BILL NUMBER: SB 45 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 22, 1999
AMENDED IN SENATE APRIL 8, 1999
AMENDED IN SENATE APRIL 6, 1999
AMENDED IN SENATE MARCH 15, 1999
INTRODUCED BY Senator Sher
DECEMBER 7, 1998
An act to amend Section 22922 of the Business and Professions
Code, to amend Sections 955, 955.1, 1799.100, 1799.103,
1812.601, 2924f, 2944, 2983.8, 3439.08, 3440.1, and 3440.5 of the
Civil Code, to amend Sections 481.030, 481.115, 488.405, 488.500,
680.130, 680.210, 697.590, 697.610, 697.640, 697.650, 697.730,
697.740, 701.040, and 730.5 of the Code of Civil Procedure, to amend
Sections 1105, 1206, 2103, 4210, 6102, 6103, 7503, 8103, 10103,
10303, 10307, 10309, 13102, 13105, and 14106 of, and to repeal and
add Division 9 (commencing with Section 9101) of, and to repeal
and add Section 9321 of, the Commercial Code, to amend Section
22337 of the Financial Code, to amend Sections 7159, 7170, and 14735
of the Government Code, to amend Sections 18035, 18035.2, 18037.5,
18080.7, 18093, 18105, and 18106 of the Health and Safety Code, to
amend Section 538 of the Penal Code, and to amend Sections 843 and
844 of the Public Utilities Code, relating to secured transactions.
LEGISLATIVE COUNSEL'S DIGEST
SB 45, as amended, Sher. Commercial law: secured transactions.
Existing provisions of the Commercial Code govern security
interests in personal property and fixtures, as well as certain sales
of accounts, contract rights, and chattel paper.
This bill would repeal those provisions and replace them with new
provisions concerning those subjects. Among other things, the new
provisions would (1) broaden the scope of covered transactions and
collateral, (2) expand the duties of secured parties relating to the
release of control and the provision of information to debtors with
respect to collateral and the obligations it secures, (3) change
certain choice-of-law rules and other requirements regarding the
perfection of security interests, (4) revise and add certain new
priority rules for secured interests generally and certain special
priority rules relating to banks and deposit accounts, (5) revise
provisions relative to the relationships between certain 3rd parties
and the parties to secured transactions, (6) enact new provisions
governing the assignment of certain types of collateral, (7) revise
specified filing requirements and financing statement requisites, and
impose certain new reporting and other duties on the Secretary of
State in connection with these changes, and (8) change certain
default and enforcement rules.
This bill would revise cross-references in several codes to
conform to the bill.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 22922 of the Business and Professions Code is
amended to read:
22922. (a) Except to the extent specifically set forth in this
chapter, the lien created by this chapter is subject to Division 9
(commencing with Section 9101) of the Commercial Code.
(b) For the purposes of this chapter, as used in Division 9
(commencing with Section 9101) of the Commercial Code, the following
terms have the following meanings:
(1) "Secured party" refers to the equipment dealer, lien creditor,
lien claimant, or assignee thereof under this chapter.
(2) "Debtor" refers to the supplier, lien debtor, or debtor under
this chapter.
(3) "Collateral" refers to the equipment subject to the lien
created under this chapter.
(c) A security agreement is not necessary to make an equipment
repurchase lien created under this chapter enforceable.
(d) An equipment repurchase lien created under this chapter shall
not continue in the repurchased equipment following the disposition
thereof.
(e) The right of an equipment dealer to enforce the lien created
under this chapter shall be governed by this chapter and shall not be
governed by Chapter 6 (commencing with Section 9601) of Division 9
of the Commercial Code.
SEC. 2. Section 955 of the Civil Code is amended to read:
955. A transfer other than one intended to create a security
interest (paragraph (1) or (3) of subdivision (a) of Section 9109 of
the Commercial Code) of a nonnegotiable instrument which is otherwise
negotiable within Division 3 of the Commercial Code but which is not
payable to order or to bearer and a sale of accounts or chattel
paper as part of a sale of the business out of which they arose
(paragraph (4) of subdivision (d) of Section 9109 of the Commercial
Code) shall be deemed perfected against third persons when such
property rights have been endorsed or assigned in writing and in the
case of such instruments or chattel paper delivered to the
transferee, whether or not notice of such transfer or sale has been
given to the obligor; but such endorsement, assignment, or delivery
is not, of itself, notice to the obligor so as to invalidate any
payments made by the obligor to the transferor.
SEC. 3. Section 955.1 of the Civil Code is amended to read:
955.1. (a) Except as provided in Sections 954.5 and 955 and
subject to subdivisions (b) and (c), a transfer other than one
intended to create a security interest (paragraph (1) or (3) of
subdivision (a) of Section 9109 of the Commercial Code) of any
general intangible (Section 9102 of the Commercial Code) consisting
of any right to payment and any transfer of accounts or chattel paper
excluded from the coverage of Division 9 of the Commercial Code by
paragraph (4) of subdivision (d) of Section 9109 of the Commercial
Code shall be deemed perfected as against third persons upon there
being executed and delivered to the transferee an assignment thereof
in writing.
(b) As between bona fide assignees of the same right for value
without notice, the assignee first giving notice thereof to the
obligor in writing has priority.
(c) The assignment is not, of itself, notice to the obligor so as
to invalidate any payments made by the obligor to the transferor.
(d) This section does not apply to transfers or assignments of
transition property, as defined in Section 840 of the Public
Utilities Code.
SEC. 3.5. Section 1799.100 of the Civil Code is amended to read:
1799.100. (a) It is unlawful for any person to take a security
interest in any household goods, as defined in subdivision (g), in
connection with a consumer credit contract or other credit obligation
incurred primarily for personal, family, or household purposes
unless (1) the person takes possession of the household goods or (2)
the purchase price of the household goods was financed through the
consumer credit contract or credit obligation.
(b) An agreement or other document creating a nonpossessory
security interest in personal property as defined in subdivision (d)
in connection with a consumer credit contract or other credit
obligation incurred primarily for personal, family, or household
purposes shall contain a statement of description reviewed and signed
by the consumer indicating each specific item of the personal
property in which the security interest is taken. A consumer credit
contract or other credit obligation subject to the Unruh Act (Chapter
1 (commencing with Section 1801) of Title 2) that complies with the
provisions of subdivision (a) of Section 1803.3, or of subdivision
(f) of Section 1810.1, shall be deemed to comply with this
subdivision.
(c) Notwithstanding any other provision of law, a person who has a
nonpossessory security interest in personal property, described in
subdivision (d), taken in connection with a consumer credit contract
or other credit obligation incurred primarily for personal, family,
or household purposes shall only enforce the security interest by
judicial action unless the property is abandoned or freely and
voluntarily surrendered by the consumer.
(d) The provisions of subdivisions (b) and (c) apply only to the
following types of personal property:
(1) Any goods, as defined in paragraph (44) of
subdivision (h) (a) of Section
9105 9102 of the Commercial Code, except for
vessels, vehicles, and aircraft, that are used or bought for use
primarily for personal, family, or household purposes and that has a
fair market value of less than one thousand dollars ($1,000) per
individual item at the time the security interest is created.
(2) The property described in Section 704.050 and subdivision (a)
of Section 704.060 of the Code of Civil Procedure, except for
vessels, vehicles, and aircraft.
(e) Any security interest taken in violation of either subdivision
(a) or (b) is void and unenforceable.
(f) Any person injured by a violation of this section may bring a
civil action for the recovery of damages, equitable relief, and
attorney's fees and costs.
(g) For the purpose of this section:
(1) "Household goods" means and includes clothing, furniture,
appliances, one radio, one television, linens, china, crockery,
kitchenware, personal effects, and wedding rings. "Household goods"
does not include works of art, electronic entertainment equipment
(except one radio and one television), items acquired as antiques,
and jewelry (except wedding rings).
(2) "Antique" means any item over one hundred years of age,
including such items that have been repaired or renovated without
changing their original form or character.
SEC. 4. Section 1799.103 of the Civil Code is amended to read:
1799.103. No consumer credit contract or guarantee of a consumer
credit contract shall provide for a security interest in any
investment property, as defined in paragraph (49) of subdivision (a)
of Section 9102 of the Commercial Code, that is pledged as
collateral, unless (a) the contract either specifically identifies
the investment property as collateral or (b) the secured party is a
securities intermediary, as defined in paragraph (14) of subdivision
(a) of Section 8102 of the Commercial Code, or commodity
intermediary, as defined in paragraph (17) of subdivision (a) of
Section 9102 of the Commercial Code, with respect to the investment
property. The identification of an account shall include the name of
the holder, account number, and name of the institute holding the
investment property. In the event that a consumer credit contract or
guarantee does not comply with this section, the security interest
in the investment property is void.
SEC. 5. Section 1812.601 of the Civil Code is amended to read:
1812.601. (a) "Advertisement" means any of the following:
(1) Any written or printed communication for the purpose of
soliciting, describing, or offering to act as an auctioneer or
provide auction company services, including any brochure, pamphlet,
newspaper, periodical, or publication.
(2) A telephone or other directory listing caused or permitted by
an auctioneer or auction company to be published that indicates the
offer to practice auctioneering or auction company services.
(3) A radio, television, or similar airwave transmission that
solicits or offers the practice of auctioneering or auction company
services.
(b) "Auction" means a sale transaction conducted by means of oral
or written exchanges between an auctioneer and the members of his or
her audience, which exchanges consist of a series of invitations for
offers for the purchase of goods made by the auctioneer and offers to
purchase made by members of the audience and culminate in the
acceptance by the auctioneer of the highest or most favorable offer
made by a member of the participating audience. However, auction
does not include either of the following:
(1) A wholesale motor vehicle auction subject to regulation by the
Department of Motor Vehicles.
(2) A sale of real estate or a sale in any sequence of real estate
with personal property or fixtures or both in a unified sale
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code.
(c) "Auction company" means any person who arranges, manages,
sponsors, advertises, accounts for the proceeds of, or carries out
auction sales at locations, including, but not limited to, any fixed
location, including an auction barn, gallery place of business, sale
barn, sale yard, sale pavilion, and the contiguous surroundings of
each.
(d) "Auctioneer" means any individual who is engaged in, or who by
advertising or otherwise holds himself or herself out as being
available to engage in, the calling for, the recognition of, and the
acceptance of, offers for the purchase of goods at an auction.
(e) "Employee" means an individual who works for an employer, is
listed on the employer's payroll records, and is under the employer's
control.
(f) "Employer" means a person who employs an individual for wages
or salary, lists the individual on the person's payroll records, and
withholds legally required deductions and contributions.
(g) "Goods" means any goods, wares, chattels, merchandise, or
other personal property, including domestic animals and farm
products.
(h) "Person" means an individual, corporation, partnership, trust,
including a business trust, firm, association, organization, or any
other form of business enterprise.
SEC. 6. Section 2924f of the Civil Code is amended to read:
2924f. (a) As used in this section and Sections 2924g and 2924h,
"property" means real property or a leasehold estate therein, and
"calendar week" means Monday through Saturday, inclusive.
(b) (1) Except as provided in subdivision (c), before any sale of
property can be made under the power of sale contained in any deed of
trust or mortgage, or any resale resulting from a rescission for a
failure of consideration pursuant to subdivision (c) of Section
2924h, notice of the sale thereof shall be given by posting a written
notice of the time of sale and of the street address and the
specific place at the street address where the sale will be held, and
describing the property to be sold, at least 20 days before the date
of sale in one public place in the city where the property is to be
sold, if the property is to be sold in a city, or, if not, then in
one public place in the judicial district in which the property is to
be sold, and publishing a copy once a week for three consecutive
calendar weeks, the first publication to be at least 20 days before
the date of sale, in a newspaper of general circulation published in
the city in which the property or some part thereof is situated, if
any part thereof is situated in a city, if not, then in a newspaper
of general circulation published in the judicial district in which
the property or some part thereof is situated, or in case no
newspaper of general circulation is published in the city or judicial
district, as the case may be, in a newspaper of general circulation
published in the county in which the property or some part thereof is
situated, or in case no newspaper of general circulation is
published in the city or judicial district or county, as the case may
be, in a newspaper of general circulation published in the county in
this state that (A) is contiguous to the county in which the
property or some part thereof is situated and (B) has, by comparison
with all similarly contiguous counties, the highest population based
upon total county population as determined by the most recent federal
decennial census published by the Bureau of the Census. A copy of
the notice of sale shall also be posted in a conspicuous place on the
property to be sold at least 20 days before the date of sale, where
possible and where not restricted for any reason. If the property is
a single-family residence the posting shall be on a door of the
residence, but, if not possible or restricted, then the notice shall
be posted in a conspicuous place on the property; however, if access
is denied because a common entrance to the property is restricted by
a guard gate or similar impediment, the property may be posted at
that guard gate or similar impediment to any development community.
Additionally, the notice of sale shall conform to the minimum
requirements of Section 6043 of the Government Code and be recorded
with the county recorder of the county in which the property or some
part thereof is situated at least 14 days prior to the date of sale.
The notice of sale shall contain the name, street address, and
telephone number of the trustee or other person conducting the sale,
and the name of the original trustor, and also shall contain the
statement required by paragraph (3) of subdivision (c). In addition
to any other description of the property, the notice shall describe
the property by giving its street address, if any, or other common
designation, if any, and a county assessor's parcel number; but if
the property has no street address or other common designation, the
notice shall contain a legal description of the property, the name
and address of the beneficiary at whose request the sale is to be
conducted, and a statement that directions may be obtained pursuant
to a written request submitted to the beneficiary within 10 days from
the first publication of the notice. Directions shall be deemed
reasonably sufficient to locate the property if information as to the
location of the property is given by reference to the direction and
approximate distance from the nearest crossroads, frontage road, or
access road. If a legal description or a county assessor's parcel
number and either a street address or another common designation of
the property is given, the validity of the notice and the validity of
the sale shall not be affected by the fact that the street address,
other common designation, name and address of the beneficiary, or the
directions obtained therefrom are erroneous or that the street
address, other common designation, name and address of the
beneficiary, or directions obtained therefrom are omitted. The term
"newspaper of general circulation," as used in this section, has the
same meaning as defined in Article 1 (commencing with Section 6000)
of Chapter 1 of Division 7 of Title 1 of the Government Code.
The notice of sale shall contain a statement of the total amount
of the unpaid balance of the obligation secured by the property to be
sold and reasonably estimated costs, expenses, advances at the time
of the initial publication of the notice of sale, and, if republished
pursuant to a cancellation of a cash equivalent pursuant to
subdivision (d) of Section 2924h, a reference of that fact; provided,
that the trustee shall incur no liability for any good faith error
in stating the proper amount, including any amount provided in good
faith by or on behalf of the beneficiary. An inaccurate statement of
this amount shall not affect the validity of any sale to a bona fide
purchaser for value, nor shall the failure to post the notice of
sale on a door as provided by this subdivision affect the validity of
any sale to a bona fide purchaser for value.
(2) If the sale of the property is to be a unified sale as
provided in subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, the notice of sale shall also
contain a description of the personal property or fixtures to be
sold. In the case where it is contemplated that all of the personal
property or fixtures are to be sold, the description in the notice of
the personal property or fixtures shall be sufficient if it is the
same as the description of the personal property or fixtures
contained in the agreement creating the security interest in or
encumbrance on the personal property or fixtures or the filed
financing statement relating to the personal property or fixtures.
In all other cases, the description in the notice shall be sufficient
if it would be a sufficient description of the personal property or
fixtures under Section 9108 of the Commercial Code. Inclusion of a
reference to or a description of personal property or fixtures in a
notice of sale hereunder shall not constitute an election by the
secured party to conduct a unified sale pursuant to subparagraph (B)
of paragraph (1) of subdivision (a) of Section 9604 of the Commercial
Code, shall not obligate the secured party to conduct a unified sale
pursuant to subparagraph (B) of paragraph (1) of subdivision (a) of
Section 9604 of the Commercial Code, and in no way shall render
defective or noncomplying either that notice or a sale pursuant to
that notice by reason of the fact that the sale includes none or less
than all of the personal property or fixtures referred to or
described in the notice. This paragraph shall not otherwise affect
the obligations or duties of a secured party under the Commercial
Code.
(c) (1) This subdivision applies only to deeds of trust or
mortgages which contain a power of sale and which are secured by real
property containing a single-family, owner-occupied residence, where
the obligation secured by the deed of trust or mortgage is contained
in a contract for goods or services subject to the provisions of the
Unruh Act (Chapter 1 (commencing with Section 1801) of Title 2 of
Part 4 of Division 3).
(2) Except as otherwise expressly set forth in this subdivision,
all other provisions of law relating to the exercise of a power of
sale shall govern the exercise of a power of sale contained in a deed
of trust or mortgage described in paragraph (1).
(3) If any default of the obligation secured by a deed of trust or
mortgage described in paragraph (1) has not been cured within 30
days after the recordation of the notice of default, the trustee or
mortgagee shall mail to the trustor or mortgagor, at his or her last
known address, a copy of the following statement:
YOU ARE IN DEFAULT UNDER A
___________________________________________________,
(Deed of trust or mortgage)
DATED ______. UNLESS YOU TAKE ACTION TO PROTECT
YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE.
IF YOU NEED AN EXPLANATION OF THE NATURE OF THE
PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER.
(4) All sales of real property pursuant to a power of sale
contained in any deed of trust or mortgage described in paragraph (1)
shall be held in the county where the residence is located and shall
be made to the person making the highest offer. The trustee may
receive offers during the 10-day period immediately prior to the date
of sale and if any offer is accepted in writing by both the trustor
or mortgagor and the beneficiary or mortgagee prior to the time set
for sale, the sale shall be postponed to a date certain and prior to
which the property may be conveyed by the trustor to the person
making the offer according to its terms. The offer is revocable
until accepted. The performance of the offer, following acceptance,
according to its terms, by a conveyance of the property to the
offeror, shall operate to terminate any further proceeding under the
notice of sale and it shall be deemed revoked.
(5) In addition to the trustee fee pursuant to Section 2924c, the
trustee or mortgagee pursuant to a deed of trust or mortgage subject
to this subdivision shall be entitled to charge an additional fee of
fifty dollars ($50).
(6) This subdivision applies only to property on which notices of
default were filed on or after the effective date of this
subdivision.
SEC. 7. Section 2944 of the Civil Code is amended to read:
2944. None of the provisions of this chapter applies to any
transaction or security interest governed by the Commercial Code,
except to the extent made applicable by reason of an election made by
the secured party pursuant to subparagraph (B) of paragraph (1) of
subdivision (a) of Section 9604 of the Commercial Code.
SEC. 8. Section 2983.8 of the Civil Code is amended to read:
2983.8. Notwithstanding Section 2983.2 or any other provision of
law, no deficiency judgment shall lie in any event in any of the
following instances:
(a) After any sale of any mobilehome for which a permit is
required pursuant to Section 35780 or 35790 of the Vehicle Code for
failure of the purchaser to complete his or her
conditional sale contract given to the seller to secure payment of
the balance of the purchase price of such mobilehome. The provisions
of this subdivision shall not apply in the event there is substantial
damage to the mobilehome other than wear and tear from normal usage.
This subdivision shall apply only to contracts entered into on or
after the effective date of the act that enacted this subdivision and
before July 1, 1981.
(b) After any sale or other disposition of a motor vehicle unless
the court has determined that the sale or other disposition was in
conformity with the provisions of this chapter and the relevant
provisions of Division 9 (commencing with Section 9101) of the
Commercial Code, including Sections 9610, 9611, 9612, 9613, 9614,
9615, and 9626. The determination may be made upon an affidavit
unless the court requires a hearing in the particular case.
SEC. 9. Section 3439.08 of the Civil Code is amended to read:
3439.08. (a) A transfer or an obligation is not voidable under
subdivision (a) of Section 3439.04, against a person who took in good
faith and for a reasonably equivalent value or against any
subsequent transferee or obligee.
(b) Except as otherwise provided in this section, to the extent a
transfer is voidable in an action by a creditor under paragraph (1)
of subdivision (a) of Section 3439.07, the creditor may recover
judgment for the value of the asset transferred, as adjusted under
subdivision (c), or the amount necessary to satisfy the creditor's
claim, whichever is less. The judgment may be entered against the
following:
(1) The first transferee of the asset or the person for whose
benefit the transfer was made.
(2) Any subsequent transferee other than a good faith transferee
who took for value or from any subsequent transferee.
(c) If the judgment under subdivision (b) is based upon the value
of the asset transferred, the judgment shall be for an amount equal
to the value of the asset at the time of the transfer, subject to
adjustment as the equities may require.
(d) Notwithstanding voidability of a transfer or an obligation
under this chapter, a good faith transferee or obligee is entitled,
to the extent of the value given the debtor for the transfer or
obligation, to the following:
(1) A lien on or a right to retain any interest in the asset
transferred.
(2) Enforcement of any obligation incurred.
(3) A reduction in the amount of the liability on the judgment.
(e) A transfer is not voidable under subdivision (b) of Section
3439.04 or Section 3439.05 if the transfer results from the
following:
(1) Termination of a lease upon default by the debtor when the
termination is pursuant to the lease and applicable law.
(2) Enforcement of a lien in a noncollusive manner and in
compliance with applicable law, including Division 9 (commencing with
Section 9101) of the Commercial Code, other than a retention of
collateral under Sections 9620 and 9621 of the Commercial Code and
other than a voluntary transfer of the collateral by the debtor to
the lienor in satisfaction of all or part of the secured obligation.
SEC. 10. Section 3440.1 of the Civil Code is amended to read:
3440.1. This chapter does not apply to any of the following:
(a) Things in action.
(b) Ships or cargoes if either are at sea or in a foreign port.
(c) The sale of accounts, chattel paper, payment intangibles, or
promissory notes governed by the Uniform Commercial Code, security
interests, and contracts of bottomry or respondentia.
(d) Wines or brandies in the wineries, distilleries, or wine
cellars of the makers or owners of the wines or brandies, or other
persons having possession, care, and control of the wines or
brandies, and the pipes, casks, and tanks in which the wines or
brandies are contained, if the transfers are made in writing and
executed and acknowledged, and if the transfers are recorded in the
book of official records in the office of the county recorder of the
county in which the wines, brandies, pipes, casks, and tanks are
situated.
(e) A transfer or assignment made for the benefit of creditors
generally or by any assignee acting under an assignment for the
benefit of creditors generally.
(f) Property exempt from enforcement of a money judgment.
(g) Standing timber.
(h) Subject to the limitations in Section 3440.3, a transfer of
personal property if all of the following conditions are satisfied:
(1) Prior to the date of the intended transfer, the transferor or
the transferee files a financing statement, with respect to the
property transferred, signed by the transferor. The financing
statement shall be filed in the office of the Secretary of State in
accordance with Chapter 5 (commencing with Section 9501) of Division
9 of the Commercial Code, but may use the terms "transferor" in lieu
of "debtor" and "transferee" in lieu of "secured party." The
provisions of Chapter 5 (commencing with Section 9501) of Division 9
of the Commercial Code shall apply as appropriate to the financing
statement.
(2) The transferor or the transferee publishes a notice of the
intended transfer one time in a newspaper of general circulation
published in the judicial district in which the personal property is
located, if there is one, and if there is none in the judicial
district, then in a newspaper of general circulation in the county
embracing the
judicial district. The publication shall be completed not less than
10 days before the date the transfer occurs. The notice shall
contain the name and address of the transferor and transferee and a
general statement of the character of the personal property intended
to be transferred, and shall indicate the place where the personal
property is located and a date on or after which the transfer is to
be made.
(i) Personal property not located within this state at the time of
the transfer or attachment of the lien if the provisions of this
subdivision are not used for the purpose of evading this chapter.
(j) A transfer of property which (1) is subject to a statute or
treaty of the United States or a statute of this state that provides
for the registration of transfers of title or issuance of
certificates of title and (2) is so far perfected under that statute
or treaty that a bona fide purchaser cannot acquire an interest in
the property transferred that is superior to the interest of the
transferee.
(k) A transfer of personal property in connection with a
transaction in which the property is immediately thereafter leased by
the transferor from the transferee provided the transferee purchased
the property for value and in good faith (subdivision (c) of Section
10308 of the Commercial Code).
(l) Transition property, as defined in Section 840 of the Public
Utilities Code.
SEC. 11. Section 3440.5 of the Civil Code is amended to read:
3440.5. (a) This chapter does not affect the rights of a secured
party who, for value and in good faith, acquires a security interest
in the transferred personal property from the transferee, or from the
transferee's successor in interest, if the transferor is no longer
in possession of the personal property at the time the security
interest attaches.
(b) Additionally, except as provided in Section 3440.3, this
chapter does not affect the rights of a secured party who acquires a
security interest from the transferee, or from the tranferee's
successor in interest, in the personal property, if all of the
following conditions are satisfied:
(1) On or before the date the security agreement is executed, the
intended debtor or secured party files a financing statement with
respect to the property transferred, signed by the intended debtor.
The financing statement shall be filed in the office of the Secretary
of State in accordance with Chapter 5 (commencing with Section 9501)
of Division 9 of the Commercial Code, but shall use the terms
"transferor" in lieu of "debtor," "transferee" in lieu of "secured
party," and "secured party" in lieu of "assignee of secured party."
The provisions of Chapter 5 (commencing with Section 9501) of
Division 9 of the Commercial Code shall apply as appropriate to such
a statement. For the purpose of indexing, and in any certification
of search, the Secretary of State may refer to any financing
statement filed pursuant to this paragraph as a financing statement
under the Commercial Code and may describe the transferor as a debtor
and the transferee as a secured party.
Compliance with this paragraph shall, however, not perfect the
security interest of the secured party. Perfection of such a
security interest shall be governed by Division 9 (commencing with
Section 9101) of the Commercial Code.
(2) The intended debtor or secured party publishes a notice of the
transfer one time in a newspaper of general circulation published in
the judicial district in which the personal property is located, if
there is one, and if there is none in the judicial district, then in
a newspaper of general circulation in the county embracing the
judicial district. The publication shall be completed not less than
10 days before the date of execution by the intended debtor of the
intended security agreement. The notice shall contain the names and
addresses of the transferor and transferee and of the intended debtor
and secured party, a general statement of the character of the
personal property transferred and intended to be subject to the
security interest, the location of the personal property, and the
date on or after which the security agreement is to be executed by
the intended debtor.
SEC. 12. Section 481.030 of the Code of Civil Procedure is amended
to read:
481.030. "Account receivable" means "account" as defined in
paragraph (2) of subdivision (a) of Section 9102 of the Commercial
Code.
SEC. 13. Section 481.115 of the Code of Civil Procedure is amended
to read:
481.115. "General intangibles" means "general intangibles," as
defined in paragraph (42) of subdivision (a) of Section 9102 of the
Commercial Code, consisting of rights to payment.
SEC. 14. Section 488.405 of the Code of Civil Procedure is amended
to read:
488.405. (a) This section provides an alternative method of
attaching farm products or inventory of a going business in the
possession or under the control of the defendant, but this section
does not apply to property described in Section 488.325. This
section applies if the plaintiff instructs the levying officer to
attach the farm products or inventory under this section.
(b) To attach under this section farm products or inventory of a
going business in the possession or under the control of the
defendant, the levying officer shall file a notice of attachment with
the Secretary of State.
(c) Except as provided in subdivisions (d) and (e), the filing of
the notice of attachment gives the plaintiff an attachment lien on
all of the following:
(1) The farm products or inventory described in the notice.
(2) Identifiable cash proceeds (as that term is used in Section
9315 of the Commercial Code).
(3) If permitted by the writ of attachment or court order,
after-acquired property.
(d) The attachment lien created by the filing of the notice of
attachment under this section does not extend to either of the
following:
(1) A vehicle or vessel required to be registered with the
Department of Motor Vehicles or a mobilehome or commercial coach
required to be registered pursuant to the Health and Safety Code.
(2) The inventory of a retail merchant held for sale except to the
extent that the inventory of the retail merchant consists of durable
goods having a unit retail value of at least five hundred dollars
($500). For the purposes of this paragraph, "retail merchant" does
not include (A) a person whose sales for resale exceeded 75 percent
in dollar volume of the person's total sales of all goods during the
12 months preceding the filing of the notice of attachment or (B) a
cooperative association organized pursuant to Chapter 1 (commencing
with Section 54001) of Division 20 of the Food and Agricultural Code
(agricultural cooperative associations) or Part 3 (commencing with
Section 13200) of Division 3 of Title 1 of the Corporations Code
(Fish Marketing Act).
(e) If property subject to an attachment lien under this section
becomes a fixture (as defined in paragraph (41) of subdivision (a) of
Section 9102 of the Commercial Code), the attachment lien under this
section is extinguished.
(f) The notice of attachment shall be in the form prescribed by
the Secretary of State and shall contain all of the following:
(1) The name and mailing address of the plaintiff.
(2) The name and last known mailing address of the defendant.
(3) The title of the court where the action is pending and the
cause and number of the action.
(4) A description of the farm products and inventory attached.
(5) A statement that the plaintiff has acquired an attachment lien
on the described property and on identifiable cash proceeds (as that
term is used in Section 9315 of the Commercial Code) and, if
permitted by the writ of attachment or court order, on after-acquired
property.
(g) Upon presentation of a notice of attachment under this section
for filing and tender of the filing fee to the office of the
Secretary of State, the notice of attachment shall be filed, marked,
and indexed in the same manner as a financing statement. The fee for
filing in the office of the Secretary of State is the same as the
fee for filing a financing statement in the standard form.
(h) Upon the request of any person, the Secretary of State shall
issue a certificate showing whether there is on file in that office
on the date and hour stated therein any notice of attachment filed
against the farm products or inventory of a particular person named
in the request. If a notice of attachment is on file, the
certificate shall state the date and hour of filing of each such
notice of attachment and any notice affecting any such notice of
attachment and the name and address of the plaintiff. Upon request,
the Secretary of State shall furnish a copy of any notice of
attachment or notice affecting a notice of attachment.
(i) The fee for filing, indexing, and furnishing filing data for a
notice of extension of attachment is the same as the fee for a
continuation statement under Section 9525 of the Commercial Code.
The fee for filing, indexing, and furnishing filing data for a notice
of release of attachment is the same as the fee for a statement of
release under Section 9519 of the Commercial Code.
SEC. 15. Section 488.500 of the Code of Civil Procedure is amended
to read:
488.500. (a) A levy on property under a writ of attachment
creates an attachment lien on the property from the time of levy
until the expiration of the time provided by Section 488.510.
(b) Except as provided in subdivisions (c) and (d), if property
subject to an attachment lien is transferred or encumbered, the
property transferred or encumbered remains subject to the lien after
the transfer or encumbrance to the same extent that the property
would remain subject to an execution lien pursuant to Sections
697.720 to 697.750, inclusive.
(c) Except as otherwise provided in this title, if equipment is
attached pursuant to Section 488.375 or farm products or inventory is
attached pursuant to Section 488.405, the attachment lien on the
property covered by the attachment lien has the same force and effect
as a judgment lien on personal property created at the same time
would have pursuant to Sections 697.590 to 697.620, inclusive.
(d) If equipment consisting of a vehicle, vessel, mobilehome, or
commercial coach is attached pursuant to Section 488.385, the
attachment lien on the specified property does not affect the rights
of a person who is a bona fide purchaser or encumbrancer and obtains
possession of both the property and its certificate of ownership
issued by the Department of Motor Vehicles or its certificate of
title or registration card issued by the Department of Housing and
Community Development. If the levying officer obtains possession of
the certificate of ownership or certificate of title or registration
card, the attachment lien has the priority of the lien of a lien
creditor under Sections 9317 and 9323 of the Commercial Code as of
the time possession is obtained by the levying officer. If the
levying officer does not obtain possession of the certificate of
ownership or certificate of title or registration card, the
attachment lien has the same force and effect as an unperfected
security interest that attached at the same time as the notice of
attachment was filed.
(e) If an attachment lien is created on property that is subject
to the lien of a temporary protective order or a lien under Article 1
(commencing with Section 491.110) of Chapter 11, the priority of the
attachment lien relates back to the date the earlier lien was
created. Nothing in this subdivision affects priorities or rights of
third persons established while the lien of the temporary protective
order or the lien under Article 1 (commencing with Section 491.110)
of Chapter 11 was in effect as determined under the law governing the
effect of such lien.
SEC. 16. Section 680.130 of the Code of Civil Procedure is amended
to read:
680.130. "Account receivable" means "account" as defined in
paragraph (2) of subdivision (a) of Section 9102 of the Commercial
Code.
SEC. 17. Section 680.210 of the Code of Civil Procedure is amended
to read:
680.210. "General intangibles" means "general
intangibles", intangibles," as defined in
paragraph (42) of subdivision (a) of Section 9102 of the Commercial
Code, consisting of rights to payment.
SEC. 18. Section 697.590 of the Code of Civil Procedure is amended
to read:
697.590. (a) As used in this section:
(1) "Filing" means:
(A) With respect to a judgment lien on personal property, the
filing of a notice of judgment lien in the office of the Secretary of
State to create a judgment lien on personal property under this
article.
(B) With respect to a security interest, the filing of a financing
statement pursuant to Division 9 (commencing with Section 9101) of
the Commercial Code.
(2) "Perfection" means perfection of a security interest pursuant
to Division 9 (commencing with Section 9101) of the Commercial Code.
(3) "Personal property" means:
(A) With respect to a judgment lien on personal property, the
property to which a judgment lien has attached pursuant to this
article.
(B) With respect to a security interest, the collateral subject to
a security interest pursuant to Division 9 (commencing with Section
9101) of the Commercial Code.
(4) "Purchase money security interest" means "purchase money
security interest" as defined in Section 9103 of the Commercial Code.
(b) Except as provided in subdivisions (d) and (e), priority
between a judgment lien on personal property and a conflicting
security interest in the same personal property shall be determined
according to this subdivision. Conflicting interests rank according
to priority in time of filing or perfection. In the case of a
judgment lien, priority dates from the time filing is first made
covering the personal property. In the case of a security interest,
priority dates from the time a filing is first made covering the
personal property or the time the security interest is first
perfected, whichever is earlier, provided that there is no period
thereafter when there is neither filing nor perfection.
(c) For the purposes of subdivision (b), a date of filing or
perfection as to personal property is also a date of filing or
perfection as to proceeds.
(d) A purchase money security interest has priority over a
conflicting judgment lien on the same personal property or its
proceeds if the purchase money security interest is perfected at the
time the judgment debtor (as a debtor under the security agreement)
receives possession of the personal property or within 20 days
thereafter.
(e) If a purchase money security interest in inventory has
priority over a judgment lien pursuant to subdivision (d) and a
conflicting security interest has priority over the purchase money
security interest in the same inventory pursuant to Section 9324 of
the Commercial Code, the conflicting security interest also has
priority over the judgment lien on the inventory subject to the
purchase money security interest notwithstanding that the conflicting
security interest would not otherwise have priority over the
judgment lien.
(f) A judgment lien that has attached to personal property and
that is also subordinate under subdivision (b) to a security interest
in the same personal property is subordinate to the security
interest only to the extent that the security interest secures
advances made before the judgment lien attached or within 45 days
thereafter or made without knowledge of the judgment lien or pursuant
to a commitment entered into without knowledge of the judgment lien.
For the purpose of this subdivision, a secured party shall be
deemed not to have knowledge of a judgment lien on personal property
until (1) the judgment creditor serves a copy of the notice of
judgment lien on the secured party personally or by mail and (2) the
secured party has knowledge of the judgment lien on personal
property, as "knowledge" is defined in Section 1201 of the Commercial
Code. If service on the secured party is by mail, it shall be sent
to the secured party at the address shown in the financing statement
or security agreement.
SEC. 19. Section 697.610 of the Code of Civil Procedure is amended
to read:
697.610. Except as provided in Sections 9615 and 9617 of the
Commercial Code, a judgment lien on personal property continues
notwithstanding the sale, exchange, or other disposition of the
property, unless the person receiving the property is one of the
following:
(a) A buyer in ordinary course of business (as defined in Section
1201 of the Commercial Code) who, under Section 9320 of the
Commercial Code, would take free of a security interest created by
the seller.
(b) A lessee in ordinary course of business (as defined in
paragraph (15) of subdivision (a) of Section 10103 of the Commercial
Code) or a licensee in the ordinary course of business who, under
subdivision (c) of Section 10307, or Section 9321, of the Commercial
Code, would take free of a security interest created by the lessor.
(c) A holder to whom a negotiable document of title has been duly
negotiated within the meaning of Section 7501 of the Commercial Code.
(d) A purchaser of chattel paper who, under Section 9330 of the
Commercial Code, would have priority over another security interest
in the chattel paper.
(e) A purchaser of an instrument who would have priority under
subdivision (d) of Section 9330 of the Commercial Code.
(f) A purchaser of investment property who would have priority
under paragraph (1), (3), (4), or (5) of Section 9328 of the
Commercial Code.
(g) A transferee of money who would take free of a security
interest under Section 9332 of the Commercial Code.
SEC. 20. Section 697.640 of the Code of Civil Procedure is amended
to read:
697.640. (a) The judgment creditor, judgment debtor, owner of
property subject to a judgment lien on personal property created
under the judgment, or a person having a security interest in or a
lien on the property subject to the judgment lien, may file in the
office of the Secretary of State an acknowledgment of satisfaction of
judgment executed as provided in Section 724.060 or a court clerk's
certificate of satisfaction of judgment issued pursuant to Section
724.100, together with a statement containing the name of the
judgment creditor, the name and address of the judgment debtor, and
the file number of the notice of judgment lien. Upon such filing,
the judgment lien created under the judgment that has been satisfied
is extinguished as a matter of record. The fee for filing the
acknowledgment or certificate is the same as the fee for filing a
termination statement under Section 9404 of the Commercial Code.
(b) The filing officer shall treat an acknowledgment of
satisfaction of judgment, or court clerk's certificate of
satisfaction of judgment, and statement filed pursuant to this
section in the same manner as a termination statement filed pursuant
to Section 9525 of the Commercial Code.
SEC. 21. Section 697.650 of the Code of Civil Procedure is amended
to read:
697.650. (a) The judgment creditor may by a writing do any of the
following:
(1) Release the judgment lien on all the personal property subject
to the lien of a sole judgment debtor or of all the judgment
debtors.
(2) If the notice of judgment lien names more than one judgment
debtor, release the judgment lien on all the personal property
subject to the lien of one or more but of less than all the judgment
debtors.
(3) Release the judgment lien on all or a part of the personal
property subject to the lien.
(4) Subordinate to a security interest or other lien or
encumbrance the judgment lien on all or a part of the personal
property subject to the judgment lien.
(b) A statement of release or subordination is sufficient if it is
signed by the judgment creditor and contains the name and address of
the judgment debtor, the file number of the notice of judgment lien,
and wording appropriate to bring the statement within one of the
paragraphs of subdivision (a). In the case of a release under
paragraph (3) of subdivision (a), the statement of release shall also
describe the property being released. In the case of a
subordination under paragraph (4) of subdivision (a), the statement
of subordination shall also describe the property on which the
judgment lien is being subordinated and describe the security
interest or other lien or encumbrance to which the judgment lien is
being subordinated.
(c) The filing officer shall treat the filing of a statement of
release pursuant to paragraph (1) of subdivision (a) of this section
in the same manner as a termination statement filed pursuant to
Sections 9513 and 9519 of the Commercial Code. The filing officer
shall treat the filing of a statement of release pursuant to
paragraph (2) of subdivision (a) of this section in the same manner
as a comparable amendment filed pursuant to Sections 9512 and 9519 of
the Commercial Code. The filing officer shall treat the filing of a
statement of release pursuant to paragraph (3) of subdivision (a) of
this section and the filing of a statement of subordination filed
pursuant to paragraph (4) of subdivision (a) of this section in the
same manner as a statement of release filed pursuant to Sections 9512
and 9519 of the Commercial Code.
(d) The fee for filing the statement is the same as that provided
in Section 9525 of the Commercial Code.
SEC. 22. Section 697.730 of the Code of Civil Procedure is amended
to read:
697.730. (a) Subject to Section 701.630 and except as provided in
subdivision (b), if tangible personal property subject to an
execution lien is in the custody of a levying officer and is
transferred or encumbered, the property remains subject to the lien
after the transfer or encumbrance.
(b) If a levy upon tangible personal property of a going business
is made by the levying officer placing a keeper in charge of the
business, a purchaser or lessee of property subject to the execution
lien takes the property free of the execution lien if the purchaser
or lessee is one of the following:
(1) A buyer in ordinary course of business (as defined in Section
1201 of the Commercial Code) who, under Section 9320 of the
Commercial Code, would take free of a security interest created by
his or her seller.
(2) A lessee in ordinary course of business (as defined in
paragraph (15) of subdivision (a) of Section 10103 of the Commercial
Code) or a licensee in the ordinary course of business who, under
subdivision (c) of Section 10307, or Section 9321, of the Commercial
Code, would take free of a security interest created by the lessor.
