PRIOR PRINTER'S NOS. 235, 654 PRINTER'S NO. 817
No. 330 Session of 2001
INTRODUCED BY HOLL, MADIGAN, THOMPSON, COSTA, MUSTO, M. WHITE,
WENGER, ROBBINS, CORMAN, MOWERY, WAGNER, LEMMOND AND FUMO,
FEBRUARY 2, 2001
AS AMENDED ON SECOND CONSIDERATION, MARCH 28, 2001
AN ACT
1 Amending Titles 12 (Commerce and Trade), 13 (Commercial Code),
2 15 (Corporations and Unincorporated Associations), 30 (Fish),
3 42 (Judiciary and Judicial Procedure), 66 (Public Utilities)
4 and 75 (Vehicles) of the Pennsylvania Consolidated Statutes,
5 extensively revising provisions on secured transactions;
6 revising provisions on letters of credit; making editorial
7 changes; and making repeals.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. This amendatory act shall be known and may be
11 cited as the Uniform Commercial Code Modernization Act of 2001.
12 Section 2. Section 5108(e) of Title 12 of the Pennsylvania
13 Consolidated Statutes is amended to read:
14 § 5108. Defenses, liability and protection of transferee.
15 * * *
16 (e) Certain transfers not fraudulent.--A transfer is not
17 fraudulent under section 5104(a)(2) or 5105 (relating to
18 transfers fraudulent as to present creditors) if the transfer
19 results from:
20 (1) termination of a lease upon default by the debtor
1 when the termination is pursuant to the lease and applicable
2 law; or
3 (2) enforcement of a security interest in compliance
4 with 13 Pa.C.S. Div. 9 (relating to secured transactions),
5 [other than a retention of collateral under 13 Pa.C.S. §
6 9505(b) (relating to acceptance of collateral as discharge of
7 obligation).] other than an acceptance of collateral in full
8 or partial satisfaction of the obligations it secures under
9 13 Pa.C.S. § 9620 (relating to acceptance of collateral in
10 full or partial satisfaction of obligation; compulsory
11 disposition of collateral).
12 The references to 13 Pa.C.S. Div. 9 and 13 Pa.C.S. [§ 9505(b)] §
13 9620 in paragraph (2) shall also be deemed to refer to the
14 corresponding provisions of the Uniform Commercial Code as in
15 effect in any other jurisdiction.
16 Section 3. Title 12 is amended by adding a chapter to read:
17 CHAPTER 98
18 ASSEMBLED INDUSTRIAL PLANT DOCTRINE
19 Sec.
20 9801. Assembled industrial plant doctrine abolished.
21 § 9801. Assembled industrial plant doctrine abolished.
22 (a) General rule.--The assembled industrial plant doctrine,
23 sometimes referred to as the integrated industrial plant
24 doctrine or the integrated industrial mortgage doctrine, is
25 abolished. Whether personal property placed or installed in an
26 industrial, commercial or other establishment is a fixture shall
27 be determined by other law.
28 (b) Eminent domain not affected.--Subsection (a) shall not
29 be construed to affect the application of the assembled economic
30 unit doctrine in the context of eminent domain.
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1 (c) Applicability.--This section shall not apply to actions
2 or proceedings commenced before the effective date of this
3 section, nor shall it affect construction of a mortgage or other
4 instrument creating an interest in real estate entered into
5 before the effective date of this section. Subsection (a) shall
6 not be construed to affirm the continuing applicability or scope
7 of the assembled industrial plant doctrine before the effective
8 date of this section.
9 Section 4. Section 1105(b) of Title 13 is amended to read:
10 § 1105. Territorial application of title; power of parties to
11 choose applicable law.
12 * * *
13 (b) Limitations on power of parties to choose applicable
14 law.--Where one of the following provisions of this title
15 specifies the applicable law, that provision governs and a
16 contrary agreement is effective only to the extent permitted by
17 the law (including the conflict of laws rules) so specified:
18 Section 2402 (relating to rights of creditors of seller
19 against sold goods).
20 Sections 2A105 (relating to territorial application of
21 division to goods covered by certificate of title) and 2A106
22 (relating to limitation on power of parties to consumer lease
23 to choose applicable law and judicial forum).
24 Section 4102 (relating to applicability of division on
25 bank deposits and collections).
26 Section 4A507 (relating to choice of law).
27 Section 5116 (relating to choice of law and forum).
28 Section 8110 (relating to applicability; choice of law).
29 [Section 9103 (relating to perfection provisions of
30 division on secured transactions).]
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1 Subchapter A of Chapter 93 (relating to law governing
2 perfection and priority).
3 Section 5. The definitions of "buyer in ordinary course of
4 business," "buying," "purchase" and "security interest" in
5 section 1201 of Title 13 are amended to read:
6 § 1201. General definitions.
7 Subject to additional definitions contained in the subsequent
8 provisions of this title which are applicable to specific
9 provisions of this title, the following words and phrases when
10 used in this title shall have, unless the context clearly
11 indicates otherwise, the meanings given to them in this section:
12 * * *
13 "Buyer in ordinary course of business." A person [who in
14 good faith and without knowledge that the sale to him is in
15 violation of the ownership rights or security interest of a
16 third party in the goods buys in ordinary course from a person
17 in the business of selling goods of that kind but does not
18 include a pawnbroker. All persons who sell minerals or the like
19 (including oil and gas) at wellhead or minehead shall be deemed
20 to be persons in the business of selling goods of that kind.
21 "Buying." Buying may be for cash or by exchange of other
22 property or on secured or unsecured credit and includes
23 receiving goods or documents of title under a preexisting
24 contract for sale but does not include a transfer in bulk or as
25 security for or in total or partial satisfaction of a money
26 debt.] that buys goods in good faith, without knowledge that the
27 sale violates the rights of another person in the goods, and in
28 the ordinary course from a person, other than a pawnbroker, in
29 the business of selling goods of that kind. A person buys goods
30 in the ordinary course if the sale to the person comports with
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1 the usual or customary practices in the kind of business in
2 which the seller is engaged or with the seller's own usual or
3 customary practices. A person that sells oil, gas or other
4 minerals at the wellhead or minehead is a person in the business
5 of selling goods of that kind. A buyer in ordinary course of
6 business may buy for cash, by exchange of other property or on
7 secured or unsecured credit, and may acquire goods or documents
8 of title under a preexisting contract for sale. Only a buyer
9 that takes possession of the goods or has a right to recover the
10 goods from the seller under Division 2 (relating to sales) may
11 be a buyer in ordinary course of business. A person that
12 acquires goods in a transfer in bulk or as security for or in
13 total or partial satisfaction of a money debt is not a buyer in
14 ordinary course of business.
15 * * *
16 "Purchase." Includes taking by sale, discount, negotiation,
17 mortgage, pledge, lien, security interest, issue or reissue,
18 gift or any other voluntary transaction creating an interest in
19 property.
20 * * *
21 "Security interest."
22 (1) General definition.--A security interest means an
23 interest in personal property or fixtures which secures
24 payment or performance of an obligation.
25 (2) [Retention or reservation of title to delivered
26 goods.--The retention or reservation of title by a seller of
27 goods notwithstanding shipment or delivery to the buyer
28 (section 2401) is limited in effect to a reservation of a
29 "security interest."
30 (3) Buyers of accounts or chattel paper] Interest of
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1 consignor or buyer under Division 9.--The term "security
2 interest" also includes any interest of a consignor and a
3 buyer of accounts [or], chattel paper [which], a payment
4 intangible or a promissory note in a transaction that is
5 subject to Division 9 (relating to secured transactions).
6 [(4)] (3) Buyer's interest in identified goods.--The
7 special property interest of a buyer of goods on
8 identification of those goods to a contract for sale under
9 section 2401 (relating to passing of title; reservation for
10 security; limited application of section) is not a "security
11 interest," but a buyer may also acquire a "security interest"
12 by complying with Division 9.
13 (4) Sellers and lessors of goods.--Except as otherwise
14 provided in section 2505 (relating to shipment by seller
15 under reservation), the right of a seller or lessor of goods
16 under Division 2 (relating to sales) or 2A (relating to
17 leases) to retain or acquire possession of the goods is not a
18 "security interest," but a seller or lessor may also acquire
19 a "security interest" by complying with Division 9. The
20 retention or reservation of title by a seller of goods
21 notwithstanding shipment or delivery to the buyer (section
22 2401) is limited in effect to a reservation of a "security
23 interest."
24 (5) [Consignments.--Unless a consignment is intended as
25 security, reservation of title thereunder is not a "security
26 interest," but a consignment in any event is subject to the
27 provisions on consignment sales (section 2326).
28 (6)] Determination of lease or security interest.--
29 Whether a transaction creates a lease or security interest is
30 determined by the facts of each case; however:
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1 (i) A transaction creates a security interest if the
2 consideration the lessee is to pay the lessor for the
3 right to possession and use of the goods is an obligation
4 for the term of the lease not subject to termination by
5 the lessee and:
6 (A) the original term of the lease is equal to
7 or greater than the remaining economic life of the
8 goods;
9 (B) the lessee is bound to renew the lease for
10 the remaining economic life of the goods or is bound
11 to become the owner of the goods;
12 (C) the lessee has an option to renew the lease
13 for the remaining economic life of the goods for no
14 additional consideration or nominal additional
15 consideration upon compliance with the lease
16 agreement; or
17 (D) the lessee has an option to become the owner
18 of the goods for no additional consideration or
19 nominal additional consideration upon compliance with
20 the lease agreement.
21 (ii) A transaction does not create a security
22 interest merely because it provides that:
23 (A) the present value of the consideration the
24 lessee is obligated to pay the lessor for the right
25 to possession and use of the goods is substantially
26 equal to or is greater than the fair market value of
27 the goods at the time the lease is entered into;
28 (B) the lessee assumes risk of loss of the
29 goods, or agrees to pay taxes, insurance, filing,
30 recording or registration fees, or service or
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1 maintenance costs with respect to the goods;
2 (C) the lessee has an option to renew the lease
3 or to become the owner of the goods;
4 (D) the lessee has an option to renew the lease
5 for a fixed rent that is equal to or greater than the
6 reasonably predictable fair market rent for the use
7 of the goods for the term of the renewal at the time
8 the option is to be performed; or
9 (E) the lessee has an option to become the owner
10 of the goods for a fixed price that is equal to or
11 greater than the reasonably predictable fair market
12 value of the goods at the time the option is to be
13 performed.
14 (iii) For purposes of determining whether the
15 transaction is a lease or a security interest:
16 (A) Additional consideration is not nominal if:
17 (I) when the option to renew the lease is
18 granted to the lessee, the rent is stated to be
19 the fair market rent for the use of the goods for
20 the term of the renewal determined at the time
21 the option is to be performed; or
22 (II) when the option to become the owner of
23 the goods is granted to the lessee, the price is
24 stated to be the fair market value of the goods
25 determined at the time the option is to be
26 performed.
27 Additional consideration is nominal if it is less
28 than the lessee's reasonably predictable cost of
29 performing under the lease agreement if the option is
30 not exercised.
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1 (B) "Reasonably predictable" and "remaining
2 economic life of the goods" are to be determined with
3 reference to the facts and circumstances at the time
4 the transaction is entered into.
5 (C) "Present value" means the amount as of a
6 date certain of one or more sums payable in the
7 future, discounted to the date certain. The discount
8 is determined by the interest rate specified by the
9 parties if the rate is not manifestly unreasonable at
10 the time the transaction is entered into; otherwise,
11 the discount is determined by a commercially
12 reasonable rate that takes into account the facts and
13 circumstances of each case at the time the
14 transaction was entered into.
15 * * *
16 Section 6. Section 1206(c) of Title 13 is amended by adding
17 a paragraph to read:
18 § 1206. Statute of frauds for kinds of personal property not
19 otherwise covered.
20 * * *
21 (c) Qualified financial contracts.--
22 * * *
23 (6) Nothing in this subsection or in section 2201(d)
24 shall be construed to affect or limit the application to a
25 qualified financial contract of any other law validating
26 records, signatures or transactions made or evidenced by
27 nontraditional media.
28 Section 7. Sections 2103(c) and 2104 of Title 13 are amended
29 to read:
30 § 2103. Definitions and index of definitions.
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1 * * *
2 (c) Index of definitions in other divisions.--The following
3 definitions in other divisions apply to this division:
4 "Check." Section 3104.
5 "Consignee." Section 7102.
6 "Consignor." Section 7102.
7 "Consumer goods." Section [9109] 9102.
8 "Dishonor." Section 3502.
9 "Draft." Section 3104.
10 * * *
11 § 2104. Definitions: "merchant"; "between merchants";
12 "financing agency."
13 The following words and phrases when used in this division
14 shall have[, unless the context clearly indicates otherwise,]
15 the meanings given to them in this section:
16 "Between merchants." Between merchants means in any
17 transaction with respect to which both parties are chargeable
18 with the knowledge or skill of merchants.
19 "Financing agency." A bank, finance company, or other person
20 who in the ordinary course of business makes advances against
21 goods or documents of title or who by arrangement with either
22 the seller or the buyer intervenes in ordinary course to make or
23 collect payment due or claimed under the contract for sale, as
24 by purchasing or paying the draft of the seller or making
25 advances against it or by merely taking it for collection
26 whether or not documents of title accompany the draft.
27 "Financing agency" includes also a bank or other person who
28 similarly intervenes between persons who are in the position of
29 seller and buyer in respect to the goods (see section 2707).
30 "Merchant." A person who:
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1 (1) deals in goods of the kind; or
2 (2) otherwise by his occupation holds himself out as
3 having knowledge or skill peculiar to the practices or goods
4 involved in the transaction or to whom such knowledge or
5 skill may be attributed by his employment of an agent or
6 broker or other intermediary who by his occupation holds
7 himself out as having such knowledge or skill.
8 Section 8. Section 2210(b) and the headings of subsections
9 (c), (d) and (e) of Title 13 are amended and the section is
10 amended by adding a subsection to read:
11 § 2210. Delegation of performance; assignment of rights.
12 * * *
13 (b) Assignment of rights.--[Unless] Except as otherwise
14 provided in section 9406 (relating to discharge of account
15 debtor; notification of assignment; identification and proof of
16 assignment; restrictions on assignment of accounts, chattel
17 paper, payment intangibles and promissory notes ineffective),
18 unless otherwise agreed, all rights of either seller or buyer
19 can be assigned except where the assignment would materially
20 change the duty of the other party, increase materially the
21 burden or risk imposed on him by his contract, or impair
22 materially his chance of obtaining return performance. A right
23 to damages for breach of the whole contract or a right arising
24 out of due performance by the assignor of his entire obligation
25 can be assigned despite agreement otherwise.
26 (c) Effect of security interest.--The creation, attachment,
27 perfection or enforcement of a security interest in the seller's
28 interest under a contract is not a transfer that materially
29 changes the duty of or increases materially the burden or risk
30 imposed on the buyer or impairs materially the buyer's chance of
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1 obtaining return performance within the purview of subsection
2 (b) unless, and then only to the extent that, enforcement
3 actually results in a delegation of material performance of the
4 seller. Even in that event, the creation, attachment, perfection
5 and enforcement of the security interest remain effective, but:
6 (1) the seller is liable to the buyer for damages caused
7 by the delegation to the extent that the damages could not
8 reasonably be prevented by the buyer; and
9 (2) a court having jurisdiction may grant other
10 appropriate relief, including cancellation of the contract
11 for sale or an injunction against enforcement of the security
12 interest or consummation of the enforcement.
13 [(c)] (d) Assignment prohibition limited to performance.--*
14 * *
15 [(d)] (e) Effect and enforceability of general assignment.--
16 * * *
17 [(e)] (f) Security for assignment delegating performance.--*
18 * *
19 Section 9. Section 2326 heading, (b), (c) and (d) of Title
20 13 are amended to read:
21 § 2326. Sale on approval and sale or return; [consignment sales
22 and] rights of creditors.
23 * * *
24 (b) Rights of creditors of buyer generally.--[Except as
25 provided in subsection (c), goods] Goods held on approval are
26 not subject to the claims of the creditors of the buyer until
27 acceptance; goods held on sale or return are subject to such
28 claims while in the possession of the buyer.
29 [(c) Consignment sales.--Where goods are delivered to a
30 person for sale and such person maintains a place of business at
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1 which he deals in goods of the kind involved, under a name other
2 than the name of the person making delivery, then with respect
3 to claims of creditors of the person conducting the business the
4 goods are deemed to be on sale or return. The provisions of this
5 subsection are applicable even though an agreement purports to
6 reserve title to the person making delivery until payment or
7 resale or uses such words as "on consignment" or "on
8 memorandum." However, this subsection is not applicable if the
9 person making delivery:
10 (1) complies with an applicable law providing for the
11 interest of a consignor or the like to be evidenced by a
12 sign;
13 (2) establishes that the person conducting the business
14 is generally known by his creditors to be substantially
15 engaged in selling the goods of others; or
16 (3) complies with the filing provisions of Division 9
17 (relating to secured transactions).
18 (d)] (c) Treatment of "or return" term.--* * *
19 Section 10. Section 2502 heading, (a) and (b) heading of
20 Title 13 are amended and the section is amended by adding a
21 subsection to read:
22 § 2502. Right of buyer to goods on repudiation, failure to
23 deliver or insolvency of seller.
24 (a) General rule.--Subject to [subsection (b)] subsections
25 (b) and (c) and even though the goods have not been shipped a
26 buyer who has paid a part or all of the price of goods in which
27 he has a special property under the provisions of section 2501
28 (relating to insurable interest in goods; manner of
29 identification of goods) may on making and keeping good a tender
30 of any unpaid portion of their price recover them from the
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1 seller if:
2 (1) in the case of goods bought for personal, family or
3 household purposes, the seller repudiates or fails to deliver
4 as required by the contract; or
5 (2) in all cases, the seller becomes insolvent within
6 ten days after receipt of the first installment on their
7 price.
8 (b) Vesting.--The buyer's right to recover the goods under
9 subsection (a)(1) vests upon acquisition of a special property,
10 even if the seller had not then repudiated or failed to deliver.
11 [(b)] (c) Identification made by buyer.--* * *
12 Section 11. Sections 2512(a)(2), 2716(c), 2A103(c),
13 2A303(a), (b), (c), (d), (e), (f) heading, (g) heading and (h)
14 heading, 2A307, 2A309(a), 3103(a) introductory paragraph, 4105
15 introductory paragraph, 4210(c), 4A103(a) introductory paragraph
16 and 4A105(a) introductory paragraph of Title 13 are amended to
17 read:
18 § 2512. Payment by buyer before inspection.
19 (a) General rule.--Where the contract requires payment
20 before inspection nonconformity of the goods does not excuse the
21 buyer from so making payment unless:
22 * * *
23 (2) despite tender of the required documents the
24 circumstances would justify injunction against honor under
25 [the provisions of] this title [(section 5114 (relating to
26 duty and privilege of issuer to honor; right to
27 reimbursement))], including section 5109(b) (relating to
28 conditions for injunction).
29 * * *
30 § 2716. Right of buyer to specific performance or replevin.
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1 * * *
2 (c) Replevin.--The buyer has a right of replevin for goods
3 identified to the contract if after reasonable effort he is
4 unable to effect cover for such goods or the circumstances
5 reasonably indicate that such effort will be unavailing, or if
6 the goods have been shipped under reservation and satisfaction
7 of the security interest in them has been made or tendered. In
8 the case of goods bought for personal, family or household
9 purposes, the buyer's right of replevin vests upon acquisition
10 of a special property, even if the seller had not then
11 repudiated or failed to deliver.
12 § 2A103. Definitions and index of definitions.
13 * * *
14 (c) Index of definitions in other divisions.--The following
15 definitions in other divisions apply to this division:
16 "Account." Section [9106] 9102(a).
17 "Between merchants." Section 2104.
18 "Buyer." Section 2103(a).
19 "Chattel paper." Section [9105(a)] 9102(a).
20 "Consumer goods." Section [9109(1)] 9102(a).
21 "Document." Section [9105(a)] 9102(a).
22 "Entrusting." Section 2403(c).
23 "General [intangibles." Section 9106.] intangible." Section
24 9102(a).
25 "Good faith." Section 2103(a).
26 "Instrument." Section [9105(a)] 9102(a).
27 "Merchant." Section 2104.
28 "Mortgage." Section [9105(a)] 9102(a).
29 "Pursuant to commitment." Section [9105(a)] 9102(a).
30 "Receipt." Section 2103(a).
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1 "Sale." Section 2106(a).
2 "Sale on approval." Section 2326.
3 "Sale or return." Section 2326.
4 "Seller." Section 2103(a).
5 * * *
6 § 2A303. Alienability of party's interest under lease contract
7 or of lessor's residual interest in goods; delegation
8 of performance; transfer of rights.
9 (a) Definition.--As used in this section, the term "creation
10 of a security interest" includes the sale of a lease contract
11 that is subject to Division 9 (relating to secured transactions)
12 by reason of section [9102(a)(2) (relating to policy and subject
13 matter of division)] 9109(a)(3) (relating to scope).
14 (b) General rule.--Except as provided in [subsections (c)
15 and (d),] subsection (c) and section 9407 (relating to
16 restrictions on creation or enforcement of security interest in
17 leasehold interest or in lessor's residual interest), a
18 provision in a lease agreement which:
19 (1) prohibits the voluntary or involuntary transfer,
20 including a transfer by sale, sublease, creation or
21 enforcement of a security interest, or attachment, levy or
22 other judicial process, of an interest of a party under the
23 lease contract or of the lessor's residual interest in the
24 goods; or
25 (2) makes such a transfer an event of default;
26 gives rise to the rights and remedies provided in subsection
27 [(e)] (d), but a transfer that is prohibited or is an event of
28 default under the lease agreement is otherwise effective.
29 [(c) Certain provisions in lease agreement not
30 enforceable.--A provision in a lease agreement which prohibits
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1 the creation or enforcement of a security interest in an
2 interest of a party under the lease contract or in the lessor's
3 residual interest in the goods, or makes such a transfer an
4 event of default, is not enforceable unless, and then only to
5 the extent that, there is an actual transfer by the lessee of
6 the lessee's right of possession or use of the goods in
7 violation of the provision or an actual delegation of a material
8 performance of either party to the lease contract in violation
9 of the provision. Neither the granting nor the enforcement of a
10 security interest in the lessor's interest under the lease
11 contract or the lessor's residual interest in the goods is a
12 transfer that materially impairs the prospect of obtaining
13 return performance by, materially changes the duty of or
14 materially increases the burden or risk imposed on the lessee
15 within the purview of subsection (e) unless, and then only to
16 the extent that, there is an actual delegation of a material
17 performance of the lessor.
18 (d)] (c) Transfer of right to damages.--A provision in a
19 lease agreement which:
20 (1) prohibits a transfer of a right to damages for
21 default with respect to the whole lease contract or of a
22 right to payment arising out of the transferor's due
23 performance of the transferor's entire obligation; or
24 (2) makes such a transfer an event of default;
25 is not enforceable, and such a transfer is not a transfer that
26 materially impairs the prospect of obtaining return performance
27 by, materially changes the duty of or materially increases the
28 burden or risk imposed on the other party to the lease contract
29 within the purview of subsection [(e).] (d).
30 [(e)] (d) Certain rights and remedies.--Subject to
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1 [subsections (c) and (d):] subsection (c) and section 9407:
2 (1) If a transfer is made which is made an event of
3 default under a lease agreement, the party to the lease
4 contract not making the transfer, unless that party waives
5 the default or otherwise agrees, has the rights and remedies
6 described in section 2A501(b) (relating to default:
7 procedure).
8 (2) If paragraph (1) is not applicable and if a transfer
9 is made that is prohibited under a lease agreement or
10 materially impairs the prospect of obtaining return
11 performance by, materially changes the duty of or materially
12 increases the burden or risk imposed on the other party to
13 the lease contract, unless the party not making the transfer
14 agrees at any time to the transfer in the lease contract or
15 otherwise, then, except as limited by contract, the
16 transferor is liable to the party not making the transfer for
17 damages caused by the transfer to the extent that the damages
18 could not reasonably be prevented by the party not making the
19 transfer and a court having jurisdiction may grant other
20 appropriate relief, including cancellation of the lease
21 contract or an injunction against the transfer.
22 [(f)] (e) Effect and enforceability of general transfer.--*
23 * *
24 [(g)] (f) Effect of delegation of performance.--* * *
25 [(h)] (g) Requirements for [written] prohibition of transfer
26 in consumer lease.--* * *
27 § 2A307. Priority of liens arising by attachment or levy on,
28 security interests in, and other claims to goods.
29 (a) Creditor of lessee.--Except as otherwise provided in
30 section 2A306 (relating to priority of certain liens arising by
20010S0330B0817 - 18 -
1 operation of law), a creditor of a lessee takes subject to the
2 lease contract.
3 (b) Creditor of lessor.--Except as otherwise provided in
4 [subsections (c) and (d)] subsection (c) and in sections 2A306
5 and 2A308 (relating to special rights of creditors), a creditor
6 of a lessor takes subject to the lease contract unless[:
7 (1)] the creditor holds a lien that attached to the goods
8 before the lease contract became enforceable[;].
9 [(2) the creditor holds a security interest in the goods
10 and the lessee did not give value and receive delivery of the
11 goods without knowledge of the security interest; or
12 (3) the creditor holds a security interest in the goods
13 which was perfected (section 9303) before the lease contract
14 became enforceable.
15 (c) Lessee in ordinary course of business.--A lessee in the
16 ordinary course of business takes the leasehold interest free of
17 a security interest in the goods created by the lessor even
18 though the security interest is perfected (section 9303) and the
19 lessee knows of its existence.
20 (d) Lessee not in ordinary course of business.--A lessee
21 other than a lessee in the ordinary course of business takes the
22 leasehold interest free of a security interest to the extent
23 that it secures future advances made after the secured party
24 acquires knowledge of the lease or more than 45 days after the
25 lease contract becomes enforceable, whichever first occurs,
26 unless the future advances are made pursuant to a commitment
27 entered into without knowledge of the lease and before the
28 expiration of the 45-day period.]
29 (c) Lessee.--Except as otherwise provided in sections 9317
30 (relating to interests which take priority over or take free of
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1 security interest or agricultural lien), 9321 (relating to
2 licensee of general intangible and lessee of goods in ordinary
3 course of business) and 9323 (relating to future advances), a
4 lessee takes a leasehold interest subject to a security interest
5 held by a creditor of the lessor.
6 § 2A309. Lessor's and lessee's rights when goods become
7 fixtures.
8 (a) Definitions.--As used in this section, the following
9 words and phrases shall have the meanings given to them in this
10 subsection:
11 "Construction mortgage." A mortgage is a construction
12 mortgage to the extent it secures an obligation incurred for the
13 construction of an improvement on land, including the
14 acquisition cost of the land, if the recorded writing so
15 indicates.
16 "Encumbrance." Includes real estate mortgages and other
17 liens on real estate and all other rights in real estate that
18 are not ownership interests.
19 "Fixture filing." The filing, in the office where a record
20 of a mortgage on the real estate would be filed or recorded, of
21 a financing statement covering goods that are or are to become
22 fixtures and conforming to the requirements of section [9402(e)
23 (relating to formal requisites of financing statement;
24 amendments; mortgage as financing statement).] 9502(a) and (b)
25 (relating to contents of financing statement; record of mortgage
26 as financing statement; time of filing financing statement).
27 "Fixtures." Goods are fixtures when they become so related
28 to particular real estate that an interest in them arises under
29 real estate law.
30 "Purchase money lease." A lease is a purchase money lease
20010S0330B0817 - 20 -
1 unless the lessee has possession or use of the goods or the
2 right to possession or use of the goods before the lease
3 agreement is enforceable.
4 * * *
5 § 3103. Definitions and index of definitions.
6 (a) Definitions.--The following words and phrases when used
7 in this division shall have[, unless the context clearly
8 indicates otherwise,] the meanings given to them in this
9 subsection:
10 * * *
11 § 4105. "Bank"; "depositary bank"; "intermediary bank";
12 "collecting bank"; "payor bank"; "presenting bank."
13 The following words and phrases when used in this division
14 shall have[, unless the context clearly indicates otherwise,]
15 the meanings given to them in this section:
16 * * *
17 § 4210. Security interest of collecting bank in items,
18 accompanying documents and proceeds.
19 * * *
20 (c) Satisfaction and continuation of security interest.--
21 Receipt by a collecting bank of a final settlement for an item
22 is a realization on its security interest in the item,
23 accompanying documents and proceeds. So long as the bank does
24 not receive final settlement for the item or give up possession
25 of the item or accompanying documents for purposes other than
26 collection, the security interest continues to that extent and
27 is subject to Division 9 (relating to secured transactions),
28 but:
29 (1) no security agreement is necessary to make the
30 security interest enforceable (section 9203[(a)(1)](b)(3)(i)
20010S0330B0817 - 21 -
1 (relating to attachment and enforceability of security
2 interest; proceeds[,]; supporting obligations; formal
3 requisites));
4 (2) no filing is required to perfect the security
5 interest; and
6 (3) the security interest has priority over conflicting
7 perfected security interests in the item, accompanying
8 documents or proceeds.
9 § 4A103. Payment order; definitions.
10 (a) Definition of "payment order" and related terms.--The
11 following words and phrases when used in this division shall
12 have[, unless the context clearly indicates otherwise,] the
13 meanings given to them in this subsection:
14 * * *
15 § 4A105. Other definitions.
16 (a) Definitions.--The following words and phrases when used
17 in this division shall have[, unless the context clearly
18 indicates otherwise,] the meanings given to them in this
19 subsection:
20 * * *
21 Section 12. Division 5 of Title 13 is repealed.
22 Section 13. Title 13 is amended by adding a division to
23 read:
24 DIVISION 5
25 LETTERS OF CREDIT
26 Chapter
27 51. Letters of Credit
28 CHAPTER 51
29 LETTERS OF CREDIT
30 Sec.
20010S0330B0817 - 22 -
1 5101. Short title of division.
2 5102. Definitions.
3 5103. Scope.
4 5104. Formal requirements.
5 5105. Consideration.
6 5106. Issuance, amendment, cancellation and duration.
7 5107. Confirmer, nominated person and adviser.
8 5108. Issuer's rights and obligations.
9 5109. Fraud and forgery.
10 5110. Warranties.
11 5111. Remedies.
12 5112. Transfer of letter of credit.
13 5113. Transfer by operation of law.
14 5114. Assignment of proceeds.
15 5115. Statute of limitations.
16 5116. Choice of law and forum.
17 5117. Subrogation of issuer, applicant and nominated person.
18 5118. Security interest of issuer or nominated person.
19 § 5101. Short title of division.
20 This division shall be known and may be cited as the Uniform
21 Commercial Code, Article 5, Letters of Credit.
22 § 5102. Definitions.
23 (a) Definitions.--The following words and phrases when used
24 in this division shall have the meanings given to them in this
25 subsection:
26 "Adviser." A person who, at the request of the issuer, a
27 confirmer or another adviser, notifies or requests another
28 adviser to notify the beneficiary that a letter of credit has
29 been issued, confirmed or amended.
30 "Applicant." A person at whose request or for whose account
20010S0330B0817 - 23 -
1 a letter of credit is issued. The term includes a person who
2 requests an issuer to issue a letter of credit on behalf of
3 another if the person making the request undertakes an
4 obligation to reimburse the issuer.
5 "Beneficiary." A person who under the terms of a letter of
6 credit is entitled to have its complying presentation honored.
7 The term includes a person to whom drawing rights have been
8 transferred under a transferable letter of credit.
9 "Confirmer." A nominated person who undertakes, at the
10 request or with the consent of the issuer, to honor a
11 presentation under a letter of credit issued by another.
12 "Dishonor (of a letter of credit)." Failure timely to honor
13 or to take an interim action, such as acceptance of a draft,
14 that may be required by the letter of credit.
15 "Document." A draft or other demand, document of title,
16 investment security, certificate, invoice or other record,
17 statement or representation of fact, law, right or opinion which
18 is:
19 (1) presented in a written or other medium permitted by
20 the letter of credit or, unless prohibited by the letter of
21 credit, by the standard practice referred to in section
22 5108(e) (relating to standard practice and role of court);
23 and
24 (2) capable of being examined for compliance with the
25 terms and conditions of the letter of credit.
26 A document may not be oral.
27 "Good faith." Honesty in fact in the conduct or transaction
28 concerned.
29 "Honor (of a letter of credit)." Performance of the issuer's
30 undertaking in the letter of credit to pay or deliver an item of
20010S0330B0817 - 24 -
1 value. Unless the letter of credit otherwise provides, "honor"
2 occurs:
3 (1) upon payment;
4 (2) if the letter of credit provides for acceptance,
5 upon acceptance of a draft and, at maturity, its payment; or
6 (3) if the letter of credit provides for incurring a
7 deferred obligation, upon incurring the obligation and, at
8 maturity, its performance.
9 "Issuer." A bank or other person that issues a letter of
10 credit, but does not include an individual who makes an
11 engagement for personal, family or household purposes.
12 "Letter of credit." A definite undertaking that satisfies
13 the requirements of section 5104 (relating to formal
14 requirements) by an issuer to a beneficiary at the request or
15 for the account of an applicant or, in the case of a financial
16 institution, to itself or for its own account, to honor a
17 documentary presentation by payment or delivery of an item of
18 value.
19 "Nominated person." A person whom the issuer:
20 (1) designates or authorizes to pay, accept, negotiate
21 or otherwise give value under a letter of credit; and
22 (2) undertakes by agreement or custom and practice to
23 reimburse.
24 "Presentation." Delivery of a document to an issuer or
25 nominated person for honor or giving of value under a letter of
26 credit.
27 "Presenter." A person making a presentation as or on behalf
28 of a beneficiary or nominated person.
29 "Record." Information that is inscribed on a tangible
30 medium, or that is stored in an electronic or other medium and
20010S0330B0817 - 25 -
1 is retrievable in perceivable form.
2 "Successor of a beneficiary." A person who succeeds to
3 substantially all of the rights of a beneficiary by operation of
4 law, including a corporation with or into which the beneficiary
5 has been merged or consolidated, an administrator, executor,
6 personal representative, trustee in bankruptcy, debtor in
7 possession, liquidator and receiver.
8 (b) Index of other definitions.--Definitions in other
9 divisions applying to this division and the sections in which
10 they appear are:
11 "Accept" or "acceptance." Section 3409 (relating to
12 acceptance of draft; certified check).
13 "Value." Sections 3303 (relating to value and consideration)
14 and 4211 (relating to when bank gives value for purposes of
15 holder in due course).
16 (c) Applicability of general definitions and principles.--
17 Division 1 (relating to general provisions) contains certain
18 additional general definitions and principles of construction
19 and interpretation applicable throughout this division.
20 § 5103. Scope.
21 (a) Applicability of division.--This division applies to
22 letters of credit and to certain rights and obligations arising
23 out of transactions involving letters of credit.
24 (b) Effect of statement of rule in this division.--The
25 statement of a rule in this division does not by itself require,
26 imply or negate application of the same or a different rule to a
27 situation not provided for, or to a person not specified, in
28 this division.
29 (c) Variation by agreement or undertaking.--With the
30 exception of this subsection, subsections (a) and (d), the
20010S0330B0817 - 26 -
1 definitions of "issuer" and "letter of credit" under section
2 5102(a) (relating to definitions) and sections 5106(d) (relating
3 to perpetual letters of credit) and 5114(d) (relating to consent
4 to assignment of proceeds), and except to the extent prohibited
5 under sections 1102(c) (relating to variation of title by
6 agreement) and 5117(d) (relating to time at which subrogation
7 rights arise), the effect of this division may be varied by
8 agreement or by a provision stated or incorporated by reference
9 in an undertaking. A term in an agreement or undertaking
10 generally excusing liability or generally limiting remedies for
11 failure to perform obligations is not sufficient to vary
12 obligations prescribed by this division.
13 (d) Independence of rights and obligations of issuer.--
14 Rights and obligations of an issuer to a beneficiary or a
15 nominated person under a letter of credit are independent of the
16 existence, performance or nonperformance of a contract or
17 arrangement out of which the letter of credit arises or which
18 underlies it, including contracts or arrangements between the
19 issuer and the applicant and between the applicant and the
20 beneficiary.
21 § 5104. Formal requirements.
22 A letter of credit, confirmation, advice, transfer, amendment
23 or cancellation may be issued in any form that is a record and
24 is authenticated:
25 (1) by a signature; or
26 (2) in accordance with the agreement of the parties or
27 the standard practice referred to in section 5108(e)
28 (relating to standard practice and role of court).
29 § 5105. Consideration.
30 Consideration is not required to issue, amend, transfer or
20010S0330B0817 - 27 -
1 cancel a letter of credit, advice or confirmation.
2 § 5106. Issuance, amendment, cancellation and duration.
3 (a) Issuance; revocability.--A letter of credit is issued
4 and becomes enforceable according to its terms against the
5 issuer when the issuer sends or otherwise transmits it to the
6 person requested to advise or to the beneficiary. A letter of
7 credit is revocable only if it so provides.
8 (b) Effect of amendment or cancellation in certain
9 circumstances.--After a letter of credit is issued, rights and
10 obligations of a beneficiary, applicant, confirmer and issuer
11 are not affected by an amendment or cancellation to which that
12 person has not consented except to the extent the letter of
13 credit provides that it is revocable or that the issuer may
14 amend or cancel the letter of credit without that consent.
15 (c) No stated expiration date.--If there is no stated
16 expiration date or other provision that determines its duration,
17 a letter of credit expires one year after its stated date of
18 issuance or, if none is stated, after the date on which it is
19 issued.
20 (d) Perpetual letters of credit.--A letter of credit that
21 states that it is perpetual expires five years after its stated
22 date of issuance or, if none is stated, after the date on which
23 it is issued.
24 § 5107. Confirmer, nominated person and adviser.
25 (a) Rights and obligations of a confirmer.--A confirmer is
26 directly obligated on a letter of credit and has the rights and
27 obligations of an issuer to the extent of its confirmation. The
28 confirmer also has rights against and obligations to the issuer
29 as if the issuer were an applicant and the confirmer had issued
30 the letter of credit at the request and for the account of the
20010S0330B0817 - 28 -
1 issuer.
2 (b) Nominated person.--A nominated person who is not a
3 confirmer is not obligated to honor or otherwise give value for
4 a presentation.
5 (c) Advisers.--A person requested to advise may decline to
6 act as an adviser. An adviser that is not a confirmer is not
7 obligated to honor or give value for a presentation. An adviser
8 undertakes to the issuer and to the beneficiary accurately to
9 advise the terms of the letter of credit, confirmation,
10 amendment or advice received by that person and undertakes to
11 the beneficiary to check the apparent authenticity of the
12 request to advise. Even if the advice is inaccurate, the letter
13 of credit, confirmation or amendment is enforceable as issued.
14 (d) Notice to transferee beneficiary.--A person who notifies
15 a transferee beneficiary of the terms of a letter of credit,
16 confirmation, amendment or advice has the rights and obligations
17 of an adviser under subsection (c). The terms in the notice to
18 the transferee beneficiary may differ from the terms in any
19 notice to the transferor beneficiary to the extent permitted by
20 the letter of credit, confirmation, amendment or advice received
21 by the person who so notifies.
22 § 5108. Issuer's rights and obligations.
23 (a) Duty to honor, dishonor.--Except as otherwise provided
24 in section 5109 (relating to fraud and forgery), an issuer shall
25 honor a presentation that, as determined by the standard
26 practice referred to in subsection (e), appears on its face
27 strictly to comply with the terms and conditions of the letter
28 of credit. Except as otherwise provided in section 5113
29 (relating to transfer by operation of law) and unless otherwise
30 agreed with the applicant, an issuer shall dishonor a
20010S0330B0817 - 29 -
1 presentation that does not appear so to comply.
2 (b) Time for honor, etc.--An issuer has a reasonable time
3 after presentation, but not beyond the end of the seventh
4 business day of the issuer after the day of its receipt of
5 documents:
6 (1) to honor;
7 (2) if the letter of credit provides for honor to be
8 completed more than seven business days after presentation,
9 to accept a draft or incur a deferred obligation; or
10 (3) to give notice to the presenter of discrepancies in
11 the presentation.
12 (c) Preclusion, generally.--Except as otherwise provided in
13 subsection (d), an issuer is precluded from asserting as a basis
14 for dishonor any discrepancy if timely notice is not given, or
15 any discrepancy not stated in the notice if timely notice is
16 given.
17 (d) Preclusion for fraud, forgery or expiration.--Failure to
18 give the notice specified in subsection (b) or to mention fraud,
19 forgery or expiration in the notice does not preclude the issuer
20 from asserting as a basis for dishonor fraud or forgery as
21 described in section 5109(a) or expiration of the letter of
22 credit before presentation.
23 (e) Standard practice.--An issuer shall observe standard
24 practice of financial institutions that regularly issue letters
25 of credit.
26 (f) Issuer not responsible for certain matters.--An issuer
27 is not responsible for:
28 (1) the performance or nonperformance of the underlying
29 contract, arrangement or transaction;
30 (2) an act or omission of others; or
20010S0330B0817 - 30 -
1 (3) observance or knowledge of the usage of a particular
2 trade other than standard practice referred to in subsection
3 (e).
4 (g) Nondocumentary conditions.--If an undertaking
5 constituting a letter of credit under the definition of "letter
6 of credit" under section 5102(a) (relating to definitions)
7 contains nondocumentary conditions, an issuer shall disregard
8 the nondocumentary conditions and treat them as if they were not
9 stated.
10 (h) Disposition of documents following dishonor.--An issuer
11 that has dishonored a presentation shall return the documents or
12 hold them at the disposal of, and send advice to that effect to,
13 the presenter.
14 (i) Certain consequences of honor.--An issuer that has
15 honored a presentation as permitted or required by this
16 division:
17 (1) is entitled to be reimbursed by the applicant in
18 immediately available funds not later than the date of its
19 payment of funds;
20 (2) takes the documents free of claims of the
21 beneficiary or presenter;
22 (3) is precluded from asserting a right of recourse on a
23 draft under sections 3414 (relating to obligation of drawer)
24 and 3415 (relating to obligation of indorser);
25 (4) except as otherwise provided in sections 5110
26 (relating to warranties) and 5117 (relating to subrogation of
27 issuer, applicant and nominated person), is precluded from
28 restitution of money paid or other value given by mistake to
29 the extent the mistake concerns discrepancies in the
30 documents or tender which are apparent on the face of the
20010S0330B0817 - 31 -
1 presentation; and
2 (5) is discharged to the extent of its performance under
3 the letter of credit.
4 § 5109. Fraud and forgery.
5 (a) Fraud and forgery generally.--If a presentation is made
6 that appears on its face strictly to comply with the terms and
7 conditions of the letter of credit, but a required document is
8 forged or materially fraudulent, or honor of the presentation
9 would facilitate a material fraud by the beneficiary on the
10 issuer or applicant:
11 (1) the issuer shall honor the presentation, if honor is
12 demanded by:
13 (i) a nominated person who has given value in good
14 faith and without notice of forgery or material fraud;
15 (ii) a confirmer who has honored its confirmation in
16 good faith;
17 (iii) a holder in due course of a draft drawn under
18 the letter of credit which was taken after acceptance by
19 the issuer or nominated person; or
20 (iv) an assignee of the issuer's or nominated
21 person's deferred obligation that was taken for value and
22 without notice of forgery or material fraud after the
23 obligation was incurred by the issuer or nominated
24 person; and
25 (2) the issuer, acting in good faith, may honor or
26 dishonor the presentation in any other case.
27 (b) Conditions for injunction.--If an applicant claims that
28 a required document is forged or materially fraudulent or that
29 honor of the presentation would facilitate a material fraud by
30 the beneficiary on the issuer or applicant, a court of competent
20010S0330B0817 - 32 -
1 jurisdiction may temporarily or permanently enjoin the issuer
2 from honoring a presentation or grant similar relief against the
3 issuer or other persons only if the court finds that:
4 (1) the relief is not prohibited under the law
5 applicable to an accepted draft or deferred obligation
6 incurred by the issuer;
7 (2) a beneficiary, issuer or nominated person who may be
8 adversely affected is adequately protected against loss that
9 it may suffer because the relief is granted;
10 (3) all of the conditions to entitle a person to the
11 relief under the law of this Commonwealth have been met; and
12 (4) on the basis of the information submitted to the
13 court, the applicant is more likely than not to succeed under
14 its claim of forgery or material fraud and the person
15 demanding honor does not qualify for protection under
16 subsection (a)(1).
17 § 5110. Warranties.
18 (a) Warranties generally.--If its presentation is honored,
19 the beneficiary warrants:
20 (1) to the issuer, any other person to whom presentation
21 is made and the applicant that there is no fraud or forgery
22 of the kind described in section 5109(a) (relating to fraud
23 and forgery generally); and
24 (2) to the applicant that the drawing does not violate
25 any agreement between the applicant and beneficiary or any
26 other agreement intended by them to be augmented by the
27 letter of credit.
28 (b) Warranties arising under other divisions.--The
29 warranties in subsection (a) are in addition to warranties
30 arising under Divisions 3 (relating to negotiable instruments),
20010S0330B0817 - 33 -
1 4 (relating to bank deposits and collections), 7 (relating to
2 warehouse receipts, bills of lading and other documents of
3 title) and 8 (relating to investment securities) because of the
4 presentation or transfer of documents covered by any of those
5 divisions.
6 § 5111. Remedies.
7 (a) Wrongful dishonor or repudiation before presentation.--
8 If an issuer wrongfully dishonors or repudiates its obligation
9 to pay money under a letter of credit before presentation, the
10 beneficiary, successor or nominated person presenting on its own
11 behalf may recover from the issuer the amount that is the
12 subject of the dishonor or repudiation. If the issuer's
13 obligation under the letter of credit is not for the payment of
14 money, the claimant may obtain specific performance or, at the
15 claimant's election, recover an amount equal to the value of
16 performance from the issuer. In either case, the claimant may
17 also recover incidental but not consequential damages. The
18 claimant is not obligated to take action to avoid damages that
19 might be due from the issuer under this subsection. If, although
20 not obligated to do so, the claimant avoids damages, the
21 claimant's recovery from the issuer must be reduced by the
22 amount of damages avoided. The issuer has the burden of proving
23 the amount of damages avoided. In the case of repudiation the
24 claimant need not present any document.
