Senate Bill No. 662
(By Senators Minard, Anderson, Schoonover and Deem)
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[Introduced February 22, 1999;
referred to the Committee on Interstate Cooperation; and then to
the Committee on the Judiciary.]
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A BILL to amend and reenact article nine, chapter forty-six of the
code of West Virginia, one thousand nine hundred thirty-one,
as amended, relating to uniform commercial code.
Be it enacted by the Legislature of West Virginia:
That article nine, chapter forty-six of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted to read as follows:
ARTICLE 9. SECURED TRANSACTIONS.
PART 1
GENERAL PROVISIONS
SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
§46-9-101. Short title.
This article may be cited as Uniform Commercial Code-Secured
Transactions.
§46-9-102. Definitions and index of definitions.
(a) In this article:
(1) "Accession" means goods that are physically united with
other goods in such a manner that the identity of the original
goods is not lost.
(2) "Account", except as used in "account for", means a right
to payment of a monetary obligation, whether or not earned by
performance: (i) For property that has been or is to be sold,
leased, licensed, assigned or otherwise disposed of; (ii) for
services rendered or to be rendered; (iii) for a policy of
insurance issued or to be issued; (iv) for a secondary obligation
incurred or to be incurred; (v) for energy provided or to be
provided; (vi) for the use or hire of a vessel under a charter or
other contract; (vii) arising out of the use of a credit or charge
card or information contained on or for use with the card; or
(viii) as winnings in a lottery or other game of chance operated or
sponsored by a state, governmental unit of a state, or person
licensed or authorized to operate the game by a state or
governmental unit of a state. The term includes health-care- insurance receivables. The term does not include: (i) Rights to payment evidenced by chattel paper or an instrument; (ii)
commercial tort claims; (iii) deposit accounts; (iv) investment
property; (v) letter-of-credit rights or letters of credit; or (vi)
rights to payment for money or funds advanced or sold, other than
rights arising out of the use of a credit or charge card or
information contained on or for use with the card.
(3) "Account debtor" means a person obligated on an account,
chattel paper, or general intangible. The term does not include
persons obligated to pay a negotiable instrument, even if the
instrument constitutes part of chattel paper.
(4) "Accounting", except as used in "accounting for", means a
record:
(A) Authenticated by a secured party;
(B) Indicating the aggregate unpaid secured obligations as of
a date not more than thirty-five days earlier or thirty-five days
later than the date of the record; and
(C) Identifying the components of the obligations in
reasonable detail.
(5) "Agricultural lien" means an interest, other than a
security interest, in farm products:
(A) Which secures payment or performance of an obligation for:
(i) Goods or services furnished in connection with a debtor's
farming operation; or
(ii) Rent on real property leased by a debtor in connection
with its farming operation;
(B) Which is created by statute in favor of a person that:
(i) In the ordinary course of its business furnished goods or
services to a debtor in connection with a debtor's farming
operation; or
(ii) Leased real property to a debtor in connection with the
debtor's farming operation; and
(C) Whose effectiveness does not depend on the person's
possession of the personal property.
(6) "As-extracted collateral" means:
(A) Oil, gas or other minerals that are subject to a security
interest that:
(i) Is created by a debtor having an interest in the minerals
before extraction; and
(ii) Attaches to the minerals as extracted; or
(B) Accounts arising out of the sale at the wellhead or
minehead of oil, gas or other minerals in which the debtor had an
interest before extraction.
(7) "Authenticate" means:
(A) To sign; or
(B) To execute or otherwise adopt a symbol, or encrypt or
similarly process a record in whole or in part, with the present
intent of the authenticating person to identify the person and
adopt or accept a record.
(8) "Bank" means an organization that is engaged in the
business of banking. The term includes savings banks, savings and
loan associations, credit unions and trust companies.
(9) "Cash proceeds" means proceeds that are money, checks,
deposit accounts or the like.
(10) "Certificate of title" means a certificate of title with
respect to which a statute provides for the security interest in
question to be indicated on the certificate as a condition or
result of the security interest's obtaining priority over the
rights of a lien creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that evidence
both a monetary obligation and a security interest in specific
goods, a security interest in specific goods and software used in
the goods, or a lease of specific goods. The term does not include
charters or other contracts involving the use or hire of a vessel.
If a transaction is evidenced both by a security agreement or lease and by an instrument or series of instruments, the group of records
taken together constitutes chattel paper.
(12) "Collateral" means the property subject to a security
interest or agricultural lien. The term includes:
(A) Proceeds to which a security interest attaches;
(B) Accounts, chattel paper, payment intangibles and
promissory notes that have been sold; and
(C) Goods that are the subject of a consignment.
(13) "Commercial tort claim" means a claim arising in tort
with respect to which:
(A) The claimant is an organization; or
(B) The claimant is an individual and the claim:
(i) Arose in the course of the claimant's business or
profession; and
(ii) Does not include damages arising out of personal injury
to or the death of an individual.
(14) "Commodity account" means an account maintained by a
commodity intermediary in which a commodity contract is carried for
a commodity customer.
(15) "Commodity contract" means a commodity futures contract,
an option on a commodity futures contract, a commodity option or
another contract if the contract or option is:
(A) 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 federal commodities laws; or
(B) 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.
(16) "Commodity customer" means a person for which a commodity
intermediary carries a commodity contract on its books.
(17) "Commodity intermediary" means a person that:
(A) Is registered as a futures commission merchant under
federal commodities law; or
(B) 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 federal commodities
law.
(18) "Communicate" means:
(A) To send a written or other tangible record;
(B) To transmit a record by any means agreed upon by the
persons sending and receiving the record; or
(C) In the case of transmission of a record to or by a filing
office, to transmit a record by any means prescribed by filing- office rule.
(19) "Consignee" means a merchant to which goods are delivered
in a consignment.
(20) "Consignment" means a transaction, regardless of its
form, in which a person delivers goods to a merchant for the
purpose of sale and:
(A) The merchant:
(i) Deals in goods of that kind under a name other than the
name of the person making delivery;
(ii) Is not an auctioneer; and
(iii) Is not generally known by its creditors to be
substantially engaged in selling the goods of others;
(B) With respect to each delivery, the aggregate value of the
goods is one thousand dollars or more at the time of delivery;
(C) The goods are not consumer goods immediately before
delivery; and
(D) The transaction does not create a security interest that
secures an obligation.
(21) "Consignor" means a person that delivers goods to a
consignee in a consignment.
(22) "Consumer debtor" means a debtor in a consumer
transaction.
(23) "Consumer goods" means goods that are used or bought for
use primarily for personal, family or household purposes.
(24) "Consumer-goods transaction" means a consumer transaction
in which:
(A) An individual incurs an obligation primarily for personal,
family, or household purposes; and
(B) A security interest in consumer goods secures the
obligation.
(25) "Consumer obligor" means an obligor who is an individual
and who incurred the obligation as part of a transaction entered
into primarily for personal, family or household purposes.
(26) "Consumer transaction" means a transaction in which: (i)
An individual incurs an obligation primarily for personal, family
or household purposes; (ii) a security interest secures the
obligation: and (iii) the collateral is held or acquired primarily
for personal, family or household purposes. The term includes
consumer-goods transactions.
(27) "Continuation statement" means an amendment of a
financing statement which:
(A) Identifies, by its file number, the initial financing
statement to which it relates; and
(B) Indicates that it is a continuation statement for, or that
it is filed to continue the effectiveness of, the identified
financing statement.
(28) "Debtor" means:
(A) A person having an interest, other than a security
interest or other lien, in the collateral, whether or not the
person is an obligor;
(B) A seller of accounts, chattel paper, payment intangibles
or promissory notes; or
(C) A consignee.
(29) "Deposit account" means a demand, time, savings, passbook
or similar account maintained with a bank. The term does not
include investment property or accounts evidenced by an instrument.
(30) "Document" means a document of title or a receipt of the
type described in section 7-201(2).
(31) "Electronic chattel paper" means chattel paper evidenced
by a record or records consisting of information stored in an
electronic medium.
(32) "Encumbrance" means a right, other than an ownership
interest, in real property. The term includes mortgages and other
liens on real property.
(33) "Equipment" means goods other than inventory, farm
products or consumer goods.
(34) "Farm products" means goods, other than standing timber,
with respect to which the debtor is engaged in a farming operation
and which are:
(A) Crops grown, growing, or to be grown, including:
(i) Crops produced on trees, vines and bushes; and
(ii) Aquatic goods produced in aquacultural operations;
(B) Livestock, born or unborn, including aquatic goods
produced in aquacultural operations;
(C) Supplies used or produced in a farming operation; or
(D) Products of crops or livestock in their unmanufactured
states.
(35) "Farming operation" means raising, cultivating,
propagating, fattening, grazing, or any other farming, livestock or
aquacultural operation.
(36) "File number" means the number assigned to an initial
financing statement pursuant to section 9-519(a).
(37) "Filing office" means an office designated in section
9-501 as the place to file a financing statement.
(38) "Filing-office rule" means a rule adopted pursuant to
section 9-526.
(39) "Financing statement" means a record or records composed
of an initial financing statement and any filed record relating to
the initial financing statement.
(40) "Fixture filing" means the filing of a financing
statement covering goods that are or are to become fixtures and
satisfying section 9-502(a) and (b). The term includes the filing
of a financing statement covering goods of a transmitting utility
which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to
particular real property that an interest in them arises under real
property law.
(42) "General intangible" means any personal property,
including things in action, other than accounts, chattel paper,
commercial tort claims, deposit accounts, documents, goods,
instruments, investment property, letter-of-credit rights, letters
of credit, money, and oil, gas or other minerals before extraction.
The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
(44) "Goods" means all things that are movable when a security
interest attaches. The term includes: (i) Fixtures; (ii) standing
timber that is to be cut and removed under a conveyance or contract for sale; (iii) the unborn young of animals; (iv) crops grown,
growing or to be grown, even if the crops are produced on trees,
vines or bushes; and (v) manufactured homes. The term also
includes a computer program embedded in goods and any supporting
information provided in connection with a transaction relating to
the program if: (i) The program is associated with the goods in
such a manner that it customarily is considered part of the goods;
or (ii) by becoming the owner of the goods, a person acquires a
right to use the program in connection with the goods. The term
does not include a computer program embedded in goods that consist
solely of the medium with which the program is embedded. The term
also does not include accounts, chattel paper, commercial tort
claims, deposit accounts, documents, general intangibles,
instruments, investment property, letter-of-credit rights, letters
of credit, money, or oil, gas or other minerals before extraction.
(45) "Governmental unit" means a subdivision, agency,
department, county, parish, municipality or other unit of the
government of the United States, a state or a foreign country. The
term includes an organization having a separate corporate existence
if the organization is eligible to issue debt on which interest is
exempt from income taxation under the laws of the United States.
(46) "Health-care-insurance receivable" means an interest in
or claim under a policy of insurance which is a right to payment of
a monetary obligation for health-care goods or services provided.
(47) "Instrument" means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary
obligation, is not itself a security agreement or lease, and is of
a type that in ordinary course of business is transferred by
delivery with any necessary indorsement or assignment. The term
does not include: (i) Investment property; (ii) letters of credit;
or (iii) writings that evidence a right to payment arising out of
the use of a credit or charge card or information contained on or
for use with the card.
(48) "Inventory" means goods, other than farm products, which:
(A) Are leased by a person as lessor;
(B) Are held by a person for sale or lease or to be furnished
under a contract of service;
(C) Are furnished by a person under a contract of service; or
(D) Consist of raw materials, work in process, or materials
used or consumed in a business.
(49) "Investment property" means a security, whether
certificated or uncertificated, security entitlement, securities
account, commodity contract or commodity account.
(50) "Jurisdiction of organization", with respect to a
registered organization, means the jurisdiction under whose law the
organization is organized.
(51) "Letter-of-credit right" means a right to payment and
performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand
payment or performance. The term does not include the right of a
beneficiary to demand payment or performance under a letter of
credit.
(52) "Lien creditor" means:
(A) A creditor that has acquired a lien on the property
involved by attachment, levy or the like;
(B) An assignee for benefit of creditors from the time of
assignment;
(C) A trustee in bankruptcy from the date of the filing of the
petition; or
(D) A receiver in equity from the time of appointment.
(53) "Manufactured home" means a structure, transportable in
one or more sections, which, in the traveling mode, is eight body
feet or more in width or forty body feet or more in length, or,
when erected on site, is three hundred twenty or more square feet,
and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected
to the required utilities, and includes the plumbing, heating, air- conditioning and electrical systems contained therein. The term
includes any structure that meets all of the requirements of this
paragraph except the size requirements and with respect to which
the manufacturer voluntarily files a certification required by the
United States Secretary of Housing and Urban Development and
complies with the standards established under Title 42 of the
United States Code.
(54) "Manufactured-home transaction" means a secured
transaction:
(A) That creates a purchase-money security interest in a
manufactured home, other than a manufactured home held as
inventory; or
(B) In which a manufactured home, other than a manufactured
home held as inventory, is the primary collateral.
(55) "Mortgage" means a consensual interest in real property,
including fixtures, which secures payment or performance of an
obligation.
(56) "New debtor" means a person that becomes bound as debtor
under section 9-203(d) by a security agreement previously entered
into by another person.
(57) "New value" means: (i) Money; (ii) money's worth in
property, services or new credit; or (iii) release by a transferee
of an interest in property previously transferred to the
transferee. The term does not include an obligation substituted
for another obligation.
(58) "Noncash proceeds" means proceeds other than cash
proceeds.
(59) "Obligor" means a person that, with respect to an
obligation secured by a security interest in or an agricultural
lien on the collateral: (i) Owes payment or other performance of
the obligation; (ii) has provided property other than the
collateral to secure payment or other performance of the
obligation; or (iii) is otherwise accountable in whole or in part
for payment or other performance of the obligation. The term does
not include issuers or nominated persons under a letter of credit.
(60) "Original debtor" means a person that, as debtor, entered
into a security agreement to which a new debtor has become bound
under section 9-203(d).
(61) "Payment intangible" means a general intangible under
which the account debtor's principal obligation is a monetary
obligation.
(62) "Person related to", with respect to an individual,
means:
(A) The spouse of the individual;
(B) A brother, brother-in-law, sister or sister-in-law of the
individual;
(C) An ancestor or lineal descendant of the individual or the
individual's spouse; or
(D) Any other relative, by blood or marriage, of the
individual or the individual's spouse who shares the same home with
the individual.
(63) "Person related to", with respect to an organization,
means:
(A) A person directly or indirectly controlling, controlled by
or under common control with the organization;
(B) An officer or director of, or a person performing similar
functions with respect to, the organization;
(C) An officer or director of, or a person performing similar
functions with respect to, a person described in subparagraph (A);
(D) The spouse of an individual described in subparagraph (A),
(B) or (C); or
(E) An individual who is related by blood or marriage to an
individual described in subparagraph (A), (B), (C) or (D) and
shares the same home with the individual.
(64) "Proceeds" means the following property:
(A) Whatever is acquired upon the sale, lease, license,
exchange or other disposition of collateral;
(B) Whatever is collected on, or distributed on account of,
collateral;
(C) Rights arising out of collateral;
(D) To the extent of the value of collateral, claims arising
out of the loss, nonconformity or interference with the use of,
defects or infringement of rights in, or damage to, the collateral;
or
(E) To the extent of the value of collateral and to the extent
payable to the debtor or the secured party, insurance payable by
reason of the loss or nonconformity of, defects or infringement of
rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that evidences a
promise to pay a monetary obligation, does not evidence an order to
pay, and does not contain an acknowledgment by a bank that the bank
has received for deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a secured
party which includes the terms on which the secured party is
willing to accept collateral in full or partial satisfaction of the
obligation it secures pursuant to sections 9-620, 9-621 and 9-622.
(67) "Public-finance transaction" means a secured transaction
in connection with which:
(A) Debt securities are issued;
(B) All or a portion of the securities issued have an initial
stated maturity of at least twenty years; and
(C) The debtor, obligor, secured party, account debtor or
other person obligated on collateral, assignor or assignee of a
secured obligation, or assignor or assignee of a security interest
is a state or a governmental unit of a state.
(68) "Pursuant to commitment", with respect to an advance made
or other value given by a secured party, means pursuant to the
secured party's obligation, whether or not a subsequent event of
default or other event not within the secured party's control has
relieved or may relieve the secured party from its obligation.
(69) "Record", except as used in "for record", "of record",
"record or legal title" and "record owner", means information that
is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable form.
(70) "Registered organization" means an organization organized
solely under the law of a single state or the United States and as
to which the state or the United States must maintain a public
record showing the organization to have been organized.
(71) "Secondary obligor" means an obligor to the extent that:
(A) The obligor's obligation is secondary; or
(B) The obligor has a right of recourse with respect to an
obligation secured by collateral against the debtor, another
obligor or property of either.
(72) "Secured party" means:
(A) A person in whose favor a security interest is created or
provided for under a security agreement, whether or not any
obligation to be secured is outstanding;
(B) A person that holds an agricultural lien;
(C) A consignor;
(D) A person to which accounts, chattel paper, payment
intangibles or promissory notes have been sold;
(E) A trustee, indenture trustee, agent, collateral agent or
other representative in whose favor a security interest or
agricultural lien is created or provided for; or
(F) A person that holds a security interest arising under
section 2-401, 2-505, 2-711(3), 2A-508(5), 4-210 or 5-118.
(73) "Security agreement" means an agreement that creates or
provides for a security interest.
(74) "Send", in connection with a record or notification,
means:
(A) To deposit in the mail, deliver for transmission or
transmit by any other usual means of communication, with postage or
cost of transmission provided for, addressed to any address
reasonable under the circumstances; or
(B) To cause the record or notification to be received within
the time that it would have been received if properly sent under
subparagraph (A).
(75) "Software" means a computer program and any supporting
information provided in connection with a transaction relating to
the program. The term does not include a computer program that is
included in the definition of goods.
(76) "State" means a state of the United States, the District
of Columbia, Puerto Rico, the United States Virgin Islands or any
territory or insular possession subject to the jurisdiction of the
United States.
(77) "Supporting obligation" means a letter-of-credit right or
secondary obligation that supports the payment or performance of an account, chattel paper, a document, a general intangible, an
instrument or investment property.
(78) "Tangible chattel paper" means chattel paper evidenced by
a record or records consisting of information that is inscribed on
a tangible medium.
(79) "Termination statement" means an amendment of a financing
statement which:
(A) Identifies, by its file number, the initial financing
statement to which it relates; and
(B) Indicates either that it is a termination statement or
that the identified financing statement is no longer effective.
(80) "Transmitting utility" means a person primarily engaged
in the business of:
(A) Operating a railroad, subway, street railway or trolley
bus;
(B) Transmitting communications electrically,
electromagnetically or by light;
(C) Transmitting goods by pipeline or sewer; or
(D) Transmitting or producing and transmitting electricity,
steam, gas or water.
(b) The following definitions in other articles apply to this
article:
"Applicant"Section 5-102.
"Beneficiary"Section 5-102.
"Broker"Section 8-102.
"Certificated security"Section 8-102.
"Check"Section 3-104.
"Clearing corporation"Section 8-102.
"Contract for sale"Section 2-106.
"Customer" Section 4-104.
"Entitlement holder"Section 8-102.
"Financial asset"Section 8-102.
"Holder in due course"Section 3-302.
"Issuer" (with respect to a letter of
credit or letter-of-credit right)Section 5-102.
"Issuer" (with respect to a security)Section 8-201.
"Lease"Section 2A-103.
"Lease agreement"Section 2A-103.
"Lease contract"Section 2A-103.
"Leasehold interest"Section 2A-103.
"Lessee"Section 2A-103.
"Lessee in ordinary course of business"Section 2A-103.
"Lessor"Section 2A-103.
"Lessor's residual interest"Section 2A-103.
"Letter of credit"Section 5-102.
"Merchant"Section 2-104.
"Negotiable instrument"Section 3-104.
"Nominated person"Section 5-102.
"Note"Section 3-104.
"Proceeds of a letter of credit"Section 5-114.
"Prove"Section 3-103.
"Sale"Section 2-106.
"Securities account"
Section 8-501.
"Securities intermediary"Section 8-102.
"Security"Section 8-102.
"Security certificate"Section 8-102.
"Security entitlement"Section 8-102.
"Uncertificated security"Section 8-102.
(c) Article one contains general definitions and principles of
construction and interpretation applicable throughout this article.
§46-9-103. Purchase-money security interest; application of
payments; burden of establishing.
(a) In this section:
(1) "Purchase-money collateral" means goods or software that
secures a purchase-money obligation incurred with respect to that
collateral; and
(2) "Purchase-money obligation" means an obligation of an
obligor incurred as all or part of the price of the collateral or
for value given to enable the debtor to acquire rights in or the
use of the collateral if the value is in fact so used.
(b) A security interest in goods is a purchase-money security
interest:
(1) To the extent that the goods are purchase-money collateral
with respect to that security interest;
(2) If the security interest is in inventory that is or was
purchase-money collateral, also to the extent that the security
interest secures a purchase-money obligation incurred with respect
to other inventory in which the secured party holds or held a
purchase-money security interest; and
(3) Also to the extent that the security interest secures a
purchase-money obligation incurred with respect to software in
which the secured party holds or held a purchase-money security
interest.
(c) A security interest in software is a purchase-money
security interest to the extent that the security interest also
secures a purchase-money obligation incurred with respect to goods
in which the secured party holds or held a purchase-money security
interest if:
(1) The debtor acquired its interest in the software in an
integrated transaction in which it acquired an interest in the
goods; and
(2) The debtor acquired its interest in the software for the
principal purpose of using the software in the goods.
(d) The security interest of a consignor in goods that are the
subject of a consignment is a purchase-money security interest in
inventory.
(e) In a transaction other than a consumer-goods transaction,
if the extent to which a security interest is a purchase-money
security interest depends on the application of a payment to a
particular obligation, the payment must be applied:
(1) In accordance with any reasonable method of application to
which the parties agree;
(2) In the absence of the parties' agreement to a reasonable
method, in accordance with any intention of the obligor manifested
at or before the time of payment; or
(3) In the absence of an agreement to a reasonable method and
a timely manifestation of the obligor's intention, in the following
order:
(A) To obligations that are not secured; and
(B) If more than one obligation is secured, to obligations
secured by purchase-money security interests in the order in which
those obligations were incurred.
