Request By:
Ms. Martha R. Davis
Oldham County Clerk
Courthouse
LaGrange, Kentucky 40031
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Ford Motor Company has requested that you, as Oldham County Clerk, record a lien on a truck that has been registered and licensed in the State of Indiana.
You request our opinion as to whether or not you can legally record a lien on a vehicle that is not licensed in the State of Kentucky.
You told us that a certificate of title was issued on the truck in Indiana and a security agreement, covering the truck, was also issued and filed in Indiana. The debtor is a resident of Oldham County, Kentucky. The Ford Motor Company did not request that you contact the debtor and ask him to license the truck in your office. They merely want the security agreement filed in your office. We assume that the truck is being used for some business purpose in the state of Indiana, although from time to time the debtor will bring the truck into Oldham County, Kentucky, but not to exceed the five day period mentioned in KRS 186.020.
KRS 355.9-401, which relates to the place of filing a security interest in Kentucky, reads:
"(1) The proper place to file in order to perfect a security interest is as follows:
"(a) When the collateral is equipment used in farming operations, or farm products, or accounts, contract rights or general intangibles arising from or relating to the sale of farm products by a farmer, or consumer goods, then in the office of the county clerk in the county of the debtor's residence or if the debtor is not a resident of this state then in the office of the county clerk in the county where the goods are kept, and in addition when the collateral is crops in the office of the county clerk in the county where the land on which the crops are growing or to be grown is located;
"(b) When the collateral is goods which at the time the security interest attaches are or are to become fixtures, then in the office where a mortgage on the real estate concerned would be filed or recorded;
"(c) In all other cases, if the debtor is a resident of this state in the office of the county clerk in the county of the debtor's residence, if the debtor is not a resident of this state but has a principal place of business in this state, in the office of the county clerk in the county where the non-resident has a principal place of business, if the debtor is a nonresident of this state and has no principal place of business in this state then in the office of the secretary of state of the Commonwealth of Kentucky. The secretary of state may collect a fee of three dollars ($3.00) for each filing in his office under this section.
"(2) A filing which is made in good faith in an improper place or not in all of the places required by this section is nevertheless effective with regard to any collateral as to which the filing complied with the requirements of this article and is also effective with regard to collateral covered by the financing statement against any person who has knowledge of the contents of such financing statement.
"(3) A filing which is made in the proper place in this state continues effective even though the debtor's residence or place of business or the location of the collateral or its use, whichever controlled the original filing, is thereafter changed.
"(4) If collateral is brought into this state from another jurisdiction, the rules stated in KRS 355.9-103 determine whether filing is necessary in this state.
Thus normally the proper place to file a security interest in this state, in order to perfect such interest in Kentucky, involving a motor vehicle, is the office of the county clerk in the county of the debtor's residence, which in this case would mean filing it in your office.
However, the question here is whether such filing is proper, i.e., necessary, considering that a certificate of title was issued in Indiana, that the security agreement affecting the truck was filed in Indiana, and that the truck is being used for business of the debtor in Indiana. The law is settled in Kentucky that the law does not compel the doing of a vain and useless thing. Kentucky Title Co. v. Hail, 219 Ky. 256, 292 S.W. 817 (1927). But let us assume that since the debtor is a resident of Oldham County, he will from time to time drive his truck to his home in Oldham County, Kentucky. Under KRS 355.9-401(4), where the collateral is brought into Kentucky from another jurisdiction, the rules stated in KRS 355.9-103 determine whether filing is necessary in this state.
Pursuant to KRS 355.9-103(3), if the security interest was already perfected under the law of the jurisdiction where the property was when the security interest attached and before being brought into this state, the security interest continues perfected in this state for four (4) months and also thereafter if within the four (4) months period it is perfected in this state. However, under KRS 355.9-103(4), notwithstanding subsections (2) and (3), if personal property is covered by a certificate of title issued under a statute of some other jurisdiction which requires indication on the certificate of title of any security interest in the property as a condition of perfection, then the perfection is governed by the law of the jurisdiction which issued the certificate.