25 (b) Wrongful dishonor upon presentation; wrongful honor.--If
26 an issuer wrongfully dishonors a draft or demand presented under
27 a letter of credit or honors a draft or demand in breach of its
28 obligation to the applicant, the applicant may recover damages
29 resulting from the breach, including incidental but not
30 consequential damages, less any amount saved as a result of the
20010S0330B0817 - 34 -
1 breach.
2 (c) Certain other breaches.--If an adviser or nominated
3 person other than a confirmer breaches an obligation under this
4 division or an issuer breaches an obligation not covered in
5 subsection (a) or (b), a person to whom the obligation is owed
6 may recover damages resulting from the breach, including
7 incidental but not consequential damages, less any amount saved
8 as a result of the breach. To the extent of the confirmation, a
9 confirmer has the liability of an issuer specified in this
10 subsection and subsections (a) and (b).
11 (d) Interest.--An issuer, nominated person or advisor who is
12 found liable under subsection (a), (b) or (c) shall pay interest
13 on the amount owed thereunder from the date of wrongful dishonor
14 or other appropriate date.
15 (e) Attorney fees.--Reasonable attorney fees and other
16 expenses of litigation may be awarded to the prevailing party in
17 an action in which a remedy is sought under this division.
18 (f) Liquidated damages.--Damages that would otherwise be
19 payable by a party for breach of an obligation under this
20 division may be liquidated by agreement or undertaking, but only
21 in an amount or by a formula that is reasonable in light of the
22 harm anticipated.
23 § 5112. Transfer of letter of credit.
24 (a) Transfer generally.--Except as otherwise provided in
25 section 5113 (relating to transfer by operation of law), unless
26 a letter of credit provides that it is transferable, the right
27 of a beneficiary to draw or otherwise demand performance under a
28 letter of credit may not be transferred.
29 (b) Limitations on duty to recognize or carry out a
30 transfer.--Even if a letter of credit provides that it is
20010S0330B0817 - 35 -
1 transferable, the issuer may refuse to recognize or carry out a
2 transfer if:
3 (1) the transfer would violate applicable law; or
4 (2) the transferor or transferee has failed to comply
5 with any requirement stated in the letter of credit or any
6 other requirement relating to transfer imposed by the issuer
7 which is within the standard practice referred to in section
8 5108(e) (relating to standard practice and role of court) or
9 is otherwise reasonable under the circumstances.
10 § 5113. Transfer by operation of law.
11 (a) Undisclosed successor.--A successor of a beneficiary may
12 consent to amendments, sign and present documents and receive
13 payment or other items of value in the name of the beneficiary
14 without disclosing its status as a successor.
15 (b) Disclosed successor.--A successor of a beneficiary may
16 consent to amendments, sign and present documents and receive
17 payment or other items of value in its own name as the disclosed
18 successor of the beneficiary. Except as otherwise provided in
19 subsection (e), an issuer shall recognize a disclosed successor
20 of a beneficiary as beneficiary in full substitution for its
21 predecessor upon compliance with the requirements for
22 recognition by the issuer of a transfer of drawing rights by
23 operation of law under the standard practice referred to in
24 section 5108(e) (relating to standard practice and role of
25 court) or, in the absence of such a practice, compliance with
26 other reasonable procedures sufficient to protect the issuer.
27 (c) Determination of successor status, signature.--An issuer
28 is not obliged to determine whether a purported successor is a
29 successor of a beneficiary or whether the signature of a
30 purported successor is genuine or authorized.
20010S0330B0817 - 36 -
1 (d) Effect of honor of presentation by purported
2 successor.--Honor of a purported successor's apparently
3 complying presentation under subsection (a) or (b) has the
4 consequences specified in section 5108(i) (relating to certain
5 consequences of honor) even if the purported successor is not
6 the successor of a beneficiary. Documents signed in the name of
7 the beneficiary or of a disclosed successor by a person who is
8 neither the beneficiary nor the successor of the beneficiary are
9 forged documents for the purposes of section 5109 (relating to
10 fraud and forgery).
11 (e) Right to decline to recognize presentation.--An issuer
12 whose rights of reimbursement are not covered by subsection (d)
13 or substantially similar law and any confirmer or nominated
14 person may decline to recognize a presentation under subsection
15 (b).
16 (f) Change of name.--A beneficiary whose name is changed
17 after the issuance of a letter of credit has the same rights and
18 obligations as a successor of a beneficiary under this section.
19 § 5114. Assignment of proceeds.
20 (a) Definition.--As used in this section, the term "proceeds
21 of a letter of credit" means the cash, check, accepted draft or
22 other item of value paid or delivered upon honor or giving of
23 value by the issuer or any nominated person under the letter of
24 credit. The term does not include a beneficiary's drawing rights
25 or documents presented by the beneficiary.
26 (b) Beneficiary's right to assign proceeds.--A beneficiary
27 may assign its right to part or all of the proceeds of a letter
28 of credit. The beneficiary may do so before presentation as a
29 present assignment of its right to receive proceeds contingent
30 upon its compliance with the terms and conditions of the letter
20010S0330B0817 - 37 -
1 of credit.
2 (c) Recognition of assignment of proceeds.--An issuer or
3 nominated person need not recognize an assignment of proceeds of
4 a letter of credit until it consents to the assignment.
5 (d) Consent to assignment of proceeds.--An issuer or
6 nominated person has no obligation to give or withhold its
7 consent to an assignment of proceeds of a letter of credit, but
8 consent may not be unreasonably withheld if the assignee
9 possesses and exhibits the letter of credit and presentation of
10 the letter of credit is a condition to honor.
11 (e) Rights of transferee beneficiary or nominated person.--
12 Rights of a transferee beneficiary or nominated person are
13 independent of the beneficiary's assignment of the proceeds of a
14 letter of credit and are superior to the assignee's right to the
15 proceeds.
16 (f) Certain rights not affected; relationship to Division
17 9.--Neither the rights recognized by this section between an
18 assignee and an issuer, transferee beneficiary or nominated
19 person nor the issuer's or nominated person's payment of
20 proceeds to an assignee or a third person affect the rights
21 between the assignee and any person other than the issuer,
22 transferee beneficiary or nominated person. The mode of creating
23 and perfecting a security interest in or granting an assignment
24 of a beneficiary's right to proceeds is governed by Division 9
25 (relating to secured transactions; sales of accounts, contract
26 rights and chattel paper) or other law. Against persons other
27 than the issuer, transferee beneficiary or nominated person, the
28 rights and obligations arising upon the creation of a security
29 interest or other assignment of a beneficiary's right to
30 proceeds and its perfection are governed by Division 9 or other
20010S0330B0817 - 38 -
1 law.
2 § 5115. Statute of limitations.
3 An action to enforce a right or obligation arising under this
4 division must be commenced within one year after the expiration
5 date of the relevant letter of credit or one year after the
6 cause of action accrues, whichever occurs later. A cause of
7 action accrues when the breach occurs, regardless of the
8 aggrieved party's lack of knowledge of the breach, except that,
9 in the event of a fraud or forgery adversely affecting the
10 aggrieved party, a cause of action accrues on the earlier of the
11 date on which the fraud or forgery was discovered by the
12 aggrieved party or the date on which the fraud or forgery could
13 have been discovered by the aggrieved party by the exercise of
14 reasonable diligence.
15 § 5116. Choice of law and forum.
16 (a) Express choice of law.--The liability of an issuer,
17 nominated person or advisor for action or omission is governed
18 by the law of the jurisdiction chosen by an agreement in the
19 form of a record signed or otherwise authenticated by the
20 affected parties in the manner provided in section 5104
21 (relating to formal requirements) or by a provision in the
22 person's letter of credit, confirmation or other undertaking.
23 The jurisdiction whose law is chosen need not bear any relation
24 to the transaction.
25 (b) Governing law otherwise.--Unless subsection (a) applies,
26 the liability of an issuer, nominated person or adviser for
27 action or omission is governed by the law of the jurisdiction in
28 which the person is located. The person is considered to be
29 located at the address indicated in the person's undertaking. If
30 more than one address is indicated, the person is considered to
20010S0330B0817 - 39 -
1 be located at the address from which the person's undertaking
2 was issued. For the purpose of jurisdiction, choice of law and
3 recognition of interbranch letters of credit, but not
4 enforcement of a judgment, all branches of a bank are considered
5 separate juridical entities and a bank is considered to be
6 located at the place where its relevant branch is considered to
7 be located under this subsection.
8 (c) Role of custom or practice.--Except as otherwise
9 provided in this subsection, the liability of an issuer,
10 nominated person or adviser is governed by any rules of custom
11 or practice, such as the Uniform Customs and Practice for
12 Documentary Credits, to which the letter of credit, confirmation
13 or other undertaking is expressly made subject. If:
14 (1) this division would govern the liability of an
15 issuer, nominated person or adviser under subsection (a) or
16 (b);
17 (2) the relevant undertaking incorporates rules of
18 custom or practice; and
19 (3) there is conflict between this division and those
20 rules as applied to that undertaking;
21 those rules govern except to the extent of any conflict with the
22 nonvariable provisions specified in section 5103(c) (relating to
23 variation by agreement or undertaking).
24 (d) Conflict with certain other divisions.--If there is
25 conflict between this division and Division 3 (relating to
26 negotiable instruments), 4 (relating to bank deposits and
27 collections), 4A (relating to funds transfers) or 9 (relating to
28 secured transactions; sales of accounts, contract rights and
29 chattel paper), this division governs.
30 (e) Forum.--The forum for settling disputes arising out of
20010S0330B0817 - 40 -
1 an undertaking within this division may be chosen in the manner
2 and with the binding effect that governing law may be chosen in
3 accordance with subsection (a).
4 § 5117. Subrogation of issuer, applicant and nominated person.
5 (a) Subrogation rights of issuer.--An issuer that honors a
6 beneficiary's presentation is subrogated to the rights of the
7 beneficiary to the same extent as if the issuer were a secondary
8 obligor of the underlying obligation owed to the beneficiary and
9 of the applicant to the same extent as if the issuer were the
10 secondary obligor of the underlying obligation owed to the
11 applicant.
12 (b) Subrogation rights of applicant.--An applicant that
13 reimburses an issuer is subrogated to the rights of the issuer
14 against any beneficiary, presenter or nominated person to the
15 same extent as if the applicant were the secondary obligor of
16 the obligations owed to the issuer and has the rights of
17 subrogation of the issuer to the rights of the beneficiary
18 stated in subsection (a).
19 (c) Subrogation rights of nominated person.--A nominated
20 person who pays or gives value against a draft or demand
21 presented under a letter of credit is subrogated to the rights
22 of:
23 (1) the issuer against the applicant to the same extent
24 as if the nominated person were a secondary obligor of the
25 obligation owed to the issuer by the applicant;
26 (2) the beneficiary to the same extent as if the
27 nominated person were a secondary obligor of the underlying
28 obligation owed to the beneficiary; and
29 (3) the applicant to the same extent as if the nominated
30 person were a secondary obligor of the underlying obligation
20010S0330B0817 - 41 -
1 owed to the applicant.
2 (d) Time at which subrogation rights arise.--Notwithstanding
3 any agreement or term to the contrary, the rights of subrogation
4 stated in subsections (a) and (b) do not arise until the issuer
5 honors the letter of credit or otherwise pays and the rights in
6 subsection (c) do not arise until the nominated person pays or
7 otherwise gives value. Until then, the issuer, nominated person
8 and the applicant do not derive under this section present or
9 prospective rights forming the basis of a claim, defense or
10 excuse.
11 § 5118. Security interest of issuer or nominated person.
12 (a) General rule.--An issuer or nominated person has a
13 security interest in a document presented under a letter of
14 credit to the extent that the issuer or nominated person honors
15 or gives value for the presentation.
16 (b) Duration.--So long as and to the extent that an issuer
17 or nominated person has not been reimbursed or has not otherwise
18 recovered the value given with respect to a security interest in
19 a document under subsection (a), the security interest continues
20 and is subject to Division 9 (relating to secured transactions),
21 but:
22 (1) a security agreement is not necessary to make the
23 security interest enforceable under section 9203(b)(3)
24 (relating to attachment and enforceability of security
25 interest; proceeds; supporting obligations; formal
26 requisites);
27 (2) if the document is presented in a medium other than
28 a written or other tangible medium, the security interest is
29 perfected; and
30 (3) if the document is presented in a written or other
20010S0330B0817 - 42 -
1 tangible medium and is not a certificated security, chattel
2 paper, a document of title, an instrument or a letter of
3 credit, the security interest is perfected and has priority
4 over a conflicting security interest in the document so long
5 as the debtor does not have possession of the document.
6 Section 14. Sections 7503(a)(1), 8102(a) introductory
7 paragraph, 8103(f), 8106(d) and (f), 8110(e), 8301(a)(3),
8 8302(a) and 8510 of Title 13 are amended to read:
9 § 7503. Document of title to goods defeated in certain cases.
10 (a) Prior legal or perfected security interest.--A document
11 of title confers no right in goods against a person who before
12 issuance of the document had a legal interest or a perfected
13 security interest in them and who neither:
14 (1) delivered or entrusted them or any document of title
15 covering them to the bailor or his nominee with actual or
16 apparent authority to ship, store or sell or with power to
17 obtain delivery under this division (section 7403 (relating
18 to obligation of warehouseman or carrier to deliver; excuse))
19 or with power of disposition under this title (section 2403
20 (relating to power to transfer; good faith purchase of goods;
21 "entrusting") and section [9307] 9320 (relating to
22 [protection of buyers] buyer of goods)) or other statute or
23 rule of law; nor
24 * * *
25 § 8102. Definitions.
26 (a) Definitions.--The following words and phrases when used
27 in this division shall have[, unless the context clearly
28 indicates otherwise,] the meanings given to them in this
29 subsection:
30 * * *
20010S0330B0817 - 43 -
1 § 8103. Rules for determining whether certain obligations and
2 interests are securities or financial assets.
3 * * *
4 (f) Commodity contract.--A commodity contract, as defined in
5 section [9115 (relating to investment property)] 9102(a)
6 (relating to definitions and index of definitions), is not a
7 security or a financial asset.
8 § 8106. Control.
9 * * *
10 (d) "Control" of security entitlement.--A purchaser has
11 "control" of a security entitlement if:
12 (1) the purchaser becomes the entitlement holder; [or]
13 (2) the securities intermediary has agreed that it will
14 comply with entitlement orders originated by the purchaser
15 without further consent by the entitlement holder[.]; or
16 (3) another person has control of the security
17 entitlement on behalf of the purchaser or, having previously
18 acquired control of the security entitlement, acknowledges
19 that it has control on behalf of the purchaser.
20 * * *
21 (f) Purchaser under subsection (c)[(2)] or (d)[(2)].--A
22 purchaser who has satisfied the requirements of subsection
23 (c)[(2)] or (d)[(2)] has control even if the registered owner in
24 the case of subsection (c)[(2)] or the entitlement holder in the
25 case of subsection (d)[(2)] retains the right to make
26 substitutions for the uncertificated security or security
27 entitlement, to originate instructions or entitlement orders to
28 the issuer or securities intermediary or otherwise to deal with
29 the uncertificated security or security entitlement.
30 * * *
20010S0330B0817 - 44 -
1 § 8110. Applicability; choice of law.
2 * * *
3 (e) Determination of "securities intermediary's
4 jurisdiction".--The following rules determine a "securities
5 intermediary's jurisdiction" for purposes of this section:
6 (1) If an agreement between the securities intermediary
7 and its entitlement holder [specifies that it is governed by
8 the law of a particular jurisdiction, that jurisdiction is
9 the securities intermediary's jurisdiction.
10 (2) If] governing the securities account expressly
11 provides that a particular jurisdiction is the securities
12 intermediary's jurisdiction for purposes of this chapter,
13 this division, or this title, that jurisdiction is the
14 securities intermediary's jurisdiction.
15 (2) If paragraph (1) does not apply and an agreement
16 between the securities intermediary and its entitlement
17 holder governing the securities account expressly provides
18 that the agreement is governed by the law of a particular
19 jurisdiction, that jurisdiction is the securities
20 intermediary's jurisdiction.
21 (3) If neither paragraph (1) nor paragraph (2) applies
22 and an agreement between the securities intermediary and its
23 entitlement holder [does not specify the governing law as
24 provided in paragraph (1), but expressly specifies] governing
25 the securities account expressly provides that the securities
26 account is maintained at an office in a particular
27 jurisdiction, that jurisdiction is the securities
28 intermediary's jurisdiction.
29 [(3) If an agreement between the securities intermediary
30 and its entitlement holder does not specify a jurisdiction as
20010S0330B0817 - 45 -
1 provided in paragraph (1) or (2)] (4) If none of the
2 preceding paragraphs applies, the securities intermediary's
3 jurisdiction is the jurisdiction in which [is located] the
4 office identified in an account statement as the office
5 serving the entitlement holder's account is located.
6 [(4) If an agreement between the securities intermediary
7 and its entitlement holder does not specify a jurisdiction as
8 provided in paragraph (1) or (2) and an account statement
9 does not identify an office serving the entitlement holder's
10 account as provided in paragraph (3)] (5) If none of the
11 preceding paragraphs applies, the securities intermediary's
12 jurisdiction is the jurisdiction in which [is located] the
13 chief executive office of the securities intermediary is
14 located.
15 * * *
16 § 8301. Delivery.
17 (a) Delivery of certificated security.--Delivery of a
18 certificated security to a purchaser occurs when:
19 * * *
20 (3) a securities intermediary acting on behalf of the
21 purchaser acquires possession of the security certificate,
22 only if the certificate is in registered form and [has been
23 specially indorsed to the purchaser by an effective
24 indorsement.] is:
25 (i) registered in the name of the purchaser;
26 (ii) payable to the order of the purchaser; or
27 (iii) specially indorsed to the purchaser by an
28 effective indorsement and has not been indorsed to the
29 securities intermediary or in blank.
30 * * *
20010S0330B0817 - 46 -
1 § 8302. Rights of purchaser.
2 (a) Rights acquired by purchaser.--Except as otherwise
3 provided in subsections (b) and (c), [upon delivery] a purchaser
4 of a certificated or uncertificated security [to a purchaser,
5 the purchaser] acquires all rights in the security that the
6 transferor had or had power to transfer.
7 * * *
8 § 8510. Rights of purchaser of security entitlement from
9 entitlement holder.
10 (a) Action based on adverse claim to financial asset or
11 security entitlement.--[An] In a case not covered by the
12 priority rules in Division 9 (relating to secured transactions)
13 or the rules stated in subsection (c), an action based on an
14 adverse claim to a financial asset or security entitlement,
15 whether framed in conversion, replevin, constructive trust,
16 equitable lien or other theory, may not be asserted against a
17 person who purchases a security entitlement, or an interest
18 therein, from an entitlement holder if the purchaser gives
19 value, does not have notice of the adverse claim and obtains
20 control.
21 (b) When adverse claim cannot be asserted.--If an adverse
22 claim could not have been asserted against an entitlement holder
23 under section 8502 (relating to assertion of adverse claim
24 against entitlement holder), the adverse claim cannot be
25 asserted against a person who purchases a security entitlement,
26 or an interest therein, from the entitlement holder.
27 (c) Rules of priority.--In a case not covered by the
28 priority rules in Division 9 [(relating to secured transactions;
29 sales of accounts, contract rights and chattel paper)], a
30 purchaser for value of a security entitlement, or an interest
20010S0330B0817 - 47 -
1 therein, who obtains control has priority over a purchaser of a
2 security entitlement, or an interest therein, who does not
3 obtain control. [Purchasers] Except as otherwise provided in
4 subsection (d), purchasers who have control rank [equally,
5 except that a] according to priority in time of:
6 (1) the purchaser's becoming the person for whom the
7 securities account, in which the security entitlement is
8 carried, is maintained, if the purchaser obtained control
9 under section 8106(d)(1) (relating to control);
10 (2) the securities intermediary's agreement to comply
11 with the purchaser's entitlement orders with respect to
12 security entitlements carried or to be carried in the
13 securities account in which the security entitlement is
14 carried, if the purchaser obtained control under section
15 8106(d)(2); or
16 (3) if the purchaser obtained control through another
17 person under section 8106(d)(3), the time on which priority
18 would be based under this subsection if the other person were
19 the secured party.
20 (d) Securities intermediary.--A securities intermediary as
21 purchaser has priority over a conflicting purchaser who has
22 control unless otherwise agreed by the securities intermediary.
23 Section 15. Division 9 of Title 13 is repealed.
24 Section 16. Title 13 is amended by adding a division to
25 read:
26 DIVISION 9
27 SECURED TRANSACTIONS
28 CHAPTER 91
29 GENERAL PROVISIONS
30 Subchapter
20010S0330B0817 - 48 -
1 A. Short Title, Definitions and General Concepts
2 B. Applicability of Division
3 SUBCHAPTER A
4 SHORT TITLE, DEFINITIONS AND GENERAL CONCEPTS
5 Sec.
6 9101. Short title of division.
7 9102. Definitions and index of definitions.
8 9103. Purchase-money security interest; application of
9 payments; burden of establishing.
10 9104. Control of deposit account.
11 9105. Control of electronic chattel paper.
12 9106. Control of investment property.
13 9107. Control of letter-of-credit right.
14 9108. Sufficiency of description.
15 § 9101. Short title of division.
16 This division shall be known and may be cited as the Uniform
17 Commercial Code, Division 9, Secured Transactions.
18 § 9102. Definitions and index of definitions.
19 (a) Division 9 definitions.--The following words and phrases
20 when used in this division shall have the meanings given to them
21 in this subsection:
22 "Accession." Goods which are physically united with other
23 goods in such a manner that the identity of the original goods
24 is not lost.
25 "Account."
26 (1) Except as used in "account for," a right to payment
27 of a monetary obligation, whether or not earned by
28 performance:
29 (i) for property which has been or is to be sold,
30 leased, licensed, assigned or otherwise disposed of;
20010S0330B0817 - 49 -
1 (ii) for services rendered or to be rendered;
2 (iii) for a policy of insurance issued or to be
3 issued;
4 (iv) for a secondary obligation incurred or to be
5 incurred;
6 (v) for energy provided or to be provided;
7 (vi) for the use or hire of a vessel under a charter
8 or other contract;
9 (vii) arising out of the use of a credit or charge
10 card or information contained on or for use with the
11 card; or
12 (viii) as winnings in a lottery or other game of
13 chance operated or sponsored by a state, governmental
14 unit of a state or person licensed or authorized to
15 operate the game by a state or governmental unit of a
16 state.
17 (2) The term includes health-care-insurance receivables.
18 (3) The term does not include:
19 (i) rights to payment evidenced by chattel paper or
20 an instrument;
21 (ii) commercial tort claims;
22 (iii) deposit accounts;
23 (iv) investment property;
24 (v) letter-of-credit right or letters of credit; or
25 (vi) rights to payment for money or funds advanced
26 or sold, other than rights arising out of the use of a
27 credit or charge card or information contained on or for
28 use with the card.
29 "Account debtor." A person obligated on an account, chattel
30 paper or general intangible. The term does not include persons
20010S0330B0817 - 50 -
1 obligated to pay a negotiable instrument, even if the instrument
2 constitutes part of chattel paper.
3 "Accounting." Except as used in "accounting for," a record:
4 (1) authenticated by a secured party;
5 (2) indicating the aggregate unpaid secured obligations
6 as of a date not more than 35 days earlier or 35 days later
7 than the date of the record; and
8 (3) identifying the components of the obligations in
9 reasonable detail.
10 "Agricultural lien." An interest, other than a security
11 interest, in farm products:
12 (1) which secures payment or performance of an
13 obligation for:
14 (i) goods or services furnished in connection with a
15 debtor's farming operation; or
16 (ii) rent on real property leased by a debtor in
17 connection with its farming operation;
18 (2) which is created by statute in favor of a person
19 that:
20 (i) in the ordinary course of its business furnished
21 goods or services to a debtor in connection with a
22 debtor's farming operation; or
23 (ii) leased real property to a debtor in connection
24 with the debtor's farming operation; and
25 (3) whose effectiveness does not depend on the person's
26 possession of the personal property.
27 "As-extracted collateral." Any of the following:
28 (1) Oil, gas or other minerals which are subject to a
29 security interest which:
30 (i) is created by a debtor having an interest in the
20010S0330B0817 - 51 -
1 minerals before extraction; and
2 (ii) attaches to the minerals as extracted.
3 (2) Accounts arising out of the sale at the wellhead or
4 minehead of oil, gas or other minerals in which the debtor
5 had an interest before extraction.
6 "Authenticate." To:
7 (i) sign; or
8 (ii) execute or otherwise adopt a symbol, or encrypt
9 or similarly process a record in whole or in part, with
10 the present intent of the authenticating person to
11 identify the person and adopt or accept a record.
12 "Bank." An organization which is engaged in the business of
13 banking. The term includes any savings bank, savings and loan
14 association, credit union or trust company.
15 "Cash proceeds." Proceeds which are money, checks, deposit
16 accounts or the like.
17 "Certificate of title." A certificate of title with respect
18 to which a statute provides for the security interest in
19 question to be indicated on the certificate as a condition or
20 result of the security interest's obtaining priority over the
21 rights of a lien creditor with respect to the collateral.
22 "Chattel paper." A record or records which evidence both a
23 monetary obligation and a security interest in specific goods, a
24 security interest in specific goods and software used in the
25 goods, a security interest in specific goods and license of
26 software used in the goods, a lease of specific goods, or a
27 lease of specific goods and license of software used in the
28 goods. In this definition, "monetary obligation" means a
29 monetary obligation secured by the goods or owed under a lease
30 of the goods and includes a monetary obligation with respect to
20010S0330B0817 - 52 -
1 software used in the goods. The term does not include charters
2 or other contracts involving the use or hire of a vessel or
3 records which evidence a right to payment arising out of the use
4 of a credit or charge card or information contained on or for
5 use with the card. If a transaction is evidenced by records that
6 include an instrument or series of instruments, the group of
7 records taken together constitutes chattel paper.
8 "Collateral." The property subject to a security interest or
9 agricultural lien. The term includes:
10 (1) proceeds to which a security interest attaches;
11 (2) accounts, chattel paper, payment intangibles and
12 promissory notes which have been sold; and
13 (3) goods which are the subject of a consignment.
14 "Commercial tort claim." A claim arising in tort with
15 respect to which:
16 (1) the claimant is an organization; or
17 (2) the claimant is an individual and the claim:
18 (i) arose in the course of the claimant's business
19 or profession; and
20 (ii) does not include damages arising out of
21 personal injury to or the death of an individual.
22 "Commodity account." An account maintained by a commodity
23 intermediary in which a commodity contract is carried for a
24 commodity customer.
25 "Commodity contract." A commodity futures contract, an
26 option on a commodity futures contract, a commodity option or
27 another contract, if the contract or option is:
28 (1) traded on or subject to the rules of a board of
29 trade which has been designated as a contract market for such
30 a contract pursuant to Federal commodities laws; or
20010S0330B0817 - 53 -
1 (2) traded on a foreign commodity board of trade,
2 exchange or market, and carried on the books of a commodity
3 intermediary for a commodity customer.
4 "Commodity customer." A person for whom or which a commodity
5 intermediary carries a commodity contract on its books.
6 "Commodity intermediary." A person that:
7 (1) is registered as a futures commission merchant under
8 Federal commodities law; or
9 (2) in the ordinary course of its business provides
10 clearance or settlement services for a board of trade which
11 has been designated as a contract market pursuant to Federal
12 commodities law.
13 "Communicate." Any of the following:
14 (1) To send a written or other tangible record.
15 (2) To transmit a record by any means agreed upon by the
16 persons sending and receiving the record.
17 (3) In the case of transmission of a record to or by a
18 filing office, to transmit a record by any means prescribed
19 by filing-office rule.
20 "Consignee." A merchant to whom or which goods are delivered
21 in a consignment.
22 "Consignment." A transaction, regardless of its form, in
23 which a person delivers goods to a merchant for the purpose of
24 sale and all of the following apply:
25 (1) The merchant:
26 (i) deals in goods of that kind under a name other
27 than the name of the person making delivery;
28 (ii) is not an auctioneer; and
29 (iii) is not generally known by its creditors to be
30 substantially engaged in selling the goods of others.
20010S0330B0817 - 54 -
1 (2) With respect to each delivery, the aggregate value
2 of the goods is $1,000 or more at the time of delivery.
3 (3) The goods are not consumer goods immediately before
4 delivery.
5 (4) The transaction does not create a security interest
6 which secures an obligation.
7 "Consignor." A person that delivers goods to a consignee in
8 a consignment.
9 "Consumer debtor." A debtor in a consumer transaction.
10 "Consumer goods." Goods which are used or bought for use
11 primarily for personal, family or household purposes.
12 "Consumer-goods transaction." A consumer transaction in
13 which:
14 (1) an individual incurs an obligation primarily for
15 personal, family or household purposes; and
16 (2) a security interest in consumer goods secures the
17 obligation.
18 "Consumer obligor." An obligor who:
19 (1) is an individual; and
20 (2) incurred the obligation as part of a transaction
21 entered into primarily for personal, family or household
22 purposes.
23 "Consumer transaction." A transaction in which:
24 (1) an individual incurs an obligation primarily for
25 personal, family or household purposes;
26 (2) a security interest secures the obligation; and
27 (3) the collateral is held or acquired primarily for
28 personal, family or household purposes.
29 The term includes consumer-goods transactions.
30 "Continuation statement." An amendment of a financing
20010S0330B0817 - 55 -
1 statement which:
2 (1) identifies, by its file number, the initial
3 financing statement to which it relates; and
4 (2) indicates that it is a continuation statement for,
5 or that it is filed to continue the effectiveness of, the
6 identified financing statement.
7 "Debtor." A:
8 (1) person having an interest, other than a security
9 interest or other lien, in the collateral, whether or not the
10 person is an obligor;
11 (2) seller of accounts, chattel paper, payment
12 intangibles or promissory notes; or
13 (3) consignee.
14 "Deposit account." A demand, time, savings, passbook or
15 similar account maintained with a bank. The term does not
16 include investment property or accounts evidenced by an
17 instrument.
18 "Document." A document of title or a receipt of the type
19 described in section 7201(b) (relating to storage under
20 government bond).
21 "Electronic chattel paper." Chattel paper evidenced by a
22 record consisting of information stored in an electronic medium.
23 "Encumbrance." A right, other than an ownership interest, in
24 real property. The term includes a mortgage and any other lien
25 on real property.
26 "Equipment." Goods other than inventory, farm products or
27 consumer goods.
28 "Farm products." Goods, other than standing timber, with
29 respect to which the debtor is engaged in a farming operation
30 and which are any of the following:
20010S0330B0817 - 56 -
1 (1) Crops grown, growing or to be grown, including:
2 (i) crops produced on trees, vines and bushes; and
3 (ii) aquatic goods produced in aquacultural
4 operations.
5 (2) Livestock, born or unborn, including aquatic goods
6 produced in aquacultural operations.
7 (3) Supplies used or produced in a farming operation.
8 (4) Products of crops or livestock in their
9 unmanufactured states.
10 "Farming operation." Raising, cultivating, propagating,
11 fattening or grazing or any other farming, livestock or
12 aquacultural operation.
13 "File number." The number assigned to an initial financing
14 statement pursuant to section 9519(a) (relating to filing office
15 duties).
16 "Filing office." An office designated in section 9501
17 (relating to filing office) as the place to file a financing
18 statement.
19 "Filing-office rule." A rule adopted pursuant to section
20 9526 (relating to filing-office rules).
21 "Financing statement." A record or records composed of an
22 initial financing statement and any filed record relating to the
23 initial financing statement.
24 "Fixture filing." The filing of a financing statement:
25 (1) covering goods which are or are to become fixtures;
26 and
27 (2) satisfying section 9502(a) (relating to sufficiency
28 of financing statement) and (b) (relating to real-property-
29 related financing statements).
30 The term includes the filing of a financing statement covering
20010S0330B0817 - 57 -
1 goods of a transmitting utility which are or are to become
2 fixtures.
3 "Fixtures." Goods which have become so related to particular
4 real property that an interest in them arises under real
5 property law.
6 "General intangible." Any personal property, including
7 things in action, other than accounts, chattel paper, commercial
8 tort claims, deposit accounts, documents, goods, instruments,
9 investment property, letter-of-credit rights, letters of credit,
10 money and oil, gas or other minerals before extraction. The term
11 includes payment intangibles and software.
12 "Good faith." Honesty in fact and the observance of
13 reasonable commercial standards of fair dealing.
14 "Goods." All things which are movable when a security
15 interest attaches.
16 (1) The term includes all of the following:
17 (i) Fixtures.
18 (ii) Standing timber which is to be cut and removed
19 under a conveyance or contract for sale.
20 (iii) The unborn young of animals.
21 (iv) Crops grown, growing or to be grown, even if
22 the crops are produced on trees, vines or bushes.
23 (v) Manufactured homes.
24 (vi) A computer program embedded in goods and any
25 supporting information provided in connection with a
26 transaction relating to the program if:
27 (A) the program is associated with the goods in
28 such a manner that it customarily is considered part
29 of the goods; or
30 (B) by becoming the owner of the goods, a person
20010S0330B0817 - 58 -
1 acquires a right to use the program in connection
2 with the goods.
3 The term does not include a computer program embedded in
4 goods which consist solely of the medium in which the program
5 is embedded.
6 (2) The term does not include accounts, chattel paper,
7 commercial tort claims, deposit accounts, documents, general
8 intangibles, instruments, investment property, letter-of-
9 credit rights, letters of credit, money or oil, gas or other
10 minerals before extraction.
11 "Governmental unit." A subdivision, agency, department,
12 county, parish, municipality or other unit of the government of
13 the United States, a state or a foreign country. The term
14 includes an organization having a separate corporate existence
15 if the organization is eligible to issue debt on which interest
16 is exempt from income taxation under the laws of the United
17 States.
18 "Health-care-insurance receivable." An interest in or claim
19 under a policy of insurance which is a right to payment of a
20 monetary obligation for health-care goods or services provided.
21 "Instrument." A negotiable instrument or any other writing
22 which evidences a right to the payment of a monetary obligation,
23 is not itself a security agreement or lease and is of a type
24 which in ordinary course of business is transferred by delivery
25 with any necessary indorsement or assignment. The term does not
26 include:
27 (1) investment property;
28 (2) letters of credit; or
29 (3) writings which evidence a right to payment arising
30 out of the use of a credit or charge card or information
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1 contained on or for use with the card.
2 "Inventory." Goods, other than farm products, which:
3 (1) are leased by a person as lessor;
4 (2) are held by a person for sale or lease or to be
5 furnished under a contract of service;
6 (3) are furnished by a person under a contract of
7 service; or
8 (4) consist of raw materials, work in process or
9 materials used or consumed in a business.
10 "Investment property." A security, whether certificated or
11 uncertificated; security entitlement; securities account;
12 commodity contract; or commodity account.
13 "Jurisdiction of organization." With respect to a registered
14 organization, the jurisdiction under whose law the organization
15 is organized.
16 "Letter-of-credit right." A right to payment or performance
17 under a letter of credit, whether or not the beneficiary has
18 demanded or is at the time entitled to demand payment or
19 performance. The term does not include the right of a
20 beneficiary to demand payment or performance under a letter of
21 credit.
22 "Lien creditor." Any of the following:
23 (1) A creditor that has acquired a lien on the property
24 involved by attachment, levy or the like.
25 (2) An assignee for benefit of creditors from the time
26 of assignment.
27 (3) A trustee in bankruptcy from the date of the filing
28 of the petition.
29 (4) A receiver in equity from the time of appointment.
30 "Manufactured home." A structure, transportable in one or
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1 more sections, which, in the traveling mode, is eight body feet
2 or more in width or 40 body feet or more in length, or, when
3 erected on site, is 320 or more square feet, and which is built
4 on a permanent chassis and designed to be used as a dwelling
5 with or without a permanent foundation when connected to the
6 required utilities, and includes the plumbing, heating, air-
7 conditioning, and electrical systems contained therein. The term
8 includes any structure that meets all of the requirements of
9 this paragraph except the size requirements and with respect to
10 which the manufacturer voluntarily files a certification
11 required by the United States Secretary of Housing and Urban
12 Development and complies with the standards established under 42
13 U.S.C. (relating to public health and welfare).
14 "Manufactured-home transaction." A secured transaction:
15 (1) which creates a purchase-money security interest in
16 a manufactured home, other than a manufactured home held as
17 inventory; or
18 (2) in which a manufactured home, other than a
19 manufactured home held as inventory, is the primary
20 collateral.
21 "Mortgage." A consensual interest in real property,
22 including fixtures, which secures payment or performance of an
23 obligation.
24 "New debtor." A person that becomes bound as debtor under
25 section 9203(d) (relating to when person becomes bound by
26 another person's security agreement) by a security agreement
27 previously entered into by another person.
28 "New value." Any of the following:
29 (1) Money.
30 (2) Money's worth in property, services or new credit.
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1 (3) Release by a transferee of an interest in property
2 previously transferred to the transferee.
3 The term does not include an obligation substituted for another
4 obligation.
5 "Noncash proceeds." Proceeds other than cash proceeds.
6 "Obligor." A person that, with respect to an obligation
7 secured by a security interest in or an agricultural lien on the
8 collateral:
9 (1) owes payment or other performance of the obligation;
10 (2) has provided property other than the collateral to
11 secure payment or other performance of the obligation; or
12 (3) is otherwise accountable in whole or in part for
13 payment or other performance of the obligation.
14 The term does not include any issuer or nominated person under a
15 letter of credit.
16 "Original debtor." Except as used in section 9310(c)
17 (relating to assignment of perfected security interest), a
18 person that, as debtor, entered into a security agreement to
19 which a new debtor has become bound under section 9203(d)
20 (relating to when person becomes bound by another person's
21 security agreement).
22 "Payment intangible." A general intangible under which the
23 account debtor's principal obligation is a monetary obligation.
24 "Person related to." One of the following:
25 (1) With respect to an individual:
26 (i) the spouse of the individual;
27 (ii) a brother, brother-in-law, sister or sister-in-
28 law of the individual;
29 (iii) an ancestor or lineal descendant of the
30 individual or the individual's spouse; or
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1 (iv) any other relative, by blood or marriage, of
2 the individual or the individual's spouse, who shares the
3 same home with the individual.
4 (2) With respect to an organization:
5 (i) a person directly or indirectly controlling,
6 controlled by or under common control with the
7 organization;
8 (ii) an officer or director of or a person
9 performing similar functions with respect to the
10 organization;
11 (iii) an officer or director of or a person
12 performing similar functions with respect to a person
13 described in subparagraph (i);
14 (iv) the spouse of an individual described in
15 subparagraph (i), (ii) or (iii); or
16 (v) an individual related by blood or marriage to an
17 individual described in subparagraph (i), (ii), (iii) or
18 (iv) who shares the same home with the individual.
19 "Proceeds." Except as used in section 9609(b) (relating to
20 secured party's right to take possession after default), the
21 following property:
22 (1) Whatever is acquired upon the sale, lease, license,
23 exchange or other disposition of collateral.
24 (2) Whatever is collected on or distributed on account
25 of collateral.
26 (3) Rights arising out of collateral.
27 (4) To the extent of the value of collateral, claims
28 arising out of:
29 (i) loss of the collateral;
30 (ii) nonconformity of the collateral;
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1 (iii) interference with the use of the collateral;
2 (iv) defects in the collateral;
3 (v) infringement of rights in the collateral; or
4 (vi) damage to the collateral.
5 (5) To the extent of the value of collateral and to the
6 extent payable to the debtor or the secured party, insurance
7 payable by reason of:
8 (i) loss of the collateral;
9 (ii) nonconformity of the collateral;
10 (iii) defects in the collateral;
11 (iv) infringement of rights in the collateral; or
12 (v) damage to the collateral.
13 "Promissory note." An instrument which:
14 (1) evidences a promise to pay a monetary obligation;
15 (2) does not evidence an order to pay; and
16 (3) does not contain an acknowledgment by a bank that
17 the bank has received for deposit a sum of money or funds.
18 "Proposal." A record authenticated by a secured party which
19 includes the terms on which the secured party is willing to
20 accept collateral in full or partial satisfaction of the
21 obligation it secures under sections 9620 (relating to
22 acceptance of collateral in full or partial satisfaction of
23 obligation; compulsory disposition of collateral), 9621
24 (relating to notification of proposal to accept collateral) and
25 9622 (relating to effect of acceptance of collateral).
26 "Public-finance transaction." A secured transaction in
27 connection with which all of the following apply:
28 (1) Debt securities are issued.
29 (2) All or a portion of the securities issued have an
30 initial stated maturity of at least 20 years.
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1 (3) Any of the following is a state or a governmental
2 unit of a state:
3 (i) The debtor.
4 (ii) The obligor.
5 (iii) The secured party.
6 (iv) The account debtor or other person obligated on
7 collateral.
8 (v) The assignor or assignee of a secured
9 obligation.
10 (vi) The assignor or assignee of a security
11 interest.
12 "Pursuant to commitment." With respect to an advance made or
13 other value given by a secured party, pursuant to the secured
14 party's obligation, whether or not a subsequent event of default
15 or other event not within the secured party's control has
16 relieved or may relieve the secured party from its obligation.
17 "Record." Except as used in "for record," "of record,"
18 "record or legal title" or "record owner," either of the
19 following:
20 (1) Information which is inscribed on a tangible medium.
21 (2) Information which is:
22 (i) stored in an electronic or other medium; and
23 (ii) retrievable in perceivable form.
24 "Registered organization." An organization organized solely
25 under the law of a single state or the United States and as to
26 which the state or the United States must maintain a public
27 record showing the organization to have been organized.
28 "Secondary obligor." An obligor to the extent that:
29 (1) the obligor's obligation is secondary; or
30 (2) the obligor has a right of recourse with respect to
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1 an obligation secured by collateral against the debtor or
2 another obligor or property of either.
3 "Secured party." Any of the following:
4 (1) A person in whose favor a security interest is
5 created or provided for under a security agreement, whether
6 or not any obligation to be secured is outstanding.
7 (2) A person that holds an agricultural lien.
8 (3) A consignor.
9 (4) A person to whom or which accounts, chattel paper,
10 payment intangibles or promissory notes have been sold.
11 (5) A trustee, indenture trustee, agent, collateral
12 agent or other representative in whose favor a security
13 interest or agricultural lien is created or provided for.
14 (6) A person that holds a security interest arising
15 under section 2401 (relating to passing of title; reservation
16 for security; limited application of section), 2505 (relating
17 to shipment by seller under reservation), 2711(c) (relating
18 to security interest of buyer in rejected goods), 2A508(e)
19 (relating to security interest in goods in lessee's
20 possession), 4210 (relating to security interest of
21 collecting bank in items, accompanying documents and
22 proceeds) or 5118 (relating to security interest of issuer or
23 nominated person).
24 "Security agreement." An agreement which creates or provides
25 for a security interest.
26 "Send." In connection with a record or notification:
27 (1) to deposit in the mail, deliver for transmission or
28 transmit by any other usual means of communication, with
29 postage or cost of transmission provided for, addressed to
30 any address reasonable under the circumstances; or
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1 (2) to cause the record or notification to be received
2 within the time which it would have been received if properly
3 sent under paragraph (1).
4 "Software." A computer program and any supporting
5 information provided in connection with a transaction relating
6 to the program. The term does not include a computer program
7 which is included in the definition of goods.
8 "State." A state of the United States, the District of
9 Columbia, Puerto Rico, the United States Virgin Islands or any
10 territory or insular possession subject to the jurisdiction of
11 the United States.
12 "Supporting obligation." A letter-of-credit right or
13 secondary obligation which supports the payment or performance
14 of an account, chattel paper, a document, a general intangible,
15 an instrument or investment property.
16 "Tangible chattel paper." Chattel paper evidenced by a
17 record or records consisting of information which is inscribed
18 on a tangible medium.
19 "Termination statement." An amendment of a financing
20 statement which:
21 (1) identifies, by its file number, the initial
22 financing statement to which it relates; and
23 (2) indicates either that it is a termination statement
24 or that the identified financing statement is no longer
25 effective.
26 "Transmitting utility." A person primarily engaged in the
27 business of:
28 (1) operating a railroad, subway, street railway or
29 trolley bus;
30 (2) transmitting communications electrically,
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1 electromagnetically or by light;
2 (3) transmitting goods by pipeline or sewer; or
3 (4) transmitting or producing and transmitting
4 electricity, steam, gas or water.
5 (b) Definitions in other divisions.--The following
6 definitions in other divisions apply to this division:
7 "Applicant." Section 5102.
8 "Beneficiary." Section 5102.
9 "Broker." Section 8102.
10 "Certificated security." Section 8102.
11 "Check." Section 3104.
12 "Clearing corporation." Section 8102.
13 "Contract for sale." Section 2106.
14 "Customer." Section 4104.
15 "Entitlement holder." Section 8102.
16 "Financial asset." Section 8102.
17 "Holder in due course." Section 3302.
18 "Issuer." With respect to a letter of credit or letter-of-
19 credit right, section 5102.
20 "Issuer." With respect to a security, section 8201.
21 "Lease." Section 2A103.
22 "Lease agreement." Section 2A103.
23 "Lease contract." Section 2A103.
24 "Leasehold interest." Section 2A103.
25 "Lessee." Section 2A103.
26 "Lessee in ordinary course of business." Section 2A103.
27 "Lessor." Section 2A103.
28 "Lessor's residual interest." Section 2A103.
29 "Letter of credit." Section 5102.
30 "Merchant." Section 2104.
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1 "Negotiable instrument." Section 3104.
2 "Nominated person." Section 5102.
3 "Note." Section 3104.
4 "Proceeds of a letter of credit." Section 5114.
5 "Prove." Section 3103.
6 "Sale." Section 2106.
7 "Securities account." Section 8501.
8 "Securities intermediary." Section 8102.
9 "Security." Section 8102.
10 "Security certificate." Section 8102.
11 "Security entitlement." Section 8102.
12 "Uncertificated security." Section 8102.
13 (c) Division 1 definitions and principles.--Division 1
14 (relating to general provisions) contains general definitions
15 and principles of construction and interpretation applicable
16 throughout this division.
17 § 9103. Purchase-money security interest; application of
18 payments; burden of establishing.
19 (a) Definitions.--As used in this section, the following
20 words and phrases shall have the meanings given to them in this
21 subsection:
22 "Purchase-money collateral." Goods or software which secures
23 a purchase-money obligation incurred with respect to that
24 collateral.