(f) In a transaction other than a consumer-goods transaction,
a purchase-money security interest does not lose its status as
such, even if:
(1) The purchase-money collateral also secures an obligation
that is not a purchase-money obligation;
(2) Collateral that is not purchase-money collateral also
secures the purchase-money obligation; or
(3) The purchase-money obligation has been renewed,
refinanced, consolidated or restructured.
(g)
In a transaction other than a consumer-goods transaction,
a secured party claiming a purchase-money security interest has the
burden of establishing the extent to which the security interest is
a purchase-money security interest.
(h)
The limitation of the rules in subsections (e), (f) and
(g) to transactions other than consumer-goods transactions is
intended to leave to the court the determination of the proper
rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods
transactions and may continue to apply established approaches.
§46-9-104. Control of deposit account.
(a) A secured party has control of a deposit account if:
(1) The secured party is the bank with which the deposit
account is maintained;
(2) The debtor, secured party and bank have agreed in an
authenticated record that the bank will comply with instructions
originated by the secured party directing disposition of the funds
in the account without further consent by the debtor; or
(3) The secured party becomes the bank's customer with respect
to the deposit account.
(b) A secured party that has satisfied subsection (a) has
control, even if the debtor retains the right to direct the
disposition of funds from the deposit account.
§46-9-105. Control of electronic chattel paper.
A secured party has control of electronic chattel paper if the
record or records comprising the chattel paper are created, stored,
and assigned in such a manner that:
(1) A single authoritative copy of the record or records
exists which is unique, identifiable and, except as otherwise
provided in paragraphs (4), (5) and (6), unalterable;
(2) The authoritative copy identifies the secured party as the
assignee of the record or records;
(3) The authoritative copy is communicated to and maintained
by the secured party or its designated custodian;
(4) Copies or revisions that add or change an identified
assignee of the authoritative copy can be made only with the
participation of the secured party;
(5) Each copy of the authoritative copy and any copy of a copy
is readily identifiable as a copy that is not the authoritative
copy; and
(6) Any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.
§46-9-106. Control of investment property.
(a) A person has control of a certificated security,
uncertificated security or security entitlement as provided in
section 8-106.
(b) A secured party has control of a commodity contract if:
(1) The secured party is the commodity intermediary with which
the commodity contract is carried; or
(2) The commodity customer, secured party and commodity
intermediary have agreed that the commodity intermediary will apply
any value distributed on account of the commodity contract as directed by the secured party without further consent by the
commodity customer.
(c) A secured party having control of all security
entitlements or commodity contracts carried in a securities account
or commodity account has control over the securities account or
commodity account.
§46-9-107. Control of letter-of-credit right.
A secured party has control of a letter-of-credit right to the
extent of any right to payment or performance by the issuer or any
nominated person if the issuer or nominated person has consented to
an assignment of proceeds of the letter of credit under section
5-114(c) or otherwise applicable law or practice.
§46-9-108. Sufficiency of description.
(a) Except as otherwise provided in subsections (c), (d) and
(e), a description of personal or real property is sufficient,
whether or not it is specific, if it reasonably identifies what is
described.
(b) Except as otherwise provided in subsection (d), a
description of collateral reasonably identifies the collateral if
it identifies the collateral by:
(1) Specific listing;
(2) Category;
(3) Except as otherwise provided in subsection (e), a type of
collateral defined in the uniform commercial code;
(4) Quantity;
(5) Computational or allocational formula or procedure; or
(6) Except as otherwise provided in subsection (c), any other
method, if the identity of the collateral is objectively
determinable.
(c) A description of collateral as "all the debtor's assets"
or "all the debtor's personal property" or using words of similar
import does not reasonably identify the collateral.
(d) Except as otherwise provided in subsection (e), a
description of a security entitlement, securities account or
commodity account is sufficient if it describes:
(1) The collateral by those terms or as investment property;
or
(2) The underlying financial asset or commodity contract.
(e) A description only by type of collateral defined in the
uniform commercial code is an insufficient description of:
(1) A commercial tort claim; or
(2) In a consumer transaction, consumer goods, a security
entitlement, a securities account, or a commodity account.
SUBPART 2. APPLICABILITY OF ARTICLE
§46-9-109. Scope.
(a) Except as otherwise provided in subsections (c) and (d),
this article applies to:
(1) A transaction, regardless of its form, that creates a
security interest in personal property or fixtures by contract;
(2) An agricultural lien;
(3) A sale of accounts, chattel paper, payment intangibles or
promissory notes;
(4) A consignment;
(5) A security interest arising under section 2-401, 2-505,
2-711(3) or 2A-508(5), as provided in section 9-110; and
(6) A security interest arising under section 4-210 or 5-118.
(b) The application of this article to a security interest in
a secured obligation is not affected by the fact that the
obligation is itself secured by a transaction or interest to which
this article does not apply.
(c) This article does not apply to the extent that:
(1) A statute, regulation or treaty of the United States
preempts this article;
(2) Another statute of this state expressly governs the
creation, perfection, priority or enforcement of a security interest created by this state or a governmental unit of this
state;
(3) A statute of another state, a foreign country or a
governmental unit of another state or a foreign country, other than
a statute generally applicable to security interests, expressly
governs creation, perfection, priority or enforcement of a security
interest created by the state, country or governmental unit; or
(4) The rights of a transferee beneficiary or nominated person
under a letter of credit are independent and superior under section
5-114.
(d) This article does not apply to:
(1) A landlord's lien, other than an agricultural lien;
(2) A lien, other than an agricultural lien, given by statute
or other rule of law for services or materials, but section 9-333
applies with respect to priority of the lien;
(3) An assignment of a claim for wages, salary or other
compensation of an employee;
(4) A sale of accounts, chattel paper, payment intangibles or
promissory notes as part of a sale of the business out of which
they arose;
(5) An assignment of accounts, chattel paper, payment
intangibles or promissory notes which is for the purpose of
collection only;
(6) An assignment of a right to payment under a contract to an
assignee that is also obligated to perform under the contract;
(7) An assignment of a single account, payment intangible or
promissory note to an assignee in full or partial satisfaction of
a preexisting indebtedness;
(8) A transfer of an interest in or an assignment of a claim
under a policy of insurance, other than an assignment by or to a
health-care provider of a health-care-insurance receivable and any
subsequent assignment of the right to payment, but sections 9-315
and 9-322 apply with respect to proceeds and priorities in
proceeds;
(9) An assignment of a right represented by a judgment, other
than a judgment taken on a right to payment that was collateral;
(10) A right of recoupment or set-off, but:
(A) Section 9-340 applies with respect to the effectiveness of
rights of recoupment or set-off against deposit accounts; and
(B) Section 9-404 applies with respect to defenses or claims
of an account debtor;
(11) The creation or transfer of an interest in or lien on
real property, including a lease or rents thereunder, except to the
extent that provision is made for:
(A) Liens on real property in sections 9-203 and 9-308;
(B) Fixtures in section 9-334;
(C) Fixture filings in sections 9-501, 9-502, 9-512, 9-516,
and 9-519; and
(D) Security agreements covering personal and real property in
section 9-604;
(12) An assignment of a claim arising in tort, other than a
commercial tort claim, but sections 9-315 and 9-322 apply with
respect to proceeds and priorities in proceeds; or
(13) An assignment of a deposit account in a consumer
transaction, but sections 9-315 and 9-322 apply with respect to
proceeds and priorities in proceeds.
§46-9-110. Security interests arising under article 2 or 2a.
A security interest arising under section 2-401, 2-505,
2-711(3) or 2A-508(5) is subject to this article. However, until
the debtor obtains possession of the goods:
(1) The security interest is enforceable, even if section
9-203(b)(3) has not been satisfied;
(2) Filing is not required to perfect the security interest;
(3) The rights of the secured party after default by the
debtor are governed by article 2 or 2-a; and
(4) The security interest has priority over a conflicting
security interest created by the debtor.
PART 2
EFFECTIVENESS OF SECURITY AGREEMENT;
ATTACHMENT OF SECURITY INTEREST;
RIGHTS OF PARTIES TO SECURITY AGREEMENT
SUBPART 1. EFFECTIVENESS AND ATTACHMENT
§46-9-201. General effectiveness of security agreement.
(a) Except as otherwise provided in the uniform commercial
code, a security agreement is effective according to its terms
between the parties, against purchasers of the collateral and
against creditors.
(b) A transaction subject to this article is subject to any
applicable rule of law which establishes a different rule for
consumers and (i) any other statute or regulation that regulates
the rates, charges, agreements, and practices for loans, credit
sales, or other extensions of credit and (ii) any consumer- protection statute or regulation.
(c) In case of conflict between this article and a rule of
law, statute or regulation described in subsection (b), the rule of law, statute or regulation controls. Failure to comply with a
statute or regulation described in subsection (b) has only the
effect the statute or regulation specifies.
(d) This article does not:
(1) Validate any rate, charge, agreement or practice that
violates a rule of law, statute or regulation described in
subsection (b); or
(2) Extend the application of the rule of law, statute or
regulation to a transaction not otherwise subject to it.
§46-9-202. Title to collateral immaterial.
Except as otherwise provided with respect to consignments or
sales of accounts, chattel paper, payment intangibles or promissory
notes, the provisions of this article with regard to rights and
obligations apply whether title to collateral is in the secured
party or the debtor.
§46-9-203. Attachment and enforceability of security interest;
proceeds; supporting obligations; formal requisites.
(a) A security interest attaches to collateral when it becomes
enforceable against the debtor with respect to the collateral,
unless an agreement expressly postpones the time of attachment.
(b) Except as otherwise provided in subsections (c) through
(i), a security interest is enforceable against the debtor and
third parties with respect to the collateral only if:
(1) Value has been given;
(2) The debtor has rights in the collateral or the power to
transfer rights in the collateral to a secured party; and
(3) One of the following conditions is met:
(A) The debtor has authenticated a security agreement that
provides a description of the collateral and, if the security
interest covers timber to be cut, a description of the land
concerned;
(B) The collateral is not a certificated security and is in
the possession of the secured party under section 9-313 pursuant to
the debtor's security agreement;
(C) The collateral is a certificated security in registered
form and the security certificate has been delivered to the secured
party under section 8-301 pursuant to the debtor's security
agreement; or
(D) The collateral is deposit accounts, electronic chattel
paper, investment property or letter-of-credit rights, and the
secured party has control under section 9-104, 9-105, 9-106 or
9-107 pursuant to the debtor's security agreement.
(c) Subsection (b) is subject to section 4-210 on the security
interest of a collecting bank, section 5-118 on the security
interest of a letter-of-credit issuer or nominated person, section
9-110 on a security interest arising under article two or two-a,
and section 9-206 on security interests in investment property.
(d) A person becomes bound as debtor by a security agreement
entered into by another person if, by operation of law other than
this article or by contract:
(1) The security agreement becomes effective to create a
security interest in the person's property; or
(2) The person becomes generally obligated for the obligations
of the other person, including the obligation secured under the
security agreement, and acquires or succeeds to all or
substantially all of the assets of the other person.
(e) If a new debtor becomes bound as debtor by a security
agreement entered into by another person:
(1) The agreement satisfies subsection (b)(3) with respect to
existing or after-acquired property of the new debtor to the extent
the property is described in the agreement; and
(2) Another agreement is not necessary to make a security
interest in the property enforceable.
(f) The attachment of a security interest in collateral gives
the secured party the rights to proceeds provided by section 9-315
and is also attachment of a security interest in a supporting
obligation for the collateral.
(g) The attachment of a security interest in a right to
payment or performance secured by a security interest or other lien
on personal or real property is also attachment of a security
interest in the security interest, mortgage or other lien.
(h) The attachment of a security interest in a securities
account is also attachment of a security interest in the security
entitlements carried in the securities account.
(i) The attachment of a security interest in a commodity
account is also attachment of a security interest in the commodity
contracts carried in the commodity account.
§46-9-204. After-acquired property; future advances.
(a) Except as otherwise provided in subsection (b), a security
agreement may create or provide for a security interest in after- acquired collateral.
(b) A security interest does not attach under a term
constituting an after-acquired property clause to:
(1) Consumer goods, other than an accession when given as
additional security, unless the debtor acquires rights in them
within ten days after the secured party gives value; or
(2) A commercial tort claim.
(c) A security agreement may provide that collateral secures,
or that accounts, chattel paper, payment intangibles or promissory
notes are sold in connection with, future advances or other value,
whether or not the advances or value are given pursuant to
commitment.
§46-9-205. Use or disposition of collateral permissible.
(a) A security interest is not invalid or fraudulent against
creditors solely because:
(1) The debtor has the right or ability to:
(A) Use, commingle or dispose of all or part of the
collateral, including returned or repossessed goods;
(B) Collect, compromise, enforce or otherwise deal with
collateral;
(C) Accept the return of collateral or make repossessions; or
(D) Use, commingle or dispose of proceeds; or
(2) The secured party fails to require the debtor to account
for proceeds or replace collateral.
(b) This section does not relax the requirements of possession
if attachment, perfection or enforcement of a security interest
depends upon possession of the collateral by the secured party.
§46-9-206. Security interest arising in purchase or delivery of
financial asset.
(a) A security interest in favor of a securities intermediary
attaches to a person's security entitlement if:
(1) The person buys a financial asset through the securities
intermediary in a transaction in which the person is obligated to
pay the purchase price to the securities intermediary at the time
of the purchase; and
(2) The securities intermediary credits the financial asset to
the buyer's securities account before the buyer pays the securities
intermediary.
(b) The security interest described in subsection (a) secures
the person's obligation to pay for the financial asset.
(c) A security interest in favor of a person that delivers a
certificated security or other financial asset represented by a
writing attaches to the security or other financial asset if:
(1) The security or other financial asset:
(A) In the ordinary course of business is transferred by
delivery with any necessary indorsement or assignment; and
(B) Is delivered under an agreement between persons in the
business of dealing with such securities or financial assets; and
(2) The agreement calls for delivery against payment.
(d) The security interest described in subsection (c) secures
the obligation to make payment for the delivery.
SUBPART 2. RIGHTS AND DUTIES
§46-9-207. Rights and duties of secured party having possession or
control of collateral.
(a) Except as otherwise provided in subsection (d), a
secured party shall use reasonable care in the custody and
preservation of collateral in the secured party's possession. In
the case of chattel paper or an instrument, reasonable care
includes taking necessary steps to preserve rights against prior
parties unless otherwise agreed.
(b) Except as otherwise provided in subsection (d), if a
secured party has possession of collateral:
(1) Reasonable expenses, including the cost of insurance and
payment of taxes or other charges, incurred in the custody,
preservation, use or operation of the collateral are chargeable to
the debtor and are secured by the collateral;
(2) The risk of accidental loss or damage is on the debtor to
the extent of a deficiency in any effective insurance coverage;
(3) The secured party shall keep the collateral identifiable,
but fungible collateral may be commingled; and
(4) The secured party may use or operate the collateral:
(A) For the purpose of preserving the collateral or its value;
(B) As permitted by an order of a court having competent
jurisdiction; or
(C) Except in the case of consumer goods, in the manner and to
the extent agreed by the debtor.
(c) Except as otherwise provided in subsection (d), a secured
party having possession of collateral or control of collateral
under section 9-104, 9-105, 9-106 or 9-107:
(1) May hold as additional security any proceeds, except money
or funds, received from the collateral;
(2) Shall apply money or funds received from the collateral to
reduce the secured obligation, unless remitted to the debtor; and
(3) May create a security interest in the collateral.
(d) If the secured party is a buyer of accounts, chattel
paper, payment intangibles, or promissory notes or a consignor:
(1) Subsection (a) does not apply unless the secured party is
entitled under an agreement:
(A) To charge back uncollected collateral; or
(B) Otherwise to full or limited recourse against the debtor
or a secondary obligor based on the nonpayment or other default of
an account debtor or other obligor on the collateral; and
(2) Subsections (b) and (c) do not apply.
§46-9-208. Additional duties of secured party having control of
collateral.
(a) This section applies to cases in which there is no
outstanding secured obligation and the secured party is not
committed to make advances, incur obligations or otherwise give
value.
(b) Within ten days after receiving an authenticated demand by
the debtor:
(1) A secured party having control of a deposit account under
section 9-104(a)(2) shall send to the bank with which the deposit
account is maintained an authenticated statement that releases the
bank from any further obligation to comply with instructions
originated by the secured party;
(2) A secured party having control of a deposit account under
section 9-104(a)(3) shall:
(A) Pay the debtor the balance on deposit in the deposit
account; or
(B) Transfer the balance on deposit into a deposit account in
the debtor's name;
(3) A secured party, other than a buyer, having control of
electronic chattel paper under section 9-105 shall:
(A) Communicate the authoritative copy of the electronic
chattel paper to the debtor or its designated custodian;
(B) If the debtor designates a custodian that is the
designated custodian with which the authoritative copy of the
electronic chattel paper is maintained for the secured party,
communicate to the custodian an authenticated record releasing the
designated custodian from any further obligation to comply with
instructions originated by the secured party and instructing the
custodian to comply with instructions originated by the debtor; and
(C) Take appropriate action to enable the debtor or its
designated custodian to make copies of or revisions to the
authoritative copy which add or change an identified assignee of
the authoritative copy without the consent of the secured party;
(4) A secured party having control of investment property
under section 8-106(d)(2) or 9-106(b) shall send to the securities
intermediary or commodity intermediary with which the security
entitlement or commodity contract is maintained an authenticated
record that releases the securities intermediary or commodity intermediary from any further obligation to comply with entitlement
orders or directions originated by the secured party; and
(5) A secured party having control of a letter-of-credit right
under section 9-107 shall send to each person having an unfulfilled
obligation to pay or deliver proceeds of the letter of credit to
the secured party an authenticated release from any further
obligation to pay or deliver proceeds of the letter of credit to
the secured party.
§46-9-209. Duties of secured party if account debtor has been
notified of assignment.
(a) Except as otherwise provided in subsection (c), this
section applies if:
(1) There is no outstanding secured obligation; and
(2) The secured party is not committed to make advances, incur
obligations, or otherwise give value.
(b)
Within ten days after receiving an authenticated demand
by the debtor, a secured party shall send to an account debtor that
has received notification of an assignment to the secured party as
assignee under section 9-406(a) an authenticated record that
releases the account debtor from any further obligation to the
secured party.
(c) This section does not apply to an assignment constituting
the sale of an account, chattel paper or payment intangible.
§46-9-210. Request for accounting; request regarding list of
collateral or statement of account.
(a) In this section:
(1) "Request" means a record of a type described in paragraph
(2), (3) or (4).
(2) "Request for an accounting" means a record authenticated
by a debtor requesting that the recipient provide an accounting of
the unpaid obligations secured by collateral and reasonably
identifying the transaction or relationship that is the subject of
the request.
(3) "Request regarding a list of collateral" means a record
authenticated by a debtor requesting that the recipient approve or
correct a list of what the debtor believes to be the collateral
securing an obligation and reasonably identifying the transaction
or relationship that is the subject of the request.
(4) "Request regarding a statement of account" means a record
authenticated by a debtor requesting that the recipient approve or
correct a statement indicating what the debtor believes to be the
aggregate amount of unpaid obligations secured by collateral as of a specified date and reasonably identifying the transaction or
relationship that is the subject of the request.
(b) Subject to subsections (c), (d), (e) and (f), a secured
party, other than a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor, shall comply with
a request within fourteen days after receipt:
(1) In the case of a request for an accounting, by
authenticating and sending to the debtor an accounting; and
(2) In the case of a request regarding a list of collateral or
a request regarding a statement of account, by authenticating and
sending to the debtor an approval or correction.
(c) A secured party that claims a security interest in all of
a particular type of collateral owned by the debtor may comply with
a request regarding a list of collateral by sending to the debtor
an authenticated record including a statement to that effect within
fourteen days after receipt.
(d) A person that receives a request regarding a list of
collateral, claims no interest in the collateral when it receives
the request, and claimed an interest in the collateral at an
earlier time shall comply with the request within fourteen days
after receipt by sending to the debtor an authenticated record:
(1) Disclaiming any interest in the collateral; and
(2) If known to the recipient, providing the name and mailing
address of any assignee of or successor to the recipient's security
interest in the collateral.
(e) A person that receives a request for an accounting or a
request regarding a statement of account, claims no interest in the
obligations when it receives the request, and claimed an interest
in the obligations at an earlier time shall comply with the request
within fourteen days after receipt by sending to the debtor an
authenticated record:
(1) Disclaiming any interest in the obligations; and
(2) If known to the recipient, providing the name and mailing
address of any assignee of or successor to the recipient's interest
in the obligations.
(f) A debtor is entitled without charge to one response to a
request under this section during any six-month period. The
secured party may require payment of a charge not exceeding twenty- five dollars for each additional response.
PART 3
PERFECTION AND PRIORITY
SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
§46-9-301. Law governing perfection and priority of security
interests.
Except as otherwise provided in sections 9-303 through 9-306,
the following rules determine the law governing perfection, the
effect of perfection or nonperfection, and the priority of a
security interest in collateral:
(1) Except as otherwise provided in this section, while a
debtor is located in a jurisdiction, the local law of that
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral.
(2) While collateral is located in a jurisdiction, the local
law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a possessory
security interest in that collateral.
(3) Except as otherwise provided in paragraph (4), while
negotiable documents, goods, instruments, money or tangible chattel
paper is located in a jurisdiction, the local law of that
jurisdiction governs:
(A) Perfection of a security interest in the goods by filing
a fixture filing;
(B) Perfection of a security interest in timber to be cut; and
(C) The effect of perfection or nonperfection and the priority
of a nonpossessory security interest in the collateral.
(4) The local law of the jurisdiction in which the wellhead or
minehead is located governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in as- extracted collateral.
§46-9-302. Law governing perfection and priority of agricultural
liens.
While farm products are located in a jurisdiction, the local
law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of an agricultural
lien on the farm products.
§46-9-303. Law governing perfection and priority of security
interests in goods covered by a certificate of title.
(a) This section applies to goods covered by a certificate of
title, even if there is no other relationship between the
jurisdiction under whose certificate of title the goods are covered
and the goods or the debtor.
