GER: Trespass to Chattels in ‘Cash & Drive’ Scheme

Jun 30, 2023 Benn-Ibler Rechtsanwälte

The collection of a vehicle by a lessor constitutes trespass to chattels, even if the lessee is in arrears. If the vehicle is subsequently sold by the lessor, the lessor is obliged to compensate the lessee for the value of the vehicle, according to the Higher Regional Court of Frankfurt am Main (hereinafter OLG).

The defendant runs a state-licensed pawnshop. In addition to the pawnbroking business, the company also offers what is known as a ‘cash & drive scheme.’ The purpose of this scheme is to help customers with short-term liquidity problems by boosting their creditworthiness through cash. Under this scheme, the pawnshop buys a customer’s car and then rents the car back to them for a fee.

The plaintiff sold her small car to the defendant pawnshop. Afterwards, she rented it back. The defendant terminated the lease when the lessee failed to pay the fee, and demanded that the lessee return the vehicle. When the plaintiff did not respond, the defendant had the vehicle collected without the lessee’s consent and sold it. The plaintiff lessee then obtained a title for restitution. The execution was unsuccessful. The whereabouts of the small car were unclear. The plaintiff tenant is now seeking compensation for the value of the car and compensation for use.

The court ruled as follows:

The plaintiff is entitled to damages for the seizure of the vehicle as well as reasonable compensation for the use of the vehicle for the entire period of withholding. The defendant had committed trespass to chattels by collecting and selling the vehicle.

The General Terms and Conditions of the lease agreement, which allowed for the liquidation of the vehicle, were invalid due to an unreasonable disadvantage to the customer. In this respect, the provisions of Sections 858 et seq. of the German Civil Code (ABGB) are intended to prevent vigilante justice in proprietor-owner relationships.

According to the OLG, the defendant had acted negligently, even if she had assumed that the seizure of the vehicle she had arranged was lawful. Due to legal concerns expressed by various courts about this type of business model, the defendant should have expected that the way the vehicle was seized was a violation of good faith.

Press release no. 40/2023 on OLG Frankfurt am Main, 2 U 165/21 (26.5.2023)