View Daily Data Tracking History
View Bill Text
View Statement of Purpose / Fiscal Impact
S1395................................................by JUDICIARY AND RULES
UNIFORM COMMERCIAL CODE - Repeals and adds to existing law to enact a new
Chapter 9, Title 28, Idaho Code, governing secured transactions; and to
amend existing law to conform to the new chapter 9.
02/10 Senate intro - 1st rdg - to printing
02/11 Rpt prt - to Com/HuRes
03/01 Rpt out - rec d/p - to 2nd rdg
03/02 2nd rdg - to 3rd rdg
03/09 3rd rdg - PASSED - 31-1-3
AYES--Andreason, Boatright, Bunderson, Burtenshaw, Cameron, Crow,
Danielson, Darrington, Davis, Deide, Dunklin, Frasure, Ingram, Ipsen,
Keough, King-Barrutia, Lee, Noh, Parry, Richardson, Riggs, Risch,
Sandy, Schroeder, Sorensen, Stennett, Thorne, Walton/Branch, Wheeler,
Whitworth, Williams
NAYS--Hawkins
Absent and excused--Geddes, McLaughlin, Stegner
Floor Sponsor - Davis
Title apvd - to House
03/10 House intro - 1st rdg - to Bus
S1395
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature Second Regular Session - 2000
