Opinion ID: 75888
Heading Depth: 2
Heading Rank: 1

Heading: The Florida UCC

Text: 17 The Florida UCC is the substantive law in Florida that governs generally the rights and obligations of debtors and secured creditors after repossession of collateral. Under the statute, a secured party usually can take possession of its property upon default without judicial process. See Fla. Stat. § 679.503. 18 After repossession, a secured party may dispose of or retain the property. If the secured party chooses to sell, lease or otherwise dispose of any or all of the collateral, the debtor has a right to any surplus made from the sale, and upon disposition of the collateral, all of the debtor's rights therein and the security interest under which it is made are discharged. See Fla. Stat. § 679.504(1), (2), (4). If, however, the secured party chooses to retain the property, the secured party must send written notice of such proposal to the debtor. See Fla. Stat. § 679.505(2). The secured party may retain the collateral unless the debtor objects in writing within 30 days from the date of notification. See id. Upon an objection, the secured party must dispose of the collateral in accordance with Fla. Stat. § 679.504. See id. At any time before the secured party has disposed of or entered into a contract to dispose of the collateral under § 679.504 or before the obligation has been discharged under § 679.505(2), the debtor may redeem the collateral. See Fla. Stat. § 679.506. To do so, the debtor must tender fulfillment of all obligations secured by the collateral as well as the expenses incurred by the secured party in preparing for the disposition of the collateral. See id. 19 As this brief discussion illustrates, the Florida UCC grants a secured party the right to repossess collateral, but contains no language addressing title, the transfer of title, or the ownership of repossessed collateral. Instead, the statute is notably silent on the issue of ownership, providing this Court with no guidance as to who owned the Debtors' vehicles upon repossession. 20 The Debtors in these appeals nonetheless argue that sections of the Florida UCC can be construed to read that repossession does not transfer ownership from the debtor to the creditor. We are not persuaded by their arguments. 21 First, the Debtors argue that § 679.207 of the Florida UCC, which requires a secured party to take reasonable care of repossessed collateral, must evince the legislature's intent to maintain ownership with the debtor after repossession, because otherwise, § 679.207 would have no reason to provide the debtor with a cause of action for failure to use reasonable care after repossession. See In re Iferd, 225 B.R. 501, 503 (Bankr.N.D.Fla.1998). On the contrary, there are many reasons the Florida UCC imposes on a creditor the duty to reasonably care for repossessed collateral. For one, imposition of this duty minimizes a debtor's potential liability for any deficiency resulting from the creditor's disposition of the property. See Fla. Stat. § 679.504(2). In addition, this duty of reasonable care is consistent with a debtor's right to redeem the collateral, ensuring that the debtor may redeem the property in the same condition it was in at repossession. See Fla. Stat. § 679.506. Finally, this duty of reasonable care is indicative of the good faith requirement established in Fla. Stat. § 671.203 (requiring that [e]very contract or duty within this code imposes an obligation of good faith in its performance or enforcement). We therefore do not read § 679.207 as providing an answer to the basic question of whether the ownership interest remains with the debtor or passes to the creditor on repossession. 22 Second, the Debtors argue that § 679.504 of the Florida UCC establishes that ownership of repossessed collateral remains with the debtor, because it states that when the secured party sells the collateral to a purchaser, all of the debtor's rights therein pass to the purchaser. See Turner v. DeKalb Bank (In re Turner), 209 B.R. 558, 566 (Bankr.N.D.Ala.1997). Yet, the term debtor as defined in the statute includes the owner of the collateral, even if he is not the person who owes payment of the obligation secured; for this reason, § 679.504(4)'s language concerning the rights of the debtor does not necessarily refer to the true debtor, and may encompass either the debtor or the creditor in possession of the collateral. 2 Plainly, this provision does not signify, contrary to the Debtors' reading, that the debtor retains ownership. 3 23 Third, the Debtors argue that the statutory right to redeem a repossessed vehicle is somehow sufficient to pull the vehicle itself into the bankruptcy estate. It is true that the Florida UCC replaces a debtor's rights in a vehicle with a right to redeem that vehicle and to recover damages if a creditor violates that right. See Fla. Stat. §§ 679.506, 679.507. However, we have already determined under Alabama law that the right to redeem a vehicle is an insufficient basis to render the vehicle itself property of the [debtor's bankruptcy] estate. Lewis, 137 F.3d at 1284. In Lewis, this Court reasoned, [i]n accordance with state law, one must take certain affirmative steps to change the otherwise dormant right to redeem repossessed collateral into a meaningful ownership interest.... [A debtor] had to `tender[] fulfillment of all [secured] obligations' plus expenses to exercise the estate's right of redemption. Id. (citing Ala.Code § 7-9-506, which uses the same language as Fla. Stat. § 679.506). We determined that Lewis's proposed Chapter 13 plan, which tendered to the creditor sixty-two cents on the dollar in return for the debtor's continued use of the vehicle, offered no indication that the estate had chosen to exercise its right of redemption, that is, to fulfill the debtor's secured obligation plus expenses in accordance with Alabama's statutory right of redemption. 24 In the instant cases, the Debtors likewise have taken no steps to exercise their rights to redeem. 4 Thus, applying Lewis 's analysis of identical language in the Alabama statute to the Florida UCC, in factual circumstances very much like Lewis, we hold that the Debtors' mere rights to redeem do not bring the vehicles into the Debtors' bankruptcy estates under Florida law. Indeed, not only do the various steps required to redeem suggest that this right does not signify ownership, but the statute itself recognizes a distinction between the two. The Florida UCC creates a category of general intangibles, such as a right of redemption or a right to sue, see Fla. Stat. § 679.106, and separates general intangibles from goods, which include tangible personal property such as a vehicle, see Fla. Stat. § 679.105(1)(h). This statutory distinction between a right of redemption in collateral and the ownership of collateral further confirms the conclusion that rights of redemption are wholly different from ownership interests. 25 Fourth and finally, the Debtors rely on Joyner, Inc. v. Ettlinger, 382 So.2d 27 (Fla.Dist.Ct.App.1980), to support the claim that under the UCC, a debtor's ownership in a vehicle is not divested until it either is sold to a third party under § 679.504, or is retained by a creditor under § 679.505(2). 5 While Joyner does hold that the superior interest holder did not become the owner of the collateral but rather became a secured party in possession of collateral, the decision does not contain any language regarding the status of a debtor 's ownership interest — notably, it only discusses the relationship between two secured creditors, and does not examine the rights of a creditor vis-à-vis a debtor after repossession. This Florida court case does not say, and cannot be read to say, that the debtor still owns the collateral while the creditor in possession does not. 26 In short, based on the language of the Florida UCC, and the little case law interpreting the statute, we are constrained to conclude that the Florida UCC does not establish who owns the repossessed vehicles. We next look at the Florida Certificate of Title statute to determine whether it speaks to the vehicles' ownership.