Office of the Revisor of Statutes
Minnesota Session Laws - 2000, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 399-S.F.No. 1495
An act relating to commerce; enacting revised article
9 of the Uniform Commercial Code as adopted by the
National Conference of Commissioners on Uniform State
Laws; amending Minnesota Statutes 1998, sections
336.1-105; 336.1-201; 336.2-103; 336.2-210; 336.2-326;
336.2-502; 336.2-716; 336.2A-103; 336.2A-303;
336.2A-307; 336.2A-309; 336.4-210; 336.7-503;
336.8-103; 336.8-106; 336.8-110; 336.8-301; 336.8-302;
and 336.8-510; proposing coding for new law in
Minnesota Statutes, chapter 336; repealing Minnesota
Statutes 1998, sections 336.9-101; 336.9-102;
336.9-103; 336.9-104; 336.9-105; 336.9-106; 336.9-107;
336.9-108; 336.9-109; 336.9-110; 336.9-112; 336.9-113;
336.9-114; 336.9-115; 336.9-116; 336.9-201; 336.9-202;
336.9-204; 336.9-205; 336.9-206; 336.9-207; 336.9-208;
336.9-301; 336.9-302; 336.9-303; 336.9-304; 336.9-305;
336.9-306; 336.9-307; 336.9-308; 336.9-309; 336.9-310;
336.9-311; 336.9-312; 336.9-313; 336.9-314; 335.9-315;
336.9-316; 336.9-317; 336.9-318; 336.9-403; 336.9-404;
336.9-405; 336.9-406; 336.9-407; 336.9-408; 336.9-410;
336.9-412; 336.9-413; 336.9-501; 336.9-502; 336.9-503;
336.9-504; 336.9-505; 336.9-506; 336.9-507; and
336.9-508; Minnesota Statutes 1999 Supplement,
sections 336.9-203; 336.9-401; 336.9-402; and
336.9-411.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
Revised Article 9
SECURED TRANSACTIONS
Part 1
GENERAL PROVISIONS
SUBPART 1. SHORT TITLE, DEFINITIONS,
AND GENERAL CONCEPTS
Section 1. [336.9-101] [SHORT TITLE.]
This article may be cited as Uniform Commercial Code -
Secured Transactions.
Sec. 2. [336.9-102] [DEFINITIONS AND INDEX OF
DEFINITIONS.]
(a) [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," means a
right to payment of a monetary obligation, whether or not earned
by performance, (i) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (ii) for
services rendered or to be rendered, (iii) for a policy of
insurance issued or to be issued, (iv) for a secondary
obligation incurred or to be incurred, (v) for energy provided
or to be provided, (vi) for the use or hire of a vessel under a
charter or other contract, (vii) arising out of the use of a
credit or charge card or information contained on or for use
with the card, or (viii) as winnings in a lottery or other game
of chance operated or sponsored by a state, governmental unit of
a state, or person licensed or authorized to operate the game by
a state or governmental unit of a state. The term includes
health-care-insurance receivables. The term does not include (i)
rights to payment evidenced by chattel paper or an instrument,
(ii) commercial tort claims, (iii) deposit accounts, (iv)
investment property, (v) letter of credit rights or letters of
credit, or (vi) rights to payment for money or funds advanced or
sold, other than rights arising out of the use of a credit or
charge card or information contained on or for use with the card.
(3) "Account debtor" means a person obligated on an
account, chattel paper, or general intangible. The term does
not include persons obligated to pay a negotiable instrument,
even if the instrument constitutes part of chattel paper.
(4) "Accounting," except as used in "accounting for," means
a record:
(A) authenticated by a secured party;
(B) indicating the aggregate unpaid secured obligations as
of a date not more than 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, other than a
security interest, in farm products:
(A) which secures payment or performance of an obligation
for:
(i) goods or services furnished in connection with a
debtor's farming operation; or
(ii) rent on real property leased by a debtor in connection
with its farming operation;
(B) which is created by statute in favor of a person that:
(i) in the ordinary course of its business furnished goods
or services to a debtor in connection with a debtor's farming
operation; or
(ii) leased real property to a debtor in connection with
the debtor's farming operation; and
(C) whose effectiveness does not depend on the person's
possession of the personal property.
(6) "As-extracted collateral" means:
(A) oil, gas, or other minerals that are subject to a
security interest that:
(i) is created by a debtor having an interest in the
minerals before extraction; and
(ii) attaches to the minerals as extracted; or
(B) accounts arising out of the sale at the wellhead or
minehead of oil, gas, or other minerals in which the debtor had
an interest before extraction.
(7) "Authenticate" means:
(A) to sign; or
(B) to execute or otherwise adopt a symbol, or encrypt or
similarly process a record in whole or in part, with the present
intent of the authenticating person to identify the person and
adopt or accept a record.
(8) "Bank" means an organization that is engaged in the
business of banking. The term includes savings banks, savings
and loan associations, credit unions, and trust companies.
(9) "Cash proceeds" means proceeds that are money, checks,
deposit accounts, or the like.
(10) "Certificate of title" means a certificate of title
with respect to which a statute provides for the security
interest in question to be indicated on the certificate as a
condition or result of the security interest's obtaining
priority over the rights of a lien creditor with respect to the
collateral.
(11) "Chattel paper" means a record or records that
evidence both a monetary obligation and a security interest in
specific goods, a security interest in specific goods and
software used in the goods, a security interest in specific
goods and license of software used in the goods, a lease of
specific goods, or a lease of specific goods and license of
software used in the goods. In this paragraph, "monetary
obligation" means a monetary obligation secured by the goods or
owed under a lease of the goods and includes a monetary
obligation with respect to software used in the goods. The term
does not include (i) charters or other contracts involving the
use or hire of a vessel or (ii) records 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. If a
transaction is evidenced by records that include an instrument
or series of instruments, the group of records taken together
constitutes chattel paper.
(12) "Collateral" means the property subject to a security
interest or agricultural lien. The term includes:
(A) proceeds to which a security interest attaches;
(B) accounts, chattel paper, payment intangibles, and
promissory notes that have been sold; and
(C) goods that are the subject of a consignment.
(13) "Commercial tort claim" means a claim arising in tort
with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the claim:
(i) arose in the course of the claimant's business or
profession; and
(ii) does not include damages arising out of personal
injury to or the death of an individual.
(14) "Commodity account" means an account maintained by a
commodity intermediary in which a commodity contract is carried
for a commodity customer.
(15) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a commodity
option, or another contract if the contract or option is:
(A) traded on or subject to the rules of a board of trade
that has been designated as a contract market for such a
contract pursuant to federal commodities law; 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.
(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 336.7-201(2).
(31) "Electronic chattel paper" means chattel paper
evidenced by a record or records consisting of information
stored in an electronic medium.
(32) "Encumbrance" means a right, other than an ownership
interest, in real property. The term includes mortgages and
other liens on real property.
(33) "Equipment" means goods other than inventory, farm
products, or consumer goods.
(34) "Farm products" means goods, other than standing
timber, with respect to which the debtor is engaged in a farming
operation and which are:
(A) crops grown, growing, or to be grown, including:
(i) crops produced on trees, vines, and bushes; and
(ii) aquatic goods produced in aquacultural operations;
(B) livestock, born or unborn, including aquatic goods
produced in aquacultural operations;
(C) supplies used or produced in a farming operation; or
(D) products of crops or livestock in their unmanufactured
states.
(35) "Farming operation" means raising, cultivating,
propagating, fattening, grazing, or any other farming,
livestock, or aquacultural operation.
(36) "File number" means the number assigned to an initial
financing statement pursuant to section 336.9-519(a).
(37) "Filing office" means an office designated in section
336.9-501 as the place to file a financing statement.
(38) "Filing office rule" means a rule adopted pursuant to
section 139.
(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 336.9-502(a) and (b). The term includes the
filing of a financing statement covering goods of a transmitting
utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to
particular real property that an interest in them arises under
real property law.
(42) "General intangible" means any personal property,
including things in action, other than accounts, chattel paper,
commercial tort claims, deposit accounts, documents, goods,
instruments, investment property, letter of credit rights,
letters of credit, money, and oil, gas, or other minerals before
extraction. The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the observance
of reasonable commercial standards of fair dealing.
(44) "Goods" means all things that are movable when a
security interest attaches. The term includes (i) fixtures,
(ii) standing timber that is to be cut and removed under a
conveyance or contract for sale, (iii) the unborn young of
animals, (iv) crops grown, growing, or to be grown, even if the
crops are produced on trees, vines, or bushes, and (v)
manufactured homes. The term also includes a computer program
embedded in goods and any supporting information provided in
connection with a transaction relating to the program if the
program is associated with the goods in such a manner that it
customarily is considered part of the goods, or by becoming the
owner of the goods, a person acquires a right to use the program
in connection with the goods. The term does not include a
computer program embedded in goods that consist solely of the
medium 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.
(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 endorsement or
assignment. The term does not include (i) investment property,
(ii) letters of credit, or (iii) writings that evidence a right
to payment arising out of the use of a credit or charge card or
information contained on or for use with the card.
(48) "Inventory" means goods, other than farm products,
which:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or to be
furnished under a contract of service;
(C) are furnished by a person under a contract of service;
or
(D) consist of raw materials, work in process, or materials
used or consumed in a business.
(49) "Investment property" means a security, whether
certificated or uncertificated, security entitlement, securities
account, commodity contract, or commodity account.
(50) "Jurisdiction of organization," with respect to a
registered organization, means the jurisdiction under whose law
the organization is organized.
(51) "Letter of credit right" means a right to payment 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
United States Code, title 42.
(54) "Manufactured home transaction" means a secured
transaction:
(A) that creates a purchase-money security interest in a
manufactured home, other than a manufactured home held as
inventory; or
(B) in which a manufactured home, other than a manufactured
home held as inventory, is the primary collateral.
(55) "Mortgage" means a consensual interest in real
property, including fixtures, which secures payment or
performance of an obligation.
(56) "New debtor" means a person that becomes bound as
debtor under section 336.9-203(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
336.9-310(c), means a person that, as debtor, entered into a
security agreement to which a new debtor has become bound under
section 336.9-203(d).
(61) "Payment intangible" means a general intangible under
which the account debtor's principal obligation is a monetary
obligation.
(62) "Person related to," with respect to an individual,
means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister, or sister-in-law of
the individual;
(C) an ancestor or lineal descendant of the individual or
the individual's spouse; or
(D) any other relative, by blood or marriage, of the
individual or the individual's spouse who shares the same home
with the individual.
(63) "Person related to," with respect to an organization,
means:
(A) a person directly or indirectly controlling, controlled
by, or under common control with the organization;
(B) an officer or director of, or a person performing
similar functions with respect to, the organization;
(C) an officer or director of, or a person performing
similar functions with respect to, a person described in
subparagraph (A);
(D) the spouse of an individual described in subparagraph
(A), (B), or (C); or
(E) an individual who is related by blood or marriage to an
individual described in subparagraph (A), (B), (C), or (D), and
shares the same home with the individual.
(64) "Proceeds", except as used in section 336.9-609(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 authenticated by a secured
party which includes the terms on which the secured party is
willing to accept collateral in full or partial satisfaction of
the obligation it secures pursuant to sections 336.9-620,
336.9-621, and 336.9-622.
(67) "Public-finance transaction" means a secured
transaction in connection with which:
(A) debt securities are issued;
(B) all or a portion of the securities issued have an
initial stated maturity of at least 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) "Pursuant to commitment," with respect to an advance
made or other value given by a secured party, means pursuant to
the secured party's obligation, whether or not a subsequent
event of default or other event not within the secured party's
control has relieved or may relieve the secured party from its
obligation.
(69) "Record," except as used in "for record," "of record,"
"record or legal title," and "record owner," means information
that is inscribed on a tangible medium or which is stored in an
electronic or other medium and is retrievable in perceivable
form.
(70) "Registered organization" means an organization
organized solely under the law of a single state or the United
States and as to which the state or the United States must
maintain a public record showing the organization to have been
organized.
(71) "Secondary obligor" means an obligor to the extent
that:
(A) the obligor's obligation is secondary; or
(B) the obligor has a right of recourse with respect to an
obligation secured by collateral against the debtor, another
obligor, or property of either.
(72) "Secured party" means:
(A) a person in whose favor a security interest is created
or provided for under a security agreement, whether or not any
obligation to be secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper, payment
intangibles, or promissory notes have been sold;
(E) a trustee, indenture trustee, agent, collateral agent,
or other representative in whose favor a security interest or
agricultural lien is created or provided for; or
(F) a person that holds a security interest arising under
section 336.2-401, 336.2-505, 336.2-711(3), 336.2A-508(5),
336.4-210, or 336.5-118.
(73) "Security agreement" means an agreement that creates
or provides for a security interest.
(74) "Send," in connection with a record or notification,
means:
(A) to deposit in the mail, deliver for transmission, or
transmit by any other usual means of communication, with postage
or cost of transmission provided for, addressed to any address
reasonable under the circumstances; or
(B) to cause the record or notification to be received
within the time that it would have been received if properly
sent under subparagraph (A).
(75) "Software" means a computer program and any supporting
information provided in connection with a transaction relating
to the program. The term does not include a computer program
that is included in the definition of goods.
(76) "State" means a state of the United States, the
District of Columbia, Puerto Rico, the United States Virgin
Islands, or any territory or insular possession subject to the
jurisdiction of the United States.
(77) "Supporting obligation" means a letter of credit right
or secondary obligation that supports the payment or performance
of an account, chattel paper, a document, a general intangible,
an instrument, or investment property.
(78) "Tangible chattel paper" means chattel paper evidenced
by a record or records consisting of information that is
inscribed on a tangible medium.
(79) "Termination statement" means an amendment of a
financing statement which:
(A) identifies, by its file number, the initial financing
statement to which it relates; and
(B) indicates either that it is a termination statement or
that the identified financing statement is no longer effective.
(80) "Transmitting utility" means a person primarily
engaged in the business of:
(A) operating a railroad, subway, street railway, or
trolley bus;
(B) transmitting communications electrically,
electromagnetically, or by light;
(C) transmitting goods by pipeline or sewer; or
(D) transmitting or producing and transmitting electricity,
steam, gas, or water.
(b) [DEFINITIONS IN OTHER ARTICLES.] The following
definitions in other articles apply to this article:
"Applicant" Section 336.5-102
"Beneficiary" Section 336.5-102
"Broker" Section 336.8-102
"Certificated security" Section 336.8-102
"Check" Section 336.3-104
"Clearing corporation" Section 336.8-102
"Contract for sale" Section 336.2-106
"Customer" Section 336.4-104
"Entitlement holder" Section 336.8-102
"Financial asset" Section 336.8-102
"Holder in due course" Section 336.3-302
"Issuer" (with respect to a
letter of credit or
letter of credit right) Section 336.5-102
"Issuer" (with respect to
a security) Section 336.8-201
"Lease" Section 336.2A-103
"Lease agreement" Section 336.2A-103
"Lease contract" Section 336.2A-103
"Leasehold interest" Section 336.2A-103
"Lessee" Section 336.2A-103
"Lessee in ordinary course
of business" Section 336.2A-103
"Lessor" Section 336.2A-103
"Lessor's residual interest" Section 336.2A-103
"Letter of credit" Section 336.5-102
"Merchant" Section 336.2-104
"Negotiable instrument" Section 336.3-104
"Nominated person" Section 336.5-102
"Note" Section 336.3-104
"Proceeds of a letter of
credit" Section 336.5-114
"Prove" Section 336.3-103
"Sale" Section 336.2-106
"Securities account" Section 336.8-501
"Securities intermediary" Section 336.8-102
"Security" Section 336.8-102
"Security certificate" Section 336.8-102
"Security entitlement" Section 336.8-102
"Uncertificated security" Section 336.8-102
(c) [ARTICLE 1 DEFINITIONS AND PRINCIPLES.] Article 1
contains general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 3. [336.9-103] [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 NONCONSUMER 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 NONCONSUMER 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 NONCONSUMER 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) [NONCONSUMER GOODS TRANSACTION; 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.
Sec. 4. [336.9-104] [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 an
authenticated 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; or
(3) the secured party becomes the bank's customer with
respect to the deposit account.
(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.
Sec. 5. [336.9-105] [CONTROL OF ELECTRONIC CHATTEL PAPER.]
A secured party has control of electronic chattel paper if
the record or records comprising the chattel paper are created,
stored, and assigned in such a manner that:
(1) a single authoritative copy of the record or records
exists which is unique, identifiable, and, except as otherwise
provided in paragraphs (4), (5), and (6), unalterable;
(2) the authoritative copy identifies the secured party as
the assignee of the record or records;
(3) the authoritative copy is communicated to and
maintained by the secured party or its designated custodian;
(4) copies or revisions that add or change an identified
assignee of the authoritative copy can be made only with the
participation of the secured party;
(5) each copy of the authoritative copy and any copy of a
copy is readily identifiable as a copy that is not the
authoritative copy; and
(6) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.
Sec. 6. [336.9-106] [CONTROL OF INVESTMENT PROPERTY.]
(a) [CONTROL UNDER SECTION 336.8-106.] A person has control
of a certificated security, uncertificated security, or security
entitlement as provided in section 336.8-106.
(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.
Sec. 7. [336.9-107] [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 336.5-114(c) or otherwise applicable law or
practice.
Sec. 8. [336.9-108] [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 subsection (d), a description of
collateral reasonably identifies the collateral if it identifies
the collateral by:
(1) specific listing;
(2) category;
(3) except as otherwise provided in subsection (e), a type
of collateral defined in the Uniform Commercial Code;
(4) quantity;
(5) computational or allocational formula or procedure; or
(6) except as otherwise provided in subsection (c), any
other method, if the identity of the collateral is objectively
determinable.
(c) [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 the Uniform Commercial
Code is an insufficient description of:
(1) a commercial tort claim; or
(2) in a consumer transaction, consumer goods, a security
entitlement, a securities account, or a commodity account.
SUBPART 2. APPLICABILITY OF ARTICLE
Sec. 9. [336.9-109] [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 336.2-401,
336.2-505, 336.2-711(3), or 336.2A-508(5), as provided in
section 336.9-110; and
(6) a security interest arising under section 336.4-210 or
336.5-118.
(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 336.5-114.