(b) Goods become covered by a certificate of title when a
valid application for the certificate of title and the applicable
fee are delivered to the appropriate authority. Goods cease to be
covered by a certificate of title at the earlier of the time the
certificate of title ceases to be effective under the law of the
issuing jurisdiction or the time the goods become covered subsequently by a certificate of title issued by another
jurisdiction.
(c) The local law of the jurisdiction under whose certificate
of title the goods are covered governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in goods covered by a certificate of title from the time
the goods become covered by the certificate of title until the
goods cease to be covered by the certificate of title.
§46-9-304. Law governing perfection and priority of security
interests in deposit accounts.
(a) The local law of a bank's jurisdiction governs perfection,
the effect of perfection or nonperfection, and the priority of a
security interest in a deposit account maintained with that bank.
(b) The following rules determine a bank's jurisdiction for
purposes of this part:
(1) If an agreement between the bank and the debtor governing
the deposit account expressly provides that a particular
jurisdiction is the bank's jurisdiction for purposes of this part,
this article, or other provisions of the uniform commercial code,
that jurisdiction is the bank's jurisdiction.
(2) If paragraph (1) does not apply and an agreement between
the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular
jurisdiction, that jurisdiction is the bank's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an
agreement between the bank and its customer governing the deposit
account expressly provides that the deposit account is maintained
at an office in a particular jurisdiction, that jurisdiction is the
bank's jurisdiction.
(4) If none of the preceding paragraphs applies, the bank's
jurisdiction is the jurisdiction in which the office identified in
an account statement as the office serving the customer's account
is located.
(5) If none of the preceding paragraphs applies, the bank's
jurisdiction is the jurisdiction in which the chief executive
office of the bank is located.
§46-9-305. Law governing perfection and priority of security
interests in investment property.
(a) Except as otherwise provided in subsection (c), the
following rules apply:
(1) While a security certificate is located in a jurisdiction,
the local law of that jurisdiction governs perfection, the effect
of perfection or nonperfection, and the priority of a security
interest in the certificated security represented thereby.
(2) The local law of the issuer's jurisdiction as specified in
section 8-110(d) governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in an
uncertificated security.
(3) The local law of the securities intermediary's
jurisdiction as specified in section 8-110(e) governs perfection,
the effect of perfection or nonperfection, and the priority of a
security interest in a security entitlement or securities account.
(4) The local law of the commodity intermediary's jurisdiction
governs perfection, the effect of perfection or nonperfection, and
the priority of a security interest in a commodity contract or
commodity account.
(b) The following rules determine a commodity intermediary's
jurisdiction for purposes of this part:
(1) If an agreement between the commodity intermediary and
commodity customer governing the commodity account expressly
provides that a particular jurisdiction is the commodity
intermediary's jurisdiction for purposes of this part, this
article, or the uniform commercial code, that jurisdiction is the
commodity intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an agreement between
the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed
by the law of a particular jurisdiction, that jurisdiction is the
commodity intermediary's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an
agreement between the commodity intermediary and commodity customer
governing the commodity account expressly provides that the
commodity account is maintained at an office in a particular
jurisdiction, that jurisdiction is the commodity intermediary's
jurisdiction.
(4) If none of the preceding paragraphs applies, the commodity
intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the
commodity customer's account is located.
(5) If none of the preceding paragraphs applies, the commodity
intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the commodity intermediary is located.
(c) The local law of the jurisdiction in which the debtor is
located governs:
(1) Perfection of a security interest in investment property
by filing;
(2) Automatic perfection of a security interest in investment
property created by a broker or securities intermediary; and
(3) Automatic perfection of a security interest in a commodity
contract or commodity account created by a commodity intermediary.
§46-9-306. Law governing perfection and priority of security
interests in letter-of-credit rights.
(a) Subject to subsection (c), the local law of the issuer's
jurisdiction or a nominated person's jurisdiction governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in a letter-of-credit right if the
issuer's jurisdiction or nominated person's jurisdiction is a
state.
(b) For purposes of this part, an issuer's jurisdiction or
nominated person's jurisdiction is the jurisdiction whose law
governs the liability of the issuer or nominated person with
respect to the letter-of-credit right as provided in section 5-116.
(c) This section does not apply to a security interest that is
perfected only under section 9-308(d).
§46-9-307. Location of debtor.
(a) In this section, "place of business" means a place where
a debtor conducts its affairs.
(b) Except as otherwise provided in this section, the
following rules determine a debtor's location:
(1) An debtor who is an individual is located at the
individual's principal residence.
(2) A debtor that is an organization and has only one place of
business is located at its place of business.
(3) A debtor that is an organization and has more than one
place of business is located at its chief executive office.
(c) Subsection (b) applies only if a debtor's residence, place
of business, or chief executive office, as applicable, is located
in a jurisdiction whose law generally requires information
concerning the existence of a nonpossessory security interest to be
made generally available in a filing, recording or registration
system as a condition or result of the security interest's
obtaining priority over the rights of a lien creditor with respect
to the collateral. If subsection (b) does not apply, the debtor is
located in the District of Columbia.
(d) A person that ceases to exist, have a residence, or have
a place of business continues to be located in the jurisdiction
specified by subsections (b) and (c).
(e) A registered organization that is organized under the law
of a state is located in that state.
(f) Except as otherwise provided in subsection (i), a
registered organization that is organized under the law of the United States and a branch or agency of a bank that is not
organized under the law of the United States or a state are
located:
(1) In the state that the law of the United States designates,
if the law designates a state of location;
(2) In the state that the registered organization, branch, or
agency designates, if the law of the United States authorizes the
registered organization, branch or agency to designate its state of
location; or
(3) In the District of Columbia, if neither paragraph (1) nor
paragraph (2) applies.
(g) A registered organization continues to be located in the
jurisdiction specified by subsection (e) or (f) notwithstanding:
(1) The suspension, revocation, forfeiture or lapse of the
registered organization's status as such in its jurisdiction of
organization; or
(2) The dissolution, winding up or cancellation of the
existence of the registered organization.
(h) The United States is located in the District of Columbia.
(i) A branch or agency of a bank that is not organized under
the law of the United States or a state is located in the state in which the branch or agency is licensed, if all branches and
agencies of the bank are licensed in only one state.
(j) A foreign air carrier under the Federal Aviation Act of
1958, as amended, is located at the designated office of the agent
upon which service of process may be made on behalf of the carrier.
(k) This section applies only for purposes of this part.
SUBPART 2. PERFECTION
§46-9-308. When security interest or agricultural lien is
perfected; continuity of perfection.
(a) Except as otherwise provided in this section and section
9-309, a security interest is perfected if it has attached and all
of the applicable requirements for perfection in ections 9-310
through 9-316 have been satisfied. A security interest is
perfected when it attaches if the applicable requirements are
satisfied before the security interest attaches.
(b) An agricultural lien is perfected if it has become
effective and all of the applicable requirements for perfection in
section 9-310 have been satisfied. An agricultural lien is
perfected when it becomes effective if the applicable requirements
are satisfied before the agricultural lien becomes effective.
(c) A security interest or agricultural lien is perfected
continuously if it is originally perfected by one method under this article and is later perfected by another method under this
article, without an intermediate period when it was unperfected.
(d) Perfection of a security interest in collateral also
perfects a security interest in a supporting obligation for the
collateral.
(e) Perfection of a security interest in a right to payment or
performance also perfects a security interest in a security
interest, mortgage, or other lien on personal or real property
securing the right.
(f) Perfection of a security interest in a securities account
also perfects a security interest in the security entitlements
carried in the securities account.
(g) Perfection of a security interest in a commodity account
also perfects a security interest in the commodity contracts
carried in the commodity account.
§46-9-309. Security interest perfected upon attachment.
The following security interests are perfected when they
attach:
(1) A purchase-money security interest in consumer goods,
except as otherwise provided in section 9-311(b) with respect to
consumer goods that are subject to a statute or treaty described in
section 9-311(a);
(2) An assignment of accounts or payment intangibles which
does not by itself or in conjunction with other assignments to the
same assignee transfer a significant part of the assignor's
outstanding accounts or payment intangibles;
(3) A sale of a payment intangible;
(4) A sale of a promissory note;
(5) A security interest created by the assignment of a health- care-insurance receivable to the provider of the health-care goods
or services;
(6) A security interest arising under section 2-401, 2-505,
2-711(3) or 2A-508(5), until the debtor obtains possession of the
collateral;
(7) A security interest of a collecting bank arising under
section 4-210;
(8) A security interest of an issuer or nominated person
arising under section 5-118;
(9) A security interest arising in the delivery of a financial
asset under section 9-206(c);
(10) A security interest in investment property created by a
broker or securities intermediary;
(11) A security interest in a commodity contract or a
commodity account created by a commodity intermediary;
(12) An assignment for the benefit of all creditors of the
transferor and subsequent transfers by the assignee thereunder; and
(13) A security interest created by an assignment of a
beneficial interest in a decedent's estate.
§46-9-310. When filing required to perfect security interest or
agricultural lien; security interests and agricultural liens
to which filing provisions do not apply.
(a) Except as otherwise provided in subsection (b) and section
9-312(b), a financing statement must be filed to perfect all
security interests and agricultural liens.
(b) The filing of a financing statement is not necessary to
perfect a security interest:
(1) That is perfected under section 9-308(d), (e), (f) or (g);
(2) That is perfected under section 9-309 when it attaches;
(3) In property subject to a statute, regulation or treaty
described in section 9-311(a);
(4) In goods in possession of a bailee which is perfected
under section 9-312(d)(1) or (2);
(5) In certificated securities, documents, goods or
instruments which is perfected without filing or possession under
Section 9-312(e), (f) or (g);
(6) In collateral in the secured party's possession under
section 9-313;
(7) In a certificated security which is perfected by delivery
of the security certificate to the secured party under section
9-313;
(8) In deposit accounts, electronic chattel paper, investment
property or letter-of-credit rights which is perfected by control
under section 9-314;
(9) In proceeds which is perfected under section 9-315; or
(10) That is perfected under section 9-316.
(c) If a secured party assigns a perfected security interest
or agricultural lien, a filing under this article is not required
to continue the perfected status of the security interest against
creditors of and transferees from the original debtor.
§46-9-311. Perfection of security interests in property subject to
certain statutes, regulations and treaties.
(a) Except as otherwise provided in subsection (d), the filing
of a financing statement is not necessary or effective to perfect
a security interest in property subject to:
(1) A statute, regulation or treaty of the United States whose
requirements for a security interest's obtaining priority over the rights of a lien creditor with respect to the property preempt
section 9-310(a);
(2) Any other certificate-of-title statute covering
automobiles, trailers, mobile homes, boats, farm tractors, or the
like, which provides for a security interest to be indicated on the
certificate as a condition or result of perfection, and any non- uniform commercial code central filing statute; or
(3) A certificate-of-title statute of another jurisdiction
which provides for a security interest to be indicated on the
certificate as a condition or result of the security interest's
obtaining priority over the rights of a lien creditor with respect
to the property.
(b) Compliance with the requirements of a statute, regulation
or treaty described in subsection (a) for obtaining priority over
the rights of a lien creditor is equivalent to the filing of a
financing statement under this article. Except as otherwise
provided in subsection (d) and sections 9-313 and 9-316(d) and (e)
for goods covered by a certificate of title, a security interest in
property subject to a statute, regulation or treaty described in
subsection (a) may be perfected only by compliance with those
requirements, and a security interest so perfected remains perfected notwithstanding a change in the use or transfer of
possession of the collateral.
(c) Except as otherwise provided in subsection (d) and section
9-316(d) and (e), duration and renewal of perfection of a security
interest perfected by compliance with the requirements prescribed
by a statute, regulation or treaty described in subsection (a) are
governed by the statute, regulation or treaty. In other respects,
the security interest is subject to this article.
(d) During any period in which collateral is inventory held
for sale or lease by a person or leased by that person as lessor
and that person is in the business of selling or leasing goods of
that kind, this section does not apply to a security interest in
that collateral created by that person as debtor.
§46-9-312. Perfection of security interests in chattel paper,
deposit accounts, documents, goods covered by documents,
instruments, investment property, letter-of-credit rights and
money; perfection by permissive filing; temporary perfection
without filing or transfer of possession.
(a) A security interest in chattel paper, negotiable
documents, instruments or investment property may be perfected by
filing.
(b) Except as otherwise provided in section 9-315(c) and (d)
for proceeds:
(1) A security interest in a deposit account may be perfected
only by control under section 9-314;
(2) And except as otherwise provided in section 9-308(d), a
security interest in a letter-of-credit right may be perfected only
by control under section 9-314; and
(3) A security interest in money may be perfected only by the
secured party's taking possession under section 9-313.
(c) While goods are in the possession of a bailee that has
issued a negotiable document covering the goods:
(1) A security interest in the goods may be perfected by
perfecting a security interest in the document; and
(2) A security interest perfected in the document has priority
over any security interest that becomes perfected in the goods by
another method during that time.
(d) While goods are in the possession of a bailee that has
issued a nonnegotiable document covering the goods, a security
interest in the goods may be perfected by:
(1) Issuance of a document in the name of the secured party;
(2) The bailee's receipt of notification of the secured
party's interest; or
(3) Filing as to the goods.
(e) A security interest in certificated securities, negotiable
documents or instruments is perfected without filing or the taking
of possession for a period of twenty days from the time it attaches
to the extent that it arises for new value given under an
authenticated security agreement.
(f) A perfected security interest in a negotiable document or
goods in possession of a bailee, other than one that has issued a
negotiable document for the goods, remains perfected for 20 days
without filing if the secured party makes available to the debtor
the goods or documents representing the goods for the purpose of:
(1) Ultimate sale or exchange; or
(2) Loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with them in a
manner preliminary to their sale or exchange.
(g) A perfected security interest in a certificated security
or instrument remains perfected for twenty days without filing if
the secured party delivers the security certificate or instrument
to the debtor for the purpose of:
(1) Ultimate sale or exchange; or
(2) Presentation, collection, enforcement, renewal or
registration of transfer.
(h) After the twenty-day period specified in subsection (e),
(f) or (g) expires, perfection depends upon compliance with this
article.
§46-9-313. When possession by or delivery to secured party
perfects security interest without filing.
(a) Except as otherwise provided in subsection (b), a secured
party may perfect a security interest in negotiable documents,
goods, instruments, money or tangible chattel paper by taking
possession of the collateral. A secured party may perfect a
security interest in certificated securities by taking delivery of
the certificated securities under section 8-301.
(b) With respect to goods covered by a certificate of title
issued by this state, a secured party may perfect a security
interest in the goods by taking possession of the goods only in the
circumstances described in section 9-316(d).
(c) With respect to collateral other than certificated
securities and goods covered by a document, a secured party takes
possession of collateral in the possession of a person other than
the debtor, the secured party or a lessee of the collateral from
the debtor in the ordinary course of the debtor's business, when:
(1) The person in possession authenticates a record
acknowledging that it holds possession of the collateral for the
secured party's benefit; or
(2) The person takes possession of the collateral after having
authenticated a record acknowledging that it will hold possession
of collateral for the secured party's benefit.
(d) If perfection of a security interest depends upon
possession of the collateral by a secured party, perfection occurs
no earlier than the time the secured party takes possession and
continues only while the secured party retains possession.
(e) A security interest in a certificated security in
registered form is perfected by delivery when delivery of the
certificated security occurs under section 8-301 and remains
perfected by delivery until the debtor obtains possession of the
security certificate.
(f) A person in possession of collateral is not required to
acknowledge that it holds possession for a secured party's benefit.
(g) If a person acknowledges that it holds possession for the
secured party's benefit:
(1) The acknowledgment is effective under subsection (c) or
section 8-301(a), even if the acknowledgment violates the rights of
a debtor; and
(2) Unless the person otherwise agrees or law other than this
article otherwise provides, the person does not owe any duty to the
secured party and is not required to confirm the acknowledgment to
another person.
(h) A secured party having possession of collateral does not
relinquish possession by delivering the collateral to a person
other than the debtor or a lessee of the collateral from the debtor
in the ordinary course of the debtor's business if the person was
instructed before the delivery or is instructed contemporaneously
with the delivery:
(1) To hold possession of the collateral for the secured
party's benefit; or
(2) To redeliver the collateral to the secured party.
(i)
A secured party does not relinquish possession, even if
a delivery under subsection (h) violates the rights of a debtor.
A person to which collateral is delivered under subsection (h) does
not owe any duty to the secured party and is not required to
confirm the delivery to another person unless the person otherwise
agrees or law other than this article otherwise provides.
§46-9-314. Perfection by control.
(a) A security interest in investment property, deposit
accounts, letter-of-credit rights or electronic chattel paper may be perfected by control of the collateral under section 9-104,
9-105, 9-106 or 9-107.
(b) A security interest in deposit accounts, electronic
chattel paper or letter-of-credit rights is perfected by control
under section 9-104, 9-105 or 9-107 when the secured party obtains
control and remains perfected by control only while the secured
party retains control.
(c) A security interest in investment property is perfected by
control under section 9-106 from the time the secured party obtains
control and remains perfected by control until:
(1) The secured party does not have control; and
(2) One of the following occurs:
(A) If the collateral is a certificated security, the debtor
has or acquires possession of the security certificate;
(B) If the collateral is an uncertificated security, the
issuer has registered or registers the debtor as the registered
owner; or
(C) If the collateral is a security entitlement, the debtor is
or becomes the entitlement holder.
§46-9-315. Secured party's rights on disposition of collateral and
in proceeds.
(a) Except as otherwise provided in this article and in
section 2-403(2):
(1) A security interest or agricultural lien continues in
collateral notwithstanding sale, lease, license, exchange or other
disposition thereof unless the secured party authorized the
disposition free of the security interest or agricultural lien; and
(2) A security interest attaches to any identifiable proceeds
of collateral.
(b) Proceeds that are commingled with other property are
identifiable proceeds:
(1) If the proceeds are goods, to the extent provided by
section 9-336; and
(2) If the proceeds are not goods, to the extent that the
secured party identifies the proceeds by a method of tracing,
including application of equitable principles, that is permitted
under law other than this article with respect to commingled
property of the type involved.
(c) A security interest in proceeds is a perfected security
interest if the security interest in the original collateral was
perfected.
(d) A perfected security interest in proceeds becomes
unperfected on the twenty-first day after the security interest
attaches to the proceeds unless:
(1) The following conditions are satisfied:
(A) A filed financing statement covers the original
collateral;
(B) The proceeds are collateral in which a security interest
may be perfected by filing in the office in which the financing
statement has been filed; and
(C) The proceeds are not acquired with cash proceeds;
(2) The proceeds are identifiable cash proceeds; or
(3) The security interest in the proceeds is perfected other
than under subsection (c) when the security interest attaches to
the proceeds or within twenty days thereafter.
(e) If a filed financing statement covers the original
collateral, a security interest in proceeds which remains perfected
under subsection (d)(1) becomes unperfected at the later of:
(1) When the effectiveness of the filed financing statement
lapses under section 9-515 or is terminated under section 9-513; or
(2) The twenty-first day after the security interest attaches
to the proceeds.
§46-9-316. Continued perfection of security interest following
change in governing law.
(a) A security interest perfected pursuant to the law of the
jurisdiction designated in section 9-301(1) or 9-305(c) remains
perfected until the earliest of:
(1) The time perfection would have ceased under the law of
that jurisdiction;
(2) The expiration of four months after a change of the
debtor's location to another jurisdiction;
(3) The expiration of one year after a transfer of collateral
to a person that thereby becomes a debtor and is located in another
jurisdiction; or
(4) The expiration of one year after a new debtor located in
another jurisdiction becomes bound under section 9-203(d).
(b) If a security interest described in subsection (a) becomes
perfected under the law of the other jurisdiction before the
earliest time or event described in that subsection, it remains
perfected thereafter. If the security interest does not become
perfected under the law of the other jurisdiction before the
earliest time or event, it becomes unperfected and is deemed never
to have been perfected as against a purchaser of the collateral for
value.
(c) A possessory security interest in collateral, other than
goods covered by a certificate of title and as-extracted collateral
consisting of goods, remains continuously perfected if:
(1) The collateral is located in one jurisdiction and subject
to a security interest perfected under the law of that
jurisdiction;
(2) Thereafter the collateral is brought into another
jurisdiction; and
(3) Upon entry into the other jurisdiction, the security
interest is perfected under the law of the other jurisdiction.
(d) Except as otherwise provided in subsection (e), a security
interest in goods covered by a certificate of title which is
perfected by any method under the law of another jurisdiction when
the goods become covered by a certificate of title from this state
remains perfected until the security interest would have become
unperfected under the law of the other jurisdiction had the goods
not become so covered.
(e) A security interest described in subsection (d) becomes
unperfected as against a purchaser of the goods for value and is
deemed never to have been perfected as against a purchaser of the
goods for value if the applicable requirements for perfection under
section 9-311(b) or 9-313 are not satisfied before the earlier of:
(1) The time the security interest would have become
unperfected under the law of the other jurisdiction had the goods
not become covered by a certificate of title from this state; or
(2) The expiration of four months after the goods had become
so covered.
(f) A security interest in deposit accounts, letter-of-credit
rights, or investment property which is perfected under the law of
the bank's jurisdiction, the issuer's jurisdiction, a nominated
person's jurisdiction, the securities intermediary's jurisdiction,
or the commodity intermediary's jurisdiction, as applicable,
remains perfected until the earlier of:
(1) The time the security interest would have become
unperfected under the law of that jurisdiction; or
(2) The expiration of four months after a change of theapplicablethe
applicable jurisdiction to another jurisdiction.
(g) If a security interest described in subsection (f) becomes
perfected under the law of the other jurisdiction before the
earlier of the time or the end of the period described in that
subsection, it remains perfected thereafter. If the security
interest does not become perfected under the law of the other
jurisdiction before the earlier of that time or the end of that period, it becomes unperfected and is deemed never to have been
perfected as against a purchaser of the collateral for value.
SUBPART 3. PRIORITY
§46-9-317. Interests that take priority over or take free of
unperfected security interest or agricultural lien.
