ENROLLED
Senate Bill No. 441
(By Senator Grubb)
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[Passed March 11, 1995; in effect ninety days from passage.]
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AN ACT to amend and reenact sections one hundred five and two
hundred six, article one, chapter forty-six of the code of
West Virginia, one thousand nine hundred thirty-one, as
amended; to amend and reenact section one hundred four,
article four of said chapter; to amend and reenact section
one hundred fourteen, article five of said chapter; to
amend and reenact article eight of said chapter; to amend
and reenact sections one hundred three, one hundred five,
one hundred six, two hundred three, three hundred one,
three hundred two, three hundred four, three hundred five,
three hundred six, three hundred nine and three hundred twelve, article nine of said chapter; and to further amend
said article by adding thereto two new sections,
designated sections one hundred fifteen and one hundred
sixteen, all relating to the uniform commercial code
(UCC); investment securities; territorial application of
the UCC; parties' power to choose applicable law; statute
of frauds for kinds of personal property not otherwise
covered; bank deposits and collections; definitions;
letters of credit; issuer's duty and privilege to honor;
right to reimbursement; investment securities; short
title; definitions; rules for determining whether certain
obligations and interests are securities or financial
assets; acquisition of security or financial asset or
interest therein; notice of adverse claim; control;
whether indorsement, instruction or entitlement order is
effective; warranties in direct holding; warranties in
indirect holding; applicability; choice of law; clearing
corporation rules; creditor's legal process; statute of
frauds inapplicable; evidentiary rules concerning certificated securities; securities intermediary and
others not liable to adverse claimant; securities
intermediary as purchaser for value; issuer; issuer's
responsibility and defenses; notice of defect or defense;
staleness as notice of defect or defense; effect of
issuer's restriction on transfer; effect of unauthorized
signature on security certificate; completion or
alteration of security certificate; rights and duties of
issuer with respect to registered owners; effect of
signature of authenticating trustee, registrar or transfer
agent; issuer's lien; overissue; transfer of certificated
and uncertificated securities; delivery; rights of
purchaser; protected purchaser; indorsement; instruction;
effect of guaranteeing signature, indorsement or
instruction; purchaser's right to requisites for
registration of transfer; registration; duty of issuer to
register transfer; assurance that indorsement or
instruction is effective; demand that issuer not register
transfer; wrongful registration; replacement of lost, destroyed or wrongfully taken security certificate;
obligation to notify issuer of lost, destroyed or
wrongfully taken security certificate; authenticating
trustee, transfer agent and registrar; security
entitlements; securities account; acquisition of security
entitlement from securities intermediary; assertion of
adverse claim against entitlement holder; property
interest of entitlement holder in financial asset held by
securities intermediary; duty of securities intermediary
to maintain financial asset; duty of securities
intermediary with respect to payments and distributions;
duty of securities intermediary to exercise rights as
directed by entitlement holder; duty of securities
intermediary to comply with entitlement order; duty of
securities intermediary to change entitlement holder's
position to other form of security holding; specification
of duties of securities intermediary by other statute or
regulation; manner of performance of duties by securities
intermediary and exercise of rights of entitlement holder; rights of purchaser of security entitlement from
entitlement holder; priority among security interests and
entitlement holders; savings clause; secured transactions
and sales of accounts and chattel paper; perfection of
security interests in multiple state transactions;
definitions; account and general intangibles defined;
investment property; security interest arising in purchase
or delivery of financial asset; attachment and
enforceability of security interest; proceeds; formal
requisites; persons who take priority over unperfected
security interests; rights of lien creditor; when filing
is required to perfect security interest; security
interests to which filing provisions of this article do
not apply; perfection of security interest in instruments,
documents and goods covered by documents; perfection by
permissive filing; temporary perfection without filing or
transfer of possession; when possession by secured party
perfects security interest without filing; proceeds;
secured party's rights on disposition of collateral; protection of purchasers of instruments, documents and
securities; and priorities among conflicting security
interests in the same collateral.
Be it enacted by the Legislature of West Virginia:
That sections one hundred five and two hundred six,
article one, chapter forty-six of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, be amended
and reenacted; that section one hundred four, article four of
said chapter be amended and reenacted; that section one hundred
fourteen, article five of said chapter be amended and
reenacted; that article eight of said chapter be amended and
reenacted; that sections one hundred three, one hundred five,
one hundred six, two hundred three, three hundred one, three
hundred two, three hundred four, three hundred five, three
hundred six, three hundred nine and three hundred twelve,
article nine of said chapter be amended and reenacted; and that
said article be further amended by adding thereto two new
sections, designated sections one hundred fifteen and one
hundred sixteen, all to read as follows:
ARTICLE 1. GENERAL PROVISIONS.
§46-1-105. Territorial application of this chapter; parties'
power to choose applicable law.
(1) Except as provided hereafter in this section, when a
transaction bears a reasonable relation to this state and also
to another state or nation the parties may agree that the law
either of this state or of such other state or nation shall
govern their rights and duties. Failing such agreement this
chapter applies to transactions bearing an appropriate relation
to this state.
(2) Where one of the following provisions of this chapter
specifies the applicable law, that provision governs and a
contrary agreement is effective only to the extent permitted by
the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods. Section 2-402.
Applicability of the article on bank deposits and
collections. Section 4-102.
Applicability of the article on investment securities.
Section 8-110.
Perfection provisions of the article on secured transactions. Section 9-103.
§46-1-206. Statute of frauds for kinds of personal property
not otherwise covered.
(1) Except in the cases described in subsection (2) of
this section a contract for the sale of personal property is
not enforceable by way of action or defense beyond five
thousand dollars in amount or value of remedy unless there is
some writing which indicates that a contract for sale has been
made between the parties at a defined or stated price,
reasonably identifies the subject matter, and is signed by the
party against whom enforcement is sought or by his authorized
agent.
(2) Subsection (1) of this section does not apply to
contracts for the sale of goods (section 2-201) nor of
securities (section 8-113) nor to security agreements (section
9-203).
ARTICLE 4. BANK DEPOSITS AND COLLECTIONS.
§46-4-104. Definitions and index of definitions.
(a) In this article unless the context otherwise requires:
(1) "Account" means any deposit or credit account with a bank, including demand, time, savings, passbook, share draft,
or like account, other than an account evidenced by a
certificate of deposit;
(2) "Afternoon" means the period of a day between noon and
midnight;
(3) "Banking day" means the part of a day on which a bank
is open to the public for carrying on substantially all of its
banking functions;
(4) "Clearing house" means an association of banks or
other payors regularly clearing items;
(5) "Customer" means a person having an account with a
bank or for whom a bank has agreed to collect items, including
a bank that maintains an account at another bank;
(6) "Documentary draft" means a draft to be presented for
acceptance or payment if specified documents, certificated
securities (section 8-102) or instructions for uncertificated
securities (section 8-102), or other certificates, statements
or the like are to be received by the drawee or other payor
before acceptance or payment of the draft;
(7) "Draft" means a draft as defined in section 3-104 or
an item, other than an instrument, that is an order;
(8) "Drawee" means a person ordered in a draft to make
payment;
(9) "Item" means an instrument or a promise or order to
pay money handled by a bank for collection or payment. The
term does not include a payment order governed by article
four-a or a credit or debit card slip;
(10) "Midnight deadline" with respect to a bank is
midnight on its next banking day following the banking day on
which it receives the relevant item or notice or from which the
time for taking action commences to run, whichever is later;
(11) "Settle" means to pay in cash, by clearing-house
settlement, in a charge or credit or by remittance, or
otherwise as agreed. A settlement may be either provisional or
final;
(12) "Suspends payments" with respect to a bank means that
it has been closed by order of the supervisory authorities,
that a public officer has been appointed to take it over or that it ceases or refuses to make payments in the ordinary
course of business.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Agreement for electronic
presentment"Section 4-110.
"Bank"Section 4-105.
"Collecting bank"Section 4-105.
"Depositary bank"Section 4-105.
"Intermediary bank"Section 4-105.
"Payor bank"Section 4-105.
"Presenting bank"Section 4-105.
"Presentment notice"Section 4-110.
(c) The following definitions in other articles of this
chapter apply to this article:
"Acceptance"Section 3-409.
"Alteration"Section 3-407.
"Cashier's check"Section 3-104.
"Certificate of deposit"Section 3-104.
"Certified check" Section 3-409.
"Check"Section 3-104.
"Draft"Section 3-104.
"Good faith"Section 3-103.
"Holder in due course"Section 3-302.
"Instrument"Section 3-104.
"Notice of dishonor"Section 3-503.
"Order"Section 3-103.
"Ordinary care"Section 3-103.
"Person entitled to enforce"Section 3-301.
"Presentment"Section 3-501.
"Promise"Section 3-103.
"Prove"Section 3-103.
"Teller's check"Section 3-104.
"Unauthorized signature"Section 3-403.
(d) In addition article one contains general definitions
and principles of construction and interpretation applicable
throughout this article.
ARTICLE 5. LETTERS OF CREDIT.
§46-5-114. Issuer's duty and privilege to honor; right to
reimbursement.
(1) An issuer must honor a draft or demand for payment
which complies with the terms of the relevant credit regardless
of whether the goods or documents conform to the underlying
contract for sale or other contract between the customer and
the beneficiary. The issuer is not excused from honor of such
a draft or demand by reason of an additional general term that
all documents must be satisfactory to the issuer, but an issuer
may require that specified documents must be satisfactory to
it.
(2) Unless otherwise agreed when documents appear on their
face to comply with the terms of a credit but a required
document does not in fact conform to the warranties made on
negotiation or transfer of a document of title (section 7-507)
or of a certificated security (section 8-108) or is forged or
fraudulent or there is fraud in the transaction:
(a) The issuer must honor the draft or demand for payment
if honor is demanded by a negotiating bank or other holder of
the draft or demand which has taken the draft or demand under the credit and under circumstances which would make it a holder
in due course (section 3-302) and in an appropriate case would
make it a person to whom a document of title has been duly
negotiated (section 7-502) or a bona fide purchaser of a
certificated security (section 8-302); and
(b) In all other cases as against its customer, an issuer
acting in good faith may honor the draft or demand for payment
despite notification from the customer of fraud, forgery or
other defect not apparent on the face of the documents but a
court of appropriate jurisdiction may enjoin such honor.
(3) Unless otherwise agreed an issuer which has duly
honored a draft or demand for payment is entitled to immediate
reimbursement of any payment made under the credit and to be
put in effectively available funds not later than the day
before maturity of any acceptance made under the credit.
(4) When a credit provides for payment by the issuer on
receipt of notice that the required documents are in the
possession of a correspondent or other agent of the issuer:
(a) Any payment made on receipt of such notice is conditional; and
(b) The issuer may reject documents which do not comply
with the credit if it does so within three banking days
following its receipt of the documents; and
(c) In the event of such rejection, the issuer is entitled
by charge-back or otherwise to return of the payment made.
(5) In the case covered by subsection (4) of this section
failure to reject documents within the time specified in
subdivision (b) of said subsection constitutes acceptance of
the documents and makes the payment final in favor of the
beneficiary.
ARTICLE 8. INVESTMENT SECURITIES.
PART 1. SHORT TITLE AND GENERAL MATTERS.
§46-8-101. Short title.
This article may be cited as uniform commercial
code--investment securities.
§46-8-102. Definitions.
(a) In this article:
(1) "Adverse claim" means a claim that a claimant has a
property interest in a financial asset and that it is a violation of the rights of the claimant for another person to
hold, transfer, or deal with the financial asset.
(2) "Bearer form", as applied to a certificated security,
means a form in which the security is payable to the bearer of
the security certificate according to its terms but not by
reason of an indorsement.
(3) "Broker" means a person defined as a broker or dealer
under the federal securities laws, but without excluding a bank
acting in that capacity.
(4) "Certificated security" means a security that is
represented by a certificate.
(5) "Clearing corporation" means:
(i) A person that is registered as a "clearing agency"
under the federal securities laws;
(ii) A federal reserve bank; or
(iii) Any other person that provides clearance or
settlement services with respect to financial assets that would
require it to register as a clearing agency under the federal
securities laws but for an exclusion or exemption from the registration requirement, if its activities as a clearing
corporation, including promulgation of rules, are subject to
regulation by a federal or state governmental authority.
(6) "Communicate" means to:
(i) Send a signed writing; or
(ii) Transmit information by any mechanism agreed upon by
the persons transmitting and receiving the information.