(d) [INAPPLICABILITY OF ARTICLE.] This article does not
apply to:
(1) a landlord's lien, other than an agricultural lien;
(2) a lien, other than an agricultural lien, given by
statute or other rule of law for services or materials, but
section 336.9-333 applies with respect to priority of the lien;
(3) an assignment of a claim for wages, salary, or other
compensation of an employee;
(4) a sale of accounts, chattel paper, payment intangibles,
or promissory notes as part of a sale of the business out of
which they arose;
(5) an assignment of accounts, chattel paper, payment
intangibles, or promissory notes which is for the purpose of
collection only;
(6) an assignment of a right-to-payment under a contract to
an assignee that is also obligated to perform under the
contract;
(7) an assignment of a single account, payment intangible,
or promissory note to an assignee in full or partial
satisfaction of a preexisting indebtedness;
(8) a transfer of an interest in or an assignment of a
claim under a policy of insurance, other than an assignment by
or to a health-care provider of a health-care-insurance
receivable and any subsequent assignment of the
right-to-payment, but sections 336.9-315 and 336.9-322 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 336.9-340 applies with respect to the
effectiveness of rights of recoupment or set-off against deposit
accounts; and
(B) section 336.9-404 applies with respect to defenses or
claims of an account debtor;
(11) the creation or transfer of an interest in or lien on
real property, including a lease or rents thereunder, except to
the extent that provision is made for:
(A) liens on real property in sections 336.9-203 and
336.9-308;
(B) fixtures in section 336.9-334;
(C) fixture filings in sections 336.9-501, 336.9-502,
336.9-512, 336.9-516, and 336.9-519; and
(D) security agreements covering personal and real property
in section 336.9-604;
(12) an assignment of a claim arising in tort, other than a
commercial tort claim, but sections 336.9-315 and 336.9-322
apply with respect to proceeds and priorities in proceeds;
(13) an assignment of a deposit account in a consumer
transaction, but sections 336.9-315 and 336.9-322 apply with
respect to proceeds and priorities in proceeds;
(14) a claim or right to receive compensation for injuries
or sickness as described in United States Code, title 26,
section 104(a)(1) or (2), as amended from time to time; or
(15) a claim or right to receive benefits under a special
needs trust as described in United States Code, title 42,
section 1396p(d)(4), as amended from time to time.
Sec. 10. [336.9-110] [SECURITY INTERESTS ARISING UNDER
ARTICLE 2 OR 2A.]
A security interest arising under section 336.2-401,
336.2-505, 336.2-711(3), or 336.2A-508(5) is subject to this
article. However, until the debtor obtains possession of the
goods:
(1) the security interest is enforceable, even if section
336.9-203(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 2A; 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
Sec. 11. [336.9-201] [GENERAL EFFECTIVENESS OF SECURITY
AGREEMENT.]
(a) [GENERAL EFFECTIVENESS.] Except as otherwise provided
in the Uniform Commercial Code, a security agreement is
effective according to its terms between the parties, against
purchasers of the collateral, and against creditors.
(b) [APPLICABLE CONSUMER LAWS AND OTHER LAW.] A transaction
subject to this article is subject to any applicable rule of law
which establishes a different rule for consumers and (i) any
other statute or regulation that regulates the rates, charges,
agreements, and practices for loans, credit sales, or other
extensions of credit and (ii) any consumer protection statute or
rule.
(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.
Sec. 12. [336.9-202] [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.
Sec. 13. [336.9-203] [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 authenticated a security agreement that
provides a description of the collateral and, if the security
interest covers timber to be cut, a description of the land
concerned;
(B) the collateral is not a certificated security and is in
the possession of the secured party under section 336.9-313
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 336.8-301 pursuant to the debtor's
security agreement; or
(D) the collateral is deposit accounts, electronic chattel
paper, investment property, or letter of credit rights, and the
secured party has control under section 336.9-104, 336.9-105,
336.9-106, or 336.9-107 pursuant to the debtor's security
agreement.
(c) [OTHER UCC PROVISIONS.] Subsection (b) is subject to
section 336.4-210 on the security interest of a collecting bank,
section 336.5-118 on the security interest of a letter of credit
issuer or nominated person, section 336.9-110 on a security
interest arising under article 2 or 2A, and section 336.9-206 on
security interests in investment property.
(d) [WHEN 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 336.9-315 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.
Sec. 14. [336.9-204] [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.] A
security interest does not attach under a term constituting an
after-acquired property clause to:
(1) consumer goods, other than an accession when given as
additional security, unless the debtor acquires rights in them
within ten days after the secured party gives value; or
(2) a commercial tort claim.
(c) [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.
Sec. 15. [336.9-205] [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.
Sec. 16. [336.9-206] [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 endorsement 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
Sec. 17. [336.9-207] [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 336.9-104, 336.9-105, 336.9-106, or
336.9-107:
(1) may hold as additional security any proceeds, except
money or funds, received from the collateral;
(2) shall apply money or funds received from the collateral
to reduce the secured obligation, unless remitted to the debtor;
and
(3) may create a security interest in the collateral.
(d) [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.
Sec. 18. [336.9-208] [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 ten days after receiving an authenticated demand
by the debtor:
(1) a secured party having control of a deposit account
under section 336.9-104(a)(2) shall send to the bank with which
the deposit account is maintained an authenticated statement
that releases the bank from any further obligation to comply
with instructions originated by the secured party;
(2) a secured party having control of a deposit account
under section 336.9-104(a)(3) shall:
(A) pay the debtor the balance on deposit in the deposit
account; or
(B) transfer the balance on deposit into a deposit account
in the debtor's name;
(3) a secured party, other than a buyer, having control of
electronic chattel paper under section 336.9-105 shall:
(A) communicate the authoritative copy of the electronic
chattel paper to the debtor or its designated custodian;
(B) if the debtor designates a custodian that is the
designated custodian with which the authoritative copy of the
electronic chattel paper is maintained for the secured party,
communicate to the custodian an authenticated record releasing
the designated custodian from any further obligation to comply
with instructions originated by the secured party and
instructing the custodian to comply with instructions originated
by the debtor; and
(C) take appropriate action to enable the debtor or its
designated custodian to make copies of or revisions to the
authoritative copy which add or change an identified assignee of
the authoritative copy without the consent of the secured party;
(4) a secured party having control of investment property
under section 336.8-106(d)(2) or 336.9-106(b) shall send to the
securities intermediary or commodity intermediary with which the
security entitlement or commodity contract is maintained an
authenticated record that releases the securities intermediary
or commodity intermediary from any further obligation to comply
with entitlement orders or directions originated by the secured
party; and
(5) a secured party having control of a letter of credit
right under section 336.9-107 shall send to each person having
an unfulfilled obligation to pay or deliver proceeds of the
letter of credit to the secured party an authenticated release
from any further obligation to pay or deliver proceeds of the
letter of credit to the secured party.
Sec. 19. [336.9-209] [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 ten days after receiving an authenticated demand
by the debtor, a secured party shall send to an account debtor
that has received notification of an assignment to the secured
party as assignee under section 336.9-406(a) an authenticated
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.
Sec. 20. [336.9-210] [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
authenticated by a debtor requesting that the recipient provide
an accounting of the unpaid obligations secured by collateral
and reasonably identifying the transaction or relationship that
is the subject of the request.
(3) "Request regarding a list of collateral" means a record
authenticated by a debtor requesting that the recipient approve
or correct a list of what the debtor believes to be the
collateral securing an obligation and reasonably identifying the
transaction or relationship that is the subject of the request.
(4) "Request regarding a statement of account" means a
record authenticated by a debtor requesting that the recipient
approve or correct a statement indicating what the debtor
believes to be the aggregate amount of unpaid obligations
secured by collateral as of a specified date and reasonably
identifying the transaction or relationship that is the subject
of the request.
(b) [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
authenticating and sending to the debtor an accounting; and
(2) in the case of a request regarding a list of collateral
or a request regarding a statement of account, by authenticating
and sending to the debtor an approval or correction.
(c) [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 an authenticated 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 an authenticated record:
(1) disclaiming any interest in the collateral; and
(2) if known to the recipient, providing the name and
mailing address of any assignee of or successor to the
recipient's 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 an
authenticated record:
(1) disclaiming any interest in the obligations; and
(2) if known to the recipient, providing the name and
mailing address of any assignee of or successor to the
recipient's interest in the obligations.
(f) [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
Sec. 21. [336.9-301] [LAW GOVERNING PERFECTION AND
PRIORITY OF SECURITY INTERESTS.]
Except as otherwise provided in sections 336.9-303 through
336.9-306, the following rules determine the law governing
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in collateral:
(1) Except as otherwise provided in this section, while a
debtor is located in a jurisdiction, the local law of that
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral.
(2) While collateral is located in a jurisdiction, the
local law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a possessory
security interest in that collateral.
(3) Except as otherwise provided in paragraph (4), while
negotiable documents, goods, instruments, money, or tangible
chattel paper is located in a jurisdiction, the local law of
that jurisdiction governs:
(A) perfection of a security interest in the goods by
filing a fixture filing;
(B) perfection of a security interest in timber to be cut;
and
(C) the effect of perfection or nonperfection and the
priority of a nonpossessory security interest in the collateral.
(4) The local law of the jurisdiction in which the wellhead
or minehead is located governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in as-extracted collateral.
Sec. 22. [336.9-302] [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.
Sec. 23. [336.9-303] [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.
Sec. 24. [336.9-304] [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.
(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 the debtor
governing the deposit account expressly provides that a
particular jurisdiction is the bank's jurisdiction for purposes
of this part, this article, or 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 applies, the bank's
jurisdiction is the jurisdiction in which the office identified
in an account statement as the office serving the customer's
account is located.
(5) If none of the preceding paragraphs applies, the bank's
jurisdiction is the jurisdiction in which the chief executive
office of the bank is located.
Sec. 25. [336.9-305] [LAW GOVERNING PERFECTION AND
PRIORITY OF SECURITY INTERESTS IN INVESTMENT PROPERTY.]
(a) [GOVERNING LAW: GENERAL RULES.] Except as otherwise
provided in subsection (c), the following rules apply:
(1) While a security certificate is located in a
jurisdiction, the local law of that jurisdiction governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in the certificated security
represented thereby.
(2) The local law of the issuer's jurisdiction as specified
in section 336.8-110(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 336.8-110(e), governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in a security entitlement or
securities account.
(4) The local law of the commodity intermediary's
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in a
commodity contract or commodity account.
(b) [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 applies, the
commodity intermediary's jurisdiction is the jurisdiction in
which the office identified in an account statement as the
office serving the commodity customer's account is located.
(5) If none of the preceding paragraphs applies, the
commodity intermediary's jurisdiction is the jurisdiction in
which the chief executive office of the commodity intermediary
is located.
(c) [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.
Sec. 26. [336.9-306] [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 336.5-116.
(c) [WHEN SECTION NOT APPLICABLE.] This section does not
apply to a security interest that is perfected only under
section 336.9-308(d).
Sec. 27. [336.9-307] [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; 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
Sec. 28. [336.9-308] [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 336.9-309, a security
interest is perfected if it has attached and all of the
applicable requirements for perfection in sections 336.9-310
through 336.9-316 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 336.9-310 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.
Sec. 29. [336.9-309] [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 336.9-311(b) with
respect to consumer goods that are subject to a statute or
treaty described in section 336.9-311(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 336.2-401,
336.2-505, 336.2-711(3), or 336.2A-508(5), until the debtor
obtains possession of the collateral;
(7) a security interest of a collecting bank arising under
section 336.4-210;
(8) a security interest of an issuer or nominated person
arising under section 336.5-118;
(9) a security interest arising in the delivery of a
financial asset under section 336.9-206(c);
(10) a security interest in investment property created by
a broker or securities intermediary;
(11) a security interest in a commodity contract or a
commodity account created by a commodity intermediary;
(12) an assignment for the benefit of all creditors of the
transferor and subsequent transfers by the assignee thereunder;
and
(13) a security interest created by an assignment of a
beneficial interest in a decedent's estate.
Sec. 30. [336.9-310] [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 336.9-312(b), a
financing statement must be filed to perfect all security
interests and agricultural liens.
(b) [EXCEPTIONS: FILING NOT NECESSARY.] The filing of a
financing statement is not necessary to perfect a security
interest:
(1) that is perfected under section 336.9-308(d), (e), (f),
or (g);
(2) that is perfected under section 336.9-309 when it
attaches;
(3) in property subject to a statute, regulation, or treaty
described in section 336.9-311(a);
(4) in goods in possession of a bailee which is perfected
under section 336.9-312(d)(1) or (2);
(5) in certificated securities, documents, goods, or
instruments which is perfected without filing or possession
under section 336.9-312(e), (f), or (g);
(6) in collateral in the secured party's possession under
section 336.9-313;
(7) in a certificated security which is perfected by
delivery of the security certificate to the secured party under
section 336.9-313;
(8) in deposit accounts, electronic chattel paper,
investment property, or letter of credit rights which is
perfected by control under section 336.9-314;
(9) in proceeds which is perfected under section 336.9-315;
or
(10) that is perfected under section 336.9-316.
(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.
Sec. 31. [336.9-311] [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 336.9-310(a);
(2) sections 86B.820 to 86B.920 and 168A.01 to 168A.31; but
during any period which collateral is inventory held for sale by
a person who is in the business of selling goods of that kind,
the filing provisions of this article (part 5) apply to a
security interest in the collateral created by the person as a
debtor; or sections 300.11 to 300.115; or
(3) a certificate-of-title statute of another jurisdiction
which provides for a security interest to be indicated on the
certificate as a condition or result of the security interest's
obtaining priority over the rights of a lien creditor with
respect to the property.
(b) [COMPLIANCE WITH 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 336.9-313 and 336.9-316(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 336.9-316(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.
Sec. 32. [336.9-312] [PERFECTION OF SECURITY INTERESTS IN
CHATTEL PAPER, DEPOSIT ACCOUNTS, DOCUMENTS, GOODS COVERED BY
DOCUMENTS, INSTRUMENTS, INVESTMENT PROPERTY, LETTER OF CREDIT
RIGHTS, AND MONEY; PERFECTION BY PERMISSIVE FILING; TEMPORARY
PERFECTION WITHOUT FILING OR TRANSFER OF POSSESSION.]
(a) [PERFECTION BY FILING PERMITTED.] A security interest
in chattel paper, negotiable documents, instruments, or
investment property may be perfected by filing.
(b) [CONTROL OR POSSESSION OF CERTAIN COLLATERAL.] Except
as otherwise provided in section 336.9-315(c) and (d) for
proceeds:
(1) a security interest in a deposit account may be
perfected only by control under section 336.9-314;
(2) and except as otherwise provided in section
336.9-308(d), a security interest in a letter of credit right
may be perfected only by control under section 336.9-314; and
(3) a security interest in money may be perfected only by
the secured party's taking possession under section 336.9-313.
(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
nonnegotiable document covering the goods, a security interest
in the goods may be perfected by:
(1) issuance of a document in the name of the secured
party;
(2) the bailee's receipt of notification of the secured
party's interest; or
(3) filing as to the goods.
(e) [TEMPORARY PERFECTION: NEW VALUE.] A security interest
in certificated securities, negotiable documents, or instruments
is perfected without filing or the taking of possession for a
period of 20 days from the time it attaches to the extent that
it arises for new value given under an authenticated 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.
Sec. 33. [336.9-313] [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 negotiable documents, goods,
instruments, money, or tangible chattel paper by taking
possession of the collateral. A secured party may perfect a
security interest in certificated securities by taking delivery
of the certificated securities under section 336.8-301.
(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 336.9-316(e).
(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 authenticates a record
acknowledging that it holds possession of the collateral for the
secured party's benefit; or
(2) the person takes possession of the collateral after
having authenticated a record acknowledging that it will hold
possession of collateral for the secured party's benefit.
(d) [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 no 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 336.8-301 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 336.8-301(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.
Sec. 34. [336.9-314] [PERFECTION BY CONTROL.]
(a) [PERFECTION BY CONTROL.] A security interest in
investment property, deposit accounts, letter of credit rights,
or electronic chattel paper may be perfected by control of the
collateral under section 336.9-104, 336.9-105, 336.9-106, or
336.9-107.
(b) [SPECIFIED COLLATERAL: TIME OF PERFECTION BY CONTROL;
CONTINUATION OF PERFECTION.] A security interest in deposit
accounts, electronic chattel paper, or letter of credit rights
is perfected by control under section 336.9-104, 336.9-105, or
336.9-107 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 336.9-106 from
the time the secured party obtains control and remains perfected
by control until:
(1) the secured party does not have control; and
(2) one of the following occurs:
(A) if the collateral is a certificated security, the
debtor has or acquires possession of the security certificate;
(B) if the collateral is an uncertificated security, the
issuer has registered or registers the debtor as the registered
owner; or
(C) if the collateral is a security entitlement, the debtor
is or becomes the entitlement holder.
Sec. 35. [336.9-315] [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 336.2-403(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 336.9-336; 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 336.9-515 or is terminated under section
336.9-513; or
(2) the 21st day after the security interest attaches to
the proceeds.
Sec. 36. [336.9-316] [CONTINUED PERFECTION OF SECURITY
INTEREST FOLLOWING 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 336.9-301(1) or
336.9-305(c) remains perfected until the earliest of:
(1) the time perfection would have ceased under the law of
that jurisdiction;
(2) the expiration of four months after a change of the
debtor's location to another jurisdiction; 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 336.9-311(b) or
336.9-313 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 BANK, ISSUER, NOMINATED
PERSON, SECURITIES INTERMEDIARY, OR COMMODITY INTERMEDIARY.] A
security interest in deposit accounts, letter of credit rights,
or investment property which is perfected under the law of the
bank's jurisdiction, the issuer's jurisdiction, a nominated
person's jurisdiction, the securities intermediary's
jurisdiction, or the commodity intermediary's jurisdiction, as
applicable, remains perfected until the earlier of:
(1) the time the security interest would have become
unperfected under the law of that jurisdiction; or
(2) the expiration of four months after a change of 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.
SUBPART 3. PRIORITY
Sec. 37. [336.9-317] [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 336.9-322;
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
336.9-203(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 tangible chattel paper, documents, goods, instruments, or a
security certificate takes free of a security interest or
agricultural lien if the buyer gives value and receives delivery
of the collateral without knowledge of the security interest or
agricultural lien and before it is perfected.
(c) [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.] A
licensee of a general intangible or a buyer, other than a
secured party, of accounts, electronic chattel paper, general
intangibles, or investment property other than a certificated
security takes free of a security interest if the licensee or
buyer gives value without knowledge of the security interest and
before it is perfected.
(e) [PURCHASE-MONEY SECURITY INTEREST.] Except as otherwise
provided in sections 336.9-320 and 336.9-321, 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.
Sec. 38. [336.9-318] [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.
Sec. 39. [336.9-319] [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.
Sec. 40. [336.9-320] [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 336.9-316(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 336.9-313.
Sec. 41. [336.9-321] [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.
Sec. 42. [336.9-322] [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 336.9-327,
336.9-328, 336.9-329, 336.9-330, or 336.9-331 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 336.4-210 with respect to a security interest
of a collecting bank;
(3) section 336.5-118 with respect to a security interest
of an issuer or nominated person; and
(4) section 336.9-110 with respect to a security interest
arising under article 2 or 2A.
(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.
Sec. 43. [336.9-323] [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 336.9-322(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 336.9-309 when it attaches; or
(B) temporarily under section 336.9-312(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 336.9-309 or 336.9-312(e), (f), or (g).
(b) [LIEN CREDITOR.] Except as otherwise provided in
subsection (c), 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 other than a buyer in ordinary
course of business takes free of a security interest to the
extent that it secures advances made after the earlier of:
(1) the time the secured party acquires knowledge of the
buyer's purchase; or
(2) 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, other than a lessee in
ordinary course of business, takes the leasehold interest free
of a security interest to the extent that it secures advances
made after the earlier of:
(1) the time the secured party acquires knowledge of the
lease; or
(2) 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.
