Source: Laws of New York, N.Y. Uniform Commercial Code (UCC), official NYS Legislature server (public.leginfo.state.ny.us, Legislative Bill Drafting Commission). Retrieved 2026-07-10. Extracted from the full-UCC single-page render (lawssrch.cgi?NVLWO: QLAWDATA=**UCC). This file contains the full Section-Captions index (all articles) followed by the Article 9 body text only.
ARTICLE 1
GENERAL PROVISIONS
PART 1
SHORT TITLE, CONSTRUCTION, APPLICATION AND
SUBJECT MATTER OF THE ACT
Section 1--101. Short Title
1--102. Scope of Article
1--103. Construction of Uniform Commercial Code to Promote its
Purposes and Policies; Applicability of Supplemental
Principles of Law
1--104. Construction Against Implied Repeal
1--105. Severability
1--106. Use of Singular and Plural; Gender
1--107. Section Captions
1--108. Relation to Electronic Signatures in Global and National
Commerce Act
PART 2
GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION
Section 1--201. General Definitions
1--202. Notice; Knowledge
1--203. Lease Distinguished From Security Interest
1--204. Value
1--205. Reasonable Time; Seasonableness
1--206. Presumptions
1--207. Statute of Frauds for Kinds of Personal Property Not
Otherwise Covered
PART 3
TERRITORIAL APPLICABILITY AND GENERAL RULES
1--301. Territorial Applicability; Parties' Power to Choose
Applicable Law
1--302. Variation by Agreement
1--303. Course of Performance, Course of Dealing, and Usage of
Trade
1--304. Obligation of Good Faith
1--305. Remedies to be Liberally Administered
1--306. Waiver or Renunciation of Claim or Right After Breach
1--307. Prima Facie evidence by Third-party Documents
1--308. Performance or Acceptance Under Reservation of Rights
1--309. Option to Accelerate at Will
1--310. Subordinated Obligations
ARTICLE 2
SALES
PART 1
SHORT TITLE, GENERAL CONSTRUCTION AND SUBJECT MATTER
Section 2--101. Short Title
2--102. Scope; Certain Security and Other Transactions Excluded
From This Article
2--103. Definitions and Index of Definitions
2--104. Definitions: "Merchant"; "Between Merchants"; "Financing
Agency"
2--105. Definitions: Transferability; "Goods"; "Future" Goods;
"Lot"; "Commercial Unit"
2--106. Definitions. "Contract"; "Agreement"; "Contract for
Sale"; "Sale"; "Present Sale"; "Conforming" to
Contract; "Termination"; "Cancellation"; "Hybrid
Transaction"
2--107. Goods to Be Severed From Realty: Recording
PART 2
FORM, FORMATION AND READJUSTMENT OF CONTRACT
Section 2--201. Formal Requirements; Statute of Frauds
2--202. Final Written Expression: Parol or Extrinsic Evidence
2--203. Seals Inoperative
2--204. Formation in General
2--205. Firm Offers
2--206. Offer and Acceptance in Formation of Contract
2--207. Additional Terms in Acceptance or Confirmation
2--208. Course of Performance or Practical Construction
2--209. Modification, Rescission and Waiver
2--210. Delegation of Performance; Assignment of Rights
PART 3
GENERAL OBLIGATION AND CONSTRUCTION
OF CONTRACT
Section 2--301. General Obligations of Parties
2--302. Unconscionable Contract or Clause
2--303. Allocation or Division of Risks
2--304. Price Payable in Money, Goods, Realty, or Otherwise
2--305. Open Price Term
2--306. Output, Requirements and Exclusive Dealings
2--307. Delivery in Single Lot or Several Lots
2--308. Absence of Specified Place for Delivery
2--309. Absence of Specific Time Provisions; Notice of
Termination
2--310. Open Time for Payment or Running of Credit; Authority to
Ship Under Reservation
2--311. Options and Cooperation Respecting Performance
2--312. Warranty of Title and Against Infringement; Buyer's
Obligation Against Infringement
2--313. Express Warranties by Affirmation, Promise, Description,
Sample
2--314. Implied Warranty: Merchantability; Usage of Trade
2--315. Implied Warranty: Fitness for Particular Purpose
2--316. Exclusion or Modification of Warranties
2--317. Cumulation and Conflict of Warranties Express or Implied
2--318. Third Party Beneficiaries of Warranties Express or
Implied
2--319. F.O.B. and F.A.S. Terms
2--320. C.I.F. and C.& F. Terms
2--321. C.I.F. or C.& F.: "Net Landed Weights"; "Payment on
Arrival"; Warranty of Condition on Arrival
2--322. Delivery "Ex-Ship"
2--323. Form of Bill of Lading Required in Overseas Shipment;
"Overseas"
2--324. "No Arrival, No Sale" Term
2--325. "Letter of Credit" Term; "Confirmed Credit"
2--326. Sale on Approval and Sale or Return; Rights of Creditors
2--327. Special Incidents of Sale on Approval and Sale or Return
2--328. Sale by Auction
PART 4
TITLE, CREDITORS AND GOOD FAITH PURCHASERS
Section 2--401. Passing of Title; Reservation for Security; Limited
Application of This Section
2--402. Rights of Seller's Creditors Against Sold Goods
2--403. Power to Transfer; Good Faith Purchase of Goods;
"Entrusting"
PART 5
PERFORMANCE
Section 2--501. Insurable Interest in Goods; Manner of Identification of
Goods
2--502. Buyer's Right to Goods on Seller's Repudiation, Failure
to Deliver, or Insolvency
2--503. Manner of Seller's Tender of Delivery
2--504. Shipment by Seller
2--505. Seller's Shipment Under Reservation
2--506. Rights of Financing Agency
2--507. Effect of Seller's Tender; Delivery on Condition
2--508. Cure by Seller of Improper Tender or Delivery;
Replacement
2--509. Risk of Loss in the Absence of Breach
2--510. Effect of Breach on Risk of Loss
2--511. Tender of Payment by Buyer; Payment by Check
2--512. Payment by Buyer Before Inspection
2--513. Buyer's Right to Inspection of Goods
2--514. When Documents Deliverable on Acceptance; When on
Payment
2--515. Preserving Evidence of Goods in Dispute
PART 6
BREACH, REPUDIATION AND EXCUSE
Section 2--601. Buyer's Rights on Improper Delivery
2--602. Manner and Effect of Rightful Rejection
2--603. Merchant Buyer's Duties as to Rightfully Rejected Goods
2--604. Buyer's Options as to Salvage of Rightfully Rejected
Goods
2--605. Waiver of Buyer's Objections by Failure to Particularize
2--606. What Constitutes Acceptance of Goods
2--607. Effect of Acceptance; Notice of Breach; Burden of
Establishing Breach After Acceptance; Notice of Claim
or Litigation to Person Answerable Over
2--608. Revocation of Acceptance in Whole or in Part
2--609. Right to Adequate Assurance of Performance
2--610. Anticipatory Repudiation
2--611. Retraction of Anticipatory Repudiation
2--612. "Installment Contract"; Breach
2--613. Casualty to Identified Goods
2--614. Substituted Performance
2--615. Excuse by Failure of Presupposed Conditions
2--616. Procedure on Notice Claiming Excuse
PART 7
REMEDIES
Section 2--701. Remedies for Breach of Collateral Contracts Not Impaired
2--702. Seller's Remedies on Discovery of Buyer's Insolvency
2--703. Seller's Remedies in General
2--704. Seller's Right to Identify Goods to the Contract
Notwithstanding Breach or to Salvage Unfinished Goods
2--705. Seller's Stoppage of Delivery in Transit or Otherwise
2--706. Seller's Resale Including Contract for Resale
2--707. "Person in the Position of a Seller"
2--708. Seller's Damages for Non-acceptance or Repudiation
2--709. Action for the Price
2--710. Seller's Incidental Damages
2--711. Buyer's Remedies in General; Buyer's Security Interest
in Rejected Goods
2--712. "Cover"; Buyer's Procurement of Substitute Goods
2--713. Buyer's Damages for Non-Delivery or Repudiation
2--714. Buyer's Damages for Breach in Regard to Accepted Goods
2--715. Buyer's Incidental and Consequential Damages
2--716. Buyer's Right to Specific Performance or Replevin
2--717. Deduction of Damages From the Price
2--718. Liquidation or Limitation of Damages; Deposits
2--719. Contractual Modification or Limitation of Remedy
2--720. Effect of "Cancellation" or "Rescission" on Claims for
Antecedent Breach
2--721. Remedies for Fraud
2--722. Who Can Sue Third Parties for Injury to Goods
2--723. Proof of Market Price: Time and Place
2--724. Admissibility of Market Quotations
2--725. Statute of Limitations in Contracts for Sale
ARTICLE 2-A
LEASES
PART 1
GENERAL PROVISIONS
Section 2-A-101. Short Title
2-A-102. Scope
2-A-103. Definitions and Index of Definitions
2-A-104. Leases Subject to Other Law
2-A-105. Territorial Application of Article to Goods Covered by
Certificate of Title
2-A-106. Limitation on Power of Parties to Consumer Lease to
Choose Applicable Law and Judicial Forum
2-A-107. Waiver or Renunciation of Claim or Right After Default
2-A-108. Unconscionability
2-A-109. Option to Accelerate at Will
PART 2
FORMATION AND CONSTRUCTION OF LEASE CONTRACT
Section 2-A-201. Statute of Frauds
2-A-202. Final Written Expression: Parol or Extrinsic Evidence
2-A-203. Seals Inoperative
2-A-204. Formation in General
2-A-205. Firm Offers
2-A-206. Offer and Acceptance in Formation of Lease Contract
2-A-208. Modification, Rescission and Waiver
2-A-209. Lessee Under Finance Lease as Beneficiary of Supply
Contract
2-A-210. Express Warranties
2-A-211. Warranties Against Interference and Against
Infringement; Lessee's Obligation Against
Infringement
2-A-212. Implied Warranty of Merchantability
2-A-213. Implied Warranty of Fitness for Particular Purpose
2-A-214. Exclusion or Modification of Warranties
2-A-215. Cumulation and Conflict of Warranties Express or
Implied
2-A-216. Third-Party Beneficiaries of Express or Implied
Warranties
2-A-217. Identification
2-A-218. Insurance and Proceeds
2-A-219. Risk of Loss
2-A-220. Effect of Default on Risk of Loss
2-A-221. Casualty to Identified Goods
PART 3
EFFECT OF LEASE CONTRACT
Section 2-A-301. Enforceability of Lease Contract
2-A-302. Title to and Possession of Goods
2-A-303. Alienability of Party's Interest Under Lease Contract
or of Lessor's Residual Interest in Goods; Delegation
of Performance; Transfer of Rights
2-A-304. Subsequent Lease of Goods by Lessor
2-A-305. Sale or Sublease of Goods by Lessee
2-A-306. Priority of Certain Liens Arising by Operation of Law
2-A-307. Priority of Liens Arising by Attachment or Levy on,
Security Interests in, and Other Claims to Goods
2-A-308. Special Rights of Creditors
2-A-309. Lessor's and Lessee's Rights When Goods Become Fixtures
2-A-310. Lessor's and Lessee's Rights When Goods Become
Accessions
2-A-311. Priority Subject to Subordination
PART 4
PERFORMANCE OF LEASE CONTRACT: REPUDIATED, SUBSTITUTED AND EXCUSED
Section 2-A-401. Insecurity: Adequate Assurance of Performance
2-A-402. Anticipatory Repudiation
2-A-403. Retraction of Anticipatory Repudiation
2-A-404. Substituted Performance
2-A-405. Excused Performance
2-A-406. Procedure on Excused Performance
2-A-407. Irrevocable Promises: Finance Leases
PART 5
DEFAULT
A. IN GENERAL
Section 2-A-501. Default: Procedure
2-A-502. Notice After Default
2-A-503. Modification or Impairment of Rights and Remedies
2-A-504. Liquidation of Damages
2-A-505. Cancellation and Termination and Effect of
Cancellation, Termination, Rescission, or Fraud on
Rights and Remedies
2-A-506. Statute of Limitations
2-A-507. Proof of Market Rent: Time and Place
B. DEFAULT BY LESSOR
Section 2-A-508. Lessee's Remedies
2-A-509. Lessee's Rights on Improper Delivery: Rightful
Rejection
2-A-510. Installment Lease Contracts: Rejection and Default
2-A-511. Merchant Lessee's Duties as to Rightfully Rejected
Goods
2-A-512. Lessee's Duties as to Rightfully Rejected Goods
2-A-513. Cure by Lessor of Improper Tender or Delivery;
Replacement
2-A-514. Waiver of Lessee's Objections
2-A-515. Acceptance of Goods
2-A-516. Effect of Acceptance of Goods; Notice of Default;
Burden of Establishing Default After Acceptance;
Notice of Claim or Litigation to Person Answerable
Over
2-A-517. Revocation of Acceptance of Goods
2-A-518. Cover; Substitute Goods
2-A-519. Lessee's Damages for Non-delivery, Repudiation,
Default, and Breach of Warranty in Regard to Accepted
Goods
2-A-520. Lessee's Incidental and Consequential Damages
2-A-521. Lessee's Right to Specific Performance or Replevin
2-A-522. Lessee's Right to Goods on Lessor's Insolvency
C. DEFAULT BY LESSEE
Section 2-A-523. Lessor's Remedies
2-A-524. Lessor's Right to Identify Goods to Lease Contract
2-A-525. Lessor's Right to Possession of Goods
2-A-526. Lessor's Stoppage of Delivery in Transit or Otherwise
2-A-527. Lessor's Rights to Dispose of Goods
2-A-528. Lessor's Damages for Non-acceptance, Failure to Pay,
Repudiation, or Other Default
2-A-529. Lessor's Action for the Rent
2-A-530. Lessor's Incidental Damages
2-A-531. Standing to Sue Third Parties for Injury to Goods
2-A-532. Lessor's Rights to Residual Interest
ARTICLE 3
COMMERCIAL PAPER
PART 1
SHORT TITLE, FORM AND INTERPRETATION
Section 3--101. Short Title.
