Court Opinion

ID: 9717667
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:08:12.312327+00
Date Added: 2024-06-11T18:23:54.636282
License: Public Domain

PRESIDING JUSTICE HEIPLE delivered the opinion of the court: This is an appeal from an order of summary judgment entered in favor of defendants East Joliet Bank and Dave Kiester, d/b/a Kiester’s Garage. The bank held a security interest in a Ford Bronco truck purchased by the plaintiffs, Walter and Acelia Kouba. Because the plaintiffs were in default on their monthly loan payments, the bank contracted with Leroy Campbell, d/b/a Recoveries Unlimited, to repossess the truck. Campbell in turn hired defendants Mau, Sullivan and Schroll, who went onto plaintiffs’ property to recover the truck. When confronted by the plaintiffs, defendant Mau allegedly grabbed Acelia Kouba by the neck, threw her to the ground and took the truck by force. The repossessors then allegedly started the truck on fire and dropped it off of a tow truck hoist shortly before the police arrived. Later, the vehicle was destroyed by fire while being stored at Kiester’s Garage. Defendants Sullivan and Schroll have never been found for service of summons and were dismissed by plaintiffs. A default judgment was entered against defendants Mau and Campbell. The plaintiffs submit the following issues on appeal: (1) whether the grant of summary judgment as to the bank contradicts the intent of the Uniform Commercial Code; (2) whether there is an issue of fact as to the bank’s vicarious liability for the tortious conduct of the re-possessors; and (3) whether the plaintiffs have a cause of action against Dave Kiester and Kiester’s Garage as the third-party beneficiaries of the bailment contract between the bank and Kiester. In its motion for summary judgment, the bank argued that there was no genuine issue of fact as to its liability since the pleadings and affidavits established that the repossessors were independent contractors. The plaintiffs ask this court to ignore agency principles and subject the bank to statutory liability under article 9 of the Uniform Commercial Code (Ill. Rev. Stat. 1983, ch. 26, par. 9 — 101 et seq.). In the alternative, the plaintiffs argue that the doctrine of respondeat superior is applicable to the bank because the repossessors were its agents. Therefore, the bank is liable for the common law torts of the repossessors. Section 9 — 503 of the U.C.C. (Ill. Rev. Stat. 1983, ch. 26, par. 9— 503) permits a secured party to take possession of the collateral following default without judicial process if repossession can be accomplished without a breach of the peace. It is beyond dispute that the repossessors hired by the bank caused a breach of the peace in the present case. However, section 9 — 503 itself does not provide an aggrieved debtor with a cause of action. The remedy is found in section 9 — 507, which has been construed as granting statutory relief for any violation of article 9, part 5. This includes a breach of the peace under 9 — 503. White & Summers, Uniform Commercial Code sec. 26 — 14 (2d ed. 1980). The statutory remedies are twofold. First, if the collateral is consumer goods, the debtor may recover the credit service charge plus 10% of the principal amount of the debt, plus 10% of the cash price. Second, the secured party may be denied a deficiency judgment. (Staley Employee Credit Union v. Christie (1982), 111 Ill. App. 3d 165.) There are a number of problems with applying these remedies to the present case. Section 9 — 507, by its terms, applies after disposition of the collateral. There has been no disposition here. There is also a question as to whether 9 — 507 applies to secured parties in cases where an independent contractor rather than an employee is charged with committing a breach of the peace in violation of section 9 — 503. There are no Illinois cases on point.  After examining count I of the plaintiffs’ complaint, we find that we need not consider the applicability of 9 — 507. The plaintiffs have failed to specifically plead a statutory remedy under 9 — 507. Therefore, they must rely on common law remedies for wrongful repossession. The plaintiffs allege that the repossession is wrongful due to the tortious acts of the repossessors, i.e., assault, battery, trespass and conversion. Since we are now dealing with common law rather than statutory liability, we must first determine whether the bank is responsible under the law of agency for the conduct of others.  An employer is generally not liable for the acts of independent contractors. The test of whether one is an independent contractor or employee is the extent of the employer’s right to control the manner and method in which the work is to be carried on. (Gunterberg v. B & M Transportation Co. (1975), 27 Ill. App. 3d 732.) We agree with the bank’s assertion that the repossessors were independent contractors. The record reveals that the repossessors were not on the bank’s payroll and were paid on a per car, flat-fee basis. The repossessors exercised complete discretion as to how and when the vehicles were to be repossessed and used their own tools and equipment. The bank had no right of control.  The plaintiffs concede that the repossessors fit within the commonly accepted description of an independent contractor but insist that they are also agents and that principals are liable for the torts of their agents. A master is liable for the acts of his servant committed within the scope of employment, and a principal is liable for the acts of an agent performed within the scope of the agency, but neither is liable for the acts of an independent contractor. (Gomien v. Wear-Ever Aluminum, Inc. (1971), 50 Ill. 2d 19.) Therefore, an employer is not responsible for the physical acts of an independent contractor who also happens to possess the powers of an agent. An attorney, broker, auctioneer and similar persons employed for a single transaction or for a series of transactions are agents, although as to their physical activities they are independent contractors. (Hoffman & Morton Co. v. American Insurance Co. (1962), 35 Ill. App. 2d 97; Restatement (Second) of Agency sec. 1, comment e, at 11 (1958).) Thus, even if we agreed with the plaintiffs that the repossessors were the bank’s agents, it is clear that in regard to their physical activities, the repossessors were independent contractors.  