Clark v. Associates Commercial Corp.
26 U.C.C. Rep. Serv. 2d (West) 601, 1994 U.S. Dist. LEXIS 20319, 877 F. Supp. 1439 (1994)
Rule of Law:
A secured creditor's statutory duty to repossess collateral without breaching the peace, as established by U.C.C. § 9-503, is non-delegable, extending vicarious liability to the creditor for the wrongful acts of a subcontractor hired by its independent contractor, even if the creditor was unaware of the subcontracting.
Facts:
- On March 31, 1989, Arnold R. Clark (plaintiff) entered a Security Agreement with Doonan Truck & Equipment, Inc. to purchase a 1989 Peterbilt tractor/truck, granting a security interest, which Doonan later assigned to Associates Commercial Corp. (Associates).
- On May 24, 1990, Clark entered a Security Agreement with Utility Midwest Trailer Sales, Inc. to purchase a 1990 Utility Trailer, granting a security interest, which Utility later assigned to Associates.
- Clark became delinquent in his payments to Associates under these and other financing arrangements.
- Beginning in mid-December 1991, Associates started repossessing and selling Clark's other tractors and trailers.
- On May 8, 1992, Associates hired Bob Howard as an independent contractor to repossess the specific tractor-trailer at issue, identifying Howard as the sole repossessor.
- On May 14, 1992, Howard retained Clark Recovery, Inc. as an independent contractor for the repossession, a fact of which Associates was unaware.
- Clark Recovery arranged for its employee, Randall Wayne Lett, to repossess Clark's tractor-trailer, hiring William Roberts to drive it back.
- Lett and Roberts repossessed Clark's tractor-trailer during the evening of May 14 at a truck stop near Knoxville, Tennessee, leading to a confrontation where Clark alleges Lett injured his leg while forcibly removing him from the truck, while Lett alleges Clark initiated the physical contact.
Procedural Posture:
- Arnold R. Clark (plaintiff) filed a lawsuit in the United States District Court for the District of Kansas against Associates Commercial Corp. (defendant) and third-party defendants (Bob Howard, Clark Recovery, Inc., and Randall Wayne Lett).
- Plaintiff asserted claims for statutory breach of peace under Tenn. Code Ann. § 47-9-503, conversion, battery, breach of contract, outrage, and invasion of privacy.
- Plaintiff moved for partial summary judgment, arguing that the duty to repossess peaceably is non-delegable under both Tennessee and Kansas law, and that Associates ratified the acts of its agents under Kansas law.
- Defendant Associates filed a motion for complete or, alternatively, partial summary judgment, seeking rulings on vicarious liability for Lett, the conversion claim, the availability of punitive damages against Associates, and whether a breach of peace occurred at any time prior to physical contact between plaintiff and Lett.
- The District Court previously issued a Memorandum and Order on June 7, 1993, which determined that Tennessee law governed plaintiff's tort claims against Associates and that, under Tennessee case law, the duty to repossess peaceably under § 9-503 is non-delegable.
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Issue:
Does a secured creditor remain vicariously liable for a breach of the peace committed during repossession by an employee of a subcontractor hired by the creditor's independent contractor, even if the creditor did not authorize or know about the subcontracting, given the non-delegable nature of the duty to repossess peaceably under Tennessee law?
Opinions:
Majority - Belot, District Judge
Yes, a secured creditor remains vicariously liable for a breach of the peace committed during repossession by an employee of a subcontractor, even if the creditor did not authorize or know about the subcontracting, because the statutory duty to repossess peaceably under Tennessee law is non-delegable. The court, applying Tennessee law as previously determined, affirmed that Tenn. Code Ann. § 47-9-503 imposes a non-delegable statutory duty on a secured creditor to repossess collateral without breaching the peace. This duty cannot be evaded by hiring an independent contractor, and importantly, extends to the acts of a 'subcontractor once removed'—a subcontractor hired by the original independent contractor. The reasoning is rooted in public policy and exceptions to the general rule of non-liability for independent contractors, specifically Restatement (Second) of Torts §§ 424 (statutory duty to provide safeguards) and 427 (inherently dangerous work). Self-help repossession carries an inherent risk of breaching the peace, and the secured creditor who chooses this remedy assumes the responsibility to ensure it is performed peacefully, regardless of the layers of delegation. Allowing creditors to escape liability by stacking contractors would undermine the statute's purpose. The court also held that Clark's conversion claim was not precluded by his earlier unsuccessful attempt to seek replevin, as the doctrine of election of remedies aims to prevent double recovery, not to bar a legitimate claim for damages. Punitive damages against Associates were deemed potentially viable, as such an award could punish Associates for failing its duty and deter future violent repossessions. Finally, addressing the definition of 'breach of peace' for summary judgment purposes, the court reconciled conflicting Tennessee appellate decisions by distinguishing between 'offenses against individuals' (which require violence or a threat of violence) and 'offenses against the public at large.' Given that the present case involved a personal confrontation, the 'violence or threat of violence' standard applied. However, due to Clark's testimony that Lett dared him to try and remove him and threatened arrest, a genuine issue of material fact remained regarding threats of violence, thus denying Associates' motion for summary judgment on this point.
Analysis:
This ruling significantly clarifies and expands the scope of vicarious liability for secured creditors in self-help repossessions. By establishing that the non-delegable duty to prevent a breach of peace extends to subcontractors hired by an independent contractor, the court prevents creditors from insulating themselves from liability through multi-tiered delegation. This decision reinforces the strong public policy interest in maintaining public order during repossessions, placing a stringent obligation on creditors to ensure compliance with the peaceable repossession mandate throughout the entire chain of agents. It underscores the idea that if a creditor chooses to avoid judicial process, it must bear the full risk of its chosen method.