3--102. Definitions and Index of Definitions
3--103. Limitations on Scope of Article
3--104. Form of Negotiable Instruments; "Draft"; "Check";
"Certificate of Deposit"; "Note"
3--105. When Promise or Order Unconditional
3--106. Sum Certain
3--107. Money
3--108. Payable on Demand
3--109. Definite Time
3--110. Payable to Order
3--111. Payable to Bearer
3--112. Terms and Omissions Not Affecting Negotiability
3--113. Seal
3--114. Date, Antedating, Postdating
3--115. Incomplete Instruments
3--116. Instruments Payable to Two or More Persons
3--117. Instruments Payable With Words of Description
3--118. Ambiguous Terms and Rules of Construction
3--119. Other Writings Affecting Instrument
3--120. Instruments "Payable Through" Bank
3--121. Instruments Payable at Bank
3--122. Accrual of Cause of Action
PART 2
TRANSFER AND NEGOTIATION
Section 3--201. Transfer: Right to Indorsement
3--202. Negotiation
3--203. Wrong or Misspelled Name
3--204. Special Indorsement; Blank Indorsement
3--205. Restrictive Indorsements
3--206. Effect of Restrictive Indorsement
3--207. Negotiation Effective Although It May Be Rescinded
3--208. Reacquisition
PART 3
RIGHTS OF A HOLDER
Section 3--301. Rights of a Holder
3--302. Holder in Due Course
3--303. Taking for Value
3--304. Notice to Purchaser
3--305. Rights of a Holder in Due Course
3--306. Rights of One Not Holder in Due Course
3--307. Burden of Establishing Signatures, Defenses and Due
Course
PART 4
LIABILITY OF PARTIES
Section 3--401. Signature
3--402. Signature in Ambiguous Capacity
3--403. Signature by Authorized Representative
3--404. Unauthorized Signatures
3--405. Impostors; Signature in Name of Payee
3--406. Negligence Contributing to Alteration or Unauthorized
Signature
3--407. Alteration
3--408. Consideration
3--409. Draft Not an Assignment
3--410. Definition and Operation of Acceptance
3--411. Certification of a Check
3--412. Acceptance Varying Draft
3--413. Contract of Maker, Drawer and Acceptor
3--414. Contract of Indorser; Order of Liability
3--415. Contract of Accommodation Party
3--416. Contract of Guarantor
3--417. Warranties on Presentment and Transfer
3--418. Finality of Payment or Acceptance
3--419. Conversion of Instrument; Innocent Representative
PART 5
PRESENTMENT, NOTICE OF DISHONOR AND PROTEST
Section 3--501. When Presentment, Notice of Dishonor, and Protest
Necessary or Permissible
3--502. Unexcused Delay; Discharge
3--503. Time of Presentment
3--504. How Presentment Made
3--505. Rights of Party to Whom Presentment Is Made
3--506. Time Allowed for Acceptance or Payment
3--507. Dishonor; Holder's Right of Recourse; Term Allowing
Re-Presentment
3--508. Notice of Dishonor
3--509. Protest; Noting for Protest
3--510. Evidence of Dishonor and Notice of Dishonor
3--511. Waived or Excused Presentment, Protest or Notice of
Dishonor or Delay Therein
PART 6
DISCHARGE
Section 3--601. Discharge of Parties
3--602. Effect of Discharge Against Holder in Due Course
3--603. Payment or Satisfaction
3--604. Tender of Payment
3--605. Cancellation and Renunciation
3--606. Impairment of Recourse or of Collateral
PART 7
ADVICE OF INTERNATIONAL SIGHT DRAFT
Section 3--701. Letter of Advice of International Sight Draft
PART 8
MISCELLANEOUS
Section 3--801. Drafts in a Set
3--802. Effect of Instrument on Obligation for Which It Is Given
3--803. Notice to Third Party
3--804. Lost, Destroyed or Stolen Instruments
3--805. Instruments Not Payable to Order or to Bearer
ARTICLE 4
BANK DEPOSITS AND COLLECTIONS
PART 1 GENERAL PROVISIONS AND DEFINITIONS
Section 4--101. Short Title
4--102. Applicability
4--103. Variation by Agreement; Measure of Damages; Certain
Action Constituting Ordinary Care
4--104. Definitions and Index of Definitions
4--105. "Depositary Bank"; "Intermediary Bank"; "Collecting
Bank"; "Payor Bank"; "Presenting Bank"; "Remitting
Bank"
4--106. Separate Office of a Bank
4--107. Time of Receipt of Items
4--108. Delays
4--109. Process of Posting
PART 2
COLLECTION OF ITEMS: DEPOSITARY AND COLLECTING BANKS
Section 4--201. Presumption and Duration of Agency Status of Collecting
Banks and Provisional Status of Credits; Applicability
of Article; Item Indorsed "Pay Any Bank"
4--202. Responsibility for Collection; When Action Seasonable
4--203. Effect of Instructions
4--204. Methods of Sending and Presenting; Sending Direct to
Payor Bank
4--205. Supplying Missing Indorsement; No Notice From Prior
Indorsement
4--206. Transfer Between Banks
4--207. Warranties of Customer and Collecting Bank on Transfer
or Presentment of Items; Time for Claims
4--208. Security Interest of Collecting Bank in Items,
Accompanying Documents and Proceeds
4--209. When Bank Gives Value for Purposes of Holder in Due
Course
4--210. Presentment by Notice of Item Not Payable by, Through or
at a Bank; Liability of Secondary Parties
4--211. Media of Remittance; Provisional and Final Settlement in
Remittance Cases
4--212. Right of Charge-Back or Refund
4--213. Final Payment of Item by Payor Bank; When Provisional
Debits and Credits Become Final; When Certain Credits
Become Available for Withdrawal
4--214. Insolvency and Preference
PART 3
COLLECTION OF ITEMS: PAYOR BANKS
Section 4--301. Deferred Posting; Recovery of Payment by Return of
Items; Time of Dishonor
4--302. Payor Bank's Responsibility for Late Return of Item
4--303. When Items Subject to Notice, Stop-Order, Legal Process
or Setoff; Order in Which Items May Be Charged or
Certified
PART 4
RELATIONSHIP BETWEEN PAYOR BANK AND ITS CUSTOMER
Section 4--401. When Bank May Charge Customer's Account
4--402. Bank's Liability to Customer for Wrongful Dishonor
4--403. Customer's Right to Stop Payment; Burden of Proof of
Loss
4--404. Bank Not Obligated to Pay Check More Than Six Months Old
4--405. Death or Incompetence of Customer
4--406. Customer's Duty to Discover and Report Unauthorized
Signature or Alteration
4--407. Payor Bank's Right to Subrogation on Improper Payment
4--408. Rights and Liabilities of Remitter or Payee With Respect
to Cashier's Check, Teller's Check and Certified Check
PART 5
COLLECTION OF DOCUMENTARY DRAFTS
Section 4--501. Handling of Documentary Drafts; Duty to Send for
Presentment and to Notify Customer of Dishonor
4--502. Presentment of "On Arrival" Drafts
4--503. Responsibility of Presenting Bank for Documents and
Goods; Report of Reasons for Dishonor; Referee in Case
of Need
4--504. Privilege of Presenting Bank to Deal With Goods;
Security Interest for Expenses
ARTICLE 4-A
FUNDS TRANSFERS
PART 1
SUBJECT MATTER AND DEFINITIONS
Section 4-A-101. Short Title
4-A-102. Subject Matter
4-A-103. Payment Order-Definitions
4-A-104. Funds Transfer-Definitions
4-A-105. Other Definitions
4-A-106. Time Payment Order is Received
4-A-107. Federal Reserve Regulations and Operating Circulars
4-A-108. Relationship to Electronic Fund Transfer Act
PART 2
ISSUE AND ACCEPTANCE OF PAYMENT ORDER
Section 4-A-201. Security Procedure
4-A-202. Authorized and Verified Payment Orders
4-A-203. Unenforceability of Certain Verified Payment Orders
4-A-204. Refund of Payment and Duty of Customer to Report With
Respect to Unauthorized Payment Order
4-A-205. Erroneous Payment Orders
4-A-206. Transmission of Payment Order Through Funds-Transfer or
Other Communication System
4-A-207. Misdescription of Beneficiary
4-A-208. Misdescription of Intermediary Bank or Beneficiary's
Bank
4-A-209. Acceptance of Payment Order
4-A-210. Rejection of Payment Order
4-A-211. Cancellation and Amendment of Payment Order
4-A-212. Liability and Duty of Receiving Bank Regarding
Unaccepted Payment Order
PART 3
EXECUTION OF SENDER'S PAYMENT
ORDER BY RECEIVING BANK
Section 4-A-301. Execution and Execution Date
4-A-302. Obligations of Receiving Bank in Execution of Payment
Order
4-A-303. Erroneous Execution of Payment Order
4-A-304. Duty of Sender to Report Erroneously Executed Payment
Order
4-A-305. Liability for Late or Improper Execution or Failure to
Execute Payment Order
PART 4
PAYMENT
Section 4-A-401. Payment Date
4-A-402. Obligation of Sender to Pay Receiving Bank
4-A-403. Payment by Sender to Receiving Bank
4-A-404. Obligation of Beneficiary's Bank to Pay and Give Notice
to Beneficiary
4-A-405. Payment by Beneficiary's Bank to Beneficiary
4-A-406. Payment by Originator to Beneficiary; Discharge of
Underlying Obligation
PART 5
MISCELLANEOUS PROVISIONS
Section 4-A-501. Variation by Agreement and Effect of Funds-Transfer
System Rule
4-A-502. Creditor Process Served on Receiving Bank; Set Off by
Beneficiary's Bank
4-A-503. Injunction or Restraining Order with Respect to Funds
Transfer
4-A-504. Order in Which Items and Payment Orders May Be Charged
to Account; Order of Withdrawals From Account
4-A-505. Preclusion of Objection to Debit of Customer's Account
4-A-506. Rate of Interest
4-A-507. Choice of Law
ARTICLE 5
LETTERS OF CREDIT
Section 5--101. Short title
5--102. Definitions
5--103. Scope
5--104. Formal requirements
5--105. Consideration
5--106. Issuance, amendment, cancellation, and duration
5--107. Confirmer, nominated person, and advisor
5--108. Issuer's rights and obligations
5--109. Fraud and forgery
5--110. Warranties
5--111. Remedies
5--112. Transfer of letter of credit
5--113. Transfer by operation of law
5--114. Assignment of proceeds
5--115. Statute of limitations
5--116. Choice of law and forum
5--117. Subrogation of issuer, applicant, and nominated person
5--118. Security Interest of Issuer or Nominated Person
5--119. Applicability
5--120. Savings clause
ARTICLE 7
DOCUMENTS OF TITLE
PART 1
GENERAL
Section 7--101. Short Title
7--102. Definitions and Index of Definitions
7--103. Relation of Article to Treaty or Statute
7--104. Negotiable and Nonnegotiable Document of Title
7--105. Reissuance in Alternative Medium
7--106. Control of Electronic Document of Title
PART 2
WAREHOUSE RECEIPTS: SPECIAL PROVISIONS
Section 7--201. Person That May Issue a Warehouse Receipt; Storage Under
Bond
7--202. Form of Warehouse Receipt; Effect of Omission
7--203. Liability for Nonreceipt or Misdescription
7--204. Duty of Care; Contractual Limitation of Warehouse's
Liability
7--205. Title Under Warehouse Receipt Defeated in Certain Cases
7--206. Termination of Storage at Warehouse's Option
7--207. Goods Must be Kept Separate; Fungible Goods
7--208. Altered Warehouse Receipts
7--209. Lien of Warehouse
7--210. Enforcement of Warehouse's Lien
PART 3
BILLS OF LADING: SPECIAL PROVISIONS
Section 7--301. Liability for Nonreceipt or Misdescription; "Said to
Contain"; "Shipper's Weight, Load, and Count";
Improper Handling
7--302. Through Bills of Lading and Similar Documents of Title
7--303. Diversion; Reconsignment; Change of Instructions
7--304. Tangible Bills of Lading in a Set
7--305. Destination Bills
7--306. Altered Bills of Lading
7--307. Lien of Carrier
7--308. Enforcement of Carrier's Lien
7--309. Duty of Care; Contractual Limitation of Carrier's
Liability
PART 4
WAREHOUSE RECEIPTS AND BILLS OF LADING: GENERAL OBLIGATIONS
Section 7--401. Irregularities in Issue of Receipt or Bill or Conduct of
Issuer
7--402. Duplicate Document of Title; Overissue
7--403. Obligation of Bailee to Deliver; Excuse
7--404. No Liability for Good-Faith Delivery Pursuant to
Document of Title
PART 5
WAREHOUSE RECEIPTS AND BILLS OF LADING: NEGOTIATION AND TRANSFER
Section 7--501. Form of Negotiation and Requirements of Due Negotiation
7--502. Rights Acquired by Due Negotiation
7--503. Document of Title to Goods Defeated in Certain Cases
7--504. Rights Acquired in Absence of Due Negotiation; Effect of
Diversion; Stoppage of Delivery
7--505. Indorser Not a Guarantor for Other Parties
7--506. Delivery Without Indorsement: Right to Compel
Indorsement
7--507. Warranties on Negotiation or Delivery of Document of
Title
7--508. Warranties of Collecting Bank as to Documents of Title
7--509. Adequate Compliance With Commercial Contract
PART 6
WAREHOUSE RECEIPTS AND BILLS OF LADING: MISCELLANEOUS PROVISIONS
Section 7--601. Lost, Stolen, or Destroyed Documents of Title
7--602. Judicial Process Against Goods Covered by Negotiable
Document of Title
7--603. Conflicting Claims; Interpleader
ARTICLE 8
INVESTMENT SECURITIES
PART 1
SHORT TITLE AND GENERAL MATTERS
Section 8--101. Short Title.
8--102. Definitions.
8--103. Rules for Determining Whether Certain Obligations and
Interests are Securities or Financial Assets.
8--104. Acquisition of Security or Financial Asset or Interest
Therein.
8--105. Notice of Adverse Claim.
8--106. Control.
8--107. Whether Indorsement, Instruction, or Entitlement Order
is Effective.
8--108. Warranties in Direct Holding.
8--109. Warranties in Indirect Holding.
8--110. Applicability; Choice of Law.
8--111. Clearing Corporation Rules.
8--112. Creditor's Legal Process.
8--113. Statute of Frauds Generally Inapplicable.
8--114. Evidentiary Rules Concerning Certificated Securities.
8--115. Securities Intermediary and Others Not Liable to Adverse
Claimant.
8--116. Securities Intermediary as Purchaser for Value.
PART 2
ISSUE AND ISSUER
Section 8--201. Issuer.
8--202. Issuer's Responsibility and Defenses; Notice of Defect
or Defense.
8--203. Staleness as Notice of Defect or Defense.
8--204. Effect of Issuer's Restriction on Transfer.
8--205. Effect of Unauthorized Signature on Security
Certificate.
8--206. Completion or Alteration of Security Certificate.
8--207. Rights and Duties of Issuer with respect to Registered
Owners.
8--208. Effect of Signature of Authenticating Trustee,
Registrar, or Transfer Agent.
8--209. Issuer's Lien.
8--210. Overissue.
PART 3
TRANSFER OF CERTIFICATED AND UNCERTIFICATED SECURITIES
Section 8--301. Delivery.
8--302. Rights of Purchaser.
8--303. Protected Purchaser.
8--304. Indorsement.
8--305. Instruction.
8--306. Effect of Guaranteeing Signature, Indorsement, or
Instruction.
8--307. Purchaser's Right to Requisites for Registration of
Transfer.
PART 4
REGISTRATION
Section 8--401. Duty of Issuer to Register Transfer.
8--402. Assurance that Indorsement or Instruction is Effective.
8--403. Demand that Issuer Not Register Transfer.
8--404. Wrongful Registration.
8--405. Replacement of Lost, Destroyed, or Wrongfully taken
Security Certificate.
8--406. Obligation to Notify Issuer of Lost, Destroyed, or
Wrongfully taken Security Certificate.
8--407. Authenticating Trustee, Transfer Agent, and Registrar.
PART 5
SECURITY ENTITLEMENTS
Section 8--501. Securities Account; Acquisition of Security Entitlement
from Securities Intermediary.
8--502. Assertion of Adverse Claim against Entitlement Holder.
8--503. Property Interest of Entitlement Holder in Financial
Asset held by Securities Intermediary.
8--504. Duty of Securities Intermediary to Maintain Financial
Asset.
8--505. Duty of Securities Intermediary with respect to Payments
and Distributions.
8--506. Duty of Securities Intermediary to Exercise Rights as
directed by Entitlement Holder.
8--507. Duty of Securities Intermediary to comply with
Entitlement Order.
8--508. Duty of Securities Intermediary to change Entitlement
Holder's Position to Other Form of Security Holding.
8--509. Specification of Duties of Securities Intermediary by
Other Statute or Regulation; Manner of Performance of
Duties of Securities Intermediary and Exercise of
Rights of Entitlement Holder.
8--510. Rights of Purchaser of Security Entitlement from
Entitlement Holder.
8--511. Priority Among Security Interests and Entitlement
Holders.
PART 6
TRANSITION PROVISIONS FOR REVISED ARTICLE 8 AND FOR THE CONFORMING
AMENDMENTS TO ARTICLES 1, 5, 9 and 13
Section 8--601. Savings Clause; Effect on Prior Perfected Security
Interest.
8--602. Cross-References to former Article 8; Meaning or
Interpretation.
ARTICLE 9
SECURED TRANSACTIONS
PART 1
GENERAL PROVISIONS
SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
Section 9--101. Short Title
9--102. Definitions and Index of Definitions
9--103. Purchase-money Security Interest; Application of
Payments; Burden of Establishing
9--104. Control of Deposit Account
9--105. Control of Electronic Copy of Record Evidencing Chattel
Paper
9--105A. Control of Electronic Money.
9--106. Control of Investment Property
9--107. Control of Letter-of-credit Right
9--107A. Control of Controllable Electronic Record, Controllable
Account, or Controllable Payment Intangible.
9--107B. No Requirement to Acknowledge or Confirm; No Duties.
9--108. Sufficiency of Description
SUBPART 2. APPLICABILITY OF ARTICLE
Section 9--109. Scope
9--110. Security Interests Arising Under Article 2 or 2-A
PART 2
EFFECTIVENESS OF SECURITY AGREEMENT; ATTACHMENT OF SECURITY INTEREST;
RIGHTS OF PARTIES TO SECURITY AGREEMENT
SUBPART 1. EFFECTIVENESS AND ATTACHMENT
Section 9--201. General Effectiveness of Security Agreement
9--202. Title to Collateral Immaterial
9--203. Attachment and Enforceability of Security Interest;
Proceeds; Supporting Obligations; Formal Requisites
9--204. After-acquired Property; Future Advances
9--205. Use or Disposition of Collateral Permissible
9--206. Security Interest Arising in Purchase or Delivery of
Financial Asset
SUBPART 2. RIGHTS AND DUTIES
Section 9--207. Rights and Duties of Secured Party Having Possession or
Control of Collateral.
9--208. Additional Duties of Secured Party Having Control of
Collateral
9--209. Duties of Secured Party if Account Debtor Has Been
Notified of Assignment
9--210. Request for Accounting; Request Regarding List of
Collateral or Statement of Account
PART 3
PERFECTION AND PRIORITY
SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
Section 9--301. Law Governing Perfection and Priority of Security
Interests
9--302. Law Governing Perfection and Priority of Agricultural
Liens
9--303. Law Governing Perfection and Priority of Security
Interests in Goods Covered by a Certificate of Title
9--304. Law Governing Perfection and Priority of Security
Interests in Deposit Accounts
9--305. Law Governing Perfection and Priority of Security
Interests in Investment Property
9--306. Law Governing Perfection and Priority of Security
Interests in Letter-of-credit Rights
9-306A. Law Governing Perfection and Priority of Security
Interests in Chattel Paper.
9-306B. Law Governing Perfection and Priority of Security
Interests in Controllable Accounts, Controllable
Electronic Records, and Controllable Payment
Intangibles.
9--307. Location of Debtor
SUBPART 2. PERFECTION
Section 9--308. When Security Interest or Agricultural Lien Is
Perfected; Continuity of Perfection
9--309. Security Interest Perfected upon Attachment
9--310. When Filing Required to Perfect Security Interest or
Agricultural Lien; Security Interests and Agricultural
Liens to Which Filing Provisions Do Not Apply
9--311. Perfection of Security Interests in Property Subject to
Certain Statutes, Regulations, and Treaties
9--312. Perfection of Security Interests in Chattel Paper,
Controllable Accounts, Controllable Electronic
Records, Controllable Payment Intangibles, 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
9--313. When Possession by or Delivery to Secured Party Perfects
Security Interest Without Filing
9--314. Perfection by Control
9-314A. Perfection by Possession and Control of Chattel Paper.
9--315. Secured Party's Rights on Disposition of Collateral and
in Proceeds
9--316. Effect of Change in Governing Law
SUBPART 3. PRIORITY
Section 9--317. Interests That Take Priority over or Take Free of
Security Interest or Agricultural Lien
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
9--319. Rights and Title of Consignee With Respect to Creditors
and Purchasers
9--320. Buyer of Goods
9--321. Licensee of General Intangible and Lessee of Goods in
Ordinary Course of Business
9--322. Priorities among Conflicting Security Interests in and
Agricultural Liens on Same Collateral
9--323. Future Advances
9--324. Priority of Purchase-money Security Interests
9--325. Priority of Security Interests in Transferred Collateral
9--326. Priority of Security Interests Created by New Debtor
9-326A. Priority of Security Interest in Controllable Account,
Controllable Electronic Record, and Controllable
Payment Intangible.
9--327. Priority of Security Interests in Deposit Account
9--328. Priority of Security Interests in Investment Property
9--329. Priority of Security Interests in Letter-of-credit Right
9--330. Priority of Purchaser of Chattel Paper or Instrument
9--331. Priority of Rights of Purchasers of Controllable
Accounts, Controllable Electronic Records,
Controllable Payment Intangibles, Documents,
Instruments, and Securities under Other Articles;
Priority of Interests in Financial Assets and Security
Entitlements and Protection Against Assertion of Claim
under Articles 8 and 12
9--332. Transfer of Money; Transfer of Funds from Deposit
Account
9--333. Priority of Certain Liens Arising by Operation of Law
9--334. Priority of Security Interests in Fixtures and Crops
9--335. Accessions
9--336. Commingled Goods
9--337. Priority of Security Interests in Goods Covered by
Certificate of Title
9--338. Priority of Security Interest or Agricultural Lien
Perfected by Filed Financing Statement Providing
Certain Incorrect Information
9--339. Priority Subject to Subordination
SUBPART 4. RIGHTS OF BANK
Section 9--340. Effectiveness of Right of Recoupment or Set-off Against
Deposit Account
9--341. Bank's Rights and Duties with Respect to Deposit Account
9--342. Bank's Right to Refuse to Enter into or Disclose
Existence of Control Agreement
PART 4
RIGHTS OF THIRD PARTIES
Section 9--401. Alienability of Debtor's Rights
9--402. Secured Party Not Obligated on Contract of Debtor or in
Tort
9--403. Agreement Not to Assert Defenses Against Assignee
9--404. Rights Acquired by Assignee; Claims and Defenses Against
Assignee
9--405. Modification of Assigned Contract
9--406. Discharge of Account Debtor; Notification of Assignment;
Identification and Proof of Assignment; Restrictions
on Assignment of Accounts, Chattel Paper, Payment
Intangibles, and Promissory Notes Ineffective
9--407. Restrictions on Creation or Enforcement of Security
Interest in Leasehold Interest or in Lessor's Residual
Interest
9--408. Restrictions on Assignment of Promissory Notes,
Health-care-insurance Receivables, and Certain General
Intangibles Ineffective
9--409. Restrictions on Assignment of Letter-of-credit Rights
Ineffective
PART 5
FILING
SUBPART 1. FILING OFFICE; CONTENTS AND EFFECTIVENESS OF FINANCING
STATEMENT
Section 9--501. Filing Office
9--502. Contents of Financing Statement; Record of Mortgage as
Financing Statement; Time of Filing Financing
Statement; Contents of Cooperative Addendum
9--503. Name of Debtor and Secured Party
9--504. Indication of Collateral
9--505. Filing and Compliance with Other Statutes and Treaties
for Consignments, Leases, Other Bailments, and Other
Transactions
9--506. Effect of Errors or Omissions
9--507. Effect of Certain Events on Effectiveness of Financing
Statement
9--508. Effectiveness of Financing Statement If New Debtor
Becomes Bound by Security Agreement
9--509. Persons Entitled to File a Record
9--510. Effectiveness of Filed Record
9--511. Secured Party of Record
9--512. Amendment of Financing Statement
9--513. Termination Statement
9--514. Assignment of Powers of Secured Party of Record
9--515. Duration and Effectiveness of Financing Statement;
Effect of Lapsed Financing Statement
9--516. What Constitutes Filing; Effectiveness of Filing
9--517. Effect of Indexing Errors
9--518. Claim Concerning Inaccurate or Wrongfully Filed Record
SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
Section 9--519. Numbering, Maintaining, and Indexing Records;
Communicating Information Provided in Records
9--520. Acceptance and Refusal to Accept Record
9--521. Uniform Form of Written Financing Statement; Amendment;
and Cooperative Addendum
9--522. Maintenance and Destruction of Records
9--523. Information from Filing Office; Sale or License of
Records
9--524. Delay by Filing Office
9--525. Fees
9--526. Filing-office Rules
9--527. Duty to Report
PART 6
DEFAULT
SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
Section 9--601. Rights after Default; Judicial Enforcement; Consignor or
Buyer of Accounts, Chattel Paper, Payment Intangibles,
or Promissory Notes
9--602. Waiver and Variance of Rights and Duties
9--603. Agreement on Standards Concerning Rights and Duties
9--604. Procedure If Security Agreement Covers Real Property,
Fixtures, or Cooperative Interests
9--605. Unknown Debtor or Secondary Obligor
9--606. Time of Default for Agricultural Lien
9--607. Collection and Enforcement by Secured Party
9--608. Application of Proceeds of Collection or Enforcement;
Liability for Deficiency and Right to Surplus
9--609. Secured Party's Right to Take Possession after Default
9--610. Disposition of Collateral after Default
9--611. Notification Before Disposition of Collateral
9--612. Timeliness of Notification Before Disposition of
Collateral
9--613. Contents and Form of Notification Before Disposition of
Collateral: General
9--614. Contents and Form of Notification Before Disposition of
Collateral: Consumer-goods Transaction
9--615. Application of Proceeds of Disposition; Liability for
Deficiency and Right to Surplus
9--616. Explanation of Calculation of Surplus or Deficiency
9--617. Rights of Transferee of Collateral
9--618. Rights and Duties of Certain Secondary Obligors
9--619. Transfer of Record or Legal Title
9--620. Acceptance of Collateral in Full or Partial Satisfaction
of Obligation; Compulsory Disposition of Collateral
9--621. Notification of Proposal to Accept Collateral
9--622. Effect of Acceptance of Collateral
9--623. Right to Redeem Collateral
9--624. Waiver
SUBPART 2. NONCOMPLIANCE WITH ARTICLE
Section 9--625. Remedies for Secured Party's Failure to Comply with
Article
9--626. Action in Which Deficiency or Surplus is in Issue
9--627. Determination of Whether Conduct Was Commercially
Reasonable
9--628. Nonliability and Limitation on Liability of Secured
Party; Liability of Secondary Obligor
PART 7
TRANSITION
Section 9--700. Definitions
9--701. Effective Date
9--702. Savings Clause
9--703. Security Interest Perfected Before Effective Date
9--704. Security Interest Unperfected Before Effective Date
9--705. Effectiveness of Action Taken Before Effective Date
9--706. When Initial Financing Statement Suffices to Continue
Effectiveness of Financing Statement
9--707. Amendment of Pre-effective-date Financing Statement
9--708. Persons Entitled to File Initial Financing Statement or
Continuation Statement
9--709. Priority
9--710. Transitional Provision for Maintaining and Searching
Local-Filing Office Records
ARTICLE 11
PROVISIONS FOR TRANSITION FROM ORIGINAL ARTICLE 9 TO REVISED ARTICLE 9.
