Abstract
If the previous chapter dealt with passive self-help remedies and showed that they are not only compatible with all legal systems analyzed, but also heavily relied upon in contract law, this chapter focuses on active self-help remedies and will prove that they are also compatible with civilian systems. When analyzing passive help-help, the book considered the ways in which creditors try to ensure, by means of contract, that they will be paid. But despite contractual covenants and the pressure they pose, these means do not guarantee payment. Events, both dependable and nondependable on the debtors’ will, could affect their possibility of making payments in accordance with the contract.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Rizoiu (2011), p. 581.
- 2.
Gilmore (1999), p. 1189.
- 3.
In this regard, American terminology uses “repossession,” while the UK one uses “recaption”; hence, for the purposes of this work, the two terms are used interchangeably.
- 4.
Gilmore (1999), p. 1190.
- 5.
Nowka (2009), p. 241.
- 6.
Gilmore (1999), p. 1190.
- 7.
Without being settled, there is even a discussion concerning the availability of self-help repossession with respect to licensed software or other copyright-protected digital content. However, most authors claim that self-help repossession should not be allowed (or should be allowed restrictively) in case of software since the losses caused are higher than the value of the disputed software. For details: Roditti (1995), pp. 452–459; Cohen (1998), pp. 1103–1119; Gitter (1993), pp. 416–420.
- 8.
UCC, Section 9-620. From the wording of the Section and the Official Comment, it is clear that strict foreclosure is a procedure by which the secured party acquires the debtor’s interest in the collateral without the need for a sale or other disposition upon default. In such cases, repossession will only be necessary where the secured creditor is not in possession of the collateral, but it is also a precondition of strict foreclosure, for the creditor must be in possession before acceptance. According to Comment 7 to Section 9.620, if the collateral is consumer goods, strict foreclosure occurs only when the creditor is in possession. The American Law Institute National Conference of Commissioners on Uniform State Laws (2009), p. 107.
- 9.
- 10.
McRobert (2012), p. 569.
- 11.
17, (Inalta Curte de Casatie si Justitie, Completul de 9 Judecatori) In Decision 3/2003, the court held: “The realization of a security interest is done by taking into possession the collateral.” The court also acknowledged the right of the secured party to choose private enforcement over judicial one.
- 12.
In some cases, where the value of the collateral has decreased and it is obvious that court action will be sought for deficiency, the creditor might prefer addressing directly the court, which will save him not only money and time but also the risk of an unlawful repossession or a suit for commercially unreasonable disposition of collateral. Evidently, the creditor will choose how to act depending on the actual circumstances and information he holds in each case. See: White and Summers (2010), p. 1331.
- 13.
For a detailed analysis of conversion claims faced by lien creditors or third party purchasers of collateral: Hayes (2006), pp. 734–739.
- 14.
Macleod (2007), p. 807. For a detailed description of the doctrine and its application in US law: Cumulative Remedies Under Article 9 of the Uniform Commercial Code: An Answer to Fuentes v. Shevin at http://scholarship.law.wm.edu/wmlr/vol14/iss1/8, pp. 217–222.
- 15.
Rizoiu (2009), p. 4/36.
- 16.
White and Summers (2010), p. 1332.
- 17.
UCC, Section 9-601 (c).
- 18.
Rusch and Sepinuck (2010), p. 141.
- 19.
- 20.
Rusch and Sepinuck (2010), p. 140.
- 21.
Ramsay (2012), p. 484.
- 22.
Dahan and Simpson (2008), p. 270.
- 23.
- 24.
Rizoiu (2009), p. 7/36.
- 25.
Repossession is available only to secured parties who formed a security interest according to the legal provisions of the UCC. See McRobert (2012), p. 570.
- 26.
Kieninger (2004), p. 79.
- 27.
Rizoiu (2009), p. 7/36.
- 28.
Art. 73, Title 6, of Law 99/1999 concerning measures for accelerating the economic reform provides that the creditor cannot adjudicate the collateral in a private sale that he organized without allowing first participation of third parties, unless otherwise agreed with the debtor.
- 29.
UCC Section 9-609 and RNCC, Art 2435 corroborated with Art 2439.
- 30.
UCC, Section 9-609. For details: White and Summers (2007), p. 218.
- 31.
RNCC, Art 2440 and the comment in Colectiv (2012), p. 873.
- 32.
White and Summers (2007), p. 219. For Romania, RNCC, Art. 2475, Para 1.
- 33.
Duncan et al. (2012), (Rel. 29), pp. 5–17.
- 34.
Goode (1999), Issue 26/IE/3053.
- 35.
Rizoiu (2009), p. 12/36.
- 36.
Rizoiu (2009), p. 15/36.
- 37.
RSTL, Art. 63 (1). By taxes or tariffs, the law understood mandatory taxes or tariffs similar to those imposed by judicial foreclosure. Fees paid to third parties involved in the repossession were not covered by this provision.
- 38.
Rizoiu (2008), p. 6/8.
- 39.
RSTL, Art 63 (4).
- 40.
The doctrine criticized harshly the mandatory formula arguing, among others, that it is a step back, since commercial agreements under the former Commercial Code were supposed to be less formalistic; it is a rigid measure because it does not allow the parties to formulate their own. The parties were allowed though to define the procedure as long as it complied with the statutory requirements. See: Rizoiu (2009), pp. 31–32/36.
- 41.
Rizoiu (2009), p. 30/36.
- 42.
Rizoiu (2011), p. 623.
- 43.
Rizoiu (2009), p. 15/36.
- 44.
RNCC, Art. 2440.
- 45.
Rizoiu (2009), p. 21/36.
- 46.
Rizoiu (2011), p. 582.
- 47.
Horvathova et al. (2011), p. 89.
- 48.
Duncan et al. (2012), (Rel. 29) 5-17.
- 49.
Fuentes v. Shevin, 407 US 67, 92 S. Ct. 1983, 32 L.Ed.2d 556 (1972), cited in Duncan et al. (2012), (Rel. 29) 5-17. See also the analysis in Symposium on Commercial Law (1973), pp. 443–445, and the point-by-point analysis in Brodsky (1974), pp. 296–297. The case became relevant due to the fact that an action in replevin to repossess collateral under a conditional sales agreement is very closely related to the self-help remedy permitted by the UCC. For a discussion concerning cases that followed Fuentes v. Shevin and a summary of the requirements of due process: TeSelle and Love (1977), pp. 256–260.
- 50.
For a detailed analysis, with history and legal implications: McDonnell (1973). Also: Symposium on Commercial Law (1973), pp 441–443. For a call of reform of self-help repossession law, based on the outcome of Fuentes: McDonald (1972), p. 540, and the following. The author argues that the most important outcome of Fuentes is that debtors in default should be provided with a notice and an opportunity to be heard “at a meaningful time,” where meaningful time is understood as “before the property is repossessed” (p. 560).
- 51.
Mitchell v. W.T. Grant Co., 94 S. Ct. 1895 (1974).
- 52.
For a detailed analysis of Mitchel and the way it departed from Fuentes, Guidry (1974), pp. 225–229.
- 53.
338 F. Supp. 614 (S.D. Cal. 1972).
- 54.
Symposium on Commercial Law (1973), pp 446–448. However, the case focused more on the efficacy of waivers found in usual consumer agreements, the majority of the judges criticizing previous decisions that upheld waivers of due process in security agreements. It was reversed in Adam v. Southern California First National Bank, but the decision cited D.H. Overmyer Co. v. Frick, 405 U.S. 174 (1972), to confirm the proposition that in certain instances, summary repossession, without notice and an opportunity for a hearing, may be unconscionable and void as a matter of public policy. See: “Self-Help” Repossession and Due Process (1974), p. 674. The decision was discussed and harshly criticized for creating adverse economic implications for all borrowers and affecting lower income groups even more severely. See: McAnally (1973), pp. 710–712 and 723–725.
- 55.
King and Cook (1996), p. 56. The authors, citing Arcoten v. Peters, 829 F.2d 671 (8th Cir. 1987), show: “The court noted that had Arcoren’s lender been private, it clearly would have been entitled to repossess without notice or hearing.”
- 56.
Following Fuentes, six decisions have declared self-help repossession under 9-503 to be state action. Three of them were overturned by courts of appeals. However, three survived: Michel v. Rex-Noreco, Inc., Boland v. Essex County Bank & Trust Co., Watson v. Branch County Bank. For details see Del Duca (1974), pp. 216–217.
- 57.
H. (1973), p. 585. On same case, see discussion at Brodsky (1974), pp. 299–300. Brodsky also mentions the eighth Circuit Court of Appeal’s Decision in Bichel Optical Laboratories, Inc v. Marquette National Bank, which held that the prejudgment self-help remedies authorized in Minnesota’s Commercial Code did not significantly involve the state in the self-help process (pp. 300–301).
- 58.
