Request By:
Hon. Joseph B. Murphy
Assistant County Attorney
Fayette County
302 First Federal Plaza
Vine and Upper Streets
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Alex W. Rose, Assistant Attorney General
You have inquired whether an automobile sale financer with a perfected security interest in an automobile may repossess and relicense that automobile without paying a delinquent property tax assessed against it. You indicate that General Motors Acceptance Corporation (GMAC) has questioned the practice of the Fayette County Clerk in requiring delinquent taxes on automobiles repossessed by GMAC to be paid prior to issuing a license to GMAC. GMAC contends that its security interest is superior to the tax lien because it was filed prior to the tax becoming delinquent. You indicate that your office has taken the position that KRS 134.420 provides that the tax lien on automobiles has priority over any security interest therein, the same as the lien for ad valorem taxes on real estate has priority over a prior recorded mortgage.
It is our opinion that the tax lien must be paid in full prior to the clerk's transfer of title to a new owner.
Though there are several other statutes which bear on this issue, you are correct in believing that KRS 134.420 is the key. That statute establishes two types of tax liens. Subsection (1) of the statute establishes a tax lien on all property for the delinquent taxes assessed against that particular property. This lien is superior to all other liens including a prior recorded first mortgage. Midland Guardian Company v. McElroy, Ky., 563 S.W.2d 752 (1978). Subsection (2) of KRS 134.420 creates a general tax lien which is inferior to a prior recorded mortgage or security interest.
Under the facts you have stated in your letter, we are dealing here with a lien which arose under KRS 134.420(1). Consequently, it is superior to even a prior recorded security interest. This is provided, however, that the requirements of KRS 134.148 have been met. This statute contains special provisions concerning tax liens on motor vehicles. In particular it requires that the county clerk record the tax lien on the face of the certificate of title and registration. KRS 134.148(2). The statute also creates two exceptions to the Midland Guardian rule. In subsection (3) a dealer who purchases an automobile is excepted from paying off the tax lien so long as the certificate of title he received from his seller did not show the tax lien on its face. In subsections (4) and (5) of the statute all other persons who in good faith purchase a motor vehicle prior to the date on which the tax lien was perfected by the county clerk's actions described above are excepted from paying the tax lien.
Under the facts you have offered, the dealer exception has no application.
The second exception is extremely narrow in application and offers no escape for the repossessor so long as the lien has been perfected according to the terms of KRS 134.148(2). This being the case, the clerk is bound by the terms of KRS 186.193 and KRS 186.232 (identical statutes) which prohibit the clerk from transferring title and registration of a motor vehicle unless and until the tax lien has been paid and released.
To summarize, it is our opinion that a tax lien on an automobile, once perfected by the filing required under KRS 134.148(2) must be paid off by one who seeks to repossess and retransfer an automobile pursuant to a prior recorded security interest.