IN THE SENATE
SENATE BILL NO. 1395
BY JUDICIARY AND RULES COMMITTEE
1 AN ACT
2 RELATING TO THE UNIFORM COMMERCIAL CODE; REPEALING CHAPTER 9, TITLE 28, IDAHO
3 CODE; AMENDING TITLE 28, IDAHO CODE, BY THE ADDITION OF A NEW CHAPTER 9,
4 TITLE 28, IDAHO CODE, TO PROVIDE A SHORT TITLE, TO PROVIDE DEFINITIONS AND
5 AN INDEX OF DEFINITIONS, TO PROVIDE FOR A PURCHASE-MONEY SECURITY INTER-
6 EST, APPLICATION OF PAYMENTS AND THE BURDEN OF ESTABLISHING A PURCHASE-
7 MONEY SECURITY INTEREST, TO PROVIDE FOR CONTROL OF A DEPOSIT ACCOUNT, TO
8 PROVIDE FOR CONTROL OF ELECTRONIC CHATTEL PAPER, TO PROVIDE FOR CONTROL OF
9 INVESTMENT PROPERTY, TO PROVIDE FOR CONTROL OF A LETTER OF CREDIT RIGHT,
10 TO PROVIDE FOR THE SUFFICIENCY OF DESCRIPTION, TO PROVIDE FOR THE SCOPE OF
11 THE CHAPTER, TO PROVIDE FOR SECURITY INTERESTS ARISING UNDER CHAPTER 2 OR
12 CHAPTER 12, TITLE 28, IDAHO CODE, TO PROVIDE THE GENERAL EFFECTIVENESS OF
13 A SECURITY AGREEMENT, TO PROVIDE THAT TITLE TO THE COLLATERAL IS IMMATE-
14 RIAL, TO PROVIDE FOR ATTACHMENT AND ENFORCEABILITY OF A SECURITY INTEREST,
15 TO PROVIDE FOR AFTER-ACQUIRED PROPERTY AND FUTURE ADVANCES, TO PROVIDE FOR
16 USE OR DISPOSITION OF COLLATERAL, TO PROVIDE FOR A SECURITY INTEREST ARIS-
17 ING IN THE PURCHASE OR DELIVERY OF A FINANCIAL ASSET, TO PROVIDE THE
18 RIGHTS AND DUTIES OF A SECURED PARTY HAVING POSSESSION OR CONTROL OF COL-
19 LATERAL, TO PROVIDE ADDITIONAL DUTIES OF A SECURED PARTY HAVING CONTROL OF
20 COLLATERAL, TO PROVIDE THE DUTIES OF A SECURED PARTY IF THE ACCOUNT DEBTOR
21 HAS BEEN NOTIFIED OF AN ASSIGNMENT, TO PROVIDE FOR A REQUEST FOR AN
22 ACCOUNTING AND A REQUEST REGARDING A LIST OF COLLATERAL OR STATEMENT OF
23 ACCOUNT, TO PROVIDE THE LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY
24 INTERESTS, TO PROVIDE THE LAW GOVERNING PERFECTION AND PRIORITY OF AGRI-
25 CULTURAL LIENS, TO PROVIDE THE LAW GOVERNING PERFECTION AND PRIORITY OF
26 SECURITY INTERESTS IN GOODS COVERED BY A CERTIFICATE OF TITLE, TO PROVIDE
27 THE LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN DEPOSIT
28 ACCOUNTS, TO PROVIDE THE LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY
29 INTERESTS IN INVESTMENT PROPERTY, TO PROVIDE THE LAW GOVERNING PERFECTION
30 AND PRIORITY OF SECURITY INTERESTS IN LETTER OF CREDIT RIGHTS, TO PROVIDE
31 FOR LOCATION OF DEBTOR, TO PROVIDE WHEN A SECURITY INTEREST OR AGRICUL-
32 TURAL LIEN IS PERFECTED AND TO PROVIDE FOR CONTINUITY OF PERFECTION, TO
33 PROVIDE WHEN A SECURITY INTEREST IS PERFECTED UPON ATTACHMENT, TO PROVIDE
34 WHEN A FILING IS REQUIRED TO PERFECT A SECURITY INTEREST OR AGRICULTURAL
35 LIEN AND TO PROVIDE EXCEPTIONS, TO PROVIDE FOR PERFECTION OF SECURITY
36 INTERESTS IN PROPERTY SUBJECT TO CERTAIN STATUTES, REGULATIONS AND TREA-
37 TIES, TO PROVIDE FOR PERFECTION OF SECURITY INTERESTS IN CHATTEL PAPER,
38 DEPOSIT ACCOUNTS, DOCUMENTS, GOODS COVERED BY DOCUMENTS, INSTRUMENTS,
39 INVESTMENT PROPERTY, LETTER OF CREDIT RIGHTS AND MONEY, TO PROVIDE FOR
40 PERFECTION BY PERMISSIVE FILING AND FOR TEMPORARY PERFECTION WITHOUT FIL-
41 ING OR TRANSFER OF POSSESSION, TO PROVIDE WHEN POSSESSION BY OR DELIVERY
42 TO A SECURED PARTY PERFECTS A SECURITY INTEREST WITHOUT FILING, TO PROVIDE
43 FOR PERFECTION BY CONTROL, TO PROVIDE A SECURED PARTY'S RIGHTS ON DISPOSI-
44 TION OF COLLATERAL AND IN PROCEEDS, TO PROVIDE FOR CONTINUED PERFECTION OF
45 A SECURITY INTEREST FOLLOWING A CHANGE IN GOVERNING LAW, TO PROVIDE THE
46 INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE OF A SECURITY INTEREST OR
2
1 AGRICULTURAL LIEN, TO PROVIDE WHEN A DEBTOR RETAINS NO INTEREST IN A RIGHT
2 TO PAYMENT THAT IS SOLD AND TO PROVIDE THE RIGHTS AND TITLE OF A SELLER OF
3 AN ACCOUNT OR CHATTEL PAPER WITH RESPECT TO CREDITORS AND PURCHASERS, TO
4 PROVIDE THE RIGHTS AND TITLE OF A CONSIGNEE WITH RESPECT TO CREDITORS AND
5 PURCHASERS, TO PROVIDE WHEN A BUYER OF GOODS TAKES FREE OF A SECURITY
6 INTEREST, TO PROVIDE FOR A LICENSEE OF A GENERAL INTANGIBLE AND A LESSEE
7 OF GOODS IN THE ORDINARY COURSE OF BUSINESS, TO PROVIDE PRIORITIES AMONG
8 CONFLICTING SECURITY INTERESTS IN AND AGRICULTURAL LIENS ON THE SAME COL-
9 LATERAL, TO PROVIDE FOR FUTURE ADVANCES, TO PROVIDE THE PRIORITY OF
10 PURCHASE-MONEY SECURITY INTERESTS, TO PROVIDE THE PRIORITY OF SECURITY
11 INTERESTS IN TRANSFERRED COLLATERAL, TO PROVIDE THE PRIORITY OF SECURITY
12 INTERESTS CREATED BY A NEW DEBTOR, TO PROVIDE THE PRIORITY OF SECURITY
13 INTERESTS IN A DEPOSIT ACCOUNT, TO PROVIDE THE PRIORITY OF SECURITY INTER-
14 ESTS IN INVESTMENT PROPERTY, TO PROVIDE THE PRIORITY OF SECURITY INTERESTS
15 IN A LETTER OF CREDIT RIGHT, TO PROVIDE THE PRIORITY OF A PURCHASER OF
16 CHATTEL PAPER OR AN INSTRUMENT, TO PROVIDE THE PRIORITY OF RIGHTS OF PUR-
17 CHASERS OF INSTRUMENTS, DOCUMENTS, AND SECURITIES UNDER OTHER CHAPTERS AND
18 THE PRIORITY OF INTERESTS IN FINANCIAL ASSETS AND SECURITY ENTITLEMENTS
19 UNDER CHAPTER 8, TITLE 28, IDAHO CODE, TO PROVIDE FOR THE TRANSFER OF
20 MONEY AND A TRANSFER OF FUNDS FROM A DEPOSIT ACCOUNT, TO PROVIDE THE PRI-
21 ORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW, TO PROVIDE THE PRIOR-