(7) "Entitlement holder" means a person identified in the
records of a securities intermediary as the person having a
security entitlement against the securities intermediary. If
a person acquires a security entitlement by virtue of section
8-501(b)(2) or (3), that person is the entitlement holder.
(8) "Entitlement order" means a notification communicated
to a securities intermediary directing transfer or redemption
of a financial asset to which the entitlement holder has a
security entitlement.
(9) "Financial asset", except as otherwise provided in
section 8-103, means:
(i) A security;
(ii) An obligation of a person or a share, participation,
or other interest in a person or in property or an enterprise
of a person, which is, or is of a type, dealt in or traded on
financial markets or which is recognized in any area in which
it is issued or dealt in as a medium for investment; or
(iii) Any property that is held by a securities
intermediary for another person in a securities account if the
securities intermediary has expressly agreed with the other
person that the property is to be treated as a financial asset
under this article. As context requires, the term means either
the interest itself or the means by which a person's claim to
it is evidenced, including a certificated or uncertificated
security, a security certificate or a security entitlement.
(10) "Good faith", for purposes of the obligation of good
faith in the performance or enforcement of contracts or duties
within this article, means honesty in fact and the observance
of reasonable commercial standards of fair dealing.
(11) "Indorsement" means a signature that alone or
accompanied by other words is made on a security certificate in registered form or on a separate document for the purpose of
assigning, transferring or redeeming the security or granting
a power to assign, transfer or redeem it.
(12) "Instruction" means a notification communicated to
the issuer of an uncertificated security which directs that the
transfer of the security be registered or that the security be
redeemed.
(13) "Registered form", as applied to a certificated
security, means a form in which:
(i) The security certificate specifies a person entitled
to the security; and
(ii) A transfer of the security may be registered upon
books maintained for that purpose by or on behalf of the
issuer, or the security certificate so states.
(14) "Securities intermediary" means:
(i) A clearing corporation; or
(ii) A person, including a bank or broker, that in the
ordinary course of its business maintains securities accounts
for others and is acting in that capacity.
(15) "Security", except as otherwise provided in section
8-103, means an obligation of an issuer or a share,
participation or other interest in an issuer or in property or
an enterprise of an issuer:
(i) Which is represented by a security certificate in
bearer or registered form, or the transfer of which may be
registered upon books maintained for that purpose by or on
behalf of the issuer;
(ii) Which is one of a class or series or by its terms is
divisible into a class or series of shares, participations,
interests or obligations; and
(iii) Which:
(A) Is, or is of a type, dealt in or traded on securities
exchanges or securities markets; or
(B) Is a medium for investment and by its terms expressly
provides that it is a security governed by this article.
(16) "Security certificate" means a certificate
representing a security.
(17) "Security entitlement" means the rights and property interest of an entitlement holder with respect to a financial
asset specified in Part 5.
(18) "Uncertificated security" means a security that is
not represented by a certificate.
(b) Other definitions applying to this article and the
sections in which they appear are:
"Appropriat
e person"Sect
ion 8-107
"Control"Section 8-106
"Delivery"Section 8-301
"Investment company security"Section 8-103
"Issuer"Section 8-201
"Overissue"
Section 8-210
"Protected purchaser"Section 8-303
"Securities account"Section 8-501
(c) In addition, article one contains general definitions
and principles of construction and interpretation applicable
throughout this article.
(d) The characterization of a person, business or
transaction for purposes of this article does not determine the characterization of the person, business or transaction for
purposes of any other law, regulation or rule.
§46-8-103. Rules for determining whether certain obligations
and interests are securities or financial assets.
(a) A share or similar equity interest issued by a
corporation, business trust, joint stock company or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an
investment company under the federal investment company laws,
an interest in a unit investment trust that is so registered or
a face-amount certificate issued by a face-amount certificate
company that is so registered. Investment company security
does not include an insurance policy or endowment policy or
annuity contract issued by an insurance company.
(c) An interest in a partnership or limited liability
company is not a security unless it is dealt in or traded on
securities exchanges or in securities markets, its terms
expressly provide that it is a security governed by this article or it is an investment company security. However, an
interest in a partnership or limited liability company is a
financial asset if it is held in a securities account.
(d) A writing that is a security certificate is governed
by this article and not by article three, even though it also
meets the requirements of that article. However, a negotiable
instrument governed by article three is a financial asset if it
is held in a securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a
financial asset.
(f) A commodity contract, as defined in section 9-115, is
not a security or a financial asset.
§46-8-104. Acquisition of security or financial asset or
interest therein.
(a) A person acquires a security or an interest therein,
under this article, if:
(1) The person is a purchaser to whom a security is
delivered pursuant to section 8-301; or
(2) The person acquires a security entitlement to the security pursuant to section 8-501.
(b) A person acquires a financial asset, other than a
security, or an interest therein, under this article, if the
person acquires a security entitlement to the financial asset.
(c) A person who acquires a security entitlement to a
security or other financial asset has the rights specified in
Part 5, but is a purchaser of any security, security
entitlement, or other financial asset held by the securities
intermediary only to the extent provided in section 8-503.
(d) Unless the context shows that a different meaning is
intended, a person who is required by other law, regulation,
rule or agreement to transfer, deliver, present, surrender,
exchange or otherwise put in the possession of another person
a security or financial asset satisfies that requirement by
causing the other person to acquire an interest in the security
or financial asset pursuant to subsection (a) or (b) of this
section.
§46-8-105. Notice of adverse claim.
(a) A person has notice of an adverse claim if:
(1) The person knows of the adverse claim;
(2) The person is aware of facts sufficient to indicate
that there is a significant probability that the adverse claim
exists and deliberately avoids information that would establish
the existence of the adverse claim; or
(3) The person has a duty, imposed by statute or
regulation, to investigate whether an adverse claim exists, and
the investigation so required would establish the existence of
the adverse claim.
(b) Having knowledge that a financial asset or interest
therein is or has been transferred by a representative imposes
no duty of inquiry into the rightfulness of a transaction and
is not notice of an adverse claim. However, a person who knows
that a representative has transferred a financial asset or
interest therein in a transaction that is, or whose proceeds
are being used, for the individual benefit of the
representative or otherwise in breach of duty has notice of an
adverse claim.
(c) An act or event that creates a right to immediate performance of the principal obligation represented by a
security certificate or sets a date on or after which the
certificate is to be presented or surrendered for redemption or
exchange does not itself constitute notice of an adverse claim
except in the case of a transfer more than:
(1) One year after a date set for presentment or surrender
for redemption or exchange; or
(2) Six months after a date set for payment of money
against presentation or surrender of the certificate, if money
was available for payment on that date.
(d) A purchaser of a certificated security has notice of
an adverse claim if the security certificate:
(1) Whether in bearer or registered form, has been
indorsed "for collection" or "for surrender" or for some other
purpose not involving transfer; or
(2) Is in bearer form and has on it an unambiguous
statement that it is the property of a person other than the
transferor, but the mere writing of a name on the certificate
is not such a statement.
(e) Filing of a financing statement under article nine is
not notice of an adverse claim to a financial asset.
§46-8-106. Control.
(a) A purchaser has "control" of a certificated security
in bearer form if the certificated security is delivered to the
purchaser.
(b) A purchaser has "control" of a certificated security
in registered form if the certificated security is delivered to
the purchaser and:
(1) The certificate is indorsed to the purchaser or in
blank by an effective indorsement; or
(2) The certificate is registered in the name of the
purchaser, upon original issue or registration of transfer by
the issuer.
(c) A purchaser has "control" of an uncertificated
security if:
(1) The uncertificated security is delivered to the
purchaser; or
(2) The issuer has agreed that it will comply with instructions originated by the purchaser without further
consent by the registered owner.
(d) A purchaser has "control" of a security entitlement
if:
(1) The purchaser becomes the entitlement holder; or
(2) The securities intermediary has agreed that it will
comply with entitlement orders originated by the purchaser
without further consent by the entitlement holder.
(e) If an interest in a security entitlement is granted by
the entitlement holder to the entitlement holder's own
securities intermediary, the securities intermediary has
control.
(f) A purchaser who has satisfied the requirements of
subdivision (2), subsection (c) of this section or subdivision
(2), subsection (d) of this section has control even if the
registered owner in the case of subdivision (2), subsection(c)
of this section), subsection (c) of this section or the
entitlement holder in the case of subdivision (2), subsection
(d) of this section retains the right to make substitutions for the uncertificated security or security entitlement, to
originate instructions or entitlement orders to the issuer or
securities intermediary, or otherwise to deal with the
uncertificated security or security entitlement.
(g) An issuer or a securities intermediary may not enter
into an agreement of the kind described in subdivision (2),
subsection (c) of this section or subdivision (2), subsection
(d) of this section without the consent of the registered owner
or entitlement holder, but an issuer or a securities
intermediary is not required to enter into such an agreement
even though the registered owner or entitlement holder so
directs. An issuer or securities intermediary that has entered
into such an agreement is not required to confirm the existence
of the agreement to another party unless requested to do so by
the registered owner or entitlement holder.
§46-8-107. Whether indorsement, instruction or entitlement
order is effective.
(a) "Appropriate person" means:
(1) With respect to an indorsement, the person specified
by a security certificate or by an effective special indorsement to be entitled to the security;
(2) With respect to an instruction, the registered owner
of an uncertificated security;
(3) With respect to an entitlement order, the entitlement
holder;
(4) If the person designated in subdivision (1), (2) or
(3) of this subsection is deceased, the designated person's
successor taking under other law or the designated person's
personal representative acting for the estate of the decedent;
or
(5) If the person designated in subdivision (1), (2) or
(3) of this subsection lacks capacity, the designated person's
guardian, conservator or other similar representative who has
power under other law to transfer the security or financial
asset.
(b) An indorsement, instruction or entitlement order is
effective if:
(1) It is made by the appropriate person;
(2) It is made by a person who has power under the law of agency to transfer the security or financial asset on behalf of
the appropriate person, including, in the case of an
instruction or entitlement order, a person who has control
under section 8-106(c)(2) or (d)(2); or
(3) The appropriate person has ratified it or is otherwise
precluded from asserting its ineffectiveness.
(c) An indorsement, instruction or entitlement order made
by a representative is effective even if:
(1) The representative has failed to comply with a
controlling instrument or with the law of the state having
jurisdiction of the representative relationship, including any
law requiring the representative to obtain court approval of
the transaction; or
(2) The representative's action in making the indorsement,
instruction or entitlement order or using the proceeds of the
transaction is otherwise a breach of duty.
(d) If a security is registered in the name of or
specially indorsed to a person described as a representative,
or if a securities account is maintained in the name of a person described as a representative, an indorsement,
instruction or entitlement order made by the person is
effective even though the person is no longer serving in the
described capacity.
(e) Effectiveness of an indorsement, instruction or
entitlement order is determined as of the date the indorsement,
instruction or entitlement order is made, and an indorsement,
instruction or entitlement order does not become ineffective by
reason of any later change of circumstances.
§46-8-108. Warranties in direct holding.
(a) A person who transfers a certificated security to a
purchaser for value warrants to the purchaser, and an indorser,
if the transfer is by indorsement, warrants to any subsequent
purchaser, that:
(1) The certificate is genuine and has not been materially
altered;
(2) The transferor or indorser does not know of any fact
that might impair the validity of the security;
(3) There is no adverse claim to the security;
(4) The transfer does not violate any restriction on
transfer;
(5) If the transfer is by indorsement, the indorsement is
made by an appropriate person or if the indorsement is by an
agent, the agent has actual authority to act on behalf of the
appropriate person; and
(6) The transfer is otherwise effective and rightful.
(b) A person who originates an instruction for
registration of transfer of an uncertificated security to a
purchaser for value warrants to the purchaser that:
(1) The instruction is made by an appropriate person, or
if the instruction is by an agent, the agent has actual
authority to act on behalf of the appropriate person;
(2) The security is valid;
(3) There is no adverse claim to the security; and
(4) At the time the instruction is presented to the
issuer:
(i) The purchaser will be entitled to the registration of
transfer;
(ii) The transfer will be registered by the issuer free
from all liens, security interests, restrictions and claims
other than those specified in the instruction;
(iii) The transfer will not violate any restriction on
transfer; and
(iv) The requested transfer will otherwise be effective
and rightful.
(c) A person who transfers an uncertificated security to
a purchaser for value and does not originate an instruction in
connection with the transfer warrants that:
(1) The uncertificated security is valid;
(2) There is no adverse claim to the security;
(3) The transfer does not violate any restriction on
transfer; and
(4) The transfer is otherwise effective and rightful.
(d) A person who indorses a security certificate warrants
to the issuer that:
(1) There is no adverse claim to the security; and
(2) The indorsement is effective.
(e) A person who originates an instruction for
registration of transfer of an uncertificated security warrants
to the issuer that:
(1) The instruction is effective; and
(2) At the time the instruction is presented to the issuer
the purchaser will be entitled to the registration of transfer.
(f) A person who presents a certificated security for
registration of transfer or for payment or exchange warrants to
the issuer that the person is entitled to the registration,
payment or exchange, but a purchaser for value and without
notice of adverse claims to whom transfer is registered
warrants only that the person has no knowledge of any
unauthorized signature in a necessary indorsement.
(g) If a person acts as agent of another in delivering a
certificated security to a purchaser, the identity of the
principal was known to the person to whom the certificate was
delivered, and the certificate delivered by the agent was
received by the agent from the principal or received by the
agent from another person at the direction of the principal, the person delivering the security certificate warrants only
that the delivering person has authority to act for the
principal and does not know of any adverse claim to the
certificated security.
(h) A secured party who redelivers a security certificate
received, or after payment and on order of the debtor delivers
the security certificate to another person, makes only the
warranties of an agent under subsection (g) of this section.
(i) Except as otherwise provided in subsection (g) of this
section, a broker acting for a customer makes to the issuer and
a purchaser the warranties provided in subsections (a) through
(f) of this section. A broker that delivers a security
certificate to its customer, or causes its customer to be
registered as the owner of an uncertificated security, makes to
the customer the warranties provided in subsection (a) or (b)
of this section, and has the rights and privileges of a
purchaser under this section. The warranties of and in favor
of the broker acting as an agent are in addition to applicable
warranties given by and in favor of the customer.
§46-8-109. Warranties in indirect holding.
(a) A person who originates an entitlement order to a
securities intermediary warrants to the securities intermediary
that:
(1) The entitlement order is made by an appropriate
person, or if the entitlement order is by an agent, the agent
has actual authority to act on behalf of the appropriate
person; and
(2) There is no adverse claim to the security entitlement.
(b) A person who delivers a security certificate to a
securities intermediary for credit to a securities account or
originates an instruction with respect to an uncertificated
security directing that the uncertificated security be credited
to a securities account makes to the securities intermediary
the warranties specified in section 8-108(a) or (b).
(c) If a securities intermediary delivers a security
certificate to its entitlement holder or causes its entitlement
holder to be registered as the owner of an uncertificated
security, the securities intermediary makes to the entitlement holder the warranties specified in section 8-108(a) or (b).
§46-8-110. Applicability; choice of law.
(a) The local law of the issuer's jurisdiction, as
specified in subsection (d) of this section governs:
(1) The validity of a security;
(2) The rights and duties of the issuer with respect to
registration of transfer;
(3) The effectiveness of registration of transfer by the
issuer;
(4) Whether the issuer owes any duties to an adverse
claimant to a security; and
(5) Whether an adverse claim can be asserted against a
person to whom transfer of a certificated or uncertificated
security is registered or a person who obtains control of an
uncertificated security.
(b) The local law of the securities intermediary's
jurisdiction, as specified in subsection (e) of this section,
governs:
(1) Acquisition of a security entitlement from the securities intermediary;
(2) The rights and duties of the securities intermediary
and entitlement holder arising out of a security entitlement;
(3) Whether the securities intermediary owes any duties to
an adverse claimant to a security entitlement; and
(4) Whether an adverse claim can be asserted against a
person who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement
or interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security
certificate is located at the time of delivery governs whether
an adverse claim can be asserted against a person to whom the
security certificate is delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under
which the issuer of the security is organized or, if permitted
by the law of that jurisdiction, the law of another
jurisdiction specified by the issuer. An issuer organized
under the law of this state may specify the law of another
jurisdiction as the law governing the matters specified in subdivisions (2) through (5), subsection (a) of this section.
(e) The following rules determine a "securities
intermediary's jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary
and its entitlement holder specifies that it is governed by the
law of a particular jurisdiction, that jurisdiction is the
securities intermediary's jurisdiction.
(2) If an agreement between the securities intermediary
and its entitlement holder does not specify the governing law
as provided in subdivision (1) of this subsection, but
expressly specifies that the securities account is maintained
at an office in a particular jurisdiction, that jurisdiction is
the securities intermediary's jurisdiction.
(3) If an agreement between the securities intermediary
and its entitlement holder does not specify a jurisdiction as
provided in subdivision (1) or (2) of this subsection, the
securities intermediary's jurisdiction is the jurisdiction in
which is located the office identified in an account statement
as the office serving the entitlement holder's account.
(4) If an agreement between the securities intermediary
and its entitlement holder does not specify a jurisdiction as
provided in subdivision (1) or (2) of this subsection and an
account statement does not identify an office serving the
entitlement holder's account as provided in subdivision (3) of
this subsection, the securities intermediary's jurisdiction is
the jurisdiction in which is located the chief executive office
of the securities intermediary.
(f) A securities intermediary's jurisdiction is not
determined by the physical location of certificates
representing financial assets, or by the jurisdiction in which
is organized the issuer of the financial asset with respect to
which an entitlement holder has a security entitlement or by
the location of facilities for data processing or other record
keeping concerning the account.
§46-8-111. Clearing corporation rules.
A rule adopted by a clearing corporation governing rights
and obligations among the clearing corporation and its
participants in the clearing corporation is effective even if the rule conflicts with this and affects another party who does
not consent to the rule.
§46-8-112. Creditor's legal process.
(a) The interest of a debtor in a certificated security
may be reached by a creditor only by actual seizure of the
security certificate by the officer making the attachment or
levy, except as otherwise provided in subsection (d) of this
section. However, a certificated security for which the
certificate has been surrendered to the issuer may be reached
by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security
may be reached by a creditor only by legal process upon the
issuer at its chief executive office in the United States,
except as otherwise provided in subsection (d) of this section.
(c) The interest of a debtor in a security entitlement may
be reached by a creditor only by legal process upon the
securities intermediary with whom the debtor's securities
account is maintained, except as otherwise provided in
subsection (d) of this section.
(d) The interest of a debtor in a certificated security
for which the certificate is in the possession of a secured
party, or in an uncertificated security registered in the name
of a secured party, or a security entitlement maintained in the
name of a secured party, may be reached by a creditor by legal
process upon the secured party.
(e) A creditor whose debtor is the owner of a certificated
security, uncertificated security or security entitlement is
entitled to aid from a court of competent jurisdiction, by
injunction or otherwise, in reaching the certificated security,
uncertificated security or security entitlement or in
satisfying the claim by means allowed at law or in equity in
regard to property that cannot readily be reached by other
legal process.
§46-8-113. Statute of frauds inapplicable.
A contract or modification of a contract for the sale or
purchase of a security is enforceable whether or not there is
a writing signed or record authenticated by a party against
whom enforcement is sought, even if the contract or modification is not capable of performance within one year of
its making.
§46-8-114. Evidentiary rules concerning certificated
securities. The following rules apply in an action on a certificated security
against the issuer:
(1) Unless specifically denied in the pleadings, each
signature on a security certificate or in a necessary
indorsement is admitted.
(2) If the effectiveness of a signature is put in issue,
the burden of establishing effectiveness is on the party
claiming under the signature, but the signature is presumed to
be genuine or authorized.
(3) If signatures on a security certificate are admitted
or established, production of the certificate entitles a holder
to recover on it unless the defendant establishes a defense or
a defect going to the validity of the security.
(4) If it is shown that a defense or defect exists, the
plaintiff has the burden of establishing that the plaintiff or
some person under whom the plaintiff claims is a person against whom the defense or defect cannot be asserted.
§46-8-115. Securities intermediary and others not liable to
adverse claimant.
A securities intermediary that has transferred a financial
asset pursuant to an effective entitlement order, or a broker
or other agent or bailee that has dealt with a financial asset
at the direction of its customer or principal, is not liable to
a person having an adverse claim to the financial asset, unless
the securities intermediary or broker or other agent or bailee:
(1) Took the action after it had been served with an
injunction, restraining order or other legal process enjoining
it from doing so, issued by a court of competent jurisdiction,
and had a reasonable opportunity to act on the injunction,
restraining order or other legal process; or
(2) Acted in collusion with the wrongdoer in violating the
rights of the adverse claimant; or
(3) In the case of a security certificate that has been
stolen, acted with notice of the adverse claim.
§46-8-116. Securities intermediary as purchaser for value.
A securities intermediary that receives a financial asset and establishes a security entitlement to the financial asset
in favor of an entitlement holder is a purchaser for value of
the financial asset. A securities intermediary that acquires
a security entitlement to a financial asset from another
securities intermediary acquires the security entitlement for
value if the securities intermediary acquiring the security
entitlement establishes a security entitlement to the financial
asset in favor of an entitlement holder.
PART 2. ISSUE AND ISSUER.
§46-8-201. Issuer.
(a) With respect to an obligation on or a defense to a
security, an "issuer" includes a person that:
(1) Places or authorizes the placing of its name on a
security certificate, other than as authenticating trustee,
registrar, transfer agent or the like, to evidence a share,
participation or other interest in its property or in an
enterprise or to evidence its duty to perform an obligation
represented by the certificate;
(2) Creates a share, participation, or other interest in its property or in an enterprise, or undertakes an obligation,
that is an uncertificated security;
(3) Directly or indirectly creates a fractional interest
in its rights or property, if the fractional interest is
represented by a security certificate; or
(4) Becomes responsible for, or in place of, another
person described as an issuer in this section.
(b) With respect to an obligation on or defense to a
security, a guarantor is an issuer to the extent of its
guaranty, whether or not its obligation is noted on a security
certificate.
(c) With respect to a registration of a transfer, issuer
means a person on whose behalf transfer books are maintained.
§46-8-202. Issuer's responsibility and defenses; notice of
defect or defense.
(a) Even against a purchaser for value and without notice,
the terms of a certificated security include terms stated on
the certificate and terms made part of the security by
reference on the certificate to another instrument, indenture,
or document or to a Constitution, statute, ordinance, rule, regulation, order or the like, to the extent the terms referred
to do not conflict with terms stated on the certificate. A
reference under this subsection does not of itself charge a
purchaser for value with notice of a defect going to the
validity of the security, even if the certificate expressly
states that a person accepting it admits notice. The terms of
an uncertificated security include those stated in any
instrument, indenture, or document or in a Constitution,
statute, ordinance, rule, regulation, order or the like,
pursuant to which the security is issued.
(b) The following rules apply if an issuer asserts that a
security is not valid:
(1) A security other than one issued by a government or
governmental subdivision, agency or instrumentality, even
though issued with a defect going to its validity, is valid in
the hands of a purchaser for value and without notice of the
particular defect unless the defect involves a violation of a
constitutional provision. In that case, the security is valid
in the hands of a purchaser for value and without notice of the defect, other than one who takes by original issue.
(2) Subdivision (1) of this subsection applies to an
issuer that is a government or governmental subdivision,
agency, or instrumentality only if there has been substantial
compliance with the legal requirements governing the issue or
the issuer has received a substantial consideration for the
issue as a whole or for the particular security and a stated
purpose of the issue is one for which the issuer has power to
borrow money or issue the security.
(c) Except as otherwise provided in section 8-205, lack of
genuineness of a certificated security is a complete defense,
even against a purchaser for value and without notice.
(d) All other defenses of the issuer of a security,
including nondelivery and conditional delivery of a
certificated security, are ineffective against a purchaser for
value who has taken the certificated security without notice of
the particular defense.
(e) This section does not affect the right of a party to
cancel a contract for a security "when, as and if issued" or "when distributed" in the event of a material change in the
character of the security that is the subject of the contract
or in the plan or arrangement pursuant to which the security is
to be issued or distributed.
(f) If a security is held by a securities intermediary
against whom an entitlement holder has a security entitlement
with respect to the security, the issuer may not assert any
defense that the issuer could not assert if the entitlement
holder held the security directly.
§46-8-203. Staleness as notice of defect or defense.
After an act or event, other than a call that has been
revoked, creating a right to immediate performance of the
principal obligation represented by a certificated security or
setting a date on or after which the security is to be
presented or surrendered for redemption or exchange, a
purchaser is charged with notice of any defect in its issue or
defense of the issuer, if the act or event:
(1) Requires the payment of money, the delivery of a
certificated security, the registration of transfer of an uncertificated security, or any of them on presentation or
surrender of the security certificate, the money or security is
available on the date set for payment or exchange, and the
purchaser takes the security more than one year after that
date; or
(2) Is not covered by subdivision (1) of this section and
the purchaser takes the security more than two years after the
date set for surrender or presentation or the date on which
performance became due.
§46-8-204. Effect of issuer's restriction on transfer.
A restriction on transfer of a security imposed by the
issuer, even if otherwise lawful, is ineffective against a
person without knowledge of the restriction unless:
(1) The security is certificated and the restriction is
noted conspicuously on the security certificate; or
(2) The security is uncertificated and the registered
owner has been notified of the restriction.
§46-8-205. Effect of unauthorized signature on security
certificate.
An unauthorized signature placed on a security certificate before or in the course of issue is ineffective, but the
signature is effective in favor of a purchaser for value of the
certificated security if the purchaser is without notice of the
lack of authority and the signing has been done by:
(1) An authenticating trustee, registrar, transfer agent
or other person entrusted by the issuer with the signing of the
security certificate or of similar security certificates, or
the immediate preparation for signing of any of them; or
(2) An employee of the issuer, or of any of the persons
listed in subdivision (1) of this section, entrusted with
responsible handling of the security certificate.
§46-8-206. Completion or alteration of security certificate.
(a) If a security certificate contains the signatures
necessary to its issue or transfer but is incomplete in any
other respect:
(1) Any person may complete it by filling in the blanks as
authorized; and
(2) Even if the blanks are incorrectly filled in, the
security certificate as completed is enforceable by a purchaser who took it for value and without notice of the incorrectness.
(b) A complete security certificate that has been
improperly altered, even if fraudulently, remains enforceable,
but only according to its original terms.
§46-8-207. Rights and duties of issuer with respect to
registered owners.
(a) Before due presentment for registration of transfer of
a certificated security in registered form or of an instruction
requesting registration of transfer of an uncertificated
security, the issuer or indenture trustee may treat the
registered owner as the person exclusively entitled to vote,
receive notifications, and otherwise exercise all the rights
and powers of an owner.
(b) This article does not affect the liability of the
registered owner of a security for a call, assessment or the
like.
§46-8-208. Effect of signature of authenticating trustee,
registrar, or transfer agent.
(a) A person signing a security certificate as
authenticating trustee, registrar, transfer agent or the like, warrants to a purchaser for value of the certificated security,
if the purchaser is without notice of a particular defect,
that:
(1) The certificate is genuine;
(2) The person's own participation in the issue of the
security is within the person's capacity and within the scope
of the authority received by the person from the issuer; and
(3) The person has reasonable grounds to believe that the
certificated security is in the form and within the amount the
issuer is authorized to issue.
(b) Unless otherwise agreed, a person signing under
subsection (a) of this section does not assume responsibility
for the validity of the security in other respects.
§46-8-209. Issuer's lien.
A lien in favor of an issuer upon a certificated security
is valid against a purchaser only if the right of the issuer to
the lien is noted conspicuously on the security certificate.
§46-8-210. Overissue.
(a) In this section, "overissue" means the issue of
securities in excess of the amount the issuer has corporate power to issue, but an overissue does not occur if appropriate
action has cured the overissue.
(b) Except as otherwise provided in subsections (c) and
(d) of this section, the provisions of this article which
validate a security or compel its issue or reissue do not apply
to the extent that validation, issue or reissue would result in
overissue.
(c) If an identical security not constituting an overissue
is reasonably available for purchase, a person entitled to
issue or validation may compel the issuer to purchase the
security and deliver it if certificated or register its
transfer if uncertificated, against surrender of any security
certificate the person holds.
(d) If a security is not reasonably available for
purchase, a person entitled to issue or validation may recover
from the issuer the price the person or the last purchaser for
value paid for it with interest from the date of the person's
demand.
PART 3. TRANSFER OF CERTIFICATED
AND UNCERTIFICATED SECURITIES.
§46-8-301. Delivery.
(a) Delivery of a certificated security to a purchaser
occurs when:
(1) The purchaser acquires possession of the security
certificate;
(2) Another person, other than a securities intermediary,
either acquires possession of the security certificate on
behalf of the purchaser or, having previously acquired
possession of the certificate, acknowledges that it holds for
the purchaser; or
(3) A securities intermediary acting on behalf of the
purchaser acquires possession of the security certificate, only
if the certificate is in registered form and has been specially
indorsed to the purchaser by an effective indorsement.
(b) Delivery of an uncertificated security to a purchaser
occurs when:
(1) The issuer registers the purchaser as the registered
owner, upon original issue or registration of transfer; or
(2) Another person, other than a securities intermediary,
either becomes the registered owner of the uncertificated
security on behalf of the purchaser or, having previously
become the registered owner, acknowledges that it holds for the
purchaser.
§46-8-302. Rights of purchaser.
(a) Except as otherwise provided in subsections (b) and
(c) of this section, upon delivery of a certificated or
uncertificated security to a purchaser, the purchaser acquires
all rights in the security that the transferor had or had power
to transfer.
(b) A purchaser of a limited interest acquires rights only
to the extent of the interest purchased.
(c) A purchaser of a certificated security who as a
previous holder had notice of an adverse claim does not improve
its position by taking from a protected purchaser.
§46-8-303. Protected purchaser.
(a) "Protected purchaser" means a purchaser of a
certificated or uncertificated security, or of an interest
therein, who:
(1) Gives value;
(2) Does not have notice of any adverse claim to the
security; and
(3) Obtains control of the certificated or uncertificated
security.
(b) In addition to acquiring the rights of a purchaser, a
protected purchaser also acquires its interest in the security
free of any adverse claim.
§46-8-304. Indorsement.
(a) An indorsement may be in blank or special. An
indorsement in blank includes an indorsement to bearer. A
special indorsement specifies to whom a security is to be
transferred or who has power to transfer it. A holder may
convert a blank indorsement to a special indorsement.
(b) An indorsement purporting to be only of part of a
security certificate representing units intended by the issuer
to be separately transferable is effective to the extent of the
indorsement.
(c) An indorsement, whether special or in blank, does not constitute a transfer until delivery of the certificate on
which it appears or, if the indorsement is on a separate
document, until delivery of both the document and the
certificate.
(d) If a security certificate in registered form has been
delivered to a purchaser without a necessary indorsement, the
purchaser may become a protected purchaser only when the
indorsement is supplied. However, against a transferor, a
transfer is complete upon delivery and the purchaser has a
specifically enforceable right to have any necessary
indorsement supplied.
(e) An indorsement of a security certificate in bearer
form may give notice of an adverse claim to the certificate,
but it does not otherwise affect a right to registration that
the holder possesses.
(f) Unless otherwise agreed, a person making an
indorsement assumes only the obligations provided in section
8-108 and not an obligation that the security will be honored
by the issuer.
§46-8-305. Instruction.
(a) If an instruction has been originated by an
appropriate person but is incomplete in any other respect, any
person may complete it as authorized and the issuer may rely on
it as completed, even though it has been completed incorrectly.
(b) Unless otherwise agreed, a person initiating an
instruction assumes only the obligations imposed by section
8-108 and not an obligation that the security will be honored
by the issuer.
§46-8-306. Effect of guaranteeing signature, indorsement, or
instruction.
(a) A person who guarantees a signature of an indorser of
a security certificate warrants that at the time of signing:
(1) The signature was genuine;
(2) The signer was an appropriate person to indorse, or if
the signature is by an agent, the agent had actual authority to
act on behalf of the appropriate person; and
(3) The signer had legal capacity to sign.
(b) A person who guarantees a signature of the originator
of an instruction warrants that at the time of signing:
(1) The signature was genuine;
(2) The signer was an appropriate person to originate the
instruction, or if the signature is by an agent, the agent had
actual authority to act on behalf of the appropriate person, if
the person specified in the instruction as the registered owner
was, in fact, the registered owner, as to which fact the
signature guarantor does not make a warranty; and
(3) The signer had legal capacity to sign.
(c) A person who specially guarantees the signature of an
originator of an instruction makes the warranties of a
signature guarantor under subsection (b) of this section and
also warrants that at the time the instruction is presented to
the issuer:
(1) The person specified in the instruction as the
registered owner of the uncertificated security will be the
registered owner; and
(2) The transfer of the uncertificated security requested
in the instruction will be registered by the issuer free from
all liens, security interests, restrictions, and claims other than those specified in the instruction.
(d) A guarantor under subsections (a) and (b) of this
section or a special guarantor under subsection (c) of this
section does not otherwise warrant the rightfulness of the
transfer.
(e) A person who guarantees an indorsement of a security
certificate makes the warranties of a signature guarantor under
subsection (a) of this section and also warrants the
rightfulness of the transfer in all respects.
(f) A person who guarantees an instruction requesting the
transfer of an uncertificated security makes the warranties of
a special signature guarantor under subsection (c) of this
section and also warrants the rightfulness of the transfer in
all respects.
(g) An issuer may not require a special guaranty of
signature, a guaranty of indorsement, or a guaranty of
instruction as a condition to registration of transfer.
(h) The warranties under this section are made to a person
taking or dealing with the security in reliance on the guaranty, and the guarantor is liable to the person for loss
resulting from their breach. An indorser or originator of an
instruction whose signature, indorsement, or instruction has
been guaranteed is liable to a guarantor for any loss suffered
by the guarantor as a result of breach of the warranties of the
guarantor.
§46-8-307. Purchaser's right to requisites for registration
of transfer.
Unless otherwise agreed, the transferor of a security on
due demand shall supply the purchaser with proof of authority
to transfer or with any other requisite necessary to obtain
registration of the transfer of the security, but if the
transfer is not for value, a transferor need not comply unless
the purchaser pays the necessary expenses. If the transferor
fails within a reasonable time to comply with the demand, the
purchaser may reject or rescind the transfer.
PART 4. REGISTRATION.
§46-8-401. Duty of issuer to register transfer.
(a) If a certificated security in registered form is
presented to an issuer with a request to register transfer or an instruction is presented to an issuer with a request to
register transfer of an uncertificated security, the issuer
shall register the transfer as requested if:
(1) Under the terms of the security the person seeking
registration of transfer is eligible to have the security
registered in its name;
(2) The indorsement or instruction is made by the
appropriate person or by an agent who has actual authority to
act on behalf of the appropriate person;
(3) Reasonable assurance is given that the indorsement or
instruction is genuine and authorized (section 8-402);
(4) Any applicable law relating to the collection of taxes
has been complied with;
(5) The transfer does not violate any restriction on
transfer imposed by the issuer in accordance with section
8-204;
(6) A demand that the issuer not register transfer has not
become effective under section 8-403, or the issuer has
complied with section 8-403(b) but no legal process or indemnity bond is obtained as provided in section 8-403(d); and
(7) The transfer is in fact rightful or is to a protected
purchaser.
(b) If an issuer is under a duty to register a transfer of
a security, the issuer is liable to a person presenting a
certificated security or an instruction for registration or to
the person's principal for loss resulting from unreasonable
delay in registration or failure or refusal to register the
transfer.
§46-8-402. Assurance that indorsement or instruction is
effective.
(a) An issuer may require the following assurance that
each necessary indorsement or each instruction is genuine and
authorized:
(1) In all cases, a guaranty of the signature of the
person making an indorsement or originating an instruction
including, in the case of an instruction, reasonable assurance
of identity;
(2) If the indorsement is made or the instruction is
originated by an agent, appropriate assurance of actual authority to sign;
(3) If the indorsement is made or the instruction is
originated by a fiduciary pursuant to section 8-107(a)(4) or
(a)(5), appropriate evidence of appointment or incumbency;
(4) If there is more than one fiduciary, reasonable
assurance that all who are required to sign have done so; and
(5) If the indorsement is made or the instruction is
originated by a person not covered by another provision of this
subsection, assurance appropriate to the case corresponding as
nearly as may be to the provisions of this subsection.
(b) An issuer may elect to require reasonable assurance
beyond that specified in this section.
(c) In this section:
(1) "Guaranty of the signature" means a guaranty signed by
or on behalf of a person reasonably believed by the issuer to
be responsible. An issuer may adopt standards with respect to
responsibility if they are not manifestly unreasonable.
(2) "Appropriate evidence of appointment or incumbency"
means:
(i) In the case of a fiduciary appointed or qualified by
a court, a certificate issued by or under the direction or
supervision of the court or an officer thereof and dated within
sixty days before the date of presentation for transfer; or
(ii) In any other case, a copy of a document showing the
appointment or a certificate issued by or on behalf of a person
reasonably believed by an issuer to be responsible or, in the
absence of that document or certificate, other evidence the
issuer reasonably considered appropriate.
§46-8-403. Demand that issuer not register transfer.
(a) A person who is an appropriate person to make an
indorsement or originate an instruction may demand that the
issuer not register transfer of a security by communicating to
the issuer a notification that identifies the registered owner
and the issue of which the security is a part and provides an
address for communications directed to the person making the
demand. The demand is effective only if it is received by the
issuer at a time and in a manner affording the issuer
reasonable opportunity to act on it.
(b) If a certificated security in registered form is
presented to an issuer with a request to register transfer or
an instruction is presented to an issuer with a request to
register transfer of an uncertificated security after a demand
that the issuer not register transfer has become effective, the
issuer shall promptly communicate to: (i) The person who
initiated the demand at the address provided in the demand; and
(ii) the person who presented the security for registration of
transfer or initiated the instruction requesting registration
of transfer a notification stating that:
(1) The certificated security has been presented for
registration of transfer or instruction for registration of
transfer of uncertificated security has been received;
(2) A demand that the issuer not register transfer had
previously been received; and
(3) The issuer will withhold registration of transfer for
a period of time stated in the notification in order to provide
the person who initiated the demand an opportunity to obtain
legal process or an indemnity bond.
(c) The period described in subdivision (3), subsection
(b) of this section may not exceed thirty days after the date
of communication of the notification. A shorter period may be
specified by the issuer if it is not manifestly unreasonable.
(d) An issuer is not liable to a person who initiated a
demand that the issuer not register transfer for any loss the
person suffers as a result of registration of a transfer
pursuant to an effective indorsement or instruction if the
person who initiated the demand does not, within the time
stated in the issuer's communication, either:
(1) Obtain an appropriate restraining order, injunction or
other process from a court of competent jurisdiction enjoining
the issuer from registering the transfer; or
(2) File with the issuer an indemnity bond, sufficient in
the issuer's judgment to protect the issuer and any transfer
agent, registrar or other agent of the issuer involved from any
loss it or they may suffer by refusing to register the
transfer.
(e) This section does not relieve an issuer from liability for registering transfer pursuant to an indorsement or
instruction that was not effective.
§46-8-404. Wrongful registration.
(a) Except as otherwise provided in section 8-406, an
issuer is liable for wrongful registration of transfer if the
issuer has registered a transfer of a security to a person not
entitled to it, and the transfer was registered:
(1) Pursuant to an ineffective indorsement or instruction;
(2) After a demand that the issuer not register transfer
became effective under section 8-403(a) and the issuer did not
comply with section 8-403(b);
(3) After the issuer had been served with an injunction,
restraining order, or other legal process enjoining it from
registering the transfer, issued by a court of competent
jurisdiction, and the issuer had a reasonable opportunity to
act on the injunction, restraining order, or other legal
process; or
(4) By an issuer acting in collusion with the wrongdoer.
(b) An issuer that is liable for wrongful registration of transfer under subsection (a) of this section on demand shall
provide the person entitled to the security with a like
certificated or uncertificated security, and any payments or
distributions that the person did not receive as a result of
the wrongful registration. If an overissue would result, the
issuer's liability to provide the person with a like security
is governed by section 8-210.
(c) Except as otherwise provided in subsection (a) of this
section or in a law relating to the collection of taxes, an
issuer is not liable to an owner or other person suffering loss
as a result of the registration of a transfer of a security if
registration was made pursuant to an effective indorsement or
instruction.
§46-8-405. Replacement of lost, destroyed, or wrongfully taken
security certificate.
(a) If an owner of a certificated security, whether in
registered or bearer form, claims that the certificate has been
lost, destroyed, or wrongfully taken, the issuer shall issue a
new certificate if the owner:
(1) So requests before the issuer has notice that the certificate has been acquired by a protected purchaser;
(2) Files with the issuer a sufficient indemnity bond; and
(3) Satisfies other reasonable requirements imposed by the
issuer.
(b) If, after the issue of a new security certificate, a
protected purchaser of the original certificate presents it for
registration of transfer, the issuer shall register the
transfer unless an overissue would result. In that case, the
issuer's liability is governed by section 8-210. In addition
to any rights on the indemnity bond, an issuer may recover the
new certificate from a person to whom it was issued or any
person taking under that person, except a protected purchaser.
§46-8-406. Obligation to notify issuer of lost, destroyed, or
wrongfully taken security certificate.
If a security certificate has been lost, apparently
destroyed, or wrongfully taken, and the owner fails to notify
the issuer of that fact within a reasonable time after the
owner has notice of it and the issuer registers a transfer of
the security before receiving notification, the owner may not
assert against the issuer a claim for registering the transfer under section 8-404 or a claim to a new security certificate
under section 8-405.
§46-8-407. Authenticating trustee, transfer agent and
registrar.
A person acting as authenticating trustee, transfer agent,
registrar, or other agent for an issuer in the registration of
a transfer of its securities, in the issue of new security
certificates or uncertificated securities or in the
cancellation of surrendered security certificates has the same
obligation to the holder or owner of a certificated or
uncertificated security with regard to the particular functions
performed as the issuer has in regard to those functions.
PART 5. SECURITY ENTITLEMENTS.
§46-8-501. Securities account; acquisition of security
entitlement from securities intermediary.
(a) "Securities account" means an account to which a
financial asset is or may be credited in accordance with an
agreement under which the person maintaining the account
undertakes to treat the person for whom the account is
maintained as entitled to exercise the rights that comprise the financial asset.
(b) Except as otherwise provided in subsections (d) and
(e) of this section, a person acquires a security entitlement
if a securities intermediary:
(1) Indicates by book entry that a financial asset has
been credited to the person's securities account;
(2) Receives a financial asset from the person or acquires
a financial asset for the person and, in either case, accepts
it for credit to the person's securities account; or
(3) Becomes obligated under other law, regulation, or rule
to credit a financial asset to the person's securities account.
(c) If a condition of subsection (b) of this section has
been met, a person has a security entitlement even though the
securities intermediary does not itself hold the financial
asset.
(d) If a securities intermediary holds a financial asset
for another person, and the financial asset is registered in
the name of, payable to the order of, or specially indorsed to
the other person, and has not been indorsed to the securities intermediary or in blank, the other person is treated as
holding the financial asset directly rather than as having a
security entitlement with respect to the financial asset.
(e) Issuance of a security is not establishment of a
security entitlement.
§46-8-502. Assertion of adverse claim against entitlement
holder.
An action based on an adverse claim to a financial asset,
whether framed in conversion, replevin, constructive trust,
equitable lien or other theory, may not be asserted against a
person who acquires a security entitlement under section 8-501
for value and without notice of the adverse claim.
§46-8-503. Property interest of entitlement holder in
financial asset held by securities intermediary.
(a) To the extent necessary for a securities intermediary
to satisfy all security entitlements with respect to a
particular financial asset, all interests in that financial
asset held by the securities intermediary are held by the
securities intermediary for the entitlement holders, are not
property of the securities intermediary, and are not subject to claims of creditors of the securities intermediary, except as
otherwise provided in section 8-511.
(b) An entitlement holder's property interest with respect
to a particular financial asset under subsection (a) of this
section is a pro rata property interest in all interests in
that financial asset held by the securities intermediary,
without regard to the time the entitlement holder acquired the
security entitlement or the time the securities intermediary
acquired the interest in that financial asset.
(c) An entitlement holder's property interest with respect
to a particular financial asset under subsection (a) of this
section may be enforced against the securities intermediary
only by exercise of the entitlement holder's rights under
sections 8-505 through 8-508.
(d) An entitlement holder's property interest with respect
to a particular financial asset under subsection (a) of this
section may be enforced against a purchaser of the financial
asset or interest therein only if:
(1) Insolvency proceedings have been initiated by or against the securities intermediary;
(2) The securities intermediary does not have sufficient
interests in the financial asset to satisfy the security
entitlements of all of its entitlement holders to that
financial asset;
(3) The securities intermediary violated its obligations
under section 8-504 by transferring the financial asset or
interest therein to the purchaser; and
(4) The purchaser is not protected under subsection (e) of
this section. The trustee or other liquidator, acting on
behalf of all entitlement holders having security entitlements
with respect to a particular financial asset, may recover the
financial asset, or interest therein, from the purchaser. If
the trustee or other liquidator elects not to pursue that
right, an entitlement holder whose security entitlement remains
unsatisfied has the right to recover its interest in the
financial asset from the purchaser.
(e) An action based on the entitlement holder's property
interest with respect to a particular financial asset under subsection (a) of this section, whether framed in conversion,
replevin, constructive trust, equitable lien or other theory,
may not be asserted against any purchaser of a financial asset
or interest therein who gives value, obtains control and does
not act in collusion with the securities intermediary in
violating the securities intermediary's obligations under
section 8-504.
§46-8-504. Duty of securities intermediary to maintain
financial asset.
(a) A securities intermediary shall promptly obtain and
thereafter maintain a financial asset in a quantity
corresponding to the aggregate of all security entitlements it
has established in favor of its entitlement holders with
respect to that financial asset. The securities intermediary
may maintain those financial assets directly or through one or
more other securities intermediaries.
(b) Except to the extent otherwise agreed by its
entitlement holder, a securities intermediary may not grant any
security interests in a financial asset it is obligated to
maintain pursuant to subsection (a) of this section.
(c) A securities intermediary satisfies the duty in
subsection (a) of this section if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the
securities intermediary; or
(2) In the absence of agreement, the securities
intermediary exercises due care in accordance with reasonable
commercial standards to obtain and maintain the financial
asset.
(d) This section does not apply to a clearing corporation
that is itself the obligor of an option or similar obligation
to which its entitlement holders have security entitlements.
§46-8-505. Duty of securities intermediary with respect to
payments and distributions.
(a) A securities intermediary shall take action to obtain
a payment or distribution made by the issuer of a financial
asset. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the
securities intermediary; or
(2) In the absence of agreement, the securities
intermediary exercises due care in accordance with reasonable
commercial standards to attempt to obtain the payment or
distribution.
(b) A securities intermediary is obligated to its
entitlement holder for a payment or distribution made by the
issuer of a financial asset if the payment or distribution is
received by the securities intermediary.
§46-8-506. Duty of securities intermediary to exercise rights
as directed by entitlement holder.
A securities intermediary shall exercise rights with
respect to a financial asset if directed to do so by an
entitlement holder. A securities intermediary satisfies the
duty if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the
securities intermediary; or
(2) In the absence of agreement, the securities
intermediary either places the entitlement holder in a position
to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the
direction of the entitlement holder.
§46-8-507. Duty of securities intermediary to comply with
entitlement order.
(a) A securities intermediary shall comply with an
entitlement order if the entitlement order is originated by the
appropriate person, the securities intermediary has had
reasonable opportunity to assure itself that the entitlement
order is genuine and authorized, and the securities
intermediary has had reasonable opportunity to comply with the
entitlement order. A securities intermediary satisfies the
duty if:
(1) The securities intermediary acts with respect to the
duty as agreed upon by the entitlement holder and the
securities intermediary; or
(2) In the absence of agreement, the securities
intermediary exercises due care in accordance with reasonable
commercial standards to comply with the entitlement order.
(b) If a securities intermediary transfers a financial
asset pursuant to an ineffective entitlement order, the securities intermediary shall reestablish a security
entitlement in favor of the person entitled to it, and pay or
credit any payments or distributions that the person did not
receive as a result of the wrongful transfer. If the
securities intermediary does not reestablish a security
entitlement, the securities intermediary is liable to the
entitlement holder for damages.
§46-8-508. Duty of securities intermediary to change
entitlement holder's position to other form of security
holding.
A securities intermediary shall act at the direction of an
entitlement holder to change a security entitlement into
another available form of holding for which the entitlement
holder is eligible, or to cause the financial asset to be
transferred to a securities account of the entitlement holder
with another securities intermediary. A securities
intermediary satisfies the duty if:
(1) The securities intermediary acts as agreed upon by the
entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable
commercial standards to follow the direction of the entitlement
holder.
§46-8-509. Specification of duties of securities intermediary
by other statute or regulation; manner of performance of
duties of securities intermediary and exercise of rights
of entitlement holder.
(a) If the substance of a duty imposed upon a securities
intermediary by sections 8-504 through 8-508 is the subject of
other statute, regulation or rule, compliance with that
statute, regulation or rule satisfies the duty.
(b) To the extent that specific standards for the
performance of the duties of a securities intermediary or the
exercise of the rights of an entitlement holder are not
specified by other statute, regulation or rule or by agreement
between the securities intermediary and entitlement holder, the
securities intermediary shall perform its duties and the
entitlement holder shall exercise its rights in a commercially
reasonable manner.
(c) The obligation of a securities intermediary to perform the duties imposed by sections 8-504 through 8-508 is subject
to:
(1) Rights of the securities intermediary arising out of
a security interest under a security agreement with the
entitlement holder or otherwise; and
(2) Rights of the securities intermediary under other law,
regulation, rule, or agreement to withhold performance of its
duties as a result of unfulfilled obligations of the
entitlement holder to the securities intermediary.
(d) Sections 8-504 through 8-508 do not require a
securities intermediary to take any action that is prohibited
by other statute, regulation or rule.
§46-8-510. Rights of purchaser of security entitlement from
entitlement holder.
(a) An action based on an adverse claim to a financial
asset or security entitlement, whether framed in conversion,
replevin, constructive trust, equitable lien or other theory,
may not be asserted against a person who purchases a security
entitlement, or an interest therein, from an entitlement holder
if the purchaser gives value, does not have notice of the adverse claim, and obtains control.
(b) If an adverse claim could not have been asserted
against an entitlement holder under section 8-502, the adverse
claim cannot be asserted against a person who purchases a
security entitlement, or an interest therein, from the
entitlement holder.
(c) In a case not covered by the priority rules in article
nine, a purchaser for value of a security entitlement, or an
interest therein, who obtains control has priority over a
purchaser of a security entitlement, or an interest therein,
who does not obtain control. Purchasers who have control rank
equally, except that a securities intermediary as purchaser has
priority over a conflicting purchaser who has control unless
otherwise agreed by the securities intermediary.
§46-8-511. Priority among security interests and entitlement
holders.
(a) Except as otherwise provided in subsections (b) and
(c) of this section, if a securities intermediary does not have
sufficient interests in a particular financial asset to satisfy
both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a
creditor of the securities intermediary who has a security
interest in that financial asset, the claims of entitlement
holders, other than the creditor, have priority over the claim
of the creditor.
(b) A claim of a creditor of a securities intermediary who
has a security interest in a financial asset held by a
securities intermediary has priority over claims of the
securities intermediary's entitlement holders who have security
entitlements with respect to that financial asset if the
creditor has control over the financial asset.
(c) If a clearing corporation does not have sufficient
financial assets to satisfy both its obligations to entitlement
holders who have security entitlements with respect to a
financial asset and its obligation to a creditor of the
clearing corporation who has a security interest in that
financial asset, the claim of the creditor has priority over
the claims of entitlement holders.
PART 6. TRANSITION PROVISIONS FOR REVISED ARTICLE 8 AND
CONFORMING AMENDMENTS TO ARTICLES 1, 5, 9 AND 10.
§46-8-601.
Savings clause.
(a) This article does not affect an action or proceeding
commenced before this article takes effect.
(b) If a security interest in a security is perfected at
the date this article takes effect and the action by which the
security interest was perfected would suffice to perfect a
security interest under this article, no further action is
required to continue perfection. If a security interest in a
security is perfected at the date this article takes effect but
the action by which the security interest was perfected would
not suffice to perfect a security interest under this article,
the security interest remains perfected for a period of four
months after the effective date and continues perfected
thereafter if appropriate action to perfect under this article
is taken within that period. If a security interest is
perfected at the date this article takes effect and the
security interest can be perfected by filing under this
article, a financing statement signed by the secured party instead of the debtor may be filed within that period to
continue perfection or thereafter to perfect.
ARTICLE 9. SECURED TRANSACTIONS; SALES OF ACCOUNTS AND CHATTEL
PAPER.
§46-9-103. Perfection of security interests in multiple state
transactions.
(1) Documents, instruments and ordinary goods. --
(a) This subsection applies to documents and instruments
and to goods other than those covered by a certificate of title
described in subsection (2) of this section, mobile goods
described in subsection (3), and minerals described in
subsection (5) of this section.
(b) Except as otherwise provided in this subsection,
perfection and the effect of perfection or nonperfection of a
security interest in collateral are governed by the law of the
jurisdiction where the collateral is when the last event occurs
on which is based the assertion that the security interest is
perfected or unperfected.
(c) If the parties to a transaction creating a purchase
money security interest in goods in one jurisdiction understand at the time that the security interest attaches that the goods
will be kept in another jurisdiction, then the law of the other
jurisdiction governs the perfection and the effect of
perfection or nonperfection of the security interest from the
time it attaches until thirty days after the debtor receives
possession of the goods and thereafter if the goods are taken
to the other jurisdiction before the end of the thirty-day
period.
(d) When collateral is brought into and kept in this state
while subject to a security interest perfected under the law of
the jurisdiction from which the collateral was removed, the
security interest remains perfected, but if action is required
by Part 3 of this article to perfect the security interest:
(i) If the action is not taken before the expiration of
the period of perfection in the other jurisdiction or the end
of four months after the collateral is brought into this state,
whichever period first expires, the security interest becomes
unperfected at the end of that period and is thereafter deemed
to have been unperfected as against a person who became a purchaser after removal;
(ii) If the action is taken before the expiration of the
period specified in paragraph (i) of this subdivision, the
security interest continues perfected thereafter;
(iii) For the purpose of priority over a buyer of consumer
goods (subsection (2) of section 9-307), the period of the
effectiveness of a filing in the jurisdiction from which the
collateral is removed is governed by the rules with respect to
perfection in paragraphs (i) and (ii) of this subdivision.
(2) Certificate of title. --
(a) This subsection applies to goods covered by a
certificate of title issued under a statute of this state or of
another jurisdiction under the law of which indication of a
security interest on the certificate is required as a condition
of perfection.
(b) Except as otherwise provided in this subsection,
perfection and the effect of perfection or nonperfection of the
security interest are governed by the law (including the
conflict of laws rules) of the jurisdiction issuing the certificate until four months after the goods are removed from
that jurisdiction and thereafter until the goods are registered
in another jurisdiction, but in any event not beyond surrender
of the certificate. After the expiration of that period, the
goods are not covered by the certificate of title within the
meaning of this section.
(c) Except with respect to the rights of a buyer described
in the next paragraph, a security interest, perfected in
another jurisdiction otherwise than by notation on a
certificate of title, in goods brought into this state and
thereafter covered by a certificate of title issued by this
state is subject to the rules stated in subdivision (d)
subsection (1) of this section.
(d) If goods are brought into this state while a security
interest therein is perfected in any manner under the law of
the jurisdiction from which the goods are removed and a
certificate of title is issued by this state and the
certificate does not show that the goods are subject to the
security interest or that they may be subject to security interests not shown on the certificate, the security interest
is subordinate to the rights of a buyer of the goods who is not
in the business of selling goods of that kind to the extent
that he gives value and receives delivery of the goods after
issuance of the certificate and without knowledge of the
security interest.
(3) Accounts, general intangibles and mobile goods. --
(a) This subsection applies to accounts (other than an
account described in subsection (5) of this section on
minerals) and general intangibles (other than uncertificated
securities) and to goods which are mobile and which are of a
type normally used in more than one jurisdiction, such as motor
vehicles, trailers, rolling stock, airplanes, shipping
containers, road building and construction machinery and
commercial harvesting machinery and the like, if the goods are
equipment or are inventory leased or held for lease by the
debtor to others, and are not covered by a certificate of title
described in subsection (2) of this section.
(b) The law (including the conflict of laws rules) of the jurisdiction in which the debtor is located governs the
perfection and the effect of perfection or nonperfection of the
security interest.
(c) If, however, the debtor is located in a jurisdiction
which is not a part of the United States, and which does not
provide for perfection of the security interest by filing or
recording in that jurisdiction, the law of the jurisdiction in
the United States in which the debtor has its major executive
office in the United States governs the perfection and the
effect of perfection or nonperfection of the security interest
through filing. In the alternative, if the debtor is located
in a jurisdiction which is not a part of the United States or
Canada and the collateral is accounts or general intangibles
for money due or to become due, the security interest may be
perfected by notification to the account debtor. As used in
this paragraph, "United States" includes its territories and
possessions and the Commonwealth of Puerto Rico.
(d) A debtor shall be deemed located at his place of
business if he has one, at his chief executive office if he has more than one place of business, otherwise at his residence.
If, however, the debtor is a foreign air carrier under the
federal Aviation Act of 1958, as amended, it shall be deemed
located at the designated office of the agent upon whom service
of process may be made on behalf of the foreign air carrier.
(e) A security interest perfected under the law of the
jurisdiction of the location of the debtor is perfected until
the expiration of four months after a change of the debtor's
location to another jurisdiction, or until perfection would
have ceased by the law of the first jurisdiction, whichever
period first expires. Unless perfected in the new jurisdiction
before the end of that period, it becomes unperfected
thereafter and is deemed to have been unperfected as against a
person who became a purchaser after the change.
(4) Chattel paper. --
The rules stated for goods in subsection (1) of this section
apply to a possessory security interest in chattel paper. The
rules stated for accounts in subsection (3) of this section
apply to a nonpossessory security interest in chattel paper, but the security interest may not be perfected by notification
to the account debtor.
(5) Minerals. --
Perfection and the effect of perfection or nonperfection
of a security interest which is created by a debtor who has an
interest in minerals or the like (including oil and gas) before
extraction and which attaches thereto as extracted, or which
attaches to an account resulting from the sale thereof at the
wellhead or minehead are governed by the law (including the
conflict of laws rules) of the jurisdiction wherein the
wellhead or minehead is located.
(6) Investment property. --
(a) This subsection applies to investment property.
(b) Except as otherwise provided in subdivision (f) of
this section, during the time that a security certificate is
located in a jurisdiction, perfection of a security interest,
the effect of perfection or nonperfection, and the priority of
a security interest in the certificated security represented
thereby are governed by the local law of that jurisdiction.
(c) Except as otherwise provided in subdivision (f) of
this section, perfection of a security interest, the effect of
perfection or nonperfection, and the priority of a security
interest in an uncertificated security are governed by the
local law of the issuer's jurisdiction as specified in section
8-110(d).
(d) Except as otherwise provided in subdivision (f) of
this section, perfection of a security interest, the effect of
perfection or nonperfection, and the priority of a security
interest in a security entitlement or securities account are
governed by the local law of the securities intermediary's
jurisdiction as specified in section 8-110(e).
(e) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of perfection or
nonperfection, and the priority of a security interest in a
commodity contract or commodity account are governed by the
local law of the commodity intermediary's jurisdiction. The
following rules determine a "commodity intermediary's
jurisdiction" for purposes of this paragraph:
(i) If an agreement between the commodity intermediary and
commodity customer specifies that it is governed by the law of
a particular jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(ii) If an agreement between the commodity intermediary
and commodity customer does not specify the governing law as
provided in paragraph (i) of this subdivision, but expressly
specifies that the commodity account is maintained at an office
in a particular jurisdiction, that jurisdiction is the
commodity intermediary's jurisdiction.
(iii) If an agreement between the commodity intermediary
and commodity customer does not specify a jurisdiction as
provided in paragraphs (i) or (ii) of this subdivision, the
commodity intermediary's jurisdiction is the jurisdiction in
which is located the office identified in an account statement
as the office serving the commodity customer's account.
(iv) If an agreement between the commodity intermediary
and commodity customer does not specify a jurisdiction as
provided in subparagraph (i) or (ii) of this subdivision and an account statement does not identify an office serving the
commodity customer's account as provided in paragraph (iii) of
this subdivision, the commodity intermediary's jurisdiction is
the jurisdiction in which is located the chief executive office
of the commodity intermediary.
(f) Perfection of a security interest by filing, automatic
perfection of a security interest in investment property
granted by a broker or securities intermediary, and automatic
perfection of a security interest in a commodity contract or
commodity account granted by a commodity intermediary are
governed by the local law of the jurisdiction in which the
debtor is located.
§46-9-105. Definitions and index of definitions.
(1) In this article unless the context otherwise requires:
(a) "Account debtor" means the person who is obligated on
an account, chattel paper or general intangible;
(b) "Chattel paper" means a writing or writings which
evidence both a monetary obligation and a security interest in
or a lease of specific goods, but a charter or other contract involving the use or hire of a vessel is not chattel paper.
