Law-enforcement officers and self-help repossession: a state-action approach.

AuthorLoterstein, Aaron

Repossession of secured collateral is a fundamental component of the consumer credit industry. The Uniform Commercial Code authorizes a secured party to engage in self-help repossession of secured collateral under section 9-609, so long as the repossession takes place without "breach of the peace." While that term is undefined, several courts have adopted a counterintuitive rule, holding that a law-enforcement officer's presence during a self-help repossession--regardless of purpose or level of involvement--creates a breach of the peace. The Official Comments to the Code have seemingly endorsed this position as well This Note rejects the primary justifications courts have offered to justify a bright-line rule and makes clear that an officer's involvement in self-help repossession is unrelated to breach of the peace. The correct approach to law-enforcement-officer involvement in self-help repossessions asks whether the officer's presence constitutes state action. An officer's involvement should only invalidate a repossession where it is deemed state action sufficient to trigger a constitutional violation under section 1983. In such cases, the repossession is not of the sort authorized by section 9-609 and would therefore be wrongful, rather than a breach of the peace. In accordance with this approach, this Note concludes with a proposal for a modified Official Comment to section 9-609.

TABLE OF CONTENTS INTRODUCTION I. FRUSTRATION OF THE RIGHT TO OBJECT AS BREACH OF THE PEACE A. Genesis of the Right to Object B. Exploring the Stone Machinery Rationale C. Fallacy of the Right to Object II. SELF-HELP REPOSSESSION AS STATE ACTION A. Overview of Creditors' Remedies as State Action B. State Action and Self-Help Repossession C. The Proper State-Action Approach D. Misuse of the State-Action Approach III. A PROPOSED SOLUTION A. Proposed Modification to Section 9-609's Official Comments B. Application of the State-Action Approach CONCLUSION INTRODUCTION

The repossession industry is dangerous. Tensions frequently run high, and when an unsuspecting car owner learns that his vehicle is being repossessed, his reaction is unpredictable and can be violent, (1) Sensationalist portrayals of repossessions in television shows such as Operation Repo can attract violent personalities to the repossession industry, (2) further contributing to the likelihood of violence during repossessions. The sheer number of vehicle repossessions far exceeds home mortgage defaults. (3) Despite the risk of violence, repossession is a vital aspect of the consumer credit industry. Of the various rights triggered upon debtor default, repossession is paramount. (4) It provides a secured party (5) with an avenue of recourse to collect at least part of a debt owed to him, which also provides some assurance that a debtor will comply with repayment obligations. (6)

The Uniform Commercial Code ("UCC") provides a secured party with the right to repossess its collateral upon default in two ways: repossession by judicial process and repossession by self-help. (7) Because of the financial and time-related costs associated with reducing a claim to judgment, secured parties prefer instead to engage in self-help repossession. (8) The UCC only imposes one statutory limitation on self-help repossession: it may not result in a "breach of the peace." (9) Typically, independent contractors, popularly known as "repo men," perform such repossessions. Even though a repo agent is an independent contractor, a secured party who hires one will still be held personally liable for a breach of the peace. (10) The most commonly repossessed goods are automobiles, as they are frequently purchased with credit and are easy to transport. Section 9-609, however, applies to any collateral in which a lender has a security interest.

Despite its importance as the sole statutory limitation on self-help repossession, the UCC does not define "breach of the peace" or explain how one can avoid doing so during a repossession. Some scholars have called for the UCC to clearly define the contours of breach of the peace, (11) though the drafters of revised Article 9 considered and rejected these proposals. (12) Accordingly, in the Official Comment to revised section 9-609, the drafters explain that they intentionally chose not to define the term "breach of the peace," instead leaving it open to judicial determination. (13) Though the breach-of-the-peace inquiry implicates several considerations, the essential question that often underlies courts' decisions regarding breach of the peace in this context is whether the repossession created an unreasonable risk of violence. (14) In fact, one can understand many standard examples of breach of the peace by framing the rule's motivation as avoidance of violence. (15)

