Underwood v. Foremost Financial Services Corp.
| Decision Date | 20 June 1990 |
| Docket Number | No. 89-CA-0053,89-CA-0053 |
| Citation | 563 So.2d 1387 |
| Parties | A.V. UNDERWOOD and Augustine Underwood v. FOREMOST FINANCIAL SERVICES CORPORATION. |
| Court | Mississippi Supreme Court |
W.T. Bailey, Sr., Lucedale, for appellant.
Wayne L. Hengen, Hengen & Hengen, Biloxi, for appellee.
Before HAWKINS, P.J., and PRATHER and BLASS, JJ.
I. INTRODUCTION
In this case, purchasers (debtors) of a mobile home and furnishings under security agreement and retail installment contract became delinquent in making monthly payments; the delinquency led seller (creditor) to seize the debtors' home and its contents. The debtors sued the creditor for compensatory and punitive damages arising from an allegedly unconstitutional ex parte seizure of their home and its contents; they contended that the seizure of their property, prior to notification and a hearing, was violative of all due process rights accorded under the Fourteenth Amendment.
A hearing was held and briefs were submitted--subsequent to which the circuit judge entered judgment against the debtors. The judge reasoned that the creditor was not liable for damages since it acted in accord with a presumptively-valid, albeit unconstitutional, state statute. The debtors appealed.
On appeal, this Court was asked to decide whether the circuit judge's reasoning was proper. Perusal of well-entrenched federal and state constitutional law leads to the conclusion that a reversal is necessitated.
Unless otherwise noted, the following facts are undisputed.
On July 19, 1986, A.V. and Augustine Underwood of Lucedale, Mississippi, purchased a mobile home and furnishings from Crabtree Trailer Sales of Mobile, Alabama. The home and furnishings were financed by Foremost Financial Services Corporation (hereinafter Foremost or creditor), a Michigan corporation, upon execution of a security agreement and retail installment contract--pursuant to which the Underwoods were obligated to make 120 monthly installments of about $150.00. 1 After making a down payment of $470.00 and four monthly installments, the Underwoods met hard times and, presumably in February 1987, their account with Foremost became delinquent. Several months later, Foremost: (1) filed a complaint in replevin, (2) posted bond, (3) seized the Underwoods' mobile home and its contents, and (4) transported the home to the place of purchase (i.e., Alabama).
Of critical import, the home was seized prior to serving the Underwoods with notice and prior to providing them with an opportunity to be heard. The evidence indicates that the Underwoods first learned of the seizure upon their return from work to the vacant lot on which their home was sited.
On June 15, 1987, the Underwoods filed a "Response to Replevin" and claimed that their home was seized in an improper manner. They explained that, after their account became delinquent, they hired an attorney to help them work out an amicable settlement with Foremost; however, their attorney's attempts were ignored by Foremost and their home was surprisingly seized while they were away at work. The Underwoods later amended their response--contending that Foremost's "surprise" seizure of their home and contents was grievously-violative of their constitutional rights to due process (i.e., right to adequate notification and a pre-seizure hearing). The Underwoods requested attorneys fees, compensatory and punitive damages for the unconstitutional seizure. See 42 U.S.C. Sec. 1983 ().
On November 6, 1987, a replevin hearing was held in the George County Circuit Court. Two specific issues were before the circuit court: (1) whether Foremost should be permitted to permanently retain possession of the Underwoods' home and its contents; and (2) whether Foremost seized the home in an unconstitutional manner and, as a consequence, should be held liable for damages.
Upon conclusion of the hearing, the judge found that, in view of the delinquent status of the Underwoods' account, he had no "alternative but to award [permanent] possession of the ... home to [Foremost]." The judge then ordered the parties to submit briefs on the issue concerning constitutionality of the seizure. Upon reviewing the briefs, the judge found that the Underwoods were indeed deprived of their property in an unconstitutional manner, but declined to hold Foremost liable for damages since the creditor acted under color of a presumptively-valid (albeit unconstitutional) state statute governing replevins. The Underwoods appealed.
Whether the Underwoods defaulted on their sales agreement, thereby entitling Foremost to seize the mobile home in a constitutionally-permissible manner--is an issue which seems to be undisputed and is not before this Court. The issues before this Court are: (1) whether the seizure transpired in a constitutionally-impermissible manner and, if so (2) whether the circuit judge properly refused to impose liability for the unconstitutional seizure.
