Johnson County Auto Credit, Inc. v. Green

Pierron, J.:

dissenting. I respectfully dissent. Regarding the insurance question, the trial court relied on the fact that although the Greens allowed die insurance to lapse, Auto Credit, with knowledge of a possible lapse of insurance, continued the relationship and allowed execution of an extension agreement without any mention of the insurance. Nor did Auto Credit purchase auto insurance and tack the cost onto the extension agreement. The court stated that at the time of repossession, the Greens were only 15 days in arrears. The court also noted that the Greens continued to maintain communication with Auto Credit, and Auto Credit never called the Greens for an explanation as to Ronda’s written note indicating their financial difficulties. The court concluded it was unreasonable for Auto Credit to believe the Greens were filing for bankruptcy since at no time did the Greens threaten or even mention the possibility of filing for bankruptcy protection.

The major factors of significant impairment relied on in Prairie State Bank and Medling are not present in the case at bar. The purpose of K.S.A.16a-5-109 is to protect a creditor from a consumer who defaults on a consumer credit transaction. This protec*257tion addresses two potential types of default: (1) when the consumer defaults on payment, and (2) when the prospect of payment, performance, or realization of collateral is significantly impaired. When a consumer is simply in default on payment, the UCCC provides for statutorily required notices and then a consumer is given a period of time to cure the default prior to repossession. K.S.A. 16a-5-110.

The Kansas Legislature did not impose any notice requirements when the default in a consumer credit transaction is based on the significant impairment of the prospect of payment, performance, or realization of collateral. However, the creditor s burden of proof to establish significant impairment should not be an insignificant one. Creditors are not allowed repossession under any impairment but, rather, under a significant impairment of collateral.

The trial court weighed all the evidence and concluded that Auto Credit lacked a reasonable belief of significant impairment. Auto Credit has not alleged bias, passion, or prejudice on the part of the trial court or the court’s disregard of undisputed evidence.

Based on our standard of review, the only basis for Auto Credit’s belief of significant impairment that could be legally sufficient is the failure of the Greens to keep the van insured. The Greens’ slow payments, financial problems, and the communication problems were reasonably found by the trial court to not constitute significant impairment under these facts.

The trial court appears to discount the insurance factor because Auto Credit did not immediately move to seize the collateral when it became aware of the definite possibility that the insurance would lapse. Only when Auto received a note from Ronda alerting it to further economic storm clouds on the horizon did it act. Since the court found the information provided by Ronda did not separately constitute the basis for a reasonable belief of significant impairment, it found there was no significant impairment.

The legislature obviously wanted to place restrictions on the ability of finance companies to repossess vehicles without legal process. Failure to insure a vehicle as required by the financing agreement could certainly be a factor leading to the conclusion that the collateral was significantly impaired. However, in the instant case, it *258did not seem to be a weighty one in the mind of Auto Credit, as it apparently took no action because of it.

I believe it was not an abuse of discretion for the trial court, under these facts, to find there was no significant impairment. The Greens were very candid with Auto Credit and showed no indications they were going to do anything dishonest or reckless. Auto Credit could have insured the van itself and billed that to the Greens. More basically, it could have asked the Greens about the insurance problem and demanded action. Had this been done, failure to take immediate action by the Greens would probably have constituted a significant impairment of the collateral.

I do not find the trial court’s ruling to be irrational or unsupported by competent probative evidence and would affirm.