BATTAGLIA, J.
We have before us a question of law certified by the United States Bankruptcy Court for the District of Maryland, pursuant to the Maryland Uniform Certification of Questions of Law Act, Maryland Code (1974, 2006 Repl.Vol.), Sections 12-601
et seq.
of the Courts and Judicial Proceedings Article and Maryland Rule 8-305,
that being:
Whether the repossession of a vehicle based solely on the violation of an
ipso facto
clause of a vehicle retail installment contract, in the absence of any other breach, is permissible under Maryland law?
In the Certification Order, the bankruptcy judge summarized the circumstances giving rise to the question now before
us, involving an action by a debtor, Maureen Roberson, to recover damages because Ford Motor Credit Company had repossessed her car shortly after she was discharged in bankruptcy, even though she had made timely monthly payments on the vehicle indebtedness before, during, and after the bankruptcy proceedings, but failed to “reaffirm”
the debt:
The debtor in this case, Maureen Roberson (Ms. Roberson or the “Debtor”) filed a petition under chapter 13 [
] of title 11 of the United States Code (the “Bankruptcy Code”) on February 21, 2008. According to Ms. Roberson, she filed her petition because Ford Motor Credit Company, LLC (“Ford”) wrongfully repossessed her car in the wake of her prior chapter 7[
] bankruptcy discharge and she wanted to redress that wrong.
Ms. Roberson filed a previous chapter 7 bankruptcy case (bankruptcy case no. 07-20394) on October 22, 2007 and she received a discharge of her debts on January 30, 2008. On
the bankruptcy schedules in her chapter 7 case, she listed Ford as a creditor and the vehicle she financed through Ford (the “Vehicle”) as an asset. She did not reaffirm the Vehicle during her chapter 7 bankruptcy case. There appears to be no dispute that at all times before, during and after Ms. Roberson’s chapter 7 bankruptcy case, she timely made all monthly payments on the Vehicle to Ford and the Vehicle was, at all times, properly insured and titled.
Ms. Roberson had entered into a “Maryland Simple Interest Vehicle Retail Installment Contract,” containing an
ipso facto
clause,
in which, among other contingencies, the filing of a bankruptcy petition was characterized as a default:
To consummate the purchase and finance of the Vehicle, Ms. Roberson and Ford executed a Maryland Simple Interest Vehicle Retail Installment Contract (the “Vehicle Contract”) dated on or about July 11, 2004. The Vehicle Contract contains an
ipso facto
clause as follows:
F. Default: You will be in default if:
4. You file a bankruptcy petition or one is filed against you.
If you do not cure a default where allowed by law, the Creditor may require you to pay at once the unpaid Amount Financed, the earned and unpaid part of the Finance Charge and all other amounts due under this contract. He may repossess (take back) the vehicle, too. He may also take goods found in the vehicle when repossessed and hold them for you.
Vehicle Contract at page 2.
After Ms. Roberson’s Chapter 7 bankruptcy case was closed, Ford Motor Credit repossessed the car because Ms. Roberson failed to cure the default by executing a reaffirmation agreement. Ms. Roberson, thereafter, filed a Chapter 13
bankruptcy petition, the sole basis for which was to “facilitate recovery” of the car and to seek damages from Ford Motor Credit for “wrongfully, illegally and maliciously” repossessing the car:
On February 19, 2008, about three weeks after Ms. Roberson received her chapter 7 discharge, Ford repossessed Ms. Roberson’s Vehicle on the basis that she had breached the
ipso facto
clause in the Vehicle Contract by virtue of having filed for bankruptcy protection.
Two days after the repossession of the Vehicle, on February 21, 2008, Ms. Roberson filed the instant chapter 18 case. Ms. Roberson alleges that her sole motivation in filing this case is to redress her rights
vis a vis
Ford and to attempt to obtain her Vehicle from Ford based on what she asserts was a wrongful taking under Maryland law. Although Ms. Roberson initially filed an Emergency Motion for Return of Vehicle in her main bankruptcy case, she later filed an adversary complaint against Ford.