22 ITY OF SECURITY INTERESTS IN FIXTURES AND CROPS, TO PROVIDE FOR ACCES-
23 SIONS, TO PROVIDE FOR COMMINGLED GOODS, TO PROVIDE THE PRIORITY OF SECU-
24 RITY INTERESTS IN GOODS COVERED BY A CERTIFICATE OF TITLE, TO PROVIDE THE
25 PRIORITY OF A SECURITY INTEREST OR AGRICULTURAL LIEN PERFECTED BY A FILED
26 FINANCING STATEMENT PROVIDING CERTAIN INCORRECT INFORMATION, TO PROVIDE
27 THAT PRIORITY IS SUBJECT TO SUBORDINATION BY AGREEMENT, TO PROVIDE THE
28 EFFECTIVENESS OF A RIGHT OF RECOUPMENT OR SET-OFF AGAINST A DEPOSIT
29 ACCOUNT, TO PROVIDE A BANK'S RIGHTS AND DUTIES WITH RESPECT TO A DEPOSIT
30 ACCOUNT, TO PROVIDE FOR THE BANK'S RIGHT TO REFUSE TO ENTER INTO OR DIS-
31 CLOSE THE EXISTENCE OF A CONTROL AGREEMENT, TO PROVIDE FOR ALIENABILITY OF
32 DEBTOR'S RIGHTS, TO PROVIDE THAT A SECURED PARTY IS NOT OBLIGATED ON A
33 CONTRACT OF THE DEBTOR OR IN TORT, TO PROVIDE FOR AN AGREEMENT NOT TO
34 ASSERT DEFENSES AGAINST AN ASSIGNEE, TO PROVIDE FOR RIGHTS ACQUIRED BY AN
35 ASSIGNEE AND CLAIMS AND DEFENSES AGAINST AN ASSIGNEE, TO PROVIDE FOR MODI-
36 FICATION OF AN ASSIGNED CONTRACT, TO PROVIDE FOR DISCHARGE OF THE ACCOUNT
37 DEBTOR UPON PAYMENT TO THE ASSIGNOR, TO PROVIDE FOR NOTIFICATION OF THE
38 ASSIGNMENT AND TO PROVIDE FOR RESTRICTIONS ON ASSIGNMENT, TO PROVIDE FOR
39 RESTRICTIONS ON THE CREATION OR ENFORCEMENT OF A SECURITY INTEREST IN A
40 LEASEHOLD INTEREST OR IN THE LESSOR'S RESIDUAL INTEREST, TO PROVIDE WHEN
41 RESTRICTIONS ON THE ASSIGNMENT OF PROMISSORY NOTES, HEALTH CARE INSURANCE
42 RECEIVABLES AND CERTAIN INTANGIBLES IS INEFFECTIVE, TO PROVIDE WHEN
43 RESTRICTIONS ON THE ASSIGNMENT OF LETTER OF CREDIT RIGHTS IS INEFFECTIVE,
44 TO PROVIDE THE OFFICE FOR FILING A FINANCING STATEMENT, TO PROVIDE THE
45 CONTENTS OF A FINANCING STATEMENT, TO PROVIDE FOR THE RECORD OF A MORTGAGE
46 AS A FINANCING STATEMENT, TO PROVIDE FOR THE TIME OF FILING A FINANCING
47 STATEMENT AND TO PROVIDE FOR A FINANCING STATEMENT COVERING FARM PRODUCTS,
48 TO PROVIDE FOR SUFFICIENCY OF THE NAME OF THE DEBTOR AND SECURED PARTY, TO
49 PROVIDE FOR A SUFFICIENT INDICATION OF THE COLLATERAL, TO PROVIDE FOR FIL-
50 ING AND COMPLIANCE WITH OTHER STATUTES AND TREATIES FOR CONSIGNMENTS,
51 LEASES, OTHER BAILMENTS AND OTHER TRANSACTIONS, TO PROVIDE THE EFFECT OF
52 ERRORS OR OMISSIONS, TO PROVIDE THE EFFECT OF CERTAIN EVENTS ON THE EFFEC-
53 TIVENESS OF A FINANCING STATEMENT, TO PROVIDE THE EFFECTIVENESS OF A
54 FINANCING STATEMENT IF A NEW DEBTOR BECOMES BOUND BY A SECURITY AGREEMENT,
55 TO PROVIDE THE PERSONS ENTITLED TO FILE A RECORD, TO PROVIDE THE EFFEC-
3
1 TIVENESS OF A FILED RECORD, TO PROVIDE FOR THE SECURED PARTY OF RECORD, TO
2 PROVIDE FOR AMENDMENT OF A FINANCING STATEMENT, TO PROVIDE FOR A TERMINA-
3 TION STATEMENT, TO PROVIDE FOR ASSIGNMENT OF THE POWERS OF A SECURED PARTY
4 OF RECORD, TO PROVIDE THE DURATION AND EFFECTIVENESS OF A FINANCING STATE-
5 MENT AND THE EFFECT OF A LAPSED FINANCING STATEMENT, TO PROVIDE WHAT CON-
6 STITUTES FILING AND THE EFFECTIVENESS OF FILING, TO PROVIDE THE EFFECT OF
7 INDEXING ERRORS, TO PROVIDE FOR A CLAIM CONCERNING AN INACCURATE OR WRONG-
8 FULLY FILED RECORD, TO PROVIDE FOR NUMBERING, MAINTAINING AND INDEXING
9 RECORDS AND COMMUNICATING INFORMATION PROVIDED IN RECORDS, TO PROVIDE FOR
10 ACCEPTANCE OF AND A REFUSAL TO ACCEPT A RECORD BY A FILING OFFICE, TO PRO-
11 VIDE THE UNIFORM FORMS FOR A WRITTEN FINANCING STATEMENT AND AN AMENDMENT,
12 TO PROVIDE FOR MAINTENANCE AND DESTRUCTION OF RECORDS, TO PROVIDE FOR
13 INFORMATION FROM A FILING OFFICE, TO PROVIDE FOR THE SALE OR LICENSE OF
14 RECORDS AND TO PROVIDE FOR MASTER LISTS OF FARM PRODUCTS, TO PROVIDE FOR A
15 DELAY BY A FILING OFFICE, TO PROVIDE FOR FEES, TO PROVIDE FOR PROMULGATION
16 OF RULES BY THE SECRETARY OF STATE, TO PROVIDE FOR RIGHTS AFTER DEFAULT
17 AND UPON JUDICIAL ENFORCEMENT, TO PROVIDE FOR WAIVER AND VARIANCE OF
18 RIGHTS AND DUTIES, TO PROVIDE FOR AN AGREEMENT ON STANDARDS CONCERNING
19 RIGHTS AND DUTIES, TO PROVIDE THE PROCEDURE IF A SECURITY AGREEMENT COVERS
20 REAL PROPERTY OR FIXTURES, TO PROVIDE FOR AN UNKNOWN DEBTOR OR SECONDARY
21 OBLIGOR, TO PROVIDE THE TIME OF DEFAULT FOR AN AGRICULTURAL LIEN, TO PRO-
22 VIDE FOR COLLECTION AND ENFORCEMENT BY A SECURED PARTY, TO PROVIDE FOR
23 APPLICATION OF THE PROCEEDS OF COLLECTION OR ENFORCEMENT, TO PROVIDE THE
24 LIABILITY FOR A DEFICIENCY AND RIGHT TO SURPLUS, TO PROVIDE THE SECURED
25 PARTY'S RIGHT TO TAKE POSSESSION AFTER DEFAULT, TO PROVIDE FOR DISPOSITION
26 OF COLLATERAL AFTER DEFAULT, TO PROVIDE FOR NOTIFICATION BEFORE DISPOSI-
27 TION OF COLLATERAL, TO PROVIDE FOR TIMELINESS OF NOTIFICATION BEFORE DIS-
28 POSITION OF COLLATERAL, TO PROVIDE THE CONTENTS AND FORM OF NOTIFICATION
29 BEFORE DISPOSITION OF COLLATERAL IN GENERAL AND IN A CONSUMER GOODS TRANS-
30 ACTION, TO PROVIDE FOR APPLICATION OF THE PROCEEDS OF DISPOSITION, TO PRO-
31 VIDE THE LIABILITY FOR A DEFICIENCY AND THE RIGHT TO SURPLUS, TO PROVIDE
32 FOR AN EXPLANATION OF THE CALCULATION OF A SURPLUS OR A DEFICIENCY, TO
33 PROVIDE THE RIGHTS OF A TRANSFEREE OF COLLATERAL, TO PROVIDE THE RIGHTS