(a) An unperfected security interest or agricultural lien is
subordinate to the rights of:
(1) A person entitled to priority under section 9-322; and
(2) A person that becomes a lien creditor before the earlier
of the time the security interest or agricultural lien is perfected
or a financing statement covering the collateral is filed.
(b) Except as otherwise provided in subsection (e), a buyer,
other than a secured party, of tangible chattel paper, documents,
goods, instruments or a security certificate takes free of a
security interest or agricultural lien if the buyer gives value and
receives delivery of the collateral without knowledge of the
security interest or agricultural lien and before it is perfected.
(c) Except as otherwise provided in subsection (e), a lessee
of goods takes free of a security interest or agricultural lien if
the lessee gives value and receives delivery of the collateral
without knowledge of the security interest or agricultural lien and
before it is perfected.
(d)
A licensee of a general intangible or a buyer, other than
a secured party, of accounts, electronic chattel paper, general
intangibles or investment property other than a certificated
security takes free of a security interest if the licensee or buyer
gives value without knowledge of the security interest and before
it is perfected.
(e) Except as otherwise provided in sections 9-320 and 9-321,
if a person files a financing statement with respect to a purchase- money security interest before or within twenty days after the
debtor receives delivery of the collateral, the security interest
takes priority over the rights of a buyer, lessee or lien creditor
which arise between the time the security interest attaches and the
time of filing.
§46-9-318. No interest retained in right to payment that is sold;
rights and title of seller of account or chattel paper with
respect to creditors and purchasers.
(a) A debtor that has sold an account, chattel paper, payment
intangible or promissory note does not retain a legal or equitable
interest in the collateral sold.
(b) For purposes of determining the rights of creditors of,
and purchasers for value of an account or chattel paper from, a
debtor that has sold an account or chattel paper, while the buyer's security interest is unperfected, the debtor is deemed to have
rights and title to the account or chattel paper identical to those
the debtor sold.
§46-9-319. Rights and title of consignee with respect to creditors
and purchasers.
(a) Except as otherwise provided in subsection (b), for
purposes of determining the rights of creditors of, and purchasers
for value of goods from, a consignee, while the goods are in the
possession of the consignee, the consignee has rights and title to
the goods identical to those the consignor had or had power to
transfer.
(b) For purposes of determining the rights of a creditor of a
consignee, law other than this article determines the rights and
title of a consignee while goods are in the consignee's possession
if, under this part, a perfected security interest held by the
consignor would have priority over the rights of the creditor.
§46-9-320. Buyer of goods.
(a) Except as otherwise provided in subsection (e), a buyer in
ordinary course of business, other than a person buying farm
products from a person engaged in farming operations, takes free of
a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its
existence.
(b) Except as otherwise provided in subsection (e), a buyer of
goods from a person who used or bought the goods for use primarily
for personal, family or household purposes takes free of a security
interest, even if perfected, if the buyer buys:
(1) Without knowledge of the security interest;
(2) For value;
(3) Primarily for the buyer's personal, family or household
purposes; and
(4) Before the filing of a financing statement covering the
goods.
(c) To the extent that it affects the priority of a security
interest over a buyer of goods under subsection (b), the period of
effectiveness of a filing made in the jurisdiction in which the
seller is located is governed by section 9-316(a) and (b).
(d) A buyer in ordinary course of business buying oil, gas or
other minerals at the wellhead or minehead or after extraction
takes free of an interest arising out of an encumbrance.
(e) Subsections (a) and (b) do not affect a security interest
in goods in the possession of the secured party under section
9-313.
§46-9-321. Licensee of general intangible and lessee of goods in
ordinary course of business.
(a) In this section, "licensee in ordinary course of business"
means a person that becomes a licensee of a general intangible in
good faith, without knowledge that the license violates the rights
of another person in the general intangible, and in the ordinary
course from a person in the business of licensing general
intangibles of that kind. A person becomes a licensee in the
ordinary course if the license to the person comports with the
usual or customary practices in the kind of business in which the
licensor is engaged or with the licensor's own usual or customary
practices.
(b) A licensee in ordinary course of business takes its rights
under the license free of a security interest in the general
intangible created by the licensor, even if the security interest
is perfected and the licensee knows of its existence.
(c) A lessee in ordinary course of business takes its
leasehold interest free of a security interest in the goods created
by the lessor, even if the security interest is perfected and the
lessee knows of its existence.
§46-9-322. Priorities among conflicting security interests in and
agricultural liens on same collateral.
(a) Except as otherwise provided in this section, priority
among conflicting security interests and agricultural liens in the
same collateral is determined according to the following rules:
(1) Conflicting perfected security interests and agricultural
liens rank according to priority in time of filing or perfection.
Priority dates from the earlier of the time a filing covering the
collateral is first made or the security interest or agricultural
lien is first perfected, if there is no period thereafter when
there is neither filing nor perfection.
(2) A perfected security interest or agricultural lien has
priority over a conflicting unperfected security interest or
agricultural lien.
(3) The first security interest or agricultural lien to attach
or become effective has priority if conflicting security interests
and agricultural liens are unperfected.
(b) For the purposes subsection (a)(1):
(1) The time of filing or perfection as to a security interest
in collateral is also the time of filing or perfection as to a
security interest in proceeds; and
(2) The time of filing or perfection as to a security interest
in collateral supported by a supporting obligation is also the time of filing or perfection as to a security interest in the supporting
obligation.
(c)
Except as otherwise provided in subsection (f), a security
interest in collateral which qualifies for priority over a
conflicting security interest under section 9-327, 9-328, 9-329,
9-330 or 9-331 also has priority over a conflicting security
interest in:
(1) Any supporting obligation for the collateral; and
(2) Proceeds of the collateral if:
(A) The security interest in proceeds is perfected;
(B) The proceeds are cash proceeds or of the same type as the
collateral; and
(C) In the case of proceeds that are proceeds of proceeds, all
intervening proceeds are cash proceeds, proceeds of the same type
as the collateral, or an account relating to the collateral.
(d) Subject to subsection (e) and except as otherwise provided
in subsection (f), if a security interest in chattel paper, deposit
accounts, negotiable documents, instruments, investment property or
letter-of-credit rights is perfected by a method other than filing,
conflicting perfected security interests in proceeds of the
collateral rank according to priority in time of filing.
(e) Subsection (d) applies only if the proceeds of the
collateral are not cash proceeds, chattel paper, negotiable
documents, instruments, investment property or letter-of-credit
rights.
(f) Subsections (a) through (e) are subject to:
(1) Subsection (g) and the other provisions of this part;
(2) Section 4-210 with respect to a security interest of a
collecting bank;
(3) Section 5-118 with respect to a security interest of an
issuer or nominated person; and
(4) Section 9-110 with respect to a security interest arising
under article two or two-a.
(g) A perfected agricultural lien on collateral has priority
over a conflicting security interest in or agricultural lien on the
same collateral if the statute creating the agricultural lien so
provides.
§46-9-323. Future advances.
(a) Except as otherwise provided in subsection (c), for
purposes of determining the priority of a perfected security
interest under section 9-322(a)(1), perfection of the security
interest dates from the time an advance is made to the extent that
the security interest secures an advance that:
(1) Is made while the security interest is perfected only:
(A) Under section 9-309 when it attaches; or
(B) Temporarily under section 9-312(e), (f) or (g); and
(2) Is not made pursuant to a commitment entered into before
or while the security interest is perfected by a method other than
under section 9-309 or 9-312(e), (f) or (g).
(b) Except as otherwise provided in subsection (c), a security
interest is subordinate to the rights of a person that becomes a
lien creditor while the security interest is perfected only to the
extent that it secures advances made more than 45 days after the
person becomes a lien creditor unless the advance is made:
(1) Without knowledge of the lien; or
(2) Pursuant to a commitment entered into without knowledge of
the lien.
(c) Subsections (a) and (b) do not apply to a security
interest held by a secured party that is a buyer of accounts,
chattel paper, payment intangibles or promissory notes or a
consignor.
(d) Except as otherwise provided in subsection (e), a buyer of
goods other than a buyer in ordinary course of business takes free
of a security interest to the extent that it secures advances made
after the earlier of:
(1) The time the secured party acquires knowledge of the
buyer's purchase; or
(2) Forty-five days after the purchase.
(e) Subsection (d) does not apply if the advance is made
pursuant to a commitment entered into without knowledge of the
buyer's purchase and before the expiration of the forty-five-day
period.
(f) Except as otherwise provided in subsection (g), a lessee
of goods, other than a lessee in ordinary course of business, takes
the leasehold interest free of a security interest to the extent
that it secures advances made after the earlier of:
(1) The time the secured party acquires knowledge of the
lease; or
(2) Forty-five days after the lease contract becomes
enforceable.
(g) Subsection (f) does not apply if the advance is made
pursuant to a commitment entered into without knowledge of the
lease and before the expiration of the forty-five-day period.
§46-9-324. Priority of purchase-money security interests.
(a) Except as otherwise provided in subsection (g), a
perfected purchase-money security interest in goods other than
inventory or livestock has priority over a conflicting security interest in the same goods, and, except as otherwise provided in
section 9-327, a perfected security interest in its identifiable
proceeds also has priority, if the purchase-money security interest
is perfected when the debtor receives possession of the collateral
or within twenty days thereafter.
(b) Subject to subsection (c) and except as otherwise provided
in subsection (g), a perfected purchase-money security interest in
inventory has priority over a conflicting security interest in the
same inventory, has priority over a conflicting security interest
in chattel paper or an instrument constituting proceeds of the
inventory and in proceeds of the chattel paper, if so provided in
section 9-330, and, except as otherwise provided in section 9-327,
also has priority in identifiable cash proceeds of the inventory to
the extent the identifiable cash proceeds are received on or before
the delivery of the inventory to a buyer, if:
(1) The purchase-money security interest is perfected when the
debtor receives possession of the inventory;
(2) The purchase-money secured party sends an authenticated
notification to the holder of the conflicting security interest;
(3) The holder of the conflicting security interest receives
the notification within five years before the debtor receives
possession of the inventory; and
(4) The notification states that the person sending the
notification has or expects to acquire a purchase-money security
interest in inventory of the debtor and describes the inventory.
(c) Subsections (b)(2) through (4) apply only if the holder of
the conflicting security interest had filed a financing statement
covering the same types of inventory:
(1) If the purchase-money security interest is perfected by
filing, before the date of the filing; or
(2) If the purchase-money security interest is temporarily
perfected without filing or possession under section 9-312(f),
before the beginning of the twenty-day period thereunder.
(d) Subject to subsection (e) and except as otherwise provided
in subsection (g), a perfected purchase-money security interest in
livestock that are farm products has priority over a conflicting
security interest in the same livestock, and, except as otherwise
provided in section 9-327, a perfected security interest in their
identifiable proceeds and identifiable products in their
unmanufactured states also has priority, if:
(1) The purchase-money security interest is perfected when the
debtor receives possession of the livestock;
(2) The purchase-money secured party sends an authenticated
notification to the holder of the conflicting security interest;
(3) The holder of the conflicting security interest receives
the notification within six months before the debtor receives
possession of the livestock; and
(4) The notification states that the person sending the
notification has or expects to acquire a purchase-money security
interest in livestock of the debtor and describes the livestock.
(e)
Subsections (d)(2) through (4) apply only if the holder
of the conflicting security interest had filed a financing
statement covering the same types of livestock:
(1) If the purchase-money security interest is perfected by
filing, before the date of the filing; or
(2) If the purchase-money security interest is temporarily
perfected without filing or possession under section 9-312(f),
before the beginning of the twenty-day period thereunder.
(f) Except as otherwise provided in subsection (g), a
perfected purchase-money security interest in software has priority
over a conflicting security interest in the same collateral, and,
except as otherwise provided in section 9-327, a perfected security
interest in its identifiable proceeds also has priority, to the
extent that the purchase-money security interest in the goods in
which the software was acquired for use has priority in the goods
and proceeds of the goods under this section.
(g) If more than one security interest qualifies for priority
in the same collateral under subsection (a), (b), (d) or (f):
(1) A security interest securing an obligation incurred as all
or part of the price of the collateral has priority over a security
interest securing an obligation incurred for value given to enable
the debtor to acquire rights in or the use of collateral; and
(2) In all other cases, section 9-322(a) applies to the
qualifying security interests.
§46-9-325. Priority of security interests in transferred
collateral.
(a) Except as otherwise provided in subsection (b), a security
interest created by a debtor is subordinate to a security interest
in the same collateral created by another person if:
(1) The debtor acquired the collateral subject to the security
interest created by the other person;
(2) The security interest created by the other person was
perfected when the debtor acquired the collateral; and
(3) There is no period thereafter when the security interest
is unperfected.
(b) Subsection (a) subordinates a security interest only if
the security interest:
(1) Otherwise would have priority solely under section
9-322(a) or 9-324; or
(2) Arose solely under section 2-711(3) or 2A-508(5).
§46-9-326. Priority of security interests created by new debtor.
(a) Subject to subsection (b), a security interest
created by a new debtor which is perfected by a filed financing
statement that is effective solely under section 9-508 in
collateral in which a new debtor has or acquires rights is
subordinate to a security interest in the same collateral which is
perfected by another method.
(b) If more than one security interest in the same collateral
is subordinate under subsection (a), the other provisions of this
part determine the priority among of the subordinated security
interests.
§46-9-327. Priority of security interests in deposit account.
The following rules govern priority among conflicting security
interests in the same deposit account:
(1) A security interest held by a secured party having control
of the deposit account under section 9-104 has priority over a
conflicting security interest held by a secured party that does not
have control.
(2) Except as otherwise provided in paragraphs (3) and (4),
security interests perfected by control under section 9-314 rank
according to priority in time of obtaining control.
(3) Except as otherwise provided in paragraph (4), a security
interest held by the bank with which the deposit account is
maintained has priority over a conflicting security interest held
by another secured party.
(4) A security interest perfected by control under section
9-104(a)(3) has priority over a security interest held by the bank
with which the deposit account is maintained.
§46-9-328. Priority of security interests in investment property.
The following rules govern priority among conflicting security
interests in the same investment property:
(1) A security interest held by a secured party having control
of investment property under section 9-106 has priority over a
security interest held by a secured party that does not have
control of the investment property.
(2) Except as otherwise provided in paragraphs (3) and (4),
conflicting security interests held by secured parties each of
which has control under section 9-106 rank according to priority in
time of:
(A) If the collateral is a security, obtaining control;
(B) If the collateral is a security entitlement carried in a
securities account and:
(i) If the secured party obtained control under section
8-106(d)(1), the secured party's becoming the person for which the
securities account is maintained;
(ii) If the secured party obtained control under section
8-106(d)(2), the securities intermediary's agreement to comply with
the secured party's entitlement orders with respect to security
entitlements carried or to be carried in the securities account; or
(iii) If the secured party obtained control through another
person under section 8-106(d)(3), the time on which priority would
be based under this paragraph if the other person were the secured
party; or
(C) If the collateral is a commodity contract carried with a
commodity intermediary, the satisfaction of the requirement for
control specified in section 9-106(b)(2) with respect to commodity
contracts carried or to be carried with the commodity intermediary.
(3) A security interest held by a securities intermediary in
a security entitlement or a securities account maintained with the
securities intermediary has priority over a conflicting security
interest held by another secured party.
(4) A security interest held by a commodity intermediary in a
commodity contract or a commodity account maintained with the
commodity intermediary has priority over a conflicting security
interest held by another secured party.
(5) A security interest in a certificated security in
registered form which is perfected by taking delivery under section
9-313(a) and not by control under section 9-314 has priority over
a conflicting security interest perfected by a method other than
control.
(6) Conflicting security interests created by a broker,
securities intermediary, or commodity intermediary which are
perfected without control under section 9-106 rank equally.
(7) In all other cases, priority among conflicting security
interests in investment property is governed by sections 9-322 and
9-323.
§46-9-329. Priority of security interests in letter-of-credit
right.
The following rules govern priority among conflicting security
interests in the same letter-of-credit right:
(1) A security interest held by a secured party having control
of the letter-of-credit right under section 9-107 has priority to the extent of its control over a conflicting security interest held
by a secured party that does not have control.
(2) Security interests perfected by control under section
9-314 rank according to priority in time of obtaining control.
§46-9-330. Priority of purchaser of chattel paper or instrument.
(a) A purchaser of chattel paper has priority over a security
interest in the chattel paper which is claimed merely as proceeds
of inventory subject to a security interest if:
(1) In good faith and in the ordinary course of the
purchaser's business, the purchaser gives new value and takes
possession of the chattel paper or obtains control of the chattel
paper under section 9-105; and
(2) The chattel paper does not indicate that it has been
assigned to an identified assignee other than the purchaser.
(b)
A purchaser of chattel paper has priority over a security
interest in the chattel paper which is claimed other than merely as
proceeds of inventory subject to a security interest if the
purchaser gives new value and takes possession of the chattel paper
or obtains control of the chattel paper under section 9-105 in good
faith, in the ordinary course of the purchaser's business, and
without knowledge that the purchase violates the rights of the
secured party.
(c) Except as otherwise provided in section 9-327, a purchaser
having priority in chattel paper under subsection (a) or (b) also
has priority in proceeds of the chattel paper to the extent that:
(1) Section 9-322 provides for priority in the proceeds; or
(2) The proceeds consist of the specific goods covered by the
chattel paper or cash proceeds of the specific goods, even if the
purchaser's security interest in the proceeds is unperfected.
(d) Except as otherwise provided in section 9-331(a), a
purchaser of an instrument has priority over a security interest in
the instrument perfected by a method other than possession if the
purchaser gives value and takes possession of the instrument in
good faith and without knowledge that the purchase violates the
rights of the secured party.
(e) For purposes of subsections (a) and (b), the holder of a
purchase-money security interest in inventory gives new value for
chattel paper constituting proceeds of the inventory.
(f) For purposes of subsections (b) and (d), if chattel paper
or an instrument indicates that it has been assigned to an
identified secured party other than the purchaser, a purchaser of
the chattel paper or instrument has knowledge that the purchase
violates the rights of the secured party.
§46-9-331. Priority of rights of purchasers of instruments,
documents, and securities under other articles; priority of
interests in financial assets and security entitlements under
article eight.
(a) This article does not limit the rights of a holder in due
course of a negotiable instrument, a holder to which a negotiable
document of title has been duly negotiated, or a protected
purchaser of a security. These holders or purchasers take priority
over an earlier security interest, even if perfected, to the extent
provided in articles three, seven and eight.
(b) This article does not limit the rights of or impose
liability on a person to the extent that the person is protected
against the assertion of an adverse claim under article eight.
(c) Filing under this article does not constitute notice of a
claim or defense to the holders, or purchasers, or persons
described in subsections (a) and (b).
§46-9-332. Transfer of money; transfer of funds from deposit
account.
(a) A transferee of money takes the money free of a security
interest unless the transferee acts in collusion with the debtor in
violating the rights of the secured party.
(b) A transferee of funds from a deposit account takes the
funds free of a security interest in the deposit account unless the
transferee acts in collusion with the debtor in violating the
rights of the secured party.
§46-9-333. Priority of certain liens arising by operation of law.
(a) In this section, "possessory lien" means an interest,
other than a security interest or an agricultural lien:
(1) Which secures payment or performance of an obligation for
services or materials furnished with respect to goods by a person
in the ordinary course of the person's business;
(2) Which is created by statute or rule of law in favor of the
person; and
(3) Whose effectiveness depends on the person's possession of
the goods.
(b) A possessory lien on goods has priority over a security
interest in the goods unless the lien is created by a statute that
expressly provides otherwise.
§46-9-334. Priority of security interests in fixtures and crops.
(a) A security interest under this article may be created in
goods that are fixtures or may continue in goods that become
fixtures. A security interest does not exist under this article in ordinary building materials incorporated into an improvement on
land.
(b)
This article does not prevent creation of an encumbrance
upon fixtures under real property law.
(c) In cases not governed by subsections (d) through (h), a
security interest in fixtures is subordinate to a conflicting
interest of an encumbrancer or owner of the related real property
other than the debtor.
(d) Except as otherwise provided in subsection (h), a
perfected security interest in fixtures has priority over a
conflicting interest of an encumbrancer or owner of the real
property if the debtor has an interest of record in or is in
possession of the real property and:
(1) The security interest is a purchase-money security
interest;
(2) The interest of the encumbrancer or owner arises before
the goods become fixtures; and
(3) The security interest is perfected by a fixture filing
before the goods become fixtures or within twenty days thereafter.
(e) A perfected security interest in fixtures has priority
over a conflicting interest of an encumbrancer or owner of the real
property if:
(1) The debtor has an interest of record in the real property
or is in possession of the real property and the security interest:
(A) Is perfected by a fixture filing before the interest of
the encumbrancer or owner is of record; and
(B) Has priority over any conflicting interest of a
predecessor in title of the encumbrancer or owner;
(2) Before the goods become fixtures, the security interest is
perfected by any method permitted by this article and the fixtures
are readily removable:
(A) Factory or office machines;
(B) Equipment that is not primarily used or leased for use in
the operation of the real property; or
(C) Replacements of domestic appliances that are consumer
goods;
(3) The conflicting interest is a lien on the real property
obtained by legal or equitable proceedings after the security
interest was perfected by any method permitted by this article; or
(4) The security interest is:
(A) Created in a manufactured home in a manufactured-home
transaction; and
(B) Perfected pursuant to a statute described in section
9-311(a)(2).
(f) A security interest in fixtures, whether or not perfected,
has priority over a conflicting interest of an encumbrancer or
owner of the real property if:
(1) The encumbrancer or owner has, in an authenticated record,
consented to the security interest or disclaimed an interest in the
goods as fixtures; or
(2) The debtor has a right to remove the goods as against the
encumbrancer or owner.
(g) The priority of the security interest under subsection (f)
continues for a reasonable time if the debtor's right to remove the
goods as against the encumbrancer or owner terminates.
(h) A mortgage is a construction mortgage to the extent that
it secures an obligation incurred for the construction of an
improvement on land, including the acquisition cost of the land, if
a recorded record of the mortgage so indicates. Except as
otherwise provided in subsections (e) and (f), a security interest
in fixtures is subordinate to a construction mortgage if a record
of the mortgage is recorded before the goods become fixtures and
the goods become fixtures before the completion of the
construction. A mortgage has this priority to the same extent as
a construction mortgage to the extent that it is given to refinance
a construction mortgage.
