Fair Debt Collection: 15.6.2.1 Summary of Elements
The elements of a malicious prosecution claim are often identified as:
The elements of a malicious prosecution claim are often identified as:
The first required element of a malicious prosecution claim is the institution of a proceeding. Arbitration proceedings356 and small claims actions357 qualify. Filing a complaint is sufficient, even without service of process.358 On the other hand, examples of steps that have been held not to constitute a proceeding include:
The primary hurdle in a malicious prosecution suit is usually the requirement that the wrongful proceeding have been without probable cause or possible validity.
Another required element of a malicious prosecution claim is that the proceeding must have been instituted either maliciously377 or for an improper purpose.378 The plaintiff need not prove intent to harm; “gross negligence or great indifference to persons, property, or the rights of others” is sufficient to show “legal malice.”379 Malice is subjective and may be shown by circumstantial evidence.380 Ma
The final element of a malicious prosecution claim is that the proceeding must have been terminated in the defendant’s favor.393 Because of this requirement, a malicious prosecution action cannot be brought while the underlying suit is still pending.394 Accordingly, it is premature to assert malicious prosecution by way of a counterclaim or defense.395 It is safest to wait until any appeal of the underlying suit has been decided and all appeal peri
Examples of malicious prosecution claims in the debt collection context include:
Abuse of process is often described as the use of “legal process against another in an improper manner to accomplish a purpose for which it was not designed.”415 One court described this tort as having a “broad reach,” and explained that it developed historically “as a ‘catch-all’ category to cover improper uses of the judicial machinery that did not fit within the earlier established, but narrowly circumscribed, action of malicious prosecution.”416
Courts construe the term “process” broadly to include the entire range of procedures incident to the litigation process,431 including discovery requests,432 garnishment,433 motions,434 asserting bogus claims of privilege to obstruct discovery,435 and making misrepresentations to opposing counsel or to the court.436
An abuse-of-process claim requires a showing that process was used primarily to accomplish a purpose for which it was not designed.442 Some incidental motive or spite is insufficient.443 Neither bad intentions alone nor lack of probable cause will create liability for abuse of process if the other elements are not met.444 Nonetheless, the fact that a party has at least one valid purpose does not necessarily mean that that purpose is primary; if the
Examples of abuse of process in the debt collection context include:
Torts not applicable to typical debt collection practices may apply in particular factual situations.
A collection attempt that involves a visit to the debtor’s home may be a trespass.493 Many states allow repossessors a qualified privilege to enter on private property, however, if this can be done without breach of peace.494 Mortgage lenders and servicers may have a contractual right to enter a home to preserve it in certain circumstances such as abandonment by the homeowner, but acts that go beyond the steps that are reasonably necessary to inspect or protect the property may amount to trespas
The tort of conversion occurs when the defendant wrongfully exercises dominion or control over identifiable personal property that the plaintiff has a right to possess.499 This tort most commonly arises in the repossession context,500 but other collection abuses may also amount to conversion.501 Some courts hold that wrongful seizure of money is not conversion in ordinary circumstances, but allow a conversion claim for money that has been set aside
Negligence claims can arise in a variety of collection scenarios.509 For example, a negligence claim may lie if a creditor initiates collection activity after negligently failing to realize that a debt has been paid,510 or if it negligently pursues collection activity against the wrong person.511 A number of courts have held creditors liable for negligently extending credit to an identity thief.512 A
A wrongful repossession may tortiously interfere with a contract or business expectancy.478 A claim such as malicious prosecution or abuse of process may be available if a creditor brings a baseless replevin, deficiency, or other cause of action,479 or files a criminal complaint against the debtor without probable cause.480
Assuming a tort is proven, courts will consider the market value of the collateral at the time of seizure, not the eventual sale price, in calculating the debtor’s damages.489 There is some authority that, if the secured party is the tortfeasor, the amount of the secured debt should be deducted from the market value of the collateral in determining damages.490
When the creditor’s tort is wanton, willful, or egregious, common law authorizes punitive damages.501 Punitive damages, often in the $20,000 to $100,000 range, have been awarded for repossession-related torts.502 These decisions include awards of punitive damages when repossession was wrongful simply because the creditor failed to give the debtor proper notice.503
In many situations a debtor may desire the return of wrongfully seized or detained property, rather than the receipt of the property’s value. For example, an old car in good operating condition may be worth more to a debtor than its fair market value. Under such circumstances, if the creditor still possesses the property, the consumer should consider the remedy of replevin.508 Replevin may also be an appropriate vehicle for challenging the amount of a lien.509
Often the parties’ contract will echo some UCC or tort law requirements. For example, the contract may provide that the creditor may “peacefully take” the collateral if the consumer defaults. A repossession that breaches the peace will violate this contract clause as well as violating the UCC.518 In addition, a contract may be construed to incorporate state law, thereby giving the consumer the right to bring a contract claim for a violation of the state law.519
This section summarizes remedies for due process and Fourteenth Amendment claims. The substantive requirements for these claims are discussed in , supra.
Assuming that the state action requirement is met, debtors in a repossession action still face questions of what defendants to sue. To sort out this question it is important to understand what level of involvement in the illegal acts is necessary for section 1983 liability, and what types of immunity each potential defendant is likely to claim.
Municipalities and other local governmental bodies do not enjoy the immunity from suit that a state enjoys, but they still will not be liable on a respondeat superior basis for the actions of law enforcement officials.531 These units of local government will be liable only if their “official policy” was to allow such police assistance in repossessions.532