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Soldiers & Sailors Civil Relief Act (SSCRA)
Chapter 4, Rents, Morgages and Foreclosures (Page 2)
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Installment Contracts

Section 301

(50 U.S.C. App. § 531)

(1) No person who has received, or whose assignor has received, under a contract for the purchase of real or personal property, or of lease or bailment with a view to purchase of such property, a deposit or installment of the purchase price, or a deposit or installment under the contract, lease, or bailment, from a person or from the assignor of a person who, after the date of payment of such deposit or installment, has entered the military service, shall exercise any right or option under such contract to rescind or terminate the contract or resume possession of the property for nonpayment of any installment thereunder due for any other breach of the terms thereof occurring prior to or during the period of such military service, except by action in a court of competent jurisdiction.

(2) Any person who shall knowingly resume possession of property which is the subject of this section otherwise than as provided in subsection (1) of this section or in section 107, or attempts so to do, shall be fined as provided in title 18, United States Code, or imprisoned, not to exceed one year, or both.

(3) Upon the hearing of such action the court may order the repayment of prior installments or deposits or any part thereof, as a condition of terminating the contract and resuming possession of the property, or may, in its discretion, on its own motion, and shall, on application to it by such person in military service or some person on his behalf, order a stay of proceedings as provided in this Act unless, in the opinion of the court, the ability of the defendant to comply with the terms of the contract is not materially affected by reason of such service; or it may make such other disposition of the case as may be equitable to conserve the interest of all parties.

General. Section 301 is designed to protect the service member who, prior to entry into military service,has entered an installment contract for the purchase real or personal property. The provision prohibits creditors, without "action in a court," from terminating certain installment contracts and repossessing the property for nonpayment or breach occurring prior to or during military service.

Application. This section applies if the service member has entered either an installment contract for the purchase of real or personal property, or a contract of lease or bailment with a view to purchase real or personal property, prior to entry into military service. In addition, the service member must have paid, prior to entry into military service, a deposit or installment under the contract. The vendor is then prohibited from exercising any right or option under the contract to rescind or terminate the contract, to resume possession of the property for nonpayment of any installment due, or to breach the terms, except by action in a court of competent jurisdiction. It is immaterial whether the nonpayment or other breach occurred prior to or during the period of military service. May a service member who leased an automobile prior to military service use this section to cancel the lease because he or she got orders overseas? No. This provision prohibits creditors from terminating certain contracts, it does not allow the military member to cancel the agreement (but the service member might be able to use 50 U.S.C. App.§ 590 to request a stay of enforcement of the obligation). What if the lessor of the auto seeks to repossess for service member's breach, does this section apply? The contract to lease must be with "view to purchase".... Therefore, the answer will depend on the specifics of the contract. Most auto leases do have an “option to purchase” clause. Legal assistance attorneys are best advised to contact the auto lease holder, suggesting that the soldier will surrender the collateral (leased auto) in return for a release from any deficiency judgments, early termination penalties or interest. Point out to the lease holder that they cannot repossess the vehicle without the costs and delay of a court order in case of non-payment, that the soldier may seek SSCRA stay of any legal action, and the protection afforded by Section 590 to extend payments and stay any early termination or other penalties.

This section does not prevent the parties from entering into a written agreement pertaining to repossession or forfeiture of the property, provided the parties execute the agreement subsequent to the service member's entry into active duty or his receipt of notice of induction.

This section has no application to installment contracts entered into after entry upon active duty. Nor does it apply where a deposit or installment has not been paid by or on behalf of the service member before he receives an induction notice or before he/she enters active duty.

Court action required. As previously noted, this section prohibits the vendor from enforcing any of his/her rights under the contract except by action in a court of competent jurisdiction. Section 301(3) provides that "upon the hearing of such action the court may order . . ." one of three possible courses of action. This phrase, along with the phrase, "action in a court of competent jurisdiction," indicates that the vendor must have a court order before taking any action with respect to the property in question.

This section, however, does not prevent the court from taking action to bring the property into judicial custody. In Universal C.I.T. Credit Corp. v. Ganter, the court construed "action in a court of competent jurisdiction" and held that the issuance and delivery to the sheriff of a summons, complaint, requisition, affidavit, and an action in replevin constituted an "action in a court of competent jurisdiction as required by section 301 of the Soldiers' and Sailors' Civil Relief Act . . . and the action by the sheriff will not violate the provisions of that section."

Court procedure is mandatory under this section of the Act. Property repossessed without benefit of the requisite court action will subject the creditor to a suit for wrongful conversion and criminal liability. In addition, several cases indicate that where oppression, fraud, or malice on the part of the creditor can be shown, punitive damages may be awarded.

Nature and extent of relief. When an action by a creditor­-vendor comes before a court under this section, three alternative courses of action are open to the court. First, the court may order repayment of any prior installments or deposits as a condition of terminating the contract and resuming possession of the property. Second, the court may order a stay of the proceedings, as provided in this Act, during the period of military service and for 3 months thereafter. Third, the court may make such other disposition of the case as may be equitable to conserve the interests of all parties. These three types of relief are predicated upon a finding that the ability of the service member to meet his/her obligation is or has been materially affected by reason of his military service.

Courts have exercised their equitable powers in a variety of ways. In a case where the court found that a service member's ability to comply had been materially affected by his military service, but any delay in enforcement would impose an "unnecessary, unexpected and unjustifiable hardship" on the creditor, "without bringing any benefit" to the service member, the court refused to grant a stay and resorted to its equitable powers to resolve the dilemma. Because the value of the security exceeded the amount due under the contract, the property was ordered sold, thereby terminating the service member's liability while the creditor received the balance due on the contract. In another case in which the security for the obligation would have been destroyed or so diminished in value as to render it useless, the court ordered it sold and the proceeds divided proportionately.

Material effect. In determining whether military service materially affects a service member's ability to meet his/her obligations, the court may compare his/her financial condition prior to entry on active duty with his/her condition while in military service. Thus, where it was shown that the plaintiff had defaulted prior to entry into military service, and that he/she earned more money while in the military service than as a civilian, the court properly refused to stay the proceedings, holding that the plaintiff failed to prove that his service in the Navy impaired his/her ability to meet obligations.

Another factor that courts have considered is when the default or noncompliance by the service member began. When a pattern of noncompliance was begun long before the debtor's induction into the service, it supported the court's belief that military service was not the cause of the debtor's inability to meet the obligation. Consequently, the service member seeking relief under this section must show hardship or material effect before he/she is entitled to protection under this section of the Act.

Criminal sanctions. As in other sections of the Act, subsection 301(2) provides that anyone who knowingly resumes possession of property that is subject to this section without taking the action required by subsection (1), or attempts to do so, shall be fined as provided in title 18, United States Code, or imprisoned, not to exceed one year, or both.

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Above Information Courtesy of United States Army JAG Corps

 

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