Laswell (1974), pp. 98–100. The four circuit courts that have considered the issue have found that the states were merely regulating the contractual right to repossess and as such were lending only their passive support, but they were not requiring the use of the self-help remedy. Hence, they concluded that no significant state action was involved and the cases were dismissed for failing to make a federal cause of action. However, district courts did not reach the same consensus on whether a state’s enactment of the UCC constitutes significant state action or not. Those that found that there was no significant state action relied on the fact that secured creditors are acting independently, under their contracts, and not under color of state law. Therefore, it was not the arm of the state that acted directly against an individual’s property and depriving him of it without notice and hearing but rather an individual. Those that have found that the enactment of the self-help repossession provisions by the states encouraged and involved the states in private repossessions thought it constituted sufficient action to raise a federal question. However, the latter position was dropped after the decision rendered in Mitchell v. W.T. Grant Co. (42 U.S.L.W. 4671 (U.s. May 14, 1974). On the position of federal Court of Appeals as well as a discussion on the district courts’ decisions finding sufficient state action in Article 9 and an analysis of Mitchel: Buckley Jr (1976), pp. 167–169. Also: H. (1973), p. 587, mainly footnote 9, for an extensive list of cases where state and federal courts have disagreed with the contention according to which explicit authorization by state statutes of self-help repossession constitutes sufficient state involvement to be a violation of 14th Amendment. The author also discusses in detail Adam v. First National Bank (9th Cir., Oct 4, 1973), where the Court of Appeals held that “where private individuals employ self-help based on a contractual agreement and without explicit aid, from the state there is no significant state involvement by reason of state allowing such action.” Similarly, in King v. South Jersey Nat’l Bank, the court held that self-help repossession was a contracting matter rather than state action and therefore immune from constitutional challenge, despite a dissenting opinion. See: T. (1975), pp. 177–178. Relatively recent, the Louisiana Supreme Court reached the same outcome in Price v. U-Haul Co., 745 So 2d 593, 594 (La 1999), where it held that self-help repossession did not violate the Federal Constitution. See: Hamilton (2000), p. 2241.
- 59.
See the decision in Boland v. Essex County Bank and Trust Co., where the court stated that the statute created an election of remedies that was unavailable under the common law and, hence, the expansion of the common law remedy involved the state to such a significant degree that it became state action, at Buckley (1976), p. 168. For contrary outcomes, see Adam v. First National Bank, at H. (1973), p. 589; and Del Duca (1974), pp. 217–219. Also see James v. Pinnix (495 F.2d 206 (5th Cir. 1974), cited and discussed at McRae (1974), p. 1421, where the fifth Circuit Court of Appeals held that the state of Mississippi did not significantly involve itself in self-help repossession actions taken by the creditor. Similar outcome was reached in Northside Motors, Inc v. Brinkley, 282 So 2d 617 (Fla. 1973), discussed at Smith (1973), pp. 231–232, and in Price v. U-Haul Co, 745 So 2d 593, 594 (La 1999), where the Louisiana Supreme Court noted that “the state did not encourage or benefit from private action authorized by the Act and that the Act did not compel U-Haul’s action” and “private enforcement of possessory liens was justified by avoiding expenses that would otherwise be incurred in judicial recovery of debt.” Hence, by applying the “state encouragement theory” and “public function concept,” the court determined that the state’s enactment of the Act was not itself state action. See: Hamilton (2000), p. 2243. A discussion on the rejection of three theories of state action—partnership, encouragement and traditional state—and relevant cases are to be found also in “Self-Help” repossession and due process (1974), pp. 668–675.
- 60.
King v. South Jersey Nat’l Bank, at T. (1975), p. 178.
- 61.
In King v. South Jersey Nat’l Bank, the court found that Section 9-503 was not invalid under the Constitution of New Jersey. The court relied on the notion that only those absolute rights that were part of common law when the constitution was enacted are protected by the courts. Therefore, even if the property right of the debtor was fundamental, by contract the secured party was granted a property interest in the collateral, and these interests of both debtor and creditor needed to be balanced. See: T. (1975), p. 178. Also: TeSelle and Love (1977), pp. 291–293, citing and discussing several state courts’ decisions in which constitutionality of self-help repossession was upheld: Benschoter v. First National Bank of Lawrence (218 Kan. 144, 542 P.2d 1042 (1975), Borg-Warner Acceptance Corp. v. Scott, 86 Wash. 2d 276, 543 P.2d 638 (1975), HiU v. Michigan Nat’l Bank, 58 Mich. App. 430, 228 N.W.2d 407 (1975), and Helfinstine v. Martin, 48 OxLA. B.A.J. 668 (Mar. 19, 1977). For a detailed list of federal and state court cases dealing with the issue of constitutionality: Duncan et al. (2012) (Rel. 29) 5-17, footnote 12. For a case with a different outcome, see same source, footnote 13.
- 62.
Brodsky (1974), pp. 301–302. The author substantiates his position by relying and restating the arguments of James J. White with respect to the benefits of self-help repossession. For a different opinion: Buckley Jr (1976), p. 170. The author contends that Section 9-503 does not meet the substantive due process tests of the Supreme Court, despite the fact that most Courts of Appeals have upheld the Code provision. Since more than 30 years have passed and the Supreme Court has not ruled against self-help repossession, this opinion can only be mentioned in the footnote.
- 63.
Debtors tried to expand the concept of state action to include private conduct under circumstances of significant state involvement. The four theories on which the debtors relied were as follows: (1) that the involvement of the police in repossession activities constituted concerted action between state and private parties, (2) that private parties were performing a public function in repossession property because seizure of property was traditionally done by state officials, (3) that the extensive regulation of the activities surrounding consumer financing and motor vehicle resale and certification constituted significant state involvement and (4) that the enactment of Section 9-503 amounted to significant action because it authorized and encouraged creditors to make use of self-help repossession. As already stated, the overwhelming majority of courts did not find these arguments persuasive. T. (1975), pp. 182–183. For a case in which the District Court argued that “when a statute or even a common law custom allows an individual to unilaterally transcend the fundamental and inalienable level of equality incident to all dealings between people in this country, that statute is clothing the individual with a power which can only truly be consistent with the state. It is this power given an individual by the state, that constitutes ‘state action,’” see the discussion on Gibbs v. Titelman, 369 F. Supp. 38 (E.D. Pa. 1973) at Del Duca (1974), pp. 219–223. It should be noted though that the District Court’s decision was overruled by the Court of Appeals. See also Oller v. Bank of America, 342 F. Supp. At 21, where the court stated that “the requirement of ‘state action’ can rarely be satisfied when the action is taken by one not a state official,” cited and discussed by McAnally (1973), pp. 712–713.
- 64.
- 65.
Santa Barbara, Inc. v. Heart of Cedar Lane, Inc., 226 N.J. Super. 509, 545 A. 2d 180, cert. denied and appeal dismissed sub nom. Priovolos v. Heart of Cedar Lane, Inc. 109 S. Ct. 485 (1988) cited in Duncan et al. (2012) (Rel. 29) 5-18. For an extensive list of similar decisions, see same source, footnote 16. The position of Justice Pashman, dissenting in King v. South Jersey Nat’l Bank, was that the cooperation between the police and creditors constitutes state action in those cases where creditors keep the police apprised of their repossession activities to avoid being arrested as car thieves. T. (1975), p. 179. The author provides a list of cases where the police accompanied the repossessor and helped him, directly or indirectly, to repossess the car, at same page, footnote 29.
- 66.
Duncan et al. (2012) (Rel. 33), 5-19.
- 67.
UCC, Section 9-609, Official Comment 3 states: “This section does not authorize a secured party who repossesses without judicial process to utilize the assistance of a law-enforcement officer. [A] repossessing party’s use of a law enforcement officer without benefit of judicial process constitute[s] a failure to comply with former Section 9-503.” The American Law Institute National Conference of Commissioners on Uniform State Laws (2009), p. 1054.
- 68.
Macleod (2007), p. 809.
- 69.
Rizoiu (2011), p. 583.
- 70.
Rizoiu (2009), p. 13/36.
- 71.
For a detailed discussion, see: Horvathova et al. (2011), pp. 103–104.
- 72.
Decision no 458/2009 of the Constitutional Court of Romania, published in the Official Gazette no 256/17.04.2009.
- 73.
The former Section 9-503 on self-help repossession did not provide for this possibility. White and Summers (2010), p. 1335.
- 74.
Rusch and Sepinuck (2010), p. 143. McRobert (2012), p. 578; Martin (2013), at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2331708, p. 3; and Braucher (1997), pp. 566–591.
- 75.
Lloyd and Kuney (2008), p. 196.
- 76.
McRobert (2012), p. 580. The author criticizes this approach because, by analyzing each case individually and creating new factors and rules, courts fail to give adequate guidance for future determination of breach of peace.
- 77.
White and Summers (2010), p. 1336. In summarizing the pre-Code cases, they mention that courts inquire mainly into “(1) whether there was an entry by the creditor upon the debtor’s premises and (2) whether the debtor or someone acting on his behalf consented (or objected) to the entry and repossession.” However, recent cases (Clarin v. Minn Repossessors, 198 F 3d 661, 664 (8th Cir. 1999); Giles v. First va. Credit Serv., 560 S.E. 2d 557, 565 (N.C. Ct. App. 2002); Davenport v. Chrysler Credit Corp., 818 S.W. 2d 23, 29 (Tenn. Ct. Appl. 1991), brought up more factors to be considered: “1) where the repossession took place; 2) the debtor’s express or constructive consent; the reaction of third parties; 4) the type of premises entered; and the creditor’s use of deception.” For details: McRobert (2012), p. 579.