Section 11--101. Definitions.
11--102. Preservation of Old Transition Provision.
11--103. Transition to Revised Article 9--General Rule.
11--104. Transition Provision on Change of Requirement of
Filing.
11--105. Transition Provision on Change of Place of Filing.
11--106. Required Refilings.
11--107. Transition Provisions as to Priorities.
11--108. Presumption that Rule of Law Continues Unchanged.
ARTICLE 12
CONTROLLABLE ELECTRONIC RECORDS
12--101. Short title
12--102. Definitions
12--103. Relation to Article 9 and Consumer Laws
12--104. Rights in Controllable Account, Controllable Electronic
Record, and Controllable Payment Intangible
12--105. Control of Controllable Electronic Record
12--106. Discharge of Account Debtor on Controllable Account or
Controllable Payment Intangible
12--107. Governing Law
ARTICLE 12-A
TRANSITIONAL PROVISIONS FOR UNIFORM COMMERCIAL CODE AMENDMENTS
PART 1
GENERAL PROVISIONS AND DEFINITIONS
12-A-101. Title
12-A-102. Definitions
PART 2
GENERAL TRANSITIONAL PROVISION
12-A-201. Saving Clause
PART 3
TRANSITIONAL PROVISIONS FOR ARTICLES 9 AND 12
12-A-301. Saving Clause
12-A-302. Security Interest Perfected Before Effective Date
12-A-303. Security Interest Unperfected Before Effective Date
12-A-304. Effectiveness of Actions Taken Before Effective Date
12-A-305. Priority
12-A-306. Priority of Claims When Priority Rules of Article 9 Do
Not Apply
ARTICLE 13
EFFECTIVE DATE AND REPEALER
Section 13--101. Application of Act
13--102. Laws Repealed; Provision for Transition
13--103. Inconsistent Laws; Which Law Governs
13--104. Laws Not Repealed
13--105. Effective Date
ARTICLE 9
SECURED TRANSACTIONS
PART 1
GENERAL PROVISIONS
SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
Section 9--101. Short Title.
This article may be cited as Uniform Commercial Code--Secured
Transactions.
Section 9--102. Definitions And Index of Definitions.
(a) Article 9 definitions. 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", "account
statement", "account to", "commodity account" in paragraph
(14), "customer account", "deposit account" in paragraph
(29), "on account of", and "statement of account", 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 controllable accounts and
health-care-insurance receivables. The term does not include
(i) chattel paper, (ii) commercial tort claims, (iii) deposit
accounts, (iv) investment property, (v) letter-of-credit
rights or letters of credit, (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, or (vii) rights to payment
evidences by an instrument.
(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 evidences chattel paper.
(4) "Accounting", except as used in "accounting for", means a
record:
(A) signed by a secured party;
(B) indicating the aggregate unpaid secured obligations as of
a date not more than 35 days earlier or 35 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 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; and
(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) Reserved.
(7-a) "Assignee", except as used in "assignee for benefit of
creditors", means a person (A) in whose favor a security
interest that secures an obligation is created or provided
for under a security agreement, whether or not the
obligation is outstanding or (B) to which an account,
chattel paper, payment intangible, or promissory note has
been sold. The term includes a person to which a security
interest has been transferred by a secured party.
(7-b) "Assignor" means a person that (A) under a security
agreement creates or provides for a security interest that
secures an obligation or (B) sells an account, chattel paper,
payment intangible, or promissory note. The term includes a
secured party that has transferred a security interest to
another person.
(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. Such term includes another record maintained
as an alternative to a certificate of title by the
governmental unit that issues certificates of title if a
statute permits the security interest in question to be
indicated on the record 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) a right to payment of a monetary obligation secured by
specific goods, if the right to payment and security
agreement are evidenced by a record; or
(B) a right to payment of a monetary obligation owed by a
lessee under a lease agreement with respect to specific
goods and a monetary obligation owed by the lessee in
connection with the transaction giving rise to the lease,
if:
(i) the right to payment and lease agreement are evidenced by
a record; and
(ii) the predominant purpose of the transaction giving rise
to the lease was to give the lessee the right to
possession and use of the goods; but
(C) does not include a right to payment arising out of a
charter or other contract involving the use or hire of a
vessel or 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.
(11-a) "Check" means (i) a draft, other than a documentary draft,
payable on demand and drawn on a bank or (ii) a cashier's
check or a teller's check. An instrument may be a check
even though it is described on its face by another term,
such as "money order". An instrument that (i) meets all of
the requirements stated in Article 3 of this chapter to be
a negotiable instrument other than stating that it is
payable to order or bearer and (ii) otherwise qualifies as
a check is a negotiable instrument and a check.
(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 $1,000 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.
(27-a) "Controllable account" means an account evidenced by a
controllable electronic record that provides that the
account debtor undertakes to pay the person that has
control under Section 12--105 of the controllable
electronic record.
(27-b) "Controllable payment intangible" means a payment
intangible evidenced by a controllable electronic record
that provides that the account debtor undertakes to pay
the person that has control under Section 12--105 of the
controllable electronic record.
(27-c) "Cooperative addendum" means a record that satisfies
Section 9--502(e).
(27-d) "Cooperative interest" means an ownership interest in a
cooperative organization, which interest, when created, is
coupled with possessory rights of a proprietary nature in
identified physical space belonging to the cooperative
organization. A subsequent termination of the possessory
rights shall not cause an ownership interest to cease
being a cooperative interest.
(27-e) "Cooperative organization" means an organization which has
as its principal asset an interest in real property in
this state and in which organization all ownership
interests are cooperative interests.
(27-f) "Cooperative organization security interest" means a
security interest which is in a cooperative interest, is
in favor of the cooperative organization, is created by
the cooperative record, and secures only obligations
incident to ownership of that cooperative interest.
(27-g) "Cooperative record" means those records which, as a
whole, evidence cooperative interests and define the
mutual rights and obligations of the owners of the
cooperative interests and the cooperative organization.
(27-h) "Cooperative unit" means the physical space associated
with a cooperative interest.
(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 (b).
(31) Reserved.
(31-a) "Electronic money" means money in an electronic form.
(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 controllable electronic
records, 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 consists solely of the medium in 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 or to be 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, (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, or (iv) writings that evidence chattel paper.
(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 formed or organized.
(51) "Letter-of-credit right" means a right to payment or
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 40 body feet or more in
length, or, when erected on site, is 320 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.
(54-a) "Money" has the same meaning as in Section 1--201(b)(24),
but does not include (A) a deposit account or (B) money in
an electronic form that cannot be subjected to control under
Section 9-105A.
(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", except as used in Section 9--310(c),
means a person that, as debtor, entered into a security
agreement to which a new debtor has become bound under
Section 9--203(d).
(60-a) "Payment assurance device" means any device installed in a
vehicle that can be used to remotely disable the vehicle.
(61) "Payment intangible" means a general intangible under which
the account debtor's principal obligation is a monetary
obligation. The term includes a controllable payment
intangible.
(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", except as used in Section 9--609(b), 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 signed 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.
(66-a) "Prove" with respect to a fact means to meet the burden of
establishing the fact (Section 1--201(b)(8)).
(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 20 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) "Public organic record" means a record that is available to
the public for inspection and is:
(A) a record consisting of the record initially filed with or
issued by a state or the United States to form or
organize an organization and any record filed with or
issued by the state or the United States which amends or
restates the initial record;
(B) an organic record of a business trust consisting of the
record initially filed with a state and any record filed
with the state which amends or restates the initial
record, if a statute of the state governing business
trusts requires that the record be filed with the state;
or
(C) a record consisting of legislation enacted by the
legislature of a state or the Congress of the United
States which forms or organizes an organization, any
record amending the legislation, and any record filed
with or issued by the state or the United States which
amends or restates the name of the organization.
(69) "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.
(70) "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.
(71) "Registered organization" means an organization formed or
organized solely under the law of a single state or the
United States by the filing of a public organic record with,
the issuance of a public organic record by, or the enactment
of legislation by the state or the United States. The term
includes a business trust that is formed or organized under
the law of a single state if a statute of the state
governing business trusts requires that the business trust's
organic record be filed with the state.
(72) "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.
(73) "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), 2-A-508(5), 4--210, or
5--118.
(74) "Security agreement" means an agreement that creates or
provides for a security interest. A cooperative record that
provides that the owner of a cooperative interest has an
obligation to pay amounts to the cooperative organization
incident to ownership of that cooperative interest and which
states that the cooperative organization has a direct remedy
against that cooperative interest if such amounts are not
paid is a security agreement creating a cooperative
organization security interest.
(75) Reserved.
(76) "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.
(77) "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.
(78) "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.
(79) Reserved.
(79-a) "Tangible money" means money in a tangible form.
(80) "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.
(81) "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) Definitions in other articles. 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.
"Clearing corporation" Section 8--102.
"Contract for sale" Section 2--106.
"Control" (with respect to a document Section 7--106.
of title)
"Controllable electronic record" Section 12--102.
"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.
"Issuer" (with respect to document of title) Section 7--102.
"Lease" Section 2-A-103.
"Lease agreement" Section 2-A-103.
"Lease contract" Section 2-A-103.
"Leasehold interest" Section 2-A-103.
"Lessee" Section 2-A-103.
"Lessee in ordinary course of business" Section 2-A-103.
"Lessor" Section 2-A-103.
"Lessor's residual interest" Section 2-A-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.
"Protected purchaser" Section 8--303.
"Prove" Section 4-A-105.
"Qualifying purchaser" Section 12--102.
"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 1 definitions and principles. Article 1 contains general
definitions and principles of construction and interpretation applicable
throughout this article.
Section 9--103. Purchase-money Security Interest; Application of
Payments; Burden of Establishing.
(a) Definitions. 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) Purchase-money security interest in goods. 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) Purchase-money security interest in software. 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) Consignor's inventory purchase-money security interest. The
security interest of a consignor in goods that are the subject of a
consignment is a purchase-money security interest in inventory.
(e) Application of payment in non-consumer-goods transaction. 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) No loss of status of purchase-money security interest in
non-consumer-goods transaction. 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) Burden of proof in non-consumer-goods transaction. 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) Non-consumer-goods transactions; no inference. 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.
Section 9--104. Control of Deposit Account.
(a) Requirements for control. 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 a signed
record that the bank will comply with instructions originated
by the secured party directing disposition of the funds in
the deposit account without further consent by the debtor;
(3) the secured party becomes the bank's customer with respect to
the deposit account;
(4) the name on the deposit account is the name of the secured
party or indicates that the secured party has a security
interest in the deposit account; or
(5) another person, other than the debtor:
(A) has control of the deposit account and acknowledges that it has
control on behalf of the secured party; or
(B) obtains control of the deposit account after having acknowledged
that it will obtain control of the deposit account on behalf of the
secured party.
(b) Debtor's right to direct disposition. 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.
(c) No implied duties of bank. The authentication of a record by the
bank under subsection (a)(2) does not impose upon the bank any duty not
expressly agreed to by the bank in the record. The naming of the deposit
account in the name of the secured party or with an indication that the
secured party has a security interest in the deposit account under
subsection (a)(4) does not impose upon the bank any duty not expressly
agreed to by the bank.
(d) Conditions not relevant. A secured party has control under
subsection (a)(2) even if any duty of the bank to comply with
instructions originated by the secured party directing disposition of
the funds in the deposit account is subject to any condition or
conditions (other than further consent by the debtor).
(e) No inferences. The procedures and requirements of subsection
(a)(4) available to obtain control shall not be used in interpreting the
sufficiency of a secured party's compliance with the procedures and
requirements of subsection (a)(1), (a)(2) or (a)(3) to obtain control.
The provisions of subsection (a)(4) shall create no inference regarding
the requirements for compliance with subsection (a)(1), (a)(2) or
(a)(3).
Section 9--105. Control of Electronic Copy of Record Evidencing Chattel
Paper.
(a) General rule: control of electronic copy of record evidencing
chattel paper. A purchaser has control of an authoritative electronic
copy of a record evidencing chattel paper if a system employed for
evidencing the assignment of interests in the chattel paper reliably
establishes the purchaser as the person to which the authoritative
electronic copy was assigned.
(b) Single authoritative copy. A system satisfies subsection (a) if
the record or records evidencing the chattel paper are created, stored,
and assigned in 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.
(c) One or more authoritative copies. A system satisfies subsection
(a), and a purchaser has control of an authoritative electronic copy of
a record evidencing chattel paper, if the electronic copy, a record
attached to or logically associated with the electronic copy, or a
system in which the electronic copy is recorded:
(1) enables the purchaser readily to identify each electronic copy as
either an authoritative copy or a nonauthoritative copy;
(2) enables the purchaser readily to identify itself in any way,
including by name, identifying number, cryptographic key, office, or
account number, as the assignee of the authoritative electronic copy;
and
(3) gives the purchaser exclusive power, subject to subsection (d),
to:
(A) prevent others from adding or changing an identified assignee of
the authoritative electronic copy; and
(B) transfer control of the authoritative electronic copy.
(d) Meaning of exclusive. Subject to subsection (e), a power is
exclusive under subsection (c)(3)(A) and (B) even if:
(1) the authoritative electronic copy, a record attached to or
logically associated with the authoritative electronic copy, or a system
in which the authoritative electronic copy is recorded limits the use of
the authoritative electronic copy or has a protocol programmed to cause
a change, including a transfer or loss of control; or
(2) the power is shared with another person.
(e) When power not shared with another person. A power of a purchaser
is not shared with another person under subsection (d)(2) and the
purchaser's power is not exclusive if:
(1) the purchaser can exercise the power only if the power also is
exercised by the other person; and
(2) the other person:
(A) can exercise the power without exercise of the power by the
purchaser; or
(B) is the transferor to the purchaser of an interest in the chattel
paper.
(f) Presumption of exclusivity of certain powers. If a purchaser has
the powers specified in subsection (c)(3)(A) and (B), the powers are
presumed to be exclusive.
(g) Obtaining control through another person. A purchaser has control
of an authoritative electronic copy of a record evidencing chattel paper
if another person, other than the transferor to the purchaser of an
interest in the chattel paper:
(1) has control of the authoritative electronic copy and acknowledges
that it has control on behalf of the purchaser; or
(2) obtains control of the authoritative electronic copy after having
acknowledged that it will obtain control of the electronic copy on
behalf of the purchaser.
Section 9--105A. Control of Electronic Money.
(a) General rule: control of electronic money. A person has control of
electronic money if:
(1) the electronic money, a record attached to or logically associated
with the electronic money, or a system in which the electronic money is
recorded gives the person:
(A) power to avail itself of substantially all the benefit from the
electronic money; and
(B) exclusive power, subject to subsection (b), to:
(i) prevent others from availing themselves of substantially all the
benefit from the electronic money; and
(ii) transfer control of the electronic money to another person or
cause another person to obtain control of other electronic money as a
result of the transfer of the electronic money; and
(2) the electronic money, a record attached to or logically associated
with the electronic money, or a system in which the electronic money is
recorded enables the person readily to identify itself in any way,
including by name, identifying number, cryptographic key, office, or
account number, as having the powers under paragraph (1).
(b) Meaning of exclusive. Subject to subsection (c), a power is
exclusive under subsection (a)(1)(B)(i) and (ii) even if:
(1) the electronic money, a record attached to or logically associated
with the electronic money, or a system in which the electronic money is
recorded limits the use of the electronic money or has a protocol
programmed to cause a change, including a transfer or loss of control;
or
(2) the power is shared with another person.
(c) When power not shared with another person. A power of a person is
not shared with another person under subsection (b)(2) and the person's
power is not exclusive if:
(1) the person can exercise the power only if the power also is
exercised by the other person; and
(2) the other person:
(A) can exercise the power without exercise of the power by the
person; or
(B) is the transferor to the person of an interest in the electronic
money.
(d) Presumption of exclusivity of certain powers. If a person has the
powers specified in subsection (a)(1)(B)(i) and (ii), the powers are
presumed to be exclusive.
(e) Control through another person. A person has control of electronic
money if another person, other than the transferor to the person of an
interest in the electronic money:
(1) has control of the electronic money and acknowledges that it has
control on behalf of the person; or
(2) obtains control of the electronic money after having acknowledged
that it will obtain control of the electronic money on behalf of the
person.
Section 9--106. Control of Investment Property.
(a) Control under Section 8--106. A person has control of a
certificated security, uncertificated security, or security entitlement
as provided in Section 8--106.
(b) Control of commodity contract. 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) Effect of control of securities account or commodity account. 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.
Section 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.
Section 9--107A. Control of Controllable Electronic Record, Controllable
Account, or Controllable Payment Intangible.