25 "Purchase-money obligation." An obligation of an obligor
26 incurred as all or part of the price of the collateral or for
27 value given to enable the debtor to acquire rights in or the use
28 of the collateral if the value is in fact so used.
29 (b) Purchase-money security interest in goods.--A security
30 interest in goods is a purchase-money security interest:
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1 (1) to the extent that the goods are purchase-money
2 collateral with respect to that security interest;
3 (2) if the security interest is in inventory which is or
4 was purchase-money collateral, also to the extent that the
5 security interest secures a purchase-money obligation
6 incurred with respect to other inventory in which the secured
7 party holds or held a purchase-money security interest; and
8 (3) also to the extent that the security interest
9 secures a purchase-money obligation incurred with respect to
10 software in which the secured party holds or held a purchase-
11 money security interest.
12 (c) Purchase-money security interest in software.--A
13 security interest in software is a purchase-money security
14 interest to the extent that the security interest also secures a
15 purchase-money obligation incurred with respect to goods in
16 which the secured party holds or held a purchase-money security
17 interest if:
18 (1) the debtor acquired its interest in the software in
19 an integrated transaction in which it acquired an interest in
20 the goods; and
21 (2) the debtor acquired its interest in the software for
22 the principal purpose of using the software in the goods.
23 (d) Consignor's inventory purchase-money security
24 interest.--The security interest of a consignor in goods which
25 are the subject of a consignment is a purchase-money security
26 interest in inventory.
27 (e) Application of payment in nonconsumer-goods
28 transaction.--In a transaction other than a consumer-goods
29 transaction, if the extent to which a security interest is a
30 purchase-money security interest depends on the application of a
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1 payment to a particular obligation, the payment must be applied:
2 (1) in accordance with any reasonable method of
3 application to which the parties agree;
4 (2) in the absence of the parties' agreement to a
5 reasonable method, in accordance with any intention of the
6 obligor manifested at or before the time of payment; or
7 (3) in the absence of an agreement to a reasonable
8 method and a timely manifestation of the obligor's intention,
9 in the following order:
10 (i) to obligations which are not secured; and
11 (ii) if more than one obligation is secured, to
12 obligations secured by purchase-money security interests
13 in the order in which those obligations were incurred.
14 (f) No loss of status of purchase-money security interest in
15 nonconsumer-goods transaction.--In a transaction other than a
16 consumer-goods transaction, a purchase-money security interest
17 does not lose its status as such even if:
18 (1) the purchase-money collateral also secures an
19 obligation which is not a purchase-money obligation;
20 (2) collateral which is not purchase-money collateral
21 also secures the purchase-money obligation; or
22 (3) the purchase-money obligation has been renewed,
23 refinanced, consolidated or restructured.
24 (g) Burden of proof in nonconsumer-goods transaction.--In a
25 transaction other than a consumer-goods transaction, a secured
26 party claiming a purchase-money security interest has the burden
27 of establishing the extent to which the security interest is a
28 purchase-money security interest.
29 (h) Nonconsumer-goods transactions; no inference.--The
30 limitation of the rules in subsections (e), (f) and (g) to
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1 transactions other than consumer-goods transactions is intended
2 to leave to the court the determination of the proper rules in
3 consumer-goods transactions. The court may not infer from that
4 limitation the nature of the proper rule in consumer-goods
5 transactions and may continue to apply established approaches.
6 § 9104. Control of deposit account.
7 (a) Requirements for control.--A secured party has control
8 of a deposit account if:
9 (1) the secured party is the bank with which the deposit
10 account is maintained;
11 (2) the debtor, secured party and bank have agreed in an
12 authenticated record that the bank will comply with
13 instructions originated by the secured party directing
14 disposition of the funds in the deposit account without
15 further consent by the debtor; or
16 (3) the secured party becomes the bank's customer with
17 respect to the deposit account.
18 (b) Debtor's right to direct disposition.--A secured party
19 that has satisfied subsection (a) has control, even if the
20 debtor retains the right to direct the disposition of funds from
21 the deposit account.
22 § 9105. Control of electronic chattel paper.
23 A secured party has control of electronic chattel paper if
24 the record or records comprising the chattel paper are created,
25 stored and assigned in such a manner that:
26 (1) a single authoritative copy of the record or records
27 exists which is unique, identifiable and, except as otherwise
28 provided in paragraphs (4), (5) and (6), unalterable;
29 (2) the authoritative copy identifies the secured party
30 as the assignee of the record or records;
20010S0330B0817 - 72 -
1 (3) the authoritative copy is communicated to and
2 maintained by the secured party or its designated custodian;
3 (4) copies or revisions which add or change an
4 identified assignee of the authoritative copy can be made
5 only with the participation of the secured party;
6 (5) each copy of the authoritative copy and any copy of
7 a copy is readily identifiable as a copy which is not the
8 authoritative copy; and
9 (6) any revision of the authoritative copy is readily
10 identifiable as an authorized or unauthorized revision.
11 § 9106. Control of investment property.
12 (a) Control under section 8106.--A person has control of a
13 certificated security, an uncertificated security or a security
14 entitlement as provided in section 8106 (relating to control).
15 (b) Control of commodity contract.--A secured party has
16 control of a commodity contract if:
17 (1) the secured party is the commodity intermediary with
18 which the commodity contract is carried; or
19 (2) the commodity customer, secured party and commodity
20 intermediary have agreed that the commodity intermediary will
21 apply any value distributed on account of the commodity
22 contract as directed by the secured party without further
23 consent by the commodity customer.
24 (c) Effect of control of securities account or commodity
25 account.--A secured party having control of all security
26 entitlements or commodity contracts carried in a securities
27 account or commodity account has control over the securities
28 account or commodity account.
29 § 9107. Control of letter-of-credit right.
30 A secured party has control of a letter-of-credit right to
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1 the extent of any right to payment or performance by the issuer
2 or any nominated person if the issuer or nominated person has
3 consented to an assignment of proceeds of the letter of credit
4 under section 5114(c) (relating to recognition of assignment of
5 proceeds) or otherwise applicable law or practice.
6 § 9108. Sufficiency of description.
7 (a) Sufficiency of description.--Except as otherwise
8 provided in subsections (c), (d) and (e), a description of
9 personal or real property is sufficient, whether or not it is
10 specific, if it reasonably identifies what is described.
11 (b) Examples of reasonable identification.--Except as
12 otherwise provided in subsection (d), a description of
13 collateral reasonably identifies the collateral if it identifies
14 the collateral by:
15 (1) specific listing;
16 (2) category;
17 (3) except as otherwise provided in subsection (e), a
18 type of collateral defined in this title;
19 (4) quantity;
20 (5) computational or allocational formula or procedure;
21 or
22 (6) except as otherwise provided in subsection (c), any
23 other method, if the identity of the collateral is
24 objectively determinable.
25 (c) Supergeneric description not sufficient.--A description
26 of collateral as "all the debtor's assets" or "all the debtor's
27 personal property" or using words of similar import does not
28 reasonably identify the collateral.
29 (d) Investment property.--Except as otherwise provided in
30 subsection (e), a description of a security entitlement,
20010S0330B0817 - 74 -
1 securities account or commodity account is sufficient if it
2 describes:
3 (1) the collateral by those terms or as investment
4 property; or
5 (2) the underlying financial asset or commodity
6 contract.
7 (e) When description by type insufficient.--A description
8 only by type of collateral defined in this title is an
9 insufficient description of:
10 (1) a commercial tort claim; or
11 (2) in a consumer transaction, consumer goods, a
12 security entitlement, a securities account or a commodity
13 account.
14 SUBCHAPTER B
15 APPLICABILITY OF DIVISION
16 Sec.
17 9109. Scope.
18 9110. Security interests arising under Division 2 or 2A.
19 § 9109. Scope.
20 (a) General scope of division.--Except as otherwise provided
21 in subsections (c) and (d), this division applies to:
22 (1) a transaction, regardless of its form, which creates
23 a security interest in personal property or fixtures by
24 contract;
25 (2) an agricultural lien;
26 (3) a sale of accounts, chattel paper, payment
27 intangibles or promissory notes;
28 (4) a consignment;
29 (5) a security interest arising under section 2401
30 (relating to passing of title; reservation for security;
20010S0330B0817 - 75 -
1 limited application of section), 2505 (relating to shipment
2 by seller under reservation), 2711(c) (relating to security
3 interest of buyer in rejected goods) or 2A508(e) (relating to
4 security interest in goods in lessee's possession), as
5 provided in section 9110 (relating to security interests
6 arising under Division 2 or 2A); and
7 (6) a security interest arising under section 4210
8 (relating to security interest of collecting bank in items,
9 accompanying documents and proceeds) or 5118 (relating to
10 security interest of issuer or nominated person).
11 (b) Security interest in secured obligation.--The
12 application of this division to a security interest in a secured
13 obligation is not affected by the fact that the obligation is
14 itself secured by a transaction or interest to which this
15 division does not apply.
16 (c) Extent to which division does not apply.--This division
17 does not apply to the extent that:
18 (1) a statute, regulation or treaty of the United States
19 preempts this division;
20 (2) another statute of this Commonwealth expressly
21 governs the creation, perfection, priority or enforcement of
22 a security interest created by the Commonwealth or a
23 governmental unit of the Commonwealth;
24 (3) a statute of another state, a foreign country or a
25 governmental unit of another state or a foreign country,
26 other than a statute generally applicable to security
27 interests, expressly governs creation, perfection, priority
28 or enforcement of a security interest created by the state,
29 country or governmental unit; or
30 (4) the rights of a transferee beneficiary or nominated
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1 person under a letter of credit are independent and superior
2 under section 5114 (relating to assignment of proceeds).
3 (d) Inapplicability of division.--This division does not
4 apply to any of the following:
5 (1) A landlord's lien other than an agricultural lien.
6 (2) A lien, other than an agricultural lien, given by
7 statute or other rule of law for services or materials.
8 Section 9333 (relating to priority of certain liens arising
9 by operation of law) applies with respect to priority of the
10 lien.
11 (3) An assignment of a claim for wages, salary or other
12 compensation of an employee.
13 (4) A sale of accounts, chattel paper, payment
14 intangibles or promissory notes as part of a sale of the
15 business out of which they arose.
16 (5) An assignment of accounts, chattel paper, payment
17 intangibles or promissory notes which is for the purpose of
18 collection only.
19 (6) An assignment of a right to payment under a contract
20 to an assignee that is also obligated to perform under the
21 contract.
22 (7) An assignment of a single account, payment
23 intangible or promissory note to an assignee in full or
24 partial satisfaction of a preexisting indebtedness.
25 (8) A transfer of an interest in or an assignment of a
26 claim under a policy of insurance, other than an assignment
27 by or to a health-care provider of a health-care-insurance
28 receivable and any subsequent assignment of the right to
29 payment. Sections 9315 (relating to secured party's rights on
30 disposition of collateral and in proceeds) and 9322 (relating
20010S0330B0817 - 77 -
1 to priorities among conflicting security interests in and
2 agricultural liens on same collateral) apply with respect to
3 proceeds and priorities in proceeds.
4 (9) An assignment of a right represented by a judgment,
5 other than a judgment taken on a right to payment which was
6 collateral.
7 (10) A right of recoupment or set-off. However:
8 (i) section 9340 (relating to effectiveness of right
9 of recoupment or set-off against deposit account) applies
10 with respect to the effectiveness of rights of recoupment
11 or set-off against deposit accounts; and
12 (ii) section 9404 (relating to rights acquired by
13 assignee; claims and defenses against assignee) applies
14 with respect to defenses or claims of an account debtor.
15 (11) The creation or transfer of an interest in or lien
16 on real property, including a lease or rents thereunder,
17 except to the extent that provision is made for:
18 (i) liens on real property in sections 9203
19 (relating to attachment and enforceability of security
20 interest; proceeds; supporting obligations; formal
21 requisites) and 9308 (relating to when security interest
22 or agricultural lien is perfected; continuity of
23 perfection);
24 (ii) fixtures in section 9334 (relating to priority
25 of security interests in fixtures and crops);
26 (iii) fixture filings in sections 9501 (relating to
27 filing office), 9502 (relating to contents of financing
28 statement; record of mortgage as financing statement;
29 time of filing financing statement), 9512 (relating to
30 amendment of financing statement), 9516 (relating to what
20010S0330B0817 - 78 -
1 constitutes filing; effectiveness of filing) and 9519
2 (relating to numbering, maintaining and indexing records;
3 communicating information provided in records); and
4 (iv) security agreements covering personal and real
5 property in section 9604 (relating to procedure if
6 security agreement covers real property or fixtures).
7 (12) An assignment of a claim arising in tort, other
8 than a commercial tort claim. Sections 9315 and 9322 apply
9 with respect to proceeds and priorities in proceeds.
10 (13) An assignment of a deposit account in a consumer
11 transaction. Sections 9315 and 9322 apply with respect to
12 proceeds and priorities in proceeds.
13 (14) A security interest in intangible transition
14 property, as defined in 66 Pa.C.S. § 2812(g) (relating to
15 approval of transition bonds), to the extent that such
16 security interest is governed by 66 Pa.C.S. § 2812 rather
17 than by this title.
18 § 9110. Security interests arising under Division 2 or 2A.
19 A security interest arising under section 2401 (relating to
20 passing of title; reservation for security; limited application
21 of section), 2505 (relating to shipment by seller under
22 reservation), 2711(c) (relating to security interest of buyer in
23 rejected goods) or 2A508(e) (relating to security interest in
24 goods in lessee's possession) is subject to this division.
25 However, until the debtor obtains possession of the goods:
26 (1) the security interest is enforceable, even if
27 section 9203(b)(3) (relating to enforceability) has not been
28 satisfied;
29 (2) filing is not required to perfect the security
30 interest;
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1 (3) the rights of the secured party after default by the
2 debtor are governed by Division 2 (relating to sales) or 2A
3 (relating to leases); and
4 (4) the security interest has priority over a
5 conflicting security interest created by the debtor.
6 CHAPTER 92
7 EFFECTIVENESS OF SECURITY AGREEMENT, ATTACHMENT OF SECURITY
8 INTEREST AND RIGHTS OF PARTIES TO SECURITY AGREEMENT
9 Subchapter
10 A. Effectiveness and Attachment
11 B. Rights and Duties
12 SUBCHAPTER A
13 EFFECTIVENESS AND ATTACHMENT
14 Sec.
15 9201. General effectiveness of security agreement.
16 9202. Title to collateral immaterial.
17 9203. Attachment and enforceability of security interest;
18 proceeds; supporting obligations; formal requisites.
19 9204. After-acquired property; future advances.
20 9205. Use or disposition of collateral permissible.
21 9206. Security interest arising in purchase or delivery of
22 financial asset.
23 § 9201. General effectiveness of security agreement.
24 (a) General effectiveness.--Except as otherwise provided in
25 this title, a security agreement is effective according to its
26 terms between the parties, against purchasers of the collateral
27 and against creditors.
28 (b) Applicable consumer laws and other law.--A transaction
29 subject to this division is subject to:
30 (1) any applicable rule of law which establishes a
20010S0330B0817 - 80 -
1 different rule for consumers;
2 (2) any other statute or regulation of the Commonwealth
3 which regulates the rates, charges, agreements and practices
4 for loans, credit sales or other extensions of credit; and
5 (3) any consumer protection statute or regulation of the
6 Commonwealth.
7 (c) Other applicable law controls.--In case of conflict
8 between this division and a rule of law, statute or regulation
9 described in subsection (b), the rule of law, statute or
10 regulation controls. Failure to comply with a statute or
11 regulation described in subsection (b) has only the effect the
12 statute or regulation specifies.
13 (d) Further deference to other applicable law.--This
14 division does not:
15 (1) validate any rate, charge, agreement or practice
16 which violates a rule of law, statute or regulation described
17 in subsection (b); or
18 (2) extend the application of the rule of law, statute
19 or regulation to a transaction not otherwise subject to it.
20 § 9202. Title to collateral immaterial.
21 Except as otherwise provided with respect to consignments or
22 sales of accounts, chattel paper, payment intangibles or
23 promissory notes, the provisions of this division with regard to
24 rights and obligations apply whether title to collateral is in
25 the secured party or the debtor.
26 § 9203. Attachment and enforceability of security interest;
27 proceeds; supporting obligations; formal requisites.
28 (a) Attachment.--A security interest attaches to collateral
29 when it becomes enforceable against the debtor with respect to
30 the collateral unless an agreement expressly postpones the time
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1 of attachment.
2 (b) Enforceability.--Except as otherwise provided in
3 subsections (c) through (i), a security interest is enforceable
4 against the debtor and third parties with respect to the
5 collateral only if all of the following apply:
6 (1) Value has been given.
7 (2) The debtor has rights in the collateral or the power
8 to transfer rights in the collateral to a secured party.
9 (3) One of the following conditions is met:
10 (i) The debtor has authenticated a security
11 agreement which provides a description of the collateral
12 and, if the security interest covers timber to be cut, a
13 description of the land concerned.
14 (ii) The collateral is not a certificated security
15 and is in the possession of the secured party under
16 section 9313 (relating to when possession by or delivery
17 to secured party perfects security interest without
18 filing) pursuant to the debtor's security agreement.
19 (iii) The collateral is a certificated security in
20 registered form and the security certificate has been
21 delivered to the secured party under section 8301
22 (relating to delivery) pursuant to the debtor's security
23 agreement.
24 (iv) The collateral is deposit accounts, electronic
25 chattel paper, investment property or letter-of-credit
26 rights, and the secured party has control under section
27 9104 (relating to control of deposit account), 9105
28 (relating to control of electronic chattel paper), 9106
29 (relating to control of investment property) or 9107
30 (relating to control of letter-of-credit right) pursuant
20010S0330B0817 - 82 -
1 to the debtor's security agreement.
2 (c) Other Title 13 provisions.--Subsection (b) is subject to
3 sections 4210 (relating to security interest of collecting bank
4 in items, accompanying documents and proceeds), 5118 (relating
5 to security interest of issuer or nominated person), 9110
6 (relating to security interests arising under Division 2 or 2A)
7 and 9206 (relating to security interest arising in purchase or
8 delivery of financial asset).
9 (d) When person becomes bound by another person's security
10 agreement.--A person becomes bound as debtor by a security
11 agreement entered into by another person if, by operation of law
12 other than this division or by contract:
13 (1) the security agreement becomes effective to create a
14 security interest in the person's property; or
15 (2) the person becomes generally obligated for the
16 obligations of the other person, including the obligation
17 secured under the security agreement, and acquires or
18 succeeds to all or substantially all of the assets of the
19 other person.
20 (e) Effect of new debtor becoming bound.--If a new debtor
21 becomes bound as debtor by a security agreement entered into by
22 another person:
23 (1) the agreement satisfies subsection (b)(3) with
24 respect to existing or after-acquired property of the new
25 debtor to the extent the property is described in the
26 agreement; and
27 (2) another agreement is not necessary to make a
28 security interest in the property enforceable.
29 (f) Proceeds and supporting obligations.--The attachment of
30 a security interest in collateral gives the secured party the
20010S0330B0817 - 83 -
1 rights to proceeds provided by section 9315 (relating to secured
2 party's rights on disposition of collateral and in proceeds) and
3 is also attachment of a security interest in a supporting
4 obligation for the collateral.
5 (g) Lien securing right to payment.--The attachment of a
6 security interest in a right to payment or performance secured
7 by a security interest or other lien on personal or real
8 property is also attachment of a security interest in the
9 security interest, mortgage or other lien.
10 (h) Security entitlement carried in securities account.--The
11 attachment of a security interest in a securities account is
12 also attachment of a security interest in the security
13 entitlements carried in the securities account.
14 (i) Commodity contracts carried in commodity account.--The
15 attachment of a security interest in a commodity account is also
16 attachment of a security interest in the commodity contracts
17 carried in the commodity account.
18 § 9204. After-acquired property; future advances.
19 (a) After-acquired collateral.--Except as otherwise provided
20 in subsection (b), a security agreement may create or provide
21 for a security interest in after-acquired collateral.
22 (b) When after-acquired property clause not effective.--A
23 security interest does not attach under a term constituting an
24 after-acquired property clause to:
25 (1) consumer goods, other than an accession when given
26 as additional security, unless the debtor acquires rights in
27 them within ten days after the secured party gives value; or
28 (2) a commercial tort claim.
29 (c) Future advances and other value.--A security agreement
30 may provide that collateral secures, or that accounts, chattel
20010S0330B0817 - 84 -
1 paper, payment intangibles or promissory notes are sold in
2 connection with, future advances or other value, whether or not
3 the advances or value are given pursuant to commitment.
4 § 9205. Use or disposition of collateral permissible.
5 (a) When security interest not invalid or fraudulent.--A
6 security interest is not invalid or fraudulent against creditors
7 solely because any of the following apply:
8 (1) The debtor has the right or ability to:
9 (i) use, commingle or dispose of all or part of the
10 collateral, including returned or repossessed goods;
11 (ii) collect, compromise, enforce or otherwise deal
12 with collateral;
13 (iii) accept the return of collateral or make
14 repossessions; or
15 (iv) use, commingle or dispose of proceeds.
16 (2) The secured party fails to require the debtor to
17 account for proceeds or replace collateral.
18 (b) Requirements of possession not relaxed.--This section
19 does not relax the requirements of possession if attachment,
20 perfection or enforcement of a security interest depends upon
21 possession of the collateral by the secured party.
22 § 9206. Security interest arising in purchase or delivery of
23 financial asset.
24 (a) Security interest when person buys through securities
25 intermediary.--A security interest in favor of a securities
26 intermediary attaches to a person's security entitlement if:
27 (1) the person buys a financial asset through the
28 securities intermediary in a transaction in which the person
29 is obligated to pay the purchase price to the securities
30 intermediary at the time of the purchase; and
20010S0330B0817 - 85 -
1 (2) the securities intermediary credits the financial
2 asset to the buyer's securities account before the buyer pays
3 the securities intermediary.
4 (b) Security interest secures obligation to pay for
5 financial asset.--The security interest described in subsection
6 (a) secures the person's obligation to pay for the financial
7 asset.
8 (c) Security interest in payment against delivery
9 transaction.--A security interest in favor of a person that
10 delivers a certificated security or other financial asset
11 represented by a writing attaches to the security or other
12 financial asset if all of the following apply:
13 (1) The security or other financial asset:
14 (i) in the ordinary course of business is
15 transferred by delivery with any necessary indorsement or
16 assignment; and
17 (ii) is delivered under an agreement between persons
18 in the business of dealing with such securities or
19 financial assets.
20 (2) The agreement calls for delivery against payment.
21 (d) Security interest secures obligation to pay for
22 delivery.--The security interest described in subsection (c)
23 secures the obligation to make payment for the delivery.
24 SUBCHAPTER B
25 RIGHTS AND DUTIES
26 Sec.
27 9207. Rights and duties of secured party having possession or
28 control of collateral.
29 9208. Additional duties of secured party having control of
30 collateral.
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1 9209. Duties of secured party if account debtor has been
2 notified of assignment.
3 9210. Request for accounting; request regarding list of
4 collateral or statement of account.
5 § 9207. Rights and duties of secured party having possession or
6 control of collateral.
7 (a) Duty of care when secured party in possession.--Except
8 as otherwise provided in subsection (d), a secured party shall
9 use reasonable care in the custody and preservation of
10 collateral in the secured party's possession. In the case of
11 chattel paper or an instrument, reasonable care includes taking
12 necessary steps to preserve rights against prior parties unless
13 otherwise agreed.
14 (b) Expenses, risks, duties and rights when secured party in
15 possession.--Except as otherwise provided in subsection (d), if
16 a secured party has possession of collateral:
17 (1) Reasonable expenses, including the cost of insurance
18 and payment of taxes or other charges, incurred in the
19 custody, preservation, use or operation of the collateral are
20 chargeable to the debtor and are secured by the collateral.
21 (2) The risk of accidental loss or damage is on the
22 debtor to the extent of a deficiency in any effective
23 insurance coverage.
24 (3) The secured party shall keep the collateral
25 identifiable, but fungible collateral may be commingled.
26 (4) The secured party may use or operate the collateral:
27 (i) for the purpose of preserving the collateral or
28 its value;
29 (ii) as permitted by an order of a court having
30 competent jurisdiction; or
20010S0330B0817 - 87 -
1 (iii) except in the case of consumer goods, in the
2 manner and to the extent agreed by the debtor.
3 (c) Duties and rights when secured party in possession or
4 control.--Except as otherwise provided in subsection (d), a
5 secured party having possession of collateral or control of
6 collateral under section 9104 (relating to control of deposit
7 account), 9105 (relating to control of electronic chattel
8 paper), 9106 (relating to control of investment property) or
9 9107 (relating to control of letter-of-credit right):
10 (1) may hold as additional security any proceeds, except
11 money or funds, received from the collateral;
12 (2) shall apply money or funds received from the
13 collateral to reduce the secured obligation, unless remitted
14 to the debtor; and
15 (3) may create a security interest in the collateral.
16 (d) Buyer of certain rights to payment.--If the secured
17 party is a buyer of accounts, chattel paper, payment intangibles
18 or promissory notes or a consignor:
19 (1) Subsection (a) does not apply unless the secured
20 party is entitled under an agreement:
21 (i) to charge back uncollected collateral; or
22 (ii) otherwise to full or limited recourse against
23 the debtor or a secondary obligor based on the nonpayment
24 or other default of an account debtor or other obligor on
25 the collateral.
26 (2) Subsections (b) and (c) do not apply.
27 § 9208. Additional duties of secured party having control of
28 collateral.
29 (a) Applicability of section.--This section applies to cases
30 in which there is no outstanding secured obligation and the
20010S0330B0817 - 88 -
1 secured party is not committed to make advances, incur
2 obligations or otherwise give value.
3 (b) Duties of secured party after receiving demand from
4 debtor.--Within ten days after receiving an authenticated demand
5 by the debtor:
6 (1) A secured party having control of a deposit account
7 under section 9104(a)(2) (relating to control of deposit
8 account) shall send to the bank with which the deposit
9 account is maintained an authenticated statement which
10 releases the bank from any further obligation to comply with
11 instructions originated by the secured party.
12 (2) A secured party having control of a deposit account
13 under section 9104(a)(3) shall:
14 (i) pay the debtor the balance on deposit in the
15 deposit account; or
16 (ii) transfer the balance on deposit into a deposit
17 account in the debtor's name.
18 (3) A secured party, other than a buyer, having control
19 of electronic chattel paper under section 9105 (relating to
20 control of electronic chattel paper) shall:
21 (i) communicate the authoritative copy of the
22 electronic chattel paper to the debtor or its designated
23 custodian;
24 (ii) if the debtor designates a custodian that is
25 the designated custodian with whom or which the
26 authoritative copy of the electronic chattel paper is
27 maintained for the secured party, communicate to the
28 custodian an authenticated record releasing the
29 designated custodian from any further obligation to
30 comply with instructions originated by the secured party
20010S0330B0817 - 89 -
1 and instructing the custodian to comply with instructions
2 originated by the debtor; and
3 (iii) take appropriate action to enable the debtor
4 or its designated custodian to make copies of or
5 revisions to the authoritative copy which add or change
6 an identified assignee of the authoritative copy without
7 the consent of the secured party.
8 (4) A secured party having control of investment
9 property under section 8106(d)(2) (relating to control of
10 security entitlement) or 9106(b) (relating to control of
11 commodity contract) shall send to the securities intermediary
12 or commodity intermediary with which the security entitlement
13 or commodity contract is maintained an authenticated record
14 which releases the securities intermediary or commodity
15 intermediary from any further obligation to comply with
16 entitlement orders or directions originated by the secured
17 party.
18 (5) A secured party having control of a letter-of-credit
19 right under section 9107 (relating to control of letter-of-
20 credit right) shall send to each person having an unfulfilled
21 obligation to pay or deliver proceeds of the letter of credit
22 to the secured party an authenticated release from any
23 further obligation to pay or deliver proceeds of the letter
24 of credit to the secured party.
25 § 9209. Duties of secured party if account debtor has been
26 notified of assignment.
27 (a) Applicability of section.--Except as otherwise provided
28 in subsection (c), this section applies if:
29 (1) there is no outstanding secured obligation; and
30 (2) the secured party is not committed to make advances,
20010S0330B0817 - 90 -
1 incur obligations or otherwise give value.
2 (b) Duties of secured party after receiving demand from
3 debtor.--Within ten days after receiving an authenticated demand
4 by the debtor, a secured party shall send to an account debtor
5 that has received notification of an assignment to the secured
6 party as assignee under section 9406(a) (relating to discharge
7 of account debtor; effect of notification) an authenticated
8 record which releases the account debtor from any further
9 obligation to the secured party.
10 (c) Inapplicability to sales.--This section does not apply
11 to an assignment constituting the sale of an account, chattel
12 paper or payment intangible.
13 § 9210. Request for accounting; request regarding list of
14 collateral or statement of account.
15 (a) Definitions.--As used in this section, the following
16 words and phrases shall have the meanings given to them in this
17 subsection:
18 "Request." A:
19 (1) request for an accounting;
20 (2) request regarding a list of collateral; or
21 (3) request regarding a statement of account.
22 "Request for an accounting." A record authenticated by a
23 debtor requesting that the recipient provide an accounting of
24 the unpaid obligations secured by collateral and reasonably
25 identifying the transaction or relationship which is the subject
26 of the request.
27 "Request regarding a list of collateral." A record
28 authenticated by a debtor requesting that the recipient approve
29 or correct a list of what the debtor believes to be the
30 collateral securing an obligation and reasonably identifying the
20010S0330B0817 - 91 -
1 transaction or relationship which is the subject of the request.
2 "Request regarding a statement of account." A record
3 authenticated by a debtor requesting that the recipient approve
4 or correct a statement indicating what the debtor believes to be
5 the aggregate amount of unpaid obligations secured by collateral
6 as of a specified date and reasonably identifying the
7 transaction or relationship which is the subject of the request.
8 (b) Duty to respond to requests.--Subject to subsections
9 (c), (d), (e) and (f), a secured party, other than a buyer of
10 accounts, chattel paper, payment intangibles or promissory notes
11 or a consignor, shall comply with a request within 14 days after
12 receipt:
13 (1) in the case of a request for an accounting, by
14 authenticating and sending to the debtor an accounting; and
15 (2) in the case of a request regarding a list of
16 collateral or a request regarding a statement of account, by
17 authenticating and sending to the debtor an approval or
18 correction.
19 (c) Request regarding list of collateral; statement
20 concerning type of collateral.--A secured party that claims a
21 security interest in all of a particular type of collateral
22 owned by the debtor may comply with a request regarding a list
23 of collateral by sending to the debtor an authenticated record
24 including a statement to that effect within 14 days after
25 receipt.
26 (d) Request regarding list of collateral; no interest
27 claimed.--A person that receives a request regarding a list of
28 collateral, claims no interest in the collateral when it
29 receives the request and claimed an interest in the collateral
30 at an earlier time shall comply with the request within 14 days
20010S0330B0817 - 92 -
1 after receipt by sending to the debtor an authenticated record:
2 (1) disclaiming any interest in the collateral; and
3 (2) if known to the recipient, providing the name and
4 mailing address of any assignee of or successor to the
5 recipient's interest in the collateral.
6 (e) Request for accounting or regarding statement of
7 account; no interest in obligation claimed.--A person that
8 receives a request for an accounting or a request regarding a
9 statement of account, claims no interest in the obligations when
10 it receives the request and claimed an interest in the
11 obligations at an earlier time shall comply with the request
12 within 14 days after receipt by sending to the debtor an
13 authenticated record:
14 (1) disclaiming any interest in the obligations; and
15 (2) if known to the recipient, providing the name and
16 mailing address of any assignee of or successor to the
17 recipient's interest in the obligations.
18 (f) Charges for responses.--A debtor is entitled without
19 charge to one response to a request under this section during
20 any six-month period. The secured party may require payment of a
21 charge not exceeding $25 for each additional response.
22 CHAPTER 93
23 PERFECTION AND PRIORITY
24 Subchapter
25 A. Law Governing Perfection and Priority
26 B. Perfection
27 C. Priority
28 D. Rights of Bank
29 SUBCHAPTER A
30 LAW GOVERNING PERFECTION AND PRIORITY
20010S0330B0817 - 93 -
1 Sec.
2 9301. Law governing perfection and priority of security
3 interests.
4 9302. Law governing perfection and priority of agricultural
5 liens.
6 9303. Law governing perfection and priority of security
7 interests in goods covered by certificate of title.
8 9304. Law governing perfection and priority of security
9 interests in deposit accounts.
10 9305. Law governing perfection and priority of security
11 interests in investment property.
12 9306. Law governing perfection and priority of security
13 interests in letter-of-credit rights.
14 9307. Location of debtor.
15 § 9301. Law governing perfection and priority of security
16 interests.
17 (a) General rule; location of debtor.--Except as otherwise
18 provided in this section, while a debtor is located in a
19 jurisdiction, the local law of that jurisdiction governs
20 perfection, the effect of perfection or nonperfection and the
21 priority of a security interest in collateral.
22 (b) Possessory security interests; location of collateral.--
23 While collateral is located in a jurisdiction, the local law of
24 that jurisdiction governs perfection, the effect of perfection
25 or nonperfection and the priority of a possessory security
26 interest in that collateral.
27 (c) Fixture filings, timber to be cut, priority of
28 nonpossessory tangible personal property security interests;
29 location of collateral.--Except as otherwise provided in
30 subsection (d), while collateral is located in a jurisdiction,
20010S0330B0817 - 94 -
1 the local law of that jurisdiction governs:
2 (1) perfection of a security interest in goods by filing
3 a fixture filing;
4 (2) perfection of a security interest in timber to be
5 cut; and
6 (3) the effect of perfection or nonperfection and the
7 priority of a nonpossessory security interest in negotiable
8 documents, goods, instruments, money or tangible chattel
9 paper.
10 (d) As-extracted collateral; location of wellhead or
11 minehead.--The local law of the jurisdiction in which the
12 wellhead or minehead is located governs perfection, the effect
13 of perfection or nonperfection and the priority of a security
14 interest in as-extracted collateral.
15 (e) Other exceptions.--The rules of this section are subject
16 to:
17 (1) Section 9303 (relating to law governing perfection
18 and priority of security interests in goods covered by
19 certificate of title).
20 (2) Section 9304 (relating to law governing perfection
21 and priority of security interests in deposit accounts).
22 (3) Section 9305 (relating to law governing perfection
23 and priority of security interests in investment property).
24 (4) Section 9306 (relating to law governing perfection
25 and priority of security interests in letter-of-credit
26 rights).
27 § 9302. Law governing perfection and priority of agricultural
28 liens.
29 While farm products are located in a jurisdiction, the local
30 law of that jurisdiction governs perfection, the effect of
20010S0330B0817 - 95 -
1 perfection or nonperfection and the priority of an agricultural
2 lien on the farm products.
3 § 9303. Law governing perfection and priority of security
4 interests in goods covered by certificate of title.
5 (a) Applicability of section.--This section applies to goods
6 covered by a certificate of title, even if there is no other
7 relationship between the jurisdiction under whose certificate of
8 title the goods are covered and the goods or the debtor.
9 (b) When goods covered by certificate of title.--Goods
10 become covered by a certificate of title when a valid
11 application for the certificate of title and the applicable fee
12 are delivered to the appropriate authority. Goods cease to be
13 covered by a certificate of title at the earlier of the time the
14 certificate of title ceases to be effective under the law of the
15 issuing jurisdiction or the time the goods become covered
16 subsequently by a certificate of title issued by another
17 jurisdiction.
18 (c) Applicable law.--The local law of the jurisdiction under
19 whose certificate of title the goods are covered governs
20 perfection, the effect of perfection or nonperfection and the
21 priority of a security interest in goods covered by a
22 certificate of title from the time the goods become covered by
23 the certificate of title until the goods cease to be covered by
24 the certificate of title.
25 § 9304. Law governing perfection and priority of security
26 interests in deposit accounts.
27 (a) Law of bank's jurisdiction governs.--The local law of a
28 bank's jurisdiction governs perfection, the effect of perfection
29 or nonperfection and the priority of a security interest in a
30 deposit account maintained with that bank.
20010S0330B0817 - 96 -
1 (b) Bank's jurisdiction.--The following rules determine a
2 bank's jurisdiction for purposes of this chapter:
3 (1) If an agreement between the bank and the debtor
4 governing the deposit account expressly provides that a
5 particular jurisdiction is the bank's jurisdiction for
6 purposes of this chapter, this division or this title, that
7 jurisdiction is the bank's jurisdiction.
8 (2) If paragraph (1) does not apply and an agreement
9 between the bank and its customer governing the deposit
10 account expressly provides that the agreement is governed by
11 the law of a particular jurisdiction, that jurisdiction is
12 the bank's jurisdiction.
13 (3) If neither paragraph (1) nor paragraph (2) applies
14 and an agreement between the bank and its customer governing
15 the deposit account expressly provides that the deposit
16 account is maintained at an office in a particular
17 jurisdiction, that jurisdiction is the bank's jurisdiction.
18 (4) If none of the preceding paragraphs applies, the
19 bank's jurisdiction is the jurisdiction in which the office
20 identified in an account statement as the office serving the
21 customer's account is located.
22 (5) If none of the preceding paragraphs applies, the
23 bank's jurisdiction is the jurisdiction in which the chief
24 executive office of the bank is located.
25 § 9305. Law governing perfection and priority of security
26 interests in investment property.
27 (a) Governing law; general rules.--Except as otherwise
28 provided in subsection (c), the following rules apply:
29 (1) While a security certificate is located in a
30 jurisdiction, the local law of that jurisdiction governs
20010S0330B0817 - 97 -
1 perfection, the effect of perfection or nonperfection and the
2 priority of a security interest in the certificated security
3 represented thereby.
4 (2) The local law of the issuer's jurisdiction as
5 specified in section 8110(d) (relating to applicability;
6 choice of law) governs perfection, the effect of perfection
7 or nonperfection and the priority of a security interest in
8 an uncertificated security.
9 (3) The local law of the securities intermediary's
10 jurisdiction as specified in section 8110(e) governs
11 perfection, the effect of perfection or nonperfection and the
12 priority of a security interest in a security entitlement or
13 securities account.
14 (4) The local law of the commodity intermediary's
15 jurisdiction governs perfection, the effect of perfection or
16 nonperfection and the priority of a security interest in a
17 commodity contract or commodity account.
18 (b) Commodity intermediary's jurisdiction.--The following
19 rules determine a commodity intermediary's jurisdiction for
20 purposes of this part:
21 (1) If an agreement between the commodity intermediary
22 and commodity customer governing the commodity account
23 expressly provides that a particular jurisdiction is the
24 commodity intermediary's jurisdiction for purposes of this
25 chapter, this division or this title, that jurisdiction is
26 the commodity intermediary's jurisdiction.
27 (2) If paragraph (1) does not apply and an agreement
28 between the commodity intermediary and commodity customer
29 governing the commodity account expressly provides that the
30 agreement is governed by the law of a particular
20010S0330B0817 - 98 -
1 jurisdiction, that jurisdiction is the commodity
2 intermediary's jurisdiction.
3 (3) If neither paragraph (1) nor paragraph (2) applies
4 and an agreement between the commodity intermediary and
5 commodity customer governing the commodity account expressly
6 provides that the commodity account is maintained at an
7 office in a particular jurisdiction, that jurisdiction is the
8 commodity intermediary's jurisdiction.
9 (4) If none of the preceding paragraphs applies, the
10 commodity intermediary's jurisdiction is the jurisdiction in
11 which the office identified in an account statement as the
12 office serving the commodity customer's account is located.
13 (5) If none of the preceding paragraphs applies, the
14 commodity intermediary's jurisdiction is the jurisdiction in
15 which the chief executive office of the commodity
16 intermediary is located.
17 (c) When perfection governed by law of jurisdiction where
18 debtor located.--The local law of the jurisdiction in which the
19 debtor is located governs:
20 (1) perfection of a security interest in investment
21 property by filing;
22 (2) automatic perfection of a security interest in
23 investment property created by a broker or securities
24 intermediary; and
25 (3) automatic perfection of a security interest in a
26 commodity contract or commodity account created by a
27 commodity intermediary.
28 § 9306. Law governing perfection and priority of security
29 interests in letter-of-credit rights.
30 (a) Governing law; issuer's or nominated person's
20010S0330B0817 - 99 -
1 jurisdiction.--Subject to subsection (c), the local law of the
2 issuer's jurisdiction or a nominated person's jurisdiction
3 governs perfection, the effect of perfection or nonperfection
4 and the priority of a security interest in a letter-of-credit
5 right if the issuer's jurisdiction or nominated person's
6 jurisdiction is a state.
7 (b) Issuer's or nominated person's jurisdiction.--For
8 purposes of this chapter, an issuer's jurisdiction or nominated
9 person's jurisdiction is the jurisdiction whose law governs the
10 liability of the issuer or nominated person with respect to the
11 letter-of-credit right as provided in section 5116 (relating to
12 choice of law and forum).
13 (c) When section not applicable.--This section does not
14 apply to a security interest which is perfected only under
15 section 9308(d) (relating to supporting obligation).
16 § 9307. Location of debtor.
17 (a) Place of business.--As used in this section, the term
18 "place of business" means a place where a debtor conducts its
19 affairs.
20 (b) Debtor's location: general rules.--Except as otherwise
21 provided in this section, the following rules determine a
22 debtor's location:
23 (1) A debtor who is an individual is located at the
24 individual's principal residence.
25 (2) A debtor which is an organization and has only one
26 place of business is located at its place of business.
27 (3) A debtor which is an organization and has more than
28 one place of business is located at its chief executive
29 office.
30 (c) Limitation of applicability of subsection (b).--
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1 Subsection (b) applies only if a debtor's residence, place of
2 business or chief executive office, as applicable, is located in
3 a jurisdiction whose law generally requires information
4 concerning the existence of a nonpossessory security interest to
5 be made generally available in a filing, recording or
6 registration system as a condition or result of the security
7 interest's obtaining priority over the rights of a lien creditor
8 with respect to the collateral. If subsection (b) does not
9 apply, the debtor is located in the District of Columbia.
10 (d) Continuation of location: cessation of existence, etc.--
11 A person that ceases to exist, ceases to have a residence or
12 ceases to have a place of business continues to be located in
13 the jurisdiction specified by subsections (b) and (c).
14 (e) Location of registered organization organized under
15 state law.--A registered organization which is organized under
16 the law of a state is located in that state.
17 (f) Location of registered organization organized under
18 Federal law; bank branches and agencies.--Except as otherwise
19 provided in subsection (i), a registered organization which is
20 organized under the law of the United States and a branch or
21 agency of a bank which is not organized under the law of the
22 United States or a state are located:
23 (1) in the state which the law of the United States
24 designates, if the law designates a state of location;
25 (2) in the state which the registered organization,
26 branch or agency designates, if the law of the United States
27 authorizes the registered organization, branch or agency to
28 designate its state of location; or
29 (3) in the District of Columbia, if neither paragraph
30 (1) nor paragraph (2) applies.
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1 (g) Continuation of location: change in status of registered
2 organization.--A registered organization continues to be located
3 in the jurisdiction specified by subsection (e) or (f)
4 notwithstanding:
5 (1) the suspension, revocation, forfeiture or lapse of
6 the registered organization's status as such in its
7 jurisdiction of organization; or
8 (2) the dissolution, winding up or cancellation of the
9 existence of the registered organization.
10 (h) Location of United States.--The location of the United
11 States is the District of Columbia.
12 (i) Location of foreign bank branch or agency if licensed in
13 only one state.--A branch or agency of a bank which is not
14 organized under the law of the United States or a state is
15 located in the state in which the branch or agency is licensed,
16 if all branches and agencies of the bank are licensed in only
17 one state.
18 (j) Location of foreign air carrier.--A foreign air carrier
19 under the Federal Aviation Act of 1958 (Public Law 85-726, 72
20 Stat. 731), as amended, is located at the designated office of
21 the agent upon which service of process may be made on behalf of
22 the carrier.
23 (k) Section applies only to this chapter.--This section
24 applies only for purposes of this chapter.
25 SUBCHAPTER B
26 PERFECTION
27 Sec.
28 9308. When security interest or agricultural lien is perfected;
29 continuity of perfection.
30 9309. Security interest perfected upon attachment.
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1 9310. When filing required to perfect security interest or
2 agricultural lien; security interests and agricultural
3 liens to which filing provisions do not apply.
4 9311. Perfection of security interests in property subject to
5 certain statutes, regulations and treaties.
6 9312. Perfection of security interests in chattel paper, deposit
7 accounts, documents, goods covered by documents,
8 instruments, investment property, letter-of-credit rights
9 and money; perfection by permissive filing; temporary
10 perfection without filing or transfer of possession.
11 9313. When possession by or delivery to secured party perfects
12 security interest without filing.
13 9314. Perfection by control.
14 9315. Secured party's rights on disposition of collateral and
15 in proceeds.
16 9316. Continued perfection of security interest following
17 change in governing law.
18 § 9308. When security interest or agricultural lien is
19 perfected; continuity of perfection.
20 (a) Perfection of security interest.--Except as otherwise
21 provided in this section and section 9309 (relating to security
22 interest perfected upon attachment), a security interest is
23 perfected if it has attached and all of the applicable
24 requirements for perfection in sections 9310 (relating to when
25 filing required to perfect security interest or agricultural
26 lien; security interests and agricultural liens to which filing
27 provisions do not apply) through 9316 (relating to continued
28 perfection of security interest following change in governing
29 law) have been satisfied. A security interest is perfected when
30 it attaches if the applicable requirements are satisfied before
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1 the security interest attaches.
2 (b) Perfection of agricultural lien.--An agricultural lien
3 is perfected if it has become effective and all of the
4 applicable requirements for perfection in section 9310 have been
5 satisfied. An agricultural lien is perfected when it becomes
6 effective if the applicable requirements are satisfied before
7 the agricultural lien becomes effective.
8 (c) Continuous perfection; perfection by different
9 methods.--A security interest or agricultural lien is perfected
10 continuously if it is originally perfected by one method under
11 this division and is later perfected by another method under
12 this division without an intermediate period when it was
13 unperfected.
14 (d) Supporting obligation.--Perfection of a security
15 interest in collateral also perfects a security interest in a
16 supporting obligation for the collateral.
