Court Opinion

ID: 7921666
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:24:18.543491+00
Date Added: 2024-06-11T16:33:05.972802
License: Public Domain

Six, J.,
dissenting: The question is whether the Court of Appeals has erroneously interpreted and improperly applied K.S.A. 1993 Supp. 79-3102(d)(3) to determine that die subject mortgage is exempt from the mortgage registration fee. The question is not, as the majority states, “whether the mortgagee is subject to a second mortgage registration fee when the new mortgage, which has been refinanced with the original lender and which includes the principal indebtedness from the original loan, is filed.” I do not agree that the principal indebtedness from die original loan is involved in the second borrowing. The facts as stated in the Court of Appeals’ opinion will help in developing my analysis. See In re Application of Zivanovic, 22 Kan. App. 2d 184, 185, 913 P.2d 224 (1996).
The mortgage registration fee is a tax. See Missouri Pacific Railroad Co. v. Deering, 184 Kan. 283, 286, 336 P.2d 482 (1959) (“Neither the legislature nor this court has shown any disposition' to disguise the evident fact that the mortgage registration fee is a tax.”). Because the mortgage registration fee is a tax, an exemption must be strictiy construed against the party who claims the exemption, and the party must be clearly within the exemption provisions. See Meadowlark Hill, Inc. v. Kearns, 211 Kan. 35, Syl. ¶ 2, 505 P.2d 1127 (1973).
■ The protection of notice is sought by the holder of the mortgage. K.S.A. 79-3107 provides that no mortgage shall be received in evidence and no judgment enforcing such mortgage can be obtained unless the mortgage registration fee has been paid.
All parties agree that under K.S.A. 1993 Supp. 79-3102(d)(3), a bank refinancing a mortgage that it still holds at the time of refinancing falls within the exemption. The parties diságree about whetiier the exemption applies to the refinanced mortgage if the original mortgagee has assigned the original mortgage before the refinancing.
*196Riley County argues that when the First State Bank assigned the first mortgage, First State Bank transferred all of its interest in that mortgage to the assignee. Therefore, First State Bank should not be entitled to claim die exemption when the borrower returns and obtains refinancing from First State Bank. I agree.
If the original lender is the refinancing bank but has previously assigned the original mortgage and indebtedness to another financial institution, then the refinancing is a new transaction. The refinancing bank advances new loan proceeds (all or part of which will.be used to pay off the prior mortgage held by the assignee); a new note and a new mortgage document will be recorded by the refinancing bank; and the prior mortgage will be released after the assignee is paid off with funds advanced by the refinancing bank.
Attorney General Opinion Nos. 93-82 and 93-156 reasoned that after the original mortgage has been assigned, the new funds should not be treated as the same “principal indebtedness” covered by the original mortgage under 79-3102(d)(3). The exemption should not be available to the original mortgagee unless the mortgage is reassigned to it by the time refinancing is sought. I agree with the Attorney General’s analysis.
If the original lender has assigned the mortgage before the mortgagor seeks refinancing with the original lender, the original debt is held by the assignee, not the original lender. When the assigned debt is paid off, a new “indebtedness” is created — not the same indebtedness on which mortgage registration tax was paid when the original mortgage was recorded.
The problem with the majority’s analysis is that First State Bank is the taxpayer, not Zivanovic. “The tax is imposed upon the mortgagee and not upon the mortgagor.” Misco Industries, Inc. v. Board of Sedgwick County Comm’rs, 235 Kan. 958, 961, 685 P.2d 866 (1984). K.S.A. 1993 Supp. 79-3102 places the responsibility for payment of the registration tax on the party seeking to obtain the protection provided by the recording.
The majority cites no authority for its conclusion that the second note/mortgage merely renews the first and therefore represents and secures the same debt as the first when the second note and mortgage are executed by a lender other than the one which holds *197the first. The Zivanovics owed nothing to First State Bank at the time they sought refinancing of their original mortgage from First State Bank. Therefore, the “indebtedness” under the new mortgage should not be considered as the same indebtedness under the original mortgage, for purposes of the exemption.
The amicus curiae brief of the Kansas Register of Deeds Association crystallizes the issue by saying that we must decide whether the fee exemption follows the indebtedness or the debtor. K.S.A. 1993 Supp. 79-3102 is most internally consistent if the (d)(3) exemption is read as following the indebtedness. The exemption should follow the holder of the mortgage.
I disagree with the majority’s conclusion that before the 1985 amendment to 79-3102(d)(3) the mortgage at issue here would have been exempt, and an assignment of a mortgage would be irrelevant to the application of the exemption. I also disagree with the majority’s conclusions on legislative history. There is no indication of the Kansas Bankers Association (KBA) support for the language of H.B. 2354 at issue here. The KBA did support an exemption for any mortgage, all or part of which is insured by the federal government or an agency thereof. See K.S.A. 1993 Supp. 79-3102(d)(6). The minutes of the Committee on Commercial and Financial Institutions of February 28, 1985, reflect a submission from the KBA commenting favorably on H.B. 2354, currently 79-3102(d)(6). See Heinemann, Legislation 1985,54 J.K.B.A. 157,187 (1985) (referencing [d][6] in H.B. 2354, not [d][3]).
According to the minutes of the Committee on Financial Institution and Insurance of March 7, 1985, the phrase “or their assigns” was added to 79-3102(d)(3) by Representative David Louis’ motion, seconded by Representative Bob Ott. Representative David Heinemann authored H.B. 2354. Representative Heinemann’s article does not reference Representative Louis’ amendment. No clue is offered as to the legislative intent behind the phrase “or their assigns.”
I disagree with the majority’s characterization of the reassignment of the original mortgage back to the original mortgagor to avoid a new registration fee upon refinancing as a “useless act.” The majority decision shifts to the public not only the costs asso*198dated with recording these newly exempted mortgages but also the costs of providing protection to holders of those mortgages.
I would reverse the Court of Appeals, the district court, and BOTA. No tax refund should have been ordered.
Allegrucci and Davis, JJ., join in the foregoing dissent.