Summary
referring to notice as a “strict compliance letter”
Summary of this case from Buzzell v. Citizens Auto. Finance, Inc.Opinion
Civ. No. 99-1537 (MJD/JGL)
June 11, 2001
Thomas J. Lyons, Jr., Consumer Justice Center, P.A., on behalf of Plaintiffs.
William F. Mohrman, Mohrman Kaardal, P.A., on behalf of Defendant TCF National Bank of Minnesota.
Gregory J. Johnson, Michael P. North, Johnson Van Vliet, L.L.P., on behalf of Defendant Minnesota Recovery Bureau, Inc.
MEMORANDUM OPINION AND ORDER
This matter is before the Court on cross motions for summary judgment, and Plaintiffs' motion to strike testimony. Plaintiffs Richard and Susan Akerlund filed suit against Defendants TCF National Bank of Minnesota, and Minnesota Recovery Bureau, alleging wrongful repossession under the UCC; violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq.; and conversion, arising out of Defendants' repossession of Plaintiffs' truck on U.S. Postal Service property.
Plaintiffs Richard and Susan Akerlund obtained a loan for $8,700 from Defendant TCF National Bank of Minnesota on October 31, 1997. The loan was secured by a lien on Plaintiffs' 1991 Chevrolet S-10 truck and 1991 Isuzu Trooper. The loan agreement signed by the Akerlund states, "[TCF] may go on to [Plaintiffs'] property to repossess the collateral, but [TCF] may not breach the peace or break the law." Between November, 1997 and April, 1999, Plaintiffs failed to make any timely payments, routinely sending late and partial loan payments.
On or about April 19, 1999, TCF collection agent Tracie Mershon sent Plaintiffs a "Cobb Notice" indicating that their account was in default for the March and April, 1999 payments. The letter advises the Akerlunds that the bank is insisting on strict compliance with the terms of the loan, and warns them that if the default is not cured within ten days, the bank will take possession of the vehicles. According to Mershon's sworn testimony, after signing the Akerlund's Cobb Notice (prepared by an administrative assistant), she placed it in a envelope pre-printed with the Akerlund's home address. She then placed the envelope in a mail bin for collection by TCF's mail center clerks on April 19, 1999. Mershon Aff. at ¶ 12.
The April 19 letter is from a "Tracie Stone." Mershon has submitted a sworn affidavit attesting that, for security reasons, she uses that pseudonym in her capacity as a collection agent in the Consumer Collection Department. She affirmed that she is, in fact, the author of the April 19 letter sent to Plaintiffs.
According to Mershon, TCF employs a full-time staff of mail center clerks who collect the envelopes from the mail bins several times each business day. Id. at ¶¶ 13-14. The clerks apply the necessary postage and take the envelopes to the U.S. Postal Service for delivery. In the event of a returned item of mail, the mail center clerks open the envelope, identify the TCF employee who sent the letter and return the letter to that employee. Mershon's affidavit asserts that the letter was picked up by the mail clerks on April 19, 1999, and was not returned to her at any time thereafter. Id.
Plaintiffs failed to cure the default within ten days. TCF then hired Co-Defendant Minnesota Recovery Bureau ("MRB") to repossess both vehicles, pursuant to the "self-help" provisions of Minnesota Statute § 336.9-503. On the morning of May 3, 1999, two MRB employees, James Gallagher and Craig Olson, repossessed the Isuzu Trooper from the Akerlund driveway. Gallagher then proceeded to Richard Akerlund's place of employment, the Eden Prairie branch of the United States Post Office, in order to repossess the Chevrolet S-10 truck.
The employee parking lot of the Eden Prairie post office is surrounded by a chain link fence, approximately eight feet high, with a gate. Posted along the fence and on the post office building wall are signs that read "Authorized Vehicles Only," and "U.S. Property No Trespassing." In deposition testimony, Gallagher stated that upon arriving at the Post Office employee parking lot, he noticed the fence, the open gate, and a sign that said "Authorized Vehicles Only." He testified that he did not see a sign that said "No Trespassing." Unsure of how to proceed, he called his supervisor at MRB by cellular telephone, and described the scene. The supervisor advised him to take the truck. Gallagher called Olson, who was driving the tow truck; together, the agents entered the parking lot and took the vehicle. Gallagher estimates that they were actually inside the parking lot for approximately forty-five seconds. They encountered no one during that time.
The two agents took the Chevy S-10 to a nearby gas station where Gallagher cleaned out the personal property in the truck, and completed the repossession paperwork. The Akerlunds retrieved their car from the auction lot 7 days later, after filing for bankruptcy protection.