Sec. 44. [336.9-324] [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 336.9-327, 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 336.9-330, and, except as otherwise provided in
section 336.9-327, also has priority in identifiable cash
proceeds of the inventory to the extent the identifiable cash
proceeds are received on or before the delivery of the inventory
to a buyer, if:
(1) the purchase-money security interest is perfected when
the debtor receives possession of the inventory;
(2) the purchase-money secured party sends an authenticated
notification to the holder of the conflicting security interest;
(3) the holder of the conflicting security interest
receives the notification within five years before the debtor
receives possession of the inventory; and
(4) the notification states that the person sending the
notification has or expects to acquire a purchase-money security
interest in inventory of the debtor and describes the inventory.
(c) [HOLDERS OF CONFLICTING INVENTORY SECURITY INTERESTS TO
BE NOTIFIED.] Subsection (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
336.9-312(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 336.9-327, a perfected security interest in
their identifiable proceeds and identifiable products in their
unmanufactured states also has priority, if:
(1) the purchase-money security interest is perfected when
the debtor receives possession of the livestock;
(2) the purchase-money secured party sends an authenticated
notification to the holder of the conflicting security interest;
(3) the holder of the conflicting security interest
receives the notification within six months before the debtor
receives possession of the livestock; and
(4) the notification states that the person sending the
notification has or expects to acquire a purchase-money security
interest in livestock of the debtor and describes the livestock.
(e) [HOLDERS OF CONFLICTING LIVESTOCK SECURITY INTERESTS TO
BE NOTIFIED.] Subsection (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
336.9-312(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 336.9-327, 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 336.9-322(a) applies to the
qualifying security interests.
Sec. 45. [336.9-325] [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
336.9-322(a) or 336.9-324; or
(2) arose solely under section 336.2-711(3) or
336.2A-508(5).
Sec. 46. [336.9-326] [PRIORITY OF SECURITY INTERESTS
CREATED BY NEW DEBTOR.]
(a) [SUBORDINATION OF SECURITY INTEREST CREATED BY NEW
DEBTOR.] Subject to subsection (b), a security interest created
by a new debtor which is perfected by a filed financing
statement that is effective solely under section 336.9-508 in
collateral in which a new debtor has or acquires rights is
subordinate to a security interest in the same collateral which
is perfected other than by a filed financing statement that is
effective solely under section 336.9-508.
(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 that are
effective solely under section 336.9-508. 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.
Sec. 47. [336.9-327] [PRIORITY OF SECURITY INTERESTS IN
DEPOSIT ACCOUNT.]
The following rules govern priority among conflicting
security interests in the same deposit account:
(1) A security interest held by a secured party having
control of the deposit account under section 336.9-104 has
priority over a conflicting security interest held by a secured
party that does not have control.
(2) Except as otherwise provided in paragraphs (3) and (4),
security interests perfected by control under section 336.9-314
rank according to priority in time of obtaining control.
(3) Except as otherwise provided in paragraph (4), a
security interest held by the bank with which the deposit
account is maintained has priority over a conflicting security
interest held by another secured party.
(4) A security interest perfected by control under section
336.9-104(a)(3) has priority over a security interest held by
the bank with which the deposit account is maintained.
Sec. 48. [336.9-328] [PRIORITY OF SECURITY INTERESTS IN
INVESTMENT PROPERTY.]
The following rules govern priority among conflicting
security interests in the same investment property:
(1) A security interest held by a secured party having
control of investment property under section 336.9-106 has
priority over a security interest held by a secured party that
does not have control of the investment property.
(2) Except as otherwise provided in paragraphs (3) and (4),
conflicting security interests held by secured parties each of
which has control under section 336.9-106 rank according to
priority in time of:
(A) if the collateral is a security, obtaining control;
(B) if the collateral is a security entitlement carried in
a securities account and:
(i) if the secured party obtained control under section
336.8-106(d)(1), the secured party's becoming the person for
which the securities account is maintained;
(ii) if the secured party obtained control under section
336.8-106(d)(2), the securities intermediary's agreement to
comply with the secured party's entitlement orders with respect
to security entitlements carried or to be carried in the
securities account; or
(iii) if the secured party obtained control through another
person under section 336.8-106(d)(3), the time on which priority
would be based under this paragraph if the other person were the
secured party; or
(C) if the collateral is a commodity contract carried with
a commodity intermediary, the satisfaction of the requirement
for control specified in section 336.9-106(b)(2) with respect to
commodity contracts carried or to be carried with the commodity
intermediary.
(3) A security interest held by a securities intermediary
in a security entitlement or a securities account maintained
with the securities intermediary has priority over a conflicting
security interest held by another secured party.
(4) A security interest held by a commodity intermediary in
a commodity contract or a commodity account maintained with the
commodity intermediary has priority over a conflicting security
interest held by another secured party.
(5) A security interest in a certificated security in
registered form which is perfected by taking delivery under
section 336.9-313(a) and not by control under section 336.9-314
has priority over a conflicting security interest perfected by a
method other than control.
(6) Conflicting security interests created by a broker,
securities intermediary, or commodity intermediary which are
perfected without control under section 336.9-106 rank equally.
(7) In all other cases, priority among conflicting security
interests in investment property is governed by sections
336.9-322 and 336.9-323.
Sec. 49. [336.9-329] [PRIORITY OF SECURITY INTERESTS IN
LETTER OF CREDIT RIGHT.]
The following rules govern priority among conflicting
security interests in the same letter of credit right:
(1) A security interest held by a secured party having
control of the letter of credit right under section 336.9-107
has priority to the extent of its control over a conflicting
security interest held by a secured party that does not have
control.
(2) Security interests perfected by control under section
336.9-314 rank according to priority in time of obtaining
control.
Sec. 50. [336.9-330] [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 and takes
possession of the chattel paper or obtains control of the
chattel paper under section 336.9-105; and
(2) the chattel paper does not indicate that it 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 and takes possession of the chattel
paper or obtains control of the chattel paper under section
336.9-105 in good faith, in the ordinary course of the
purchaser's business, and without knowledge that the purchase
violates the rights of the secured party.
(c) [CHATTEL PAPER PURCHASER'S PRIORITY IN
PROCEEDS.] Except as otherwise provided in section 336.9-327, 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 336.9-322 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 336.9-331(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 chattel paper or an
instrument indicates that it has been assigned to an identified
secured party other than the purchaser, a purchaser of the
chattel paper or instrument has knowledge that the purchase
violates the rights of the secured party.
Sec. 51. [336.9-331] [PRIORITY OF RIGHTS OF PURCHASERS OF
INSTRUMENTS, DOCUMENTS, AND SECURITIES UNDER OTHER ARTICLES;
PRIORITY OF INTERESTS IN FINANCIAL ASSETS AND SECURITY
ENTITLEMENTS UNDER ARTICLE 8.]
(a) [RIGHTS UNDER ARTICLES 3, 7, AND 8 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, or a protected purchaser of a
security. These holders or purchasers take priority over an
earlier security interest, even if perfected, to the extent
provided in articles 3, 7, and 8.
(b) [PROTECTION UNDER ARTICLE 8.] 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.
(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).
Sec. 52. [336.9-332] [TRANSFER OF MONEY; TRANSFER OF FUNDS
FROM DEPOSIT ACCOUNT.]
(a) [TRANSFEREE OF MONEY.] A transferee of money takes the
money free of a security interest unless the transferee acts in
collusion with the debtor in violating the rights of the secured
party.
(b) [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 unless the
transferee acts in collusion with the debtor in violating the
rights of the secured party.
Sec. 53. [336.9-333] [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.
Sec. 54. [336.9-334] [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
336.9-311(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 an authenticated
record, consented to the security interest or disclaimed an
interest in the goods as fixtures; or
(2) the debtor has a right to remove the goods as against
the encumbrancer or owner.
(g) [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 of the following statutes:
(1) section 557.12; and
(2) section 559.2091.
Sec. 55. [336.9-335] [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
336.9-311(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.
Sec. 56. [336.9-336] [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.
Sec. 57. [336.9-337] [PRIORITY OF SECURITY INTERESTS IN
GOODS COVERED BY CERTIFICATE OF TITLE.]
If, while a security interest in goods is perfected by any
method under the law of another jurisdiction, this state issues
a certificate of title that does not show that the goods are
subject to the security interest or contain a statement that
they may be subject to security interests not shown on the
certificate:
(1) a buyer of the goods, other than a person in the
business of selling goods of that kind, takes free of the
security interest if the buyer gives value and receives delivery
of the goods after issuance of the certificate and without
knowledge of the security interest; and
(2) the security interest is subordinate to a conflicting
security interest in the goods that attaches, and is perfected
under section 336.9-311(b), after issuance of the certificate
and without the conflicting secured party's knowledge of the
security interest.
Sec. 58. [336.9-338] [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 336.9-516(b)(5) which is incorrect at the time the
financing statement is filed:
(1) the security interest or agricultural lien is
subordinate to a conflicting perfected security interest in the
collateral to the extent that the holder of the conflicting
security interest gives value in reasonable reliance upon the
incorrect information; and
(2) a purchaser, other than a secured party, of the
collateral takes free of the security interest or agricultural
lien to the extent that, in reasonable reliance upon the
incorrect information, the purchaser gives value and, in the
case of chattel paper, documents, goods, instruments, or a
security certificate, receives delivery of the collateral.
Sec. 59. [336.9-339] [PRIORITY SUBJECT TO SUBORDINATION.]
This article does not preclude subordination by agreement
by a person entitled to priority.
SUBPART 4. RIGHTS OF BANK
Sec. 60. [336.9-340] [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
336.9-104(a)(3), if the set-off is based on a claim against the
debtor.
Sec. 61. [336.9-341] [BANK'S RIGHTS AND DUTIES WITH
RESPECT TO DEPOSIT ACCOUNT.]
Except as otherwise provided in section 336.9-340(c), and
unless the bank otherwise agrees in an authenticated record, a
bank's rights and duties with respect to a deposit account
maintained with the bank are not terminated, suspended, or
modified by:
(1) the creation, attachment, or perfection of a security
interest in the deposit account;
(2) the bank's knowledge of the security interest; or
(3) the bank's receipt of instructions from the secured
party.
Sec. 62. [336.9-342] [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 336.9-104(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
Sec. 63. [336.9-401] [ALIENABILITY OF DEBTOR'S RIGHTS.]
(a) [OTHER LAW GOVERNS ALIENABILITY; EXCEPTIONS.] Except as
otherwise provided in subsection (b) and sections 336.9-406,
336.9-407, 336.9-408, and 336.9-409, 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.
Sec. 64. [336.9-402] [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.
Sec. 65. [336.9-403] [AGREEMENT NOT TO ASSERT DEFENSES
AGAINST ASSIGNEE.]
(a) [VALUE.] In this section, "value" has the meaning
provided in section 336.3-303(a).
(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 defense or claim in recoupment of
the type that may be asserted against a person entitled to
enforce a negotiable instrument under section 336.3-305(a).
(c) [WHEN SUBSECTION (B) NOT APPLICABLE.] Subsection (b)
does not apply to defenses of a type that may be asserted
against a holder in due course of a negotiable instrument under
section 336.3-305(b).
(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.
Sec. 66. [336.9-404] [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 authenticated 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.
Sec. 67. [336.9-405] [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 336.9-406(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.
Sec. 68. [336.9-406] [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, authenticated by the
assignor or the assignee, that the amount due or to become due
has been assigned and that payment is to be made to the
assignee. After receipt of the notification, the account debtor
may discharge its obligation by paying the assignee and may not
discharge the obligation by paying the assignor.
(b) [WHEN NOTIFICATION INEFFECTIVE.] Subject to subsection
(h), 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 subsection (h), 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.] Except as otherwise provided in subsection (e) and
sections 336.2A-303 and 336.9-407, and subject to subsection
(h), 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) [LEGAL RESTRICTIONS ON ASSIGNMENT GENERALLY
INEFFECTIVE.] Except as otherwise provided in sections
336.2A-303 and 336.9-407, and subject to subsections (h) and
(i), a rule of law, statute, or regulation, that prohibits,
restricts, or requires the consent of a government, governmental
body or official, or account debtor to the assignment or
transfer of, or creation of a security interest in, an account
or chattel paper is ineffective to the extent that the rule of
law, statute, or regulation:
(1) prohibits, restricts, or requires the consent of the
government, governmental body or official, or account debtor to
the assignment or transfer of, or the creation, attachment,
perfection, or enforcement of a security interest in, the
account or chattel paper; 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 or chattel paper.
(g) [SUBSECTION (B)(3) NOT WAIVABLE.] Subject to subsection
(h), an account debtor may not waive or vary its option under
subsection (b)(3).
(h) [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.
(i) [INAPPLICABILITY TO HEALTH-CARE-INSURANCE
RECEIVABLE.] This section does not apply to an assignment of a
health-care-insurance receivable.
Sec. 69. [336.9-407] [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 336.2A-303(7), a term described in
subsection (a)(2) is effective to the extent that there is:
(1) a transfer by the lessee of the lessee's right of
possession or use of the goods in violation of the term; or
(2) a delegation of a material performance of either party
to the lease contract in violation of the term.
(c) [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 336.2A-303(4) unless, and then
only to the extent that, enforcement actually results in a
delegation of material performance of the lessor. Even in that
event, the creation, attachment, perfection, and enforcement of
the security interest remain effective.
Sec. 70. [336.9-408] [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) [LEGAL RESTRICTIONS ON ASSIGNMENT GENERALLY
INEFFECTIVE.] A rule of law, statute, or regulation, that
prohibits, restricts, or requires the consent of a government,
governmental body or official, person obligated on a promissory
note, or account debtor to the assignment or transfer of, or
creation of a security interest in, a promissory note,
health-care-insurance receivable, or general intangible,
including a contract, permit, license, or franchise between an
account debtor and a debtor, is ineffective to the extent that
the rule of law, statute, or regulation:
(1) would impair the creation, attachment, or perfection of
a security interest; or
(2) provides that the 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.
(d) [LIMITATION ON INEFFECTIVENESS UNDER SUBSECTIONS (A)
AND (C).] To the extent that a term in a promissory note or in
an agreement between an account debtor and a debtor which
relates to a health-care-insurance receivable or general
intangible or a rule of law, statute, or regulation described in
subsection (c) would be effective under law other than this
article but is ineffective under subsection (a) or (c), the
creation, attachment, or perfection of a security interest in
the promissory note, health-care-insurance receivable, or
general intangible:
(1) is not enforceable against the person obligated on the
promissory note or the account debtor;
(2) does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor;
(3) does not require the person obligated on the promissory
note or the account debtor to recognize the security interest,
pay or render performance to the secured party, or accept
payment or performance from the secured party;
(4) does not entitle the secured party to use or assign the
debtor's rights under the promissory note, health-care-insurance
receivable, or general intangible, including any related
information or materials furnished to the debtor in the
transaction giving rise to the promissory note,
health-care-insurance receivable, or general intangible;
(5) does not entitle the secured party to use, assign,
possess, or have access to any trade secrets or confidential
information of the person obligated on the promissory note or
the account debtor; and
(6) does not entitle the secured party to enforce the
security interest in the promissory note, health-care-insurance
receivable, or general intangible.
Sec. 71. [336.9-409] [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
Sec. 72. [336.9-501] [FILING OFFICE.]
(a) [FILING OFFICES.] Except as otherwise provided in
subsection (b), if the local law of this state governs
perfection of a security interest or agricultural lien, the
office in which to file a financing statement to perfect the
security interest or agricultural lien is:
(1) the office designated for the filing or recording of a
record of a mortgage on the related real property, if:
(A) the collateral is as-extracted collateral or timber to
be cut; or
(B) the financing statement is filed as a fixture filing
and the collateral is goods that are or are to become fixtures;
or
(2) the central filing system operated by 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 central filing system operated by 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.
Sec. 73. [336.9-502] [CONTENTS OF FINANCING STATEMENT;
RECORD OF MORTGAGE AS FINANCING STATEMENT; TIME OF FILING
FINANCING STATEMENT.]
(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; and
(3) indicates the collateral covered by the financing
statement.
(b) [REAL PROPERTY-RELATED FINANCING STATEMENTS.] Except as
otherwise provided in section 336.9-501(b), to be sufficient, a
financing statement that covers as-extracted collateral or
timber to be cut, or which is filed as a fixture filing and
covers goods that are or are to become fixtures, must satisfy
subsection (a) and also:
(1) indicate that it covers this type of collateral;
(2) indicate that it is to be filed for record in the real
property records;
(3) provide a description of the real property to which the
collateral is related sufficient to give constructive notice of
a mortgage under the law of this state if the description were
contained in a record of the mortgage of the real property; and
(4) if the debtor does not have an interest of record in
the real property, provide the name of a record owner.
(c) [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 other than an indication that it is to
be filed in the real property records; and
(4) the record is recorded in the office of the county
recorder or registrar of titles in the county where the real
property is located.
(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.
Sec. 74. [336.9-503] [NAME OF DEBTOR AND SECURED PARTY.]
(a) [SUFFICIENCY OF DEBTOR'S NAME.] A financing statement
sufficiently provides the name of the debtor:
(1) if the debtor is a registered organization, only if the
financing statement provides the name of the debtor indicated on
the public record of the debtor's jurisdiction of organization
which shows the debtor to have been organized;
(2) if the debtor is a decedent's estate, only if the
financing statement provides the name of the decedent and
indicates that the debtor is an estate;
(3) if the debtor is a trust or a trustee acting with
respect to property held in trust, only if the financing
statement:
(A) provides the name specified for the trust in its
organic documents or, if no name is specified, provides the name
of the settlor and additional information sufficient to
distinguish the debtor from other trusts having one or more of
the same settlors; and
(B) indicates, in the debtor's name or otherwise, that the
debtor is a trust or is a trustee acting with respect to
property held in trust; and
(4) in other cases:
(A) if the debtor has a name, only if it provides the
individual or organizational name of the debtor; and
(B) if the debtor does not have a name, only if it provides
the names of the partners, members, associates, or other persons
comprising the debtor.
(b) [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)(4)(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.
Sec. 75. [336.9-504] [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
336.9-108; or
(2) an indication that the financing statement covers all
assets or all personal property.
Sec. 76. [336.9-505] [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 336.9-311(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
336.9-311(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.
Sec. 77. [336.9-506] [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 336.9-503(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 336.9-503(a), the name provided does not make the
financing statement seriously misleading.
(d) [DEBTOR'S CORRECT NAME.] For purposes of section
336.9-508(b), the "debtor's correct name" in subsection (c)
means the correct name of the new debtor.
Sec. 78. [336.9-507] [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 336.9-508, 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
336.9-506.
(c) [CHANGE IN DEBTOR'S NAME.] If a debtor so changes its
name that a filed financing statement becomes seriously
misleading under section 336.9-506:
(1) the financing statement is effective to perfect a
security interest in collateral acquired by the debtor before,
or within four months after, the change; and
(2) the financing statement is not effective to perfect a
security interest in collateral acquired by the debtor more than
four months after the change, unless an amendment to the
financing statement which renders the financing statement not
seriously misleading is filed within four months after the
change.
Sec. 79. [336.9-508] [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 336.9-506:
(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 336.9-203(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 336.9-203(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
336.9-507(a).
