Court Opinion

ID: 9692152
Source: CourtListenerOpinion
Date Created: 2023-08-25 15:44:41.723512+00
Date Added: 2024-06-11T18:19:32.171000
License: Public Domain

NOBLE, J.,
Dissenting:
Respectfully, I dissent.
I believe the majority view misreads the statutes at issue in this certification of law question from the Sixth Circuit. First, it is not clear on which date perfection would occur, either by operation of law or fact, under the majority’s view, though I think *562the statutes are clear as to when perfection, as a matter of law, occurs. I also do not agree that KRS 186A.195 was enacted primarily to deal with priorities among multiple liens, but I believe it is instead a general timing statute, applicable to any question about timing of perfection in titled vehicles, including the question presented in this case.
Chapter 186A is named the “Automated Motor Vehicle Registration System.” Because Kentucky has chosen to use an efficient, automated method of requesting and issuing vehicle titles (the Automated Vehicle Identification System, commonly called AVIS), certain timing issues inherent in the use of an automated system require the legislature to draft accordingly, and outside the Uniform Commercial Code, Chapter 355 of the Kentucky Revised Statutes.
Using the automated title system creates a timing problem that the legislature recognized would impact vehicle sales under the Uniform Commercial Code. This problem manifests itself through the necessity of having a clerk log the requisite documents into AVIS, and the inability to fine tune input into AVIS that adequately covers the nuances of commercial sales law. To harmonize with the commercial code, the legislature enacted KRS 186A.195 to allow perfection to occur as it normally would, but for the timing problems inherent in using an automated system such as AVIS.
KRS 186A.190 establishes how “the perfection and discharge of a security interest” in titled property must be established: “by notation on the certificate of title,” which “shall be in accordance with this chapter.” The latter language, however, is a flag to indicate that other provisions in the chapter come into play. This statute standing alone does not say anything about when a security interest is perfected. That is left to KRS 186A.195.
KRS 186A.195 is not specifically about priorities. By its heading, it purports to govern “perfection of a security interest.” At subsection (5), the statute deals with time, and states that the security interest noted on the title “shall be deemed perfected at the time the security interest attaches,” (emphasis added), as defined by KRS 355.9-203. That statute says the security interest attaches when it is enforceable against the debtor: when value is given, the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party, and the debt- or has authenticated a security agreement that provides a description of the collateral. See KRS 355.9-203(2). Ordinarily, this occurs upon the debtor’s entry into a valid contract for purchase of the vehicle and taking possession of the vehicle.
However, KRS 186A.195(5) also adds the requirement that the secured party must have tendered the required fees and submitted a properly completed title lien statement and application for first title if the vehicle is new, or the certificate of title if it is used, before the date of attachment can be deemed to be the date of perfection. Thus, when the perfection occurs is determined in part based on completion of the elements listed in KRS 186A. 195(5). That certainly will be a date earlier than the date on which the Department of Transportation actually makes a notation on the title. These steps listed in this statute all precede the submission of a request for title through AVIS by the county clerk.
Usually, the county clerk submits the title request to AVIS the day the above documents are filed by the lienholder, and that is the date shown on the title for perfection. But when the clerk delays, as happened here, the date on the title will come back from AVIS showing the date *563the clerk logged the documents into AVIS, which will be different than when the security interest attached. This is where the operation of KRS 186A.195(5) comes into play.
If everything has been tendered to the clerk within 20 days of attachment, by operation of law perfection will be deemed to have occurred as of the date of attachment. This date is readily ascertainable from the documents tendered.
If the title lien statement and application for first title or title are filed and the appropriate fees are paid after 20 days, then perfection will be deemed to have occurred “at the time” all three have been tendered to the county clerk. It is notable that the legislature did not state that the operative date was when the clerk filed the documents into AVIS, but rather when the materials were actually given to the clerk.
Thus there is no conflict between KRS 186A.190 and KRS 186A.195(5). Indeed, the latter statute complements the first, and establishes the date of perfection (when) as the date of attachment when all necessary items are tendered to the clerk. However, I agree with the majority that before a proper time of perfection can be established, there must be a notation of perfection on the title itself. That is because notation of perfection will not occur until the fees have been paid, and the lien statement and application for title, or title if the vehicle is used, have been tendered to the clerk, because the clerk will not input anything into AVIS until then. The date used in the notation of title will be an adequate notation that there actually is perfection.
Consequently, the notation of perfection date on the title will be the date the clerk enters the necessary documents into the AVIS system. However, the legal date of perfection will be deemed to be either the date of attachment if documents are tendered within 20 days of attachment or the date all documents are actually tendered if after 20 days of the date of attachment. Thus while the date noted on the title will probably not be the legal date of perfection, it is necessary that it be done so that the legal date of perfection can be fixed.
In situations such as this one, KRS 186A.195(5) determines the legal date of perfection. Naturally, it would also answer questions of priority regarding titled vehicles, as it fixes the time of perfection, but that is not an issue in this case.
CUNNINGHAM, J., joins.