- 78.
McRobert (2012), p. 587.
- 79.
Rizoiu (2009), p. 21/36.
- 80.
The sole exceptions are the Guidance Decisions for the unitary application of the law of the High Court of Cassation and Justice, Art 517, Para 4 of New Code of Civil Procedure.
- 81.
Salisbury Livestock Co. v. Colo. Cent. Union, 793 P. 2d 470, 474 n. 3 (1990).
- 82.
McRobert (2012), p. 582.
- 83.
Macleod (2007), p. 809.
- 84.
UCC, Section 9-609, Official Comment 3, “[C]ourts should hold the secured party responsible for the actions of others taken on the secured party’s behalf, including independent contractors engaged by the secured party to take possession of collateral.” The American Law Institute National Conference of Commissioners on Uniform State Laws (2009), p. 1054.
- 85.
Rizoiu (2009), p. 26/36.
- 86.
White and Summers (2010), p. 1336; Martin (2013), p. 7; McRobert (2012), p. 582. White and Summers mention Girard v. Anderson, 257 N.W. 400, 402–403 (Iowa 1934), as the most articulate and forceful statement of the rule that entry into the debtor’s residence in the absence of the debtor is a breach of peace, even if the debtor admitted that the door was unlocked at the time of the creditor’s entry. Martin mentions Pantoja-Cahue v. Ford Motor Credit Co. 872 N.E. 2d 1039 (III App. Ct. 2007), where the court held that where a repossession takes place by actually breaking into the debtor’s premises or by breaching or cutting chains, gates, barricades, doors or any kind of barriers designed to exclude trespassers, the likelihood for breach of peace is high. Lastly, McRobert mentions Girard as well and adds a list of similar cases in footnote 123: Evers-Jordan Furniture Co v. Hartzog, 187 So 491, 493 (Ala. 1939); Girard v. Anderson; Hileman v. Harter Bank & Trust Co., 186 N.E 2d 853, 855 (Ohio 1962).
- 87.
White and Summers (2010), p. 1337. The authors mention that with respect to debtor’s consent, even an oral one would suffice.
- 88.
- 89.
There is no legal distinction between serious and light trespass. Hence, whether trespass has occurred and it is deemed “serious” enough to constitute breach of peace is fact specific and is determined on a case-by-case basis.
- 90.
Martin (2013), p. 7.
- 91.
Guest et al. (2009), p. 2091.
- 92.
Tajti (2013), p. 134.
- 93.
Tajti (2013), p. 134.
- 94.
Rizoiu (2009), p. 32/36. See: RNCC, Art. 2440, requiring for expressed consent to self-help repossession in the contract between the secured creditor and the debtor.
- 95.
Rizoiu (2011), p. 617.
- 96.
Rizoiu (2009), p. 33/36.
- 97.
Official Comment 3 to UCC Rev Section 9-609 (1999), cited in Duncan et al. (2012) (Rel. 35) 5-23. Also: Rusch and Sepinuck (2010), p. 151. In the UK, the Administration of Justice Act 1970 extends any offense committed during debt collection to “any person ‘who concerts with others in taking such action…’ notwithstanding that his own course of conduct does not by itself amount to harassment.” See Macleod (2007), p. 809; and Martin (2013), p. 6.
- 98.
Under Romanian law, the creditor would be liable in tort for culpa in eligendo. See Rizoiu (2009), p. 15/36.
- 99.
White and Summers (2010), p. 1336. The authors mention that they have found no case in which the repossession of an automobile from a driveway or a public street (absent any other circumstances, such as debtor objection) constituted breach of peace in itself, and, in footnote 4, they provide a list of examples in which courts upheld such a repossession: repossession of car from driveway at 5 AM (Ragde v. Peoples Bank, 53 Wash App. 173, 767 P.2d, 949, 7 UCC 2d 1314 (1989)); repossession of vehicles not visible from public place when repossessed from a secluded years, on an isolated ranch (Salisbury Livestock Co. v. Colorado Central Credit Union, 793 P. 2d 470, 12, UCC2d 894 (Wyo. 1990)). Salisbury is also discussed in Picker et al. (2002), pp. 310–317. The previous authors’ position is confirmed and strengthened by McRobert, who claims that no reported decision has held that mere trespassing onto debtor’s property, without entering the home, constitutes breach of peace. He also offers an extensive list of such cases at footnote 128: no breach of peace where secured creditor made an unauthorized entry onto driveway of debtor’s residence to remove vehicle (Butler v. Ford Motor Credit Co., 829 F.2d 568, 570 (5th Cir. 1987)); simply going upon the private driveway of the debtor and taking possession of secured collateral is not breach of peace (Hester v. Bandy, 627 So. 2d 833, 840 (Miss. 1993)). See: McRobert (2012), p. 583. Several other cases (Chrysler Credit Corp v. Koontz, 661 N.E. 2d 1171 (III App. Ct. 1996) and Oakloan Bank v. Baldwin, 709 S.W. 2d 91 (Ark. 1986)) where no breach of peace occurred, although the lender had entered the debtor’s premises, but encountered no barriers, are found at Martin (2013), p. 7, footnote 38.
- 100.
McRobert (2012), p. 583, footnote 130. The author mentions that cutting chains connected to a lock is breach of peace (Martin v. Dorn Equip. Co. 821 P.2d 1025, 1026–1028 (Mont. 1991)) and so is cutting the gate’s chain without permission (Williamson v. Fowler Toyota, Inc., 956 P.2d 858, 859, 862 (Okla. 1998)) or entering a garage and cutting chains that attached car to post in garage to repossess the car (Davenport v. Chrysler Credit Corp, 818 S.W. 2d23, 26, 29–30 (Tenn. Ct. App. 1991)). See also Pantoja-Cahue v. Ford Motor Credit Co. 872 N.E. 2d 1039 (III App. Ct. 2007) cited and discussed by Martin (2013), p. 7.
- 101.
McRobert (2012), p. 583, footnote 131. All mentioned cases are from New York: Global casting Indus., Inc. v. Daley-Hodkin Corp., 432 N.Y.S. 2d 453, 456 (N.Y. Sup. Ct. 1980); Cherno v. Bank of Babylon, 282 N.Y.S. 2d 114, 120 (N.Y. Sup. Ct. 1967), aff’d, 288 N.Y.S. 2d 862 (N.Y. App. Div. 1968).
- 102.
See: Chrysler Fin. Co. v. Flynn, 88 S.W. 3d 142, 147–152 (Mo. Ct. App. 2002).
- 103.
Although common, such provisions were avoided by the Hire Purchase Act 1938 in some hire purchase agreements. This protection was extended by the CCA to include conditional sales and simple hirings. Section 92(1) of the CCA provides that “except under an order of the court, the creditor shall not be entitled to enter any premises to take possession of goods subject to a regulated hire purchase agreement, regulated conditional sale agreement or regulated consumer hire agreement.” See: Macleod (2007), p. 821.
- 104.
Violent entry without consent or a court order may be an offense under s6 (as amended) of the Criminal Law Act 1977. See Macleod (2007), p. 809.
- 105.
Macleod (2007), p. 821.
- 106.
For a detailed discussion supported by relevant court cases, see: Guest et al. (2009), p. 2091.
- 107.
Rizoiu (2009), p. 22/36. Any breach of public order that occurs after the repossession, even if it involves a repossessed good, would not bear any effects on the repossession itself.
- 108.
White and Summers (2010), p. 1337.
- 109.
Walker v. Walthall, 588 P.2d 863 (Ariz. Ct. App. 1978), cited by Lloyd and Kuney (2008), p. 206. The court held: “the introduction of law enforcement officers in self-help repossession, regardless of the degree of participation or non-participation, in the actual events would constitute state action, thereby invalidating repossession without a proper notice or hearing.”
- 110.
White and Summers (2007), p. 220. Putting the case law under a question mark the authors express their doubts, which seem correct, at least from a logical point of view: “[W]hy is it wrong for a person who is entitled to possession to take along a “peace officer” to insure that it gets possession “peacefully”?” For an elaborate recent study and criticism of the consequences of involvement of law officers in repossession: Loterstein (2013), pp. 1365–1372.
- 111.
Pride Hyundai, Inc. v. Chrysler Fin. Co., 369 F 3d 603, 613 (1st Cir. 2004) and Smith v. First Union Nat’l Bank of Tenn., 958 S.W. 2d 113, 116 (Tenn. Ct. App. 1997), where it was held that secured parties are not allowed to use the assistance of law enforcement personnel to accomplish self-help repossession, cited by McRobert (2012), p. 577, footnote 75.
- 112.