Sec. 80. [336.9-509] [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 an authenticated
record or pursuant to subsection (b) or (c); or
(2) the person holds an agricultural lien that has become
effective at the time of filing and the financing statement
covers only collateral in which the person holds an agricultural
lien.
(b) [SECURITY AGREEMENT AS AUTHORIZATION.] By
authenticating 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
336.9-315(a)(2), whether or not the security agreement expressly
covers proceeds.
(c) [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 336.9-513(a) or (c), the debtor authorizes the filing,
and the termination statement indicates that the debtor
authorized it to be filed.
(d) [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 (c).
Sec. 81. [336.9-510] [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 336.9-509.
(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 336.9-515(d) is ineffective.
Sec. 82. [336.9-511] [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 336.9-514(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 336.9-514(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.
Sec. 83. [336.9-512] [AMENDMENT OF FINANCING STATEMENT.]
(a) [AMENDMENT OF INFORMATION IN FINANCING
STATEMENT.] Subject to section 336.9-509, 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 or recorded in a filing office described in
section 336.9-501(a)(1), provides the information specified in
section 336.9-502(b).
(b) [PERIOD OF EFFECTIVENESS NOT AFFECTED.] Except as
otherwise provided in section 336.9-515, 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.
Sec. 84. [336.9-513] [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 an authenticated demand from a debtor.
(c) [OTHER COLLATERAL.] In cases not governed by subsection
(a), within 20 days after a secured party receives an
authenticated demand from a debtor, the secured party shall
cause the secured party of record for a financing statement to
send to the debtor a termination statement for the financing
statement or file the termination statement in the filing office
if:
(1) except in the case of a financing statement covering
accounts or chattel paper that has been sold or goods that are
the subject of a consignment, there is no obligation secured by
the collateral covered by the financing statement and no
commitment to make an advance, incur an obligation, or otherwise
give value;
(2) the financing statement covers accounts or chattel
paper that has been sold but as to which the account debtor or
other person obligated has discharged its obligation;
(3) the financing statement covers goods that were the
subject of a consignment to the debtor but are not in the
debtor's possession; or
(4) the debtor did not authorize the filing of the initial
financing statement.
(d) [EFFECT OF FILING TERMINATION STATEMENT.] Except as
otherwise provided in section 336.9-510, 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
336.9-510, for purposes of sections 336.9-519(g), 336.9-522(a),
and 336.9-523(c), the filing with the filing office of a
termination statement relating to a filing statement that
indicates that the debtor is a transmitting utility also causes
the effectiveness of the financing statement to lapse.
Sec. 85. [336.9-514] [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 336.9-502(c) may be made only
by an assignment of record of the mortgage in the manner
provided by law of this state other than the Uniform Commercial
Code.
Sec. 86. [336.9-515] [DURATION AND EFFECTIVENESS OF
FINANCING STATEMENT; EFFECT OF LAPSED FINANCING STATEMENT.]
(a) [FIVE-YEAR EFFECTIVENESS.] Except as otherwise provided
in subsections (b), (e), (f), and (g), a filed financing
statement is effective for a period of five years after the date
of filing.
(b) [PUBLIC FINANCE OR MANUFACTURED HOME
TRANSACTION.] Except as otherwise provided in subsections (e),
(f), and (g), an initial financing statement filed in connection
with a public finance transaction or manufactured home
transaction is effective for a period of 30 years after the date
of filing if it indicates that it is filed in connection with a
public finance transaction or manufactured home transaction.
(c) [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 30-year period specified in subsection
(b), whichever is applicable.
(e) [EFFECT OF FILING CONTINUATION STATEMENT.] Except as
otherwise provided in section 336.9-510, 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 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 336.9-502(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.
Sec. 87. [336.9-516] [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 336.9-512 or 336.9-518, as applicable; or
(ii) identifies an initial financing statement whose
effectiveness has lapsed under section 336.9-515;
(C) in the case of an initial financing statement that
provides the name of a debtor identified as an individual or an
amendment that provides a name of a debtor identified as an
individual which was not previously provided in the financing
statement to which the record relates, the record does not
identify the debtor's last name; or
(D) in the case of a record filed or recorded in the filing
office described in section 336.9-501(a)(1), the record does not
provide a sufficient description of the real property to which
it relates;
(4) in the case of an initial financing statement or an
amendment that adds a secured party of record, the record does
not provide a name and mailing address for the secured party of
record;
(5) in the case of an initial financing statement or an
amendment that provides a name of a debtor which was not
previously provided in the financing statement to which the
amendment relates, the record does not:
(A) provide a mailing address for the debtor;
(B) indicate whether the debtor is an individual or an
organization; or
(C) if the financing statement indicates that the debtor is
an organization, provide:
(i) a type of organization for the debtor;
(ii) a jurisdiction of organization for the debtor; or
(iii) an organizational identification number for the
debtor or indicate that the debtor has none;
(6) in the case of an assignment reflected in an initial
financing statement under section 336.9-514(a) or an amendment
filed under section 336.9-514(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
336.9-515(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 336.9-512, 336.9-514, or 336.9-518, 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.
Sec. 88. [336.9-517] [EFFECT OF INDEXING ERRORS.]
The failure of the filing office to index a record
correctly does not affect the effectiveness of the filed record.
Sec. 89. [336.9-518] [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 the file
number assigned to the initial financing statement to which the
record relates;
(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.
SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
Sec. 90. [336.9-519] [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 assigned after July 1,
2001, must include a digit that:
(1) is mathematically derived from or related to the other
digits of the file number; and
(2) enables the filing office to detect whether a number
communicated as the file number includes a single-digit or
transpositional error.
(c) [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, it must be filed
for record and the filing office shall index it:
(1) under the names of the debtor and of each owner of
record shown on the financing statement as if they were the
mortgagors under a mortgage of the real property described; and
(2) to the extent that the law of this state provides for
indexing of records of mortgages under the name of the
mortgagee, under the name of the secured party as if the secured
party were the mortgagee thereunder, or, if indexing is by
description, as if the financing statement were a record of a
mortgage of the real property described.
(e) [INDEXING: REAL PROPERTY-RELATED ASSIGNMENT.] If a
financing statement is filed as a fixture filing or covers
as-extracted collateral or timber to be cut, the filing office
shall index an assignment filed under section 336.9-514(a) or an
amendment filed under section 336.9-514(b):
(1) under the name of the assignor as grantor; and
(2) to the extent that the law of this state provides for
indexing a record of the assignment of a mortgage under the name
of the assignee, under the name of the assignee.
(f) [RETRIEVAL AND ASSOCIATION CAPABILITY.] The filing
office shall maintain a capability:
(1) to retrieve a record by the name of the debtor and by
the file number assigned to the initial financing statement to
which the record relates; and
(2) to associate and retrieve with one another an initial
financing statement and each filed record relating to the
initial financing statement.
(g) [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 336.9-515 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 336.9-501(a)(1).
Sec. 91. [336.9-520] [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 336.9-516(b) and may refuse to accept a record
for filing only for a reason set forth in section 336.9-516(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 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 336.9-502(a) and (b) is
effective, even if the filing office is required to refuse to
accept it for filing under subsection (a). However, section
336.9-338 applies to a filed financing statement providing
information described in section 336.9-516(b)(5) which is
incorrect at the time the financing statement is filed.
(d) [SEPARATE APPLICATION TO MULTIPLE DEBTORS.] If a record
communicated to a filing office provides information that
relates to more than one debtor, this part applies as to each
debtor separately.
Sec. 92. [336.9-521] [UNIFORM FORM OF WRITTEN FINANCING
STATEMENT AND AMENDMENT.]
(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 and format adopted by
the National Conference of Commissioners on Uniform State Laws,
except for a reason set forth in section 336.9-516(b).
(b) [AMENDMENT FORM.] A filing office that accepts written
records may not refuse to accept a written record in the form
and format adopted by the National Conference of Commissioners
on Uniform State Laws, except for a reason set forth in section
336.9-516(b).
Sec. 93. [336.9-522] [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 336.9-515 with respect to all secured
parties of record. The record must be retrievable by using the
name of the debtor and by using the file number assigned to the
initial financing statement to which the record relates.
(b) [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).
Sec. 94. [336.9-523] [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 336.9-519(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 336.9-519(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
336.9-519(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 336.9-515 with respect to
all secured parties of record; and
(C) if the request so states, has lapsed under section
336.9-515 and a record of which is maintained by the filing
office under section 336.9-522(a);
(2) the date and time of filing of each financing
statement; and
(3) the information provided in each financing statement.
(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 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.
Sec. 95. [336.9-524] [DELAY BY FILING OFFICE.]
Delay by the filing office beyond a time limit prescribed
by this part is excused if:
(1) the delay is caused by interruption of communication or
computer facilities, war, emergency conditions, failure of
equipment, or other circumstances beyond control of the filing
office; and
(2) the filing office exercises reasonable diligence under
the circumstances.
Sec. 96. [336.9-525] [FEES.]
(a) [INITIAL FINANCING STATEMENT OR OTHER RECORD: GENERAL
RULE.] Except as otherwise provided in subsection (d), the fee
for filing and indexing a record under this part is $20.
(b) [NUMBER OF NAMES.] The number of names required to be
indexed does not affect the amount of the fee in subsection (a).
(c) [RESPONSE TO INFORMATION REQUEST.] The fee for
responding to a request for information from the filing office,
including for issuing a certificate showing whether there is on
file any financing statement naming a particular debtor, is $20.
(d) [RECORD OF MORTGAGE.] This section does not require a
fee with respect to a record of a mortgage which is effective as
a financing statement filed as a fixture filing or as a
financing statement covering as-extracted collateral or timber
to be cut under section 336.9-502(c). However, the recording
and satisfaction fees that otherwise would be applicable to the
record of the mortgage apply.
Sec. 97. [336.9-526] [DUTY TO REPORT.]
The secretary of state shall report annually on or before
January 1 to the legislature on the operation of the filing
office.
Sec. 98. [336.9-527] [SATELLITE OFFICES AUTHORIZED.]
The secretary of state may establish satellite offices by
written agreements with public officials within the state for
the purpose of meeting the filing officer responsibilities
described in sections 336.9-528 to 336.9-530. The term of the
agreement must be set by, and may be renewed by, mutual
agreement. The agreement may be terminated upon 60 days'
notice. The secretary must maintain a list of those public
officials authorized to act as satellite offices. The secretary
of state must make this list available in an electronic format
and the list must be updated at least monthly.
Sec. 99. [336.9-528] [FILING; ASSIGNMENT OF FILING
INFORMATION AT SATELLITE OFFICES.]
Satellite offices shall accept Uniform Commercial Code
documents and respond to requests for information pursuant to
the provisions of sections 336.9-101 to 336.9-708. A filing
made at a satellite office is filed and effective at the same
time and under the same rules provided for filing in any other
manner in the Uniform Commercial Code information system. The
filing date, time, and file number for any Uniform Commercial
Code document accepted at a satellite office must be
automatically assigned by the Uniform Commercial Code
information management system operated by the secretary of
state, and the file number must be the next available file
number in the Uniform Commercial Code information management
system.
Sec. 100. [336.9-529] [MAINTENANCE AND RETRIEVAL OF
DOCUMENTS AND DATA.]
The secretary of state shall maintain all Uniform
Commercial Code documents and the database used to index them
regardless of where or how the Uniform Commercial Code document
was filed. The Uniform Commercial Code documents and database
must be housed in the Uniform Commercial Code information
management system. Uniform Commercial Code documents and data
shall be available from the secretary of state or any satellite
office. The secretary of state shall arrange by mutual
agreement with county recorders for the storage and retrieval of
existing Uniform Commercial Code documents.
Any filing office within the Uniform Commercial Code
information management system may respond to requests for
information, and the secretary of state shall establish and
administer a system to facilitate those responses.
Sec. 101. [336.9-530] [SATELLITE OFFICES; UNIFORMITY OF
SERVICES ASSURED.]
Subdivision 1. [PERFORMANCE STANDARDS.] All filing
officers must perform the responsibilities in sections 336.9-501
to 336.9-530 and rules adopted under section 139 in a uniform
manner, whether services are provided by the secretary of state
or at a satellite office location. Reports by citizens
describing concerns with performance of filing officer
responsibilities must be made to the secretary of state. The
secretary of state is responsible for responding to reports
about performance in a manner the secretary of state determines
is appropriate.
Subd. 2. [FAILURE TO MEET PERFORMANCE STANDARDS.] If, upon
investigation of citizen reports described in subdivision 1, the
secretary of state determines that performance by a satellite
office of the filing officer responsibilities has been so
unsatisfactory that customer service has been severely impaired,
the secretary of state must terminate the satellite office's
status and ability to perform filing office responsibilities.
If a satellite office's ability to perform filing office
responsibilities is terminated by the secretary of state, the
change in status must be posted in the former satellite office
and must also be publicly posted in the county courthouse in the
county in which the former satellite office is located and must
be made available in an electronic format.
Part 6
DEFAULT
SUBPART 1. DEFAULT AND ENFORCEMENT OF
SECURITY INTEREST
Sec. 102. [336.9-601] [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 336.9-602, 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 336.9-104, 336.9-105, 336.9-106, or
336.9-107 has the rights and duties provided in section
336.9-207.
(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 336.9-605, 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 336.9-607(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.
Sec. 103. [336.9-602] [WAIVER AND VARIANCE OF RIGHTS AND
DUTIES.]
Except as otherwise provided in section 336.9-624, to the
extent that they give rights to a debtor or obligor and impose
duties on a secured party, the debtor or obligor may not waive
or vary the rules stated in the following listed sections:
(1) section 336.9-207(b)(4)(C), which deals with use and
operation of the collateral by the secured party;
(2) section 336.9-210, which deals with requests for an
accounting and requests concerning a list of collateral and
statement of account;
(3) section 336.9-607(c), which deals with collection and
enforcement of collateral;
(4) sections 336.9-608(a) and 336.9-615(c) to the extent
that they deal with application or payment of noncash proceeds
of collection, enforcement, or disposition;
(5) sections 336.9-608(a) and 336.9-615(d) to the extent
that they require accounting for or payment of surplus proceeds
of collateral;
(6) section 336.9-609 to the extent that it imposes upon a
secured party that takes possession of collateral without
judicial process the duty to do so without breach of the peace;
(7) sections 336.9-610(b), 336.9-611, 336.9-613, and
336.9-614, which deal with disposition of collateral;
(8) section 336.9-615(f), which deals with calculation of a
deficiency or surplus when a disposition is made to the secured
party, a person related to the secured party, or a secondary
obligor;
(9) section 336.9-616, which deals with explanation of the
calculation of a surplus or deficiency;
(10) sections 336.9-620, 336.9-621, and 336.9-622, which
deal with acceptance of collateral in satisfaction of
obligation;
(11) section 336.9-623, which deals with redemption of
collateral;
(12) section 336.9-624, which deals with permissible
waivers; and
(13) sections 336.9-625 and 336.9-626, which deal with the
secured party's liability for failure to comply with this
article.
Sec. 104. [336.9-603] [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 336.9-602 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
336.9-609 to refrain from breaching the peace.
Sec. 105. [336.9-604] [PROCEDURE IF SECURITY AGREEMENT
COVERS REAL PROPERTY OR FIXTURES.]
(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.
Sec. 106. [336.9-605] [UNKNOWN DEBTOR OR SECONDARY
OBLIGOR.]
A secured party does not owe a duty based on its status as
secured party:
(1) to a person that is a debtor or obligor, unless the
secured party knows:
(A) that the person is a debtor or obligor;
(B) the identity of the person; and
(C) how to communicate with the person; or
(2) to a secured party or lienholder that has filed a
financing statement against a person, unless the secured party
knows:
(A) that the person is a debtor; and
(B) the identity of the person.
Sec. 107. [336.9-606] [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.
Sec. 108. [336.9-607] [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 336.9-315;
(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 336.9-104(a)(1), may apply
the balance of the deposit account to the obligation secured by
the deposit account;
(5) if it holds a security interest in a deposit account
perfected by control under section 336.9-104(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; and
(6) if the obligation of the account debtor or other person
obligated on collateral is secured by an interest in real
property and the account debtor or other person obligated on
collateral satisfies its obligation, must furnish the account
debtor or the other person obligated on collateral with a
release or satisfaction of the interest in real property
sufficient for recording in the real property records applicable
to that real property.
(b) [NONJUDICIAL ENFORCEMENT OF MORTGAGE.] (1) To exercise
under subsection (a)(3) the right of a debtor to enforce a
mortgage nonjudicially, the secured party must record in the
office in which a record of the mortgage is recorded:
(A) an assignment of the mortgage to the secured party; or
(B) the secured party's sworn affidavit of assignment in
recordable form stating:
(i) a default has occurred under a security agreement that
creates or provides for a security interest in the obligation
secured by the mortgage;
(ii) a true and correct copy of the security agreement is
attached to the affidavit;
(iii) the secured party is entitled to enforce the mortgage
nonjudicially;
(iv) the legal description of the real property encumbered
by the mortgage;
(v) the parties to the mortgage, the date of the mortgage,
the date of recording of the mortgage, the place of recording of
the mortgage, and the identifying number or other indexing
information that identifies the mortgage in the office of the
county recorder or registrar of titles where the mortgage is
recorded;
(vi) the secured party has succeeded to the interest of the
debtor under the mortgage; and
(vii) the affidavit of assignment shall be an assignment to
the secured party of the interest of the debtor under the
mortgage.
(2) The affidavit of assignment is entitled to be recorded
with the county recorder or the registrar of titles and upon
recording, the affidavit of assignment shall be deemed an
assignment to the secured party of the interest of the debtor
under the mortgage.
(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 attorneys 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.
(f) [SECURED PARTY TO OBTAIN ASSIGNMENT OF DEBTOR'S
INTEREST UNDER THE MORTGAGE.] If the obligation of an account
debtor or other person obligated on collateral is secured by an
interest in real property, the secured party promptly after
commencing exercise of any of its rights under this section
shall:
(1) file an assignment of the mortgage to the secured
party;
(2) proceed under section 336.9-619 and record a transfer
statement in the office of the county recorder or registrar of
titles where the mortgage is recorded; or
(3) file an affidavit of assignment as provided under
subsection (b).
Sec. 109. [336.9-608] [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
336.9-607 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 attorneys fees and legal expenses incurred by
the secured party;
(B) the satisfaction of obligations secured by the security
interest or agricultural lien under which the collection or
enforcement is made; and
(C) the satisfaction of obligations secured by any
subordinate security interest in or other lien on the collateral
subject to the security interest or agricultural lien under
which the collection or enforcement is made if the secured party
receives an authenticated demand for proceeds before
distribution of the proceeds is completed.
(2) If requested by a secured party, a holder of a
subordinate security interest or other lien shall furnish
reasonable proof of the interest or lien within a reasonable
time. Unless the holder complies, the secured party need not
comply with the holder's demand under paragraph (1)(C).
(3) A secured party need not apply or pay over for
application noncash proceeds of collection and enforcement under
section 336.9-607 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.
Sec. 110. [336.9-609] [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
336.9-610.
(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.
Sec. 111. [336.9-610] [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.
Sec. 112. [336.9-611] [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 an authenticated 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 336.9-610 shall send to the
persons specified in subsection (c) a reasonable authenticated
notification of disposition.
