King v. South Jersey Nat. Bank

Decision Date10 December 1974
Citation66 N.J. 161,330 A.2d 1
Parties, 75 A.L.R.3d 1030, 15 UCC Rep.Serv. 969 William B. KING, Plaintiff-Appellant, v. SOUTH JERSEY NATIONAL BANK, Defendant-Respondent. . Re
CourtNew Jersey Supreme Court

Allen S. Zeller, of Camden Regional Legal Services, Camden, for the plaintiff-appellant; Saul Ferster, Santa Monica, Cal., and Carl S. Bisgaier, Camden, on the brief.

William E. Reifsteck and Jack N. Hill, Haddon Heights, for defendant-respondent; Farr, Reifsteck & Wolf, Haddon Heights, attorneys.

The opinion of the Court was delivered by


Challenging as invalid the repossession of an automobile (by a secured creditor, after default in payment) this appeal primarily suggests constitutional infirmity in N.J.S.A. 12A:9--503, a part of the New Jersey Uniform Commercial Code. 1 It invokes, in the name of constitutional right, the conceptual reach of the policy which would provide protection in the market-place in cases such as typified by Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), reh. den. 409 U.S. 902, 93 S.Ct. 177, 34 L.Ed.2d 165. 2

The relevant facts and procedural history, uncomplicated and not in dispute, are these: the appellant, William B. King (plaintiff) purchased and received an automobile from a dealer, entering into an installment sales contract under which he promised to pay the balance due on a monthly basis. The contract created in the dealer and assigns a security interest in the automobile to secure payment of the monthly installments as they would become due. The contract provided that in the event of default in payment the unpaid balance would become due and payable and the seller and assigns could 'without notice or demand for performance or legal process, enter any premises where the goods may be found (and) peaceably take possession of them * * *.' The contract also stated '(u)pon default holder shall also have all the remedies of a secured party under the New Jersey Uniform Commercial Code if it is applicable to default hereunder.'

Upon delivery of the automobile and execution of the contract, the seller assigned the latter to the respondent South Jersey National Bank (the Bank). Plaintiff defaulted in an overdue monthly payment (which had been called to his attention by notice) and the Bank thereupon invoked the acceleration clause of the contract and peaceably exercised its right to repossess the automobile without notice to plaintiff, as the contract authorized it to do. Plaintiff later offered to make good on the defaulted payment, but this was rejected and he was informed the car would be returned only if he paid the full balance remaining due.

The Bank sent plaintiff a notice that the automobile would be sold at public auction. 3 On the same day plaintiff filed a complaint in the Chancery Division and obtained an order temporarily restraining the sale pending a hearing. Before the hearing date was reached a consent order was entered returning the automobile to plaintiff under certain conditions not here pertinent. Plaintiff then filed an amended complaint containing three counts, (1) for damages for tortious conversion of the automobile, (2) for damages for the unlawful conversion of personal property which was in the automobile 4 and (3) seeking declaratory judgment that N.J.S.A. 12A:9--503, Supra, was unconstitutional on its face and as applied and that the acceleration clause in the retail installment sales contract was unconscionable.

After answer field and pretrial conference held, the Bank moved for summary judgment and plaintiff countered with a similar motion. The trial court granted summary judgment for the Bank, dismissing the first and third counts of the complaint, thus upholding the constitutional validity of the repossession and its incidents and negating the claim of unconscionability. Plaintiff appealed from this summary judgment order and this Court granted his motion for certification under R. 2:12--2 while the appeal was pending unheard in the Appellate Division, 63 N.J. 561, 310 A.2d 476 (1973).

Count one (unlawful conversion) falls unless count three (invalidity of seizure and unconscionability of contract) is upheld, and hence our attention is directed to the validity of the allegations of the latter count. Aside from the claim that the acceleration clause in the contract was unconscionable (which we shall mention briefly hereafter), plaintiff's denunciation of the repossession and his plea for judicial repudiation of N.J.S.A. 12A:9--503, Supra, were predicated entirely upon the proposition made in one charge of his amended complaint:

14. Repossession of said vehicle by defendant was allegedly authorized by and taken pursuant to N.J.S.A. 12A:9--503.

By a pretrial stipulation the Bank made clear its contention Contra, that its retaking was based on its private contractual rights and not under the authority of N.J.S.A 12A:9--503, Supra, and hence without the assistance or cooperation or involvement of the state.

