Each year, over one million motor vehicles are repossessed from consumers who became delinquent in their payments to a lender who holds a purchase money security interest in the motor vehicle.
Section 9-503 of the Uniform Commercial Code authorizes secured lenders to seize possession of their collateral after the borrower defaults without judicial process if this can be done without breach of the peace. The Uniform Commercial Code (U.C.C.) does not define the term breach of peace.
The black letter definition of breach of peace is conduct or speech that violates the public order, disturbs the public tranquility, or has the potential to provoke violence or is likely to incite immediate public turbulence, or leads to or is likely to lead to an immediate loss of public order and tranquility. Breach of the peace further includes any violation of any law enacted to preserve peace and good order. See, e.g., Kimble v. Universal TV Rental, Inc., 417 N.E.2d 597 (Mun. Ct. 1980).
But what type of conduct meets this standard?
The Courts look to many decades of case law (much of which pre-dates the enactment of the states U.C.C.s) to determine when a lenders conduct breached the peace.
Not surprisingly, some courts have ruled that violence or threats of violence breached the peace. Threatening to use violence creates an obvious risk to the borrowers peace and safety. But, lenders may breach the peace even where there was no violence or threat of violence.
Although the law varies somewhat from state to state, the general rule is that secured lenders also breach the peace if they : (1) repossess the collateral despite the consumers objections; or (2) trespass in order to gain possession of the collateral.
Lenders breach the peace if they enter the borrowers home without their permission in order to gain possession of the collateral. It does not matter whether the doors or windows are locked. Nor does it matter whether anyone is home. The lenders conduct amounts to breaking and entering and creates a risk of violence.
Courts usually rule that motor vehicle lenders who open garage doors in order to claim a car breached the peace. Protecting borrowers garage as the law protects the rest of their home makes sense because homeowners expect that their right of privacy and seclusion extends to all of their home and unlawful entry into their garage also creates a risk of retaliatory violence.
The courts have held that lenders did not breach the peace by taking possession of vehicles left on public streets, private driveways, apartment complex parking lots, or even in their open garage or unenclosed car port. In such cases, the borrowers did not express their objection to the lenders repo agent entering their property.
If the borrower becomes aware that of the repo mans intrusion and objects to the repo man being on their property, the repo man must leave or they're trespassing.
Repo mens attempts to repossess autos while the borrower is at work are treated similarly repossessions at the borrowers home. If the employers place of business is open to the general public, the repo man can enter the parking lot and would not be trespassing. However, repo men who break locks or chains to enter the employers property breached the peace. A Florida appellate court held that a bank breached the peace by misrepresenting its purpose for entering the employers property.
The lenders duty to refrain from breaching the peace is non-delegable. The term non-delegable means that lenders are responsible for their repo mans conduct even if the repo man is an agent rather than an employee of the lender.
If the Court finds that the lender (or the lenders repo man) breached the peace, the lender may be liable for substantial damages including statutory damages under the U.C.C. Section 9-507, punitive damages, and tort claims. In some jurisdictions, the borrower may even have a defense to the lenders potential claims for the deficiency which often result from the sale of the collateral. In many states, the repo man may also be subject to criminal penalties.
Other types of lender conduct may also constitute a breach of the peace.
Each breach of peace action is unique and must be evaluated on the specific facts of the case. Often, an experienced lawyer must evaluate the totality of the facts and circumstances rather than an isolated variable.
This article is intended for educational purposes. As is the case with any blog post, this post can not thoroughly summarize the law nonetheless begin to address the subtle nuances of applicable state law.
To find a lawyer who represents borrowers against lenders who unlawfully repossessed a motor vehicle or other collateral securing a loan, visit www.NACA.net/find-attorney And use the drop-down menu to identify the NACA members in your state. Then contact a NACA member whose areas of practice includes Automobiles / Repossessions.
About the Author
Donald E. Petersen is an Orlando, Florida consumer rights lawyer who joined NACA in 2001. Mr. Petersen also comments on consumer law issues at www.FDCPA.me. Mr. Petersen represents consumers in actions under the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, the Fair Credit Reporting Act, and other consumer protection statutes including the Uniform Commercial Code. Mr. Petersen also defends consumers against lawsuits arising from credit card accounts, motor vehicle repossessions, and other consumer debts.