Request By:
Mr. Donald W. Blevins
Fayette County Clerk
162 East Main Street
Lexington, KY 40507
Opinion
Opinion By: David L. Armstrong, Attorney General; Patricia Todd Thomas, Assistant Attorney General
You have requested a formal opinion from the Office of the Attorney General regarding recent changes in statutes governing security agreements and secured transactions embodied in SB-28 passed by the 1986 General Assembly. In your letter of July 13, 1987, you presented the following questions:
1. Security agreements filed on motor vehicles prior to July 1, 1987 were effective for five years and sixty days unless a written continuation statement was filed. The statute, 186A under the new law, makes no mention of continuation statements. When does a perfected lien on a motor vehicle which was filed prior to July 1, 1987 expire?
If motor vehicle liens which were filed before July 1, 1987 will expire in five years and sixty days the only procedure for preserving that lien perfection is by filing a Motor Vehicle Lien Statement. Since it is a new filing it will be assigned a new file number and filing date by the clerk. In the instance where there are two liens on one title, does the secured party who holds first priority lose that priority because of this new filing?
In response to your first question, KRS 355.11-103 provides transition procedures for those transactions validly entered into after July 1, 1960 and before July 1, 1987. According to that statute,
. . . the rights, duties and interests flowing from such transactions remain valid after the latter date and may be terminated, completed, consummated or enforced as required or permitted by new UCC.
This section applies to valid security interests in collateral and, thus, applies to valid liens held on motor vehicles. A valid lien is one which has not been held for a period of time longer than five years. Any valid lien held on a motor vehicle on July 1, 1987, would not expire until terminated according to new law. No new filing is necessary so there is no confusion in the priorities.
2. Prior to July 1, 1987, the fee for filing an original security agreement included a $1.00 fee for termination of the financing statement. Partial releases of collateral were $1.00.
The filing fee per motor vehicle included a $1.00 fee for termination on motor vehicle lien statements. What is the fee for partial termination for security agreements with motor vehicles included for filings prior to July 1, 1987? What is the fee, if any, for partial terminations on Motor Vehicle Liens statements filed after July 1, 1987?
The answer to your second question is that there is a $1.00 fee for a partial release on an original security agreement filed prior to July 1, 1987. After July 1, 1987, the revised KRS 186A.190 establishes the fee for the single notation of a security interest on the certificate of title for one motor vehicle. Therefore, after that date a partial termination would not be necessary since there is not a situation in which part of a security interest in a motor vehicle would end. Instead, a new motor vehicle lien notation should be made.
3. Does the state tax imposed by KRS 142.010 apply to continuation statements?
In response to your third question regarding the state tax imposed by Chapter 142 of the Revised Statutes, I call your attention to an opinion of the Attorney General found at 74-465. The opinion states this particular tax applies only to the filing of the original statement and not to the filing of a continuation statement. The appropriate section of the Kentucky Revised Statutes, which is now codified as 142.010(1)(c), is substantially similar to the statute upon which the above-referenced opinion is founded. Therefore, the tax is to be charged in the same manner.
4. Does a fixture filing which the secured party requests to be filed in the mortgage records have to be first filed as a financing statement before or simultaneous with its filing in the mortgage index and records?
Your fourth question is partially addressed by OAG 86-83 which refers to KRS 355.9-401(1)(b) and 355.9-313(1)(b). These sections of the Uniform Commercial Code direct fixture filings to be filed in the office where a mortgage on real estate would be filed or recorded. However, neither these sections of the Uniform Commercial Code nor OAG 86-83 require fixture filings actually be recorded with mortgages in a mortgage book. If a separate fixture filing book has been established, then the appropriate place for filing would be made in the book created for that purpose.
A duplicate filing may be made in the Mortgage Book at the request of the secured party if the fixture filing complies with Chapter 382 of the Kentucky Revised Statutes. That chapter establishes the contents which are necessary to permit proper recordation of a mortgage. Should a fixture filing contain all of the requirements of a mortgage, then it, at the request of the secured party, may be filed in the appropriate mortgage book. As to the chronological order of filing, there is no statutory direction; however, a uniform system of treatment would seem appropriate.
5. What fee should a clerk collect on a security agreement at its original filing which assigns the secured interest within the document to a third party?
The fifth question presented concerns the fee to be collected for the filing of an original security agreement containing an assignment. The answer is dependent upon whether the security interest is to be noted upon a motor vehicle lien statement. KRS 186A.190 establishes the fee for the notation of the secured interest on the certificate of title for a motor vehicle as $10.50. Since only one actual notation is made on the certificate, that of the assignee, the fee is $10.50. On the other hand, if the secured interest is being filed upon property other than a motor vehicle, the fee, pursuant to KRS 64.012, would be $6.00 for filing, $6.00 for an assignment and $1.00 for termination, plus any miscellaneous fees established by other applicable statutes.
6. Under what circumstances would an amendment be required to be filed to a filed Motor Vehicle Lien Statement?
With regard to your final question, it is very difficult to predict the circumstances under which a Motor Vehicle Lien Statement would be amended. The only possible amendments would be the address of the debtor or the secured party or if the secured party has changed its name. Amendments of this nature are not necessary and are at the option of the parties.