UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
decided: August 1, 1974.
HARRY H. AND THELMA GIBBS, AND ELLA LEMAR, ON THEIR OWN BEHALF AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLANTS IN NO. 74-1067, COMMONWEALTH OF PENNSYLVANIA EX REL. ISRAEL PACKEL, INTERVENOR PLAINTIFF,
WILLIAM A. TITELMAN, INDIVIDUALLY AND AS DIRECTOR OF THE BUREAU OF MOTOR VEHICLES OF THE COMMONWEALTH OF PENNSYLVANIA, GENERAL MOTORS ACCEPTANCE CORPORATION, APPELLANT IN NO. 74-1062, AUTO ROAD, INC., AMERICAN MUTUAL SERVICES CORPORATION, CHRYSLER CREDIT CORPORATION, APPELLANT IN NO. 74-1063, GIRARD TRUST COMPANY, APPELLANT IN NO. 74-1065, PROVIDENT NATIONAL BANK, APPELLANT IN NO. 74-1064, JOHN B. WHITE FORD, INC. AND PUBLIC ACCEPTANCE CORPORATION FORD MOTOR CREDIT COMPANY, INTERVENOR DEFENDANT, APPELLANT IN NO. 74-1066
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA.
Van Dusen, Hunter and Garth, Circuit Judges.
Opinion OF THE COURT
HUNTER, Circuit Judge:
This is an appeal from the judgment of the United States District Court for the Eastern District of Pennsylvania declaring unconstitutional certain provisions of the Pennsylvania Motor Vehicle Sales Finance Act ("MVSFA")*fn1 and the Pennsylvania Uniform Commercial Code ("UCC")*fn2 insofar as they permit creditors to repossess automobiles peaceably without resort to judicial process upon default by debtors.*fn3 This Court has jurisdiction pursuant to 28 U.S.C. §§ 2201 & 1291. We reverse.
This case was tried as a class action under the Civil Rights Act, 42 U.S.C. § 1983 & 28 U.S.C. § 1343 based upon the claim that the repossessions of automobiles subject to security interests were made under "color of . . . State law, statute, ordinance, regulation, custom or usage"*fn4 and in violation of due process because effected without notice and opportunity for a hearing.
Each of the named appellees financed the purchase of an automobile either through an installment sale contract or a loan agreement which required periodic payments over a specified period of time. Each named appellee had created a security interest in his automobile as collateral security for the indebtedness. The agreements provided that, in the event of default by an appellee, the creditor would have the right to retake the automobile, with or without judicial process -- a practice commonly referred to as self-help repossession.*fn5
The challenged statutes neither compel nor prohibit peaceable self-help repossession. Section 9-503 of the UCC, 12A Pa. Stat. § 9-503 provides:
"Unless otherwise agreed a secured party has on default the right to take possession of the collateral. In taking possession a secured party may proceed without judicial process if this can be done without breach of the peace or may proceed by action."
Section 23 (A) of the MVSFA, 69 Pa. Stat. § 623 (A) provides:
"When the buyer shall be in default in the payment of any amount due under a motor vehicle installment sale contract or when the buyer has committed any other breach of contract, which is by the contract specifically made a ground for retaking the motor vehicle, the seller or any holder, who has lawfully acquired such contract, may retake possession thereof. Unless the motor vehicle can be retaken without breach of the peace, it shall be retaken by legal process, but nothing herein shall be construed to authorize a violation of the criminal law."
The district court found that there was sufficient state involvement to constitute "state action" and held that under Fuentes v. Shevin, 407 U.S. 67, 32 L. Ed. 2d 556, 92 S. Ct. 1983 (1972), lack of prior notice and an opportunity to be heard renders extra-judicial repossession unconstitutional. Since we believe that the requisite "state action" is not present and that therefore a cause of action under 42 U.S.C. § 1983 has not been alleged, we need not reach the due process issue.*fn6
It is well-settled that the fourteenth amendment applies only to actions of the "States" and not to actions which are "private." Under 42 U.S.C. § 1983, the "under color of state law" requirement is the same as the "state action" requirement of the fourteenth amendment. Adickes v. S. H. Kress & Co., 398 U.S. 144, 152 n. 7, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970); United States v. Price, 383 U.S. 787, 794-95 n. 7, 16 L. Ed. 2d 267, 86 S. Ct. 1152 (1966).*fn6a
Unlike pre-judgment seizures recently considered by the Supreme Court in which state action was clearly present,*fn7 the seizures complained of here were effected by private individuals without the aid of any state official. Therefore, absent direct state involvement by the State of Pennsylvania, appellees' claim of "state action" rests on one of two general theories: 1) by comprehensively regulating the field of automobile financing, without prohibiting the practice of self-help repossession, the State of Pennsylvania has become so involved and has so encouraged this private remedy that it becomes "state action," or 2) by allowing the practice of self-help repossession, the State of Pennsylvania has abdicated or delegated to private individuals a traditional state function, thus infusing the private act of repossession with "state action."