(a) Control under Section 12--105. A secured party has control of a
controllable electronic record as provided in Section 12--105.
(b) Control of controllable account and controllable payment
intangible. A secured party has control of a controllable account or
controllable payment intangible if the secured party has control of the
controllable electronic record that evidences the controllable account
or controllable payment intangible.
Section 9--107B. No Requirement to Acknowledge or Confirm; No Duties.
(a) No requirement to acknowledge. A person that has control under
Section 9--104, 9--105, or 9--105A is not required to acknowledge that
it has control on behalf of another person.
(b) No duties or confirmation. If a person acknowledges that it has or
will obtain control on behalf of another person, unless the person
otherwise agrees or law other than this article otherwise provides, the
person does not owe any duty to the other person and is not required to
confirm the acknowledgment to any other person.
Section 9--108. Sufficiency of Description.
(a) Sufficiency of description. 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) Examples of reasonable identification. Except as otherwise
provided in Section 9--502 and 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 this chapter;
(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) Supergeneric description not sufficient. 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) Investment property. 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) When description by type insufficient. A description only by type
of collateral defined in this chapter is an insufficient description of:
(1) a commercial tort claim;
(2) in a consumer transaction, consumer goods, a security
entitlement, a securities account, or a commodity account; or
(3) a cooperative interest.
SUBPART 2. APPLICABILITY OF ARTICLE
Section 9--109. Scope.
(a) General scope of article. 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 2-A-508(5), as provided in Section 9--110;
(6) a security interest arising under Section 4--210 or 5--118;
and
(7) a security interest in a cooperative interest.
(b) Security interest in secured obligation. 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) Extent to which article does not apply. 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) Inapplicability of article. This article does not apply to:
(1) a landlord's lien, other than an agricultural lien, or a
security interest in a cooperative interest;
(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 or contract for an annuity
including a variable annuity 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 Section 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;
(D) security agreements covering personal and real property
in Section 9--604; and
(E) security interests in cooperative interests;
(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.
Section 9--110. Security Interests Arising Under Article 2 or 2-A.
A security interest arising under Section 2--401, 2--505, 2--711(3),
or 2-A-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
Section 9--201. General Effectiveness of Security Agreement.
(a) General effectiveness. Except as otherwise provided in this
chapter, a security agreement is effective according to its terms
between the parties, against purchasers of the collateral, and against
creditors.
(b) Applicable consumer laws and other law. A transaction subject to
this article is subject to:
(1) any applicable rule of law which establishes a different rule
for consumers;
(2) any other statute or regulation of this state which regulates
the rates, charges, agreements and practices for loans,
credit sales or other extensions of credit;
(3) any consumer protection statute or regulation of this state.
(c) Other applicable law controls. 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) Further deference to other applicable law. 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.
Section 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.
Section 9--203. Attachment and Enforceability of Security Interest;
Proceeds; Supporting Obligations; Formal Requisites.
(a) Attachment. 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) Enforceability. 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 signed 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;
(D) the collateral is controllable accounts, controllable
electronic records, controllable payment intangibles,
deposit accounts, electronic documents, electronic money,
investment property or letter-of-credit rights, and the
secured party has control under Section 7--106, 9--104,
9--105, 9--105A, 9--106, 9--107, or 9--107A pursuant to
the debtor's security agreement; or
(E) the collateral is chattel paper and the secured party has
possession and control under Section 9--314A pursuant to
the debtor's security agreement.
(c) Other UCC provisions. 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 2 or 2-A,
and Section 9--206 on security interests in investment property.
(d) When a person becomes bound by another person's security
agreement. 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) Effect of new debtor becoming bound. 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) Proceeds and supporting obligations. 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) Lien securing right to payment. 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) Security entitlement carried in securities account. 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) Commodity contracts carried in commodity account. 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.
Section 9--204. After-acquired Property; Future Advances.
(a) After-acquired collateral. Except as otherwise provided in
subsection (b), a security agreement may create or provide for a
security interest in after-acquired collateral.
(b) When after-acquired property clause not effective. Subject to
subsection (b-1), 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 10 days after the secured party gives value; or
(2) a commercial tort claim.
(b-1) Limitation on subsection (b). Subsection (b) does not prevent a
security interest from attaching:
(1) to consumer goods as proceeds under Section 9--315(a) or
commingled goods under Section 9--336(c);
(2) to a commercial tort claim as proceeds under Section
9--315(a); or
(3) under an after-acquired property clause to property that is
proceeds of consumer goods or a commercial tort claim.
(c) Future advances and other value. 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.
Section 9--205. Use or Disposition of Collateral Permissible.
(a) When security interest not invalid or fraudulent. 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) Requirements of possession not relaxed. 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.
Section 9--206. Security Interest Arising in Purchase or Delivery of
Financial Asset.
(a) Security interest when person buys through securities
intermediary. 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) Security interest secures obligation to pay for financial asset.
The security interest described in subsection (a) secures the person's
obligation to pay for the financial asset.
(c) Security interest in payment against delivery transaction. 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) Security interest secures obligation to pay for delivery. The
security interest described in subsection (c) secures the obligation to
make payment for the delivery.
SUBPART 2. RIGHTS AND DUTIES
Section 9--207. Rights and Duties of Secured Party Having Possession or
Control of Collateral.
(a) Duty of care when secured party in possession. 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) Expenses, risks, duties, and rights when secured party in
possession. 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) Duties and rights when secured party in possession or control.
Except as otherwise provided in subsection (d), a secured party having
possession of collateral or control of collateral under Section 7--106,
9--104, 9--105, 9--105A, 9--106, 9--107, or 9--107A:
(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) Buyer of certain rights to payment. 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.
Section 9--208. Additional Duties of Secured Party Having Control of
Collateral.
(a) Applicability of section. 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) Duties of secured party after receiving demand from debtor. Within
10 days after receiving a signed 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 a signed record 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 under
Section 9--105 of an authoritative electronic copy of a
record evidencing chattel paper shall transfer control of the
electronic copy to debtor or a person designated by the
debtor;
(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
a signed 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;
(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 a signed release from
any further obligation to pay or deliver proceeds of the
letter-of-credit to the secured party;
(6) a secured party having control under Section 7--106 of an
authoritative electronic copy of an electronic document of
title shall transfer control of the electronic copy to the
debtor or a person designated by the debtor;
(7) a secured party having control under Section 9--105A of
electronic money shall transfer control of the electronic
money to the debtor or a person designated by the debtor; and
(8) a secured party having control under Section 12--105 of a
controllable electronic record, other than a buyer of a
controllable account or controllable payment intangible
evidenced by the controllable electronic record, shall
transfer control of the controllable electronic record to the
debtor or a person designated by the debtor.
Section 9--209. Duties of Secured Party If Account Debtor Has Been
Notified of Assignment.
(a) Applicability of section. 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) Duties of secured party after receiving demand from debtor. Within
10 days after receiving a signed demand by the debtor, a secured party
shall send to an account debtor that has received notification under
Section 9--406(a) or 12--106(b) of an assignment to the secured party as
assignee a signed record that releases the account debtor from any
further obligation to the secured party.
(c) Inapplicability to sales. This section does not apply to an
assignment constituting the sale of an account, chattel paper, or
payment intangible.
Section 9--210. Request for Accounting; Request Regarding List of
Collateral or Statement of Account.
(a) Definitions 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 signed 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
signed 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
signed 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) Duty to respond to requests. 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 14 days after receipt:
(1) in the case of a request for an accounting, by signing 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 signing and
sending to the debtor an approval or correction.
(c) Request regarding list of collateral; statement concerning type of
collateral. 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 a signed
record including a statement to that effect within 14 days after
receipt.
(d) Request regarding list of collateral; no interest claimed. 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 14 days after receipt by sending to the debtor a signed
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
interest in the collateral.
(e) Request for accounting or regarding statement of account; no
interest in obligation claimed. 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 14 days after receipt by sending to the debtor a signed
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) Charges for responses. 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 $25 for
each additional response.
PART 3
PERFECTION AND PRIORITY
SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
Section 9--301. Law Governing Perfection and Priority of Security
Interests.
Except as otherwise provided in Sections 9--303 through 9-306B, the
following rules determine the law governing perfection, the effect of
perfection or nonperfection, and the priority of a security interest in
collateral:
(a) 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.
(b) 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.
(c) Except as otherwise provided in subsection (d), while negotiable
tangible documents, goods, instruments, or tangible money is located in
a jurisdiction, the local law of that jurisdiction governs:
(1) perfection of a security interest in the goods by filing a
fixture filing;
(2) perfection of a security interest in timber to be cut; and
(3) the effect of perfection or nonperfection and the priority of
a nonpossessory security interest in the collateral.
(d) 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.
(e) When collateral is a cooperative interest, the law of this state
governs perfection, the effect of perfection or nonperfection, and the
priority of the security interest in such collateral.
Section 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.
Section 9--303. Law Governing Perfection and Priority of Security
Interests in Goods Covered by a Certificate of Title.
(a) Applicability of section. 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) When goods covered by certificate of title. 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) Applicable law. 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.
Section 9--304. Law Governing Perfection and Priority of Security
Interests in Deposit Accounts.
(a) Law of bank's jurisdiction governs. 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 even if the transaction does not bear
any relation to the bank's jurisdiction.
(b) Bank's jurisdiction. The following rules determine a bank's
jurisdiction for purposes of this part:
(1) If an agreement between the bank and its customer governing
the deposit account expressly provides that a particular
jurisdiction is the bank's jurisdiction for purposes of this
part, this article, or this chapter, 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 apply, 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 apply, the bank's
jurisdiction is the jurisdiction in which the chief executive
office of the bank is located.
Section 9--305. Law Governing Perfection and Priority of Security
Interests in Investment Property.
(a) Governing law: general rules. Except as otherwise provided in
subsections (c) and (d), 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.
(5) Paragraphs (2), (3), and (4) apply even if the transaction
does not bear any relation to the jurisdiction.
(b) Commodity intermediary's jurisdiction. 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 this chapter, 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 apply, 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 apply, the commodity
intermediary's jurisdiction is the jurisdiction in which the
chief executive office of the commodity intermediary is
located.
(c) When perfection governed by law of jurisdiction where debtor
located. 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.
(d) Cooperative interests. Subsections (a) through (c) do not apply to
cooperative interests.
Section 9--306. Law Governing Perfection and Priority of Security
Interests in Letter-of-credit Rights.
(a) Governing law: issuer's or nominated person's jurisdiction.
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) Issuer's or nominated person's jurisdiction. 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) When section not applicable. This section does not apply to a
security interest that is perfected only under Section 9--308(d).
Section 9-306A. Law Governing Perfection and Priority of Security
Interests in Chattel Paper.
(a) Chattel paper evidenced by authoritative electronic copy. Except
as provided in subsection (d), if chattel paper is evidenced only by an
authoritative electronic copy of the chattel paper or is evidenced by an
authoritative electronic copy and an authoritative tangible copy, the
local law of the chattel paper's jurisdiction governs perfection, the
effect of perfection or nonperfection, and the priority of a security
interest in the chattel paper, even if the transaction does not bear any
relation to the chattel paper's jurisdiction.
(b) Chattel paper's jurisdiction. The following rules determine the
chattel paper's jurisdiction under this section:
(1) If the authoritative electronic copy of the record evidencing
chattel paper, or a record attached to or logically associated with the
electronic copy and readily available for review, expressly provides
that a particular jurisdiction is the chattel paper's jurisdiction for
purposes of this part, this article, or this code, that jurisdiction is
the chattel paper's jurisdiction.
(2) If paragraph (1) does not apply and the rules of the system in
which the authoritative electronic copy is recorded are readily
available for review and expressly provide that a particular
jurisdiction is the chattel paper's jurisdiction for purposes of this
part, this article, or this code, that jurisdiction is the chattel
paper's jurisdiction.
(3) If paragraphs (1) and (2) do not apply and the authoritative
electronic copy, or a record attached to or logically associated with
the electronic copy and readily available for review, expressly provides
that the chattel paper is governed by the law of a particular
jurisdiction, that jurisdiction is the chattel paper's jurisdiction.
(4) If paragraphs (1), (2) and (3) do not apply and the rules of the
system in which the authoritative electronic copy is recorded are
readily available for review and expressly provide that the chattel
paper or the system is governed by the law of a particular jurisdiction,
that jurisdiction is the chattel paper's jurisdiction.
(5) If paragraphs (1) through (4) do not apply, the chattel paper's
jurisdiction is the jurisdiction in which the debtor is located.
(c) Chattel paper evidenced by authoritative tangible copy. If an
authoritative tangible copy of a record evidences chattel paper and the
chattel paper is not evidenced by an authoritative electronic copy,
while the authoritative tangible copy of the record evidencing chattel
paper is located in a jurisdiction, the local law of that jurisdiction
governs:
(1) perfection of a security interest in the chattel paper by
possession under Section 9--314A; and
(2) the effect of perfection or nonperfection and the priority of a
security interest in the chattel paper.
(d) When perfection governed by law of jurisdiction where debtor
located. The local law of the jurisdiction in which the debtor is
located governs perfection of a security interest in chattel paper by
filing.
Section 9-306B. Law Governing Perfection and Priority of Security
Interests in Controllable Accounts, Controllable
Electronic Records, and Controllable Payment
Intangibles.
(a) Governing law: general rules. Except as provided in subsection
(b), the local law of the controllable electronic record's jurisdiction
specified in Section 12--107(c) and (d) governs perfection, the effect
of perfection or nonperfection, and the priority of a security interest
in a controllable electronic record and a security interest in a
controllable account or controllable payment intangible evidenced by the
controllable electronic record.
(b) When perfection governed by law of jurisdiction where debtor
located. The local law of the jurisdiction in which the debtor is
located governs:
(1) perfection of a security interest in a controllable account,
controllable electronic record, or controllable payment intangible by
filing; and
(2) automatic perfection of a security interest in a controllable
payment intangible created by a sale of the controllable payment
intangible.
Section 9--307. Location of Debtor.
(a) "Place of business." In this section, "place of business" means a
place where a debtor conducts its affairs.
(b) Debtor's location: general rules. Except as otherwise provided in
this section, the following rules determine a debtor's location:
(1) A 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) Limitation of applicability of subsection (b). 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) Continuation of location: cessation of existence, etc. 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) Location of registered organization organized under state law. A
registered organization that is organized under the law of a state is
located in that state.
(f) Location of registered organization organized under federal law;
bank branches and agencies. 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, including by designating its main
office, home office, or other comparable office; or
(3) in the District of Columbia, if neither paragraph (1) nor
paragraph (2) applies.
(g) Continuation of location: change in status of registered
organization. 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) Location of United States. The United States is located in the
District of Columbia.
(i) Location of foreign bank branch or agency if licensed in only one
state. 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) Location of foreign air carrier. 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) Section applies only to this part. This section applies only for
purposes of this part.
SUBPART 2. PERFECTION
Section 9--308. When Security Interest or Agricultural Lien Is
Perfected; Continuity of Perfection.
(a) Perfection of security interest. 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
Sections 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) Perfection of agricultural lien. 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) Continuous perfection; perfection by different methods. 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) Supporting obligation. Perfection of a security interest in
collateral also perfects a security interest in a supporting obligation
for the collateral.
(e) Lien securing right to payment. 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) Security entitlement carried in securities account. Perfection of
a security interest in a securities account also perfects a security
interest in the security entitlements carried in the securities account.
(g) Commodity contract carried in commodity account. Perfection of a
security interest in a commodity account also perfects a security
interest in the commodity contracts carried in the commodity account.
(h) Cooperative organization security interest. A cooperative
organization security interest becomes perfected when the cooperative
interest first comes into existence and remains perfected so long as the
cooperative interest exists.
Section 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 2-A-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;
(13) a security interest created by an assignment of a beneficial
interest in a decedent's estate; and
(14) a sale by an individual of an account that is a right to payment
of winnings in a lottery or other game of chance.
Section 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) General rule: perfection by filing. 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) Exceptions: filing not necessary. Except as provided in subsection
(d), 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, control, 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 controllable accounts, controllable electronic records,
controllable payment intangibles, deposit accounts,
electronic documents, investment property, or
letter-of-credit rights which is perfected by control under
Section 9--314;
(8-a) in chattel paper which is perfected by possession and
control under Section 9--314A;
(9) in proceeds which is perfected under Section 9--315;
(10) that is perfected under Section 9--316; or
(11) that is a cooperative organization security interest.
(c) Assignment of perfected security interest. 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.
(d) Special rule for cooperative interests. Except for a cooperative
organization security interest, a security interest in a cooperative
interest may be perfected only by filing a financing statement.
Section 9--311. Perfection of Security Interests in Property Subject to
Certain Statutes, Regulations, and Treaties.
(a) Security interest subject to other law. 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) a certificate-of-title statute of this state or
regulations promulgated thereunder, to the extent such
statute or regulations provide for a security interest to
be indicated on the certificate as a condition or result
of perfection; or
(3) a statute of another jurisdiction which provides for a
security interest to be indicated on a certificate of
title 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 other law. 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) Duration and renewal of perfection. 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) Inapplicability to certain inventory. During any period in which
collateral subject to a statute specified in subsection (a)(2) 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 goods of that kind,
this section does not apply to a security interest in that collateral
created by that person.
Section 9--312. Perfection of Security Interests in Chattel Paper,
Controllable Accounts, Controllable Electronic
Records, Controllable Payment Intangibles, 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) Perfection by filing permitted. A security interest in chattel
paper, controllable accounts, controllable electronic records,
controllable payment intangibles, instruments, investment property, or
negotiable documents may be perfected by filing.
(b) Control or possession of certain collateral. 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;
(3) a security interest in tangible money may be perfected only
by the secured party's taking possession under Section
9--313; and
(4) a security interest in electronic money may be perfected only
by control under Section 9--314.
(c) Goods covered by negotiable document. 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) Goods covered by nonnegotiable document. While goods are in the
possession of a bailee that has issued a non-negotiable 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) Temporary perfection: new value. A security interest in
certificated securities, negotiable documents, or instruments is
perfected without filing or the taking of possession or control for a
period of 20 days from the time it attaches to the extent that it arises
for new value given under a signed security agreement.
(f) Temporary perfection: goods or documents made available to debtor.
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) Temporary perfection: delivery of security certificate or
instrument to debtor. A perfected security interest in a certificated
security or instrument remains perfected for 20 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) Expiration of temporary perfection. After the 20-day period
specified in subsection (e), (f), or (g) expires, perfection depends
upon compliance with this article.
(i) Cooperative interests. Subsections (a) through (h) do not apply to
cooperative interests.
Section 9--313. When Possession by or Delivery to Secured Party Perfects
Security Interest Without Filing.
(a) Perfection by possession or delivery. Except as otherwise provided
in subsection (b), a secured party may perfect a security interest in
goods, instruments, negotiable tangible documents, or tangible money 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) Goods covered by certificate of title. 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) Collateral in possession of person other than debtor. 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 signs 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
signed a record acknowledging that it will hold possession of
the collateral for the secured party's benefit.
(d) Time of perfection by possession; continuation of perfection. If
perfection of a security interest depends upon possession of the
collateral by a secured party, perfection occurs not earlier than the
time the secured party takes possession and continues only while the
secured party retains possession.
(e) Time of perfection by delivery; continuation of perfection. 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) Acknowledgment not required. A person in possession of collateral
is not required to acknowledge that it holds possession for a secured
party's benefit.
(g) Effectiveness of acknowledgment; no duties or confirmation. 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) Secured party's delivery to person other than debtor. 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) Effect of delivery under subsection (h); no duties or
confirmation. 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.
(j) Cooperative interests. Subsections (a) through (i) do not apply to
cooperative interests.