Richard Akerlund testified in his deposition that he inspected the truck prior to retrieving it from the auction lot. At that time, he asserts, he noticed that the truck's bedliner was missing. He did not notify either the auction lot supervisor or MRB about the missing article. Susan Akerlund signed a release, stating that she had an opportunity to inspect the vehicle, and that there was no property missing from the truck when she and her husband retrieved it from the lot. Richard Akerlund signed a second release two days later when he retrieved the box of personal property contained in the truck. That document releases MRB from any claims arising out of MRB's repossession of the truck, including any claims for missing property.
Plaintiffs filed suit against TCF and MRB, claiming 1) that Defendants violated Minnesota law and the Fair Debt Collection Practices Act when MRB's agents trespassed on government property to repossess the Chevy S-10 truck; 2) that Defendants violated the Fair Debt Collection Practices Act because Plaintiffs did not receive the "Cobb Notice" letter; and 3) that Defendants are responsible for conversion of the missing bedliner. All three parties now move for summary judgment. Plaintiffs also move to strike the testimony of Tracie Mershon.
I. Motion to Strike
Pursuant to Fed.R.Civ.P.26(a)(1), Plaintiffs move to strike the affidavit testimony of Tracie Mershon, contending that they are prejudiced by what they allege was Defendant
TCF's late disclosure of Mershon and the use of her affidavit as the basis of TCF's defense to Plaintiffs' Cobb Notice claim. The Court finds that while TCF may have been in technical violation of R.26 when it did not notify Plaintiffs about Mershon until over 14 days after the discovery meeting, the disclosure, when it came, afforded Plaintiffs almost six months to conduct further discovery.
The 2000 Amendments to Fed.R.Civ.P. extended the time for disclosure after the discovery meeting from 10 days to 14 days. See Fed.R.Civ.P. 26, Advisory Committee Notes.
Defendant TCF's disclosure, in the form of a response to an interrogatory from Plaintiffs, adequately described Stone's involvement in the Akerlund's case and put Plaintiffs on notice that her testimony might be used by Defendants. The Court understands that Mershon was identified in that disclosure by her pseudonym, Tracie Stone, but notes that Plaintiffs have not alleged that they unsuccessfully attempted to contact Tracie Stone. In the event that this was the case, the appropriate remedy would have been to file a Motion to Compel under Fed.R.Civ.P. 37. The Motion to Strike is therefore denied.
II. Motions for Summary Judgment
Summary judgment is proper if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 65(c). The court must view evidence and inferences which reasonably may be drawn in the light most favorable to the non-moving party. See Enterprise Bank v. Magna Bank of Missouri, 92 F.3d 743, 747 (8th Cir. 1996). The moving party bears the burden of showing that there are no genuine issues of material fact and that it is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The non-moving party must demonstrate the existence of specific facts that create a genuine issue for trial; mere allegations or denials are not enough. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Summary judgment is to be granted only where the evidence is such that no reasonable jury could return a verdict for the non-moving party. See id., 477 U.S. at 250.
A. Minn. Stat. § 336.9-503
Minn. Stat. § 336.9-503 permits secured parties the right to take possession of collateral, if the party can do so without breach of the peace. Plaintiffs argue that when Defendants trespassed on U.S. Postal Service property, they committed criminal trespass and violated a government regulation against collecting private debts on postal service property. These are offenses, they argue, which constitute a technical breach of the peace, notwithstanding the lack of any violence or confrontation during the repossession. TCF would therefore be liable for the actions of Gallagher and MRB because the duty to collect debts lawfully is non-delegable under Minnesota law. See James v. Ford Motor Credit Co., 842 F. Supp. 1202,1207 (D.Minn. 1994), citing Nichols v. Metropolitan Bank, 435 N.W.2d 637 (Minn.Ct.App. 1988).
"Breach of the peace" is not defined explicitly by the Minnesota version of the U.C.C. Minnesota courts have held, however, that no violence or threat of violence need occur before a breach of the peace may be found. See Bloomquist v. First Nat'l Bank of Elk River, 378 N.W.2d 81, 86 (Minn.Ct.App. 1986). This Court previously held that any underlying offense, such as trespass, could suffice to constitute breach of the peace. See Clarin v. Norwest Bank Minnesota, No. 97-2003, slip op. at 12; see also Wallace v. Chrysler Credit Corp., 743 F. Supp. 1228,1231 (W.D.Va. 1990) ("Breach of the peace . . . includes any violation of any law enacted to preserve peace and good order," quoting 2 R. Anderson, Wharton's Criminal Law and Procedure § 802 (1957)).
In Minnesota, it is a misdemeanor to "trespass on the premises of another and, without claim of right, refuse to depart from the premises on demand of the lawful possessor." Minn. Stat. § 609.605(b)(3). According to the undisputed facts of this case, the MRB agent was not confronted by anyone, much less any representative of the Postal Service, and asked to leave. The agents' entry onto the Postal Service property, therefore, does not qualify as criminal trespass.
