Michael Nadalin v. Automobile Recovery Bureau, Inc.

Citations: 169 F.3d 1084; 1999 U.S. App. LEXIS 3994; 1999 WL 130194Docket: 98-2601

Court: Court of Appeals for the Seventh Circuit; March 12, 1999; Federal Appellate Court

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A class action lawsuit under the Fair Debt Collection Practices Act (FDCPA) was filed by Michael Nadalin against Automobile Recovery Bureau, Inc. (ARB) concerning ARB's repossession practices. The case, decided by the Seventh Circuit, centered on whether ARB's practice of charging a $25 fee for the return of personal property found in repossessed vehicles violated the FDCPA. The court examined 15 U.S.C. § 1692f(6)(A), which prohibits repossessors from taking property without a right to possession. While ARB had no security interest in the personal property found, it argued that its possession was incidental to repossessing collateral. The court noted that ARB had a common law duty to provide the owner a reasonable opportunity to retrieve their property, supported by the security agreement between creditor and debtor, which allowed ARB to take non-covered goods as long as it made reasonable efforts to return them. Thus, ARB's actions regarding inventorying and notifying the owner were seen as necessary to fulfill both its common law and contractual obligations, distinguishing this case from previous rulings that found similar practices unlawful.

The plaintiff asserts that the duties of the defendant, ARB, relate to the federal debt collection statute through common law bailments. ARB is identified as a constructive bailee, having unintentionally taken custody of the plaintiff's property, differing from a contractual bailee. The established principle is that a constructive bailee lacks a lien on the bailed property and has no right to possession to compel reimbursement for any preservation expenses incurred. This principle is supported by various cases, including Hertz Corp. v. Paloni and Hartford Ins. Co. v. Overland Body Tow, Inc. However, exceptions exist, such as the salvage doctrine in admiralty law and the rights of finders, who may be entitled to compensation for reasonable expenses and, in some cases, a lien on the goods. The law is conflicted: it seeks to discourage "officious intermeddlers," who provide unsolicited services without the owner's consent, while also recognizing that a businessman providing valuable services without owner consent, due to infeasibility, may deserve compensation. The nature of the finder as a businessman aids the court in determining a reasonable fee, facilitating the creation of a hypothetical contract.

The finder's or bailee's lien is pivotal for enforcing the right to charge a fee. The plaintiff concedes that the repossessor can impose a fee but contends that the repossessor must return personal property before collecting it. This position could effectively inhibit the repossessor from collecting any fee, as pursuing small amounts like $25 through litigation is impractical, and voluntary payment is unlikely due to the borrower's default on their vehicle loan. Illinois case law suggests that a lien may not be recognized under these circumstances, particularly given the security agreement's stipulation that the repossessor must make reasonable efforts to return property found in the repossessed vehicle without mention of a fee, potentially entitling the owner to free return of their property.

The court does not need to resolve these lien-related issues, assuming ARB lacks a lien or the right to charge for costs associated with preserving or returning property left in a potentially repossessable vehicle. The Fair Debt Collection Practices Act is primarily concerned with whether the repossessor acted as the lender's agent in asserting a lien for the fee. If ARB collected the fee and returned the property, the lender would not gain, nor would they benefit if the property were destroyed. While leaving the property in the vehicle for a foreclosure sale might benefit the lender depending on its value, the borrower could always retrieve the property by paying the fee if it was worth more than $25. Property valued under $25 would likely not justify the costs of sale.

ARB's action in seizing the plaintiff's property did not serve to enforce a debt owed to the lender or to secure additional collateral. There is no indication that Congress intended to abolish the repossessors' common law rights as bailees, provided their actions do not involve seizing property as collateral for the lender's loan.

The $25 fee charged by the repossessor is not deemed unreasonably high, as it does not exceed the average cost of preserving and returning the owner's property left in the vehicle. If the fee were excessively high, potentially shared with the creditor, it could suggest collusion to extort payment, but no such allegations exist. A hypothetical scenario involving a $500 fee with additional personal property complicating the collateral arrangement is also dismissed, as it is not relevant to the current claims. According to the Uniform Commercial Code, a creditor can recover reasonable expenses related to the loan, including those for preserving personal property. However, if the creditor attempts to collect expenses through a lien on personal property found in the repossessed vehicle without proper security interest, it violates the Fair Debt Collection Practices Act, though this argument was not presented and is therefore waived. The plaintiff has made a claim under Illinois bailment or conversion law, which the district court properly referred to state court upon dismissing the federal claim. Ultimately, the plaintiff failed to establish a viable claim under the federal debt collection statute. The decision is affirmed.