(c) [PERSONS TO BE NOTIFIED.] To comply with subsection
(b), the secured party shall send an authenticated notification
of disposition to:
(1) the debtor;
(2) any secondary obligor; and
(3) if the collateral is other than consumer goods:
(A) any other person from which the secured party has
received, before the notification date, an authenticated
notification of a claim of an interest in the collateral;
(B) any other secured party or lienholder that, ten days
before the notification date, held a security interest in or
other lien on the collateral perfected by the filing of a
financing statement that:
(i) identified the collateral;
(ii) was indexed under the debtor's name as of that date;
and
(iii) was filed in the office in which to file a financing
statement against the debtor covering the collateral as of that
date; and
(C) any other secured party that, ten days before the
notification date, held a security interest in the collateral
perfected by compliance with a statute, regulation, or treaty
described in section 336.9-311(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 20 days or earlier than 30 days before
the notification date, the secured party requests, in a
commercially reasonable manner, information concerning financing
statements indexed under the debtor's name in the office
indicated in subsection (c)(3)(B); and
(2) before the notification date, the secured party:
(A) did not receive a response to the request for
information; or
(B) received a response to the request for information and
sent an authenticated notification of disposition to each
secured party named in that response whose financing statement
covered the collateral.
Sec. 113. [336.9-612] [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) [TEN-DAY PERIOD SUFFICIENT IN NONCONSUMER TRANSACTION.]
In a transaction other than a consumer transaction, a
notification of disposition sent after default and ten days or
more before the earliest time of disposition set forth in the
notification is sent within a reasonable time before the
disposition.
Sec. 114. [336.9-613] [CONTENTS AND FORM OF NOTIFICATION
BEFORE DISPOSITION OF COLLATERAL: GENERAL.]
Except in a consumer goods transaction, the following rules
apply:
(1) The contents of a notification of disposition are
sufficient if the notification:
(A) describes the debtor and the secured party;
(B) describes the collateral that is the subject of the
intended disposition;
(C) states the method of intended disposition;
(D) states that the debtor is entitled to an accounting of
the unpaid indebtedness and states the charge, if any, for an
accounting; and
(E) states the time and place of a public 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 paragraph (1) are nevertheless
sufficient is a question of fact.
(3) The contents of a notification providing substantially
the information specified in paragraph (1) are sufficient, even
if the notification includes:
(A) information not specified by that paragraph; or
(B) minor errors that are not seriously misleading.
(4) A particular phrasing of the notification is not
required.
(5) The following form of notification and the form
appearing in section 336.9-614(3), when completed, each provides
sufficient information:
NOTIFICATION OF DISPOSITION OF COLLATERAL
To: (Name of debtor, obligor, or other person
to which the notification is sent)
From: (Name, address, and telephone number of
secured party)
Name of Debtor(s): (Include only if debtor(s) are not an
addressee)
(For a public disposition:)
We will sell (or lease or license, as applicable) the
.....(describe collateral)..... (to the highest qualified
bidder) in public as follows:
Day and Date: ........................
Time: ........................
Place: ........................
(For a private disposition:)
We will sell (or lease or license, as applicable) the
.....(describe collateral)..... privately sometime after ...(day
and date)....
You are entitled to an accounting of the unpaid
indebtedness secured by the property that we intend to sell (or
lease or license, as applicable) (for a charge of $.......).
You may request an accounting by calling us at ...(telephone
number)....
Sec. 115. [336.9-614] [CONTENTS AND FORM OF NOTIFICATION
BEFORE DISPOSITION OF COLLATERAL: CONSUMER GOODS TRANSACTION.]
In a consumer goods transaction, the following rules apply:
(1) A notification of disposition must provide the
following information:
(A) the information specified in section 336.9-613(1);
(B) a description of any liability for a deficiency of the
person to which the notification is sent;
(C) a telephone number from which the amount that must be
paid to the secured party to redeem the collateral under section
336.9-623 is available; and
(D) a telephone number or mailing address from which
additional information concerning the disposition and the
obligation secured is available.
(2) A particular phrasing of the notification is not
required.
(3) The following form of notification, when completed,
provides sufficient information:
(Name and address of secured party)
(Date)
NOTICE OF OUR PLAN TO SELL PROPERTY
(Name and address of any obligor who is also a debtor)
Subject: ....(Identification of Transaction)....
We have your ...(describe collateral)..., because you broke
promises in our agreement.
(For a public disposition:)
We will sell ...(describe collateral)... at public sale. A
sale could include a lease or license. The sale will be held as
follows:
Date: .............
Time: .............
Place: .............
You may attend the sale and bring bidders if you want.
(For a private disposition:)
We will sell ...(describe collateral)... at private sale
sometime after ..(date)... A sale could include a lease or
license.
The money that we get from the sale (after paying our costs)
will reduce the amount you owe. If we get less money than you
owe, you ..(will or will not, as applicable).. still owe us the
difference. If we get more money than you owe, you will get the
extra money, unless we must pay it to someone else.
You can get the property back at any time before we sell it
by paying us the full amount you owe (not just the past due
payments), including our expenses. To learn the exact amount
you must pay, call us at ..(telephone number)...
If you want us to explain to you in writing how we have
figured the amount that you owe us, you may call us at
..(telephone number).. (or write us at ..(secured party's
address)..) and request a written explanation. (We will charge
you $....... for the explanation if we sent you another written
explanation of the amount you owe us within the last six months.)
If you need more information about the sale call us at
..(telephone number).. (or write us at ..(secured party's
address)..).
We are sending this notice to the following other people
who have an interest in ...(describe collateral)... or who owe
money under your agreement:
..(Names of all other debtors and obligors, if any)..
(4) A notification in the form of paragraph (3) is
sufficient, even if additional information appears at the end of
the form.
(5) A notification in the form of paragraph (3) is
sufficient, even if it includes errors in information not
required by paragraph (1), unless the error is misleading with
respect to rights arising under this article.
(6) If a notification under this section is not in the form
of paragraph (3), law other than this article determines the
effect of including information not required by paragraph (1).
Sec. 116. [336.9-615] [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 336.9-610 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
attorneys fees and legal expenses incurred by the secured party;
(2) the satisfaction of obligations secured by the security
interest or agricultural lien under which the disposition is
made;
(3) the satisfaction of obligations secured by any
subordinate security interest in or other subordinate lien on
the collateral if:
(A) the secured party receives from the holder of the
subordinate security interest or other lien an authenticated
demand for proceeds before distribution of the proceeds is
completed; and
(B) in a case in which a consignor has an interest in the
collateral, the subordinate security interest or other lien is
senior to the interest of the consignor; and
(4) a secured party that is a consignor of the collateral
if the secured party receives from the consignor an
authenticated demand for proceeds before distribution of the
proceeds is completed.
(b) [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 336.9-610 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.
Sec. 117. [336.9-616] [EXPLANATION OF CALCULATION OF
SURPLUS OR DEFICIENCY.]
(a) [DEFINITIONS.] In this section:
(1) "Explanation" means a writing that:
(A) states the amount of the surplus or deficiency;
(B) provides an explanation in accordance with subsection
(c) of how the secured party calculated the surplus or
deficiency;
(C) states, if applicable, that future debits, credits,
charges, including additional credit service charges or
interest, rebates, and expenses may affect the amount of the
surplus or deficiency; and
(D) provides a telephone number or mailing address from
which additional information concerning the transaction is
available.
(2) "Request" means a record:
(A) authenticated by a debtor or consumer obligor;
(B) requesting that the recipient provide an explanation;
and
(C) sent after disposition of the collateral under section
336.9-610.
(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
336.9-615, the secured party shall:
(1) send an explanation to the debtor or consumer obligor,
as applicable, after the disposition and:
(A) before or when the secured party accounts to the debtor
and pays any surplus or first makes written demand on the
consumer obligor after the disposition for payment of the
deficiency; and
(B) within 14 days after receipt of a request; or
(2) in the case of a consumer obligor who is liable for a
deficiency, within 14 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), a writing must provide the following information in
the following order:
(1) the aggregate amount of obligations secured by the
security interest under which the disposition was made, and, if
the amount reflects a rebate of unearned interest or credit
service charge, an indication of that fact, calculated as of a
specified date:
(A) if the secured party takes or receives possession of
the collateral after default, not more than 35 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 35 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
attorneys 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 for each
additional response.
Sec. 118. [336.9-617] [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 (cite acts or
statutes providing for liens, if any, 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.
Sec. 119. [336.9-618] [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
336.9-610; and
(2) relieves the secured party of further duties under this
article.
Sec. 120. [336.9-619] [TRANSFER OF RECORD OR LEGAL TITLE.]
(a) [TRANSFER STATEMENT.] (1) In this section, "transfer
statement" means a record authenticated by a secured party
stating:
(A) that the debtor has defaulted in connection with an
obligation secured by specified collateral;
(B) that the secured party has exercised its postdefault
remedies with respect to the collateral;
(C) that, by reason of the exercise, a transferee has
acquired the rights of the debtor in the collateral;
(D) the name and mailing address of the secured party,
debtor, and transferee; and
(E) in addition, if the statement is to be filed in the
real property records concerning a mortgage or other record
evidencing an interest in real property, the statement must
state the following information concerning the mortgage or other
record evidencing an interest in real property:
(i) the name and title on the record;
(ii) the date on the record;
(iii) the names of the parties on the record;
(iv) the identity of the office of the county recorder or
registrar of titles where the record is filed;
(v) the date the record was filed; and
(vi) the identifying number of the record in the office of
the county recorder or registrar of titles.
(2) A transfer statement that is to be filed in the real
property records must contain an acknowledgment by the secured
party in a form sufficient to satisfy the requirements of
chapter 358.
(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 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.
Sec. 121. [336.9-620] [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 subsection (g), a secured party may accept
collateral in full or partial satisfaction of the obligation it
secures only if:
(1) the debtor consents to the acceptance under subsection
(c);
(2) the secured party does not receive, within the time set
forth in subsection (d), a notification of objection to the
proposal authenticated by:
(A) a person to which the secured party was required to
send a proposal under section 336.9-621; 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 336.9-624.
(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 20 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 336.9-621, 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 336.9-621; 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 336.9-610 within the time
specified in subsection (f) if:
(1) 60 percent of the cash price has been paid in the case
of a purchase-money security interest in consumer goods; or
(2) 60 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.
Sec. 122. [336.9-621] [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, ten days
before the debtor consented to the acceptance, held a security
interest in or other lien on the collateral perfected by the
filing of a financing statement that:
(A) identified the collateral;
(B) was indexed under the debtor's name as of that date;
and
(C) was filed in the office or offices in which to file a
financing statement against the debtor covering the collateral
as of that date; and
(3) any other secured party that, ten days before the
debtor consented to the acceptance, held a security interest in
the collateral perfected by compliance with a statute,
regulation, or treaty described in section 336.9-311(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).
Sec. 123. [336.9-622] [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.
Sec. 124. [336.9-623] [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 attorneys fees described in
section 336.9-615(a)(1).
(c) [WHEN REDEMPTION MAY OCCUR.] A redemption may occur at
any time before a secured party:
(1) has collected collateral under section 336.9-607;
(2) has disposed of collateral or entered into a contract
for its disposition under section 336.9-610; or
(3) has accepted collateral in full or partial satisfaction
of the obligation it secures under section 336.9-622.
Sec. 125. [336.9-624] [WAIVER.]
(a) [WAIVER OF DISPOSITION NOTIFICATION.] A debtor or
secondary obligor may waive the right to notification of
disposition of collateral under section 336.9-611 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
336.9-620(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 336.9-623 only by an
agreement to that effect entered into and authenticated after
default.
SUBPART 2. NONCOMPLIANCE WITH ARTICLE
Sec. 126. [336.9-625] [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 LOSSES.] 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
IN CONSUMER GOODS TRANSACTION.] Except as otherwise provided in
section 336.9-628:
(1) a person that, at the time of the failure, was a
debtor, was an obligor, or held a security interest in or other
lien on the collateral may recover damages under subsection (b)
for its loss; and
(2) if the collateral is consumer goods, a person that was
a debtor or a secondary obligor at the time a secured party
failed to comply with this part may recover for that failure in
any event an amount not less than the credit service charge plus
ten percent of the principal amount of the obligation or the
time-price differential plus ten percent of the cash price.
(d) [RECOVERY WHEN DEFICIENCY ELIMINATED OR REDUCED.] A
debtor whose deficiency is eliminated under section 336.9-626
may recover damages for the loss of any surplus. However, a
debtor or secondary obligor whose deficiency is eliminated or
reduced under section 336.9-626 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 $500 in
each case from a person who:
(1) fails to comply with section 336.9-208;
(2) fails to comply with section 336.9-209;
(3) files a record that the person is not entitled to file
under section 336.9-509(a);
(4) fails to cause the secured party of record to file or
send a termination statement as required by section 336.9-513(a)
or (c);
(5) fails to comply with section 336.9-616(b)(1) and whose
failure is part of a pattern, or consistent with a practice, of
noncompliance; or
(6) fails to comply with section 336.9-616(b)(2).
(f) [STATUTORY DAMAGES: NONCOMPLIANCE WITH SECTION
336.9-210.] A debtor or consumer obligor may recover damages
under subsection (b) and, in addition, $500 in each case from a
person that, without reasonable cause, fails to comply with a
request under section 336.9-210. A recipient of a request under
section 336.9-210 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 336.9-210.] If a secured party fails to comply with a
request regarding a list of collateral or a statement of account
under section 336.9-210, 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.
Sec. 127. [336.9-626] [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 336.9-628, 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 attorneys
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 attorneys fees unless the
secured party proves that the amount is less than that sum.
(5) If a deficiency or surplus is calculated under section
336.9-615(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) [NONCONSUMER 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.
Sec. 128. [336.9-627] [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.
Sec. 129. [336.9-628] [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 GOOD FAITH BELIEF THAT
TRANSACTION IS NOT A CONSUMER GOODS TRANSACTION OR CONSUMER
TRANSACTION.] A secured party is not liable to any person, and a
persons 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
336.9-625(c)(2) for its failure to comply with section 336.9-616.
(e) [LIMITATION OF MULTIPLE LIABILITY FOR STATUTORY
DAMAGES.] A secured party is not liable under section
336.9-625(c)(2) more than once with respect to any one secured
obligation.
Part 7
TRANSITION
Sec. 130. [336.9-701] [EFFECTIVE DATE.]
This act takes effect July 1, 2001.
Sec. 131. [336.9-702] [SAVINGS CLAUSE.]
(a) [PREEFFECTIVE DATE TRANSACTIONS OR LIENS.] Except as
otherwise provided in this part, this act applies to a
transaction or lien within its scope, even if the transaction or
lien was entered into or created before this act takes effect.
(b) [CONTINUING VALIDITY.] Except as otherwise provided in
subsection (c) and sections 336.9-703 through 336.9-709:
(1) transactions and liens that were not governed by former
article 9, were validly entered into or created before this act
takes effect, and would be subject to this act if they had been
entered into or created after this act takes effect, and the
rights, duties, and interests flowing from those transactions
and liens remain valid after this act takes effect; and
(2) the transactions and liens may be terminated,
completed, consummated, and enforced as required or permitted by
this act or by the law that otherwise would apply if this act
had not taken effect.
(c) [PREEFFECTIVE DATE PROCEEDINGS.] This act does not
affect an action, case, or proceeding commenced before this act
takes effect.
Sec. 132. [336.9-703] [SECURITY INTEREST PERFECTED BEFORE
EFFECTIVE DATE.]
(a) [CONTINUING PRIORITY OVER LIEN CREDITOR: PERFECTION
REQUIREMENTS SATISFIED.] A security interest that is enforceable
immediately before this act takes effect and would have priority
over the rights of a person that becomes a lien creditor at that
time is a perfected security interest under this act if, when
this act takes effect, the applicable requirements for
enforceability and perfection under this act are satisfied
without further action.
(b) [CONTINUING PRIORITY OVER LIEN CREDITOR: PERFECTION
REQUIREMENTS NOT SATISFIED.] Except as otherwise provided in
section 336.9-705, if, immediately before this act takes effect,
a security interest is enforceable and would have priority over
the rights of a person that becomes a lien creditor at that
time, but the applicable requirements for enforceability or
perfection under this act are not satisfied when this act takes
effect, the security interest:
(1) is a perfected security interest for one year after
this act takes effect;
(2) remains enforceable thereafter only if the security
interest becomes enforceable under section 336.9-203 before the
year expires; and
(3) remains perfected thereafter only if the applicable
requirements for perfection under this act are satisfied before
the year expires.
Sec. 133. [336.9-704] [SECURITY INTEREST UNPERFECTED
BEFORE EFFECTIVE DATE.]
A security interest that is enforceable immediately before
this act takes effect but which would be subordinate to the
rights of a person that becomes a lien creditor at that time:
(1) remains an enforceable security interest for one year
after this act takes effect;
(2) remains enforceable thereafter if the security interest
becomes enforceable under section 336.9-203 when this act takes
effect or within one year thereafter; and
(3) becomes perfected:
(A) without further action, when this act takes effect if
the applicable requirements for perfection under this act are
satisfied before or at that time; or
(B) when the applicable requirements for perfection are
satisfied if the requirements are satisfied after that time.
Sec. 134. [336.9-705] [EFFECTIVENESS OF ACTION TAKEN
BEFORE EFFECTIVE DATE.]
(a) [PREEFFECTIVE DATE ACTION; ONE-YEAR PERFECTION PERIOD
UNLESS REPERFECTED.] If action, other than the filing of a
financing statement, is taken before this act takes effect and
the action would have resulted in priority of a security
interest over the rights of a person that becomes a lien
creditor had the security interest become enforceable before
this act takes effect, the action is effective to perfect a
security interest that attaches under this act within one year
after this act takes effect. An attached security interest
becomes unperfected one year after this act takes effect unless
the security interest becomes a perfected security interest
under this act before the expiration of that period.
(b) [PREEFFECTIVE DATE FILING.] The filing of a financing
statement before this act takes effect is effective to perfect a
security interest to the extent the filing would satisfy the
applicable requirements for perfection under this act.
(c) [PREEFFECTIVE DATE FILING IN JURISDICTION FORMERLY
GOVERNING PERFECTION.] This act does not render ineffective an
effective financing statement that, before this act takes
effect, is filed and satisfies the applicable requirements for
perfection under the law of the jurisdiction governing
perfection as provided in Minnesota Statutes 1998, section
336.9-103. However, except as otherwise provided in subsections
(d) and (e) and section 336.9-706, 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 30, 2006.
(d) [CONTINUATION STATEMENT.] The filing of a continuation
statement after this act takes effect does not continue the
effectiveness of the financing statement filed before this act
takes effect. However, upon the timely filing of a continuation
statement after this act takes effect and in accordance with the
law of the jurisdiction governing perfection as provided in Part
3, the effectiveness of a financing statement filed in the same
office in that jurisdiction before this act takes effect
continues for the period provided by the law of that
jurisdiction.
