Request By:
Mr. C. S. Wagers
Clerk of Madison County Court
Courthouse
Richmond, Kentucky 40475
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Elizabeth E. Blackford, Assistant Attorney General
You have described the following situation:
For years lenders have treated house trailers as private dwelling places, not subject to registration under Chapter 186. They have recorded their liens as they would a lien on furniture or other consumer items, by filing a financing statement only. They have not presented a certificate of title for notation of the lien thereon when they file the financing statement.
Later the owner sells the house trailer to someone else. Before the lender will finance the new owner, it requires the owner to produce a certificate of title so that the lien may be noted thereon. At some point all documents showing ownership have been lost, so you, following the proper procedure, issue a new certificate of title pursuant to KRS 186.655(f), and the new lien is noted thereon.
Later the lien of record which was filed prior to the issuance of the new certificate of title comes to light. The earlier lien had not been noted on the face of the new certificate of title because the new owner either did not reveal or did not know of the earlier lien, and therefore did not include it in the affidavit which he or she renders pursuant to KRS 186.655.
Your question is whether the county clerk will be liable for any loss incurred by the prior lender whose lien was not noted on the face of the new certificate of title. The simple answer is that the county clerk will not be liable.
Pursuant to KRS 382.675, the clerk shall not record an instrument conveying or reserving a security interest in a motor vehicle subject to registration until the vehicle has in fact been registered. Under KRS 186.045, the clerk shall note the lien upon the owner's receipt which the secured party shall attain and present to the clerk with the financing statement if a vehicle is subject to the registration requirements of Chapter 186. Thus, for those motor vehicles such as cars, which are always subject to registration, the clerk clearly has the duty to be sure the vehicle is registered and to note the security interest on the registration receipt.
However, unlike cars, not all house trailers are subject to registration. Pursuant to KRS 186.650 and 186.655, only those house trailers which are "used or maintained for use as conveyances upon the highway, designed . . . [to] permit occupancy thereof as a temporary dwelling . . . having no other foundation other than wheels or jacks, and not being used in one location as a permanent dwelling" must be registered. For those house trailers subject to registration the provisions of KRS 186.045 shall be followed insofar as practicable. KRS 186.690.
Clearly then there are two means for perfecting a security interest in a house trailer. If the house trailer is being used in one place as a permanent dwelling, then filing a financing statement serves to perfect the security interest. If, on the other hand, the house trailer falls within the definition of KRS 186.650, it is subject to registration and insofar as practicable a financing statement should be filed and registration receipt should be presented for notation of the lien thereon.
Since the clerk is not personally responsible for determining how the house trailer is being used, he may rely upon the secured party's representation that it is or is not subject to registration. Accordingly, the clerk may rely upon the secured party's representation that a financing statement is all that is required, or if the secured party also presents a registration receipt, he may note the lien thereon. Once the clerk has done this, his duties are at an end.
The clerk does not have to search the record to determine whether there are any outstanding security interests on the house trailer if he subsequently issues a new certificate of title pursuant to KRS 186.655(f). His only duty under that statute is to obtain an affidavit, and to that effect he may rely upon the statements therein. The duty of searching the title rests upon the subsequent lender or buyer. (See enclosed OAG 64-563.) Therefore, the clerk will not be liable for any losses incurred by the prior lender if its lien of record was not noted in the affidavit where he issues a new certificate of title pursuant to KRS 186.655(f).