COMPREHENSIVE STATE REGULATION
Unquestionably the legislature of Pennsylvania, in enacting the MVSFA, comprehensively sought to regulate the area of automobile financing.*fn8 But the act complained of -- i.e., the seizure of appellees' automobiles -- is neither compelled*fn9 nor prohibited by the MVSFA. The statute simply permits what private parties have agreed upon. Section 23 of the MVSFA, 69 Pa. Stat. § 623 provides that the creditor "may re-take possession" peaceably, without resort to legal process, if the default "is by the contract specifically made a ground for re-taking the motor vehicle."
Under the MVSFA, self-help repossession remains a private remedy enforced by purely private conduct pursuant to an agreement made privately and not under state compulsion. Thus, the state plays no significant role. Where, as here, "the impetus for the [act complained of] is private," we are simply unable to conclude, as required under Moose Lodge v. Irvis, 407 U.S. 163, 173, 32 L. Ed. 2d 627, 92 S. Ct. 1965 (1972), that the State of Pennsylvania has " significantly involved itself" in the alleged conduct so as to constitute "state action." (Emphasis added.)
Nor do we believe that by enacting the MVSFA has the State of Pennsylvania formed a "symbiotic relationship" with creditors as was present in Burton v. Wilmington Parking Authority, 365 U.S. 715, 6 L. Ed. 2d 45, 81 S. Ct. 856 (1961). Cf. Moose Lodge v. Irvis, 407 U.S. 163, 174-75, 32 L. Ed. 2d 627, 92 S. Ct. 1965 (symbiotic relationship lacking).
Nor do we find in the statutory scheme the kind of encouragement and fosterage of the alleged unconstitutional act as in Reitman v. Mulkey, 387 U.S. 369, 18 L. Ed. 2d 830, 87 S. Ct. 1627 (1967). In Reitman, the State constitutional amendment repealed prior state legislation regulating racial discrimination in housing. Thus, in effect, the State constitutionally authorized discrimination by repealing prior law and by substantially inhibiting any subsequent change.*fn10
The case before us is vastly dissimilar to the situation in Reitman. Appellees concede that the self-help remedy of repossession "existed in some form in the common law from a very early time."*fn11 Unlike Reitman then, the State of Pennsylvania has not by the enactment of the MVSFA permitted a practice which was formerly prohibited. It is true, as appellees suggest, that "the protections surrounding the use of [this self-help] remedy have continuously ebbed and flowed."*fn12 But any encouragement or fosterage of self-help repossession resulting, if at all, from statutory modification of safeguards surrounding this private remedy is indirect and highly conjectural and is simply far less significant than the state involvement in Reitman. We think that Reitman and Moose Lodge, supra, read together, suggest that absent direct state action, private repossessions are not infused with the quality of "state action" unless we can conclude that the involvement of the State of Pennsylvania (through its enactment of the MVSFA) has "significantly" encouraged or fostered self-help repossessions. Reitman, supra, 387 U.S. at 380; Moose Lodge, supra, 407 U.S. at 173. See Burton, supra, 365 U.S. at 772. We cannot so conclude.
Actually, far from encouraging private repossessions, the MVSFA was enacted in 1947, among other reasons, to curb the abuses associated with private repossessions.*fn13 The statute displays a noticeable concern for protecting a broad range of consumer interests, including, but not limited to, private repossessions.*fn14 The MVSFA then not only makes it more difficult to repossess, but also, by protecting various other interests of the buyer, indirectly minimizes the circumstances which give rise to repossessions. We think the Second Circuit's characterization of an installment sales financing act of another state is equally appropriate to the MVSFA:
"The state enactment was amelioratory not regressive; it did not 'move in ' on the . . . buyers, but rather on the installment sellers.
"The partnership, if any, is with the purchaser and not the [sellers]. See Adickes v. S. H. Kress & Co., 398 U.S. 144, 146, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1969)"
Shirley v. State National Bank, 493 F.2d 739, slip op. at 1779 (2nd Cir., 1974).