(3) A purchaser of an instrument who would have priority under
subdivision (d) of Section 9330 of the Commercial Code.
(4) A purchaser of investment property who would have priority
under paragraph (1), (3), (4), or (5) of Section 9328 of the
Commercial Code.
(5) A transferee of money who would take free of a security
interest under Section 9332 of the Commercial Code.
SEC. 23. Section 697.740 of the Code of Civil Procedure is amended
to read:
697.740. Except as provided in Section 9504 of the Commercial
Code and in Section 701.630, if personal property subject to an
execution lien is not in the custody of a levying officer and the
property is transferred or encumbered, the property remains subject
to the lien after the transfer or encumbrance except where the
transfer or encumbrance is made to one of the following persons:
(a) A person who acquires an interest in the property under the
law of this state for reasonably equivalent value without knowledge
of the lien. For purposes of this subdivision, value is given for a
transfer or encumbrance if, in exchange for the transfer or
encumbrance, property is transferred or an antecedent debt is secured
or satisfied.
(b) A buyer in ordinary course of business (as defined in Section
1201 of the Commercial Code) who, under Section 9320 of the
Commercial Code, would take free of a security interest created by
the seller or encumbrancer.
(c) A lessee in ordinary course of business (as defined in
paragraph (15) of subdivision (a) of Section 10103 of the Commercial
Code) who, under subdivision (c) of Section 10307 of the Commercial
Code, would take free of a security interest created by the lessor.
(d) A holder in due course (as defined in Section 3302 of the
Commercial Code) of a negotiable instrument within the meaning of
Section 3104 of the Commercial Code.
(e) A holder to whom a negotiable document of title has been duly
negotiated within the meaning of Section 7501 of the Commercial Code.
(f) A protected purchaser (as defined in Section 8303 of the
Commercial Code) of a security.
(g) A purchaser of chattel paper or an instrument who gives new
value and takes possession of the chattel paper or instrument in the
ordinary course of business.
(h) A holder of a purchase money security interest (as defined in
Section 9103 of the Commercial Code).
(i) A collecting bank holding a security interest in items being
collected, accompanying documents and proceeds, pursuant to Section
4210 of the Commercial Code.
(j) A person who acquires any right or interest in letters of
credit, advices of credit, or money.
(k) A person who acquires any right or interest in property
subject to a certificate of title statute of another jurisdiction
under the law of which indication of a security interest on the
certificate of title is required as a condition of perfection of the
security interest.
SEC. 24. Section 701.040 of the Code of Civil Procedure is amended
to read:
701.040. (a) Except as otherwise ordered by the court upon a
determination that the judgment creditor's lien has priority over the
security interest, if property levied upon is subject to a security
interest that attached prior to levy, the property or obligation is
subject to enforcement of the security interest without regard to the
levy unless the property is in the custody of the levying officer;
but, if the execution lien has priority over the security interest,
the secured party is liable to the judgment creditor for any proceeds
received by the secured party from the property to the extent of the
execution lien.
(b) After the security interest is satisfied, the secured party
shall deliver any excess property, and pay any excess payments or
proceeds of property, remaining in the possession of the secured
party to the levying officer for the purposes of the levy, as
provided in Section 9615 of
the Commercial Code, unless otherwise ordered by the court or
directed by the levying officer.
(c) This section shall be repealed on January 1, 2002.
SEC. 25. Section 730.5 of the Code of Civil Procedure is amended
to read:
730.5. Except as otherwise provided by Section 9604 of the
Commercial Code, none of the provisions of this chapter or of Section
580a, 580b, 580c, or 580d applies to any security interest in
personal property or fixtures governed by the Commercial Code.
SEC. 26. Section 1105 of the Commercial Code is amended to read:
1105. (1) Except as provided hereafter in this section, when a
transaction bears a reasonable relation to this state and also to
another state or nation the parties may agree that the law either of
this state or of such other state or nation shall govern their rights
and duties. Failing such agreement this code applies to
transactions bearing an appropriate relation to this state.
(2) Where one of the following provisions of this code specifies
the applicable law, that provision governs and a contrary agreement
is effective only to the extent permitted by the law (including the
conflict of laws rules) so specified:
Rights of creditors against sold goods. Section 2402.
Applicability of the division on leases. Sections 10105 and
10106.
Applicability of the division on bank deposits and collections.
Section 4102.
Letters of credit. Section 5116.
Bulk sales subject to the division on bulk sales. Section 6103.
Applicability of the division on investment securities. Section
8110.
Perfection provisions of the division on secured transactions.
Sections 9301, 9303, 9304, 9305, 9306, 9307, 9316, and 9337.
SEC. 27. Section 1206 of the Commercial Code is amended to read:
1206. (1) Except in the cases described in subdivision (2) of
this section a contract for the sale of personal property is not
enforceable by way of action or defense beyond five thousand dollars
($5,000) in amount or value of remedy unless there is some writing
which indicates that a contract for sale has been made between the
parties at a defined or stated price, reasonably identifies the
subject matter, and is signed by the party against whom enforcement
is sought or by his or her authorized agent.
(2) Subdivision (1) of this section does not apply to contracts
for the sale of goods (Section 2201) nor of securities (Section 8113)
nor to security agreements ( Sections
(Sections 9201 and 9203).
(3) Subdivision (1) of this section does not apply to a qualified
financial contract as that term is defined in paragraph (2) of
subdivision (b) of Section 1624 of the Civil Code if either (a) there
is, as provided in paragraph (3) of subdivision (b) of Section
1624 of the Civil Code, sufficient evidence to indicate that a
contract has been made or (b) the parties thereto, by means of a
prior or subsequent written contract, have agreed to be bound by the
terms of the qualified financial contract from the time they reach
agreement (by telephone, by exchange of electronic messages, or
otherwise) on those terms.
SEC. 28. Section 2103 of the Commercial Code is amended to read:
2103. (1) In this division unless the context otherwise
requires requires:
(a) "Buyer" means a person who buys or contracts to buy goods.
(b) "Good faith" in the case of a merchant means honesty in fact
and the observance of reasonable commercial standards of fair dealing
in the trade.
(c) "Receipt" of goods means taking physical possession of them.
(d) "Seller" means a person who sells or contracts to sell goods.
(2) Other definitions applying to this division or to specified
chapters thereof, and the sections in which they appear are:
"Acceptance." Section 2606.
"Banker's credit." Section 2325.
"Between merchants." Section 2104.
"Cancellation." Section 2106(4).
"Commercial unit." Section 2105.
"Confirmed credit." Section 2325.
"Conforming to contract." Section 2106.
"Contract for sale." Section 2106.
"Cover." Section 2712.
"Entrusting." Section 2403.
"Financing agency." Section 2104.
"Future goods." Section 2105.
"Goods." Section 2105.
"Identification." Section 2501.
"Installment contract." Section 2612.
"Letter of Credit." Section 2325.
"Lot." Section 2105.
"Merchant." Section 2104.
"Overseas." Section 2323.
"Person in position of seller." Section 2707.
"Present sale." Section 2106.
"Sale." Section 2106.
"Sale on approval." Section 2326.
"Sale or return." Section 2326.
"Termination." Section 2106.
(3) The following definitions in other divisions apply to this
division:
"Check." Section 3104.
"Consignee." Section 7102.
"Consignor." Section 7102.
"Consumer goods." Section 9102.
"Dishonor." Section 3502.
"Draft." Section 3104.
(4) In addition Division 1 contains general definitions and
principles of construction and interpretation applicable throughout
this division.
SEC. 29. Section 4210 of the Commercial Code is amended to read:
4210. (a) A collecting bank has a security interest in an item
and any accompanying documents or the proceeds of either:
(1) In case of an item deposited in an account to the extent to
which credit given for the item has been withdrawn or applied.
(2) In case of an item for which it has given credit available for
withdrawal as of right, to the extent of the credit given, whether
or not the credit is drawn upon or there is a right of chargeback.
(3) If it makes an advance on or against the item.
(b) If credit given for several items received at one time or
pursuant to a single agreement is withdrawn or applied in part, the
security interest remains upon all the items, any accompanying
documents or the proceeds of either. For the purpose of this
section, credits first given are first withdrawn.
(c) Receipt by a collecting bank of a final settlement for an item
is a realization on its security interest in the item, accompanying
documents, and proceeds. So long as the bank does not receive final
settlement for the item or give up possession of the item or
accompanying documents for purposes other than collection, the
security interest continues to that extent and is subject to Division
9 (commencing with Section 9101), but all of the following are
applicable:
(1) No security agreement is necessary to make the security
interest enforceable (subdivision (b) of Section 9203).
(2) No filing is required to perfect the security interest.
(3) The security interest has priority over conflicting perfected
security interests in the item, accompanying documents, or proceeds.
SEC. 30. Section 6102 of the Commercial Code is amended to read:
6102. (a) In this division, unless the context otherwise
requires:
(1) "Assets" means the inventory and equipment that is the subject
of a bulk sale and any tangible and intangible personal property
used or held for use primarily in, or arising from, the seller's
business and sold in connection with that inventory and equipment,
but the term does not include any of the following:
(i) Fixtures (paragraph (41) of subdivision (a) of Section 9102)
other than readily removable factory and office machines.
(ii) The lessee's interest in a lease of real property.
(iii) Property to the extent it is generally exempt from creditor
process under nonbankruptcy law.
(2) "Auctioneer" means a person whom the seller engages to direct,
conduct, control, or be responsible for a sale by auction.
(3) "Bulk sale" means either of the following:
(i) In the case of a sale by auction or a sale or series of sales
conducted by a liquidator on the seller's behalf, a sale or series of
sales not in the ordinary course of the seller's business of more
than half of the seller's inventory and equipment, as measured by a
value on the date of the bulk-sale agreement.
(ii) In all other cases, a sale not in the ordinary course of the
seller's business of more than half the seller's inventory and
equipment, as measured by value on the date of the bulk-sale
agreement.
(4) "Claim" means a right to payment from the seller, whether or
not the right is reduced to judgment, liquidated, fixed, matured,
disputed, secured, legal, or equitable. The term includes costs of
collection and attorney's fees only to the extent that the laws of
this state permit the holder of the claim to recover them in an
action against the obligor.
(5) "Claimant" means a person holding a claim incurred in the
seller's business other than any of the following:
(i) An unsecured and unmatured claim for employment compensation
and benefits, including commissions and vacation, severance, and
sick-leave pay.
(ii) A claim for injury to an individual or to property, or for
breach of warranty, unless all of the following are satisfied:
(A) A right of action for the claim has accrued.
(B) The claim has been asserted against the seller.
(C) The seller knows the identity of the person asserting the
claim and the basis upon which the person has asserted it.
(iii) A claim for taxes owing to a governmental unit, if both of
the following are satisfied:
(A) A statute governing the enforcement of the claim permits or
requires notice of the bulk sale to be given to the governmental unit
in a manner other than by compliance with the requirements of this
division.
(B) Notice is given in accordance with the statute.
(6) "Creditor" means a claimant or other person holding a claim.
(7) (i) "Date of the bulk sale" means either of the following:
(A) If the sale is by auction or is conducted by a liquidator on
the seller's behalf, the date on which more than 10 percent of the
net proceeds is paid to or for the benefit of the seller.
(B) In all other cases, the later of the date on which either of
the following occurs:
(I) More than 10 percent of the net contract price is paid to or
for the benefit of the seller.
(II) More than 10 percent of the assets, as measured by value, are
transferred to the buyer.
(ii) For purposes of this subdivision the following shall apply:
(A) Delivery of a negotiable instrument (subdivision (1) of
Section 3104) to or for the benefit of the seller in exchange for
assets constitutes payment of the contract price pro tanto.
(B) To the extent that the contract price is deposited in an
escrow, the contract price is paid to or for the benefit of the
seller when the seller acquires the unconditional right to receive
the deposit or when the deposit is delivered to the seller or for the
benefit of the seller, whichever is earlier.
(C) An asset is transferred when a person holding an unsecured
claim can no longer obtain through judicial proceedings rights to the
asset that are superior to those of the buyer arising as a result of
the bulk sale. A person holding an unsecured claim can obtain those
superior rights to a tangible asset at least until the buyer has an
unconditional right, under the bulk-sale agreement, to possess the
asset, and a person holding an unsecured claim can obtain those
superior rights to an intangible asset at least until the buyer has
an unconditional right, under the bulk-sale agreement, to use the
asset.
(8) "Date of the bulk-sale agreement" means either of the
following:
(i) In the case of a sale by auction or conducted by a liquidator
(subparagraph (i) of paragraph (3)), the date on which the seller
engages the auctioneer or liquidator.
(ii) In all other cases, the date on which a bulk-sale agreement
becomes enforceable between the buyer and the seller.
(9) "Debt" means liability on a claim.
(10) "Liquidator" means a person who is regularly engaged in the
business of disposing of assets for businesses contemplating
liquidation or dissolution.
(11) "Net contract price" means the new consideration the buyer is
obligated to pay for the assets less each of the following:
(i) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(ii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured
by an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(12) "Net proceeds" means the new consideration received for
assets sold at a sale by auction or a sale conducted by a liquidator
on the seller's behalf less each of the following:
(i) Commissions and reasonable expenses of the sale.
(ii) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(iii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured
by an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(13) A sale is "in the ordinary course of the seller's business"
if the sale comports with usual or customary practices in the kind of
business in which the seller is engaged or with the seller's own
usual or customary practices.
(14) "United States" includes its territories and possessions and
the Commonwealth of Puerto Rico.
(15) "Value" means fair market value.
(16) "Verified" means signed and sworn to or affirmed.
(b) The following definitions in other divisions apply to this
division:
(1) "Buyer." Paragraph (a) of subdivision (1) of Section 2103.
(2) "Equipment." Paragraph (33) of subdivision (a) of Section
9102.
(3) "Inventory." Paragraph (48) of subdivision (a) of Section
9102.
(4) "Sale." Subdivision (1) of Section 2106.
(5) "Seller." Paragraph (d) of subdivision (1) of Section 2103.
(c) In addition, Division 1 (commencing with Section 1101)
contains general definitions and principles of construction and
interpretation applicable throughout this division.
SEC. 31. Section 6103 of the Commercial Code is amended to read:
6103. (a) Except as otherwise provided in subdivision (c), this
division applies to a bulk sale if both of the following are
satisfied:
(1) The seller's principal business is the sale of inventory from
stock, including those who manufacture what they sell, or that of a
restaurant owner.
(2) On the date of the bulk-sale agreement the seller is located
in this state or, if the seller is located in a jurisdiction that is
not a part of the United States, the seller's major executive office
in the United States is in this state.
(b) A seller is deemed to be located at its place of business. If
a seller has more than one place of business, the seller is deemed
located at its chief executive office.
(c) This division does not apply to any of the following:
(1) A transfer made to secure payment or performance of an
obligation.
(2) A transfer of collateral to a secured party pursuant to
Section 9609.
(3) A sale of collateral pursuant to Section 9610.
(4) Retention of collateral pursuant to Section 9620.
(5) A sale of an asset encumbered by a security interest or lien
if (i) all the proceeds of the sale are applied in partial or total
satisfaction of the debt secured by the security interest or lien or
(ii) the security interest or lien is enforceable against the asset
after it has been sold to the buyer and the net contract price is
zero.
(6) A general assignment for the benefit of creditors or to a
subsequent transfer by the assignee.
(7) A sale by an executor, administrator, receiver, trustee in
bankruptcy, debtor in possession, or any public officer under
judicial process.
(8) A sale made in the course of judicial or administrative
proceedings for the dissolution or reorganization of an organization.
(9) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Not earlier than 21 days before the date of the bulk sale, (A)
obtains from the seller a verified and dated list of claimants of
whom the seller has notice three days before the seller sends or
delivers the list to the buyer or (B) conducts a reasonable inquiry
to discover the claimants.
(ii) Assumes in full the debts owed to claimants of whom the buyer
has knowledge on the date the buyer receives the list of claimants
from the seller or on the date the buyer completes the reasonable
inquiry, as the case may be.
(iii) Is not insolvent after the assumption.
(iv) Records and publishes notice of the assumption not later than
30 days after the date of the bulk sale in the manner provided in
Section 6105.
(10) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Assumes in full the debts that were incurred in the seller's
business before the date of the bulk sale.
(ii) Is not insolvent after the assumption.
(iii) Records and publishes notice of the assumption not later
than 30 days after the date of the bulk sale in the manner provided
by Section 6105.
(11) A sale to a new organization that is organized to take over
and continue the business of the seller and that has its principal
place of business in the United States if each of the following
conditions are satisfied:
(i) The buyer assumes in full the debts that were incurred in the
seller's business before the date of the bulk sale.
(ii) The seller receives nothing from the sale except an interest
in the new organization that is subordinate to the claims against the
organization arising from the assumption.
(iii) The buyer records and publishes notice of the assumption not
later than 30 days after the date of the bulk sale in the manner
provided in Section 6105.
(12) A sale of assets having either of the following:
(i) A value, net of liens and security interests, of less than ten
thousand dollars ($10,000). If a debt is secured by assets and
other property of the seller, the net value of the assets is
determined by subtracting from their value an amount equal to the
product of the debt multiplied by a fraction, the numerator of which
is the value of the assets on the date of the bulk sale and the
denominator of which is the value of all property securing the debt
on the date of the bulk sale.
(ii) A value of more than five million dollars ($5,000,000) on the
date of the bulk-sale agreement.
(13) A sale required by, and made pursuant to, statute.
(14) A transfer of personal property, if the personal property is
leased back to the transferor immediately following the transfer and
either there has been compliance with subdivision (h) of Section
3440.1 of the Civil Code or the transfer is exempt under subdivision
(k) of Section 3440.1 of the Civil Code.
(15) A transfer which is subject to and complies with Article 5
(commencing with Section 24070) of Chapter 6 of Division 9 of the
Business and Professions Code, if the transferee records and
publishes notice of the transfer at least 12 business days before the
transfer is to be consummated in the manner provided in Section 6105
and the notice contains the information set forth in paragraphs (1)
to (4) inclusive, of subdivision (a) of Section 6105.
(16) A transfer of goods in a warehouse where a warehouse receipt
has been issued therefor by a warehouseman (Section 7102) and a copy
of the receipt is kept at the principal place of business of the
warehouseman and at the warehouse in which the goods are stored.
(d) The notice under subparagraph (iv) of paragraph (9) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume in full the debts
owed to claimants of whom the buyer has knowledge on the date the
buyer receives the list of claimants from the seller or completes a
reasonable inquiry to discover the claimants.
(e) The notice under subparagraph (iii) of paragraph (10) of
subdivision (c) and subparagraph (iii) of paragraph (11) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume the debts that were
incurred in the seller's business before the date of the bulk sale.
(f) For purposes of paragraph (12) of subdivision (c), the value
of assets is presumed to be equal to the price the buyer agrees to
pay for the assets. However, in a sale by auction or a sale
conducted by a liquidator on the seller's behalf, the value of assets
is presumed to be the amount the auctioneer or liquidator reasonably
estimates the assets will bring at auction or upon liquidation.
SEC. 32. Section 7503 of the Commercial Code is amended to read:
7503. (1) A document of title confers no right in goods against a
person who before issuance of the document had a legal interest or a
perfected security interest in them and who neither
(a) Delivered nor entrusted them nor any document of title
covering them to the bailor or his nominee with actual or apparent
authority to ship, store or sell or with power to obtain delivery
under this division (Section 7403) or with power of disposition under
this code (Sections 2403, 9320, and 9323) or other statute or rule
of law, nor
(b) Acquiesced in the procurement by the bailor or his or her
nominee of any document of title.
(2) Title to goods based upon a bill of lading issued to a freight
forwarder is subject to the rights of anyone to whom a bill issued
by the freight forwarder is duly negotiated; but delivery by the
carrier in accordance with Chapter 4 of this division pursuant to its
own bill of lading discharges the carrier's obligation to deliver.
SEC. 33. Section 8103 of the Commercial Code is amended to read:
8103. (a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar entity
is a security.
(b) An "investment company security" is a security. "Investment
company security" means a share or similar equity interest issued by
an entity that is registered as an investment company under the
federal investment company laws, an interest in a unit investment
trust that is so registered, or a face-amount certificate issued by a
face-amount certificate company that is so registered. Investment
company security does not include an insurance policy or endowment
policy or annuity contract issued by an insurance company.
(c) An interest in a partnership or limited liability company is
not a security unless it is dealt in or traded on securities
exchanges or in securities markets, its terms expressly provide that
it is a security governed by this division, or it is an investment
company security. However, an interest in a partnership or limited
liability company is a financial asset if it is held in a securities
account.
(d) A writing that is a security certificate is governed by this
division and not by Division 3 (commencing with Section 3101), even
though it also meets the requirements of that division. However, a
negotiable instrument governed by Division 3 (commencing with Section
3101) is a financial asset if it is held in a securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a financial
asset.
(f) A commodity contract, as defined in paragraph (15) of
subdivision (a) of Section 9102, is not a security or a financial
asset.
SEC. 34. Division 9 (commencing with Section 9101) of the
Commercial Code is repealed.
SEC. 35. Division 9 (commencing with Section 9101) is added to the
Commercial Code, to read:
DIVISION 9. SECURED TRANSACTIONS
CHAPTER 1. GENERAL PROVISIONS
9101. This division may be cited as the Uniform Commercial
Code-Secured Transactions.
9102. (a) In this division:
(1) "Accession" means goods that are physically united with other
goods in such a manner that the identity of the original goods is not
lost.
(2) "Account," except as used in "account for," means a right to
payment of a monetary obligation, whether or not earned by
performance, (i) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (ii) for services
rendered or to be rendered, (iii) for a policy of insurance issued or
to be issued, (iv) for a secondary obligation incurred or to be
incurred, (v) for energy provided or to be provided, (vi) for the use
or hire of a vessel under a charter or other contract, (vii) arising
out of the use of a credit or charge card or information contained
on or for use with the card, or (viii) as winnings in a lottery or
other game of chance operated or sponsored by a state, governmental
unit of a state, or person licensed or authorized to operate the game
by a state or governmental unit of a state. The term includes
health care insurance receivables. The term does not include (i)
rights to payment evidenced by chattel paper or an instrument, (ii)
commercial tort claims, (iii) deposit accounts, (iv) investment
property, (v) letter-of-credit rights or letters of credit, or (vi)
rights to payment for money or funds advanced
or sold, other than rights arising out of the use
of a credit or charge card or information contained on or for use
with the card.
(3) "Account debtor" means a person obligated on an account,
chattel paper, or general intangible. The term does not include
persons obligated to pay a negotiable instrument, even if the
instrument constitutes part of chattel paper.
(4) "Accounting," except as used in "accounting for," means a
record that is all of the following:
(A) Authenticated by a secured party.
(B) Indicating the aggregate unpaid secured obligations as of a
date not more than 35 days earlier or 35 days later than the date of
the record.
(C) Identifying the components of the obligations in reasonable
detail.
(5) "Agricultural lien" means an interest, other than a security
interest, in farm products that meets all of the following
conditions:
(A) It secures payment or performance of an obligation for either
of the following:
(i) Goods or services furnished in connection with a debtor's
farming operation.
(ii) Rent on real property leased by a debtor in connection with
its farming operation.
(B) It is created by statute in favor of a person that does either
of the following:
(i) In the ordinary course of its business furnished goods or
services to a debtor in connection with a debtor's farming operation.
(ii) Leased real property to a debtor in connection with the
debtor's farming operation.
(C) Its effectiveness does not depend on the person's possession
of the personal property.
(6) "As-extracted collateral" means either of the following:
(A) Oil, gas, or other minerals that are subject to a security
interest that does both of the following:
(i) Is created by a debtor having an interest in the minerals
before extraction.
(ii) Attaches to the minerals as extracted.
(B) Accounts arising out of the sale at the wellhead or minehead
of oil, gas, or other minerals in which the debtor had an interest
before extraction.
(7) "Authenticate" means to do either of the following:
(A) To sign.
(B) To execute or otherwise adopt a symbol, or encrypt or
similarly process a record in whole or in part, with the present
intent of the authenticating person to identify the person and adopt
or accept a record.
(8) "Bank" means an organization that is engaged in the business
of banking. The term includes savings banks, savings and loan
associations, credit unions, and trust companies.
(9) "Cash proceeds" means proceeds that are money, checks, deposit
accounts, or the like.
(10) "Certificate of title" means a certificate of title with
respect to which a statute provides for the security interest in
question to be indicated on the certificate as a condition or result
of the security interest's obtaining priority over the rights of a
lien creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that evidence both
a monetary obligation and a security interest in specific goods, a
security interest in specific goods and software used in the goods,
or a lease of specific goods. The term does not include charters or
other contracts involving the use or hire of a vessel. If a
transaction is evidenced both by a security agreement or lease and by
an instrument or series of instruments, the group of records taken
together constitutes chattel paper.
(12) "Collateral" means the property subject to a security
interest or agricultural lien. The term includes all of the
following:
(A) Proceeds to which a security interest attaches.
(B) Accounts, chattel paper, payment intangibles, and promissory
notes that have been sold.
(C) Goods that are the subject of a consignment.
(13) "Commercial tort claim" means a claim arising in tort with
respect to which either of the following conditions is satisfied:
(A) The claimant is an organization.
(B) The claimant is an individual and both of the following
conditions are satisfied regarding the claim:
(i) It arose in the course of the claimant's business or
profession.
(ii) It does not include damages arising out of personal injury to
or the death of an individual.
(14) "Commodity account" means an account maintained by a
commodity intermediary in which a commodity contract is carried for a
commodity customer.
(15) "Commodity contract" means a commodity futures contract, an
option on a commodity futures contract, a commodity option, or
another contract if the contract or option is either of the
following:
(A) Traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to
federal commodities laws.
(B) Traded on a foreign commodity board of trade, exchange, or
market, and is carried on the books of a commodity intermediary for a
commodity customer.
(16) "Commodity customer" means a person for which a commodity
intermediary carries a commodity contract on its books.
(17) "Commodity intermediary" means a person that is either of the
following:
(A) Is registered as a futures commission merchant under federal
commodities law.
(B) In the ordinary course of its business provides clearance or
settlement services for a board of trade that has been designated as
a contract market pursuant to federal commodities law.
(18) "Communicate" means to do either of the following:
(A) To send a written or other tangible record.
(B) To transmit a record by any means agreed upon by the persons
sending and receiving the record.
(C) In the case of transmission of a record to or by a filing
office, to transmit a record by any means prescribed by filing-office
rule.
(19) "Consignee" means a merchant to which goods are delivered in
a consignment.
(20) "Consignment" means a transaction, regardless of its form, in
which a person delivers goods to a merchant for the purpose of sale
and all of the following conditions are satisfied:
(A) The merchant satisfies all of the following conditions:
(i) He or she deals in goods of that kind under a name other than
the name of the person making delivery.
(ii) He or she is not an auctioneer.
(iii) He or she is not generally known by its creditors to be
substantially engaged in selling the goods of others.
(B) With respect to each delivery, the aggregate value of the
goods is one thousand dollars ($1,000) or more at the time of
delivery.
(C) The goods are not consumer goods immediately before delivery.
(D) The transaction does not create a security interest that
secures an obligation.
(21) "Consignor" means a person that delivers goods to a consignee
in a consignment.
(22) "Consumer debtor" means a debtor in a consumer transaction.
(23) "Consumer goods" means goods that are used or bought for use
primarily for personal, family, or household purposes.
(24) "Consumer-goods transaction" means a consumer transaction in
which both of the following conditions are satisfied:
(A) An individual incurs an obligation primarily for personal,
family, or household purposes.
(B) A security interest in consumer goods secures the obligation.
(25) "Consumer obligor" means an obligor who is an individual and
who incurred the obligation as part of a transaction entered into
primarily for personal, family, or household purposes.
(26) "Consumer transaction" means a transaction in which (i) an
individual incurs an obligation primarily for personal, family, or
household purposes, (ii) a security interest secures the obligation,
and (iii) the collateral is held or acquired primarily for personal,
family, or household purposes. The term includes consumer-goods
transactions.
(27) "Continuation statement" means an amendment of a financing
statement which does both of the following:
(A) Identifies, by its file number, the initial financing
statement to which it relates.
(B) Indicates that it is a continuation statement for, or that it
is filed to continue the effectiveness of, the identified financing
statement.
(28) "Debtor" means any of the following:
(A) A person having an interest, other than a security interest or
other lien, in the collateral, whether or not the person is an
obligor.
(B) A seller of accounts, chattel paper, payment intangibles, or
promissory notes.
(C) A consignee.
(29) "Deposit account" means a demand, time, savings, passbook, or
similar account maintained with a bank. The term does not include
investment property or accounts evidenced by an instrument.
(30) "Document" means a document of title or a receipt of the type
described in subdivision (2) of Section 7201.
(31) "Electronic chattel paper" means chattel paper evidenced by a
record or records consisting of information stored in an electronic
medium.
(32) "Encumbrance" means a right, other than an ownership
interest, in real property. The term includes mortgages and other
liens on real property.
(33) "Equipment" means goods other than inventory, farm products,
or consumer goods.
(34) "Farm products" means goods, other than standing timber, with
respect to which the debtor is engaged in a farming operation and
which are any of the following:
(A) Crops grown, growing, or to be grown, including both of the
following:
(i) Crops produced on trees, vines, and bushes.
(ii) Aquatic goods produced in aquacultural operations.
(B) Livestock, born or unborn, including aquatic goods produced in
aquacultural operations.
(C) Supplies used or produced in a farming operation.
(D) Products of crops or livestock in their unmanufactured states.
(35) "Farming operation" means raising, cultivating, propagating,
fattening, grazing, or any other farming, livestock, or aquacultural
operation.
(36) "File number" means the number assigned to an initial
financing statement pursuant to subdivision (a) of Section 9519.
(37) "Filing office" means an office designated in Section 9501 as
the place to file a financing statement.
(38) "Filing-office rule" means a rule adopted pursuant to Section
9526.
(39) "Financing statement" means a record or records composed of
an initial financing statement and any filed record relating to the
initial financing statement.
(40) "Fixture filing" means the filing of a financing statement
covering goods that are or are to become fixtures and satisfying
subdivisions (a) and (b) of Section 9502. The term includes the
filing of a financing statement covering goods of a transmitting
utility which are or are to become fixtures.
(41) "Fixtures" means goods that have become so related to
particular real property that an interest in them arises under real
property law.
(42) "General intangible" means any personal property, including
things in action, other than accounts, chattel paper, commercial tort
claims, deposit accounts, documents, goods, instruments, investment
property, letter-of-credit rights, letters of credit, money, and oil,
gas, or other minerals before extraction. The term includes payment
intangibles and software.
(43) "Good faith" means honesty in fact and the observance of
reasonable commercial standards of fair dealing.
(44) "Goods" means all things that are movable when a security
interest attaches. The term includes (i) fixtures, (ii) standing
timber that is to be cut and removed under a conveyance or contract
for sale, (iii) the unborn young of animals, (iv) crops grown,
growing, or to be grown, even if the crops are produced on trees,
vines, or bushes, and (v) manufactured homes. The term also includes
a computer program embedded in goods and any supporting information
provided in connection with a transaction relating to the program if
(i) the program is associated with the goods in such a manner that it
customarily is considered part of the goods, or (ii) by becoming the
owner of the goods, a person acquires a right to use the program in
connection with the goods. The term does not include a computer
program embedded in goods that consist solely of the medium with
which the program is embedded. The term also does not include
accounts, chattel paper, commercial tort claims, deposit accounts,
documents, general intangibles, instruments, investment property,
letter-of-credit rights, letters of credit, money, or oil, gas, or
other minerals before extraction.
(45) "Governmental unit" means a subdivision, agency, department,
county, parish, municipality, or other unit of the government of the
United States, a state, or a foreign country. The term includes an
organization having a separate corporate existence if the
organization is eligible to issue debt on which interest is exempt
from income taxation under the laws of the United States.
(46) "Health care insurance receivable" means an interest in or
claim under a policy of insurance which is a right to payment of a
monetary obligation for health care goods or services provided.
(47) "Instrument" means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary
obligation, is not itself a security agreement or lease, and is of a
type that in ordinary course of business is transferred by delivery
with any necessary indorsement or assignment. The term does not
include (i) investment property, (ii) letters of credit, or (iii)
writings that evidence a right to payment arising out of the use of a
credit or charge card or information contained on or for use with
the card.
(48) "Inventory" means goods, other than farm products, which are
any of the following:
(A) Leased by a person as lessor.
(B) Held by a person for sale or lease or to be furnished under a
contract of service.
(C) Furnished by a person under a contract of service.
(D) Consist of raw materials, work in process, or materials used
or consumed in a business.
(49) "Investment property" means a security, whether certificated
or uncertificated, security entitlement, securities account,
commodity contract, or commodity account.
(50) "Jurisdiction of organization," with respect to a registered
organization, means the jurisdiction under whose law the organization
is organized.
(51) "Letter-of-credit right" means a right to payment and
performance under a letter of credit, whether or not the beneficiary
has demanded or is at the time entitled to demand payment or
performance. The term does not include the right of a beneficiary to
demand payment or performance under a letter of credit.
(52) (A) "Lien creditor" means either of the following:
(i) A creditor that has acquired a lien on the property involved
by attachment, levy, or the like.
(ii) An assignee for benefit of creditors from the time of
assignment.
(iii) A trustee in bankruptcy from the date of the filing of the
petition.
(iv) A receiver in equity from the time of appointment.
(B) "Lien creditor" does not include a creditor who by filing a
notice with the Secretary of State has acquired only an attachment or
judgment lien on personal property, or both.
(53) "Manufactured home" means a structure, transportable in one
or more sections, which, in the traveling mode, is eight body-feet or
more in width or 40 body-feet or more in length, or, when erected on
site, is 320 or more square feet, and which is built on a permanent
chassis and designed to be used as a dwelling with or without a
permanent foundation when connected to the required utilities, and
includes the plumbing, heating, air-conditioning, and electrical
systems contained therein. The term includes any structure that
meets all of the requirements of this paragraph except the size
requirements and with respect to which the manufacturer voluntarily
files a certification required by the United States Secretary of
Housing and Urban Development and complies with the standards
established under Title 42 of the United States Code.
(54) "Manufactured home transaction" means a secured transaction
that satisfies either of the following:
(A) It creates a purchase money security interest in a
manufactured home, other than a manufactured home held as inventory.
(B) It is a secured transaction in which a manufactured home,
other than a manufactured home held as inventory, is the primary
collateral.
(55) "Mortgage" means a consensual interest in real property,
including fixtures, which secures payment or performance of an
obligation.
(56) "New debtor" means a person that becomes bound as debtor
under subdivision (d) of Section 9203 by a security agreement
previously entered into by another person.
(57) "New value" means (i) money, (ii) money's worth in property,
services, or new credit, or (iii) release by a transferee of an
interest in property previously transferred to the transferee. The
term does not include an obligation substituted for another
obligation.
(58) "Noncash proceeds" means proceeds other than cash proceeds.
(59) "Obligor" means a person that, with respect to an obligation
secured by a security interest in or an agricultural lien on the
collateral, (i) owes payment or other performance of the obligation,
(ii) has provided property other than the collateral to secure
payment or other performance of the obligation, or (iii) is otherwise
accountable in whole or in part for payment or other performance of
the obligation. The term does not include issuers or nominated
persons under a letter of credit.
(60) "Original debtor" means a person that, as debtor, entered
into a security agreement to which a new debtor has become bound
under subdivision (d) of Section 9203.
(61) "Payment intangible" means a general intangible under which
the account debtor's principal obligation is a monetary obligation.
(62) "Person related to," with respect to an individual, means any
of the following:
(A) The spouse of the individual.
(B) A brother, brother-in-law, sister, or sister-in-law of the
individual.
(C) An ancestor or lineal descendant of the individual or the
individual's spouse.
(D) Any other relative, by blood or marriage, of the individual or
the individual's spouse who shares the same home with the
individual.
(63) "Person related to," with respect to an organization, means
any of the following:
(A) A person directly or indirectly controlling, controlled by, or
under common control with the organization.
(B) An officer or director of, or a person performing similar
functions with respect to, the organization.
(C) An officer or director of, or a person performing similar
functions with respect to, a person described in subparagraph (A).
(D) The spouse of an individual described in subparagraph (A),
(B), or (C).
(E) An individual who is related by blood or marriage to an
individual described in subparagraph (A), (B), (C), or (D) and shares
the same home with the individual.
(64) "Proceeds" means any of the following property:
(A) Whatever is acquired upon the sale, lease, license, exchange,
or other disposition of collateral.
(B) Whatever is collected on, or distributed on account of,
collateral.
(C) Rights arising out of collateral.
(D) To the extent of the value of collateral, claims arising out
of the loss, nonconformity, or interference with the use of, defects
or infringement of rights in, or damage to, the collateral.
(E) To the extent of the value of collateral and to the extent
payable to the debtor or the secured party, insurance payable by
reason of the loss or nonconformity of, defects or infringement of
rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that evidences a
promise to pay a monetary obligation, does not evidence an order to
pay, and does not contain an acknowledgment by a bank that the bank
has received for deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a secured party
that includes the terms on which the secured party is willing to
accept collateral in full or partial satisfaction of the obligation
it secures pursuant to Sections 9620, 9621, and 9622.
(67) "Public finance transaction" means a secured transaction in
connection with which all of the following conditions are satisfied:
(A) Debt securities are issued.
(B) All or a portion of the securities issued have an initial
stated maturity of at least 20 years.
(C) The debtor, obligor, secured party, account debtor or other
person obligated on collateral, assignor or assignee of a secured
obligation, or assignor or assignee of a security interest is a state
or a governmental unit of a state.
(68) "Pursuant to commitment," with respect to an advance made or
other value given by a secured party, means pursuant to the secured
party's obligation, whether or not a subsequent event of default or
other event not within the secured party's control has relieved or
may relieve the secured party from its obligation.
(69) "Record," except as used in "for record," "of record,"
"record or legal title," and "record owner," means information that
is inscribed on a tangible medium or which is stored in an electronic
or other medium and is retrievable in perceivable form.
(70) "Registered organization" means an organization organized
solely under the law of a single state or the United States and as to
which the state or the United States must maintain a public record
showing the organization to have been organized.
(71) "Secondary obligor" means an obligor to the extent that
either of the following conditions are satisfied:
(A) The obligor's obligation is secondary.
(B) The obligor has a right of recourse with respect to an
obligation secured by collateral against the debtor, another obligor,
or property of either.
(72) "Secured party" means any of the following:
(A) A person in whose favor a security interest is created or
provided for under a security agreement, whether or not any
obligation to be secured is outstanding.
(B) A person that holds an agricultural lien.
(C) A consignor.
(D) A person to which accounts, chattel paper, payment
intangibles, or promissory notes have been sold.
(E) A trustee, indenture trustee, agent, collateral agent, or
other representative in whose favor a security interest or
agricultural lien is created or provided for.
(F) A person that holds a security interest arising under Section
2401, 2505, 4210, or 5118, or under subdivision (3) of Section 2711
or subdivision (5) of Section 10508.
(73) "Security agreement" means an agreement that creates or
provides for a security interest.
(74) "Send," in connection with a record or notification, means to
do either of the following:
(A) To deposit in the mail, deliver for transmission, or transmit
by any other usual means of communication, with postage or cost of
transmission provided for, addressed to any address reasonable under
the circumstances.
(B) To cause the record or notification to be received within the
time that it would have been received if properly sent under
subparagraph (A).
(75) "Software" means a computer program and any supporting
information provided in connection with a transaction relating to the
program. The term does not include a computer program that is
included in the definition of goods.
(76) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
(77) "Supporting obligation" means a letter-of-credit right or
secondary obligation that supports the payment or performance of an
account, chattel paper, document, general intangible, instrument, or
investment property.
(78) "Tangible chattel paper" means chattel paper evidenced by a
record or records consisting of information that is inscribed on a
tangible medium.
(79) "Termination statement" means an amendment of a financing
statement that does both of the following:
(A) Identifies, by its file number, the initial financing
statement to which it relates.
(B) Indicates either that it is a termination statement or that
the identified financing statement is no longer effective.
(80) "Transmitting utility" means a person primarily engaged in
the business of any of the following:
(A) Operating a railroad, subway, street railway, or trolley bus.
(B) Transmitting communications electrically, electromagnetically,
or by light.
(C) Transmitting goods by pipeline or sewer.
(D) Transmitting or producing and transmitting electricity, steam,
gas, or water.
(b) The following definitions in other divisions apply to this
division:
"Applicant" Section 5102.
"Beneficiary" Section 5102.
"Broker" Section 8102.
"Certificated security" Section 8102.
"Check" Section 3104.
"Clearing corporation" Section 8102.
"Contract for sale" Section 2106.
"Customer" Section 4104.
"Entitlement holder" Section 8102.
"Financial asset" Section 8102.
"Holder in due course" Section 3302.