(e) [APPLICATION OF SUBSECTION (C)(2) TO TRANSMITTING
UTILITY FINANCING STATEMENT.] Subsection (c)(2) applies to a
financing statement that, before this act 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 Minnesota Statutes 1998,
section 336.9-103, 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 this act takes
effect and a continuation statement filed after this act takes
effect is effective only to the extent that it satisfies the
requirements of Part 5 for an initial financing statement.
Sec. 135. [336.9-706] [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 336.9-501 continues the
effectiveness of a financing statement filed before this act
takes effect if:
(1) the filing of an initial financing statement in that
office would be effective to perfect a security interest under
this act;
(2) the preeffective 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 preeffective date financing statement:
(1) if the initial financing statement is filed before this
act takes effect, for the period provided in Minnesota Statutes
1998, section 336.9-403, with respect to a financing statement;
and
(2) if the initial financing statement is filed after this
act takes effect, for the period provided in section 336.9-515
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 preeffective 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 preeffective date financing statement
remains effective.
Sec. 136. [336.9-707] [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 this act takes effect.
(b) [APPLICABLE LAW.] After this act 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 this
act takes effect only if:
(1) the pre-effective date financing statement and an
amendment are filed in the office specified in section
336.9-501;
(2) an amendment is filed in the office specified in
section 336.9-501 concurrently with, or after the filing in that
office of, an initial financing statement that satisfies section
336.9-706(c); or
(3) an initial financing statement that provides the
information as amended and satisfies section 336.9-706(c) is
filed in the office specified in section 336.9-501.
(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 336.9-705(d) and (f) or 336.9-706.
(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 this act 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 336.9-706(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.
Sec. 137. [336.9-708] [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:
(1) the secured party of record authorizes the filing; and
(2) the filing is necessary under this part:
(A) to continue the effectiveness of a financing statement
filed before this act takes effect; or
(B) to perfect or continue the perfection of a security
interest.
Sec. 138. [336.9-709] [PRIORITY.]
(a) [LAW GOVERNING PRIORITY.] This act determines the
priority of conflicting claims to collateral. However, if the
relative priorities of the claims were established before this
act takes effect, former article 9 determines priority.
(b) [PRIORITY IF SECURITY INTERESTS BECOME ENFORCEABLE
UNDER SECTION 336.9-203.] For purposes of section 336.9-322(a),
the priority of a security interest that becomes enforceable
under section 336.9-203 dates from the time this act takes
effect if the security interest is perfected under this act by
the filing of a financing statement before this act takes effect
which would not have been effective to perfect the security
interest under former article 9. This subsection does not apply
to conflicting security interests each of which is perfected by
the filing of such a financing statement.
Sec. 139. [SATELLITE OFFICES; RULEMAKING.]
The secretary of state shall adopt rules governing the
establishment and operation of satellite offices under Minnesota
Statutes, sections 336.9-527 to 336.9-530, by July 1, 2000. The
rules are exempt from the rulemaking provisions of Minnesota
Statutes, chapter 14, but must be adopted under Minnesota
Statutes, section 14.386. Notwithstanding Minnesota Statutes,
section 14.386, paragraph (b), the rules remain in effect until
July 1, 2003.
The secretary of state may also adopt expedited rules
governing the establishment and operation of the central filing
system under Minnesota Statutes, sections 336.9-501 to 336.9-530
and 336.9-701 to 336.9-709, pursuant to section 14.389.
The authority to adopt rules under this section expires on
July 1, 2003. The expiration of this authority does not affect
the validity of the rules adopted under it.
This section is effective the day following final enactment.
Sec. 140. [REPEALER.]
Minnesota Statutes 1998, sections 336.9-101; 336.9-102;
336.9-103; 336.9-104; 336.9-105; 336.9-106; 336.9-107;
336.9-108; 336.9-109; 336.9-110; 336.9-112; 336.9-113;
336.9-114; 336.9-115; 336.9-116; 336.9-201; 336.9-202;
336.9-204; 336.9-205; 336.9-206; 336.9-207; 336.9-208;
336.9-301; 336.9-302; 336.9-303; 336.9-304; 336.9-305;
336.9-306; 336.9-307; 336.9-308; 336.9-309; 336.9-310;
336.9-311; 336.9-312; 336.9-313; 336.9-314; 335.9-315;
336.9-316; 336.9-317; 336.9-318; 336.9-403; 336.9-404;
336.9-405; 336.9-406; 336.9-407; 336.9-408; 336.9-410;
336.9-412; 336.9-413; 336.9-501; 336.9-502; 336.9-503;
336.9-504; 336.9-505; 336.9-506; 336.9-507; and 336.9-508; and
Minnesota Statutes 1999 Supplement, sections 336.9-203;
336.9-401; 336.9-402; and 336.9-411, are repealed.
ARTICLE 2
CONFORMING AMENDMENTS TO OTHER ARTICLES
Section 1. Minnesota Statutes 1998, section 336.1-105, is
amended to read:
336.1-105 [TERRITORIAL APPLICATION OF THE CHAPTER; PARTIES'
POWER TO CHOOSE APPLICABLE LAW.]
(1) Except as provided hereafter in this section, when a
transaction bears a reasonable relation to this state and also
to another state or nation the parties may agree that the law
either of this state or of such other state or nation shall
govern their rights and duties. Failing such agreement this
chapter applies to transactions bearing an appropriate relation
to this state.
(2) Where one of the following provisions of this chapter
specifies the applicable law, that provision governs and a
contrary agreement is effective only to the extent permitted by
the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods. Section 336.2-402.
Applicability of the article on leases. Sections
336.2A-105 and 336.2A-106.
Applicability of the article on bank deposits and
collections. Section 336.4-102.
Governing law in the article on funds transfers. Section
336.4A-507.
Letters of Credit. Section 336.5-116.
Applicability of the article on investment securities.
Section 336.8-110.
Perfection provisions of the article on secured
transactions. Section 336.9-103.
Law governing perfection, the effect of perfection or
nonperfection, and the priority of security interests and
agricultural liens. Sections 336.9-301 to 336.9-307.
Sec. 2. Minnesota Statutes 1998, section 336.1-201, is
amended to read:
336.1-201 [GENERAL DEFINITIONS.]
Subject to additional definitions contained in the
subsequent articles of this chapter which are applicable to
specific articles or parts thereof, and unless the context
otherwise requires, in this chapter:
(1) "Action" in the sense of a judicial proceeding includes
recoupment, counterclaim, setoff, suit in equity and any other
proceedings in which rights are determined.
(2) "Aggrieved party" means a party entitled to resort to a
remedy.
(3) "Agreement" means the bargain of the parties in fact as
found in their language or by implication from other
circumstances including course of dealing or usage of trade or
course of performance as provided in this chapter (sections
336.1-205 and 336.2-208). Whether an agreement has legal
consequences is determined by the provisions of this chapter, if
applicable; otherwise by the law of contracts (section
336.1-103). (Compare "Contract.")
(4) "Bank" means any person engaged in the business of
banking.
(5) "Bearer" means the person in possession of an
instrument, document of title, or certificated security payable
to bearer or endorsed in blank.
(6) "Bill of lading" means a document evidencing the
receipt of goods for shipment issued by a person engaged in the
business of transporting or forwarding goods, and includes an
airbill. "Airbill" means a document serving for air
transportation as a bill of lading does for marine or rail
transportation, and includes an air consignment note or air
waybill.
(7) "Branch" includes a separately incorporated foreign
branch of a bank.
(8) "Burden of establishing" a fact means the burden of
persuading the triers of fact that the existence of the fact is
more probable than its nonexistence.
(9) "Buyer in ordinary course of business" means a person
who that buys goods in good faith and, without knowledge that
the sale to that person is in violation of violates the
ownership rights or security interest of a third party another
person in the goods buys, and in the ordinary course from a
person, other than a pawnbroker, in the business of selling
goods of that kind but does not include a pawnbroker. All
persons who sell minerals or the like (including oil and gas) at
wellhead or minehead shall be deemed to be persons A person buys
goods in the ordinary course if the sale to the person comports
with the usual or customary practices in the kind of business in
which the seller is engaged or with the seller's own usual or
customary practices. A person that sells oil, gas, or other
minerals at the wellhead or minehead is a person in the business
of selling goods of that kind. "Buying" A buyer in ordinary
course of business may be buy for cash or, by exchange of
other property, or on secured or unsecured credit, and includes
receiving may acquire goods or documents of title under a
preexisting contract for sale but does not include a transfer in
bulk or as security for or in total or partial satisfaction of a
money debt. Only a buyer that takes possession of the goods or
has a right to recover the goods from the seller under article 2
may be a buyer in ordinary course of business. A person that
acquires goods in a transfer in bulk or as security for or in
total or partial satisfaction of a money debt is not a buyer in
ordinary course of business.
(10) "Conspicuous": A term or clause is conspicuous when
it is so written that a reasonable person against whom it is to
operate ought to have noticed it. A printing heading in
capitals (as: NONNEGOTIABLE BILL OF LADING) is conspicuous.
Language in the body of a form is "conspicuous" if it is in
larger or other contrasting type or color. But in a telegram
any stated term is "conspicuous". Whether a term or clause is
"conspicuous" or not is for decision by the court.
(11) "Contract" means the total legal obligation which
results from the parties' agreement as affected by this chapter
and any other applicable rules of law. (Compare "Agreement.")
(12) "Creditor" includes a general creditor, a secured
creditor, a lien creditor and any representative of creditors,
including an assignee for the benefit of creditors, a trustee in
bankruptcy, a receiver in equity and an executor or
administrator of an insolvent debtor's or assignor's estate.
(13) "Defendant" includes a person in the position of
defendant in a cross-action or counterclaim.
(14) "Delivery" with respect to instruments, documents of
title, chattel paper, or certificated securities means voluntary
transfer of possession.
(15) "Document of title" includes bill of lading, dock
warrant, dock receipt, warehouse receipt or order for the
delivery of goods, and also any other document which in the
regular course of business or financing is treated as adequately
evidencing that the person in possession of it is entitled to
receive, hold and dispose of the document and the goods it
covers. To be a document of title a document must purport to be
issued by or addressed to a bailee and purport to cover goods in
the bailee's possession which are either identified or are
fungible portions of an identified mass.
(16) "Fault" means wrongful act, omission or breach.
(17) "Fungible" with respect to goods or securities means
goods or securities of which any unit is, by nature or usage of
trade, the equivalent of any other like unit. Goods which are
not fungible shall be deemed fungible for the purposes of this
chapter to the extent that under a particular agreement or
document unlike units are treated as equivalents.
(18) "Genuine" means free of forgery or counterfeiting.
(19) "Good faith" means honesty in fact in the conduct or
transaction concerned.
(20) "Holder," with respect to a negotiable instrument,
means the person in possession if the instrument is payable to
bearer or, in the case of an instrument payable to an identified
person, if the identified person is in possession. "Holder,"
with respect to a document of title, means the person in
possession if the goods are deliverable to bearer or to the
order of the person in possession.
(21) To "honor" is to pay or to accept and pay, or where a
credit so engages to purchase or discount a draft complying with
the terms of the credit.
(22) "Insolvency proceedings" includes any assignment for
the benefit of creditors or other proceedings intended to
liquidate or rehabilitate the estate of the person involved.
(23) A person is "insolvent" who either has ceased to pay
debts in the ordinary course of business or cannot pay the debts
as they become due or is insolvent within the meaning of the
federal bankruptcy law.
(24) "Money" means a medium of exchange authorized or
adopted by a domestic or foreign government and includes a
monetary unit of account established by an intergovernmental
organization or by agreement between two or more nations.
(25) A person has "notice" of a fact when that person
(a) has actual knowledge of it; or
(b) has received a notice or notification of it; or
(c) from all the facts and circumstances known to that
person at the time in question, has reason to know that it
exists.
A person "knows" or has "knowledge" of a fact when that
person has actual knowledge of it. "Discover" or "learn" or a
word or phrase of similar import refers to knowledge rather than
to reason to know. The time and circumstances under which a
notice or notification may cease to be effective are not
determined by this chapter.
(26) A person "notifies" or "gives" a notice or
notification to another by taking such steps as may be
reasonably required to inform the other in ordinary course
whether or not such other actually comes to know of it. A
person "receives" a notice or notification when
(a) it comes to that person's attention; or
(b) it is duly delivered at the place of business through
which the contract was made or at any other place held out by
that person as the place for receipt of such communications.
(27) Notice, knowledge or a notice or notification received
by an organization is effective for a particular transaction
from the time when it is brought to the attention of the
individual conducting that transaction, and in any event from
the time when it would have been brought to the individual's
attention if the organization had exercised due diligence. An
organization exercises due diligence if it maintains reasonable
routines for communicating significant information to the person
conducting the transaction and there is reasonable compliance
with the routines. Due diligence does not require an individual
acting for the organization to communicate information unless
such communication is part of regular duties or unless the
individual has reason to know of the transaction and that the
transaction would be materially affected by the information.
(28) "Organization" includes a corporation, government or
governmental subdivision or agency, business trust, estate,
trust, partnership or association, two or more persons having a
joint or common interest, or any other legal or commercial
entity.
(29) "Party," as distinct from "third party," means a
person who has engaged in a transaction or made an agreement
within this chapter.
(30) "Person" includes an individual or an organization
(see section 336.1-102).
(31) "Presumption" or "presumed" means that the trier of
fact must find the existence of the fact presumed unless and
until evidence is introduced which would support a finding of
its nonexistence.
(32) "Purchase" includes taking by sale, discount,
negotiation, mortgage, pledge, lien, security interest, issue or
reissue, gift or any other voluntary transaction creating an
interest in property.
(33) "Purchaser" means a person who takes by purchase.
(34) "Remedy" means any remedial right to which an
aggrieved party is entitled with or without resort to a tribunal.
(35) "Representative" includes an agent, an officer of a
corporation or association, and a trustee, executor or
administrator of an estate, or any other person empowered to act
for another.
(36) "Rights" includes remedies.
(37) "Security interest" means an interest in personal
property or fixtures which secures payment or performance of an
obligation. The retention or reservation of title by a seller
of goods notwithstanding shipment or delivery to the buyer
(section 336.2-401) is limited in effect to a reservation of a
"security interest". The term also includes any interest of a
consignor and a buyer of accounts or, chattel paper which, a
payment intangible, or a promissory note in a transaction that
is subject to article 9. The special property interest of a
buyer of goods on identification of those goods to a contract
for sale under section 336.2-401 is not a "security interest,"
but a buyer may also acquire a "security interest" by complying
with article 9. Unless a consignment is intended as security,
reservation of title thereunder is not a "security interest,"
but a consignment in any event is subject to the provisions on
consignment sales (section 336.2-326). Except as otherwise
provided in section 336.2-505, the right of a seller or lessor
of goods under article 2 or 2a to retain or acquire possession
of the goods is not a "security interest," but a seller or
lessor may also acquire a security interest by complying with
article 9. The retention or reservation of title by a seller of
goods notwithstanding shipment or delivery to the buyer (section
336.2-401) is limited in effect to a reservation of a security
interest.
Whether a transaction creates a lease or security interest
is determined by the facts of each case; however, a transaction
creates a security interest if the consideration the lessee is
to pay the lessor for the right to possession and use of the
goods is an obligation for the term of the lease not subject to
termination by the lessee, and
(a) the original term of the lease is equal to or greater
than the remaining economic life of the goods,
(b) the lessee is bound to renew the lease for the
remaining economic life of the goods or is bound to become the
owner of the goods,
(c) the lessee has an option to renew the lease for the
remaining economic life of the goods for no additional
consideration or nominal additional consideration upon
compliance with the lease agreement, or
(d) the lessee has an option to become the owner of the
goods for no additional consideration or nominal additional
consideration upon compliance with the lease agreement.
A transaction does not create a security interest merely
because it provides that
(a) the present value of the consideration the lessee is
obligated to pay the lessor for the right to possession and use
of the goods is substantially equal to or is greater than the
fair market value of the goods at the time the lease is entered
into,
(b) the lessee assumes risk of loss of the goods, or agrees
to pay taxes, insurance, filing, recording, or registration
fees, or service or maintenance costs with respect to the goods,
(c) the lessee has an option to renew the lease or to
become the owner of the goods,
(d) the lessee has an option to renew the lease for a fixed
rent that is equal to or greater than the reasonably predictable
fair market rent for the use of the goods for the term of the
renewal at the time the option is to be performed, or
(e) the lessee has an option to become the owner of the
goods for a fixed price that is equal to or greater than the
reasonably predictable fair market value of the goods at the
time the option is to be performed.
For purposes of this subsection (37):
(x) Additional consideration is not nominal if (i) when the
option to renew the lease is granted to the lessee the rent is
stated to be the fair market rent for the use of the goods for
the term of the renewal determined at the time the option is to
be performed, or (ii) when the option to become the owner of the
goods is granted to the lessee the price is stated to be the
fair market value of the goods determined at the time the option
is to be performed. Additional consideration is nominal if it
is less than the lessee's reasonably predictable cost of
performing under the lease agreement if the option is not
exercised;
(y) "Reasonably predictable" and "remaining economic life
of the goods" are to be determined with reference to the facts
and circumstances at the time the transaction is entered into;
and
(z) "Present value" means the amount as of a date certain
of one or more sums payable in the future, discounted to the
date certain. The discount is determined by the interest rate
specified by the parties if the rate is not manifestly
unreasonable at the time the transaction is entered into;
otherwise, the discount is determined by a commercially
reasonable rate that takes into account the facts and
circumstances of each case at the time the transaction was
entered into.
(38) "Send" in connection with any writing or notice means
to deposit in the mail or deliver for transmission by any other
usual means of communication with postage or cost of
transmission provided for and properly addressed and in the case
of an instrument to an address specified thereon or otherwise
agreed, or if there be none to any address reasonable under the
circumstances. The receipt of any writing or notice within the
time at which it would have arrived if properly sent has the
effect of a proper sending.
(39) "Signed" includes any symbol executed or adopted by a
party with present intention to authenticate a writing.
(40) "Surety" includes guarantor.
(41) "Telegram" includes a message transmitted by radio,
teletype, cable, any mechanical method of transmission, or the
like.
(42) "Term" means that portion of an agreement which
relates to a particular matter.
(43) "Unauthorized" signature means one made without
actual, implied, or apparent authority and includes a forgery.
(44) "Value": Except as otherwise provided with respect to
negotiable instruments and bank collections (sections 336.3-303,
336.4-210 and 336-4.211) a person gives "value" for rights by
acquiring them
(a) in return for a binding commitment to extend credit or
for the extension of immediately available credit whether or not
drawn upon and whether or not a chargeback is provided for in
the event of difficulties in collection; or
(b) as security for or in total or partial satisfaction of
a preexisting claim; or
(c) by accepting delivery pursuant to a preexisting
contract for purchase; or
(d) generally, in return for any consideration sufficient
to support a simple contract.
(45) "Warehouse receipt" means a receipt issued by a person
engaged in the business of storing goods for hire.
(46) "Written" or "writing" includes printing, typewriting
or any other intentional reduction to tangible form.
Sec. 3. Minnesota Statutes 1998, section 336.2-103, is
amended to read:
336.2-103 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(1) In this article unless the context otherwise requires:
(a) "Buyer" means a person who buys or contracts to buy
goods.
(b) "Good faith" in the case of a merchant means honesty in
fact and the observance of reasonable commercial standards of
fair dealing in the trade.