(i) A perfected security interest in crops growing on real
property has priority over a conflicting interest of an
encumbrancer or owner of the real property if the debtor has an
interest of record in or is in possession of the real property.
(j) Subsection (i) prevails over any inconsistent provisions
of other statutes:
§46-9-335. Accessions.
(a) A security interest may be created in an accession and
continues in collateral that becomes an accession.
(b) If a security interest is perfected when the collateral
becomes an accession, the security interest remains perfected in
the collateral.
(c)
Except as otherwise provided in subsection (d), the other
provisions of this part determine the priority of a security
interest in an accession.
(d) A security interest in an accession is subordinate to a
security interest in the whole which is perfected by compliance
with the requirements of a certificate-of-title statute under
section 9-311(b).
(e) After default, subject to Part 6, a secured party may
remove an accession from other goods if the security interest in the accession has priority over the claims of every person having
an interest in the whole.
(f) A secured party that removes an accession from other goods
under subsection (e) shall promptly reimburse any encumbrancer or
owner of the whole or of the other goods, other than the debtor,
for the cost of repair of any physical injury to the whole or the
other goods. The secured party need not reimburse the encumbrancer
or owner for any diminution in value of the whole or the other
goods caused by the absence of the accession removed or by any
necessity for replacing it. A person entitled to reimbursement may
refuse permission to remove until the secured party gives adequate
assurance for the performance of the obligation to reimburse.
§46-9-336. Commingled goods.
(a) In this section, "commingled goods" means goods that are
physically united with other goods in such a manner that their
identity is lost in a product or mass.
(b) A security interest does not exist in commingled goods as
such. However, a security interest may attach to a product or mass
that results when goods become commingled goods.
(c) If collateral becomes commingled goods, a security
interest attaches to the product or mass.
(d) If a security interest in collateral is perfected before
the collateral becomes commingled goods, the security interest that
attaches to the product or mass under subsection (c) is perfected.
(e) Except as otherwise provided in subsection (f), the other
provisions of this part determine the priority of a security
interest that attaches to the product or mass under subsection (c).
(f) If more than one security interest attaches to the product
or mass under subsection (c), the following rules determine
priority:
(1) A security interest that is perfected under subsection (d)
has priority over a security interest that is unperfected at the
time the collateral becomes commingled goods.
(2) If more than one security interest is perfected under
subsection (d), the security interests rank equally in proportion
to value of the collateral at the time it became commingled goods.
§46-9-337. Priority of security interests in goods covered by
certificate of title.
If, while a security interest in goods is perfected by any
method under the law of another jurisdiction, this state issues a
certificate of title that does not show that the goods are subject
to the security interest or contain a statement that they may be
subject to security interests not shown on the certificate:
(1) A buyer of the goods, other than a person in the business
of selling goods of that kind, takes free of the security interest
if the buyer gives value and receives delivery of the goods after
issuance of the certificate and without knowledge of the security
interest; and
(2) The security interest is subordinate to a conflicting
security interest in the goods that attaches, and is perfected
under section 9-311(b), after issuance of the certificate and
without the conflicting secured party's knowledge of the security
interest.
§47-9-338. Priority of security interest or agricultural lien
perfected by filed financing statement providing certain
incorrect information.
If a security interest or agricultural lien is perfected by a
filed financing statement providing information described in
section 9-516(b)(5) which is incorrect at the time the financing
statement is filed:
(1) The security interest or agricultural lien is subordinate
to a conflicting perfected security interest in the collateral to
the extent that the holder of the conflicting security interest
gives value in reasonable reliance upon the incorrect information;
and
(2) A purchaser, other than a secured party, of the collateral
takes free of the security interest or agricultural lien to the
extent that, in reasonable reliance upon the incorrect information,
the purchaser gives value and, in the case of chattel paper,
documents, goods, instruments or a security certificate, receives
delivery of the collateral.
§46-9-339. Priority subject to subordination.
This article does not preclude subordination by agreement by
a person entitled to priority.
SUBPART 4. RIGHTS OF BANK
§46-9-340. Effectiveness of right of recoupment or set-off against
deposit account.
(a) Except as otherwise provided in subsection (c), a bank
with which a deposit account is maintained may exercise any right
of recoupment or set-off against a secured party that holds a
security interest in the deposit account.
(b) Except as otherwise provided in subsection (c), the
application of this article to a security interest in a deposit
account does not affect a right of recoupment or set-off of the
secured party as to a deposit account maintained with the secured
party.
(c) The exercise by a bank of a set-off against a deposit
account is ineffective against a secured party that holds a
security interest in the deposit account which is perfected by
control under section 9-104(a)(3), if the set-off is based on a
claim against the debtor.
§46-9-341. Bank's rights and duties with respect to deposit
account.
Except as otherwise provided in section 9-340(c), and unless
the bank otherwise agrees in an authenticated record, a bank's
rights and duties with respect to a deposit account maintained with
the bank are not terminated, suspended or modified by:
(1) The creation, attachment or perfection of a security
interest in the deposit account;
(2) The bank's knowledge of the security interest; or
(3) The bank's receipt of instructions from the secured party.
§46-9-342. Bank's right to refuse to enter into or disclose
existence of control agreement.
This article does not require a bank to enter into an
agreement of the kind described in section 9-104(a)(2), even if its
customer so requests or directs. A bank that has entered into such
an agreement is not required to confirm the existence of the agreement to another person unless requested to do so by its
customer.
PART 4
RIGHTS OF THIRD PARTIES
§46-9-401. Alienability of debtor's rights.
(a) Except as otherwise provided in subsection (b) and
sections 9-406, 9-407, 9-408 and 9-409, whether a debtor's rights
in collateral may be voluntarily or involuntarily transferred is
governed by law other than this article.
(b) An agreement between the debtor and secured party which
prohibits a transfer of the debtor's rights in collateral or makes
the transfer a default does not prevent the transfer from taking
effect.
§46-9-402. Secured party not obligated on contract of debtor or in
tort.
The existence of a security interest, agricultural lien, or
authority given to a debtor to dispose of or use collateral,
without more, does not subject a secured party to liability in
contract or tort for the debtor's acts or omissions.
§46-9-403. Agreement not to assert defenses against assignee.
(a) In this section, "value" has the meaning provided in
section 3-303(a).
(b) Except as otherwise provided in this section, an agreement
between an account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may have
against the assignor is enforceable by an assignee that takes an
assignment:
(1) For value;
(2) In good faith;
(3) Without notice of a claim of a property or possessory
right to the property assigned; and
(4) Without notice of a defense or claim in recoupment of the
type that may be asserted against a person entitled to enforce a
negotiable instrument under section 3-305(a).
(c) Subsection (b) does not apply to defenses of a type that
may be asserted against a holder in due course of a negotiable
instrument under section 3-305(b).
(d) In a consumer transaction, if a record evidences the
account debtor's obligation, law other than this article requires
that the record include a statement to the effect that the rights
of an assignee are subject to claims or defenses that the account
debtor could assert against the original obligee, and the record
does not include such a statement:
(1) The record has the same effect as if the record included
such a statement; and
(2) The account debtor may assert against an assignee those
claims and defenses that would have been available if the record
included such a statement.
(e) This section is subject to law other than this article
which establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family or household purposes.
(f) Except as otherwise provided in subsection (d), this
section does not displace law other than this article which gives
effect to an agreement by an account debtor not to assert a claim
or defense against an assignee.
§46-9-404. Rights acquired by assignee; claims and defenses
against assignee.
(a) Unless an account debtor has made an enforceable agreement
not to assert defenses or claims, and subject to subsections (b)
through (e), the rights of an assignee are subject to:
(1) All terms of the agreement between the account debtor and
assignor and any defense or claim in recoupment arising from the
transaction that gave rise to the contract; and
(2) Any other defense or claim of the account debtor against
the assignor which accrues before the account debtor receives a
notification of the assignment authenticated by the assignor or the
assignee.
(b) Subject to subsection (c) and except as otherwise provided
in subsection (d), the claim of an account debtor against an
assignor may be asserted against an assignee under subsection (a)
only to reduce the amount the account debtor owes.
(c) This section is subject to law other than this article
which establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family or household purposes.
(d) In a consumer transaction, if a record evidences the
account debtor's obligation, law other than this article requires
that the record include a statement to the effect that the account
debtor's recovery against an assignee with respect to claims and
defenses against the assignor may not exceed amounts paid by the
account debtor under the record, and the record does not include
such a statement, the extent to which a claim of an account debtor
against the assignor may be asserted against an assignee is
determined as if the record included such a statement.
(e) This section does not apply to an assignment of a health- care-insurance receivable.
§46-9-405. Modification of assigned contract.
(a) A modification of or substitution for an assigned contract
is effective against an assignee if made in good faith. The
assignee acquires corresponding rights under the modified or
substituted contract. The assignment may provide that the
modification or substitution is a breach of contract by the
assignor. This subsection is subject to subsections (b) through
(d).
(b) Subsection (a) applies to the extent that:
(1) The right to payment or a part thereof under an assigned
contract has not been fully earned by performance; or
(2) The right to payment or a part thereof has been fully
earned by performance and the account debtor has not received
notification of the assignment under section 9-406(a).
(c) This section is subject to law other than this article
which establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family or household purposes.
(d)
This section does not apply to an assignment of a health-
care-insurance receivable.
§46-9-406. Discharge of account debtor; notification of
assignment; identification and proof of assignment; term
prohibiting assignment ineffective.
(a) Subject to subsections (b) through (h), an account debtor
on an account, chattel paper, or a payment intangible may discharge
its obligation by paying the assignor until, but not after, the
account debtor receives a notification, authenticated by the
assignor or the assignee, that the amount due or to become due has
been assigned and that payment is to be made to the assignee.
After receipt of the notification, the account debtor may discharge
its obligation by paying the assignee and may not discharge the
obligation by paying the assignor.
(b) Subject to subsection (g), notification is ineffective
under subsection (a):
(1) If it does not reasonably identify the rights assigned;
(2) To the extent that an agreement between an account debtor
and a seller of a payment intangible limits the account debtor's
duty to pay a person other than the seller and the limitation is
effective under law other than this article; or
(3) At the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount of
any installment or other periodic payment to the assignee, even if:
(A) Only a portion of the account, chattel paper or general
intangible has been assigned to that assignee;
(B) A portion has been assigned to another assignee; or
(C) The account debtor knows that the assignment to that
assignee is limited.
(c) Subject to subsection (g), if requested by the account
debtor, an assignee shall seasonably furnish reasonable proof that
the assignment has been made. Unless the assignee complies, the
account debtor may discharge its obligation by paying the assignor,
even if the account debtor has received a notification under
subsection (a).
(d) Except as otherwise provided in subsection (e) and
sections 2A-303 and 9-407, and subject to subsection (g), a term in
an agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it:
(1) Prohibits, restricts or requires the consent of the
account debtor or person obligated on the promissory note to the
assignment or transfer of, or the creation, attachment, perfection
or enforcement of a security interest in, the account, chattel
paper, payment intangible, or promissory note; or
(2) Provides that the creation, attachment, perfection or
enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of
termination, or remedy under the account, chattel paper, payment
intangible or promissory note.
(e) Subsection (d) does not apply to the sale of a payment
intangible or promissory note.
(f) Subject to subsection (g), an account debtor may not waive
or vary its option under subsection (b)(3).
(g) This section is subject to law other than this article
which establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
(h)
This section does not apply to an assignment of a health-
care-insurance receivable.
§46-9-407. Restrictions on creation or enforcement of security
interest in leasehold interest or in lessor's residual
interest.
(a)
Except as otherwise provided in subsection (b), a term
in a lease agreement is ineffective to the extent that it:
(1) Prohibits, restricts or requires the consent of a party to
the lease to the creation, attachment, perfection or enforcement of
a security interest in an interest of a party under the lease
contract or in the lessor's residual interest in the goods; or
(2) Provides that the creation, attachment, perfection or
enforcement of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of
termination or remedy under the lease.
(b) Except as otherwise provided in section 2A-303(7), a term
described in subsection (a)(2) is effective to the extent that
there is:
(1) A transfer by the lessee of the lessee's right of
possession or use of the goods in violation of the term; or
(2) A delegation of a material performance of either party to
the lease contract in violation of the term.
(c) The creation, attachment, perfection or enforcement of a
security interest in the lessor's interest under the lease contract
or the lessor's residual interest in the goods is not a transfer
that materially impairs the lessee's prospect of obtaining return
performance or materially changes the duty of or materially
increases the burden or risk imposed on the lessee within the
purview of section 2A-303(4) unless, and then only to the extent
that, enforcement actually results in a delegation of material
performance of the seller. Even in that event, the creation,
attachment, perfection and enforcement of the security interest
remain effective.
§46-9-408. Restrictions on assignment of promissory notes, health-
care-insurance receivables, and certain general intangibles
ineffective.
(a) Except as otherwise provided in subsection (b), a term in
a promissory note or in an agreement between an account debtor and
a debtor which relates to a health-care-insurance receivable or a
general intangible, including a contract, permit, license or
franchise, and which term prohibits, restricts or requires the
consent of the person obligated on the promissory note or the
account debtor to, the assignment or transfer of, or creation,
attachment or perfection of a security interest in, the promissory
note, health-care-insurance receivable or general intangible, is
ineffective to the extent that the term:
(1) Would impair the creation, attachment or perfection of a
security interest; or
(2) Provides that the creation, attachment or perfection of
the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination or
remedy under the promissory note, health-care-insurance receivable
or general intangible.
(b) Subsection (a) applies to a security interest in a payment
intangible or promissory note only if the security interest arises
out of a sale of the payment intangible or promissory note.
(c)
A rule of law, statute or regulation, which prohibits,
restricts or requires the consent of a government, governmental
body or official, person obligated on a promissory note or account
debtor to the assignment or transfer of, or creation of a security
interest in, a promissory note, health-care-insurance receivable or
general intangible, including a contract, permit, license or
franchise between an account debtor and a debtor, is ineffective to
the extent that the rule of law, statute or regulation:
(1) Would impair the creation, attachment or perfection of a
security interest; or
(2) Provides that the creation, attachment or perfection of
the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination or
remedy under the promissory note, health-care-insurance receivable
or general intangible.
(d) To the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor which relates to
a health-care-insurance receivable or general intangible or a rule
of law, statute or regulation described in subsection (c) would be effective under law other than this article but is ineffective
under subsection (a) or (c), the creation, attachment or perfection
of a security interest in the promissory note, health-care- insurance receivable or general intangible:
(1) Is not enforceable against the person obligated on the
promissory note or the account debtor;
(2) Does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor;
(3) Does not require the person obligated on the promissory
note or the account debtor to recognize the security interest, pay
or render performance to the secured party or accept payment or
performance from the secured party;
(4) Does not entitle the secured party to use or assign the
debtor's rights under the promissory note, health-care-insurance
receivable or general intangible, including any related information
or materials furnished to the debtor in the transaction giving rise
to the promissory note, health-care-insurance receivable or general
intangible;
(5) Does not entitle the secured party to use, assign, possess
or have access to any trade secrets or confidential information of
the person obligated on the promissory note or the account debtor;
and
(6) Does not entitle the secured party to enforce the security
interest in the promissory note, health-care-insurance receivable
or general intangible.
(e) This section prevails over any inconsistent provisions of
the other statutes, rules and regulations.
§46-9-409. Restrictions on assignment of letter-of-credit rights
ineffective.
(a) A term in a letter of credit or a rule of law, statute,
regulation, custom or practice applicable to the letter of credit
which prohibits, restricts or requires the consent of an applicant,
issuer or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is
ineffective to the extent that the term or rule of law, statute,
regulation, custom or practice:
(1) Would impair the creation, attachment or perfection of a
security interest in the letter-of-credit right; or
(2) Provides that the creation, attachment or perfection of
the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination or
remedy under the letter-of-credit right.
(b) To the extent that a term in a letter of credit is
ineffective under subsection (a) but would be effective under law other than this article or a custom or practice applicable to the
letter of credit, to the transfer of a right to draw or otherwise
demand performance under the letter of credit or to the assignment
of a right to proceeds of the letter of credit, the creation,
attachment or perfection of a security interest in the letter-of- credit right:
(1) Is not enforceable against the applicant, issuer,
nominated person or transferee beneficiary;
(2) Imposes no duties or obligations on the applicant, issuer,
nominated person or transferee beneficiary; and
(3) Does not require the applicant, issuer, nominated person
or transferee beneficiary to recognize the security interest, pay
or render performance to the secured party, or accept payment or
other performance from the secured party.
PART 5
FILING
SUBPART 1. FILING OFFICE; CONTENTS AND
EFFECTIVENESS OF FINANCING STATEMENT
§46-9-501. Filing office.
(a) Except as otherwise provided in subsection (b), if the
local law of this state governs perfection of a security interest or agricultural lien, the office in which to file a financing
statement to perfect the security interest or agricultural lien is:
(1) The office designated for the filing or recording of a
record of a mortgage on the related real property, if:
(A) The collateral is as-extracted collateral or timber to be
cut; or
(B) The financing statement is filed as a fixture filing and
the collateral is goods that are or are to become fixtures; or
(2) The office of the secretary of state, in all other cases,
including a case in which the collateral is goods that are or are
to become fixtures and the financing statement is not filed as a
fixture filing.
(b) The office in which to file a financing statement to
perfect a security interest in collateral, including fixtures, of
a transmitting utility is the office of the secretary of state.
The financing statement also constitutes a fixture filing as to the
collateral indicated in the financing statement which is or is to
become fixtures.
§46-9-502. Contents of financing statement; record of mortgage as
financing statement; time of filing financing statement.
(a) Subject to subsection (b), a financing statement is
sufficient only if it:
(1) Provides the name of the debtor;
(2) Provides the name of the secured party or a representative
of the secured party; and
(3) Indicates the collateral covered by the financing
statement.
(b) Except as otherwise provided in section 9-501(b), to be
sufficient, a financing statement that covers as-extracted
collateral or timber to be cut, or which is filed as a fixture
filing and covers goods that are or are to become fixtures, must
satisfy subsection (a) and also:
(1) Indicate that it covers this type of collateral;
(2) Indicate that it is to be filed in the real property
records;
(3) Provide a description of the real property to which the
collateral is related, sufficient to give constructive notice of a
mortgage under the law of this state if the description were
contained in a record of the mortgage of the real property; and
(4) If the debtor does not have an interest of record in the
real property, provide the name of a record owner.
(c) A record of a mortgage is effective, from the date of
recording, as a financing statement filed as a fixture filing or as a financing statement covering as-extracted collateral or timber to
be cut only if:
(1) The record indicates the goods or accounts that it covers;
(2) The goods are or are to become fixtures related to the
real property described in the record or the collateral is related
to the real property described in the record and is as-extracted
collateral or timber to be cut;
(3) The record complies with the requirements for a financing
statement in this section other than an indication that it is to be
filed in the real property records; and
(4) The record is duly recorded.
(d) A financing statement may be filed before a security
agreement is made or a security interest otherwise attaches.
§46-9-503. Name of debtor and secured party.
(a) A financing statement sufficiently provides the name of
the debtor:
(1) If the debtor is a registered organization, only if the
financing statement provides the name of the debtor indicated on
the public record of the debtor's jurisdiction of organization
which shows the debtor to have been organized;
(2) If the debtor is a decedent's estate, only if the
financing statement provides the name of the decedent and indicates
that the debtor is an estate;
(3) If the debtor is a trust or a trustee acting with respect
to property held in trust, only if the financing statement:
(A) Provides the name specified for the trust in its organic
documents or, if no name is specified, provides the name of the
settlor and additional information sufficient to distinguish the
debtor from other trusts having one or more of the same settlors;
and
(B) Indicates, in the debtor's name or otherwise, that the
debtor is a trust or is a trustee acting with respect to property
held in trust; and
(4) In other cases:
(A) If the debtor has a name, only if it provides the
individual or organizational name of the debtor; and
(B) If the debtor does not have a name, only if it provides
the names of the partners, members, associates or other persons
comprising the debtor.
(b) A financing statement that provides the name of the debtor
in accordance with subsection (a) is not rendered ineffective by
the absence of:
(1) A trade name or other name of the debtor; or
(2) Unless required under subsection (a)(4)(B), names of
partners, members, associates or other persons comprising the
debtor.
(c) A financing statement that provides only the debtor's
trade name does not sufficiently provide the name of the debtor.
(d) Failure to indicate the representative capacity of a
secured party or representative of a secured party does not affect
the sufficiency of a financing statement.
(e) A financing statement may provide the name of more than
one debtor and the name of more than one secured party.
§46-9-504. Indication of collateral.
A financing statement sufficiently indicates the collateral
that it covers only if the financing statement provides:
(1) A description of the collateral pursuant to section 9-108;
or
(2) An indication that the financing statement covers all
assets or all personal property.
§46-9-505. Filing and compliance with other statutes and treaties
for consignments, leases, other bailments and other
transactions.
(a) A consignor, lessor or other bailor of goods or a buyer of
a payment intangible or promissory note may file a financing
statement, or may comply with a statute or treaty described in
section 9-311(a), using the terms "consignor", "consignee",
"lessor", "lessee", "bailor", "bailee", "owner", "registered
owner", "buyer", "seller" or words of similar import, instead of
the terms "secured party" and "debtor".
(b) This part applies to the filing of a financing statement
under subsection (a) and, as appropriate, to compliance that is
equivalent to filing a financing statement under section 9-311(b),
but the filing or compliance is not of itself a factor in
determining whether the collateral secures an obligation. If it is
determined for another reason that the collateral secures an
obligation, a security interest held by the consignor, lessor,
bailor, owner or buyer which attaches to the collateral is
perfected by the filing or compliance.
§46-9-506. Effect of errors or omissions.
(a) A financing statement substantially satisfying the
requirements of this part is effective, even if it has minor errors
or omissions, unless the errors or omissions make the financing
statement seriously misleading.
(b) Except as otherwise provided in subsection (c), a
financing statement that fails sufficiently to provide the name of
the debtor in accordance with section 9-503(a) is seriously
misleading.
