Szata v. Cobado
131 Misc. 2d 206, 499 NYS 2d 610 (1986)
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Rule of Law:
A secured creditor's self-help repossession of collateral under UCC § 9-503 constitutes a 'breach of the peace' if the creditor continues the seizure after the debtor has made a contemporaneous and explicit objection. The creditor must then cease self-help and resort to judicial process, as physical violence is not required to find a breach of the peace.
Facts:
- Kent Cobado sold a herd of cattle to the Szatas, with the sale being secured by chattel mortgage agreements.
- While the Szatas remained current on all required monthly payments, they culled several cattle from the herd, a practice to which Cobado objected.
- Without prior warning, Cobado arrived at the Szatas' farm accompanied by two Deputy Sheriffs to repossess the cattle.
- Mr. Szata, who is disabled and uses a cane, immediately confronted Cobado and explicitly told him that he was not in default and ordered him to leave the premises immediately.
- One of the deputies warned Mr. Szata that if he 'got out of line' he would be arrested, while also noting that Cobado had a violent temper.
- Cobado ignored Szata's demands, stating, 'to hell with this we’re taking the cows,' and proceeded to enter the barn and release the cattle.
- The Szatas and a relative again ordered Cobado to stop, but he laughed and continued herding the animals.
- A Sheriff's Lieutenant who arrived later also warned Cobado that he would be arrested if he left with the cattle, but Cobado ignored this warning as well.
Procedural Posture:
- The plaintiffs, the Szatas, initiated a lawsuit against the defendant, Kent Cobado, in a New York trial court.
- Within that lawsuit, the Szatas filed a motion for a preliminary injunction, asking the court for an immediate order compelling Cobado to return the 26 cattle he had seized.
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Issue:
Does a creditor's self-help repossession of collateral, conducted over the debtor's explicit and repeated verbal objections and in a confrontational manner, constitute a 'breach of the peace' under UCC § 9-503, thereby making the repossession wrongful?
Opinions:
Majority - Edward M. Horey, J.
Yes, a creditor's self-help repossession of collateral conducted over the debtor's explicit objection constitutes a 'breach of the peace.' Under UCC § 9-503, a secured party may use self-help repossession only if it can be done 'without breach of the peace.' The court defines a breach of the peace as a disturbance of public order by an act of violence or any act likely to produce violence, or which causes consternation and alarm. The court reasoned that physical confrontation is not a necessary element. Cobado's actions—ignoring the Szatas' direct and repeated orders to desist and leave, his contemptuous statement 'to hell with this we’re taking the cows,' and his disregard for a Sheriff's Lieutenant's warning—constituted conduct likely to produce violence and consternation. The intimidating presence of deputies, one of whom threatened Mr. Szata with arrest, contributed to the non-peaceable nature of the seizure. Therefore, the repossession was wrongful because it was accomplished through a breach of the peace.
Analysis:
This decision significantly clarifies the 'breach of the peace' limitation on self-help repossession under UCC § 9-503. It establishes that a debtor's clear verbal objection, without any physical resistance, is sufficient to revoke the creditor's right to proceed with self-help. By defining 'breach of the peace' to include acts that cause 'consternation and alarm' rather than just physical violence, the court sets a low threshold for what constitutes a wrongful repossession. This ruling serves to protect debtors from confrontational and intimidating seizures on their own property, forcing creditors to resort to judicial remedies once a debtor objects, thereby promoting the resolution of disputes through the court system rather than through potentially volatile confrontations.
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