Global Casting Industries, Inc. v. Daley-Hodkin Corp.
105 Misc.2d 517, 31 U.C.C. Rep. Serv. (West) 377, 432 N.Y.S.2d 453 (1980)
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Rule of Law:
Under UCC § 9-503, a secured party's entry into a debtor's locked commercial premises without confrontation by breaking a lock to repossess collateral does not constitute a breach of the peace, particularly when the security agreement grants a right of entry upon default.
Facts:
- On October 8, 1976, Global Casting Industries, Inc. (Global Casting) executed a promissory note and a blanket security agreement in favor of Chemical Bank, covering all of Global Casting's business assets.
- The security agreement explicitly authorized Chemical Bank, upon default, to enter Global Casting's premises and take possession of the collateral without legal process.
- Global Casting subsequently defaulted on the note.
- Chemical Bank retained Daley-Hodkin Corp. (Daley-Hodkin) to repossess and liquidate the collateral.
- On June 17, 1977, an employee of Daley-Hodkin went to Global Casting's place of business, found the exterior gates locked, and hired a locksmith to gain entry.
- After gaining entry, Daley-Hodkin's employee changed the locks on the doors.
- Daley-Hodkin's employees allegedly answered Global Casting's telephones and informed callers that the business was closed and its merchandise would be sold at auction.
Procedural Posture:
- Global Casting Industries, Inc. sued Daley-Hodkin Corp. in a state trial court, asserting causes of action for trespass, conversion, and prima facie tort.
- Daley-Hodkin filed a motion for summary judgment, seeking dismissal of the complaint.
- Global Casting filed a cross-motion to compel the deposition of Daley-Hodkin and to adjourn the summary judgment motion until after the deposition.
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Issue:
Does a secured creditor's agent, authorized by a security agreement, commit a breach of the peace under UCC § 9-503 by hiring a locksmith to gain entry into the debtor's locked commercial premises to repossess collateral?
Opinions:
Majority - Arthur D. Spatt, J.
No. A secured creditor's agent does not commit a breach of the peace under UCC § 9-503 by entering a debtor's locked commercial premises via a locksmith, especially when a security agreement consents to such entry. The court reasoned that both the security agreement and UCC § 9-503 gave the creditor the right to take possession upon default, provided it could be done without a 'breach of the peace.' Citing Cherno v. Bank of Babylon, the court defined a breach of the peace as a 'disturbance of public order by an act of violence' or an act 'likely to produce violence.' The act of entering an unoccupied commercial property with a locksmith, even if it constitutes a technical breaking, does not disturb public order, cause alarm, or create a risk of violence. Therefore, as a matter of law, no breach of the peace occurred, and the repossession was lawful. The court also dismissed a potential claim for prima facie tort regarding the phone calls, finding the defendant's actions were legally justified and not motivated solely by malice.
Analysis:
This decision clarifies the scope of permissible self-help repossession for secured creditors in a commercial context under UCC § 9-503. It establishes that non-confrontational, forcible entry into an unoccupied commercial property, when authorized by contract, does not constitute a breach of the peace. This precedent gives creditors significant latitude to repossess collateral without resorting to more expensive judicial processes, strengthening their position upon a debtor's default. However, it implicitly distinguishes such actions from repossessions involving residential properties or any confrontation with the debtor, where the risk of violence would likely lead to a finding of a breach of the peace.