(c) If a search of the records of the filing office under the
debtor's correct name, using the filing office's standard search
logic, if any, would disclose a financing statement that fails
sufficiently to provide the name of the debtor in accordance with
section 9-503(a), the name provided does not make the financing
statement seriously misleading.
(d) For purposes of section 9-508(b), the "debtor's correct
name" in subsection (c) means the correct name of the new debtor.
§46-9-507. Effect of certain events on effectiveness of financing
statement.
(a) A filed financing statement remains effective with respect
to collateral that is sold, exchanged, leased, licensed or
otherwise disposed of and in which a security interest or
agricultural lien continues, even if the secured party knows of or
consents to the disposition.
(b) Except as otherwise provided in subsection (c) and section
9-508, a financing statement is not rendered ineffective if, after
the financing statement is filed, the information provided in the financing statement becomes seriously misleading under section
9-506.
(c) If a debtor so changes its name that a filed financing
statement becomes seriously misleading under section 9-506:
(1) The financing statement is effective to perfect a security
interest in collateral acquired by the debtor before, or within
four months after, the change; and
(2) The financing statement is not effective to perfect a
security interest in collateral acquired by the debtor more than
four months after the change, unless an amendment to the financing
statement which renders the financing statement not seriously
misleading is filed within four months after the change.
§46-9-508. Effectiveness of financing statement if new debtor
becomes bound by security agreement.
(a) Except as otherwise provided in this section, a filed
financing statement naming an original debtor is effective to
perfect a security interest in collateral in which a new debtor has
or acquires rights to the extent that the financing statement would
have been effective had the original debtor acquired rights in the
collateral.
(b) If the difference between the name of the original debtor
and that of the new debtor causes a filed financing statement that is effective under subsection (a) to be seriously misleading under
section 9-506:
(1) The financing statement is effective to perfect a security
interest in collateral acquired by the new debtor before, and
within four months after, the new debtor becomes bound under
section 9-203(d); and
(2) The financing statement is not effective to perfect a
security interest in collateral acquired by the new debtor more
than four months after the new debtor becomes bound under section
9-203(d) unless an initial financing statement providing the name
of the new debtor is filed before the expiration of that time.
(c) This section does not apply to collateral as to which a
filed financing statement remains effective against the new debtor
under section 9-507(a).
§46-9-509. Persons entitled to file a record.
(a) A person may file an initial financing statement,
amendment that adds collateral covered by a financing statement, or
amendment that adds a debtor to a financing statement only if:
(1) The debtor authorizes the filing in an authenticated
record; or
(2) The person holds an agricultural lien that has become
effective at the time of filing and the financing statement covers
only collateral in which the person holds an agricultural lien.
(b) By authenticating a security agreement, a debtor
authorizes the filing of an initial financing statement, and an
amendment, covering:
(1) The collateral described in the security agreement; and
(2) Property that becomes collateral under section
9-315(a)(2), whether or not the security agreement expressly covers
proceeds.
(c) A person may file an amendment other than an amendment
that adds collateral covered by a financing statement or an
amendment that adds a debtor to a financing statement only if:
(1) The secured party of record authorizes the filing; or
(2) The amendment is a termination statement for a financing
statement as to which the secured party of record has failed to
file or send a termination statement as required by section
9-513(a) or (c), the debtor authorizes the filing, and the
termination statement indicates that the debtor authorized it to be
filed.
(d) If there is more than one secured party of record for a
financing statement, each secured party of record may authorize the
filing of an amendment under subsection (c).
§46-9-510. Effectiveness of filed record.
(a) A filed record is effective only to the extent that it was
filed by a person that may file it under section 9-509.
(b) A record authorized by one secured party of record does
not affect the financing statement with respect to another secured
party of record.
(c) A continuation statement that is not filed within the six- month period prescribed by section 9-515(d) is ineffective.
§46--511. Secured party of record.
(a) A secured party of record with respect to a financing
statement is a person whose name is provided as the name of the
secured party or a representative of the secured party in an
initial financing statement that has been filed. If an initial
financing statement is filed under section 9-514(a), the assignee
named in the initial financing statement is the secured party of
record with respect to the financing statement.
(b) If an amendment of a financing statement which provides
the name of a person as a secured party or a representative of a
secured party is filed, the person named in the amendment is a secured party of record. If an amendment is filed under section
9-514(b), the assignee named in the amendment is a secured party of
record.
(c) A person remains a secured party of record until the
filing of an amendment of the financing statement which deletes the
person.
§46-9-512. Amendment of financing statement.
(a) Subject to section 9-509, a person may add or delete
collateral covered by, continue or terminate the effectiveness of,
or, subject to subsection (e), otherwise amend the information
provided in, a financing statement by filing an amendment that:
(1) Identifies, by its file number, the initial financing
statement to which the amendment relates; and
(2) If the amendment relates to an initial financing statement
filed in a filing office described in section 9-501(a)(1), provides
the date and time that the initial financing statement was filed
and the information specified in section 9-502(b).
(b) Except as otherwise provided in section 9-515, the filing
of an amendment does not extend the period of effectiveness of the
financing statement.
(c) A financing statement that is amended by an amendment that
adds collateral is effective as to the added collateral only from
the date of the filing of the amendment.
(d) A financing statement that is amended by an amendment that
adds a debtor is effective as to the added debtor only from the
date of the filing of the amendment.
(e) An amendment is ineffective to the extent it:
(1) Purports to delete all debtors and fails to provide the
name of a debtor to be covered by the financing statement; or
(2) Purports to delete all secured parties of record and fails
to provide the name of a new secured party of record.
§46-9-513. Termination statement.
(a) A secured party shall cause the secured party of record
for a financing statement to file a termination statement for the
financing statement if the financing statement covers consumer
goods and:
(1) There is no obligation secured by the collateral covered
by the financing statement and no commitment to make an advance,
incur an obligation or otherwise give value; or
(2) The debtor did not authorize the filing of the initial
financing statement.
(b) To comply with subsection (a), a secured party shall cause
the secured party of record to file the termination statement:
(1) Within one month after there is no obligation secured by
the collateral covered by the financing statement and no commitment
to make an advance, incur an obligation or otherwise give value; or
(2) If earlier, within twenty days after the secured party
receives an authenticated demand from a debtor.
(c) In cases not governed by subsection (a), within twenty
days after a secured party receives an authenticated demand from a
debtor, the secured party shall cause the secured party of record
for a financing statement to send to the debtor a termination
statement for the financing statement or file the termination
statement in the filing office if:
(1) Except in the case of a financing statement covering
accounts or chattel paper that has been sold or goods that are the
subject of a consignment, there is no obligation secured by the
collateral covered by the financing statement and no commitment to
make an advance, incur an obligation, or otherwise give value;
(2) The financing statement covers accounts or chattel paper
that has been sold but as to which the account debtor or other
person obligated has discharged its obligation;
(3) The financing statement covers goods that were the subject
of a consignment to the debtor but are not in the debtor's
possession; or
(4) The debtor did not authorize the filing of the initial
financing statement.
(d) Except as otherwise provided in section 9-510, upon the
filing of a termination statement with the filing office, the
financing statement to which the termination statement relates
ceases to be effective.
§46-9-514. Assignment of powers of secured party of record.
(a) Except as otherwise provided in subsection (c), an initial
financing statement may reflect an assignment of all of the secured
party's power to authorize an amendment to the financing statement
by providing the name and mailing address of the assignee as the
name and address of the secured party.
(b) Except as otherwise provided in subsection (c), a secured
party of record may assign of record all or part of its power to
authorize an amendment to a financing statement by filing in the
filing office an amendment of the financing statement which:
(1) Identifies, by its file number, the initial financing
statement to which it relates;
(2) Provides the name of the assignor; and
(3) Provides the name and mailing address of the assignee.
(c) An assignment of record of a security interest in a
fixture covered by a record of a mortgage which is effective as a
financing statement filed as a fixture filing under section
9-502(c) may be made only by an assignment of record of the
mortgage in the manner provided by law of this state other than the
uniform commercial code].
§46-9-515. Duration and effectiveness of financing statement;
effect of lapsed financing statement.
(a) Except as otherwise provided in subsections (b), (e), (f)
and (g), a filed financing statement is effective for a period of
five years after the date of filing.
(b) Except as otherwise provided in subsections (e), (f) and
(g), an initial financing statement filed in connection with a
public-finance transaction or manufactured-home transaction is
effective for a period of thirty years after the date of filing if
it indicates that it is filed in connection with a public-finance
transaction or manufactured-home transaction.
(c) The effectiveness of a filed financing statement lapses on
the expiration of the period of its effectiveness unless before the
lapse a continuation statement is filed pursuant to subsection (d).
Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the
financing statement becomes unperfected, unless the security
interest is perfected without filing. If the security interest or
agricultural lien becomes unperfected upon lapse, it is deemed
never to have been perfected as against a purchaser of the
collateral for value.
(d) A continuation statement may be filed only within six
months before the expiration of the five-year period specified in
subsection (a) or the thirty-year period specified in subsection
(b), whichever is applicable.
(e) Except as otherwise provided in section 9-510, upon timely
filing of a continuation statement, the effectiveness of the
initial financing statement continues for a period of five years
commencing on the day on which the financing statement would have
become ineffective in the absence of the filing. Upon the
expiration of the five-year period, the financing statement lapses
in the same manner as provided in subsection (c), unless, before
the lapse, another continuation statement is filed pursuant to
subsection (d). Succeeding continuation statements may be filed in
the same manner to continue the effectiveness of the initial
financing statement.
(f) If a debtor is a transmitting utility and a filed
financing statement so indicates, the financing statement is
effective until a termination statement is filed.
(g) A record of a mortgage that is effective as a financing
statement filed as a fixture filing under section 9-502(c) remains
effective as a financing statement filed as a fixture filing until
the mortgage is released or satisfied of record or its
effectiveness otherwise terminates as to the real property.
§46-9-516. What constitutes filing; effectiveness of filing.
(a) Except as otherwise provided in subsection (b),
communication of a record to a filing office and tender of the
filing fee or acceptance of the record by the filing office
constitutes filing.
(b) Filing does not occur with respect to a record that a
filing office refuses to accept because:
(1) The record is not communicated by a method or medium of
communication authorized by the filing office;
(2) An amount equal to or greater than the applicable filing
fee is not tendered;
(3) The filing office is unable to index the record because:
(A) In the case of an initial financing statement, the record
does not provide a name for the debtor;
(B) In the case of an amendment or correction statement, the
record:
(i) Does not identify the initial financing statement as
required by section 9-512 or 9-518, as applicable; or
(ii) Identifies an initial financing statement whose
effectiveness has lapsed under section 9-515;
(C) In the case of an initial financing statement that
provides the name of a debtor identified as an individual or an
amendment that provides a name of a debtor identified as an
individual which was not previously provided in the financing
statement to which the record relates, the record does not identify
the debtor's last name; or
(D) In the case of a record filed or recorded in the filing
office described in section 9-501(a)(1), the record does not
provide a sufficient description of the real property to which it
relates;
(4) In the case of an initial financing statement or an
amendment that adds a secured party of record, the record does not
provide a name and mailing address for the secured party of record;
(5) In the case of an initial financing statement or an
amendment that provides a name of a debtor which was not previously provided in the financing statement to which the amendment relates,
the record does not:
(A) Provide a mailing address for the debtor;
(B) Indicate whether the debtor is an individual or an
organization; or
(C) If the financing statement indicates that the debtor is an
organization, provide:
(i) A type of organization for the debtor;
(ii) A jurisdiction of organization for the debtor; or
(iii) An organizational identification number for the debtor
or indicate that the debtor has none;
(6) In the case of an assignment reflected in an initial
financing statement under section 9-514(a) or an amendment filed
under section 9-514(b), the record does not provide a name and
mailing address for the assignee; or
(7) In the case of a continuation statement, the record is not
filed within the six-month period prescribed by section 9-515(d).
(c) For purposes of subsection (b):
(1) A record does not provide information if the filing office
is unable to read or decipher the information; and
(2) A record that does not indicate that it is an amendment or
identify an initial financing statement to which it relates, as required by section 9-512, 9-514 or 9-518, is an initial financing
statement.
(d) A record that is communicated to the filing office with
tender of the filing fee, but which the filing office refuses to
accept for a reason other than one set forth in subsection (b), is
effective as a filed record except as against a purchaser of the
collateral which gives value in reasonable reliance upon the
absence of the record from the files.
§46-9-517. Effect of indexing errors.
The failure of the filing office to index a record correctly
does not affect the effectiveness of the filed record.
§46-9-518. Claim concerning inaccurate or wrongfully filed record.
(a) A person may file in the filing office a correction
statement with respect to a record indexed there under the person's
name if the person believes that the record is inaccurate or was
wrongfully filed.
(b)
A correction statement must:
(1) Identify the record to which it relates by:
(A) The file number assigned to the initial financing
statement to which the record relates; and
(B) If the correction statement relates to a record filed or
recorded in a filing office described in section 9-501(a)(1), the date and time that the initial financing statement was filed and
the information specified in section 9-502(b);
(2) Indicate that it is a correction statement; and
(3) Provide the basis for the person's belief that the record
is inaccurate and indicate the manner in which the person believes
the record should be amended to cure any inaccuracy or provide the
basis for the person's belief that the record was wrongfully filed.
(c) The filing of a correction statement does not affect the
effectiveness of an initial financing statement or other filed
record.
SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
§46-9-519. Numbering, maintaining, and indexing records;
communicating information provided in records.
(a) For each record filed in a filing office, the filing
office shall:
(1) Assign a unique number to the filed record;
(2) Create a record that bears the number assigned to the
filed record and the date and time of filing;
(3) Maintain the filed record for public inspection; and
(4) Index the filed record in accordance with subsections (c),
(d) and (e).
(b) A file number assigned after the first day of January, two
thousand, must include a digit that:
(1) Is mathematically derived from or related to the other
digits of the file number; and
(2) Enables the filing office to detect whether a number
communicated as the file number includes a single-digit or
transpositional error.
(c) Except as otherwise provided in subsections (d) and (e),
the filing office shall:
(1) Index an initial financing statement according to the name
of the debtor and index all filed records relating to the initial
financing statement in a manner that associates with one another an
initial financing statement and all filed records relating to the
initial financing statement; and
(2) Index a record that provides a name of a debtor which was
not previously provided in the financing statement to which the
record relates also according to the name that was not previously
provided.
(d) If a financing statement is filed as a fixture filing or
covers as-extracted collateral or timber to be cut, it must be
filed for record and the filing office shall index it:
(1) Under the names of the debtor and of each owner of record
shown on the financing statement as if they were the mortgagors
under a mortgage of the real property described; and
(2) To the extent that the law of this state provides for
indexing of records of mortgages under the name of the mortgagee,
under the name of the secured party as if the secured party were
the mortgagee thereunder, or, if indexing is by description, as if
the financing statement were a record of a mortgage of the real
property described.
(e) If a financing statement is filed as a fixture filing or
covers as-extracted collateral or timber to be cut, the filing
office shall index an assignment filed under section 9-514(a) or an
amendment filed under section 9-514(b):
(1) Under the name of the assignor as grantor; and
(2) To the extent that the law of this state provides for
indexing a record of the assignment of a mortgage under the name of
the assignee, under the name of the assignee.
(f) The filing office shall maintain a capability:
(1) To retrieve a record by the name of the debtor and by the
file number assigned to the initial financing statement to which
the record relates; and
(2) To associate and retrieve with one another an initial
financing statement and each filed record relating to the initial
financing statement.
(g) The filing office may not remove a debtor's name from the
index until one year after the effectiveness of a financing
statement naming the debtor lapses under section 9-515 with respect
to all secured parties of record.
(h) The filing office shall perform the acts required by
subsections (a) through (e) at the time and in the manner
prescribed by filing-office rule, but not later than two business
days after the filing office receives the record in question.
§46-9-520. Acceptance and refusal to accept record.
(a) A filing office shall refuse to accept a record for filing
for a reason set forth in section 9-516(b) and may refuse to accept
a record for filing only for a reason set forth in section
9-516(b).
(b) If a filing office refuses to accept a record for filing,
it shall communicate to the person that presented the record the
fact of and reason for the refusal and the date and time the record
would have been filed had the filing office accepted it. The
communication must be made at the time and in the manner prescribed
by filing-office rule, but in the case of a filing office described in section 9-501(a)(2), in no event more than two business days
after the filing office receives the record.
(c) A filed financing statement satisfying section 9-502(a)
and (b) is effective, even if the filing office is required to
refuse to accept it for filing under subsection (a). However,
section 9-338 applies to a filed financing statement providing
information described in section 9-516(b)(5) which is incorrect at
the time the financing statement is filed.
(d) If a record communicated to a filing office provides
information that relates to more than one debtor, this part applies
as to each debtor separately.
§46-9-521. Uniform form of written financing statement and
amendment.
(a) A filing office that accepts written records may not
refuse to accept a written initial financing statement in the
following form and format except for a reason set forth in section
9-516(b):
(b) A filing office that accepts written records may not
refuse to accept a written record in the following form and format
except for a reason set forth in section 9-516(b):
§46-9-522. Maintenance and destruction of records.
(a) The filing office shall maintain a record of the
information provided in a filed financing statement for at least
one year after the effectiveness of the financing statement has
lapsed under section 9-515 with respect to all secured parties of
record. The record must be retrievable by using the name of the
debtor and by using the file number assigned to the initial
financing statement to which the record relates.
(b) Except to the extent that a statute governing disposition
of public records provides otherwise, the filing office immediately
may destroy any written record evidencing a financing statement.
However, if the filing office destroys a written record, it shall
maintain another record of the financing statement which complies
with subsection (a).
§46-9-523. Information from filing office; sale or license of
records.
(a) If a person that files a written record requests an
acknowledgment of the filing, the filing office shall send to the
person an image of the record showing the number assigned to the
record pursuant to section 9-519(a)(1) and the date and time of the
filing of the record. However, if the person furnishes a copy of
the record to the filing office, the filing office may instead:
(1) Note upon the copy the number assigned to the record
pursuant to section 9-519(a)(1) and the date and time of the filing
of the record; and
(2) Send the copy to the person.
(b) If a person files a record other than a written record,
the filing office shall communicate to the person an acknowledgment
that provides:
(1) The information in the record;
(2) The number assigned to the record pursuant to section
9-519(a)(1); and
(3) The date and time of the filing of the record.
(c) The filing office shall communicate or otherwise make
available in a record the following information to any person that
requests it:
(1) Whether there is on file on a date and time specified by
the filing office, but not a date earlier than three business days
before the filing office receives the request, any financing
statement that:
(A) Designates a particular debtor or, if the request so
states, designates a particular debtor at the address specified in
the request;
(B) Has not lapsed under section 9-515 with respect to all
secured parties of record; and
(C) If the request so states, has lapsed under section 9-515
and a record of which is maintained by the filing office under
section 9-522(a);
(2) The date and time of filing of each financing statement;
and
(3) The information provided in each financing statement.
(d) In complying with its duty under subsection (c), the
filing office may communicate information in any medium. However,
if requested, the filing office shall communicate information by
issuing its written certificate or other record that can be
admitted into evidence in the courts of this state without
extrinsic evidence of its authenticity.
(e) The filing office shall perform the acts required by
subsections (a) through (d) at the time and in the manner
prescribed by filing-office rule, but not later than two business
days after the filing office receives the request.
(f) At least weekly, the secretary of state shall offer to
sell or license to the public on a nonexclusive basis, in bulk,
copies of all records filed in it under this part, in every medium
from time to time available to the filing office.
§46-9-524. Delay by filing office.
Delay by the filing office beyond a time limit prescribed in
this part is excused if:
(1) The delay is caused by interruption of communication or
computer facilities, war, emergency conditions, failure of
equipment or other circumstances beyond control of the filing
office; and
(2) The filing office exercises reasonable diligence under the
circumstances.
§46-9-525. Fees.
(a) Except as otherwise provided in subsection (e), the fee
for filing and indexing a record under this part, other than an
initial financing statement of the kind described in section
9-502(c), is:
(1) $ __[X]______ if the record is communicated in writing and
consists of one or two pages;
(2) $ __[2X]______ if the record is communicated in writing
and consists of more than two pages; and
(3) $ __[1/2X]___ if the record is communicated by another
medium authorized by filing-office rule.
(b) Except as otherwise provided in subsection (e), the fee
for filing and indexing an initial financing statement of the kind
described in section 9-502(c) is:
(1) $ _____ if the financing statement indicates that it is
filed in connection with a public-finance transaction;
(2) $ _____ if the financing statement indicates that it is
filed in connection with a manufactured-home transaction.
(c) The number of names required to be indexed does not affect
the amount of the fee in subsections (a) and (b).
(d) The fee for responding to a request for information from
the filing office, including for issuing a certificate showing
whether there is on file any financing statement naming a
particular debtor, is:
(1) $ ____ if the request is communicated in writing; and
(2) $ ____ if the request is communicated by another medium
authorized by filing-office rule.
(e) This section does not require a fee with respect to a
record of a mortgage which is effective as a financing statement
filed as a fixture filing or as a financing statement covering as- extracted collateral or timber to be cut under section 9-502(c).
However, the recording and satisfaction fees that otherwise would
be applicable to the record of the mortgage apply.
§46-9-526. Filing-office rules.
(a) The secretary of state shall adopt and publish rules to
implement this article. The filing-office rules must be:
(1) Consistent with this article; and
(2) Adopted and published in accordance with chapter twenty- nine-a of this code.
(b) To keep the filing-office rules and practices of the
filing office in harmony with the rules and practices of filing
offices in other jurisdictions that enact substantially this part,
and to keep the technology used by the filing office compatible
with the technology used by filing offices in other jurisdictions
that enact substantially this part, the secretary of state, so far
as is consistent with the purposes, policies, and provisions of
this article, in adopting, amending, and repealing filing-office
rules, shall:
(1) Consult with filing offices in other jurisdictions that
enact substantially this part; and
(2) Consult the most recent version of the Model Rules
promulgated by the international association of corporate
Administrators or any successor organization; and
(3) Take into consideration the rules and practices of, and
the technology used by, filing offices in other jurisdictions that
enact substantially this part.
§46-9-527. Duty to report.
