### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE DONALD MALONE and LYNN MALONE, d/b/a MALONE & SON ’S WRECKER AND REPAIR SERV ICE, LLC, v. ASSOCIATES COMMERCIAL CORPORATION Direct Appeal from the Circuit Court for Greene County No. 98CV127 Hon. John K. Wilson, Judge

No. E2000-00220-COA-R3-CV - Decided April 26, 2000

Plaintiff brought an action for the wrongful removal of a tractor tra iler from his premises. The portion of the action relating to compensatory damage was settled between t he pa rties by the defendant paying plaintiff

$2 ,500.00. The Tria

l Judge had grante

d partial summary j udgment to defendant o n the iss ue of punitive dama ges, and the settle

ment preserved t

hat issue for appe

al. Plaintiff has appe

aled. We rever

se the Trial Court’ s judgment on the issu e of punitive dama

ges. Tenn. R. App. 3 Appeal as of Right; Judgment o

f the Trial Court R

eversed. F RANKS , J., delivered the opinion of the court, in which S USANO , J ., and S WINEY , J ., joined.

James t. Bowman and

A. Scott Pratt, Johns

on City, Tennessee

, for Appellant. James A. Matlock, Jr ., and Mic hael P. McGovern, Ayres and Parkey, Attorneys, Knoxville, for Appellee.

OPINION

The sole issue on appeal is whether defendant was entitled to summary judgment on the issue of punitiv

e damages. Plaintiff held for storage a 1984 International Cabover Truck with T raile r from1 Associates faced a similar lawsuit several years ag o for breach of the peace during a

repossession. Clark v. Associates Commercial Corporation, 877 F.Supp 1439 (D. Kan. 1994). -2- October 2, 1996. The unit was stored at plaintiff’s business location in Greeneville, Tennessee, behind a five to six-foot high c hainlink fence w ith access to the lo

t through a gate. A

ccording to plaintiff’s testimony, the defendant approached plaintiff and informed him of

its security inter

est. Plaintiff understood that

Associates had a

greed to pay the s

torage bill, in ord

er to obtain

the vehicle, butduring the night time of April 12, 1997, emp loyees of a recovery service hired by Associates entered plaintiff’s premises by tearing thetop hinge pins from the gate, removing the gate, and then removing the tractor trai

ler from the prem

ises. The gate

sustained some damage, and a guard dog, according to plai

ntiff’s testimony,

was injured durin

g the removal. In Hodges v. S.C. Toof & Co. , 833 S.W.2d 896 (Tenn. 1992), the Supreme

Court set outcriteria for determining whether punitive d amages may be awarded. In so doing, the Court restricted the availability of

such damages to

“cases involving only the most egregious of wrongs.” p. 901. The Court he

ld that: [A] court may henceforth award punitive damages only if it find s a defendant has acted either (1) intentionally, (2) fraudulently, (3) maliciously; or (4) recklessly. When evaluating a motion for summary judgment, the tri al court should consider “(1) whether a factual dispute exists; (2) whether the disputed fact is material to the outcome of the case; and(3) whether thedisputed fact creates a genuine issue for a trial.” Byrd v. Hall, 847 S.W.2d 208, 214 (Tenn. 1993).

Our review is de novo upon the record of the Trial Court with no presumption o f correctness

to the decision granting summary judgment. Hembree v. State , 925 S.W.2d 513 (Tenn. 1996). Moreover, this Court must view the evidence in the light most favorable to the opponent of the motion, and all

legitimate conclu

sions of fact must

be drawn in favor of the opponent. Gray v. Amos , 869 S.W.2d 925 (Ten n. App. 1993). Vie

wing the facts in the light mos t favorable to the plaintiff, we believe that a trier of fact could find the defendant had acted both intentionally and fraudulently in its repossession of the tractor trailer.