17 (e) Lien securing right to payment.--Perfection of a
18 security interest in a right to payment or performance also
19 perfects a security interest in a security interest, mortgage or
20 other lien on personal or real property securing the right.
21 (f) Security entitlement carried in securities account.--
22 Perfection of a security interest in a securities account also
23 perfects a security interest in the security entitlements
24 carried in the securities account.
25 (g) Commodity contract carried in commodity account.--
26 Perfection of a security interest in a commodity account also
27 perfects a security interest in the commodity contracts carried
28 in the commodity account.
29 § 9309. Security interest perfected upon attachment.
30 The following security interests are perfected when they
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1 attach:
2 (1) A purchase-money security interest in consumer
3 goods, except as otherwise provided in section 9311(b)
4 (relating to perfection of security interests in property
5 subject to certain statutes, regulations and treaties) with
6 respect to consumer goods which are subject to a statute or
7 treaty described in section 9311(a).
8 (2) An assignment of accounts or payment intangibles
9 which does not by itself or in conjunction with other
10 assignments to the same assignee transfer a significant part
11 of the assignor's outstanding accounts or payment
12 intangibles.
13 (3) A sale of a payment intangible.
14 (4) A sale of a promissory note.
15 (5) A security interest created by the assignment of a
16 health-care-insurance receivable to the provider of the
17 health-care goods or services.
18 (6) A security interest arising under section 2401
19 (relating to passing of title; reservation for security;
20 limited application of section), 2505 (relating to shipment
21 by seller under reservation), 2711(c) (relating to security
22 interest of buyer in rejected goods) or 2A508(e) (relating to
23 security interest in goods in lessee's possession), until the
24 debtor obtains possession of the collateral.
25 (7) A security interest of a collecting bank arising
26 under section 4210 (relating to security interest of
27 collecting bank in items, accompanying documents and
28 proceeds).
29 (8) A security interest of an issuer or nominated person
30 arising under section 5118 (relating to security interest of
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1 issuer or nominated person).
2 (9) A security interest arising in the delivery of a
3 financial asset under section 9206(c) (relating to security
4 interest in payment against delivery transaction).
5 (10) A security interest in investment property created
6 by a broker or securities intermediary.
7 (11) A security interest in a commodity contract or a
8 commodity account created by a commodity intermediary.
9 (12) An assignment for the benefit of all creditors of
10 the transferor and subsequent transfers by the assignee
11 thereunder.
12 (13) A security interest created by an assignment of a
13 beneficial interest in a decedent's estate.
14 § 9310. When filing required to perfect security interest or
15 agricultural lien; security interests and
16 agricultural liens to which filing provisions do not
17 apply.
18 (a) General rule: perfection by filing.--Except as otherwise
19 provided in subsection (b) and section 9312(b) (relating to
20 control or possession of certain collateral), a financing
21 statement must be filed to perfect all security interests and
22 agricultural liens.
23 (b) Exceptions: filing not necessary.--The filing of a
24 financing statement is not necessary to perfect a security
25 interest:
26 (1) which is perfected under section:
27 (i) 9308(d) (relating to supporting obligation);
28 (ii) 9308(e) (relating to lien securing right to
29 payment);
30 (iii) 9308(f) (relating to security entitlement
20010S0330B0817 - 106 -
1 carried in securities account); or
2 (iv) 9308(g) (relating to commodity contract carried
3 in commodity account);
4 (2) which is perfected under section 9309 (relating to
5 security interest perfected upon attachment) when it
6 attaches;
7 (3) in property subject to a statute, regulation or
8 treaty described in section 9311(a) (relating to perfection
9 of security interests in property subject to certain
10 statutes, regulations and treaties);
11 (4) in goods in possession of a bailee which is
12 perfected under section 9312(d)(1) or (2) (relating to goods
13 covered by nonnegotiable document);
14 (5) in certificated securities, documents, goods or
15 instruments which is perfected without filing or possession
16 under section:
17 (i) 9312(e) (relating to temporary perfection: new
18 value);
19 (ii) 9312(f) (relating to temporary perfection:
20 goods or documents made available to debtor); or
21 (iii) 9312(g) (relating to temporary perfection:
22 delivery of security certificate or instrument to
23 debtor);
24 (6) in collateral in the secured party's possession
25 under section 9313 (relating to when possession by or
26 delivery to secured party perfects security interest without
27 filing);
28 (7) in a certificated security which is perfected by
29 delivery of the security certificate to the secured party
30 under section 9313;
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1 (8) in deposit accounts, electronic chattel paper,
2 investment property or letter-of-credit rights which is
3 perfected by control under section 9314 (relating to
4 perfection by control);
5 (9) in proceeds which is perfected under section 9315
6 (relating to secured party's rights on disposition of
7 collateral and in proceeds); or
8 (10) which is perfected under section 9316 (relating to
9 continued perfection of security interest following change in
10 governing law).
11 (c) Assignment of perfected security interest.--If a secured
12 party assigns a perfected security interest or agricultural
13 lien, a filing under this division is not required to continue
14 the perfected status of the security interest against creditors
15 of and transferees from the original debtor.
16 § 9311. Perfection of security interests in property subject to
17 certain statutes, regulations and treaties.
18 (a) Security interest subject to other law.--Except as
19 otherwise provided in subsection (d), the filing of a financing
20 statement is not necessary or effective to perfect a security
21 interest in property subject to:
22 (1) a statute, regulation or treaty of the United States
23 whose requirements for a security interest's obtaining
24 priority over the rights of a lien creditor with respect to
25 the property preempt section 9310(a) (relating to when filing
26 required to perfect security interest or agricultural lien;
27 security interests and agricultural liens to which filing
28 provisions do not apply);
29 (2) a certificate-of-title statute of this Commonwealth
30 or regulations promulgated thereunder, to the extent such
20010S0330B0817 - 108 -
1 statute or regulations provide for a security interest to be
2 indicated on the certificate as a condition or result of
3 perfection; or
4 (3) a certificate-of-title statute of another
5 jurisdiction which provides for a security interest to be
6 indicated on the certificate as a condition or result of the
7 security interest's obtaining priority over the rights of a
8 lien creditor with respect to the property.
9 (b) Compliance with other law.--Compliance with the
10 requirements of a statute, regulation or treaty described in
11 subsection (a) for obtaining priority over the rights of a lien
12 creditor is equivalent to the filing of a financing statement
13 under this division. Except as otherwise provided in subsection
14 (d) and sections 9313 (relating to when possession by or
15 delivery to secured party perfects security interest without
16 filing) and 9316(d) and (e) (relating to continued perfection of
17 security interest following change in governing law) for goods
18 covered by a certificate of title, a security interest in
19 property subject to a statute, regulation or treaty described in
20 subsection (a) may be perfected only by compliance with those
21 requirements, and a security interest so perfected remains
22 perfected notwithstanding a change in the use or transfer of
23 possession of the collateral.
24 (c) Duration and renewal of perfection.--Except as otherwise
25 provided in subsection (d) and section 9316(d) and (e), duration
26 and renewal of perfection of a security interest perfected by
27 compliance with the requirements prescribed by a statute,
28 regulation or treaty described in subsection (a) are governed by
29 the statute, regulation or treaty. In other respects, the
30 security interest is subject to this division.
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1 (d) Inapplicability to certain inventory.--During any period
2 in which collateral subject to a statute specified in subsection
3 (a)(2) is inventory held for sale or lease by a person or leased
4 by that person as lessor and that person is in the business of
5 selling goods of that kind, this section does not apply to a
6 security interest in that collateral created by that person.
7 § 9312. Perfection of security interests in chattel paper,
8 deposit accounts, documents, goods covered by
9 documents, instruments, investment property, letter-
10 of-credit rights and money; perfection by permissive
11 filing; temporary perfection without filing or
12 transfer of possession.
13 (a) Perfection by filing permitted.--A security interest in
14 chattel paper, negotiable documents, instruments or investment
15 property may be perfected by filing.
16 (b) Control or possession of certain collateral.--Except as
17 otherwise provided in section 9315(c) (relating to perfection of
18 security interest in proceeds) and (d) (relating to continuation
19 of perfection) for proceeds:
20 (1) a security interest in a deposit account may be
21 perfected only by control under section 9314 (relating to
22 perfection by control);
23 (2) except as otherwise provided in section 9308(d)
24 (relating to supporting obligation), a security interest in a
25 letter-of-credit right may be perfected only by control under
26 section 9314; and
27 (3) a security interest in money may be perfected only
28 by the secured party's taking possession under section 9313
29 (relating to when possession by or delivery to secured party
30 perfects security interest without filing).
20010S0330B0817 - 110 -
1 (c) Goods covered by negotiable document.--While goods are
2 in the possession of a bailee that has issued a negotiable
3 document covering the goods:
4 (1) a security interest in the goods may be perfected by
5 perfecting a security interest in the document; and
6 (2) a security interest perfected in the document has
7 priority over any security interest which becomes perfected
8 in the goods by another method during that time.
9 (d) Goods covered by nonnegotiable document.--While goods
10 are in the possession of a bailee that has issued a
11 nonnegotiable document covering the goods, a security interest
12 in the goods may be perfected by:
13 (1) issuance of a document in the name of the secured
14 party;
15 (2) the bailee's receipt of notification of the secured
16 party's interest; or
17 (3) filing as to the goods.
18 (e) Temporary perfection: new value.--A security interest in
19 certificated securities, negotiable documents or instruments is
20 perfected without filing or the taking of possession for a
21 period of 20 days from the time it attaches to the extent that
22 it arises for new value given under an authenticated security
23 agreement.
24 (f) Temporary perfection: goods or documents made available
25 to debtor.--A perfected security interest in a negotiable
26 document or goods in possession of a bailee, other than one that
27 has issued a negotiable document for the goods, remains
28 perfected for 20 days without filing if the secured party makes
29 available to the debtor the goods or documents representing the
30 goods for the purpose of:
20010S0330B0817 - 111 -
1 (1) ultimate sale or exchange; or
2 (2) loading, unloading, storing, shipping,
3 transshipping, manufacturing, processing or otherwise dealing
4 with them in a manner preliminary to their sale or exchange.
5 (g) Temporary perfection: delivery of security certificate
6 or instrument to debtor.--A perfected security interest in a
7 certificated security or instrument remains perfected for 20
8 days without filing if the secured party delivers the security
9 certificate or instrument to the debtor for the purpose of:
10 (1) ultimate sale or exchange; or
11 (2) presentation, collection, enforcement, renewal or
12 registration of transfer.
13 (h) Expiration of temporary perfection.--After the 20-day
14 period specified in subsection (e), (f) or (g) expires,
15 perfection depends upon compliance with this division.
16 § 9313. When possession by or delivery to secured party
17 perfects security interest without filing.
18 (a) Perfection by possession or delivery.--Except as
19 otherwise provided in subsection (b), a secured party may
20 perfect a security interest in negotiable documents, goods,
21 instruments, money or tangible chattel paper by taking
22 possession of the collateral. A secured party may perfect a
23 security interest in certificated securities by taking delivery
24 under section 8301 (relating to delivery).
25 (b) Goods covered by certificate of title.--With respect to
26 goods covered by a certificate of title issued by the
27 Commonwealth, a secured party may perfect a security interest in
28 the goods by taking possession of the goods only in the
29 circumstances described in section 9316(d) (relating to
30 continued perfection of security interest following change in
20010S0330B0817 - 112 -
1 governing law).
2 (c) Collateral in possession of person other than debtor.--
3 With respect to collateral other than certificated securities
4 and goods covered by a document, a secured party takes
5 possession of collateral in the possession of a person other
6 than the debtor, the secured party or a lessee of the collateral
7 from the debtor in the ordinary course of the debtor's business,
8 when:
9 (1) the person in possession authenticates a record
10 acknowledging that the person holds possession of the
11 collateral for the secured party's benefit; or
12 (2) the person takes possession of the collateral after
13 having authenticated a record acknowledging that the person
14 will hold possession of the collateral for the secured
15 party's benefit.
16 (d) Time of perfection by possession; continuation of
17 perfection.--If perfection of a security interest depends upon
18 possession of the collateral by a secured party, perfection
19 occurs no earlier than the time the secured party takes
20 possession and continues only while the secured party retains
21 possession.
22 (e) Time of perfection by delivery; continuation of
23 perfection.--A security interest in a certificated security in
24 registered form is perfected by delivery when delivery of the
25 certificated security occurs under section 8301 and remains
26 perfected by delivery until the debtor obtains possession of the
27 security certificate.
28 (f) Acknowledgment not required.--A person in possession of
29 collateral is not required to acknowledge that the person holds
30 possession for a secured party's benefit.
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1 (g) Effectiveness of acknowledgment; no duties or
2 confirmation.--If a person acknowledges that the person holds
3 possession for the secured party's benefit:
4 (1) the acknowledgment is effective under subsection (c)
5 or section 8301(a) (relating to delivery of certificated
6 security), even if the acknowledgment violates the rights of
7 a debtor; and
8 (2) unless the person otherwise agrees or law other than
9 this division otherwise provides, the person does not owe any
10 duty to the secured party and is not required to confirm the
11 acknowledgment to another person.
12 (h) Secured party's delivery to person other than debtor.--A
13 secured party having possession of collateral does not
14 relinquish possession by delivering the collateral to a person
15 other than the debtor or a lessee of the collateral from the
16 debtor in the ordinary course of the debtor's business if the
17 person was instructed before the delivery or is instructed
18 contemporaneously with the delivery:
19 (1) to hold possession of the collateral for the secured
20 party's benefit; or
21 (2) to redeliver the collateral to the secured party.
22 (i) Effect of delivery under subsection (h); no duties or
23 confirmation.--A secured party does not relinquish possession,
24 even if a delivery under subsection (h) violates the rights of a
25 debtor. A person to which collateral is delivered under
26 subsection (h) does not owe any duty to the secured party and is
27 not required to confirm the delivery to another person unless
28 the person otherwise agrees or law other than this division
29 otherwise provides.
30 § 9314. Perfection by control.
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1 (a) Perfection by control.--A security interest in
2 investment property, deposit accounts, letter-of-credit rights
3 or electronic chattel paper may be perfected by control of the
4 collateral under section 9104 (relating to control of deposit
5 account), 9105 (relating to control of electronic chattel
6 paper), 9106 (relating to control of investment property) or
7 9107 (relating to control of letter-of-credit right).
8 (b) Specified collateral: time of perfection by control;
9 continuation of perfection.--A security interest in deposit
10 accounts, electronic chattel paper or letter-of-credit rights is
11 perfected by control under section 9104, 9105 or 9107 when the
12 secured party obtains control and remains perfected by control
13 only while the secured party retains control.
14 (c) Investment property: time of perfection by control;
15 continuation of perfection.--A security interest in investment
16 property is perfected by control under section 9106 from the
17 time the secured party obtains control and remains perfected by
18 control until both of the following paragraphs apply:
19 (1) The secured party does not have control.
20 (2) One of the following occurs:
21 (i) If the collateral is a certificated security,
22 the debtor has or acquires possession of the security
23 certificate.
24 (ii) If the collateral is an uncertificated
25 security, the issuer has registered or registers the
26 debtor as the registered owner.
27 (iii) If the collateral is a security entitlement,
28 the debtor is or becomes the entitlement holder.
29 § 9315. Secured party's rights on disposition of collateral and
30 in proceeds.
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1 (a) Disposition of collateral: continuation of security
2 interest or agricultural lien; proceeds.--Except as otherwise
3 provided in this division and in section 2403(b) (relating to
4 transfer by merchant entrusted with possession of goods):
5 (1) a security interest or agricultural lien continues
6 in collateral notwithstanding sale, lease, license, exchange
7 or other disposition thereof unless the secured party
8 authorized the disposition free of the security interest or
9 agricultural lien; and
10 (2) a security interest attaches to any identifiable
11 proceeds of collateral.
12 (b) When commingled proceeds identifiable.--Proceeds which
13 are commingled with other property are identifiable proceeds:
14 (1) if the proceeds are goods, to the extent provided by
15 section 9336 (relating to commingled goods); and
16 (2) if the proceeds are not goods, to the extent that
17 the secured party identifies the proceeds by a method of
18 tracing, including application of equitable principles, that
19 is permitted under law other than this division with respect
20 to commingled property of the type involved.
21 (c) Perfection of security interest in proceeds.--A security
22 interest in proceeds is a perfected security interest if the
23 security interest in the original collateral was perfected.
24 (d) Continuation of perfection.--A perfected security
25 interest in proceeds becomes unperfected on the 21st day after
26 the security interest attaches to the proceeds unless one of the
27 following paragraphs applies:
28 (1) The conditions set forth in all of the following
29 subparagraphs are satisfied:
30 (i) A filed financing statement covers the original
20010S0330B0817 - 116 -
1 collateral.
2 (ii) The proceeds are collateral in which a security
3 interest may be perfected by filing in the office in
4 which the financing statement has been filed.
5 (iii) The proceeds are not acquired with cash
6 proceeds.
7 (2) The proceeds are identifiable cash proceeds.
8 (3) The security interest in the proceeds is perfected
9 other than under subsection (c) when the security interest
10 attaches to the proceeds or within 20 days thereafter.
11 (e) When perfected security interest in proceeds becomes
12 unperfected.--If a filed financing statement covers the original
13 collateral, a security interest in proceeds which remains
14 perfected under subsection (d)(1) becomes unperfected at the
15 later of:
16 (1) when the effectiveness of the filed financing
17 statement lapses under section 9515 (relating to duration and
18 effectiveness of financing statement; effect of lapsed
19 financing statement) or is terminated under section 9513
20 (relating to termination statement); or
21 (2) the 21st day after the security interest attaches to
22 the proceeds.
23 § 9316. Continued perfection of security interest following
24 change in governing law.
25 (a) General rule: effect on perfection of change in
26 governing law.--A security interest perfected pursuant to the
27 law of the jurisdiction designated in section 9301(a) (relating
28 to general rule: location of debtor) or 9305(c) (relating to
29 when perfection governed by law of jurisdiction where debtor
30 located) remains perfected until the earliest of:
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1 (1) the time perfection would have ceased under the law
2 of that jurisdiction;
3 (2) the expiration of four months after a change of the
4 debtor's location to another jurisdiction; or
5 (3) the expiration of one year after a transfer of
6 collateral to a person that thereby becomes a debtor and is
7 located in another jurisdiction.
8 (b) Security interest perfected or unperfected under law of
9 new jurisdiction.--If a security interest described in
10 subsection (a) becomes perfected under the law of the other
11 jurisdiction before the earliest time or event described in that
12 subsection, it remains perfected thereafter. If the security
13 interest does not become perfected under the law of the other
14 jurisdiction before the earliest time or event, it becomes
15 unperfected and is deemed never to have been perfected as
16 against a purchaser of the collateral for value.
17 (c) Possessory security interest in collateral moved to new
18 jurisdiction.--A possessory security interest in collateral,
19 other than goods covered by a certificate of title and as-
20 extracted collateral consisting of goods, remains continuously
21 perfected if:
22 (1) the collateral is located in one jurisdiction and
23 subject to a security interest perfected under the law of
24 that jurisdiction;
25 (2) thereafter the collateral is brought into another
26 jurisdiction; and
27 (3) upon entry into the other jurisdiction, the security
28 interest is perfected under the law of the other
29 jurisdiction.
30 (d) Goods covered by certificate of title from the
20010S0330B0817 - 118 -
1 Commonwealth.--Except as otherwise provided in subsection (e), a
2 security interest in goods covered by a certificate of title
3 which is perfected by any method under the law of another
4 jurisdiction when the goods become covered by a certificate of
5 title from the Commonwealth remains perfected until the security
6 interest would have become unperfected under the law of the
7 other jurisdiction had the goods not become so covered.
8 (e) When subsection (d) security interest becomes
9 unperfected against purchasers.--A security interest described
10 in subsection (d) becomes unperfected as against a purchaser of
11 the goods for value and is deemed never to have been perfected
12 as against a purchaser of the goods for value if the applicable
13 requirements for perfection under section 9311(b) (relating to
14 perfection of security interests in property subject to certain
15 statutes, regulations and treaties) or 9313 (relating to when
16 possession by or delivery to secured party perfects security
17 interest without filing) are not satisfied before the earlier
18 of:
19 (1) the time the security interest would have become
20 unperfected under the law of the other jurisdiction had the
21 goods not become covered by a certificate of title from the
22 Commonwealth; or
23 (2) the expiration of four months after the goods had
24 become so covered.
25 (f) Change in jurisdiction of bank, issuer, nominated
26 person, securities intermediary or commodity intermediary.--A
27 security interest in deposit accounts, letter-of-credit rights
28 or investment property which is perfected under the law of the
29 bank's jurisdiction, the issuer's jurisdiction, a nominated
30 person's jurisdiction, the securities intermediary's
20010S0330B0817 - 119 -
1 jurisdiction or the commodity intermediary's jurisdiction, as
2 applicable, remains perfected until the earlier of:
3 (1) the time the security interest would have become
4 unperfected under the law of that jurisdiction; or
5 (2) the expiration of four months after a change of the
6 applicable jurisdiction to another jurisdiction.
7 (g) Subsection (f) security interest perfected or
8 unperfected under law of new jurisdiction.--If a security
9 interest described in subsection (f) becomes perfected under the
10 law of the other jurisdiction before the earlier of the time or
11 the end of the period described in that subsection, it remains
12 perfected thereafter. If the security interest does not become
13 perfected under the law of the other jurisdiction before the
14 earlier of that time or the end of that period, it becomes
15 unperfected and is deemed never to have been perfected as
16 against a purchaser of the collateral for value.
17 SUBCHAPTER C
18 PRIORITY
19 Sec.
20 9317. Interests which take priority over or take free of
21 security interest or agricultural lien.
22 9318. No interest retained in right to payment which is sold;
23 rights and title of seller of account or chattel paper
24 with respect to creditors and purchasers.
25 9319. Rights and title of consignee with respect to creditors
26 and purchasers.
27 9320. Buyer of goods.
28 9321. Licensee of general intangible and lessee of goods in
29 ordinary course of business.
30 9322. Priorities among conflicting security interests in and
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1 agricultural liens on same collateral.
2 9323. Future advances.
3 9324. Priority of purchase-money security interests.
4 9325. Priority of security interests in transferred collateral.
5 9326. Priority of security interests created by new debtor.
6 9327. Priority of security interests in deposit account.
7 9328. Priority of security interests in investment property.
8 9329. Priority of security interests in letter-of-credit right.
9 9330. Priority of purchaser of chattel paper or instrument.
10 9331. Priority of rights of purchasers of instruments,
11 documents and securities under other divisions; priority
12 of interests in financial assets and security entitlements
13 under Division 8.
14 9332. Transfer of money; transfer of funds from deposit account.
15 9333. Priority of certain liens arising by operation of law.
16 9334. Priority of security interests in fixtures and crops.
17 9335. Accessions.
18 9336. Commingled goods.
19 9337. Priority of security interests in goods covered by
20 certificate of title.
21 9338. Priority of security interest or agricultural lien
22 perfected by filed financing statement providing certain
23 incorrect information.
24 9339. Priority subject to subordination.
25 § 9317. Interests which take priority over or take free of
26 security interest or agricultural lien.
27 (a) Conflicting security interests and rights of lien
28 creditors.--A security interest or agricultural lien is
29 subordinate to the rights of all of the following:
30 (1) A person entitled to priority under section 9322
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1 (relating to priorities among conflicting security interests
2 in and agricultural liens on same collateral).
3 (2) Except as otherwise provided in subsection (e), a
4 person that becomes a lien creditor before the earlier of the
5 time:
6 (i) the security interest or agricultural lien is
7 perfected; or
8 (ii) one of the conditions specified in section
9 9203(b)(3) (relating to enforceability) is met and a
10 financing statement covering the collateral is filed.
11 (b) Buyers that receive delivery.--Except as otherwise
12 provided in subsection (e), a buyer, other than a secured party,
13 of tangible chattel paper, documents, goods, instruments or a
14 security certificate takes free of a security interest or
15 agricultural lien if the buyer gives value and receives delivery
16 of the collateral without knowledge of the security interest or
17 agricultural lien and before it is perfected.
18 (c) Lessees that receive delivery.-- Except as otherwise
19 provided in subsection (e), a lessee of goods takes free of a
20 security interest or agricultural lien if the lessee gives value
21 and receives delivery of the collateral without knowledge of the
22 security interest or agricultural lien and before it is
23 perfected.
24 (d) Licensees and buyers of certain collateral.-- A licensee
25 of a general intangible or a buyer, other than a secured party,
26 of accounts, electronic chattel paper, general intangibles or
27 investment property other than a certificated security takes
28 free of a security interest if the licensee or buyer gives value
29 without knowledge of the security interest and before it is
30 perfected.
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1 (e) Purchase-money security interest.--Except as otherwise
2 provided in sections 9320 (relating to buyer of goods) and 9321
3 (relating to licensee of general intangible and lessee of goods
4 in ordinary course of business), if a person files a financing
5 statement with respect to a purchase-money security interest
6 before or within 20 days after the debtor receives delivery of
7 the collateral, the security interest takes priority over the
8 rights of a buyer, lessee or lien creditor which arise between
9 the time the security interest attaches and the time of filing.
10 § 9318. No interest retained in right to payment which is sold;
11 rights and title of seller of account or chattel
12 paper with respect to creditors and purchasers.
13 (a) Seller retains no interest.--A debtor that has sold an
14 account, chattel paper, payment intangible or promissory note
15 does not retain a legal or equitable interest in the collateral
16 sold.
17 (b) Deemed rights of debtor if buyer's security interest
18 unperfected.--For purposes of determining the rights of
19 creditors of and purchasers for value of an account or chattel
20 paper from a debtor that has sold an account or chattel paper,
21 while the buyer's security interest is unperfected, the debtor
22 is deemed to have rights and title to the account or chattel
23 paper identical to those the debtor sold.
24 § 9319. Rights and title of consignee with respect to creditors
25 and purchasers.
26 (a) Consignee has consignor's rights.--Except as otherwise
27 provided in subsection (b), for purposes of determining the
28 rights of creditors of and purchasers for value of goods from a
29 consignee, while the goods are in the possession of the
30 consignee, the consignee is deemed to have rights and title to
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1 the goods identical to those the consignor had or had power to
2 transfer.
3 (b) Applicability of other law.--For purposes of determining
4 the rights of a creditor of a consignee, law other than this
5 division determines the rights and title of a consignee while
6 goods are in the consignee's possession if, under this chapter,
7 a perfected security interest held by the consignor would have
8 priority over the rights of the creditor.
9 § 9320. Buyer of goods.
10 (a) Buyer in ordinary course of business.--Except as
11 otherwise provided in subsection (e), a buyer in ordinary course
12 of business, other than a person buying farm products from a
13 person engaged in farming operations, takes free of a security
14 interest created by the buyer's seller, even if the security
15 interest is perfected and the buyer knows of its existence.
16 (b) Buyer of consumer goods.--Except as otherwise provided
17 in subsection (e), a buyer of goods from a person who used or
18 bought the goods for use primarily for personal, family or
19 household purposes takes free of a security interest, even if
20 perfected, if the buyer buys:
21 (1) without knowledge of the security interest;
22 (2) for value;
23 (3) primarily for the buyer's personal, family or
24 household purposes; and
25 (4) before the filing of a financing statement covering
26 the goods.
27 (c) Effectiveness of filing for subsection (b).--To the
28 extent that it affects the priority of a security interest over
29 a buyer of goods under subsection (b), the period of
30 effectiveness of a filing made in the jurisdiction in which the
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1 seller is located is governed by section 9316(a) and (b)
2 (relating to continued perfection of security interest following
3 change in governing law).
4 (d) Buyer in ordinary course of business at wellhead or
5 minehead.--A buyer in ordinary course of business buying oil,
6 gas or other minerals at the wellhead or minehead or after
7 extraction takes free of an interest arising out of an
8 encumbrance.
9 (e) Possessory security interest not affected.--Subsections
10 (a) and (b) do not affect a security interest in goods in the
11 possession of the secured party under section 9313 (relating to
12 when possession by or delivery to secured party perfects
13 security interest without filing).
14 § 9321. Licensee of general intangible and lessee of goods in
15 ordinary course of business.
16 (a) Licensee in ordinary course of business.--As used in
17 this section, the term "licensee in ordinary course of business"
18 means a person that becomes a licensee of a general intangible
19 in good faith, without knowledge that the license violates the
20 rights of another person in the general intangible, and in the
21 ordinary course from a person in the business of licensing
22 general intangibles of that kind. A person becomes a licensee in
23 the ordinary course if the license to the person comports with
24 the usual or customary practices in the kind of business in
25 which the licensor is engaged or with the licensor's own usual
26 or customary practices.
27 (b) Rights of licensee in ordinary course of business.--A
28 licensee in ordinary course of business takes its rights under a
29 nonexclusive license free of a security interest in the general
30 intangible created by the licensor, even if the security
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1 interest is perfected and the licensee knows of its existence.
2 (c) Rights of lessee in ordinary course of business.--A
3 lessee in ordinary course of business takes its leasehold
4 interest free of a security interest in the goods created by the
5 lessor, even if the security interest is perfected and the
6 lessee knows of its existence.
7 § 9322. Priorities among conflicting security interests in and
8 agricultural liens on same collateral.
9 (a) General priority rules.--Except as otherwise provided in
10 this section, priority among conflicting security interests and
11 agricultural liens in the same collateral is determined
12 according to the following rules:
13 (1) Conflicting perfected security interests and
14 agricultural liens rank according to priority in time of
15 filing or perfection. Priority dates from the earlier of the
16 time a filing covering the collateral is first made or the
17 security interest or agricultural lien is first perfected, if
18 there is no period thereafter when there is neither filing
19 nor perfection.
20 (2) A perfected security interest or agricultural lien
21 has priority over a conflicting unperfected security interest
22 or agricultural lien.
23 (3) The first security interest or agricultural lien to
24 attach or become effective has priority if conflicting
25 security interests and agricultural liens are unperfected.
26 (b) Time of perfection: proceeds and supporting
27 obligations.--For the purposes of subsection (a)(1):
28 (1) the time of filing or perfection as to a security
29 interest in collateral is also the time of filing or
30 perfection as to a security interest in proceeds; and
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1 (2) the time of filing or perfection as to a security
2 interest in collateral supported by a supporting obligation
3 is also the time of filing or perfection as to a security
4 interest in the supporting obligation.
5 (c) Special priority rules: proceeds and supporting
6 obligations.--Except as otherwise provided in subsection (f), a
7 security interest in collateral which qualifies for priority
8 over a conflicting security interest under section 9327
9 (relating to priority of security interests in deposit account),
10 9328 (relating to priority of security interests in investment
11 property), 9329 (relating to priority of security interests in
12 letter-of-credit right), 9330 (relating to priority of purchaser
13 of chattel paper or instrument) or 9331 (relating to priority of
14 rights of purchasers of instruments, documents and securities
15 under other divisions; priority of interests in financial assets
16 and security entitlements under Division 8) also has priority
17 over a conflicting security interest in all of the following:
18 (1) Any supporting obligation for the collateral.
19 (2) Proceeds of the collateral if:
20 (i) the security interest in proceeds is perfected;
21 (ii) the proceeds are cash proceeds or of the same
22 type as the collateral; and
23 (iii) in the case of proceeds which are proceeds of
24 proceeds, all intervening proceeds are:
25 (A) cash proceeds;
26 (B) proceeds of the same type as the collateral;
27 or
28 (C) an account relating to the collateral.
29 (d) First-to-file priority rule for certain collateral.--
30 Subject to subsection (e) and except as otherwise provided in
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1 subsection (f), if a security interest in chattel paper, deposit
2 accounts, negotiable documents, instruments, investment property
3 or letter-of-credit rights is perfected by a method other than
4 filing, conflicting perfected security interests in proceeds of
5 the collateral rank according to priority in time of filing.
6 (e) Applicability of subsection (d).--Subsection (d) applies
7 only if the proceeds of the collateral are not cash proceeds,
8 chattel paper, negotiable documents, instruments, investment
9 property or letter-of-credit rights.
10 (f) Limitations on subsections (a) through (e).--Subsections
11 (a) through (e) are subject to:
12 (1) subsection (g) and the other provisions of this
13 chapter;
14 (2) section 4210 (relating to security interest of
15 collecting bank in items, accompanying documents and
16 proceeds);
17 (3) section 5118 (relating to security interest of
18 issuer or nominated person); and
19 (4) section 9110 (relating to security interests arising
20 under Division 2 or 2A).
21 (g) Priority under agricultural lien statute.--A perfected
22 agricultural lien on collateral has priority over a conflicting
23 security interest in or agricultural lien on the same collateral
24 if the statute creating the agricultural lien so provides.
25 § 9323. Future advances.
26 (a) When priority based on time of advance.--Except as
27 otherwise provided in subsection (c), for purposes of
28 determining the priority of a perfected security interest under
29 section 9322(a)(1) (relating to general priority rules),
30 perfection of the security interest dates from the time an
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1 advance is made to the extent that the security interest secures
2 an advance which:
3 (1) is made while the security interest is perfected
4 only:
5 (i) under section 9309 (relating to security
6 interest perfected upon attachment) when it attaches; or
7 (ii) temporarily under any of the following
8 sections:
9 (A) 9312(e) (relating to temporary perfection:
10 new value);
11 (B) 9312(f) (relating to temporary perfection:
12 goods or documents made available to debtor); or
13 (C) 9312(g) (relating to temporary perfection:
14 delivery of security certificate or instrument to
15 debtor); and
16 (2) is not made pursuant to a commitment entered into
17 before or while the security interest is perfected by a
18 method other than under section 9309 or 9312(e), (f) or (g).
19 (b) Lien creditor.--Except as otherwise provided in
20 subsection (c), a security interest is subordinate to the rights
21 of a person that becomes a lien creditor to the extent that the
22 security interest secures an advance made more than 45 days
23 after the person becomes a lien creditor unless the advance is
24 made:
25 (1) without knowledge of the lien; or
26 (2) pursuant to a commitment entered into without
27 knowledge of the lien.
28 (c) Buyer of receivables.--Subsections (a) and (b) do not
29 apply to a security interest held by a secured party that is a
30 buyer of accounts, chattel paper, payment intangibles or
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1 promissory notes or a consignor.
2 (d) Buyer of goods.--Except as otherwise provided in
3 subsection (e), a buyer of goods other than a buyer in ordinary
4 course of business takes free of a security interest to the
5 extent that it secures advances made after the earlier of:
6 (1) the time the secured party acquires knowledge of the
7 buyer's purchase; or
8 (2) 45 days after the purchase.
9 (e) Advances made pursuant to commitment: priority of buyer
10 of goods.--Subsection (d) does not apply if the advance is made
11 pursuant to a commitment entered into without knowledge of the
12 buyer's purchase and before the expiration of the 45-day period.
13 (f) Lessee of goods.--Except as otherwise provided in
14 subsection (g), a lessee of goods, other than a lessee in
15 ordinary course of business, takes the leasehold interest free
16 of a security interest to the extent that it secures advances
17 made after the earlier of:
18 (1) the time the secured party acquires knowledge of the
19 lease; or
20 (2) 45 days after the lease contract becomes
21 enforceable.
22 (g) Advances made pursuant to commitment: priority of lessee
23 of goods.--Subsection (f) does not apply if the advance is made
24 pursuant to a commitment entered into without knowledge of the
25 lease and before the expiration of the 45-day period.
26 § 9324. Priority of purchase-money security interests.
27 (a) General rule: purchase-money priority.--Except as
28 otherwise provided in subsection (g), a perfected purchase-money
29 security interest in goods other than inventory or livestock has
30 priority over a conflicting security interest in the same goods,
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1 and, except as otherwise provided in section 9327 (relating to
2 priority of security interests in deposit account), a perfected
3 security interest in its identifiable proceeds also has
4 priority, if the purchase-money security interest is perfected
5 when the debtor receives possession of the collateral or within
6 20 days thereafter.
7 (b) Inventory purchase-money priority.--Subject to
8 subsection (c) and except as otherwise provided in subsection
9 (g), a perfected purchase-money security interest in inventory
10 has priority over a conflicting security interest in the same
11 inventory; has priority over a conflicting security interest in
12 chattel paper or an instrument constituting proceeds of the
13 inventory and in proceeds of the chattel paper if so provided in
14 section 9330 (relating to priority of purchaser of chattel paper
15 or instrument); and, except as otherwise provided in section
16 9327, also has priority in identifiable cash proceeds of the
17 inventory to the extent the identifiable cash proceeds are
18 received on or before the delivery of the inventory to a buyer,
19 if:
20 (1) the purchase-money security interest is perfected
21 when the debtor receives possession of the inventory;
22 (2) the purchase-money secured party sends an
23 authenticated notification to the holder of the conflicting
24 security interest;
25 (3) the holder of the conflicting security interest
26 receives the notification within five years before the debtor
27 receives possession of the inventory; and
28 (4) the notification states that the person sending the
29 notification has or expects to acquire a purchase-money
30 security interest in inventory of the debtor and describes
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1 the inventory.
2 (c) Holders of conflicting inventory security interests to
3 be notified.--Subsection (b)(2) through (4) apply only if the
4 holder of the conflicting security interest had filed a
5 financing statement covering the same types of inventory:
6 (1) if the purchase-money security interest is perfected
7 by filing, before the date of the filing; or
8 (2) if the purchase-money security interest is
9 temporarily perfected without filing or possession under
10 section 9312(f) (relating to temporary perfection: goods or
11 documents made available to debtor), before the beginning of
12 the 20-day period thereunder.
13 (d) Livestock purchase-money priority.--Subject to
14 subsection (e) and except as otherwise provided in subsection
15 (g), a perfected purchase-money security interest in livestock
16 which are farm products has priority over a conflicting security
17 interest in the same livestock; and, except as otherwise
18 provided in section 9327, a perfected security interest in their
19 identifiable proceeds and identifiable products in their
20 unmanufactured state also has priority, if:
21 (1) the purchase-money security interest is perfected
22 when the debtor receives possession of the livestock;
23 (2) the purchase-money secured party sends an
24 authenticated notification to the holder of the conflicting
25 security interest;
26 (3) the holder of the conflicting security interest
27 receives the notification within six months before the debtor
28 receives possession of the livestock; and
29 (4) the notification states that the person sending the
30 notification has or expects to acquire a purchase-money
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1 security interest in livestock of the debtor and describes
2 the livestock.
3 (e) Holders of conflicting livestock security interests to
4 be notified.--Subsection (d)(2) through (4) apply only if the
5 holder of the conflicting security interest had filed a
6 financing statement covering the same types of livestock:
7 (1) if the purchase-money security interest is perfected
8 by filing, before the date of the filing; or
9 (2) if the purchase-money security interest is
10 temporarily perfected without filing or possession under
11 section 9312(f), before the beginning of the 20-day period
12 thereunder.
13 (f) Software purchase-money priority.--Except as otherwise
14 provided in subsection (g), a perfected purchase-money security
15 interest in software has priority over a conflicting security
16 interest in the same collateral; and, except as otherwise
17 provided in section 9327, a perfected security interest in its
18 identifiable proceeds also has priority, to the extent that the
19 purchase-money security interest in the goods in which the
20 software was acquired for use has priority in the goods and
21 proceeds of the goods under this section.
22 (g) Conflicting purchase-money security interests.--If more
23 than one security interest qualifies for priority in the same
24 collateral under subsection (a), (b), (d) or (f):
25 (1) a security interest securing an obligation incurred
26 as all or part of the price of the collateral has priority
27 over a security interest securing an obligation incurred for
28 value given to enable the debtor to acquire rights in or the
29 use of collateral; and
30 (2) in all other cases, section 9322(a) (relating to
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1 general priority rules) applies to the qualifying security
2 interests.
3 § 9325. Priority of security interests in transferred
4 collateral.
5 (a) Subordination of security interest in transferred
6 collateral.--Except as otherwise provided in subsection (b), a
7 security interest created by a debtor is subordinate to a
8 security interest in the same collateral created by another
9 person if:
10 (1) the debtor acquired the collateral subject to the
11 security interest created by the other person;
12 (2) the security interest created by the other person
13 was perfected when the debtor acquired the collateral; and
14 (3) there is no period thereafter when the security
15 interest is unperfected.
16 (b) Limitation of subsection (a) subordination.--Subsection
17 (a) subordinates a security interest only if the security
18 interest:
19 (1) otherwise would have priority solely under section
20 9322(a) (relating to general priority rules) or 9324
21 (relating to priority of purchase-money security interests);
22 or
23 (2) arose solely under section 2711(c) (relating to
24 security interest of buyer in rejected goods) or 2A508(e)
25 (relating to security interest in goods in lessee's
26 possession).
27 § 9326. Priority of security interests created by new debtor.
28 (a) Subordination of security interest created by new
29 debtor.--Subject to subsection (b), a security interest created
30 by a new debtor which is perfected by a filed financing
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1 statement which is effective solely under section 9508 (relating
2 to effectiveness of financing statement if new debtor becomes
3 bound by security agreement) in collateral in which a new debtor
4 has or acquires rights is subordinate to a security interest in
5 the same collateral which is perfected other than by a filed
6 financing statement which is effective solely under section
7 9508.
8 (b) Priority under other provisions; multiple original
9 debtors.--The other provisions of this chapter determine the
10 priority among conflicting security interests in the same
11 collateral perfected by filed financing statements which are
12 effective solely under section 9508. However, if the security
13 agreements to which a new debtor became bound as debtor were not
14 entered into by the same original debtor, the conflicting
15 security interests rank according to priority in time of the new
16 debtor's having become bound.
17 § 9327. Priority of security interests in deposit account.
18 The following rules govern priority among conflicting
19 security interests in the same deposit account:
20 (1) A security interest held by a secured party having
21 control of the deposit account under section 9104 (relating
22 to control of deposit account) has priority over a
23 conflicting security interest held by a secured party that
24 does not have control.
25 (2) Except as otherwise provided in paragraphs (3) and
26 (4), security interests perfected by control under section
27 9314 (relating to perfection by control) rank according to
28 priority in time of obtaining control.
29 (3) Except as otherwise provided in paragraph (4), a
30 security interest held by the bank with which the deposit
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1 account is maintained has priority over a conflicting
2 security interest held by another secured party.
3 (4) A security interest perfected by control under
4 section 9104(a)(3) has priority over a security interest held
5 by the bank with which the deposit account is maintained.
6 § 9328. Priority of security interests in investment property.
7 The following rules govern priority among conflicting
8 security interests in the same investment property:
9 (1) A security interest of a secured party having
10 control of investment property under section 9106 (relating
11 to control of investment property) has priority over a
12 security interest of a secured party that does not have
13 control over the investment property.
14 (2) Except as otherwise provided in paragraphs (3) and
15 (4), conflicting security interests held by secured parties
16 each of which has control under section 9106 rank according
17 to priority in time of:
18 (i) if the collateral is a security, obtaining
19 control;
20 (ii) if the collateral is a security entitlement
21 carried in a securities account and:
22 (A) if the secured party obtained control under
23 section 8106(d)(1) (relating to control), the secured
24 party's becoming the person for which the securities
25 account is maintained;
26 (B) if the secured party obtained control under
27 section 8106(d)(2), the securities intermediary's
28 agreement to comply with the secured party's
29 entitlement orders with respect to security
30 entitlements carried or to be carried in the
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1 securities account; or
2 (C) if the secured party obtained control
3 through another person under section 8106(d)(3), the
4 time on which priority would be based under this
5 subsection if the other person were the secured
6 party; or
7 (iii) if the collateral is a commodity contract
8 carried with a commodity intermediary, the satisfaction
9 of the requirement for control specified in section
10 9106(b)(2) with respect to commodity contracts carried or
11 to be carried with the commodity intermediary.
12 (3) A security interest held by a securities
13 intermediary in a security entitlement or a securities
14 account maintained with the securities intermediary has
15 priority over a conflicting security interest held by another
16 secured party.
17 (4) A security interest held by a commodity intermediary
18 in a commodity contract or a commodity account maintained
19 with the commodity intermediary has priority over a
20 conflicting security interest held by another secured party.
21 (5) A security interest in a certificated security in
22 registered form which is perfected by taking delivery under
23 section 9313(a) (relating to perfection by possession or
24 delivery) and not by control under section 9314 (relating to
25 perfection by control) has priority over a conflicting
26 security interest perfected by a method other than control.
27 (6) Conflicting security interests created by a broker,
28 securities intermediary or commodity intermediary which are
29 perfected without control under section 9106 rank equally.
30 (7) In all other cases, priority among conflicting
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1 security interests in investment property is governed by
2 sections 9322 (relating to priorities among conflicting
3 security interests in and agricultural liens on same
4 collateral) and 9323 (relating to future advances).
5 § 9329. Priority of security interests in letter-of-credit
6 right.
7 The following rules govern priority among conflicting
8 security interests in the same letter-of-credit right:
9 (1) A security interest held by a secured party having
10 control of the letter-of-credit right under section 9107
11 (relating to control of letter-of-credit right) has priority
12 to the extent of its control over a conflicting security
13 interest held by a secured party that does not have control.
14 (2) Security interests perfected by control under
15 section 9314 (relating to perfection by control) rank
16 according to priority in time of obtaining control.
17 § 9330. Priority of purchaser of chattel paper or instrument.
18 (a) Purchaser's priority: security interest claimed merely
19 as proceeds.--A purchaser of chattel paper has priority over a
20 security interest in the chattel paper which is claimed merely
21 as proceeds of inventory subject to a security interest if:
22 (1) in good faith and in the ordinary course of the
23 purchaser's business, the purchaser gives new value and takes
24 possession of the chattel paper or obtains control of the
25 chattel paper under section 9105 (relating to control of
26 electronic chattel paper); and
27 (2) the chattel paper does not indicate that it has been
28 assigned to an identified assignee other than the purchaser.
29 (b) Purchaser's priority: other security interests.--A
30 purchaser of chattel paper has priority over a security interest
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1 in the chattel paper which is claimed other than merely as
2 proceeds of inventory subject to a security interest if the
3 purchaser gives new value and takes possession of the chattel
4 paper or obtains control of the chattel paper under section 9105
5 in good faith, in the ordinary course of the purchaser's
6 business and without knowledge that the purchase violates the
7 rights of the secured party.