The secretary of state shall report on or before the tenth day
of January of each year to the joint committee on government and
finance on the operation of the filing office. The report must
contain a statement of the extent to which:
(1) The filing-office rules are not in harmony with the rules
of filing offices in other jurisdictions that enact substantially
this part and the reasons for these variations; and
(2) The filing-office rules are not in harmony with the most
recent version of the model rules promulgated by the international
association of corporate administrators, or any successor
organization, and the reasons for these variations.
PART 6
DEFAULT
SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
§46-9-601. Rights after default; judicial enforcement; consignor
or buyer of accounts, chattel paper, payment intangibles or
promissory notes.
(a) After default, a secured party has the rights provided in
this part and, except as otherwise provided in section 9-602, those
provided by agreement of the parties. A secured party:
(1) May reduce a claim to judgment, foreclose or otherwise
enforce the claim, security interest or agricultural lien by any
available judicial procedure; and
(2) If the collateral is documents, may proceed either as to
the documents or as to the goods they cover.
(b) A secured party in possession of collateral or control of
collateral under section 9-104, 9-105, 9-106 or 9-107 has the
rights and duties provided in section 9-207.
(c) The rights under subsections (a) and (b) are cumulative
and may be exercised simultaneously.
(d) Except as otherwise provided in subsection (g) and section
9-605, after default, a debtor and an obligor have the rights
provided in this part and by agreement of the parties.
(e) If a secured party has reduced its claim to judgment, the
lien of any levy that may be made upon the collateral by virtue of
an execution based upon the judgment relates back to the earliest
of:
(1) The date of perfection of the security interest or
agricultural lien in the collateral;
(2) The date of filing a financing statement covering the
collateral; or
(3) Any date specified in a statute under which the
agricultural lien was created.
(f) A sale pursuant to an execution is a foreclosure of the
security interest or agricultural lien by judicial procedure within
the meaning of this section. A secured party may purchase at the
sale and thereafter hold the collateral free of any other
requirements of this article.
(g) Except as otherwise provided in section 9-607(c), this
part imposes no duties upon a secured party that is a consignor or
is a buyer of accounts, chattel paper, payment intangibles or
promissory notes.
§46-9-602. Waiver and variance of rights and duties.
Except as otherwise provided in section 9-624, to the extent
that they give rights to a debtor or obligor and impose duties on
a secured party, the debtor or obligor may not waive or vary the
rules stated in the following listed sections:
(1) Section 9-207(b)(4)(C), which deals with use and operation
of the collateral by the secured party;
(2) Section 9-210, which deals with requests for an accounting
and requests concerning a list of collateral and statement of
account;
(3) Section 9-607(c), which deals with collection and
enforcement of collateral;
(4) Sections 9-608(a) and 9-615(c) to the extent that they
deal with application or payment of noncash proceeds of collection,
enforcement or disposition;
(5) Sections 9-608(a) and 9-615(d) to the extent that they
require accounting for or payment of surplus proceeds of
collateral;
(6) Section 9-609 to the extent that it imposes upon a secured
party that takes possession of collateral without judicial process
the duty to do so without breach of the peace;
(7) Sections 9-610(b), 9-611, 9-613 and 9-614, which deal with
disposition of collateral;
(8) Section 9-615(f), which deals with calculation of a
deficiency or surplus when a disposition is made to the secured
party, a person related to the secured party, or a secondary
obligor;
(9) Section 9-616, which deals with explanation of the
calculation of a surplus or deficiency;
(10) Section 9-620, 9-621 and 9-622, which deal with
acceptance of collateral in satisfaction of obligation;
(11) Section 9-623, which deals with redemption of collateral;
(12) Section 9-624, which deals with permissible waivers; and
(13) Sections 9-625 and 9-626, which deal with the secured
party's liability for failure to comply with this article.
146-9-603. Agreement on standards concerning rights and duties.
(a) The parties may determine by agreement the standards
measuring the fulfillment of the rights of a debtor or obligor and
the duties of a secured party under a rule stated in section 9-602
if the standards are not manifestly unreasonable.
(b) Subsection (a) does not apply to the duty under section
9-609 to refrain from breaching the peace.
§46-9-604. Procedure if security agreement covers real property or
fixtures.
(a) If a security agreement covers both personal and real
property, a secured party may proceed:
(1) Under this part as to the personal property without
prejudicing any rights with respect to the real property; or
(2) As to both the personal property and the real property in
accordance with the rights with respect to the real property, in
which case the other provisions of this part do not apply.
(b) Subject to subsection (c), if a security agreement covers
goods that are or become fixtures, a secured party may proceed:
(1) Under this part; or
(2) In accordance with the rights with respect to real
property, in which case the other provisions of this part do not
apply.
(c) Subject to the other provisions of this part, if a secured
party holding a security interest in fixtures has priority over all
owners and encumbrancers of the real property, the secured party,
after default, may remove the collateral from the real property.
(d) A secured party that removes collateral shall promptly
reimburse any encumbrancer or owner of the real property, other
than the debtor, for the cost of repair of any physical injury
caused by the removal. The secured party need not reimburse the
encumbrancer or owner for any diminution in value of the real
property caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to reimbursement
may refuse permission to remove until the secured party gives
adequate assurance for the performance of the obligation to
reimburse.
§46-9-605. Unknown debtor or secondary obligor.
A secured party does not owe a duty based on its status as
secured party:
(1) To a person that is a debtor or obligor, unless the
secured party knows:
(A) That the person is a debtor or obligor;
(B) The identity of the person; and
(C) How to communicate with the person; or
(2) To a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
(A) That the person is a debtor; and
(B) The identity of the person.
§46-9-606. Time of default for agricultural lien.
For purposes of this part, a default occurs in connection with
an agricultural lien at the time the secured party becomes entitled
to enforce the lien in accordance with the statute under which it
was created.
§46-9-607. Collection and enforcement by secured party.
(a) If so agreed, and in any event after default, a secured
party:
(1) May notify an account debtor or other person obligated on
collateral to make payment or otherwise render performance to or
for the benefit of the secured party;
(2) May take any proceeds to which the secured party is
entitled under section 9-315;
(3) May enforce the obligations of an account debtor or other
person obligated on collateral and exercise the rights of the
debtor with respect to the obligation of the account debtor or
other person obligated on collateral to make payment or otherwise
render performance to the debtor, and with respect to any property
that secures the obligations of the account debtor or other person
obligated on the collateral;
(4) If it holds a security interest in a deposit account
perfected by control under section 9-104(a)(1), may apply the
balance of the deposit account to the obligation secured by the
deposit account; and
(5) If it holds a security interest in a deposit account
perfected by control under section 9-104(a)(2) or (3), may instruct
the bank to pay the balance of the deposit account to or for the
benefit of the secured party.
(b) If necessary to enable a secured party to exercise under
subsection (a)(3) the right of a debtor to enforce a mortgage nonjudicially, the secured party may record in the office in which
a record of the mortgage is recorded:
(1) A copy of the security agreement that creates or provides
for a security interest in the obligation secured by the mortgage;
and
(2) The secured party's sworn affidavit in recordable form
stating that:
(A) A default has occurred; and
(B) The secured party is entitled to enforce the mortgage
nonjudicially.
(c) A secured party shall proceed in a commercially reasonable
manner if the secured party:
(1) Undertakes to collect from or enforce an obligation of an
account debtor or other person obligated on collateral; and
(2) Is entitled to charge back uncollected collateral or
otherwise to full or limited recourse against the debtor or a
secondary obligor.
(d) A secured party may deduct from the collections made
pursuant to subsection (c) reasonable expenses of collection and
enforcement, including reasonable attorney's fees and legal
expenses incurred by the secured party.
(e) This section does not determine whether an account debtor,
bank or other person obligated on collateral owes a duty to a
secured party.
§46-9-608. Application of proceeds of collection or enforcement;
liability for deficiency and right to surplus.
(a) If a security interest or agricultural lien secures
payment or performance of an obligation, the following rules apply:
(1) A secured party shall apply or pay over for application
the cash proceeds of collection or enforcement under this section
in the following order to:
(A) The reasonable expenses of collection and enforcement and,
to the extent provided for by agreement and not prohibited by law,
reasonable attorney's fees and legal expenses incurred by the
secured party;
(B) The satisfaction of obligations secured by the security
interest or agricultural lien under which the collection or
enforcement is made; and
(C) The satisfaction of obligations secured by any subordinate
security interest in or other lien on the collateral subject to the
security interest or agricultural lien under which the collection
or enforcement is made if the secured party receives an authenticated demand for proceeds before distribution of the
proceeds is completed.
(2) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of
the interest or lien within a reasonable time. Unless the holder
complies, the secured party need not comply with the holder's
demand under paragraph (1)(C).
(3) A secured party need not apply or pay over for application
noncash proceeds of collection and enforcement under this section
unless the failure to do so would be commercially unreasonable. A
secured party that applies or pays over for application noncash
proceeds shall do so in a commercially reasonable manner.
(4) A secured party shall account to and pay a debtor for any
surplus, and the obligor is liable for any deficiency.
(b) If the underlying transaction is a sale of accounts,
chattel paper, payment intangibles or promissory notes, the debtor
is not entitled to any surplus, and the obligor is not liable for
any deficiency.
§46-9-609. Secured party's right to take possession after default.
(a) After default, a secured party:
(1) May take possession of the collateral; and
(2) Without removal, may render equipment unusable and dispose
of collateral on a debtor's premises under section 9-610.
(b) A secured party may proceed under subsection (a):
(1) Pursuant to judicial process; or
(2) Without judicial process, if it proceeds without breach of
the peace.
(c) If so agreed, and in any event after default, a secured
party may require the debtor to assemble the collateral and make it
available to the secured party at a place to be designated by the
secured party which is reasonably convenient to both parties.
§46-9-610. Disposition of collateral after default.
(a) After default, a secured party may sell, lease, license or
otherwise dispose of any or all of the collateral in its present
condition or following any commercially reasonable preparation or
processing.
(b) Every aspect of a disposition of collateral, including the
method, manner, time, place and other terms, must be commercially
reasonable. If commercially reasonable, a secured party may
dispose of collateral by public or private proceedings, by one or
more contracts, as a unit or in parcels, and at any time and place
and on any terms.
(c) A secured party may purchase collateral:
(1) At a public disposition; or
(2) At a private disposition only if the collateral is of a
kind that is customarily sold on a recognized market or the subject
of widely distributed standard price quotations.
(d) A contract for sale, lease, license or other disposition
includes the warranties relating to title, possession, quiet
enjoyment and the like which by operation of law accompany a
voluntary disposition of property of the kind subject to the
contract.
(e) A secured party may disclaim or modify warranties under
subsection (d):
(1) In a manner that would be effective to disclaim or modify
the warranties in a voluntary disposition of property of the kind
subject to the contract of disposition; or
(2) By communicating to the purchaser a record evidencing the
contract for disposition and including an express disclaimer or
modification of the warranties.
(f) A record is sufficient to disclaim warranties under
subsection (e) if it indicates "There is no warranty relating to
title, possession, quiet enjoyment, or the like in this
disposition" or uses words of similar import.
§46-9-611. Notification before disposition of collateral.
(a) In this section, "notification date" means the earlier of
the date on which:
(1) A secured party sends to the debtor and any secondary
obligor an authenticated notification of disposition; or
(2) The debtor and any secondary obligor waive the right to
notification.
(b) Except as otherwise provided in subsection (d), a secured
party that disposes of collateral under section 9-610 shall send to
the persons specified in subsection (c) a reasonable authenticated
notification of disposition.
(c) To comply with subsection (b), the secured party shall
send an authenticated notification of disposition to:
(1) The debtor;
(2) Any secondary obligor; and
(3) If the collateral is other than consumer goods:
(A) Any other person from which the secured party has
received, before the notification date, an authenticated
notification of a claim of an interest in the collateral;
(B) Any other secured party or lienholder that, ten days
before the notification date, held a security interest in or other
lien on the collateral perfected by the filing of a financing
statement that:
(i) Identified the collateral;
(ii) Was indexed under the debtor's name as of that date; and
(iii) Was filed in the office in which to file a financing
statement against the debtor covering the collateral as of that
date; and
(C) Any other secured party that, ten days before the
notification date, held a security interest in the collateral
perfected by compliance with a statute, regulation or treaty
described in section 9-311(a).
(d) Subsection (b) does not apply if the collateral is
perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market.
(e) A secured party complies with the requirement for
notification prescribed in subsection (c)(3)(B) if:
(1) Not later than twenty days or earlier than thirty days
before the notification date, the secured party requests, in a
commercially reasonable manner, information concerning financing
statements indexed under the debtor's name in the office indicated
in subsection (c)(3)(B); and
(2) Before the notification date, the secured party:
(A) Did not receive a response to the request for information;
or
(B) Received a response to the request for information and
sent an authenticated notification of disposition to each secured
party named in that response whose financing statement covered the
collateral.
§46-9-612. Timeliness of notification before disposition of
collateral.
(a) Except as otherwise provided in subsection (b), whether a
notification is sent within a reasonable time is a question of
fact.
(b) In a transaction other than a consumer transaction, a
notification of disposition sent after default and ten days or more
before the earliest time of disposition set forth in the
notification is sent within a reasonable time before the
disposition.
§46-9-613. Contents and form of notification before disposition of
collateral: general.
Except in a consumer-goods transaction, the following rules
apply:
(1) The contents of a notification of disposition are
sufficient if the notification:
(A) Describes the debtor and the secured party;
(B) Describes the collateral that is the subject of the
intended disposition;
(C) States the method of intended disposition;
(D) States that the debtor is entitled to an accounting of the
unpaid indebtedness and states the charge, if any, for an
accounting; and
(E) States the time and place of a public sale or the time
after which any other disposition is to be made.
(2) Whether the contents of a notification that lacks any of
the information specified in paragraph (1) are nevertheless
sufficient is a question of fact.
(3) The contents of a notification providing substantially the
information specified in paragraph (1) are sufficient, even if the
notification includes:
(A) Information not specified by that paragraph; or
(B) Minor errors that are not seriously misleading.
(4) A particular phrasing of the notification is not required.
(5) The following form of notification and the form appearing
in section 9-614(3), when completed, each provides sufficient
information:
NOTIFICATION OF DISPOSITION OF COLLATERAL
To:
[Name of debtor, obligor, or other person
to which the notification is sent]
From:
[Name, address, and telephone number of
secured party]
Name of Debtor(s):
[Include only if debtor(s) are not an
addressee]
[
For a public disposition:]
We will sell [or lease or license,
as applicable] the
[describe collateral] [to the highest qualified bidder] in
public as follows:
Day and Date:
Time:
Place:
[
For a private disposition:]
We will sell [or lease or license,
as applicable] the
[describe collateral] privately sometime after
[day and
date] .
You are entitled to an accounting of the unpaid indebtedness
secured by the property that we intend to sell [or lease or
license,
as applicable] [for a charge of $
]. You may
request an accounting by calling us at
[telephone number]
§46-9-614. Contents and form of notification before disposition of
collateral; consumer-goods transaction.
In a consumer-goods transaction, the following rules apply:
(1) A notification of disposition must provide the following
information:
(A) The information specified in section 9-613(1);
(B) A description of any liability for a deficiency of the
person to which the notification is sent;
(C) A telephone number from which the amount that must be paid
to the secured party to redeem the collateral under section 9-623
is available; and
(D) A telephone number or mailing address from which
additional information concerning the disposition and the
obligation secured is available.
(2) A particular phrasing of the notification is not required.
(3) The following form of notification, when completed,
provides sufficient information:
[Name and address of secured party]
[Date]
NOTICE OF OUR PLAN TO SELL PROPERTY
[Name and address of any obligor who is also a debtor]
Subject:
[Identification of Transaction]
We have your
[describe collateral] , because you broke
promises in our agreement.
[
For a public disposition:]
We will sell
[describe collateral] at public sale. A
sale could include a lease or license. The sale will be held as
follows:
Date:
Time:
Place:
You may attend the sale and bring bidders if you want.
[
For a private disposition:]
We will sell
[describe collateral] at private sale
sometime after
[date] . A sale could include a lease or
license.
The money that we get from the sale (after paying our costs) will
reduce the amount you owe. If we get less money than you owe, you
[will or will not, as applicable] still owe us the difference. If we get more money than you owe, you will get the
extra money, unless we must pay it to someone else.
You can get the property back at any time before we sell it by
paying us the full amount you owe (not just the past due payments),
including our expenses. To learn the exact amount you must pay,
call us at
[telephone number] .
If you want us to explain to you in writing how we have figured the
amount that you owe us, you may call us at
[telephone
number] [or write us at
[secured party's address] ]
and request a written explanation. [We will charge you
$
for the explanation if we sent you another written
explanation of the amount you owe us within the last six months.]
If you need more information about the sale call us at
[telephone number] ] [or write us at
[secured party's
address] ].
We are sending this notice to the following other people who have
an interest in
[describe collateral] or who owe money
under your agreement:
[Names of all other debtors and obligors, if any]
(4) A notification in the form of paragraph (3) is sufficient,
even if additional information appears at the end of the form.
(5) A notification in the form of paragraph (3) is sufficient,
even if it includes errors in information not required by paragraph
(1), unless the error is misleading with respect to rights arising
under this article.
(6) If a notification under this section is not in the form
of paragraph (3), law other than this article determines the effect
of including information not required by paragraph (1).
§46-9-615. Application of proceeds of disposition; liability for
deficiency and right to surplus.
(a) A secured party shall apply or pay over for application
the cash proceeds of disposition in the following order to:
(1) The reasonable expenses of retaking, holding, preparing
for disposition, processing and disposing, and, to the extent
provided for by agreement and not prohibited by law, reasonable
attorney's fees and legal expenses incurred by the secured party;
(2) The satisfaction of obligations secured by the security
interest or agricultural lien under which the disposition is made;
(3) The satisfaction of obligations secured by any subordinate
security interest in or other subordinate lien on the collateral
if:
(A) The secured party receives from the holder of the
subordinate security interest or other lien an authenticated demand
for proceeds before distribution of the proceeds is completed; and
(B) In a case in which a consignor has an interest in the
collateral, the subordinate security interest or other lien is
senior to the interest of the consignor; and
(4) A secured party that is a consignor of the collateral if
the secured party receives from the consignor an authenticated
demand for proceeds before distribution of the proceeds is
completed.
(b) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of
the interest or lien within a reasonable time. Unless the holder
does so, the secured party need not comply with the holder's demand
under subsection (a)(3).
(c) A secured party need not apply or pay over for application
noncash proceeds of disposition under this section unless the failure to do so would be commercially unreasonable. A secured
party that applies or pays over for application noncash proceeds
shall do so in a commercially reasonable manner.
(d) If the security interest under which a disposition is made
secures payment or performance of an obligation, after making the
payments and applications required by subsection (a) and permitted
by subsection (c):
(1) Unless subsection (a)(4) requires the secured party to
apply or pay over cash proceeds to a consignor, the secured party
shall account to and pay a debtor for any surplus; and
(2) The obligor is liable for any deficiency.
(e) If the underlying transaction is a sale of accounts,
chattel paper, payment intangibles or promissory notes:
(1) The debtor is not entitled to any surplus; and
(2) The obligor is not liable for any deficiency.
(f) The surplus or deficiency following a disposition is
calculated based on the amount of proceeds that would have been
realized in a disposition complying with this part to a transferee
other than the secured party, a person related to the secured
party, or a secondary obligor if:
(1) the transferee in the disposition is the secured party, a
person related to the secured party, or a secondary obligor; and
(2) The amount of proceeds of the disposition is significantly
below the range of proceeds that a complying disposition to a
person other than the secured party, a person related to the
secured party, or a secondary obligor would have brought.
(g) A secured party that receives cash proceeds of a
disposition in good faith and without knowledge that the receipt
violates the rights of the holder of a security interest or other
lien that is not subordinate to the security interest or
agricultural lien under which the disposition is made:
(1) Takes the cash proceeds free of the security interest or
other lien;
(2) Is not obligated to apply the proceeds of the disposition
to the satisfaction of obligations secured by the security interest
or other lien; and
(3) Is not obligated to account to or pay the holder of the
security interest or other lien for any surplus.
§46-9-616. Explanation of calculation of surplus or deficiency.
(a) In this section:
(1) "Explanation" means a writing that:
(A) States the amount of the surplus or deficiency;
(B) Provides an explanation in accordance with subsection (c)
of how the secured party calculated the surplus or deficiency;
(C) States, if applicable, that future debits, credits,
charges, including additional credit service charges or interest,
rebates and expenses may affect the amount of the surplus or
deficiency; and
(D) Provides a telephone number or mailing address from which
additional information concerning the transaction is available.
(2) "Request" means a record:
(A) Authenticated by a debtor or consumer obligor;
(B) Requesting that the recipient provide an explanation; and
(C) Sent after disposition of the collateral under section
9-610.
(b) In a consumer-goods transaction in which the debtor is
entitled to a surplus or a consumer obligor is liable for a
deficiency under section 9-615, the secured party shall:
(1) Send an explanation to the debtor or consumer obligor, as
applicable, after the disposition and:
(A) Before or when the secured party accounts to the debtor
and pays any surplus or first makes written demand on the consumer
obligor after the disposition for payment of the deficiency; and
(B) Within fourteen days after receipt of a request; or
(2) In the case of a consumer obligor who is liable for a
deficiency, within fourteen days after receipt of a request, send to the consumer obligor a record waiving the secured party's right
to a deficiency.
(c) To comply with subsection (a)(1)(B), a writing must
provide the following information in the following order:
(1) The aggregate amount of obligations secured by the
security interest under which the disposition was made, and, if the
amount reflects a rebate of unearned interest or credit service
charge, an indication of that fact, calculated as of a specified
date:
(A) If the secured party takes or receives possession of the
collateral after default, not more than thirty-five days before the
secured party takes or receives possession; or
(B) If the secured party takes or receives possession of the
collateral before default or does not take possession of the
collateral, not more than thirty-five days before the disposition;
(2) The amount of proceeds of the disposition;
(3) the aggregate amount of the obligations after deducting
the amount of proceeds;
(4) The amount, in the aggregate or by type, and types of
expenses, including expenses of retaking, holding, preparing for
disposition, processing and disposing of the collateral, and attorney's fees secured by the collateral which are known to the
secured party and relate to the current disposition;
(5) The amount, in the aggregate or by type, and types of
credits, including rebates of interest or credit service charges,
to which the obligor is known to be entitled and which are not
reflected in the amount in paragraph (1); and
(6) The amount of the surplus or deficiency.