"Issuer" (with respect to a letter of credit or
letter-of-credit right) Section 5102.
"Issuer" (with respect to a security) Section 8201.
"Lease" Section 10103.
"Lease agreement" Section 10103.
"Lease contract" Section 10103.
"Leasehold interest" Section 10103.
"Lessee" Section 10103.
"Lessee in ordinary course of business" Section 10103.
"Lessor" Section 10103.
"Lessor's residual interest" Section 10103.
"Letter of credit" Section 5102.
"Merchant" Section 2104.
"Negotiable instrument" Section 3104.
"Nominated person" Section 5102.
"Note" Section 3104.
"Proceeds of a letter of credit" Section 5114.
"Prove"
Section 3103.
"Sale" Section 2106.
"Securities account" Section 8501.
"Securities intermediary" Section 8102.
"Security" Section 8102.
"Security certificate" Section 8102.
"Security entitlement" Section 8102.
"Uncertificated security" Section 8102.
(c) Division 1 (commencing with Section 1101) contains general
definitions and principles of construction and interpretation
applicable throughout this division.
9103. (a) In this section:
(1) "Purchase money collateral" means goods or software that
secures a purchase money obligation incurred with respect to that
collateral.
(2) "Purchase money obligation" means an obligation of an obligor
incurred as all or part of the price of the collateral or for value
given to enable the debtor to acquire rights in or the use of the
collateral if the value is in fact so used.
(b) A security interest in goods is a purchase money security
interest as follows:
(1) To the extent that the goods are purchase money collateral
with respect to that security interest.
(2) If the security interest is in inventory that is or was
purchase money collateral, also to the extent that the security
interest secures a purchase money obligation incurred with respect to
other inventory in which the secured party holds or held a purchase
money security interest.
(3) Also to the extent that the security interest secures a
purchase money obligation incurred with respect to software in which
the secured party holds or held a purchase money security interest.
(c) A security interest in software is a purchase money security
interest to the extent that the security interest also secures a
purchase money obligation incurred with respect to goods in which the
secured party holds or held a purchase money security interest if
both of the following conditions are satisfied:
(1) The debtor acquired its interest in the software in an
integrated transaction in which it acquired an interest in the goods.
(2) The debtor acquired its interest in the software for the
principal purpose of using the software in the goods.
(d) The security interest of a consignor in goods that are the
subject of a consignment is a purchase money security interest in
inventory.
(e) In a transaction other than a consumer-goods transaction, if
the extent to which a security interest is a purchase money security
interest depends on the application of a payment to a particular
obligation, the payment must be applied as follows:
(1) In accordance with any reasonable method of application to
which the parties agree.
(2) In the absence of the parties' agreement to a reasonable
method, in accordance with any intention of the obligor manifested at
or before the time of payment.
(3) In the absence of an agreement to a reasonable method and a
timely manifestation of the obligor's intention, in the following
order:
(A) To obligations that are not secured.
(B) If more than one obligation is secured, to obligations secured
by purchase money security interests in the order in which those
obligations were incurred.
(f) In a transaction other than a consumer-goods transaction, a
purchase money security interest does not lose its status as such,
even if any of the following conditions are satisfied:
(1) The purchase money collateral also secures an obligation that
is not a purchase money obligation.
(2) Collateral that is not purchase money collateral also secures
the purchase money obligation.
(3) The purchase money obligation has been renewed, refinanced,
consolidated, or restructured.
(g) In a transaction other than a consumer-goods transaction, a
secured party claiming a purchase money security interest has the
burden of establishing the extent to which the security interest is a
purchase money security interest.
(h) The limitation of the rules in subdivisions (e), (f), and (g)
to transactions other than consumer-goods transactions is intended to
leave to the court the determination of the proper rules in
consumer-goods transactions. The court may not infer from that
limitation the nature of the proper rule in consumer-goods
transactions and may continue to apply established approaches.
9104. (a) A secured party has control of a deposit account if any
of the following conditions is satisfied:
(1) The secured party is the bank with which the deposit account
is maintained.
(2) The debtor, secured party, and bank have agreed in an
authenticated record that the bank will comply with instructions
originated by the secured party directing disposition of the funds in
the account without further consent by the debtor.
(3) The secured party becomes the bank's customer with respect to
the deposit account.
(b) A secured party that has satisfied subdivision (a) has
control, even if the debtor retains the right to direct the
disposition of funds from the deposit account.
9105. A secured party has control of electronic chattel paper if
the record or records comprising the chattel paper are created,
stored, and assigned in such a manner that each of the following
conditions is satisfied:
(1) A single authoritative copy of the record or records exists
which is unique, identifiable, and, except as otherwise provided in
paragraphs (4), (5), and (6), unalterable.
(2) The authoritative copy identifies the secured party as the
assignee of the record or records.
(3) The authoritative copy is communicated to and maintained by
the secured party or its designated custodian.
(4) Copies or revisions that add or change an identified assignee
of the authoritative copy can be made only with the participation of
the secured party.
(5) Each copy of the authoritative copy and any copy of a copy is
readily identifiable as a copy that is not the authoritative copy.
(6) Any revision of the authoritative copy is readily identifiable
as an authorized or unauthorized revision.
9106. (a) A person has control of a certificated security,
uncertificated security, or security entitlement as provided in
Section 8106.
(b) A secured party has control of a commodity contract if either
of the following conditions is satisfied:
(1) The secured party is the commodity intermediary with which the
commodity contract is carried.
(2) The commodity customer, secured party, and commodity
intermediary have agreed that the commodity intermediary will apply
any value distributed on account of the commodity contract as
directed by the secured party without further consent by the
commodity customer.
(c) A secured party having control of all security entitlements or
commodity contracts carried in a securities account or commodity
account has control over the securities account or commodity account.
9107. A secured party has control of a letter-of-credit right to
the extent of any right to payment or performance by the issuer or
any nominated person if the issuer or nominated person has consented
to an assignment of proceeds of the letter of credit under
subdivision (c) of Section 5114 or otherwise applicable law or
practice.
9108. (a) Except as otherwise provided in subdivisions (c), (d),
and (e), a description of personal or real property is sufficient,
whether or not it is specific, if it reasonably identifies what is
described.
(b) Except as otherwise provided in subdivision (d), a description
of collateral reasonably identifies the collateral if it identifies
the collateral by any of the following:
(1) Specific listing.
(2) Category.
(3) Except as otherwise provided in subdivision (e), a type of
collateral defined in the Uniform Commercial Code.
(4) Quantity.
(5) Computational or allocational formula or procedure.
(6) Except as otherwise provided in subdivision (c), any other
method, if the identity of the collateral is objectively
determinable.
(c) A description of collateral as "all the debtor's assets" or
"all the debtor's personal property" or using words of similar import
does not reasonably identify the collateral.
(d) Except as otherwise provided in subdivision (e), a description
of a security entitlement, securities account, or commodity account
is sufficient if it describes either of the following:
(1) The collateral by those terms or as investment property.
(2) The underlying financial asset or commodity contract.
(e) A description only by type of collateral defined in the
Uniform Commercial Code is an insufficient description of either of
the following:
(1) A commercial tort claim.
(2) In a consumer transaction, consumer goods, a security
entitlement, a securities account, or a commodity account.
(f) A description of investment property collateral also shall
meet the requirements of Section 1799.103 of the Civil Code. A
description of consumer goods also shall meet the requirements of
Section 1799.100 of the Civil Code.
9109. (a) Except as otherwise provided in subdivisions (c) and
(d), this division applies to each of the following:
(1) A transaction, regardless of its form, that creates a security
interest in personal property or fixtures by contract.
(2) An agricultural lien.
(3) A sale of accounts, chattel paper, payment intangibles, or
promissory notes.
(4) A consignment.
(5) A security interest arising under Section 2401 or 2505, or
under subdivision (3) of Section 2711, or subdivision (5) of Section
10508, as provided in Section 9110.
(6) A security interest arising under Section 4210 or 5118.
(b) The application of this division to a security interest in a
secured obligation is not affected by the fact that the obligation is
itself secured by a transaction or interest to which this division
does not apply.
(c) This division does not apply to the extent that any of the
following conditions is satisfied:
(1) A statute, regulation, or treaty of the United States preempts
this division.
(2) Another statute of this state expressly governs the creation,
perfection, priority, or enforcement of a security interest created
by this state or a governmental unit of this state.
(3) A statute of another state, a foreign country, or a
governmental unit of another state or a foreign country, other than a
statute generally applicable to security interests, expressly
governs creation, perfection, priority, or enforcement of a security
interest created by the state, country, or governmental unit.
(4) The rights of a transferee beneficiary or nominated person
under a letter of credit are independent and superior under Section
5114.
(d) This division does not apply to any of the following:
(1) A landlord's lien, other than an agricultural lien.
(2) A lien, other than an agricultural lien, given by statute or
other rule of law for services or materials, but Section 9333 applies
with respect to priority of the lien.
(3) An assignment of a claim for wages, salary, or other
compensation of an employee.
(4) A sale of accounts, chattel paper, payment intangibles, or
promissory notes as part of a sale of the business out of which they
arose.
(5) An assignment of accounts, chattel paper, payment intangibles,
or promissory notes which is for the purpose of collection only.
(6) An assignment of a right to payment under a contract to an
assignee that is also obligated to perform under the contract.
(7) An assignment of a single account, payment intangible, or
promissory note to an assignee in full or partial satisfaction of a
preexisting indebtedness.
(8) Any loan made by an insurance company pursuant to the
provisions of a policy or contract issued by it and upon the sole
security of the policy or contract.
(9) An assignment of a right represented by a judgment, other than
a judgment taken on a right to payment that was collateral.
(10) A right of recoupment or setoff, provided that both of the
following sections apply:
(A) Section 9340 applies with respect to the effectiveness of
rights of recoupment or setoff against deposit accounts.
(B) Section 9404 applies with respect to defenses or claims of an
account debtor.
(11) The creation or transfer of an interest in or lien on real
property, including a lease or rents thereunder, except to the extent
that provision is made for each of the following:
(A) Liens on real property in Sections 9203 and 9308.
(B) Fixtures in Section 9334.
(C) Fixture filings in Sections 9501, 9502, 9512, 9516, and 9519.
(D) Security agreements covering personal and real property in
Section 9604.
(12) An assignment of a claim arising in tort, other than a
commercial tort claim, but Sections 9315 and 9322 apply with respect
to proceeds and priorities in proceeds.
(13) An assignment of a deposit account in a consumer transaction,
but Sections 9315 and 9322 apply with respect to proceeds and
priorities in proceeds.
(14) Any security interest created by the assignment of the
benefits of any public construction contract under the Improvement
Act of 1911 (Division 7 (commencing with Section 5000), Streets and
Highways Code).
(15) Transition property, as defined in Section 840 of the Public
Utilities Code, except to the extent that the provisions of this
division are referred to in Article 5.5 (commencing with Section 840)
of Chapter 4 of Part 1 of Division 1 of the Public Utilities Code.
9110. A security interest arising under Section 2401 or 2505, or
under subdivision (3) of Section 2711, or subdivision (5) of Section
10508 is subject to this division. However, until the debtor obtains
possession of the goods, all of the following apply:
(1) The security interest is enforceable, even if paragraph (3) of
subdivision (b) of Section 9203 has not been satisfied.
(2) Filing is not required to perfect the security interest.
(3) The rights of the secured party after default by the debtor
are governed by Division 2 (commencing with Section 2101) or Division
10 (commencing with Section 10101).
(4) The security interest has priority over a conflicting security
interest created by the debtor.
CHAPTER 2. EFFECTIVENESS OF SECURITY AGREEMENT: ATTACHMENT OF
SECURITY INTEREST: RIGHTS OF PARTIES TO SECURITY AGREEMENT
9201. (a) Except as otherwise provided in the Uniform Commercial
Code, a security agreement is effective according to its terms
between the parties, against purchasers of the collateral, and
against creditors.
(b) A transaction subject to this division is subject to any
applicable rule of law which establishes a different rule for
consumers and Chapter 5 (commencing with Section 17200) of Part 2 of
Division 7 of the Business and Professions Code; Chapter 1
(commencing with Section 17500) of Part 3 of Division 7 of the
Business and Professions Code; Part 4 (commencing with Section 1738)
of Division 3 of the Civil Code; the Retail Installment Sales Act,
Chapter 1 (commencing with Section 1801) of Title 2 of Part 4 of
Division 3 of the Civil Code; the Automobile Sales Finance Act,
Chapter 2b (commencing with Section 2981) of Title 14 of Part 4 of
Division 3 of the Civil Code; the Industrial Loan Law, Division 7
(commencing with Section 18000) of the Financial Code; the Pawnbroker
Law, Division 8 (commencing with Section 21000) of the Financial
Code; the California Finance Lenders Law, Division 9 (commencing with
Section 22000) of the Financial Code; and the
Mobilehomes-Manufactured Housing Act of 1980, Part 2 (commencing with
Section 18000) of Division 13 of the Health and Safety Code.
(c) In case of conflict between this division and a rule of law,
statute, or regulation described in subdivision (b), the rule of law,
statute, or regulation controls. Failure to comply with a statute
or regulation described in subdivision (b) has only the effect the
statute or regulation specifies.
(d) This division does not do either of the following:
(1) Validate any rate, charge, agreement, or practice that
violates a rule of law, statute, or regulation described in
subdivision (b).
(2) Extend the application of the rule of law, statute, or
regulation to a transaction not otherwise subject to it.
9202. Except as otherwise provided with respect to consignments
or sales of accounts, chattel paper, payment intangibles, or
promissory notes, the provisions of this article with regard to
rights and obligations apply whether title to collateral is in the
secured party or the debtor.
9203. (a) A security interest attaches to collateral when it
becomes enforceable against the debtor with respect to the
collateral, unless an agreement expressly postpones the time of
attachment.
(b) Except as otherwise provided in subdivisions (c) to (i),
inclusive, a security interest is enforceable against the debtor and
third parties with respect to the collateral only if each of the
following conditions is satisfied:
(1) Value has been given.
(2) The debtor has rights in the collateral or the power to
transfer rights in the collateral to a secured party.
(3) One of the following conditions is met:
(A) The debtor has authenticated a security agreement that
provides a description of the collateral and, if the security
interest covers timber to be cut, a description of the land
concerned.
(B) The collateral is not a certificated security and is in the
possession of the secured party under Section 9313 pursuant to the
debtor's security agreement.
(C) The collateral is a certificated security in registered form
and the security certificate has been delivered to the secured party
under Section 8301 pursuant to the debtor's security agreement.
(D) The collateral is deposit accounts, electronic chattel paper,
investment property, or letter-of-credit rights, and the secured
party has control under Section 9104, 9105, 9106, or 9107 pursuant to
the debtor's security agreement.
(c) Subdivision (b) is subject to Section 4210 on the security
interest of a collecting bank, Section 5118 on the security interest
of a letter-of-credit issuer or nominated person, Section 9110 on a
security interest arising under Division 2 (commencing with Section
2101) or Division 10 (commencing with Section 10101), and Section
9206 on security interests in investment property.
(d) A person becomes bound as debtor by a security agreement
entered into by another person if, by operation of law other than
this division or by contract, either of the following conditions is
satisfied:
(1) The security agreement becomes effective to create a security
interest in the person's property.
(2) The person becomes generally obligated for the obligations of
the other person, including the obligation secured under the security
agreement, and acquires or succeeds to all or substantially all of
the assets of the other person.
(e) If a new debtor becomes bound as debtor by a security
agreement entered into by another person both of the following apply:
(1) The agreement satisfies paragraph (3) of subdivision (b) with
respect to existing or after-acquired property of the new debtor to
the extent the property is described in the agreement.
(2) Another agreement is not necessary to make a security interest
in the property enforceable.
(f) The attachment of a security interest in collateral gives the
secured party the rights to proceeds provided by Section 9315 and is
also attachment of a security interest in a supporting obligation for
the collateral.
(g) The attachment of a security interest in a right to payment or
performance secured by a security interest or other lien on personal
or real property is also attachment of a security interest in the
security interest, mortgage, or other lien.
(h) The attachment of a security interest in a securities account
is also attachment of a security interest in the security
entitlements carried in the securities account.
(i) The attachment of a security interest in a commodity account
is also attachment of a security interest in the commodity contracts
carried in the commodity account.
9204. (a) Except as otherwise provided in subdivision (b), a
security agreement may create or provide for a security interest in
after-acquired collateral.
(b) A security interest does not attach under a term constituting
an after-acquired property clause to either of the following:
(1) Consumer goods, other than an accession when given as
additional security, unless the debtor acquires rights in them within
10 days after the secured party gives value.
(2) A commercial tort claim.
(c) A security agreement may provide that collateral secures, or
that accounts, chattel paper, payment intangibles, or promissory
notes are sold in connection with, future advances or other value,
whether or not the advances or value are given pursuant to
commitment.
9205. (a) A security interest is not invalid or fraudulent
against creditors solely because either of the following conditions
is satisfied:
(1) The debtor has the right or ability to do any of the
following:
(A) Use, commingle, or dispose of all or part of the collateral,
including returned or repossessed goods.
(B) Collect, compromise, enforce, or otherwise deal with
collateral.
(C) Accept the return of collateral or make repossessions.
(D) Use, commingle, or dispose of proceeds.
(2) The secured party fails to require the debtor to account for
proceeds or replace collateral.
(b) This section does not relax the requirements of possession if
attachment, perfection, or enforcement of a security interest depends
upon possession of the collateral by the secured party.
9206. (a) A security interest in favor of a securities
intermediary attaches to a person's security entitlement if both of
the following conditions are satisfied:
(1) The person buys a financial asset through the securities
intermediary in a transaction in which the person is obligated to pay
the purchase price to the securities intermediary at the time of the
purchase.
(2) The securities intermediary credits the financial asset to the
buyer's securities account before the buyer pays the securities
intermediary.
(b) The security interest described in subdivision (a) secures the
person's obligation to pay for the financial asset.
(c) A security interest in favor of a person that delivers a
certificated security or other financial asset represented by a
writing attaches to the security or other financial asset if both of
the following conditions are satisfied:
(1) The security or other financial asset satisfies both of the
following:
(A) In the ordinary course of business it is transferred by
delivery with any necessary endorsement or assignment.
(B) It is delivered under an agreement between persons in the
business of dealing with those securities or financial assets.
(2) The agreement calls for delivery against payment.
(d) The security interest described in subdivision (c) secures the
obligation to make payment for the delivery.
9207. (a) Except as otherwise provided in subdivision (d), a
secured party shall use reasonable care in the custody and
preservation of collateral in the secured party's possession. In the
case of chattel paper or an instrument, reasonable care includes
taking necessary steps to preserve rights against prior parties
unless otherwise agreed.
(b) Except as otherwise provided in subdivision (d), if a secured
party has possession of collateral all of the following apply:
(1) Reasonable expenses, including the cost of insurance and
payment of taxes or other charges, incurred in the custody,
preservation, use, or operation of the collateral are chargeable to
the debtor and are secured by the collateral.
(2) The risk of accidental loss or damage is on the debtor to the
extent of a deficiency in any effective insurance coverage.
(3) The secured party shall keep the collateral identifiable, but
fungible collateral may be commingled.
(4) The secured party may use or operate the collateral for any of
the following purposes:
(A) For the purpose of preserving the collateral or its value.
(B) As permitted by an order of a court having competent
jurisdiction.
(C) Except in the case of consumer goods, in the manner and to the
extent agreed by the debtor.
(c) Except as otherwise provided in subdivision (d), a secured
party having possession of collateral or control of collateral under
Section 9104, 9105, 9106, or 9107 may or shall, as the case may be,
do all of the following:
(1) May hold as additional security any proceeds, except money or
funds, received from the collateral.
(2) Shall apply money or funds received from the collateral to
reduce the secured obligation, unless remitted to the debtor.
(3) May create a security interest in the collateral.
(d) If the secured party is a buyer of accounts, chattel paper,
payment intangibles, or promissory notes or a consignor both of the
following apply:
(1) Subdivision (a) does not apply unless the secured party is
entitled under an agreement to either of the following:
(A) To charge back uncollected collateral.
(B) Otherwise to full or limited recourse against the debtor or a
secondary obligor based on the nonpayment or other default of an
account debtor or other obligor on the collateral.
(2) Subdivisions (b) and (c) do not apply.
9208. (a) This section applies to cases in which there is no
outstanding secured obligation and the secured party is not committed
to make advances, incur obligations, or otherwise give value.
(b) Within 10 days after receiving an authenticated demand by the
debtor all of the following apply:
(1) A secured party having control of a deposit account under
paragraph (2) of subdivision (a) of Section 9104 shall send to the
bank with which the deposit account is maintained an authenticated
statement that releases the bank from any further obligation to
comply with instructions originated by the secured party.
(2) A secured party having control of a deposit account under
paragraph (3) of subdivision (a) of Section 9104 shall do either of
the following:
(A) Pay the debtor the balance on deposit in the deposit account.
(B) Transfer the balance on deposit into a deposit account in the
debtor's name.
(3) A
secured party, other than a buyer, having control of electronic
chattel paper under Section 9105 shall do all of the following:
(A) Communicate the authoritative copy of the electronic chattel
paper to the debtor or its designated custodian.
(B) If the debtor designates a custodian that is the designated
custodian with which the authoritative copy of the electronic chattel
paper is maintained for the secured party, communicate to the
custodian an authenticated record releasing the designated custodian
from any further obligation to comply with instructions originated by
the secured party and instructing the custodian to comply with
instructions originated by the debtor.
(C) Take appropriate action to enable the debtor or its designated
custodian to make copies of or revisions to the authoritative copy
which add or change an identified assignee of the authoritative copy
without the consent of the secured party.
(4) A secured party having control of investment property under
paragraph (2) of subdivision (d) of Section 8106 or under subdivision
(b) of Section 9106 shall send to the securities intermediary or
commodity intermediary with which the security entitlement or
commodity contract is maintained an authenticated record that
releases the securities intermediary or commodity intermediary from
any further obligation to comply with entitlement orders or
directions originated by the secured party.
(5) A secured party having control of a letter-of-credit right
under Section 9107 shall send to each person having an unfulfilled
obligation to pay or deliver proceeds of the letter of credit to the
secured party an authenticated release from any further obligation to
pay or deliver proceeds of the letter of credit to the secured
party.
9209. (a) Except as otherwise provided in subdivision (c), this
section applies if both of the following conditions are satisfied:
(1) There is no outstanding secured obligation.
(2) The secured party is not committed to make advances, incur
obligations, or otherwise give value.
(b) Within 10 days after receiving an authenticated demand by the
debtor, a secured party shall send to an account debtor that has
received notification of an assignment to the secured party as
assignee under subdivision (a) of Section 9406 an authenticated
record that releases the account debtor from any further obligation
to the secured party.
(c) This section does not apply to an assignment constituting the
sale of an account, chattel paper, or payment intangible.
9210. (a) In this section:
(1) "Request" means a record of a type described in paragraph (2),
(3), or (4).
(2) "Request for an accounting" means a record authenticated by a
debtor requesting that the recipient provide an accounting of the
unpaid obligations secured by collateral and reasonably identifying
the transaction or relationship that is the subject of the request.
(3) "Request regarding a list of collateral" means a record
authenticated by a debtor requesting that the recipient approve or
correct a list of what the debtor believes to be the collateral
securing an obligation and reasonably identifying the transaction or
relationship that is the subject of the request.
(4) "Request regarding a statement of account" means a record
authenticated by a debtor requesting that the recipient approve or
correct a statement indicating what the debtor believes to be the
aggregate amount of unpaid obligations secured by collateral as of a
specified date and reasonably identifying the transaction or
relationship that is the subject of the request.
(b) Subject to subdivisions (c), (d), (e), and (f), a secured
party, other than a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor, shall comply with a
request within 14 days after receipt as follows:
(1) In the case of a request for an accounting, by authenticating
and sending to the debtor an accounting.
(2) In the case of a request regarding a list of collateral or a
request regarding a statement of account, by authenticating and
sending to the debtor an approval or correction.
(c) A secured party that claims a security interest in all of a
particular type of collateral owned by the debtor may comply with a
request regarding a list of collateral by sending to the debtor an
authenticated record including a statement to that effect within 14
days after receipt.
(d) A person that receives a request regarding a list of
collateral, claims no interest in the collateral when it receives the
request, and claimed an interest in the collateral at an earlier
time shall comply with the request within 14 days after receipt by
sending to the debtor an authenticated record that satisfies both of
the following conditions:
(1) It disclaims any interest in the collateral.
(2) If known to the recipient, it provides the name and mailing
address of any assignee of or successor to the recipient's security
interest in the collateral.
(e) A person that receives a request for an accounting or a
request regarding a statement of account, claims no interest in the
obligations when it receives the request, and claimed an interest in
the obligations at an earlier time shall comply with the request
within 14 days after receipt by sending to the debtor an
authenticated record that satisfies both of the following conditions:
(1) It disclaims any interest in the obligations.
(2) If known to the recipient, it provides the name and mailing
address of any assignee of or successor to the recipient's interest
in the obligations.
(f) A debtor is entitled without charge to one response to a
request under this section during any six-month period. The secured
party may require payment of a charge not exceeding twenty-five
dollars ($25) for each additional response.
CHAPTER 3. PERFECTION AND PRIORITY
9301. Except as otherwise provided in Sections 9303 to 9306,
inclusive, the following rules determine the law governing
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in collateral:
(1) Except as otherwise provided in this section, while a debtor
is located in a jurisdiction, the local law of that jurisdiction
governs perfection, the effect of perfection or nonperfection, and
the priority of a security interest in collateral.
(2) While collateral is located in a jurisdiction, the local law
of that jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a possessory security interest in
that collateral.
(3) Except as otherwise provided in paragraph (4), while
negotiable documents, goods, instruments, money, or tangible chattel
paper is located in a jurisdiction, the local law of that
jurisdiction governs all of the following:
(A) Perfection of a security interest in the goods by filing a
fixture filing.
(B) Perfection of a security interest in timber to be cut.
(C) The effect of perfection or nonperfection and the priority of
a nonpossessory security interest in the collateral.
(4) The local law of the jurisdiction in which the wellhead or
minehead is located governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
as-extracted collateral.
9302. While farm products are located in a jurisdiction, the
local law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of an agricultural lien
on the farm products.
9303. (a) This section applies to goods covered by a certificate
of title, even if there is no other relationship between the
jurisdiction under whose certificate of title the goods are covered
and the goods or the debtor.
(b) Goods become covered by a certificate of title when a valid
application for the certificate of title and the applicable fee are
delivered to the appropriate authority. Goods cease to be covered by
a certificate of title at the earlier of the time the certificate of
title ceases to be effective under the law of the issuing
jurisdiction or the time the goods become covered subsequently by a
certificate of title issued by another jurisdiction.
(c) The local law of the jurisdiction under whose certificate of
title the goods are covered governs perfection, the effect of
perfection or nonperfection, and the priority of a security interest
in goods covered by a certificate of title from the time the goods
become covered by the certificate of title until the goods cease to
be covered by the certificate of title.
9304. (a) The local law of a bank's jurisdiction governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in a deposit account maintained with
that bank.
(b) The following rules determine a bank's jurisdiction for
purposes of this chapter:
(1) If an agreement between the bank and the debtor governing the
deposit account expressly provides that a particular jurisdiction is
the bank's jurisdiction for purposes of this chapter, this division,
or the Uniform Commercial Code, that jurisdiction is the bank's
jurisdiction.
(2) If paragraph (1) does not apply and an agreement between the
bank and its customer governing the deposit account expressly
provides that the agreement is governed by the law of a particular
jurisdiction, that jurisdiction is the bank's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an
agreement between the bank and its customer governing the deposit
account expressly provides that the deposit account is maintained at
an office in a particular jurisdiction, that jurisdiction is the bank'
s jurisdiction.
(4) If none of the preceding paragraphs applies, the bank's
jurisdiction is the jurisdiction in which the office identified in an
account statement as the office serving the customer's account is
located.
(5) If none of the preceding paragraphs applies, the bank's
jurisdiction is the jurisdiction in which the chief executive office
of the bank is located.
9305. (a) Except as otherwise provided in subdivision (c), the
following rules apply:
(1) While a security certificate is located in a jurisdiction, the
local law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a security interest
in the certificated security represented thereby.
(2) The local law of the issuer's jurisdiction as specified in
subdivision (d) of Section 8110 governs perfection, the effect of
perfection or nonperfection, and the priority of a security interest
in an uncertificated security.
(3) The local law of the securities intermediary's jurisdiction as
specified in subdivision (e) of Section 8110 governs perfection, the
effect of perfection or nonperfection, and the priority of a
security interest in a security entitlement or securities account.
(4) The local law of the commodity intermediary's jurisdiction
governs perfection, the effect of perfection or nonperfection, and
the priority of a security interest in a commodity contract or
commodity account.
(b) The following rules determine a commodity intermediary's
jurisdiction for purposes of this chapter:
(1) If an agreement between the commodity intermediary and
commodity customer governing the commodity account expressly provides
that a particular jurisdiction is the commodity intermediary's
jurisdiction for purposes of this chapter, this division, or the
Uniform Commercial Code, that jurisdiction is the commodity
intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an agreement between the
commodity intermediary and commodity customer governing the commodity
account expressly provides that the agreement is governed by the law
of a particular jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an
agreement between the commodity intermediary and commodity customer
governing the commodity account expressly provides that the commodity
account is maintained at an office in a particular jurisdiction,
that jurisdiction is the commodity intermediary's jurisdiction.
(4) If none of the preceding paragraphs applies, the commodity
intermediary's jurisdiction is the jurisdiction in which the office
identified in an account statement as the office serving the
commodity customer's account is located.
(5) If none of the preceding paragraphs applies, the commodity
intermediary's jurisdiction is the jurisdiction in which the chief
executive office of the commodity intermediary is located.
(c) The local law of the jurisdiction in which the debtor is
located governs all of the following:
(1) Perfection of a security interest in investment property by
filing.
(2) Automatic perfection of a security interest in investment
property created by a broker or securities intermediary.
(3) Automatic perfection of a security interest in a commodity
contract or commodity account created by a commodity intermediary.
9306. (a) Subject to subdivision (c), the local law of the issuer'
s jurisdiction or a nominated person's jurisdiction governs
perfection, the effect of perfection or nonperfection, and the
priority of a security interest in a letter-of-credit right if the
issuer's jurisdiction or nominated person's jurisdiction is a state.
(b) For purposes of this chapter, an issuer's jurisdiction or
nominated person's jurisdiction is the jurisdiction whose law governs
the liability of the issuer or nominated person with respect to the
letter-of-credit right as provided in Section 5116.
(c) This section does not apply to a security interest that is
perfected only under subdivision (d) of Section 9308.
9307. (a) In this section, "place of business" means a place
where a debtor conducts its affairs.
(b) Except as otherwise provided in this section, the following
rules determine a debtor's location:
(1) A debtor who is an individual is located at the individual's
principal residence.
(2) A debtor that is an organization and has only one place of
business is located at its place of business.
(3) A debtor that is an organization and has more than one place
of business is located at its chief executive office.
(c) Subdivision (b) applies only if a debtor's residence, place of
business, or chief executive office, as applicable, is located in a
jurisdiction whose law generally requires information concerning the
existence of a nonpossessory security interest to be made generally
available in a filing, recording, or registration system as a
condition or result of the security interest's obtaining priority
over the rights of a lien creditor with respect to the collateral.
If subdivision (b) does not apply, the debtor is located in the
District of Columbia.
(d) A person that ceases to exist, have a residence, or have a
place of business continues to be located in the jurisdiction
specified by subdivisions (b) and (c).
(e) A registered organization that is organized under the law of a
state is located in that state.
(f) Except as otherwise provided in subdivision (i), a registered
organization that is organized under the law of the United States and
a branch or agency of a bank that is not organized under the law of
the United States or a state are located in either of the following
jurisdictions:
(1) In the state that the law of the United States designates, if
the law designates a state of location.
(2) In the state that the registered organization, branch, or
agency designates, if the law of the United States authorizes the
registered organization, branch, or agency to designate its state of
location.
(3) In the District of Columbia, if neither paragraph (1) nor
paragraph (2) applies.
(g) A registered organization continues to be located in the
jurisdiction specified by subdivision (e) or (f) notwithstanding
either of the following:
(1) The suspension, revocation, forfeiture, or lapse of the
registered organization's status as such in its jurisdiction of
organization.
(2) The dissolution, winding up, or cancellation of the existence
of the registered organization.
(h) The United States is located in the District of Columbia.
(i) A branch or agency of a bank that is not organized under the
law of the United States or a state is located in the state in which
the branch or agency is licensed, if all branches and agencies of the
bank are licensed in only one state.
(j) A foreign air carrier under the Federal Aviation Act of 1958,
as amended, is located at the designated office of the agent upon
which service of process may be made on behalf of the carrier.
(k) This section applies only for purposes of this chapter.
9308. (a) Except as otherwise provided in this section and in
Section 9309, a security interest is perfected if it has attached and
all of the applicable requirements for perfection in Sections 9310
to 9316, inclusive, have been satisfied. A security interest is
perfected when it attaches if the applicable requirements are
satisfied before the security interest attaches.
(b) An agricultural lien is perfected if it has become effective
and all of the applicable requirements for perfection in Section 9310
have been satisfied. An agricultural lien is perfected when it
becomes effective if the applicable requirements are satisfied before
the agricultural lien becomes effective.
(c) A security interest or agricultural lien is perfected
continuously if it is originally perfected by one method under this
division and is later perfected by another method under this
division, without an intermediate period when it was unperfected.
(d) Perfection of a security interest in collateral also perfects
a security interest in a supporting obligation for the collateral.
(e) Perfection of a security interest in a right to payment or
performance also perfects a security interest in a security interest,
mortgage, or other lien on personal or real property securing the
right.
(f) Perfection of a security interest in a securities account also
perfects a security interest in the security entitlements carried in
the securities account.
(g) Perfection of a security interest in a commodity account also
perfects a security interest in the commodity contracts carried in
the commodity account.
9309. The following security interests are perfected when they
attach:
(1) A purchase money security interest in consumer goods, except
as otherwise provided in subdivision (b) of Section 9311 with respect
to consumer goods that are subject to a statute or treaty described
in subdivision (a) of Section 9311.
(2) An assignment of accounts or payment intangibles which does
not by itself or in conjunction with other assignments to the same
assignee transfer a significant part of the assignor's outstanding
accounts or payment intangibles.
(3) A sale of a payment intangible.
(4) A sale of a promissory note.
(5) A security interest created by the assignment of a health care
insurance receivable to the provider of the health care goods or
services.
(6) A security interest arising under Section 2401 or 2505, under
subdivision (3) of Section 2711, or under subdivision (5) of Section
10508, until the debtor obtains possession of the collateral.
(7) A security interest of a collecting bank arising under Section
4210.
(8) A security interest of an issuer or nominated person arising
under Section 5118.
(9) A security interest arising in the delivery of a financial
asset under subdivision (c) of Section 9206.
(10) A security interest in investment property created by a
broker or securities intermediary.
(11) A security interest in a commodity contract or a commodity
account created by a commodity intermediary.
(12) An assignment for the benefit of all creditors of the
transferor and subsequent transfers by the assignee thereunder.
(13) A security interest created by an assignment of a beneficial
interest in a decedent's estate.
9310. (a) Except as otherwise provided in subdivision (b) and in
subdivision (b) of Section 9312, a financing statement must be filed
to perfect all security interests and agricultural liens.
(b) The filing of a financing statement is not necessary to
perfect a security interest that satisfies any of the following
conditions:
(1) It is perfected under subdivision (d), (e), (f), or (g) of
Section 9308.
(2) It is perfected under Section 9309 when it attaches.
(3) It is a security interest in property subject to a statute,
regulation, or treaty described in subdivision (a) of Section 9311.
(4) It is a security interest in goods in possession of a bailee
which is perfected under paragraph (1) or (2) of subdivision (d) of
Section 9312.
(5) It is a security interest in certificated securities,
documents, goods, or instruments which is perfected without filing or
possession under subdivision (e), (f), or (g) of Section 9312.
(6) It is a security interest in collateral in the secured party's
possession under Section 9313.
(7) It is a security interest in a certificated security which is
perfected by delivery of the security certificate to the secured
party under Section 9313.
(8) It is a security interest in deposit accounts, electronic
chattel paper, investment property, or letter-of-credit rights which
is perfected by control under Section 9314.
(9) It is a security interest in proceeds which is perfected under
Section 9315.
(10) It is perfected under Section 9316.
(11) A security interest in, or claim in or under, any policy of
insurance including unearned premiums. The interest is perfected
when notice thereof is given in writing to the insurer.
(c) If a secured party assigns a perfected security interest or
agricultural lien, a filing under this division is not required to
continue the perfected status of the security interest against
creditors of and transferees from the original debtor.
9311. (a) Except as otherwise provided in subdivision (d), the
filing of a financing statement is not necessary or effective to
perfect a security interest in property subject to any of the
following:
(1) A statute, regulation, or treaty of the United States whose
requirements for a security interest's obtaining priority over the
rights of a lien creditor with respect to the property preempt
subdivision (a) of Section 9310.
(2) (A) The provisions of the Vehicle Code which require
registration of a vehicle or boat.
(B) The provisions of the Health and Safety Code which require
registration of a mobilehome or commercial coach, except that during
any period in which collateral is inventory, the filing provisions of
Chapter 5 (commencing with Section 9501) apply to a security
interest in that collateral.
(C) The provisions of the Health and Safety Code which require
registration of all interests in approved air contaminant emission
reductions (Sections 40709 to 40713, inclusive, of the Health and
Safety Code).
(3) A certificate of title statute of another jurisdiction which
provides for a security interest to be indicated on the certificate
as a condition or result of the security interest's obtaining
priority over the rights of a lien creditor with respect to the
property.
(b) Compliance with the requirements of a statute, regulation, or
treaty described in subdivision (a) for obtaining priority over the
rights of a lien creditor is equivalent to the filing of a financing
statement under this division. Except as otherwise provided in
subdivision (d), in Section 9313, and in subdivisions (d) and (e) of
Section 9316 for goods covered by a certificate of title, a security
interest in property subject to a statute, regulation, or treaty
described in subdivision (a) may be perfected only by compliance with
those requirements, and a security interest so perfected remains
perfected notwithstanding a change in the use or transfer of
possession of the collateral.
(c) Except as otherwise provided in subdivision (d) and in
subdivisions (d) and (e) of Section 9316, duration and renewal of
perfection of a security interest perfected by compliance with the
requirements prescribed by a statute, regulation, or treaty described
in subdivision (a) are governed by the statute, regulation, or
treaty. In other respects, the security interest is subject to this
division.
(d) During any period in which collateral is inventory held for
sale or lease by a person or leased by that person as lessor and that
person is in the business of selling or leasing goods of that kind,
this section does not apply to a security interest in that collateral
created by that person as debtor.
9312. (a) A security interest in chattel paper, negotiable
documents, instruments, or investment property may be perfected by
filing.
(b) Except as otherwise provided in subdivisions (c) and (d) of
Section 9315 for proceeds, all of the following apply:
(1) A security interest in a deposit account may be perfected only
by control under Section 9314.
(2) Except as otherwise provided in subdivision (d) of Section
9308, a security interest in a letter-of-credit right may be
perfected only by control under Section 9314.
(3) A security interest in money may be perfected only by the
secured party's taking possession under Section 9313.
(c) While goods are in the possession of a bailee that has issued
a negotiable document covering the goods both of the following apply:
(1) A security interest in the goods may be perfected by
perfecting a security interest in the document.
(2) A security interest perfected in the document has priority
over any security interest that becomes perfected in the goods by
another method during that time.
(d) While goods are in the possession of a bailee that has issued
a nonnegotiable document covering the goods, a security interest in
the goods may be perfected by any of the following methods:
(1) Issuance of a document in the name of the secured party.
(2) The bailee's receipt of notification of the secured party's
interest.
(3) Filing as to the goods.
(e) A security interest in certificated securities, negotiable
documents, or instruments is perfected without filing or the taking
of possession for a period of 20 days from the time it attaches to
the extent that it arises for new value given under an authenticated
security agreement.
(f) A perfected security interest in a negotiable document or
goods in possession of a bailee, other than one that has issued a
negotiable document for the goods, remains perfected for
20 days without filing if the secured
party makes available to the debtor the goods or documents
representing the goods for the purpose of either of the following:
(1) Ultimate sale or exchange.
(2) Loading, unloading, storing, shipping, transshipping,
manufacturing, processing, or otherwise dealing with them in a manner
preliminary to their sale or exchange.
(g) A perfected security interest in a certificated security or
instrument remains perfected for 20 days without filing if the
secured party delivers the security certificate or instrument to the
debtor for the purpose of either of the following:
(1) Ultimate sale or exchange.
(2) Presentation, collection, enforcement, renewal, or
registration of transfer.
