller.”

(Emphasis on preceding paragraph is added.) In same case the Court said:

“Under this provision of the contract there would not be a wrongful taking of the property, but the failure of the defendants to account to plaintiff for the property upon his demand therefore would constitute an unlawful exercise of dominion over the same. The fact that party may lawfully obtain possession of personal property does not preclude a subsequent action for unlawful conversion.”

Notice that in all of the cases, reference is made to provisions in the contract itself. Whatever actions taken should conform to provisions within the actual contract. If you are with a lending or lease company and your contract does not have the underlined wordage, have your legal department consider putting it in !

Right to Cure

Several states now require a prior notice of Right to Cure be sent before recovery can be executed. Right to Cure is legal notice that an account is past due and gives a specified time for the debtor to pay a specific amount to cure the delinquency.

The last day for payment in the seven states is as follows:

Colorado—20 days from notice date
Iowa—21 days from notice date
Kansas—20 days from notice date
Massachusetts—21 days from notice date
Maine—20 days from notice date
Missouri—15 days from notice date
South Carolina—20 days from notice date

Money-Saving Tips

If you ask an adjuster his charge for a repossession, you will probably be given the fee for repo at a given address. If the vehicle is not at the address given, you will probably be billed an additional fee for relocating. Save by giving the most up-to-date info you can find. Having key codes may save you $30 or more for locksmith service. Key codes may often be obtained by calling the selling dealer. Inquire when assigning an account the charges for repo, towing, storage, etc.

On “no contact“ repos, many firms send a second man to help the wrecker driver. His help, and extra eyes, often makes the difference between a successful “pop” and missing the vehicle. On vehicles out of town, mileage and often driving time is charged.

When a vehicle is recovered, most firms charge for bids and photos; check when assigning. If you decide to sell the vehicle, let the adjuster know as soon as possible to protect the bid and save storage.

Most agencies cannot sell the vehicle until they have the title.

If you are going to pick up the vehicle, most agencies require the bill to be paid before releasing the vehicle. Inquire and save any embarrassment.

I know of no professional agencies that work repo assignments on a contingent basis. You should expect to be billed for the services they perform.

To Whom Should I Assign?

It is extremely important to select a true professional (engaged in one of the learned professions or in an occupation requiring a high level of training or proficiency—manifesting fine artistry or workmanship based on sound knowledge—reflecting the results of education, training, and experience). The tow truck driver at the corner gas station is not usually a good choice to hire as your agent.

The Professional

The professional adjuster of today is a member of one or more national associations, and attends their meetings for updates on new laws and recovery techniques. He is an authority on UCC 9-503, has a working knowledge of a wrecker, the tools, and expertise to pick or overcome locks. He can bypass anti-theft auto devices, skip trace, converse intelligently with debtors and their attorneys. He probably works his own computer.

National Finance Adjusters

In the more than fifty years of N.F.A.'s existence, it has attracted the most respected adjusters in the industry. It became known as The Cadillac of the Industry. With very few exceptions, every truly respected mover and shaker in the financial adjuster field is a member of National. National has maintained a policy of selecting for membership only professional adjusters with sound financial backgrounds and who are highly recommended by the lending industry.

$1,000,000 Bond

National Finance Adjusters has established a CLIENT SECURITY TRUST FUND in the amount of $1,000,000, secured by a Certificate of Deposit. The TRUST FUND is administered by the Executive Board for the purpose of maintaining the integrity and good name of NATIONAL FINANCE ADJUSTERS, INC. by reimbursing losses of escrow funds or chattels caused by its members or their employees while acting on behalf of a client.

National Finance Adjusters Code of Ethics

To serve the finance industry with loyalty and to cooperate with the Collection and Claims Managers of banks and financial institutions in the proper handling of their conversions, claims, losses, skips, embezzlement and delinquent accounts.
To conduct ourselves so as to merit respect and confidence from Clients, fellow members and the general public.
To promote business by an unvarying attitude of fairness, confidence, integrity and a proper respect for the persons with whom we have dealings.
To approach investigations and adjustments with an unbiased and open mind.
To make truthful and unbiased reports of facts and conditions as we find them.
To resist influences tending to produce improper and inadequate adjustments and to serve our Clients faithfully.
To work in harmony with one another and with our Clients so as to foster cordial relationships.
To avoid improper alliances.
To render the highest quality service.