1. In order to repossess collateral, there must be
a. a security interest in the collateral taken by the creditor
b. a default by the debtor
c. either one of the above
d. both of the above

    -9-609 (a)
    -linked from section 1 of lecture notes

2. Which of the following would might reasonably be considered a "default" that could result in repossession?
a. a payment that is late, even one day late
b. failure of the debtor to insure the collateral
c. using the secured property as collateral for another advance of credit
d. the creditor's good faith belief that the prospect of payment or performance is impaired
e. all of the above

    -see contract in file (same contract we saw in cross-collateral topic)

3. Before repossessing, the creditor must
a. notify the debtor in writing of its intent to repossess
b. notify the debtor orally of its intent to repossess
c. go to court and get a "writ of replevin"
d. none of the above; the creditor may go to court or take the property without a court order, at its option

    -9-609 (b)
    - "self-help" vs. "replevin"
    -note reference to "breach of peace"

Questions 4-8 relate to the following fact situation: After 20 years of marriage, George dumps Martha and marries a younger woman. As part of the divorce decree, Martha gets the family's SUV--a one-year-old Toyota Land Cruiser--and George is obligated to make the monthly payments to Unfriendly Finance Co. (UFC). George is unable to keep up the payments, but neglects to tell Martha. George is 60 days late when Al, a repo man from Heartless Towing, pulls into the parking lot at the hairdressing salon where Martha works, hooks up the SUV to its wrecker, and climbs in the cab. Alerted by her co-workers, Martha runs to the SUV, pulls her shotgun off the rack, and stands in the path of the wrecker. "Touch that gas pedal and I'll blow your head off," shouts Martha. Al, not believing Martha will shoot, drives away, barely avoiding hitting Martha, who does not shoot.

4. Is the repossession of Martha's SUV legal? Why or why not?

    -no
    -breach of the peace
    -see Willliams * p. 2

5. Would your answer to #4 be different if Martha had not used the shotgun, but had simply stood in the way of the wrecker instead?

    -no; still "risk of invoking violence"

6. Would your answer to #4 be different if the repossession had taken place in Martha's driveway instead of the parking lot? What if there was a "no trespassing" sign on Martha's lawn?

    -no difference
    -sign has no impact (cuz there was a right to repossess)

7. Would your answer to #4 be different if Al had taken the vehicle from Martha's driveway in the middle of the night while she was sleeping? What if, in order to get the keys, the repo man had reached in a window in Martha's home?

    -yes; there's no breach of the peace
    -probably would be a breach (though ultimately the jury would have to decide)

8. Would your answer to #4 be different if Al had taken the vehicle from Martha's locked garage in the middle of the night while she was sleeping?

    -yes; it's not OK to go into a locked garage

Questions 17-21 relate to the following continuation of the hypothetical repossession case: Al tows the SUV to UFC's place of business. Al offers to buy the SUV for $5,000. Bill, president of UFC, decides to avoid hassles and sell it to Al for that price. Bill then asks his attorney to collect $21,000 from George, based on the following calculations:

Amount owed on SUV:    $25,000
+ Cost of repossession:      1,000
                                             26,000
- Proceeds of sale to Al:      5,000
Amount owed:                   $21,000

17. Was the end result here fair to George?

    -George got screwed (even though he may have deserved it)

18. Was it legal for UFC to charge George for the cost of the repossession?

    -yes
    -9-615 (a) (1) (lecture notes section 4)

19. What is the standard required by the UCC in this situation?

    -to act in a "commercially reasonable manner"
    -9-610 (b) (sec. 3 of lecture notes)

20. What should UFC have done with the SUV in order to minimize George's losses in this case?

    -sold it in a competitive market
       -e.g., ad in paper, sale from dealer's lot

21. Does the law require UFC to follow that process?

    -no
    -see 9-627
    -thus cars are usually sold via auctions, which don't return top dollar

Questions 22-30 relate to the opinion of the Supreme Court of Alabama in Chrysler Credit Corp. v. McKinney

22. Why did McKinney return the vehicle to the dealer?
   
    -it had lots of mechanical problems, particularly a leaky roof that could not be repaired
 

23. What did the creditor, Chrysler Credit, agree to do at that point?

24. Did it live up to its promise?  What did it do with the car?

    -no; it repossessed the vehicle
    -said it would be sold in 5 days

25. For whom did the lower court rule and on what two bases?

    -directed verdict for dealership
     -against Chrysler Corp. for breach of warranty
    -against Chrysler Credit for conversion (remember that?)
       -awarded $20,000

26. On what basis did Chrysler Credit appeal?

    -it could not be conversion because the repossession was lawful

27. For whom did the Supreme Court of Alabama rule?  Why?

    -for the McKinneys
     -UCC authorizes repossession on default, but not by trick or fraud

28. What precedent did the court rely on in making its decision?

    -an earlier Alabama Supreme Court case, Ford Motor Co. v. Byrd

29. According to the court, on what basis were the McKinneys justified in withholding payments to Chrysler?

    -The FTC Holder-in-Due-Course rule (that we saw last week)
    -see * p. 3

30. Do you think that the Court would have been as sympathetic to the McKinneys if they were simply behind on their payments?

    -probably not; this was an appealing set of facts
    -note that Byrd and McKinney are minority decisions
    -note Thanksgiving case mentioned in notes

Questions 31-35 relate to the opinion of the FTC in In Re Ford Motor Co. (briefly described in lecture notes only)

(I didn't assign this case, but it's important to discuss; goes back to the issue of how the surplus or deficiency is determined.)

31. Who were the defendants in this case?

    -Ford, Ford Motor Credit, and a Portland, OR dealership
    -Ford and FMC settled; dealer litigated

32. According to the procedures used by the defendants, after repossession how much was credited to the defaulting consumer's account?

    -the amount owed to Ford Motor Credit

33. What happened to the car next?

     -returned to seller's lot and re-sold to a retail purchaser

34. Using this procedure, could there ever be a surplus?

    -no; regardless of what the dealer later sold it for, there could never be a surplus
    -no deficiency, but no surplus

35. Which sale, according to the FTC, should have determined the amount of any deficiency or surplus?

     -sale from dealer's lot