(h) After the 20-day period specified in subdivision (e), (f), or
(g) expires, perfection depends upon compliance with this division.
9313. (a) Except as otherwise provided in subdivision (b), a
secured party may perfect a security interest in negotiable
documents, goods, instruments, money, or tangible chattel paper by
taking possession of the collateral. A secured party may perfect a
security interest in certificated securities by taking delivery of
the certificated securities under Section 8301.
(b) With respect to goods covered by a certificate of title issued
by this state, a secured party may perfect a security interest in
the goods by taking possession of the goods only in the circumstances
described in subdivision (d) of Section 9316.
(c) With respect to collateral other than certificated securities
and goods covered by a document, a secured party takes possession of
collateral in the possession of a person other than the debtor, the
secured party, or a lessee of the collateral from the debtor in the
ordinary course of the debtor's business, when either of the
following conditions is satisfied:
(1) The person in possession authenticates a record acknowledging
that it holds possession of the collateral for the secured party's
benefit.
(2) The person takes possession of the collateral after having
authenticated a record acknowledging that it will hold possession of
collateral for the secured party's benefit.
(d) If perfection of a security interest depends upon possession
of the collateral by a secured party, perfection occurs no earlier
than the time the secured party takes possession and continues only
while the secured party retains possession.
(e) A security interest in a certificated security in registered
form is perfected by delivery when delivery of the certificated
security occurs under Section 8301 and remains perfected by delivery
until the debtor obtains possession of the security certificate.
(f) A person in possession of collateral is not required to
acknowledge that it holds possession for a secured party's benefit.
(g) If a person acknowledges that it holds possession for the
secured party's benefit both of the following apply:
(1) The acknowledgment is effective under subdivision (c) or under
subdivision (a) of Section 8301, even if the acknowledgment violates
the rights of a debtor.
(2) Unless the person otherwise agrees or law other than this
division otherwise provides, the person does not owe any duty to the
secured party and is not required to confirm the acknowledgment to
another person.
(h) A secured party having possession of collateral does not
relinquish possession by delivering the collateral to a person other
than the debtor or a lessee of the collateral from the debtor in the
ordinary course of the debtor's business if the person was instructed
before the delivery or is instructed contemporaneously with the
delivery to do either of the following:
(1) To hold possession of the collateral for the secured party's
benefit.
(2) To redeliver the collateral to the secured party.
(i) A secured party does not relinquish possession, even if a
delivery under subdivision (h) violates the rights of a debtor. A
person to which collateral is delivered under subdivision (h) does
not owe any duty to the secured party and is not required to confirm
the delivery to another person unless the person otherwise agrees or
law other than this division otherwise provides.
9314. (a) A security interest in investment property, deposit
accounts, letter-of-credit rights, or electronic chattel paper may be
perfected by control of the collateral under Section 9104, 9105,
9106, or 9107.
(b) A security interest in deposit accounts, electronic chattel
paper, or letter-of-credit rights is perfected by control under
Section 9104, 9105, or 9107 when the secured party obtains control
and remains perfected by control only while the secured party retains
control.
(c) A security interest in investment property is perfected by
control under Section 9106 from the time the secured party obtains
control and remains perfected by control until both of the following
conditions are satisfied:
(1) The secured party does not have control.
(2) One of the following occurs:
(A) If the collateral is a certificated security, the debtor has
or acquires possession of the security certificate.
(B) If the collateral is an uncertificated security, the issuer
has registered or registers the debtor as the registered owner.
(C) If the collateral is a security entitlement, the debtor is or
becomes the entitlement holder.
9315. (a) Except as otherwise provided in this division and in
subdivision (2) of Section 2403, both of the following apply:
(1) A security interest or agricultural lien continues in
collateral notwithstanding sale, lease, license, exchange, or other
disposition thereof unless the secured party authorized the
disposition free of the security interest or agricultural lien.
(2) A security interest attaches to any identifiable proceeds of
collateral.
(b) Proceeds that are commingled with other property are
identifiable proceeds as follows:
(1) If the proceeds are goods, to the extent provided by Section
9336.
(2) If the proceeds are not goods, to the extent that the secured
party identifies the proceeds by a method of tracing, including
application of equitable principles, that is permitted under law
other than this division with respect to commingled property of the
type involved.
(c) A security interest in proceeds is a perfected security
interest if the security interest in the original collateral was
perfected.
(d) A perfected security interest in proceeds becomes unperfected
on the 21st day after the security interest attaches to the proceeds
unless any of the following conditions is satisfied:
(1) All of the following are satisfied:
(A) A filed financing statement covers the original collateral.
(B) The proceeds are collateral in which a security interest may
be perfected by filing in the office in which the financing statement
has been filed.
(C) The proceeds are not acquired with cash proceeds.
(2) The proceeds are identifiable cash proceeds.
(3) The security interest in the proceeds is perfected other than
under subdivision (c) when the security interest attaches to the
proceeds or within 20 days thereafter.
(e) If a filed financing statement covers the original collateral,
a security interest in proceeds which remains perfected under
paragraph (1) of subdivision (d) becomes unperfected at the later of
either of the following:
(1) When the effectiveness of the filed financing statement lapses
under Section 9515 or is terminated under Section 9513.
(2) The 21st day after the security interest attaches to the
proceeds.
(f) Cash proceeds retain their character as cash proceeds while in
the possession of a levying officer pursuant to Title 6.5
(commencing with Section 481.010) or Title 9 (commencing with Section
680.010) of Part 2 of the Code of Civil Procedure.
9316. (a) A security interest perfected pursuant to the law of
the jurisdiction designated in subdivision (1) of Section 9301 or in
subdivision (c) of Section 9305 remains perfected until the earliest
of any of the following:
(1) The time perfection would have ceased under the law of that
jurisdiction.
(2) The expiration of four months after a change of the debtor's
location to another jurisdiction.
(3) The expiration of one year after a transfer of collateral to a
person that thereby becomes a debtor and is located in another
jurisdiction.
(b) If a security interest described in subdivision (a) becomes
perfected under the law of the other jurisdiction before the earliest
time or event described in that subdivision, it remains perfected
thereafter. If the security interest does not become perfected under
the law of the other jurisdiction before the earliest time or event,
it becomes unperfected and is deemed never to have been perfected as
against a purchaser of the collateral for value.
(c) A possessory security interest in collateral, other than goods
covered by a certificate of title and as-extracted collateral
consisting of goods, remains continuously perfected if all of the
following conditions are satisfied:
(1) The collateral is located in one jurisdiction and subject to a
security interest perfected under the law of that jurisdiction.
(2) Thereafter the collateral is brought into another
jurisdiction.
(3) Upon entry into the other jurisdiction, the security interest
is perfected under the law of the other jurisdiction.
(d) Except as otherwise provided in subdivision (e), a security
interest in goods covered by a certificate of title which is
perfected by any method under the law of another jurisdiction when
the goods become covered by a certificate of title from this state
remains perfected until the security interest would have become
unperfected under the law of the other jurisdiction had the goods not
become so covered.
(e) A security interest described in subdivision (d) becomes
unperfected as against a purchaser of the goods for value and is
deemed never to have been perfected as against a purchaser of the
goods for value if the applicable requirements for perfection under
subdivision (b) of Section 9311 or under Section 9313 are not
satisfied before the earlier of either of the following:
(1) The time the security interest would have become unperfected
under the law of the other jurisdiction had the goods not become
covered by a certificate of title from this state.
(2) The expiration of four months after the goods had become so
covered.
(f) A security interest in deposit accounts, letter-of-credit
rights, or investment property which is perfected under the law of
the bank's jurisdiction, the issuer's jurisdiction, a nominated
person's jurisdiction, the securities intermediary's jurisdiction, or
the commodity intermediary's jurisdiction, as applicable, remains
perfected until the earlier of the following:
(1) The time the security interest would have become unperfected
under the law of that jurisdiction.
(2) The expiration of four months after a change of the applicable
jurisdiction to another jurisdiction.
(g) If a security interest described in subdivision (f) becomes
perfected under the law of the other jurisdiction before the earlier
of the time or the end of the period described in that subdivision,
it remains perfected thereafter. If the security interest does not
become perfected under the law of the other jurisdiction before the
earlier of that time or the end of that period, it becomes
unperfected and is deemed never to have been perfected as against a
purchaser of the collateral for value.
9317. (a) An unperfected security interest or agricultural lien
is subordinate to the rights of both of the following:
(1) A person entitled to priority under Section 9322.
(2) A person that becomes a lien creditor before the earlier of
the time the security interest or agricultural lien is perfected or a
financing statement covering the collateral is filed.
(b) Except as otherwise provided in subdivision (e), a buyer,
other than a secured party, of tangible chattel paper, documents,
goods, instruments, or a security certificate takes free of a
security interest or agricultural lien if the buyer gives value and
receives delivery of the collateral without knowledge of the security
interest or agricultural lien and before it is perfected.
(c) Except as otherwise provided in subdivision (e), a lessee of
goods takes free of a security interest or agricultural lien if the
lessee gives value and receives delivery of the collateral without
knowledge of the security interest or agricultural lien and before it
is perfected.
(d) A licensee of a general intangible or a buyer, other than a
secured party, of accounts, electronic chattel paper, general
intangibles, or investment property other than a certificated
security takes free of a security interest if the licensee or buyer
gives value without knowledge of the security interest and before it
is perfected.
(e) Except as otherwise provided in Sections 9320 and 9321, if a
person files a financing statement with respect to a purchase money
security interest before or within 20 days after the debtor receives
delivery of the collateral, the security interest takes priority over
the rights of a buyer, lessee, or lien creditor which arise between
the time the security interest attaches and the time of filing.
9318. (a) A debtor that has sold an account, chattel paper,
payment intangible, or promissory note does not retain a legal or
equitable interest in the collateral sold.
(b) For purposes of determining the rights of creditors of, and
purchasers for value of an account or chattel paper from, a debtor
that has sold an account or chattel paper, while the buyer's security
interest is unperfected, the debtor is deemed to have rights and
title to the account or chattel paper identical to those the debtor
sold.
9319. (a) Except as otherwise provided in subdivision (b), for
purposes of determining the rights of creditors of, and purchasers
for value of goods from, a consignee, while the goods are in the
possession of the consignee, the consignee has rights and title to
the goods identical to those the consignor had or had power to
transfer.
(b) For purposes of determining the rights of a creditor of a
consignee, law other than this division determines the rights and
title of a consignee while goods are in the consignee's possession
if, under this chapter, a perfected security interest held by the
consignor would have priority over the rights of the creditor.
9320. (a) Except as otherwise provided in subdivision (e), a
buyer in ordinary course of business takes free of a security
interest created by the buyer's seller, even if the security interest
is perfected and the buyer knows of its existence.
(b) Except as otherwise provided in subdivision (e), a buyer of
goods from a person who used or bought the goods for use primarily
for personal, family, or household purposes takes free of a security
interest, even if perfected, if all of the following conditions are
satisfied:
(1) The buyer buys without knowledge of the security interest.
(2) The buyer buys for value.
(3) The buyer buys primarily for the buyer's personal, family, or
household purposes.
(4) The buyer buys before the filing of a financing statement
covering the goods.
(c) To the extent that it affects the priority of a security
interest over a buyer of goods under subdivision (b), the period of
effectiveness of a filing made in the jurisdiction in which the
seller is located is governed by subdivisions (a) and (b) of Section
9316.
(d) A buyer in ordinary course of business buying oil, gas, or
other minerals at the wellhead or minehead or after extraction takes
free of an interest arising out of an encumbrance.
(e) Subdivisions (a) and (b) do not affect a security interest in
goods in the possession of the secured party under Section 9313.
9321. (a) In this section, "licensee in ordinary course of
business" means a person that becomes a licensee of a general
intangible in good faith, without knowledge that the license violates
the rights of another person in the general intangible, and in the
ordinary course from a person in the business of licensing general
intangibles of that kind. A person becomes a licensee in the
ordinary course if the license to the person comports with the usual
or customary practices in the kind of business in which the licensor
is engaged or with the licensor's own usual or customary practices.
(b) A licensee in ordinary course of business takes its rights
under a nonexclusive license free of a security interest in the
general intangible created by the licensor, even if the security
interest is perfected and the licensee knows of its existence.
(c) A lessee in ordinary course of business takes its leasehold
interest free of a security interest in the goods created by the
lessor, even if the security interest is perfected and the lessee
knows of its existence.
(d) This section shall remain in effect only until January 1, 2004,
and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2004, deletes or extends that date.
9321. (a) A lessee in ordinary course of business takes its
leasehold interest free of a security interest in the goods created
by the lessor, even if the security interest is perfected and the
lessee knows of its existence.
(b) This section shall become operative on January 1, 2004.
9322. (a) Except as otherwise provided in this section, priority
among conflicting security interests and agricultural liens in the
same collateral is determined according to the following rules:
(1) Conflicting perfected security interests and agricultural
liens rank according to priority in time of filing or perfection.
Priority dates from the earlier of the time a filing covering the
collateral is first made or the security interest or agricultural
lien is first perfected, if there is no period thereafter when there
is neither filing nor perfection.
(2) A perfected security interest or agricultural lien has
priority over a conflicting unperfected security interest or
agricultural lien.
(3) The first security interest or agricultural lien to attach or
become effective has priority if conflicting security interests and
agricultural liens are unperfected.
(b) For the purposes of paragraph (1) of subdivision (a), the
following rules apply:
(1) The time of filing or perfection as to a security interest in
collateral is also the time of filing or perfection as to a security
interest in proceeds.
(2) The time of filing or perfection as to a security interest in
collateral supported by a supporting obligation is also the time of
filing or perfection as to a security interest in the supporting
obligation.
(c) Except as otherwise provided in subdivision (f), a security
interest in collateral which qualifies for priority over a
conflicting security interest under Section 9327, 9328, 9329, 9330,
or 9331 also has priority over a conflicting security interest in
both of the following:
(1) Any supporting obligation for the collateral.
(2) Proceeds of the collateral if all of the following conditions
are satisfied:
(A) The security interest in proceeds is perfected.
(B) The proceeds are cash proceeds or of the same type as the
collateral.
(C) In the case of proceeds that are proceeds of proceeds, all
intervening proceeds are cash proceeds, proceeds of the same type as
the collateral, or an account relating to the collateral.
(d) Subject to subdivision (e) and except as otherwise provided in
subdivision (f), if a security interest in chattel paper, deposit
accounts, negotiable documents, instruments, investment property, or
letter-of-credit rights is perfected by a method other than filing,
conflicting perfected security interests in proceeds of the
collateral rank according to priority in time of filing.
(e) Subdivision (d) applies only if the proceeds of the collateral
are not cash proceeds, chattel paper, negotiable documents,
instruments, investment property, or letter-of-credit rights.
(f) Subdivisions (a) to (e), inclusive, are subject to all of the
following:
(1) Subdivision (g) and the other provisions of this chapter.
(2) Section 4210 with respect to a security interest of a
collecting bank.
(3) Section 5118 with respect to a security interest of an issuer
or nominated person.
(4) Section 9110 with respect to a security interest arising under
Division 2 (commencing with Section 2101) or Division 10 (commencing
with Section 10101).
(g) A perfected agricultural lien on collateral has priority over
a conflicting security interest in or agricultural lien on the same
collateral if the statute creating the agricultural lien so provides.
9323. (a) Except as otherwise provided in subdivision (c), for
purposes of determining the priority of a perfected security interest
under paragraph (1) of subdivision (a) of Section 9322, perfection
of the security interest dates from the time an advance is made to
the extent that the security interest secures an advance that
satisfies both of the following conditions:
(1) It is made while the security interest is perfected only under
either of the following:
(A) Under Section 9309 when it attaches.
(B) Temporarily under subdivision (e), (f), or (g) of Section
9312.
(2) It is not made pursuant to a commitment entered into before or
while the security interest is perfected by a method other than
under Section 9309 or under subdivision (e), (f), or (g) of Section
9312.
(b) Except as otherwise provided in subdivision (c), a security
interest is subordinate to the rights of a person that becomes a lien
creditor while the security interest is perfected only to the extent
that it secures advances made more than 45 days after the person
becomes a lien creditor unless either of the following conditions is
satisfied:
(1) The advance is made without knowledge of the lien.
(2) The advance is made pursuant to a commitment entered into
without knowledge of the lien.
(c) Subdivisions (a) and (b) do not apply to a security interest
held by a secured party that is a buyer of accounts, chattel paper,
payment intangibles, or promissory notes or a consignor.
(d) Except as otherwise provided in subdivision (e), a buyer of
goods other than a buyer in ordinary course of business takes free of
a security interest to the extent that it secures advances made
after the earlier of either of the following:
(1) The time the secured party acquires knowledge of the buyer's
purchase.
(2) Forty-five days after the purchase.
(e) Subdivision (d) does not apply if the advance is made pursuant
to a commitment entered into without knowledge of the buyer's
purchase and before the expiration of the 45-day period.
(f) Except as otherwise provided in subdivision (g), a lessee of
goods, other than a lessee in ordinary course of business, takes the
leasehold interest free of a security interest to the extent that it
secures advances made after the earlier of either of the following:
(1) The time the secured party acquires knowledge of the lease.
(2) Forty-five days after the lease contract becomes enforceable.
(g) Subdivision (f) does not apply if the advance is made pursuant
to a commitment entered into without knowledge of the lease and
before the expiration of the 45-day period.
9324. (a) Except as otherwise provided in subdivision (g), a
perfected purchase money security interest in goods other than
inventory or livestock has priority over a conflicting security
interest in the same goods, and, except as otherwise provided in
Section 9327, a perfected security interest in its identifiable
proceeds also has priority, if the purchase money security interest
is perfected when the debtor receives possession of the collateral or
within 20 days thereafter.
(b) Subject to subdivision (c) and except as otherwise provided in
subdivision (g), a perfected purchase money security interest in
inventory has priority over a conflicting security interest in the
same inventory, has priority over a conflicting security interest in
chattel paper or an instrument constituting proceeds of the inventory
and in proceeds of the chattel paper, if so provided in Section
9330, and, except as otherwise provided in Section 9327, also has
priority in identifiable cash proceeds of the inventory to the extent
the identifiable cash proceeds are received on or before the
delivery of the inventory to a buyer, if all of the following
conditions are satisfied:
(1) The purchase money security interest is perfected when the
debtor receives possession of the inventory.
(2) The purchase money secured party sends an authenticated
notification to the holder of the conflicting security interest.
(3) The holder of the conflicting security interest receives the
notification within five years before the debtor receives possession
of the inventory.
(4) The notification states that the person sending the
notification has or expects to acquire a purchase money security
interest in inventory of the debtor and describes the inventory.
(c) Paragraphs (2) to (4), inclusive, of subdivision (b) apply
only if the holder of the conflicting security interest had filed a
financing statement covering the same types of inventory as follows:
(1) If the purchase money security interest is perfected by
filing, before the date of the filing.
(2) If the purchase money security interest is temporarily
perfected without filing or possession under subdivision (f) of
Section 9312, before the beginning of the 20-day period thereunder.
(d) Subject to subdivision (e) and except as otherwise provided in
subdivision (g), a perfected purchase money security interest in
livestock that are farm products has priority over a conflicting
security interest in the same livestock, and, except as otherwise
provided in Section 9327, a perfected security interest in their
identifiable proceeds and identifiable products in their
unmanufactured states also has priority, if all of the following
conditions are satisfied:
(1) The purchase money security interest is perfected when the
debtor receives possession of the livestock.
(2) The purchase money secured party sends an authenticated
notification to the holder of the conflicting security interest.
(3) The holder of the conflicting security interest receives the
notification within six months before the debtor receives
possession of the livestock.
(4) The notification states that the person sending the
notification has or expects to acquire a purchase money security
interest in livestock of the debtor and describes the livestock.
(e) Paragraphs (2) to (4), inclusive, of subdivision (d) apply
only if the holder of the conflicting security interest had filed a
financing statement covering the same types of livestock as follows:
(1) If the purchase money security interest is perfected by
filing, before the date of the filing.
(2) If the purchase money security interest is temporarily
perfected without filing or possession under subdivision (f) of
Section 9312, before the beginning of the 20-day period thereunder.
(f) Except as otherwise provided in subdivision (g), a perfected
purchase money security interest in software has priority over a
conflicting security interest in the same collateral, and, except as
otherwise provided in Section 9327, a perfected security interest in
its identifiable proceeds also has priority, to the extent that the
purchase money security interest in the goods in which the software
was acquired for use has priority in the goods and proceeds of the
goods under this section.
(g) If more than one security interest qualifies for priority in
the same collateral under subdivision (a), (b), (d), or (f), the
following rules apply:
(1) A security interest securing an obligation incurred as all or
part of the price of the collateral has priority over a security
interest securing an obligation incurred for value given to enable
the debtor to acquire rights in, or the use of, collateral.
(2) In all other cases, subdivision (a) of Section 9322 applies to
the qualifying security interests.
9325. (a) Except as otherwise provided in subdivision (b), a
security interest created by a debtor is subordinate to a security
interest in the same collateral created by another person if either
of the following applies:
(1) The debtor acquired the collateral subject to the security
interest created by the other person.
(2) The security interest created by the other person was
perfected when the debtor acquired the collateral.
(3) There is no period thereafter when the security interest is
unperfected.
(b) Subdivision (a) subordinates a security interest only if
either of the following conditions is satisfied:
(1) The security interest otherwise would have priority solely
under subdivision (a) of Section 9322 or under Section 9324.
(2) The security interest arose solely under subdivision (3) of
Section 2711 or subdivision (5) of Section 10508.
9326. (a) Subject to subdivision (b), a security interest created
by a new debtor which is perfected by a filed financing statement
that is effective solely under Section 9508 in collateral in which a
new debtor has or acquires rights is subordinate to a security
interest in the same collateral which is perfected other than by a
filed financing statement that is effective solely under Section
9508.
(b) The other provisions of this chapter determine the priority
among conflicting security interests in the same collateral perfected
by filed financing statements that are effective solely under
Section 9508. However, if the security agreements to which a new
debtor became bound as debtor were not entered into by the same
original debtor, the conflicting security interests rank according to
priority in time of the new debtor's having become bound.
9327. The following rules govern priority among conflicting
security interests in the same deposit account:
(1) A security interest held by a secured party having control of
the deposit account under Section 9104 has priority over a
conflicting security interest held by a secured party that does not
have control.
(2) Except as otherwise provided in subdivisions (3) and (4),
security interests perfected by control under Section 9314 rank
according to priority in time of obtaining control.
(3) Except as otherwise provided in subdivision (4), a security
interest held by the bank with which the deposit account is
maintained has priority over a conflicting security interest held by
another secured party.
(4) A security interest perfected by control under paragraph (3)
of subdivision (a) of Section 9104 has priority over a security
interest held by the bank with which the deposit account is
maintained.
9328. The following rules govern priority among conflicting
security interests in the same investment property:
(1) A security interest held by a secured party having control of
investment property under Section 9106 has priority over a security
interest held by a secured party that does not have control of the
investment property.
(2) Except as otherwise provided in subdivisions (3) and (4),
conflicting security interests held by secured parties each of which
has control under Section 9106 rank according to priority in time of
one of the following:
(A) If the collateral is a security, obtaining control.
(B) If the collateral is a security entitlement carried in a
securities account and if the secured party obtained control under
paragraph (1) of subdivision (d) of Section 8106, the secured party's
becoming the person for which the securities account is maintained.
(C) If the collateral is a security entitlement carried in a
securities account and if the secured party obtained control under
paragraph (2) of subdivision (d) of Section 8106, the securities
intermediary's agreement to comply with the secured party's
entitlement orders with respect to security entitlements carried, or
to be carried, in the securities account.
(D) If the collateral is a security entitlement carried in a
securities account and if the secured party obtained control through
another person under paragraph (3) of subdivision (d) of Section
8106, the time on which priority would be based under this paragraph
if the other person were the secured party.
(E) If the collateral is a commodity contract carried with a
commodity intermediary, the satisfaction of the requirement for
control specified in paragraph (2) of subdivision (b) of Section 9106
with respect to commodity contracts carried, or to be carried, with
the commodity intermediary.
(3) A security interest held by a securities intermediary in a
security entitlement or a securities account maintained with the
securities intermediary has priority over a conflicting security
interest held by another secured party.
(4) A security interest held by a commodity intermediary in a
commodity contract or a commodity account maintained with the
commodity intermediary has priority over a conflicting security
interest held by another secured party.
(5) A security interest in a certificated security in registered
form which is perfected by taking delivery under subdivision (a) of
Section 9313 and not by control under Section 9314 has priority over
a conflicting security interest perfected by a method other than
control.
(6) Conflicting security interests created by a broker, securities
intermediary, or commodity intermediary which are perfected without
control under Section 9106 rank equally.
(7) In all other cases, priority among conflicting security
interests in investment property is governed by Sections 9322 and
9323.
9329. The following rules govern priority among conflicting
security interests in the same letter-of-credit right:
(1) A security interest held by a secured party having control of
the letter-of-credit right under Section 9107 has priority to the
extent of its control over a conflicting security interest held by a
secured party that does not have control.
(2) Security interests perfected by control under Section 9314
rank according to priority in time of obtaining control.
9330. (a) A purchaser of chattel paper has priority over a
security interest in the chattel paper which is claimed merely as
proceeds of inventory subject to a security interest if both of the
following conditions are satisfied:
(1) In good faith and in the ordinary course of the purchaser's
business, the purchaser gives new value and takes possession of the
chattel paper or obtains control of the chattel paper under Section
9105.
(2) The chattel paper does not indicate that it has been assigned
to an identified assignee other than the purchaser.
(b) A purchaser of chattel paper has priority over a security
interest in the chattel paper which is claimed other than merely as
proceeds of inventory subject to a security interest if the purchaser
gives new value and takes possession of the chattel paper or obtains
control of the chattel paper under Section 9105 in good faith, in
the ordinary course of the purchaser's business, and without
knowledge that the purchase violates the rights of the secured party.
(c) Except as otherwise provided in Section 9327, a purchaser
having priority in chattel paper under subdivision (a) or (b) also
has priority in proceeds of the chattel paper to the extent that
either of the following applies:
(1) Section 9322 provides for priority in the proceeds.
(2) The proceeds consist of the specific goods covered by the
chattel paper or cash proceeds of the specific goods, even if the
purchaser's security interest in the proceeds is unperfected.
(d) Except as otherwise provided in subdivision (a) of Section
9331, a purchaser of an instrument has priority over a security
interest in the instrument perfected by a method other than
possession if the purchaser gives value and takes possession of the
instrument in good faith and without knowledge that the purchase
violates the rights of the secured party.
(e) For purposes of subdivisions (a) and (b), the holder of a
purchase money security interest in inventory gives new value for
chattel paper constituting proceeds of the inventory.
(f) For purposes of subdivisions (b) and (d), if chattel paper or
an instrument indicates that it has been assigned to an identified
secured party other than the purchaser, a purchaser of the chattel
paper or instrument has knowledge that the purchase violates the
rights of the secured party.
9331. (a) This division does not limit the rights of a holder in
due course of a negotiable instrument, a holder to which a negotiable
document of title has been duly negotiated, or a protected purchaser
of a security. These holders or purchasers take priority over an
earlier security interest, even if perfected, to the extent provided
in Division 3 (commencing with Section 3101), Division 7 (commencing
with Section 7101), and Division 8 (commencing with Section 8101).
(b) This division does not limit the rights of or impose liability
on a person to the extent that the person is protected against the
assertion of an adverse claim under Division 8 (commencing with
Section 8101).
(c) Filing under this division does not constitute notice of a
claim or defense to the holders, or purchasers, or persons described
in subdivisions (a) and (b).
9332. (a) A transferee of money takes the money free of a
security interest unless the transferee acts in collusion with the
debtor in violating the rights of the secured party.
(b) A transferee of funds from a deposit account takes the funds
free of a security interest in the deposit account unless the
transferee acts in collusion with the debtor in violating the rights
of the secured party.
9333. (a) In this section, "possessory lien" means an interest,
other than a security interest or an agricultural lien which
satisfies all of the following conditions:
(1) It secures payment or performance of an obligation for
services or materials furnished with respect to goods by a person in
the ordinary course of the person's business.
(2) It is created by statute or rule of law in favor of the
person.
(3) Its effectiveness depends on the person's possession of the
goods.
(b) A possessory lien on goods has priority over a security
interest in the goods unless the lien is created by a statute that
expressly provides otherwise.
9334. (a) A security interest under this division may be created
in goods that are fixtures or may continue in goods that become
fixtures. A security interest does not exist under this division in
ordinary building materials incorporated into an improvement on land.
(b) This division does not prevent creation of an encumbrance upon
fixtures under real property law.
(c) In cases not governed by subdivisions (d) to (h), inclusive, a
security interest in fixtures is subordinate to a conflicting
interest of an encumbrancer or owner of the related real property
other than the debtor.
(d) Except as otherwise provided in subdivision (h), a perfected
security interest in fixtures has priority over a conflicting
interest of an encumbrancer or owner of the real property if the
debtor has an interest of record in or is in possession of the real
property and all of the following conditions are satisfied:
(1) The security interest is a purchase money security interest.
(2) The interest of the encumbrancer or owner arises before the
goods become fixtures.
(3) The security interest is perfected by a fixture filing before
the goods become fixtures or within 20 days thereafter.
(e) A perfected security interest in fixtures has priority over a
conflicting interest of an encumbrancer or owner of the real property
if any of the following conditions is satisfied:
(1) The debtor has an interest of record in the real property or
is in possession of the real property and both of the following
conditions are satisfied:
(A) The security interest is perfected by a fixture filing before
the interest of the encumbrancer or owner is of record.
(B) The security interest has priority over any conflicting
interest of a predecessor in title of the encumbrancer or owner.
(2) The fixtures are readily removable factory or office machines
or readily removable replacements of domestic appliances that are
consumer goods.
(3) The conflicting interest is a lien on the real property
obtained by legal or equitable proceedings after the security
interest was perfected by any method permitted by this division.
(4) The security interest is both of the following:
(A) Created in a manufactured home in a manufactured home
transaction.
(B) Perfected pursuant to a statute described in paragraph (2) of
subdivision (a) of Section 9311.
(f) A security interest in fixtures, whether or not perfected, has
priority over a conflicting interest of an encumbrancer or owner of
the real property if either of the following conditions is satisfied:
(1) The encumbrancer or owner has, in an authenticated record,
consented to the security interest or disclaimed an interest in the
goods as fixtures.
(2) The debtor has a right to remove the goods as against the
encumbrancer or owner.
(g) The priority of the security interest under subdivision (f)
continues for a reasonable time if the debtor's right to remove the
goods as against the encumbrancer or owner terminates.
(h) A mortgage is a construction mortgage to the extent that it
secures an obligation incurred for the construction of an improvement
on land, including the acquisition cost of the land, if a recorded
record of the mortgage so indicates. Except as otherwise provided in
subdivisions (e) and (f), a security interest in fixtures is
subordinate to a construction mortgage if a record of the mortgage is
recorded before the goods become fixtures and the goods become
fixtures before the completion of the construction. A mortgage has
this priority to the same extent as a construction mortgage to the
extent that it is given to refinance a construction mortgage.
(i) A perfected security interest in crops growing on real
property has priority over a conflicting interest of an encumbrancer
or owner of the real property if the debtor has an interest of record
in, or is in possession of, the real property.
9335. (a) A security interest may be created in an accession and
continues in collateral that becomes an accession.
(b) If a security interest is perfected when the collateral
becomes an accession, the security interest remains perfected in the
collateral.
(c) Except as otherwise provided in subdivision (d), the other
provisions of this chapter determine the priority of a security
interest in an accession.
(d) A security interest in an accession is subordinate to a
security interest in the whole which is perfected by compliance with
the requirements of a certificate of title statute under subdivision
(b) of Section 9311.
(e) After default, subject to Chapter 6 (commencing with
subdivision 9601), a secured party may remove an accession from other
goods if the security interest in the accession has priority over
the claims of every person having an interest in the whole.
(f) A secured party that removes an accession from other goods
under subdivision (e) shall promptly reimburse any holder of a
security interest or other lien on, or owner of, the whole or of the
other goods, other than the debtor, for the cost of repair of any
physical injury to the whole or the other goods. The secured party
need not reimburse the holder or owner for any diminution in value of
the whole or the other goods caused by the absence of the accession
removed or by any necessity for replacing it. A person entitled to
reimbursement may refuse permission to remove until the secured party
gives adequate assurance for the performance of the obligation to
reimburse.
9336. (a) In this section, "commingled goods" means goods that
are physically united with other goods in such a manner that their
identity is lost in a product or mass.
(b) A security interest does not exist in commingled goods as
such. However, a security interest may attach to a product or mass
that results when goods become commingled goods.
(c) If collateral becomes commingled goods, a security interest
attaches to the product or mass.
(d) If a security interest in collateral is perfected before the
collateral becomes commingled goods, the security interest that
attaches to the product or mass under subdivision (c) is perfected.
(e) Except as otherwise provided in subdivision (f), the other
provisions of this chapter determine the priority of a security
interest that attaches to the product or mass under subdivision (c).
(f) If more than one security interest attaches to the product or
mass under subdivision (c), the following rules determine priority:
(1) A security interest that is perfected under subdivision (d)
has priority over a security interest that is unperfected at the time
the collateral becomes commingled goods.
(2) If more than one security interest is perfected under
subdivision (d), the security interests rank equally in proportion to
value of the collateral at the time it became commingled goods.
9337. If, while a security interest in goods is perfected by any
method under the law of another jurisdiction, this state issues a
certificate of title that does not show that the goods are subject to
the security interest or contain a statement that they may be
subject to security interests not shown on the certificate both of
the following apply:
(1) A buyer of the goods, other than a person in the business of
selling goods of that kind, takes free of the security interest if
the buyer gives value and receives delivery of the goods after
issuance of the certificate and without knowledge of the security
interest.
(2) The security interest is subordinate to a conflicting security
interest in the goods that attaches, and is perfected under
subdivision (b) of Section 9311, after issuance of the certificate
and without the conflicting secured party's knowledge of the security
interest.
9338. If a security interest or agricultural lien is perfected by
a filed financing statement providing information described in
paragraph (5) of subdivision (b) of Section 9516 which is incorrect
at the time the financing statement is filed both of the following
apply:
(1) The security interest or agricultural lien is subordinate to a
conflicting perfected security interest in the collateral to the
extent that the holder of the conflicting security interest gives
value in reasonable reliance upon the incorrect information.
(2) A purchaser, other than a secured party, of the collateral
takes free of the security interest or agricultural lien to the
extent that, in reasonable reliance upon the incorrect information,
the purchaser gives value and, in the case of chattel paper,
documents, goods, instruments, or a security certificate, receives
delivery of the collateral.
9339. This division does not preclude subordination by agreement
by a person entitled to priority.
9340. (a) Except as otherwise provided in subdivision (c), a bank
with which a deposit account is maintained may exercise any right of
recoupment or setoff against a secured party that holds a security
interest in the deposit account.
(b) Except as otherwise provided in subdivision (c), the
application of this division to a security interest in a deposit
account does not affect a right of recoupment or setoff of the
secured party as to a deposit account maintained with the secured
party.
(c) The exercise by a bank of a setoff against a deposit account
is ineffective against a secured party that holds a security interest
in the deposit account which is perfected by control under paragraph
(3) of subdivision (a) of Section 9104, if the setoff is based on a
claim against the debtor.
9341. Except as otherwise provided in subdivision (c) of Section
9340, and unless the bank otherwise agrees in an authenticated
record, a bank's rights and duties with respect to a deposit account
maintained with the bank are not terminated, suspended, or modified
by any of the following:
(1) The creation, attachment, or perfection of a security interest
in the deposit account.
(2) The bank's knowledge of the security interest.
(3) The bank's receipt of instructions from the secured party.
9342. This division does not require a bank to enter into an
agreement of the kind described in paragraph (2) of subdivision (a)
of Section 9104, even if its customer so requests or directs. A bank
that has entered into such an agreement is not required to confirm
the existence of the agreement to another person unless requested to
do so by its customer.
CHAPTER 4. RIGHTS OF THIRD PARTIES
9401. (a) Except as otherwise provided in subdivision (b) and in
Sections 9406, 9407, 9408, and 9409, whether a debtor's rights in
collateral may be voluntarily or involuntarily transferred is
governed by law other than this division.
(b) An agreement between the debtor and secured party which
prohibits a transfer of the debtor's rights in collateral or makes
the transfer a default does not prevent the transfer from taking
effect.
9402. The existence of a security interest, agricultural lien, or
authority given to a debtor to dispose of or use collateral, without
more, does not subject a secured party to liability in contract or
tort for the debtor's acts or omissions.
9403. (a) In this section, "value" has the meaning provided in
subdivision (a) of Section 3303.
(b) Except as otherwise provided in this section, an agreement
between an account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may have
against the assignor is enforceable by an assignee that takes an
assignment that satisfies all of the following conditions:
(1) It is taken for value.
(2) It is taken in good faith.
(3) It is taken without notice of a claim of a property or
possessory right to the property assigned.
(4) It is taken without notice of a defense or claim in recoupment
of the type that may be asserted against a person entitled to
enforce a negotiable instrument under subdivision (a) of Section
3305.
(c) Subdivision (b) does not apply to defenses of a type that may
be asserted against a holder in due course of a negotiable instrument
under subdivision (b) of Section 3305.
(d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the rights of an
assignee are subject to claims or defenses that the account debtor
could assert against the original obligee, and the record does not
include such a statement, then both of the following apply:
(1) The record has the same effect as if the record included such
a statement.
(2) The account debtor may assert against an assignee those claims
and defenses that would have been available if the record included
such a statement.
(e) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
(f) Except as otherwise provided in subdivision (d), this section
does not displace law other than this division which gives effect to
an agreement by an account debtor not to assert a claim or defense
against an assignee.
9404. (a) Unless an account debtor has made an enforceable
agreement not to assert defenses or claims, and subject to
subdivisions (b) to (e), inclusive, the rights of an assignee are
subject to both of the following:
(1) All terms of the agreement between the account debtor and
assignor and any defense or claim in recoupment arising from the
transaction that gave rise to the contract.
(2) Any other defense or claim of the account debtor against the
assignor which accrues before the account debtor receives a
notification of the assignment authenticated by the assignor or the
assignee.
(b) Subject to subdivision (c) and except as otherwise provided in
subdivision (d), the claim of an account debtor against an assignor
may be asserted against an assignee under subdivision (a) only to
reduce the amount the account debtor owes.
(c) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
(d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the account debtor's
recovery against an assignee with respect to claims and defenses
against the assignor may not exceed amounts paid by the account
debtor under the record,
and the record does not include such a statement, the extent to which
a claim of an account debtor against the assignor may be asserted
against an assignee is determined as if the record included such a
statement.
(e) This section does not apply to an assignment of a health care
insurance receivable.
9405. (a) A modification of or substitution for an assigned
contract is effective against an assignee if made in good faith. The
assignee acquires corresponding rights under the modified or
substituted contract. The assignment may provide that the
modification or substitution is a breach of contract by the assignor.
This subdivision is subject to subdivisions (b) to (d), inclusive.
(b) Subdivision (a) applies to the extent that either of the
following apply:
(1) The right to payment or a part thereof under an assigned
contract has not been fully earned by performance.
(2) The right to payment or a part thereof has been fully earned
by performance and the account debtor has not received notification
of the assignment under subdivision (a) of Section 9406.
(c) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
(d) This section does not apply to an assignment of a health care
insurance receivable.
9406. (a) Subject to subdivisions (b) to (i), inclusive, an
account debtor on an account, chattel paper, or a payment intangible
may discharge its obligation by paying the assignor until, but not
after, the account debtor receives a notification, authenticated by
the assignor or the assignee, that the amount due or to become due
has been assigned and that payment is to be made to the assignee.
After receipt of the notification, the account debtor may discharge
its obligation by paying the assignee and may not discharge the
obligation by paying the assignor.
(b) Subject to subdivision (h), notification is ineffective under
subdivision (a) as follows:
(1) If it does not reasonably identify the rights assigned.
(2) To the extent that an agreement between an account debtor and
a seller of a payment intangible limits the account debtor's duty to
pay a person other than the seller and the limitation is effective
under law other than this division.
(3) At the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount of any
installment or other periodic payment to the assignee, even if any of
the following conditions is satisfied:
(A) Only a portion of the account, chattel paper, or general
intangible has been assigned to that assignee.
(B) A portion has been assigned to another assignee.
(C) The account debtor knows that the assignment to that assignee
is limited.
(c) Subject to subdivision (h), if requested by the account
debtor, an assignee shall seasonably furnish reasonable proof that
the assignment has been made. Unless the assignee complies, the
account debtor may discharge its obligation by paying the assignor,
even if the account debtor has received a notification under
subdivision (a).