34 AND DUTIES OF CERTAIN SECONDARY OBLIGORS, TO PROVIDE FOR A TRANSFER OF
35 RECORD OR LEGAL TITLE, TO PROVIDE FOR ACCEPTANCE OF COLLATERAL IN FULL OR
36 PARTIAL SATISFACTION OF AN OBLIGATION AND FOR COMPULSORY DISPOSITION OF
37 COLLATERAL, TO PROVIDE FOR NOTIFICATION OF A PROPOSAL TO ACCEPT COLLATERAL
38 AND FOR THE EFFECT OF AN ACCEPTANCE OF COLLATERAL, TO PROVIDE FOR A RIGHT
39 TO REDEEM COLLATERAL, TO PROVIDE FOR WAIVER OF A DISPOSITION NOTIFICATION
40 OR A REDEMPTION RIGHT, TO PROVIDE REMEDIES FOR A SECURED PARTY'S FAILURE
41 TO COMPLY WITH CHAPTER 9, TITLE 28, IDAHO CODE, TO PROVIDE FOR AN ACTION
42 IN WHICH A DEFICIENCY OR SURPLUS IS IN ISSUE, TO PROVIDE FOR A DETERMINA-
43 TION OF WHETHER CONDUCT WAS COMMERCIALLY REASONABLE, TO PROVIDE FOR NON-
44 LIABILITY AND A LIMITATION OF THE LIABILITY OF A SECURED PARTY AND FOR THE
45 LIABILITY OF A SECONDARY OBLIGOR, TO PROVIDE A SAVINGS CLAUSE, TO PROVIDE
46 FOR A SECURITY INTEREST PERFECTED BEFORE THE EFFECTIVE DATE OF THE ACT AND
47 FOR A SECURITY INTEREST UNPERFECTED BEFORE THE EFFECTIVE DATE OF THE ACT,
48 TO PROVIDE THE EFFECTIVENESS OF ACTION TAKEN BEFORE THE EFFECTIVE DATE OF
49 THE ACT, TO PROVIDE WHEN AN INITIAL FINANCING STATEMENT SUFFICES TO CON-
50 TINUE THE EFFECTIVENESS OF A FINANCING STATEMENT, TO PROVIDE THE PERSONS
51 ENTITLED TO FILE AN INITIAL FINANCING STATEMENT OR A CONTINUATION STATE-
52 MENT AND TO PROVIDE FOR THE LAW GOVERNING PRIORITY; AMENDING SECTION
53 28-1-105, IDAHO CODE, TO PROVIDE APPROPRIATE CODE REFERENCES AND TO MAKE
54 TECHNICAL CORRECTIONS; AMENDING SECTION 28-1-201, IDAHO CODE, TO REDEFINE
55 "BUYER IN THE ORDINARY COURSE OF BUSINESS" AND "SECURITY INTEREST," TO
4
1 INCLUDE A SECURITY INTEREST WITHIN THE DEFINITION OF "PURCHASE" AND TO
2 MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 28-2-103, IDAHO CODE, TO PRO-
3 VIDE CORRECT CODE REFERENCES AND TO MAKE TECHNICAL CORRECTIONS; AMENDING
4 SECTION 28-2-210, IDAHO CODE, TO PROVIDE THAT A SECURITY INTEREST IN THE
5 SELLER'S INTEREST UNDER A CONTRACT IS NOT A PROHIBITED TRANSFER UNLESS
6 ENFORCEMENT RESULTS IN A DELEGATION OF MATERIAL PERFORMANCE AND TO PROVIDE
7 THE SELLER'S LIABILITY IN THAT EVENT; AMENDING SECTION 28-2-326, IDAHO
8 CODE, TO DELETE OBSOLETE PROVISIONS AND TO MAKE TECHNICAL CORRECTIONS;
9 AMENDING SECTION 28-2-502, IDAHO CODE, TO PROVIDE THE BUYER'S RIGHT TO
10 GOODS ON THE SELLER'S REPUDIATION AND FAILURE TO DELIVER AND TO MAKE TECH-
11 NICAL CORRECTIONS; AMENDING SECTION 28-2-716, IDAHO CODE, TO PROVIDE WHEN
12 THE BUYER'S RIGHT OF REPLEVIN VESTS IN THE CASE OF GOODS BOUGHT FOR PER-
13 SONAL, FAMILY OR HOUSEHOLD PURPOSES; AMENDING SECTION 28-4-210, IDAHO
14 CODE, TO PROVIDE A CORRECT CODE REFERENCE AND TO MAKE TECHNICAL CORREC-
15 TIONS; AMENDING PART 1, CHAPTER 5, TITLE 28, IDAHO CODE, BY THE ADDITION
16 OF A NEW SECTION 28-5-120, IDAHO CODE, TO PROVIDE FOR THE SECURITY INTER-
17 EST OF AN ISSUER OR NOMINATED PERSON IN A DOCUMENT; AMENDING SECTION
18 28-7-503, IDAHO CODE, TO PROVIDE CORRECT CODE REFERENCES AND TO MAKE
19 TECHNICAL CORRECTIONS; AMENDING SECTION 28-8-103, IDAHO CODE, TO PROVIDE
20 CORRECT CODE REFERENCES; AMENDING SECTION 28-8-106, IDAHO CODE, TO PROVIDE
21 THAT A PURCHASER HAS CONTROL OF A SECURITY ENTITLEMENT IF ANOTHER PERSON
22 HAS CONTROL OF THE SECURITY ENTITLEMENT ON BEHALF OF THE PURCHASER AND TO
23 PROVIDE CORRECT CODE REFERENCES; AMENDING SECTION 28-8-110, IDAHO CODE, TO
24 PROVIDE FOR A SECURITIES INTERMEDIARY'S JURISDICTION IN PARTICULAR CIRCUM-
25 STANCES AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 28-8-301,
26 IDAHO CODE, TO PROVIDE ADDITIONAL CIRCUMSTANCES WHEN A SECURITIES INTERME-
27 DIARY ACTING ON BEHALF OF THE PURCHASER ACQUIRES POSSESSION OF A SECURITY
28 CERTIFICATE; AMENDING SECTION 28-8-302, IDAHO CODE, TO DELETE THE REQUIRE-
29 MENT FOR DELIVERY BEFORE A PURCHASER ACQUIRES RIGHTS IN A CERTIFICATED OR
30 UNCERTIFICATED SECURITY; AMENDING SECTION 28-8-510, IDAHO CODE, TO PROVIDE
31 FOR APPLICATION OF THE SECTION IN CASES NOT COVERED BY THE PRIORITY RULES
32 OF CHAPTER 9, TITLE 28, IDAHO CODE, TO PROVIDE FOR PRIORITY WITH RESPECT
33 TO PURCHASERS OF A SECURITY ENTITLEMENT HAVING CONTROL AND TO MAKE A TECH-
34 NICAL CORRECTION; AMENDING SECTION 28-12-103, IDAHO CODE, TO PROVIDE COR-
35 RECT CODE REFERENCES AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION
36 28-12-303, IDAHO CODE, TO PROVIDE CORRECT CODE REFERENCES, TO DELETE OBSO-
37 LETE PROVISIONS AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION
38 28-12-307, IDAHO CODE, TO PROVIDE CORRECT CODE REFERENCES AND TO PROVIDE
39 WHEN A LESSEE TAKES A LEASEHOLD INTEREST SUBJECT TO A SECURITY INTEREST
40 HELD BY A LESSOR'S CREDITOR; AMENDING SECTION 28-12-309, IDAHO CODE, TO
41 PROVIDE CORRECT NOMENCLATURE AND CODE REFERENCES AND TO MAKE TECHNICAL
42 CORRECTIONS; AMENDING CHAPTER 3, TITLE 45, IDAHO CODE, BY THE ADDITION OF
43 A NEW SECTION 45-318, IDAHO CODE, TO PROVIDE APPLICABILITY OF THE UNIFORM
44 COMMERCIAL CODE; AMENDING SECTION 8-506A, IDAHO CODE, TO PROVIDE A CORRECT
45 CODE REFERENCE AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION
46 31-2402, IDAHO CODE, TO PROVIDE CORRECT CODE REFERENCES AND TO MAKE TECH-
47 NICAL CORRECTIONS; AMENDING SECTION 45-1909, IDAHO CODE, TO PROVIDE COR-
48 RECT CODE REFERENCES; AMENDING SECTION 49-120, IDAHO CODE, TO PROVIDE COR-
49 RECT REFERENCES AND TO MAKE TECHNICAL CORRECTIONS; AND PROVIDING AN EFFEC-
50 TIVE DATE.
51 Be It Enacted by the Legislature of the State of Idaho:
52 SECTION 1. That Chapter 9, Title 28, Idaho Code, be, and the same is
53 hereby repealed.
5
1 SECTION 2. That Title 28, Idaho Code, be, and the same is hereby amended
2 by the addition thereto of a NEW CHAPTER, to be known and designated as Chap-
3 ter 9, Title 28, Idaho Code, and to read as follows:
4 CHAPTER 9
5 SECURED TRANSACTIONS
6 PART 1
7 GENERAL PROVISIONS
8 28-9-101. SHORT TITLE. This chapter may be cited as "Uniform Commercial
9 Code -- Secured Transactions."
10 28-9-102. DEFINITIONS AND INDEX OF DEFINITIONS. (a) In this chapter:
11 (1) "Accession" means goods that are physically united with other goods
12 in such a manner that the identity of the original goods is not lost.
13 (2) "Account," except as used in "account for," means a right to payment
14 of a monetary obligation, whether or not earned by performance: (i) for
15 property that has been or is to be sold, leased, licensed, assigned, or
16 otherwise disposed of, (ii) for services rendered or to be rendered, (iii)
17 for a policy of insurance issued or to be issued, (iv) for a secondary
18 obligation incurred or to be incurred, (v) for energy provided or to be
19 provided, (vi) for the use or hire of a vessel under a charter or other
20 contract, (vii) arising out of the use of a credit or charge card or
21 information contained on or for use with the card, or (viii) as winnings
22 in a lottery or other game of chance operated or sponsored by a state,
23 governmental unit of a state, or a person licensed or authorized to oper-
24 ate the game by a state or governmental unit of a state. The term includes
25 health care insurance receivables. The term does not include: (i) rights
26 to payment evidenced by chattel paper or an instrument, (ii) commercial
27 tort claims, (iii) deposit accounts, (iv) investment property, (v) letter
28 of credit rights or letters of credit, or (vi) rights to payment for money
29 or funds advanced or sold, other than rights arising out of the use of a
30 credit or charge card or information contained on or for use with the
31 card.
32 (3) "Account debtor" means a person obligated on an account, chattel
33 paper, or general intangible. The term does not include persons obligated
34 to pay a negotiable instrument, even if the instrument constitutes part of
35 chattel paper.
36 (4) "Accounting," except as used in "accounting for," means a record:
37 (A) authenticated by a secured party;
38 (B) indicating the aggregate unpaid secured obligations as of a date
39 not more than thirty-five (35) days earlier or thirty-five (35) days
40 later than the date of the record; and
41 (C) identifying the components of the obligations in reasonable
42 detail.
43 (5) "Agricultural lien" means an interest, other than a security inter-
44 est, in farm products:
45 (A) which secures payment or performance of an obligation for:
46 (i) goods or services furnished in connection with a debtor's
47 farming operation; or
48 (ii) rent on real property leased by a debtor in connection
49 with its farming operation;
50 (B) which is created by statute in favor of a person that:
51 (i) in the ordinary course of its business furnished goods or
6
1 services to a debtor in connection with a debtor's farming oper-
2 ation; or
3 (ii) leased real property to a debtor in connection with the
4 debtor's farming operation; and
5 (C) whose effectiveness does not depend on the person's possession
6 of the personal property.
7 (6) "As-extracted collateral" means:
8 (A) oil, gas, or other minerals that are subject to a security
9 interest that:
10 (i) is created by a debtor having an interest in the minerals
11 before extraction; and
12 (ii) attaches to the minerals as extracted; or
13 (B) accounts arising out of the sale at the wellhead or minehead of
14 oil, gas, or other minerals in which the debtor had an interest
15 before extraction.
16 (7) "Authenticate" means:
17 (A) to sign; or
18 (B) to execute or otherwise adopt a symbol, or encrypt or similarly
19 process a record in whole or in part, with the present intent of the
20 authenticating person to identify the person and adopt or accept a
21 record.
22 (8) "Bank" means an organization that is engaged in the business of bank-
23 ing. The term includes savings banks, savings and loan associations,
24 credit unions and trust companies.
25 (9) "Cash proceeds" means proceeds that are money, checks, deposit
26 accounts, or the like.
27 (10) "Certificate of title" means a certificate of title with respect to
28 which a statute provides for the security interest in question to be indi-
29 cated on the certificate as a condition or result of the security
30 interest's obtaining priority over the rights of a lien creditor with
31 respect to the collateral.