8 (c) Chattel paper purchaser's priority in proceeds.--Except
9 as otherwise provided in section 9327 (relating to priority of
10 security interests in deposit account), a purchaser having
11 priority in chattel paper under subsection (a) or (b) also has
12 priority in proceeds of the chattel paper to the extent that:
13 (1) section 9322 (relating to priorities among
14 conflicting security interests in and agricultural liens on
15 same collateral) provides for priority in the proceeds; or
16 (2) the proceeds consist of the specific goods covered
17 by the chattel paper or cash proceeds of the specific goods,
18 even if the purchaser's security interest in the proceeds is
19 unperfected.
20 (d) Instrument purchaser's priority.--Except as otherwise
21 provided in section 9331(a) (relating to rights under Divisions
22 3, 7 and 8 not limited), a purchaser of an instrument has
23 priority over a security interest in the instrument perfected by
24 a method other than possession if the purchaser gives value and
25 takes possession of the instrument in good faith and without
26 knowledge that the purchase violates the rights of the secured
27 party.
28 (e) Holder of purchase-money security interest gives new
29 value.--For purposes of subsections (a) and (b), the holder of a
30 purchase-money security interest in inventory gives new value
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1 for chattel paper constituting proceeds of the inventory.
2 (f) Indication of assignment gives knowledge.--For purposes
3 of subsections (b) and (d), if chattel paper or an instrument
4 indicates that it has been assigned to an identified secured
5 party other than the purchaser, a purchaser of the chattel paper
6 or instrument has knowledge that the purchase violates the
7 rights of the secured party.
8 § 9331. Priority of rights of purchasers of instruments,
9 documents and securities under other divisions;
10 priority of interests in financial assets and
11 security entitlements under Division 8.
12 (a) Rights under Divisions 3, 7 and 8 not limited.--This
13 division does not limit the rights of a holder in due course of
14 a negotiable instrument, a holder to which a negotiable document
15 of title has been duly negotiated or a protected purchaser of a
16 security. These holders or purchasers take priority over an
17 earlier security interest, even if perfected, to the extent
18 provided in Divisions 3 (relating to negotiable instruments), 7
19 (relating to warehouse receipts, bills of lading and other
20 documents of title) and 8 (relating to investment securities).
21 (b) Protection under Division 8.--This division does not
22 limit the rights of or impose liability on a person to the
23 extent that the person is protected against the assertion of a
24 claim under Division 8.
25 (c) Filing not notice.--Filing under this division does not
26 constitute notice of a claim or defense to the holders,
27 purchasers or persons described in subsections (a) and (b).
28 § 9332. Transfer of money; transfer of funds from deposit
29 account.
30 (a) Transferee of money.--A transferee of money takes the
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1 money free of a security interest unless the transferee acts in
2 collusion with the debtor in violating the rights of the secured
3 party.
4 (b) Transferee of funds from deposit account.--A transferee
5 of funds from a deposit account takes the funds free of a
6 security interest in the deposit account unless the transferee
7 acts in collusion with the debtor in violating the rights of the
8 secured party.
9 § 9333. Priority of certain liens arising by operation of law.
10 (a) Possessory lien.--As used in this section, the term
11 "possessory lien" means an interest, other than a security
12 interest or an agricultural lien:
13 (1) which secures payment or performance of an
14 obligation for services or materials furnished with respect
15 to goods by a person in the ordinary course of the person's
16 business;
17 (2) which is created by statute or rule of law in favor
18 of the person; and
19 (3) whose effectiveness depends on the person's
20 possession of the goods.
21 (b) Priority of possessory lien.--A possessory lien on goods
22 has priority over a security interest in the goods unless the
23 lien is created by a statute which expressly provides otherwise.
24 § 9334. Priority of security interests in fixtures and crops.
25 (a) Security interest in fixtures under this division.--A
26 security interest under this division may be created in goods
27 which are fixtures or may continue in goods which become
28 fixtures. A security interest does not exist under this division
29 in ordinary building materials incorporated into an improvement
30 on land.
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1 (b) Security interest in fixtures under real property law.--
2 This division does not prevent creation of an encumbrance upon
3 fixtures under real property law.
4 (c) General rule: subordination of security interest in
5 fixtures.--In cases not governed by subsections (d) through (h),
6 a security interest in fixtures is subordinate to a conflicting
7 interest of an encumbrancer or owner of the related real
8 property other than the debtor.
9 (d) Fixtures purchase-money priority.--Except as otherwise
10 provided in subsection (h), a perfected security interest in
11 fixtures has priority over a conflicting interest of an
12 encumbrancer or owner of the real property if the debtor has an
13 interest of record in or is in possession of the real property
14 and:
15 (1) the security interest is a purchase-money security
16 interest;
17 (2) the interest of the encumbrancer or owner arises
18 before the goods become fixtures; and
19 (3) the security interest is perfected by a fixture
20 filing before the goods become fixtures or within 20 days
21 thereafter.
22 (e) Priority of security interest in fixtures over interests
23 in real property.--A perfected security interest in fixtures has
24 priority over a conflicting interest of an encumbrancer or owner
25 of the real property if any of the following paragraphs apply:
26 (1) The debtor has an interest of record in the real
27 property or is in possession of the real property and the
28 security interest:
29 (i) is perfected by a fixture filing before the
30 interest of the encumbrancer or owner is of record; and
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1 (ii) has priority over any conflicting interest of a
2 predecessor in title of the encumbrancer or owner.
3 (2) Before the goods become fixtures, the security
4 interest is perfected by any method permitted by this
5 division and the fixtures are readily removable:
6 (i) factory or office machines;
7 (ii) equipment which is not primarily used or leased
8 for use in the operation of the real property; or
9 (iii) replacements of domestic appliances which are
10 consumer goods.
11 (3) The conflicting interest is a lien on the real
12 property obtained by legal or equitable proceedings after the
13 security interest was perfected by any method permitted by
14 this division.
15 (4) The security interest is:
16 (i) created in a manufactured home in a
17 manufactured-home transaction; and
18 (ii) perfected pursuant to a statute described in
19 section 9311(a)(2) (relating to perfection of security
20 interests in property subject to certain statutes,
21 regulations and treaties).
22 (f) Priority based on consent, disclaimer or right to
23 remove.--A security interest in fixtures, whether or not
24 perfected, has priority over a conflicting interest of an
25 encumbrancer or owner of the real property if:
26 (1) the encumbrancer or owner has, in an authenticated
27 record, consented to the security interest or disclaimed an
28 interest in the goods as fixtures; or
29 (2) the debtor has a right to remove the goods as
30 against the encumbrancer or owner.
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1 (g) Continuation of subsection (f)(2) priority.--The
2 priority of the security interest under subsection (f)(2)
3 continues for a reasonable time if the debtor's right to remove
4 the goods as against the encumbrancer or owner terminates.
5 (h) Priority of construction mortgage.--A mortgage is a
6 construction mortgage to the extent that it secures an
7 obligation incurred for the construction of an improvement on
8 land, including the acquisition cost of the land, if a recorded
9 record of the mortgage so indicates. Except as otherwise
10 provided in subsections (e) and (f), a security interest in
11 fixtures is subordinate to a construction mortgage if a record
12 of the mortgage is recorded before the goods become fixtures and
13 the goods become fixtures before the completion of the
14 construction. A mortgage has this priority to the same extent as
15 a construction mortgage to the extent that it is given to
16 refinance a construction mortgage.
17 (i) Priority of security interest in crops.--A perfected
18 security interest in crops growing on real property has priority
19 over a conflicting interest of an encumbrancer or owner of the
20 real property if the debtor has an interest of record in or is
21 in possession of the real property.
22 § 9335. Accessions.
23 (a) Creation of security interest in accession.--A security
24 interest may be created in an accession and continues in
25 collateral which becomes an accession.
26 (b) Perfection of security interest.--If a security interest
27 is perfected when the collateral becomes an accession, the
28 security interest remains perfected in the collateral.
29 (c) Priority of security interest.--Except as otherwise
30 provided in subsection (d), the other provisions of this chapter
20010S0330B0817 - 144 -
1 determine the priority of a security interest in an accession.
2 (d) Compliance with certificate-of-title statute.--A
3 security interest in an accession is subordinate to a security
4 interest in the whole which is perfected by compliance with the
5 requirements of a certificate-of-title statute under section
6 9311(b) (relating to perfection of security interests in
7 property subject to certain statutes, regulations and treaties).
8 (e) Removal of accession after default.--After default,
9 subject to Chapter 96 (relating to default), a secured party may
10 remove an accession from other goods if the security interest in
11 the accession has priority over the claims of every person
12 having an interest in the whole.
13 (f) Reimbursement following removal.--A secured party that
14 removes an accession from other goods under subsection (e) shall
15 promptly reimburse any holder of a security interest or other
16 lien on, or owner of, the whole or of the other goods, other
17 than the debtor, for the cost of repair of any physical injury
18 to the whole or the other goods. The secured party need not
19 reimburse the holder or owner for any diminution in value of the
20 whole or the other goods caused by the absence of the accession
21 removed or by any necessity for replacing it. A person entitled
22 to reimbursement may refuse permission to remove until the
23 secured party gives adequate assurance for the performance of
24 the obligation to reimburse.
25 § 9336. Commingled goods.
26 (a) Commingled goods.--As used in this section, the term
27 "commingled goods" means goods which are physically united with
28 other goods in such a manner that their identity is lost in a
29 product or mass.
30 (b) No security interest in commingled goods as such.--A
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1 security interest does not exist in commingled goods as such.
2 However, a security interest may attach to a product or mass
3 which results when goods become commingled goods.
4 (c) Attachment of security interest to product or mass.--If
5 collateral becomes commingled goods, a security interest
6 attaches to the product or mass.
7 (d) Perfection of security interest.--If a security interest
8 in collateral is perfected before the collateral becomes
9 commingled goods, the security interest which attaches to the
10 product or mass under subsection (c) is perfected.
11 (e) Priority of security interest.--Except as otherwise
12 provided in subsection (f), the other provisions of this chapter
13 determine the priority of a security interest which attaches to
14 the product or mass under subsection (c).
15 (f) Conflicting security interests in product or mass.--If
16 more than one security interest attaches to the product or mass
17 under subsection (c), the following rules determine priority:
18 (1) A security interest which is perfected under
19 subsection (d) has priority over a security interest which is
20 unperfected at the time the collateral becomes commingled
21 goods.
22 (2) If more than one security interest is perfected
23 under subsection (d), the security interests rank equally in
24 proportion to the value of the collateral at the time it
25 became commingled goods.
26 § 9337. Priority of security interests in goods covered by
27 certificate of title.
28 If, while a security interest in goods is perfected by any
29 method under the law of another jurisdiction, the Commonwealth
30 issues a certificate of title which does not show that the goods
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1 are subject to the security interest or contain a statement that
2 they may be subject to security interests not shown on the
3 certificate:
4 (1) a buyer of the goods, other than a person in the
5 business of selling goods of that kind, takes free of the
6 security interest if the buyer gives value and receives
7 delivery of the goods after issuance of the certificate and
8 without knowledge of the security interest; and
9 (2) the security interest is subordinate to a
10 conflicting security interest in the goods which attaches,
11 and is perfected under section 9311(b) (relating to
12 perfection of security interests in property subject to
13 certain statutes, regulations and treaties), after issuance
14 of the certificate and without the conflicting secured
15 party's knowledge of the security interest.
16 § 9338. Priority of security interest or agricultural lien
17 perfected by filed financing statement providing
18 certain incorrect information.
19 If a security interest or agricultural lien is perfected by a
20 filed financing statement providing information described in
21 section 9516(b)(5) (relating to what constitutes filing;
22 effectiveness of filing) which is incorrect at the time the
23 financing statement is filed:
24 (1) the security interest or agricultural lien is
25 subordinate to a conflicting perfected security interest in
26 the collateral to the extent that the holder of the
27 conflicting security interest gives value in reasonable
28 reliance upon the incorrect information; and
29 (2) a purchaser, other than a secured party, of the
30 collateral takes free of the security interest or
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1 agricultural lien to the extent that, in reasonable reliance
2 upon the incorrect information, the purchaser gives value
3 and, in the case of chattel paper, documents, goods,
4 instruments or a security certificate, receives delivery of
5 the collateral.
6 § 9339. Priority subject to subordination.
7 This division does not preclude subordination by agreement by
8 a person entitled to priority.
9 SUBCHAPTER D
10 RIGHTS OF BANK
11 Sec.
12 9340. Effectiveness of right of recoupment or set-off against
13 deposit account.
14 9341. Bank's rights and duties with respect to deposit
15 account.
16 9342. Bank's right to refuse to enter into or disclose
17 existence of control agreement.
18 § 9340. Effectiveness of right of recoupment or set-off against
19 deposit account.
20 (a) Exercise of recoupment or set-off.--Except as otherwise
21 provided in subsection (c), a bank with which a deposit account
22 is maintained may exercise any right of recoupment or set-off
23 against a secured party that holds a security interest in the
24 deposit account.
25 (b) Recoupment or set-off not affected by security
26 interest.--Except as otherwise provided in subsection (c), the
27 application of this division to a security interest in a deposit
28 account does not affect a right of recoupment or set-off of the
29 secured party as to a deposit account maintained with the
30 secured party.
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1 (c) When set-off ineffective.--The exercise by a bank of a
2 set-off against a deposit account is ineffective against a
3 secured party that holds a security interest in the deposit
4 account which is perfected by control under section 9104(a)(3)
5 (relating to requirements for control) if the set-off is based
6 on a claim against the debtor.
7 § 9341. Bank's rights and duties with respect to deposit
8 account.
9 Except as otherwise provided in section 9340(c) (relating to
10 when set-off ineffective) and unless the bank otherwise agrees
11 in an authenticated record, a bank's rights and duties with
12 respect to a deposit account maintained with the bank are not
13 terminated, suspended or modified by:
14 (1) the creation, attachment or perfection of a security
15 interest in the deposit account;
16 (2) the bank's knowledge of the security interest; or
17 (3) the bank's receipt of instructions from the secured
18 party.
19 § 9342. Bank's right to refuse to enter into or disclose
20 existence of control agreement.
21 This division does not require a bank to enter into an
22 agreement of the kind described in section 9104(a)(2) (relating
23 to requirements for control) even if its customer so requests or
24 directs. A bank which has entered into such an agreement is not
25 required to confirm the existence of the agreement to another
26 person unless requested to do so by its customer.
27 CHAPTER 94
28 RIGHTS OF THIRD PARTIES
29 Sec.
30 9401. Alienability of debtor's rights.
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1 9402. Secured party not obligated on contract of debtor or in
2 tort.
3 9403. Agreement not to assert defenses against assignee.
4 9404. Rights acquired by assignee; claims and defenses against
5 assignee.
6 9405. Modification of assigned contract.
7 9406. Discharge of account debtor; notification of
8 assignment; identification and proof of assignment;
9 restrictions on assignment of accounts, chattel paper,
10 payment intangibles and promissory notes ineffective.
11 9407. Restrictions on creation or enforcement of security
12 interest in leasehold interest or in lessors residual
13 interest.
14 9408. Restrictions on assignment of promissory notes,
15 health-care-insurance receivables and certain general
16 intangibles ineffective.
17 9409. Restrictions on assignment of letter-of-credit rights
18 ineffective.
19 § 9401. Alienability of debtor's rights.
20 (a) Other law governs alienability; exceptions.--Except as
21 otherwise provided in subsections (b) and (c), whether a
22 debtor's rights in collateral may be voluntarily or
23 involuntarily transferred is governed by law other than this
24 division.
25 (b) Agreement does not prevent transfer.--An agreement
26 between the debtor and secured party which prohibits a transfer
27 of the debtor's rights in collateral or makes the transfer a
28 default does not prevent the transfer from taking effect.
29 (c) Exceptions.--Subsection (a) is also subject to the
30 following:
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1 (1) section 9406 (relating to discharge of account
2 debtor; notification of assignment; identification and proof
3 of assignment; restrictions on assignment of accounts,
4 chattel paper, payment intangibles and promissory notes
5 ineffective);
6 (2) section 9407 (relating to restrictions on creation
7 or enforcement of security interest in leasehold interest or
8 in lessor's residual interest);
9 (3) section 9408 (relating to restrictions on assignment
10 of promissory notes, health-care-insurance receivables and
11 certain general intangibles ineffective); and
12 (4) section 9409 (relating to restrictions on assignment
13 of letter-of-credit rights ineffective).
14 § 9402. Secured party not obligated on contract of debtor or in
15 tort.
16 The existence of a security interest, agricultural lien or
17 authority given to a debtor to dispose of or use collateral,
18 without more, does not subject a secured party to liability in
19 contract or tort for the debtor's acts or omissions.
20 § 9403. Agreement not to assert defenses against assignee.
21 (a) Value.--As used in this section, the term "value" has
22 the meaning provided in section 3303(a) (relating to value).
23 (b) Agreement not to assert claim or defense.--Except as
24 otherwise provided in this section, an agreement between an
25 account debtor and an assignor not to assert against an assignee
26 any claim or defense which the account debtor may have against
27 the assignor is enforceable by an assignee that takes an
28 assignment:
29 (1) for value;
30 (2) in good faith;
20010S0330B0817 - 151 -
1 (3) without notice of a claim of a property or
2 possessory right to the property assigned; and
3 (4) without notice of a defense or claim in recoupment
4 of the type which may be asserted against a person entitled
5 to enforce a negotiable instrument under section 3305(a)
6 (relating to defenses and claims in recoupment).
7 (c) When subsection (b) not applicable.--Subsection (b) does
8 not apply to defenses of a type which may be asserted against a
9 holder in due course of a negotiable instrument under section
10 3305(b).
11 (d) Omission of required statement in consumer
12 transaction.--In a consumer transaction, if a record evidences
13 the account debtor's obligation, law other than this division
14 requires that the record include a statement to the effect that
15 the rights of an assignee are subject to claims or defenses
16 which the account debtor could assert against the original
17 obligee and the record does not include such a statement:
18 (1) the record has the same effect as if the record
19 included such a statement; and
20 (2) the account debtor may assert against an assignee
21 those claims and defenses which would have been available if
22 the record included such a statement.
23 (e) Rule for individual under other law.--This section is
24 subject to law other than this division which establishes a
25 different rule for an account debtor who is an individual and
26 who incurred the obligation primarily for personal, family or
27 household purposes.
28 (f) Other law not displaced.--Except as otherwise provided
29 in subsection (d), this section does not displace law other than
30 this division which gives effect to an agreement by an account
20010S0330B0817 - 152 -
1 debtor not to assert a claim or defense against an assignee.
2 § 9404. Rights acquired by assignee; claims and defenses
3 against assignee.
4 (a) Assignee's rights subject to terms, claims and defenses;
5 exceptions.--Unless an account debtor has made an enforceable
6 agreement not to assert defenses or claims, and subject to
7 subsections (b) through (e), the rights of an assignee are
8 subject to:
9 (1) all terms of the agreement between the account
10 debtor and assignor and any defense or claim in recoupment
11 arising from the transaction which gave rise to the contract;
12 and
13 (2) any other defense or claim of the account debtor
14 against the assignor which accrues before the account debtor
15 receives a notification of the assignment authenticated by
16 the assignor or the assignee.
17 (b) Account debtor's claim reduces amount owed to
18 assignee.--Subject to subsection (c) and except as otherwise
19 provided in subsection (d), the claim of an account debtor
20 against an assignor may be asserted against an assignee under
21 subsection (a) only to reduce the amount the account debtor
22 owes.
23 (c) Rule for individual under other law.--This section is
24 subject to law other than this division which establishes a
25 different rule for an account debtor who is an individual and
26 who incurred the obligation primarily for personal, family or
27 household purposes.
28 (d) Omission of required statement in consumer
29 transaction.--In a consumer transaction, if a record evidences
30 the account debtor's obligation, law other than this division
20010S0330B0817 - 153 -
1 requires that the record include a statement to the effect that
2 the account debtor's recovery against an assignee with respect
3 to claims and defenses against the assignor may not exceed
4 amounts paid by the account debtor under the record, and the
5 record does not include such a statement, the extent to which a
6 claim of an account debtor against the assignor may be asserted
7 against an assignee is determined as if the record included such
8 a statement.
9 (e) Inapplicability to health-care-insurance receivable.--
10 This section does not apply to an assignment of a health-care-
11 insurance receivable.
12 § 9405. Modification of assigned contract.
13 (a) Effect of modification on assignee.--A modification of
14 or substitution for an assigned contract is effective against an
15 assignee if made in good faith. The assignee acquires
16 corresponding rights under the modified or substituted contract.
17 The assignment may provide that the modification or substitution
18 is a breach of contract by the assignor. This subsection is
19 subject to subsections (b) through (d).
20 (b) Applicability of subsection (a).--Subsection (a) applies
21 to the extent that:
22 (1) the right to payment or a part thereof under an
23 assigned contract has not been fully earned by performance;
24 or
25 (2) the right to payment or a part thereof has been
26 fully earned by performance and the account debtor has not
27 received notification of the assignment under section 9406(a)
28 (relating to discharge of account debtor; effect of
29 notification).
30 (c) Rule for individual under other law.--This section is
20010S0330B0817 - 154 -
1 subject to law other than this division which establishes a
2 different rule for an account debtor who is an individual and
3 who incurred the obligation primarily for personal, family or
4 household purposes.
5 (d) Inapplicability to health-care-insurance receivable.--
6 This section does not apply to an assignment of a health-care-
7 insurance receivable.
8 § 9406. Discharge of account debtor; notification of
9 assignment; identification and proof of assignment;
10 restrictions on assignment of accounts, chattel
11 paper, payment intangibles and promissory notes
12 ineffective.
13 (a) Discharge of account debtor; effect of notification.--
14 Subject to subsections (b) through (i), an account debtor on an
15 account, chattel paper or a payment intangible may discharge its
16 obligation by paying the assignor until, but not after, the
17 account debtor receives a notification, authenticated by the
18 assignor or the assignee, that the amount due or to become due
19 has been assigned and that payment is to be made to the
20 assignee. After receipt of the notification, the account debtor
21 may discharge its obligation by paying the assignee and may not
22 discharge the obligation by paying the assignor.
23 (b) When notification ineffective.--Subject to subsection
24 (h), notification is ineffective under subsection (a):
25 (1) If it does not reasonably identify the rights
26 assigned.
27 (2) To the extent that an agreement between an account
28 debtor and a seller of a payment intangible limits the
29 account debtor's duty to pay a person other than the seller
30 and the limitation is effective under law other than this
20010S0330B0817 - 155 -
1 division.
2 (3) At the option of an account debtor, if the
3 notification notifies the account debtor to make less than
4 the full amount of any installment or other periodic payment
5 to the assignee, even if:
6 (i) only a portion of the account, chattel paper or
7 payment intangible has been assigned to that assignee;
8 (ii) a portion has been assigned to another
9 assignee; or
10 (iii) the account debtor knows that the assignment
11 to that assignee is limited.
12 (c) Proof of assignment.--Subject to subsection (h), if
13 requested by the account debtor, an assignee shall seasonably
14 furnish reasonable proof that the assignment has been made.
15 Unless the assignee complies, the account debtor may discharge
16 its obligation by paying the assignor, even if the account
17 debtor has received a notification under subsection (a).
18 (d) Term restricting assignment generally ineffective.--
19 Except as otherwise provided in subsections (e) and (j) and
20 sections 2A303 (relating to alienability of party's interest
21 under lease contract or of lessor's residual interest in goods;
22 delegation of performance; transfer of rights) and 9407
23 (relating to restrictions on creation or enforcement of security
24 interest in leasehold interest or in lessor's residual
25 interest), and subject to subsection (h), a term in an agreement
26 between an account debtor and an assignor or in a promissory
27 note is ineffective to the extent that it:
28 (1) prohibits, restricts or requires the consent of the
29 account debtor or person obligated on the promissory note to
30 the assignment or transfer of, or the creation, attachment,
20010S0330B0817 - 156 -
1 perfection or enforcement of a security interest in, the
2 account, chattel paper, payment intangible or promissory
3 note; or
4 (2) provides that the assignment or transfer or the
5 creation, attachment, perfection or enforcement of the
6 security interest may give rise to a default, breach, right
7 of recoupment, claim, defense, termination, right of
8 termination or remedy under the account, chattel paper,
9 payment intangible or promissory note.
10 (e) Inapplicability of subsection (d) to certain sales.--
11 Subsection (d) does not apply to the sale of a payment
12 intangible or promissory note.
13 (f) Legal restrictions on assignment generally
14 ineffective.--Except as otherwise provided in subsection (j) and
15 sections 2A303 and 9407 and subject to subsections (h) and (i),
16 a rule of law, statute or regulation which prohibits, restricts
17 or requires the consent of a government, governmental body or
18 official or account debtor to the assignment or transfer of, or
19 creation of a security interest in, an account or chattel paper
20 is ineffective to the extent that the rule of law, statute or
21 regulation:
22 (1) prohibits, restricts or requires the consent of the
23 government, governmental body or official or account debtor
24 to the assignment or transfer of, or the creation,
25 attachment, perfection or enforcement of a security interest
26 in, the account or chattel paper; or
27 (2) provides that the assignment or transfer or the
28 creation, attachment, perfection or enforcement of the
29 security interest may give rise to a default, breach, right
30 of recoupment, claim, defense, termination, right of
20010S0330B0817 - 157 -
1 termination or remedy under the account or chattel paper.
2 (g) Subsection (b)(3) not waivable.--Subject to subsection
3 (h), an account debtor may not waive or vary its option under
4 subsection (b)(3).
5 (h) Rule for individual under other law.--This section is
6 subject to law other than this division which establishes a
7 different rule for an account debtor who is an individual and
8 who incurred the obligation primarily for personal, family or
9 household purposes.
10 (i) Inapplicability to health-care-insurance receivable.--
11 This section does not apply to an assignment of a health-care-
12 insurance receivable.
13 (j) Section prevails over inconsistent law.--
14 (1) Except as set forth in paragraphs (2), (3) and (4), <--
15 (4) AND (5), this section prevails over any inconsistent
16 provision of any existing or future statute or regulation of
17 the Commonwealth, unless the provision is contained in a
18 statute of the Commonwealth, refers expressly to this section
19 and states that the provision prevails over this section.
20 (2) Subsection (f) does not apply to an account or
21 chattel paper if the account debtor is the Commonwealth.
22 (3) Subsection (f) does not apply to the following:
23 (i) A claim or right to receive benefits under a
24 workers' compensation act as compensation for personal
25 injury or sickness, including a claim or right to receive
26 benefits under the act of June 2, 1915 (P.L.736, No.338),
27 known as the Workers' Compensation Act.
28 (ii) The act of June 21, 1939 (P.L.566, No.284),
29 known as The Pennsylvania Occupational Disease Act.
30 (iii) Section 306 of the act of August 26, 1971
20010S0330B0817 - 158 -
1 (P.L.351, No.91), known as the State Lottery Law.
2 (iv) A claim or right to receive amounts, whether by <--
3 suit or agreement and whether as lump sums or as periodic
4 payments, as damages, other than punitive damages, on
5 account of personal physical injuries or physical
6 sickness, including a claim or right to receive amounts
7 under the act of February 11, 2000 (P.L.1, No.1), known
8 as the Structured Settlement Protection Act.
9 (4) Subsections (d) and (f) do not apply to a claim or
10 right to receive benefits from a special needs trust
11 described in section 1917(d)(4) of the Social Security Act
12 (49 Stat. 620, 42 U.S.C. § 1396R(d)(4) 1396P(D)(4)). <--
13 (5) THE LIMITATIONS ON RESTRICTIONS OF ASSIGNMENTS <--
14 CONTAINED IN THIS SECTION ARE INAPPLICABLE TO TRANSFERS OF
15 STRUCTURED SETTLEMENT PAYMENT RIGHTS PURSUANT TO THE ACT OF
16 FEBRUARY 11, 2000 (P.L.1, NO.1), KNOWN AS THE STRUCTURED
17 SETTLEMENT PROTECTION ACT.
18 § 9407. Restrictions on creation or enforcement of security
19 interest in leasehold interest or in lessor's
20 residual interest.
21 (a) Term restricting assignment generally ineffective.--
22 Except as otherwise provided in subsection (b), a term in a
23 lease agreement is ineffective to the extent that it:
24 (1) prohibits, restricts or requires the consent of a
25 party to the lease to the assignment or transfer of, or the
26 creation, attachment, perfection or enforcement of a security
27 interest in, an interest of a party under the lease contract
28 or in the lessor's residual interest in the goods; or
29 (2) provides that the assignment or transfer or the
30 creation, attachment, perfection or enforcement of the
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1 security interest may give rise to a default, breach, right
2 of recoupment, claim, defense, termination, right of
3 termination or remedy under the lease.
4 (b) Effectiveness of certain terms.--Except as otherwise
5 provided in section 2A303(g) (relating to requirements for
6 prohibition of transfer in consumer lease), a term described in
7 subsection (a)(2) is effective to the extent that there is:
8 (1) a transfer by the lessee of the lessee's right of
9 possession or use of the goods in violation of the term; or
10 (2) a delegation of a material performance of either
11 party to the lease contract in violation of the term.
12 (c) Security interest not material impairment.--The
13 creation, attachment, perfection or enforcement of a security
14 interest in the lessor's interest under the lease contract or
15 the lessor's residual interest in the goods is not a transfer
16 which materially impairs the lessee's prospect of obtaining
17 return performance or materially changes the duty of or
18 materially increases the burden or risk imposed on the lessee
19 within the purview of section 2A303(d) (relating to certain
20 rights and remedies) unless, and then only to the extent that,
21 enforcement actually results in a delegation of material
22 performance of the lessor.
23 § 9408. Restrictions on assignment of promissory notes, health-
24 care-insurance receivables and certain general
25 intangibles ineffective.
26 (a) Term restricting assignment generally ineffective.--
27 Except as otherwise provided in subsections (b) and (e), a term
28 in a promissory note or in an agreement between an account
29 debtor and a debtor which relates to a health-care-insurance
30 receivable or a general intangible, including a contract,
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1 permit, license or franchise, and which term prohibits,
2 restricts or requires the consent of the person obligated on the
3 promissory note or the account debtor to, the assignment or
4 transfer of, or creation, attachment or perfection of a security
5 interest in, the promissory note, health-care-insurance
6 receivable or general intangible, is ineffective to the extent
7 that the term:
8 (1) would impair the creation, attachment or perfection
9 of a security interest; or
10 (2) provides that the assignment or transfer or the
11 creation, attachment or perfection of the security interest
12 may give rise to a default, breach, right of recoupment,
13 claim, defense, termination, right of termination or remedy
14 under the promissory note, health-care-insurance receivable
15 or general intangible.
16 (b) Applicability of subsection (a) to sales of certain
17 rights to payment.--Subsection (a) applies to a security
18 interest in a payment intangible or promissory note only if the
19 security interest arises out of a sale of the payment intangible
20 or promissory note.
21 (c) Legal restrictions on assignment generally
22 ineffective.--Except as otherwise provided in subsection (e), a
23 rule of law, statute or regulation which prohibits, restricts or
24 requires the consent of a government, governmental body or
25 official, person obligated on a promissory note or account
26 debtor to the assignment or transfer of, or creation of a
27 security interest in, a promissory note, health-care-insurance
28 receivable or general intangible, including a contract, permit,
29 license or franchise between an account debtor and a debtor, is
30 ineffective to the extent that the rule of law, statute or
20010S0330B0817 - 161 -
1 regulation:
2 (1) would impair the creation, attachment or perfection
3 of a security interest; or
4 (2) provides that the assignment or transfer or the
5 creation, attachment or perfection of the security interest
6 may give rise to a default, breach, right of recoupment,
7 claim, defense, termination, right of termination or remedy
8 under the promissory note, health-care-insurance receivable
9 or general intangible.
10 (d) Limitation on ineffectiveness under subsections (a) and
11 (c).--To the extent that a term in a promissory note or in an
12 agreement between an account debtor and a debtor which relates
13 to a health-care-insurance receivable or general intangible or a
14 rule of law, statute or regulation described in subsection (c)
15 would be effective under law other than this division but is
16 ineffective under subsection (a) or (c), the creation,
17 attachment or perfection of a security interest in the
18 promissory note, health-care-insurance receivable or general
19 intangible:
20 (1) is not enforceable against the person obligated on
21 the promissory note or the account debtor;
22 (2) does not impose a duty or obligation on the person
23 obligated on the promissory note or the account debtor;
24 (3) does not require the person obligated on the
25 promissory note or the account debtor to recognize the
26 security interest, pay or render performance to the secured
27 party or accept payment or performance from the secured
28 party;
29 (4) does not entitle the secured party to use or assign
30 the debtor's rights under the promissory note, health-care-
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1 insurance receivable or general intangible, including any
2 related information or materials furnished to the debtor in
3 the transaction giving rise to the promissory note, health-
4 care-insurance receivable or general intangible;
5 (5) does not entitle the secured party to use, assign,
6 possess or have access to any trade secrets or confidential
7 information of the person obligated on the promissory note or
8 the account debtor; and
9 (6) does not entitle the secured party to enforce the
10 security interest in the promissory note, health-care-
11 insurance receivable or general intangible.
12 (e) Section prevails over inconsistent law.--
13 (1) Except as set forth in paragraphs (2) and (3), (3) <--
14 AND (4), this section prevails over any inconsistent
15 provision of any existing or future statute or regulation of
16 the Commonwealth, unless the provision is contained in a
17 statute of the Commonwealth, refers expressly to this section
18 and states that the provision prevails over this section.
19 (2) Subsection (c) does not apply to the provisions,
20 claims and rights listed in section 9406(j)(3) (relating to
21 discharge of account debtor; notification of assignment;
22 identification and proof of assignment; restrictions on
23 assignment of accounts, chattel paper, payment intangibles
24 and promissory notes ineffective).
25 (3) Subsections (a) and (c) do not apply to the claims
26 and rights described in section 9406(j)(4).
27 (4) THE LIMITATIONS ON RESTRICTIONS OF ASSIGNMENTS <--
28 CONTAINED IN THIS SECTION ARE INAPPLICABLE TO TRANSFERS OF
29 STRUCTURED SETTLEMENT PAYMENT RIGHTS PURSUANT TO THE ACT OF
30 FEBRUARY 11, 2000 (P.L.1, NO.1), KNOWN AS THE STRUCTURED
20010S0330B0817 - 163 -
1 SETTLEMENT PROTECTION ACT.
2 § 9409. Restrictions on assignment of letter-of-credit rights
3 ineffective.
4 (a) Term or law restricting assignment generally
5 ineffective.--A term in a letter of credit or a rule of law,
6 statute, regulation, custom or practice applicable to the letter
7 of credit which prohibits, restricts or requires the consent of
8 an applicant, issuer or nominated person to a beneficiary's
9 assignment of or creation of a security interest in a letter-of-
10 credit right is ineffective to the extent that the term or rule
11 of law, statute, regulation, custom or practice:
12 (1) would impair the creation, attachment or perfection
13 of a security interest in the letter-of-credit right; or
14 (2) provides that the assignment or the creation,
15 attachment or perfection of the security interest may give
16 rise to a default, breach, right of recoupment, claim,
17 defense, termination, right of termination or remedy under
18 the letter-of-credit right.
19 (b) Limitation on ineffectiveness under subsection (a).--To
20 the extent that a term in a letter of credit is ineffective
21 under subsection (a) but would be effective under law other than
22 this division or a custom or practice applicable to the letter
23 of credit, to the transfer of a right to draw or otherwise
24 demand performance under the letter of credit or to the
25 assignment of a right to proceeds of the letter of credit, the
26 creation, attachment or perfection of a security interest in the
27 letter-of-credit right:
28 (1) is not enforceable against the applicant, issuer,
29 nominated person or transferee beneficiary;
30 (2) imposes no duties or obligations on the applicant,
20010S0330B0817 - 164 -
1 issuer, nominated person or transferee beneficiary; and
2 (3) does not require the applicant, issuer, nominated
3 person or transferee beneficiary to recognize the security
4 interest, pay or render performance to the secured party or
5 accept payment or other performance from the secured party.
6 CHAPTER 95
7 FILING
8 Subchapter
9 A. Filing Office; Contents and Effectiveness of Financing
10 Statement
11 B. Duties and Operation of Filing Office
12 SUBCHAPTER A
13 FILING OFFICE; CONTENTS AND
14 EFFECTIVENESS OF FINANCING STATEMENT
15 Sec.
16 9501. Filing office.
17 9502. Contents of financing statement; record of mortgage as
18 financing statement; time of filing financing statement.
19 9503. Name of debtor and secured party.
20 9504. Indication of collateral.
21 9505. Filing and compliance with other statutes and treaties for
22 consignments, leases, other bailments and other
23 transactions.
24 9506. Effect of errors or omissions.
25 9507. Effect of certain events on effectiveness of financing
26 statement.
27 9508. Effectiveness of financing statement if new debtor
28 becomes bound by security agreement.
29 9509. Persons entitled to file a record.
30 9510. Effectiveness of filed record.
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1 9511. Secured party of record.
2 9512. Amendment of financing statement.
3 9513. Termination statement.
4 9514. Assignment of powers of secured party of record.
5 9515. Duration and effectiveness of financing statement; effect
6 of lapsed financing statement.
7 9516. What constitutes filing; effectiveness of filing.
8 9517. Effect of indexing errors.
9 9518. Claim concerning inaccurate or wrongfully filed record.
10 § 9501. Filing office.
11 (a) Filing offices.--Except as otherwise provided in
12 subsection (b), if the local law of this Commonwealth governs
13 perfection of a security interest or agricultural lien, the
14 office in which to file a financing statement to perfect the
15 security interest or agricultural lien is one of the following:
16 (1) The office designated for the filing or recording of
17 a record of a mortgage on the related real property, if:
18 (i) the collateral is as-extracted collateral or
19 timber to be cut; or
20 (ii) the financing statement is filed as a fixture
21 filing and the collateral is goods which are or are to
22 become fixtures.
23 (2) The office of the Secretary of the Commonwealth in
24 all other cases, including a case in which the collateral is
25 goods which are or are to become fixtures and the financing
26 statement is not filed as a fixture filing.
27 (b) Filing office for transmitting utilities.--The office in
28 which to file a financing statement to perfect a security
29 interest in collateral, including fixtures, of a transmitting
30 utility is the office of the Secretary of the Commonwealth. The
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1 financing statement also constitutes a fixture filing as to the
2 collateral indicated in the financing statement which is or is
3 to become fixtures.
4 § 9502. Contents of financing statement; record of mortgage as
5 financing statement; time of filing financing
6 statement.
7 (a) Sufficiency of financing statement.--Subject to
8 subsection (b), a financing statement is sufficient only if it:
9 (1) provides the name of the debtor;
10 (2) provides the name of the secured party or a
11 representative of the secured party; and
12 (3) indicates the collateral covered by the financing
13 statement.
14 (b) Real-property-related financing statements.--Except as
15 otherwise provided in section 9501(b) (relating to filing office
16 for transmitting utilities), to be sufficient, a financing
17 statement which covers as-extracted collateral or timber to be
18 cut or which is filed as a fixture filing and covers goods which
19 are or are to become fixtures must satisfy subsection (a) and
20 also:
21 (1) indicate that it covers this type of collateral;
22 (2) indicate that it is to be filed in the real property
23 records;
24 (3) provide a description of the real property to which
25 the collateral is related; and
26 (4) if the debtor does not have an interest of record in
27 the real property, provide the name of a record owner.
28 (c) Record of mortgage as financing statement.--A record of
29 a mortgage is effective, from the date of recording, as a
30 financing statement filed as a fixture filing or as a financing
20010S0330B0817 - 167 -
1 statement covering as-extracted collateral or timber to be cut
2 only if:
3 (1) the record indicates the goods or accounts which it
4 covers;
5 (2) the goods are or are to become fixtures related to
6 the real property described in the record or the collateral
7 is related to the real property described in the record and
8 is as-extracted collateral or timber to be cut;
9 (3) the record satisfies the requirements for a
10 financing statement in this section other than an indication
11 that it is to be filed in the real property records; and
12 (4) the record is duly recorded.
13 (d) Filing before security agreement or attachment.--A
14 financing statement may be filed before a security agreement is
15 made or a security interest otherwise attaches.
16 § 9503. Name of debtor and secured party.
17 (a) Sufficiency of debtor's name.--A financing statement
18 sufficiently provides the name of the debtor:
19 (1) If the debtor is a registered organization, only if
20 the financing statement provides the name of the debtor
21 indicated on the public record of the debtor's jurisdiction
22 of organization which shows the debtor to have been
23 organized.
24 (2) If the debtor is a decedent's estate, only if the
25 financing statement provides the name of the decedent and
26 indicates that the debtor is an estate.
27 (3) If the debtor is a trust or a trustee acting with
28 respect to property held in trust, only if the financing
29 statement:
30 (i) provides the name specified for the trust in its
20010S0330B0817 - 168 -
1 organic documents or, if no name is specified, provides
2 the name of the settlor and additional information
3 sufficient to distinguish the debtor from other trusts
4 having one or more of the same settlors; and
5 (ii) indicates, in the debtor's name or otherwise,
6 that the debtor is a trust or is a trustee acting with
7 respect to property held in trust; and
8 (4) In other cases:
9 (i) if the debtor has a name, only if it provides
10 the individual or organizational name of the debtor; and
11 (ii) if the debtor does not have a name, only if it
12 provides the names of the partners, members, associates
13 or other persons comprising the debtor.
14 (b) Additional debtor-related information.--A financing
15 statement which provides the name of the debtor in accordance
16 with subsection (a) is not rendered ineffective by the absence
17 of:
18 (1) a trade name or other name of the debtor; or
19 (2) unless required under subsection (a)(4)(ii), names
20 of partners, members, associates or other persons comprising
21 the debtor.
22 (c) Debtor's trade name insufficient.--A financing statement
23 which provides only the debtor's trade name does not
24 sufficiently provide the name of the debtor.
25 (d) Representative capacity.--Failure to indicate the
26 representative capacity of a secured party or representative of
27 a secured party does not affect the sufficiency of a financing
28 statement.
29 (e) Multiple debtors and secured parties.--A financing
30 statement may provide the name of more than one debtor and the
20010S0330B0817 - 169 -
1 name of more than one secured party.
2 § 9504. Indication of collateral.
3 A financing statement sufficiently indicates the collateral
4 which it covers if the financing statement provides:
5 (1) a description of the collateral pursuant to section
6 9108 (relating to sufficiency of description); or
7 (2) an indication that the financing statement covers
8 all assets or all personal property.
9 § 9505. Filing and compliance with other statutes and treaties
10 for consignments, leases, other bailments and other
11 transactions.
12 (a) Use of terms other than "debtor" and "secured party".--A
13 consignor, lessor or other bailor of goods, a licensor or a
14 buyer of a payment intangible or promissory note may file a
15 financing statement or may comply with a statute or treaty
16 described in section 9311(a) (relating to perfection of security
17 interests in property subject to certain statutes, regulations
18 and treaties), using the terms "consignor," "consignee,"
19 "lessor," "lessee," "bailor," "bailee," "licensor," "licensee,"
20 "owner," "registered owner," "buyer," "seller" or words of
21 similar import, instead of the terms "secured party" and
22 "debtor."
23 (b) Effect of financing statement under subsection (a).--
24 This chapter applies to the filing of a financing statement
25 under subsection (a) and, as appropriate, to compliance which is
26 equivalent to filing a financing statement under section
27 9311(b), but the filing or compliance is not of itself a factor
28 in determining whether the collateral secures an obligation. If
29 it is determined for another reason that the collateral secures
30 an obligation, a security interest held by the consignor,
20010S0330B0817 - 170 -
1 lessor, bailor, licensor, owner or buyer which attaches to the
2 collateral is perfected by the filing or compliance.
3 § 9506. Effect of errors or omissions.
4 (a) Minor errors and omissions.--A financing statement
5 substantially satisfying the requirements of this chapter is
6 effective even if it has minor errors or omissions, unless the
7 errors or omissions make the financing statement seriously
8 misleading.
9 (b) Financing statement seriously misleading.--Except as
10 otherwise provided in subsection (c), a financing statement
11 which fails sufficiently to provide the name of the debtor in
12 accordance with section 9503(a) (relating to sufficiency of
13 debtor's name) is seriously misleading.
14 (c) Financing statement not seriously misleading.--If a
15 search of the records of the filing office under the debtor's
16 correct name, using the filing office's standard search logic,
17 if any, would disclose a financing statement which fails
18 sufficiently to provide the name of the debtor in accordance
19 with section 9503(a), the name provided does not make the
20 financing statement seriously misleading.
21 (d) Debtor's correct name.--For purposes of section 9508(b)
22 (relating to effectiveness of financing statement if new debtor
23 becomes bound by security agreement), the "debtor's correct
24 name" in subsection (c) means the correct name of the new
25 debtor.
26 § 9507. Effect of certain events on effectiveness of financing
27 statement.
28 (a) Disposition.--A filed financing statement remains
29 effective with respect to collateral which is sold, exchanged,
30 leased, licensed or otherwise disposed of and in which a
20010S0330B0817 - 171 -
1 security interest or agricultural lien continues, even if the
2 secured party knows of or consents to the disposition.
3 (b) Information becoming seriously misleading.--Except as
4 otherwise provided in subsection (c) and section 9508 (relating
5 to effectiveness of financing statement if new debtor becomes
6 bound by security agreement), a financing statement is not
7 rendered ineffective if, after the financing statement is filed,
8 the information provided in the financing statement becomes
9 seriously misleading under section 9506 (relating to effect of
10 errors or omissions).
11 (c) Change in debtor's name.--If a debtor so changes its
12 name that a filed financing statement becomes seriously
13 misleading under section 9506:
14 (1) the financing statement is effective to perfect a
15 security interest in collateral acquired by the debtor before
16 or within four months after the change; and
17 (2) the financing statement is not effective to perfect
18 a security interest in collateral acquired by the debtor more
19 than four months after the change unless an amendment to the
20 financing statement which renders the financing statement not
21 seriously misleading is filed within four months after the
22 change.
23 § 9508. Effectiveness of financing statement if new debtor
24 becomes bound by security agreement.
25 (a) Financing statement naming original debtor.--Except as
26 otherwise provided in this section, a filed financing statement
27 naming an original debtor is effective to perfect a security
28 interest in collateral in which a new debtor has or acquires
29 rights to the extent that the financing statement would have
30 been effective had the original debtor acquired rights in the
20010S0330B0817 - 172 -
1 collateral.