II. ANALYSIS
No one disputes that Foremost seized the Underwoods' home in compliance with Mississippi's so-called "replevin statute." See MISS.CODE ANN. Sec. 11-37-101 (1989 Supp.). 2
The dispute concerns the statute's (i.e., the seizure's) constitutionality. See U.S. CONST. amend. XIV, Sec. 1 (); see also MISS. CONST. art. 3, Sec. 14 (). Foremost contended that the statute is constitutional; the Underwoods and ultimately, the circuit judge, disagreed. The issue was recently rendered moot.
On April 13, 1989, a federal district court rightly found Sec. 11-37-101 to be unconstitutional. See Wyatt v. Cole, 710 F.Supp. 180 (S.D.Miss.1989). The Mississippi Legislature responded promptly and redrafted the statute; it now meets minimum due process requirements. See Miss. SB 2187 (1990) (( Sec. 11-37-101) (approved by the Governor and to become effective on July 1, 1990)). Thus, a sole issue remains for this Court's resolution.
As noted in Section I(A)(3) of this opinion, the circuit judge found that:
Because the [Underwoods'] claim for damages is without merit as to the ultimate taking of their property, due to [Foremost's] proven entitlement to same, the sole remaining issue ... is whether [Foremost's unconstitutional] taking of the property ... resulted in damage to the [Underwoods] for which [Foremost] is responsible. It is apparent that ... [Foremost] properly proceeded to take immediate possession of the [Underwoods'] property according to the provisions of Miss.Code Ann. Sec. 11-37-101 (Supp.1987), a law [Foremost] was entitled to assume was constitutional.
Vol. I, at 141-42 (). In short, Foremost was not subjected to liability for damages simply because it acted pursuant to a presumptively-valid (albeit unconstitutional) statute.
The circuit judge's decision concerning liability disregards applicable and established constitutional law.
For example, in Guzman v. Western State Bank of Devils Lake, 540 F.2d 948 (8th Cir.1976), the debtors (purchasers of a mobile home under security agreement and retail installment contract) sued the creditor for compensatory and punitive damages arising from an unconstitutional ex parte seizure of their home. The home had been seized: (1) after the debtors' account became delinquent, and (2) after the creditor complied with a presumptively-valid state statute which provided for seizure prior to notification and a hearing. (Notably, the statute involved in the Guzman case was nearly identical to the one involved in the case sub judice.) A jury ultimately found for the debtors, and awarded $9,365.23 in compensatory damages and $30,000 in punitive damages. The federal district judge, however, granted the creditor's j.n.o.v. motion after concluding that the creditor seized the debtors' mobile home in good-faith reliance on a presumptively-valid (albeit unconstitutional) state statute. The debtors appealed.
On appeal, the creditor maintained: (1) that the jury improperly awarded damages; (2) that it should not be held liable for damages simply because it was "acting in accord with [statutory] provisions which [it] believed were constitutional"; and (3) therefore, the district court properly granted its j.n.o.v. motion. Id. at 951. The Eighth Circuit Court of Appeals disagreed: "A [creditor] may feel [it] is pursuing [its] legal rights but, where [its] acts are oppressive and in reckless disregard of another['s] constitutional rights, [it] can still be [held] liable." Id. (citing 42 U.S.C. Sec. 1983) (emphasis in original). The Eighth Circuit noted that the applicable test is:
[W]here a plaintiff asserts denial of constitutional rights ..., a defendant's claim of good faith reliance on a presumptively valid statute must be considered in light of not only the sincerity in his belief that what he was doing was right, but the reasonableness of his actions in the circumstances.
Id. at 952 (emphasis in original) (citing Stephenson v. Gaskins, 531 F.2d 765 (5th Cir.1976); 3 Laverne v. Corning, 522 F.2d 1144 (2d Cir.1975)); see also McElveen v. County of Prince William, 725 F.2d 954, 957 (4th Cir.1984) (). The Court added that "[w]here it is patently obvious that [the creditor's] conduct will oppressively harm [the debtor] and [it] acts with reckless disregard of the [d...
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