32 (11) "Chattel paper" means a record or records that evidence both a mone-
33 tary obligation and a security interest in specific goods, a security
34 interest in specific goods and software used in the goods, a security
35 interest in specific goods and license of software used in the goods, a
36 lease of specific goods, or a lease of specific goods and license of soft-
37 ware used in the goods. In this paragraph, "monetary obligation" means a
38 monetary obligation secured by the goods or owed under a lease of the
39 goods and includes a monetary obligation with respect to software used in
40 the goods. The term does not include charters or other contracts involv-
41 ing the use or hire of a vessel. If a transaction is evidenced by records
42 that include an instrument or series of instruments, the group of records
43 taken together constitutes chattel paper.
44 (12) "Collateral" means the property subject to a security interest or
45 agricultural lien. The term includes:
46 (A) proceeds to which a security interest attaches;
47 (B) accounts, chattel paper, payment intangibles, and promissory
48 notes that have been sold; and
49 (C) goods that are the subject of a consignment.
50 (13) "Commercial tort claim" means a claim arising in tort with respect to
51 which:
52 (A) the claimant is an organization; or
53 (B) the claimant is an individual and the claim:
54 (i) arose in the course of the claimant's business or profes-
55 sion; and
7
1 (ii) does not include damages arising out of personal injury to
2 or the death of an individual.
3 (14) "Commodity account" means an account maintained by a commodity inter-
4 mediary in which a commodity contract is carried for a commodity customer.
5 (15) "Commodity contract" means a commodity futures contract, an option on
6 a commodity futures contract, a commodity option, or another contract if
7 the contract or option is:
8 (A) traded on or subject to the rules of a board of trade that has
9 been designated as a contract market for such a contract pursuant to
10 federal commodities laws; or
11 (B) traded on a foreign commodity board of trade, exchange, or mar-
12 ket, and is carried on the books of a commodity intermediary for a
13 commodity customer.
14 (16) "Commodity customer" means a person for which a commodity intermedi-
15 ary carries a commodity contract on its books.
16 (17) "Commodity intermediary" means a person that:
17 (A) is registered as a futures commission merchant under federal
18 commodities law; or
19 (B) in the ordinary course of its business provides clearance or
20 settlement services for a board of trade that has been designated as
21 a contract market pursuant to federal commodities law.
22 (18) "Communicate" means:
23 (A) to send a written or other tangible record;
24 (B) to transmit a record by any means agreed upon by the persons
25 sending and receiving the record; or
26 (C) in the case of transmission of a record to or by a filing
27 office, to transmit a record by any means prescribed by filing office
28 rule.
29 (19) "Consignee" means a merchant to which goods are delivered in a con-
30 signment.
31 (20) "Consignment" means a transaction, regardless of its form, in which a
32 person delivers goods to a merchant for the purpose of sale and:
33 (A) the merchant:
34 (i) deals in goods of that kind under a name other than the
35 name of the person making delivery;
36 (ii) is not an auctioneer; and
37 (iii) is not generally known by its creditors to be substan-
38 tially engaged in selling the goods of others;
39 (B) with respect to each delivery, the aggregate value of the goods
40 is one thousand dollars ($1,000) or more at the time of delivery;
41 (C) the goods are not consumer goods immediately before delivery;
42 and
43 (D) the transaction does not create a security interest that secures
44 an obligation.
45 (21) "Consignor" means a person that delivers goods to a consignee in a
46 consignment.
47 (22) "Consumer debtor" means a debtor in a consumer transaction.
48 (23) "Consumer goods" means goods that are used or bought for use primar-
49 ily for personal, family or household purposes.
50 (24) "Consumer goods transaction" means a consumer transaction in which:
51 (A) an individual incurs an obligation primarily for personal, fam-
52 ily or household purposes; and
53 (B) a security interest in consumer goods secures the obligation.
54 (25) "Consumer obligor" means an obligor who is an individual and who
55 incurred the obligation as part of a transaction entered into primarily
8
1 for personal, family or household purposes.
2 (26) "Consumer transaction" means a transaction in which: (i) an individ-
3 ual incurs an obligation primarily for personal, family or household pur-
4 poses, (ii) a security interest secures the obligation, and (iii) the col-
5 lateral is held or acquired primarily for personal, family or household
6 purposes. The term includes consumer goods transactions.
7 (27) "Continuation statement" means an amendment of a financing statement
8 which:
9 (A) identifies, by its file number, the initial financing statement
10 to which it relates; and
11 (B) indicates that it is a continuation statement for, or that it is
12 filed to continue the effectiveness of, the identified financing
13 statement.
14 (28) "Debtor" means:
15 (A) a person having an interest, other than a security interest or
16 other lien, in the collateral, whether or not the person is an obli-
17 gor;
18 (B) a seller of accounts, chattel paper, payment intangibles, or
19 promissory notes; or
20 (C) a consignee.
21 (29) "Deposit account" means a demand, time, savings, passbook, or similar
22 account maintained with a bank. The term does not include investment
23 property or accounts evidenced by an instrument.
24 (30) "Document" means a document of title or a receipt of the type
25 described in section 28-7-201(2).
26 (31) "Electronic chattel paper" means chattel paper evidenced by a record
27 or records consisting of information stored in an electronic medium.
28 (32) "Encumbrance" means a right, other than an ownership interest, in
29 real property. The term includes mortgages and other liens on real prop-
30 erty.
31 (33) "Equipment" means goods other than inventory, farm products or con-
32 sumer goods.
33 (34) "Farm products" means goods, other than standing timber, with respect
34 to which the debtor is engaged in a farming operation and which are:
35 (A) crops grown, growing, or to be grown, including:
36 (i) crops produced on trees, vines and bushes; and
37 (ii) aquatic goods produced in aquacultural operations;
38 (B) livestock, born or unborn, including aquatic goods produced in
39 aquacultural operations;
40 (C) supplies used or produced in a farming operation; or
41 (D) products of crops or livestock in their unmanufactured states.
42 (35) "Farming operation" means raising, cultivating, propagating, fatten-
43 ing, grazing, or any other farming, livestock, or aquacultural operation.
44 (36) "File number" means the number assigned to an initial financing
45 statement pursuant to section 28-9-519(a).