2 (b) Financing statement becoming seriously misleading.--If
3 the difference between the name of the original debtor and that
4 of the new debtor causes a filed financing statement which is
5 effective under subsection (a) to be seriously misleading under
6 section 9506 (relating to effect of errors or omissions):
7 (1) the financing statement is effective to perfect a
8 security interest in collateral acquired by the new debtor
9 before and within four months after the new debtor becomes
10 bound under section 9203(d) (relating to when person becomes
11 bound by another person's security agreement); and
12 (2) the financing statement is not effective to perfect
13 a security interest in collateral acquired by the new debtor
14 more than four months after the new debtor becomes bound
15 under section 9203(d) unless an initial financing statement
16 providing the name of the new debtor is filed before the
17 expiration of that time.
18 (c) When section not applicable.--This section does not
19 apply to collateral as to which a filed financing statement
20 remains effective against the new debtor under section 9507(a)
21 (relating to disposition).
22 § 9509. Persons entitled to file a record.
23 (a) Person entitled to file record.--A person may file an
24 initial financing statement, amendment which adds collateral
25 covered by a financing statement or amendment which adds a
26 debtor to a financing statement only if:
27 (1) the debtor authorizes the filing in an authenticated
28 record or pursuant to subsection (b) or (c); or
29 (2) the person holds an agricultural lien which has
30 become effective at the time of filing and the financing
20010S0330B0817 - 173 -
1 statement covers only collateral in which the person holds an
2 agricultural lien.
3 (b) Security agreement as authorization.--By authenticating
4 or becoming bound as debtor by a security agreement, a debtor or
5 new debtor authorizes the filing of an initial financing
6 statement and an amendment covering:
7 (1) the collateral described in the security agreement;
8 and
9 (2) property which becomes collateral under section
10 9315(a)(2) (relating to secured party's rights on disposition
11 of collateral and in proceeds), whether or not the security
12 agreement expressly covers proceeds.
13 (c) Acquisition of collateral as authorization.--By
14 acquiring collateral in which a security interest or
15 agricultural lien continues under section 9315(a)(1), a debtor
16 authorizes the filing of an initial financing statement and an
17 amendment covering the collateral and property which becomes
18 collateral under section 9315(a)(2).
19 (d) Person entitled to file certain amendments.--A person
20 may file an amendment other than an amendment which adds
21 collateral covered by a financing statement or an amendment
22 which adds a debtor to a financing statement only if:
23 (1) the secured party of record authorizes the filing;
24 or
25 (2) the amendment is a termination statement for a
26 financing statement as to which the secured party of record
27 has failed to file or send a termination statement as
28 required by section 9513(a) or (c) (relating to termination
29 statement), the debtor authorizes the filing and the
30 termination statement indicates that the debtor authorized it
20010S0330B0817 - 174 -
1 to be filed.
2 (e) Multiple secured parties of record.--If there is more
3 than one secured party of record for a financing statement, each
4 secured party of record may authorize the filing of an amendment
5 under subsection (d).
6 § 9510. Effectiveness of filed record.
7 (a) Filed record effective if authorized.--A filed record is
8 effective only to the extent that it was filed by a person that
9 may file it under section 9509 (relating to persons entitled to
10 file a record).
11 (b) Authorization by one secured party of record.--A record
12 authorized by one secured party of record does not affect the
13 financing statement with respect to another secured party of
14 record.
15 (c) Continuation statement not timely filed.--A continuation
16 statement which is not filed within the six-month period
17 prescribed by section 9515(d) (relating to when continuation
18 statement may be filed) is ineffective.
19 § 9511. Secured party of record.
20 (a) Secured party of record.--A secured party of record with
21 respect to a financing statement is a person whose name is
22 provided as the name of the secured party or a representative of
23 the secured party in an initial financing statement which has
24 been filed. If an initial financing statement is filed under
25 section 9514(a) (relating to assignment reflected on initial
26 financing statement), the assignee named in the initial
27 financing statement is the secured party of record with respect
28 to the financing statement.
29 (b) Amendment naming secured party of record.--If an
30 amendment of a financing statement which provides the name of a
20010S0330B0817 - 175 -
1 person as a secured party or a representative of a secured party
2 is filed, the person named in the amendment is a secured party
3 of record. If an amendment is filed under section 9514(b), the
4 assignee named in the amendment is a secured party of record.
5 (c) Amendment deleting secured party of record.--A person
6 remains a secured party of record until the filing of an
7 amendment of the financing statement which deletes the person.
8 § 9512. Amendment of financing statement.
9 (a) Amendment of information in financing statement.--
10 Subject to section 9509 (relating to persons entitled to file a
11 record), a person may add or delete collateral covered by,
12 continue or terminate the effectiveness of or, subject to
13 subsection (e), otherwise amend the information provided in a
14 financing statement by filing an amendment which:
15 (1) identifies by its file number the initial financing
16 statement to which the amendment relates; and
17 (2) if the amendment relates to an initial financing
18 statement filed in a filing office described in section
19 9501(a)(1) (relating to filing offices), provides the
20 information specified in section 9502(b) (relating to real-
21 property-related financing statements).
22 (b) Period of effectiveness not affected.--Except as
23 otherwise provided in section 9515 (relating to duration and
24 effectiveness of financing statement; effect of lapsed financing
25 statement), the filing of an amendment does not extend the
26 period of effectiveness of the financing statement.
27 (c) Effectiveness of amendment adding collateral.--A
28 financing statement which is amended by an amendment which adds
29 collateral is effective as to the added collateral only from the
30 date of the filing of the amendment.
20010S0330B0817 - 176 -
1 (d) Effectiveness of amendment adding debtor.--A financing
2 statement which is amended by an amendment which adds a debtor
3 is effective as to the added debtor only from the date of the
4 filing of the amendment.
5 (e) Certain amendments ineffective.--An amendment is
6 ineffective to the extent it:
7 (1) purports to delete all debtors and fails to provide
8 the name of a debtor to be covered by the financing
9 statement; or
10 (2) purports to delete all secured parties of record and
11 fails to provide the name of a new secured party of record.
12 § 9513. Termination statement.
13 (a) Consumer goods.--A secured party shall cause the secured
14 party of record for a financing statement to file a termination
15 statement for the financing statement if the financing statement
16 covers consumer goods and:
17 (1) there is no obligation secured by the collateral
18 covered by the financing statement and no commitment to make
19 an advance, incur an obligation or otherwise give value; or
20 (2) the debtor did not authorize the filing of the
21 initial financing statement.
22 (b) Time for compliance with subsection (a).--To comply with
23 subsection (a), a secured party shall cause the secured party of
24 record to file the termination statement:
25 (1) within one month after there is no obligation
26 secured by the collateral covered by the financing statement
27 and no commitment to make an advance, incur an obligation or
28 otherwise give value; or
29 (2) if earlier, within 20 days after the secured party
30 receives an authenticated demand from a debtor.
20010S0330B0817 - 177 -
1 (c) Other collateral.--In cases not governed by subsection
2 (a), within 20 days after a secured party receives an
3 authenticated demand from a debtor, the secured party shall
4 cause the secured party of record for a financing statement to
5 send to the debtor a termination statement for the financing
6 statement or file the termination statement in the filing office
7 if:
8 (1) except in the case of a financing statement covering
9 accounts or chattel paper which has been sold or goods which
10 are the subject of a consignment, there is no obligation
11 secured by the collateral covered by the financing statement
12 and no commitment to make an advance, incur an obligation or
13 otherwise give value;
14 (2) the financing statement covers accounts or chattel
15 paper which has been sold but as to which the account debtor
16 or other person obligated has discharged its obligation;
17 (3) the financing statement covers goods which were the
18 subject of a consignment to the debtor but are not in the
19 debtor's possession; or
20 (4) the debtor did not authorize the filing of the
21 initial financing statement.
22 (d) Effect of filing termination statement.--Except as
23 otherwise provided in section 9510 (relating to effectiveness of
24 filed record), upon the filing of a termination statement with
25 the filing office, the financing statement to which the
26 termination statement relates ceases to be effective. Except as
27 otherwise provided in section 9510, for purposes of sections
28 9519(g) (relating to removal of debtor's name), 9522(a)
29 (relating to post-lapse maintenance and retrieval of
30 information) and 9523(c) (relating to communication of requested
20010S0330B0817 - 178 -
1 information), the filing with the filing office of a termination
2 statement relating to a financing statement which indicates that
3 the debtor is a transmitting utility also causes the
4 effectiveness of the financing statement to lapse.
5 § 9514. Assignment of powers of secured party of record.
6 (a) Assignment reflected on initial financing statement.--
7 Except as otherwise provided in subsection (c), an initial
8 financing statement may reflect an assignment of all of the
9 secured party's power to authorize an amendment to the financing
10 statement by providing the name and mailing address of the
11 assignee as the name and address of the secured party.
12 (b) Assignment of filed financing statement.--Except as
13 otherwise provided in subsection (c), a secured party of record
14 may assign of record all or part of its power to authorize an
15 amendment to a financing statement by filing in the filing
16 office an amendment of the financing statement which:
17 (1) identifies by its file number the initial financing
18 statement to which it relates;
19 (2) provides the name of the assignor; and
20 (3) provides the name and mailing address of the
21 assignee.
22 (c) Assignment of record of mortgage.--An assignment of
23 record of a security interest in a fixture covered by a record
24 of a mortgage which is effective as a financing statement filed
25 as a fixture filing under section 9502(c) (relating to record of
26 mortgage as financing statement) may be made only by an
27 assignment of record of the mortgage in the manner provided by
28 law of this Commonwealth other than this title.
29 § 9515. Duration and effectiveness of financing statement;
30 effect of lapsed financing statement.
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1 (a) Five-year effectiveness.--Except as otherwise provided
2 in subsections (b), (e), (f) and (g), a filed financing
3 statement is effective for a period of five years after the date
4 of filing.
5 (b) Public-finance or manufactured-home transaction.--Except
6 as otherwise provided in subsections (e), (f) and (g), an
7 initial financing statement filed in connection with a public-
8 finance transaction or manufactured-home transaction is
9 effective for a period of 30 years after the date of filing if
10 it indicates that it is filed in connection with a public-
11 finance transaction or manufactured-home transaction.
12 (c) Lapse and continuation of financing statement.--The
13 effectiveness of a filed financing statement lapses on the
14 expiration of the period of its effectiveness unless before the
15 lapse a continuation statement is filed pursuant to subsection
16 (d). Upon lapse, a financing statement ceases to be effective
17 and any security interest or agricultural lien which was
18 perfected by the financing statement becomes unperfected unless
19 the security interest is perfected otherwise. If the security
20 interest or agricultural lien becomes unperfected upon lapse, it
21 is deemed never to have been perfected as against a purchaser of
22 the collateral for value.
23 (d) When continuation statement may be filed.--A
24 continuation statement may be filed only within six months
25 before the expiration of the five-year period specified in
26 subsection (a) or the 30-year period specified in subsection
27 (b), whichever is applicable.
28 (e) Effect of filing continuation statement.--Except as
29 otherwise provided in section 9510 (relating to effectiveness of
30 filed record), upon timely filing of a continuation statement,
20010S0330B0817 - 180 -
1 the effectiveness of the initial financing statement continues
2 for a period of five years commencing on the day on which the
3 financing statement would have become ineffective in the absence
4 of the filing. Upon the expiration of the five-year period, the
5 financing statement lapses in the same manner as provided in
6 subsection (c) unless, before the lapse, another continuation
7 statement is filed pursuant to subsection (d). Succeeding
8 continuation statements may be filed in the same manner to
9 continue the effectiveness of the initial financing statement.
10 (f) Transmitting utility financing statement.--If a debtor
11 is a transmitting utility and a filed financing statement so
12 indicates, the financing statement is effective until a
13 termination statement is filed.
14 (g) Record of mortgage as financing statement.--A record of
15 a mortgage which is effective as a financing statement filed as
16 a fixture filing under section 9502(c) (relating to record of
17 mortgage as financing statement) remains effective as a
18 financing statement filed as a fixture filing until the mortgage
19 is released or satisfied of record or its effectiveness
20 otherwise terminates as to the real property.
21 § 9516. What constitutes filing; effectiveness of filing.
22 (a) What constitutes filing.--Except as otherwise provided
23 in subsection (b), communication of a record to a filing office
24 and tender of the filing fee or acceptance of the record by the
25 filing office constitutes filing.
26 (b) Refusal to accept record; filing does not occur.--Filing
27 does not occur with respect to a record which a filing office
28 refuses to accept because one of the following paragraphs
29 applies:
30 (1) The record is not communicated by a method or medium
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1 of communication authorized by the filing office.
2 (2) An amount equal to or greater than the applicable
3 filing fee is not tendered.
4 (3) The filing office is unable to index the record
5 because of a reason stated in one of the following
6 subparagraphs:
7 (i) In the case of an initial financing statement,
8 the record does not provide a name for the debtor.
9 (ii) In the case of an amendment or correction
10 statement, the record:
11 (A) does not identify the initial financing
12 statement as required by section 9512 (relating to
13 amendment of financing statement) or 9518 (relating
14 to claim concerning inaccurate or wrongfully filed
15 record), as applicable; or
16 (B) identifies an initial financing statement
17 whose effectiveness has lapsed under section 9515
18 (relating to duration and effectiveness of financing
19 statement; effect of lapsed financing statement).
20 (iii) In the case of an initial financing statement
21 which provides the name of a debtor identified as an
22 individual or an amendment which provides a name of a
23 debtor identified as an individual which was not
24 previously provided in the financing statement to which
25 the record relates, the record does not identify the
26 debtor's last name.
27 (iv) In the case of a record filed in the filing
28 office described in section 9501(a)(1) (relating to
29 filing offices), the record does not provide a sufficient
30 description of the real property to which it relates.
20010S0330B0817 - 182 -
1 (4) In the case of an initial financing statement or an
2 amendment which adds a secured party of record, the record
3 does not provide a name and mailing address for the secured
4 party of record.
5 (5) In the case of an initial financing statement or an
6 amendment which provides a name of a debtor which was not
7 previously provided in the financing statement to which the
8 amendment relates, the record does not do one or more of the
9 following:
10 (i) Provide a mailing address for the debtor.
11 (ii) Indicate whether the debtor is an individual or
12 an organization.
13 (iii) If the financing statement indicates that the
14 debtor is an organization, provide:
15 (A) a type of organization for the debtor;
16 (B) a jurisdiction of organization for the
17 debtor; or
18 (C) an organizational identification number for
19 the debtor or indicate that the debtor has none.
20 (6) In the case of an assignment reflected in an initial
21 financing statement under section 9514(a) (relating to
22 assignment reflected on initial financing statement) or an
23 amendment filed under section 9514(b) (relating to assignment
24 of filed financing statement), the record does not provide a
25 name and mailing address for the assignee.
26 (7) In the case of a continuation statement, the record
27 is not filed within the six-month period prescribed by
28 section 9515(d) (relating to when continuation statement may
29 be filed).
30 (c) Rules applicable to subsection (b).--For purposes of
20010S0330B0817 - 183 -
1 subsection (b):
2 (1) a record does not provide information if the filing
3 office is unable to read or decipher the information; and
4 (2) a record which does not indicate that it is an
5 amendment or identify an initial financing statement to which
6 it relates, as required by section 9512, 9514 or 9518, is an
7 initial financing statement.
8 (d) Refusal to accept record; record effective as filed
9 record.--A record which is communicated to the filing office
10 with tender of the filing fee, but which the filing office
11 refuses to accept for a reason other than one set forth in
12 subsection (b), is effective as a filed record except as against
13 a purchaser of the collateral that gives value in reasonable
14 reliance upon the absence of the record from the files.
15 § 9517. Effect of indexing errors.
16 The failure of the filing office to index a record correctly
17 does not affect the effectiveness of the filed record.
18 § 9518. Claim concerning inaccurate or wrongfully filed record.
19 (a) Correction statement.--A person may file in the filing
20 office a correction statement with respect to a record indexed
21 there under the person's name if the person believes that the
22 record is inaccurate or was wrongfully filed.
23 (b) Sufficiency of correction statement.--A correction
24 statement must:
25 (1) identify the record to which it relates by the file
26 number assigned to the initial financing statement to which
27 the record relates;
28 (2) indicate that it is a correction statement; and
29 (3) provide the basis for the person's belief that the
30 record is inaccurate and indicate the manner in which the
20010S0330B0817 - 184 -
1 person believes the record should be amended to cure any
2 inaccuracy or provide the basis for the person's belief that
3 the record was wrongfully filed.
4 (c) Record not affected by correction statement.--Except as
5 provided in subsection (d), the filing of a correction statement
6 does not affect the effectiveness of an initial financing
7 statement or other filed record.
8 (d) Fraudulent financing statements.--
9 (1) The Department of State may conduct an
10 administrative hearing to determine if an initial financing
11 statement was fraudulently filed in accordance with the
12 following:
13 (i) The hearing shall be conducted in accordance
14 with 2 Pa.C.S. (relating to Administrative Law and
15 Procedure). The department shall determine the initial
16 financing statement to be fraudulently filed for purposes
17 of this subsection if it determines that no rational
18 basis exists under section 9509 (relating to persons
19 entitled to file a record), entitling the person to file
20 the initial financing statement and it appears that the
21 person filed the initial financing statement with intent
22 to annoy, harass or harm the debtor.
23 (ii) If the department determines that the initial
24 financing statement was fraudulently filed and no timely
25 appeal of the determination was filed, the department
26 shall file a correction statement with respect to the
27 initial financing statement indexed there. In addition to
28 complying with the requirements of subsection (b), the
29 correction statement filed by the department under this
30 paragraph shall state all of the following:
20010S0330B0817 - 185 -
1 (A) the correction statement was filed by the
2 department under this subsection;
3 (B) the department has determined that the
4 initial financing statement was fraudulently filed
5 and that the person had the right to appeal the
6 decision to a court of competent jurisdiction;
7 (C) the initial financing statement found to be
8 fraudulently filed may be ineffective; and
9 (D) the reasons why the department found the
10 initial financing statement to have been fraudulently
11 filed.
12 (iii) A correction statement filed by the department
13 in accordance with paragraph (ii) creates a rebuttable
14 presumption that the initial financing statement found to
15 be fraudulently filed is ineffective.
16 (iv) A person adversely affected by a determination
17 of the department under paragraph (i) may appeal the
18 determination in accordance with 2 Pa.C.S. § 702
19 (relating to appeals).
20 (v) If the department determines that the initial
21 financing statement was fraudulently filed and the
22 determination is appealed to Commonwealth Court, the
23 department shall file a correction statement with respect
24 to the initial financing statement indexed there only
25 upon affirmation by the court of its determination. In
26 addition to complying with the requirements of subsection
27 (b), the correction statement shall state all of the
28 following:
29 (A) the correction statement was filed by the
30 department under this subsection;
20010S0330B0817 - 186 -
1 (B) the department has determined that the
2 initial financing statement was fraudulently filed
3 and that the person had the right to appeal the
4 decision to a court of competent jurisdiction;
5 (C) the initial financing statement found to be
6 fraudulently is ineffective; and
7 (D) the reasons why the department found the
8 initial financing statement to have been fraudulently
9 filed.
10 (vi) If the department files a correction statement
11 with respect to the initial financing statement indexed
12 there under this subsection, it shall refer the matter
13 for criminal prosecution to the Office of Attorney
14 General pursuant to 18 Pa.C.S. § 4911 (relating to
15 tampering with public records or information).
16 (2) Nothing in this subsection limits the rights or
17 remedies the debtor may have with respect to an initial
18 financing statement that has been fraudulently filed. Nothing
19 in this subsection limits the effectiveness of a termination
20 or correction statement filed by a debtor under sections
21 9509(d)(2) and 9513 (relating to termination statement), or
22 the rights of a debtor under section 9625 (relating to
23 remedies for secured party's failure to comply with
24 division).
25 SUBCHAPTER B
26 DUTIES AND OPERATION OF FILING OFFICE
27 Sec.
28 9519. Numbering, maintaining and indexing records;
29 communicating information provided in records.
30 9520. Acceptance and refusal to accept record.
20010S0330B0817 - 187 -
1 9521. Uniform form of written financing statement and
2 amendment.
3 9522. Maintenance and destruction of records.
4 9523. Information from filing office; sale or license of
5 records.
6 9524. Delay by filing office.
7 9525. Fees.
8 9526. Filing-office rules.
9 9527. Duty to report.
10 § 9519. Numbering, maintaining and indexing records;
11 communicating information provided in records.
12 (a) Filing office duties.--For each record filed in a filing
13 office, the filing office shall:
14 (1) assign a unique number to the filed record;
15 (2) create a record which bears the number assigned to
16 the filed record and the date and time of filing;
17 (3) maintain the filed record for public inspection; and
18 (4) index the filed record in accordance with
19 subsections (c), (d) and (e).
20 (b) File number.--Except as provided in subsection (i), a
21 file number assigned after January 1, 2002, must include a digit
22 which:
23 (1) is mathematically derived from or related to the
24 other digits of the file number; and
25 (2) aids the filing office in determining whether a
26 number communicated as the file number includes a single
27 digit or transpositional error.
28 (c) Indexing: general.--Except as otherwise provided in
29 subsections (d) and (e), the filing office shall:
30 (1) index an initial financing statement according to
20010S0330B0817 - 188 -
1 the name of the debtor and index all filed records relating
2 to the initial financing statement in a manner which
3 associates with one another an initial financing statement
4 and all filed records relating to the initial financing
5 statement; and
6 (2) index a record which provides a name of a debtor
7 which was not previously provided in the financing statement
8 to which the record relates also according to the name which
9 was not previously provided.
10 (d) Indexing: real-property-related financing statement.--If
11 a financing statement is filed as a fixture filing or covers as-
12 extracted collateral or timber to be cut, the filing office
13 shall index it:
14 (1) under the names of the debtor and of each owner of
15 record shown on the financing statement as if they were the
16 mortgagors under a mortgage of the real property described;
17 and
18 (2) to the extent that the law of this Commonwealth
19 provides for indexing of records of mortgages under the name
20 of the mortgagee, under the name of the secured party as if
21 the secured party were the mortgagee thereunder or, if
22 indexing is by description, as if the financing statement
23 were a record of a mortgage of the real property described.
24 (e) Indexing: real-property-related assignment.--If a
25 financing statement is filed as a fixture filing or covers as-
26 extracted collateral or timber to be cut, the filing office
27 shall index an assignment filed under section 9514(a) (relating
28 to assignment reflected on initial financing statement) or an
29 amendment filed under section 9514(b) (relating to assignment of
30 filed financing statement):
20010S0330B0817 - 189 -
1 (1) under the name of the assignor as grantor; and
2 (2) to the extent that the law of this Commonwealth
3 provides for indexing a record of the assignment of a
4 mortgage under the name of the assignee, under the name of
5 the assignee.
6 (f) Retrieval and association capability.--The filing office
7 shall maintain a capability:
8 (1) to retrieve a record by the name of the debtor and
9 by the file number assigned to the initial financing
10 statement to which the record relates; and
11 (2) to associate and retrieve with one another an initial
12 financing statement and each filed record relating to the
13 initial financing statement.
14 (g) Removal of debtor's name.--The filing office may not
15 remove a debtor's name from the index until one year after the
16 effectiveness of a financing statement naming the debtor lapses
17 under section 9515 (relating to duration and effectiveness of
18 financing statement; effect of lapsed financing statement) with
19 respect to all secured parties of record.
20 (h) Timeliness of filing office performance.--Except as
21 provided in subsection (i), the filing office shall perform the
22 acts required by subsections (a) through (e) at the time and in
23 the manner prescribed by filing-office rule, but not later than
24 two FIVE business days after the filing office receives the <--
25 record in question.
26 (i) Inapplicability to real-property-related filing
27 office.--Subsections (b) and (h) do not apply to a filing office
28 described in section 9501(a)(1) (relating to filing offices).
29 § 9520. Acceptance and refusal to accept record.
30 (a) Mandatory refusal to accept record.--A filing office
20010S0330B0817 - 190 -
1 shall refuse to accept a record for filing for a reason set
2 forth in section 9516(b) (relating to refusal to accept record;
3 filing does not occur) and may refuse to accept a record for
4 filing only for a reason set forth in section 9516(b).
5 (b) Communication concerning refusal.--If a filing office
6 refuses to accept a record for filing, it shall communicate to
7 the person that presented the record the fact of and reason for
8 the refusal and the date and time the record would have been
9 filed had the filing office accepted it. The communication must
10 be made at the time and in the manner prescribed by filing-
11 office rule but, in the case of a filing office described in
12 section 9501(a)(2) (relating to filing offices), in no event
13 more than two FIVE business days after the filing office <--
14 receives the record.
15 (c) When filed financing statement effective.--A filed
16 financing statement satisfying section 9502(a) and (b) (relating
17 to contents of financing statement; record of mortgage as
18 financing statement; time of filing financing statement) is
19 effective, even if the filing office is required to refuse to
20 accept it for filing under subsection (a). However, section 9338
21 (relating to priority of security interest or agricultural lien
22 perfected by filed financing statement providing certain
23 incorrect information) applies to a filed financing statement
24 providing information described in section 9516(b)(5) which is
25 incorrect at the time the financing statement is filed.
26 (d) Separate application to multiple debtors.--If a record
27 communicated to a filing office provides information which
28 relates to more than one debtor, this chapter applies as to each
29 debtor separately.
30 § 9521. Uniform form of written financing statement and
20010S0330B0817 - 191 -
1 amendment.
2 (a) Initial financing statement form.--A filing office which
3 accepts written records may not refuse to accept a written
4 initial financing statement in the form and format set forth in
5 the final official text of the 1999 revisions to Article 9 of
6 the Uniform Commercial Code promulgated by The American Law
7 Institute and the National Conference of Commissioners on
8 Uniform State Laws, except for a reason set forth in section
9 9516(b) (relating to refusal to accept record; filing does not
10 occur).
11 (b) Amendment form.--A filing office which accepts written
12 records may not refuse to accept a written record in the form
13 and format set forth in the final official text of the 1999
14 revisions to Article 9 of the Uniform Commercial Code
15 promulgated by The American Law Institute and the National
16 Conference of Commissioners on Uniform State Laws, except for a
17 reason set forth in section 9516(b).
18 § 9522. Maintenance and destruction of records.
19 (a) Post-lapse maintenance and retrieval of information.--
20 The filing office shall maintain a record of the information
21 provided in a filed financing statement for at least one year
22 after the effectiveness of the financing statement has lapsed
23 under section 9515 (relating to duration and effectiveness of
24 financing statement; effect of lapsed financing statement) with
25 respect to all secured parties of record. The record must be
26 retrievable by using the name of the debtor and by using the
27 file number assigned to the initial financing statement to which
28 the record relates.
29 (b) Destruction of written records.--Except to the extent
30 that a statute governing disposition of public records provides
20010S0330B0817 - 192 -
1 otherwise, the filing office immediately may destroy any written
2 record evidencing a financing statement. However, if the filing
3 office destroys a written record, it shall maintain another
4 record of the financing statement which complies with subsection
5 (a).
6 § 9523. Information from filing office; sale or license of
7 records.
8 (a) Acknowledgment of filing written record.--If a person
9 that files a written record requests an acknowledgment of the
10 filing, the filing office shall send to the person an image of
11 the record showing the number assigned to the record pursuant to
12 section 9519(a)(1) (relating to numbering, maintaining and
13 indexing records; communicating information provided in records)
14 and the date and time of the filing of the record. However, if
15 the person furnishes a copy of the record to the filing office,
16 the filing office may instead:
17 (1) note upon the copy the number assigned to the record
18 pursuant to section 9519(a)(1) and the date and time of the
19 filing of the record; and
20 (2) send the copy to the person.
21 (b) Acknowledgment of filing other record.--If a person
22 files a record other than a written record, the filing office
23 shall communicate to the person an acknowledgment which
24 provides:
25 (1) the information in the record;
26 (2) the number assigned to the record pursuant to
27 section 9519(a)(1); and
28 (3) the date and time of the filing of the record.
29 (c) Communication of requested information.--The filing
30 office shall communicate or otherwise make available in a record
20010S0330B0817 - 193 -
1 the following information to any person that requests it:
2 (1) Whether there is on file on a date and time
3 specified by the filing office, but not a date earlier than
4 three business days before the filing office receives the
5 request, any financing statement which:
6 (i) designates a particular debtor or, if the
7 request so states, designates a particular debtor at the
8 address specified in the request;
9 (ii) has not lapsed under section 9515 (relating to
10 duration and effectiveness of financing statement; effect
11 of lapsed financing statement) with respect to all
12 secured parties of record; and
13 (iii) if the request so states, has lapsed under
14 section 9515 and a record of which is maintained by the
15 filing office under section 9522(a) (relating to post-
16 lapse maintenance and retrieval of information).
17 (2) The date and time of filing of each financing
18 statement.
19 (3) The information provided in each financing
20 statement.
21 (d) Medium for communicating information.--In complying with
22 its duty under subsection (c), the filing office may communicate
23 information in any medium. However, if requested, the filing
24 office shall communicate information by issuing its written
25 certificate.
26 (e) Timeliness of filing office performance.--
27 (1) Except as set forth in paragraph (2), the filing
28 office shall perform the acts required by subsections (a)
29 through (d) at the time and in the manner prescribed by
30 filing-office rule.
20010S0330B0817 - 194 -
1 (2) A filing office described in section 9501(a)(2)
2 (relating to filing offices) shall perform the acts required
3 by subsections (a) through (d) not later than five business
4 days after the filing office receives the request.
5 (f) Public availability of records.--At least weekly, the
6 filing office described in section 9501(a)(2) shall offer to
7 sell or license to the public on a nonexclusive basis, in bulk,
8 copies of all records filed in it under this chapter, in every
9 medium from time to time available to the filing office.
10 § 9524. Delay by filing office.
11 Delay by the filing office beyond a time limit prescribed by
12 this chapter is excused if:
13 (1) the delay is caused by interruption of communication
14 or computer facilities, war, emergency conditions, failure of
15 equipment or other circumstances beyond control of the filing
16 office; and
17 (2) the filing office exercises reasonable diligence
18 under the circumstances.
19 § 9525. Fees.
20 (a) Initial financing statement or other record.--Except as
21 otherwise provided in subsections (c) and (d):
22 (1) The fee for filing and indexing a record under this
23 chapter shall be as follows:
24 (i) For a record communicated to a filing office
25 described in section 9501(a)(1) (relating to filing
26 office), $48.
27 (ii) For a record communicated to a filing office
28 described in section 9501(a)(2), $12.
29 (2) The amount of the fee for filing and indexing the
30 record is not affected by the number of names to be indexed
20010S0330B0817 - 195 -
1 or the number of pages in the record.
2 (b) Response to information request.--Except as otherwise
3 provided in subsection (d), the fee for responding to a request
4 for information from the filing office, including for issuing a
5 certificate showing whether there is on file any financing
6 statement naming a particular debtor shall be as follows:
7 (1) The basic charge is $12.
8 (2) If the filing office responds to the request in
9 writing, there is an additional charge of:
10 (i) no charge per record found;
11 (ii) $2 per page of copies; and
12 (iii) if certification is requested, $28.
13 (c) Record of mortgage.--This section does not require a fee
14 with respect to a record of a mortgage which is effective as a
15 financing statement filed as a fixture filing or as a financing
16 statement covering as-extracted collateral or timber to be cut
17 under section 9502(c) (relating to record of mortgage as
18 financing statement). However, the recording and satisfaction
19 fees that otherwise would be applicable to the record of the
20 mortgage apply.
21 (d) Variation by regulation.--Within 90 days of the
22 effective date of this subsection, the Department of State shall
23 promulgate regulations regarding the fees required by
24 subsections (a) and (b). The department shall establish fees
25 required by subsection (a)(1)(i) that generate revenue
26 equivalent to the amount collected from UCC filing fees by all
27 counties during calendar year 2000. The department shall
28 establish fees required by subsection (a)(1)(ii) which generate
29 revenue equivalent to the amount collected from UCC filing fees
30 and deposited in the General Fund and the Corporation Bureau
20010S0330B0817 - 196 -
1 Restricted Account during fiscal year 1999-2000. Changes in the
2 fees shall be promulgated as a final-form regulation with
3 proposed rulemaking omitted in accordance with the act of June
4 25, 1982 (P.L.633, No.181), known as the Regulatory Review Act.
5 After July 1, 2001, the department may promulgate regulations in
6 accordance with the Regulatory Review Act regarding the fees
7 required by subsections (a) and (b) for services rendered by the
8 department. Fee regulations promulgated by the department under
9 this subsection shall supersede the fees listed in subsections
10 (a) and (b).
11 § 9526. Filing-office rules.
12 (a) Adoption of filing-office rules.--The Department of
13 State shall promulgate rules to implement this division. The
14 filing-office rules must be consistent with this division.
15 (b) Harmonization of rules.--To keep the filing-office rules
16 and practices of the filing office in harmony with the rules and
17 practices of filing offices in other jurisdictions which enact
18 substantially this chapter and to keep the technology used by
19 the filing office compatible with the technology used by filing
20 offices in other jurisdictions which enact substantially this
21 chapter, the department, so far as is consistent with the
22 purposes, policies and provisions of this division, in
23 promulgating filing-office rules, shall:
24 (1) consult with filing offices in other jurisdictions
25 which enact substantially this chapter;
26 (2) consult the most recent version of the Model Rules
27 promulgated by the International Association of Corporate
28 Administrators or any successor organization; and
29 (3) take into consideration the rules and practices of
30 and the technology used by filing offices in other
20010S0330B0817 - 197 -
1 jurisdictions which enact substantially this chapter.
2 § 9527. Duty to report.
3 The Department of State shall report by October 31 of every
4 even-numbered year to the Governor and the General Assembly on
5 the operation of the filing office. The report must contain a
6 statement of the extent to which:
7 (1) the filing-office rules are not in harmony with the
8 rules of filing offices in other jurisdictions which enact
9 substantially this chapter and the reasons for these
10 variations; and
11 (2) the filing-office rules are not in harmony with the
12 most recent version of the Model Rules promulgated by the
13 International Association of Corporate Administrators or any
14 successor organization and the reasons for these variations.
15 CHAPTER 96
16 DEFAULT
17 Subchapter
18 A. Default and Enforcement of Security Interest
19 B. Noncompliance with Division
20 SUBCHAPTER A
21 DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
22 Sec.
23 9601. Rights after default; judicial enforcement; consignor or
24 buyer of accounts, chattel paper, payment intangibles or
25 promissory notes.
26 9602. Waiver and variance of rights and duties.
27 9603. Agreement on standards concerning rights and duties.
28 9604. Procedure if security agreement covers real property or
29 fixtures.
30 9605. Unknown debtor or secondary obligor.
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1 9606. Time of default for agricultural lien.
2 9607. Collection and enforcement by secured party.
3 9608. Application of proceeds of collection or enforcement;
4 liability for deficiency and right to surplus.
5 9609. Secured party's right to take possession after default.
6 9610. Disposition of collateral after default.
7 9611. Notification before disposition of collateral.
8 9612. Timeliness of notification before disposition of
9 collateral.
10 9613. Contents and form of notification before disposition of
11 collateral: general.
12 9614. Contents and form of notification before disposition of
13 collateral: consumer-goods transaction.
14 9615. Application of proceeds of disposition; liability for
15 deficiency and right to surplus.
16 9616. Explanation of calculation of surplus or deficiency.
17 9617. Rights of transferee of collateral.
18 9618. Rights and duties of certain secondary obligors.
19 9619. Transfer of record or legal title.
20 9620. Acceptance of collateral in full or partial satisfaction
21 of obligation; compulsory disposition of collateral.
22 9621. Notification of proposal to accept collateral.
23 9622. Effect of acceptance of collateral.
24 9623. Right to redeem collateral.
25 9624. Waiver.
26 § 9601. Rights after default; judicial enforcement; consignor
27 or buyer of accounts, chattel paper, payment
28 intangibles or promissory notes.
29 (a) Rights of secured party after default.--After default, a
30 secured party has the rights provided in this chapter and,
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1 except as otherwise provided in section 9602 (relating to waiver
2 and variance of rights and duties), those provided by agreement
3 of the parties. A secured party:
4 (1) may reduce a claim to judgment, foreclose or
5 otherwise enforce the claim, security interest or
6 agricultural lien by any available judicial procedure; and
7 (2) if the collateral is documents, may proceed either
8 as to the documents or as to the goods they cover.
9 (b) Rights and duties of secured party in possession or
10 control.--A secured party in possession of collateral or control
11 of collateral under section 9104 (relating to control of deposit
12 account), 9105 (relating to control of electronic chattel
13 paper), 9106 (relating to control of investment property) or
14 9107 (relating to control of letter-of-credit right) has the
15 rights and duties provided in section 9207 (relating to rights
16 and duties of secured party having possession or control of
17 collateral).
18 (c) Rights cumulative; simultaneous exercise.--The rights
19 under subsections (a) and (b) are cumulative and may be
20 exercised simultaneously.
21 (d) Rights of debtor and obligor.--Except as otherwise
22 provided in subsection (g) and section 9605 (relating to unknown
23 debtor or secondary obligor), after default, a debtor and an
24 obligor have the rights provided in this chapter and by
25 agreement of the parties.
26 (e) Lien of levy after judgment.--If a secured party has
27 reduced its claim to judgment, the lien of any levy which may be
28 made upon the collateral by virtue of an execution based upon
29 the judgment relates back to the earliest of:
30 (1) the date of perfection of the security interest or
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1 agricultural lien in the collateral;
2 (2) the date of filing a financing statement covering
3 the collateral; or
4 (3) any date specified in a statute under which the
5 agricultural lien was created.
6 (f) Execution sale.--A sale pursuant to an execution is a
7 foreclosure of the security interest or agricultural lien by
8 judicial procedure within the meaning of this section. A secured
9 party may purchase at the sale and thereafter hold the
10 collateral free of any other requirements of this division.
11 (g) Consignor or buyer of certain rights to payment.--Except
12 as otherwise provided in section 9607(c) (relating to
13 commercially reasonable collection and enforcement), this
14 chapter imposes no duties upon a secured party that is a
15 consignor or is a buyer of accounts, chattel paper, payment
16 intangibles or promissory notes.
17 § 9602. Waiver and variance of rights and duties.
18 Except as otherwise provided in section 9624 (relating to
19 waiver), to the extent that they give rights to a debtor or
20 obligor and impose duties on a secured party, the debtor or
21 obligor may not waive or vary the rules stated in:
22 (1) section 9207(b)(4)(iii) (relating to expenses,
23 risks, duties and rights when secured party in possession);
24 (2) section 9210 (relating to request for accounting;
25 request regarding list of collateral or statement of
26 account);
27 (3) section 9607(c) (relating to commercially reasonable
28 collection and enforcement);
29 (4) sections 9608(a) (relating to application of
30 proceeds, surplus and deficiency if obligation secured) and
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1 9615(c) (relating to application of noncash proceeds) to the
2 extent that they deal with application or payment of noncash
3 proceeds of collection, enforcement or disposition;
4 (5) sections 9608(a) and 9615(d) (relating to surplus or
5 deficiency if obligation secured) to the extent that they
6 require accounting for or payment of surplus proceeds of
7 collateral;
8 (6) section 9609 (relating to secured party's right to
9 take possession after default) to the extent that it imposes
10 upon a secured party that takes possession of collateral
11 without judicial process the duty to do so without breach of
12 the peace;
13 (7) sections 9610(b) (relating to commercially
14 reasonable disposition), 9611 (relating to notification
15 before disposition of collateral), 9613 (relating to contents
16 and form of notification before disposition of collateral:
17 general) and 9614 (relating to contents and form of
18 notification before disposition of collateral: consumer-goods
19 transaction);
20 (8) section 9615(f) (relating to calculation of surplus
21 or deficiency in disposition to person related to secured
22 party);
23 (9) section 9616 (relating to explanation of calculation
24 of surplus or deficiency);
25 (10) sections 9620 (relating to acceptance of collateral
26 in full or partial satisfaction of obligation; compulsory
27 disposition of collateral), 9621 (relating to notification of
28 proposal to accept collateral) and 9622 (relating to effect
29 of acceptance of collateral);
30 (11) section 9623 (relating to right to redeem
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1 collateral);
2 (12) section 9624 (relating to waiver); and
3 (13) sections 9625 (relating to remedies for secured
4 party's failure to comply with division) and 9626 (relating
5 to action in which deficiency or surplus is in issue).
6 § 9603. Agreement on standards concerning rights and duties.
7 (a) Agreed standards.--The parties may determine by
8 agreement the standards measuring the fulfillment of the rights
9 of a debtor or obligor and the duties of a secured party under a
10 rule stated in section 9602 (relating to waiver and variance of
11 rights and duties) if the standards are not manifestly
12 unreasonable.
13 (b) Agreed standards inapplicable to breach of peace.--
14 Subsection (a) does not apply to the duty under section 9609
15 (relating to secured party's right to take possession after
16 default) to refrain from breaching the peace.
17 § 9604. Procedure if security agreement covers real property or
18 fixtures.
19 (a) Enforcement: personal and real property.--If a security
20 agreement covers both personal and real property, a secured
21 party may proceed:
22 (1) under this chapter as to the personal property
23 without prejudicing any rights with respect to the real
24 property; or
25 (2) as to both the personal property and the real
26 property in accordance with the rights with respect to the
27 real property, in which case the other provisions of this
28 chapter do not apply.
29 (b) Enforcement: fixtures.--Subject to subsection (c), if a
30 security agreement covers goods which are or become fixtures, a
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1 secured party may proceed:
2 (1) under this chapter; or
3 (2) in accordance with the rights with respect to real
4 property, in which case the other provisions of this chapter
5 do not apply.
6 (c) Removal of fixtures.--Subject to the other provisions of
7 this chapter, if a secured party holding a security interest in
8 fixtures has priority over all owners and encumbrancers of the
9 real property, the secured party, after default, may remove the
10 collateral from the real property.
11 (d) Injury caused by removal.--A secured party that removes
12 collateral shall promptly reimburse any encumbrancer or owner of
13 the real property, other than the debtor, for the cost of repair
14 of any physical injury caused by the removal. The secured party
15 need not reimburse the encumbrancer or owner for any diminution
16 in value of the real property caused by the absence of the goods
17 removed or by any necessity of replacing them. A person entitled
18 to reimbursement may refuse permission to remove until the
19 secured party gives adequate assurance for the performance of
20 the obligation to reimburse.
21 § 9605. Unknown debtor or secondary obligor.
22 A secured party does not owe a duty based on its status as
23 secured party to any of the following:
24 (1) A person that is a debtor or obligor, unless the
25 secured party knows:
26 (i) that the person is a debtor or obligor;
27 (ii) the identity of the person; and
28 (iii) how to communicate with the person.
29 (2) A secured party or lienholder that has filed a
30 financing statement against a person, unless the secured
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1 party knows:
2 (i) that the person is a debtor; and
3 (ii) the identity of the person.
4 § 9606. Time of default for agricultural lien.
5 For purposes of this chapter, a default occurs in connection
6 with an agricultural lien at the time the secured party becomes
7 entitled to enforce the lien in accordance with the statute
8 under which it was created.
9 § 9607. Collection and enforcement by secured party.
10 (a) Collection and enforcement generally.--If so agreed, and
11 in any event after default, a secured party:
12 (1) may notify an account debtor or other person
13 obligated on collateral to make payment or otherwise render
14 performance to or for the benefit of the secured party;
15 (2) may take any proceeds to which the secured party is
16 entitled under section 9315 (relating to secured party's
17 rights on disposition of collateral and in proceeds);
18 (3) may enforce the obligations of an account debtor or
19 other person obligated on collateral and exercise the rights
20 of the debtor with respect to the obligation of the account
21 debtor or other person obligated on collateral to make
22 payment or otherwise render performance to the debtor and
23 with respect to any property which secures the obligations of
24 the account debtor or other person obligated on the
25 collateral;
26 (4) if the secured party holds a security interest in a
27 deposit account perfected by control under section 9104(a)(1)
28 (relating to requirements for control), may apply the balance
29 of the deposit account to the obligation secured by the
30 deposit account; and
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1 (5) if the secured party holds a security interest in a
2 deposit account perfected by control under section 9104(a)(2)
3 or (3), may instruct the bank to pay the balance of the
4 deposit account to or for the benefit of the secured party.
5 (b) Nonjudicial enforcement of mortgage.--If necessary to
6 enable a secured party to exercise under subsection (a)(3) the
7 right of a debtor to enforce a mortgage nonjudicially, the
8 secured party may record in the office in which a record of the
9 mortgage is recorded:
10 (1) A copy of the security agreement which creates or
11 provides for a security interest in the obligation secured by
12 the mortgage.
13 (2) The secured party's sworn affidavit in recordable
14 form stating that:
15 (i) a default has occurred; and
16 (ii) the secured party is entitled to enforce the
17 mortgage nonjudicially.
18 (c) Commercially reasonable collection and enforcement.--A
19 secured party shall proceed in a commercially reasonable manner
20 if the secured party:
21 (1) undertakes to collect from or enforce an obligation
22 of an account debtor or other person obligated on collateral;
23 and
24 (2) is entitled to charge back uncollected collateral or
25 otherwise to full or limited recourse against the debtor or a
26 secondary obligor.
27 (d) Expenses of collection and enforcement.--A secured party
28 may deduct from the collections made pursuant to subsection (c)
29 reasonable expenses of collection and enforcement, including
30 reasonable attorney fees and legal expenses incurred by the
20010S0330B0817 - 206 -
1 secured party.
2 (e) Duties to secured party not affected.--This section does
3 not determine whether an account debtor, bank or other person
4 obligated on collateral owes a duty to a secured party.
5 § 9608. Application of proceeds of collection or enforcement;
6 liability for deficiency and right to surplus.
7 (a) Application of proceeds, surplus and deficiency if
8 obligation secured.--If a security interest or agricultural lien
9 secures payment or performance of an obligation, the following
10 rules apply:
11 (1) A secured party shall apply or pay over for
12 application the cash proceeds of collection or enforcement
13 under section 9607 (relating to collection and enforcement by
14 secured party) in the following order to:
15 (i) the reasonable expenses of collection and
16 enforcement and, to the extent provided for by agreement
17 and not prohibited by law, reasonable attorney fees and
18 legal expenses incurred by the secured party;
19 (ii) the satisfaction of obligations secured by the
20 security interest or agricultural lien under which the
21 collection or enforcement is made; and
22 (iii) the satisfaction of obligations secured by any
23 subordinate security interest in or other lien on the
24 collateral subject to the security interest or
25 agricultural lien under which the collection or
26 enforcement is made if the secured party receives an
27 authenticated demand for proceeds before distribution of
28 the proceeds is completed.