In summarizing the analysis thus far, collateral brought into Kentucky from another jurisdiction is governed by KRS 355.9-103 as to whether filing of the security agreement is necessary in Kentucky. KRS 355.9-401(4).
Now, since Indiana requires a certificate of title and requires an indication on the certificate of title of any security interest in the property as a condition of perfection, the perfection is governed by the law of Indiana. KRS 355.9-103(4). It then follows that the holder of the security interest does not have to protect such Indiana security by any further action in Kentucky, to which the truck may thereafter be brought. See Deposit National Bank of Mobile Co. v. Chrysler Corp., Ala., 263 So.2d 139 (1972).
As to the perfection of the security agreement in Indiana, that state requires a certificate of title which must contain a reference to any liens. The certificate is evidence of title. Champa v. Consolidated Finance Corp., Inc., 110 N.E.2d 289 (1953).
In In Re Knapp, (U.S.C.A. -2, 1978) 575 F.2d 341, the court stated that the purpose of Section 9-401 of the Code was to simplify the creditor's task in choosing a proper place to file the security agreement. Thus, in the case of motor vehicles, the place is the county of debtor's residence. The court also wrote that the Code eschews any scheme that would require a secured party to maintain regular and continuing surveillance of the debtor. A security interest, once perfected by filing, remains effective regardless of the number of times or places the debtor or the collateral moves. See Section 9-401(3) of the U.C.C. Kentucky has adopted that principle in KRS 355.9-401(3). The court said that to suggest that the express intention of the debtor respecting residence controls would needlessly complicate the code's design.
Indiana adopted Section 9-103(3) and (4) of the Code. As we said above, subsection (4) provides that where personal property is covered by a certificate of title issued under a statute of the adopting state or any other state which requires indication on the certificate of title of any security interest in the property as a condition of perfection, then the perfection is governed by the law of the jurisdiction which issued the certificate. See Burns Indiana Statutes, Title 26, 26-1-9-103(3) and (4). Cf. Brown v. Universal C.I.T. Credit Corp. (U.S.C.A. -7, 1964), 331 F.2d 246, noting Indiana's adoption of Code Section 9-103. Also see In Re Automated Book-binding Services, Inc. (U.S.C.A. -4, 1972) 471 F.2d 546. See also 26 Burns Indiana Statutes annotated, 26-1-9-401(3), providing that a filing which is made in the proper place in Indiana continues effective even though the debtor's residence or place of business or the location of the collateral of its use, is thereafter changed. See 9 Burns Indiana Statutes annotated, 9-1-2-1, relating to the required issuance of certificates of title and the requirement that such certificate shall contain a statement of any liens or encumbrances which the application for the certificate may show to be thereon.
CONCLUSION
Since Indiana has adopted Section 9-103(4) of the Uniform Commercial Code and Section 9-401(3), and since Indiana requires a certificate of title and a notation thereon of any security interest in such motor vehicle, the perfection of such security interest was governed by the law of Indiana. See 9 Burns, Indiana Statutes, 9-1-2-1. See KRS 355.9-103(4). Thus it is our opinion that the holder of the security interest does not have to protect such Indiana security by any further action in Kentucky, to which the truck may be hereafter brought. Therefore, it is not necessary nor proper to file such Indiana security agreement in your office. You have indicated that the debtor does not presently wish to license the truck in Kentucky.
If the debtor later decides to operate the truck upon the highways of Kentucky for longer than five days, the debtor must apply for registration in your office, pursuant to KRS 186.020.
KRS 186.045(2)(a) provides that " whenever a financing statement required by KRS Chapter 355 relating to any vehicle registered or required to be registered in Kentucky for use on the highway is presented to the county clerk for filing, such clerk shall also immediately note information required by the department relative thereto on the owner's copy of the certificate of registration and ownership . . ." (Emphasis added).
However, since we above concluded that filing the Indiana security agreement in Kentucky is not necessary in this situation, it is our opinion under the express wording of KRS 186.045(2)(a), above underscored, that the actual requiring of licensing in Kentucky does not change the law as to perfection of the security interest.