Ford argues that its repossession of Ms. Roberson’s Vehicle was lawful because Ms. Roberson filed a bankruptcy petition and failed to take steps in her previous chapter 7 case to reaffirm the debt owing to Ford. Accordingly, Ford claims, under Maryland state law and the Vehicle Contract, Ford was permitted to repossess Ms. Roberson’s vehicle based on the
ipso facto
clause,
ie.,
based on nothing more than the fact that Ms. Roberson filed for bankruptcy protection.
There appears to be no dispute that at all relevant times, Ms. Roberson was current on her payments to Ford, was current on her insurance obligations under the Vehicle Contract and had not breached her contract with Ford in any way, other than having filed a bankruptcy petition. Based on this breach alone, and based on its interpretation of Maryland law, Ford repossessed Ms. Roberson’s car after the dismissal of her first bankruptcy case and before she filed her second bankruptcy case.
Now, in the context of her second bankruptcy case, Ms. Roberson is attempting to redress the allegedly wrongful
repossession of her vehicle by Ford. Ford is defending based on its interpretation of Maryland law and the
ipso facto
clause in the governing contract.
Ms. Roberson alleged that the repossession was in violation of the “Discharge Injunction”
in her Chapter 7 case, the Fair Debt Collection Practices Act, 15 U.S.C. § 1692
et seq.
(2006), the Maryland Consumer Protection Act, Sections 13-101
et seq.
of the Commercial Law Article, Maryland Code (1975, 2005 Repl.Vol.), the Maryland Consumer Debt Collection Act, Sections 14-201
et seq.
of the Commercial Law Article, Maryland Code (1975, 2005 Repl.Vol.), was a breach of contract, and also formed the basis for trespass and conversion actions. She also filed an “Emergency Motion for Return of Vehicle,” as well. Ford Motor Credit returned the car to Ms. Roberson after, according to the creditor, she had provided “adequate protection.”
The action for damages is the crucible for the certified question. During the proceedings, Ford Motor Credit filed a
motion for summary judgment, asserting that it did not violate the discharge injunction as a matter of fact or law, was not a “debt collector” as that term is used in the Fair Debt Collection Practices Act, 15 U.S.C. § 1692
et seq.
(2006) and that the Bankruptcy Court lacked “subject matter jurisdiction over the [remaining] state law allegations.” Before the Bankruptcy Court ruled on the motion for summary judgment, Ms. Roberson filed a motion seeking certification of the instant question, which the Bankruptcy Court granted.
The crux of the certified question is whether a secured creditor is permitted under Maryland law to repossess a car in which it maintains a security interest when the debtor has filed a bankruptcy petition and has failed to reaffirm the indebtedness, but has otherwise made timely payments before, during, and after bankruptcy proceedings. To address the question in order to establish its context, we review the choices available to a debtor who seeks to keep her car which is encumbered by a loan, when the debtor opts for discharge as a Chapter 7 bankrupt.
When a buyer finances the purchase of a car with funds advanced by a creditor, the creditor often retains a security interest in the car as collateral.
See
Section 12-1021 of the Commercial Law Article, Maryland Code (1975, 2005 Repl. Vol.) (stating that if the “consumer borrower is in default,” the “credit grantor may repossess tangible personal property securing the loan”). The creditor, in turn, may also define what constitutes a default under the loan, and Ford Motor Credit defined default in the vehicle retail installment contract in the present case as follows:
F. Default: You will be in default if:
1. You do not make any payment when it is due; or
2. You gave false or misleading information on your credit application relating to this contract; or
3. Your vehicle is seized by any local, state, or federal authority and is not promptly and unconditionally returned to you; or
4. You file a bankruptcy petition or one is filed against you; or
5. You do not keep any other promise in this contract.
If you do not cure a default where allowed by law, the Creditor may require you to pay at once the unpaid Amount Financed, the earned and unpaid part of the Finance Charge and all other amounts due under this contract. He may repossess (take back) the vehicle, too. He may also take goods found in the vehicle when repossessed and hold them for you.
Once the debtor files a Chapter 7 bankruptcy petition, the protection of the automatic stay is triggered, 11 U.S.C. § 362, which “operates as a stay against lawsuits and lien enforcement!.]” Richard B. Levin,
Fundamentals of Bankruptcy Law
175 (7th ed. 2010).
