Request By:
Mr. Tommy Lee
Harlan County Clerk
P.O. Box 670
Harlan, Kentucky 40831
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
You ask for our opinion of transferring a vehicle that has been held for storage.
KRS 376.275 reads:
"Any person engaged in the business of storing or towing motor vehicles, shall have a lien on the motor vehicle, for the reasonable or agreed charges for storing or towing the vehicle, as long as it remains in his possession. If after a period of sixty (60) days the reasonable or agreed charges for storing or towing a motor vehicle have not been paid, the motor vehicle may be sold to pay the charges after the owner has been notified by registered letter of the time and place of the sale. This lien shall be subject to prior recorded liens."
Assuming that the terms of the statute were met and the storage lienholder caused the public sale of the vehicle, you ask whether the holder of a prior recorded lien can at any time take the vehicle from the new owner.
We concluded in OAG 74-865, copy enclosed, that a county clerk could make a valid transfer of a motor vehicle registration to a buyer at a storage lienholder's sale held pursuant to KRS 376.275, although a similar statute, KRS 376.280 [lien for repairing vehicle] has been declared to be unconstitutional by a three-judge federal court in Cockerel v. Caldwell (U.S. Dist. Ct. W.D. Ky., 1974) 378 F.Supp 491. The federal court held that KRS 376.280 did not afford a presale judicial hearing and thus violated the Fourteenth Amendment [due process] of the United States Constitution, relying upon Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972), and Sniadach v. Family Finance Corporation, 395 U.S. 337, 89 S. Ct. 1280, 23 L. Ed. 2d 349 (1969). Thus presently KRS 376.275 is presumed to be constitutional, especially since its constitutionality was specifically upheld in Department of Revenue v. Derringer, Ky., 399 S.W.2d 482 (1966) 484, 485, although the court noted that the sale must be commercially reasonable.
Since KRS 376.275 expressly provides that the storage lien is subject to a prior recorded lien, the recorded prior lien put the public sale purchaser on constructive notice. Therefore he took the vehicle, subject to the recorded prior lien. Corbin Deposit Bank v. King, Ky., 384 S.W.2d 302 (1964) 303.
KRS 355.9-310 reads:
"When a person in the ordinary course of his business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise."
The question at this point is whether the prior recorded lien must simply be carried forward on the Certificate of Title and Registration, in connection with the transfer to the buyer at the public sale, or whether the prior recorded lienholder is entitled, as a matter of first rights, to the proceeds of sale. Let us assume that at the time of the storage lienholder's sale the original owner of the vehicle was not in default in connection with the prior recorded lien transaction.
It is our opinion, in the absence of a waiver of the prior recorded lienholder or a stipulation in the lien instrument to the contrary, that where the storage lienholder effects a sale of the vehicle in question, the prior recorded lienholder is entitled to the first priority as applied to the sales proceeds. Where the sale was made without observing the prior recorded lienholder's rights, the prior recorded lienholder could assert his lien claim against the vehicle and the public sales seller (storage lienholder) to the extent of the money unpaid under the prior recorded lien transaction. See C.I.T. Corporation v. Studebaker Sales of Kentucky, 251 Ky. 349, 65 S.W.2d 84 (1933); American Loan Co. v. See, 298 Ky. 180, 182 S.W.2d 644 (1944); and Corbin Deposit Bank v. King, Ky., 384 S.W.2d 302 (1964).