Section 9--314. Perfection by Control.
(a) Perfection by control. A security interest in controllable
accounts, controllable electronic records, controllable payment
intangibles, deposit accounts, electronic documents, electronic money,
investment property, or letter-of-credit rights, may be perfected by
control of the collateral under Section 7--106, 9--104, 9--105A, 9--106,
9--107 or 9--107A.
(b) Specified collateral: time of perfection by control; continuation
of perfection. A security interest in controllable accounts,
controllable electronic records, controllable payment intangibles,
deposit accounts, electronic documents, electronic money, or
letter-of-credit rights is perfected by control under Section 7--106,
9--104, 9--105A, 9--107, or 9--107A not earlier than the time when the
secured party obtains control and remains perfected by control only
while the secured party retains control.
(c) Investment property: time of perfection by control; continuation
of perfection. A security interest in investment property is perfected
by control under Section 9--106 not earlier than 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.
(d) Cooperative interests. Subsections (a) through (c) do not apply to
cooperative interests.
Section 9-314A. Perfection by Possession and Control of Chattel Paper.
(a) Perfection by possession and control. A secured party may perfect
a security interest in chattel paper by taking possession of each
authoritative tangible copy of the record evidencing the chattel paper
and obtaining control of each authoritative electronic copy of the
electronic record evidencing the chattel paper.
(b) Time of perfection; continuation of perfection. A security
interest is perfected under subsection (a) not earlier than the time the
secured party takes possession and obtains control and remains perfected
under subsection (a) only while the secured party retains possession and
control.
(c) Application of Section 9--313 to perfection by possession of
chattel paper. Section 9--313(c) and (f) through (i) applies to
perfection by possession of an authoritative tangible copy of a record
evidencing chattel paper.
Section 9--315. Secured Party's Rights on Disposition of Collateral and
in Proceeds.
(a) Disposition of collateral: continuation of security interest or
agricultural lien; proceeds. 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) When commingled proceeds identifiable. 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) Perfection of security interest in proceeds. A security interest
in proceeds is a perfected security interest if the security interest in
the original collateral was perfected.
(d) Continuation of perfection. A perfected security interest in
proceeds becomes unperfected on the 21st 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 20 days thereafter.
(e) When perfected security interest in proceeds becomes unperfected.
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 21st day after the security interest attaches to the
proceeds.
Section 9--316. Effect of Change in Governing Law.
(a) General rule: effect on perfection of change in governing law. A
security interest perfected pursuant to the law of the jurisdiction
designated in Section 9--301(a), 9--305(c), 9-306A(d), or 9-306B(b)
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; or
(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.
(b) Security interest perfected or unperfected under law of new
jurisdiction. 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) Possessory security interest in collateral moved to new
jurisdiction. 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) Goods covered by certificate of title from this state. 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) When subsection (d) security interest becomes unperfected against
purchasers. 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) Change in jurisdiction of chattel paper, controllable electronic
record, bank, issuer, nominated person, securities intermediary, or
commodity intermediary. A security interest in chattel paper,
controllable accounts, controllable electronic records, controllable
payment intangibles, deposit accounts, letter-of-credit rights, or
investment property which is perfected under the law of the chattel
paper's jurisdiction, the controllable electronic record's jurisdiction,
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 the
applicable jurisdiction to another jurisdiction.
(g) Subsection (f) security interest perfected or unperfected under
law of new jurisdiction. 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.
(h) Effect on filed financing statement of change in governing law.
The following rules apply to collateral to which a security interest
attaches within four months after the debtor changes its location to
another jurisdiction:
(1) A financing statement filed before the change pursuant to the
law of the jurisdiction designated in Section 9--301(a) or
9--305(c) is effective to perfect a security interest in the
collateral if the financing statement would have been
effective to perfect a security interest in the collateral
had the debtor not changed its location.
(2) If a security interest perfected by a financing statement
that is effective under paragraph (1) becomes perfected under
the law of the other jurisdiction before the earlier of the
time the financing statement would have become ineffective
under the law of the jurisdiction designated in Section
9--301(a) or 9--305(c) or the expiration of the four-month
period, it remains perfected thereafter. If the security
interest does not become perfected under the law of the other
jurisdiction before the earlier time or event, it becomes
unperfected and is deemed never to have been perfected as
against a purchaser of the collateral for value.
(i) Effect of change in governing law on financing statement filed
against original debtor. If a financing statement naming an original
debtor is filed pursuant to the law of the jurisdiction designated in
Section 9--301(a) or 9--305(c) and the new debtor is located in another
jurisdiction, the following rules apply:
(1) The financing statement is effective to perfect a security
interest in collateral in which the new debtor has or
acquires rights before or within four months after the new
debtor becomes bound under Section 9--203(d), if the
financing statement would have been effective to perfect a
security interest in the collateral had the collateral been
acquired by the original debtor.
(2) A security interest that is perfected by the financing
statement and which becomes perfected under the law of the
other jurisdiction before the earlier of the expiration of
the four month period or the time the financing statement
would have become ineffective under the law of the
jurisdiction designated in Section 9--301(a) or 9--305(c)
remains perfected thereafter. A security interest that is
perfected by the financing statement but which does not
become perfected under the law of the other jurisdiction
before the earlier time or event becomes unperfected and is
deemed never to have been perfected as against a purchaser of
the collateral for value.
SUBPART 3. PRIORITY
Section 9--317. Interests That Take Priority over or Take Free of
Security Interest or Agricultural Lien.
(a) Conflicting security interests and rights of lien creditors. A
security interest or agricultural lien is subordinate to the rights of:
(1) a person entitled to priority under Section 9--322; and
(2) except as otherwise provided in subsection (e), a person that
becomes a lien creditor before the earlier of the time:
(A) the security interest or agricultural lien is perfected;
or
(B) one of the conditions specified in Section 9--203(b)(3)
is met and a financing statement covering the collateral
is filed.
(b) Buyers that receive delivery. Except as otherwise provided in
subsection (e), a buyer, other than a secured party, of goods,
instruments, tangible documents, or a certificated security 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) Lessees that receive delivery. 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) Licensees and buyers of certain collateral. Subject to subsections
(f) through (i), a licensee of a general intangible or a buyer, other
than a secured party, of collateral other than electronic money, goods,
instruments, intangible documents or 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) Purchase-money security interest. 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 20 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. The preceding sentence does not apply to cooperative
interests.
(f) Buyers of chattel paper. A buyer, other than a secured party, of
chattel paper takes free of a security interest if, without knowledge of
the security interest and before it is perfected, the buyer gives value
and:
(1) receives delivery of each authoritative tangible copy of the
record evidencing the chattel paper; and
(2) if each authoritative electronic copy of the record evidencing the
chattel paper can be subjected to control under Section 9--105, obtains
control of each authoritative electronic copy.
(g) Buyers of electronic documents. A buyer of an electronic document
takes free of a security interest if, without knowledge of the security
interest and before it is perfected, the buyer gives value and, if each
authoritative electronic copy of the document can be subjected to
control under Section 7--106, obtains control of each authoritative
electronic copy.
(h) Buyers of controllable electronic records. A buyer of a
controllable electronic record takes free of a security interest if,
without knowledge of the security interest and before it is perfected,
the buyer gives value and obtains control of the controllable electronic
record.
(i) Buyers of controllable accounts and controllable payment
intangibles. A buyer, other than a secured party, of a controllable
account or a controllable payment intangible takes free of a security
interest if, without knowledge of the security interest and before it is
perfected, the buyer gives value and obtains control of the controllable
account or controllable payment intangible.
Section 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) Seller retains no interest. 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) Deemed rights of debtor if buyer's security interest unperfected.
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.
Section 9--319. Rights and Title of Consignee with Respect to Creditors
and Purchasers.
(a) Consignee has consignor's rights. 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 is deemed to have
rights and title to the goods identical to those the consignor had or
had power to transfer.
(b) Applicability of other law. 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.
Section 9--320. Buyer of Goods.
(a) Buyer in ordinary course of business. 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) Buyer of consumer goods. 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) Effectiveness of filing for subsection (b). 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) Buyer in ordinary course of business at wellhead or minehead. 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) Possessory security interest not affected. Subsections (a) and (b)
do not affect a security interest in goods in the possession of the
secured party under Section 9--313.
Section 9--321. Licensee of General Intangible and Lessee of Goods in
Ordinary Course of Business.
(a) "Licensee in ordinary course of business." 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) Rights of licensee in ordinary course of business. A licensee in
ordinary course of business takes its rights under a nonexclusive
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) Rights of lessee in ordinary course of business. 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.
Section 9--322. Priorities among Conflicting Security Interests in and
Agricultural Liens on Same Collateral.
(a) General priority rules. 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) Time of perfection: proceeds and supporting obligations. For the
purposes of 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) Special priority rules: proceeds and supporting obligations.
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) First-to-file priority rule for certain collateral. 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) Applicability of subsection (d). 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) Limitations on subsections (a) through (e). 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 2 or 2-A.
(g) Priority under agricultural lien statute. 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.
(h) Special priority rules: cooperative interests.
(1) With respect to all amounts secured, a cooperative
organization security interest has priority over all other
security interests in a cooperative interest.
(2) As to security interests in cooperative interests other than
cooperative organization security interests, Section
9--323(h) provides special rules for future advances.
Section 9--323. Future Advances.
(a) When priority based on time of advance. 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) Lien creditor. Except as otherwise provided in subsections (c) and
(h), a security interest is subordinate to the rights of a person that
becomes a lien creditor to the extent that the security interest secures
an advance 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) Buyer of receivables. 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) Buyer of goods. Except as otherwise provided in subsection (e), a
buyer of goods 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) 45 days after the purchase.
(e) Advances made pursuant to commitment: priority of buyer of goods.
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 45 day period.
(f) Lessee of goods. Except as otherwise provided in subsection (g), a
lessee of goods 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) 45 days after the lease contract becomes enforceable.
(g) Advances made pursuant to commitment: priority of lessee of goods.
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 45 day period.
(h) Priority with respect to cooperative interests. The following
rules apply for purposes of determining under Section 9--322(a)(1) the
priority of a perfected security interest in a cooperative interest:
(1) Perfection of the security interest with respect to a future
advance dates from the time of the filing under Section
9--310(d) if all of the following are true:
(A) The security agreement states the maximum amount to be
advanced pursuant to commitment;
(B) The future advance is made pursuant to that commitment;
(C) The future advance plus the outstanding sum of any prior
advances is not more than the stated maximum amount; and
(D) The filed financing statement includes a cooperative
addendum disclosing that the security agreement contains
a commitment to make future advances.
(2) Except as provided in paragraph (1), perfection of the
security interest with respect to a future advance dates from
the time the advance is made.
(3) For purposes of paragraph (1), no amendment of a security
agreement shall adversely affect the priority of any other
security interest in the same cooperative interest that was
perfected prior to the amendment.
(4) This subsection applies only to advances made subsequent to
an initial advance.
Section 9--324. Priority of Purchase-money Security Interests.
(a) General rule: purchase-money priority. 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 20 days thereafter.
(b) Inventory purchase-money priority. 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 a signed 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) Holders of conflicting inventory security interests to be
notified. 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 20-day period
thereunder.
(d) Livestock purchase-money priority. 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 a signed 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) Holders of conflicting livestock security interests to be
notified. 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 20-day period
thereunder.
(f) Software purchase-money priority. 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) Conflicting purchase-money security interests. 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.
Section 9--325. Priority of Security Interests in Transferred
Collateral.
(a) Subordination of security interest in transferred collateral.
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) Limitation of subsection (a) subordination. 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 2-A-508(5).
Section 9--326. Priority of Security Interests Created by New Debtor.
(a) Subordination of security interest created by new debtor. Subject
to subsection (b), a security interest that is created by a new debtor
in collateral in which the new debtor has or acquires rights and is
perfected solely by a filed financing statement that would be
ineffective to perfect the security interest but for the application of
Section 9--316(i)(1) or 9--508 is subordinate to a security interest in
the same collateral which is perfected other than by such a filed
financing statement.
(b) Priority under other provisions; multiple original debtors. The
other provisions of this part determine the priority among conflicting
security interests in the same collateral perfected by filed financing
statements described in subsection (a). However, if the security
agreements to which a new debtor became bound as debtor were not entered
into by the same original debtor, the conflicting security interests
rank according to priority in time of the new debtor's having become
bound.
Section 9-326A. Priority of Security Interest in Controllable Account,
Controllable Electronic Record, and Controllable
Payment Intangible.
A security interest in a controllable account, controllable electronic
record, or controllable payment intangible held by a secured party
having control of the account, electronic record, or payment intangible
has priority over a conflicting security interest held by a secured
party that does not have control.
Section 9--327. Priority of Security Interests in Deposit Account.
The following rules govern priority among conflicting security
interests in the same deposit account:
(a) 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.
(b) Except as otherwise provided in subsections (c) and (d), security
interests perfected by control under Section 9--314 rank according to
priority in time of obtaining control.
(c) Except as otherwise provided in subsection (d), 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.
(d) 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.
Section 9--328. Priority of Security Interests in Investment Property.
The following rules govern priority among conflicting security
interests in the same investment property:
(a) 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.
(b) Except as otherwise provided in paragraphs (c) and (d),
conflicting security interests held by secured parties each of which has
control under Section 9--106 rank according to priority in time of:
(1) if the collateral is a security, obtaining control;
(2) if the collateral is a security entitlement carried in a
securities account and:
(A) 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;
(B) 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
(C) 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
(3) 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.
(c) 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.
(d) 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.
(e) 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.
(f) Conflicting security interests created by a broker, securities
intermediary, or commodity intermediary which are perfected without
control under Section 9--106 rank equally.
(g) In all other cases, priority among conflicting security interests
in investment property is governed by Sections 9--322 and 9--323.
(h) Subsections (a) through (g) do not apply to cooperative interests.
Section 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:
(a) 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.
(b) Security interests perfected by control under Section 9--314 rank
according to priority in time of obtaining control.
Section 9--330. Priority of Purchaser of Chattel Paper or Instrument.
(a) Purchaser's priority: security interest claimed merely as
proceeds. 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, takes possession of
each authoritative tangible copy of the record evidencing the
chattel paper, and obtains control under Section 9--105 of
each authoritative electronic copy of the record evidencing
the chattel paper; and
(2) the authoritative copies of the record evidencing the chattel
paper do not indicate that the chattel paper has been
assigned to an identified assignee other than the purchaser.
(b) Purchaser's priority: other security interests. 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, takes possession of
each authoritative tangible copy of the record evidencing the chattel
paper, and obtains control under Section 9--105 of each authoritative
electronic copy of the record evidencing the chattel paper 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) Chattel paper purchaser's priority in proceeds. 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) Instrument purchaser's priority. 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) Holder of purchase-money security interest gives new value. 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) Indication of assignment gives knowledge. For purposes of
subsections (b) and (d), if the authoritative copies of the record
evidencing chattel paper or an instrument indicate that the chattel
paper or instrument 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.
Section 9--331. Priority of Rights of Purchasers of Controllable
Accounts, Controllable Electronic Records,
Controllable Payment Intangibles, Documents,
Instruments, and Securities under Other Articles;
Priority of Interests in Financial Assets and Security
Entitlements and Protection Against Assertion of Claim
under Articles 8 and 12.
(a) Rights under Articles 3, 7, 8, and 12 not limited. 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, protected purchaser of a security, or a qualifying
purchaser of a controllable account, controllable electronic record, or
controllable payment intangible. These holders or purchasers take
priority over an earlier security interest, even if perfected, to the
extent provided in Articles 3, 7, 8, and 12.
(b) Protection under Articles 8 and 12. 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 a claim under Article 8 or
12.
(c) Filing not notice. 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).
(d) Section not applicable to cooperative interests. Subsections (a),
(b), and (c) do not apply to cooperative interests.
Section 9--332. Transfer of Money; Transfer of Funds from Deposit
Account.
(a) Transferee of tangible money. A transferee of tangible money takes
the money free of a security interest if the transferee receives
possession of the money without acting in collusion with the debtor in
violating the rights of the secured party.
(b) Transferee of funds from deposit account. A transferee of funds
from a deposit account takes the funds free of a security interest in
the deposit account if the transferee receives the funds without acting
in collusion with the debtor in violating the rights of the secured
party.
(c) Transferee of electronic money. A transferee of electronic money
takes the money free of a security interest if the transferee obtains
control of the money without acting in collusion with the debtor in
violating the rights of the secured party.
Section 9--333. Priority of Certain Liens Arising by Operation of Law.
(a) "Possessory lien." 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) Priority of possessory lien. 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.
Section 9--334. Priority of Security Interests in Fixtures and Crops.
(a) Security interest in fixtures under this article. 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) Security interest in fixtures under real property law. This
article does not prevent creation of an encumbrance upon fixtures under
real property law.
(c) General rule: subordination of security interest in fixtures. 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) Fixtures purchase-money priority. 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 20 days thereafter.
(e) Priority of security interest in fixtures over interests in real
property. 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) Priority based on consent, disclaimer, or right to remove. 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 a signed 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) Continuation of paragraph (f)(2) priority. The priority of the
security interest under paragraph (f)(2) continues for a reasonable time
if the debtor's right to remove the goods as against the encumbrancer or
owner terminates.
(h) Priority of construction mortgage. 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) Priority of security interest in crops. 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. Subsection (i) prevails over any
inconsistent provisions with this article or any other chapter of law.
Section 9--335. Accessions.
(a) Creation of security interest in accession. A security interest
may be created in an accession and continues in collateral that becomes
an accession.
(b) Perfection of security interest. If a security interest is
perfected when the collateral becomes an accession, the security
interest remains perfected in the collateral.
(c) Priority of security interest. Except as otherwise provided in
subsection (d), the other provisions of this part determine the priority
of a security interest in an accession.
(d) Compliance with certificate-of-title statute. 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) Removal of accession after default. 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) Reimbursement following removal. A secured party that removes an
accession from other goods under subsection (e) shall promptly reimburse
any holder of a security interest or other lien on, 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 holder 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.
Section 9--336. Commingled Goods.
(a) "Commingled goods." 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) No security interest in commingled goods as such. 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) Attachment of security interest to product or mass. If collateral
becomes commingled goods, a security interest attaches to the product or
mass.
(d) Perfection of security interest. 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) Priority of security interest 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) Conflicting security interests in product or mass 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 the value of the collateral at the time it
became commingled goods.
Section 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:
(a) 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
(b) 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.
Section 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 tangible chattel paper, tangible
documents, goods, instruments, or a security certificate, receives
delivery of the collateral.
Section 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
Section 9--340. Effectiveness of Right of Recoupment or Set-off Against
Deposit Account.
(a) Exercise of recoupment or set-off. 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) Recoupment or set-off not affected by security interest. 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) When set-off ineffective. 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.
Section 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 a signed record, a bank's rights and duties
with respect to a deposit account maintained with the bank are not
terminated, suspended, or modified by:
(a) the creation, attachment, or perfection of a security
interest in the deposit account;
(b) the bank's knowledge of the security interest; or
(c) the bank's receipt of instructions from the secured party.
Section 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
Section 9--401. Alienability of Debtor's Rights.
(a) Other law governs alienability; exceptions. 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) Agreement does not prevent transfer. 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.
Section 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.
Section 9--403. Agreement Not to Assert Defenses Against Assignee.
(a) "Value." In this section, "value" has the meaning provided in
Section 3--303. In this section the meaning of "obligor" is not limited
to the meaning given it in Section 9--102(a)(59). In this section the
term "person entitled to enforce the instrument" means (i) the holder of
the instrument, (ii) a nonholder in possession of the instrument who has
the rights of a holder, or (iii) a person not in possession of the
instrument who is entitled to enforce the instrument pursuant to Article
3 of this chapter. A person may be a person entitled to enforce the
instrument even though the person is not the owner of the instrument or
is in wrongful possession of the instrument.
