Recent Entries

Kentucky Amends Mechanic’s Lien Statute to the Benefit of Lienholders

Nick RohnerBy: Nicholas K. Rohner, Attorney

On June 24, 2015, amendments to two sections of Kentucky’s mechanic’s lien statute, KRS 376.268, et seq., took effect. For background, KRS 376.270 has long provided that a person engaged in the business of repairing vehicles has a lien on a vehicle for reasonable or agreed charges for repairs and storing that vehicle, and may detain the vehicle until the charges have been paid. This essentially gives a garage a senior lien on a vehicle in the amount of any repairs done as well as for the costs of any incidental storage.

Amended KRS 376.268 adds a new paragraph defining what “reasonable charges” are:

(3) those charges which are usual and customary, not discriminatory, and which are typical charges for services provided by similar towing or storage companies with similar equipment and facilities operating in the region or comparable-size city or county from which the vehicle was towed or stored.

This new paragraph was presumably added to protect vehicle owners and lienholders from unscrupulous garages who have been charging exorbitant storage fees when a vehicle was left following a repair.

A different section, KRS 376.275, deals specifically with involuntary tows and the storage resulting therefrom. If a vehicle is involuntarily towed pursuant to police order or at the request of a private person or business, the garage or storage company has a duty to notify the registered owner about the impoundment within 10 business days from the date of the tow, or it is limited to storage fees accrued after 10 business days. While that requirement is still in effect, the Legislature added a new paragraph requiring that the garage or storage company must now also notify any recorded lienholder of the impoundment within 15 calendar days of the tow or else it is limited to just 15 calendar days of storage. This is a significant protection for the lienholder, who previously was not entitled to any notification of impoundment and often found itself facing a large storage lien once the impoundment was discovered.

Also under amended KRS 376.275, upon notification, the lienholder has the right to take possession of the vehicle after showing proof of its lien and paying the reasonable towing or storage charges. Now with a definition of “reasonable charges” in place under KRS 376.268 (see above), the amount of storage fees that must be paid by a lienholder to recover an impounded vehicle should be minimized, provided the lienholder acts quickly upon the receipt of the garage or storage company’s notice of impoundment.

National Collateral Recovery and Money Judgments

Doug DahmerBy Douglas M. DahmerAttorney

Are you unclear as to what a Replevin is and how to handle it, should a debtor and/or the collateral be located outside of Ohio? Weltman, Weinberg and Reis (WWR) can help shed some light on this one.

A Replevin (claim and delivery, detinue) is generally defined in Black’s Law Dictionary, 10th edition as “[A]n action for the repossession of personal property wrongfully taken or detained by the defendant, whereby the plaintiff gives security for and holds the property until the court decides who owns it; [A] writ obtained from a court authorizing the retaking of personal property wrongfully taken or detained.” The legal remedy of a Replevin is best used when the secured creditor cannot repossess the collateral without breaching the peace. Generally, the Replevin action, filed like a regular lawsuit, frequently contains a count or prayer for both money judgment and permanent possession of secured collateral. This collateral recovery weapon is also available on a national level.

Similar to Ohio, on the national level, an action to recover secured collateral – either consumer or commercial – is commenced by the filing of a complaint for either possession only, or money and possession. These actions can be filed against the debtor and/or a third party in possession of the secured collateral. There are ten states which prohibit the filing of a combination complaint: Connecticut, Georgia, Iowa, Maine, Maryland, Mississippi, Nebraska, New Hampshire, South Carolina and Virginia.

WWR integrates outbound collection activities with the filing of legal action to affect recovery in any jurisdiction the debtor or property may be located. WWR handles the litigation and judgment execution personally within our footprint states of Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, and Pennsylvania. For matters outside our direct footprint, WWR has an established national litigation network of experienced attorneys to handle matters across the United States. We remain actively involved with local counsel throughout the legal process and monitor the handling and reporting of each case, providing you consistent service and accountability in every state.

Once the secured collateral is recovered and the money judgment obtained, the national litigation network of attorneys can competently and confidently handle any post judgment execution procedures allowed in that individual state, including judgment debtor exams, wage garnishments and bank attachments. Post judgment work can be done on a flat fee or contingency basis at our clients’ discretion.

Indiana Repossession Triggers Acceleration Clause, Statute of Limitations

Nick RohnerBy: Nicholas Rohner, Attorney

In 2004, Robert Imbody (“Imbody”) financed the purchase of a truck through Fifth Third Bank (“Bank”). Imbody made all scheduled payments until March of 2006. On May 31, 2006, the Bank repossessed the truck. The Bank sold the truck at auction and a deficiency balance of more than $14,000 was established. On June 5, 2012, the Bank filed a complaint against Imbody for breach of the loan contract. Following a bench trial, the Indiana trial court entered judgment in favor of the Bank and Imbody appealed.

At issue on appeal was whether the Bank’s claim was barred by Indiana’s six-year statute of limitations (“SOL”). Imbody contended that the Bank’s cause of action accrued, and the SOL began to run, on May 31, 2006, when the Bank repossessed the truck.

In a short opinion, the Court of Appeals focused on the loan agreement’s optional acceleration clause. The Court emphasized that the SOL does not begin to run immediately upon a debtor’s default, but rather when a creditor exercises its option to accelerate. In the absence of a specific notice of acceleration, a creditor must undertake some affirmative act to make it clear to the debtor that it has accelerated the debt.

The Court ruled that repossession is an affirmative act that accelerates the final maturity of a debt. Thus, when the Bank repossessed the truck on May 31, 2006, it accelerated the debt and triggered the SOL. Because of this, the Bank’s complaint, filed on June 5, 2012, was time-barred. See Imbody v. Fifth Third Bank., 12 N.E.3d 943 (Ind. Ct. App. 2014).