(c) "Receipt" of goods means taking physical possession of
them.
(d) "Seller" means a person who sells or contracts to sell
goods.
(2) Other definitions applying to this article or to
specified parts thereof, and the sections in which they appear
are:
"Acceptance," section 336.2-606.
"Banker's credit," section 336.2-325.
"Between merchants," section 336.2-104.
"Cancellation," section 336.2-106(4).
"Commercial unit," section 336.2-105.
"Confirmed credit," section 336.2-325.
"Conforming to contract," section 336.2-106.
"Contract for sale," section 336.2-106.
"Cover," section 336.2-712.
"Entrusting," section 336.2-403.
"Financing agency," section 336.2-104.
"Future goods," section 336.2-105.
"Goods," section 336.2-105.
"Identification," section 336.2-501.
"Installment contract," section 336.2-612.
"Letter of credit," section 336.2-325.
"Lot," section 336.2-105.
"Merchant," section 336.2-104.
"Overseas," section 336.2-323.
"Person in position of seller," section 336.2-707.
"Present sale," section 336.2-106.
"Sale," section 336.2-106.
"Sale on approval," section 336.2-326.
"Sale or return," section 336.2-326.
"Termination," section 336.2-106.
(3) The following definitions in other articles apply to
this article:
"Check," section 336.3-104.
"Consignee," section 336.7-102.
"Consignor," section 336.7-102.
"Consumer goods," section 336.9-109 336.9-102.
"Dishonor," section 336.3-502.
"Draft," section 336.3-104.
(4) In addition article 1 contains general definitions and
principles of construction and interpretation applicable
throughout this article.
Sec. 4. Minnesota Statutes 1998, section 336.2-210, is
amended to read:
336.2-210 [DELEGATION OF PERFORMANCE; ASSIGNMENT OF
RIGHTS.]
(1) A party may perform a duty through a delegate unless
otherwise agreed or unless the other party has a substantial
interest in having the original promisor perform or control the
acts required by the contract. No delegation of performance
relieves the party delegating of any duty to perform or any
liability for breach.
(2) Unless otherwise agreed all rights of either seller or
buyer can be assigned except where the assignment would
materially change the duty of the other party, or increase
materially the burden or risk imposed on the other party by the
contract, or impair materially the other party's chance of
obtaining return performance. A right to damages for breach of
the whole contract or a right arising out of the assignor's due
performance of the assignor's entire obligation can be assigned
despite agreement otherwise.
(3) The creation, attachment, perfection, or enforcement of
a security interest in the seller's interest under a contract is
not a transfer that materially changes the duty of or increases
materially the burden or risk imposed on the buyer or impairs
materially the buyer's chance of obtaining return performance
within the purview of subsection (2) unless, and then only to
the extent that, enforcement actually results in a delegation of
material performance of the seller. Even in that event, the
creation, attachment, perfection, and enforcement of the
security interest remain effective, but (i) the seller is liable
to the buyer for damages caused by the delegation to the extent
that the damages could not reasonably be prevented by the buyer,
and (ii) a court having jurisdiction may grant other appropriate
relief, including cancellation of the contract for sale or an
injunction against enforcement of the security interest or
consummation of the enforcement.
(4) Unless the circumstances indicate the contrary a
prohibition of assignment of "the contract" is to be construed
as barring only the delegation to the assignee of the assignor's
performance.
(4) (5) An assignment of "the contract" or of "all my
rights under the contract" or an assignment in similar general
terms is an assignment of rights and unless the language or the
circumstances (as in an assignment for security) indicate the
contrary, it is a delegation of performance of the duties of the
assignor and its acceptance by the assignee constitutes a
promise by the assignee to perform those duties. This promise
is enforceable by either the assignor or the other party to the
original contract.
(5) (6) The other party may treat any assignment which
delegates performance as creating reasonable grounds for
insecurity and may without prejudice to the rights of the other
party against the assignor demand assurances from the assignee
(section 336.2-609).
Sec. 5. Minnesota Statutes 1998, section 336.2-326, is
amended to read:
336.2-326 [SALE ON APPROVAL AND SALE OR RETURN; CONSIGNMENT
SALES AND RIGHTS OF CREDITORS.]
(1) Unless otherwise agreed, if delivered goods may be
returned by the buyer even though they conform to the contract,
the transaction is
(a) a "sale on approval" if the goods are delivered
primarily for use, and
(b) a "sale or return" if the goods are delivered primarily
for resale.
(2) Except as provided in subsection (3), Goods held on
approval are not subject to the claims of the buyer's creditors
until acceptance; goods held on sale or return are subject to
such claims while in the buyer's possession.
(3) Where goods are delivered to a person for sale and such
person maintains a place of business dealing in goods of the
kind involved, under a name other than the name of the person
making delivery, then with respect to claims of creditors of the
person conducting the business the goods are deemed to be on
sale or return. The provisions of this subsection are
applicable even though an agreement purports to reserve title to
the person making delivery until payment or resale or uses such
words as "on consignment" or "on memorandum." However, this
subsection is not applicable if the person making delivery
(a) complies with an applicable law providing for a
consignor's interest or the like to be evidenced by a sign, or
(b) establishes that the person conducting the business is
generally known by the person's creditors to be substantially
engaged in selling the goods of others, or
(c) complies with the filing provisions of the article on
secured transactions (article 9).
(4) Any "or return" term of a contract for sale is to be
treated as a separate contract for sale within the statute of
frauds section of this article (section 336.2-201) and as
contradicting the sale aspect of the contract within the
provisions of this article on parol or extrinsic evidence
(section 336.2-202).
Sec. 6. Minnesota Statutes 1998, section 336.2-502, is
amended to read:
336.2-502 [BUYER'S RIGHT TO GOODS ON SELLER'S REPUDIATION,
FAILURE TO DELIVER, OR INSOLVENCY.]
(1) Subject to subsection subsections (2) and (3) and even
though the goods have not been shipped a buyer who has paid a
part or all of the price of goods in which the buyer has a
special property under the provisions of the immediately
preceding section may on making and keeping good a tender of any
unpaid portion of their price recover them from the seller if:
(a) in the case of goods bought for personal, family, or
household purposes, the seller repudiates or fails to deliver as
required by the contract; or
(b) in all cases, the seller becomes insolvent within ten
days after receipt of the first installment on their price.
(2) The buyer's right to recover the goods under subsection
(1)(a) vests upon acquisition of a special property, even if the
seller had not then repudiated or failed to deliver.
(3) If the identification creating the special property has
been made by the buyer, the buyer acquires the right to recover
the goods only if they conform to the contract for sale.
Sec. 7. Minnesota Statutes 1998, section 336.2-716, is
amended to read:
336.2-716 [BUYER'S RIGHT TO SPECIFIC PERFORMANCE OR
REPLEVIN.]
(1) Specific performance may be decreed where the goods are
unique or in other proper circumstances.
(2) The decree for specific performance may include such
terms and conditions as to payment of the price, damages, or
other relief as the court may deem just.
(3) The buyer has a right of replevin for goods identified
to the contract if after reasonable effort the buyer is unable
to effect cover for such goods or the circumstances reasonably
indicate that such effort will be unavailing or if the goods
have been shipped under reservation and satisfaction of the
security interest in them has been made or tendered. In the
case of goods bought for personal, family, or household
purposes, the buyer's right of replevin vests upon acquisition
of a special property, even if the seller had not then
repudiated or failed to deliver.
Sec. 8. Minnesota Statutes 1998, section 336.2A-103, is
amended to read:
336.2A-103 [DEFINITIONS AND INDEX OF DEFINITIONS.]
(1) In this article unless the context otherwise requires:
(a) "Buyer in ordinary course of business" means a person
who in good faith and without knowledge that the sale is in
violation of the ownership rights or security interest or
leasehold interest of a third party in the goods, buys in
ordinary course from a person in the business of selling goods
of that kind but does not include a pawnbroker. "Buying" may be
for cash or by exchange of other property or on secured or
unsecured credit and includes receiving goods or documents of
title under a preexisting contract for sale but does not include
a transfer in bulk or as security for or in total or partial
satisfaction of a money debt.
(b) "Cancellation" occurs when either party puts an end to
the lease contract for default by the other party.
(c) "Commercial unit" means a unit of goods that by
commercial usage is a single whole for purposes of lease and
division of which materially impairs its character or value on
the market or in use. A commercial unit may be a single
article, as a machine, or a set of articles, as a suite of
furniture or a line of machinery, or a quantity, as a gross or
carload, or any other unit treated in use or in the relevant
market as a single whole.
(d) "Conforming" goods or performance under a lease
contract means goods or performance that are in accordance with
the obligations under the lease contract.
(e) "Consumer lease" means a lease that a lessor regularly
engaged in the business of leasing or selling makes to a lessee
who is an individual and who takes under the lease primarily for
a personal, family, or household purpose, if the total payments
to be made under the lease contract, excluding payments for
options to renew or buy, do not exceed $25,000.
(f) "Fault" means wrongful act, omission, breach, or
default.
(g) "Finance lease" means a lease in which
(1) the lessor does not select, manufacture, or supply the
goods,
(2) the lessor acquires the goods or the right to
possession and use of the goods in connection with the lease,
and
(3) either
(i) the lessee receives a copy of the contract evidencing
the lessor's purchase of the goods or a disclaimer statement on
or before signing the lease contract, or
(ii) the lessee's approval of the contract evidencing the
lessor's purchase of the goods or a disclaimer statement is a
condition to effectiveness of the lease contract.
"Disclaimer statement" means a written statement that is
part of or separate from the lease contract that discloses all
warranties and other rights provided to the lessee by the lessor
and supplier in connection with the lease contract and informs
the lessee in a conspicuous manner that there are no warranties
or other rights provided to the lessee by the lessor and
supplier other than those disclosed in the statement.
(h) "Goods" means all things that are movable at the time
of identification to the lease contract, or are fixtures
(section 336.2A-309), but the term does not include money,
documents, instruments, accounts, chattel paper, general
intangibles, or minerals or the like, including oil and gas,
before extraction. The term also includes the unborn young of
animals.
(i) "Installment lease contract" means a lease contract
that authorizes or requires the delivery of goods in separate
lots to be separately accepted, even though the lease contract
contains a clause "each delivery is a separate lease" or its
equivalent.
(j) "Lease" means a transfer of the right to possession and
use of goods for a term in return for consideration, but a sale,
including a sale on approval or a sale or return, or retention
or creation of a security interest is not a lease. Unless the
context clearly indicates otherwise, the term includes a
sublease.
(k) "Lease agreement" means the bargain, with respect to
the lease, of the lessor and the lessee in fact as found in
their language or by implication from other circumstances
including course of dealing or usage of trade or course of
performance as provided in this article. Unless the context
clearly indicates otherwise, the term includes a sublease
agreement.
(l) "Lease contract" means the total legal obligation that
results from the lease agreement as affected by this article and
any other applicable rules of law. Unless the context clearly
indicates otherwise, the term includes a sublease contract.
(m) "Leasehold interest" means the interest of the lessor
or the lessee under a lease contract.
(n) "Lessee" means a person who acquires the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessee.
(o) "Lessee in ordinary course of business" means a person
who in good faith and without knowledge that the lease is in
violation of the ownership rights or security interest or
leasehold interest of a third party in the goods leases in
ordinary course from a person in the business of selling or
leasing goods of that kind but does not include a pawnbroker.
"Leasing" may be for cash or by exchange of other property or on
secured or unsecured credit and includes receiving goods or
documents of title under a preexisting lease contract but does
not include a transfer in bulk or as security for or in total or
partial satisfaction of a money debt.
(p) "Lessor" means a person who transfers the right to
possession and use of goods under a lease. Unless the context
clearly indicates otherwise, the term includes a sublessor.
(q) "Lessor's residual interest" means the lessor's
interest in the goods after expiration, termination, or
cancellation of the lease contract.
(r) "Lien" means a charge against or interest in goods to
secure payment of a debt or performance of an obligation, but
the term does not include a security interest.
(s) "Lot" means a parcel or a single article that is the
subject matter of a separate lease or delivery, whether or not
it is sufficient to perform the lease contract.
(t) "Merchant lessee" means a lessee that is a merchant
with respect to goods of the kind subject to the lease.
(u) "Present value" means the amount as of a date certain
of one or more sums payable in the future, discounted to the
date certain. The discount is determined by the interest rate
specified by the parties if the rate was not manifestly
unreasonable at the time the transaction was entered into;
otherwise, the discount is determined by a commercially
reasonable rate that takes into account the facts and
circumstances of each case at the time the transaction was
entered into.
(v) "Purchase" includes taking by sale, lease, mortgage,
security interest, pledge, gift, or any other voluntary
transaction creating an interest in goods.
(w) "Sublease" means a lease of goods the right to
possession and use of which was acquired by the lessor as a
lessee under an existing lease.
(x) "Supplier" means a person from whom a lessor buys or
leases goods to be leased under a finance lease.
(y) "Supply contract" means a contract under which a lessor
buys or leases goods to be leased.
(z) "Termination" occurs when either party pursuant to a
power created by agreement or law puts an end to the lease
contract otherwise than for default.
(2) Other definitions applying to this article and the
sections in which they appear are:
"Accessions." Section 336.2A-310(1).
"Construction mortgage." Section 336.2A-309(1)(d).
"Encumbrance." Section 336.2A-309(1)(e).
"Fixtures." Section 336.2A-309(1)(a).
"Fixture filing." Section 336.2A-309(1)(b).
"Purchase money lease." Section 336.2A-309(1)(c).
(3) The following definitions in other articles apply to
this article:
"Account." Section 336.9-106 336.9-102(a)(2).
"Between merchants." Section 336.2-104(3).
"Buyer." Section 336.2-103(1)(a).
"Chattel paper." Section 336.9-105(1)(b) 336.9-102(a)(11).
"Consumer goods." Section 336.9-109(1) 336.9-102(a)(23).
"Document." Section 336.9-105(1)(f) 336.9-102(a)(30).
"Entrusting." Section 336.2-403(3).
"General intangibles intangible." Section 336.9-106
336.9-102(a)(42).
"Good faith." Section 336.2-103(1)(b).
"Instrument." Section 336.9-105(1)(i) 336.9-102(a)(47).
"Merchant." Section 336.2-104(1).
"Mortgage." Section 336.9-105(1)(j) 336.9-102(a)(55).
"Pursuant to commitment."
Section 336.9-105(1)(k) 336.9-102(a)(68).
"Receipt." Section 336.2-103(1)(c).
"Sale." Section 336.2-106(1).
"Sale on approval." Section 336.2-326.
"Sale or return." Section 336.2-326.
"Seller." Section 336.2-103(1)(d).
(4) In addition, sections 336.1-101 to 336.1-109 contain
general definitions and principles of construction and
interpretation applicable throughout this article.
Sec. 9. Minnesota Statutes 1998, section 336.2A-303, is
amended to read:
336.2A-303 [ALIENABILITY OF PARTY'S INTEREST UNDER LEASE
CONTRACT OR OF LESSOR'S RESIDUAL INTEREST IN GOODS; DELEGATION
OF PERFORMANCE; TRANSFER OF RIGHTS.]
(1) As used in this section, "creation of a security
interest" includes the sale of a lease contract that is subject
to article 9, secured transactions, by reason of section
336.9-102(1)(b) 336.9-109(a)(3).
(2) Except as provided in subsections subsection (3)
and (4) section 336.9-407, a provision in a lease agreement that
(i) prohibits the voluntary or involuntary transfer, including a
transfer by sale, sublease, creation or enforcement of a
security interest, or attachment, levy, or other judicial
process, of an interest of a party under the lease contract or
of the lessor's residual interest in the goods, or (ii) makes
the transfer an event of default, gives rise to the rights and
remedies provided in subsection (5) (4), but a transfer that is
prohibited or is an event of default under the lease agreement
is otherwise effective.
(3) A provision in a lease agreement that (i) prohibits the
creation 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 (ii) makes the transfer an event of
default, is not enforceable unless, and then only to the extent
that, there is an actual transfer by the lessee of the lessee's
right of possession or use of the goods in violation of the
provision or an actual delegation of a material performance of
either party to the lease contract in violation of the
provision. Neither the granting nor the enforcement of a
security interest in (i) the lessor's interest under the lease
contract or (ii) the lessor's residual interest in the goods is
a transfer that materially impairs the prospect of obtaining
return performance by, materially changes the duty of, or
materially increases the burden or risk imposed on, the lessee
within the purview of subsection (5) unless, and then only to
the extent that, there is an actual delegation of a material
performance of the lessor.
(4) A provision in a lease agreement that (i) prohibits a
transfer of a right to damages for default with respect to the
whole lease contract or of a right to payment arising out of the
transferor's due performance of the transferor's entire
obligation, or (ii) makes the transfer an event of default, is
not enforceable, and the transfer is not a transfer that
materially impairs the prospect of obtaining return performance
by, materially changes the duty of, or materially increases the
burden or risk imposed on, the other party to the lease contract
within the purview of subsection (5) (4).
(5) (4) Subject to subsections subsection (3)
and (4) section 336.9-407:
(a) if a transfer is made that is made an event of default
under a lease agreement, the party to the lease contract not
making the transfer, unless that party waives the default or
otherwise agrees, has the rights and remedies described in
section 336.2A-501(2);
(b) if paragraph (a) is not applicable and if a transfer is
made that (i) is prohibited under a lease agreement or (ii)
materially impairs the prospect of obtaining return performance
by, materially changes the duty of, or materially increases the
burden or risk imposed on, the other party to the lease
contract, unless the party not making the transfer agrees at any
time to the transfer in the lease contract or otherwise, then,
except as limited by contract, (i) the transferor is liable to
the party not making the transfer for damages caused by the
transfer to the extent that the damages could not reasonably be
prevented by the party not making the transfer and (ii) a court
having jurisdiction may grant other appropriate relief,
including cancellation of the lease contract or an injunction
against the transfer.
(6) (5) A transfer of "the lease" or of "all my rights
under the lease," or a transfer in similar general terms, is a
transfer of rights and, unless the language or the
circumstances, as in a transfer for security, indicate the
contrary, the transfer is a delegation of duties by the
transferor to the transferee. Acceptance by the transferee
constitutes a promise by the transferee to perform those
duties. The promise is enforceable by either the transferor or
the other party to the lease contract.
(7) (6) Unless otherwise agreed by the lessor and the
lessee, a delegation of performance does not relieve the
transferor as against the other party of any duty to perform or
of any liability for default.
(8) (7) In a consumer lease, to prohibit the transfer of an
interest of a party under the lease contract or to make a
transfer an event of default, the language must be specific, by
a writing, and conspicuous.
Sec. 10. Minnesota Statutes 1998, section 336.2A-307, is
amended to read:
336.2A-307 [PRIORITY OF LIENS ARISING BY ATTACHMENT OR LEVY
ON, SECURITY INTERESTS IN, AND OTHER CLAIMS TO GOODS.]
(1) Except as otherwise provided in section 336.2A-306, a
creditor of a lessee takes subject to the lease contract.