This refinement of the constitutional issue, I.e., the distinction between private or individual action and 'state action' subject to the equal protection and due process clauses of the Fourteenth Amendment, was clearly understood by the trial court. Its opinion supporting summary disposition fully and accurately dealt with the 'essential dichotomy between discriminatory action by the State, which is prohibited by the Equal Protection Clause, and private conduct, 'however discriminatory or wrongful,' against which that clause 'erects no shield. " Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 172, 92 S.Ct. 1965, 1971, 32 L.Ed.2d 627, 637 (1972); Shelley v. Kraemer, 334 U.S. 1, 13, 68 S.Ct. 836, 842, 92 L.Ed. 1161, 1180 (1948); 5 The Civil Rights Cases, 109 U.S. 3, 3 S.Ct. 18, 27 L.Ed. 835 (1883). The same philosophy obviously applies to the Due Process Clause.

Thus the court determined, as had been held in a comparable case (Messenger v. Sandy Motors, Inc., 121 N.J.Super. 1, 295 A.2d 402 (Ch.Div.1972)) that the repossession was a private contractual matter rather than a state action, and so was immune from constitutional attack. This conclusion is supported by an overwhelming majority of federal and state courts which have held (many in very recent times) that 'self-help' repossession is not an act under color of state laws and thus no state action is involved. 6 Before discussing the argument that the statute mentioned and the action allegedly taken under it came within the 'state action' theory, we note the claim that the acceleration clause of the contract was unconscionable. Our scrutiny of the factual record shows nothing that would justify us in declaring that such a clause, universally acceptable in such transactions and in the business world is, or in its exercise in this case was unconscionable. In the absence of extraordinary circumstances demonstrating oppression or grossly unfair dealing or the like not here present, or conflict with the public policy of the state (Cf. Unico v. Owen, 50 N.J. 101, 232 A.2d 405 (1967)), the court should not declare unconscionable the provisions for acceleration and for self-help repossession deliberately agreed to in the contract between the parties in this case.

On the main issue it must first be noticed that the right of self-help repossession of property under circumstances such as involved here, far from being a right created (and thus the fruit of 'state action') by N.J.S.A. 12A:9--503, Supra, or that statute's predecessor, Section 16 of the Uniform Conditional Sales Act codified by N.J.S.A. 46:32--22, has roots deep in the common law and has been recognized for centuries. 2 Pollock & Maitland, The History of English Law 573 (2d ed. 1952), 2 Blackstone, (Commentaries on the Laws of England 857--858 (4th ed. T. Cooley 1899). Nor did the Uniform Commercial Code or its predecessor statute distort such a common law right, as had the Florida and Pennsylvania statutes (invalidated in Fuentes, supra) which had so radically altered the ancient replevin remedy that, as Justice Stewart said 'they bear very little resemblance to it.' (407 U.S. at 78, 92 S.Ct. at 1993, 32 L.Ed.2d at 569)

The New Jersey Study Comment pertaining to N.J.S.A. 12A:9--503 mentions:

This section carries forward the provisions of R.S. 46:32--22 of the Uniform Conditional Sales Act * * *. Pursuant to this section the secured party may take possession ex parte if such can be done without breach of peace * * *.

By the same token the Uniform Commercial disposal of the secured property) suggests 12A:9--503 suggests that: Code Comment to N.J.S.A. of the earlier uniform legislation in allowing the secured party in most cases to take possession without the issuance of judicial process * * *.

Again, the New Jersey Study Comment to N.J.S.A. 12A:9--504 (outlining safeguards to the debtor in connection with the disposal of the secured property) suggests that:

* * * This section is designed to give the secured party the utmost freedom of action in disposition of the collateral subject only to the 'commercially reasonable' requirement.

The Uniform Commercial Code Comment to the last mentioned section also emphasizes the requirement that the method of disposition of the repossessed article must be 'commercially reasonable' and applies certain safeguards with respect to such post-seizure disposition, and accounting for proceeds of sale to satisfy the outstanding debt.

The primary purpose of inclusion of such safeguards in the Uniform Conditional Sales Act was protection of the buyer, Pacific Discount Co., Inc. v. Jackson, 68 N.J.Super. 331, 172 A.2d 440 (App.Div.1961) rev'd on other grounds, 37 N.J. 169, 179 A.2d 745 (1962); Bancredit Inc. v. Meyers, 62 N.J.Super. 77, 162 A.2d 109 (App.Div.1960); Commercial Credit Corp. v. Lawley, 47 N.J.Super. 207, 135 A.2d 546 (App.Div.1957); Plainfield Motor Co. v. Salamon, 13 N.J.Misc. 570, 180 A. 428 (D.Ct.1935), and...

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