Self-Help Repossession Can Be Dangerous and Costly in Indiana

On December 10, 2015, the Indiana Court of Appeals decided the case of Auto Liquidation Center v. Chaca (pdf). The defendant, Auto Liquidation Center (“ALC”), sold a car on credit to the Plaintiff, Chaca. Mistakenly believing that Chaca was behind on payments, ALC ordered the vehicle repossessed. The mistake came from the fact that Chaca made a double payment one month and, the next month when no payment came in, ALS failed to note the double payment from the month before.

The vehicle was equipped with a GPS system that, among other things, enabled ALC to disable the vehicle pending repossession. Believing the vehicle was disabled due to a mechanical issue, Chaca took the vehicle to a mechanic. The mechanic said that the GPS was installed incorrectly, in such a way as to endanger the transmission if not removed. After the GPS was removed (without Chaca having actually consented to the removal) but before it could be re-installed, the vehicle was repossessed.

Chaca sued for conversion of his vehicle. Conversion is the exercise of unauthorized control over the property of another. The trial court determined (and the Court of Appeals affirmed) that, because Chaca was up to date on his payments, ALS had no cause to repossess the vehicle. When ALS tried to switch gears (so to speak) and claim that the repossession was due to Chaca having disabled the GPS in violation of the loan agreement, the court was not persuaded. ALS had the opportunity to return the vehicle once the misunderstandings were cleared up but declined to do so.

Further exacerbating the situation was the fact that Chaca had personal items in the vehicle that were never returned and, to clear the title, ALS had a power of attorney signed at the time of sale by Chaca falsely notarized to say that Chaca had signed it two days after Chaca had filed his complaint.

Indiana law allows a claim for triple damages when a civil claim is based on facts that satisfy the elements of criminal conversion (as opposed to a more routine and innocent breach of contract or failure to pay a debt.) Criminal conversion is the knowing or intentional exertion of unauthorized control over the property of another. When the defendant argued that the evidence supported only a breach of contract, not criminal conversion, the Court of Appeals disagreed, stating “even if the jury believed that [ALS] had initially acted on a mistaken belief that [Chaca] missed a payment, the evidence supports that the misunderstanding morphed into an intentional, unauthorized taking of [Chaca’s] property.”

The resulting verdict was significant. The original purchase price of the vehicle was $14,500. Chaca made a down payment of $4,000 and had made additional payments of $1,750. ALS repossessed the vehicle based on a belief that Chaca had missed a $250 payment. The evidence suggested the worth of the vehicle taken from Chaca was somewhere between $10,400 and $18,900. His personal property was worth around $600. The jury came back with a verdict of $45,883.86 and the trial court added interest and $66,000 in attorney’s fees, bringing the total judgment to $121,069.66. Additionally, because Chaca was successful on appeal, he was entitled to appellate attorney’s fees, so that $121,000 total will rise.

The Court of Appeals concluded:

As a final note: justice is better dispensed in a courtroom and not in one’s own hands. Self-help remedies are perilous and potentially expensive. When self-help is attempted, a jury or judge decides the appropriateness or inappropriateness of the actions regardless of how justified the actor may have thought his actions were. As we see here, the risks of paying damages, treble damages, pre-judgment interest, attorney’s fees, appellate attorney’s fees, and costs are not worth the possible benefits of sidestepping the court system.

Self-help may be less expensive in the short term, but in this case, the creditor ended up with a $121,000+ judgment because it jumped the gun chasing a $250 payment.