Strangely, the Court’s decision failed to address a glaring issue–the possible restarting of the SOL due to partial payments by Imbody. After the deficiency had been established, Imbody agreed to pay the Bank $100 per month toward the debt and made fourteen payments. On appeal, the Bank asserted that the cause of action accrued, and the SOL began to run, on February 29, 2008, when Imbody made his last payment on the deficiency balance.

The law in Indiana for more than a century has been that a voluntary payment on a debt, either before or after the expiration of the SOL, has the effect of starting the running of the statute anew. See, e.g., Spencer v. McCune, 126 N.E. 30 (Ind. Ct. App. 1920). However, since the Court failed to discuss the partial payment issue, even in dicta, this writer can only conclude that the well-established law regarding voluntary partial payments renewing the SOL was not abrogated by the Imbody decision.


Repair Shops, Storage Facilities and Liens, Oh My…

Amy HolbrookBy Amy Holbrook, Partner

In Ohio, like most states, there is a law that allows a garage or storage facility to obtain an abandon vehicle title on vehicles with a value of less than $2,500.00 and have been left by their owners for fifteen days or more. This abandon vehicle title, however, cannot be obtained until all lien holders have been informed of the abandoned vehicle through a written notice.

So here is a scenario that I see often. Dorothy Debtor takes her vehicle to Tinman’s Auto Body Shop for body work in January. Let’s say the vehicle has a fair market value of $8,000.00 when it’s dropped off, and repairs are estimated to cost about $2,500.00. Tinman’s begins work on the vehicle, but, eventually, Dorothy Debtor stops returning calls, and her check for the repair work bounces. Tinman’s stops all work on the vehicle and parks it on its property. At this point the vehicle is worth $5,500 ($8,000 – $2,500 for the necessary repair work). At this time, Tinman’s cannot even try to get an abandon vehicle title because the vehicle is worth more than $2,500.

What often happens, however, is that Tinman’s will simply let the vehicle sit on its property accruing storage charges. In July, six months later, Tinman’s decides the time is right to go after that abandon vehicle title. It now justifies this by stating that the vehicle is worth less than $2,500, and this is how Tinman’s does the math:

  • Fair Market Value: $8,000
  • Repair Cost: -$2,500
  • Storage Costs: -$3,600 ($20/day for 180 days)
  • Vehicle’s Value: $1,900

To complicate matters, Tinman’s will notify Lion Lien Holder that it has this abandon vehicle on his property as required by the statute, but will further demand payment from Lion Lienholder, and that math will likely look like this:

  • Charge for partial repair work: $500.00
  • Storage Costs $3,600.00 ($20/day for 180 days)
  • Total Demand: $4,100.00

While some garages and storage facilities will negotiate on fees for storage, many will not and deem the refusal of the lien holder to pay the demanded amount as a forfeiture of its interest in the vehicle enabling the garage to move forward in obtaining an abandon vehicle title.

So, what can a lien holder do to protect itself? First, any notice coming from a garage or storage facility should be taken very seriously. Procedures need to be put in place for the handling of notices. When a notice comes in it must be addressed. Either start negotiating the fees right away or refer the case to an attorney who can give you advice about what to do when negotiations fail. Don’t forget either, while you may in good faith be negotiating, the garage or storage facility, may only be waiting for the notice time to run so it can get title to the vehicle. Second, if a debtor informs you that a vehicle is at a garage and he cannot afford to pay for the work or that his vehicle was impounded, start gathering information about such things as the name and address of garage and the nature of the work being done. See if your debtor will give you copies of estimates or invoices. Remember, in most states you can file a replevin against anyone in possession of collateral upon which you have a lien. Finally, if you find yourself in the position of having a garage or storage facility obtain an abandoned vehicle title, contact an attorney who can tell you how this too can be remedied.

Changes are Coming in Pennsylvania

Amy HolbrookBy Amy Holbrook, Attorney/Partner

Changes are coming to Pennsylvania’s Motor Vehicles Sales Finance Act (MVSFA). In November of 2013, Act 98 was passed in Pennsylvania and goes into effect December 1, 2014. This Act will repeal both the MVSFA and the Goods and Services Installment Sales Act (GSISA) and amend and consolidate both sets of statutes. The amendments contained in this new Act will require that both dealers and those offering financing thoroughly review some of the substantive changes by this new statute. Some of the changes include:

• Disclosure of a prescribed notice that advises consumers of their rights under the Pennsylvania Unfair Trade Practices and Consumer Protection Law
• Notices to consumers when a contract has been fully paid
• A change in the definition of “heavy commercial motor vehicle”, reducing the manufacturer’s gross weight to 13,000 pounds. Vehicles defined as heavy commercial motor vehicles are subject to a higher maximum interest rate, and a variable rate of interest is allowable on their financing agreements
• Minimum finance charge authority is removed
• A change in the definition of “motor vehicle” will be expanded to include manufactured homes, mobility devices and recreation vehicles
• A prohibition from adding to the original contract the cost of any necessary repairs after the contact was executed
• Allowance for the acceleration of the balance owed if the consumer files bankruptcy, defaults on payments on a cross-collateralized agreement or provides intentionally fraudulent or misleading information on the credit application
• A minimum type-size for terms in an installment contract as well as a requirement that all headers, disclosures, acknowledgments or notices be in a larger type-size

With these changes on the horizon, dealers and those financing or purchasing auto finance paper in Pennsylvania need to familiarize themselves with this new law. Please reach out with any questions or concerns at