29 (2) If requested by a secured party, a holder of a
30 subordinate security interest or other lien shall furnish
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1 reasonable proof of the interest or lien within a reasonable
2 time. Unless the holder complies, the secured party need not
3 comply with the holder's demand under paragraph (1)(iii).
4 (3) A secured party need not apply or pay over for
5 application noncash proceeds of collection and enforcement
6 under section 9607 unless the failure to do so would be
7 commercially unreasonable. A secured party that applies or
8 pays over for application noncash proceeds shall do so in a
9 commercially reasonable manner.
10 (4) A secured party shall account to and pay a debtor
11 for any surplus, and the obligor is liable for any
12 deficiency.
13 (b) No surplus or deficiency in sales of certain rights to
14 payment.--If the underlying transaction is a sale of accounts,
15 chattel paper, payment intangibles or promissory notes, the
16 debtor is not entitled to any surplus and the obligor is not
17 liable for any deficiency.
18 § 9609. Secured party's right to take possession after default.
19 (a) Possession; rendering equipment unusable; disposition on
20 debtor's premises.--After default, a secured party:
21 (1) may take possession of the collateral; and
22 (2) without removal, may render equipment unusable and
23 dispose of collateral on a debtor's premises under section
24 9610 (relating to disposition of collateral after default).
25 (b) Judicial and nonjudicial process.--A secured party may
26 proceed under subsection (a):
27 (1) pursuant to judicial process; or
28 (2) without judicial process, if it proceeds without
29 breach of the peace.
30 (c) Assembly of collateral.--If so agreed, and in any event
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1 after default, a secured party may require the debtor to
2 assemble the collateral and make it available to the secured
3 party at a place to be designated by the secured party which is
4 reasonably convenient to both parties.
5 § 9610. Disposition of collateral after default.
6 (a) Disposition after default.--After default, a secured
7 party may sell, lease, license or otherwise dispose of any or
8 all of the collateral in its present condition or following any
9 commercially reasonable preparation or processing.
10 (b) Commercially reasonable disposition.-- Every aspect of a
11 disposition of collateral, including the method, manner, time,
12 place and other terms, must be commercially reasonable. If
13 commercially reasonable, a secured party may dispose of
14 collateral by public or private proceedings, by one or more
15 contracts, as a unit or in parcels and at any time and place and
16 on any terms.
17 (c) Purchase by secured party.--A secured party may purchase
18 collateral:
19 (1) at a public disposition; or
20 (2) at a private disposition only if the collateral is
21 of a kind which is customarily sold on a recognized market or
22 the subject of widely distributed standard price quotations.
23 (d) Warranties on disposition.--A contract for sale, lease,
24 license or other disposition includes the warranties relating to
25 title, possession, quiet enjoyment and the like which by
26 operation of law accompany a voluntary disposition of property
27 of the kind subject to the contract.
28 (e) Disclaimer of warranties.--A secured party may disclaim
29 or modify warranties under subsection (d):
30 (1) in a manner which would be effective to disclaim or
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1 modify the warranties in a voluntary disposition of property
2 of the kind subject to the contract of disposition; or
3 (2) by communicating to the purchaser a record
4 evidencing the contract for disposition and including an
5 express disclaimer or modification of the warranties.
6 (f) Record sufficient to disclaim warranties.--A record is
7 sufficient to disclaim warranties under subsection (e) if it
8 indicates "There is no warranty relating to title, possession,
9 quiet enjoyment or the like in this disposition" or uses words
10 of similar import.
11 § 9611. Notification before disposition of collateral.
12 (a) Notification date.--As used in this section, the term
13 "notification date" means the earlier of the date on which:
14 (1) a secured party sends to the debtor and any
15 secondary obligor an authenticated notification of
16 disposition; or
17 (2) the debtor and any secondary obligor waive the right
18 to notification.
19 (b) Notification of disposition required.--Except as
20 otherwise provided in subsection (d), a secured party that
21 disposes of collateral under section 9610 (relating to
22 disposition of collateral after default) shall send to the
23 persons specified in subsection (c) a reasonable authenticated
24 notification of disposition.
25 (c) Persons to be notified.--To comply with subsection (b),
26 the secured party shall send an authenticated notification of
27 disposition to all of the following:
28 (1) The debtor.
29 (2) Any secondary obligor.
30 (3) If the collateral is other than consumer goods, all
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1 of the following:
2 (i) Any other person from which the secured party
3 has received, before the notification date, an
4 authenticated notification of a claim of an interest in
5 the collateral.
6 (ii) Any other secured party or lienholder that, ten
7 days before the notification date, held a security
8 interest in or other lien on the collateral perfected by
9 the filing of a financing statement which:
10 (A) identified the collateral;
11 (B) was indexed under the debtor's name as of
12 that date; and
13 (C) was filed in the office in which to file a
14 financing statement against the debtor covering the
15 collateral as of that date.
16 (iii) Any other secured party that, ten days before
17 the notification date, held a security interest in the
18 collateral perfected by compliance with a statute,
19 regulation or treaty described in section 9311(a)
20 (relating to security interest subject to other law).
21 (d) Subsection (b) inapplicable: perishable collateral;
22 recognized market.--Subsection (b) does not apply if the
23 collateral is perishable or threatens to decline speedily in
24 value or is of a type customarily sold on a recognized market.
25 (e) Compliance with subsection (c)(3)(ii).--A secured party
26 complies with the requirement for notification prescribed by
27 subsection (c)(3)(ii) if both of the following paragraphs apply:
28 (1) Not later than 20 days or earlier than 30 days
29 before the notification date, the secured party requests, in
30 a commercially reasonable manner, information concerning
20010S0330B0817 - 211 -
1 financing statements indexed under the debtor's name in the
2 office indicated in subsection (c)(3)(ii).
3 (2) Before the notification date, the secured party:
4 (i) did not receive a response to the request for
5 information; or
6 (ii) received a response to the request for
7 information and sent an authenticated notification of
8 disposition to each secured party or other lienholder
9 named in that response whose financing statement covered
10 the collateral.
11 § 9612. Timeliness of notification before disposition of
12 collateral.
13 (a) Reasonable time is question of fact.--Except as
14 otherwise provided in subsection (b), whether a notification is
15 sent within a reasonable time is a question of fact.
16 (b) Ten-day period sufficient in nonconsumer transaction.--
17 In a transaction other than a consumer transaction, a
18 notification of disposition sent after default and ten days or
19 more before the earliest time of disposition set forth in the
20 notification is sent within a reasonable time before the
21 disposition.
22 § 9613. Contents and form of notification before disposition of
23 collateral: general.
24 Except in a consumer-goods transaction, the following rules
25 apply:
26 (1) The contents of a notification of disposition are
27 sufficient if the notification:
28 (i) describes the debtor and the secured party;
29 (ii) describes the collateral which is the subject
30 of the intended disposition;
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1 (iii) states the method of intended disposition;
2 (iv) states that the debtor is entitled to an
3 accounting of the unpaid indebtedness and states the
4 charge, if any, for an accounting; and
5 (v) states the time and place of a public
6 disposition or the time after which any other disposition
7 is to be made.
8 (2) Whether the contents of a notification which lacks
9 any of the information specified in paragraph (1) are
10 nevertheless sufficient is a question of fact.
11 (3) The contents of a notification providing
12 substantially the information specified in paragraph (1) are
13 sufficient even if the notification includes:
14 (i) information not specified by that paragraph; or
15 (ii) minor errors which are not seriously
16 misleading.
17 (4) A particular phrasing of the notification is not
18 required.
19 (5) The following form of notification and the form
20 appearing in section 9614(3) (relating to contents and form
21 of notification before disposition of collateral: consumer-
22 goods transaction), when completed, each provides sufficient
23 information:
24 NOTIFICATION OF DISPOSITION OF COLLATERAL
25 To: ____________________ (Name of debtor, obligor or
26 other person to which the notification is sent)
27 From: ____________________ (Name, address and telephone
28 number of secured party)
29 Name of Debtor(s): ____________________ (include only if
30 debtor(s) are not an addressee)
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1 (For a public disposition:)
2 We will sell (or lease or license, as applicable) the
3 ____________________ (describe collateral) (to the highest
4 qualified bidder) in public as follows:
5 Day and Date:____________________
6 Time:____________________
7 Place:____________________.
8 (For a private disposition:)
9 We will sell (or lease or license, as applicable) the
10 ____________________ (describe collateral) privately sometime
11 after ____________________ (day and date).
12 You are entitled to an accounting of the unpaid
13 indebtedness secured by the property that we intend to sell
14 (or lease or license, as applicable) (for a charge of
15 $_______). You may request an accounting by calling us at
16 ____________________ (telephone number).
17 (End of Form)
18 § 9614. Contents and form of notification before disposition of
19 collateral: consumer-goods transaction.
20 In a consumer-goods transaction, the following rules apply:
21 (1) A notification of disposition must provide the
22 following information:
23 (i) the information specified in section 9613(1)
24 (relating to contents and form of notification before
25 disposition of collateral: general);
26 (ii) a description of any liability for a deficiency
27 of the person to which the notification is sent;
28 (iii) a telephone number from which the amount which
29 must be paid to the secured party to redeem the
30 collateral under section 9623 (relating to right to
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1 redeem collateral) is available; and
2 (iv) a telephone number or mailing address from
3 which additional information concerning the disposition
4 and the obligation secured is available.
5 (2) A particular phrasing of the notification is not
6 required.
7 (3) The following form of notification, when completed,
8 provides sufficient information:
9 ____________________ (Name and address of secured party)
10 ____________________ (Date)
11 NOTICE OF OUR PLAN TO SELL PROPERTY
12 ____________________ (Name and address of any obligor who
13 is also a debtor)
14 Subject: ____________________ (Identification of
15 Transaction)
16 We have your _____________________ (describe
17 collateral), because you broke promises in our agreement.
18 (For a public disposition:)
19 We will sell ____________________ (describe
20 collateral) at public sale. A sale could include a lease
21 or license. The sale will be held as follows:
22 Date:__________________
23 Time:__________________
24 Place:____________________.
25 You may attend the sale and bring bidders if you
26 want.
27 (For a private disposition:)
28 We will sell ____________________ (describe
29 collateral) at private sale sometime after
30 ____________________ (date). A sale could include a lease
20010S0330B0817 - 215 -
1 or license. The money that we get from the sale (after
2 paying our costs) will reduce the amount you owe. If we
3 get less money than you owe, you (will or will not, as
4 applicable) still owe us the difference. If we get more
5 money than you owe, you will get the extra money, unless
6 we must pay it to someone else. You can get the property
7 back at any time before we sell it by paying us the full
8 amount you owe (not just the past due payments),
9 including our expenses. To learn the exact amount you
10 must pay, call us at ____________________ (telephone
11 number). If you want us to explain to you in writing how
12 we have figured the amount that you owe us, you may call
13 us at ____________________ (telephone number) (or write
14 us at ____________________ (secured party's address)) and
15 request a written explanation. (We will charge you
16 $________ for the explanation if we sent you another
17 written explanation of the amount you owe us within the
18 last six months.) If you need more information about the
19 sale call us at ____________________ (telephone number)
20 (or write us at ______________________ (secured party's
21 address)). We are sending this notice to the following
22 other people who have an interest in ____________________
23 (describe collateral) or who owe money under your
24 agreement: ____________________ (Names of all other
25 debtors and obligors, if any)
26 (End of Form)
27 (4) A notification in the form of paragraph (3) is
28 sufficient even if additional information appears at the end
29 of the form.
30 (5) A notification in the form of paragraph (3) is
20010S0330B0817 - 216 -
1 sufficient even if it includes errors in information not
2 required by paragraph (1) unless the error is misleading with
3 respect to rights arising under this division.
4 (6) If a notification under this section is not in the
5 form of paragraph (3), law other than this division
6 determines the effect of including information not required
7 by paragraph (1).
8 § 9615. Application of proceeds of disposition; liability for
9 deficiency and right to surplus.
10 (a) Application of proceeds.--A secured party shall apply or
11 pay over for application the cash proceeds of disposition under
12 section 9610 (relating to disposition of collateral after
13 default) in the following order to:
14 (1) The reasonable expenses of retaking, holding,
15 preparing for disposition, processing and disposing and, to
16 the extent provided for by agreement and not prohibited by
17 law, reasonable attorney fees and legal expenses incurred by
18 the secured party.
19 (2) The satisfaction of obligations secured by the
20 security interest or agricultural lien under which the
21 disposition is made.
22 (3) The satisfaction of obligations secured by any
23 subordinate security interest in or other subordinate lien on
24 the collateral if:
25 (i) the secured party receives from the holder of
26 the subordinate security interest or other lien an
27 authenticated demand for proceeds before distribution of
28 the proceeds is completed; and
29 (ii) in a case in which a consignor has an interest
30 in the collateral, the subordinate security interest or
20010S0330B0817 - 217 -
1 other lien is senior to the interest of the consignor.
2 (4) A secured party that is a consignor of the
3 collateral if the secured party receives from the consignor
4 an authenticated demand for proceeds before distribution of
5 the proceeds is completed.
6 (b) Proof of subordinate interest.--If requested by a
7 secured party, a holder of a subordinate security interest or
8 other lien shall furnish reasonable proof of the interest or
9 lien within a reasonable time. Unless the holder does so, the
10 secured party need not comply with the holder's demand under
11 subsection (a)(3).
12 (c) Application of noncash proceeds.--A secured party need
13 not apply or pay over for application noncash proceeds of
14 disposition under section 9610 unless the failure to do so would
15 be commercially unreasonable. A secured party that applies or
16 pays over for application noncash proceeds shall do so in a
17 commercially reasonable manner.
18 (d) Surplus or deficiency if obligation secured.--If the
19 security interest under which a disposition is made secures
20 payment or performance of an obligation, after making the
21 payments and applications required by subsection (a) and
22 permitted by subsection (c):
23 (1) unless subsection (a)(4) requires the secured party
24 to apply or pay over cash proceeds to a consignor, the
25 secured party shall account to and pay a debtor for any
26 surplus; and
27 (2) the obligor is liable for any deficiency.
28 (e) No surplus or deficiency in sales of certain rights to
29 payment.--If the underlying transaction is a sale of accounts,
30 chattel paper, payment intangibles or promissory notes:
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1 (1) the debtor is not entitled to any surplus; and
2 (2) the obligor is not liable for any deficiency.
3 (f) Calculation of surplus or deficiency in disposition to
4 person related to secured party.--The surplus or deficiency
5 following a disposition is calculated based on the amount of
6 proceeds which would have been realized in a disposition
7 complying with this chapter to a transferee other than the
8 secured party, a person related to the secured party or a
9 secondary obligor if:
10 (1) the transferee in the disposition is the secured
11 party, a person related to the secured party or a secondary
12 obligor; and
13 (2) the amount of proceeds of the disposition is
14 significantly below the range of proceeds which a complying
15 disposition to a person other than the secured party, a
16 person related to the secured party or a secondary obligor
17 would have brought.
18 (g) Cash proceeds received by junior secured party.--A
19 secured party that receives cash proceeds of a disposition in
20 good faith and without knowledge that the receipt violates the
21 rights of the holder of a security interest or other lien which
22 is not subordinate to the security interest or agricultural lien
23 under which the disposition is made:
24 (1) takes the cash proceeds free of the security
25 interest or other lien;
26 (2) is not obligated to apply the proceeds of the
27 disposition to the satisfaction of obligations secured by the
28 security interest or other lien; and
29 (3) is not obligated to account to or pay the holder of
30 the security interest or other lien for any surplus.
20010S0330B0817 - 219 -
1 § 9616. Explanation of calculation of surplus or deficiency.
2 (a) Definitions.--As used in this section, the following
3 words and phrases shall have the meanings given to them in this
4 subsection:
5 "Explanation." A writing which:
6 (1) states the amount of the surplus or deficiency;
7 (2) provides an explanation in accordance with
8 subsection (c) of how the secured party calculated the
9 surplus or deficiency;
10 (3) states, if applicable, that future debits, credits,
11 charges, including additional credit service charges or
12 interest, rebates and expenses may affect the amount of the
13 surplus or deficiency; and
14 (4) provides a telephone number or mailing address from
15 which additional information concerning the transaction is
16 available.
17 "Request." A record:
18 (1) authenticated by a debtor or consumer obligor;
19 (2) requesting that the recipient provide an
20 explanation; and
21 (3) sent after disposition of the collateral under
22 section 9610 (relating to disposition of collateral after
23 default).
24 (b) Explanation of calculation.--In a consumer-goods
25 transaction in which the debtor is entitled to a surplus or a
26 consumer obligor is liable for a deficiency under section 9615
27 (relating to application of proceeds of disposition; liability
28 for deficiency and right to surplus), the secured party shall
29 comply with one of the following paragraphs:
30 (1) Send an explanation to the debtor or consumer
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1 obligor, as applicable, after the disposition and:
2 (i) before or when the secured party accounts to the
3 debtor and pays any surplus or first makes written demand
4 on the consumer obligor after the disposition for payment
5 of the deficiency; and
6 (ii) within 14 days after receipt of a request.
7 (2) In the case of a consumer obligor who is liable for
8 a deficiency, within 14 days after receipt of a request, send
9 to the consumer obligor a record waiving the secured party's
10 right to a deficiency.
11 (c) Required information.--To comply with paragraph (2) of
12 the definition of the term "explanation" in subsection (a), a
13 writing must provide the following information in the following
14 order:
15 (1) The aggregate amount of obligations secured by the
16 security interest under which the disposition was made and,
17 if the amount reflects a rebate of unearned interest or
18 credit service charge, an indication of that fact, calculated
19 as of a specified date:
20 (i) if the secured party takes or receives
21 possession of the collateral after default, not more than
22 35 days before the secured party takes or receives
23 possession; or
24 (ii) if the secured party takes or receives
25 possession of the collateral before default or does not
26 take possession of the collateral, not more than 35 days
27 before the disposition.
28 (2) The amount of proceeds of the disposition.
29 (3) The aggregate amount of the obligations after
30 deducting the amount of proceeds.
20010S0330B0817 - 221 -
1 (4) The amount, in the aggregate or by type, and types
2 of expenses, including expenses of retaking, holding,
3 preparing for disposition, processing and disposing of the
4 collateral and attorney fees secured by the collateral which
5 are known to the secured party and relate to the current
6 disposition.
7 (5) The amount, in the aggregate or by type and types of
8 credits, including rebates of interest or credit service
9 charges, to which the obligor is known to be entitled and
10 which are not reflected in the amount in paragraph (1).
11 (6) The amount of the surplus or deficiency.
12 (d) Substantial compliance.--A particular phrasing of the
13 explanation is not required. An explanation complying
14 substantially with the requirements of subsection (a) is
15 sufficient even if it includes minor errors which are not
16 seriously misleading.
17 (e) Charges for responses.--A debtor or consumer obligor is
18 entitled without charge to one response to a request under this
19 section during any six-month period in which the secured party
20 did not send to the debtor or consumer obligor an explanation
21 pursuant to subsection (b)(1). The secured party may require
22 payment of a charge not exceeding $25 for each additional
23 response.
24 § 9617. Rights of transferee of collateral.
25 (a) Effects of disposition.--A secured party's disposition
26 of collateral after default:
27 (1) transfers to a transferee for value all of the
28 debtor's rights in the collateral;
29 (2) discharges the security interest under which the
30 disposition is made; and
20010S0330B0817 - 222 -
1 (3) discharges any subordinate security interest or
2 other subordinate lien.
3 (b) Rights of good-faith transferee.--A transferee that acts
4 in good faith takes free of the rights and interests described
5 in subsection (a) even if the secured party fails to comply with
6 this division or the requirements of any judicial proceeding.
7 (c) Rights of other transferee.--If a transferee does not
8 take free of the rights and interests described in subsection
9 (a), the transferee takes the collateral subject to:
10 (1) the debtor's rights in the collateral;
11 (2) the security interest or agricultural lien under
12 which the disposition is made; and
13 (3) any other security interest or other lien.
14 § 9618. Rights and duties of certain secondary obligors.
15 (a) Rights and duties of secondary obligor.--A secondary
16 obligor acquires the rights and becomes obligated to perform the
17 duties of the secured party after the secondary obligor:
18 (1) receives an assignment of a secured obligation from
19 the secured party;
20 (2) receives a transfer of collateral from the secured
21 party and agrees to accept the rights and assume the duties
22 of the secured party; or
23 (3) is subrogated to the rights of a secured party with
24 respect to collateral.
25 (b) Effect of assignment, transfer or subrogation.--An
26 assignment, transfer or subrogation described in subsection (a):
27 (1) is not a disposition of collateral under section
28 9610 (relating to disposition of collateral after default);
29 and
30 (2) relieves the secured party of further duties under
20010S0330B0817 - 223 -
1 this division.
2 § 9619. Transfer of record or legal title.
3 (a) Transfer statement.--As used in this section, the term
4 "transfer statement" means a record authenticated by a secured
5 party stating:
6 (1) that the debtor has defaulted in connection with an
7 obligation secured by specified collateral;
8 (2) that the secured party has exercised its postdefault
9 remedies with respect to the collateral;
10 (3) that, by reason of the exercise, a transferee has
11 acquired the rights of the debtor in the collateral; and
12 (4) the name and mailing address of the secured party,
13 debtor and transferee.
14 (b) Effect of transfer statement.--A transfer statement
15 entitles the transferee to the transfer of record of all rights
16 of the debtor in the collateral specified in the statement in
17 any official filing, recording, registration or certificate-of-
18 title system covering the collateral. If a transfer statement is
19 presented with the applicable fee and request form to the
20 official or office responsible for maintaining the system, the
21 official or office shall:
22 (1) accept the transfer statement;
23 (2) promptly amend its records to reflect the transfer;
24 and
25 (3) if applicable, issue a new appropriate certificate
26 of title in the name of the transferee.
27 (c) Transfer not a disposition; no relief of secured party's
28 duties.--A transfer of the record or legal title to collateral
29 to a secured party under subsection (b) or otherwise is not of
30 itself a disposition of collateral under this division and does
20010S0330B0817 - 224 -
1 not of itself relieve the secured party of its duties under this
2 division.
3 § 9620. Acceptance of collateral in full or partial
4 satisfaction of obligation; compulsory disposition of
5 collateral.
6 (a) Conditions to acceptance in satisfaction.--Except as
7 otherwise provided in subsection (g), a secured party may accept
8 collateral in full or partial satisfaction of the obligation it
9 secures only if all of the following paragraphs apply:
10 (1) The debtor consents to the acceptance under
11 subsection (c).
12 (2) The secured party does not receive, within the time
13 set forth in subsection (d), a notification of objection to
14 the proposal authenticated by:
15 (i) a person to which the secured party was required
16 to send a proposal under section 9621 (relating to
17 notification of proposal to accept collateral); or
18 (ii) any other person, other than the debtor,
19 holding an interest in the collateral subordinate to the
20 security interest which is the subject of the proposal.
21 (3) If the collateral is consumer goods, the collateral
22 is not in the possession of the debtor when the debtor
23 consents to the acceptance.
24 (4) Subsection (e) does not require the secured party to
25 dispose of the collateral or the debtor waives the
26 requirement pursuant to section 9624 (relating to waiver).
27 (b) Purported acceptance ineffective.--A purported or
28 apparent acceptance of collateral under this section is
29 ineffective unless:
30 (1) the secured party consents to the acceptance in an
20010S0330B0817 - 225 -
1 authenticated record or sends a proposal to the debtor; and
2 (2) the conditions of subsection (a) are met.
3 (c) Debtor's consent.--For purposes of this section:
4 (1) A debtor consents to an acceptance of collateral in
5 partial satisfaction of the obligation it secures only if the
6 debtor agrees to the terms of the acceptance in a record
7 authenticated after default.
8 (2) A debtor consents to an acceptance of collateral in
9 full satisfaction of the obligation it secures only if the
10 debtor agrees to the terms of the acceptance in a record
11 authenticated after default or the secured party:
12 (i) sends to the debtor after default a proposal
13 which is unconditional or subject only to a condition
14 that collateral not in the possession of the secured
15 party be preserved or maintained;
16 (ii) in the proposal, proposes to accept collateral
17 in full satisfaction of the obligation it secures; and
18 (iii) does not receive a notification of objection
19 authenticated by the debtor within 20 days after the
20 proposal is sent.
21 (d) Effectiveness of notification.--To be effective under
22 subsection (a)(2), a notification of objection must be received
23 by the secured party:
24 (1) In the case of a person to which the proposal was
25 sent pursuant to section 9621, within 20 days after
26 notification was sent to that person.
27 (2) In other cases:
28 (i) within 20 days after the last notification was
29 sent pursuant to section 9621; or
30 (ii) if a notification was not sent, before the
20010S0330B0817 - 226 -
1 debtor consents to the acceptance under subsection (c).
2 (e) Mandatory disposition of consumer goods.--A secured
3 party that has taken possession of collateral shall dispose of
4 the collateral pursuant to section 9610 (relating to disposition
5 of collateral after default) within the time specified in
6 subsection (f) if:
7 (1) 60% of the cash price has been paid in the case of a
8 purchase-money security interest in consumer goods; or
9 (2) 60% of the principal amount of the obligation
10 secured has been paid in the case of a nonpurchase-money
11 security interest in consumer goods.
12 (f) Compliance with mandatory disposition requirement.--To
13 comply with subsection (e), the secured party shall dispose of
14 the collateral:
15 (1) within 90 days after taking possession; or
16 (2) within any longer period to which the debtor and all
17 secondary obligors have agreed in an agreement to that effect
18 entered into and authenticated after default.
19 (g) No partial satisfaction in consumer transaction.--In a
20 consumer transaction, a secured party may not accept collateral
21 in partial satisfaction of the obligation it secures.
22 § 9621. Notification of proposal to accept collateral.
23 (a) Persons to which proposal to be sent.--A secured party
24 that desires to accept collateral in full or partial
25 satisfaction of the obligation it secures shall send its
26 proposal to all of the following:
27 (1) Any person from which the secured party has
28 received, before the debtor consented to the acceptance, an
29 authenticated notification of a claim of an interest in the
30 collateral.
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1 (2) Any other secured party or lienholder that, ten days
2 before the debtor consented to the acceptance, held a
3 security interest in or other lien on the collateral
4 perfected by the filing of a financing statement which:
5 (i) identified the collateral;
6 (ii) was indexed under the debtor's name as of that
7 date; and
8 (iii) was filed in the office or offices in which to
9 file a financing statement against the debtor covering
10 the collateral as of that date.
11 (3) Any other secured party that, ten days before the
12 debtor consented to the acceptance, held a security interest
13 in the collateral perfected by compliance with a statute,
14 regulation or treaty described in section 9311(a) (relating
15 to security interest subject to other law).
16 (b) Proposal to be sent to secondary obligor in partial
17 satisfaction.--A secured party that desires to accept collateral
18 in partial satisfaction of the obligation it secures shall send
19 its proposal to any secondary obligor in addition to the persons
20 described in subsection (a).
21 § 9622. Effect of acceptance of collateral.
22 (a) Effect of acceptance.--A secured party's acceptance of
23 collateral in full or partial satisfaction of the obligation it
24 secures:
25 (1) discharges the obligation to the extent consented to
26 by the debtor;
27 (2) transfers to the secured party all of a debtor's
28 rights in the collateral;
29 (3) discharges the security interest or agricultural
30 lien which is the subject of the debtor's consent and any
20010S0330B0817 - 228 -
1 subordinate security interest or other subordinate lien; and
2 (4) terminates any other subordinate interest.
3 (b) Discharge of subordinate interest notwithstanding
4 noncompliance.--A subordinate interest is discharged or
5 terminated under subsection (a) even if the secured party fails
6 to comply with this division.
7 § 9623. Right to redeem collateral.
8 (a) Persons that may redeem.--A debtor, any secondary
9 obligor or any other secured party or lienholder may redeem
10 collateral.
11 (b) Requirements for redemption.--To redeem collateral, a
12 person shall tender:
13 (1) fulfillment of all obligations secured by the
14 collateral; and
15 (2) the reasonable expenses and attorney fees described
16 in section 9615(a)(1) (relating to application of proceeds).
17 (c) When redemption may occur.--A redemption may occur at
18 any time before a secured party:
19 (1) has collected collateral under section 9607
20 (relating to collection and enforcement by secured party);
21 (2) has disposed of collateral or entered into a
22 contract for its disposition under section 9610 (relating to
23 disposition of collateral after default); or
24 (3) has accepted collateral in full or partial
25 satisfaction of the obligation it secures under section 9622
26 (relating to effect of acceptance of collateral).
27 § 9624. Waiver.
28 (a) Waiver of disposition notification.--A debtor or
29 secondary obligor may waive the right to notification of
30 disposition of collateral under section 9611 (relating to
20010S0330B0817 - 229 -
1 notification before disposition of collateral) only by an
2 agreement to that effect entered into and authenticated after
3 default.
4 (b) Waiver of mandatory disposition.--A debtor may waive the
5 right to require disposition of collateral under section 9620(e)
6 (relating to mandatory disposition of consumer goods) only by an
7 agreement to that effect entered into and authenticated after
8 default.
9 (c) Waiver of redemption right.--Except in a consumer-goods
10 transaction, a debtor or secondary obligor may waive the right
11 to redeem collateral under section 9623 (relating to right to
12 redeem collateral) only by an agreement to that effect entered
13 into and authenticated after default.
14 SUBCHAPTER B
15 NONCOMPLIANCE WITH DIVISION
16 Sec.
17 9625. Remedies for secured party's failure to comply with
18 division.
19 9626. Action in which deficiency or surplus is in issue.
20 9627. Determination of whether conduct was commercially
21 reasonable.
22 9628. Nonliability and limitation on liability of secured
23 party; liability of secondary obligor.
24 § 9625. Remedies for secured party's failure to comply with
25 division.
26 (a) Judicial orders concerning noncompliance.--If it is
27 established that a secured party is not proceeding in accordance
28 with this division, a court may order or restrain collection,
29 enforcement or disposition of collateral on appropriate terms
30 and conditions.
20010S0330B0817 - 230 -
1 (b) Damages for noncompliance.--Subject to subsections (c),
2 (d) and (f), a person is liable for damages in the amount of any
3 loss caused by a failure to comply with this division. Loss
4 caused by a failure to comply may include loss resulting from
5 the debtor's inability to obtain or increased costs of
6 alternative financing.
7 (c) Persons entitled to recover damages; statutory damages
8 in consumer-goods transaction.--Except as otherwise provided in
9 section 9628 (relating to nonliability and limitation on
10 liability of secured party; liability of secondary obligor):
11 (1) a person that, at the time of the failure, was a
12 debtor, was an obligor or held a security interest in or
13 other lien on the collateral may recover damages under
14 subsection (b) for its loss; and
15 (2) if the collateral is consumer goods, a person that
16 was a debtor or a secondary obligor at the time a secured
17 party failed to comply with this chapter may recover for that
18 failure in any event an amount not less than the credit
19 service charge plus 10% of the principal amount of the
20 obligation or the time price differential plus 10% of the
21 cash price.
22 (d) Recovery when deficiency eliminated or reduced.--A
23 debtor whose deficiency is eliminated under section 9626
24 (relating to action in which deficiency or surplus is in issue)
25 may recover damages for the loss of any surplus. However, a
26 debtor or secondary obligor whose deficiency is eliminated or
27 reduced under section 9626 may not otherwise recover under
28 subsection (b) for noncompliance with the provisions of this
29 chapter relating to collection, enforcement, disposition or
30 acceptance.
20010S0330B0817 - 231 -
1 (e) Statutory damages: noncompliance with specified
2 provisions.--In addition to any damages recoverable under
3 subsection (b), the debtor, consumer obligor or person named as
4 a debtor in a filed record, as applicable, may recover $500 from
5 a person that:
6 (1) fails to comply with section 9208 (relating to
7 additional duties of secured party having control of
8 collateral);
9 (2) fails to comply with section 9209 (relating to
10 duties of secured party if account debtor has been notified
11 of assignment);
12 (3) files a record which the person is not entitled to
13 file under section 9509(a) (relating to person entitled to
14 file record);
15 (4) fails to cause the secured party of record to file
16 or send a termination statement as required by section
17 9513(a) or (c) (relating to termination statement);
18 (5) fails to comply with section 9616(b)(1) (relating to
19 explanation of calculation of surplus or deficiency), and the
20 failure is part of a pattern or consistent with a practice of
21 noncompliance; or
22 (6) fails to comply with section 9616(b)(2).
23 (f) Statutory damages: noncompliance with section 9210.--A
24 debtor or consumer obligor may recover damages under subsection
25 (b) and, in addition, $500 in each case from a person that,
26 without reasonable cause, fails to comply with a request under
27 section 9210. A recipient of a request under section 9210 which
28 never claimed an interest in the collateral or obligations which
29 are the subject of a request under that section has a reasonable
30 excuse for failure to comply with the request within the meaning
20010S0330B0817 - 232 -
1 of this subsection.
2 (g) Limitation of security interest: noncompliance with
3 section 9210.--If a secured party fails to comply with a request
4 regarding a list of collateral or a statement of account under
5 section 9210, the secured party may claim a security interest
6 only as shown in the list or statement included in the request
7 as against a person that is reasonably misled by the failure.
8 § 9626. Action in which deficiency or surplus is in issue.
9 (a) Applicable rules if amount of deficiency or surplus in
10 issue.--In an action arising from a transaction, other than a
11 consumer transaction, in which the amount of a deficiency or
12 surplus is in issue, the following rules apply:
13 (1) A secured party need not prove compliance with the
14 provisions of this chapter relating to collection,
15 enforcement, disposition or acceptance unless the debtor or a
16 secondary obligor places the secured party's compliance in
17 issue.
18 (2) If the secured party's compliance is placed in
19 issue, the secured party has the burden of establishing that
20 the collection, enforcement, disposition or acceptance was
21 conducted in accordance with this chapter.
22 (3) Except as otherwise provided in section 9628
23 (relating to nonliability and limitation on liability of
24 secured party; liability of secondary obligor), if a secured
25 party fails to prove that the collection, enforcement,
26 disposition or acceptance was conducted in accordance with
27 the provisions of this chapter relating to collection,
28 enforcement, disposition or acceptance, the liability of a
29 debtor or a secondary obligor for a deficiency is limited to
30 an amount by which the sum of the secured obligation,
20010S0330B0817 - 233 -
1 expenses and attorney fees exceeds the greater of:
2 (i) the proceeds of the collection, enforcement,
3 disposition or acceptance; or
4 (ii) the amount of proceeds which would have been
5 realized had the noncomplying secured party proceeded in
6 accordance with the provisions of this chapter relating
7 to collection, enforcement, disposition or acceptance.
8 (4) For purposes of paragraph (3)(ii), the amount of
9 proceeds which would have been realized is equal to the sum
10 of the secured obligation, expenses and attorney fees unless
11 the secured party proves that the amount is less than that
12 sum.
13 (5) If a deficiency or surplus is calculated under
14 section 9615(f) (relating to calculation of surplus or
15 deficiency in disposition to person related to secured
16 party), the debtor or obligor has the burden of establishing
17 that the amount of proceeds of the disposition is
18 significantly below the range of prices which a complying
19 disposition to a person other than the secured party, a
20 person related to the secured party or a secondary obligor
21 would have brought.
22 (b) Nonconsumer transactions; no inference.--The limitation
23 of the rules in subsection (a) to transactions other than
24 consumer transactions is intended to leave to the court the
25 determination of the proper rules in consumer transactions. The
26 court may not infer from that limitation the nature of the
27 proper rule in consumer transactions and may continue to apply
28 established approaches.
29 § 9627. Determination of whether conduct was commercially
30 reasonable.
20010S0330B0817 - 234 -
1 (a) Greater amount obtainable under other circumstances; no
2 preclusion of commercial reasonableness.--The fact that a
3 greater amount could have been obtained by a collection,
4 enforcement, disposition or acceptance at a different time or in
5 a different method from that selected by the secured party is
6 not of itself sufficient to preclude the secured party from
7 establishing that the collection, enforcement, disposition or
8 acceptance was made in a commercially reasonable manner.
9 (b) Dispositions which are commercially reasonable.--A
10 disposition of collateral is made in a commercially reasonable
11 manner if the disposition is made:
12 (1) in the usual manner on any recognized market;
13 (2) at the price current in any recognized market at the
14 time of the disposition; or
15 (3) otherwise in conformity with reasonable commercial
16 practices among dealers in the type of property which was the
17 subject of the disposition.
18 (c) Approval by court or on behalf of creditors.--A
19 collection, enforcement, disposition or acceptance is
20 commercially reasonable if it has been approved:
21 (1) in a judicial proceeding;
22 (2) by a bona fide creditors' committee;
23 (3) by a representative of creditors; or
24 (4) by an assignee for the benefit of creditors.
25 (d) Approval under subsection (c) not necessary; absence of
26 approval has no effect.--Approval under subsection (c) need not
27 be obtained and lack of approval does not mean that the
28 collection, enforcement, disposition or acceptance is not
29 commercially reasonable.
30 § 9628. Nonliability and limitation on liability of secured
20010S0330B0817 - 235 -
1 party; liability of secondary obligor.
2 (a) Limitation of liability of secured party for
3 noncompliance with division.--Unless a secured party knows that
4 a person is a debtor or obligor, knows the identity of the
5 person and knows how to communicate with the person:
6 (1) the secured party is not liable to the person or to
7 a secured party or lienholder that has filed a financing
8 statement against the person for failure to comply with this
9 division; and
10 (2) the secured party's failure to comply with this
11 division does not affect the liability of the person for a
12 deficiency.
13 (b) Limitation of liability based on status as secured
14 party.--A secured party is not liable because of its status as
15 secured party to any of the following:
16 (1) A person that is a debtor or obligor, unless the
17 secured party knows:
18 (i) that the person is a debtor or obligor;
19 (ii) the identity of the person; and
20 (iii) how to communicate with the person.
21 (2) A secured party or lienholder that has filed a
22 financing statement against a person, unless the secured
23 party knows:
24 (i) that the person is a debtor; and
25 (ii) the identity of the person.
26 (c) Limitation of liability if reasonable belief that
27 transaction not a consumer-goods transaction or consumer
28 transaction.--A secured party is not liable to any person, and a
29 person's liability for a deficiency is not affected, because of
30 any act or omission arising out of the secured party's
20010S0330B0817 - 236 -
1 reasonable belief that a transaction is not a consumer-goods
2 transaction or a consumer transaction or that goods are not
3 consumer goods, if the secured party's belief is based on its
4 reasonable reliance on:
5 (1) a debtor's representation concerning the purpose for
6 which collateral was to be used, acquired or held; or
7 (2) an obligor's representation concerning the purpose
8 for which a secured obligation was incurred.
9 (d) Limitation of liability for statutory damages.--A
10 secured party is not liable to any person under section
11 9625(c)(2) (relating to remedies for secured party's failure to
12 comply with division) for its failure to comply with section
13 9616 (relating to explanation of calculation of surplus or
14 deficiency).
15 (e) Limitation of multiple liability for statutory
16 damages.--A secured party is not liable under section 9625(c)(2)
17 more than once with respect to any one secured obligation.
18 CHAPTER 97
19 TRANSITION PROVISIONS
20 Sec.
21 9700. Definitions.
22 9701. Effective date.
23 9702. Savings clause.
24 9703. Security interest perfected before effective date.
25 9704. Security interest unperfected before effective date.
26 9705. Effectiveness of action taken before effective date.
27 9706. When initial financing statement suffices to continue
28 effectiveness of financing statement.
29 9707. Amendment of pre-effective-date financing statement.
30 9708. Persons entitled to file initial financing statement or
20010S0330B0817 - 237 -
1 continuation statement.
2 9709. Priority.
3 9710. Operations of prothonotaries' offices after effective
4 date.
5 § 9700. Definitions.
6 The following words and terms when used in this chapter shall
7 have the meanings given to them in this section:
8 "Former Division 9." The provisions of this title, other
9 than Division 5 (relating to letters of credit), as in effect
10 before the effective date of Revised Division 9.
11 "Revised Division 9." The provisions of this title, other
12 than sections 5101 (relating to short title of division) through
13 5117 (relating to subrogation of issuer, applicant and nominated
14 person), as amended by the Uniform Commercial Code Modernization
15 Act of 2001 and as they may be further amended.
16 § 9701. Effective date.
17 Revised Division 9 takes effect on July 1, 2001.
18 § 9702. Savings clause.
19 (a) Pre-effective-date transactions or liens.--Except as
20 otherwise provided in this chapter, Revised Division 9 applies
21 to a transaction or lien within its scope, even if the
22 transaction or lien was entered into or created before the
23 effective date of Revised Division 9.
24 (b) Continuing validity.--Except as otherwise provided in
25 subsection (c) and sections 9703 (relating to security interest
26 perfected before effective date) through 9709 (relating to
27 priority) of Revised Division 9:
28 (1) transactions and liens which were not governed by
29 Former Division 9, were validly entered into or created
30 before the effective date of Revised Division 9 and would be
20010S0330B0817 - 238 -
1 subject to Revised Division 9 if they had been entered into
2 or created after the effective date of Revised Division 9 and
3 the rights, duties and interests flowing from those
4 transactions and liens remain valid after the effective date
5 of Revised Division 9; and
6 (2) transactions and liens may be terminated, completed,
7 consummated and enforced as required or permitted by Revised
8 Division 9 or by the law which otherwise would apply if
9 Revised Division 9 had not taken effect.
10 (c) Pre-effective-date proceedings.--Revised Division 9 does
11 not affect an action, case or proceeding commenced before the
12 effective date of Revised Division 9.
13 § 9703. Security interest perfected before effective date.
14 (a) Continuing priority over lien creditor: perfection
15 requirements satisfied.--A security interest which is
16 enforceable immediately before the effective date of Revised
17 Division 9 and would have priority over the rights of a person
18 that becomes a lien creditor at that time is a perfected
19 security interest under Revised Division 9 if, when Revised
20 Division 9 takes effect, the applicable requirements for
21 enforceability and perfection under Revised Division 9 are
22 satisfied without further action.
23 (b) Continuing priority over lien creditor: perfection
24 requirements not satisfied.--Except as otherwise provided in
25 section 9705 of Revised Division 9 (relating to effectiveness of
26 action taken before effective date), if, immediately before
27 Revised Division 9 takes effect, a security interest is
28 enforceable and would have priority over the rights of a person
29 that becomes a lien creditor at that time, but the applicable
30 requirements for enforceability or perfection under Revised
20010S0330B0817 - 239 -
1 Division 9 are not satisfied when Revised Division 9 takes
2 effect, the security interest:
3 (1) is a perfected security interest for one year after
4 Revised Division 9 takes effect;
5 (2) remains enforceable thereafter only if the security
6 interest becomes enforceable under section 9203 of Revised
7 Division 9 (relating to attachment and enforceability of
8 security interest; proceeds; supporting obligations; formal
9 requisites) before the year expires; and
10 (3) remains perfected thereafter only if the applicable
11 requirements for perfection under Revised Division 9 are
12 satisfied before the year expires.
13 § 9704. Security interest unperfected before effective date.
14 A security interest which is enforceable immediately before
15 Revised Division 9 takes effect but which would be subordinate
16 to the rights of a person that becomes a lien creditor at that
17 time:
18 (1) Remains an enforceable security interest for one
19 year after Revised Division 9 takes effect.
20 (2) Remains enforceable thereafter if the security
21 interest becomes enforceable under section 9203 of Revised
22 Division 9 (relating to attachment and enforceability of
23 security interest; proceeds; supporting obligations; formal
24 requisites) when Revised Division 9 takes effect or within
25 one year thereafter.
26 (3) Becomes perfected:
27 (i) without further action, when Revised Division 9
28 takes effect if the applicable requirements for
29 perfection under Revised Division 9 are satisfied before
30 or at that time; or
20010S0330B0817 - 240 -
1 (ii) when the applicable requirements for perfection
2 are satisfied if the requirements are satisfied after
3 that time.
4 § 9705. Effectiveness of action taken before effective date.
5 (a) Pre-effective-date action; one-year perfection period
6 unless reperfected.--If action, other than the filing of a
7 financing statement, is taken before Revised Division 9 takes
8 effect and the action would have resulted in priority of a
9 security interest over the rights of a person that becomes a
10 lien creditor had the security interest become enforceable
11 before Revised Division 9 takes effect, the action is effective
12 to perfect a security interest which attaches under Revised
13 Division 9 within one year after Revised Division 9 takes
14 effect. An attached security interest becomes unperfected one
15 year after Revised Division 9 takes effect unless the security
16 interest becomes a perfected security interest under Revised
17 Division 9 before the expiration of that period.
18 (b) Pre-effective-date filing.--The filing of a financing
19 statement before Revised Division 9 takes effect is effective to
20 perfect a security interest to the extent the filing would
21 satisfy the applicable requirements for perfection under Revised
22 Division 9.
23 (c) Pre-effective-date filing in jurisdiction formerly
24 governing perfection.--Revised Division 9 does not render
25 ineffective an effective financing statement which, before
26 Revised Division 9 takes effect, is filed and satisfies the
27 applicable requirements for perfection under the law of the
28 jurisdiction governing perfection as provided in section 9103 of
29 Former Division 9 (relating to perfection of security interests
30 in multiple state transactions). However, except as otherwise
20010S0330B0817 - 241 -
1 provided in subsections (d) and (e) and section 9706 of Revised
2 Division 9 (relating to when initial financing statement
3 suffices to continue effectiveness of financing statement), the
4 financing statement ceases to be effective at the earlier of:
5 (1) the time the financing statement would have ceased
6 to be effective under the law of the jurisdiction in which it
7 is filed; or
8 (2) June 30, 2006.
9 (d) Continuation statement.--The filing of a continuation
10 statement after Revised Division 9 takes effect does not
11 continue the effectiveness of the financing statement filed
12 before Revised Division 9 takes effect. However, upon the timely
13 filing of a continuation statement after Revised Division 9
14 takes effect and in accordance with the law of the jurisdiction
15 governing perfection as provided in Chapter 93 of Revised
16 Division 9 (relating to perfection and priority), the
17 effectiveness of a financing statement filed in the same office
18 in that jurisdiction before Revised Division 9 takes effect
19 continues for the period provided by the law of that
20 jurisdiction.
