Request By:
Mr. Jerry Roney
Vice President
Colwell Mortgage Corporation
301 South Perimeter Park Drive
Suite 227
Nashville, Tennessee 37211
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Colwell Mortgage Corporation finances the purchase of mobile homes. Generally, you say, a retail installment contract executed for the purchase of a mobile home is for a term of ten to twenty years.
Your specific question is as follows:
"Under Kentucky law, can a customer's name be amended on a financing statement to reflect a change in ownership of the security while leaving the lien thereon intact? If not, is there another procedure whereby a creditor does not relinquish the rights of first lienholder when perfecting a security interest in property that has changed hands? Given the term of these retail installment contracts, a mobile home could change hands several times before a loan is paid in full."
KRS 355.9-402(5) reads:
"(5) The term 'financing statement' as used in this article means the original financing statement and any amendments but if any amendment adds collateral, it is effective as to the added collateral only from the filing date of the amendment."
You have written that sometimes a purchaser of one of your mobile homes will desire to sell it to another person. In fact, you say that during the life of one of your loans covering a mobile home purchase, the ownership of the mobile home may change several times.
A financing statement may be amended under KRS 355.9-402(5), but the code does not indicate whether an amendment calls for the filing of a complete new financing statement or the filing of a statement giving appropriate information as to the points to be amended. An amendment to a financing statement may amend any aspect of the statement, and may add new collateral. See Anderson, Uniform Commercial Code, Vol. 4, § 9-402:36.
It is our opinion that a financing statement may be amended for the purpose of showing new ownership of the mobile home by filing a document with the county clerk which precisely states the change in the ownership of the mobile home by giving the owner's name and address as stated in the original financing statement and the new owner's name and address, as well as the secured party's address. Such amendment should explicitly state information which will definitely identify the original financing statement on file in the clerk's office, and it should explicitly refer to the collateral, i.e., the particular mobile home involved. A conservative practice requires the amendment to be signed by the creditor and new debtor and dated. See U.C.C. Practice Handbooks 1-6, ALI and ABA, Secured Transactions, Oscar Spivack, p. 156. The effective period of the original financing statement is not affected by the mere change in ownership of the mobile home. See KRS 355.9-403 for effective date of a financing statement, and Vanover v. Bank of Alexandria, Ky.App., 644 S.W.2d 948 (1983). Thus the security or lien is intact under proper filing of the amendment to the financing statement. The Court of Appeals held, in General Elec. Corp. v. Fancher, Ky.App., 600 S.W.2d 472 (1978), that the amendment to an original financing statement must be filed in the county which is the debtor's residence at the time the amendment is filed, if the creditor's lien is to remain effective. The court conceded that its interpretation stresses opportunity for notice, and thus protection of subsequent buyers or creditors of the property. It must be pointed out that in the General Electric Credit Corporation case, the secured party had notice of the debtor's change of address. The court wrote, in Riley v. Miller, Ky.App., 549 S.W.2d 314 (1977), that the most important purpose behind the requirements set forth in KRS 355.9-402(1) is to put subsequent creditors on notice.