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Repossessions: 2.3.4.2.3 Repossession by a bailor

The Restatement (Second) of Torts provides that a bailor who has an immediate right of possession of an item of property has a privilege to enter upon the land of the bailee, at a reasonable time and in a reasonable manner, for the purpose of taking the property and removing it.341 Entry must be peaceable and the bailor may not use any force to enter, to remove the item, or to prevent interference by the bailee.342

Repossessions: 2.3.4.2.4 Remedies in bailment cases

If the bailed property has been lost or damaged while in the bailee’s custody, the bailor may sue in contract for breach of the bailment agreement or in tort for negligence.343 As discussed in § 2.3.4.2.2, supra, the negligence standard of care and the burden of proof will be determined by the type of bailment involved.

Repossessions: 2.3.4.2.5 Distinguishing a bailment from a security interest

An essential characteristic of a bailment is that someone who does not own the bailed property is in possession of that property.350 But, while a seller may try to characterize a transaction as a bailment, the seller cannot escape Article 9’s requirements if the arrangement meets the definition of a security interest.351 Even if a seller expressly retains title to the conveyed property, if the circumstances show that the title was retained for the purpose of securing payment of a debt, the trans

Repossessions: 2.3.4.3 Common Law of the Pledge

For secured transactions that are not covered by Article 9, a court may apply the common law of the pledge.354 A pledge is a transfer of property as security for a debt.355 To create a pledge, there must be a debt, property must be offered to secure the debt, and the property must be transferred from the debtor (pledgor) to the creditor (pledgee).356 Possession, either actual or symbolic, of the pledged property must be delivered to the pledgee in

Repossessions: 2.3.4.4 Other Principles of Law and Equity

The UCC preserves principles of law and equity “unless displaced by the particular provisions” of the code.365 For example, it generally preserves the equitable estoppel doctrine.366 It also preserves the doctrines of capacity to contract, principal and agent, estoppel, duress, coercion, and mistake.367

Repossessions: 2.4.1 Overview

Choice of which state’s law applies in repossession cases can be determinative of the outcome. There is considerable disagreement among courts in different states about the interpretation of critical Article 9 provisions. For example, decisions interpreting Article 9 in one state may define breach of the peace more broadly, or bar a deficiency judgment if a creditor does not comply with Article 9 when repossessing and disposing of collateral.368

Repossessions: 2.4.2 If the Contract Does Not Have a Choice of Law Clause

If the contract does not have an effective choice of law clause, then UCC Article 1 directs that the forum state should apply its version of the UCC if the transaction bears “an appropriate relation” to the forum state.373 The term “appropriate relation” is undefined, and official comment 3 to section 1-301 states that the “question what relationship is ‘appropriate’ is left to judicial decision.”374 The majority of courts apply the most significant relationship test of the Restatement (Seco

Repossessions: 2.4.3 If the Contract Contains a Choice of Law Clause

The general rule under the UCC is that the parties may specify the governing law by agreement. Section 1-301(a) provides: “[W]hen a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.”385

Repossessions: 2.4.4 Choice of Law Under Non-UCC Statutes

Many state consumer credit laws specify that they apply to practices occurring in the state, and a contractual choice of law agreement should not override those statutory rights.405 Revised Article 9 makes clear that it does not override state consumer protection laws.406

Repossessions: 2.5.1 Overview

Article 9 itself does not defer to federal law except when and to the extent that it must, for example, when federal law preempts it.409 As discussed in § 2.5.2, infra, it is widely accepted that Article 9 of the UCC is not preempted, but applies in full force to federally related creditors.

Repossessions: 2.5.3.1 Preemption Under OCC Rules

The OCC regulates national banks, and since 2011 has regulated federal savings associations as well. It adopted a preemption rule in 2004, and then, in response to the Dodd-Frank Act, replaced it with a similarly structured but somewhat narrower rule in 2011.416 The 2004 rule applied only to national banks, but the revised rule also applies to federal savings associations.

Repossessions: 9.2.2 Notice of Right to Reinstate

State law usually prescribes specific notice requirements for the right to reinstate.15 The seller must send the debtor notice of the right to reinstate the contract, usually also stating the amount of payment required or other action needed to be taken in order to reinstate.16 In some states the notice requirements are quite specific and detailed.17 The duty to give notice may be triggered by the creditor’s exercise of control over the colla

Repossessions: 9.2.3 Limits on Right to Reinstate

Certain right to reinstate statutes limit the number of times a consumer can exercise the right to reinstate.26 For example, the California Automobile Sales Finance Act provides that the right of reinstatement may be exercised only twice during the term of a contract and only once in any twelve-month period.27 Other restrictions occasionally apply as well, such as requiring the debtor to pay several future installments as a deposit.28

Repossessions: 9.2.4 Remedies for Violation of Right to Reinstate

A creditor who fails to comply strictly with the reinstatement procedures may be barred from obtaining a deficiency judgment,33 and may be liable for conversion.34 In addition, some state laws provide statutory damages or other specific penalties for violation of the right to reinstate.35 Violation of the state right-to-reinstate law may also be a UDAP violation.36 Some courts have certified c

Repossessions: 9.3.1 Nature, Advantages, and Disadvantages of Redemption

The UCC provides that the debtor may redeem repossessed collateral by tendering an amount sufficient to satisfy all obligations secured by the collateral plus the cost of repossession.38 If the amount due under the contract has been accelerated, the debtor must tender the total remaining amount due, not just the delinquent installments.39

Repossessions: 9.3.2 Absolute Right Until Disposition

The debtor may redeem the collateral at any time before the secured party disposes of it or enters into a contract for its disposition.45 Many of the states that have non-UCC statutes or non-uniform UCC statutes regarding redemption, however, require that the redemption period be at least a certain number of days.46

Repossessions: 9.3.3 Debtor’s Continued Ownership of the Collateral During the Redemption Period

Because of the right to redeem, the debtor loses ownership of the collateral only when the creditor sells it or completes the UCC’s notice and consent procedures to retain it in satisfaction of the debt.51 The debtor retains ownership even if the creditor has obtained a repossession title in anticipation of the repossession sale,52 and even if the creditor has obtained possession by way of a writ of replevin.53 A repossession title is merely

Repossessions: 9.3.4 Who Can Redeem?

Unlike the former version of Article 9,64 the current version explicitly lists the parties who have the right to redeem the collateral: a debtor, any secondary obligor,65 and any other secured party or lienholder.66