Request By:
Mr. Donnie Kell, Clerk
Hickman County Court
Clinton, Kentucky 42031
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter seeking an opinion concerning a property transaction which provides that as part of the consideration the "buyer assumes the indebtedness of the seller." Your summary of the transaction is as follows:
"Mr. J -- sold property to Mr. R -- with a partial payment made at the time of the sale with Mr. J -- holding notes from Mr. R -- for the balance. The terms of the sale and indebtedness are a part of the deed.
Mr. R -- then contracted to sell to Mr. A -- the same property. The consideration states that Mr. A -- 'assumes the indebtedness' to Mr. J --.
Mr. J -- was not consulted about the sale to Mr. A -- and did not give his consent for Mr. A -- to assume the indebtedness of Mr. R --."
Your first question asks whether the sale from Mr. R -- to Mr. A -- is a legal transaction without the consent of Mr. J -- who holds a lien on the property. Your second question asks about the clerk's responsibility for accepting such a deed if he knows that Mr. J -- does not agree to the terms of the contract between Mr. R -- and Mr. A --.
Evidently there is a misconception on your part as to what a lien is and we, therefore, direct your attention to Brunner v. Home for Aged of Little Sisters of Poor, Ky., 429 S.W.2d 381, 382 (1968), where the Court said in part as follows:
". . . A lien is not a title to property, but rather a charge upon it. It is a right which the law gives to have a debt satisfied out of the property. It necessarily supposes the title to be in some other person. 33 Am.Jur. Liens, § 2."
We next direct your attention to KRS 382.070 which states:
"When any real property is conveyed, and any part of the consideration remains unpaid, the grantor shall not have a lien for the unpaid consideration against bona fide creditors and purchasers unless the deed states what part of the consideration remains unpaid. "
In May v. Finance & Realty Company, Ky., 451 S.W.2d 155, 157 (1970), the Court, in construing KRS 382.070, quoted from an earlier case:
"'The effect of the statute then is, that there is no lien where the grantor has executed a deed of conveyance, unless it be expressly stated in the deed what part of the purchase money remains unpaid, and consequently that actual notice, in such a case, to a subsequent purchaser, that part of the purchase money due to the original vendor remains unpaid, will not affect his title to the land. The original vendor, by executing a deed, without stating therein that the purchase money remains unpaid, thereby waives his lien, and cannot revive it by giving notice that part of the purchase money is still unpaid, for which he claims a lien upon the land.'"
Thus, the statute (KRS 382.070) plainly requires that a deed state what part of the purchase price remains unpaid or there is no lien in favor of the grantor against a subsequent bona fide purchaser. See also Stephens' Adm'x v. Union Central Life Ins. Co., 226 Ky. 233, 10 S.W.2d 833 (1928). In Uppington v. Cooper, 279 Ky. 305, 130 S.W.2d 733 (1939), the Court said that as against a bona fide purchaser, the grantor had no lien upon the realty for the unpaid purchase money not stated in the deed to be unpaid, although as between parties to the deed, the grantor had a lien for all the unpaid purchase money.
Where a deed properly retaining a purchase-money lien was recorded, all subsequent purchasers acquire the encumbered property with constructive notice of the lien. See Campbell v. Salyer, 290 Ky. 493, 161 S.W.2d 596 (1942); Welch v. Mann, 273 Ky. 341, 116 S.W.2d 663 (1938), and Wade v. Bent, Ky., 71 S.W. 444 (1903).
Since we do not have a copy of the deed involved we cannot render an opinion as to what specific rights and obligations were created. We have, however, attempted to cite some cases and principles as well as a statute which can be applied to your fact situation. By way of summary, a lien is not a title to property but a charge upon it. Whether a lien in favor of the grantor against a subsequent bona fide purchaser was created depends upon whether the terms of KRS 382.070 were satisfied and if the deed stated what part of the consideration remained unpaid. If a lien was created in favor of the grantor, the grantor cannot prevent a subsequent purchase of the land but subsequent purchasers acquired the encumbered property with at least constructive notice of the lien. Whether a lien was created and preserved as against a subsequent bona fide purchaser can only be determined from an examination of the deed. Whether a lien was created or preserved as against a subsequent bona fide purchaser is not a factor in the clerk's determination as to whether the deed is a recordable instrument pursuant to KRS Chapter 382.