There are exceptions to the rule which insulate an employer from liability for the acts of an independent contractor, but none are applicable here. An employer could be liable if he fails to exercise reasonable care in selecting a competent contractor or if the employer orders or directs the injurious act. (Gomien v. Wear-Ever Aluminum, Inc. (1971), 50 Ill. 2d 19.) However, the plaintiffs do not allege that the bank was negligent in hiring the repossessors or directed the tortious acts complained of. The complaint and affidavits fail to raise any genuine issue as to the bank’s statutory liability or accountability for the tortious acts of the repossessors. Accordingly, we affirm the order of summary judgment entered in favor of the bank. In count II of their complaint, the plaintiffs alleged that defendant Kiester was negligent in failing to take reasonable care of the truck and protect it from tampering while it was being stored following repossession. In an affidavit accompanying his motion for summary judgment, Kiester stated that the plaintiffs’ truck suddenly exploded after being parked outside Kiester’s Garage on the morning of June 7, 1982. Kiester stated that in his professional opinion as an auto mechanic and based on an examination of the vehicle after the fire, the explosion was caused by an accelerant or by explosives. Plaintiffs filed a counteraffidavit from a Ford Motor Company consultant, who stated that an automobile that had been hot-wired could unexpectedly catch fire or explode if improperly wired. There is nothing to indicate that the truck had in fact been hot wired. In granting Kiester’s motion for summary judgment, the trial court ruled that the plaintiffs had no standing to sue because they were in default, out of possession of the truck and had no contract with Kiester. In short, Kiester owed no duty of care to the plaintiffs.  On appeal, the plaintiffs claim standing to sue Kiester based on their alleged status as third-party beneficiaries of the bailment contract between the bank and Kiester. The plaintiffs do not challenge the court’s finding that they had no standing to sue because they were in default and out of possession. For reasons which follow, we find that the court’s second finding was error. Therefore, we need not address plaintiffs’ third-party beneficiary argument. The plaintiffs’ standing to sue Kiester depends upon the extent of their property interest in the truck following default and repossession. Article 9 of the U.C.C. takes no position as to the location of title. (Ill. Rev. Stat. 1983, ch. 26, par. 9 — 202.) Therefore, pre-Code common law pertaining to chattel mortgages and conditional sales governs the question of title in this case. Ill. Rev. Stat. 1983, ch. 26, par. 1-103. In Illinois, it has been held that legal title to property subject to a security interest passes to the creditor after he has taken possession following default. (Matson v. City Market Co. (1931), 262 Ill. App. 200.) However, the creditor’s title is not regarded as absolute, since the debtor retains the right to surplus proceeds following sale of the collateral. (Greenspahn v. Ehrlich (1934), 277 Ill. App. 322.) Also, a debtor has rights and property interests in the collateral under the U.C.C. which further erode a common law creditor’s claim to absolute title. A debtor has the right to an accounting for surplus proceeds of the collateral. (Ill. Rev. Stat. 1983, ch. 26, par. 9 — 501(3)(a).) The debtor may also redeem the collateral prior to disposition by tendering fulfillment of all obligations secured by the collateral plus the creditor’s reasonable expenses. (Ill. Rev. Stat. 1983, ch. 26, par. 9— 501(3)(d).) While the collateral is in the possession of the secured party, the risk of accidental loss or damage is on the debtor to the extent of any deficiency in insurance coverage. (Ill. Rev. Stat. 1983, ch. 26, par. 9 — 207(b).) Finally, a debtor has an insurable interest in the collateral which is not terminated by foreclosure or repossession. Brown v. State Farm Fire & Casualty Corp. (1975), 33 Ill. App. 3d 889. It has been suggested that a debtor should have a right of action against a third party who damages the collateral following default and repossession to the extent of the debtor’s property or insurable interest in the collateral. (69 Am. Jur. 2d Secured, Transactions sec. 264 (1973).) As discussed above, a debtor retains significant rights and responsibilities with regard to the collateral after default. We believe that these rights and liabilities are sufficient to permit a debtor to maintain an action against a third party who negligently damages the collateral after default and repossession by the secured party. Since the collateral here has been totally destroyed, the plaintiffs should be permitted to pursue their claim to recover its market value. This is so because the collateral stood as security for the loan. Destruction of the collateral meant that its market value would not be applied to the loan balance and the plaintiffs would accordingly be obligated to that extent. And if, fortuitously, the collateral had been worth more than the loan balance, the plaintiffs were further damaged to the extent of such surplus. We note that in count I of their complaint, in addition to alleging a cause of action against the bank for wrongful repossession, the plaintiffs also allege that the bank is vicariously liable for the negligence of Kiester in caring for the truck. However, on appeal the plaintiffs do not reassert these allegations in opposition to the bank’s successful motion for summary judgment. Therefore, the issue is not properly before this court. The order of the circuit court of Will County granting the East Joliet Bank’s motion for summary judgment is affirmed. The order granting the motion for summary judgment of Dave Kiester and Kiester’s Garage is reversed and the cause remanded. Affirmed in part; reversed in part; cause remanded. WOMBACHER, J., concurs.