When a transaction is evidenced both by such a security
agreement or a lease and by an instrument or a series of
instruments, the group of writings taken together constitutes
chattel paper;
(c) "Collateral" means the property subject to a security
interest, and includes accounts, and chattel paper which have
been sold;
(d) "Debtor" means the person who owes payment or other
performance of the obligation secured, whether or not he owns
or has rights in the collateral, and includes the seller of
accounts, or chattel paper. Where the debtor and the owner of
the collateral are not the same person, the term "debtor" means
the owner of the collateral in any provision of the article
dealing with the collateral, the obligor in any provision
dealing with the obligation, and may include both where the
context so requires;
(e) "Deposit account" means a demand, time, savings,
passbook or like account maintained with a bank, savings and loan association, credit union or like organization, other than
an account evidenced by a certificate of deposit;
(f) "Document" means document of title as defined in the
general definitions of article 1 (section 1-201), and a receipt
of the kind described in subsection (2) of section 7-201;
(g) "Encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that
are not ownership interests;
(h) "Goods" includes all things which are moveable at the
time the security interest attaches or which are fixtures
(section 9-313), but does not include money, documents,
instruments, investment property, commodity contracts,
accounts, chattel paper, general intangibles, or minerals or
the like (including oil and gas) before extraction. "Goods"
also includes standing timber which is to be cut and removed
under a conveyance or contract for sale, the unborn young of
animals, and growing crops;
(i) "Instrument" means a negotiable instrument (defined in
section 3-104), or any other writing which evidences a right to the payment of money and is not itself a security agreement or
lease and is of a type which is in ordinary course of business
transferred by delivery with any necessary endorsement or
assignment. The term does not include investment property;
(j) "Mortgage" means a consensual interest created by a
real estate mortgage, a trust deed on real estate, or the like;
(k) An advance is made "pursuant to commitment" if the
secured party has bound himself to make it, whether or not a
subsequent event of default or other event not within his
control has relieved or may relieve him from his obligation;
(l) "Security agreement" means an agreement which creates
or provides for a security interest;
(m) "Secured party" means a lender, seller or other person
in whose favor there is a security interest, including a person
to whom accounts or chattel paper have been sold. When the
holders of obligations issued under an indenture of trust,
equipment trust agreement or the like are represented by a
trustee or other person, the representative is the secured
party;
(n) "Transmitting utility" means any person primarily
engaged in the railroad, street railway or trolley bus
business, the electric or electronics communications
transmission business, the transmission of goods by pipeline,
or the transmission or the production and transmission of
electricity, steam, gas or water, or the provision of sewer
service.
(2) Other definitions applying to this article and the
sections in which they appear are:
"Account".Section 9-106.
"Attach".Section 9-203.
"Commodity contract".Section 9-115.
"Commodity customer".Section 9-115.
"Commodity intermediary".Section 9-115.
"Construction mortgage".Section 9-313(1).
"Consumer goods".Section 9-109(1).
"Control".Section 9-115.
"Equipment".Section 9-109(2).
"Farm products".Section 9-109(3).
"Fixture".Section 9-313(1).
"Fixture filing".Section 9-313(1).
"General intangibles".Section 9-106.
"Inventory".Section 9-109(4).
"Investment property".Section 9-115.
"Lien creditor".Section 9-301(3).
"Proceeds".Section 9-306(1).
"Purchase money security
interest".Section 9-107.
"United States".Section 9-103.
(3) The following definitions in other articles apply to
this article:
"Broker".Section 8-102.
"Certificated security".Section 8-102.
"Check".Section 3-104.
"Clearing corporation".Section 8-102.
"Contract for sale".Section 2-106.
"Control".Section 8-106.
"Delivery".Section 8-301.
"Entitlement holder".Section 8-102.
"Financial asset".Section 8-102.
"Holder in due course".Section 3-302.
"Note".Section 3-104.
"Sale".Section 2-106.
"Securities intermediary".Section 8-102.
"Security".Section 8-102.
"Security certificate".Section 8-102.
"Security entitlement".Section 8-102.
"Uncertificated security".Section 8-102.
(4) In addition, article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this article.
§46-9-106. Definitions: "Account"; "general intangibles".
"Account" means any right to payment for goods sold or
leased or for services rendered which is not evidenced by an
instrument or chattel paper, whether or not it has been earned
by performance. "General intangibles" means any personal
property (including things in action) other than goods, accounts, chattel paper, documents, instruments, investment
property and money. All rights to payment earned or unearned
under a charter or other contract involving the use or hire of
a vessel and all rights incident to the charter or contract are
accounts.
§46-9-115. Investment property.
(1) In this article:
(a) "Commodity account" means an account maintained by a
commodity intermediary in which a commodity contract is carried
for a commodity customer.
(b) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a
commodity option, or other contract that, in each case, is:
(i) Traded on or subject to the rules of a board of trade
that has been designated as a contract market for such a
contract pursuant to the federal commodities laws; or
(ii) Traded on a foreign commodity board of trade,
exchange or market, and is carried on the books of a commodity
intermediary for a commodity customer.
(c) "Commodity customer" means a person for whom a
commodity intermediary carries a commodity contract on its
books.
(d) "Commodity intermediary" means:
(i) A person who is registered as a futures commission
merchant under the federal commodities laws; or
(ii) A person who in the ordinary course of its business
provides clearance or settlement services for a board of trade
that has been designated as a contract market pursuant to the
federal commodities laws.
(e) "Control" with respect to a certificated security,
uncertificated security, or security entitlement has the
meaning specified in section 8-106. A secured party has
control over a commodity contract if by agreement among the
commodity customer, the commodity intermediary, and the secured
party, the commodity intermediary has agreed that it will apply
any value distributed on account of the commodity contract as
directed by the secured party without further consent by the
commodity customer. If a commodity customer grants a security interest in a commodity contract to its own commodity
intermediary, the commodity intermediary as secured party has
control. A secured party has control over a securities account
or commodity account if the secured party has control over all
security entitlements or commodity contracts carried in the
securities account or commodity account.
(f) "Investment property" means:
(i) A security, whether certificated or uncertificated;
(ii) A security entitlement;
(iii) A securities account;
(iv) A commodity contract; or
(v) A commodity account.
(2) Attachment or perfection of a security interest in a
securities account is also attachment or perfection of a
security interest in all security entitlements carried in the
securities account. Attachment or perfection of a security
interest in a commodity account is also attachment or
perfection of a security interest in all commodity contracts
carried in the commodity account.
(3) A description of collateral in a security agreement or
financing statement is sufficient to create or perfect a
security interest in a certificated security, uncertificated
security, security entitlement, securities account, commodity
contract or commodity account whether it describes the
collateral by those terms, or as investment property, or by
description of the underlying security, financial asset or
commodity contract. A description of investment property
collateral in a security agreement or financing statement is
sufficient if it identifies the collateral by specific listing,
by category, by quantity, by a computational or allocational
formula or procedure or by any other method, if the identity of
the collateral is objectively determinable.
(4) Perfection of a security interest in investment
property is governed by the following rules:
(a) A security interest in investment property may be
perfected by control.
(b) Except as otherwise provided in subdivisions (c) and
(d) of this subsection, a security interest in investment property may be perfected by filing.
(c) If the debtor is a broker or securities intermediary
a security interest in investment property is perfected when it
attaches. The filing of a financing statement with respect to
a security interest in investment property granted by a broker
or securities intermediary has no effect for purposes of
perfection or priority with respect to that security interest.
(d) If a debtor is a commodity intermediary, a security
interest in a commodity contract or a commodity account is
perfected when it attaches. The filing of a financing
statement with respect to a security interest in a commodity
contract or a commodity account granted by a commodity
intermediary has no effect for purposes of perfection or
priority with respect to that security interest.
(5) Priority between conflicting security interests in the
same investment property is governed by the following rules:
(a) A security interest of a secured party who has control
over investment property has priority over a security interest
of a secured party who does not have control over the investment property.
(b) Except as otherwise provided in subdivisions (c) and
(d) of this subsection, conflicting security interests of
secured parties each of whom has control rank equally.
(c) Except as otherwise agreed by the securities
intermediary, a security interest in a security entitlement or
a securities account granted to the debtor's own securities
intermediary has priority over any security interest granted by
the debtor to another secured party.
(d) Except as otherwise agreed by the commodity
intermediary, a security interest in a commodity contract or a
commodity account granted to the debtor's own commodity
intermediary has priority over any security interest granted by
the debtor to another secured party.
(e) Conflicting security interests granted by a broker, a
securities intermediary, or a commodity intermediary which are
perfected without control rank equally.
(f) In all other cases, priority between conflicting
security interests in investment property is governed by section 9-312(5), (6) and (7). Section 9-312(4) does not apply
to investment property.
(6) If a security certificate in registered form is
delivered to a secured party pursuant to agreement, a written
security agreement is not required for attachment or
enforceability of the security interest, delivery suffices for
perfection of the security interest, and the security interest
has priority over a conflicting security interest perfected by
means other than control, even if a necessary indorsement is
lacking.
§46-9-116. Security interest arising in purchase or delivery
of financial asset.
(1) If a person buys a financial asset through a
securities intermediary in a transaction in which the buyer is
obligated to pay the purchase price to the securities
intermediary at the time of the purchase and the securities
intermediary credits the financial asset to the buyer's
securities account before the buyer pays the securities
intermediary, the securities intermediary has a security
interest in the buyer's security entitlement securing the buyer's obligation to pay. A security agreement is not
required for attachment or enforceability of the security
interest and the security interest is automatically perfected.
(2) If a certificated security, or other financial asset
represented by a writing which in the ordinary course of
business is transferred by delivery with any necessary
indorsement or assignment is delivered pursuant to an agreement
between persons in the business of dealing with such securities
or financial assets and the agreement calls for delivery versus
payment, the person delivering the certificate or other
financial asset has a security interest in the certificated
security or other financial asset securing the seller's right
to receive payment. A security agreement is not required for
attachment or enforceability of the security interest, and the
security interest is automatically perfected.
§46-9-203. Attachment and enforceability of security interest;
proceeds; formal requisites.
(1) Subject to the provisions of section 4-208 on the
security interest of a collecting bank, sections 9-115 and
9-116 on security interests in investment property, and section 9-113 on a security interest arising under the article on
sales, a security interest is not enforceable against the
debtor or third parties with respect to the collateral and does
not attach unless:
(a) The collateral is in the possession of the secured
party pursuant to agreement, the collateral is investment
property and the secured party has control pursuant to
agreement, or the debtor has signed a security agreement which
contains a description of the collateral and in addition, when
the security interest covers crops growing or to be grown or
timber to be cut, a description of the land concerned;
(b) Value has been given; and
(c) The debtor has rights in the collateral.
(2) A security interest attaches when it becomes
enforceable against the debtor with respect to the collateral.
Attachment occurs as soon as all of the events specified in
subsection (1) of this section have taken place unless explicit
agreement postpones the time of attaching.
(3) Unless otherwise agreed a security agreement gives the secured party the rights to proceeds provided by section 9-306.
(4) A transaction may be subject to this article and also
to article seven-a, chapter forty-seven of this code, relating
to small loans and in case of conflict between the provisions
of this article and article seven-a, chapter forty-seven of
this code or any other such statute, the provisions of said
article seven-a or such other statute control. Failure to
comply with any applicable statute has only the effect which is
specified therein.
§46-9-301. Persons who take priority over unperfected security
interests; right of "lien creditor".
(1) Except as otherwise provided in subsection (2 of this
section), an unperfected security interest is subordinate to
the rights of:
(a) Persons entitled to priority under section 9-312;
(b) A person who becomes a lien creditor before the
security interest is perfected;
(c) In the case of goods, instruments, documents, and
chattel paper, a person who is not a secured party and who is
a transferee in bulk or other buyer not in ordinary course of business; or is a buyer of farm products in ordinary course of
business, to the extent that he gives value and receives
delivery of the collateral without knowledge of the security
interest and before it is perfected; and
(d) In the case of accounts, general intangibles and
investment property, a person who is not a secured party and
who is a transferee to the extent that he gives value without
knowledge of the security interest and before it is perfected.
(2) If the secured party files with respect to a purchase
money security interest before or within twenty days after the
debtor receives possession of the collateral, he takes priority
over the rights of a transferee in bulk or of a lien creditor
which arise between the time the security interest attaches and
the time of filing.