At this juncture, the debtor has two options: either “reaffirm” the debt by assuming personal liability for the loan or redeem the car by paying the entire balance due on the note. 11 U.S.C. § 521(a)(2), (a)(6) (2006). Because a debtor is not legally obligated to repay a discharged debt, a creditor whose debt is secured by collateral, such as a car, may insist that the debt be reaffirmed. 13A
Collier on Bankruptcy
§ CS20.11 (15th ed. 2010).
In the present case, Ford Motor Credit tendered a reaffirmation agreement to Ms. Roberson after her Chapter 7 bankruptcy filing, which, although not relevant to the question before us, would have formed the basis for a new contract between Ford Motor Credit and Ms. Roberson. The Bankruptcy Court would have also had to ratify the agreement for it to be valid. 13A
Collier on Bankruptcy
at § CS20.11 [2]-[3], Ms. Roberson, however, refused to execute a reaffirmation agreement, instead stating that she intended to “retain” the car and “pay pursuant to original contract.”
Ford Motor Credit argues that because Ms. Roberson neither reaffirmed the debt nor paid off the remainder of the loan, it was permitted to repossess the car by Section 12-1023(b) of the Credit Grantor Closed End Credit Provisions
(“CLEC”), Commercial Law Article, Maryland Code (1975, 2005 Repl.Vol.), which Ford Motor Credit elected to govern the retail installment contract, pursuant to Section 12-1013.1 of CLEC.
Ms. Roberson counters that the bankruptcy clause default provision in the contract is prohibited by Maryland law, specifically Section 12-1023 of CLEC, as well as any other potential governing statutes, those being Section 12-607 of the Retail Installment Sales Act (“RISA”), Commercial Law Article, Maryland Code (1975, 2005 RepLVol.) and Section 12-923 of the Credit Grantor Revolving Credit Provisions (“OPEC”), Commercial Law Article, Maryland Code (1975, 2005 Repl.Vol.).
The relevant statutory provisions are as follows:
Section 12-1023(b) of CLEC states, in pertinent part:
(2) An agreement, note, or other evidence of a loan may not contain:
(ii) An acceleration clause under which any part or all of the unpaid balance of the loan not yet matured may be declared
due and payable because the credit grantor deems itself insecure!.]
Section 12—923(b) of OPEC states, in pertinent part:
(2) An agreement governing a revolving credit plan or any instrument which evidences or secures an extension of credit under the plan may not contain:
(ii) An acceleration clause under which any part or all of the unpaid balance of any extension of credit not yet matured may be declared due and payable because the credit grantor deems itself insecure!.]
Section 12-607(a) of RISA states, in pertinent part:
(a)
Provisions prohibited.—A
holder may not take or receive any instrument from a buyer or a surety for a buyer, which contains:
(4) A provision for the repossession of the goods or for the acceleration of the time when any part or all of the time balance becomes payable, if the condition of the repossession or acceleration is that the holder considers himself insecure!.]
Sections 12-1023 of CLEC, 12-923 of OPEC, and 12-607 of RISA, all prohibit the creditor from taking certain actions if it considers itself “insecure.” The term “insecure” is not expressly defined in the Commercial Law Article, although a number of its provisions recognize “insecurity” as a condition which gives rise to the need for a debtor or another who is expected to give assurance to the creditor or one needing assurance that performance of a contract will occur.
For
example, Section 2-210 of the Commercial Law Article, Maryland Code (1975, 2002 Repl.Vol.), governing sales, provides, in relevant part:
(6) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee.
Section 2-609 of the Commercial Law Article, Maryland Code (1975, 2002 RepLVol.), also provides that, “A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance and until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return.” Finally, Section 2A-401 of the Commercial Law Article, Maryland Code (1975, 2002 RepLVol.), involving leases, also integrates the term “insecurity,” as follows:
(2) If reasonable grounds for insecurity arise with respect to the performance of either party, the insecure party may demand in writing adequate assurance of due performance. Until the insecure party receives that assurance, if commercially reasonable, the insecure party may suspend any performance for which he (or she) has not already received the agreed return.
