Chrysler Credit Corporation v. Jimmy McKinney, et al.
Supreme Court of Alabama
1984 Ala. LEXIS 4246
June 22, 1984


Defendant Chrysler Credit Corporation appeals from a judgment entered against it and in favor of the plaintiffs in the amount of $20,000. We affirm.

In July 1980, Jimmy McKinney bought a Dodge Mirada from Countywide Dodge for his wife's use. He negotiated and executed on behalf of McKinney Ceramic Tile Co., Inc., of which he was president and majority stockholder, a retail installment contract financing the automobile with Chrysler Credit Corporation. McKinney made only two payments pursuant to this agreement, because Countywide Doge failed to repair the car to his satisfaction.

McKinney returned the car to Countywide Dodge on numerous occasions for repairs. The dealership successfully repaired most of the defects, but never succeeded in repairing a leak in the roof of the automobile. This leak was so bad that at times, after a rainshower, two inches of water was left standing in the front floor. Because of this repeated leaking, the car's interior had an offensive odor, and the leather interior was damaged.

Mr. McKinney visited the dealership time after time and, at one point in September, explained the problem to the owner of Countywide Dodge, who assured him it would be repaired. It was not. He then wrote letters to the dealership, Chrysler Corporation, and Chrysler Credit Corporation, notifying them that he would make no more payments on the vehicle until the leak was repaired. He received no responses to these letters. Chrysler Credit later telephoned him about his failure to make the payments on the vehicle. Once again, he discussed the leak in the roof and was assured that it would be repaired. Soon thereafter, James Smith, a repossession agent of Chrysler Credit, contacted Mrs. McKinney about the car and the McKinneys' failure to make the payments on the note. Mrs. McKinney met Smith at a restaurant to discuss the matter. After a conversation, wherein Mrs. McKinney detailed to Smith the problem with the car, she and Smith reached an agreement. Mrs. McKinney testified as follows concerning the agreement:

"He [Smith] told me that everything was fine, that all he had to do was to get me to take the car in to the lot and it would be fixed. You know, they would fix the leak in it. And, if they fixed the leak in it, then we would bring up the payment, which I agreed to."

Mrs. McKinney called their attorney from the restaurant. He spoke with Smith and confirmed the agreement not to repossess the car unless and until the McKinneys failed to bring the payments up to date following the repair of the vehicle's roof.

Mrs. McKinney and Smith then left the restaurant and drove to the dealership, where Mrs. McKinney surrendered the automobile to the dealership for repairs. The owner of the dealership confirmed the agreement to catch up the past due payments when the car was repaired.

A few days later, Chrysler Credit sent repossession notices to the McKinneys, advising them that the automobile had been repossessed and would be sold within five days after the receipt of those notices. The attorney for the McKinneys corresponded with Chrysler Credit, informing them of the agreement that repossession would not occur unless the repairs were made and the payments were not then brought up to date. Chrysler Credit did not respond to this letter.

The day after the repossession took place, Chrysler Credit called upon Countywide Dodge to pay off the McKinney account, pursuant to its recourse agreement, which it did.

Following these events, Countywide again made numerous attempts to repair the leaking roof in the car. Several times Mr. McKinney went in to the dealership and, each time, the roof leaked when tested. Later, Mr. McKinney was told to remove his personal belongings from the vehicle because it was no longer his car and was being sold. Thereupon Mr. McKinney filed suit against Chrysler Credit, Chrysler Corporation, and Countywide Dodge.

The trial court granted Countywide's motion for directed verdict at the close of the plaintiffs' case. The jury returned a verdict against Chrysler Corporation and in favor of the plaintiffs for breach of warranty. That verdict is not an issue in this appeal. The jury also returned a verdict against Chrysler Credit Corporation for $20,000.00 on a conversion claim.

Only Chrysler Credit appealed. It argues that a conversion of the plaintiffs' vehicle never took place because the McKinneys were in default, and Chrysler Credit, acting within its rights under § 7-9-503, Ala. Code 1975, was entitled to possession. The right under contract to repossess an automobile upon default has been recognized consistently since the adoption of § 7-9-503. That section reads:

§ 7-9-503. Secured party's right to take possession after default

"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. If the security agreement so provides the secured party may require the debtor to assemble the collateral and make it available to the secured party at a place to be designated by the secured party which is reasonably convenient to both parties. Without removal a secured party may render equipment unusable, and may dispose of collateral on the debtor's premises under section 7-9-504.

Section 7-9-503 gives the secured party the right to possession upon default, but it does not authorize repossession by trick or fraud.

The evidence in this case would permit a jury to find that Mrs. McKinney was tricked into surrendering the automobile to the repossession agent of Chrysler Credit and the Dodge dealer. The evidence also supports a finding that Chrysler Credit fraudulently led Mrs. McKinney to believe that the car would not be repossessed unless the McKinneys failed to make the necessary payments after the car was repaired. The jury could find that Chrysler Credit breached the agreement and two days later sent the McKinneys repossession notices.

The facts here are very similar to those considered in Ford Motor Credit Company v. Byrd, 351 So. 2d 557 (Ala. 1977), where the Court held that a repossession by trick, artifice, or fraud is wrongful and will support an action for conversion of the chattel.

In Byrd, the owner/debtor was persuaded to take his car to the dealership in order to establish whether he was in fact in default. Once the car was on the dealer's lot, and while the owner was inside reviewing his account, the car was taken and locked in a storage area, without the knowledge of the owner.

Self-help repossession is not permitted in all circumstances. As this Court set out in Byrd:

"We cannot interpret § 9-503 to permit obtaining possession through trick, without knowledge on the part of the debtor. To interpret § 9-503 to allow repossession in these circumstances would encourage practices abhorrent to society: fraud, trickery, chicanery, and subterfuge, as alternatives to employment of judicial processes that foster the concept of ours being a government of laws and not of men."

As Byrd held, a repossession by artifice, trick, or fraud will support an action for conversion. The evidence clearly supports the jury's finding of wrongful repossession and conversion.

The plaintiffs properly withheld payment on the automobile until all the defects which impaired the value of the vehicle to them were repaired. Certainly, a substantial defect existed in the McKinneys' automobile and, until that defect was cured or repaired, the McKinneys had the right under their installment contract to withhold payment on the vehicle. That contract was assigned to Chrysler Credit and contained a provision which read: "Any holder of this consumer credit contract is subject to all claims and defenses which the debtor could assert against the seller of goods or services obtained pursuant hereto or with the proceeds hereof." Countywide Dodge had failed to honor its commitment to repair the vehicle, thereby subjecting Chrysler Credit to the McKinneys' right to withhold payment.