(3) A "lien creditor" means a creditor who has acquired a
lien on the property involved by attachment, levy or the like
and includes an assignee for benefit of creditors from the time
of assignment, and a trustee in bankruptcy from the date of the
filing of the petition or a receiver in equity from the time of appointment.
(4) A person who becomes a lien creditor while a security
interest is perfected takes subject to the security interest
only to the extent that it secures advances made before he
becomes a lien creditor or within forty-five days thereafter or
made without knowledge of the lien or pursuant to a commitment
entered into without knowledge of the lien.
§46-9-302. When filing is required to perfect security
interest; security interests to which filing provisions of
this article do not apply.
(1) A financing statement must be filed to perfect all
security interests except the following:
(a) A security interest in collateral in possession of the
secured party under section 9-305;
(b) A security interest temporarily perfected in
instruments, certificated securities or documents without
delivery under section 9-304 or in proceeds for a ten-day
period under section 9-306;
(c) A security interest created by an assignment of a
beneficial interest in a trust or a decedent's estate;
(d) A purchase money security interest in consumer goods;
but filing is required for a motor vehicle required to be
registered; and fixture filing is required for priority over
conflicting interests in fixtures to the extent provided in
section 9-313;
(e) An assignment of accounts which does not alone or in
conjunction with other assignments to the same assignee
transfer a significant part of the outstanding accounts of the
assignor;
(f) A security interest of a collecting bank (section
4-208) or arising under the article on sales (see section 9-
113) or covered in subsection (3) of this section;
(g) An assignment for the benefit of all the creditors of
the transferor, and subsequent transfers by the assignee
thereunder;
(h) A security interest in investment property which is
perfected without filing under section 9-115 or section 9-116.
(2) If a secured party assigns a perfected security
interest, no filing under this article is required in order to continue the perfected status of the security interest against
creditors of and transferees from the original debtor.
(3) The filing of a financing statement otherwise required
by this article is not necessary or effective to perfect a
security interest in property subject to:
(a) A statute or treaty of the United States which
provides for a national or international registration or a
national or international certificate of title or which
specifies a place of filing different from that specified in
this article for filing of the security interest; or
(b) The following statute of this state: Chapter
seventeen-a of this code; but during any period in which
collateral is inventory held for sale by a person who is in the
business of selling goods of that kind, the filing provisions
of this article (Part 4) apply to a security interest in that
collateral created by him as debtor; or
(c) A certificate of title statute of another jurisdiction
under the law of which indication of a security interest on the
certificate is required as a condition of perfection (subsection (2) of section 9-103).
(4) Compliance with a statute or treaty described in
subsection (3) of this section is equivalent to the filing of
a financing statement under this article, and a security
interest in property subject to the statute or treaty can be
perfected only by compliance therewith except as provided in
section 9-103 on multiple state transactions. Duration and
renewal of perfection of a security interest perfected by
compliance with the statute or treaty are governed by the
provisions of the statute or treaty; in other respects the
security interest is subject to this article.
§46-9-304. Perfection of security interest in instruments,
documents, and goods covered by documents; perfection by
permissive filing; temporary perfection without filing or
transfer of possession.
(1) A security interest in chattel paper or negotiable
documents may be perfected by filing. A security interest in
money or instruments (other than instruments which constitute
part of chattel paper) can be perfected only by the secured
party's taking possession, except as provided in subsections (4) and (5) of this section and subsections (2) and (3) of
section 9-306 on proceeds.
(2) During the period that goods are in the possession of
the issuer of a negotiable document therefor, a security
interest in the goods is perfected by perfecting a security
interest in the document, and any security interest in the
goods otherwise perfected during such period is subject
thereto.
(3) A security interest in goods in the possession of a
bailee other than one who has issued a negotiable document
therefor is perfected by issuance of a document in the name of
the secured party or by the bailee's receipt of notification of
the secured party's interest or by filing as to the goods.
(4) A security interest in instruments, certificated
securities or negotiable documents is perfected without filing
or the taking of possession for a period of twenty-one days
from the time it attaches to the extent that it arises for new
value given under a written security agreement.
(5) A security interest remains perfected for a period of twenty-one days without filing where a secured party having a
perfected security interest in an instrument, a certificated
security, a negotiable document or goods in possession of a
bailee other than one who has issued a negotiable document
therefor:
(a) Makes available to the debtor the goods or documents
representing the goods for the purpose of ultimate sale or
exchange or for the purpose of loading, unloading, storing,
shipping, transshipping, manufacturing, processing or otherwise
dealing with them in a manner preliminary to their sale or
exchange, but priority between conflicting security interests
in the goods is subject to subsection (3) of section 9-312; or
(b) Delivers the instrument or certificated security to
the debtor for the purpose of ultimate sale or exchange or of
presentation, collection, renewal or registration of transfer.
(6) After the twenty-one-day period in subsections (4) and
(5) of this section perfection depends upon compliance with
applicable provisions of this article.
§46-9-305. When possession by secured party perfects security interest without filing.
A security interest in letters of credit and advices of
credit (subsection (2) (a) of section 5-116), goods,
instruments, money, negotiable documents or chattel paper may
be perfected by the secured party's taking possession of the
collateral. If such collateral other than goods covered by a
negotiable document is held by a bailee, the secured party is
deemed to have possession from the time the bailee receives
notification of the secured party's interest. A security
interest is perfected by possession from the time possession is
taken without relation back and continues only so long as
possession is retained, unless otherwise specified in this
article. The security interest may be otherwise perfected as
provided in this article before or after the period of
possession by the secured party.
§46-9-306. "Proceeds"; secured party's rights on disposition
of collateral.
(1) "Proceeds" includes whatever is received upon the
sale, exchange, collection or other disposition of collateral
or proceeds. Insurance payable by reason of loss or damage to the collateral is proceeds, except to the extent that it is
payable to a person other than a party to the security
agreement. Any payments or distributions made with respect to
investment property collateral are proceeds. Money, checks,
deposit accounts and the like are "cash proceeds". All other
proceeds are "noncash proceeds".
(2) Except where this article otherwise provides, a
security interest continues in collateral notwithstanding sale,
exchange or other disposition thereof unless the disposition
was authorized by the secured party in the security agreement
or otherwise, and also continues in any identifiable proceeds
including collections received by the debtor.
(3) The security interest in proceeds is a continuously
perfected security interest if the interest in the original
collateral was perfected but it ceases to be a perfected
security interest and becomes unperfected ten days after
receipt of the proceeds by the debtor unless:
(a) A filed financing statement covers the original
collateral and the proceeds are collateral in which a security interest may be perfected by filing in the office or offices
where the financing statement has been filed and, if the
proceeds are acquired with cash proceeds, the description of
collateral in the financing statement indicates the types of
property constituting the proceeds; or
(b) A filed financing statement covers the original
collateral and the proceeds are identifiable cash proceeds; or
(c) The original collateral was investment property and
the proceeds are identifiable cash proceeds; or
(d) The security interest in the proceeds is perfected
before the expiration of the ten-day period. Except as
provided in this section, a security interest in proceeds can
be perfected only by the methods or under the circumstances
permitted in this article for original collateral of the same
type.
(4) In the event of insolvency proceedings instituted by
or against a debtor, a secured party with a perfected security
interest in proceeds has a perfected security interest only in
the following proceeds:
(a) In identifiable noncash proceeds and in separate
deposit accounts containing only proceeds;
(b) In identifiable cash proceeds in the form of money
which is neither commingled with other money nor deposited in
a deposit account prior to the insolvency proceedings;
(c) In identifiable cash proceeds in the form of checks
and the like which are not deposited in a deposit account prior
to the insolvency proceedings; and
(d) In all cash and deposit accounts of the debtor in
which proceeds have been commingled with other funds, but the
perfected security interest under this subdivision is:
(i) Subject to any right of setoff; and
(ii) Limited to an amount not greater than the amount of
any cash proceeds received by the debtor within ten days before
the institution of the insolvency proceedings less the sum of:
(I) The payments to the secured party on account of cash
proceeds received by the debtor during such period; and (II)
the cash proceeds received by the debtor during such period to
which the secured party is entitled under subdivisions (a) through (c) of this subsection.
(5) If a sale of goods results in an account or chattel
paper which is transferred by the seller to a secured party,
and if the goods are returned to or are repossessed by the
seller or the secured party, the following rules determine
priorities:
(a) If the goods were collateral at the time of sale for
an indebtedness of the seller which is still unpaid, the
original security interest attaches again to the goods and
continues as the perfected security interest if it was
perfected at the time when the goods were sold. If the
security interest was originally perfected by a filing which is
still effective, nothing further is required to continue the
perfected status; in any other case, the secured party must
take possession of the returned or repossessed goods or must
file.
(b) An unpaid transferee of the chattel paper has a
security interest in the goods against the transferor. Such
security interest is prior to a security interest asserted under paragraph (a) to the extent that the transferee of the
chattel paper was entitled to priority under section 9-308.
(c) An unpaid transferee of the account has a security
interest in the goods against the transferor. Such security
interest is subordinate to a security interest asserted under
subdivision (a) of this subsection.
(d) A security interest of an unpaid transferee asserted
under subdivision (b) or (c) of this subsection must be
perfected for protection against creditors of the transferor
and purchasers of the returned or repossessed goods.
§46-9-309. Protection of purchasers of instruments, documents
and securities.
Nothing in this article limits the rights of a holder in
due course of a negotiable instrument (section 3-302) or a
holder to whom a negotiable document of title has been duly
negotiated (section 7-501) or a protected purchaser of a
security (section 8-303) and such holders or purchasers take
priority over an earlier security interest even though
perfected. Filing under this article does not constitute notice
of the security interest to such holders or purchasers.
§46-9-312. Priorities among conflicting security interests in
the same collateral.
(1) The rules of priority stated in other sections of this
part and in the following sections shall govern when
applicable: Section 4-210 with respect to the security
interests of collecting banks in items being collected,
accompanying documents and proceeds; section 9-103 on security
interests related to other jurisdictions; section 9-114 on
consignments; section 9-115 on security interests in investment
property.
(2) A perfected security interest in crops for new value
given to enable the debtor to produce the crops during the
production season and given not more than three months before
the crops become growing crops by planting or otherwise takes
priority over an earlier perfected security interest to the
extent that such earlier interest secures obligations due more
than six months before the crops become growing crops by
planting or otherwise, even though the person giving new value
had knowledge of the earlier security interest.
(3) A perfected purchase money security interest in inventory has priority over a conflicting security interest in
the same inventory and also has priority in identifiable cash
proceeds received on or before the delivery of the inventory to
a buyer if:
(a) The purchase money security interest is perfected at
the time the debtor receives possession of the inventory; and
(b) The purchase money secured party gives notification in
writing to the holder of the conflicting security interest if
the holder had filed a financing statement covering the same
types of inventory: (i) Before the date of the filing made by
the purchase money secured party; or (ii) before the beginning
of the twenty-one-day period where the purchase money security
interest is temporarily perfected without filing or possession
(subsection (5) of section 9-304); and
(c) The holder of the conflicting security interest
receives the notification within five years before the debtor
receives possession of the inventory; and
(d) The notification states that the person giving the
notice has or expects to acquire a purchase money security interest in inventory of the debtor, describing such inventory
by item or type.
(4) A purchase money security interest in collateral other
than inventory has priority over a conflicting security
interest in the same collateral or its proceeds if the purchase
money security interest is perfected at the time the debtor
receives possession of the collateral or within twenty days
thereafter.
(5) In all cases not governed by other rules stated in
this section (including cases of purchase money security
interests which do not qualify for the special priorities set
forth in subsections (3) and (4) of this section), priority
between conflicting security interests in the same collateral
shall be determined according to the following rules:
(a) Conflicting security interests rank according to
priority in time of filing or perfection. Priority dates from
the time a filing is first made covering the collateral or the
time the security interest is first perfected, whichever is
earlier, provided that there is no period thereafter when there is neither filing nor perfection.
(b) So long as conflicting security interests are
unperfected, the first to attach has priority.
(6) For the purposes of subsection (5) of this section a
date of filing or perfection as to collateral is also a date of
filing or perfection as to proceeds.
(7) If future advances are made while a security interest
is perfected by filing, the taking of possession, or under
section 9-115 or section 9-116 on investment property, the
security interest has the same priority for the purposes of
subsection (5) or (8) of this section with respect to the
future advances as it does with respect to the first advance.
If a commitment is made before or while the security interest
is so perfected, the security interest has the same priority
with respect to advances made pursuant thereto. In other cases
a perfected security interest has priority from the date the
advance is made.