(d) Except as otherwise provided in subdivision (e) and in
Sections 9407 and 10303, and subject to subdivision (h), a term in an
agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it does either of
the following:
(1) Prohibits, restricts, or requires the consent of the account
debtor or person obligated on the promissory note to the assignment
or transfer of, or the creation, attachment, perfection, or
enforcement of a security interest in, the account, chattel paper,
payment intangible, or promissory note.
(2) Provides that the creation, attachment, perfection, or
enforcement of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of
termination, or remedy under the account, chattel paper, payment
intangible, or promissory note.
(e) Subdivision (d) does not apply to the sale of a payment
intangible or promissory note.
(f) Except as otherwise provided in Sections 9407 and 10303, and
subject to subdivisions (h) and (i), a rule of law, statute, or
regulation, that prohibits, restricts, or requires the consent of a
government, governmental body or official, or account debtor to the
assignment or transfer of, or creation of a security interest in, an
account or chattel paper is ineffective to the extent that the rule
of law, statute, or regulation does either of the following:
(1) Prohibits, restricts, or requires the consent of the
government, governmental body or official, or account debtor to the
assignment or transfer of, or the creation, attachment, perfection,
or enforcement of a security interest in, the account or chattel
paper.
(2) Provides that the creation, attachment, perfection, or
enforcement of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of
termination, or remedy under the account or chattel paper.
(g) Subject to subdivision (h), an account debtor may not waive or
vary its option under paragraph (3) of subdivision (b).
(h) This section is subject to law other than this division which
establishes a different rule for an account debtor who is an
individual and who incurred the obligation primarily for personal,
family, or household purposes.
(i) This section does not apply to an assignment of a health care
insurance receivable.
9407. (a) Except as otherwise provided in subdivision (b), a term
in a lease agreement is ineffective to the extent that it does
either of the following:
(1) Prohibits, restricts, or requires the consent of a party to
the lease to the creation, attachment, perfection, or enforcement of
a security interest in an interest of a party under the lease
contract or in the lessor's residual interest in the goods.
(2) Provides that the creation, attachment, perfection, or
enforcement of the security interest may give rise to a default,
breach, right of recoupment, claim, defense, termination, right of
termination, or remedy under the lease.
(b) Except as otherwise provided in subdivision (7) of Section
10303, a term described in paragraph (2) of subdivision (a) is
effective to the extent that there is either of the following:
(1) A transfer by the lessee of the lessee's right of possession
or use of the goods in violation of the term.
(2) A delegation of a material performance of either party to the
lease contract in violation of the term.
(c) The creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease contract
or the lessor's residual interest in the goods is not a transfer that
materially impairs the lessee's prospect of obtaining return
performance or materially changes the duty of or materially increases
the burden or risk imposed on the lessee within the purview of
subdivision (4) of Section 10303 unless, and then only to the extent
that, enforcement actually results in a delegation of material
performance of the lessor. Even in that event, the creation,
attachment, perfection, and enforcement of the security interest
remain effective.
9408. (a) Except as otherwise provided in subdivision (b), a term
in a promissory note or in an agreement between an account debtor
and a debtor which relates to a health care insurance receivable or a
general intangible, including a contract, permit, license, or
franchise, and which term prohibits, restricts, or requires the
consent of the person obligated on the promissory note or the account
debtor to, the assignment or transfer of, or the creation,
attachment, or perfection of a security interest in, the promissory
note, health care insurance receivable, or general intangible, is
ineffective to the extent that the term does, or would do, either of
the following:
(1) It would impair the creation, attachment, or perfection of a
security interest.
(2) It provides that the creation, attachment, or perfection of
the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination, or
remedy under the promissory note, health care insurance receivable,
or general intangible.
(b) Subdivision (a) applies to a security interest in a payment
intangible or promissory note only if the security interest arises
out of a sale of the payment intangible or promissory note.
(c) A rule of law, statute, or regulation, which prohibits,
restricts, or requires the consent of a government, governmental body
or official, person obligated on a promissory note, or account
debtor to the assignment or transfer of, or the creation of a
security interest in, a promissory note, health care insurance
receivable, or general intangible, including a contract, permit,
license, or franchise between an account debtor and a debtor, is
ineffective to the extent that the rule of law, statute, or
regulation does, or would do, either of the following:
(1) It would impair the creation, attachment, or perfection of a
security interest.
(2) It provides that the creation, attachment, or perfection of
the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination, or
remedy under the promissory note, health care insurance receivable,
or general intangible.
(d) To the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor which relates to a
health care insurance receivable or general intangible or a rule of
law, statute, or regulation described in subdivision (c) would be
effective under law other than this division but is ineffective under
subdivision (a) or (c), all of the following rules apply with
respect to the creation, attachment, or perfection of a security
interest in the promissory note, health care insurance receivable, or
general intangible:
(1) It is not enforceable against the person obligated on the
promissory note or the account debtor.
(2) It does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor.
(3) It does not require the person obligated on the promissory
note or the account debtor to recognize the security interest, pay or
render performance to the secured party, or accept payment or
performance from the secured party.
(4) It does not entitle the secured party to use or assign the
debtor's rights under the promissory note, health care insurance
receivable, or general intangible, including any related information
or materials furnished to the debtor in the transaction giving rise
to the promissory note, health care insurance receivable, or general
intangible.
(5) It does not entitle the secured party to use, assign, possess,
or have access to any trade secrets or confidential information of
the person obligated on the promissory note or the account debtor.
(6) It does not entitle the secured party to enforce the security
interest in the promissory note, health care insurance receivable, or
general intangible.
9409. (a) A term in a letter of credit or a rule of law, statute,
regulation, custom, or practice applicable to the letter of credit
which prohibits, restricts, or requires the consent of an applicant,
issuer, or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is
ineffective to the extent that the term or rule of law, statute,
regulation, custom, or practice does, or would do, either of the
following:
(1) It would impair the creation, attachment, or perfection of a
security interest in the letter-of-credit right.
(2) It provides that the creation, attachment, or perfection of
the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination, or
remedy under the letter-of-credit right.
(b) To the extent that a term in a letter of credit is ineffective
under subdivision (a) but would be effective under law other than
this division or a custom or practice applicable to the letter of
credit, to the transfer of a right to draw or otherwise demand
performance under the letter of credit, or to the assignment of a
right to proceeds of the letter of credit, all of the following rules
apply with respect to the creation, attachment, or perfection of a
security interest in the letter-of-credit right:
(1) It is not enforceable against the applicant, issuer, nominated
person, or transferee beneficiary.
(2) It imposes no duties or obligations on the applicant, issuer,
nominated person, or transferee beneficiary.
(3) It does not require the applicant, issuer, nominated person,
or transferee beneficiary to recognize the security interest, pay or
render performance to the secured party, or accept payment or other
performance from the secured party.
CHAPTER 5. FILING
9501. (a) Except as otherwise provided in subdivision (b), if the
local law of this state governs perfection of a security interest or
agricultural lien, the office in which to file a financing statement
to perfect the security interest or agricultural lien is either of
the following:
(1) The office designated for the filing or recording of a record
of a mortgage on the related real property, if either of the
following conditions is satisfied:
(A) The collateral is as-extracted collateral or timber to be cut.
(B) The financing statement is filed as a fixture filing and the
collateral is goods that are or are to become fixtures.
(2) The office of the Secretary of State in all other cases,
including a case in which the collateral is goods that are or are to
become fixtures and the financing statement is not filed as a fixture
filing.
(b) The office in which to file a financing statement to perfect a
security interest in collateral, including fixtures, of a
transmitting utility is the office of the Secretary of State. The
financing statement also constitutes a fixture filing as to the
collateral indicated in the financing statement which is or is to
become fixtures.
9502. (a) Subject to subdivision (b), a financing statement is
sufficient only if it satisfies all of the following conditions:
(1) It provides the name of the debtor.
(2) It provides the name of the secured party or a representative
of the secured party.
(3) It indicates the collateral covered by the financing
statement.
(b) Except as otherwise provided in subdivision (b) of Section
9501, to be sufficient, a financing statement that covers
as-extracted collateral or timber to be cut, or which is filed as a
fixture filing and covers goods that are or are to become fixtures,
must satisfy subdivision (a) and also satisfy all of the following
conditions:
(1) Indicate that it covers this type of collateral.
(2) Indicate that it is to be recorded in the real property
records.
(3) Provide a description of the real property to which the
collateral is related sufficient to give constructive notice of a
mortgage under the law of this state if the description were
contained in a record of the mortgage of the real property.
(4) If the debtor does not have an interest of record in the real
property, provide the name of a record owner.
(c) A record of a mortgage is effective, from the date of
recording, as a financing statement filed as a fixture filing or as a
financing statement covering as-extracted collateral or timber to be
cut only if all of the following conditions are satisfied:
(1) The record indicates the goods or accounts that it covers.
(2) The goods are or are to become fixtures related to the real
property described in the record or the collateral is related to the
real property described in the record and is as-extracted collateral
or timber to be cut.
(3) The record complies with the requirements for a financing
statement in this section other than an indication that it is to be
filed in the real property records.
(4) The record is duly recorded.
(d) A financing statement may be filed before a security agreement
is made or a security interest otherwise attaches.
9503. (a) A financing statement sufficiently provides the name of
the debtor only if it does so in accordance with the following
rules:
(1) If the debtor is a registered organization, only if the
financing statement provides the name of the debtor indicated on the
public record of the debtor's jurisdiction of organization which
shows the debtor to have been organized.
(2) If the debtor is a decedent's estate, only if the financing
statement provides the name of the decedent and indicates that the
debtor is an estate.
(3) If the debtor is a trust or a trustee acting with respect to
property held in trust, only if the financing statement satisfies
both of the following conditions:
(A) It provides the name specified for the trust in its organic
documents or, if no name is specified, provides the name of the
settlor and additional information sufficient to distinguish the
debtor from other trusts having one or more of the same settlors.
(B) It indicates, in the debtor's name or otherwise, that the
debtor is a trust or is a trustee acting with respect to property
held in trust.
(4) In other cases, according to the following rules:
(A) If the debtor has a name, only if it provides the individual
or organizational name of the debtor.
(B) If the debtor does not have a name, only if it provides the
names of the partners, members, associates, or other persons
comprising the debtor.
(b) A financing statement that provides the name of the debtor in
accordance with subdivision (a) is not rendered ineffective by the
absence of either of the following:
(1) A trade name or other name of the debtor.
(2) Unless required under subparagraph (B) of paragraph (4) of
subdivision (a), names of partners, members, associates, or other
persons comprising the debtor.
(c) A financing statement that provides only the debtor's trade
name does not sufficiently provide the name of the debtor.
(d) Failure to indicate the representative capacity of a secured
party or representative of a secured party does not affect the
sufficiency of a financing statement.
(e) A financing statement may provide the name of more than one
debtor and the name of more than one secured party.
9504. A financing statement sufficiently indicates the collateral
that it covers only if the financing statement provides either of
the following:
(1) A description of the collateral pursuant to Section 9108.
(2) An indication that the financing statement covers all assets
or all personal property.
9505. (a) A consignor, lessor, or other bailor of goods, a
licensor, or a buyer of a payment intangible or promissory note may
file a financing statement, or may comply with a statute or treaty
described in subdivision (a) of Section 9311, using the terms
"consignor," "consignee," "lessor," "lessee," "bailor," "bailee,"
"licensor," "licensee," "owner," "registered owner," "buyer,"
"seller," or words of similar import, instead of the terms "secured
party" and "debtor."
(b) This chapter applies to the filing of a financing statement
under subdivision (a) and, as appropriate, to compliance that is
equivalent to filing a financing statement under subdivision (b) of
Section 9311, but the filing or compliance is not of itself a factor
in determining whether the collateral secures an obligation. If it
is determined for another reason that the collateral secures an
obligation, a security interest held by the consignor, lessor,
bailor, owner, or buyer which attaches to the collateral is perfected
by the filing or compliance.
9506. (a) A financing statement substantially satisfying the
requirements of this part is effective, even if it has minor errors
or omissions, unless the errors or omissions make the financing
statement seriously misleading.
(b) Except as otherwise provided in subdivision (c), a financing
statement that fails sufficiently to provide the name of the debtor
in accordance with subdivision (a) of Section 9503 is seriously
misleading.
(c) If a search of the records of the filing office under the
debtor's correct name, using the filing office's standard search
logic, if any, would disclose a financing statement that fails
sufficiently to provide the name of the debtor in accordance with
subdivision (a) of Section 9503, the name provided does not make the
financing statement seriously misleading.
(d) For purposes of subdivision (b) of Section 9508, the "debtor's
correct name" in subdivision (c) means the correct name of the new
debtor.
9507. (a) A filed financing statement remains effective with
respect to collateral that is sold, exchanged, leased, licensed, or
otherwise disposed of and in which a security interest or
agricultural lien continues, even if the secured party knows of or
consents to the disposition.
(b) Except as otherwise provided in subdivision (c) and in Section
9508, a financing statement is not rendered ineffective if, after
the financing statement is filed, the information provided in the
financing statement becomes seriously misleading under Section 9506.
(c) If a debtor so changes its name that a filed financing
statement becomes seriously misleading under Section 9506, the
following rules apply:
(1) The financing statement is effective to perfect a security
interest in collateral acquired by the debtor before, or within four
months after, the change.
(2) The financing statement is not effective to perfect a security
interest in collateral acquired by the debtor more than four months
after the change, unless an amendment to the financing statement
which renders the financing statement not seriously misleading is
filed within four months after the change.
9508. (a) Except as otherwise provided in this section, a filed
financing statement naming an original debtor is effective to perfect
a security interest in collateral in which a new debtor has or
acquires rights to the extent that the financing statement would have
been effective had the original debtor acquired rights in the
collateral.
(b) If the difference between the name of the original debtor and
that of the new debtor causes a filed financing statement that is
effective under subdivision (a) to be seriously misleading under
Section 9506, the following rules apply:
(1) The financing statement is effective to perfect a security
interest in collateral acquired by the new debtor before, and within
four months after, the new debtor becomes bound under subdivision (d)
of Section 9203.
(2) The financing statement is not effective to perfect a security
interest in collateral acquired by the new debtor more than four
months after the new debtor becomes bound under subdivision (d) of
Section 9203 unless an initial financing statement providing the name
of the new debtor is filed before the expiration of that time.
(c) This section does not apply to collateral as to which a filed
financing statement remains effective against the new debtor under
subdivision (a) of Section 9507.
9509. (a) A person may file an initial financing statement, an
amendment that adds collateral covered by a financing statement, or
an amendment that adds a debtor to a financing statement only if
either of the following conditions is satisfied:
(1) The debtor authorizes the filing in an authenticated record.
(2) The person holds an agricultural lien that has become
effective at the time of filing and the financing statement covers
only collateral in which the person holds an agricultural lien.
(b) By authenticating or becoming bound as debtor by a security
agreement, a debtor or new debtor authorizes the filing of an initial
financing statement, and an amendment, covering both of the
following:
(1) The collateral described in the security agreement.
(2) Property that becomes collateral under paragraph (2) of
subdivision (a) of Section 9315, whether or not the security
agreement expressly covers proceeds.
(c) A person may file an amendment other than an amendment that
adds collateral covered by a financing statement or an amendment that
adds a debtor to a financing statement only if either of the
following conditions is satisfied:
(1) The secured party of record authorizes the filing.
(2) The amendment is a termination statement for a financing
statement as to which the secured party of record has failed to file
or send a termination statement as required by subdivision (a) or (c)
of Section 9513, the debtor authorizes the filing, and the
termination statement indicates that the debtor authorized it to be
filed.
(d) If there is more than one secured party of record for a
financing statement, each secured party of record may authorize the
filing of an amendment under subdivision (c).
9510. (a) A filed record is effective only to the extent that it
was filed by a person that may file it under Section 9509.
(b) A record authorized by one secured party of record does not
affect the financing statement with respect to another secured party
of record.
(c) A continuation statement that is not filed within the
six-month period prescribed by subdivision (d) of Section 9515 is
ineffective.
9511. (a) A secured party of record with respect to a financing
statement is a person whose name is provided as the name of the
secured party or a representative of the secured party in an initial
financing statement that has been filed. If an initial financing
statement is filed under subdivision (a) of Section 9514, the
assignee named in the initial financing statement is the secured
party of record with respect to the financing statement.
(b) If an amendment of a financing statement which provides the
name of a person as a secured party or a representative of a secured
party is filed, the person named in the amendment is a secured party
of record. If an amendment is filed under subdivision (b) of Section
9514, the assignee named in the amendment is a secured party of
record.
(c) A person remains a secured party of record until the filing of
an amendment of the financing statement which deletes the person.
9512. (a) Subject to Section 9509, a person may add or delete
collateral covered by, continue or terminate the effectiveness of,
or, subject to subdivision (e), otherwise amend the information
provided in, a financing statement by filing an amendment that does
both of the
following:
(1) Identifies, by its file number, the initial financing
statement to which the amendment relates.
(2) If the amendment relates to an initial financing statement
filed or recorded in a filing office described in paragraph (1) of
subdivision (a) of Section 9501, provides the date that the initial
financing statement was filed or recorded and the information
specified in subdivision (b) of Section 9502.
(b) Except as otherwise provided in Section 9515, the filing of an
amendment does not extend the period of effectiveness of the
financing statement.
(c) A financing statement that is amended by an amendment that
adds collateral is effective as to the added collateral only from the
date of the filing of the amendment.
(d) A financing statement that is amended by an amendment that
adds a debtor is effective as to the added debtor only from the date
of the filing of the amendment.
(e) An amendment is ineffective to the extent that it does either
of the following:
(1) It purports to delete all debtors and fails to provide the
name of a debtor to be covered by the financing statement.
(2) It purports to delete all secured parties of record and fails
to provide the name of a new secured party of record.
9513. (a) A secured party shall cause the secured party of record
for a financing statement to file a termination statement for the
financing statement if the financing statement covers consumer goods
and either of the following conditions is satisfied:
(1) There is no obligation secured by the collateral covered by
the financing statement and no commitment to make an advance, incur
an obligation, or otherwise give value.
(2) The debtor did not authorize the filing of the initial
financing statement.
(b) To comply with subdivision (a), a secured party shall cause
the secured party of record to file the termination statement in
accordance with either of the following rules:
(1) Within one month after there is no obligation secured by the
collateral covered by the financing statement and no commitment to
make an advance, incur an obligation, or otherwise give value.
(2) If earlier, within 20 days after the secured party receives an
authenticated demand from a debtor.
(c) In cases not governed by subdivision (a), within 20 days after
a secured party receives an authenticated demand from a debtor, the
secured party shall cause the secured party of record for a financing
statement to send to the debtor a termination statement for the
financing statement or file the termination statement in the filing
office if any of the following conditions is satisfied:
(1) Except in the case of a financing statement covering accounts
or chattel paper that has been sold or goods that are the subject of
a consignment, there is no obligation secured by the collateral
covered by the financing statement and no commitment to make an
advance, incur an obligation, or otherwise give value.
(2) The financing statement covers accounts or chattel paper that
has been sold but as to which the account debtor or other person
obligated has discharged its obligation.
(3) The financing statement covers goods that were the subject of
a consignment to the debtor but are not in the debtor's possession.
(4) The debtor did not authorize the filing of the initial
financing statement.
(d) Except as otherwise provided in Section 9510, upon the filing
of a termination statement with the filing office, the financing
statement to which the termination statement relates ceases to be
effective.
9514. (a) Except as otherwise provided in subdivision (c), an
initial financing statement may reflect an assignment of all of the
secured party's power to authorize an amendment to the financing
statement by providing the name and mailing address of the assignee
as the name and address of the secured party.
(b) Except as otherwise provided in subdivision (c), a secured
party of record may assign all or part of its power to authorize an
amendment to a financing statement by filing in the filing office an
amendment of the financing statement which does all of the following:
(1) Identifies, by its file number, the initial financing
statement to which it relates.
(2) Provides the name of the assignor.
(3) Provides the name and mailing address of the assignee.
(c) An assignment of record of a security interest in a fixture
covered by a record of a mortgage which is effective as a financing
statement filed as a fixture filing under subdivision (c) of Section
9502 may be made only by an assignment of record of the mortgage in
the manner provided by law of this state other than the Uniform
Commercial Code.
9515. (a) Except as otherwise provided in subdivisions (b), (e),
(f), and (g), a filed financing statement is effective for a period
of five years after the date of filing.
(b) Except as otherwise provided in subdivisions (e), (f), and
(g), an initial financing statement filed in connection with a public
finance transaction or manufactured home transaction is effective
for a period of 30 years after the date of filing if it indicates
that it is filed in connection with a public finance transaction or
manufactured home transaction.
(c) The effectiveness of a filed financing statement lapses on the
expiration of the period of its effectiveness unless before the
lapse a continuation statement is filed pursuant to subdivision (d).
Upon lapse, a financing statement ceases to be effective and any
security interest or agricultural lien that was perfected by the
financing statement becomes unperfected, unless the security interest
is perfected otherwise. If the security interest or agricultural
lien becomes unperfected upon lapse, it is deemed never to have been
perfected as against a purchaser of the collateral for value.
(d) A continuation statement may be filed only within six months
before the expiration of the five-year period specified in
subdivision (a) or the 30-year period specified in subdivision (b),
whichever is applicable.
(e) Except as otherwise provided in Section 9510, upon timely
filing of a continuation statement, the effectiveness of the initial
financing statement continues for a period of five years commencing
on the day on which the financing statement would have become
ineffective in the absence of the filing. Upon the expiration of the
five-year period, the financing statement lapses in the same manner
as provided in subdivision (c), unless, before the lapse, another
continuation statement is filed pursuant to subdivision (d).
Succeeding continuation statements may be filed in the same manner to
continue the effectiveness of the initial financing statement.
(f) If a debtor is a transmitting utility and a filed financing
statement so indicates, the financing statement is effective until a
termination statement is filed.
(g) A record of a mortgage that is effective as a financing
statement filed as a fixture filing under subdivision (c) of Section
9502 remains effective as a financing statement filed as a fixture
filing until the mortgage is released or satisfied of record or its
effectiveness otherwise terminates as to the real property.
9516. (a) Except as otherwise provided in subdivision (b),
communication of a record to a filing office and tender of the filing
fee or acceptance of the record by the filing office constitutes
filing.
(b) Filing does not occur with respect to a record that a filing
office refuses to accept because of any of the following:
(1) The record is not communicated by a method or medium of
communication authorized by the filing office.
(2) An amount equal to or greater than the applicable filing fee
is not tendered.
(3) The filing office is unable to index the record because of any
of the following:
(A) In the case of an initial financing statement, the record does
not provide a name for the debtor.
(B) In the case of an amendment or correction statement, either of
the following applies with respect to the record:
(i) It does not identify the initial financing statement as
required by Section 9512 or 9518, as applicable.
(ii) It identifies an initial financing statement whose
effectiveness has lapsed under Section 9515.
(C) In the case of an initial financing statement that provides
the name of a debtor identified as an individual or an amendment that
provides a name of a debtor identified as an individual which was
not previously provided in the financing statement to which the
record relates, the record does not identify the debtor's last name.
(D) In the case of a record filed or recorded in the filing office
described in paragraph (1) of subdivision (a) of Section 9501, the
record does not provide a sufficient description of the real property
to which it relates.
(4) In the case of an initial financing statement or an amendment
that adds a secured party of record, the record does not provide a
name and mailing address for the secured party of record.
(5) In the case of an initial financing statement or an amendment
that provides a name of a debtor which was not previously provided in
the financing statement to which the amendment relates, the record
does not do any of the following:
(A) Provide a mailing address for the debtor.
(B) Indicate whether the debtor is an individual or an
organization.
(C) If the financing statement indicates that the debtor is an
organization, provide any of the following:
(i) A type of organization for the debtor.
(ii) A jurisdiction of organization for the debtor.
(iii) An organizational identification number for the debtor or
indicate that the debtor has none.
(6) In the case of an assignment reflected in an initial financing
statement under subdivision (a) of Section 9514 or an amendment
filed under subdivision (b) of Section 9514, the record does not
provide a name and mailing address for the assignee.
(7) In the case of a continuation statement, the record is not
filed within the six-month period prescribed by subdivision (d) of
Section 9515.
(c) For purposes of subdivision (b), both of the following rules
apply:
(1) A record does not provide information if the filing office is
unable to read or decipher the information.
(2) A record that does not indicate that it is an amendment or
identify an initial financing statement to which it relates, as
required by Section 9512, 9514, or 9518, is an initial financing
statement.
(d) A record that is communicated to the filing office with tender
of the filing fee, but which the filing office refuses to accept for
a reason other than one set forth in subdivision (b), is effective
as a filed record except as against a purchaser of the collateral
which gives value in reasonable reliance upon the absence of the
record from the files.
9517. The failure of the filing office to index a record
correctly does not affect the effectiveness of the filed record.
9518. (a) A person may file in the filing office a correction
statement with respect to a record indexed there under the person's
name if the person believes that the record is inaccurate or was
wrongfully filed.
(b) A correction statement must do all of the following:
(1) Identify the record to which it relates by both of the
following:
(A) The file number assigned to the initial financing statement to
which the record relates.
(B) If the correction statement relates to a record filed or
recorded in a filing office described in paragraph (1) of subdivision
(a) of Section 9501, the date that the initial financing statement
was filed or recorded and the information specified in subdivision
(b) of Section 9502.
(2) Indicate that it is a correction statement.
(3) Provide the basis for the person's belief that the record is
inaccurate and indicate the manner in which the person believes the
record should be amended to cure any inaccuracy or provide the basis
for the person's belief that the record was wrongfully filed.
(c) The filing of a correction statement does not affect the
effectiveness of an initial financing statement or other filed
record.
9519. (a) For each record filed in a filing office, the filing
office shall do all of the following:
(1) Assign a unique number to the filed record.
(2) Create a record that bears the number assigned to the filed
record and the date and time of filing.
(3) Maintain the filed record for public inspection.
(4) Index the filed record in accordance with subdivisions (c),
(d), and (e).
(b) Except as otherwise provided in subdivision (i), a file number
assigned after January 1, 2002, must include a digit that:
(1) Is mathematically derived from or related to the other digits
of the file number.
(2) Enables the filing office to detect whether a number
communicated as the file number includes a single-digit or
transpositional error.
(c) Except as otherwise provided in subdivisions (d) and (e), the
filing office shall do both of the following:
(1) Index an initial financing statement according to the name of
the debtor and index all filed records relating to the initial
financing statement in a manner that associates with one another an
initial financing statement and all filed records relating to the
initial financing statement.
(2) Index a record that provides a name of a debtor which was not
previously provided in the financing statement to which the record
relates also according to the name that was not previously provided.
(d) If a financing statement is filed as a fixture filing or
covers as-extracted collateral or timber to be cut, it must be
recorded and the filing office shall index it in accordance with both
of the following rules:
(1) Under the names of the debtor and of each owner of record
shown on the financing statement as if they were the mortgagors under
a mortgage of the real property described.
(2) To the extent that the law of this state provides for indexing
of records of mortgages under the name of the mortgagee, under the
name of the secured party as if the secured party were the mortgagee
thereunder, or, if indexing is by description, as if the financing
statement were a record of a mortgage of the real property described.
(e) If a financing statement is filed as a fixture filing or
covers as-extracted collateral or timber to be cut, the filing office
shall index an assignment filed under subdivision (a) of Section
9514 or an amendment filed under subdivision (b) of Section 9514 in
accordance with both of the following rules:
(1) Under the name of the assignor as grantor.
(2) To the extent that the law of this state provides for indexing
a record of the assignment of a mortgage under the name of the
assignee, under the name of the assignee.
(f) The filing office shall maintain a capability to do both of
the following:
(1) Retrieve a record by the name of the debtor and by either of
the following:
(A) If the filing office is described in paragraph (1) of
subdivision (a) of Section 9501, by the file number assigned to the
initial financing statement to which the record relates and the date
that the record was filed or recorded.
(B) If the filing office is described in paragraph (2) of
subdivision (a) of Section 9501, by the file number assigned to the
initial financing statement to which the record relates.
(2) Associate and retrieve with one another an initial financing
statement and each filed record relating to the initial financing
statement.
(g) The filing office may not remove a debtor's name from the
index until one year after the effectiveness of a financing statement
naming the debtor lapses under Section 9515 with respect to all
secured parties of record.
(h) Except as otherwise provided in subdivision (i), the filing
office shall perform the acts required by subdivisions (a) to (e),
inclusive, at the time and in the manner prescribed by filing-office
rule, but not later than two business days after the filing office
receives the record in question.
(i) Subdivisions (b) and (h) do not apply to a filing office
described in paragraph (1) of subdivision (a) of Section 9501.
9520. (a) A filing office shall refuse to accept a record for
filing for a reason set forth in subdivision (b) of Section 9516 and
may refuse to accept a record for filing only for a reason set forth
in subdivision (b) of Section 9516.
(b) If a filing office refuses to accept a record for filing, it
shall communicate to the person that presented the record the fact of
and reason for the refusal and the date and time the record would
have been filed had the filing office accepted it. The communication
shall be made at the time and in the manner prescribed by
filing-office rule, but in the case of a filing office described in
paragraph (2) of subdivision (a) of Section 9501, in no event more
than two business days after the filing office receives the record.
(c) A filed financing statement satisfying subdivisions (a) and
(b) of Section 9502 is effective, even if the filing office is
required to refuse to accept it for filing under subdivision (a).
However, Section 9338 applies to a filed financing statement
providing information described in paragraph (5) of subdivision (b)
of Section 9516 which is incorrect at the time the financing
statement is filed.
(d) If a record communicated to a filing office provides
information that relates to more than one debtor, this chapter
applies as to each debtor separately.
9521. (a) A filing office that accepts written records may not
refuse to accept a written initial financing statement in the
following form and format except for a reason set forth in
subdivision (b) of Section 9516:
(b) A filing office that accepts written records may not refuse to
accept a written record in the following form and format except for
a reason set forth in subdivision (b) of Section 9516:
9522. (a) The filing office shall maintain a record of the
information provided in a filed financing statement for at least one
year after the effectiveness of the financing statement has lapsed
under Section 9515 with respect to all secured parties of record.
The record shall be retrievable by using the name of the debtor and
either of the following:
(1) If the record was filed or recorded in a filing office
described in paragraph (1) of subdivision (a) of Section 9501, by
using the file number assigned to the initial financing statement to
which the record relates and the date the record was filed or
recorded.
(2) If the record was filed in a filing office described in
paragraph (2) of subdivision (a) of Section 9501, by using the file
number assigned to the initial financing statement to which the
record relates.
(b) Except to the extent that a statute governing disposition of
public records provides otherwise, the filing office immediately may
destroy any written record evidencing a financing statement.
However, if the filing office destroys a written record, it shall
maintain another record of the financing statement which complies
with subdivision (a).
9523. (a) If a person that files a written record requests an
acknowledgment of the filing, the filing office shall send to the
person an image of the record showing the number assigned to the
record pursuant to paragraph (1) of subdivision (a) of Section 9519
and the date and time of the filing of the record. However, if the
person furnishes a copy of the record to the filing office, the
filing office may instead do both of the following:
(1) Note upon the copy the number assigned to the record pursuant
to paragraph (1) of subdivision (a) of Section 9519 and the date and
time of the filing of the record.
(2) Send the copy to the person.
(b) If a person files a record other than a written record, the
filing office shall communicate to the person an acknowledgment that
provides all of the following information:
(1) The information in the record.
(2) The number assigned to the record pursuant to paragraph (1) of
subdivision (a) of Section 9519.
(3) The date and time of the filing of the record.
(c) The filing office shall communicate or otherwise make
available in a record all of the following information to any person
that requests it:
(1) Whether there is on file on a date and time specified by the
filing office, but not a date earlier than three business days before
the filing office receives the request, any financing statement that
satisfies all of the following conditions:
(A) It designates a particular debtor or, if the request so
states, designates a particular debtor at the address specified in
the request.
(B) It has not lapsed under Section 9515 with respect to all
secured parties of record.
(C) If the request so states, it has lapsed under Section 9515 and
a record of which is maintained by the filing office under
subdivision (a) of Section 9522.
(2) The date and time of filing of each financing statement.
(3) The information provided in each financing statement.
(d) In complying with its duty under subdivision (c), the filing
office may communicate information in any medium. However, if
requested, the filing office shall communicate information by issuing
its written certificate.
(e) The filing office described in paragraph (2) of subdivision
(a) of Section 9501 shall perform the acts required by subdivisions
(a) to (d), inclusive, at the time and in the manner prescribed by
filing-office rule, but not later than two business days after the
filing office receives the request.
(f) At least weekly, the filing office described in paragraph (2)
of subdivision (a) of Section 9501 shall offer to sell or license to
the public on a nonexclusive basis, in bulk, copies of all records
filed in it under this chapter, in every medium from time to time
available to the filing office.
9524. Delay by the filing office beyond a time limit prescribed
in this chapter is excused if both of the following conditions are
satisfied:
(1) The delay is caused by interruption of communication or
computer facilities, war, emergency conditions, failure of equipment,
or other circumstances beyond control of the filing office.
(2) The filing office exercises reasonable diligence under the
circumstances.
9525. (a) Except as otherwise provided in subdivision (e), the
fee for filing and indexing a record under this chapter, other than
an initial financing statement of the kind described in subdivision
(c) of Section 9502, is as follows:
(1) Ten dollars ($10) if the record is communicated in writing and
consists of one or two pages.
(2) Twenty dollars ($20) if the record is communicated in writing
and consists of more than two pages.
(3) Five dollars ($5) if the record is communicated by another
medium authorized by a rule adopted by the filing office.
(b) Except as otherwise provided in subdivision (e), the fee for
filing and indexing an initial financing statement of the kind
described in subdivision (c) of Section 9502 is the amount specified
in subdivision (c), if applicable, plus the following amounts:
(1) $ ____ if the financing statement indicates that it is filed
in connection with a public finance transaction.
(2) $ ____if the financing statement indicates that it is filed in
connection with a manufactured home transaction.
(c) The number of names required to be indexed does not affect the
amount of the fee in subdivisions (a) and (b).
(d) The fee for responding to a request for information from the
filing office, including for issuing a certificate showing whether
there is on file any financing statement naming a particular debtor,
is as follows:
(1) Ten dollars ($10) if the request is communicated in writing.
(2) Five dollars ($5) if the request is communicated by another
medium authorized by a rule adopted by the filing office.
(e) This section does not require a fee with respect to a record
of a mortgage which is effective as a financing statement filed as a
fixture filing or as a financing statement covering as-extracted
collateral or timber to be cut under subdivision (c) of Section 9502.
However, the recording and satisfaction fees that otherwise would
be applicable to the record of the mortgage apply.
9526. (a) The Secretary of State shall adopt and publish rules to
implement this division. The filing-office rules shall be
consistent with this division.
(b) To keep the filing-office rules and practices of the filing
office in harmony with the rules and practices of filing offices in
other jurisdictions that enact substantially this chapter, and to
keep the technology used by the filing office compatible with the
technology used by filing offices in other jurisdictions that enact
substantially this chapter, the Secretary of State, so far as is
consistent with the purposes, policies, and provisions of this
division, in adopting, amending, and repealing filing-office rules,
shall do all of the following:
(1) Consult with filing offices in other jurisdictions that enact
substantially this chapter.
(2) Consult the most recent version of the Model Rules promulgated
by the International Association of Corporate Administrators or any
successor organization.
(3) Take into consideration the rules and practices of, and the
technology used by, filing offices in other jurisdictions that enact
substantially this chapter.
9527. The Secretary of State shall report annually on or before
January 31 to the Legislature on the operation of the filing office.
The report must contain a statement of the extent to which both of
the following apply:
(1) The filing-office rules are not in harmony with the rules of
filing offices in other jurisdictions that enact substantially this
chapter and the reasons for these variations.
(2) The filing-office rules are not in harmony with the most
recent version of the Model Rules promulgated by the International
Association of Corporate Administrators, or any successor
organization, and the reasons for these variations.
CHAPTER 6. DEFAULT
9601. (a) After default, a secured party has the rights provided
in this chapter and, except as otherwise provided in Section 9602,
those rights provided by agreement of the parties. A secured party
may do both of the following:
(1) Reduce a claim to judgment, foreclose, or otherwise enforce
the claim, security interest, or agricultural lien by any available
judicial procedure.
(2) If the collateral is documents, proceed either as to
the documents or as to the goods they cover.
(b) A secured party in possession of collateral or control of
collateral under Section 9104, 9105, 9106, or 9107 has the rights and
duties provided in Section 9207.
(c) The rights under subdivisions (a) and (b) are cumulative and
may be exercised simultaneously.
(d) Except as otherwise provided in subdivision (g) and in Section
9605, after default, a debtor and an obligor have the rights
provided in this chapter and by agreement of the parties.
(e) If a secured party has reduced its claim to judgment, the lien
of any levy that may be made upon the collateral by virtue of an
execution based upon the judgment relates back to the earliest of any
of the following:
(1) The date of perfection of the security interest or
agricultural lien in the collateral.
(2) The date of filing a financing statement covering the
collateral.
(3) Any date specified in a statute under which the agricultural
lien was created.
(f) A sale pursuant to an execution is a foreclosure of the
security interest or agricultural lien by judicial procedure within
the meaning of this section. A secured party may purchase at the
sale and thereafter hold the collateral free of any other
requirements of this division.
(g) Except as otherwise provided in subdivision (c) of Section
9607, this part imposes no duties upon a secured party that is a
consignor or is a buyer of accounts, chattel paper, payment
intangibles, or promissory notes.
9602. Except as otherwise provided in Section 9624, to the extent
that they give rights to a debtor or obligor and impose duties on a
secured party, the debtor or obligor may not waive or vary the rules
stated in the following listed sections:
(1) Subparagraph (C) of paragraph (4) of subdivision (b) of
Section 9207, which deals with use and operation of the collateral by
the secured party.
(2) Section 9210, which deals with requests for an accounting and
requests concerning a list of collateral and statement of account.
(3) Subdivision (c) of Section 9607, which deals with collection
and enforcement of collateral.
(4) Subdivision (a) of Section 9608 and subdivision (c) of Section
9615 to the extent that they deal with application or payment of
noncash proceeds of collection, enforcement, or disposition.
(5) Subdivision (a) of Section 9608 and subdivision (d) of Section
9615 to the extent that they require accounting for or payment of
surplus proceeds of collateral.
(6) Section 9609 to the extent that it imposes upon a secured
party that takes possession of collateral without judicial process
the duty to do so without breach of the peace.
(7) Subdivision (b) of Section 9610, and Sections 9611, 9613, and
9614, which deal with disposition of collateral.
(8) Subdivision (f) of Section 9615, which deals with calculation
of a deficiency or surplus when a disposition is made to the secured
party, a person related to the secured party, or a secondary obligor.
(9) Section 9616, which deals with explanation of the calculation
of a surplus or deficiency.
(10) Section 9620, 9621, and 9622, which deal with acceptance of
collateral in satisfaction of obligation.
(11) Section 9623, which deals with redemption of collateral.
(12) Section 9624, which deals with permissible waivers.
(13) Sections 9625 and 9626, which deal with the existence of a
deficiency and with the secured party's liability for failure to
comply with this division.
9603. (a) The parties may determine by agreement the standards
measuring the fulfillment of the rights of a debtor or obligor and
the duties of a secured party under a rule stated in Section 9602 if
the standards are not manifestly unreasonable.
(b) Subdivision (a) does not apply to the duty under Section 9609
to refrain from breaching the peace.
9604. (a) If an obligation secured by a security interest in
personal property or fixtures is also secured by an interest in real
property or an estate therein:
(1) The secured party may do any of the following:
(A) Proceed, in any sequence, (i) in accordance with the secured
party's rights and remedies in respect of real property as to the
real property security, and (ii) in accordance with this chapter as
to the personal property or fixtures.
(B) Proceed in any sequence, as to both, some, or all of the real
property and some or all of the personal property or fixtures in
accordance with the secured party's rights and remedies in respect of
the real property, by including the portion of the personal property
or fixtures selected by the secured party in the judicial or
nonjudicial foreclosure of the real property in accordance with the
procedures applicable to real property. In proceeding under this
subparagraph, (i) no provision of this chapter other than this
subparagraph, subparagraph (C) of paragraph (4), and paragraphs (7)
and (8) shall apply to any aspect of the foreclosure; (ii) a power of
sale under the deed of trust or mortgage shall be exercisable with
respect to both the real property and the personal property or
fixtures being sold; and (iii) the sale may be conducted by the
mortgagee under the mortgage or by the trustee under the deed of
trust. The secured party shall not be deemed to have elected
irrevocably to proceed as to both real property and personal property
or fixtures as provided in this subparagraph with respect to any
particular property, unless and until that particular property
actually has been disposed of pursuant to a unified sale (judicial or
nonjudicial) conducted in accordance with the procedures applicable
to real property, and then only as to the property so sold.
(C) Proceed, in any sequence, as to part of the personal property
or fixtures as provided in subparagraph (A), and as to other of the
personal property or fixtures as provided in subparagraph (B).
