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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).

HIST: 2000 c 399 art 1 s 26

* NOTE: This section, as added by Laws 2000, chapter 399, *article 1, section 26, is effective July 1, 2001. Laws 2000, *chapter 399, article 1, section 130.

* NOTE: Minnesota Statutes 1998, section 336.9-306, which *reads as follows, is repealed July 1, 2001. Laws 2000, chapter *399, article 1, section 130.

* "336.9-306 "Proceeds"; secured party's rights on *disposition of collateral.

* (1) "Proceeds" includes whatever is received upon the sale, *exchange, collection or other disposition of collateral or *proceeds. Insurance payable by reason of loss or damage to the *collateral is proceeds, except to the extent that it is payable *to a person other than a party to the security agreement. Any *payments or distributions made with respect to investment *property collateral are proceeds. Money, checks, deposit *accounts, and the like, are "cash proceeds." All other proceeds *are "noncash proceeds."

* (2) Except where this article otherwise provides, a *security interest continues in collateral notwithstanding sale, *exchange or other disposition thereof unless the disposition was *authorized by the secured party in the security agreement or *otherwise, and also continues in any identifiable proceeds *including collections received by the debtor.

* (3) The security interest in proceeds is a continuously *perfected security interest if the interest in the original *collateral was perfected but it ceases to be a perfected *security interest and becomes unperfected 20 days after receipt *of the proceeds by the debtor unless

* (a) a filed financing statement covers the original *collateral and the proceeds are collateral in which a security *interest may be perfected by filing in the office or offices *where the financing statement has been filed and, if the *proceeds are acquired with cash proceeds, the description of *collateral in the financing statement indicates the types of *property constituting the proceeds; or

* (b) a filed financing statement covers the original *collateral and the proceeds are identifiable cash proceeds; or

* (c) the original collateral was investment property and the *proceeds are identifiable cash proceeds; or

* (d) the security interest in the proceeds is perfected *before the expiration of the 20-day period.

* Except as provided in this section, a security interest in *proceeds can be perfected only by the methods or under the *circumstances permitted in this article for original collateral *of the same type.

* (4) In the event of insolvency proceedings instituted by or *against a debtor, a secured party with a perfected security *interest in proceeds has a perfected security interest only in *the following proceeds:

* (a) in identifiable noncash proceeds and in separate *deposit accounts containing only proceeds;

* (b) in identifiable cash proceeds in the form of money *which is neither commingled with other money nor deposited in a *deposit account prior to the insolvency proceedings;

* (c) in identifiable cash proceeds in the form of checks and *the like which are not deposited in a deposit account prior to *the insolvency proceedings; and

* (d) in all cash and deposit accounts of the debtor, in *which proceeds have been commingled with other funds, but the *perfected security interest under this paragraph (d) is

* (i) subject to any right of setoff; and

* (ii) limited to an amount not greater than the amount of *any cash proceeds received by the debtor within 20 days before *the institution of the insolvency proceedings less the sum of *(I) the payments to the secured party on account of cash *proceeds received by the debtor during such period and (II) the *cash proceeds received by the debtor during such period to which *the secured party is entitled under paragraphs (a) to (c) of *this subsection (4).

* (5) If a sale of goods results in an account or chattel *paper which is transferred by the seller to a secured party, and *if the goods are returned to or are repossessed by the seller or *the secured party, the following rules determine priorities:

* (a) If the goods were collateral at the time of sale for an *indebtedness of the seller which is still unpaid, the original *security interest attaches again to the goods and continues as a *perfected security interest if it was perfected at the time when *the goods were sold. If the security interest was originally *perfected by a filing which is still effective, nothing further *is required to continue the perfected status; in any other case, *the secured party must take possession of the returned or *repossessed goods or must file.

* (b) An unpaid transferee of the chattel paper has a *security interest in the goods against the transferor. Such *security interest is prior to a security interest asserted under *paragraph (a) to the extent that the transferee of the chattel *paper was entitled to priority under section 336.9-308.

* (c) An unpaid transferee of the account has a security *interest in the goods against the transferor. Such security *interest is subordinate to a security interest asserted under *paragraph (a).

* (d) A security interest of an unpaid transferee asserted *under paragraph (b) or (c) must be perfected for protection *against creditors of the transferor and purchasers of the *returned or repossessed goods."

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Revisor of Statutes