(b) Agreement not to assert claim or defense. 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) a defense of the obligor based on (i) infancy of the
obligor to the extent it is a defense to a simple
contract, (ii) duress, lack of legal capacity, or
illegality of the transaction which, under other law,
nullifies the obligation of the obligor, (iii) fraud that
induced the obligor to sign the instrument with neither
knowledge nor reasonable opportunity to learn of its
character or its essential terms, or (iv) discharge of
the obligor in solving proceedings;
(B) a defense of the obligor stated anywhere in Article 3 of
this chapter or a defense of the obligor that would be
available if the person entitled to enforce the
instrument were enforcing a right to payment under a
simple contract; and
(C) a claim in recoupment of the obligor against the assignor
if the claim arose from the transaction that gave rise to
the assigned obligation, but the claim of the obligor may
be asserted against an assignee only to reduce the amount
owing on the assigned obligation at the time the action
is brought.
(c) When subsection (b) not applicable. An assignee takes subject to
the defenses listed in paragraph (b)(4)(A), but is not subject to
defenses of the obligor stated in paragraph (b)(4)(B) or claims in
recoupment stated in paragraph (b)(4)(C) against a person other than the
enforcing assignee.
(d) Omission of required statement in consumer transaction. 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) Rule for individual under other law. 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) Other law not displaced. 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.
Section 9--404. Rights Acquired by Assignee; Claims and Defenses Against
Assignee.
(a) Assignee's rights subject to terms, claims, and defenses;
exceptions. 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 signed by the assignor or the
assignee.
(b) Account debtor's claim reduces amount owed to assignee. 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) Rule for individual under other law. 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) Omission of required statement in consumer transaction. 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) Inapplicability to health-care-insurance receivable. This section
does not apply to an assignment of a health-care-insurance receivable.
Section 9--405. Modification of Assigned Contract.
(a) Effect of modification on assignee. 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) Applicability of subsection (a). 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) Rule for individual under other law. 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) Inapplicability to health-care-insurance receivable. This section
does not apply to an assignment of a health-care-insurance receivable.
Section 9--406. Discharge of Account Debtor; Notification of Assignment;
Identification and Proof of Assignment; Restrictions
on Assignment of Accounts, Chattel Paper, Payment
Intangibles, and Promissory Notes Ineffective.
(a) Discharge of account debtor; effect of notification. Subject to
subsections (b) through (i), 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, signed 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) When notification ineffective. Subject to subsections (g) and (i),
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 payment
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) Proof of assignment. Subject to subsections (g) and (i), 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) Term restricting assignment generally ineffective. For purposes of
this subsection, "promissory note" includes a negotiable instrument that
evidences chattel paper. Except as otherwise provided in subsection (e)
and Sections 2-A-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 assignment or transfer or 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) Inapplicability of subsection (d) to certain sales. Subsection (d)
does not apply to the sale of a payment intangible or promissory note.
(f) Subsection (b)(3) not waivable. Subject to subsections (g) and
(i), an account debtor may not waive or vary its option under subsection
(b)(3).
(g) Rule for individual under other law. This section is subject to a
rule of law, statute, rule or regulation 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) Inapplicability. This section does not apply to:
(1) an assignment of a health care insurance receivable to the
extent such assignment conflicts with other law or the
parties have otherwise agreed in writing that such receivable
is non-assignable,
(2) a claim or right to receive compensation for injuries or
sickness as described in 26 U.S.C. § 104(a)(1) and (2), as
amended from time to time, or
(3) a claim or right to receive benefits under a special needs
trust as described in 42 U.S.C. § 1396p (d)(4), as amended
from time to time.
(i) Inapplicability of certain subsections. Subsections (a), (b), (c)
and (f) do not apply to a controllable account or controllable payment
intangible.
Section 9--407. Restrictions on Creation or Enforcement of Security
Interest in Leasehold Interest or in Lessor's Residual
Interest.
(a) Term restricting assignment generally ineffective. 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 assignment or transfer of, or 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 assignment or transfer or 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) Effectiveness of certain terms. Except as otherwise provided in
Section 2-A-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) Security interest not material impairment. 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 2-A-303(4) unless, and then only to
the extent that, enforcement actually results in a delegation of
material performance of the lessor.
Section 9--408. Restrictions on Assignment of Promissory Notes,
Health-care-insurance Receivables, and Certain General
Intangibles Ineffective.
(a) Term restricting assignment generally ineffective. 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 assignment or transfer or 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) Applicability of subsection (a) to sales of certain rights to
payment. 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) Limitation on ineffectiveness under subsection (a). 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 would be effective under law other than this
article but is ineffective under subsection (a), 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.
(d) Inapplicability. This section does not apply to:
(1) a claim or right to receive compensation for injuries or
sickness as described in 26 U.S.C. § 104(a)(1) and (2), as
amended from time to time, or
(2) a claim or right to receive benefits under a special needs
trust as described in 42 U.S.C. § 1396p (d)(4), as amended
from time to time.
(e) "Promissory note". In this section, "promissory note" includes a
negotiable instrument that evidences chattel paper.
Section 9--409. Restrictions on Assignment of Letter-of-credit Rights
Ineffective.
(a) Term or law restricting assignment generally ineffective. 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 assignment or 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) Limitation on ineffectiveness under subsection (a). 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
Section 9--501. Filing Office.
(a) Filing offices. Except as otherwise provided in subsection (b), if
the 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
(C) the collateral is a cooperative interest; 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) Filing office for transmitting utilities. 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.
(c) The term "filing officer" or "recording officer" means the county
clerk of the county, except in the counties of Bronx, Kings, New York,
and Queens where it means the city register in the county; and the term
"filing officer" includes the secretary of state where a filing is made
in the department of state.
Section 9--502. Contents of Financing Statement; Record of Mortgage as
Financing Statement; Time of Filing Financing
Statement; Contents of Cooperative Addendum.
(a) Sufficiency of financing statement. 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;
(3) indicates the collateral covered by the financing statement;
and
(4) in the case of a cooperative interest, indicates the number
or other designation and the street address of the
cooperative unit.
(b) Real-property-related financing statements. 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, or, unless a cooperative addendum is filed, which covers a
cooperative interest, 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, including the location of the real
estate by reference to a book and page number in a deed or
mortgage index maintained in the county clerk's office in the
county where the property is situate or by street and number
and town or city, or, if the real estate is in the city of
New York, by county, except that if the real estate is in the
city of New York or counties of Nassau or Onondaga, where the
block system of recording or registering and indexing
conveyances is in use, the statement must also specify the
block and lot number in which the real estate is situated;
and
(4) if the debtor does not have an interest of record in the real
property, provide the name of a record owner.
(c) Record of mortgage as financing statement. 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 satisfies the requirements for a financing
statement in this section, but:
(A) the record need not indicate that it is to be filed in
the real property records; and
(B) the record sufficiently provides the name of a debtor who
is an individual if it provides the individual name of
the debtor or the surname and first personal name of the
debtor, even if the debtor is an individual to whom
Section 9--503(a)(4) applies; and
(4) the record is duly recorded.
(d) Filing before security agreement or attachment. A financing
statement may be filed before a security agreement is made or a security
interest otherwise attaches.
(e) Contents of cooperative addendum. A cooperative addendum is
sufficient only if it satisfies subsection (a) and also:
(1) if not filed simultaneously with the initial financing
statement, identifies, by its file number, the initial
financing statement to which the addendum relates;
(2) indicates the street address of the cooperative unit;
(3) indicates the county in which the cooperative unit is
located;
(4) indicates the city, town, or village in which the cooperative
unit is located;
(5) indicates the real property tax designation associated with
the real property in which the cooperative unit is located as
assigned by the local real property tax assessing authority;
and
(6) indicates the name of the cooperative organization.
Section 9--503. Name of Debtor and Secured Party.
(a) Sufficiency of debtor's name. A financing statement sufficiently
provides the name of the debtor:
(1) except as otherwise provided in paragraph (3), if the debtor
is a registered organization or the collateral is held in a
trust that is a registered organization, only if the
financing statement provides the name that is stated to be
the registered organization's name on the public organic
record most recently filed with or issued or enacted by the
registered organization's jurisdiction of organization which
purports to state, amend, or restate the registered
organization's name;
(2) subject to subsection (f), if the collateral is being
administered by the personal representative of a decedent,
only if the financing statement provides, as the name of the
debtor, the name of the decedent and, in a separate part of
the financing statement, indicates that the collateral is
being administered by a personal representative;
(3) if the collateral is held in a trust that is not a registered
organization, only if the financing statement:
(A) provides, as the name of the debtor:
(i) if the organic record of the trust specifies a name
for the trust, the name specified; or
(ii) if the organic record of the trust does not specify
a name for the trust, the name of the settlor or
testator; and
(B) in a separate part of the financing statement:
(i) if the name is provided in accordance with
subparagraph (A)(i), indicates that the collateral is
held in a trust; or
(ii) if the name is provided in accordance with
subparagraph (A)(ii), provides additional
information sufficient to distinguish the trust from
other trusts having one or more of the same settlors
or the same testator and indicates that the
collateral is held in a trust, unless the additional
information so indicates;
(4) subject to subsection (g), if the debtor is an individual to
whom this State has issued a driver's license or non-driver
photo identification card that has not expired, only if the
financing statement provides the name of the individual which
is indicated on the driver's license or non-driver photo
identification card;
(5) if the debtor is an individual to whom paragraph (4) does not
apply, only if the financing statement provides the
individual name of the debtor or the surname and first
personal name of the debtor; and
(6) in other cases:
(A) if the debtor has a name, only if the financing statement
provides the 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, in a manner that each name
provided would be sufficient if the person named were the
debtor.
(b) Additional debtor-related information. 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)(6)(B), names of
partners, members, associates, or other persons comprising
the debtor.
(c) Debtor's trade name insufficient. A financing statement that
provides only the debtor's trade name does not sufficiently provide the
name of the debtor.
(d) Representative capacity. 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) Multiple debtors and secured parties. A financing statement may
provide the name of more than one debtor and the name of more than one
secured party.
(f) Name of decedent. The name of the decedent indicated on the order
appointing the personal representative of the decedent issued by the
court having jurisdiction over the collateral is sufficient as the "name
of the decedent" under subsection (a)(2).
(g) Multiple driver's licenses. If this State has issued to an
individual more than one driver's license or non-driver photo
identification card of a kind described in subsection (a)(4), the one
that was issued most recently is the one to which subsection (a)(4)
refers.
(h) Definition. In this section, the "name of the settlor or testator"
means:
(1) if the settlor is a registered organization, the name that is
stated to be the settlor's name on the public organic record
most recently filed with or issued or enacted by the
settlor's jurisdiction of organization which purports to
state, amend, or restate the settlor's name; or
(2) in other cases, the name of the settlor or testator indicated
in the trust's organic record.
Section 9--504. Indication of Collateral.
A financing statement sufficiently indicates the collateral that it
covers 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.
Section 9--505. Filing and Compliance with Other Statutes and Treaties
for Consignments, Leases, Other Bailments, and Other
Transactions.
(a) Use of terms other than "debtor" and "secured party." A consignor,
lessor, or other bailor of goods, a licensor, 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", "licensor", "licensee", "owner", "registered owner", "buyer",
"seller", or words of similar import, instead of the terms "secured
party" and "debtor".
(b) Effect of financing statement under subsection (a). 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, licensor, owner, or buyer which attaches to the
collateral is perfected by the filing or compliance.
Section 9--506. Effect of Errors or Omissions.
(a) Minor errors and omissions. 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) Financing statement seriously misleading. 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) Financing statement not seriously misleading. 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) "Debtor's correct name." For purposes of Section 9--508(b), the
"debtor's correct name" in subsection (c) means the correct name of the
new debtor.
Section 9--507. Effect of Certain Events on Effectiveness of Financing
Statement.
(a) Disposition. 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) Information becoming seriously misleading. 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) Change in debtor's name. If the name that a filed financing
statement provides for a debtor becomes insufficient as the name of the
debtor under Section 9--503(a) so that the 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 filed financing statement
becomes seriously misleading; 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 filed financing statement becomes
seriously misleading, unless an amendment to the financing
statement which renders the financing statement not seriously
misleading is filed within four months after the financing
statement became seriously misleading.
Section 9--508. Effectiveness of Financing Statement If New Debtor
Becomes Bound by Security Agreement.
(a) Financing statement naming original debtor. 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) Financing statement becoming seriously misleading. 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) When section not applicable. 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).
Section 9--509. Persons Entitled to File a Record.
(a) Person entitled to file record. 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 a signed record or
pursuant to subsection (b) or (c); or a security agreement as
authorization.
(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) Security agreement as authorization. By signing or becoming bound
as debtor by a security agreement, a debtor or new 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) Acquisition of collateral as authorization. By acquiring
collateral in which a security interest or agricultural lien continues
under Section 9--315(a)(1), a debtor authorizes the filing of an initial
financing statement, and an amendment, covering the collateral and
property that becomes collateral under Section 9--315(a)(2).
(d) Person entitled to file certain amendments. 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.
(e) Multiple secured parties of record. 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 (d).
Section 9--510. Effectiveness of Filed Record.
(a) Filed record effective if authorized. 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) Authorization by one secured party of record. A record authorized
by one secured party of record does not affect the financing statement
with respect to another secured party of record.
(c) Continuation statement not timely filed. A continuation statement
that is not filed within the six-month period prescribed by Section
9--515(d) is ineffective.
Section 9--511. Secured Party of Record.
(a) Secured party of record. 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) Amendment naming secured party of record. 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) Amendment deleting secured party of record. A person remains a
secured party of record until the filing of an amendment of the
financing statement which deletes the person.
Section 9--512. Amendment of Financing Statement.
(a) Amendment of information in financing statement. 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) Period of effectiveness not affected. 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) Effectiveness of amendment adding collateral. 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) Effectiveness of amendment adding debtor. 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) Certain amendments ineffective. 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.
Section 9--513. Termination Statement.
(a) Consumer goods. 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) Time for compliance with subsection (a). 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 20 days after the secured party receives a
signed demand from a debtor.
(c) Other collateral. In cases not governed by subsection (a), within
20 days after a secured party receives a signed 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) Effect of filing termination statement. 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. Except as otherwise provided
in Section 9--510, for purposes of Section 9--519(g), 9--522(a), and
9--523(c), the filing with the filing office of a termination statement
relating to a financing statement that indicates that the debtor is a
transmitting utility also causes the effectiveness of the financing
statement to lapse.
(e) Cooperative Interests.
(1) "Cooperative Interest Settlement" means the time and place at
which an owner of a cooperative interest transfers the
cooperative interest, or refinances or pays off the debt
secured by the cooperative interest.
(2) Upon an authenticated demand with sufficient notice by a
debtor, the secured party shall deliver to a cooperative
interest settlement a termination statement or partial
release and any component of the cooperative record of which
it took possession, which shall be released to the debtor
upon payment of the debt secured by the cooperative interest
and the discharge of any obligation of the secured party to
make further advances. Unless the secured party has agreed
otherwise or the cooperative interest settlement takes place
at the offices of the secured party, the secured party or its
agent shall be entitled to a reasonable fee for attendance at
the cooperative interest settlement.
(3) Upon payment of the debt secured by a cooperative interest
other than at a cooperative interest settlement and the
discharge of any obligation of the secured party to make
further advances, the secured party shall arrange for a
termination statement or partial release to be filed within
one month of receipt of the payment or discharge of the
obligation to make further advances, whichever is later, and
shall send to the debtor any component of the cooperative
record of which it took possession.
Section 9--514. Assignment of Powers of Secured Party of Record.
(a) Assignment reflected on initial financing statement. 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) Assignment of filed financing statement. 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) Assignment of record of mortgage. 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 this
chapter.
Section 9--515. Duration and Effectiveness of Financing Statement;
Effect of Lapsed Financing Statement.
(a) Five-year effectiveness. Except as otherwise provided in
subsections (b), (e), (f), (g), and (h), a filed financing statement is
effective for a period of five years after the date of filing.
(b) Public-financed or manufactured-home transaction. Except as
otherwise provided in subsections (e), (f), (g), and (h), an initial
financing statement filed in connection with a public-financed
transaction or manufactured-home transaction is effective for a period
of 30 years after the date of filing if it indicates that it is filed in
connection with a public-financed transaction or manufactured-home
transaction.
(c) Lapse and continuation of financing statement. 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 otherwise. 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) When continuation statement may be filed. 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) or the fifty-year period specified in
subsection (h), whichever is applicable.
(e) Effect of filing continuation statement. 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) Transmitting utility financing statement. If a debtor is a
transmitting utility and a filed initial financing statement so
indicates, the financing statement is effective until a termination
statement is filed.
(g) Record of mortgage as financing statement. 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.
(h) Cooperative interest transaction. An initial financing statement
covering a cooperative interest is effective for a period of 50 years
after the date of the filing of the initial financing statement if a
cooperative addendum is filed simultaneously with the initial financing
statement or is filed before the financing statement lapses.
Section 9--516. What Constitutes Filing; Effectiveness of Filing.
(a) What constitutes filing. 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) Refusal to accept record; filing does not occur. 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 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; or
(B) indicate whether the debtor is an individual or an
organization;
(C) if the financing statement indicates that the debtor is
an organization, provide:
(i) a type of organization for the debtor, or
(ii) a jurisdiction of organization for the debtor; or
(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) Rules applicable to subsection (b). 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) Refusal to accept record; record effective as filed record. 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.
(e) Special rule for cooperative interests; record effective as
notice. A filing that includes a cooperative addendum covering a
cooperative interest constitutes notice of the existence of the security
interest in the cooperative interest as of the date of the filing of the
cooperative addendum, except as against a purchaser of the collateral
which gives value in reasonable reliance upon the absence of the record
from the files.
Section 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.
Section 9--518. Claim Concerning Inaccurate or Wrongfully Filed Record.
(a) Correction statement. 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) Sufficiency of correction statement. 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 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) Record not affected by correction statement. The filing of a
correction statement does not affect the effectiveness of an initial
financing statement or other filed record.
(d) Special proceeding to redact or expunge a falsely filed or amended
financing statement. (1) Provided he or she is an employee of the state
or a political subdivision thereof, a person identified as a debtor in a
financing statement filed pursuant to this subpart may bring a special
proceeding against the named filer of such statement or any amendment
thereof to invalidate the filing or amendment thereof where such
statement was falsely filed or amended; except that an attorney who is
not an employee of the state or a political subdivision thereof may also
bring a special proceeding hereunder where he or she represents or has
represented the respondent therein in a criminal court. Such special
proceeding shall be governed by article four of the civil practice law
and rules, and shall be commenced in the supreme court of Albany county,
the county of the petitioner's residence or a county within the judicial
district in which any property covered by the financing statement is
located. No fee pursuant to article eighty of the civil practice law and
rules shall be collected in such special proceeding.
(2) The petition in a special proceeding hereunder shall plead that:
(A) the financing statement filed or amended by the respondent
pursuant to section 9--509 was falsely filed or amended to retaliate
for: (i) the performance of the petitioner's official duties in his or
her capacity as an employee of the state or a political subdivision
thereof, or (ii) in the case of a special proceeding brought by an
attorney who is not an employee of the state or a political subdivision
thereof, to retaliate for the performance of the petitioner's duties in
his or her capacity as an attorney for the respondent in a criminal
court; and
(B) such financing statement does not relate to an interest in a
consumer-goods transaction, a commercial transaction, or any other
actual transaction between the petitioner and the respondent; and
(C) the collateral covered in such financing statement is the property
of the petitioner; and
(D) prompt redaction or invalidation of the financing statement is
necessary to avert or mitigate prejudice to the petitioner.
(3) If the court makes a written finding that the allegations in
paragraph two of this subsection are established, the court shall order
the expungement of such statement or its redaction in the public records
in the office in which the financing statement is filed, as appropriate,
and may grant any additional relief authorized by section 9--625. In
such case, the court shall cause a copy of its order to be filed with
the secretary of state or other appropriate filing office pursuant to
this chapter. Upon a finding that the respondent has engaged in a
repeated pattern of false filings as found under this subsection, the
court also may enjoin the respondent from filing or amending any further
financing statement pursuant to this article without leave of the court.
If the respondent is incarcerated at the time the court issues an order
containing such an injunction, the court shall cause the head of the
correctional facility in which the respondent is incarcerated to receive
a copy of such determination. The head of such a facility shall cause a
copy of such order to be provided to the respondent. In any instances of
the issuance of such an injunction where the respondent has defaulted,
the court shall direct service of such injunction upon the respondent.
SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
Section 9--519. Numbering, Maintaining, and Indexing Records;
Communicating Information Provided in Records.
(a) Filing office duties. 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) File number. A file number must include a digit that:
(1) is mathematically derived from or related to the other digits
of the file number; and
(2) aids the filing office in determining whether a number
communicated as the file number includes a single-digit or
transpositional error.
(c) Indexing: general. 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) Indexing: real-property-related financing statement. If a
financing statement is filed as a fixture filing or covers as-extracted
collateral, or timber to be cut, or a cooperative interest, 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, and;
(3) if the real estate is in the City of New York or in Nassau,
Onondaga, or any other county where the block system of
recording or registering and indexing conveyances is in use,
according to the block in which the real estate is situated;
the filing officer may index such statements according to the
names of the record owners of the real estate in a single
consolidated index installed and maintained by him pursuant
to section five hundred twenty-nine of the county law.
(e) Indexing: real-property-related assignment. If a financing
statement is filed as a fixture filing or covers as-extracted
collateral, timber to be cut or a cooperative interest, 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; and
(3) if the real estate is in the City of New York or in Nassau,
Onondaga, or any other county where the block system of
recording or registering and indexing conveyances is in use,
according to the block in which the real estate is situated;
the filing officer may index such assignments according to
the names of the record owners of the real estate in a single
consolidated index installed and maintained by him pursuant
to section five hundred twenty-nine of the county law.
(f) Retrieval and association capability. The filing office shall
maintain a capability:
(1) to retrieve a record by the name of the debtor and:
(A) if the filing office is described in Section
9--501(a)(1), by the file number assigned to the initial
financing statement to which the record relates and the
date and time that the record was filed or recorded; or
(B) if the filing office is described in Section
9--501(a)(2), 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; and
(3) if the real estate is in the City of New York or in Nassau,
Onondaga, or any other county where the block system of
recording or registering and indexing conveyances is in use,
to retrieve a record according to the block in which the real
estate is situated.
(g) Removal of debtor's name. 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) Timeliness of filing office performance. 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.
(i) Inapplicability to real-property-related filing office.
Subsections (b) and (h) do not apply to a filing office described in
Section 9--501(a)(1).
Section 9--520. Acceptance and Refusal to Accept Record.
(a) Mandatory refusal to accept record. 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) Communication concerning refusal. 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) When filed financing statement effective. 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.
Section 9--521. Uniform Form of Written Financing Statement; Amendment;
and Cooperative Addendum.
(a) Initial financing statement form. A filing office that accepts
written records may not refuse to accept a written initial financing
statement in the form promulgated by the department of state except for
a reason as set forth in Section 9--516(b).
(b) Amendment form. A filing office that accepts written records may
not refuse to accept a written financing statement amendment in the form
promulgated by the department of state except for a reason as set forth
in Section 9--516 (b).
(c) Cooperative addendum form. A filing office that accepts written
records may not refuse to accept a written cooperative addendum in the
form promulgated by the department of state except for a reason as set
forth in Section 9--516 (b).
Section 9--522. Maintenance and Destruction of Records.
(a) Post-lapse maintenance and retrieval of information. 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:
(1) if the record was filed in the filing office described in
Section 9--501(a)(1), by using:
(A) the file number assigned to the initial financing
statement to which the record relates and the date and
time that the record was filed; and
(B) in the case of collateral which is a cooperative
interest, the real property tax designation associated
with the real property in which the cooperative unit is
located as assigned by the local real property tax
assessing authority; or
(2) if the record was filed in the filing office described in
Section 9--501(a)(2), by using the file number assigned to
the initial financing statement to which the record relates.
(b) Destruction of written records. 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).
Section 9--523. Information from Filing Office; Sale or License of
Records.
(a) Acknowledgment of filing written record. 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) Acknowledgment of filing other record. 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) Communication of requested information. 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);
(D) is filed in the filing office described in Section
9--501(a)(1), if the request indicates the real property
tax designation associated with the real property as
assigned by the local real property tax assessing
authority.
(2) the date and time of filing of each financing statement,
(3) the information provided in each financing statement,
(4) whether there is on file any notice of federal tax lien, or a
certificate or notice affecting such lien, on the date and
time specified in such record naming a particular debtor; and
(5) the date and time of filing of each such notice or
certificate of or affecting a federal tax lien.
(d) Medium for communicating information. 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.
(e) Timeliness of filing office performance. The filing office, except
by a filing office described in Section 9--501 (a) (1), 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) Public availability of records. 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.
Section 9--524. Delay by Filing Office.
Delay by the filing office beyond a time limit prescribed by this part
is excused if:
(a) 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
(b) the filing office exercises reasonable diligence under the
circumstances.
Section 9--525. Fees.
Fees for filing and services under this chapter shall be determined in
accordance with section ninety-six-a of the executive law.
Section 9--526. Filing-office Rules.
(a) Adoption of filing-office rules. The secretary of state shall
adopt and publish rules to implement this article. The filing-office
rules must be consistent with this article.
(b) Harmonization of rules. 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.
Section 9--527. Duty to Report.
The secretary of state shall report to the governor, the temporary
president of the senate and the speaker of the assembly on the first day
of July, two thousand two, on the first day of July, two thousand three
and biennially on the first day of July thereafter, on the operation of
the filing office. In addition to a statement on the operation of the
filing office, the report shall contain a statement of the extent to
which:
(a) the filing office rules are not in harmony with the rules of the
filing offices in other jurisdictions that enact substantially this part
and the reasons for such variation; and
(b) 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
Section 9--601. Rights after Default; Judicial Enforcement; Consignor or
Buyer of Accounts, Chattel Paper, Payment Intangibles,
or Promissory Notes.
(a) Rights of secured party after default. 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) Rights and duties of secured party in possession or control. A
secured party in possession of collateral or control of collateral under
Section 7--106, 9--104, 9--105, 9--105A, 9--106, 9--107, or 9--107A has
the rights and duties provided in Section 9--207.
(c) Rights cumulative; simultaneous exercise. The rights under
subsections (a) and (b) are cumulative and may be exercised
simultaneously.
(d) Rights of debtor and obligor. 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) Lien of levy after judgment. 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) Execution sale. 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) Consignor or buyer of certain rights to payment. 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.
Section 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:
(a) Section 9--207 (b) (4) (C), which deals with use and operation of
the collateral by the secured party;
(b) Section 9--210, which deals with requests for an accounting and
requests concerning a list of collateral and statement of account;
(c) Section 9--607 (c), which deals with collection and enforcement of
collateral;
(d) 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;
(e) Sections 9--608 (a) and 9--615 (d) to the extent that they require
accounting for or payment of surplus proceeds of collateral;
(f) 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;
(g) Sections 9--610 (b), 9--611, 9--613, and 9--614, which deal with
disposition of collateral;
(h) 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;
(i) Section 9--616, which deals with explanation of the calculation of
a surplus or deficiency;
(j) Sections 9--620, 9--621, and 9--622, which deal with acceptance of
collateral in satisfaction of obligation;
(k) Section 9--623, which deals with redemption of collateral;
(l) Section 9--624, which deals with permissible waivers; and
(m) Sections 9--625 and 9--626, which deal with the secured party's
liability for failure to comply with this article.
Section 9--603. Agreement on Standards Concerning Rights and Duties.
(a) Agreed standards. 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) Agreed standards inapplicable to breach of peace. Subsection (a)
does not apply to the duty under Section 9--609 to refrain from
breaching the peace.
Section 9--604. Procedure If Security Agreement Covers Real Property,
Fixtures, or Cooperative Interests.
(a) Enforcement: personal and real property. 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) Enforcement: fixtures. 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) Removal of fixtures. 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) Injury caused by removal. 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.
(e) Enforcement: cooperative interests. A security interest in a
cooperative interest may be enforced only as provided in Section
9--601(a).
Section 9--605. Unknown Debtor or Secondary Obligor.
(a) In general: No duty owed by secured party. Except as provided in
subsection (b), 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.
(b) Exception: Secured party owes duty to debtor or obligor. A secured
party owes a duty based on its status as a secured party to a person if,
at the time the secured party obtains control of collateral that is a
controllable account, controllable electronic record, or controllable
payment intangible or at the time the security interest attaches to the
collateral, whichever is later:
(1) the person is a debtor or obligor; and
(2) the secured party knows that the information in subsection
(a)(1)(A), (B), or (C) relating to the person is not provided by the
collateral, a record attached to or logically associated with the
collateral, or the system in which the collateral is recorded.
Section 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.
Section 9--607. Collection and Enforcement by Secured Party.
(a) Collection and enforcement generally. 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) Nonjudicial enforcement of mortgage. 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 with respect to the obligation
secured by the mortgage; and
(B) the secured party is entitled to enforce the mortgage
nonjudicially.
(c) Commercially reasonable collection and enforcement. 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) Expenses of collection and enforcement. 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) Duties to secured party not affected. This section does not
determine whether an account debtor, bank, or other person obligated on
collateral owes a duty to a secured party.
Section 9--608. Application of Proceeds of Collection or Enforcement;
Liability for Deficiency and Right to Surplus.
(a) Application of proceeds, surplus, and deficiency if obligation
secured. 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 Section
9--607 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 a
signed 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 Section
9--607 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) No surplus or deficiency in sales of certain rights to payment. 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.
Section 9--609. Secured Party's Right to Take Possession after Default.
(a) Possession; rendering equipment unusable; disposition on debtor's
premises. 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) Judicial and nonjudicial process. 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) Assembly of collateral. 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.
Section 9--610. Disposition of Collateral after Default.
(a) Disposition after default. 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) Commercially reasonable disposition. 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) Purchase by secured party. 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) Warranties on disposition. 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) Disclaimer of warranties. 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) Record sufficient to disclaim warranties. 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.
Section 9--611. Notification Before Disposition of Collateral.
(a) "Notification date." 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
a signed notification of disposition; or
(2) the debtor and any secondary obligor waive the right to
notification.
(b) Notification of disposition required. 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 signed notification of disposition.
(c) Persons to be notified. To comply with subsection (b), the secured
party shall send a signed 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, a signed
notification of a claim of an interest in the collateral;
(B) any other secured party or lienholder that, 10 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, 10 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) inapplicable: perishable collateral; recognized
market. 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) Compliance with subsection (c) (3) (B). A secured party complies
with the requirement for notification prescribed by 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 a signed notification of disposition to each secured
party or other lienholder named in that response whose
financing statement covered the collateral.
(f) Additional pre-disposition notice for cooperative interests.
(1) In addition to such other notification as may be required pursuant
to subsection (b) of this section and section 9-613 of this article, a
secured party whose collateral consists of a residential cooperative
interest used by the debtor and whose security interest in such
collateral secures an obligation incurred in connection with financing
or refinancing of the acquisition of such cooperative interest and who
proposes to dispose of such collateral after a default with respect to
such obligation, shall send to the debtor, not less than ninety days
prior to the date of the disposition of the cooperative interest, an
additional pre-disposition notice as provided herein.
(1-a) Notwithstanding any other provision of law, with regard to a
reverse cooperative apartment unit loan, at least forty-five days before
a secured party, as defined under Section 9-102(a)(73), or its agent
takes any steps to dispose of its collateral, as provided for in Section
9-610, the secured party or its agent shall give notice to the borrower,
and separate notice to the borrower's designated third-party if one has
been designated in at least fourteen-point type except for the heading
which shall be in at least sixteen-point type. The notice shall include
the following:
YOU COULD LOSE YOUR COOPERATIVE APARTMENT UNIT TO FORECLOSURE. PLEASE
READ THE FOLLOWING NOTICE CAREFULLY.
Date
Borrower's address
Loan Number:
Property Address:
Dear Borrower(s) {or heirs of Debtor?}:
As of ___________, your reverse cooperative apartment unit loan is in
default. Under New York State Law, we are required to send you this
notice to inform you that you may be at risk of losing your home.
Your reverse loan is in default because you have not complied with the
following conditions of your loan:
_____ You are not occupying your cooperative apartment unit as your
primary residence
_____ You did not submit the required annual certificate of occupancy
_____ The named borrower on the reverse loan has died
_____ You did not pay maintenance on your unit to the cooperative
corporation, and {servicer} paid your maintenance for you on the
following date(s) in the following
amount(s):________________________________
____________________________________
_____ You did not make required repairs to your unit
If the claim is based on your failure to pay maintenance to the
cooperative corporation, you can cure this default by making the payment
of $____________ for the advances we made towards these payments on your
behalf.
You have the right to dispute the claims listed above by contacting us,
by calling ___________ or sending a letter to __________________. This
may include proof of payments made for water and sewer charges or a
current declaration page from your insurance company, or any other proof
to dispute the servicer's claim.
OPTIONS MAY BE AVAILABLE FOR YOU TO CURE YOUR DEFAULT. SOME OF THESE
OPTIONS ARE LISTED BELOW. YOU MAY CONTACT {SERVICER} AT {TOLL-FREE
NUMBER} TO DISCUSS YOUR OPTIONS.
If you are in default for failure to pay maintenance, you may qualify
for a re-payment plan to cure the default balance owed.
Attached to this notice is a list of New York approved housing
counseling agencies and legal services in your area which provide free
counseling. A statewide listing by county is also available at
https://www.dfs.ny.gov/consumers/
help_for_homeowners/new_york_state_non-
profit_housing_counseling_agencies. You may also call your local
Department of Aging for a referral or call 311 if you live in New York
City.
Qualified free help is available; watch out for companies or people who
charge a fee for these services.
You may also contact {SERVICER} directly at __________ and ask to
discuss all possible options to allow you to cure your default and
prevent the foreclosure of your home. While we cannot ensure that a
resolution is possible, we encourage you to take immediate steps to try
to achieve a resolution. The longer you wait, the fewer options you may
have.
If you have not taken any actions to resolve this matter within ninety
days from the date this notice was mailed, we will have the right to
take your cooperative shares from you.
If you need further information, please call the New York State
Department of Financial Services' toll-free helpline at 877-226-5697 or
visit the Department's website at http://www.dfs.ny.gov.
IMPORTANT: You have the right to remain in your unit until you receive a
court order telling you to leave the property. If a foreclosure action
is filed against you in court, you still have the right to remain in the
unit until a court orders you to leave. You legally remain the owner of
your cooperative shares and are responsible for the unit until the
shares are transferred to a new owner through a sale. However, there
will be no court proceeding before the shares are transferred to a new
owner. After the shares are transferred, the new owner may begin a court
proceeding to evict you from the unit.
This notice is not an eviction notice.
(2) The notice required by this subsection shall be in bold,
fourteen-point type and shall be printed on colored paper that is other
than the color of the notice required by subsection (b) of this section,
and the title of the notice shall be in bold, twenty-point type. The
notice shall be on its own page.
(3) The notice required by this subsection shall appear as follows:
Help for Homeowners at Risk of Foreclosure
New York State Law requires that we send you this information about the
foreclosure process. Please read it carefully.
Notice
You are in danger of losing your home. You are in default of your
obligations under the loan secured by your rights to your cooperative
apartment. It is important that you take action, if you wish to avoid
losing your home.
Sources of Information and Assistance
The State encourages you to become informed about your options, by
seeking assistance from an attorney, a legal aid office, or a government
agency or non-profit organization that provides counseling with respect
to home foreclosures.
To locate a housing counselor near you, you may call the toll-free
helpline maintained by the New York State Department of Financial
Services at (enter number) or visit the Department's
website at (enter web address).
One of these persons or organizations may be able to help you, including
trying to work with your lender to modify the loan to make it more
affordable.
Foreclosure rescue scams
Be careful of people who approach you with offers to "save" your home.
There are individuals who watch for notices of foreclosure actions or
collateral sales in order to unfairly profit from a homeowner's
distress. You should be extremely careful about any such promises and
any suggestions that you pay them a fee or sign any papers that transfer
rights of any kind to your cooperative apartment. State law requires
anyone offering such services for profit to enter into a contract which
fully describes the services they will perform and fees they will
charge, and which prohibits them from taking any money from you until
they have completed all such promised services.
(4) The department of financial services shall prescribe the telephone
number and web address to be included in the notice.
(5) The department of financial services shall post on its website or
otherwise make readily available the name and contact information of
government agencies or non-profit organizations that may be contacted
for information about the foreclosure process, including maintaining a
toll-free helpline to disseminate the information required by this
subsection.
Section 9--612. Timeliness of Notification Before Disposition of
Collateral.
(a) Reasonable time is question of fact. Except as otherwise provided
in subsection (b), whether a notification is sent within a reasonable
time is a question of fact.
(b) 10-day period sufficient in non-consumer transaction. In a
transaction other than a consumer transaction, a notification of
disposition sent after default and 10 days or more before the earliest
time of disposition set forth in the notification is sent within a
reasonable time before the disposition.
Section 9--613. Contents and Form of Notification Before Disposition of
Collateral: General.
(a) Contents and form of notification. 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 disposition 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 subsection (a) are nevertheless sufficient is a
question of fact.
(3) The contents of a notification providing substantially the
information specified in subsection (a) are sufficient, even if the
notification includes:
(A) information not specified by subsection (a); 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(a)(3), when completed in accordance with the instructions
in subsection (b) and Section 9--614(b), 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)
{1} Name of any debtor that is not an addressee: (Name of each debtor)
{2} We will sell (describe collateral) (to the highest qualified
bidder) at public sale. A sale could include a lease or license. The
sale will be held as follows:
(Date)
(Time)
(Place)
{3} We will sell (describe collateral) at private sale sometime after
(date). A sale could include a lease or license.
{4} You are entitled to an accounting of the unpaid indebtedness
secured by the property that we intend to sell or, as applicable, lease
or license.
{5} If you request an accounting you must pay a charge of $ (amount).
{6} You may request an accounting by calling us at (telephone number).
(End of Form)
(b) Instructions for form of notification. The following instructions
apply to the form of notification in subsection (a)(5):
(1) The instructions in this subsection refer to the numbers in braces
before items in the form of notification in subsection (a)(5). Do not
include the numbers or braces in the notification. The numbers and
braces are used only for the purpose of these instructions.
(2) Include and complete subsection (a)(5) item {1} only if there is a
debtor that is not an addressee of the notification and list the name or
names.
(3) Include and complete either item {2}, if the notification relates
to a public disposition of the collateral, or item {3}, if the
notification relates to a private disposition of the collateral. If item
{2} is included, include the words "to the highest qualified bidder"
only if applicable.
(4) Include and complete items {4} and {6}.
(5) Include and complete item {5} only if the sender will charge the
recipient for an accounting.
Section 9--614. Contents and Form of Notification Before Disposition of
Collateral: Consumer-goods Transaction.