(2) (A) Except as otherwise provided in paragraph (3), provisions
and limitations of any law respecting real property and obligations
secured by an interest in real property or an estate therein,
including, but not limited to, Section 726 of the Code of Civil
Procedure, provisions regarding acceleration or reinstatement of
obligations secured by an interest in real property or an estate
therein, prohibitions against deficiency judgments, limitations on
deficiency judgments based on the value of the collateral,
limitations on the right to proceed as to collateral, and
requirements that a creditor resort either first or at all to its
security, do not in any way apply to either (i) any personal property
or fixtures other than personal property or fixtures as to which the
secured party has proceeded or is proceeding under subparagraph (B)
of paragraph (1), or (ii) the obligation.
(B) Pursuant to, but without limiting subparagraph (A), in the
event that an obligation secured by personal property or fixtures
would otherwise become unenforceable by reason of Section 726 of the
Code of Civil Procedure or any requirement that a creditor resort
first to its security, then, notwithstanding that section or any
similar requirement, the obligation shall nevertheless remain
enforceable to the full extent necessary to permit a secured party to
proceed against personal property or fixtures securing the
obligation in accordance with the secured party's rights and remedies
as permitted under this chapter.
(3) (A) Paragraph (2) does not limit the application of Section
580b of the Code of Civil Procedure.
(B) If the secured party commences an action, as defined in
Section 22 of the Code of Civil Procedure, and the action seeks a
monetary judgment on the debt, paragraph (2) does not prevent the
assertion by the debtor or an obligor of any right to require the
inclusion in the action of any interest in real property or an estate
therein securing the debt. If a monetary judgment on the debt is
entered in the action, paragraph (2) does not prevent the assertion
by the debtor or an obligor of the subsequent unenforceability of the
encumbrance on any interest in real property or an estate therein
securing the debt and not included in the action.
(C) Nothing in paragraph (2) shall be construed to excuse
compliance with Section 2924c of the Civil Code as a prerequisite to
the sale of real property, but that section has no application to the
right of a secured party to proceed as to personal property or
fixtures except, and then only to the extent that the secured party
is proceeding as to personal property or fixtures in a unified sale
as provided in subparagraph (B) of paragraph (1).
(D) Paragraph (2) does not deprive the debtor of the protection of
Section 580d of the Code of Civil Procedure against a deficiency
judgment following a sale of the real property collateral pursuant to
a power of sale in a deed of trust or mortgage.
(E) Paragraph (2) shall not affect, nor shall it determine the
applicability or inapplicability of, any law respecting real property
or obligations secured in whole or in part by real property with
respect to a loan or a credit sale made to any individual primarily
for personal, family, or household purposes.
(F) Paragraph (2) does not deprive the debtor or an obligor of the
protection of Section 580a of the Code of Civil Procedure following
a sale of real property collateral.
(G) If the secured party violates any statute or rule of law that
requires a creditor who holds an obligation secured by an interest in
real property or an estate therein to resort first to its security
before resorting to any property of the debtor that does not secure
the obligation, paragraph (2) does not prevent the assertion by the
debtor or an obligor of any right to require correction of the
violation, any right of the secured party to correct the violation,
or the assertion by the debtor or an obligor of the subsequent
unenforceability of the encumbrance on any interest in real property
or an estate therein securing the obligation, or the assertion by the
debtor or an obligor of the subsequent unenforceability of the
obligation except to the extent that the obligation is preserved by
subparagraph (B) of paragraph (2).
(4) If the secured party realizes proceeds from the disposition of
collateral that is personal property or fixtures, the following
provisions shall apply:
(A) The disposition of the collateral, the realization of the
proceeds, the application of the proceeds, or any one or more of the
foregoing shall not operate to cure any nonmonetary default.
(B) The disposition of the collateral, the realization of the
proceeds, the application of the proceeds, or any one or more of the
foregoing shall not operate to cure any monetary default (although
the application of the proceeds shall, to the extent of those
proceeds, satisfy the secured obligation) so as to affect in any way
the secured party's rights and remedies under this chapter with
respect to any remaining personal property or fixtures collateral.
(C) All proceeds so realized shall be applied by the secured party
to the secured obligation in accordance with the agreement of the
parties and applicable law.
(5) An action by the secured party utilizing any available
judicial procedure shall in no way be affected by omission of a
prayer for a monetary judgment on the debt. Notwithstanding Section
726 of the Code of Civil Procedure, any prohibition against splitting
causes of action or any other statute or rule of law, a judicial
action which neither seeks nor results in a monetary judgment on the
debt shall not preclude a subsequent action seeking a monetary
judgment on the debt or any other relief.
(6) As used in this subdivision, "monetary judgment on the debt"
means a judgment for the recovery from the debtor of all or part of
the principal amount of the secured obligation, including, for
purposes of this subdivision, contractual interest thereon.
"Monetary judgment on the debt" does not include a judgment which
provides only for other relief (whether or not that other relief is
secured by the collateral), such as one or more forms of nonmonetary
relief, and monetary relief ancillary to any of the foregoing, such
as attorneys' fees and costs incurred in seeking the relief.
(7) If a secured party fails to comply with the procedures
applicable to real property in proceeding as to both real and
personal property under subparagraph (B) of paragraph (1), a
purchaser for value of any interest in the real property at judicial
or nonjudicial foreclosure proceedings conducted pursuant to
subparagraph (B) of paragraph (1) takes that interest free from any
claim or interest of another person, or any defect in title, based
upon that noncompliance, unless:
(A) The purchaser is the secured party and the failure to comply
with this chapter occurred other than in good faith; or
(B) The purchaser is other than the secured party and at the time
of sale of the real property at that foreclosure the purchaser had
knowledge of the failure to comply with this chapter and that the
noncompliance occurred other than in good faith.
Even if the purchaser at the foreclosure sale does not take his or
her interest free of claims, interests, or title defects based upon
that noncompliance with this chapter, a subsequent purchaser for
value who acquires an interest in that real property from the
purchaser at that foreclosure takes that interest free from any claim
or interest of another person, or any defect in title, based upon
that noncompliance, unless at the time of acquiring the interest the
subsequent purchaser has knowledge of the failure to comply with this
chapter and that the noncompliance occurred other than in good
faith.
(8) If a secured party proceeds by way of a unified sale under
subparagraph (B) of paragraph (1), then, for purposes of applying
Section 580a or subdivision (b) of Section 726 of the Code of Civil
Procedure to any such unified sale, the personal property or fixtures
included in the unified sale shall be deemed to be included in the
"real property or other interest sold," as that term is used in
Section 580a or subdivision (b) of Section 726 of the Code of Civil
Procedure.
9605. A secured party does not owe a duty based on its status as
secured party to either of the following persons:
(1) To a person that is a debtor or obligor, unless the secured
party knows any of the following:
(A) That the person is a debtor or obligor.
(B) The identity of the person.
(C) How to communicate with the person.
(2) To a secured party or lienholder that has filed a financing
statement against a person, unless the secured party knows both of
the following:
(A) That the person is a debtor.
(B) The identity of the person.
9606. For purposes of this chapter, a default occurs in
connection with an agricultural lien at the time the secured party
becomes entitled to enforce the lien in accordance with the statute
under which it was created.
9607. (a) If so agreed, and in any event after default, a secured
party may do all of the following:
(1) Notify an account debtor or other person obligated on
collateral to make payment or otherwise render performance to or for
the benefit of the secured party.
(2) Take any proceeds to which the secured party is entitled under
Section 9315.
(3) Enforce the obligations of an account debtor or other person
obligated on collateral and exercise the rights of the debtor with
respect to the obligation of the account debtor or other person
obligated on collateral to make payment or otherwise render
performance to the debtor, and with respect to any property that
secures the obligations of the account debtor or other person
obligated on the collateral.
(4) If it holds a security interest in a deposit account perfected
by control under paragraph (1) of subdivision (a) of Section 9104,
apply the balance of the deposit account to the obligation secured by
the deposit account.
(5) If it holds a security interest in a deposit account perfected
by control under paragraph (2) or (3) of subdivision (a) of Section
9104, instruct the bank to pay the balance of the deposit account to
or for the benefit of the secured party.
(b) If necessary to enable a secured party to exercise under
paragraph (3) of subdivision (a) the right of a debtor to enforce a
mortgage nonjudicially, the secured party may record in the office in
which a record of the mortgage is recorded both of the following:
(1) A copy of the security agreement that creates or provides for
a security interest in the obligation secured by the mortgage.
(2) The secured party's sworn affidavit in recordable form stating
both of the following:
(A) That a default has occurred.
(B) That the secured party is entitled to enforce the mortgage
nonjudicially.
(c) A secured party shall proceed in a commercially reasonable
manner if both of the following apply with respect to the secured
party:
(1) It undertakes to collect from or enforce an obligation of an
account debtor or other person obligated on collateral.
(2) It is entitled to charge back uncollected collateral or
otherwise to full or limited recourse against the debtor or a
secondary obligor.
(d) A secured party may deduct from the collections made pursuant
to subdivision (c) reasonable expenses of collection and enforcement,
including reasonable attorney's fees and legal expenses incurred by
the secured party.
(e) This section does not determine whether an account debtor,
bank, or other person obligated on collateral owes a duty to a
secured party.
9608. (a) If a security interest or agricultural lien secures
payment or performance of an obligation, the following rules apply:
(1) A secured party shall apply or pay over for application the
cash proceeds of collection or enforcement under this section in the
following order to:
(A) The reasonable expenses of collection and enforcement and, to
the extent provided for by agreement and not prohibited by law,
reasonable attorney's fees and legal expenses incurred by the secured
party.
(B) The satisfaction of obligations secured by the security
interest or agricultural lien under which the collection or
enforcement is made.
(C) The satisfaction of obligations secured by any subordinate
security interest in or other lien on the collateral subject to the
security interest or agricultural lien under which the collection or
enforcement is made if the secured party receives an authenticated
demand for proceeds before distribution of the proceeds is completed.
(2) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the
interest or lien within a reasonable time. Unless the holder
complies, the secured party need not comply with the holder's demand
under subparagraph (C) of paragraph (1).
(3) A secured party need not apply or pay over for application
noncash proceeds of collection and enforcement under this section
unless the failure to do so would be commercially unreasonable. A
secured party that applies or pays over for application noncash
proceeds shall do so in a commercially reasonable manner.
(4) A secured party shall account to and pay a debtor for any
surplus, and subject to subdivision (b) of Section 9626, the obligor
is liable for any deficiency.
(b) If the underlying transaction is a sale of accounts, chattel
paper, payment intangibles, or promissory notes, the debtor is not
entitled to any surplus, and the obligor is not liable for any
deficiency. Subdivision (b) of Section 701.040 of the Code of Civil
Procedure relating to the payment of proceeds applies only if the
security agreement provides that the debtor is entitled to any
surplus.
9609. (a) After default, a secured party may do both of the
following:
(1) Take possession of the collateral.
(2) Without removal, render equipment unusable and dispose of
collateral on a debtor's premises under Section 9610.
(b) A secured party may proceed under subdivision (a) in either of
the following ways:
(1) Pursuant to judicial process.
(2) Without judicial process, if it proceeds without breach of the
peace.
(c) If so agreed, and in any event after default, a secured party
may require the debtor to assemble the collateral and make it
available to the secured party at a place to be designated by the
secured party which is reasonably convenient to both parties.
9610. (a) After default, a secured party may sell, lease,
license, or otherwise dispose of any or all of the collateral in its
present condition or following any commercially reasonable
preparation or processing.
(b) Every aspect of a disposition of collateral, including the
method, manner, time, place, and other terms, must be commercially
reasonable. If commercially reasonable, a secured party may dispose
of collateral by public or private proceedings, by one or more
contracts, as a unit or in parcels, and at any time and place and on
any terms.
(c) A secured party may purchase collateral at either of the
following:
(1) At a public disposition.
(2) At a private disposition only if the collateral is of a kind
that is customarily sold on a recognized market or the subject of
widely distributed standard price quotations.
(d) A contract for sale, lease, license, or other disposition
includes the warranties relating to title, possession, quiet
enjoyment, and the like which by operation of law accompany a
voluntary disposition of property of the kind subject to the
contract.
(e) A secured party may disclaim or modify warranties under
subdivision (d) in either of the following ways:
(1) In a manner that would be effective to disclaim or modify the
warranties in a voluntary disposition of property of the kind subject
to the contract of disposition.
(2) By communicating to the purchaser a record evidencing the
contract for disposition and including an express disclaimer or
modification of the warranties.
(f) A record is sufficient to disclaim warranties under
subdivision (e) if it indicates "There is no warranty relating to
title, possession, quiet enjoyment, or the like in this disposition"
or uses words of similar import.
9611. (a) In this section, "notification date" means the earlier
of the date on which:
(1) A secured party sends to the debtor and any secondary obligor
an authenticated notification of disposition.
(2) The debtor and any secondary obligor waive the right to
notification.
(b) Except as otherwise provided in subdivision (d), a secured
party that disposes of collateral under Section 9610 shall send to
the persons specified in subdivision (c) a reasonable authenticated
notification of disposition.
(c) To comply with subdivision (b), the secured party shall send
an authenticated notification of disposition to all of the following
persons:
(1) The debtor.
(2) Any secondary obligor.
(3) If the collateral is other than consumer goods to both of the
following persons:
(A) Any other person from which the secured party has received,
before the notification date, an authenticated notification of a
claim of an interest in the collateral.
(B) Any other secured party or lienholder that, 10 days before the
notification date, held a security interest in or other lien on the
collateral perfected by the filing of a financing statement with
respect to which all of the following apply:
(i) It identified the collateral.
(ii) It was indexed under the debtor's name as of that date.
(iii) It was filed in the office in which to file a financing
statement against the debtor covering the collateral as of that date.
(C) Any other secured party that, 10 days before the notification
date, held a security interest in the collateral perfected by
compliance with a statute, regulation, or treaty described in
subdivision (a) of Section 9311.
(d) Subdivision (b) does not apply if the collateral is perishable
or threatens to decline speedily in value or is of a type
customarily sold on a recognized market.
(e) A secured party complies with the requirement for notification
prescribed in subparagraph (B) of paragraph (3) of subsection (c) if
it satisfies both of the following conditions:
(1) Not later than 20 days or earlier than 30 days before the
notification date, the secured party requests, in a commercially
reasonable manner, information concerning financing statements
indexed under the debtor's name in the office indicated in
subparagraph (B) of paragraph (3) of subdivision (c).
(2) Before the notification date, the secured party either:
(A) Did not receive a response to the request for information.
(B) Received a response to the request for information and sent an
authenticated notification of disposition to each secured party
named in that response whose financing statement covered the
collateral.
9612. (a) Except as otherwise provided in subdivision (b),
whether a notification is sent within a reasonable time is a question
of fact.
(b) In a transaction other than a consumer transaction, a
notification of disposition sent after default and 10 days or more
before the earliest time of disposition set forth in the notification
is sent within a reasonable time before the disposition.
9613. Except in a consumer-goods transaction, the following rules
apply:
(1) The contents of a notification of disposition are sufficient
if the notification does all of the following:
(A) It describes the debtor and the secured party.
(B) It describes the collateral that is the subject of the
intended disposition.
(C) It states the method of intended disposition.
(D) It states that the debtor is entitled to an accounting of the
unpaid indebtedness and states the charge, if any, for an accounting.
(E) It states the time and place of a public sale or the time
after which any other disposition is to be made.
(2) Whether the contents of a notification that lacks any of the
information specified in paragraph (1) are nevertheless sufficient is
a question of fact.
(3) The contents of a notification providing substantially the
information specified in paragraph (1) are sufficient, even if the
notification includes either of the following:
(A) Information not specified by that paragraph.
(B) Minor errors that are not seriously misleading.
(4) A particular phrasing of the notification is not required.
(5) The following form of notification and the form appearing in
subdivision (3) of Section 9614, when completed, each provides
sufficient information:
NOTIFICATION OF DISPOSITION OF COLLATERAL
To:
__________________________________________________________________
(Name of debtor, obligor, or other person to which
the notification is sent)
From:
_______________________________________________________________
(Name, address, and telephone number of
secured party)
Name of Debtor(s):
_________________________________________________
(Include only if debtor(s) are not an
addressee)
(For a public disposition:)
We will sell (or lease or license, as applicable)
the ________________________ (to the highest qualified bidder in
public
(describe collateral)
as follows:)
Day and Date: _________________________
Time: __________________________________
Place: _________________________________
(For a private disposition:)
We will sell (or license, as applicable) the
________________________
describe
collateral
privately sometime after
___________________________________________.
(day and date)
You are entitled to an accounting of the unpaid indebtedness
secured
by the property that we intend to sell (or lease or license, as
applicable) (for a charge of $____). You may request an
accounting
by calling us at
___________________________________________________
(telephone number)
9614. In a consumer-goods transaction, the following rules apply:
(1) A notification of disposition must provide all of the
following information:
(A) The information specified in subdivision (1) of Section 9613.
(B) A description of any liability for a deficiency of the person
to which the notification is sent.
(C) A telephone number from which the amount that must be paid to
the secured party to redeem the collateral under Section 9623 is
available.
(D) A telephone number or mailing address from which additional
information concerning the disposition and the obligation secured is
available.
(2) A particular phrasing of the notification is not required.
(3) The following form of notification, when completed, provides
sufficient information:
_____________________________________________________________________
Name and address of secured party)
______________________________________
(Date)
NOTICE OF OUR PLAN TO SELL PROPERTY
_____________________________________________________________________
(Name and address of any obligor who is also a debtor)
Subject:
____________________________________________________________
(Identification of Transaction)
We have your ___________________________, because you broke
promises
(describe collateral)
in our agreement.
(For a public disposition:)
We will sell ______________________________, at public sale. A
sale
(describe collateral)
could include a lease or license. The sale will be held as
follows:
Date: ________________________________
Time: ________________________________
Place: _______________________________
You may attend the sale and bring bidders if you want.
(For a private disposition:)
We will sell _____________________________ at private sale sometime
(describe collateral)
after ___________________________________.
(date)
A sale could include a lease or license.
The money that we get from the sale (after paying our costs) will
reduce the amount you owe. If we get less money than you owe,
you _________________________________________ still owe us the
(will or will not, as applicable)
difference. If we get more money than you owe, you will get the
extra money, unless we must pay it to someone else.
You can get the property back at any time before we sell it by
paying us the full amount you owe (not just the past due payments),
including our expenses. To learn the exact amount you must pay,
call us at _______________________________________________.
(telephone number)
If you want us to explain to you in writing how we have figured
the amount that you owe us, you may call us
at ______________________ (or write us at
__________________________)
(telephone number) (secured party's
address)
and request a written explanation. (We will charge you $ ____
for the explanation if we sent you another written explanation of
the amount you owe us within the last six months.)
If you need more information about the sale call us
at _____________________ (or write us at
__________________________).
(telephone number) (secured party's address)
We are sending this notice to the following other people who
have an interest in _________________________ or who owe money
under
(describe collateral)
your agreement:
_____________________________________________________
(Names of all other debtors and obligors, if any)
(4) A notification in the form of paragraph (3) is sufficient,
even if additional information appears at the end of the form.
(5) A notification in the form of paragraph (3) is sufficient,
even if it includes errors in information not required by paragraph
(1), unless the error is misleading with respect to rights arising
under this division.
(6) If a notification under this section is not in the form of
paragraph (3), law other than this division determines the effect of
including information not required by paragraph (1).
9615. (a) A secured party shall apply or pay over for application
the cash proceeds of disposition in the following order to each of
the following:
(1) The reasonable expenses of retaking, holding, preparing for
disposition, processing, and disposing, and, to the extent provided
for by agreement and not prohibited by law, reasonable attorney's
fees and legal expenses incurred by the secured party.
(2) The satisfaction of obligations secured by the security
interest or agricultural lien under which the disposition is made.
(3) The satisfaction of obligations secured by any subordinate
security interest in or other subordinate lien on the collateral and
to the satisfaction of any subordinate attachment lien or execution
lien pursuant to subdivision (b) of Section 701.040 of the Code of
Civil Procedure if both of the following conditions are satisfied:
(A) The secured party receives from the holder of the subordinate
security interest or other lien an authenticated demand for proceeds
or notice of the levy of attachment or execution before distribution
of the proceeds is completed.
(B) In a case in which a consignor has an interest in the
collateral, the subordinate security interest or other lien is senior
to the interest of the consignor.
(4) A secured party that is a consignor of the collateral if the
secured party receives from the consignor an authenticated demand for
proceeds before distribution of the proceeds is completed.
(b) If requested by a secured party, a holder of a subordinate
security interest or other lien shall furnish reasonable proof of the
interest or lien within a reasonable time. Unless the holder does
so, the secured party need not comply with the holder's demand under
paragraph (3) of subdivision (a).
(c) A secured party need not apply or pay over for application
noncash proceeds of disposition under this section unless the failure
to do so would be commercially unreasonable. A secured party that
applies or pays over for application noncash proceeds shall do so in
a commercially reasonable manner.
(d) If the security interest under which a disposition is made
secures payment or performance of an obligation, after making the
payments and applications required by subdivision (a) and permitted
by subdivision (c), both of the following apply:
(1) Unless paragraph (4) of subdivision (a) requires the secured
party to apply or pay over cash proceeds to a consignor, the secured
party shall account to and pay a debtor for any surplus except as
provided in Section 701.040 of the Code of Civil Procedure.
(2) Subject to subdivision (b) of Section 9626, the obligor is
liable for any deficiency.
(e) (1) If the underlying transaction is a sale of accounts,
chattel paper, payment intangibles, or promissory notes, both of the
following apply:
(A) The debtor is not entitled to any surplus.
(B) The obligor is not liable for any deficiency.
(2) Subdivision (b) of Section 701.040 of the Code of Civil
Procedure relating to the payment of proceeds and the liability of
the secured party applies only if the security agreement provides
that the debtor is entitled to any surplus.
(f) The surplus or deficiency following a disposition is
calculated based on the amount of proceeds that would have been
realized in a disposition complying with this chapter to a transferee
other than the secured party, a person related to the secured party,
or a secondary obligor if both of the following apply:
(1) The transferee in the disposition is the secured party, a
person related to the secured party, or a secondary obligor.
(2) The amount of proceeds of the disposition is significantly
below the range of proceeds that a complying disposition to a person
other than the secured party, a person related to the secured party,
or a secondary obligor would have brought.
(g) The following rules apply with respect to a secured party that
receives cash proceeds of a disposition in good faith and without
knowledge that the receipt violates the rights of the holder of a
security interest or other lien that is not subordinate to the
security interest or agricultural lien under which the disposition is
made:
(1) The secured party takes the cash proceeds free of the security
interest or other lien.
(2) The secured party is not obligated to apply the proceeds of
the disposition to the satisfaction of obligations secured by the
security interest or other lien.
(3) The secured party is not obligated to account to or pay the
holder of the security interest or other lien for any surplus.
9616. (a) In this section:
(1) "Explanation" means a writing that contains all of the
following:
(A) States the amount of the surplus or deficiency.
(B) Provides an explanation in accordance with subdivision (c) of
how the secured party calculated the surplus or deficiency.
(C) States, if applicable, that future debits, credits, charges,
including additional credit service charges or interest, rebates, and
expenses may affect the amount of the surplus or deficiency.
(D) Provides a telephone number or mailing address from which
additional information concerning the transaction is available.
(2) "Request" means a record that is all of the following:
(A) Authenticated by a debtor or consumer obligor.
(B) Requesting that the recipient provide an explanation.
(C) Sent after disposition of the collateral under Section 9610.
(b) In a consumer-goods transaction in which the debtor is
entitled to a surplus or a consumer obligor is liable for a
deficiency under Section 9615, the secured party shall do either of
the following:
(1) Send an explanation to the debtor or consumer obligor, as
applicable, after the disposition and in accordance with both of the
following:
(A) Before or when the secured party accounts to the debtor and
pays any surplus or first makes written demand on the consumer
obligor after the disposition for payment of the deficiency.
(B) Within 14 days after receipt of a request.
(2) In the case of a consumer obligor who is liable for a
deficiency, within 14 days after receipt of a request, send to the
consumer obligor a record waiving the secured party's right to a
deficiency.
(c) To comply with subparagraph (B) of paragraph (1) of
subdivision (a), a writing must provide the following information in
the following order:
(1) The aggregate amount of obligations secured by the security
interest under which the disposition was made, and, if the amount
reflects a rebate of unearned interest or credit service charge, an
indication of that fact, calculated as of a specified date in
accordance with either of the following:
(A) If the secured party takes or receives possession of the
collateral after default, not more than 35 days before the secured
party takes or receives possession.
(B) If the secured party takes or receives possession of the
collateral before default or does not take possession of the
collateral, not more than 35 days before the disposition.
(2) The amount of proceeds of the disposition.
(3) The aggregate amount of the obligations after deducting the
amount of proceeds.
(4) The amount, in the aggregate or by type, and types of
expenses, including expenses of retaking, holding, preparing for
disposition, processing, and disposing of the collateral, and
attorney's fees secured by the collateral which are known to the
secured party and relate to the current disposition.
(5) The amount, in the aggregate or by type, and types of credits,
including rebates of interest or credit service charges, to which
the obligor is known to be entitled and which are not reflected in
the amount in paragraph (1).
(6) The amount of the surplus or deficiency.
(d) A particular phrasing of the explanation is not required. An
explanation complying substantially with the requirements of
subdivision (a) is sufficient, even if it includes minor errors that
are not seriously misleading.
(e) A debtor or consumer obligor is entitled without charge to one
response to a request under this section during any six-month period
in which the secured party did not send to the debtor or consumer
obligor an explanation pursuant to paragraph (1) of subdivision (b).
The secured party may require payment of a charge not exceeding
twenty-five dollars ($25) for each additional response.
9617. (a) A secured party's disposition of collateral after
default does all of the following:
(1) Transfers to a transferee for value all of the debtor's rights
in the collateral.
(2) Discharges the security interest under which the disposition
is made.
(3) Discharges any subordinate security interest or other
subordinate lien.
(b) A transferee that acts in good faith takes free of the rights
and interests described in subdivision (a), even if the secured party
fails to comply with this division or the requirements of any
judicial proceeding.
(c) If a transferee does not take free of the rights and interests
described in subdivision (a), the transferee takes the collateral
subject to all of the following:
(1) The debtor's rights in the collateral.
(2) The security interest or agricultural lien under which the
disposition is made.
(3) Any other security interest or other lien.
9618. (a) A secondary obligor acquires the rights and becomes
obligated to perform the duties of the secured party after any of the
following occurs:
(1) The secondary obligor receives an assignment of a secured
obligation from the secured party.
(2) The secondary obligor receives a transfer of collateral from
the secured party and agrees to accept the rights and assume the
duties of the secured party.
(3) The secondary obligor is subrogated to the rights of a secured
party with respect to collateral.
(b) Both of the following rules apply with respect to an
assignment, transfer, or subrogation described in subdivision (a):
(1) It is not a disposition of collateral under Section 9610.
(2) It relieves the secured party of further duties under this
division.
9619. (a) In this section, "transfer statement" means a record
authenticated by a secured party stating all of the following:
(1) That the debtor has defaulted in connection with an obligation
secured by specified collateral.
(2) That the secured party has exercised its postdefault remedies
with respect to the collateral.
(3) That, by reason of the exercise, a transferee has acquired the
rights of the debtor in the collateral.
(4) The name and mailing address of the secured party, debtor, and
transferee.
(b) A transfer statement entitles the transferee to the transfer
of record of all rights of the debtor in the collateral specified in
the statement in any official filing, recording, registration, or
certificate of title system covering the collateral. If a transfer
statement is presented with the applicable fee and request form to
the official or office responsible for maintaining the system, the
official or office shall do all of the following:
(1) Accept the transfer statement.
(2) Promptly amend its records to reflect the transfer.
(3) If applicable, issue a new appropriate certificate of title in
the name of the transferee.
(c) A transfer of the record or legal title to collateral to a
secured party under subdivision (b) or otherwise is not of itself a
disposition of collateral under this division and does not of itself
relieve the secured party of its duties under this division.
9620. (a) Except as otherwise provided in subdivision (g), a
secured party may accept collateral in full or partial satisfaction
of the obligation it secures only if all of the following conditions
are satisfied:
(1) The debtor consents to the acceptance under subdivision (c).
(2) The secured party does not receive, within the time set forth
in subdivision (d), a notification of objection to the proposal
authenticated by either of the following:
(A) A person to which the secured party was required to send a
proposal under Section 9621.
(B) Any other person, other than the debtor, holding an interest
in the collateral subordinate to the security interest that is the
subject of the proposal.
(3) If the collateral is consumer goods, the collateral is not in
the possession of the debtor when the debtor consents to the
acceptance.
(4) Subdivision (e) does not require the secured party to dispose
of the collateral or the debtor waives the requirement pursuant to
Section 9624.
(b) A purported or apparent acceptance of collateral under this
section is ineffective unless both of the following conditions are
satisfied:
(1) The secured party consents to the acceptance in an
authenticated record or sends a proposal to the debtor.
(2) The conditions of subdivision (a) are met.
(c) For purposes of this section both of the following rules
apply:
(1) A debtor consents to an acceptance of collateral in partial
satisfaction of the obligation it secures only if the debtor agrees
to the terms of the acceptance in a record authenticated after
default.
(2) A debtor consents to an acceptance of collateral in full
satisfaction of the obligation it secures only if the debtor agrees
to the terms of the acceptance in a record authenticated after
default or the secured party does all of the following:
(A) Sends to the debtor after default a proposal that is
unconditional or subject only to a condition that collateral not in
the possession of the secured party be preserved or maintained.
(B) In the proposal, proposes to accept collateral in full
satisfaction of the obligation it secures.
(C) Does not receive a notification of objection authenticated by
the debtor within 20 days after the proposal is sent.
(d) To be effective under paragraph (2) of subdivision (a), a
notification of objection must be received by the secured party as
follows:
(1) In the case of a person to which the proposal was sent
pursuant to Section 9621, within 20 days after notification was sent
to that person.
(2) In other cases, in accordance with either of the following:
(A) Within 20 days after the last notification was sent pursuant
to Section 9621.
(B) If a notification was not sent, before the debtor consents to
the acceptance under subdivision (c).
(e) A secured party that has taken possession of collateral shall
dispose of the collateral pursuant to Section 9610 within the time
specified in subdivision (f) if either of the following conditions
has been satisfied:
(1) Sixty percent of the cash price has been paid in the case of a
purchase money security interest in consumer goods.
(2) Sixty percent of the principal amount of the obligation
secured has been paid in the case of a nonpurchase money security
interest in consumer goods.
(f) To comply with subdivision (e), the secured party shall
dispose of the collateral within either of the following time
periods:
(1) Within 90 days after taking possession.
(2) Within any longer period to which the debtor and all secondary
obligors have agreed in an agreement to that effect entered into and
authenticated after default.
(g) In a consumer transaction, a secured party may not accept
collateral in partial satisfaction of the obligation it secures.
9621. (a) A secured party that desires to accept collateral in
full or partial satisfaction of the obligation it secures shall send
its proposal to all of the following persons:
(1) Any person from which the secured party has received, before
the debtor consented to the acceptance, an authenticated notification
of a claim of an interest in the collateral.
(2) Any other secured party or lienholder that, 10 days before the
debtor consented to the acceptance, held a security interest in or
other lien on the collateral perfected by the filing of a financing
statement that satisfied all of the following conditions:
(A) It identified the collateral.
(B) It was indexed under the debtor's name as of that date.
(C) It was filed in the office or offices in which to file a
financing statement against the debtor covering the collateral as of
that date.
(3) Any other secured party that, 10 days before the debtor
consented to the acceptance, held a security interest in the
collateral perfected by compliance with a statute, regulation, or
treaty described in subdivision (a) of Section 9311.
(b) A secured party that desires to accept collateral in partial
satisfaction of the obligation it secures shall send its proposal to
any secondary obligor in addition to the persons described in
subdivision (a).
9622. (a) A secured party's acceptance of collateral in full or
partial satisfaction of the obligation it secures does all of the
following:
(1) It discharges the obligation to the extent consented to by the
debtor.
(2) It transfers to the secured party all of a debtor's rights in
the collateral.
(3) It discharges the security interest or agricultural lien that
is the subject of the debtor's consent and any subordinate security
interest or other subordinate lien.
(4) It terminates any other subordinate interest.
(b) A subordinate interest is discharged or terminated under
subdivision (a), even if the secured party fails to comply with this
division.
9623. (a) A debtor, any secondary obligor, or any other secured
party or lienholder may redeem collateral.
(b) To redeem collateral, a person shall tender both of the
following:
(1) Fulfillment of all obligations secured by the collateral.
(2) The reasonable expenses and attorney's fees described in
paragraph (1) of subdivision (a) of Section 9615.
(c) A redemption may occur at any time before a secured party has
done any of the following:
(1) Collected collateral under Section 9607.
(2) Disposed of collateral or entered into a contract for its
disposition under Section 9610.
(3) Accepted collateral in full or partial satisfaction of the
obligation it secures under Section 9622.
9624. (a) A debtor or secondary obligor may waive the right to
notification of disposition of collateral under Section 9611 only by
an agreement to that effect entered into and authenticated after
default.
(b) A debtor may waive the right to require disposition of
collateral under subdivision (e) of Section 9620 only by an agreement
to that effect entered into and authenticated after default.
(c) Except in a consumer-goods transaction, a debtor or secondary
obligor may waive the right to redeem collateral under Section 9623
only by an agreement to that effect entered into and authenticated
after default.
9625. (a) If it is established that a secured party is not
proceeding in accordance with this division, a court may order or
restrain collection, enforcement, or disposition of collateral on
appropriate terms and conditions.
(b) Subject to subdivisions (c), (d), and (f), a person is liable
for damages in the amount of any loss caused by a failure to comply
with this division. Loss caused by a failure to comply with a
request under Section 9210 may include loss resulting from the debtor'
s inability to obtain, or increased costs of, alternative financing.
(c) Except as otherwise provided in Section 9628, a person that,
at the time of the failure, was a debtor, was an obligor, or held a
security interest in or other lien on the collateral may recover
damages under subdivision (b) for its loss.
(d) A debtor whose deficiency is eliminated under Section 9626 may
recover damages for the loss of any surplus. However, in a
transaction other than a consumer transaction, a debtor or secondary
obligor whose deficiency is eliminated or reduced under Section 9626
may not otherwise recover under subdivision (b) for noncompliance
with the provisions of this chapter relating to collection,
enforcement, disposition, or acceptance.
(e) In addition to any damages recoverable under subdivision (b),
the debtor, consumer obligor, or person named as a debtor in a filed
record, as applicable, may recover five hundred dollars ($500) in
each case from any of the following persons:
(1) A person that fails to comply with Section 9208.
(2) A person that fails to comply with Section 9209.
(3) A person that files a record that the person is not entitled
to file under subdivision (a) of Section 9509.
(4) A person that fails to cause the secured party of record to
file or send a termination statement as required by subdivision (a)
or (c) of Section 9513.
(5) A person that fails to comply with paragraph (1) of
subdivision (b) of Section 9616 and whose failure is part of a
pattern, or consistent with a practice, of noncompliance.
(6) A person that fails to comply with paragraph (2) of
subdivision (b) of Section 9616.
(f) A debtor or consumer obligor may recover damages under
subdivision (b) and, in addition, five hundred dollars ($500) in each
case from a person that, without reasonable cause, fails to comply
with a request under Section 9210. A recipient of a request under
Section 9210 which never claimed an interest in the collateral or
obligations that are the subject of a request under that section has
a reasonable excuse for failure to comply with the request within the
meaning of this subdivision.
(g) If a secured party fails to comply with a request regarding a
list of collateral or a statement of account under Section 9210, the
secured party may claim a security interest only as shown in the
statement included in the request as against a person that is
reasonably misled by the failure.
9626. (a) In an action arising from a transaction, other than a
consumer transaction, in which the amount of a deficiency or surplus
is in issue, the following rules apply:
(1) A secured party need not prove compliance with the provisions
of this chapter relating to collection, enforcement, disposition, or
acceptance unless the debtor or a secondary obligor places the
secured party's compliance in issue.
(2) If the secured party's compliance is placed in issue, the
secured party has the burden of establishing that the collection,
enforcement, disposition, or acceptance was conducted in accordance
with this chapter.
(3) Except as otherwise provided in Section 9628, if a secured
party fails to prove that the collection, enforcement, disposition,
or acceptance was conducted in accordance with the provisions of this
chapter relating to collection, enforcement, disposition, or
acceptance, the liability of a debtor or a secondary obligor for a
deficiency is limited to an amount by which the sum of the secured
obligation, expenses, and attorney's fees exceeds the greater of
either of the following:
(A) The proceeds of the collection, enforcement, disposition, or
acceptance.
(B) The amount of proceeds that would have been realized had the
noncomplying secured party proceeded in accordance with the
provisions of this chapter relating to collection, enforcement,
disposition, or acceptance.
(4) For purposes of subparagraph (B) of paragraph (3), the amount
of proceeds that would have been realized is equal to the sum of the
secured obligation, expenses, and attorney's fees unless the secured
party proves that the amount is less than that sum.
(5) If a deficiency or surplus is calculated under subdivision (f)
of Section 9615, the debtor or obligor has the burden of
establishing that the amount of proceeds of the disposition is
significantly below the range of prices that a complying disposition
to a person other than the secured party, a person related to the
secured party, or a secondary obligor would have brought.
(b) In a consumer transaction, the following rules apply:
(1) In an action in which a deficiency or a surplus is in issue:
(A) A secured party has the burden of proving compliance with the
provisions of this chapter relating to collection, enforcement,
disposition, and acceptance whether or not the debtor or a secondary
obligor places the secured party's compliance in issue.
(B) If a deficiency or surplus is calculated under subdivision (f)
of Section 9615, the secured party has the burden of establishing
that the amount of proceeds of the disposition is not significantly
below the range of prices that a complying disposition to a person
other than the secured party, a person related to the secured party,
or a secondary obligor would have brought.
(2) The debtor or any secondary obligor is liable for any
deficiency only if all of the following conditions are met:
(A) It is not otherwise agreed or otherwise provided in the Retail
Installment Sales Act (Chapter 1 (commencing with Section 1801),
Title 2, Part 4, Division 3, Civil Code), and, in particular, Section
1812.5 of the Civil Code or any other statute.
(B) The debtor and obligor were given notice, in accordance with
Section 9611, 9612, and 9613 or Sections
9611, 9612, and 9613, or Section 9614, as applicable, of the
disposition of the collateral.
(C) The collection, enforcement, disposition, and acceptance by
the secured party were conducted in good faith and in a commercially
reasonable manner.
(3) Upon entry of a final judgment that the debtor or obligor is
not liable for a deficiency by reason of paragraph (2) or subdivision
(f) of Section 9615, the secured party may neither obtain a
deficiency judgment nor retain a security interest in any other
collateral of the debtor or obligor that secured the indebtedness for
which the debtor or obligor is no longer liable.
(4) If, subsequent to a disposition that does not satisfy any one
or more of the conditions set forth in paragraph (2), or subsequent
to a disposition that is subject to subdivision (f) of Section 9615,
the secured party disposes pursuant to this section of other
collateral securing the same indebtedness, the debtor or obligor may,
to the extent he or she is no longer liable for a deficiency
judgment by reason of paragraph (2) or subdivision (f) of Section
9615, recover the proceeds realized from the subsequent dispositions,
as well as any damages to which the debtor may be entitled if the
subsequent disposition is itself noncomplying or otherwise wrongful.
(5) Nothing herein shall deprive the debtor of any right to
recover damages from the secured party under subdivision (a) of
Section 9625, or to offset any such damages against any claim by the
secured party for a deficiency, or of any right or remedy to which
the debtor may be entitled under any other law. A debtor or obligor
in a consumer transaction shall not have any damages owed to it
reduced by the amount of any deficiency that would have resulted had
the disposition of the collateral by the secured party been conducted
in conformity with this division.
(6) The secured party shall account to the debtor for any surplus,
except as provided in Section 701.040 of the Code of Civil
Procedure.
9627. (a) The fact that a greater amount could have been obtained
by a collection, enforcement, disposition, or acceptance at a
different time or in a different method from that selected by the
secured party is not of itself sufficient to preclude the secured
party from establishing that the collection, enforcement,
disposition, or acceptance was made in a commercially reasonable
manner.
(b) A disposition of collateral is made in a commercially
reasonable manner if the disposition satisfies any of the following
conditions:
(1) It is made in the usual manner on any recognized market.
(2) It is made at the price current in any recognized market at
the time of the disposition.
(3) It is made otherwise in conformity with reasonable commercial
practices among dealers in the type of property that was the subject
of the disposition.
(c) A collection, enforcement, disposition, or acceptance is
commercially reasonable if it has been approved in or by any of the
following:
(1) In a judicial proceeding.
