Jan. 12, 2022 – A company that repossessed a car from an apartment building garage violated the Wisconsin Consumer Act (WCA), the Wisconsin Supreme Court has ruled.

In Duncan v. Asset Recovery Specialists, Inc., 2019AP1365, (Jan. 6, 2022) the supreme court held that for purposes of the WCA’s prohibition against a creditor entering a residential dwelling to repossess collateral or leased goods, the garage was included within the term “dwelling used by the customer as a residence.”

The decision came on a 4-3 vote.

Justice Rebecca Dallet wrote the majority opinion, joined by Justices Ann Walsh Bradley, Brian Hagedorn, and Jill Karofsky.

However, Justice Karofsky, in a concurrence, departed from the majority opinion’s conclusion that “a customer can never raise unconscionability as a defense to a non-judicial repossession.”

Justice Patience Roggensack filed a dissenting opinion, which was joined by Chief Justice Annette Ziegler and Justice Rebecca Grassl Bradley.

Defaulted on Loan

Danelle Duncan purchased a car on an installment sales contract with an auto dealer.

After Duncan defaulted on the loan, the creditor sent her three notices of her right to cure her default by paying various amounts. When she didn’t pay, the creditor sent Duncan a notice saying that it planned to repossess the car.

That notice included a recitation of Duncan’s right to demand that the creditor file a writ of replevin to recover the automobile. Duncan did not respond to the notice.

The creditor hired Asset Recovery Specialists (ARS) to repossess Duncan’s car. A tow truck crew towed Duncan’s car from the garage attached to the apartment building where she lived.

Dwelling Means ‘An Entire Building’

Duncan sued the company in Dane County Circuit Court, alleging that the repossession violated Wis Stat. section 425.206(2)(b) and that the company’s conduct was unconscionable under section 425.107(1).

The circuit court granted the company’s motion for summary judgment. But the court of appeals reversed, holding that the garage was part of the dwelling that Duncan used as a residence.

Section 425.206(2)(b) prohibits a merchant from entering “a dwelling used by the customer as a residence except at the voluntary request of a customer” to take possession of collateral.

The supreme court majority began its analysis by concluding that the dictionary meaning of “dwelling” is “a building in which at least one person lives.” The court then looked at other statutes in effect when the WCA was enacted and concluded that “[dwelling] referred to an entire building, not just the parts of the building in which the residents might eat, sleep, or shower.”

Support From Related Statutes

The use of the term “dwelling” in other provisions of the WCA supported such a conclusion, Justice Dallet explained.

For instance, section 422.419(1)(a) bars the use of contract provisions that allow a merchant or its agents from entering a customer’s dwelling to repossess collateral, and an administrative rule promulgated pursuant to that section includes within its definition of dwelling “any garage, shed, barn or other building on premises whether attached or unattached.

“Because ‘dwelling’ in section 422.419(1)(a) includes any garage on the premises … Defendants could not have contracted for the right to repossess Duncan’s car from her apartment building’s parking garage,” Dallet wrote. “We see no reason why ‘dwelling’ in section 425.206(2)(b) should exclude that same garage, especially since both statutes prevent merchants from entering a dwelling to possess property.”

Modifier Interpreted

The majority then turned to the question of whether the phrase “used by the customer as residence” excluded the garage from the ambit of section 425.206(2)(b).

The phrase does not narrow the meaning of dwelling for purposes of section 425.206(2)(b) to a place where a person actually lives, Dallet explained. Rather, it merely distinguishes one person’s residence from another’s.

Unconscionability Claim Foreclosed

The majority held that Duncan’s claim of unconscionability under section 425.107 could only be raised n response to a formal legal proceeding brought by ARS.

Section 425.102 restricts the scope of the WCA to “actions or other proceedings brought by a creditor,” and that phrase includes only litigation or other formal legal procedures, Dallet reasoned.

Because repossession of collateral was an informal process, Dallet explained, the WCA did not allow Duncan to assert that repossession of her car was unconscionable.

A Trap for Customers?

In her concurrence, Judge Karofsky wrote that Duncan’s unconscionability claim should be allowed under the WCA.

The majority’s interpretation of the phrase “actions or other proceedings brought by a creditor” in section 425.102 was too narrow, Karofsky explained.

By holding that repossession is an informal process against which customers may not assert unconscionability, Karofsky wrote, the majority had set a trap for customers who miss the 15-day deadline to demand that a creditor file a replevin.

“An unwary customer who misses the tight demand deadline would lose even a meritorious claim against a creditor’s unconscionable conduct—giving an unconscionable creditor a free pass.”

‘Hodgepodge of Theories’

In a 16-page dissent, Justice Rggensack wrote that the majority “patches together a hodgepodge of theories in order to affirm the court of appeals.”

To Roggensack, it was clear that the modifier “used by the customer as a residence” in section 425.206(2)(b) limits the meaning of “dwelling” “by the use to which the customer puts the dwelling.”

“Stated otherwise, the customer must use the ‘dwelling’ referenced in section 425.206(2(b) as a residence in order to come within the plain meaning of section 425.206(b),” Roggensack wrote.

The circuit court found that Duncan didn’t live in the garage, Roggensack explained; she merely rented a parking spot there.

Personal Policy Preferences?

The majority was wrong to look to section 422.419(1)(a) and the administrative rule promulgated pursuant to it, Justice Roggensack explained – section 422.419(1)(a) deals with consumer credit contracts, and there was no dispute that the contract Duncan executed with the auto dealer was valid.

Both the court of appeals and the majority ignored the plain meaning of section 425.206(2)(b), Roggensack wrote.

“The majority opinion’s hodgepodge of definitions totally ignores the structure of section 425.206(2)(b) which limits ‘dwelling’ according to how the customer uses the space. Again, it appears the majority opinion did so to avoid the plain meaning of section 425.206(2)(b) and to obtain a result that the plain meaning of the words the legislature enacted will not permit.

“Our directives on statutory interpretation assist judges in keeping their personal policy preferences out of their decisions. They provide certainty in the law based on the words the legislature chose to enact. When courts avoid our directives, they take away those protections and replace them with personal policy preferences that then drive decisions that follow.”