21 (e) Application of subsection (c)(2) to transmitting utility
22 financing statement.--Subsection (c)(2) applies to a financing
23 statement which, before Revised Division 9 takes effect, is
24 filed against a transmitting utility and satisfies the
25 applicable requirements for perfection under the law of the
26 jurisdiction governing perfection as provided in section 9103 of
27 Former Division 9 only to the extent that Chapter 93 of Revised
28 Division 9 provides that the law of a jurisdiction other than
29 the jurisdiction in which the financing statement is filed
30 governs perfection of a security interest in collateral covered
20010S0330B0817 - 242 -
1 by the financing statement.
2 (f) Application of Chapter 95.--A financing statement which
3 includes a financing statement filed before Revised Division 9
4 takes effect and a continuation statement filed after Revised
5 Division 9 takes effect is effective only to the extent that it
6 satisfies the requirements of Chapter 95 of Revised Division 9
7 (relating to filing) for an initial financing statement.
8 § 9706. When initial financing statement suffices to continue
9 effectiveness of financing statement.
10 (a) Initial financing statement in lieu of continuation
11 statement.--The filing of an initial financing statement in the
12 office specified in section 9501 of Revised Division 9 (relating
13 to filing office) continues the effectiveness of a financing
14 statement filed before Revised Division 9 takes effect if:
15 (1) the filing of an initial financing statement in that
16 office would be effective to perfect a security interest
17 under Revised Division 9;
18 (2) the pre-effective-date financing statement was filed
19 in an office in another state or another office in this
20 Commonwealth; and
21 (3) the initial financing statement satisfies subsection
22 (c).
23 (b) Period of continued effectiveness.--The filing of an
24 initial financing statement under subsection (a) continues the
25 effectiveness of the pre-effective-date financing statement:
26 (1) if the initial financing statement is filed before
27 Revised Division 9 takes effect, for the period provided in
28 section 9403 of Former Division 9 (relating to what
29 constitutes filing; duration of filing; effect of lapsed
30 filing; duties of filing officer) with respect to a financing
20010S0330B0817 - 243 -
1 statement; and
2 (2) if the initial financing statement is filed after
3 Revised Division 9 takes effect, for the period provided in
4 section 9515 of Revised Division 9 (relating to duration and
5 effectiveness of financing statement; effect of lapsed
6 financing statement) with respect to an initial financing
7 statement.
8 (c) Requirements for initial financing statement under
9 subsection (a).--To be effective for purposes of subsection (a),
10 an initial financing statement must:
11 (1) satisfy the requirements of Chapter 95 of Revised
12 Division 9 (relating to filing) for an initial financing
13 statement;
14 (2) identify the pre-effective-date financing statement
15 by indicating the office in which the financing statement was
16 filed and providing the dates of filing and file numbers, if
17 any, of the financing statement and of the most recent
18 continuation statement filed with respect to the financing
19 statement; and
20 (3) indicate that the pre-effective-date financing
21 statement remains effective.
22 § 9707. Amendment of pre-effective-date financing statement.
23 (a) Pre-effective-date financing statement.--In this
24 section, "pre-effective-date financing statement" means a
25 financing statement filed before Revised Division 9 takes
26 effect.
27 (b) Applicable law.--After Revised Division 9 takes effect,
28 a person may add or delete collateral covered by, continue or
29 terminate the effectiveness of, or otherwise amend the
30 information provided in, a pre-effective-date financing
20010S0330B0817 - 244 -
1 statement only in accordance with the law of the jurisdiction
2 governing perfection as provided in Chapter 93 of Revised
3 Division 9 (relating to perfection and priority). However, the
4 effectiveness of a pre-effective-date financing statement also
5 may be terminated in accordance with the law of the jurisdiction
6 in which the financing statement is filed.
7 (c) Method of amending: general rule.--Except as otherwise
8 provided in subsection (d), if the law of this Commonwealth
9 governs perfection of a security interest, the information in a
10 pre-effective-date financing statement may be amended after
11 Revised Division 9 takes effect only if:
12 (1) the pre-effective-date financing statement and an
13 amendment are filed in the office specified in section 9501
14 of Revised Division 9 (relating to filing office);
15 (2) an amendment is filed in the office specified in
16 section 9501 of Revised Division 9 concurrently with, or
17 after the filing in that office of, an initial financing
18 statement that satisfies section 9706(c) of Revised Division
19 9 (relating to when initial financing statement suffices to
20 continue effectiveness of financing statement); or
21 (3) an initial financing statement that provides the
22 information as amended and satisfies section 9706(c) of
23 Revised Division 9 is filed in the office specified in
24 section 9501 of Revised Division 9.
25 (d) Method of amending: continuation.--If the law of this
26 Commonwealth governs perfection of a security interest, the
27 effectiveness of a pre-effective-date financing statement may be
28 continued only under section 9705(d) and (f) of Revised Division
29 9 (relating to effectiveness of action taken before effective
30 date) or section 9706 of Revised Division 9.
20010S0330B0817 - 245 -
1 (e) Methods of amending: additional termination rule.--
2 Whether or not the law of this Commonwealth governs perfection
3 of a security interest, the effectiveness of a pre-effective-
4 date financing statement filed in this Commonwealth may be
5 terminated after Revised Division 9 takes effect by filing a
6 termination statement in the office in which the pre-effective-
7 date financing statement is filed, unless one or both of the
8 following conditions apply:
9 (1) An initial financing statement that satisfies
10 section 9706(c) of Revised Division 9 has been filed in the
11 office specified by the law of the jurisdiction governing
12 perfection as provided in Chapter 93 of Revised Division 9 as
13 the office in which to file a financing statement.
14 (2) The pre-effective-date financing statement is filed
15 in the office of a prothonotary of a county of this
16 Commonwealth.
17 § 9708. Persons entitled to file initial financing statement or
18 continuation statement.
19 A person may file an initial financing statement or a
20 continuation statement under this chapter if all of the
21 following paragraphs apply:
22 (1) The secured party of record authorizes the filing.
23 (2) The filing is necessary under this chapter:
24 (i) to continue the effectiveness of a financing
25 statement filed before Revised Division 9 takes effect;
26 or
27 (ii) to perfect or continue the perfection of a
28 security interest.
29 § 9709. Priority.
30 (a) Law governing priority.--Revised Division 9 determines
20010S0330B0817 - 246 -
1 the priority of conflicting claims to collateral. However, if
2 the relative priorities of the claims were established before
3 Revised Division 9 takes effect, Former Division 9 determines
4 priority.
5 (b) Priority if security interest becomes enforceable under
6 section 9203 of Revised Division 9.--For purposes of section
7 9322(a) of Revised Division 9 (relating to general priority
8 rules), the priority of a security interest which becomes
9 enforceable under section 9203 of Revised Division 9 (relating
10 to attachment and enforceability of security interest; proceeds;
11 supporting obligations; formal requisites) dates from the time
12 Revised Division 9 takes effect if the security interest is
13 perfected under Revised Division 9 by the filing of a financing
14 statement before Revised Division 9 takes effect which financing
15 statement would not have been effective to perfect the security
16 interest under Former Division 9. This subsection does not apply
17 to conflicting security interests each of which is perfected by
18 the filing of such a financing statement.
19 § 9710. Operations of prothonotaries' offices after effective
20 date.
21 (a) Definitions.--As used in this section, the following
22 words and phrases shall have the meanings given to them in this
23 subsection:
24 "Former Division 9 records." The following records:
25 (1) Financing statements and other records that have
26 been filed in a prothonotary's office pursuant to Former
27 Division 9 before July 1, 2001, and that are, or upon
28 processing and indexing will be, reflected in the index
29 maintained, as of June 30, 2001, by the prothonotary's office
30 for financing statements and other records filed in the
20010S0330B0817 - 247 -
1 prothonotary's office before July 1, 2001.
2 (2) The index as of June 30, 2001.
3 The term does not include records presented to a prothonotary's
4 office for filing after June 30, 2001, whether or not the
5 records relate to financing statements filed in the
6 prothonotary's office before July 1, 2001.
7 "Prothonotary's office." The office of a prothonotary of a
8 county of this Commonwealth.
9 (b) No records to be accepted after June 30, 2001.--A
10 prothonotary's office must not accept for filing a record
11 presented after June 30, 2001, whether or not the record relates
12 to a financing statement filed in the prothonotary's office
13 before July 1, 2001.
14 (c) Maintenance of Former Division 9 records.--Until July 1,
15 2008, each prothonotary's office must maintain all Former
16 Division 9 records in accordance with Former Division 9. A
17 Former Division 9 record that is not reflected on the index
18 maintained at June 30, 2001, by the prothonotary's office must
19 be processed and indexed, and reflected on the index as of June
20 30, 2001, as soon as practicable but in any event no later than
21 July 30, 2001.
22 (d) Response to information requests.--Until June 30, 2008,
23 each prothonotary's office shall respond to requests for
24 information with respect to Former Division 9 records relating
25 to a debtor and issue certificates, in accordance with Former
26 Division 9. The fees charged for responding to requests for
27 information relating to a debtor and issuing certificates with
28 respect to Former Division 9 records must be the fees in effect
29 under Former Division 9 on June 30, 2001, unless a different fee
30 is established by regulation issued by the Department of State
20010S0330B0817 - 248 -
1 pursuant to section 9525 of Revised Division 9 (relating to
2 fees).
3 (e) Removal and destruction of Former Division 9 records.--
4 After June 30, 2008, each prothonotary's office may remove and
5 destroy, in accordance with any then applicable record retention
6 law of this Commonwealth, all Former Division 9 records,
7 including the related index.
8 Section 17. The heading of Subchapter C of Chapter 1 of
9 Title 15 is amended to read:
10 SUBCHAPTER C
11 CORPORATION BUREAU AND UCC FEES
12 Section 18. Section 151(b) of Title 15 is amended to read:
13 § 151. Short title and application of subchapter.
14 * * *
15 (b) Application.--This subchapter contains an enumeration of
16 fees to be charged by the Corporation Bureau of the [Department
17 of State] department for services performed under this title or
18 any other provision of law relating to corporations or
19 associations and under Titles 13 (relating to commercial code),
20 17 (relating to credit unions) and 54 (relating to names)[, and,
21 except as otherwise provided by law, by local filing officers
22 under Title 13].
23 Section 18.1. Section 153(a)(8) of Title 15 is amended and
24 the section is amended by adding a subsection to read:
25 § 153. Fee schedule.
26 (a) General rule.--The fees of the Corporation Bureau of the
27 [Department of State] department, including fees for the public
28 acts and transactions of the Secretary of the Commonwealth
29 administered through the bureau, [and of county filing officers
30 under Title 13 (relating to commercial code),] shall be as
20010S0330B0817 - 249 -
1 follows:
2 * * *
3 (8) Uniform Commercial Code[:]
4 As provided in 13 Pa.C.S. § 9525 (relating
5 to fees).
6 [(i) Financing statement - per debtor
7 name:
8 (A) State fee..................... 12
9 (B) County fee.................... 48
10 (ii) Each ancillary transaction:
11 (A) State fee..................... 12
12 (B) County fee.................... 48
13 (iii) Search - per debtor name:
14 (A) State fee..................... 12
15 (B) County fee.................... 48
16 (iv) Additional fee for each financing
17 statement found and for each statement of
18 assignment reported therein:
19 (A) State fee..................... 1
20 (B) County fee.................... 4
21 (v) For each financing statement or
22 ancillary transaction not filed on standard
23 forms approved by the Department of State,
24 in addition to the fee provided above,
25 there shall be charged a per filing fee of:
26 (A) State fee..................... 28
27 (B) County fee.................... 112
28 (vi) Seventy-five percent of the
29 county fees collected pursuant to
30 subparagraphs (i) through (v) shall be
20010S0330B0817 - 250 -
1 payable to the Commonwealth and shall be
2 deposited in the General Fund.
3 (vii) Beginning on January 1, 1994,
4 and each January 1 thereafter, the county
5 fees under paragraph (8) shall be increased
6 by the percentage of increase in the
7 Consumer Price Index for Urban Workers for
8 the immediate preceding calendar year which
9 shall be published in the Pennsylvania
10 Bulletin annually by the Supreme Court on
11 or before the preceding November 30. This
12 subparagraph shall expire January 1, 2001.]
13 * * *
14 (d) Restriction.--UCC Revenue received by a county recorder
15 of deeds under 13 Pa.C.S. § 9525 (relating to fees) after June
16 30, 2001, shall be restricted for use by the county recorder of
17 deeds and the county prothonotary. The revenue shall be credited
18 to the offices of the county recorder of deeds and the county
19 prothonotary on the basis of the amount collected in each office
20 in calendar year 2000, excluding any amounts paid to the
21 Commonwealth. Revenue received in excess of the total amount
22 received by each office during the year 2000, excluding amounts
23 paid to the Commonwealth, shall be distributed pro rata to the
24 county recorder of deeds and the county prothonotary. In a
25 county without a recorder of deeds or a prothonotary, the
26 provisions of this subsection shall apply to the equivalent
27 county officials.
28 Section 18.2. Sections 154(a) and 155(a) of Title 15 are
29 amended to read:
30 § 154. Enforcement and collection.
20010S0330B0817 - 251 -
1 (a) General rule.--
2 (1) The [Department of State] department shall not be
3 required to receive or file any document or paper unless the
4 same shall be accompanied by the proper fee, but the
5 department may in its discretion permit the filing of any
6 document or paper without first requiring payment of the fee
7 required by this subchapter when satisfied that the fee will
8 be paid promptly. If any such fee is not paid in the manner
9 and within the time prescribed by regulation of the
10 department, the filing to which such fee relates shall become
11 void.
12 (2) With respect to filings under 13 Pa.C.S. Div. 9
13 (relating to secured transactions), paragraph (1) is subject
14 to 13 Pa.C.S. §§ 9516 (relating to what constitutes filing;
15 effectiveness of filing) and 9520 (relating to acceptance and
16 refusal to accept record).
17 * * *
18 § 155. Disposition of funds.
19 (a) Establishment of restricted account.--There is hereby
20 established in the General Fund a restricted account to be known
21 as the Corporation Bureau Restricted Account. This account shall
22 receive 30% of the amount received by the [Department of State]
23 department under this subchapter except for the fees collected
24 under 13 Pa.C.S. § 9525(a)(1)(ii) (relating to fees). This
25 account shall receive 5% of the amount received by the
26 department under section 9525(a)(1)(ii). The balance of the
27 amount received by the [Department of State] department under
28 this subchapter shall be deposited in the General Fund. Funds in
29 the Corporation Bureau Restricted Account shall be used solely
30 for the operation of the Corporation Bureau in the Department of
20010S0330B0817 - 252 -
1 State and for its modernization as may be required for improved
2 operations of the bureau.
3 * * *
4 Section 19. Section 5323(b) of Title 30 is amended to read:
5 § 5323. Content and effect of certificate of title.
6 * * *
7 (b) Certificate as evidence and notice.--A certificate of
8 title issued by the commission is prima facie evidence of the
9 facts appearing on the certificate. [The] Except as otherwise
10 provided in 13 Pa.C.S. §§ 9311(d) (relating to perfection of
11 security interests in property subject to certain statutes,
12 regulations and treaties), 9315(c) and (d) (relating to secured
13 party's right on disposition of collateral and in proceeds) and
14 9316(d) and (e) (relating to continued perfection of security
15 interest following change in governing law), the certificate
16 shall be adequate notice to the Commonwealth, creditors,
17 subsequent lienholders and purchasers that a lien against the
18 boat exists.
19 Section 20. Section 5327 of Title 30 is amended by adding a
20 paragraph to read:
21 § 5327. Fees.
22 The following fees shall be due:
23 * * *
24 (6) The fee for continuing the effectiveness of
25 perfection of a security interest shall be $5.
26 Section 21. Section 1725(c)(2)(ix) of Title 42 is amended to
27 read:
28 § 1725. Establishment of fees and charges.
29 * * *
30 (c) Counties of the first class.--
20010S0330B0817 - 253 -
1 * * *
2 (2) The fees to be received by the Prothonotary of the
3 Trial Division of the Court of Common Pleas and as clerk of
4 the Family Division of said court in counties of the first
5 class shall be as follows:
6 * * *
7 (ix) [Financing statements - U.C.C.'s:
8 The filing of a U.C.C.-1 statement
9 or any initial filing under the]
10 Uniform Commercial Code[............... $50.00
11 Includes continuation statement and
12 termination.] as provided in 13 Pa.C.S. §
13 9525 (relating to fees).
14 * * *
15 Section 22. Section 2812(d)(1) of Title 66 is amended to
16 read:
17 § 2812. Approval of transition bonds.
18 * * *
19 (d) Security interests in intangible transition property.--
20 (1) Neither intangible transition property nor any
21 right, title or interest of a utility or assignee described
22 in paragraph (1) of the definition of "intangible transition
23 property" in subsection (g), whether before or after the
24 issuance of the qualified rate order, shall constitute "an
25 account" or "general intangibles" under 13 Pa.C.S. [§ 9106
26 (relating to definitions: "account"; "general intangibles")]
27 § 9102 (relating to definitions and index of definitions) nor
28 shall any such right, title or interest pertaining to a
29 qualified rate order, including the associated intangible
30 transition property and any revenues, collections, claims,
20010S0330B0817 - 254 -
1 payments, money or proceeds of or arising from intangible
2 transition charges pursuant to such order, be deemed proceeds
3 of any right or interest other than in the order and the
4 intangible transition property arising from the order.
5 * * *
6 Section 23. Sections 1131(3), 1132, 1133, 1134, 1135(a)(2) <--
7 and (b)(2), 1137 and 1138 of Title 75 are amended to read:
8 SECTION 23. SECTIONS 1131(3) AND 1132 OF TITLE 75 ARE <--
9 AMENDED TO READ:
10 § 1131. Applicability of subchapter.
11 This subchapter does not apply to or affect:
12 * * *
13 (3) A security interest in a vehicle [created by a
14 manufacturer or dealer who holds the vehicle for sale.]
15 described in 13 Pa.C.S. § 9311(d) (relating to perfection of <--
16 security interests in property subject to certain statutes,
17 regulations and treaties) WHICH IS INVENTORY HELD FOR SALE OR <--
18 LEASE BY A PERSON OR LEASED BY THAT PERSON AS LESSOR AND THAT
19 PERSON IS IN THE BUSINESS OF SELLING GOODS OF THAT KIND.
20 * * *
21 [§ 1132. Perfection of security interest in vehicle to be <--
22 titled by Commonwealth.
23 [(a) Validity of unperfected interest.--Unless perfected as <--
24 provided in this subchapter or excepted by section 1131
25 (relating to applicability of subchapter), a security interest
26 in a vehicle of a type for which a certificate of title is
27 required is not valid against any person as to whose rights an
28 unperfected security interest is subordinate under the
29 provisions of Title 13 (relating to commercial code).
30 (b) Method of perfection.--A security interest is perfected
20010S0330B0817 - 255 -
1 at the time an application for a certificate of title is
2 received or date stamped by the department. In order to obtain
3 such notation the lienholder shall deliver to the department the
4 existing certificate of title, if any; an application for a
5 certificate of title upon a form prescribed by the department
6 containing the name and address of the lienholder; and any other
7 information regarding the security interest as may be reasonably
8 required and the required fee.
9 (c) Prior security interest in vehicle from another
10 jurisdiction.--If a vehicle is subject to a security interest
11 when brought into this Commonwealth, the validity of the
12 security interest is determined by the law of the jurisdiction
13 where the vehicle was located when the security interest
14 attached subject to the following:
15 (1) If the parties understood at the time the security
16 interest attached that the vehicle would be kept in this
17 Commonwealth and it was brought into this Commonwealth within
18 30 days thereafter for purposes other than transportation
19 through this Commonwealth, the validity of the security
20 interest in this Commonwealth is determined by the law of
21 this Commonwealth.
22 (2) If the security interest was perfected under the law
23 of the jurisdiction where the vehicle was located when the
24 security interest attached, the following rules apply:
25 (i) If the name of the lienholder is shown on an
26 existing certificate of title issued by the jurisdiction,
27 the security interest continues perfected in this
28 Commonwealth.
29 (ii) If the name of the lienholder is not shown on
30 an existing certificate of title issued by that
20010S0330B0817 - 256 -
1 jurisdiction, the security interest continues perfected
2 in this Commonwealth for four months after a first
3 certificate of title of the vehicle is issued in this
4 Commonwealth, and, thereafter if, within the four-month
5 period, it is perfected in this Commonwealth. The
6 security interest may also be perfected in this
7 Commonwealth after the expiration of the four-month
8 period in which case perfection dates from the time of
9 perfection in this Commonwealth.
10 (3) If the security interest was not perfected under the
11 law of the jurisdiction where the vehicle was located when
12 the security interest attached, it may be perfected in this
13 Commonwealth in which case perfection dates from the time of
14 perfection in this Commonwealth.
15 (4) A security interest may be perfected under paragraph
16 (2)(ii) or paragraph (3) either as provided in subsection (b)
17 or by the lienholder delivering to the department a notice of
18 security interest in the form the department prescribes
19 together with the required fee.]
20 A security interest in a vehicle for which a Commonwealth <--
21 certificate of title is to be issued is perfected at the time
22 the department receives from the lienholder, or the owner at the
23 lienholder's request, all of the following:
24 (1) Any certificate of title that may then be in
25 existence with respect to the subject vehicle.
26 (2) An application upon a form prescribed by the
27 department specifying the lienholder's name and address.
28 (3) An amount equal to or greater than the required fee.
29 A security interest is perfected at the time the department
30 receives all of the items in paragraphs (1), (2) and (3) and
20010S0330B0817 - 257 -
1 date stamping shall conclusively evidence such receipt. Upon
2 receipt of any certificate of title that may then be in
3 existence with respect to the subject vehicle, an application
4 upon a form prescribed by the department specifying the
5 lienholder's name and address, and an amount equal to or greater
6 than the required fee, the department shall endorse on the
7 certificate of title to be issued the name and address of all
8 lienholders and shall mail the certificate of title to be issued
9 to the first lienholder named in the certificate of title.
10 SECTION 23.1. TITLE 75 IS AMENDED BY ADDING A SECTION TO <--
11 READ:
12 § 1132.1. PERFECTION OF A SECURITY INTEREST IN A VEHICLE.
13 (A) PERFECTION.--A SECURITY INTEREST IN A VEHICLE TITLED IN
14 THIS COMMONWEALTH IS PERFECTED AT THE TIME THE DEPARTMENT
15 RECEIVES ALL OF THE FOLLOWING:
16 (1) A COMPLETED APPLICATION SPECIFYING THE LIENHOLDER'S
17 NAME AND ADDRESS.
18 (2) AN AMOUNT EQUAL TO OR GREATER THAN THE FEE REQUIRED
19 BY SECTION 1953 (RELATING TO SECURITY INTEREST).
20 (3) THE MANUFACTURER'S STATEMENT OF ORIGIN OR THE
21 EXISTING CERTIFICATE OF TITLE FOR THE VEHICLE.
22 (B) DUTY OF A LIENHOLDER.--IF AN ADDITIONAL SECURITY
23 INTEREST IN A VEHICLE TITLED IN THIS COMMONWEALTH IS BEING
24 CREATED BY THE OWNER OF THE VEHICLE AND THE CERTIFICATE OF TITLE
25 IS IN THE POSSESSION OF A LIENHOLDER, THE LIENHOLDER SHALL, AT
26 THE REQUEST OF THE OWNER, DELIVER THE CERTIFICATE OF TITLE TO
27 THE PERSON PERFECTING THE SECURITY INTEREST IN THE VEHICLE. UPON
28 RECEIPT OF THE CERTIFICATE OF TITLE, THE PERSON PERFECTING THE
29 SECURITY INTEREST IN THE VEHICLE SHALL DELIVER THE CERTIFICATE
30 OF TITLE TO THE DEPARTMENT IN ACCORDANCE WITH SUBSECTION (A).
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1 (C) WORK IDENTIFICATION NUMBER.--UPON RECEIPT OF ITEMS
2 REQUIRED IN SUBSECTION (A), THE DEPARTMENT SHALL ASSIGN OR PLACE
3 A WORK IDENTIFICATION NUMBER ON EACH OF THE ITEMS. THE FIRST TWO
4 NUMBERS IN THE WORK IDENTIFICATION NUMBER SHALL INDICATE THE
5 YEAR IN WHICH THE ITEMS WERE RECEIVED. THE NEXT THREE NUMBERS IN
6 THE WORK IDENTIFICATION NUMBER SHALL INDICATE THE DAY OF THE
7 YEAR THE ITEMS WERE RECEIVED. THE DATE INDICATED IN THE WORK
8 IDENTIFICATION NUMBER SHALL CONSTITUTE CONCLUSIVE EVIDENCE OF
9 THE DATE OF RECEIPT AND THE DATE OF PERFECTION.
10 (D) DELIVERY OF CERTIFICATE OF TITLE.--UPON PERFECTION OF A
11 SECURITY INTEREST IN A VEHICLE, THE DEPARTMENT SHALL ISSUE A
12 CERTIFICATE OF TITLE WITH THE NAMES OF THE FIRST TWO LIENHOLDERS
13 AND INDICATE THE NUMBER OF ADDITIONAL LIENHOLDERS EXISTING AT
14 THAT TIME. THE DEPARTMENT SHALL MAIL THE CERTIFICATE OF TITLE TO
15 THE FIRST LIENHOLDER NAMED IN THE CERTIFICATE OF TITLE.
16 SECTION 23.2. SECTIONS 1133, 1134, 1135(A)(2), 1137 AND 1138
17 OF TITLE 75 ARE AMENDED TO READ:
18 [§ 1133. Creation of security interest for titled vehicle. <--
19 (a) Application by owner.--If an owner creates a security
20 interest in a vehicle for which a certificate of title has been
21 issued by the Commonwealth, the owner, at the request of the <--
22 lienholder, shall immediately execute an application on a form
23 prescribed by the department, naming the lienholder on the
24 certificate, showing the name and address of the lienholder and
25 the date of the security agreement. The certificate of title,
26 together with the application and the required fee, shall be
27 mailed or delivered to the department.
28 (b) Where certificate of title is in possession of <--
29 lienholder.--Upon request of the owner or subordinate
30 lienholder, a lienholder in possession of the certificate of
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1 title shall mail or deliver the certificate to the department
2 or, upon receipt from the subordinate lienholder of the
3 application of the owner and the required fee, mail or deliver
4 them to the department with the certificate of title. The <--
5 delivery of the certificate of title does not affect the rights <--
6 of the first lienholder under his security agreement.
7 (c) Endorsement and delivery of certificate.--The security <--
8 interest is perfected when the certificate of title, a valid
9 application and an amount equal to or greater than the required
10 fee is received by the department. Date stamping shall
11 constitute conclusive evidence of such receipt. Upon receipt of
12 the certificate of title, application and the required fees, the
13 department shall endorse on the existing certificate of title,
14 or on a new certificate which it then issues, the name and
15 address of all [secured parties] lienholders and shall mail the <--
16 certificate of title to the first lienholder named in the
17 certificate of title. CERTIFICATE.] <--
18 § 1134. Assignment by lienholder of security interest.
19 (a) General rule.--A lienholder may assign, absolutely or
20 otherwise, his security interest in the vehicle to a person
21 other than the owner without affecting the interest of the owner
22 or the validity or perfection of the security interest but any
23 person without notice of the assignment is protected in dealing
24 with the lienholder as the holder of the security interest and
25 the lienholder remains liable for any obligations as lienholder
26 under this chapter until the assignee is named as lienholder on
27 the certificate of title.
28 (b) Duty of assignee.--[The] If the assignee desires to <--
29 become the lienholder of record, the assignee shall deliver to
30 the department the certificate of title and an assignment by the
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1 lienholder named in the certificate of title on a form
2 prescribed and furnished by the department and accompanied by
3 the required fee. FAILURE OF THE ASSIGNEE TO MAKE THE DELIVERY <--
4 SHALL NOT AFFECT THE VALIDITY OR PERFECTION OF THE SECURITY
5 INTEREST.
6 (c) Division 9.--The provisions of this subchapter are
7 subject to 13 Pa.C.S. § 9308(e) (relating to when security
8 interest or agricultural lien is perfected; continuity of
9 perfection).
10 § 1135. Satisfaction of security interest.
11 (a) Absence of subsequent liens.--Where there are no
12 subsequent liens upon a vehicle, the following rules apply upon
13 the satisfaction of a security interest in the vehicle:
14 * * *
15 (2) The owner may mail or deliver the certificate of
16 title with proper evidence of satisfaction of the security
17 interest to the department which shall issue a corrected
18 certificate of title without a statement of liens or
19 encumbrances. The corrected certificate of title may also be
20 issued when the outstanding certificate of title cannot be
21 returned and proper evidence is produced that all recorded
22 security interests have been satisfied.
23 (b) Prior or subsequent liens.--Where there are subsequent <--
24 liens upon a vehicle or the lien to be released is not a first
25 lien, the following rules apply upon the satisfaction of a
26 security interest in the vehicle:
27 * * *
28 (2) Upon the satisfaction of a security interest in a
29 vehicle for which the certificate of title is in the
30 possession of a prior lienholder, the lienholder whose
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1 security interest is satisfied shall, immediately upon
2 satisfaction, mail or deliver to the owner proper evidence of
3 the satisfaction and release of the security interest. Upon
4 request of the owner and receipt of the release, the
5 lienholder in possession of the certificate of title shall
6 mail or deliver the certificate of title together with the
7 release to the department. The department shall issue a
8 corrected certificate of title which shall be mailed to the
9 first lienholder. Delivery of the certificate of title does
10 not affect the rights of the prior lienholder under the
11 security agreement of that lienholder.
12 * * *
13 § 1137. Subchapter exclusive for perfecting security interest.
14 The method provided in this subchapter for perfecting and
15 giving notice of security interests is exclusive[.], except as
16 otherwise provided in 13 Pa.C.S. §§ 9311(d) (relating to <--
17 perfection of security interests in property subject to certain
18 statutes, regulations and treaties), 9315 (relating to secured
19 party's rights on disposition of collateral and in proceeds) and
20 9316(d) and (e) (relating to continued perfection of security
21 interest following change in governing law).
22 § 1138. Duration of [lien recorded on certificate of title]
23 perfection.
24 (a) General rule.--[A] Perfection of a security interest
25 [recorded on a certificate of title] is effective for a period
26 of 15 years in the case of a mobile home or emergency vehicle,
27 eight years in the case of a truck tractor or trailer weighing
28 in excess of 10,000 pounds and six years in all other cases, in
29 each case dating from the time of perfection as provided for in
30 this subchapter and subject to renewal as provided in subsection
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1 (b).
2 (b) Renewal [of lien].--The effectiveness of [a lien
3 recorded on the certificate of title] perfection lapses on the
4 expiration of the periods specified in subsection (a) unless a
5 [continuation statement] renewal form is filed within the six
6 months immediately preceding expiration. [The lien] Upon the
7 timely filing of a renewal form, the effectiveness of perfection
8 continues for a period of three years, commencing on the date on
9 which perfection would have become effective LAPSED in the <--
10 absence of the filing. Perfection may be renewed for as many
11 three-year periods as may be necessary by the holder of the
12 security interest upon a form furnished by the department,
13 signed by the secured party and accompanied by the fee provided
14 in this title.
15 (c) Corrected certificate when [lien] perfection expires.--A
16 corrected certificate of title without a statement of liens or
17 encumbrances shall be issued by the department, upon the request
18 of the owner, when perfection of the security interests recorded
19 on the certificate of title have expired.
20 Section 24. Title 75 is amended by adding a section to read:
21 § 1140. Cancellation of certificate of title or ownership for
22 mobile home.
23 (a) General rule.--The department may cancel a certificate
24 of title for a mobile home affixed to real property. The person
25 or entity requesting such cancellation shall furnish the <--
26 department with an application for such cancellation, which
27 application shall be on such form as the department shall
28 prescribe, and the applicable certificate of title or ownership.
29 When so canceled, interest in the ownership of the mobile home,
30 REQUESTING THE CANCELLATION SHALL SUBMIT TO THE DEPARTMENT AN <--
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1 APPLICATION FOR CANCELLATION AND THE CERTIFICATE OF TITLE. THE
2 APPLICATION MUST BE ON A FORM PRESCRIBED BY THE DEPARTMENT. UPON
3 CANCELLATION, THE OWNERSHIP INTEREST IN THE MOBILE HOME,
4 together with all liens and encumbrances thereon, shall be
5 transferred to and shall encumber the real property to which the
6 mobile home has become affixed.
7 (b) New certificate of title after cancellation.--To obtain <--
8 a new certificate of title after cancellation of a certificate,
9 IF THE DEPARTMENT HAS PREVIOUSLY CANCELED A CERTIFICATE OF TITLE <--
10 TO A MOBILE HOME UNDER SUBSECTION (A), the owner of the mobile
11 home shall submit to the department all of the following:
12 (1) An application for a new certificate of title on <--
13 such forms as the department shall prescribe. THE FORMS <--
14 PRESCRIBED BY THE DEPARTMENT.
15 (2) A certificate from an attorney or title company that
16 there are no mortgages, judgments or other liens of record
17 against the mobile home, or, if there is a lien, a certified
18 copy of a release of lien executed by the lienholder, which <--
19 certified copy shall be AND issued by the recorder of deeds <--
20 or prothonotary, as appropriate.
21 (3) One of the following: <--
22 (i) A department form "Receipt for Mobile Home Title
23 Cancellation" which shall have been issued by the owner
24 of the mobile home and properly endorsed by the
25 department.
26 (ii) The deed to the land indicating ownership of
27 the mobile home by the owner who intends to transfer the
28 mobile home.
29 (iii) If neither of the items in subparagraphs (i)
30 and (ii) is available, a bill of sale for the mobile home
20010S0330B0817 - 264 -
1 to be issued to the intended transferee.
2 (4) Such other documents or information as the
3 (3) SUCH OTHER INFORMATION AS THE department shall require. <--
4 Section 25. Section 7712(c) of Title 75 is amended by adding
5 a paragraph to read:
6 § 7712. Registration of snowmobiles and registration and
7 issuance of certificates of title for ATV's.
8 * * *
9 (c) Fees.--Fees for registration of snowmobiles and
10 registration and issuance of certificates of title for ATV's to
11 be collected by the department under this chapter are as
12 follows:
13 * * *
14 (7) Recording the name of a secured party on a
15 certificate of title, $5.
16 * * *
17 Section 26. Sections 7712.5(a) and 7712.7(c) of Title 75 are
18 amended to read:
19 § 7712.5. Issuance of new certificate following transfer.
20 (a) Voluntary transfer.--The department, upon receipt of a
21 properly assigned certificate of title with an application for a
22 new certificate of title, the required fee and any other
23 required documents and articles, shall issue a new certificate
24 of title in the name of the transferee as owner and mail it to
25 the first [lienholder] secured party named in the certificate
26 or, if none, to the owner.
27 * * *
28 § 7712.7. Application for certificate of title by agent.
29 * * *
30 (c) Persons authorized to hold certificate.--No person shall
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1 receive, obtain or hold a certificate of title recorded in the
2 name of another person for the other person who is not in the
3 regular employ of, or not a member of the family of, the other
4 person, unless the person receiving, obtaining or holding the
5 certificate of title has a valid undischarged [lien] security
6 interest recorded in the department against the ATV represented
7 by the certificate of title.
8 * * *
9 Section 27. Title 75 is amended by adding sections to read:
10 § 7712.8. Perfection of security interest in an ATV.
11 (a) Applicability of section.--Except as otherwise provided
12 in 13 Pa.C.S. §§ 9311(d) (relating to perfection of security
13 interests in property subject to certain statutes, regulations
14 and treaties), 9315(c) and (d) (relating to secured party's
15 rights on disposition of collateral and in proceeds) and 9316(d)
16 and (e) (relating to continued perfection of security interest
17 following change in governing law), this section provides the
18 exclusive method of perfecting a security interest in an ATV for
19 which a certificate of title is required under this subchapter.
20 (b) ATV's without Pennsylvania certificate of title.--If an
21 owner creates a security interest in an ATV for which a
22 certificate of title has not been issued by the department, the
23 owner shall, at the request of the secured party, promptly
24 execute an application for a certificate of title on a form
25 prescribed by the department, showing the name and address of
26 the secured party. The owner shall tender the application, the
27 existing certificate of title, if any, and the required fee to
28 the department. A security interest in an ATV is perfected at
29 the time that such application, existing certificate of title,
30 if any, and required fee are received by the department.
20010S0330B0817 - 266 -
1 (c) ATV's with Pennsylvania certificate of title.--If an
2 owner creates a security interest in an ATV for which a
3 certificate of title has been issued by the department, the
4 owner shall, at the request of the secured party, promptly
5 execute an application on a form prescribed by the department
6 showing the name and address of the secured party. The owner
7 shall tender the certificate of title, together with the
8 application and the required fee, to the department. A security
9 interest in an ATV is perfected at the time such application,
10 certificate of title and required fee are received by the
11 department.
12 (d) Certificate of title in possession of secured party.--
13 Upon request of the owner or a subordinate secured party, a
14 secured party in possession of the certificate of title shall
15 mail or deliver the certificate to the department or, upon
16 receipt from the subordinate secured party of the application of
17 the owner and the required fee, shall mail or deliver them to
18 the department with the certificate of title. The delivery of
19 the certificate to the department does not affect the rights of
20 the first secured party under his security agreement.
21 (e) Indorsement and delivery of certificate of title.--Upon
22 receipt of the application, existing certificate of title, if
23 any, and required fee, the department shall indorse on the
24 existing certificate of title or the new certificate that it
25 issues the names and addresses of all secured parties and shall
26 mail the certificate of title to the first secured party named
27 in the certificate.
28 § 7712.9. Satisfaction of security interest.
29 (a) Satisfaction of secured obligation.--Unless otherwise
30 agreed by the owner, within 15 days of the satisfaction of the
20010S0330B0817 - 267 -
1 obligation secured by a security interest in an ATV, the secured
2 party shall mail or deliver the certificate of title to the
3 owner or to the department with a statement of satisfaction
4 signed by the secured party. Upon receipt of the certificate of
5 title and statement of satisfaction, the department shall issue
6 a corrected certificate of title without an indorsement of such
7 secured party's security interest and mail the same to the
8 holder of the first remaining security interest, or if there is
9 no remaining security interest, the owner.
10 (b) Satisfaction of subordinate secured obligation.--If the
11 certificate of title for an ATV is in the possession of a prior
12 secured party, the subordinate secured party whose obligation is
13 satisfied shall mail or deliver to the owner a signed statement
14 of satisfaction in accordance with subsection (a). Upon request
15 of the owner and receipt of the statement of satisfaction, the
16 secured party in possession of the certificate of title shall
17 mail or deliver the certificate of title together with the
18 statement of satisfaction to the department. Upon receipt of the
19 certificate of title and evidence of satisfaction, the
20 department shall issue a corrected certificate of title without
21 an indorsement of the satisfied security interest and mail the
22 same to the prior secured party.
23 (c) Penalties.--Any person violating the provisions of this
24 section commits of a summary offense and shall, upon conviction,
25 be sentenced to pay a fine of $50.
26 § 7712.10. Release of security interest.
27 A secured party that releases a security interest in an ATV
28 shall mail or deliver the certificate of title to the owner with
29 a statement of release signed by the secured party or the
30 secured party may apply to the department for a corrected
20010S0330B0817 - 268 -
1 certificate of title to be issued in the name of the owner. Upon
2 receipt of the certificate of title and statement of release,
3 the department shall issue a corrected certificate of title
4 without an indorsement of such secured party and mail the same
5 to the holder of the first remaining security interest, or if
6 there is no remaining secured party, the owner.
7 § 7712.11. Effectiveness of security interests.
8 A security interest perfected in accordance with this
9 subchapter is perfected until the secured party provides written
10 evidence of satisfaction in accordance with section 7712.9
11 (relating to satisfaction of security interest) or release in
12 accordance with section 7712.10 (relating to release of security
13 interest) and the indorsement of the security interest is
14 removed by the department pursuant to section 7712.9 or 7712.10.
15 § 7712.12. Assignment by secured party of security interest.
16 (a) General rule.--A secured party may assign, absolutely or
17 otherwise, his security interest in an ATV to a person other
18 than the owner without affecting the interest of the owner or
19 the validity or perfection of the security interest.
20 (b) Duty of assignee.--An assignee who desires to become the
21 secured party of record shall mail or deliver to the department
22 the certificate of title and an assignment by the secured party
23 named on the certificate of title on a form prescribed by the
24 department accompanied by the required fee. Upon receipt of the
25 certificate of title, assignment and fee, the department shall
26 issue a corrected certificate of title naming the assignee as
27 secured party.
28 (c) Division 9.--The provisions of this section are subject
29 to 13 Pa.C.S. § 9308(e) (relating to when security interest or
30 agricultural lien is perfected; continuity of perfection).
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1 § 7712.13. Exemptions.
2 The provisions of this subchapter relating to procedures for
3 perfecting, assigning and satisfying security interests do not
4 apply to:
5 (1) a lien given by statute or rule of law to a supplier
6 of services or materials for the ATV;
7 (2) a lien given by statute to the United States, the
8 Commonwealth or any political subdivision of the
9 Commonwealth;
10 (3) a security interest in an ATV described in 13
11 Pa.C.S. § 9311(d) (relating to perfection of security
12 interests in property subject to certain statutes,
13 regulations and treaties); or
14 (4) an ATV for which a certificate of title is not
15 required under this subchapter.
16 Section 28. The following transitional provisions apply only
17 to the addition of 13 Pa.C.S. §§ 5101 through 5117:
18 (1) A transaction arising out of or associated with a
19 letter of credit that was issued before the effective date of
20 this act and the rights, obligations and interests flowing
21 from that transaction are governed by any statute or other
22 law amended or repealed by this act as if repeal or amendment
23 had not occurred and may be terminated, completed,
24 consummated or enforced under that statute or other law.
25 (2) This act applies to a letter of credit that is
26 issued on or after the effective date of this act. This act
27 does not apply to a transaction, event, obligation or duty
28 arising out of or associated with a letter of credit that was
29 issued before the effective date of this act.
30 Section 29. (a) The following acts and parts of acts are
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1 repealed to the extent specified:
2 Act of April 5, 1853 (P.L.295, No.198), entitled "An act to
3 authorize mortgages of Coal Leases in Schuylkill county,"
4 absolutely.
5 Act of March 22, 1861 (P.L.185, No.181), entitled "A
6 supplement to an act to authorize Mortgages of Coal Leases in
7 Schuylkill county, approved the fifth day of April, Anno Domini
8 one thousand eight hundred and fifty-three," absolutely.
9 Act of April 12, 1872 (P.L.60, No.47), entitled "An act to
10 regulate the execution and transfer of notes given for patent
11 rights," absolutely.
12 Penultimate paragraph setting fees in section 1 of the act of
13 June 12, 1919 (P.L.476, No.240), referred to as the Second Class
14 County Recorder of Deeds Fee Law, insofar as inconsistent with
15 13 Pa.C.S. § 9525.
16 Act of March 28, 1931 (P.L.11, No.9), entitled "An act to
17 enable the farmers of the Commonwealth of Pennsylvania, as an
18 emergency measure, to borrow money from the United States of
19 America under the provisions of the Joint Resolution of
20 Congress, approved the twentieth day of December one thousand
21 nine hundred and thirty (Public Resolution, Number one hundred
22 twelve, Seventy-first Congress), as amended, for the relief of
23 farmers in the drought and storm-stricken areas of the United
24 States; authorizing the execution and recording of chattel
25 mortgages unto the United States of America on crops already
26 planted or to be planted; and designating the nature of the lien
27 operation and effect of such mortgages," absolutely.
28 Act of July 15, 1936 (1st Sp.Sess., P.L.47, No.22) entitled
29 "An act to enable persons, associations, partnerships, and
30 corporations to borrow money and secure the repayment thereof by
20010S0330B0817 - 271 -
1 the execution and recordation of chattel mortgages on any
2 chattels of any kind or description; providing for bonds with
3 confessions of judgments; regulating the assignment and release
4 of such mortgages; and designating the operation and effect of
5 the lien of such mortgages," absolutely.
6 Tenth paragraph setting fees in section 1 of the act of April
7 20, 1949 (P.L.644, No.143), entitled "An act to regulate and
8 establish the fees to be charged and collected by the recorders
9 of deeds in counties of the first class," insofar as
10 inconsistent with 13 Pa.C.S. § 9525.
11 Act of January 24, 1956 (1955 P.L.931, No.288), entitled "An
12 act relating to chattel mortgages executed and filed prior to
13 July one, one thousand nine hundred fifty-four, regulating the
14 assignment, release, satisfaction and extension of the lien of
15 mortgages, and the filing, indexing and docketing thereof in
16 prothonotaries' offices; prescribing methods of foreclosure;
17 defining defaults and violations; prescribing prothonotaries'
18 fees; and fixing penalties," absolutely.
19 Act of February 28, 1956 (1955 P.L.1147, No.358), entitled
20 "An act relating to conditional sales made prior to July one,
21 one thousand nine hundred fifty-four," absolutely.
22 Act of July 25, 1977 (P.L.95, No.35), known as the Mobile
23 Home Titling Act, absolutely.
24 Section 2(10)(i) and (ii) and (23)(iii) and (v) of the act of
25 April 8, 1982 (P.L.303, No.85), known as the Second Class County
26 Prothonotary Fee Act, absolutely.
27 As much as relates to finance statements, including
28 assignment or release, continuation, secured transaction and
29 termination, and to searches, including financial statements and
30 additional fees for financing statements, of section 1 of the
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1 act of April 8, 1982 (P.L.310, No.87), referred to as the
2 Recorder of Deeds Fee Law, insofar as inconsistent with 13
3 Pa.C.S. § 9525.
4 (b) All acts and parts of acts are repealed insofar as they
5 are inconsistent with this act.
6 Section 30. This act shall take effect as follows:
7 (1) The following provisions shall take effect
8 immediately:
9 (i) The addition of 13 Pa.C.S. § 9525(d).
10 (ii) This section.
11 (2) The addition of 15 Pa.C.S. § 153(d) shall take
12 effect in 90 days.
13 (3) The remainder of this act shall take effect July 1,
14 2001.
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