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Repossessions: 13.6.9 Other Potential Tort Causes of Action
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
Repossessions: 13.6.10 Actual Damages in Tort
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
Repossessions: 13.6.11 Punitive Damages
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
Repossessions: 13.6.12 Debtor’s Replevin of Wrongfully Seized Property
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
Repossessions: 13.6.13 Contract Claims
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
Repossessions: 13.7.1 Overview
This section summarizes remedies for due process and Fourteenth Amendment claims. The substantive requirements for these claims are discussed in , supra.
Repossessions: 13.7.3.1 Generally
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.
Repossessions: 13.7.3.3 Liability of Local Governmental Bodies
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
Repossessions: 13.7.3.4 Individual Law Enforcement Officers and Qualified Good Faith Immunity
Individual police officials sued under 42 U.S.C. § 1983 enjoy qualified good faith immunity.
Repossessions: 13.7.3.5 Liability of Private Parties
The private party on whose behalf the unlawful state action was undertaken can be liable under section 1983 for participating in a conspiracy with the state actors.548 Merely reporting false information to a law enforcement officer is usually insufficient to show joint action, however.549 A private party can also be liable when a state has delegated a traditionally public function to it.550 A private party that invokes an unconstitutional sta
Repossessions: 13.8 U.S. Bankruptcy Code
The United States Bankruptcy Code553 offers some of the most effective consumer remedies to prevent repossessions. For most debtors, bankruptcy automatically stays all actions against the debtor’s secured property.554 A bankruptcy filing, in appropriate circumstances, can even lead to the return to the consumer of property already repossessed.
Repossessions: 13.9.1 Types of Claims to Raise
Consumers whose property has been repossessed often have not only claims related to the repossession but also claims against the dealer or creditor related to other matters, such as the sale itself. Because many consumers seek legal help only after being sued for a deficiency, the deficiency suit often presents the best opportunity to raise these other claims.
Repossessions: 13.9.2.1 Scope and Effect of the FTC Holder Rule
Seller-related claims can be raised as counterclaims to a deficiency action in a consumer case when the party bringing the deficiency claim is the seller. In many cases, those same seller-related claims can be brought as counterclaims when the party bringing the deficiency claim is an entity other than the seller.
Repossessions: 13.9.2.2 Limits on Creditor Liability for Seller-Related Claims
When a creditor or assignee is subject to seller-related claims by virtue of the FTC Holder Notice, there are limitations to its liability. The holder’s liability pursuant to the Holder Notice for the seller’s misconduct is capped at the amount outstanding on the obligation and the amount already paid.580 This means that the consumer can, at most, cancel the remainder of the debt (that is, the deficiency) and recover everything already paid in, which should include all installment payments.
Repossessions: 13.10.1 Debtor’s Consent As Defense to Wrongful Repossession
A debtor who gives valid consent to a repossession at the time of seizure cannot challenge the repossession as wrongful.589 Most statutes that limit self-help repossession590 allow the creditor to seize collateral if the debtor consents, and even a repossessor’s entry into the debtor’s home is excused by the debtor’s consent.
Repossessions: 13.10.3 Contractual Waivers of Consumer’s Right to Sue for Personal Property Taken with the Collateral
Some creditors attempt to avoid liability for the temporary taking of unsecured property seized with the repossessed collateral by inserting a clause into the security or credit agreement. This clause grants the secured party the right to take unsecured personalty in the course of a repossession and hold it for the debtor without liability. Challenges to these clauses are discussed in , supra.
Repossessions: 13.10.4.1 Employer’s Respondeat Superior Liability
Creditors who employ repossessors will claim that they are not liable for the unauthorized acts of their employees.
Repossessions: 13.10.4.2.1 Care in repossession of collateral as a non-delegable duty
Secured parties often claim that the repossessor is an independent contractor and that therefore respondeat superior does not apply.623 While it is generally true that an employer is not liable for the acts of an independent contractor, the responsibility to repossess collateral without breaching the peace is a non-delegable duty for which the secured party is always responsible, even if it hires independent contractors to do the work.624 One court extended this reasoning to allow p
Repossessions: 13.10.4.2.2 Creditor’s failure to exercise care in selecting a contractor
Even if the responsibility not to breach the peace during repossession were not a non-delegable duty, a creditor would be liable for the acts of an independent contractor if it failed to exercise due care in selecting a competent contractor.630 The mere act of hiring someone else to handle a repossession is not necessarily negligent or egregious.
Repossessions: 13.10.4.2.3 Creditor liability based on other statutes
It is always important to examine other state laws regulating the credit transaction to see if they explicitly make the creditor liable for the conduct of the repossessors it hires.633 One such statute is found in the District of Columbia.634 However, California has taken the opposite position, and has specified that neither a secured party nor a licensed repossessor is liable for any act or omission by the other in carrying out an assignment by a creditor to repossess collateral, provided t
Repossessions: 13.10.4.3 Liability of Repossession Company or Other Third Parties
Because of the question of a creditor’s liability for the acts of its independent contractor, it is generally a good idea to bring the repossession company into the lawsuit with the lender.636 Accredited repossession agencies will generally have insurance and a bond.