Request By:
Mr. Robert E. Kulp, Jr.
Attorney at Law
Suite 3626
First National Tower
101 South Fifth Street
Louisville, Kentucky 40202
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
A mortgage insured by F.H.A. under the National Housing Act, and now held by the Kentucky Housing Corporation, pursuant to KRS Chapter 198A, as mortgagee, contained this clause:
"NOTICE: So long as the debt, or any part thereof, is outstanding, the property may be freely sold, assigned or transferred to anyone; provided, however, that in the event of any sale, assignment or other transfer to any person who is not a person of low or moderate income, the rate of interest payable on the debt shall be 15.50% per annum, effective on the date the lender provides notice of the new rate to that person. A person of low and moderate income has been defined by resolutions of the Board of Directors of the Kentucky Housing Corporation dated the 6th of April, 1976, the 15th of December, 1977, and the 3rd of July, 1980. Lender may not apply a definition which is more restrictive than the definition of a person of low and moderate income in effect as to the date this Mortgage is executed."
The Kentucky Housing Corporation, upon the advice of Kentucky Counsel, has the subject clause inserted in all such mortgages insured by F.H.A. in order to make clear the free alienability of the property while the mortgage is outstanding, and to provide that any subsequent holder of title who is not a person of low income must pay the rate of interest on the mortgage debt which constitutes the maximum F.H.A. interest rate at the original closing of the loan. In addition, because the subject clause is not a usual provision in a standard mortgage instrument, Kentucky Counsel advised the K.H.C. to have the mortgagors initial the clause in order to have specia, documentary evidence of the mortgagors' awareness of the inclusion of the special clause.
In connection with the specific mortgage you mention, the mortgagors apparently forgot to initial the special clause before the county clerk recorded it the first time.
After the mortgage was recorded the first time by the Warren County Clerk, the mortgagors initialed the special clause on the original mortgage previously recorded. Whereupon the original mortgage was mailed to the Warren County Clerk to be re-recorded. The clerk's office indicated that they could not re-record the original mortgage, and that a new real estate mortgage would have to be filed. This situation does not involve the request for recording a new instrument, that is, a mortgage of correction.
The question is whether the original mortgage, once recorded, can now be legally re-recorded where the mortgagors have, since the first recording of the mortgage, initialed the special clause. Actually no change or alteration in the substantive provisions or wording of the instrument have been made. Only these belated initials of the special clause are involved.
In the case of Carmack v. Check & Dent, 10 Ky. Opin. 532 (1880), the appellate court laid down the rule that where the terms of a mortgage are plain and unmistakable, and the signature of the mortgagor and acknowledgment are unquestioned, it is conclusive, and will not be varied because the mortgagor believed that the agreement was other than that plainly recited in the mortgage. A "Shepardizing" of the case reveals no appellate retreat from that rule. Based upon that principle, the initialing ritual is superfluous. However, that does not answer your question.
Primarily, the recording statutes determine the recordability or non-recordability of a mortgage. 76 C.J.S., Records, § 10, p.p. 117-118. See KRS 382.110 and 382.300, relating to the recording of deeds and mortgages. We assume in your problem that the mortgagors signed and duly acknowledged the mortgage. State Bank of Stearns v. Stephens, 265 Ky. 615, 97 S.W.2d 553 (1936).
Since the original mortgage in your problem contained the special F.H.A. clause, which was couched in plain and unambiguous language, and since the signature and acknowledgments of the mortgagaors are unquestioned, the recording of the original mortgage instrument is sufficient and dispositive. No additional recording of that instrument, initials or no initials, is permissible, since the policy established by the courts is that the law does not require the doing of a vain or useless thing. Kentucky Title Co. v. Hail, 219 Ky. 256, 292 S.W. 817 (1927) 821. Moreover, there is no statute in KRS Chapter 382 which would permit the county clerk to re-record the original mortgage.
On the subject of changes in the record, this was said in 76 C.J.S., Records, § 25, p. 127:
"A record cannot be changed to state that a certain action was taken which in fact was not taken, and changes in a record may be made only to make the record speak the truth. The record cannot be altered so as to show anything not in the instrument recorded at the time of the original record; and, if at the time of the original record the instrument was correctly copied, the officer cannot subsequently alter the record, even though there was a mistake in the original instrument and the alteration of the record is made by consent and on the written request of the parties."
Even though the initialing of the special clause, effected on the original mortgage instrument after its recordation, was not an alteration of substantive provisions of the instrument, it nevertheless constituted a change in the original record. Thus the original mortgage instrument now of record cannot be altered in this manner. The clerk can refuse on this ground to re-record the mortgage. See KRS 382.290, relating to the assignment and release of notes, which has no application here.