Other Commercial Law provisions incorporating the term include Section 22-504(c) of the Commercial Law Article, Maryland Code (1975, 2005 Repl.Vol.), which states that, “A party to the original contract, other than the transferor, may treat a transfer that conveys a right or duty of performance without its consent as creating reasonable grounds for insecurity and, without prejudice to the party’s rights against the
transferor, may demand assurances from the transferee under § 22-708 of this title,” and Section 22-708(a) of the Commercial Law Article, Maryland Code (1975, 2005 Repl.Vol.), which provides that, “A contract imposes an obligation on each party not to impair the other’s expectation of receiving due performance. If reasonable grounds for insecurity arise with respect to the performance of either party, the aggrieved party may .. . [d]emand in a record adequate assurance of due performance[.]”
With this sense of what the term “insecure” or “insecurity” means and the breadth of its inclusion in the Commercial Law Article, we turn to the statutory sections in issue. RISA, the oldest of the three statutory schemes, was enacted by Chapter 851 of the Maryland Laws of 1941 to address abuses in retail installment contracts, as follows:
This legislation reflects the view that “improvident and careless consumers who buy on the installment plan need legal protection” (Report of Committee on Consumers Credit, Massachusetts, 1936), and that without such protection “in the usual case the buyer probably is discouraged from reading the contract and might not fully understand its terms even if he did read it.” This legislation aims to eliminate “contract abuses” by requiring the contract to be in writing, to be delivered to the purchaser within a definite period, to contain certain information and not to contain certain provisions. Research Report No. 6. Thus, the Maryland act aims not only to prevent actual frauds
(Cooke v. Real Estate Trust Co.,
180 Md. 133, 139, 22 A.2d 554), but to close avenues to fraud.
Stride v. Martin,
184 Md. 446, 451-52, 41 A.2d 489, 491-92 (1945). Section 12-607 of RISA, the specific provision, was also enacted by Chapter 851 of the Laws of 1941, and stated:
113.
Provisions Forbidden in Instruments.
No seller, sales finance company, or holder shall at any time take or receive any instrument from a buyer, or from any surety or guarantor for the buyer, which contains:
(d)
any provision for repossession of the goods or for the acceleration of the time when any part or all of the time balance becomes payable,
if the condition of such repossession or acceleration is in substance that the seller or holder deems himself to be insecure[.]
(emphasis added). The Section was repealed and reenacted as Section 12-607 of the Commercial Law Article by Chapter 49 of the Maryland Laws of 1975, but otherwise remained substantively unchanged.
Section 12-1023 of CLEC and Section 12-923 of OPEC have more circuitous origins. As we described in
Biggus v. Ford Motor Credit Co.,
328 Md. 188, 613 A.2d 986 (1992), CLEC and OPEC were enacted as the “Credit Deregulation Act” by Chapter 143 of the Laws of 1983, to entice creditors to do business in the State:
Prior to the 1983 session of the General Assembly, four Maryland banks transferred certain of their operations to Delaware where the banking laws were more favorable. These included the credit card operations of two major banks based in Baltimore. Some 1,000 jobs were lost in the Baltimore area. The response by the General Assembly was Chapter 143 of the Acts of 1983, the enactment of which was urged by then Mayor Schaefer of Baltimore and others. Chapter 143 has become known as the Credit Deregulation Act of 1983.
Id.
at 197, 613 A.2d at 991. Both CLEC and OPEC enable a creditor to unilaterally elect the legal framework for structuring a form contract to be offered to potential borrowers.
Section 12-1028 of CLEC and Section 12-923 of OPEC were added to their respective subtitles by Chapter 404 of the Maryland Laws of 1993. Section 12-1023 of CLEC states, in pertinent part:
(a) This section applies only to a loan made by a credit grantor under this subtitle to a consumer borrower.
(b) (1) Paragraph (2) of this subsection applies only to a loan or an extension of credit primarily for personal, household, or family purposes.
(2) An agreement, note, or other evidence of a loan may not contain:
(ii) An acceleration clause under which any part or all of the unpaid balance of the loan not yet matured may be declared due and payable because the credit grantor deems itself insecure.
1993 Maryland Laws, Chapter 404. A nearly identical provision was added to Section 12-923 of OPEC, as follows:
(a) This section applies only to a plan established by a credit grantor under this subtitle for a consumer borrower.