Harris v. City of Rosenburg, 664 F. 2d 1121, 1127 (9th Cir. 1981); Jackson v. Richards, 433 A.2d 888, 895–896, n. 11 (Pa. Super. Ct. 1981); Stone Mach. Co. v. Kessler, 1 Wash. App. 750, 757, 463 P. 2d 651, 655 (1970). In the latter case, it was held that even an officer’s verbal assistance amounts to constructive force, intimidation and oppression, which constitutes breach of peace. McRobert (2012), pp. 580–581; and Picker et al. (2002), pp. 322–326.
- 113.
Walker v. Walthall, 588 P.2d 863 (Ariz. 1978), where the court decided that the mere presence of a uniformed deputy sheriff at the site of repossession constituted a breach of peace. Similar view was adopted in United States v. Coleman, 628 F.2d 961 (6th Cir. 1980), but the court refused to extend it to mere surveillance by the officers. Basically, in the mentioned case, the police officer remained around the corner from the location of the repossession and was out of sight of the debtor.
- 114.
- 115.
Falsely representing himself to be authorized in some official capacity to claim or enforce payment or uttering a document falsely represented by him to have some official character or purporting to have some official character is unlawful harassment and is criminally liable. Macleod (2007), pp. 809–810.
- 116.
Art. 241 of the New Romanian Criminal Code, sanctioning the illegal use of official uniforms or insignia. The liability will be incurred by the person actually impersonating a law enforcement officer and not by the creditor, unless it is the creditor himself who made use of official uniforms or insignia.
- 117.
RSTL, Art 63 (3).
- 118.
Given the silence of the law, the doctrine asked what would be the outcome if the police officer is the creditor or what if he does not reveal he is a police officer or what if he is simply present, without getting involved or “actively assisting” the creditor. Rizoiu (2009), p. 27/36.
- 119.
White and Summers (2010), p. 1337.
- 120.
Marcus v. McCollum, 394 F.3d 13, 820 (10th Cir. 2004), where the court determined that any debtor’s request for secured creditor to stop constitutes breach of peace, and Hollibush v. Ford Motor Credit Co., 508 N.W. 2d 449, 451–453 (Wis. Ct. App. 1993), where the court held that the debtor’s protest to repossessing agent “You are not going to take the Bronco” was enough to constitute breach of peace.
- 121.
Dixon v. Ford Motor credit Co., 391 N.E. 2d 493, 497 (Ill Ct. App. 1979), where the court required “an unequivocal oral protest,” or First & Farmers Bank, Inc. v. Henderson, 763 S.W.2d 137, 140 (Ky. Ct. App. 1988), where the court required “repossession in the face of debtor’s objection.”
- 122.
McRobert (2012), p. 584. The author refers to Chrysler Credit Corp v. Koontz, 661 N.E.2d 1171, 1173–1174 (Ill. Ct. App. 1996), where the court found no breach of peace where the debtor yelled “Don’t take it” to the secured creditor attempting to repossess his car. To find so, the court defined breach of peace as “a conduct which incites or is likely to incite to immediate public turbulence.” Given the fact that the repossessor made no physical or verbal response to the debtor’s request and the debtor did not act in a violent either, the court reasoned there was not breach of peace. A similar reasoning was used in Williams v. Ford Motor Credit Co., 674 F.2d 717, 720 (8th Cir. 1982), where the court found no breach of peace where repossessor completed the repossession after the debtor interrupted and was allowed to recover personal items from the car. The court held that there was no evidence to reveal that the repossessors have performed any act that was oppressive, threatening or tended to cause physical violence. However, the dissenting opinion makes a good argument to the contrary and should be mentioned here.
- 123.
In Chapa v. Tracier & Associates, 267 S.W. 3d 386 (Tex. Ct. App. 2008), the court refused to find breach of peace where harm to third parties has occurred during a self-help repossession. In the mentioned case, the secured creditor’s repossession agent repossessed a car from a public street, during the absence of the driver. However, the repossessor failed to observe the fact that in the backseat of the car were the debtor’s two young children. When he finally realized that fact, the repossessor returned the children and the vehicle to the mother. Surprisingly, the court found no breach of peace, for the reason that at the time of the repossession no objection was expressed. Any harm done, after the repossession has taken place, was not considered. Therefore, the harm done to the children, to the mother and her brother, who was present and was later diagnosed with post-traumatic stress disorder due to this event, was totally disregarded. Similarly, in Jordan v. Citizens & Southern National Bank of South Carolina, 298 S>E. 2d 213, 214 (S.C 1982), where, after the debtor’s truck has been repossessed and the debtor engaged in a pursuit of the creditor, in another vehicle, for up to 30 min, resulting in repossessor’s reckless driving and endangerment of public safety, the court found no breach of peace. McRobert (2012), pp. 585–586. See also the discussion on Smith v. AFS acceptance, LLC, 77 U.C.C. Rep. Serv. 2d 794 (N.D. III. June 1, 2012), and Thompson v. Gateway Fin. Servs., 2012 U.S. Dist. LEXIS 169377 (N.D. III. Nov. 29, 2012) at Martin (2013), pp. 4–5. In the former case, where the vehicle was repossessed although the debtor and her daughter were inside, with the doors opened, and both of them, together with the neighbors, were shouting at the repossessors, the court held that only the debtor’s claims were allowed, but not those of the daughter’s, for the simple reason that the daughter was not a debtor for the purposes of the statutory requirements of Section 9-609. In the latter case, the court held that the debtor’s child and car passenger did not have standing to bring claims under Section 9-609 after the vehicle repossessor frightened them and caused the diabetic passenger to urinate on himself.
- 124.
- 125.
The assumption seems to be that the creditor’s obligations regarding breach of peace under Section 9-609 cease when the repossession is completed. See Martin (2013), p. 5.
- 126.
For details and other similar cases, supra footnote 123.
- 127.
The doctrine underlined that “public order” is a fluctuating concept regarding the essential social interests of the state and local communities. See: Rizoiu (2009), p. 24/36.
- 128.
Rizoiu (2009), p. 22/36.
- 129.
UCC, Section 9-620, e).
- 130.
McRobert (2012), p. 577.
- 131.
Macleod (2007), pp. 806–807.
- 132.
This is not valid in case of mortgages.
- 133.
The practice of snatch back was described as follows: “[w]hile most firms wanted payment in full rather than repossession, there was a significant proportion – including some who engaged in considerable advertising – that specialized in repossessing good after most payments were made… many cases were reported of debtors who had almost completed contracts having their goods snatched within hours of missing a single payment. (Scott 2002, 195, 215).” See: Ramsay (2012), p. 481.
- 134.
Ramsay (2012), p. 482.
- 135.
Macleod (2007), p. 821. Where the hirer had paid more than one-third of the hire purchase price, HPA 1938 termed them “protected goods”: in respect of these, the exercise of any common law right of recaption was totally prohibited and, if the owner alternatively sought to recover the goods through court action, introduced a number of substantive and procedural protections.
- 136.
Under the definition of “individual,” the CCA covers also partnerships and any other unincorporated bodies.
- 137.
Furmston and Chuah (2010), p. 529. “The central point of a time order is that whilst it is in force and being complied with, the creditor’s right to terminate the agreement, demand early payment of any sum, recover possession of any goods or land, enforce any security, etc. – in effect the creditor’s rights – are put on hold and if the breach is remedied by meeting the payments under the time order the breach is deemed never to have taken place.”
- 138.
The notion extends to “add on” agreements. According to Section 90 (3) of CCA, once the debtor has paid 1/3 or more of the total price of the goods under an earlier agreement and a later agreement is made between the same debtor and creditor relating to any such goods, then all goods under the later agreement (including the old goods) are automatically protected goods. This result only follows where the debtor has not paid 1/3 or more under the later agreement. If he had, then Section 90 (1) would apply anyway. Thus, the creditor is not entitled to recover possession of the goods subject to a later agreement except on an order of court, even if less than a third (or indeed nothing) has been paid under the later agreement. Same result is obtained under subsection 4 where the earlier agreement is modified under Section 82(2) as well as when a completely new agreement was entered into. For details: Guest et al. (2009), p. 2089.
- 139.
- 140.
- 141.
CCA, Section 189 (1).
- 142.
Guest et al. (2009), p. 2088.
- 143.
Guest et al. (2009), pp. 2088–2089.
- 144.
Goode (1999), issue 36/II/B 265.
- 145.
Kassam v. Chartered Trust Plc., [1998] R.T.T. 220.
- 146.
Guest et al. (2009), p. 2089.
- 147.
Bentink Ltd v. Cromwell Engineering Co [1071] 1 Q.B. 324 CA.
- 148.
FC Finance Ltd v. Francis [1970] 114 SJ 568. Goods merely left by the debtor with a garage for repair do not constitute abandoned goods.
- 149.
For a comprehensive analysis of consent: Goode (1999), Issue 36/II/B 266.
- 150.
Macleod (2007), p. 824.
- 151.
Chartered Trust Plc v. Pitcher [1988] RTR 72 CA.
- 152.
Mercantile Credit Co Ltd v. Cross [1965] 2 QB 205, [1965] 1 All ER 577, [1999] GCCR 251).
- 153.
“Termination” means primarily termination under a contractual power. It probably also includes the case where the debtor purports to terminate without complying with the contractual conditions attached to his power, for he is equally manifesting his intention to be rid of the agreement. It does not, however, include the case where the debtor repudiates and the creditor accepts the breach as terminating the agreement. Goode (1999), Issue 36/II/B 264–265.