At least an aspect of appellees' argument, distilled to its essence, is that when a state attempts to comprehensively regulate an area of private conduct, its failure to prohibit is equivalent to "state action."*fn15 Such a rule, however, would virtually obliterate the distinction between state and private action. As the Ninth Circuit noted in Adams v. Southern California First National Bank, 492 F.2d 324, 330-31 (9th Cir. 1973):
"Statutes and laws regulate many forms of purely private activity, such as contractual relations and gifts, and subjecting all behavior that conforms to state law to the Fourteenth Amendment would emasculate the state action concept.*fn15
Lastly, we reject two other contentions of appellees by noting our agreement with the Ninth, Eighth, Fifth and Second Circuits (1) that private repossessions are not infused with "state action" merely because the state enacted sections 9-503 and 9-504 of the UCC,*fn15a James v. Pinnix, 495 F.2d 206 (5th Cir., 1974); Nowlin v. Professional Auto Sales, Inc., 496 F.2d 16, & Mayhugh v. Bill Allen Chevrolet Co., 496 F.2d 16 (8th Cir. 1974); Shirley v. State National Bank, supra ; Adams v. Southern California First National Bank, supra ; and (2) that private repossessions are not infused with "state action" merely because a state issues a certificate of ownership*fn16 to the secured party enabling it to transfer the automobile to a third party purchaser at a sale following repossession,*fn17 Nichols v. Tower Grove Bank, 497 F.2d 404 (8th Cir. 1974); Shirley v. State National Bank, supra ; Adams v. Southern California First National Bank, supra.
DELEGATION OF TRADITIONAL STATE FUNCTION
In Evans v. Newton, 382 U.S. 296, 299, 15 L. Ed. 2d 373, 86 S. Ct. 486 (1966), the Supreme Court stated:
"Conduct that is formally 'private' may become so entwined with governmental policies or so impregnated with a governmental character as to become subject to the constitutional limitations placed upon state action. . . . When private individuals or groups are endowed by the State with powers or functions governmental in nature, they become agencies or instrumentalities of the State and subject to its constitutional limitations."
Although we find no similarity between Evans (and the cases cited therein)*fn18 and the present case, appellees nevertheless suggest and the district court agreed that the State of Pennsylvania has delegated to private individuals a traditional state function, i.e., the power to decide that one's rights are superior to another's and to carry out that decision by seizing another's property. We disagree.
Probably the chief obstacle to concluding that self-help repossession involves a traditional state function is the fact, recognized by the district court and the appellees, that in one form or another the common law very early recognized repossession as a private remedy. As the Ninth Circuit has noted, "based on this history, it does not appear likely that the Fourteenth Amendment, when written, was intended to eliminate self-help in light of the prevailing use of peaceful repossession."*fn19 We do not believe, moreover, that this obstacle can be surmounted by concluding as the district court did that this self-help remedy was not a "historically sound principle of the common law" and that it " ought never have been deemed applicable to the American state of society."
Nor do we believe that the district court was correct in reading Fuentes v. Shevin, 407 U.S. 67, 32 L. Ed. 2d 556, 92 S. Ct. 1983 (1972), as suggesting that "state action" encompasses any abdication by the state of "the power to decide that your rights are greater than another's."*fn20 Although Fuentes clearly involved state action,*fn21 the plurality opinion nonetheless spoke of a state's abdication of effective control over "state power."*fn22 However, contrary to what the district court suggested, the "state power" to which Fuentes referred was the use of state power in the form of state officers to accomplish the seizures for the creditor. The plurality opinion recognized that at common law a creditor could "invoke state power " through the action of debt or detinue or alternatively a "creditor could . . . proceed without the use of state power, through self-help, by 'distraining ' the property before a judgment."*fn23 The dissent in Fuentes also read the majority opinion as clearly distinguishing between state action and purely private action such as repossession:
"It would appear that creditors could withstand the attack under today's opinion simply by making clear in the controlling credit instruments that they may retake possession without a hearing, or, for that matter, without resort to judicial process at all." 407 U.S. at 102.
Thus, we find no support for the contention that the State of Pennsylvania has delegated a traditional state function.*fn24
We therefore conclude that appellees have failed to show the requisite "state action" necessary to support a claim under 42 U.S.C. § 1983. Accord, James v. Pinnix, 495 F.2d 206 (5th Cir. 1974); Nichols v. Tower Grove Bank, 497 F.2d 404 (8th Cir. 1974); Nowlin v. Professional Auto Sales, Inc., 496 F.2d 16, & Mayhugh v. Bill Allen Chevrolet Co., 496 F.2d 16 (8th Cir. 1974); Shirley v. State National Bank, 493 F.2d 739 (2nd Cir. 1974); Adams v. Southern California First National Bank, 492 F.2d 324 (9th Cir. 1973).*fn25
The order of the district court of November 8, 1973 granting the declaratory relief specified in the first sentence of this opinion will be reversed with directions that the district court dismiss appellees' complaint for failure to state a claim under 42 U.S.C. § 1983 upon which relief can be granted.*fn26