(b) (1) Paragraph (2) of this subsection applies only to a loan or an extension of credit primarily for personal, household, or family purposes.
(2) An agreement governing a revolving credit plan or any instrument which evidences or secures an extension of credit under the plan may not contain:
(ii) An acceleration clause under which any part or all of the unpaid balance of any extension of credit not yet matured
may be declared due and payable because the credit grantor deems itself insecure[.]
1993 Maryland Laws, Chapter 404.
Ms. Roberson interprets these provisions as having prohibited Ford Motor Credit from repossessing her car based solely on her Chapter 7 bankruptcy filing. Ford Motor Credit counters that Section 12-1023 of CLEC prohibits only acceleration in the face of creditor insecurity, and therefore permits repossession when a debtor files bankruptcy.
In addressing this conundrum, our decision in
Biggus,
328 Md. at 188, 613 A.2d at 986, is informative, largely because of the Legislature’s reaction to that opinion. In
Biggus,
we were asked to consider the interrelationship of RISA and CLEC. In that case, Mr. Biggus had purchased a used Ford van, entering into a “Maryland Retail Installment Contract,” which included the grant of a security interest in the vehicle to the creditor, and the following:
G. General: Any change in this contract must be in writing and signed by you and the Creditor. The law of Maryland applies to this contract including Subtitle 10 of the Maryland Commercial Law Article. If the applicable law does not allow all of the agreements in this contract, the ones that are not allowed will be void. The rest of this contract will still be good.
Id.
at 191-92, 613 A.2d at 988. When he failed to make two consecutive scheduled payments, the van was repossessed and sold at a public auction. Ford then filed suit against Mr. Biggus in the District Court to collect a deficiency of $2,248.92, and Mr. Biggus responded by alleging that Ford had not complied with the repossession provisions of RISA, such that he was absolved from any deficiency liability. The District Court agreed with Mr. Biggus, but the Circuit Court reversed, holding that CLEC rather than RISA applied and entered judgment in favor of Ford Credit. We affirmed the Circuit Court, reasoning that the contract elected CLEC both “by express election and also by structuring the document consistently with CLEC,” such that the disclosure and storage
of vehicle provisions of RISA were not applicable.
Id.
at 202, 613 A.2d at 994. In so holding, we reasoned that “[t]he repossession systems of RISA and CLEC are respectively complete in themselves, in the sense that each is intended to be applied independently of the other.”
Id.
at 208, 613 A.2d at 996. We also addressed, in dicta, the question of whether CLEC was intended to apply exclusively to all aspects of a transaction for which CLEC had been elected, even if CLEC was silent on, but RISA spoke about, the issue. We opined that where CLEC was silent, the provisions of RISA could apply:
Implicit in [the consumer’s] argument that an effective election of CLEC is “mutually exclusive” of RISA is the concept that CLEC then becomes the only body of Maryland law that bears on any aspect of the transaction. That is correct as to any aspect, such as interest, disclosure, or repossession, as to which the Legislature manifested an intent that CLEC have that effect. But there are subjects regulated by RISA, by other Maryland statutes, and by common law, that are not addressed at all by CLEC. In other words, an election to extend credit under CLEC does not make RISA, or other Maryland law, entirely irrelevant to the credit transaction.
Id.
at 208, 613 A.2d at 996.
In reaction to
Biggus,
the General Assembly enacted Chapter 404 of the Maryland Laws of 1993, containing Section 12-1023 of CLEC and Section 12-923 of OPEC:
The
Biggus
case means that a credit grantor who elects to operate under [OPEC or CLEC] is only assured protection from other competing credit statutes in the following areas:
(1) Interest fees, points, disclosure, and other items listed under the exclusionary clauses;
(2) Other aspects of a credit transaction which [OPEC or CLEC] regulates in a manner sufficiently comprehensive as to completely occupy the field.
House Economic Matters Committee Bill Analysis on HB 424, at 9-10 (1993). It appears that the Legislature was concerned that lenders would cease undertaking new loans:
Many lenders currently package loans made under [OPEC or CLEC] and sell them on the secondary market. Any impairment of value of these loans would jeopardize the ability of the lenders to market these loans. Because the lenders rely on the income from the sale of loan packages to finance new lending, the lack of marketability of loans made in Maryland may cause lenders to cease making new loans because they lack the capital to do so.