- 154.
- 155.
Penalties are provided by Section 91 of the CCA.
- 156.
CCA, Section 92 (1).
- 157.
Guest et al. (2009), p. 2091.
- 158.
Goode (1999), Issue 36/II/B 269.
- 159.
For a detailed discussion of all criminal liabilities faced by a creditor trying to retake goods that are the subject of a regulated hire purchase or conditional sale agreement, see: Goode (1999), Issue 26/IE/3054–3060.
- 160.
Colectiv (2012), p. 873. Comment to Art. 2441.
- 161.
RNCC, Art 2442, provides for the right of the creditor to request the support of the bailiff (executor judecătoresc) for repossessing the collateral.
- 162.
- 163.
Since neither the public sale nor the private sale is statutorily defined, the doctrine tried to establish what is understood by both of them. Based on pre-Code case law, Gilmore concluded, for example, that the essence of a public sale is not that the relevant public is not only invited to attend but is also informed, by whatever means of publicity are deemed appropriate, when and where the sale is to take place. Otherwise, in the absence of proper publicity, it would not be a public sale, no matter the place or time when it was conducted. On the matter whether a public sale must be an auction sale, Gilmore answered positively, for reasons that have more to do with the protection of the purchaser, though he noted that if the legislator would have intended to require an auction it would have said so specifically. Gilmore (1999), pp. 1242–1243. After the revised version of Article 9, the comments seem to agree on the auction requirement by describing the public sale as “one at which the price is determined after the public has had a meaningful opportunity for competitive bidding.” UCC Rev. Section 9-610, Official Comment 7 (1999), cited in Duncan et al. (2012), (Rel. 29) 5-30.3, footnote 30. Most courts follow the comment’s guideline and thus require that a public disposition be open to the public and not just a limited segment of the public. Therefore, dealers’ only auctions might not satisfy the requirements and will be classified as private dispositions. See Nowka (2009), p. 251.
- 164.
Rusch and Sepinuck (2010), p. 156.
- 165.
Official Comment 2 to UCC, Section 9-610: “[…] This section encourages private dispositions on the assumption that they will result in higher realization on collateral for the benefit of all concerned.[…],” The American Law Institute National Conference of Commissioners on Uniform State Laws (2009), pp. 1055–1056. Also Kieninger (2004), p. 79. For a similar opinion: Nowka (2009), p. 249: “The court does not hold, approve, or oversees a Section 9-610 disposition. The secured party may dispose of the collateral in a public or private disposition, in a single unit or separate parcels, when and where It chooses, and on terms it chooses. This freedom theoretically helps produce higher disposition price, but the freedom is not unlimited.”
- 166.
Ramsay (2012), p. 482.
- 167.
See infra Section 100 of CCA.
- 168.
Section 100 introduced a 50 % rule intended to provide a form of justice between hirer and owner: “100-(1) Where a regulated hire purchase or regulated conditional sale agreement is terminated under section 99 the debtor shall be liable, unless the agreement provides for a smaller payment, or does not provide for any payment, to pay to the creditor the amount (if any) by which one-half of the total price exceeds the aggregate of the sums paid and the sums due in respect of the total price immediately before termination.”
- 169.
Ramsay (2012), p. 483.
- 170.
If the security interest was not perfected according to the law, the creditor shall not be entitled to sell the collateral. See: Colectiv (2012), p. 875.
- 171.
RNCC, Art 2445 (1).
- 172.
The good can be sold by the creditor even if it is still in the possession of the debtor, since the law expressly empowers the creditor to take possession of the goods (Art. 2447). But the right of the buyer to take into possession the good, after the sale, covers only the situation where the good is still in the possession of the debtor. If the good is in the possession of a third party, the sale must occur after the good was taken into possession by the creditor. See: Colectiv (2012), p. 876.
- 173.
RNCC, Art 2445 (2)–(5).
- 174.
RNCC, Art. 2456, and its commentary in Colectiv (2012), p. 879.
- 175.
Gilmore (1999), p. 1228.
- 176.
Gilmore (1999), p. 1229.
- 177.
Gilmore (1999), pp. 1232–1233.
- 178.
Duncan et al. (2012), (Rel. 32) 5-42, footnote 88.
- 179.
In R & J of Tennessee, Inc. v. Blankenship-Melton Real Estate, Inc., 55 UCC Rep Serv. 2d 278, (Tenn. App. 2004), the court held that the sale was not commercially reasonable under Revised Article 9 because the secured party failed to provide adequate notice to a secondary obligor, did not advertise the sale, did not hire an experienced auctioneer, held the collateral for over 7 months before conducting the sale and permitted others to use the collateral during the extended time period. For a list of court decisions on the applicability of the commercially reasonable standard, see: Duncan et al. (2012), (Rel. 32) 5-43, footnote 901.
- 180.
Duncan et al. (2012), (Rel. 35) 5-48, footnotes 108 and 113.
- 181.
Before the Revision, Prof. Gilmore stated that among the secured party’s powers in conducting the sale of collateral lies the authorization to prepare or even process the goods in order to maximize the proceeds. Gilmore (1999), p. 1238. The courts, although not entirely unanimous, have taken the same position and held that it would be unreasonable for the secured creditor not to take any action to prepare the collateral such as minor repairs or cleaning it up before the sale. See: Duncan et al. (2012), (Rel. 35) 5-46.
- 182.
Duncan et al. (2012), (Rel. 32) 5-44.
- 183.
Gilmore (1999), p. 1237.
- 184.
This view is also supported by the case law, which held that mere inadequacy in the price obtained will not make the disposition commercially unreasonable as long as there was no fraud or wrongdoing from the creditor’s side. For a detailed list of cases: Duncan et al. (2012), (Rel. 33) 5-50.2, footnote 123.
- 185.
Gilmore (1999), p. 1245.
- 186.
Commenting on the previous provisions of the UCC, Prof. Gilmore observed that “Allegations of fraud or of failure to exercise a required degree of diligence are easily made” and, hence, he concluded that the burden of bringing convincing proof “should be on the party who makes these allegations.” Gilmore (1999), p. 1235.
- 187.
Reno Financial Ltd. v. Valleroy, 229 S.W. 3d 622 (Mo. App. 2007).
- 188.
Duncan et al. (2012), (Rel. 33) 5-50, footnote 1161.
- 189.
Gilmore (1999), p. 1236.
- 190.
Macleod (2007), p. 808. The author mentions an unreported case in which the court ruled in this way: Contra Forward Trust Ltd. v. Best (1983).
- 191.
Macleod (2007), p. 808.
- 192.
RNCC, Art 2446.
- 193.
Art 2446 of RNCC, Para 2.
- 194.
Colectiv (2012), p. 875.
- 195.
Gilmore (1999), p. 1220.
- 196.
However, in Reeves v. Foutz and Tanner, Inc., 617 P.2d 149 (New Mexico Supreme Court, 1980), cited by Picker et al. (2002), pp. 344–346, the court held that where the creditor retained the collateral, but sold it in the normal course of his business, he must account for the surplus.
- 197.
Official Comment 2 to UCC, Section 9-620, The American Law Institute National Conference of Commissioners on Uniform State Laws (2009), p. 1074. “This section […] reflect the belief that strict foreclosure should be encouraged and often will produce better results than a disposition for all the concerned.” Also: Duncan et al. (2012), (Rel. 33) 5-56.3.
- 198.
For a detailed discussion on the contents of the notice and the categories entitled to receive such notice, see Gilmore (1999), pp. 1223–1227.
- 199.
See: Gilmore (1999), p. 1226. Gilmore made a good observation that a “commercially reasonable” proposal should not be defeated by a “commercially unreasonable” objection, but he also pointed out that such an issue, although interesting from a theoretical point of view, has slim chances of being argued in practice since the secured party is better of disposing of the collateral via sale than spending time and money in court trying to determine if the objection was done in good faith and based on sufficient reasons.
- 200.
Gilmore (1999), p. 1240.
- 201.
Dahan and Simpson (2008), p. 270.
- 202.
Dahan and Simpson (2008), p. 266.
- 203.
Dahan and Simpson (2008), p. 266.
- 204.
The DCFR might offer an idea about how strict foreclosure is perceived in Germany given the number of German scholars involved in the drafting. In particular, Arts. IX-7:105 and IX-7:216 and the corresponding comments are relevant. An agreement for strict foreclosure that is predefault will not be deemed effective. Strict foreclosure may be total or partial; however, in case there is a surplus, its value must be returned to the debtor, while in case of deficiency, the debtor will still be liable for it. von Bar and Clive (2010), pp. 5621–5623 and 5659–5661.
- 205.
BGB, Art. 1229, prohibits agreements reached before default that transfer ownership over the pledged collateral to the pledgee, in case the debtor defaults. The prohibition strictly refers to agreements reached before default but mentioned nothing with respect to such agreements concluded after default. Per a contrario this may be interpreted that the latter are allowed.
- 206.
RNCC, Art. 2460, Para 1.
- 207.
