Giles v. First Virginia Credit Services, Inc.
149 N.C. App. 89, 560 S.E.2d 557, 46 U.C.C. Rep. Serv. 2d (West) 913 (2002)
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Rule of Law:
A self-help repossession of collateral does not constitute a breach of the peace under N.C. Gen. Stat. § 25-9-503 if it is conducted without confrontation, even if it causes a disturbance that awakens third parties. The determination of whether a breach of the peace occurred in the absence of confrontation is based on the reasonableness of the time and manner of the repossession, evaluated through a multi-factor balancing test.
Facts:
- On January 18, 1997, Joann Giles entered into an installment sale contract to purchase an automobile, which was later assigned to First Virginia Credit Services, Inc.
- The contract stipulated that failure to make a payment within ten days of its due date constituted a default, and upon default, First Virginia could use lawful means to take the vehicle without notice.
- The contract also contained a clause stating that if First Virginia excused one default, it would not excuse later defaults.
- Joann Giles fell into arrears on her account for payments due on May 2, 1999, and June 2, 1999.
- During the early morning hours of June 27, 1999, Professional Auto Recovery, acting on behalf of First Virginia, repossessed the locked automobile from the Gileses' front driveway.
- The repossession was conducted using a loud diesel rollback truck with only its parking lights on, which awakened a neighbor, Glenn Mosteller.
- Mr. Mosteller, believing a theft was in progress, called the Gileses after the car had already been driven away.
- There was no contact or confrontation between the repossession agents and the Gileses or their neighbor during the actual taking of the vehicle.
Procedural Posture:
- Richard and Joann Giles (plaintiffs) filed a complaint in a state trial court against First Virginia Credit Services, Inc. and Professional Auto Recovery, Inc. for wrongful repossession.
- First Virginia filed a motion for summary judgment, arguing the repossession was lawful.
- The trial court granted First Virginia's motion for summary judgment in part, ruling that as a matter of law, the repossession of the vehicle was not wrongful and did not constitute a breach of the peace.
- The trial court denied summary judgment on the separate claim concerning personal property located inside the repossessed vehicle.
- The trial court certified its partial summary judgment order as a final judgment, making it immediately appealable.
- The Gileses (plaintiffs-appellants) appealed the trial court's grant of partial summary judgment to the North Carolina Court of Appeals.
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Issue:
Does the repossession of an automobile from a debtor's private driveway in the early morning hours, which causes a loud disturbance and awakens a neighbor but involves no confrontation with the debtor or any other person, constitute a breach of the peace in violation of N.C. Gen. Stat. § 25-9-503?
Opinions:
Majority - McGee, J.
No, the repossession of an automobile from a debtor's private driveway under these circumstances does not constitute a breach of the peace. While confrontation is a key element of a breach of the peace, its absence does not end the inquiry; instead, the court must assess the reasonableness of the time and manner of the repossession. The court adopted a five-factor balancing test to determine if a breach of the peace occurred absent a confrontation. Applying this test, the court found the repossession was lawful because: 1) it occurred on an open driveway, not an enclosed space; 2) the contract expressly consented to repossession; 3) no third parties confronted the repossessors; 4) the premises entered was not a dwelling; and 5) no deception was used. The commotion and disturbance that occurred after the repossession agents had left the scene did not transform the otherwise peaceful repossession into a breach of the peace. The court also rejected the argument that the account was not in default, as a payment mailed before but received after the repossession does not cure the default. Finally, the court held that N.C. Gen. Stat. § 25-9-503 is not unconstitutional, as a private self-help repossession does not involve state action necessary to trigger Fourteenth Amendment due process protections.
Analysis:
This case is significant for clarifying the ambiguous 'breach of the peace' standard for self-help repossessions in North Carolina under the Uniform Commercial Code. By explicitly adopting a five-factor balancing test for situations without direct confrontation, the court provides creditors with a clearer framework for conducting lawful repossessions. The decision moves beyond a simple 'confrontation-only' definition of breach of the peace but stops short of adopting a broad, subjective standard that would make nearly every clandestine repossession a question for the jury. This ruling reinforces the creditor's statutory right to self-help repossession while defining its limits, thereby impacting how lenders and repossession companies must conduct their operations to avoid liability.