(a) Contents and form of notification. 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(a);
(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 in accordance
with the instructions in subsection (b), 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.
{1} 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.
{2} We will sell (describe collateral) at private sale sometime after
(date). A sale could include a lease or license.
{3} 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.
{4} 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).
{5} If you want us to explain to you in writing or in (description of
electronic record) (description of electronic record) how we have
figured the amount that you owe us,
{6} call us at (telephone number) or write us at (secured party's
address) or contact us by (description of electronic communication
method)
{7} and request a written explanation or an explanation in
(description of electronic record) an explanation in (description of
electronic record).
{8} We will charge you $ (amount) for the explanation if we sent you
another written explanation of the amount you owe us within the last six
months.
{9} If you need more information about the sale call us at (telephone
number) or write us at (secured party's address) or contact us by
(description of electronic communication method).
{10} 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)
(End of Form)
(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 (3), 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 (3).
(b) Instructions for form of notification. The following instructions
apply to the form of notification in subsection (a)(3):
(1) The instructions in this subsection refer to the numbers in braces
before items in the form of notification in subsection (a)(3). Do not
include the numbers or braces in the notification. The numbers and
braces are used only for the purpose of these instructions.
(2) Include and complete either item {1}, if the notification relates
to a public disposition of the collateral, or item {2}, if the
notification relates to a private disposition of the collateral.
(3) Include and complete items {3}, {4}, {5}, {6}, and {7}.
(4) In item {5}, include and complete any one of the three alternative
methods for the explanation--writing, writing or electronic record, or
electronic record.
(5) In item {6}, include the telephone number. In addition, the sender
may include and complete either or both of the two additional
alternative methods of communication--writing or electronic
communication-for the recipient of the notification to communicate with
the sender. Neither of the two additional methods of communication is
required to be included.
(6) In item {7}, include and complete the method or methods for the
explanation--writing, writing or electronic record, or electronic
record--included in item {5}.
(7) Include and complete item {8} only if a written explanation is
included in item {5} as a method for communicating the explanation and
the sender will charge the recipient for another written explanation.
(8) In item {9}, include either the telephone number or the address or
both the telephone number and the address. In addition, the sender may
include and complete the additional method of communication--electronic
communication--for the recipient of the notification to communicate with
the sender. The additional method of electronic communication is not
required to be included.
(9) If item {10} does not apply, insert "None" after "agreement:".
Section 9--615. Application of Proceeds of Disposition; Liability for
Deficiency and Right to Surplus.
(a) Application of proceeds. A secured party shall apply or pay over
for application the cash proceeds of disposition under Section 9--610 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;
(1-a) in the case of a cooperative organization security
interest, the holder thereof in the amount secured thereby;
(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 a signed
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 a signed demand for
proceeds before distribution of the proceeds is completed.
(b) Proof of subordinate interest. 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) Application of noncash proceeds. A secured party need not apply or
pay over for application noncash proceeds of disposition under Section
9--610 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) Surplus or deficiency if obligation secured. 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) No surplus or deficiency in sales of certain rights to payment. 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) Calculation of surplus or deficiency in disposition to person
related to secured party. 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) Cash proceeds received by junior secured party. 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.
Section 9--616. Explanation of Calculation of Surplus or Deficiency.
(a) Definitions. In this section:
(1) "Explanation" means a record 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) signed 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) Explanation of calculation. 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 demand in a record 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) Required information. To comply with subsection (a)(1)(B), an
explanation 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) Substantial compliance. 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) Charges for responses. 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 25
dollars for each additional response.
Section 9--617. Rights of Transferee of Collateral.
(a) Effects of disposition. 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 any law of
this state that are not to be discharged.
(b) Rights of good-faith transferee. 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) Rights of other transferee. 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 other security interest or other lien.
Section 9--618. Rights and Duties of Certain Secondary Obligors.
(a) Rights and duties of secondary obligor. 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) Effect of assignment, transfer, or subrogation. 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.
Section 9--619. Transfer of Record or Legal Title.
(a) "Transfer statement." In this section, "transfer statement" means
a record signed 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) Effect of transfer statement. 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 the transferee.
(c) Transfer not a disposition; no relief of secured party's duties. 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.
Section 9--620. Acceptance of Collateral in Full or Partial Satisfaction
of Obligation; Compulsory Disposition of Collateral.
(a) Conditions to acceptance in satisfaction. Except as otherwise
provided in subsections (g) and (h), 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) Purported acceptance ineffective. 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) Debtor's consent. 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) Effectiveness of notification. 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 20 days after notification
was sent to that person; and
(2) in other cases:
(A) within 20 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) Mandatory disposition of consumer goods. 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) Compliance with mandatory disposition requirement. To comply with
subsection (e), the secured party shall dispose of the collateral:
(1) within 90 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) No partial satisfaction in consumer transaction. In a consumer
transaction, a secured party may not accept collateral in partial
satisfaction of the obligation it secures.
(h) Special provisions for cooperative interests. A secured party
whose collateral consists of a residential cooperative interest used by
the debtor and whose security interest in such collateral secures an
obligation incurred in connection with financing or refinancing of the
acquisition of such cooperative interest and who chooses to accept that
cooperative interest in full satisfaction of the debtor's obligation may
do so.
(1) If the secured party sends a proposal to take the cooperative
interest in full satisfaction of the debtor's obligation, the proposal
shall be accompanied by a notice in the form and manner prescribed in
subsection (f) of section 9-611 of this subpart, unless the secured
party has previously sent the debtor such notice. A debtor consents to
an acceptance of a cooperative interest in full satisfaction of the
obligation it secures only if the debtor agrees to the terms of the
proposal in a record authenticated after default.
(2) A debtor may propose to the secured party that it take the
cooperative interest in full satisfaction of the obligation it secures.
The proposal shall be ineffective unless the secured party consents to
the proposal in an authenticated record.
Section 9--621. Notification of Proposal to Accept Collateral.
(a) Persons to which proposal to be sent. 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, 10 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, 10 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) Proposal to be sent to secondary obligor in partial satisfaction.
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).
Section 9--622. Effect of Acceptance of Collateral.
(a) Effect of acceptance. 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) Discharge of subordinate interest notwithstanding noncompliance. A
subordinate interest is discharged or terminated under subsection (a),
even if the secured party fails to comply with this article.
Section 9--623. Right to Redeem Collateral.
(a) Persons that may redeem. A debtor, any secondary obligor, or any
other secured party or lienholder may redeem collateral.
(b) Requirements for redemption. 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) When redemption may occur. 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.
Section 9--624. Waiver.
(a) Waiver of disposition notification. 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) Waiver of mandatory disposition. 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) Waiver of redemption right. 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
Section 9--625. Remedies for Secured Party's Failure to Comply with
Article.
(a) Judicial orders concerning noncompliance. 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) Damages for noncompliance. Subject to subsections (c), (d), and
(f), a person 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 may include loss resulting from the debtor's inability to obtain,
or increased costs of, alternative financing.
(c) Persons entitled to recover damages; statutory damages if
collateral is consumer goods. 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 10 percent of the principal amount of the
obligation or the time-price differential plus 10 percent of
the cash price.
(d) Recovery when deficiency eliminated or reduced. 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) Statutory damages: noncompliance with specified provisions. 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 a person
that:
(1) fails to comply with Section 9--208;
(2) fails to comply with Section 9--209;
(3) files a record that the person is not entitled to file under
Section 9--509 (a);
(4) fails to cause the secured party of record to file or send a
termination statement as required by Section 9--513 (a), (c),
or (e);
(5) 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) fails to comply with Section 9--616 (b) (2).
(f) Statutory damages: noncompliance with Section 9--210. 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) Limitation of security interest: noncompliance with Section
9--210. 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 list or
statement included in the request as against a person that is reasonably
misled by the failure.
Section 9--626. Action in Which Deficiency or Surplus is in Issue.
(a) Applicable rules if amount of deficiency or surplus is in issue.
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) Non-consumer transactions; no inference. 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.
Section 9--627. Determination of Whether Conduct Was Commercially
Reasonable.
(a) Greater amount obtainable under other circumstances; no preclusion
of commercial reasonableness. 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) Dispositions that are commercially reasonable. 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) Approval by court or on behalf of creditors. 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) not necessary; absence of approval
has no effect. 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.
Section 9--628. Nonliability and Limitation on Liability of Secured
Party; Liability of Secondary Obligor.
(a) Limitation of liability of secured party for noncompliance with
article. 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) Limitation of liability based on status as secured party. 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) Limitation of liability if reasonable belief that transaction not
a consumer-goods transaction or consumer transaction. 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) Limitation of liability for statutory damages. 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) Limitation of multiple liability for statutory damages. 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
Section 9--700. Definitions.
The following words and terms when used in this part 7 shall have the
following meanings:
"Former Article 9." The provisions of article 9 of the Uniform
Commercial Code of this state as in effect before the effective date of
Revised Article 9.
"Revised Article 9." The provisions of article 9 of the Uniform
Commercial Code of this state, as amended by the chapter of the laws of
2001 which added these words and as they may be further amended.
Section 9--701. Effective Date.
Revised Article 9 takes effect on July 1, 2001.
Section 9--702. Savings Clause.
(a) Pre-effective-date transactions or liens. Except as otherwise
provided in this part, Revised Article 9 applies to a transaction or
lien within its scope, even if the transaction or lien was entered into
or created before Revised Article 9 takes effect.
(b) Continuing validity. Except as otherwise provided in subsection
(c) and Sections 9--703 through 9--709:
(1) transactions and liens that were not governed by Former
Article 9, were validly entered into or created before
Revised Article 9 takes effect, and would be subject to
Revised Article 9 if they had been entered into or created
after Revised Article 9 takes effect, and the rights, duties,
and interests flowing from those transactions and liens
remain valid after Revised Article 9 takes effect; and
(2) the transactions and liens may be terminated, completed,
consummated, and enforced as required or permitted by Revised
Article 9 or by the law that otherwise would apply if Revised
Article 9 had not taken effect.
(c) Pre-effective-date proceedings. Revised Article 9 does not affect
an action, case, or proceeding commenced before Revised Article 9 takes
effect.
Section 9--703. Security Interest Perfected Before Effective Date.
(a) Continuing priority over lien creditor: perfection requirements
satisfied. A security interest that is enforceable immediately before
Revised Article 9 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 Revised Article 9 if, when Revised Article 9
takes effect, the applicable requirements for enforceability and
perfection under Revised Article 9 are satisfied without further action.
(b) Continuing priority over lien creditor: perfection requirements
not satisfied. Except as otherwise provided in Section 9--705 and
subsection (c), if, immediately before this article 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
article are not satisfied when this article takes effect, the security
interest:
(1) is a perfected security interest for one year after this
article 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 article are satisfied
before the year expires.
(c) Special rule for cooperative interests: perfection requirements
not satisfied. If, immediately before Revised Article 9 takes effect, a
security interest in a cooperative 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 perfection under
Revised Article 9 are not satisfied when Revised Article 9 takes effect,
the security interest:
(1) is a perfected security interest for 5 years after Revised
Article 9 takes effect; and
(2) remains perfected thereafter only if the applicable
requirements for perfection under Revised Article 9 are
satisfied before the 5 years expire.
Section 9--704. Security Interest Unperfected Before Effective Date.
A security interest that is enforceable immediately before Revised
Article 9 takes effect but which would be subordinate to the rights of a
person that becomes a lien creditor at that time:
(a) remains an enforceable security interest for one year after
Revised Article 9 takes effect;
(b) remains enforceable thereafter if the security interest becomes
enforceable under Section 9--203 when Revised Article 9 takes effect or
within one year thereafter; and
(c) becomes perfected:
(1) without further action, when Revised Article 9 takes effect
if the applicable requirements for perfection under Revised
Article 9 are satisfied before or at that time; or
(2) when the applicable requirements for perfection are satisfied
if the requirements are satisfied after that time.
Section 9--705. Effectiveness of Action Taken Before Effective Date.
(a) Pre-effective-date action; one-year perfection period unless
reperfected. If action, other than the filing of a financing statement,
is taken before Revised Article 9 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 Revised Article 9 takes effect, the action is
effective to perfect a security interest that attaches under Revised
Article 9 within one year after Revised Article 9 takes effect. An
attached security interest becomes unperfected one year after Revised
Article 9 takes effect unless the security interest becomes a perfected
security interest under Revised Article 9 before the expiration of that
period.
(b) Pre-effective-date filing. The filing of a financing statement
before Revised Article 9 takes effect is effective to perfect a security
interest to the extent the filing would satisfy the applicable
requirements for perfection under Revised Article 9.
(c) Pre-effective-date filing in jurisdiction formerly governing
perfection. Revised Article 9 does not render ineffective an effective
financing statement that, before Revised Article 9 takes effect, is
filed and satisfies 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) June thirtieth, 2006.
(d) Continuation statement. The filing of a continuation statement
after Revised Article 9 takes effect does not continue the effectiveness
of the financing statement filed before Revised Article 9 takes effect.
However, upon the timely filing of a continuation statement after
Revised Article 9 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 Revised Article 9 takes effect continues for the
period provided by the law of that jurisdiction.
(e) Application of subsection (c) (2) to transmitting utility
financing statement. Subsection (c) (2) applies to a financing statement
that, before Revised Article 9 takes effect, is filed against a
transmitting utility and satisfies 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 the jurisdiction in
which the financing statement is filed governs perfection of a security
interest in collateral covered by the financing statement.
(f) Application of Part 5. A financing statement that includes a
financing statement filed before Revised Article 9 takes effect and a
continuation statement filed after Revised Article 9 takes effect is
effective only to the extent that it satisfies the requirements of Part
5 for an initial financing statement.
Section 9--706. When Initial Financing Statement Suffices to Continue
Effectiveness of Financing Statement.
(a) Initial financing statement in lieu of continuation statement. The
filing of an initial financing statement in the office specified in
Section 9--501 continues the effectiveness of a financing statement
filed before Revised Article 9 takes effect if:
(1) the filing of an initial financing statement in that office
would be effective to perfect a security interest under
Revised Article 9;
(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 (c).
(b) Period of continued effectiveness. The filing of an initial
financing statement under subsection (a) continues the effectiveness of
the pre-effective-date financing statement:
(1) if the initial financing statement is filed before Revised
Article 9 takes effect, for the period provided in Former
Section 9--403 with respect to a financing statement; and
(2) if the initial financing statement is filed after Revised
Article 9 takes effect, for the period provided in Section
9--515 with respect to an initial financing statement.
(c) Requirements for initial financing statement under subsection (a).
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.
Section 9--707. Amendment of Pre-effective-date Financing Statement.
(a) "Pre-effective-date financing statement". In this section,
"pre-effective-date financing statement" means a financing statement
filed before Revised Article 9 takes effect.
(b) Applicable law. After Revised Article 9 takes effect, a person may
add or delete collateral covered by, continue or terminate the
effectiveness of, or otherwise amend the information provided in, a
pre-effective-date financing statement only in accordance with the law
of the jurisdiction governing perfection as provided in Part 3. However,
the effectiveness of a pre-effective-date financing statement also may
be terminated in accordance with the law of the jurisdiction in which
the financing statement is filed.
(c) Method of amending: general rule. Except as otherwise provided in
subsection (d), if the law of this state governs perfection of a
security interest, the information in a pre-effective-date financing
statement may be amended after Revised Article 9 takes effect only if:
(1) the pre-effective-date financing statement and an amendment
are filed in the office specified in Section 9--501;
(2) an amendment is filed in the office specified in Section
9--501 concurrently with, or after the filing in that office
of, an initial financing statement that satisfies Section
9--706 (c); or
(3) an initial financing statement that provides the information
as amended and satisfies Section 9--706 (c) is filed in the
office specified in Section 9--501.
(d) Method of amending: continuation. If the law of this state governs
perfection of a security interest, the effectiveness of a
pre-effective-date financing statement may be continued only under
Section 9--705 (d) and (f) or 9--706.
(e) Method of amending: additional termination rule. Whether or not
the law of this state governs perfection of a security interest, the
effectiveness of a pre-effective-date financing statement filed in this
state may be terminated after Revised Article 9 takes effect by filing a
termination statement in the office in which the pre-effective-date
financing statement is filed, unless an initial financing statement that
satisfies Section 9--706 (c) has been filed in the office specified by
the law of the jurisdiction governing perfection as provided in Part 3
as the office in which to file a financing statement.
Section 9--708. 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:
(a) the secured party of record authorizes the filing; and
(b) the filing is necessary under this part:
(1) to continue the effectiveness of a financing statement filed
before Revised Article 9 takes effect; or
(2) to perfect or continue the perfection of a security interest.
Section 9--709. Priority.
(a) Law governing priority. Revised Article 9 determines the priority
of conflicting claims to collateral. However, if the relative priorities
of the claims were established before Revised Article 9 takes effect,
Former Article 9 determines priority.
(b) Priority if security interest becomes enforceable under Section
9--203. For purposes of Section 9--322(a), the priority of a security
interest that becomes enforceable under Section 9--203 of Revised
Article 9 dates from the time Revised Article 9 takes effect if the
security interest is perfected under Revised Article 9 by the filing of
a financing statement before Revised Article 9 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.
Section 9--710. Transitional Provision for Maintaining and Searching
Local-Filing Office Records.
(a) In this Section:
(1) "Local-filing office" means a filing office, other than the
department of state, that is designated as the proper place
to file a financing statement under Section 9-401 of Former
Article 9. The term applies only with respect to a record
that covers a type of collateral as to which the filing
office is designated in that section as the proper place to
file.
(2) "Former-Article-9 records" means:
(A) financing statements and other records that have been
filed in a local-filing office before the effective date
of this Article, and that are, or upon processing and
indexing will be, reflected in the index maintained, as
of the effective date of this Article, by the
local-filing office for financing statements and other
records filed in the local-filing office before the
effective date of this Article, and
(B) the index as of the day before the effective date of this
Article.
The term does not include records presented to a local-filing
office for filing after the effective date of this
Article, whether or not the records relate to financing
statements filed in the local-filing office before the
effective date of this Article.
(3) "Cooperative interest", "mortgage", "as-extracted
collateral", "fixture filing", "goods" and "fixtures" have
the meanings set forth in this Article.
(b) A local-filing office must not accept for filing a record
presented on or after the effective date of this Article, whether or not
the record relates to a financing statement filed in the local-filing
office before the effective date of this Article.
(c) Until at least seven years after the effective date of this
Article, each local-filing office shall maintain all former-Article-9
records in accordance with Former Article 9. A former-Article-9 record
that is not reflected on the index maintained on the day before the
effective date of this Article by the local-filing office must be
processed and indexed as soon as practicable but in any event no later
than thirty days after the effective date of this Article.
(d) Until at least seven years after the effective date of this
Article, each local-filing office shall respond to requests for
information with respect to former-Article-9 records relating to a
debtor and issue certificates, in accordance with Former Article 9. The
fees charged for responding to requests for information relating to a
debtor and issuing certificates with respect to former-Article-9 records
shall be the fees in effect under Former Article 9 on the day before the
effective date of this Article, unless a different fee is later
determined in accordance with section ninety-six-a of the executive law.
(e) Subsequent to seven years after the effective date of this
Article, each local-filing office may remove and destroy, in accordance
with any then applicable record retention law of this state, all
former-Article-9 records, including the related index.
(f) This section shall not apply, with respect to financing statements
and other records, to a filing office in which mortgages or records of
mortgages on real property are required to be filed or recorded, if:
(1) the collateral is timber to be cut or as-extracted
collateral; or
(2) the record is or relates to a financing statement filed as a
fixture filing and the collateral is goods that are or are to
become fixtures; or
(3) the collateral is a cooperative interest.