See Colectiv (2012), p. 881, comment to Art. 2463.
- 208.
Gilmore (1999), p. 1221.
- 209.
Ramsay (2012), p. 481.
- 210.
UCC, Section 9-620 (e).
- 211.
The underlining idea is simple: if the debtor has paid as much as 60 %, then he has built up an equity that should be protected by requiring a compulsory disposition that will produce a surplus to be returned to him. Gilmore (1999), p. 1222.
- 212.
For a detailed discussion and explanation on the difference between the cash price and the loan: Duncan et al. (2012), (Rel. 15) 5-57–5-58.
- 213.
Duncan et al. (2012), (Rel. 15) 5-57.
- 214.
See supra Sect. 4.1.5.1.
- 215.
UCC, Section 9-620 (f).
- 216.
Duncan et al. (2012), (Rel. 23), 5-60, footnote 16.
- 217.
For a discussion of the problem and a few cases addressing it: Duncan et al. (2012), (Rel. 15) 5-62–5.5.63, footnotes 25, 26 and 30.
- 218.
White and Summers (2010), pp. 1335–1336 and 1356–1357. On the same issue of tort liability: Rusch and Sepinuck (2010), pp. 12, 151 and 187; and Martin (2013), pp. 1 and 9. On the issue of punitive damages, at page 9, footnote 47, Martin provides an extensive list of cases where punitive damages were declined. Without restating them all again here, it is worth mentioning that in order for the court to grant punitive damages, one must prove that the repossessor’s behavior was outrageous, indicating spite or malice, fraudulent evil or willful improper motives, conscious and deliberate or reckless disregard for debtor’s interests, oppression or wanton.
- 219.
- 220.
UCC, Section 9-625, provides for statutory remedies in case of secured party’s failure to comply with Article 9: judicial orders concerning noncompliance, damages for loss caused by failure to comply, statutory damages in consumer goods transactions in the amount of not less than the credit service plus 10 % of the principal amount of the obligation or the time price differential plus 10 % of the cash price, damages for the loss of any surplus. In addition, the same Section established at letters e) and f) a list of cases in which noncompliance with the specified provision would amount to statutory damages in the value of 500 dollars for each case. For details, White and Summers (2010), pp. 1355–1356.
- 221.
Rusch and Sepinuck (2010), pp. 187–191. Also: White and Summers (2010), pp. 1354–1355, and In Re Downing, U.S. Bankruptcy Court, W.D. Missouri (2002), 286 B.R. 900, where the court held that the notice concerning the sale of collateral given by the secured creditor to the debtor was insufficient and hence the secured creditor lost its right to a deficiency judgment under Missouri law.
- 222.
Martin (2013), p. 1.
- 223.
In tort and criminal law, conversion is defined as the wrongful possession or disposition of another’s property as if it were one’s own; an act or series of acts of willful interference, without lawful justification, with an item of property in a manner inconsistent with another’s right, whereby that other person is deprived of the use and possession of the property. See: Garner (2009), p. 381.
- 224.
Macleod (2007), p. 808.
- 225.
RNCC, Art. 1683.
- 226.
Reftu (2012), the author fails to recognize the risks of having personal property sold by a third party, once the owner has lost possession, claiming that such sale needs to be validated by the real owner. In fact, goods sold on black market or fairs do not require such validation and a good faith purchaser would acquire valid title, while the real owner would be left with an action for damages against the seller.
- 227.
Decision no 14/2009 of Suceava Court of Appeals.
- 228.
Decision no 543/2012 of Gorj County Court.
- 229.
Tajti (2013), p. 13. The author emphasizes that lack of proper regulation has actually encouraged out-of-court enforcement, but placing it somewhere on the boundaries of legality and on the expense of consumers.
- 230.
- 231.
Duncan et al. (2012), (Rel. 32) 5-75.
- 232.
White and Summers (2007), pp. 242–243.
- 233.
For a list of cases, see Duncan et al. (2012), (Rel. 35), 5-77, footnotes 16 and 17.
- 234.
UCC, Section 9-507 (1).
- 235.
Duncan et al. (2012), (Rel. 35), 5-77.
- 236.
UCC, Section 9-625 (b).
- 237.
UCC, Section 9-626.
- 238.
- 239.
See infra, footnote 11 in Chap. 7.
- 240.
White and Summers (2007), pp. 239–241.
- 241.
For a detailed discussion and list of court decisions and their position: Duncan et al. (2012), (Rel. 35), 5-80–5-84, footnotes 31–38.
- 242.
See supra, Sect. 4.1.5.1.
- 243.
Furmston and Chuah (2010), p. 528.
- 244.
Harding (1995), p. 114.
- 245.
Noncompliance for disobeying the rules established for distribution of proceeds that resulted from the sale of collateral only gives rise to an action for damages, based on general civil law.
- 246.
RNCC, Art. 2475, Para 2.
- 247.
RSTL, Art 87 and 88.
- 248.
Rizoiu (2009), p. 19/36.
- 249.
Ali (2002), p. 249. The author mentions four self-help remedies available to secured parties: taking possession of secured property, selling the secured property, appointing a receiver in respect of the secured property and foreclosing the security interest. These remedies are considered self-help remedies because “they do not depend upon the grant of a judicial order or the intervention of a regulatory authority.” Also: Getzler and Payne (2006), p. 136.
- 250.
The appointment was subjected in the UK to certain limitations: the secured creditor needed to have such right granted through the security agreement and the remedy was available only for a floating charge. In Romania, only the first condition was required. Ali (2002), pp. 259–260.
- 251.
According to the definition, a receiver is “a disinterested person appointed by a court, or by a corporation or other person, for the protection or collection of property that is the subject of diverse claims (for example, because it belongs to a bankrupt or is otherwise being litigated).” See: Garner (2009), p. 1383.
- 252.
“Other jurisdictions […] do not permit a creditor to run a debtor’s business, either because this is simply a form of enforcement remedy which does not exist in that jurisdiction (as is the case with many continental legal systems) or because the jurisdiction in question has developed a bankruptcy procedure which actually prohibits secured creditors running a debtor’s business effectively for their own account (as is the case with Chapter 11 proceedings in the United States of America).” Vinter (1998), p. 150.
- 253.
See infra, footnote 261.
- 254.
Section 29 (2) of Insolvency Act 1986. According to one author, “the essential characteristic of a “floating” charge is that the company which grants it remains free to carry on its business and use its assets in the normal course of its business, until the lender intervenes, by appointing a receiver or in certain other ways, to enforce his security.” Collins (1978), p. 691. Also: McCormack (2009), p. 126.
- 255.
Armour and Frisby (2001), p. 75.
- 256.
Section 9 (2) (a) of the Insolvency Act 1986.
- 257.
Armour and Frisby (2001), p. 76.
- 258.
- 259.
- 260.
Collins (1978), pp. 692–693.
- 261.
Sheehan (2011), pp. 400–401. “The administrative receiver has control over the assets for the purpose of paying off one particular creditor (the floating charge), and his or her management powers are ancillary to that aim.”
- 262.
RNCC, Art. 2435, letter b) states: “Upon default, the creditor is entitled, at his choice to […] take over the collateral for the purpose of administer it under the provisions of Art 2468-2473.” In Romanian: “În caz de neexecutare, creditorul are dreptul, la alegerea sa, să preia bunul în scop de administrare în condiţiile Art 2468-2473.”
- 263.
Taking over the collateral for the purpose of administering it is considered a special case of administering the goods of another, an institution that was adopted from the Civil Code of Quebec. See for details: Boti (2011) and Boti and Boti (2010), http://www.juridice.ro/130791/institutia-administrarii-bunurilor-altuia-in-noul-cod-civil-roman.html.
- 264.
RNCC, Art 2468, and the provisions of Art 3 (3). The former defines the condition required for the creditor to exercise his right of administration of the collateral, while the latter defines what the exploitation of the enterprise is.
- 265.
The categories of interested persons to be notified are specified in RNCC, Art 2450, and are the same categories upon which a creditor must serve notice in case of enforcement by sale of collateral.
- 266.
According to the wording of Art 2468, the three conditions must be met cumulatively.
- 267.
RNC, Art 2472, last thesis. At the moment when the RNCC was adopted, commentators appreciated that this article created a veritable exception from the provisions of Art 36 of Insolvency Act no 85/2006. See: Colectiv (2012), p. 883. Given the fact that the Insolvency Act no 85/2006 was replaced by a new Insolvency Act no 85/2014, it is highly debatable if such an exception still survives.
- 268.
The right to take over the collateral in order to administer it is a temporary right. RNCC, Art 2468, para 2.
- 269.
These cases are the general cases established by the RNCC with respect to termination of administration of another’s goods—which constitutes general law with respect to administration right—and they are listed in Art. 846: termination of the creditor’s or beneficiary’s rights over the administered goods, the expiry of the term, the achievement of the purpose, the denunciation of the creditor or of the beneficiary of the appointment, the replacement of the administrator by the creditor, beneficiary or the court, at the request of any interested person, by death, incapacity or insolvency of the administrator or of the beneficiary.
- 270.
Hunter (2005), p. 470
- 271.
