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Commercial Credit Group Inc. v. Protégé Excavation, Inc.

United States District Court, D. New Mexico

August 5, 2019

COMMERCIAL CREDIT GROUP INC., Plaintiff,
v.
PROTÉGÉ EXCAVATION, INC., Defendant.

          PROPOSED FINDINGS AND RECOMMENDED DISPOSITION REGARDING EXPEDITED EX PARTE ISSUANCE OF WRIT OF REPLEVIN

          JERRY H. RITTER U.S. MAGISTRATE JUDGE

         This matter comes before the Court upon the request of Commercial Credit Group, Inc. (Commercial Credit) for an expedited ex parte writ of replevin to secure the collateral for certain loans extended by it to Protégé Excavation, Inc. (Protégé). The undersigned Magistrate Judge, as authorized by a referral order entered by the presiding District Judge, held an ex parte hearing on July 30, 2019, attended by Jeanne Y. Sohn, attorney for Commercial Credit. Based upon that hearing and a review of the court filing to date, I recommend that the District Judge adopt the following findings of fact and issue the requested writ in a form to be proposed by Commercial Credit and attached as an Exhibit to these recommendations.

         BACKGROUND

         Commercial Credit filed a complaint for replevin [Doc. 1] on June 14, 2019, alleging Protégé's default on certain loans and its own resulting entitlement to immediate possession and ultimate sale of the collateral. The complaint included the affidavit of a Senior Vice President of Commercial Credit reflecting a review of business records of the course of dealings between the parties. [See Doc. 1, at 9-13.] A few days later, Commercial Credit filed copies of the pertinent documents including promissory notes and security agreements. [Doc. 3-1]. On June 27, 2019, Commercial Credit filed a Motion for Setting and Request for Expedited Ex Parte Hearing [Doc. 4], alleging circumstances supporting its belief that Protégé “may conceal, dispose of, or waste the Collateral at issue described in the Petition, or the revenues therefrom, or remove the Collateral from the jurisdiction, during the pendency of Plaintiff's Petition.” [Id., p. 1]. Because of those circumstances, Commercial Credit seeks a pre-judgment writ of replevin to secure the collateral pending further proceedings. [Id., p. 1-2].[1]

         NEW MEXICO LAW OF REPLEVIN

         Replevin was an original common-law remedy, but New Mexico has long-authorized a suit for replevin by statute. The current version states: "Any person having a right to the immediate possession of any goods or chattels, wrongfully taken or wrongfully detained, may bring an action of replevin for the recovery thereof and for damages sustained by reason of the unjust caption or detention thereof." NMSA 1978, § 42-8-1 [1907]. Corporations are within the scope of proper defendants in replevin: "Suits of replevin may be commenced and carried to a conclusion against any incorporated company in this state in all cases that may be begun and carried against any ordinary defendants." NMSA 1978 § 42-8-4 [1907].

         A replevin suit has two possible components: physical recovery of the collateral, and pursuit of damages for wrongful taking. NMSA 1978, § 42-8-1; see also Security Pacific Financial Services v. Signfilled Corp., 1998-NMCA-046, ¶ 17. Because New Mexico authorizes recovery of wrongful taking damages, a plaintiff in replevin cannot also pursue a claim for conversion.[2] NMSA 1978, § 42-8-7; Security Pacific, 1998-NMCA-046, ¶ 16.

         In order to secure the collateral against potential concealment, disposition or waste, New Mexico authorizes, upon a proper showing, the issuance of a writ of replevin at the commencement of the case. NMSA 1978, § 42-8-5. In order to obtain a pre-judgment writ of replevin, an affidavit must be filed “stating: A. that the plaintiff is lawfully entitled to the possession of the property mentioned in the complaint; B. that the same was wrongfully taken or wrongfully detained by the defendant; C. that the plaintiff has reason to believe that the defendant may conceal, dispose of, or waste the property or the revenues therefrom or remove the property from the jurisdiction, during the pendency of the action; D. that the right of action accrued within one year; and E. specific facts, from which it clearly appears that the above allegations are justified." Id.

         New Mexico also requires posting of a bond before execution of a pre-judgment writ of replevin. NMSA 1978, § 42-8-6. The bond is to guarantee that the plaintiff will “[prosecute] the suit with effect and without delay and that he will without delay make return of the property if a return is adjudged, keep harmless the officer and pay all costs that may accrue." Id.; see also NMSA 1978, § 42-8-11 (defendant's remedies for lack of successful prosecution). The bond amount must be double the value of the collateral. Id. The sheriff involved in a replevin can be liable to a “party injured” by the insufficiency of the posted bond, NMSA 1978, § 42-8-15, thus justifying the “hold harmless” pledge required from the plaintiff in § 42-8-6. A plaintiff can avoid the requirement of an affidavit and bond by waiving pre-judgment seizure and delivery of the collateral. NMSA 1978, § 42-8-7.

         If a proper affidavit and sufficient bond are filed, a New Mexico district court judge “shall … issue the writs of replevin applied for by the complainant directed to the sheriff of the county”. NMSA 1978, § 42-8-18. The sheriff then must seize the collateral and deliver it to the plaintiff, and also “[summon] the defendant to appear on the return day of the writ, to answer the action of the plaintiff.” Section 42-8-10.

         PROPOSED FINDINGS OF FACT

1. Commercial Credit, as creditor, and Protégé, as debtor, are parties to contracts whereby Commercial Credit loaned purchase money to Protégé to procure machinery and equipment which the parties intended to serve as collateral for repayment of the loans. The terms of the parties' contracts as well as the descriptions of the collateral are contained in promissory notes, security agreements, and UCC financing statements as described in the court record, both in the complaint, [Doc. 1], and supporting exhibits, [Doc. 3-1].
2. Commercial Credit alleges that the physical collateral has an estimated value of $659, 943. [Doc. 1, at 1 and 11].
3. The terms of the contracts authorize Commercial Credit to take possession of the collateral upon default by ...

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