Despite the lack of statutory guidance in defining breach of the peace, an Official Comment to section 9-609 notes a peculiar rule:

This section does not authorize a secured party who repossesses without judicial process to utilize the assistance of a law-enforcement officer. A number of cases have held that a repossessing secured party's use of a law-enforcement officer without benefit of judicial process constituted a failure to comply with former Section 9-503. (16) This Comment is ambiguous. The fact that section 9-609 "does not authorize" the use of a law-enforcement officer is not to say that the statute expressly forbids it. In addition, the Comment's reference to the "assistance" of law-enforcement officers may only intend to prohibit law-enforcement officers from actively facilitating repossession, rather than standing by to keep the peace. (17) Scholars and courts have interpreted the Comment as an unqualified prohibition on the participation of law-enforcement officers, (18) and, absent further clarification, this interpretation of the Official Comment is compelling.

This rule against the use of law-enforcement officers in self-help repossession is counterintuitive. Why would the involvement of a law-enforcement officer constitute a breach of the very peace that he has sworn to protect? Moreover, the Official Comment does not clearly indicate how much of an active role--if any--an officer may take in a repossession before a breach of the peace occurs. This Note addresses these questions and concludes that the current state of the law is more nuanced than section 9609's comments suggest.

Part I argues that the most prevalent theory that courts use to explain why a law-enforcement officer's involvement constitutes a breach of the peace--frustration of the debtor's right to object--is unsatisfactory. First, it is based on a misconstruction of existing case law that turned a fact-specific inquiry into a bright-line prohibition of law-enforcement-officer involvement. Second, the debtor does not have a right to object under the UCC, which, on the contrary, compels the debtor to cooperate with lawful repossession efforts.

Part II argues that the best approach to law-enforcement-officer involvement in self-help repossessions is one that considers whether a law-enforcement officer's presence constitutes state action. When a law-enforcement officer's involvement is repossession-facilitating rather than peacekeeping, it becomes state action, which makes the officer's involvement wrongful because it is neither the self-help repossession nor the judicial-process repossession authorized by the UCC. This approach provides a more nuanced and logically consistent framework for addressing law-enforcement involvement in self-help repossession.

Drawing upon this framework, Part III suggests language for an Official Comment to section 9-609 to replace the less precise rule that it currently endorses. This proposal unambiguously links the issue of law-enforcement involvement to the state-action inquiry and makes clear that the question is generally not one of breach of the peace. Part III then offers several illustrations to demonstrate application of the state-action approach.

  1. FRUSTRATION OF THE RIGHT TO OBJECT AS BREACH OF THE PEACE

    Even prior to the promulgation of the UCC, courts found improper the involvement of law-enforcement officers in self-help repossession. (19) In one of the earliest formulations of this principle, the Supreme Court of Washington stated that a "mortgagee becomes a trespasser by going upon the premises of the mortgagor, accompanied by a deputy sheriff who has no legal process, but claims to act colore officii, and taking possession without the active resistance of the mortgagor." (20) The court further explained that this type of behavior violates societal order, noting that "[t]o obtain possession under such a show and pretense of authority is to trifle with the obedience of citizens to the law and its officers." (21)

    Thus, according to this and similar cases from this era, the mere presence of a law-enforcement officer at a serf-help repossession constituted a breach of the peace only if the officer acted colore officii, under color of office. The significance of acting under color of office was the officer's use of his law-enforcement authority as a basis for the repossession. An action was colore officii when the officer acted beyond the scope of official duties but as if he were acting pursuant to law-enforcement authority. Accordingly, these cases did not hold that the officer's involvement was inherently a breach of the peace. Where an officer did not act under color of office, there was nothing improper about the repossession, assuming that no independent breach of the peace occurred.

    Early cases often framed this inquiry in terms of intimidation. That is, where an officer facilitated the repossession by improperly intimidating the debtor with the weight of his position, a breach of the peace occurred. (22) The underlying issue was that an officer's use of his position to repossess property exceeds the scope of his official duties. (23) To find a...

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