Hunter (2005), p. 471.
- 272.
The security agreement must contain the possibility of the secured party to appoint a receiver, the circumstances in which a receiver can be appointed and the range of powers conferred upon the receiver, which may extend the statutory powers that were provided by the Insolvency Act 1986. Ali (2002), p. 260.
- 273.
Hunter (2005), pp. 478–479.
- 274.
Hunter (2005), p. 508.
- 275.
Section 39 (1) of the Insolvency Act 1986.
- 276.
- 277.
RNCC, Art 2469.
- 278.
Boti (2011), para 13.1.
- 279.
For details: Collins (1978), pp. 707–710. The author mentions a “dual” status of the receiver and discusses the complications that arise where foreign jurisdictions are involved, especially those where the institution is unknown, such as France and Germany, or has a different regime, such as Canada or the US.
- 280.
Section 44 (1) of the Insolvency Act 1986.
- 281.
However, given the peculiarities of the receiver’s agency, the principal does not have the right to dismiss the agent. Section 45 (1) of the Insolvency Act 1986.
- 282.
For these reasons, McCormack notes that although “the receiver is designated by statute as an agent of the company […] this is a very curious and unusual form of agency.” McCormack (2009), p. 126.
- 283.
McCormack (2008), p. 49. Also: Armour and Frisby (2001), p. 77. Keeping in mind that they are referring to the previous legal regime, the authors mention that a receiver owed to the “principal” (the debtor company) no duty of obedience nor any general duty to provide information as to the conduct of its affairs. They also mention that the common belief according to which the receiver’s duty of care was limited to the requirement to take reasonable steps to obtain a proper price on the exercise of his power to sale was overturned by the decision rendered in Medforth v. Blake & Ors [2000] Ch 86 (CA), where the court ruled that if the receiver decided to continue trading, then he owes an equitable duty of skill and care to the debtor company. However, this duty was not supposed to conflict with the main duty of acting in the interest of the secured creditor. For details on Medforth v. Blake & Ors and on the duty of good faith and duty of care to obtain the best price for assets sold, see: Sheehan (2011), p. 401. Also: Collins (1978), p. 692. “The primary duty of the receiver is to the debenture holders and not to the company. He is receiver and manager of the property of the company for the debenture holders, not manager of the company.”
- 284.
Sheehan (2011), p. 401.
- 285.
Armour and Frisby (2001), p. 88.
- 286.
This contention requires some qualification. A receiver would not be personally liable on the contracts he enters into in the name of the principal. However, Section 44 (1) of Insolvency Act 1986 established an exception from this rule in relation to both commercial and employment contracts. The receiver was allowed to escape this personal liability by contracting it out. Hence, the company was to be liable as principal only in these cases where receivers managed to contract out their personal liability. See: McCormack (2008), p. 51.
- 287.
Sheehan (2011), p. 401. However, the creditor owes a duty to exercise his appointment right in good faith by not appointing an incompetent person. See: Hunter (2005), pp. 469, 491 and 522. Additionally, the creditor could have been held liable in case he sought to direct or influence the judgment of the receiver. Hunter (2005), p. 496.
- 288.
RNCC, Art 2470.
- 289.
The legal regime applicable to complete administration is provided by RNCC, Arts 800 and 801, corroborated with the general legal regime applicable to any administration of another’s goods, as established by RNCC, Arts 792–857 and Arts 79 and 80, points 15, 16 from the Law for the Application of the Civil Code.
- 290.
RNCC, Art 800.
- 291.
RNCC, Art 801.
- 292.
RNCC, Art 2471.
- 293.
The administrative receiver had a standard list of powers in Section 42 (1) and Schedule 1 of the Insolvency Act 1986, if the absence of any explicit powers in the security instrument. See Sheehan (2011), p. 402.
- 294.
Section 42 (1) of the Insolvency Act 1986 and Armour and Frisby (2001), p. 77. However, the powers were not completely discretionary. The receiver was supposed to take note and pay the preferential debts ranking in priority to the floating charge. See: Sheehan (2011), pp. 401–402. Also: Hunter (2005), p. 480. For a detailed list and analysis of powers and privileges conferred to the administrative receiver, see: Hunter (2005), pp. 508–511.
- 295.
The reason lies in the fact that the rule established in Said v. Butt ([1920] 2 KB 497) according to which an agent cannot be liable in tort for inducing a breach of his principal’s contract has been held to apply to receivers as well according to several cases: Lathia v. Dronsfield Bros [1987] QB 357; Re Sobam BV (In Receivership) [1996] 1 BCLC 446.
- 296.
“The ‘New Labour’ government saw receivership as too heavily creditor oriented. There the concern was that the economic recession of the early 1990s had been prolonged by banks protecting their returns through appointing receivers and consequently, many companies had been driven unnecessarily into insolvency.” McCormack (2009), p. 126. Also: Sheehan (2011), p. 402: “It was thought that administrative receivers and their appointors held too much power and were able to look after their own interests in the detriment of other corporate stakeholders.”
- 297.
The Insolvency Act 1986 was modified by the Enterprise Act 2002. “Receivership was not seen as sufficiently responsive to the concerns of other stakeholders.” McCormack (2009), p. 126.
- 298.
Section 176 A of the Insolvency Act 1986, inserted by Section 252 of the Enterprise Act 2002, provides, for example, that the liquidator of an insolvent company should use a prescribed portion of the assets subject to the floating charge to satisfy unsecured debts. Moreover, floating and fixed charges cannot participate in the distribution of these assets should there be a shortfall in money owed to them, unless all the unsecured creditors have been paid in full. However, it is contended that despite the harshness of this measure, the prescribed part makes little difference in practice to unsecured creditors. Sheehan (2011), pp. 402–403. Whether that is true or not, this work cannot verify. However, insulating part of the debtor’s assets from a secured creditor’s reach has an obvious, negative impact on the secured creditor’s recovery and undermines the purpose of the security interest, which is even more important. Additionally, Section 72 of the Insolvency Act 1986 now makes it impossible for a floating charge to appoint an administrative receiver except where the charge was created before the date or where the charge was created after the date with the observation of several circumstances. See for details Sheehan (2011), p. 403; and Hunter (2005), pp. 437–439 and 503–504. It is why authors have claimed that floating charge should even be dropped off altogether. For details: Sheehan (2011), pp. 411–413.
- 299.
- 300.
- 301.
The Enterprise Act 2002 prohibited the appointment of an administrative receiver altogether with the exception of charges created before the 15th of September 2003 and of charges created after that date, in cases which fell under statutory exempted categories (Section 250 of Enterprise Act 2002). The exemptions are meant to protect large capital market financings, step-in rights in public–private partnership projects, utility projects, urban regeneration projects, financial market charges, registered social landlords and protected railway companies. McKendrick (2010), pp. 926–927. Also: McCormack (2008), pp. 53–56.
- 302.
RNCC, Art 802.
- 303.
RNCC, Art 803.
- 304.
RNCC Art 2441, para 2.
- 305.
RNCC, Art 813. However, he is liable if he acts outside the powers conferred and the third parties were unware that the administrator is acting outside granted powers (RNCC, Art 814).
- 306.
RNCC, Art 816.
- 307.
When addressing the general legal regime applicable to the administrator of another’s goods, the RNCC refers only to duties towards the beneficiary (the party whose goods are administered). However, if one extrapolates these provisions to the special case established by Art 2435, para 2, the beneficiary of the administration is not the party whose goods are administered but the secured creditor, since the purpose of the administration right is the repayment of the debt. Similarly, when the general regime refers to the liability of the beneficiary, it refers to the party whose goods are administered as well, but under the special regime, the beneficiary secured party cannot and should not be held liable for the obligations undertaken by the administrator since that would undermine the whole purpose of the administration. Unfortunately, Romanian law left all these issues to be answered by the practice and since the Romanian courts can only interpret law (and not create it as common law courts can) the results are hard to predict.
- 308.
Boti and Boti (2010), Para 11.
- 309.
See Boti (2011), at http://www.juridice.ro/152502/influenta-codului-civil-din-quebec-asupra-noului-cod-civil-din-romania.html, Para 13.1. The author claims that with respect to the administration of another’s goods, only the practice will decide the utility and pertinence of this activity.
- 310.
Over two million repossessions occurred in the US in 2009, according to an American NGO monitoring consumer protection. See Van Alst and Jurgens (2010), p. 1.
- 311.
McRobert (2012), p. 586.
- 312.
McRobert (2012), p. 593.
- 313.
Such proposals to define breach of peace were made during the revision of Article 9, but they were dismissed by the legislators. See: Loterstein (2013), p. 1363.
- 314.
Macleod (2007), pp. 834–836.
- 315.
Macleod (2007), p. 836.
- 316.
Dahan and Simpson (2008), p. 90.
- 317.
Rizoiu (2009), p. 3/36.
- 318.
Dahan and Simpson (2008), p. 234.
- 319.
Horvathova et al. (2011), p. 105, specifically footnote 61.
- 320.
Maiorescu (1868).
