Request By:
Ms. M. Elizabeth Hils
Heckerman & Hood
2300 Central Trust Center
201 East Fifth Street
Cincinnati, Ohio 45202
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Alex W. Rose, Assistant Attorney General
You have requested an opinion relating to the transfer of repossessed mobile homes subject to taxes. In your request, you stated that you represent a creditor which accepts security interests in mobile homes as collateral for its loans. In the event of a default, the creditor repossesses and sells the collateral in accordance with the procedures set forth in Article 9 of the Uniform Commercial Code. Thereafter, the creditor presents its repossession affidavit and termination statement to the county clerk to obtain a transfer of registration to the new owner. You further stated that the creditor had been informed by the county clerk that the clerk will not transfer the registration of a repossessed mobile home to a new owner until all taxes on the mobile home have been paid.
Your first and primary question is whether the county clerk has authority to demand payment of all taxes on a repossessed mobile home before transferring the registration to the new owner. It is our opinion that the clerk can require payment of all tax liens against a mobile home before transferring registration to its new owner if the liens have been properly filed.
As you have stated, the policy adopted by the county clerk is supported by KRS 186.230(9), 186.193 and 186.232. Those statutes state, in pertinent part, as follows:
KRS 186.230(9). County clerk's duties -- Lien on vehicle, effect. -- No person shall be permitted to sell, trade or transfer ownership of a motor vehicle if evidence is presented to the county clerk that any lien exists on the motor vehicle.
KRS 186.193. Evidence required of ad valorem tax payment. [Effective July 1, 1981.] -- The county clerk shall not transfer the registration on any motor vehicle or trailer against which a tax lien has been filed until the taxes have been paid and the lien has been released.
KRS 186.232. Registration not transferable until taxes paid and lien released. -- The county clerk shall not transfer the registration on any motor vehicle or trailer against which a tax lien has been filed until the taxes have been paid and the lien has been released.
It is clear that those statutes require payment of taxes prior to registration when a tax lien has been filed against the vehicle. The only ambiguity is whether those statutes apply to mobile homes. That ambiguity is relieved by KRS 186.690 which states as follows:
KRS 186.045 and 186.070 to 186.240 shall apply to the registration of trailers, semitrailers, mobile homes, and recreational vehicles insofar as practicable.
Kentucky has long recognized that, when property subject to a lien for taxes is transferred, the transferee must pay those taxes. Bank of Kentucky v. Commonwealth, 29 Ky. Law. Rep. 643, 94 S.W. 620 (1906);
Kling v. Geary, Ky., 667 S.W.2d 379 (1984). KRS 186.193 and KRS 186.232 do not affect the relationship between the purchaser and the seller. The tax lien is a matter of public record and obviously subject to negotiations between the parties at the time of the sale, transfer of title, and registration. The purchaser is free to accept or reject the offer. If the purchaser accepts the offer, the statutes do not prevent the purchaser from taking title to the mobile home. The statutes only prevent the purchaser from registering the mobile home until the tax lien has been paid.
As you noted, the opinions rendered in OAG 79-445 and OAG 81-160 concluded that KRS 186.230(9) was unconstitutional as an undue restraint on alienation of property. In a footnote, OAG 79-445 reserved the question of the constitutionality of KRS 186.193 and was not to be considered a reflection upon the constitutionality of KRS 186.193. Neither KRS 186.193 nor KRS 186.232 prohibits the alienability of the mobile home. The statutes only prevent the purchaser from registering the mobile home. We conclude that the statutes in question do not suffer from the constitutional defect found in KRS 186.230(9).
You have requested that the constitutionality of KRS 186.193 and 186.232 also be evaluated in light of the decisions of the
Kentucky Court of Appeals in Schoo v. Rose, Ky., 270 S.W.2d 940 (1954) and
Department of Revenue v. Williams, Ky., 351 S.W.2d 875 (1961). The standard to which all legislation must conform to avoid unconstitutionality is set out in Schoo v. Rose. The two requirements are that the legislation must: (1) apply equally to all in a class, and (2) there must be distinctive and natural reasons inducing and supporting the classification. In Schoo, the court held that the General Assembly cannot enact legislation for a natural class and then arbitrarily divide that class in halves and treat those halves differently. Neither KRS 186.193 nor 186.232 support an arbitrary classification in violation of Sections 2 and 59 of the Kentucky Constitution. These statutes apply equally to all vehicles and trailers which are to be operated on the highways of this state. It might be further noted that the case of
Kling v. Geary, supra, clearly supports the constitutionality of these statutes.
Next, you ask if KRS 186.193 and 186.232 are constitutional, to what taxes do they apply and do they apply to all tax liens of every sort? These statutes refer generally to a "tax lien" which has been filed. No definition of tax lien is given in KRS Chapter 186 and there is no subsequent statutory language more specific in scope. Therefore, the statutory language must be given its clear and commonly accepted meaning.
Barnes v. Department of Revenue, Ky., 575 S.W.2d 169 (1978). KRS 186.193 and 186.232 apply to all tax liens of every sort which have been filed.
You also ask what filing procedures are required. The filing procedures for ad valorem tax liens are found in KRS 134.148 and 134.810. The filing procedures for tax liens, in general, are found in KRS 134.420. Pursuant to KRS 134.420, the Revenue Cabinet may file a notice of tax lien with the county clerk and such notices are to be recorded in the same manner as notices of lis pendens are filed. Pursuant to KRS 134.148 and 134.810, tax liens are not only recorded in the manner in which lis pendens are recorded, but also recorded on the face of the certificate of title and registration.
Finally, you ask whether tax liens must be noted on the certificate of title or the registration in order for these sections to be operative. It is not necessary for tax liens to be noted on the certificate of title or registration except with respect to ad valorem tax liens as provided in KRS 134.148(4), which states as follows:
(4) In the event that a bona fide purchaser for value without notice purchases a motor vehicle or a trailer on which no lien has been filed on the certificate of title of such motor vehicle or trailer as provided for in subsection (2) of this section, such person shall not be held responsible for paying delinquent ad valorem taxes or lien fees on the certificate of title of such motor vehicle or trailer if such lien was placed on the certificate of title after same person's purchase of the motor vehicle or trailer.
I hope you will find that all of your questions have been fully answered. If not, feel free to write for further clarification.