Judges: Carla J. Stovall, Attorney General of Kansas
Filed Date: 9/12/2002
Status: Precedential
Modified Date: 7/5/2016
Richard A. Euson County Counselor 525 North Main, Suite 359 Wichita, Kansas 67203-3790
Dear Mr. Euson:
As Sedgwick County Counselor and on behalf of the Sedgwick County Register of Deeds, you request our opinion regarding assessment of mortgage registration fees for the filing of certain "master construction mortgages" and related documents. Your question is based on the following scenario:
"1) Developer obtains authority from Bank for a set amount of credit.
"2) The Developer initially mortgages properties A, B, C, D, and E as collateral for the debt.
"3) The Bank has the master construction mortgage recorded for properties A, B, C, D, and E, and it pays the mortgage registration tax on the amount secured by the original mortgage.
"4) The properties mortgaged are vacant lots which the Developer then builds new homes on.
"5) After building the homes, the Developer sells properties A and B. The proceeds from the sale are used to pay down the line of credit. The Bank issues a partial release for properties A and B.
"6) The Developer then draws on the line of credit to purchase properties F and G, which also are vacant lots to be developed. The Bank records a mortgage modification agreement that purports to add properties F and G to the master mortgage as ``additional collateral.' A K.S.A.
79-3102 (d)(3) affidavit is filed with the mortgage modification agreement and no mortgage registration tax is paid when the mortgage modification agreement is filed."
You provide samples of the documents in question and pose the following questions:
"1) Are the documents titled ``Mortgage Modification Agreements' exempt from mortgage registration tax under K.S.A.
79-3102 (d)(2), or in other words does this qualify as ``additional security' for the ``same indebtedness'?
"2) Are the documents titled ``Mortgage Modification Agreements' exempt from mortgage registration tax under K.S.A.
"3) Is it required that the document titled ``Mortgage Modification Agreement' state an amount of indebtedness related to the mortgage modification?
"4) Does the form of the sample affidavit meet the requirements of K.S.A.
"5) What action, if any, should the Register of Deeds take if he or she reasonably believes an affidavit submitted under K.S.A.
79-3102 (d)(3) misstates a material fact?"
K.S.A.
"(d) No registration fee whatsoever shall be paid, collected or required for or on:
. . . .
"(2) any mortgage or other instrument given for the purpose of providing additional security for the same indebtedness, where the registration fee herein provided for has been paid on the original mortgage or instrument;
"(3) any mortgage or other instrument upon that portion of the consideration stated in the mortgage tendered for filing which is verified by affidavit to be principal indebtedness covered or included in a previously recorded mortgage or other instrument with the same lender or their assigns upon which the registration fee herein provided for has been paid;. . . ."3
You indicate your belief that the exception stated in K.S.A.
To our knowledge, the only appellate court cases and prior opinions directly addressing subsection (d)(2) of K.S.A.
Whether the mortgage modification agreement secures the "same indebtedness" as the original mortgage upon which fees were paid must be determined for application of either subsection (d)(2) or (d)(3). The issue you present here is whether a revolving line of credit can be considered the same indebtedness, when the debt is continually being paid down and subsequent advances, or readvances, extended. This office has addressed this issue twice previously and has concluded that "a mortgage containing a future advance clause secures initial and future advances up to the maximum amount stated in the mortgage as being secured. Thus, mortgage registration fees shall be imposed on the maximum amount stated as being secured and no additional fees shall be charged for future advances unless and until the mortgagee refiles the mortgage to secure more than the maximum amount stated as secured in the original mortgage."10 There have been no statutory amendments or recorded cases that would alter this conclusion. Even though money changes hands, the debt remains the same. While we understand the Register of Deeds' concern that use of a close-ended future advance clause appears to be creative way to circumvent the spirit of the law, we believe that unless the statutes are amended to preclude its usage without paying additional fees whenever future advances or readvances are made, it is within the letter of the exemption, assuming, for purposes of subsection (d)(3), an affidavit is properly filed and the other requirements of the pertinent exception are met.
With regard to the form of the affidavit, the only requirement set forth in the statute is that it verify what portion of the consideration stated in the new instrument is principal indebtedness covered by a previously recorded mortgage or other instrument upon which the registration fee has been paid. It is our opinion that the affidavit should clearly state that the instrument to which it is attached secures the same indebtedness (or whatever portion of that indebtedness) covered by a previously recorded mortgage, identify the previously recorded mortgage and confirm that the registration fee was in fact paid on that previously recorded mortgage. The sample affidavit you have provided lists previously filed instruments upon which the fee has been paid, notes that the lender was the same for each, and identifies where the previously filed instruments may be found in the register of deeds files. It also states that the new instrument to be filed contains no new indebtedness. However, it does not verify that the new instrument secures the same indebtedness as is secured by those instruments that are listed in the affidavit. Therefore, it is our opinion that the sample affidavit does not meet the requirements of K.S.A.
With regard to what action, if any, a register of deeds should take if he or she reasonably believes that an affidavit submitted under K.S.A.
In conclusion, property that is added to a mortgage may be considered "additional security" for purposes of the K.S.A.
Very truly yours,
CARLA J. STOVALL Attorney General of Kansas
Julene L. Miller Deputy Attorney General
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