46 (37) "Filing office" means an office designated in section 28-9-501 as the
47 place to file a financing statement.
48 (38) "Filing office rule" means a rule adopted pursuant to section
49 28-9-526.
50 (39) "Financing statement" means a record or records composed of an ini-
51 tial financing statement and any filed record relating to the initial
52 financing statement.
53 (40) "Fixture filing" means the filing of a financing statement covering
54 goods that are or are to become fixtures and satisfying section
55 28-9-502(a) and (b). The term includes the filing of a financing statement
9
1 covering goods of a transmitting utility which are or are to become fix-
2 tures.
3 (41) "Fixtures" means goods that have become so related to particular real
4 property that an interest in them arises under real property law.
5 (42) "General intangible" means any personal property, including things in
6 action, other than accounts, chattel paper, commercial tort claims,
7 deposit accounts, documents, goods, instruments, investment property, let-
8 ter of credit rights, letters of credit, money, and oil, gas, or other
9 minerals before extraction. The term includes payment intangibles and
10 software.
11 (43) "Good faith" means honesty in fact and the observance of reasonable
12 commercial standards of fair dealing.
13 (44) "Goods" means all things that are movable when a security interest
14 attaches. The term includes: (i) fixtures, (ii) standing timber that is to
15 be cut and removed under a conveyance or contract for sale, (iii) the
16 unborn young of animals, (iv) crops grown, growing, or to be grown, even
17 if the crops are produced on trees, vines or bushes, and (v) manufactured
18 homes. The term also includes a computer program embedded in goods and any
19 supporting information provided in connection with a transaction relating
20 to the program if: (i) the program is associated with the goods in such a
21 manner that it customarily is considered part of the goods, or (ii) by
22 becoming the owner of the goods, a person acquires a right to use the pro-
23 gram in connection with the goods. The term does not include a computer
24 program embedded in goods that consist solely of the medium in which the
25 program is embedded. The term also does not include accounts, chattel
26 paper, commercial tort claims, deposit accounts, documents, general intan-
27 gibles, instruments, investment property, letter of credit rights, letters
28 of credit, money, or oil, gas, or other minerals before extraction.
29 (45) "Governmental unit" means a subdivision, agency, department, county,
30 parish, municipality, or other unit of the government of the United
31 States, a state, or a foreign country. The term includes an organization
32 having a separate corporate existence if the organization is eligible to
33 issue debt on which interest is exempt from income taxation under the laws
34 of the United States.
35 (46) "Health care insurance receivable" means an interest in or claim
36 under a policy of insurance which is a right to payment of a monetary
37 obligation for health care goods or services provided.
38 (47) "Instrument" means a negotiable instrument or any other writing that
39 evidences a right to the payment of a monetary obligation, is not itself a
40 security agreement or lease, and is of a type that in ordinary course of
41 business is transferred by delivery with any necessary indorsement or
42 assignment. The term does not include: (i) investment property, (ii) let-
43 ters of credit, or (iii) writings that evidence a right to payment arising
44 out of the use of a credit or charge card or information contained on or
45 for use with the card.
46 (48) "Inventory" means goods, other than farm products, which:
47 (A) are leased by a person as lessor;
48 (B) are held by a person for sale or lease or to be furnished under
49 a contract of service;
50 (C) are furnished by a person under a contract of service; or
51 (D) consist of raw materials, work in process, or materials used or
52 consumed in a business.
53 (49) "Investment property" means a security, whether certificated or
54 uncertificated, security entitlement, securities account, commodity con-
55 tract or commodity account.
10
1 (50) "Jurisdiction of organization," with respect to a registered organi-
2 zation, means the jurisdiction under whose law the organization is orga-
3 nized.
4 (51) "Letter of credit right" means a right to payment or performance
5 under a letter of credit, whether or not the beneficiary has demanded or
6 is at the time entitled to demand payment or performance. The term does
7 not include the right of a beneficiary to demand payment or performance
8 under a letter of credit.
9 (52) "Lien creditor" means:
10 (A) a creditor that has acquired a lien on the property involved by
11 attachment, levy, or the like;
12 (B) an assignee for benefit of creditors from the time of assign-
13 ment;
14 (C) a trustee in bankruptcy from the date of the filing of the peti-
15 tion; or
16 (D) a receiver in equity from the time of appointment.
17 (53) "Manufactured home" means a structure, transportable in one (1) or
18 more sections, which, in the traveling mode, is eight (8) body feet or
19 more in width or forty (40) body feet or more in length, or, when erected
20 on site, is three hundred twenty (320) or more square feet, and which is
21 built on a permanent chassis and designed to be used as a dwelling with or
22 without a permanent foundation when connected to the required utilities,
23 and includes the plumbing, heating, air conditioning, and electrical sys-
24 tems contained therein. The term includes any structure that meets all of
25 the requirements of this paragraph except the size requirements and with
26 respect to which the manufacturer voluntarily files a certification
27 required by the United States secretary of housing and urban development
28 and complies with the standards established under title 42 of the United
29 States Code.
30 (54) "Manufactured home transaction" means a secured transaction:
31 (A) that creates a purchase-money security interest in a manufac-
32 tured home, other than a manufactured home held as inventory; or
33 (B) in which a manufactured home, other than a manufactured home
34 held as inventory, is the primary collateral.
35 (55) "Mortgage" means a consensual interest in real property, including
36 fixtures, which secures payment or performance of an obligation.
37 (56) "New debtor" means a person that becomes bound as debtor under sec-
38 tion 28-9-203(d) by a security agreement previously entered into by
39 another person.
40 (57) "New value" means: (i) money, (ii) money's worth in property, ser-
41 vices or new credit, or (iii) release by a transferee of an interest in
42 property previously transferred to the transferee. The term does not
43 include an obligation substituted for another obligation.
44 (58) "Noncash proceeds" means proceeds other than cash proceeds.
45 (59) "Obligor" means a person that, with respect to an obligation secured
46 by a security interest in or an agricultural lien on the collateral: (i)
47 owes payment or other performance of the obligation, (ii) has provided
48 property other than the collateral to secure payment or other performance
49 of the obligation, or (iii) is otherwise accountable in whole or in part
50 for payment or other performance of the obligation. The term does not
51 include issuers or nominated persons under a letter of credit.