Plaintiffs argue that the subsequent provision of the trespass statute, Minn. Stat. § 609.605(b)(4), should be applied. That section makes it a misdemeanor to "occupy or enter the dwelling or locked or posted building of another, without claim of right or consent of the owner. . . ." Id. Minn. Stat. § 609.581 subd.2 defines "Building" as "a structure suitable for affording shelter for human beings including any appurtenant or connected structure." Plaintiffs' argument fails for the simple reason that no one has alleged that the agents occupied or entered any Postal Service building or structure. See also Wallace, 743 F. Supp. at 1233 (holding that repossession of movable collateral from property owned by third party is not, by itself, a breach of peace).
The analysis does not end there, however. The U.S. Postal Service has promulgated rules and regulations specifically governing conduct on postal service property. 39 C.F.R. § 232.1. Under these regulations, collecting private debts on postal service property is prohibited. 39 C.F.R. § 232.1(h)(1). A violation of these regulations is a misdemeanor punishable by up to 30 days in prison and a $50 fine. 39 C.F.R. § 232.1(p)(2); 18 U.S.C.A. § 3559(a)(8). See U.S. v. Gliatta, 580 F.2d 156 (5th Cir. 1978) (affirming constitutionality of postal service regulations criminalizing violations). The purpose of these regulations is "to maintain safety and order on government property." Id. at 160.
Defendants do not dispute that MRB's agents entered postal service property and retrieved collateral on a private debt. This violation of Postal Service regulations is a criminal offense, and therefore also a per se breach of the peace for the purposes of Minn. Stat. 336.9-503. See 39 C.F.R. § 232.1(h)(1); Bloomquist, 378 N.W.2d at 85, (holding that breach of peace is "any violation of any law enacted to preserve peace and good order," quoting Kimble v. Universal TV Rental, Inc., 417 N.W.2d 597, 602 (1980)).
MRB argues that it should not be included in this judgment because the language of Minn. Stat. 336.9-503 refers only to the actions of "secured creditors," which MRB is not. The case law in this District is conflicting on this issue. Compare Shelly v. Wells Fargo et al., No. 97-1837, slip op. (D.Minn. July 2, 1998) (finding no cause of action against repossessors because statute expressly refers to secured parties); with Oehrlein v. Western Funding, Inc. et al., No. 97-2726, slip op. (D.Minn. Jan. 26, 1999) (holding repossession company to standards of conduct set forth in statute). The Court is persuaded by the argument of the Oehrlein court, and finds that as an independent contractor, MRB was operating on behalf of a secured party, TCF, and thus is governed by the standards of conduct set forth in Minn. Stat. 336.9-503.
The Court grants summary judgment to Plaintiffs on this issue.
B. Fair Debt Collection Practices Act
Plaintiffs argue that both Defendants violated the Fair Debt Collection Practices Act by failing to ensure that Plaintiffs received a strict compliance "Cobb Notice," and by violating the Postal Service regulation against collecting private debts on Postal Service property. The FDCPA prohibits:
[t]aking or threatening to take any nonjudicial action to effect dispossession or disablement of property if-(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest.
The FDCPA applies to "debt collectors," who are defined as "any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). Actual creditors are generally not subject to the FDCPA. See Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985) ("The legislative history of § 1692a(6) indicates conclusively that a debt collector does not include the consumer's creditors," citing S. Rep. No. 95-382, 95th Cong., 1st Sess. 3, reprinted in 1977 U.S.C.C.A.N. 1695, 1698); James v. Ford Motor Credit Co., 842 F. Supp. 1201, 1207 (D.Minn. 1994). As a creditor, Defendant TCF is not subject to the FDCPA, and therefore Plaintiffs' FDCPA claims against TCF are dismissed.
However, while repossession companies are also generally outside the scope of the FDCPA, 15 U.S.C. § 1692f(6) explicitly extends the FDCPA to repossession companies acting to enforce the security interests of others. See James, 842 F. Supp. at 1207 (citing Jordan v. Kent Recovery Serv., Inc., 731 F. Supp. 652, 657 (D.Del. 1990)).
As such, MRB would be within the scope of the FDCPA if its agents repossessed the truck when they did not have the "present right of possession." 15 U.S.C. § 1692f(6).
Present Right to Possession
Plaintiffs argue first that Defendants did not have the present right to possession when they repossessed the collateral vehicles, because they failed to notify Plaintiffs of their intent to repossess. Minnesota law requires that a creditor must notify a debtor prior to exercising its right to self-help repossession, in situations such as this where a creditor has repeatedly accepted late payments from a debtor. In Cobb v. Midwest Recovery Bureau Company, the court held that "the repeated acceptance of late payments by a creditor who has the contractual right to repossess the property imposes a duty on the creditor to notify the debtor that strict compliance with the contract terms will be required before the creditor can lawfully repossess the collateral." Cobb, 295 N.W.2d 232, 237 (Minn. 1980).
Such a letter, which has come to be known as a "Cobb Notice," shall set forth the amount owed to the creditor, the date by which said amount must be tendered, and the consequences for failure to tender. See McNeill v. Dakota County State Bank, 522 N.W.2d 381, 384-85 (Minn.Ct.App. 1994). Through the strict compliance letter, a creditor preserves its remedies "so that if the account continues in default, repossession could be pursued as provided in the contract without further demand or notice." Cobb, 295 N.W.2d at 237. Plaintiffs argue that they never received any Cobb Notice, and therefore Defendants did not have a present right to possession when they took the vehicles.
In the Minnesota version of the U.C.C., giving notice requires "taking such steps as may be reasonably required to inform the other in ordinary course whether or not such other actually comes to know of it." Minn. Stat. §§ 336.1-201, subsec. 26, 38(1994). Generally, evidence that the notice was properly addressed and mailed with postage prepaid, will be enough to satisfy that requirement. See Nafstad v. Merchant, 303 Minn. 569, 571 (Minn. 1975); Har-Ned Lumber Co. v. Amagineers, Inc., 436 N.W.2d 811, 815 (Minn.App. 1989) (holding that service is complete when properly mailed). The burden is on the sender to show evidence of customary procedures with respect to mailings from the sender's office, as well as some evidence showing compliance with those procedures in the instant case. See Nafstad, 303 Minn. at 571.
TCF employee Tracie Mershon has testified about the process she and the mail clerks at TCF followed to send the Cobb Notice on April 19, 1999. Plaintiffs have offered no evidence rebutting that testimony, nor do they claim that the address was incorrect. Plaintiff Richard Akerlund testified that, due to problems with his 13 year old son interfering with his mail, he had missed important deliveries from other creditors, and had felt it necessary to rent a post office box. TCF was not notified of the new post office box address. The Court finds that Defendants have offered sufficient evidence to demonstrate that the strict compliance letter was sent on April 19, 1999, and that the requirements of the U.C.C. and Cobb were fulfilled.
Plaintiffs also argue that Defendants violated the FDCPA when they breached the peace during the repossession. As described above, Defendants' repossession of the Chevy S-10 truck on U.S. Postal Service property violated a Postal Service regulation, and therefore constituted a breach of the peace in violation of Minn. Stat. 336.9-503. Once MRB's agents breached the peace, according to Plaintiffs, they lost their present right to possession and therefore violated § 1692f(6).
The Court declines to apply the breach of peace doctrine so broadly. It is undisputed that TCF had a valid and enforceable security interest in the truck. Neither do Plaintiffs dispute that they were in default on the loan, or that Defendants had the present right to possession up until the moment MRB's agents set foot on Postal Service property. Defendants did not lose the present right to possession because they violated a Postal Service regulation. See James v. Ford Motor Credit Co., 842 F. Supp. 1202, 1209 (D.Minn. 1994) ("A debtor can limit a creditor's right of self-help repossession, but not absolutely"); Oehrlein, slip op. 97-2726 at 7 ("A breach of peace may limit the manner in which repossession may be effected, but does not abrogate the right to present possession.")
Because Defendants had the present right to possession at the time they repossessed Plaintiffs' truck from the Postal Service property, Defendant MRB did not violate the Fair Debt Collection Practices Act.
3. Conversion
Defendants also move for summary judgment on Plaintiff's claims of conversion of the bedliner. The Court finds that issues of material fact remain which preclude an award of summary judgment on these claims.
Accordingly, IT IS HEREBY ORDERED that:
1. Plaintiffs' Motion to Strike Affidavit Testimony is DENIED.
2. Plaintiffs' Motion for Summary Judgment on the issue of the breach of the peace is GRANTED.
3. Defendant TCF's Motion for Summary Judgment on the issue of the breach of the peace is DENIED.
4. Defendant MRB's Motion for Summary Judgment on the issue of the breach of the peace is DENIED.
5. Plaintiffs' Motion for Summary Judgment on the Fair Debt Collection Practices Act claim is DENIED.
6. Defendant TCF's Motion for Summary Judgment the Fair Debt Collection Practices Act claim is GRANTED.
7. Defendant MRB's Motion for Summary Judgment on the Fair Debt Collection Practices Act claim is GRANTED.
8. Defendant TCF's Motion for Summary Judgment on the issue of conversion of the bedliner is DENIED.
9. Defendant MRB's Motion for Summary Judgment on the issue of conversion of the bedliner is DENIED.