(2) By a bona fide creditors' committee.
(3) By a representative of creditors.
(4) By an assignee for the benefit of creditors.
(d) Approval under subdivision (c) need not be obtained, and lack
of approval does not mean that the collection, enforcement,
disposition, or acceptance is not commercially reasonable.
9628. (a) Unless a secured party knows that a person is a debtor
or obligor, knows the identity of the person, and knows how to
communicate with the person both of the following rules apply:
(1) The secured party is not liable to the person, or to a secured
party or lienholder that has filed a financing statement against the
person, for failure to comply with this division.
(2) The secured party's failure to comply with this division does
not affect the liability of the person for a deficiency.
(b) A secured party is not liable because of its status as secured
party to either of the following persons:
(1) To a person that is a debtor or obligor, unless the secured
party knows all of the following:
(A) That the person is a debtor or obligor.
(B) The identity of the person.
(C) How to communicate with the person.
(2) To a secured party or lienholder that has filed a financing
statement against a person, unless the secured party knows both of
the following:
(A) That the person is a debtor.
(B) The identity of the person.
(c) A secured party is not liable to any person, and a person's
liability for a deficiency is not affected, because of any act or
omission arising out of the secured party's reasonable belief that a
transaction is not a consumer-goods transaction or a consumer
transaction or that goods are not consumer goods, if the secured
party's belief is based on its reasonable reliance on either of the
following representations:
(1) A debtor's representation concerning the purpose for which
collateral was to be used, acquired, or held.
(2) An obligor's representation concerning the purpose for which a
secured obligation was incurred.
(d) A secured party is not liable to any person under paragraph
(2) of subdivision (c) of Section 9625 for its failure to comply with
Section 9616.
(e) A secured party is not liable under paragraph (2) of
subdivision (c) of Section 9625 more than once with respect to any
one secured obligation.
9629. No renunciation or modification by the debtor of any of his
or her rights under this chapter as to consumer goods shall be valid
or enforceable unless the renunciation or modification is in
consideration of a waiver by the secured party of any right to a
deficiency on the debt.
CHAPTER 7. TRANSITION
9701. This division shall become operative on July 1, 2001.
9702. (a) Except as otherwise provided in this chapter, this
division applies to a transaction or lien within its scope, even if
the transaction or lien was entered into or created before this
division takes effect.
(b) Except as otherwise provided in subdivision (c) and in
Sections 9703 to 9708, inclusive, both of the following rules apply:
(1) Transactions and liens that were not governed by former
Division 9, were validly entered into or created before July 1, 2001,
and would be subject to this act if they had been entered into or
created after July 1, 2001, and the rights, duties, and interests
flowing from those transactions and liens remain valid after July 1,
2001.
(2) The transactions and liens may be terminated, completed,
consummated, and enforced as required or permitted by this division
or by the law that otherwise would apply if this division had not
taken effect.
(c) This division does not affect an action, case, or proceeding
commenced before July 1, 2001.
9703. (a) A security interest that is enforceable immediately
before July 1, 2001, and would have priority over the rights of a
person that becomes a lien creditor at that time is a perfected
security interest under this division if, on July 1, 2001, the
applicable requirements for enforceability and perfection under this
division are satisfied without further action.
(b) Except as otherwise provided in Section 9705, if, immediately
before July 1, 2001, a security interest is enforceable and would
have priority over the rights of a person that becomes a lien
creditor at that time, but the applicable requirements for
enforceability or perfection under this division are not satisfied on
July 1, 2001, when all of the following rules apply with respect to
the security interest:
(1) It is a perfected security interest until July 1, 2002.
(2) It remains enforceable thereafter only if the security
interest becomes enforceable under Section 9203 before July 1, 2002.
(3) It remains perfected thereafter only if the applicable
requirements for perfection under this division are satisfied before
July 1, 2002.
9704. All of the following rules apply with respect to a security
interest that is enforceable immediately before July 1, 2001, but
which would be subordinate to the rights of a person that becomes a
lien creditor at that time:
(1) It remains an enforceable security interest until July 1,
2002.
(2) It remains enforceable thereafter if the security interest
becomes enforceable under Section 9203 on July 1, 2001, or on July 1,
2002.
(3) It becomes perfected in either of the following ways:
(A) Without further action, on July 1, 2001, if the applicable
requirements for perfection under this division are satisfied on or
before that time.
(B) When the applicable requirements for perfection are satisfied
if the requirements are satisfied after that time.
9705. (a) If action, other than the filing of a financing
statement, is taken before July 1, 2001, and the action would have
resulted in priority of a security interest over the rights of a
person that becomes a lien creditor had the security interest become
enforceable before July 1, 2001, the action is effective to perfect a
security interest that attaches under this division on or before
July 1, 2002. An attached security interest becomes unperfected on
July 1, 2002, unless the security interest becomes a perfected
security interest under this division before that date.
(b) The filing of a financing statement before July 1, 2001, is
effective to perfect a security interest to the extent the filing
would satisfy the applicable requirements for perfection under this
division.
(c) This division does not render ineffective an effective
financing statement that is filed before July 1, 2001, and that has
satisfied the applicable requirements for perfection under the law of
the jurisdiction governing perfection as provided in former Section
9103. However, except as otherwise provided in subdivisions (d) and
(e) and in Section 9706, the financing statement ceases to be
effective at the earlier of either of the following:
(1) The time the financing statement would have ceased to be
effective under the law of the jurisdiction in which it is filed.
(2) June 30, 2006.
(d) The filing of a continuation statement after July 1, 2001,
does not continue the effectiveness of the financing statement filed
before July 1, 2001. However, upon the timely filing of a
continuation statement after July 1, 2001, and in accordance with the
law of the jurisdiction governing perfection as provided in Chapter
3 (commencing with Section 9301), the effectiveness of a financing
statement filed in the same office in that jurisdiction before July
1, 2001, continues for the period provided by the law of that
jurisdiction.
(e) Paragraph (2) of subdivision (c) applies to a financing
statement that is filed against a transmitting utility before July 1,
2001, and that has satisfied the applicable requirements for
perfection under the law of the jurisdiction governing perfection as
provided in former Section 9103 only to the extent that Chapter 3
(commencing with Section 9301) provides that the law of a
jurisdiction other than jurisdiction in which the financing statement
is filed governs perfection of a security interest in collateral
covered by the financing statement.
(f) A financing statement that includes a financing statement
filed before July 1, 2001, and a continuation statement filed after
July 1, 2001, is effective only to the extent that it satisfies the
requirements of Chapter 5 (commencing with Section 9501) for an
initial financing statement.
9706. (a) The filing of an initial financing statement in the
office specified in Section 9501 continues the effectiveness of a
financing statement filed before July 1, 2001, if all of the
following conditions are satisfied:
(1) The filing of an initial financing statement in that office
would be effective to perfect a security interest under this
division.
(2) The pre-effective-date financing statement was filed in an
office in another state or another office in this state.
(3) The initial financing statement satisfies subdivision (c).
(b) The filing of an initial financing statement under subdivision
(a) continues the effectiveness of the pre-effective-date financing
statement for the following periods:
(1) If the initial financing statement is filed before July 1,
2001, for the period provided in former Section 9403 with respect to
a financing statement.
(2) If the initial financing statement is filed after July 1,
2001, for the period provided in Section 9515 with respect to an
initial financing statement.
(c) To be effective for purposes of subdivision (a), an initial
financing statement must do all of the following:
(1) Satisfy the requirements of Chapter 5 (commencing with Section
9501) for an initial financing statement.
(2) Identify the pre-effective-date financing statement by
indicating the office in which the financing statement was filed and
providing the dates of filing and file numbers, if any, of the
financing statement and of the most recent continuation statement
filed with respect to the financing statement.
(3) Indicate that the pre-effective-date financing statement
remains effective.
9707. A person may file an initial financing statement or a
continuation statement under this chapter if both of the following
conditions are satisfied:
(1) The secured party of record authorizes the filing.
(2) The filing is necessary under this chapter to do either of the
following:
(A) To continue the effectiveness of a financing statement filed
before July 1, 2001.
(B) To perfect or continue the perfection of a security interest.
9708. (a) This division determines priority of conflicting claims
to collateral. However, if the relative priorities of the claims
were established before July 1, 2001, former Division 9 (commencing
with Section 9101) determines priority.
(b) For purposes of subdivision (a) of Section 9322, the priority
of a security interest that becomes enforceable under Section 9203
dates from July 1, 2001, if the security interest is perfected under
this division by the filing of a financing statement before July 1,
2001, which would not have been effective to perfect the security
interest under former Division 9 (commencing with Section 9101).
This subdivision does not apply to conflicting security interests
each of which is perfected by the filing of such a financing
statement.
SEC. 36. Section 10103 of the Commercial Code is amended to read:
10103. (a) In this division, unless the context otherwise
requires:
(1) "Buyer in ordinary course of business" means a person who, in
good faith and without knowledge that the sale to him or her is in
violation of the ownership rights or security interest or leasehold
interest of a third party in the goods, buys in ordinary course from
a person in the business of selling goods of that kind, but does not
include a pawnbroker. "Buying" may be for cash or by exchange of
other property or on secured or unsecured credit and includes
receiving goods or documents of title under a preexisting contract
for sale but does not include a transfer in bulk or as security for
or in total or partial satisfaction of a money debt.
(2) "Cancellation" occurs when either party puts an end to the
lease contract for default by the other party.
(3) "Commercial unit" means such a unit of goods as by commercial
usage is a single whole for purposes of lease and division of which
materially impairs its character or value on the market or in use. A
commercial unit may be a single article, as a machine, or a set of
articles, as a suite of furniture or a line of machinery, or a
quantity, as a gross or carload, or any other unit treated in use or
in the relevant market as a single whole.
(4) "Conforming" goods or performance under a lease contract means
goods or performance that are in accordance with the obligations
under the lease contract.
(5) "Consumer lease" means a lease that a lessor regularly engaged
in the business of leasing or selling makes to a lessee who is an
individual and who takes under the lease primarily for a personal,
family, or household purpose.
(6) "Fault" means wrongful act, omission, breach, or default.
(7) "Finance lease" means a lease with respect to which (A) the
lessor does not select, manufacture, or supply the goods, (B) the
lessor acquires the goods or the right to possession and use of the
goods in connection with the lease, and (C) one of the following
occurs:
(i) The lessee receives a copy of the contract by which the lessor
acquired the goods or the right to possession and use of the goods
before signing the lease contract.
(ii) The lessee's approval of the contract by which the lessor
acquired the goods or the right to possession and use of the goods is
a condition to effectiveness of the lease contract.
(iii) The lessee, before signing the lease contract, receives an
accurate and complete statement designating the promises and
warranties, and any disclaimers of warranties, limitations or
modifications of remedies, or liquidated damages, including those of
a third party, such as the manufacturer of the goods, provided to the
lessor by the person supplying the goods in connection with or as
part of the contract by which the lessor acquired the goods or the
right to possession and use of the goods.
(iv) The lessor, before the lessee signs the lease contract,
informs the lessee in writing (aa) of the identity of the person
supplying the goods to the lessor, unless the lessee has selected
that person and directed the lessor to acquire the goods or the right
to possession and use of the goods from that person, (bb) that the
lessee is entitled under this division to the promises and
warranties, including those of any third party, provided to the
lessor by the person supplying the goods in connection with or as
part of the contract by which the lessor acquired the goods or the
right to possession and use of the goods, and (cc) that the lessee
may communicate with the person supplying the goods to the lessor and
receive an accurate and complete statement of those promises and
warranties, including any disclaimers and limitations of them or of
remedies.
(8) "Goods" means all things that are movable at the time of
identification to the lease contract, or are fixtures (Section
10309), but the term does not include money, documents, instruments,
accounts, chattel paper, general intangibles, or minerals or the
like, including oil and gas, before extraction. The term also
includes the unborn young of animals.
(9) "Installment lease contract" means a lease contract that
authorizes or requires the delivery of goods in separate lots to be
separately accepted, even though the lease contract contains a clause
"each delivery is a separate lease" or its equivalent.
(10) "Lease" means a transfer of the right to possession and use
of goods for a term in return for consideration, but a sale,
including a sale on approval or a sale or return, or retention or
creation of a security interest is not a lease. Unless the context
clearly indicates otherwise, the term includes a sublease.
(11) "Lease agreement" means the bargain, with respect to the
lease, of the lessor and the lessee in fact as found in their
language or by implication from other circumstances including course
of dealing or usage of trade or course of performance as provided in
this division. Unless the context clearly indicates otherwise, the
term includes a sublease agreement.
(12) "Lease contract" means the total legal obligation that
results from the lease agreement as affected by this division and any
other applicable rules of law. Unless the context clearly indicates
otherwise, the term includes a sublease contract.
(13) "Leasehold interest" means the interest of the lessor or the
lessee under a lease contract.
(14) "Lessee" means a person who acquires the right to possession
and use of goods under a lease. Unless the context clearly
indicates otherwise, the term includes a sublessee.
(15) "Lessee in ordinary course of business" means a person who,
in good faith and without knowledge that the lease to him or her is
in violation of the ownership rights or security interest or
leasehold interest of a third party in the goods, leases in ordinary
course from a person in the business of selling or leasing goods of
that kind, but does not include a pawnbroker. "Leasing" may be for
cash or by exchange of other property or on secured or unsecured
credit and includes receiving goods or documents of title under a
preexisting lease contract but does not include a transfer in bulk or
as security for or in total or partial satisfaction of a money debt.
(16) "Lessor" means a person who transfers the right to possession
and use of goods under a lease. Unless the context clearly
indicates otherwise, the term includes a sublessor.
(17) "Lessor's residual interest" means the lessor's interest in
the goods after expiration, termination, or cancellation of the lease
contract.
(18) "Lien" means a charge against or interest in goods to secure
payment of a debt or performance of an obligation, but the term does
not include a security interest.
(19) "Lot" means a parcel or a single article that is the subject
matter of a separate lease or delivery, whether or not it is
sufficient to perform the lease contract.
(20) "Merchant lessee" means a lessee that is a merchant with
respect to goods of the kind subject to the lease.
(21) "Present value" means the amount as of a date certain of one
or more sums payable in the future, discounted to the date certain.
The discount is determined by the interest rate specified by the
parties if the rate was not manifestly unreasonable at the time the
transaction was entered into; otherwise, the discount is determined
by a commercially reasonable rate that takes into account the facts
and circumstances of each case at the time the transaction was
entered into.
(22) "Purchase" includes taking by sale, lease, mortgage, security
interest, pledge, gift, or any other voluntary transaction creating
an interest in goods.
(23) "Sublease" means a lease of goods the right to possession and
use of which was acquired by the lessor as a lessee under an
existing lease.
(24) "Supplier" means a person from whom a
lessor buys or leases goods to be leased under a finance lease.
(25) "Supply contract" means a contract under which a lessor buys
or leases goods to be leased.
(26) "Termination" occurs when either party pursuant to a power
created by agreement or law puts an end to the lease contract
otherwise than for default.
(b) Other definitions applying to this division and the sections
in which they appear are:
"Accessions." Subdivision (a) of Section 10310.
"Construction mortgage." Paragraph (4) of subdivision (a) of
Section 10309.
"Encumbrance." Paragraph (5) of subdivision (a) of Section 10309.
"Fixtures." Paragraph (1) of subdivision (a) of Section 10309.
"Fixture filing." Paragraph (2) of subdivision (a) of Section
10309.
"Purchase money lease." Paragraph (3) of subdivision (a) of
Section 10309.
(c) The following definitions in other divisions apply to this
division:
"Account." Paragraph (2) of subdivision (a) of Section 9102.
"Between merchants." Subdivision (3) of Section 2104.
"Buyer." Paragraph (a) of subdivision (1) of Section 2103.
"Chattel paper." Paragraph (11) of subdivision (a) of Section
9102.
"Consumer goods." Paragraph (23) of subdivision (a) of Section
9102.
"Document." Paragraph (30) of subdivision (a) of Section 9102.
"Entrusting." Subdivision (3) of Section 2403.
"General intangibles." Paragraph (42) of subdivision (a) of
Section 9102.
"Good faith." Paragraph (b) of subdivision (1) of Section 2103.
"Instrument." Paragraph (47) of subdivision (a) of Section 9102.
"Merchant." Subdivision (1) of Section 2104.
"Mortgage." Paragraph (55) of subdivision (a) of Section 9102.
"Pursuant to commitment." Paragraph (68) of subdivision (a) of
Section 9102.
"Receipt." Paragraph (c) of subdivision (1) of Section 2103.
"Sale." Subdivision (1) of Section 2106.
"Sale on approval." Section 2326.
"Sale or return." Section 2326.
"Seller." Paragraph (d) of subdivision (1) of Section 2103.
(d) In addition, Division 1 contains general definitions and
principles of construction and interpretation applicable throughout
this division.
SEC. 37. Section 10303 of the Commercial Code is amended to read:
10303. (a) As used in the section, "creation of a security
interest" includes the sale of a lease contract that is subject to
Division 9 (commencing with Section 9101), Secured Transactions, by
reason of paragraph (3) of subdivision (a) of Section 9109.
(b) Except as provided in subdivisions (c) and (d), a provision in
a lease agreement which (1) prohibits the voluntary or involuntary
transfer, including a transfer by sale, sublease, creation or
enforcement of a security interest, or attachment, levy, or other
judicial process, of an interest of a party under the lease contract
or of the lessor's residual interest in the goods, or (2) makes such
a transfer an event of default, gives rise to the rights and remedies
provided in subdivision (e), but a transfer that is prohibited or is
an event of default under the lease agreement is otherwise
effective.
(c) A provision in a lease agreement which (1) prohibits the
creation or enforcement of a security interest in an interest of a
party under the lease contract or in the lessor's residual interest
in the goods, or (2) makes such a transfer an event of default, is
not enforceable unless, and then only to the extent that, there is an
actual transfer by the lessee of the lessee's right of possession or
use of the goods in violation of the provision or an actual
delegation of a material performance of either party to the lease
contract in violation of the provision. Neither the granting nor the
enforcement of a security interest in (1) the lessor's interest
under the lease contract or (2) the lessor's residual interest in the
goods is a transfer that materially impairs the prospect of
obtaining return performance by, materially changes the duty of, or
materially increases the burden or risk imposed on, the lessee within
the purview of subdivision (e) unless, and then only to the extent
that, there is an actual delegation of a material performance of the
lessor.
(d) A provision in a lease agreement which (1) prohibits a
transfer of a right to damages for default with respect to the whole
lease contract or of a right to payment arising out of the transferor'
s due performance of the transferor's entire obligation, or (2) makes
such a transfer an event of default, is not enforceable, and such a
transfer is not a transfer that materially impairs the prospect of
obtaining return performance by, materially changes the duty of, or
materially increases the burden or risk imposed on, the other party
to the lease contract within the purview of subdivision (e).
(e) Subject to subdivisions (c) and (d):
(1) If a transfer is made which is made an event of default under
a lease agreement, the party to the lease contract not making the
transfer, unless that party waives the default or otherwise agrees,
has the rights and remedies described in subdivision (b) of Section
10501.
(2) If paragraph (1) is not applicable and if a transfer is made
that (A) is prohibited under a lease agreement or (B) materially
impairs the prospect of obtaining return performance by, materially
changes the duty of, or materially increases the burden or risk
imposed on, the other party to the lease contract, unless the party
not making the transfer agrees at any time to the transfer in the
lease contract or otherwise, then, except as limited by contract, (C)
the transferor is liable to the party not making the transfer for
damages caused by the transfer to the extent that the damages could
not reasonably be prevented by the party not making the transfer and
(D) a court having jurisdiction may grant other appropriate relief,
including cancellation of the lease contract or an injunction against
the transfer.
(f) A transfer of "the lease" or of "all my rights under the
lease," or a transfer in similar general terms, is a transfer of
rights and, unless the language or the circumstances, as in a
transfer for security, indicate the contrary, the transfer is a
delegation of duties by the transferor to the transferee. Acceptance
by the transferee constitutes a promise by the transferee to perform
those duties. The promise is enforceable by either the transferor
or the other party to the lease contract.
(g) Unless otherwise agreed by the lessor and the lessee, a
delegation of performance does not relieve the transferor as against
the other party of any duty to perform or of any liability for
default.
(h) In a consumer lease, to prohibit the transfer of an interest
of a party under the lease contract or to make a transfer an event of
default, the language must be specific, by a writing, and
conspicuous.
SEC. 38. Section 10307 of the Commercial Code is amended to read:
10307. (a) Except as otherwise provided in Section 10306, a
creditor of a lessee takes subject to the lease contract.
(b) Except as otherwise provided in subdivisions (c) and (d) and
in Sections 10306 and 10308, a creditor of a lessor takes subject to
the lease contract unless:
(1) The creditor holds a lien that attached to the goods before
the lease contract became enforceable,
(2) The creditor holds a security interest in the goods and the
lessee did not give value and receive delivery of the goods without
knowledge of the security interest, or
(3) The creditor holds a security interest in the goods which was
perfected (Section 9308) before the lease contract became
enforceable.
(c) A lessee in the ordinary course of business takes the
leasehold interest free of a security interest in the goods created
by the lessor even though the security interest is perfected (Section
9308) and the lessee knows of its existence.
(d) A lessee other than a lessee in the ordinary course of
business takes the leasehold interest free of a security interest to
the extent that it secures future advances made after the secured
party acquires knowledge of the lease unless the future advances are
made pursuant to a commitment entered into without knowledge of the
lease.
SEC. 39. Section 10309 of the Commercial Code is amended to read:
10309. (a) In this section:
(1) Goods are "fixtures" when they become so related to particular
real estate that an interest in them arises under real estate law;
(2) A "fixture filing" is the filing, in the office where a
mortgage on the real estate would be recorded, of a financing
statement covering goods that are or are to become fixtures and
conforming to the requirements of Section 9502;
(3) A lease is a "purchase money lease" unless the lessee has
possession or use of the goods or the right to possession or use of
the goods before the lease agreement is enforceable;
(4) A mortgage is a "construction mortgage" to the extent it
secures an obligation incurred for the construction of an improvement
on land including the acquisition cost of the land, if the recorded
writing so indicates; and
(5) "Encumbrance" includes real estate mortgages and other liens
on real estate and all other rights in real estate that are not
ownership interests.
(b) Under this division a lease may be of goods that are fixtures
or may continue in goods that become fixtures, but no lease exists
under this division of ordinary building materials incorporated into
an improvement on land.
(c) This division does not prevent creation of a lease of fixtures
pursuant to real estate law.
(d) The interest of a lessor of fixtures has priority over a
conflicting interest of an encumbrancer or owner of the real estate
if:
(1) The lease is a purchase money lease, the conflicting interest
of the encumbrancer or owner arises before the goods become fixtures,
a fixture filing covering the fixtures is filed before the goods
become fixtures or within 20 days thereafter, and the lessee has an
interest of record in the real estate or is in possession of the real
estate;
(2) A fixture filing covering the fixtures is filed before the
interest of the encumbrancer or owner is of record, the lessor's
interest has priority over any conflicting interest of a predecessor
in title of the encumbrancer or owner, and the lessee has an interest
of record in the real estate or is in possession of the real estate;
(3) The fixtures are readily removable factory or office machines,
readily removable equipment that is not primarily used or leased for
use in the operation of the real estate, or readily removable
replacements of domestic appliances that are goods subject to a
consumer lease;
(4) The conflicting interest is a lien on the real estate obtained
by legal or equitable proceedings after the lease contract is
enforceable;
(5) The encumbrancer or owner has consented in writing to the
lease or has disclaimed an interest in the goods as fixtures; or
(6) The lessee has a right to remove the goods as against the
encumbrancer or owner. If the lessee's right to remove terminates,
the priority of the interest of the lessor continues for a reasonable
time.
(e) Notwithstanding paragraph (1) of subdivision (d) but otherwise
subject to subdivision (d), the interest of a lessor of fixtures,
including the lessor's residual interest, is subordinate to the
conflicting interest of an encumbrancer of the real estate under a
construction mortgage recorded before the goods become fixtures if
the goods become fixtures before the completion of the construction.
To the extent given to refinance a construction mortgage, the
conflicting interest of an encumbrancer of the real estate under a
mortgage has this priority to the same extent as the encumbrancer of
the real estate under the construction mortgage.
(f) In cases not within the preceding subdivisions, priority
between the interest of a lessor of fixtures, including the lessor's
residual interest, and the conflicting interest of an encumbrancer or
owner of the real estate who is not the lessee is determined by the
priority rules governing conflicting interests in real estate.
(g) If the interest of a lessor of fixtures, including the lessor'
s residual interest, has priority over all conflicting interests of
all owners and encumbrancers of the real estate, the lessor or the
lessee may (1) on default, expiration, termination, or cancellation
of the lease agreement but subject to the lease agreement and this
division, or (2) if necessary to enforce other rights and remedies
of the lessor or lessee under this division, remove the goods from
the real estate, free and clear of all conflicting interests of all
owners and encumbrancers of the real estate, but the lessor or lessee
must reimburse any encumbrancer or owner of the real estate who is
not the lessee and who has not otherwise agreed for the cost of
repair of any physical injury, but not for any diminution in value of
the real estate caused by the absence of the goods removed or by any
necessity of replacing them. A person entitled to reimbursement may
refuse permission to remove until the party seeking removal gives
adequate security for the performance of this obligation.
SEC. 40. Section 13102 of the Commercial Code is amended to read:
13102. Transactions validly entered into before January 1, 1965,
and the rights, duties, and interests flowing from them remain valid
thereafter and may be terminated, completed, consummated, or enforced
as required or permitted by any statute or other law amended or
repealed by this act as though such repeal or amendment had not
occurred; provided, however, that the perfection of a security
interest (other than a security interest (i) in a motor vehicle or
vessel required to be registered under the Vehicle Code unless such
vehicle or vessel is inventory or (ii) in personal property,
including fixtures, which constitutes a portion of the properties
included in an agreement which is a mortgage or deed of trust of both
real and personal property made to secure the payment of bonds or
other evidences of indebtedness authorized or permitted to be issued
by the Commissioner of Corporations, or made by a public utility as
defined in the Public Utilities Code), as defined in this code
(Section 1201), and however denominated in any law repealed by this
act, (a) Which was perfected on or before January 1, 1965, by a
filing or recording under a law repealed by this act and requiring a
further filing or recording to continue its perfection, continues
until and will lapse on the date provided by the law so repealed for
such further filing or recording. (b) Which was perfected on or
before January 1, 1965, by a filing or recording under a law repealed
by this act and requiring no further filing or recording to continue
its perfection, continues until and will lapse 12 months after
January 1, 1965. (c) Which was perfected on or before January 1,
1965, without any filing or recording, but with respect to which a
financing statement is required to be filed in order for it to be
perfected under this code, continues until and will lapse 12 months
after January 1, 1965; unless, in each case, a continuation statement
is filed by the secured party within 12 months before the perfection
of the security interest would otherwise lapse. Any such
continuation statement must be signed by the secured party, identify
the original security agreement, however denominated, state the
office where and the date when last filed or refiled, or recorded or
rerecorded, and the filing number or recordation data and further
state that the original security agreement is still effective.
Subdivision (1) of Section 9501 determines the proper place to file
such a continuation statement. Except as herein specified the
provisions of Sections 9515 and 9522 apply to such a continuation
statement.
SEC. 41. Section 13105 of the Commercial Code is amended to read:
13105. (1) A financing statement or a continuation thereof,
properly filed and effective pursuant to Section 9401 as it existed
prior to January 1, 1971, remains valid and effective after January
1, 1971, until expiration of the usual five-year period from date of
filing. Any termination, release, assignment, or amendment of the
financing statement prior to expiration of the five-year period of
effectiveness shall be filed, as previously required, with the county
recorder who has filed the financing statement.
(2) After January 1, 1971, any continuation of a financing
statement which had been properly filed with a county recorder prior
to January 1, 1971, and which now would be required to be filed with
the Secretary of State, shall be filed with the Secretary of State in
accordance with Sections 9515 and 9516. The continuation statement
shall be accompanied by a certified copy of the entire record of the
county recorder related to the financing statement. After filing of
the continuation statement with the Secretary of State, any
termination, release, assignment, amendment, or continuation of the
financing statement shall also be filed with the Secretary of State
and any documents affecting the financing statement that are not
filed with the Secretary of State shall not be effective.
SEC. 42. Section 14106 of the Commercial Code is amended to read:
14106. (1) If a security interest is perfected or has priority on
January 1, 1976, as to all persons or as to certain persons without
any filing or recording, and if the filing of a financing statement
would be required for the perfection or priority of the security
interest against those persons under this code, as amended by the
Legislature at the 1973-74 Regular Session, the perfection and
priority rights of the security interest continue until January 1,
1979. The perfection will then lapse unless a financing statement is
filed as provided in subdivision (4) or unless the security interest
is perfected otherwise than by filing.
(2) If a security interest is perfected on January 1, 1976, under
a law other than this code which requires no further filing,
refiling or recording to continue its perfection, perfection
continues until and will lapse January 1, 1979, unless a financing
statement is filed as provided in subdivision (4) or unless the
security interest is perfected otherwise than by filing, or unless
under Section 9311 the other law continues to govern filing.
(3) If a security interest is perfected by a filing, refiling or
recording under a law repealed by this code as amended by the
Legislature at the 1973-74 Regular Session which required further
filing, refiling or recording to continue its perfection, perfection
continues and will lapse on the date provided by the law so repealed
for a further filing, refiling, or recording unless a financing
statement is filed as provided in subdivision (4) or unless the
security interest is perfected otherwise than by filing.
(4) A financing statement may be filed within six months before
the perfection of a security interest would otherwise lapse. Any
such financing statement may be signed by either the debtor or the
secured party. It must identify the security agreement, statement,
or notice (however denominated in any statute or other law repealed
or modified by this code as amended by the Legislature at the 1973-74
Regular Session), state the office where and the date when the last
filing, refiling, or recording, if any, was made with respect
thereto, and the filing number, if any, was made with respect
thereto, and the filing number, if any, or book and page, if any, of
recording and further state that the security agreement, statement,
or notice, however denominated, in another filing office under this
code or under any statute or other law repealed or modified by this
code as amended by the Legislature at the 1973-74 Regular Session is
still effective. Section 9501 and Sections 9301, 9303, 9304, 9305,
9306, 9307, 9316, and 9337 determine the proper place to file such a
financing statement. Except as specified in this subdivision, the
provisions of Sections 9515 and 9522 for continuation statements
apply to such a financing statement.
SEC. 43. Section 22337 of the Financial Code is amended to read:
22337. Each licensed finance lender shall:
(a) Deliver or cause to be delivered to the borrower, or any one
thereof, at the time the loan is made, a statement showing in clear
and distinct terms the name, address, and license number of the
finance lender and the broker, if any. The statement shall show the
date, amount, and maturity of the loan contract, how and when
repayable, the nature of the security for the loan, if any, and the
agreed rate of charge or the annual percentage rate pursuant to
Regulation Z promulgated by the Board of Governors of the Federal
Reserve System (12 C.F.R. 226).
(b) Obtain from the borrower a signed statement as to whether any
person has performed any act as a broker in connection with the
making of the loan. If the statement discloses that a broker or
other person has participated, then the finance lender shall obtain a
full statement of all sums paid or payable to the broker or other
person. The finance lender shall keep these statements for a period
of two years from and after the date the loan has been paid in full,
or has matured according to its terms, or has been charged off.
(c) Permit payment to be made in advance in any amount on any
contract of loan at any time. The licensee may apply the payment
first to any agreed prepayment penalty, then to all charges due,
including charges at the agreed rate or rates up to the date of
payment, not to exceed the applicable maximum rate permitted by this
article.
(d) Deliver or cause to be delivered to the person making any cash
payment, or to the person who requests a receipt at the time of
making any payment, at the time payment is made on account of any
loan, a plain and complete receipt showing the total amount received
and identifying the loan contract upon which the payment is applied.
(e) Upon repayment of any loan in full, release all security for
the loan, endorse and return any certificate of ownership, and cancel
or plainly mark "paid" and return to the borrower or person making
final payment, any note, mortgage, security agreement, trust deed,
assignment, or order signed by the borrower, or an optical image
reproduction thereof, except those documents that are a part of the
court record in any action, or that have been delivered to a third
person for the purpose of carrying out their terms, or a security
agreement that secures any other indebtedness of a borrower to the
licensee, or original documents otherwise required by law. When a
trust deed on real property has been taken as security for a loan
that has been subsequently paid in full, a duly executed request for
reconveyance shall be delivered to the trustor or trustee for the
purpose of recording a reconveyance. A termination statement,
furnished to the borrower as provided for in Sections 9512 and 9513
of the Commercial Code, shall be deemed a release of the security
when a financing statement has been filed pursuant to Section 9501 of
the Commercial Code.
For purposes of this subdivision, an optical image reproduction
shall meet all of the following requirements:
(1) The optical image storage media used to store the document
shall be nonerasable write once, read many (WORM) optical image media
that does not allow changes to the stored document.
(2) The optical image reproduction shall be made consistent with
the minimum standards of quality approved by either the National
Institute of Standards and Technology or the Association for
Information and Image Management.
(3) Written authentication identifying the optical image
reproduction as an exact unaltered copy of the note, trust deed,
mortgage, security agreement, assignment or order shall be stamped or
printed on the optical image reproduction.
(f) Deliver or cause to be delivered to the potential borrower, or
any one thereof, at the time the licensee first requires or accepts
any signed instrument or the payment of any fee, a statement showing
in clear and distinct terms the name, address, and license number of
the finance lender and the broker, if any.
SEC. 44. Section 7159 of the Government Code is amended to read:
7159. "Purchase money security interest" has the same meaning as
defined in Section 9103 of the Commercial Code.
SEC. 45. Section 7170 of the Government Code is amended to read:
7170. (a) Except as provided in subdivisions (b) and (c), a state
tax lien attaches to all property and rights to property whether
real or personal, tangible or intangible, including all
after-acquired property and rights to property, belonging to the
taxpayer and located in this state. A state tax lien attaches to a
dwelling notwithstanding the prior recording of a homestead
declaration (as defined in Section 704.910 of the Code of Civil
Procedure).
(b) A state tax lien is not valid as to real property against the
right, title, or interest of any of the following persons where the
person's right, title, or interest was acquired or perfected prior to
recording of the notice of state tax lien in the office of the
county recorder of the county in which the real property is located
pursuant to Section 7171:
(1) A successor in interest of the taxpayer without knowledge of
the lien.
(2) A holder of a security interest.
(3) A mechanic's lienor.
(4) A judgment lien creditor.
(c) A state tax lien is not valid as to personal property against:
(1) The holder of a security interest in the property whose
interest is perfected pursuant to Section 9308 of the Commercial Code
prior to the time the notice of the state tax lien is filed with the
Secretary of State pursuant to Section 7171.
(2) Any person (other than the taxpayer) who acquires an interest
in the property under the law of this state without knowledge of the
lien or who perfects an interest in accordance with the law of this
state prior to the time that the notice of state tax lien is filed
with the Secretary of State pursuant to Section 7171.
(3) A buyer in ordinary course of business who, under Section 9307
of the Commercial Code, would take free of a security interest
created by the seller.
(4) Any person (other than the taxpayer) who, notwithstanding the
prior filing of the notice of the state tax lien:
(A) Is a holder in due course of a negotiable instrument.
(B) Is a holder to whom a negotiable document of title has been
duly negotiated.
(C) Is a bona fide purchaser of a security.
(D) Is a purchaser of chattel paper or an instrument who gives new
value and takes possession of the chattel paper or instrument in the
ordinary course of business.
(E) Is a holder of a purchase money security interest.
(F) Is a collecting bank holding a security interest in items
being collected, accompanying documents and proceeds, pursuant to
Section 4210 of the Commercial Code.
(G) Acquires a security interest in a deposit account or in the
beneficial interest in a trust or estate.
(H) Acquires any right or interest in letters of credit, advices
of credit, or money.
(I) Acquires without actual knowledge of the state tax lien a
security interest in or a claim in or under any policy of insurance
including unearned premiums.
(J) Acquires any right or interest in property subject to a
certificate of title statute of another jurisdiction under the law of
which indication of a security interest on the certificate of title
is required as a condition of perfection of the security interest.
(K) Is a purchaser of an instrument who would have priority under
subdivision (d) of Section 9330 of the Commercial Code.
(L) Is a purchaser of investment property who would have priority
under paragraph (1), (3), (4), or (5) of Section 9328 of the
Commercial Code.
(M) A transferee of money who would take free of a security
interest under Section 9332 of the Commercial Code.
(5) A judgment lien creditor whose lien was created by the filing
of a notice of judgment lien on personal property with the Secretary
of State prior to the time the notice of state tax lien is filed with
the Secretary of State pursuant to Section 7171.
SEC. 46. Section 14735 of the Government Code is amended to read:
14735. Upon being directed by the Controller to sell a
residential dwelling pursuant to Section 16201, the department shall
sell the residential dwelling in the manner prescribed and in
accordance with the procedure established in Chapter 7 (commencing
with Section 3201) of Part 5 of Division 1 of the Revenue and
Taxation Code, or if applicable, in the manner prescribed and in
accordance with the procedures established in Chapter 6 (commencing
with Section 9601) of Division 9 of the Commercial Code.
SEC. 47. Section 18035 of the Health and Safety Code is amended to
read:
18035. (a) (1) For every transaction by or through a dealer to
sell or lease with the option to buy a new or used manufactured home
or mobilehome subject to registration under this part, the dealer
shall execute in writing and obtain the buyer's signature on a
purchase order, conditional sale contract, or other document
evidencing the purchase contemporaneous with, or prior to, the
receipt of any cash or cash equivalent from the buyer, shall
establish an escrow account with an escrow agent, and shall cause to
be deposited into that escrow account any cash or cash equivalent
received at any time prior to the close of escrow as a deposit,
downpayment, or whole or partial payment for the manufactured home or
mobilehome or accessory thereto. Checks, money orders, or similar
payments toward the purchase shall be made payable only to the escrow
agent.
(2) The downpayment, or whole or partial payment, shall include an
amount designated as a deposit, which may be less than, or equal to,
the total amount placed in escrow, and shall be subject to
subdivision (f). The parties shall provide for escrow instructions
that identify the fixed amounts of the deposit, downpayment, and
balance due prior to closing consistent with the amounts set forth in
the purchase documents and receipt for deposit if one is required by
Section 18035.1. The deposits shall be made by the dealer within
five working days of receipt, one of which shall be the day of
receipt.
(3) For purposes of this section, "cash equivalent" means any
property, other than cash. If an item of cash equivalent is, due to
its size, incapable of physical delivery to the escrow holder, the
property may be held by the dealer for the purchaser until close of
escrow and, if the property has been registered with the department
or the Department of Motor Vehicles, its registration certificate
and, if available, its certificate of title shall be delivered to the
escrow holder.
(b) For every transaction by or through a dealer to sell or lease
with the option to buy a new manufactured home or mobilehome subject
to registration under this part, the escrow instructions shall
provide all of the following:
(1) That the original manufacturer's certificate of origin be
placed in escrow.
(2) (A) That, in the alternative, either of the following shall
occur:
(i) The lien of any inventory creditor on the manufactured home or
mobilehome shall be satisfied by payment from the escrow account.
(ii) The inventory creditor shall consent in writing to other than
full payment.
(B) For purposes of this paragraph, "inventory creditor" includes
any person who is identified as a creditor on the manufacturer's
certificate of origin or any person who places the original
certificate of origin in escrow and claims in writing to the escrow
agent to have a purchase money security interest in the manufactured
home or mobilehome, as contemplated by Section 9103 of the Commercial
Code.
(3) That the escrow agent shall obtain from the manufacturer a
true and correct facsimile of the copy of the certificate of origin
retained by the manufacturer pursuant to Section 18093.
(c) For every transaction by or through a dealer to sell or lease
with the option to buy a used manufactured home or mobilehome subject
to registration under this part, the escrow instructions shall
provide:
(1) That the current registration card, all copies of the
registration cards held by junior lienholders, and the certificate of
title be placed in escrow.
(2) That, in the alternative, either of the following shall occur:
(A) (i) The registered owner shall acknowledge in writing the
amount of the commission to be received by the dealer for the sale of
the manufactured home or mobilehome, and (ii) the registered owner
shall release all of its ownership interests in the manufactured home
or mobilehome either contemporaneously upon the payment of a
specified amount from the escrow account or at the close of the
escrow where the buyer has executed a security agreement approved by
the registered owner covering the unpaid balance of the purchase
price.
(B) (i) The dealer shall declare in writing that the manufactured
home or mobilehome is its inventory, (ii) the registered owner shall
acknowledge in writing that the purchase price relating to the sale
of the manufactured home or mobilehome to the dealer for resale has
been paid in full by the dealer, (iii) the current certificate of
title shall be appropriately executed by the registered owner to
reflect the release of all of its ownership interests, and (iv) the
dealer shall release all of its ownership interests in the
manufactured home or mobilehome either contemporaneously upon the
payment of a specified amount from the escrow account or at the close
of escrow where the buyer has executed a security agreement approved
by the dealer covering the unpaid balance of the purchase price.