References
Ali P (2002) The law of secured finance. An international survey of security interests over personal property. Oxford University Press, USA
Armour J, Frisby S (2001) Rethinking receivership. Oxford J Legal Stud 21:73
Boti I (2011) Influenta Codului Civil din Quebec asupra Noului Cod Civil din Romania. www.juridice.ro
Boti I, Boti V (2010) Institutia administrarii bunului altuia in Noul Cod Civil Roman. www.juridice.ro
Braucher J (1997) The Repo Code: a study of adjustment to uncertainty in commercial law. Wash Univ Law Rev 75:549
Brodsky JA (1974) Constitutionality of self-help repossession under the Uniform Commercial Code: the Eighth and Ninth Circuits Speak. South Dakota Law Rev 19:295
Buckley LW Jr (1976) The future of self-help repossession under the Uniform Commercial Code. Commer Law J 81:165
Cohen JE (1998) Copyright and the jurisprudence of self-help. Berkeley Technol Law J 13:1089
Colectiv (2012) Noul Cod civil. Comentarii, doctrina, jurisprudenta. Ed. Hamangiu, Bucuresti
Collins L (1978) Floating charges, receivers and managers and the conflict of laws. Int Comp Law Q 27:691
Dahan F, Simpson J (2008) Secured transactions reform and access to credit. Edward Elgar, Cheltenham/Northampton
Del Duca LF (1974) Pre-notice, pre-hearing, pre-judgment seizure of assets – self-help repossession under UCC Section 9-503, its antecedents and future. Dickinson Law Rev 79:211
Duncan RF, Lyons WH, Wilson CL (2012) The law and practice of secured transactions: working with Article 9. Law Journal Press, New York
Franklin D, Harms SA (2010) International commercial secured transactions. Carswell, Toronto
Furmston M, Chuah J (2010) Commercial and consumer law. Pearson Education Limited, Essex
Garner BA (2009) Black’s law dictionary. WEST, US
Getzler J, Payne J (2006) Company charges. Spectrum and beyond. Oxford University Press, Oxford
Gilmore G (1999) Security interests in personal property. The Lawbook Exchange, LTD, Union, New Jersey
Gitter H (1993) Self-help remedies for software vendors. Santa Clara Comput High Technol Law J 9:413
Goode R (eds) (1999) Goode: consumer credit law and practice. LexisNexis Butterworths, UK
Guest AG, Lloyd MG, Lomnicka E, Dobson P (2009) Encyclopedia of consumer credit law. Thomson Reuters (Legal) Limited, London
Guidry G (1974) Mitchell v. W.T. Grant Co.: procedural due process reexamined. LA Law Rev 35:221
H. WR (1973) Prejudgment self-help repossession of secured property held not to violate due process – Adams v. Southern California First National Bank, No. 72-1484 (9th Cir., Oct. 4, 1973). Univ Richmond Law Rev 8:585
Hamilton AW (2000) Price v. U-Haul Co: the Louisiana Supreme Court authorizes self-help repossession. Tulane Law Rev 74:2237
Harding GW (1995) Consumer credit and consumer hire law: a practical guide. Sweet & Maxwell, London
Hayes TG (2006) Secured creditors holding lien creditors hostage: have a little faith in revised Article 9. Indiana Law J 81:733
Horvathova A, Fabian K, Stanescu C-G (2011) Is self-help repossession possible in central Europe? The case of Hungary, Romania and Slovakia. J Euroasian Law 4
Hunter Q.C. M (2005) Kerr and Hunter on receivers and administrators. Sweet & Maxwell, London
Kieninger E-M (2004) Security rights in movable property in European private law. Cambridge University Press, Cambridge
King LP, Cook ML (1996) Creditors’ rights, debtors’ protection, and bankruptcy. Mathew Bender, New York
Laswell DL (1974) Commercial transactions: the future of self-help repossession. John Marshall J Pract Proced 8:98–100
Lloyd RM, Kuney GW (2008) Secured transactions: UCC Article 9 & Bankruptcy. University of Tennessee College of Law, Knoxville
Loterstein A (2013) Law-enforcement officers and self-help repossession: a state-action approach. Mich Law Rev 111
Macleod JK (2007) Consumer sales law. Routledge-Cavendish, Abingdon
Maiorescu T (1868) In contra directiei de astazi in cultura romana. Convorbiri Literare
Martin JS (2013) The repo man did what? A secured creditor’s Article 9 right to repossess collateral and when lenders have liability for repossessions gone awry. Commercial Damages Reporter 1. www.ssrn.com
McAnally JW (1973) State action considerations and economic implications of holding self-help repossessions unconstitutional. Law Soc Order 707
McCormack G (2008) Corporate rescue law – an Anglo-American perspective. Edward Elgar, Cheltenham
McCormack G (2009) Apples and oranges? Corporate rescue and functional convergence in the US and UK. Int Insolv Rev 18
McDonald KK (1972) Self-help repossession: Fuentes and judicial process. Temple Law Q 46:540
McDonnell JB (1973) Sniadach, The Replevin Cases and self-help repossession – due process tokenism? Boston Coll Law Rev 14
McKendrick E (2010) Goode on commercial law. Penguin Books, London
McRae MD (1974) Commercial law-self-help repossession – Section 9-503 of the UCC Held Constitutional. Mercer Law Rev 26:1421
McRobert R (2012) Defining ‘Breach of the Peace’ in self-help repossessions. Wash Law Rev 87
Nowka RH (2009) Mastering secured transactions: UCC Article 9. Carolina Academic Press, Durham
Picker RC, Baird DG, Jackson TH (2002) Security interests in personal property. Foundation Press, New York
Ramsay I (2012) Consumer law and policy. Hart Publishing, Oxford/Portland
Reftu R (2012) Conventia de vanzare a bunului altuia – o sursa de nesiguranta? www.lexcafe.ro. http://lexcafe.ro/articole/valabilitatea-conventiei-de-vanzare-a-bunului-altuia-o-sursa-de-nesiguranta/
Rizoiu R (2008) Garantie reala mobiliara. Executare prin mijloace pasnice. Intelesul notiunii “in mod pasnic”. Revista romana de drept privat
Rizoiu R (2009) Mecanismele executarii private in cazul luarii pasnice in posesie a bunului afectat unei garantii reale mobiliare. Revista romana de drept privat
Rizoiu R (2011) Garantiile reale imobiliare. O abordare functionala – Analiza economica a dreptului garantiilor reale – Introducere in regimul juridic al ipotecilor mobiliare. Universul Juridic, Bucharest
Roditti EC (1995) Is self-help a lawful contractual remedy? Rutgers Comput Technol Law J 21:431
Rusch LJ, Sepinuck SL (2010) Problems and materials on secured transactions. Thomson & West, St. Paul
“Self-Help” repossession and due process (1974) St. John’s Law Rev 48:661
Sheehan D (2011) The principles of personal property law. Hart Publishing, Oregon
Smith D (1973) Security interests: self-help still an available method of repossession. Univ Miami Law Rev XXVIII:231
Symposium on Commercial Law (1973) Self-help repossession of consumer goods: a constitutional look at Section 9-503 of the Uniform Commercial Code. Valparaiso Univ Law Rev 7:439
T. SM (1975) Self-help repossession pursuant to private contract held constitutional. King v. South Jersey Nat’l Bank, 66 N. j. 161, 330 A.2d 1 (1974). Rutgers Camden Law J 7:176
Tajti T (2002) Comparative secured transactions law. Akadémiai Kiadó, Budapest
Tajti T (2012) When and why is the rubberstamp of the European Union insufficient? Caveats to systems on the road towards the European Union. Zbornik. Pravnog Fakulteta U Zagrebu
Tajti T (2013) Post-1990 secured transaction law reforms in central and eastern Europe. Szegedi Közjegyzői Közlöny II:1
TeSelle J, Love JJ (1977) Attachment, garnishment, replevin and self-help repossession in Oklahoma. Oklahoma Law Rev 30
The American Law Institute National Conference of Commissioners on Uniform State Laws (2009) Uniform Commercial Code 2009–2010 Edition. Official Text and Comments. Thomson Reuters United States
Van Alst JW, Jurgens R (2010) Repo madness. How automobile repossessions endanger owners, agents and the public. National Consumer Law Center, Boston
Vinter G (1998) Project finance. Sweet & Maxwell, London
von Bar C, Clive E (2010) Principles, definition and model rules of European Private Law. Draft Common Frame of Reference (DCFR). Oxford University Press, Oxford
White JJ, Summers RS (2007) Principles of secured transactions. Thomson & West, St. Paul
White JJ, Summers RS (2010) Uniform commercial code. In Practitioner treatise series. Thomson Reuters, USA
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2015 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Stӑnescu, C.G. (2015). Active Self-Help: Self-Help Repossession, Administrative Receivership, Private Disposition of Collateral and Strict Foreclosure. In: Self-Help, Private Debt Collection and the Concomitant Risks. Springer, Cham. https://doi.org/10.1007/978-3-319-21503-7_4
Download citation
DOI: https://doi.org/10.1007/978-3-319-21503-7_4
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-21502-0
Online ISBN: 978-3-319-21503-7
eBook Packages: Humanities, Social Sciences and LawLaw and Criminology (R0)