Secured Transactions July 2002 Flashcards
(4 cards)
Summary
After a debtor’s default, a secured party may take possession of the collateral without notice and without judicial process. However, this right to self-help repossession exists only if the repossession can be accomplished without a “breach of the peace,” a standard that the UCC leaves to the courts to define. Because the “breach of the peace” standard is open-ended and subject to judicial interpretation, the outcome of this case cannot be definitively stated. But the facts provide a basis for Debtor to make a reasonable argument that Uptown should have abandoned its attempt at self-help repossession and relied on judicial process to enforce its claim. First, Debtor had made it clear to Uptown that she would resist non-judicial repossession, and Uptown relied on trickery to avoid that resistance. A number of courts disfavor such “fraudulent” conduct by creditors. Second, the repossession was arguably done by an unauthorized entry into Debtor’s “home,” required “hot-wiring” of the motor home (ordinarily the act of a thief), and involved the incidental (but intentional) seizure of possessions of Debtor to which Uptown had no lawful claim. Such “trespassory” conduct may also be disfavored. In addition, the creditor’s use of a police officer (without securing judicial approval) is also treated by courts as improper, though the police officer did not actually affect this repossession.
Following default, a secured party has the right to take possession of the collateral without prior notice of default and without judicial process.
The secured party’s right to repossess the collateral arises on the debtor’s default. UCC § 9-609. There is nothing in the Code that requires the secured party to give either notice of default or notice of intent to repossess. Repossession can be through self-help and without the need to commence judicial proceedings. Id. The only limitation is that the repossession must be accomplished without a breach of the peace. Id.
Under the facts, Debtor, having missed “several monthly payments,” was clearly in default. Accordingly, Uptown was free to proceed with the self-help remedy of repossession.
Debtor could argue that Uptown’s repossession was in breach of the peace because it involved an unconsented entry into Debtor’s place of residence, it was accomplished by “hot-wiring” the vehicle, it enlisted the aid of a law enforcement officer, and it was carried out over the verbal protests of Debtor.
UCC § 9-609 authorizes the secured party to engage in self-help “without judicial process if this can be done without breach of the peace. . . .” See Point One. The term “breach of the peace” is not defined in the Code. Rather, the drafters relied on pre-Code case law to prescribe the parameters of permissible conduct. Particularly important facts include (1) whether the creditor has entered upon the premises of the debtor and (2) whether the debtor has consented to the entry and repossession. White & Summers, UNIFORMCOMMERCIAL CODE § 34-7 (4th ed. 1995). Moreover, it is the potential for violence and not necessarily the occurrence or imminence of violence that defines a breach of the peace. Ordinarily, repossession of a vehicle from a driveway or public street or parking lot would not be found, without more, to be in breach of the peace. The matter is complicated in this case, however, because the motor home could be viewed as Debtor’s residence.