(2) Except as otherwise provided in subsections
subsection (3) and (4) and in sections 336.2A-306 and
336.2A-308, a creditor of a lessor takes subject to the lease
contract unless:
(a) the creditor holds a lien that attached to the goods
before the lease contract became enforceable;.
(b) the creditor holds a security interest in the goods and
the lessee did not give value and receive delivery of the goods
without knowledge of the security interest; or
(c) the creditor holds a security interest in the goods
which was perfected (section 336.9-303) before the lease
contract became enforceable.
(3) Except as otherwise provided in sections 336.9-317,
336.9-321, and 336.9-323, a lessee in the ordinary course of
business takes the a leasehold interest free of subject to a
security interest in the goods created by the lessor even though
the security interest is perfected (section 336.9-303) and the
lessee knows of its existence held by a creditor of the lessor.
(4) A lessee other than a lessee in the ordinary course of
business takes the leasehold interest free of a security
interest to the extent that it secures future advances made
after the secured party acquires knowledge of the lease or more
than 45 days after the lease contract becomes enforceable,
whichever first occurs, unless the future advances are made
pursuant to a commitment entered into without knowledge of the
lease and before the expiration of the 45-day period.
Sec. 11. Minnesota Statutes 1998, section 336.2A-309, is
amended to read:
336.2A-309 [LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME
FIXTURES.]
(1) In this section:
(a) goods are "fixtures" when they become so related to
particular real estate that an interest in them arises under
real estate law;
(b) a "fixture filing" is the filing, in the office where a
record of a mortgage on the real estate would be filed or
recorded, of a financing statement covering goods that are or
are to become fixtures and conforming to the requirements of
section 336.9-402(5) 336.9-502(a) and (b);
(c) a lease is a "purchase money lease" unless the lessee
has possession or use of the goods or the right to possession or
use of the goods before the lease agreement is enforceable;
(d) a mortgage is a "construction mortgage" to the extent
it secures an obligation incurred for the construction of an
improvement on land including the acquisition cost of the land,
if the recorded writing so indicates; and
(e) "encumbrance" includes real estate mortgages and other
liens on real estate and all other rights in real estate that
are not ownership interests.
(2) Under this article a lease may be of goods that are
fixtures or may continue in goods that become fixtures, but no
lease exists under this article of ordinary building materials
incorporated into an improvement on land.
(3) This article does not prevent creation of a lease of
fixtures pursuant to real estate law.
(4) The perfected interest of a lessor of fixtures has
priority over a conflicting interest of an encumbrancer or owner
of the real estate if:
(a) the lease is a purchase money lease, the conflicting
interest of the encumbrancer or owner arises before the goods
become fixtures, the interest of the lessor is perfected by a
fixture filing before the goods become fixtures or within ten
days after that, and the lessee has an interest of record in the
real estate or is in possession of the real estate; or
(b) the interest of the lessor is perfected by a fixture
filing before the interest of the encumbrancer or owner is of
record, the lessor's interest has priority over any conflicting
interest of a predecessor in title of the encumbrancer or owner,
and the lessee has an interest of record in the real estate or
is in possession of the real estate.
(5) The interest of a lessor of fixtures, whether or not
perfected, has priority over the conflicting interest of an
encumbrancer or owner of the real estate if:
(a) the fixtures are readily removable factory or office
machines, readily removable equipment that is not primarily used
or leased for use in the operation of the real estate, or
readily removable replacements of domestic appliances that are
goods subject to a consumer lease, and before the goods become
fixtures the lease contract is enforceable; or
(b) the conflicting interest is a lien on the real estate
obtained by legal or equitable proceedings after the lease
contract is enforceable; or
(c) the encumbrancer or owner has consented in writing to
the lease or has disclaimed an interest in the goods as
fixtures; or
(d) the lessee has a right to remove the goods as against
the encumbrancer or owner. If the lessee's right to remove
terminates, the priority of the interest of the lessor continues
for a reasonable time.
(6) Notwithstanding subsection (4)(a) but otherwise subject
to subsections (4) and (5), the interest of a lessor of
fixtures, including the lessor's residual interest, is
subordinate to the conflicting interest of an encumbrancer of
the real estate under a construction mortgage recorded before
the goods become fixtures if the goods become fixtures before
the completion of the construction. To the extent given to
refinance a construction mortgage, the conflicting interest of
an encumbrancer of the real estate under a mortgage has this
priority to the same extent as the encumbrancer of the real
estate under the construction mortgage.
(7) In cases not within the preceding subsections, priority
between the interest of a lessor of fixtures, including the
lessor's residual interest, and the conflicting interest of an
encumbrancer or owner of the real estate who is not the lessee
is determined by the priority rules governing conflicting
interests in real estate.
(8) If the interest of a lessor of fixtures, including the
lessor's residual interest, has priority over all conflicting
interests of all owners and encumbrancers of the real estate,
the lessor or the lessee may (i) on default, expiration,
termination, or cancellation of the lease agreement but subject
to the lease agreement and this article, or (ii) if necessary to
enforce the lessor's or lessee's other rights and remedies under
this article; remove the goods from the real estate, free and
clear of all conflicting interests of all owners and
encumbrancers of the real estate, but the lessor or lessee must
reimburse any encumbrancer or owner of the real estate who is
not the lessee and who has not otherwise agreed for the cost of
repair of any physical injury, but not for any diminution in
value of the real estate 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 party seeking removal gives adequate security for the
performance of this obligation.
(9) Even though the lease agreement does not create a
security interest, the interest of a lessor of fixtures,
including the lessor's residual interest, is perfected by filing
a financing statement as a fixture filing for leased goods that
are or are to become fixtures in accordance with the relevant
provisions of the Article on Secured Transactions (article 9).
Sec. 12. Minnesota Statutes 1998, section 336.4-210, is
amended to read:
336.4-210 [SECURITY INTEREST OF COLLECTING BANK IN ITEMS,
ACCOMPANYING DOCUMENTS, AND PROCEEDS.]
(a) A collecting bank has a security interest in an item
and any accompanying documents or the proceeds of either:
(1) in case of an item deposited in an account, to the
extent to which credit given for the item has been withdrawn or
applied;
(2) in case of an item for which it has given credit
available for withdrawal as of right, to the extent of the
credit given, whether or not the credit is drawn upon or there
is a right of chargeback; or
(3) if it makes an advance on or against the item.
(b) If credit given for several items received at one time
or pursuant to a single agreement is withdrawn or applied in
part, the security interest remains upon all the items, any
accompanying documents or the proceeds of either. For the
purpose of this section, credits first given are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for
an item is a realization on its security interest in the item,
accompanying documents, and proceeds. So long as the bank does
not receive final settlement for the item or give up possession
of the item or accompanying documents for purposes other than
collection, the security interest continues to that extent and
is subject to article 9, but:
(1) no security agreement is necessary to make the security
interest enforceable (section 336.9-203(1)(a)(b)(3)(A));
(2) no filing is required to perfect the security interest;
and
(3) the security interest has priority over conflicting
perfected security interests in the item, accompanying
documents, or proceeds.
Sec. 13. [336.5-118] [SECURITY INTEREST OF ISSUER OR
NOMINATED PERSON.]
(a) An issuer or nominated person has a security interest
in a document presented under a letter of credit to the extent
that the issuer or nominated person honors or gives value for
the presentation.
(b) So long as and to the extent that an issuer or
nominated person has not been reimbursed or has not otherwise
recovered the value given with respect to a security interest in
a document under subsection (a), the security interest continues
and is subject to article 9, but:
(1) a security agreement is not necessary to make the
security interest enforceable under section 336.9-203(b)(3);
(2) if the document is presented in a medium other than a
written or other tangible medium, the security interest is
perfected; and
(3) if the document is presented in a written or other
tangible medium and is not a certificated security, chattel
paper, a document of title, an instrument, or a letter of
credit, the security interest is perfected and has priority over
a conflicting security interest in the document so long as the
debtor does not have possession of the document.
Sec. 14. Minnesota Statutes 1998, section 336.7-503, is
amended to read:
336.7-503 [DOCUMENT OF TITLE TO GOODS DEFEATED IN CERTAIN
CASES.]
(1) A document of title confers no right in goods against a
person who before issuance of the document had a legal interest
or a perfected security interest in them and who neither
(a) delivered or entrusted them or any document of title
covering them to the bailor or the bailor's nominee with actual
or apparent authority to ship, store or sell or with power to
obtain delivery under this article (section 336.7-403) or with
power of disposition under this chapter (sections 336.2-403 and
336.9-307 336.9-320) or other statute or rule of law; nor
(b) acquiesced in the procurement by the bailor or the
bailor's nominee of any document of title.
(2) Title to goods based upon an unaccepted delivery order
is subject to the rights of anyone to whom a negotiable
warehouse receipt or bill of lading covering the goods has been
duly negotiated. Such a title may be defeated under the next
section to the same extent as the rights of the issuer or a
transferee from the issuer.
(3) Title to goods based upon a bill of lading issued to a
freight forwarder is subject to the rights of anyone to whom a
bill issued by the freight forwarder is duly negotiated; but
delivery by the carrier in accordance with part 4 of this
article pursuant to its own bill of lading discharges the
carrier's obligation to deliver.
Sec. 15. Minnesota Statutes 1998, section 336.8-103, is
amended to read:
336.8-103 [RULES FOR DETERMINING WHETHER CERTAIN
OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.]
(a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an investment
company under the federal investment company laws, an interest
in a unit investment trust that is so registered, or a
face-amount certificate issued by a face-amount certificate
company that is so registered. Investment company security does
not include an insurance policy or endowment policy or annuity
contract issued by an insurance company.
(c) An interest in a partnership or limited liability
company is a general intangible and is not a security or a
financial asset, except as follows:
(1) An interest in a partnership or limited liability
company is a security and is not a general intangible if it is
dealt in or traded on a securities exchange or in a securities
market, its terms expressly provide that it is a security
governed by this article, or it is an investment company
security.
(2) An interest in a partnership or limited liability
company is a financial asset and is not a general intangible if
it is held in a securities account.
(d) A writing that is a security certificate is governed by
this article and not by article 3, even though it also meets the
requirements of that article. However, a negotiable instrument
governed by article 3 is a financial asset if it is held in a
securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a
financial asset.
(f) A commodity contract, as defined in section 336.9-115
336.9-102(a)(15), is not a security or a financial asset.
Sec. 16. Minnesota Statutes 1998, section 336.8-106, is
amended to read:
336.8-106 [CONTROL.]
(a) A purchaser has "control" of a certificated security in
bearer form if the certificated security is delivered to the
purchaser.
(b) A purchaser has "control" of a certificated security in
registered form if the certificated security is delivered to the
purchaser, and:
(1) the certificate is endorsed to the purchaser or in
blank by an effective endorsement; or
(2) the certificate is registered in the name of the
purchaser, upon original issue or registration of transfer by
the issuer.
(c) A purchaser has "control" of an uncertificated security
if:
(1) the uncertificated security is delivered to the
purchaser; or
(2) the issuer has agreed that it will comply with
instructions originated by the purchaser without further consent
by the registered owner.
(d) A purchaser has "control" of a security entitlement if:
(1) the purchaser becomes the entitlement holder; or
(2) the securities intermediary has agreed that it will
comply with entitlement orders originated by the purchaser
without further consent by the entitlement holder; or
(3) another person has control of the security entitlement
on behalf of the purchaser or, having previously acquired
control of the security entitlement, acknowledges that it has
control on behalf of the purchaser.
(e) If an interest in a security entitlement is granted by
the entitlement holder to the entitlement holder's own
securities intermediary, the securities intermediary has control.
(f) A purchaser who has satisfied the requirements of
subsection (c)(2) (c) or (d)(2) (d) has control, even if the
registered owner in the case of subsection (c)(2) (c) or the
entitlement holder in the case of subsection (d)(2) (d) retains
the right to make substitutions for the uncertificated security
or security entitlement, to originate instructions or
entitlement orders to the issuer or securities intermediary, or
otherwise to deal with the uncertificated security or security
entitlement.
(g) An issuer or a securities intermediary may not enter
into an agreement of the kind described in subsection (c)(2) or
(d)(2) without the consent of the registered owner or
entitlement holder, but an issuer or a securities intermediary
is not required to enter into such an agreement even though the
registered owner or entitlement holder so directs. An issuer or
securities intermediary that has entered into such an agreement
is not required to confirm the existence of the agreement to
another party unless requested to do so by the registered owner
or entitlement holder.
Sec. 17. Minnesota Statutes 1998, section 336.8-110, is
amended to read:
336.8-110 [APPLICABILITY; CHOICE OF LAW.]
(a) The local law of the issuer's jurisdiction, as
specified in subsection (d), governs:
(1) the validity of a security;
(2) the rights and duties of the issuer with respect to
registration of transfer;
(3) the effectiveness of registration of transfer by the
issuer;
(4) whether the issuer owes any duties to an adverse
claimant to a security; and
(5) whether an adverse claim can be asserted against a
person to whom transfer of a certificated or uncertificated
security is registered or a person who obtains control of an
uncertificated security.
(b) The local law of the securities intermediary's
jurisdiction, as specified in subsection (e), governs:
(1) acquisition of a security entitlement from the
securities intermediary;
(2) the rights and duties of the securities intermediary
and entitlement holder arising out of a security entitlement;
(3) whether the securities intermediary owes any duties to
an adverse claimant to a security entitlement; and
(4) whether an adverse claim can be asserted against a
person who acquires a security entitlement from the securities
intermediary or a person who purchases a security entitlement or
interest therein from an entitlement holder.
(c) The local law of the jurisdiction in which a security
certificate is located at the time of delivery governs whether
an adverse claim can be asserted against a person to whom the
security certificate is delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under
which the issuer of the security is organized or, if permitted
by the law of that jurisdiction, the law of another jurisdiction
specified by the issuer. An issuer organized under the law of
this state may specify the law of another jurisdiction as the
law governing the matters specified in subsection (a)(2) through
(5).
(e) The following rules determine a "securities
intermediary's jurisdiction" for purposes of this section:
(1) If an agreement between the securities intermediary and
its entitlement holder specifies that it is governed by the law
of governing the securities account expressly provides that a
particular jurisdiction is the securities intermediary's
jurisdiction for purposes of this part, this article, or this
act, that jurisdiction is the securities intermediary's
jurisdiction.
(2) If paragraph (1) does not apply and an agreement
between the securities intermediary and its entitlement holder
governing the securities account expressly provides that the
agreement is governed by the law of a particular jurisdiction,
that jurisdiction is the securities intermediary's jurisdiction.
(3) If neither paragraph (1) nor (2) applies and an
agreement between the securities intermediary and its
entitlement holder does not specify the governing law as
provided in paragraph (1), but the securities account expressly
specifies provides that the securities account is maintained at
an office in a particular jurisdiction, that jurisdiction is the
securities intermediary's jurisdiction.
(3) (4) If an agreement between the securities intermediary
and its entitlement holder does not specify a jurisdiction as
provided in paragraph (1) or (2) none of the preceding
paragraphs apply, the securities intermediary's jurisdiction is
the jurisdiction in which is located the office identified in an
account statement as the office serving the entitlement holder's
account is located.
(4) (5) If an agreement between the securities intermediary
and its entitlement holder does not specify a jurisdiction as
provided in paragraph (1) or (2) and an account statement does
not identify an office serving the entitlement holder's account
as provided in paragraph (3) none of the preceding paragraphs
apply, the securities intermediary's jurisdiction is the
jurisdiction in which is located the chief executive office of
the securities intermediary is located.
(f) A securities intermediary's jurisdiction is not
determined by the physical location of certificates representing
financial assets, or by the jurisdiction in which is organized
the issuer of the financial asset with respect to which an
entitlement holder has a security entitlement, or by the
location of facilities for data processing or other
recordkeeping concerning the account.
Sec. 18. Minnesota Statutes 1998, section 336.8-301, is
amended to read:
336.8-301 [DELIVERY.]
(a) Delivery of a certificated security to a purchaser
occurs when:
(1) the purchaser acquires possession of the security
certificate;
(2) another person, other than a securities intermediary,
either acquires possession of the security certificate on behalf
of the purchaser or, having previously acquired possession of
the certificate, acknowledges that it holds for the purchaser;
or
(3) a securities intermediary acting on behalf of the
purchaser acquires possession of the security certificate, only
if the certificate is in registered form and has been is (i)
registered in the name of the purchaser, (ii) payable to the
order of the purchaser, or (iii) specially endorsed to the
purchaser by an effective endorsement and has not been endorsed
to the securities intermediary or in blank.
(b) Delivery of an uncertificated security to a purchaser
occurs when:
(1) the issuer registers the purchaser as the registered
owner, upon original issue or registration of transfer; or
(2) another person, other than a securities intermediary,
either becomes the registered owner of the uncertificated
security on behalf of the purchaser or, having previously become
the registered owner, acknowledges that it holds for the
purchaser.
Sec. 19. Minnesota Statutes 1998, section 336.8-302, is
amended to read:
336.8-302 [RIGHTS OF PURCHASER.]
(a) Except as otherwise provided in subsections (b) and
(c), upon delivery a purchaser of a certificated or
uncertificated security to a purchaser, the purchaser acquires
all rights in the security that the transferor had or had power
to transfer.
(b) A purchaser of a limited interest acquires rights only
to the extent of the interest purchased.
(c) A purchaser of a certificated security who as a
previous holder had notice of an adverse claim does not improve
its position by taking from a protected purchaser.
Sec. 20. Minnesota Statutes 1998, section 336.8-510, is
amended to read:
336.8-510 [RIGHTS OF PURCHASER OF SECURITY ENTITLEMENT FROM
ENTITLEMENT HOLDER.]
(a) In a case not covered by the priority rules in article
9 or the rules stated in subsection (c), an action based on an
adverse claim to a financial asset or security entitlement,
whether framed in conversion, replevin, constructive trust,
equitable lien, or other theory, may not be asserted against a
person who purchases a security entitlement, or an interest
therein, from an entitlement holder if the purchaser gives
value, does not have notice of the adverse claim, and obtains
control.
(b) If an adverse claim could not have been asserted
against an entitlement holder under section 336.8-502, the
adverse claim cannot be asserted against a person who purchases
a security entitlement, or an interest therein, from the
entitlement holder.
(c) In a case not covered by the priority rules in article
9, a purchaser for value of a security entitlement, or an
interest therein, who obtains control has priority over a
purchaser of a security entitlement, or an interest therein, who
does not obtain control. Except as otherwise provided in
subsection (d), purchasers who have control rank equally, except
that a according to priority in time of:
(1) the purchaser's becoming the person for whom the
securities account, in which the security entitlement is
carried, is maintained, if the purchaser obtained control under
section 336.8-106(d)(1);
(2) the securities intermediary's agreement to comply with
the purchaser's entitlement orders with respect to security
entitlements carried or to be carried in the securities account
in which the security entitlement is carried, if the purchaser
obtained control under section 336.8-106(d)(2); or
(3) if the purchaser obtained control through another
person under section 336.8-106(d)(3), the time on which priority
would be based under this subsection if the other person were
the secured party.
(d) A securities intermediary as purchaser has priority
over a conflicting purchaser who has control, unless otherwise
agreed by the securities intermediary.
Presented to the governor April 11, 2000
Signed by the governor April 14, 2000, 2:12 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes