Gibbs v. Titelman, 74-1067

• Decision Date: 01 August 1974
• Docket Number: No. 74-1066,Nos. 74-1062,No. 74-1065,C,No. 74-1067,No. 74-1062,No. 74-1064,No. 74-1063,74-1067,74-1062,74-1063,74-1064,74-1065,74-1066,s. 74-1062
• Citation: 502 F.2d 1107
• Parties: , 14 UCC Rep.Serv. 1443 Harry H. and Thelma GIBBS, and Ella Lemar, on Their Own Behalf and on Behalf of All Others Similarly Situated, Appellants inommonwealth of Pennsylvania ex rel. Israel Packel, Intervenor Plaintiff, v. William A. TITELMAN, Individually and as Director of the Bureau of Motor Vehicles of the Commonwealth of Pennsylvania. Appeal of GENERAL MOTORS ACCEPTANCE CORPORATION, inAppeal of CHRYSLER CREDIT CORPORATION, inAppeal of PROVIDENT NATIONAL BANK, inAppeal of GIRARD TRUST COMPANY, inAppeal of FORD MOTOR CREDIT COMPANY, Intervenor Defendant, into 74-1067.
• Court: U.S. Court of Appeals — Third Circuit

Page 1107

502 F.2d 1107

29 A.L.R.Fed. 406, 14 UCC Rep.Serv. 1443

Harry H. and Thelma GIBBS, and Ella Lemar, on Their Own

Behalf and on Behalf of All Others Similarly Situated,

Appellants in No. 74-1067, Commonwealth of Pennsylvania ex

rel. Israel Packel, Intervenor Plaintiff, v. William A. TITELMAN, Individually and as Director of the

Bureau of Motor Vehicles of the Commonwealth of

Pennsylvania.

Appeal of GENERAL MOTORS ACCEPTANCE CORPORATION, in No. 74-1062.

Appeal of CHRYSLER CREDIT CORPORATION, in No. 74-1063.

Appeal of PROVIDENT NATIONAL BANK, in No. 74-1064.

Appeal of GIRARD TRUST COMPANY, in No. 74-1065.

Appeal of FORD MOTOR CREDIT COMPANY, Intervenor Defendant,

in No. 74-1066.

Nos. 74-1062 to 74-1067.

United States Court of Appeals, Third Circuit.

Argued May 31, 1974.

Decided Aug. 1, 1974.

W. Bradley Ward, Ira P. Tiger, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellant in No. 74-1062.

Oliver C. Biddle, Leonard C. Homer, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., for appellant in No. 74-1063.

Tyson W. Coughlin, Philadelphia, Pa., for appellant in No. 74-1064.

Gordon W. Gerber, John J. Brennan, Dechert, Price & Rhoads, Philadelphia, Pa., for appellant in No. 74-1065.

George J. Miller, Dechert, Price & Rhoads, Philadelphia, Pa., for appellant in No. 74-1066.

David A. Scholl, Chester, Pa., for appellants in No. 74-1067 and for appellees in Nos. 74-1062, 74-1063, 74-1064, 74-1065, 74-1066.

James R. Adams, Harrisburg, Pa., Lawrence Silver, Philadelphia, Pa., Israel Packel, Harrisburg, Pa., for William A. Titelman and Commonwealth of Pennsylvania.

Richard A. Hesse, Boston, Mass., for National Consumer Law Center, Inc., amicus curiae.

Joseph P. Gaffney, Jr., Harold J. Conner, Philadelphia, Pa., for Pennsylvania Consumer Finance Association, amicus curiae.

Floyd W. Tompkins, Edward C. Toole, Jr., Alexander D. Kerr, Jr., Clark, Ladner, Fortenbaugh & Young, Philadelphia, Pa., for Pennsylvania Credit Union League, amicus curiae.

Morton Newman, Neal Steinman, Ronald H. Surkin, Blank, Rome, Klaus & Comisky, Philadelphia, Pa., Eli S. Silberfeld, New York City, for National Commercial Finance Conference, Inc., amicus curiae.

Before VAN DUSEN, HUNTER and GARTH, Circuit Judges.

OPINION OF THE COURT

JAMES HUNTER, III, Circuit Judge:

This is an appeal from the judgment of the United States District Court for the Eastern District of Pennsylvania declaring unconstitutional certain provisions of the Pennsylvania Motor Vehicle Sales Finance Act ('MVSFA') ¹ and the Pennsylvania Uniform Commercial Code ('UCC') ² insofar as they permit creditors to repossess automobiles peaceably without resort to judicial process upon default by debtors. ³ This Court has jurisdiction pursuant to 28 U.S.C. 2201 & 1291. We reverse.

This case was tried as a class action under the Civil Rights Act, 42 U.S.C. 1983 & 28 U.S.C. 1343 based upon the claim that the repossessions of automobiles subject to security interests were made under 'color of . . . State law, statute, ordinance, regulation, custom or usage' ⁴ and in violation of due process because effective without notice and opportunity for a hearing.

Each of the named appellees financed the purchase of an automobile either through an installment sale contract or a loan agreement which required periodic payments over a specified period of time. Each named appellee had created a security interest in his automobile as collateral security for the indebtedness. The agreements provided that, in the event of default by an appellee, the creditor would have the right to retake the automobile, with or without judicial process-- a practice commonly referred to as self-help repossession. ⁵

The challenged statutes neither compel nor prohibit peaceable self-help repossession. Section 9-503 of the UCC, 12A Pa.Stat. 9-503 provides:

'Unless otherwise agreed a secured party has on default the right to take possession of the collateral. In taking possession a secured party may proceed without judicial process if this can be done without breach of the peace or may proceed by action.'

Section 23 subd. A of the MVSFA, 69 Pa.Stat. 623, subd. A provides:

'When the buyer shall be in default in the payment of any amount due under a motor vehicle installment sale contract or when the buyer has committed any other breach of contract, which is by the contract specifically made a ground for retaking the motor vehicle, the seller or any holder, who has lawfully acquired such contract, may retake possession thereof. Unless the motor vehicle can be retaken without breach of the peace, it shall be retaken by legal process, but nothing herein shall be construed to authorize a violation of the criminal law.'

The district court found that there was sufficient state involvement to constitute stitute 'state action' and held that under Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), lack of prior notice and an opportunity to be heard renders extra-judicial repossession unconstitutional. Since we believe that the requisite 'state action' is not present and that therefore a cause of action under 42 U.S.C. 1983 has not been alleged, we need not reach the due process issue. ⁶

It is well-settled that the fourteenth amendment applies only to actions of the 'States' and not to actions which are 'private.' Under 42 U.S.C. 1983, the 'under color of state law' requirement is the same as the 'state action' requirement of the fourteenth amendment. Adickes v. S. H. Kress & Co., 398 U.S. 144, 152 n. 7, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); United States v. Price, 383 U.S. 787, 794-795 n. 7, 86 S.Ct. 1152, 16 L.Ed.2d 267 (1966). ^6A

Unlike pre-judgment seizures recently considered by the Supreme Court in which state action was clearly present, ⁷ the seizures complained of here were effected by private individuals without the aid of any state official. Therefore, absent direct state involvement by the State of Pennsylvania, appellees' claim of 'state action' rests on one of two general theories: 1) by comprehensively regulating the field of automobile financing, without prohibiting the practice of self-help repossession, the State of Pennsylvania has become so involved and has so encouraged this private remedy that it becomes 'state action,' or 2) by allowing the practice of self-help repossession, the State of Pennsylvania has abdicated or delegated to private individuals a traditional state function, thus infusing the private act of repossession with 'state action.'

COMPREHENSIVE STATE REGULATION

Unquestionably the legislature of Pennsylvania, in enacting the MVSFA, comprehensively sought to regulate the area of automobile financing. ⁸ But the act complained of - i.e., the seizure of appellees' automobiles - is neither compelled ⁹ nor prohibited by the MVSFA. The statute simply permits what private parties have agreed upon. Section 23 of the MVSFA, 69 Pa.Stat. 623 provides that the creditor 'may retake possession' peaceably, without resort to legal process, if the default 'is by the contract specifically made a ground for retaking the motor vehicle.'

Under the MVSFA, self-help repossession remains a private remedy enforced by purely private conduct pursuant to an agreement made privately and not under state compulsion. Thus, the state plays no significant role. Where, as here, 'the impetus for the (act complained of) is private,' we are simply unable to conclude, as required under Moose Lodge v. Irvis, 407 U.S. 163, 173 92 S.Ct. 1965, 1971, 32 L.Ed.2d 627 (1972), that the State of Pennsylvania has 'significantly involved itself' in the alleged conduct so as to constitute 'state action.'

Nor do we believe that by enacting the MVSFA has the State of Pennsylvania formed a 'symbiotic relationship' with creditors as was present in Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). Cf. Moose Lodge v. Irvis, 407 U.S. 163, 174-175, 92 S.Ct. 1965, 32 L.Ed.2d 627 (symbiotic relationship lacking).

Nor do we find in the statutory scheme the kind of encouragement and fosterage of the alleged unconstitutional act as in Reitman v. Mulkey, 387 U.S. 369, 87 S.Ct. 1627, 18 L.Ed.2d 830 (1967). In Reitman, the State constitutional amendment repealed prior state legislation regulating racial discrimination in housing. Thus, in effect, the State constitutionally authorized discrimination by repealing prior law and by substantially inhibiting any subsequent change. ¹⁰

The case before us is vastly dissimilar to the situation in Reitman. Appellees concede that the self-help remedy of repossession 'existed in some form in the common law from a very early time.' ¹¹ Unlike Reitman then, the State of Pennsylvania has not by the enactment of the MVSFA permitted a practice which was formerly prohibited. It is true, as appellees suggest, that 'the protections surrounding the use of (this self-help) remedy have continuously ebbed and flowed.' ¹² But any encouragement or fosterage of self-help repossession resulting, if at all, from statutory modification of safeguards surrounding this private remedy is indirect and highly conjectural and is simply far less significant than the state involvement in Reitman. We think that Reitman and Moose Lodge, supra, read together, suggest that absent direct state action, private repossessions are not infused with the quality of 'state action' unless we can conclude that the involvement of the State of Pennsylvania (through its enactment of the MVSFA) has 'significantly' encouraged or fostered self-help repossessions. Reitman, supra, 387 U.S. at 380, 87 S.Ct. 1627; Moose Lodge, supra, 407 U.S. at 173, 92 S.Ct. 1598. See Burton, supra, 365 U.S. at 772, 81 S.Ct. 856. We cannot so conclude.

Actually, far from encouraging private repossessions, the MVSFA was enacted in 1947, among other reasons, to curb the abuses associated with private repossessions. ¹³ The statute displays a noticeable concern for protecting a broad...