The
Biggus
case implied the existence of causes of action on the part of borrowers arising under the “old law” [RISA] in those areas where [OPEC or CLEC] is silent as to a particular regulatory function. The potential liability arising from the loan portfolios of banks or other financial institutions who have made or purchased loans made over the last ten years under [OPEC or CLEC], could require them to set aside special “loan loss reserves” and consequently decreasing their capital base. In addition, because the
Biggus
case did not identify all of the possible areas of the “old law” [RISA] that may be read into [OPEC or CLEC], it is likely that it will give rise to a substantial amount of litigation intended to explore the full parameters of the case.
House Economic Matters Committee Bill Analysis on HB 424, at 10.
The language of Section 12-607(a)(4) of RISA prohibiting both “repossession” and “acceleration” if “the holder considers himself insecure” then, is certainly distinct from the language of Section 12—1023(b)(2)(ii) of CLEC prohibiting only “acceleration” if the creditor “deems itself insecure.” Thus, the language of CLEC does not prohibit repossession in the event of insecurity. CLEC clearly is intended to be construed independently from RISA. Moreover, the Legislature is “presumed to act with full knowledge of existing laws,” so that if the General Assembly sought to safeguard debtors by prohibiting both “repossession” and “acceleration” on the basis of creditor insecurity in CLEC (and OPEC), as it did in RISA, it could and would have so done.
See Proctor v. Washington Metropolitan Area Transit Authority,
412 Md. 691, 720, 990 A.2d 1048, 1065 (2010), quoting
Collier v. Nesbitt,
79 Md.App. 729, 733-34, 558 A.2d 1242, 1244 (1989); see
also Burch v. United Cable Television of Baltimore Ltd. P’ship,
391 Md. 687, 702, 895 A.2d 980, 988 (2006) (“We presume that the General Assembly had, and acted with respect to, full knowledge and information as to prior and existing law ... and the policy of the prior law.” (quoting
Maryland Div. of Labor and Indus. v. Triangle,
366 Md. 407, 422, 784 A.2d 534, 542 (2001))).
Ms. Roberson’s reference to
Ford v. GMAC,
98 Md. App. 257, 633 A.2d 410 (1993), in which our colleagues on the intermediate appellate court considered whether a creditor
had appropriately repossessed a vehicle pursuant to RISA when the car was seized by police, is inapposite because the General Assembly intended that RISA and CLEC operate independently.
See
Summary by staff member Lars Kristiansen, Revolving and Closed End Credit—Applicability of Other Laws, at 1 (on file with the Department of Legislative Services) (“The bill states that any extension of credit made under subtitles 9 and 10 will be governed exclusively by these subtitles and not by any other subtitle of Title 12 of the Commercial Law Article.”).
Further, were we to preclude a creditor from repossessing a car under Section 12-923 of OPEC or 12-1023 of CLEC when the debtor has filed a bankruptcy petition and has failed to reaffirm the indebtedness, thereby causing the creditor to be “insecure,” we would implicitly be asserting that repayment default is the only basis for insecurity which could impinge negatively on the consequences of insecurity in the various Commercial Law Article provisions.
As a result, because the parties agree that Ford Motor Credit elected CLEC to govern the retail installment contract in the present case, the answer to the certified question concerning whether, under Maryland law, a creditor may repossess a car when a debtor has filed bankruptcy and has failed to reaffirm the indebtedness, is “yes” under CLEC. Section 12—1023(b) of CLEC and Section 12-923(b) of OPEC clearly prohibit only “acceleration” in the face of creditor insecurity, as evidenced by the plain meaning and corroborated by the legislative history of those provisions, while Section 12-607(a) of RISA prohibits both “repossession” and “acceleration” when a creditor deems itself “insecure.”
CERTIFIED QUESTION ANSWERED AS SET FORTH ABOVE. PURSUANT TO SECTION 12-610 OF THE COURTS AND JUDICIAL PROCEEDINGS ARTICLE, THE COSTS SHALL BE EQUALLY DIVIDED BETWEEN THE PARTIES.