Summary
In Crouse v First Trust Union Bank (86 A.D.2d 978, app withdrawn 56 N.Y.2d 1034) we held that sections 9-503 and 9-504 of the Uniform Commercial Code (giving the secured party the right to retake and dispose of the collateral without judicial process) are constitutional, noting that, unlike the provision of the Lien Law in question in Sharrock v Dell Buick-Cadillac (45 N.Y.2d 152), sections 9-503 and 9-504 merely authorized what had historically been permitted under the common law and for that reason "did not constitute significant State action or involvement".
Summary of this case from Gallets v. General Motors Acceptance Corp.Opinion
February 26, 1982
Appeal from the Supreme Court, Cattaraugus County, Horey, J.
Present — Hancock, Jr., J.P., Callahan, Denman, Boomer and Moule, JJ. [ 109 Misc.2d 89.]
Order unanimously reversed, on the law, without costs, and judgment granted in favor of defendant, in accordance with the following memorandum: The defendant bank loaned $1,400 to the plaintiff and took back from the plaintiff a promissory note and a security agreement covering plaintiff's automobile. When the plaintiff defaulted on the loan, the bank peaceably took the automobile for the purpose of selling it, as authorized by the terms of the agreement and by sections 9-503 and 9-504 of the Uniform Commercial Code. The plaintiff then brought this action to declare those sections of the Uniform Commercial Code unconstitutional. Special Term granted summary judgment in favor of the plaintiff, relying on the case of Sharrock v. Dell Buick-Cadillac ( 45 N.Y.2d 152). In Sharrock the Court of Appeals struck down the provision of the Lien Law that authorized a garageman to foreclose his garageman's lien by private sale without notice to the owner. The court held that this procedure deprived the owner of due process of law in violation of the New York State Constitution. The due process clause applies only where there is significant State action or involvement and the court found such action or involvement from the fact that the State, by statute, gave the garageman a right that he did not have at common law — the right upon default to sell without notice. At common law the lien was possessory only. Here the form of the transaction was equivalent to a chattel mortgage. At common law, a chattel mortgagee had the right, upon default, to take possession of the chattel and thenceforth treat it as his own and to sell it if he chose (1 Jones, Chattel Mortgages and Conditional Sales [Bowers ed], § 1; Blake v. Corbett, 120 N.Y. 327, 330-331; Briggs v. Oliver, 68 N.Y. 336, 339). The statute involved here, unlike that in Sharrock, does nothing more than merely acknowledge previous lawful conduct ( Sharrock v. Dell Buick-Cadillac, supra, at p 161) and hence its enactment did not constitute significant State action or involvement. The order is reversed and summary judgment is granted (1) declaring sections 9-503 and 9-504 of the Uniform Commercial Code constitutional insofar as they confirm the defendant's right to peaceably take and sell the plaintiff's automobile without prior notice and hearing; and (2) otherwise dismissing the complaint.