“A person acts inten

tionally when it is the

person’s conscio

us objective or de

sire to engage in the conduct or cause the result.” Hodges at 901. Associates intentionally hired an agent to repossess the vehicle when it knew that Malone had a storage agreement with the owner and had a lien for the cost

of storage. The agent intentionally entered plaintiff’s closed and locked premises withforce at night to rem ove th e vehicle. Associates arguably intended for its agent to enter the closedpremises while the plaintiff was not th

ere to achieve i

ts desir e re sult of repossession. Associates knew, or

should have known, that the actions by the repossessors amounted to a breach of the peace and sh

ould have instruct

e d its agents no t to enter any clos ed premises. 1 The acts of agents are imputed to Associates, as one cannot delegate the duty not to breach the peace.-3- “A person acts fraudulently when (1) the person inten tionally misrepresents an existing material fact or produces a fal se impr ession in order to mislead another, or to obtain an undue advantage; and (2) another is injured becaus e of the reasonable reliance upon the representation.” Hodges at 901. Plaintiff te stified he was misle

d by defen dant and relied on defendant’s representations that hewould be paid and no attempt would be made to take the tractor by force. We held in McCall v. Owens , 820 S.W.2d 748 (Tenn. Ct. App. 1991), that where a repossessor

uses force and b

reaches the pe

ace, the reposs

essor may be liabl

e for trespass , conversion, assault and battery and other torts, and compensatory and punitive damages may be recovered.

In Davenport v. Chrysler Credit Corp. , 818 S.W.2d 23, (Tenn. Ct. App. 1991), the Courtfound that plaintiff debtor was not entitled to punitive damages, despite the fact that the creditor breached the peace in its repossession of the car. Defendant argues that the two cases are in conflict. We do not agree. The Davenport court f oun d the actions in that case constituted a “breach of peace”, and in doing the Court said:

Neither viole nce, the threat o f violence, nor p

ersonal confron

tation is necessa

ry in order for a secured party’s conduct to amount to a breach of the peace under Tenn. Code Ann. §47-9-503. Id. at 29. The Court recognize d that pub lic policy favors peaceful, non-trespassory repossessions when the secured party has a free right of entry.

[F]orced entries onto the de

btor’s property

or into the debtor’s premises are viewed as seriously d etri mental to the ordinary conduct of human affairs. Accordingly, courts have consistently found that repossessions accompanied bybreaking locks or cutting chains are inconsistent with the Uniform Commercial Code. The courts have also disapproved of repossessions in which the secured par ty or its agent entered the debtor’s closed premises without permission, and repossessions causing damage to the debtor’s property. Id. at 29-30. The Court in Davenport declined to award punitive damages, emphasizing the fact that plaintiff put on little proof of actual damage

s, and stated “a p

artyis entitled to punitive damages only if it recovers actual damages.” In McCall , it was undisputed th at plaintiff suff

ered damages. In this case, there was no trial on the underlying claims. Instead, the parties entered an Agreed

Judgment for

compensatory damages in the amount of $2,500.00. By the nature of the judgment, there were

no findings of

fact as to damages; however, it can be reasonably inferred that-4-

the plaintiff suffered damages from the repossession of at least $2,500.00. Thus, the need for actual damages before there can be an award of punitive damages, as discussed in Davenport has beenmet. Additionally, the undisputed facts in the case, establish that the defenda nt, through its agents, committed a breach of the peace in the repossession. Courts of this jurisdict ion, as well as many others, have held that

a secured party is vicariously liable for the wrongful acts of repossessors, even when the repossessor

is an indepen dent contractor. See McCall p. 752. Clearly, breaking and entering another’s premises realistically is accompanied by the “threat of fo rce”, evenwhen the owner is not at home, beca

use the repossessor generally would not be aware of the fact and someone could arrive at any time.

Repossession is a harsh procedure, and is es sentially a delegation of the State’s exclusive prerogative to resolve disputes. Accordingly, statutes and legal principlesgov erning repossession should be construed in a way that prevents abuse, or discourages illegal conduct which mightotherwise go unchallenged because of the debtor’s lack of knowledge of legally p rop er repossession techniques. Davenport v. Chrysler Credit Corp. , 818 S.W.2d 23, 30 (T enn. Ct. App. 1991). Forced entries on

to another’s prop

erty or into

another’s premises are seriously detrimental to the ordi nary conduct of human affairs. Id. at 29 (citing Riley State Bank v. Spillman, 750 P.2 d 1024, 1030 (Kan. 1988)).

Moreover, this is not the first ti me that Associates has been sued for wrongful repossession due to a breach of the peace. As the Court is Clark v. Associates Commercial Corp. stated, “a substantial award of punitive damages would serve to punish Associates for allowing a breach of the peace to occur, and would hopefully motivate Associates to take additional precautions to prevent future violent repossessions.” 877 F.Supp 1439 (D. Kan. 1994).

We reverse the judgment of the Trial Court and remand for further proceedings on the issue of punitive damages, with the cost of the appeal assessed to the appellee.