(3) That, in the alternative, the legal owner and each junior
lienholder, respectively, shall do either of the following:
(A) Release his or her security interest or transfer its security
interest to a designated third party contemporaneously upon the
payment of a specified amount from the escrow account.
(B) Advise the escrow agent in writing that the new buyer or the
buyer's stated designee shall be approved as the new registered owner
upon the execution by the buyer of a formal assumption of the
indebtedness secured by his or her lien approved by the creditor at
or before the close of escrow.
(d) For every transaction by or through a dealer to sell or lease
with the option to buy a used manufactured home or mobilehome subject
to registration under this part:
(1) The dealer shall present the buyer's offer to purchase the
manufactured home or mobilehome to the seller in written form signed
by the buyer. The seller, upon accepting the offer to purchase,
shall sign and date the form. Copies of the fully executed form
shall be presented to both the buyer and seller, with the original
copy retained by the dealer. Any portion of the form that reflects
the commission charged by the dealer to the seller need not be
disclosed to the buyer.
(2) The escrow agent, upon receipt of notification from the dealer
that the seller has accepted the buyer's offer to purchase and
receipt of mutually endorsed escrow instructions, shall, within three
working days, prepare a notice of escrow opening on the form
prescribed by the department and forward the completed form to the
department with appropriate fees. If the escrow is canceled for any
reason before closing, the escrow agent shall prepare a notice of
escrow cancellation on the form prescribed by the department and
forward the completed form to the department.
(3) (A) The escrow agent shall forward to the legal owner and each
junior lienholder at their addresses shown on the current
registration card a written demand for a lien status report, as
contemplated by Section 18035.5, and a written demand for either an
executed statement of conditional lien release or an executed
statement of anticipated formal assumption, and shall enclose blank
copies of a statement of conditional lien release and a statement of
anticipated formal assumption on forms prescribed by the department.
The statement of conditional lien release shall include, among other
things, both of the following:
(i) A statement of the dollar amount or other conditions required
by the creditor in order to release or transfer its lien.
(ii) The creditor's release or transfer of the lien in the
manufactured home or mobilehome contingent upon the satisfaction of
those conditions.
(B) The statement of anticipated formal assumption shall include,
among other things, both of the following:
(i) A statement of the creditor's belief that the buyer will
formally assume the indebtedness secured by its lien pursuant to
terms and conditions which are acceptable to the creditor at or
before the close of escrow.
(ii) The creditor's approval of the buyer or his or her designee
as the registered owner upon the execution of the formal assumption.
(4) Within five days of the receipt of the written demand and
documents required by paragraph (3), the legal owner or junior
lienholder shall complete and execute either the statement of
conditional lien release or, if the creditor has elected to consent
to a formal assumption requested by a qualified buyer, the statement
of anticipated formal assumption, as appropriate, and prepare the
lien status report and forward the documents to the escrow agent by
first-class mail. If the creditor is the legal owner, the
certificate of title in an unexecuted form shall accompany the
documents. If the creditor is a junior lienholder, the creditor's
copy of the current registration card in an unexecuted form shall
accompany the documents.
(5) If either of the following events occur, any statement of
conditional lien release or statement of anticipated formal
assumption executed by the creditor shall become inoperative, and the
escrow agent shall thereupon return the form and the certificate of
title or the copy of the current registration card, as appropriate,
to the creditor by first-class mail:
(A) The conditions required in order for the creditor to release
or transfer his or her lien are not satisfied before the end of the
escrow period agreed upon in writing between the buyer and the seller
or, if applicable, before the end of any extended escrow period as
permitted by subdivision (g).
(B) The registered owner advises the creditor not to accept any
satisfaction of his or her lien or not to permit any formal
assumption of the indebtedness and the creditor or registered owner
advises the escrow agent in writing accordingly.
(6) If a creditor willfully fails to comply with the requirements
of paragraph (4) within 21 days of the receipt of the written demand
and documents required by paragraph (3), the creditor shall forfeit
to the escrow agent three hundred dollars ($300), except where the
creditor has reasonable cause for noncompliance. The three hundred
dollars ($300) shall be credited to the seller, unless otherwise
provided in the escrow instructions. Any penalty paid by a creditor
under this paragraph shall preclude any civil liability for
noncompliance with Section 18035.5 relating to the same act or
omission.
(e) For every transaction by or through a dealer to sell or lease
with the option to buy a new or used manufactured home or mobilehome,
the escrow instructions shall specify one of the following:
(1) Upon the buyer receiving delivery of an installed manufactured
home or mobilehome on the site and the manufactured home or
mobilehome passing inspection pursuant to Section 18613 or after the
manufactured home or mobilehome has been delivered to the location
specified in the escrow instructions when the installation is to be
performed by the buyer, all funds in the escrow account, other than
escrow fees and amounts for accessories not yet delivered, shall be
disbursed. If mutually agreed upon between buyer and dealer, the
escrow instructions may specify that funds be disbursed to a
government agency for the payment of fees and permits required as a
precondition for an installation acceptance or certificate of
occupancy, and the information that may be acceptable to the escrow
agent.
(2) Upon the buyer receiving delivery of an installed manufactured
home or mobilehome not subject to the provisions of Section 18613
with delivery requirements as mutually agreed to and set forth in the
sales documents, all funds in the escrow account, other than escrow
fees, shall be disbursed.
(f) In the event any dispute arises between the parties to the
escrow and upon notification in writing to the escrow agent, unless
otherwise specified in the escrow instructions, all funds denoted as
deposit shall be held in escrow until a release is signed by the
disputing party, or pursuant to new written escrow instructions
signed by the parties involved, or pursuant to a final order for
payment or division by a court of competent jurisdiction. Any other
funds, other than escrow fees, shall be returned to the buyer or any
person, other than the dealer or seller, as appropriate.
(g) Escrow shall be for a period of time mutually agreed upon, in
writing, by the buyer and the seller. However, the parties may, by
mutual consent, extend the time, in writing, with notice to the
escrow agent.
(h) No dealer or seller shall establish with an escrow agent any
escrow account in an escrow company in which the dealer or seller has
more than a 5 percent ownership interest.
(i) The escrow instructions may provide for the proration of any
local property tax due or to become due on the manufactured home or
mobilehome, and if the tax, or the license fee imposed pursuant to
Section 18115, or the registration fee imposed pursuant to Section
18114, is delinquent, the instructions may provide for the payment of
the taxes or fees, or both, and any applicable penalties.
(j) For every transaction by or through a dealer to sell or lease
with the option to buy a new or used manufactured home or mobilehome
that is subject to inspection pursuant to Section 18613, and for
which it is stated, on the face of the document certifying or
approving occupancy or installation, that the issuance of the
document is conditioned upon the payment of a fee, charge,
dedication, or other requirement levied pursuant to Section 53080 of
the Government Code, the escrow instructions shall provide that the
payment of that fee, charge, dedication, or other requirement be made
to the appropriate school district upon the close of escrow.
(k) No agreement shall contain any provision by which the buyer
waives his or her rights under this section, and any waiver shall be
deemed contrary to public policy and shall be void and unenforceable.
(l) If a portion of the amount in the escrow is for accessories,
then that portion of the amount shall not be released until the
accessories are actually installed.
(m) Upon opening escrow on a used manufactured home or mobilehome
which is subject to local property taxation, and subject to
registration under this part, the escrow officer may forward to the
tax collector of the county in which the used manufactured home or
mobilehome is located, a written demand for a tax clearance
certificate, if no liability exists, or a conditional tax clearance
certificate if a tax liability exists, to be provided on a form
prescribed by the office of the Controller. The conditional tax
clearance certificate shall state the amount of the tax liability
due, if any, and the final date that amount may be paid out of the
proceeds of escrow before a further tax liability may be incurred.
(1) Within five working days of receipt of the written demand for
a conditional tax clearance certificate or a tax clearance
certificate, the county tax collector shall forward the conditional
tax clearance certificate or a tax clearance certificate showing no
tax liability exists to the requesting escrow officer. In the event
the tax clearance certificate's or conditional tax clearance
certificate's final due date expires within 30 days of date of
issuance, an additional conditional tax clearance certificate or a
tax clearance certificate shall be completed which has a final due
date of at least 30 days beyond the date of issuance.
(2) If the tax collector on which the written demand for a tax
clearance certificate or a conditional tax clearance certificate was
made fails to comply with that demand within 30 days from the date
the demand was mailed, the escrow officer may close the escrow and
submit a statement of facts certifying that the written demand was
made on the tax collector and the tax collector failed to comply with
that written demand within 30 days. This statement of facts may be
accepted by the department in lieu of a conditional tax clearance
certificate or a tax clearance certificate, as prescribed by
subdivision (a) of Section 18092.7, and the transfer of ownership may
be completed.
(3) The escrow officer may satisfy the terms of the conditional
tax clearance certificate by paying the amount of tax liability shown
on the form by the tax collector out of the proceeds of escrow on or
before the date indicated on the form and by certifying in the space
provided on the form that all terms and conditions of the
conditional tax clearance certificate have been complied with.
(n) This section creates a civil cause of action against a buyer
or dealer or other seller who violates this section, and upon
prevailing, the plaintiff in the action shall be awarded actual
damages, plus an amount not in excess of two thousand dollars
($2,000). In addition, attorney's fees and court costs shall also be
awarded a plaintiff who prevails in the action.
SEC. 48. Section 18035.2 of the Health and Safety Code is amended
to read:
18035.2. (a) For every sale by a dealer of a new or used
manufactured home or mobilehome to be installed on a foundation
system pursuant to subdivision (a) of Section 18551, the dealer shall
execute in writing and obtain the buyer's signature on a purchase
order, conditional sale contract, or other document evidencing the
purchase, and provide a statement of fact complying with subdivision
(b) of Section 18035.1, contemporaneous with or prior to the receipt
of any cash or cash equivalent from the buyer and shall establish an
escrow account with an escrow agent. The escrow shall not be subject
to Section 18035.
(b) For every sale by a dealer of a new manufactured home or
mobilehome installed or to be installed on a foundation system
pursuant to subdivision (a) of Section 18551, the escrow instructions
shall provide all of the following:
(1) That the original manufacturer's certificate of origin be
placed in escrow.
(2) That, in the alternative:
(A) The lien of any inventory creditor on the manufactured home or
mobilehome shall be satisfied by payment from the escrow account.
(B) That the inventory creditor shall consent in writing to other
than full payment.
For purposes of this paragraph, "inventory creditor" includes any
person who is identified as a creditor on the manufacturer's
certificate of origin or any person who places the original
certificate of origin in escrow and claims in writing to the escrow
agent to have a purchase money security interest in the manufactured
home or mobilehome as contemplated by Section 9103 of the Commercial
Code.
(3) That the escrow agent shall obtain from the manufacturer a
true and correct facsimile of the copy of the certificate of origin
retained by the manufacturer pursuant to Section 18093.
(c) For every sale by a dealer of a new or used manufactured home
or mobilehome that is subject to inspection pursuant to subdivision
(a) of Section 18551, and for which it is stated, on the face of the
document certifying or approving occupancy, that the issuance of the
document is conditioned upon the payment of a fee, charge,
dedication, or other requirement levied pursuant to Section 17620 of
the Education Code, the escrow instructions shall provide that the
payment of that fee, charge, dedication, or other requirement be made
to the appropriate school district upon the close of escrow.
SEC. 49. Section 18037.5 of the Health and Safety Code is amended
to read:
18037.5. (a) In the event of default under the provisions of any
security agreement relating to a loan or conditional sale contract
which, according to its terms, gives the secured party the right to
foreclose its security interest in a manufactured home, mobilehome,
truck camper, or floating home subject to registration under this
part which is not inventory of a dealer, including the right to
repossess the property, notwithstanding any contrary provisions in
the security agreement or conditional sale contract or in any other
agreement entered into prior to default, the secured party may
foreclose its security interest only by satisfying the requirements
of this section.
(1) Unless the registered owner of the manufactured home,
mobilehome, truck camper, or floating home has abandoned the property
or has voluntarily surrendered possession of the property to the
foreclosing creditor, the foreclosing creditor shall deposit or cause
to be deposited in the United States mail an envelope addressed to
each registered owner as shown on the current registration of the
manufactured home, mobilehome, truck camper, or floating home,
registered or certified with postage prepaid, containing a notice in
substantially the following form and in at least 10-point type, which
notice shall be signed by the foreclosing creditor:
NOTICE OF DEFAULT
To: _________________________________________________________
(names of all registered owners)
You (if the registered owner is not the person who is in default,
substitute name of defaulting person(s)) are in default under the
terms of the
________________________________________________________________
(identify security agreement by title or caption and date)
in that _________________________________________________________.
(describe default)
This default gives the creditor named below the right to sell your
manufactured home, mobilehome, truck camper, or floating home which
is registered with the Department of Housing and Community
Development
under registration number(s)
____________________________________________, located at
(give registration numbers(s))
_________________________________________________________________
(give location of property as shown on current registration)
unless the default is promptly cured.
You may cure the default by ___________________________________
(describe conditions
________________________________________________________________
precedent to reinstatement required to cure default)
or by entirely repaying the outstanding secured indebtedness on
or before
________________________________________________________________
(state final date available for cure, which date shall be no
earlier than 45 days after mailing of the notice)
To cure the default you may also be required to reimburse the
creditor for its reasonable attorney's fees and legal expenses
and for any other sums to which the creditor may have become
entitled under the terms of your credit agreement after the
date of this notice. You may entirely repay the outstanding
obligation by paying the creditor
________________________________________________________________
(state dollar amount required to obtain release of security
interest, and if the amount may increase due to passage of
time, state that fact)
plus any amount necessary to reimburse the creditor for its
reasonable attorney's fees and legal expenses and any other
sums to which the creditor may have become entitled after
the date of this notice under the terms of your agreement.
(2) Within five days following the mailing of the notice of
default required by paragraph (1), the foreclosing creditor shall
forward a copy thereof to the legal owner shown on the current
registration card, if different than the foreclosing creditor, and to
each junior lienholder shown on the current registration card, if
different than the foreclosing creditor, and, effective July 1, 1985,
to the department. The notice shall be forwarded to each party in
the same manner as provided for mailing the original notice to the
registered owner.
(3) In the event of default under the provisions of any security
agreement relating to a loan or conditional sale contract which,
according to its terms, gives the secured party the right to
foreclose its security interest in a manufactured home, mobilehome,
truck camper, or floating home, each registered owner and each junior
lienholder having a security interest which is subordinate to the
security interest of the foreclosing creditor shall have the right to
cure the default by the methods and in the manner prescribed in the
notice within 45 days after mailing of the notice to the registered
owner required by paragraph (1).
(4) If the default is not cured within the time indicated on the
notice required by paragraph (1), or if the property has been
abandoned by the registered owner or voluntarily surrendered by the
registered owner to the foreclosing creditor, the creditor may
proceed to sell the property at private or public sale pursuant to
the provisions of Section 9610 of the Commercial Code, except as
provided in paragraph (5) and subdivision (c). The notice of sale
required by Sections 9610, 9611, 9617, 9618, and 9624 of the
Commercial Code shall not be mailed or delivered before expiration of
the period for the right to cure the default, as stated in the
notice required by paragraph (1), unless the property has been
abandoned by the registered owner or voluntarily surrendered by the
registered owner to the foreclosing creditor.
(5) Notwithstanding any contrary provisions of Sections 9610,
9611, 9615, 9617, 9618, and 9624 of the Commercial Code, the
foreclosing creditor shall deposit or cause to be deposited in the
United States mail, registered or certified with postage prepaid, an
envelope containing the notice of sale addressed to each party to
whom the notice of default was mailed pursuant to paragraph (2). The
notice of sale shall be given at least 10 days before the date fixed
for a public sale or on or after which any private sale is to be
made.
(6) For purposes of this subdivision, a manufactured home,
mobilehome, truck camper, or floating home shall be deemed abandoned
if the foreclosing creditor gives written notice of its belief of
abandonment to the registered owner as provided in this paragraph and
the registered owner fails to give the foreclosing creditor written
notice, prior to the appropriate date specified in the foreclosing
creditor's notice, stating that the registered owner has not
abandoned and does not intend to abandon the manufactured home,
mobilehome, truck camper, or floating home and stating an address at
which the registered owner may be served by certified mail with a
summons in connection with any legal action which the foreclosing
creditor may appropriately initiate. The foreclosing creditor may
give a notice of belief of abandonment only where it reasonably
believes that the registered owner has abandoned the manufactured
home, mobilehome, truck camper, or floating home. The notice of
belief of abandonment shall be personally delivered to the registered
owner or sent by registered or certified mail, with postage prepaid,
to the registered owner at his or her last known address and, if
there is reason to believe that the notice sent to that address will
not be received by the registered owner, to any other address, if
any, known to the foreclosing creditor where the registered owner may
reasonably be expected to receive the notice. The notice of belief
of abandonment shall be in substantially the following form in at
least 10-point type:
NOTICE OF BELIEF OF ABANDONMENT
To: _____________________________________________________________
(names of all registered owners)
This notice is given pursuant to Section 18037.5 of the Health and
Safety Code concerning your manufactured home, mobilehome, truck
camper, or floating home located at
______________________________________________________________________
__ .
(address of manufactured home, mobilehome, truck camper, or floating
home as shown on current registration)
You
_____________________________________________________________________
(if the registered owner is not the person who is in default,
substitute name of defaulting person(s))
are in default under the terms of the
______________________________________________________________________
____
(identify security agreement or conditional sale contract by title
or
caption and date)
in that ____________________________________.
(describe default)
This default gives the foreclosing creditor named below the right to
sell your manufactured home, mobilehome, truck camper, or floating
home
which is registered with the Department of Housing and Community
Development under number(s)
______________________________________________________________________
____
(give registration number(s))
unless the default is promptly cured. Unless the foreclosing
creditor receives a written notice from you to the contrary by
______________________________________________________________________
__ ,
(insert a date not less than 15 days after this notice is served
personally or, if mailed, not less than 18 days after this notice
is deposited in the mail)
your manufactured home, mobilehome, truck camper, or floating home
will be deemed abandoned, which means that the foreclosing creditor
may
sell your manufactured home, mobilehome, truck camper, or floating
home
sooner than would otherwise be permitted by law. The written notice
you
must send to the foreclosing creditor shall be sent to
______________________________________________________________________
____
(address of foreclosing creditor)
and shall state both of the following:
1. Your intent not to abandon the manufactured home, mobilehome,
truck
camper, or floating home.
2. An address at which you may be served by certified mail with a
summons in connection with any legal action which the foreclosing
creditor
may appropriately initiate.
_____________________________________
(name of foreclosing creditor)
_____________________________________
(signature of foreclosing
creditor)
(b) In the event of default under the provisions of any security
agreement relating to a loan or a conditional sale contract in which
the collateral is a manufactured home, mobilehome, truck camper, or
floating home subject to registration under this part which is
inventory of a dealer or a commercial coach, the secured party may
repossess and dispose of the collateral in accordance with the
provisions of the security agreement or conditional sale contract and
applicable law, including the provisions of Division 9 (commencing
with Section 9101) of the Commercial Code. Upon repossession of a
manufactured home, mobilehome, truck camper, or floating home subject
to registration under this part which is inventory of a dealer or a
commercial coach subject to registration under this part, the secured
creditor shall prepare and forward to the department a notice of
repossession on the form prescribed by the department.
(c) The proceeds of the sale of a manufactured home, mobilehome,
commercial coach, truck camper, or floating home shall be applied, in
the following order, to:
(1) The reasonable and necessary expenses incurred for preparing
for and conducting the sale and, if the foreclosing creditor has
obtained possession of the collateral prior to the disposition, the
reasonable and necessary expenses for the retaking and holding of the
collateral and to the extent provided for in the agreement and not
prohibited by law, reasonable attorney's fees and legal expenses
incurred by the foreclosing creditor in retaking the property from
any person not a party to the credit contract.
(2) The satisfaction of the indebtedness secured by the security
interest of the foreclosing creditor under which the disposition is
made.
(3) The satisfaction of indebtedness secured by any subordinate
liens or encumbrances on the property in the order of their priority
as provided in Section 18105, if with respect to a junior creditor
written notification of demand therefor is received before
distribution of the proceeds is completed, and to the satisfaction of
any subordinate attachment lien or execution lien pursuant to
subdivision (b) of Section 701.040 of the Code of Civil Procedure if
notice of the levy of attachment or execution is received before
distribution of the proceeds is completed. If requested by the
foreclosing creditor, the holder of a subordinate lien or encumbrance
shall furnish reasonable proof of his or her interest, and unless it
does so, the foreclosing creditor need not comply with its demand.
(4) The satisfaction of indebtedness secured by all senior liens
or encumbrances in the order of their priority as provided in Section
18105, if with respect to a senior creditor written demand therefor
is received by the foreclosing creditor before distribution of the
proceeds is completed. If requested by the foreclosing creditor, the
holder of a senior lien or encumbrance shall furnish reasonable
proof of his or her interest, and unless he or she does so, the
foreclosing creditor need not comply with his or her demand.
(5) To the registered owner within 45 days after the sale is
conducted if a surplus remains.
(d) Unless automatically provided to the registered owner within
45 days after the sale of a manufactured home, mobilehome, truck
camper, or floating home if a request for an accounting is made
within one year of the sale, the foreclosing creditor shall provide
to the registered owner a written accounting containing the gross
sales proceeds and its allocation pursuant to subdivision (c). In
the event any surplus is paid to the registered owner pursuant to
paragraph (5) of subdivision (c), the foreclosing creditor shall
furnish such an accounting whether or not requested by the registered
owner.
SEC. 50. Section 18080.7 of the Health and Safety Code is amended
to read:
18080.7. (a) Each person acquiring or retaining a security
interest in a manufactured home, mobilehome, commercial coach, truck
camper, or floating home subject to registration under this part,
unless the collateral is inventory, shall forward or cause to be
forwarded to the department the application for original registration
contemplated by Section 18085 with respect to a security interest
acquired or retained at or before original registration, or the
certificate of title or current registration card with appropriate
insertions and signatures as respectively contemplated by Section
18100.5 with respect to a security interest acquired or retained at a
time subsequent to original registration, together with the filing
fee prescribed by department regulations.
(b) A security interest in a manufactured home, mobilehome,
commercial coach, truck camper, or floating home subject to
registration under this part, unless the collateral is inventory, is
perfected when it has attached as contemplated by subdivision (a) and
by subdivision (a) of Section 9203 of the Commercial Code and when
the department has received the items required by subdivision (a),
whichever occurs later, except as otherwise provided by Section 9313
of the Commercial Code. The department may adopt regulations
authorizing its acceptance of a statement of lien by means of
electronic facsimile. If the department adopts these regulations, a
security interest may also be perfected when it has attached and when
the department has received the electronic facsimile, whichever
occurs later, subject to the receipt by the department of the items
required by subdivision (a), other than the fee, within 10 days of
the date of its receipt of the electronic facsimile, provided that
the fee required by subdivision (a) is paid in a timely fashion
pursuant to these regulations.
(c) Except as otherwise provided in subdivision (b) of Section
18100.5, upon receipt of the items required by subdivision (a), the
department shall establish or amend the permanent title record of the
manufactured home, mobilehome, commercial coach, truck camper, or
floating home to reflect the interest of the secured party as of that
date or, if within the preceding 10-day period the department has
received an electronic facsimile of the statement of lien, as of the
date of receipt of the electronic facsimile, provided that the fee
required by subdivision (a) is paid in a timely fashion and the
department actually receives the statement of lien within 10 days of
its receipt of the electronic facsimile.
(d) Upon establishing or amending the permanent title record, the
department shall issue to the registered owner a current registration
card indicating the interest of the secured party and shall forward
a copy of that registration card to all persons holding a record
security interest in the manufactured home, mobilehome, commercial
coach, truck camper, or floating home.
(e) Except as otherwise provided in subdivision (b) of Section
18100.5, the department shall not refuse to establish or amend the
permanent title record to indicate a security interest which is
authorized by law to be recorded and which would otherwise satisfy
statutory requirements for departmental documentation and recordation
on the basis of lack of knowledge as to the attachment of the
security interest prior to its receipt of the statement of lien or an
electronic facsimile thereof.
(f) The department shall designate the holder of a perfected
security interest as either the legal owner or a junior lienholder as
provided in this article, Article 3 (commencing with Section 18085),
or Article 4 (commencing with Section 18098), as applicable.
(g) The failure of a secured party to perfect a security interest
for which there has been attachment shall not impair or affect in any
way its enforceability against the registered owner or debtor with
respect to the manufactured home, mobilehome, commercial coach, truck
camper, or floating home.
(h) Except as otherwise provided in this part, a security interest
in a manufactured home, mobilehome, commercial coach, truck camper,
or floating home subject to registration with the department is
governed by Division 9 (commencing with Section 9101) of the
Commercial Code.
SEC. 51. Section 18093 of the Health and Safety Code is amended to
read:
18093. (a) At the time of release of a new manufactured home,
mobilehome, or commercial coach to any person, the manufacturer shall
prepare a certificate of origin, in quadruplicate, on numbered forms
prepared by the department which shall contain all of the following:
(1) The name and address of the manufacturer or fabricator.
(2) The manufacturer's identification number.
(3) The trade name of the manufactured home, mobilehome, or
commercial coach.
(4) The model name or number of the manufactured home, mobilehome,
or commercial coach.
(5) The shipping weight of the unit or separate sections of the
unit in the case of multisection manufactured homes, mobilehomes, or
commercial coaches.
(6) The length and width of the unit or separate sections of the
unit in the case of multisection manufactured homes, mobilehomes, or
commercial coaches.
(7) The serial number of the unit or separate sections of the unit
in the case of multisection manufactured homes, mobilehomes, or
commercial coaches.
(8) The date of manufacture.
(9) The United States Department of Housing and Urban Development
label number or department insignia number affixed to the unit or
separate sections of the unit in the case of multisection
manufactured homes, mobilehomes, or commercial coaches, as
applicable.
(10) The date that the ownership was transferred from the
manufacturer or fabricator and to whom the ownership is transferred.
(11) A certification of facts signed by a responsible agent of the
manufacturer or fabricator.
(12) The name and business address of any person known to the
manufacturer or fabricator who, as to the purchaser, has a purchase
money security interest in the manufactured home, mobilehome,
commercial coach, or truck camper as contemplated by Section 9103 of
the Commercial Code.
(13) Any other information as the department may reasonably
require.
(b) The manufacturer or fabricator shall forward the original and
duplicate copies of the certificate of origin by first-class mail as
follows:
(1) The original shall be forwarded to the purchase money creditor
unless there is none in which event the original shall be forwarded
to the purchaser.
(2) The first copy shall be forwarded to the department at the
address printed on the form.
(3) The second copy shall accompany the manufactured home,
mobilehome, or commercial coach to its destination.
(4) The third copy shall be retained by the manufacturer or
fabricator for its permanent records.
(c) The department may establish regulations for the distribution,
maintenance, accessibility, and surrender of certificates of origin
required by this section.
SEC. 52. Section 18105 of the Health and Safety Code is amended to
read:
18105. (a) Except as otherwise provided in subdivision (e) or
(g), the security interest of the legal owner has priority over
conflicting security interests of junior lienholders and holders of
security interests perfected pursuant to Sections 9306 and 9313 of
the Commercial Code and of unperfected security interests in a
manufactured home, mobilehome, commercial coach, truck camper, or
floating home subject to registration under this part and its
proceeds.
(b) Except as otherwise provided in subdivision (e) or (g), the
security interest of a junior lienholder has priority over
conflicting security interests of holders of security interests
perfected pursuant to Section 9313 of the Commercial Code and of
unperfected security interests in a manufactured home, mobilehome,
commercial coach, truck camper, or floating home subject to
registration under this part and its proceeds. Conflicting security
interests of junior lienholders rank in the order designated on the
permanent title record maintained by the department.
(c) Except as otherwise provided in subdivision (e) or (g), a
security interest perfected pursuant to Section 9313 of the
Commercial Code has priority over conflicting unperfected security
interests in a manufactured home, mobilehome, commercial coach, truck
camper, or floating home subject to registration under this part and
its proceeds.
(d) Except as otherwise provided in subdivision (e) or (g),
conflicting unperfected security interests in a manufactured home,
mobilehome, commercial coach, truck camper, or floating home subject
to registration under this part and its proceeds rank according to
priority in time of attachment.
(e) (1) Except as otherwise provided in subdivision (g), the
security interest of any secured party shall not have priority over
any security interest of a party having a subordinate security
interest by virtue of the preceding provisions of this section to the
extent that the otherwise senior secured obligation was incurred
subsequent to receipt by that creditor of actual or constructive
notice of the existence of the otherwise junior security interest
unless the obligation arose pursuant to the terms of a security
agreement for the purpose of preserving the collateral or protecting
the interest of the senior secured party therein or unless the
otherwise senior secured obligation was incurred under a binding
agreement that the credit would be extended by that creditor.
(2) For purposes of this subdivision receipt of a copy of the
registration certificate which reflects the existence of a security
interest shall constitute constructive notice of the existence of the
security interest. In interpreting the provisions of this
subdivision but for no other purposes, it is the intent of the
Legislature that the priorities among conflicting security interests
be determined in accordance with the rules of law applicable to
priority as to interests in real property.
(f) Except as otherwise provided in subdivision (g), the security
interest of the legal owner or a junior lienholder has priority over
a conflicting security interest of a holder of a perfected security
interest in a manufactured home, mobilehome, commercial coach, truck
camper, or floating home subject to registration under this part
which is inventory, including the proceeds of the inventory. The
rules of priority regarding conflicting security interests of holders
of a perfected security interest in a manufactured home, mobilehome,
commercial coach, truck camper, or floating home subject to
registration under this part which is inventory and of holders of
security interests perfected pursuant to Sections 9306 and 9313 of
the Commercial Code or unperfected security interests in a
manufactured home, mobilehome, commercial coach, truck camper, or
floating home subject to registration under this part shall be
governed by Sections 9322, 9323, 9324, and 9325 of the Commercial
Code.
(g) If the holders of two or more of the several security
interests shall otherwise agree among themselves, the relative
priorities among the holders of security interests who have so agreed
shall be determined according to this agreement.
SEC. 53. Section 18106 of the Health and Safety Code is amended to
read:
18106. (a) As used in this section, "lien creditor" means a
creditor who has acquired a lien on a manufactured home, mobilehome,
commercial coach, truck camper, or floating home subject to
registration under this part by attachment, levy, or the like and
includes an assignee for benefit of creditors from the time of
assignment, and a trustee in bankruptcy from the date of the filing
of the petition, or a receiver in equity from the time of
appointment, as contemplated by Section 9102 of the Commercial Code.
(b) Except as provided in subdivision (c), an unperfected security
interest in a manufactured home, mobilehome, commercial coach, truck
camper, or floating home subject to registration under this part is
subordinate to the rights of a person who becomes a lien creditor
before the security interest is perfected.
(c) If a security interest in a manufactured home, mobilehome,
commercial coach, truck camper, or floating home becomes perfected as
contemplated by subdivision (a) of Section 18080.7, the security
interest is senior to the rights of a lien creditor which arise
between the time the security interest attaches and the time of
perfection.
(d) A person who becomes a lien creditor while a security interest
in a manufactured home, mobilehome, commercial coach, truck camper,
or floating home is perfected by any of the means contemplated by
subdivision (b) of Section 18080.7 takes subject to the perfected
security interest only to the extent that it secures advances either
made before that person becomes a lien creditor or made thereafter
which would otherwise be senior to a competing security interest as
provided in subdivision (e) of Section 18105.
SEC. 54. Section 538 of the Penal Code is amended to read:
538. Every person, who, after mortgaging any of the property
, permitted to be mortgaged by the provisions of
Sections 9102 and 9109 of the Commercial Code, excepting locomotives,
engines, rolling stock of a railroad, steamboat machinery in actual
use, and vessels, during the existence of the mortgage, with intent
to defraud the mortgagee, his or her representative or assigns,
takes, drives, carries away, or otherwise removes or permits the
taking, driving, or carrying away, or other removal of the mortgaged
property, or any part thereof, from the county where it was situated
when mortgaged, without the written consent of the mortgagee, or who
sells, transfers, slaughters, destroys, or in any manner further
encumbers the mortgaged property, or any part thereof, or causes it
to be sold, transferred, slaughtered, destroyed, or further
encumbered, is guilty of theft, and is punishable accordingly. In
the case of a sale, transfer, or further encumbrance at or before the
time of making the sale, transfer, or encumbrance, the mortgagor
informs the person to whom the sale, transfer, or encumbrance is
made, of the existence of the prior mortgage, and also informs the
prior mortgagee of the intended sale, transfer, or encumbrance, in
writing, by giving the name and place of residence of the party to
whom the sale, transfer, or encumbrance is to be made.
SEC. 55. Section 843 of the Public Utilities Code is amended to
read:
843. (a) A security interest in transition property is valid, is
enforceable against the pledgor and third parties, subject to the
rights of any third parties holding security interests in the
transition property perfected in the manner described in this
section, and attaches when all of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed transition amounts included in the transition property.
(2) Value has been given by the pledgees of the transition
property.
(3) The pledgor has signed a security agreement covering the
transition property.
(b) A valid and enforceable security interest in transition
property is perfected when it has attached and when a financing
statement has been filed in accordance with Chapter 5 (commencing
with Section 9501) of Division 9 of the Commercial Code naming the
pledgor of the transition property as "debtor" and identifying the
transition property. Any description of the transition property
shall be sufficient if it refers to the financing order creating the
transition property. A copy of the financing statement shall be
filed with the commission by the electrical corporation that is the
pledgor or transferor of the transition property, and the commission
may require the electrical corporation to make other filings with
respect to the security interest in accordance with procedures it may
establish, provided that the filings shall not affect the perfection
of the security interest.
(c) A perfected security interest in transition property is a
continuously perfected security interest in all revenues and proceeds
arising with respect thereto, whether or not the revenues or
proceeds have accrued. Conflicting security interests shall rank
according to priority in time of perfection. Transition property
shall constitute property for all purposes, including for contracts
securing rate reduction bonds, whether or not the revenues and
proceeds arising with respect thereto have accrued.
(d) Subject to the terms of the security agreement covering the
transition property and the rights of any third parties holding
security interests in the transition property perfected in the manner
described in this section, the validity and relative priority of a
security interest created under this section is not defeated or
adversely affected by the commingling of revenues arising with
respect to the transition property with other funds of the electrical
corporation that is the pledgor or transferor of
the transition property, or by any
security interest in a deposit account of that electrical corporation
perfected under Division 9 (commencing with Section 9101) of the
Commercial Code into which the revenues are deposited. Subject to
the terms of the security agreement, upon compliance with the
requirements of Section 9311 of the Commercial Code, the pledgees of
the transition property shall have a perfected security interest in
all cash and deposit accounts of the electrical corporation in which
revenues arising with respect to the transition property have been
commingled with other funds, but the perfected security interest
shall be limited to an amount not greater than the amount of the
revenues with respect to the transition property received by the
electrical corporation within 12 months before (1) any default under
the security agreement or (2) the institution of insolvency
proceedings by or against the electrical corporation, less payments
from the revenues to the pledgees during that 12-month period.
(e) If an event of default occurs under the security agreement
covering the transition property, the pledgees of the transition
property, subject to the terms of the security agreement, shall have
all rights and remedies of a secured party upon default under
Division 9 (commencing with Section 9101) of the Commercial Code, and
shall be entitled to foreclose or otherwise enforce their security
interest in the transition property, subject to the rights of any
third parties holding prior security interests in the transition
property perfected in the manner provided in this section. In
addition, the commission may require, in the financing order creating
the transition property, that, in the event of default by the
electrical corporation in payment of revenues arising with respect to
the transition property, the commission and any successor thereto,
upon the application by the pledgees or transferees, including
transferees under Section 844, of the transition property, and
without limiting any other remedies available to the pledgees or
transferees by reason of the default, shall order the sequestration
and payment to the pledgees or transferees of revenues arising with
respect to the transition property. Any order shall remain in full
force and effect notwithstanding any bankruptcy, reorganization, or
other insolvency proceedings with respect to the debtor, pledgor, or
transferor of the transition property. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the rate reduction bonds, and other costs arising
under the security agreement, shall be remitted to the debtor or to
the pledgor or transferor.
(f) Section 5451 of the Government Code shall not apply to any
pledge of transition property by a financing entity. Sections 9204
and 9205 of the Commercial Code shall apply to a pledge of transition
property by an electrical corporation, an affiliate of an electrical
corporation, or a financing entity.
(g) This section sets forth the terms by which a consensual
security interest can be created and perfected in the transition
property. Unless otherwise ordered by the commission with respect to
any series of rate reduction bonds on or prior to the issuance of
the series, there shall exist a statutory lien as provided in this
subdivision. Upon the effective date of the financing order, there
shall exist a first priority lien on all transition property then
existing or thereafter arising pursuant to the terms of the financing
order. This lien shall arise by operation of this section
automatically without any action on the part of the electrical
corporation, any affiliate thereof, the financing entity, or any
other person. This lien shall secure all obligations, then existing
or subsequently arising, to the holders of the rate reduction bonds
issued pursuant to the financing order, the trustee or representative
for the holders, and any other entity specified in the financing
order. The persons for whose benefit this lien is established shall,
upon the occurrence of any defaults specified in the financing
order, have all rights and remedies of a secured party upon default
under Division 9 (commencing with Section 9101) of the Commercial
Code, and shall be entitled to foreclose or otherwise enforce this
statutory lien in the transition property. This lien shall attach to
the transition property regardless of who shall own, or shall
subsequently be determined to own, the transition property including
any electrical corporation, any affiliate thereof, the financing
entity, or any other person. This lien shall be valid, perfected,
and enforceable against the owner of the transition property and all
third parties upon the effectiveness of the financing order without
any further public notice; provided, however, that any person may,
but shall not be required to, file a financing statement in
accordance with subdivision (b). Financing statements so filed may
be "protective filings" and shall not be evidence of the ownership of
the transition property.
A perfected statutory lien in transition property is a
continuously perfected lien in all revenues and proceeds arising with
respect thereto, whether or not the revenues or proceeds have
accrued. Conflicting liens shall rank according to priority in time
of perfection. Transition property shall constitute property for all
purposes, including for contracts securing rate reduction bonds,
whether or not the revenues and proceeds arising with respect thereto
have accrued.
In addition, the commission may require, in the financing order
creating the transition property, that, in the event of default by
the electrical corporation in payment of revenues arising with
respect to transition property, the commission and any successor
thereto, upon the application by the beneficiaries of the statutory
lien, and without limiting any other remedies available to the
beneficiaries by reason of the default, shall order the sequestration
and payment to the beneficiaries of revenues arising with respect to
the transition property. Any order shall remain in full force and
effect notwithstanding any bankruptcy, reorganization, or other
insolvency proceedings with respect to the debtor, pledgor, or
transferor of the transition property. Any surplus in excess of
amounts necessary to pay principal, premium, if any, interest, costs,
and arrearages on the rate reduction bonds, and other costs arising
in connection with the documents governing the rate reduction bonds,
shall be remitted to the debtor or to the pledgor or transferor.
SEC. 56. Section 844 of the Public Utilities Code is amended to
read:
844. (a) A transfer of transition property by an electrical
corporation to an affiliate or to a financing entity, or by an
affiliate of an electrical corporation or a financing entity to
another financing entity, which the parties have in the governing
documentation expressly stated to be a sale or other absolute
transfer, in a transaction approved in a financing order, shall be
treated as an absolute transfer of all of the transferor's right,
title, and interest (as in a true sale), and not as a pledge or other
financing, of the transition property, other than for federal and
state income and franchise tax purposes. Granting to holders of rate
reduction bonds a preferred right to revenues of the electrical
corporation, or the provision by the company of other credit
enhancement with respect to rate reduction bonds, shall not impair or
negate the characterization of any transfer as a true sale, other
than for federal and state income and franchise tax purposes.
(b) A transfer of transition property shall be deemed perfected as
against third persons when both of the following have taken place:
(1) The commission has issued the financing order authorizing the
fixed transition amounts included in the transition property.
(2) An assignment of the transition property in writing has been
executed and delivered to the transferee.
(c) As between bona fide assignees of the same right for value
without notice, the assignee first filing a financing statement in
accordance with Chapter 5 (commencing with Section 9501) of Division
9 of the Commercial Code naming the assignor of the transition
property as debtor and identifying the transition property has
priority. Any description of the transition property shall be
sufficient if it refers to the financing order creating the
transition property. A copy of the financing statement shall be
filed by the assignee with the commission, and the commission may
require the assignor or the assignee to make other filings with
respect to the transfer in accordance with procedures it may
establish, but these filings shall not affect the perfection of the
transfer.