(d) A particular phrasing of the explanation is not required.
An explanation complying substantially with the requirements of
subsection (a) is sufficient, even if it includes minor errors that
are not seriously misleading.
(e) A debtor or consumer obligor is entitled without charge to
one response to a request under this section during any six-month
period in which the secured party did not send to the debtor or
consumer obligor an explanation pursuant to subsection (b)(1). The
secured party may require payment of a charge not exceeding twenty- five dollars for each additional response.
§46-9-617. Rights of transferee of collateral.
(a) A secured party's disposition of collateral after default:
(1) Transfers to a transferee for value all of the debtor's
rights in the collateral;
(2) Discharges the security interest under which the
disposition is made; and
(3) Discharges any subordinate security interest or other
subordinate lien other than liens created under other statutes
providing for liens, if any, that are not to be discharged.
(b) A transferee that acts in good faith takes free of the
rights and interests described in subsection (a), even if the
secured party fails to comply with this article or the requirements
of any judicial proceeding.
(c) If a transferee does not take free of the rights and
interests described in subsection (a), the transferee takes the
collateral subject to:
(1) The debtor's rights in the collateral;
(2) The security interest or agricultural lien under which the
disposition is made; and
(3) Any security interest or other lien.
§46-9-618. Rights and duties of certain secondary obligors.
(a) A secondary obligor acquires the rights and becomes
obligated to perform the duties of the secured party after the
secondary obligor:
(1) Receives an assignment of a secured obligation from the
secured party;
(2) Receives a transfer of collateral from the secured party
and agrees to accept the rights and assume the duties of the
secured party; or
(3) Is subrogated to the rights of a secured party with
respect to collateral.
(b) An assignment, transfer, or subrogation described in
subsection (a):
(1) Is not a disposition of collateral under Section 9-610;
and
(2) Relieves the secured party of further duties under this
article.
§46-9-619. Transfer of record or legal title.
(a) In this section, "transfer statement" means a record
authenticated by a secured party stating:
(1) That the debtor has defaulted in connection with an
obligation secured by specified collateral;
(2) That the secured party has exercised its post-default
remedies with respect to the collateral;
(3) That, by reason of the exercise, a transferee has acquired
the rights of the debtor in the collateral; and
(4) The name and mailing address of the secured party, debtor
and transferee.
(b) A transfer statement entitles the transferee to the
transfer of record of all rights of the debtor in the collateral
specified in the statement in any official filing, recording,
registration, or certificate-of-title system covering the
collateral. If a transfer statement is presented with the
applicable fee and request form to the official or office
responsible for maintaining the system, the official or office
shall:
(1) Accept the transfer statement;
(2) Promptly amend its records to reflect the transfer; and
(3) If applicable, issue a new appropriate certificate of
title in the name of transferee.
(c) A transfer of the record or legal title to collateral to
a secured party under subsection (b) or otherwise is not of itself
a disposition of collateral under this article and does not of
itself relieve the secured party of its duties under this article.
§46-9-620. Acceptance of collateral in full or partial
satisfaction of obligation; compulsory disposition of
collateral.
(a) Except as otherwise provided in subsection (g), a secured
party may accept collateral in full or partial satisfaction of the
obligation it secures only if:
(1) The debtor consents to the acceptance under subsection
(c);
(2) The secured party does not receive, within the time set
forth in subsection (d), a notification of objection to the
proposal authenticated by:
(A) A person to which the secured party was required to send
a proposal under section 9-621; or
(B) Any other person, other than the debtor, holding an
interest in the collateral subordinate to the security interest
that is the subject of the proposal;
(3) If the collateral is consumer goods, the collateral is not
in the possession of the debtor when the debtor consents to the
acceptance; and
(4) Subsection (e) does not require the secured party to
dispose of the collateral or the debtor waives the requirement
pursuant to section 9-624.
(b) A purported or apparent acceptance of collateral under
this section is ineffective unless:
(1) The secured party consents to the acceptance in an
authenticated record or sends a proposal to the debtor; and
(2) The conditions of subsection (a) are met.
(c) For purposes of this section:
(1) A debtor consents to an acceptance of collateral in
partial satisfaction of the obligation it secures only if the
debtor agrees to the terms of the acceptance in a record
authenticated after default; and
(2) A debtor consents to an acceptance of collateral in full
satisfaction of the obligation it secures only if the debtor agrees
to the terms of the acceptance in a record authenticated after
default or the secured party:
(A) Sends to the debtor after default a proposal that is
unconditional or subject only to a condition that collateral not in
the possession of the secured party be preserved or maintained;
(B) In the proposal, proposes to accept collateral in full
satisfaction of the obligation it secures; and
(C) Does not receive a notification of objection authenticated
by the debtor within twenty days after the proposal is sent.
(d) To be effective under subsection (a)(2), a notification of
objection must be received by the secured party:
(1) In the case of a person to which the proposal was sent
pursuant to section 9-621, within twenty days after notification
was sent to that person; and
(2) In other cases:
(A) Within twenty days after the last notification was sent
pursuant to section 9-621; or
(B) If a notification was not sent, before the debtor consents
to the acceptance under subsection (c).
(e) A secured party that has taken possession of collateral
shall dispose of the collateral pursuant to section 9-610 within
the time specified in subsection (f) if:
(1) Sixty percent of the cash price has been paid in the case
of a purchase-money security interest in consumer goods; or
(2) Sixty percent of the principal amount of the obligation
secured has been paid in the case of a non-purchase-money security
interest in consumer goods.
(f) To comply with subsection (e), the secured party shall
dispose of the collateral:
(1) Within ninety days after taking possession; or
(2) Within any longer period to which the debtor and all
secondary obligors have agreed in an agreement to that effect
entered into and authenticated after default.
(g) In a consumer transaction, a secured party may not accept
collateral in partial satisfaction of the obligation it secures.
§46-9-621. Notification of proposal to accept collateral.
(a) A secured party that desires to accept collateral in full
or partial satisfaction of the obligation it secures shall send its
proposal to:
(1) Any person from which the secured party has received,
before the debtor consented to the acceptance, an authenticated
notification of a claim of an interest in the collateral;
(2) Any other secured party or lienholder that, ten days
before the debtor consented to the acceptance, held a security
interest in or other lien on the collateral perfected by the filing
of a financing statement that:
(A) Identified the collateral;
(B) Was indexed under the debtor's name as of that date; and
(C) Was filed in the office or offices in which to file a
financing statement against the debtor covering the collateral as
of that date; and
(3) Any other secured party that, ten days before the debtor
consented to the acceptance, held a security interest in the
collateral perfected by compliance with a statute, regulation or
treaty described in section 9-311(a).
(b) A secured party that desires to accept collateral in
partial satisfaction of the obligation it secures shall send its proposal to any secondary obligor in addition to the persons
described in subsection (a).
§46-9-622. Effect of acceptance of collateral.
(a) A secured party's acceptance of collateral in full or
partial satisfaction of the obligation it secures:
(1) Discharges the obligation to the extent consented to by
the debtor;
(2) Transfers to the secured party all of a debtor's rights in
the collateral;
(3) Discharges the security interest or agricultural lien that
is the subject of the debtor's consent and any subordinate security
interest or other subordinate lien; and
(4) Terminates any other subordinate interest.
(b) A subordinate interest is discharged or terminated under
subsection (a), whether or not the secured party sends or is
required to send its proposal to the holder of the interest.
However, any person to which the secured party was required to
send, but did not send, its proposal has the remedy provided by
section 9-625(b).
§46-9-623. Right to redeem collateral.
(a) A debtor, any secondary obligor, or any other secured
party or lienholder may redeem collateral.
(b) To redeem collateral, a person shall tender:
(1) Fulfillment of all obligations secured by the collateral;
and
(2) The reasonable expenses and attorney's fees described in
section 9-615(a)(1).
(c) A redemption may occur at any time before a secured party:
(1) Has collected collateral under section 9-607;
(2) Has disposed of collateral or entered into a contract for
its disposition under section 9-610; or
(3) Has accepted collateral in full or partial satisfaction of
the obligation it secures under section 9-622.
§46-9-624. Waiver.
(a) A debtor or secondary obligor may waive the right to
notification of disposition of collateral under section 9-611 only
by an agreement to that effect entered into and authenticated after
default.
(b) A debtor may waive the right to require disposition of
collateral under section 9-620(e) only by an agreement to that
effect entered into and authenticated after default.
(c) Except in a consumer-goods transaction, a debtor or
secondary obligor may waive the right to redeem collateral under section 9-623 only by an agreement to that effect entered into and
authenticated after default.
SUBPART 2. NONCOMPLIANCE WITH ARTICLE
§46-9-625. Remedies for secured party's failure to comply with
article.
(a) If it is established that a secured party is not
proceeding in accordance with this article, a court may order or
restrain collection, enforcement or disposition of collateral on
appropriate terms and conditions.
(b) Subject to subsections (c), (d) and (f), a secured party
is liable for damages in the amount of any loss caused by a failure
to comply with this article. Loss caused by a failure to comply
with a request under section 9-210 may include loss resulting from
the debtor's inability to obtain, or increased costs of,
alternative financing.
(c) Except as otherwise provided in section 9-628:
(1) A person that, at the time of the failure, was a debtor,
was an obligor, or held a security interest in or other lien on the
collateral may recover damages under subsection (b) for its loss;
and
(2) If the collateral is consumer goods, a person that was a
debtor or a secondary obligor at the time a secured party failed to comply with this part may recover for that failure in any event an
amount not less than the credit service charge plus ten percent of
the principal amount of the obligation or the time-price
differential plus ten percent of the cash price.
(d) A debtor whose deficiency is eliminated under section
9-626 may recover damages for the loss of any surplus. However, a
debtor or secondary obligor whose deficiency is eliminated or
reduced under section 9-626 may not otherwise recover under
subsection (b) for noncompliance with the provisions of this part
relating to collection, enforcement, disposition or acceptance.
(e) In addition to any damages recoverable under subsection
(b), the debtor, consumer obligor or person named as a debtor in a
filed record, as applicable, may recover five hundred dollars in
each case from:
(1) A secured party that fails to comply with section 9-208;
(2) A secured party that fails to comply with section 9-209;
(3) A person that files a record that the person is not
entitled to file under section 9-509(a);
(4) A secured party that fails to cause the secured party of
record to file or send a termination statement as required by
section 9-513(a) or (c);
(5) A secured party that fails to comply with section
9-616(b)(1) and whose failure is part of a pattern, or consistent
with a practice, of noncompliance; or
(6) A secured party that fails to comply with section
9-616(b)(2).
(f) A debtor or consumer obligor may recover damages under
subsection (b) and, in addition, five hundred dollars in each case
from a person that, without reasonable cause, fails to comply with
a request under section 9-210. A recipient of a request under
section 9-210 which never claimed an interest in the collateral or
obligations that are the subject of a request under that section
has a reasonable excuse for failure to comply with the request
within the meaning of this subsection.
(g) If a secured party fails to comply with a request
regarding a list of collateral or a statement of account under
section 9-210, the secured party may claim a security interest only
as shown in the statement included in the request as against a
person that is reasonably misled by the failure.
§46-9-626. Action in which deficiency or surplus is in issue.
(a) In an action arising from a transaction, other than a
consumer transaction, in which the amount of a deficiency or
surplus is in issue, the following rules apply:
(1) A secured party need not prove compliance with the
provisions of this part relating to collection, enforcement,
disposition or acceptance unless the debtor or a secondary obligor
places the secured party's compliance in issue.
(2) If the secured party's compliance is placed in issue, the
secured party has the burden of establishing that the collection,
enforcement, disposition or acceptance was conducted in accordance
with this part.
(3) Except as otherwise provided in section 9-628, if a
secured party fails to prove that the collection, enforcement,
disposition, or acceptance was conducted in accordance with the
provisions of this part relating to collection, enforcement,
disposition or acceptance, the liability of a debtor or a secondary
obligor for a deficiency is limited to an amount by which the sum
of the secured obligation, expenses and attorney's fees exceeds the
greater of:
(A) The proceeds of the collection, enforcement, disposition
or acceptance; or
(B) The amount of proceeds that would have been realized had
the noncomplying secured party proceeded in accordance with the
provisions of this part relating to collection, enforcement,
disposition or acceptance.
(4) For purposes of paragraph (3)(B), the amount of proceeds
that would have been realized is equal to the sum of the secured
obligation, expenses and attorney's fees unless the secured party
proves that the amount is less than that sum.
(5) If a deficiency or surplus is calculated under section
9-615(f), the debtor or obligor has the burden of establishing that
the amount of proceeds of the disposition is significantly below
the range of prices that a complying disposition to a person other
than the secured party, a person related to the secured party, or
a secondary obligor would have brought.
(b) The limitation of the rules in subsection (a) to
transactions other than consumer transactions is intended to leave
to the court the determination of the proper rules in consumer
transactions. The court may not infer from that limitation the
nature of the proper rule in consumer transactions and may continue
to apply established approaches.
§46-9-627. Determination of whether conduct was commercially
reasonable.
(a) The fact that a greater amount could have been obtained by
a collection, enforcement, disposition or acceptance at a different
time or in a different method from that selected by the secured
party is not of itself sufficient to preclude the secured party from establishing that the collection, enforcement, disposition or
acceptance was made in a commercially reasonable manner.
(b) A disposition of collateral is made in a commercially
reasonable manner if the disposition is made:
(1) In the usual manner on any recognized market;
(2) At the price current in any recognized market at the time
of the disposition; or
(3) Otherwise in conformity with reasonable commercial
practices among dealers in the type of property that was the
subject of the disposition.
(c) A collection, enforcement, disposition or acceptance is
commercially reasonable if it has been approved:
(1) In a judicial proceeding;
(2) By a bona fide creditors' committee;
(3) By a representative of creditors; or
(4) By an assignee for the benefit of creditors.
(d) Approval under subsection (c) need not be obtained, and
lack of approval does not mean that the collection, enforcement,
disposition, or acceptance is not commercially reasonable.
§46-9-628. Nonliability and limitation on liability of secured
party; liability of secondary obligor.
(a) Unless a secured party knows that a person is a debtor or
obligor, knows the identity of the person, and knows how to
communicate with the person:
(1) The secured party is not liable to the person, or to a
secured party or lienholder that has filed a financing statement
against the person, for failure to comply with this article; and
(2) The secured party's failure to comply with this article
does not affect the liability of the person for a deficiency.
(b) A secured party is not liable because of its status as
secured party:
(1) To a person that is a debtor or obligor, unless the
secured party knows:
(A) That the person is a debtor or obligor;
(B) The identity of the person; and
(C) How to communicate with the person; or
(2) To a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
(A) That the person is a debtor; and
(B) The identity of the person.
(c) A secured party is not liable to any person, and a
person's liability for a deficiency is not affected, because of any act or omission arising out of the secured party's reasonable
belief that a transaction is not a consumer-goods transaction or a
consumer transaction or that goods are not consumer goods, if the
secured party's belief is based on its reasonable reliance on:
(1) A debtor's representation concerning the purpose for which
collateral was to be used, acquired or held; or
(2) An obligor's representation concerning the purpose for
which a secured obligation was incurred.
(d) A secured party is not liable to any person under section
9-625(c)(2) for its failure to comply with section 9-616.
(e)
A secured party is not liable under section 9-625(c)(2)
more than once with respect to any one secured obligation.
PART 7
TRANSITION
§46-9-701. Effective date.
This act takes effect on the first day of July, two thousand
one.
§46-9-702. Savings clause.
(a) Except as otherwise provided in this part, this act
applies to a transaction or lien within its scope, even if the
transaction or lien was entered into or created before this act
takes effect.
(b) Except as otherwise provided in subsection (c) and
sections 9-703 through 9-708:
(1) Transactions and liens that were not governed by former
Article 9, were validly entered into or created before this act
takes effect, and would be subject to this act if they had been
entered into or created after this act takes effect, and the
rights, duties, and interests flowing from those transactions and
liens remain valid after this act takes effect; and
(2) The transactions and liens may be terminated, completed,
consummated, and enforced as required or permitted by this act or
by the law that otherwise would apply if this act had not taken
effect.
(c) This act does not affect an action, case or proceeding
commenced before this act takes effect.
§46-9-703. Security interest perfected before effective date.
(a) A security interest that is enforceable immediately
before this act takes effect and would have priority over the
rights of a person that becomes a lien creditor at that time is a
perfected security interest under this act if, when this act takes
effect, the applicable requirements for enforceability and
perfection under this act are satisfied without further action.
(b)
Except as otherwise provided in section 9-705, if,
immediately before this act takes effect, a security interest is
enforceable and would have priority over the rights of a person
that becomes a lien creditor at that time, but the applicable
requirements for enforceability or perfection under this act are
not satisfied when this act takes effect, the security interest:
(1) Is a perfected security interest for one year after this
act takes effect;
(2) Remains enforceable thereafter only if the security
interest becomes enforceable under section 9-203 before the year
expires; and
(3) Remains perfected thereafter only if the applicable
requirements for perfection under this act are satisfied before the
year expires.
§46-9-704. Security interest unperfected before effective date.
A security interest that is enforceable immediately before
this act takes effect but which would be subordinate to the rights
of a person that becomes a lien creditor at that time:
(1) Remains an enforceable security interest for one year
after this act takes effect;
(2) Remains enforceable thereafter if the security interest
becomes enforceable under section 9-203 when this act takes effect
or within one year thereafter; and
(3) Becomes perfected:
(A) Without further action, when this act takes effect if the
applicable requirements for perfection under this act are satisfied
before or at that time; or
(B) When the applicable requirements for perfection are
satisfied if the requirements are satisfied after that time.
§46-9-705. Effectiveness of action taken before effective date.
(a) If action, other than the filing of a financing statement,
is taken before this act takes effect and the action would have
resulted in priority of a security interest over the rights of a person that becomes a lien creditor had the security interest
become enforceable before this act takes effect, the action is
effective to perfect a security interest that attaches under this
act within one year after this act takes effect. An attached
security interest becomes unperfected one year after this act takes
effect unless the security interest becomes a perfected security
interest under this act before the expiration of that period.
(b) The filing of a financing statement before this act takes
effect is effective to perfect a security interest to the extent
the filing would satisfy the applicable requirements for perfection
under this act.
(c) This act does not render ineffective an effective
financing statement that is filed before this act takes effect and
satisfied the applicable requirements for perfection under the law
of the jurisdiction governing perfection as provided in former
section 9-103. However, except as otherwise provided in
subsections (d) and (e) and section 9-706, the financing statement
ceases to be effective at the earlier of:
(1) The time the financing statement would have ceased to be
effective under the law of the jurisdiction in which it is filed;
or
(2) The thirthieththirtieth day of June, two thousand six.
(d) The filing of a continuation statement after this act
takes effect does not continue the effectiveness of the financing
statement filed before this act takes effect. However, upon the
timely filing of a continuation statement after this act takes
effect and in accordance with the law of the jurisdiction governing
perfection as provided in Part 3, the effectiveness of a financing
statement filed in the same office in that jurisdiction before this
act takes effect continues for the period provided by the law of
that jurisdiction.
(e) Subsection (c)(2) applies to a financing statement that is
filed against a transmitting utility before this act takes effect
and satisfied the applicable requirements for perfection under the
law of the jurisdiction governing perfection as provided in [former
section 9-103] only to the extent that Part 3 provides that the law
of a jurisdiction other than jurisdiction in which the financing
statement is filed governs perfection of a security interest in
collateral covered by the financing statement.
(f) A financing statement that includes a financing statement
filed before this act takes effect and a continuation statement
filed after this act takes effect is effective only to the extent
that it satisfies the requirements of Part 5 for an initial
financing statement.
§46-9-706. When initial financing statement suffices as
continuation statement.
(a) The filing of an initial financing statement in the office
specified in section 9-501 continues the effectiveness of a
financing statement filed before this act takes effect for the
period provided in section 9-515 with respect to an initial
financing statement if:
(1) The filing of an initial financing statement in that
office would be effective to perfect a security interest under this
act;
(2) The pre-effective-date financing statement was filed in an
office in another state or another office in this state; and
(3) The initial financing statement satisfies subsection (b).
(b) To be effective for purposes of subsection (a), an initial
financing statement must:
(1) Satisfy the requirements of Part 5 for an initial
financing statement;
(2) Identify the pre-effective-date financing statement by
indicating the office in which the financing statement was filed
and providing the dates of filing and file numbers, if any, of the
financing statement and of the most recent continuation statement
filed with respect to the financing statement; and
(3) Indicate that the pre-effective-date financing statement
remains effective.
§46-9-707. Persons entitled to file initial financing statement or
continuation statement.
A person may file an initial financing statement or a
continuation statement under this part if:
(1) The secured party of record authorizes the filing; and
(2) The filing is necessary under this part:
(A) To continue the effectiveness of a financing statement
filed before this act takes effect; or
(B) To perfect or continue the perfection of a security
interest.
§46-9-708. Priority.
(a) Former article 9 determines the priority of conflicting
claims to collateral if the relative priorities of the parties were
fixed before this act takes effect. In other cases, this act
determines priority.
(b) For purposes of section 9-322(a), the priority of a
security interest that becomes a perfected security interest under
section 9-704 dates from the time the applicable requirements for
perfection are satisfied. This subsection does not apply to conflicting security interests each of which becomes a perfected
security interest under section 9-704.
(c) For purposes of section 9-322(a), the priority of a
security interest that becomes enforceable under section 9-203 of
this act dates from the time this act takes effect if the security
interest is perfected under this act by the filing of a financing
statement before this act takes effect which would not have been
effective to perfect the security interest under former article 9.
This subsection does not apply to conflicting security interests
each of which is perfected by the filing of such a financing
statement.
NOTE: The purpose of this bill is to revise article 9 of the
Uniform Commercial Code, providing for secured transactions.
This article is new; therefore, strike-throughs and
underscoring have been omitted.
This bill has been recommended by the Commission on Interstate
Cooperation for introduction and passage this session.