52 (60) "Original debtor" means a person that, as debtor, entered into a
53 security agreement to which a new debtor has become bound under section
54 28-9-203(d).
55 (61) "Payment intangible" means a general intangible under which the
11
1 account debtor's principal obligation is a monetary obligation.
2 (62) "Person related to," with respect to an individual, means:
3 (A) the spouse of the individual;
4 (B) a brother, brother-in-law, sister, or sister-in-law of the indi-
5 vidual;
6 (C) an ancestor or lineal descendant of the individual or the
7 individual's spouse; or
8 (D) any other relative, by blood or marriage, of the individual or
9 the individual's spouse who shares the same home with the individual.
10 (63) "Person related to," with respect to an organization, means:
11 (A) a person directly or indirectly controlling, controlled by, or
12 under common control with the organization;
13 (B) an officer or director of, or a person performing similar func-
14 tions with respect to, the organization;
15 (C) an officer or director of, or a person performing similar func-
16 tions with respect to, a person described in subparagraph (A) of this
17 paragraph;
18 (D) the spouse of an individual described in subparagraph (A), (B)
19 or (C) of this paragraph; or
20 (E) an individual who is related by blood or marriage to an individ-
21 ual described in subparagraph (A), (B), (C) or (D) of this paragraph
22 and shares the same home with the individual.
23 (64) "Proceeds" means the following property:
24 (A) whatever is acquired upon the sale, lease, license, exchange or
25 other disposition of collateral;
26 (B) whatever is collected on, or distributed on account of, collat-
27 eral;
28 (C) rights arising out of collateral;
29 (D) to the extent of the value of collateral, claims arising out of
30 the loss, nonconformity, or interference with the use of, defects or
31 infringement of rights in, or damage to, the collateral; or
32 (E) to the extent of the value of collateral and to the extent pay-
33 able to the debtor or the secured party, insurance payable by reason
34 of the loss or nonconformity of, defects or infringement of rights
35 in, or damage to, the collateral.
36 (65) "Promissory note" means an instrument that evidences a promise to pay
37 a monetary obligation, does not evidence an order to pay, and does not
38 contain an acknowledgment by a bank that the bank has received for deposit
39 a sum of money or funds.
40 (66) "Proposal" means a record authenticated by a secured party which
41 includes the terms on which the secured party is willing to accept collat-
42 eral in full or partial satisfaction of the obligation it secures pursuant
43 to sections 28-9-620, 28-9-621 and 28-9-622.
44 (67) "Public-finance transaction" means a secured transaction in connec-
45 tion with which:
46 (A) debt securities are issued;
47 (B) all or a portion of the securities issued have an initial stated
48 maturity of at least twenty (20) years; and
49 (C) the debtor, obligor, secured party, account debtor or other per-
50 son obligated on collateral, assignor or assignee of a secured obli-
51 gation, or assignor or assignee of a security interest is a state or
52 a governmental unit of a state.
53 (68) "Pursuant to commitment," with respect to an advance made or other
54 value given by a secured party, means pursuant to the secured party's
55 obligation, whether or not a subsequent event of default or other event
12
1 not within the secured party's control has relieved or may relieve the
2 secured party from its obligation.
3 (69) "Record," except as used in "for record," "of record," "record or
4 legal title," and "record owner," means information that is inscribed on a
5 tangible medium or which is stored in an electronic or other medium and is
6 retrievable in perceivable form.
7 (70) "Registered organization" means an organization organized solely
8 under the law of a single state or the United States and as to which the
9 state or the United States must maintain a public record showing the orga-
10 nization to have been organized.
11 (71) "Secondary obligor" means an obligor to the extent that:
12 (A) the obligor's obligation is secondary; or
13 (B) the obligor has a right of recourse with respect to an obliga-
14 tion secured by collateral against the debtor, another obligor, or
15 property of either.
16 (72) "Secured party" means:
17 (A) a person in whose favor a security interest is created or pro-
18 vided for under a security agreement, whether or not any obligation
19 to be secured is outstanding;
20 (B) a person that holds an agricultural lien;
21 (C) a consignor;
22 (D) a person to which accounts, chattel paper, payment intangibles
23 or promissory notes have been sold;
24 (E) a trustee, indenture trustee, agent, collateral agent, or other
25 representative in whose favor a security interest or agricultural
26 lien is created or provided for; or
27 (F) a person that holds a security interest arising under section
28 28-2-401, 28-2-505, 28-2-711(3), 28-4-210, 28-5-120 or 28-12-508(5).
29 (73) "Security agreement" means an agreement that creates or provides for
30 a security interest.
31 (74) "Send," in connection with a record or notification, means:
32 (A) to deposit in the mail, deliver for transmission, or transmit by
33 any other usual means of communication, with postage or cost of
34 transmission provided for, addressed to any address reasonable under
35 the circumstances; or
36 (B) to cause the record or notification to be received within the
37 time that it would have been received if properly sent under subpara-
38 graph (A) of this paragraph.
39 (75) "Software" means a computer program and any supporting information
40 provided in connection with a transaction relating to the program. The
41 term does not include a computer program that is included in the defini-
42 tion of goods.
43 (76) "State" means a state of the United States, the District of Columbia,
44 Puerto Rico, the United States Virgin Islands, or any territory or insular
45 possession subject to the jurisdiction of the United States.
46 (77) "Supporting obligation" means a letter of credit right or secondary
47 obligation that supports the payment or performance of an account, chattel
48 paper, a document, a general intangible, an instrument or investment prop-
49 erty.
50 (78) "Tangible chattel paper" means chattel paper evidenced by a record or
51 records consisting of information that is inscribed on a tangible medium.
52 (79) "Termination statement" means an amendment of a financing statement
53 which:
54 (A) identifies, by its file number, the initial financing statement
55 to which it relates; and
13
1 (B) indicates either that it is a termination statement or that the
2 identified financing statement is no longer effective.
3 (80) "Transmitting utility" means a person primarily engaged in the busi-
4 ness of:
5 (A) operating a railroad, subway, street railway, or trolley bus;
6 (B) transmitting communications electrically, electromagnetically or
7 by light;
8 (C) transmitting goods by pipeline or sewer; or
9 (D) transmitting or producing and transmitting electricity, steam,
10 gas or water.
11 (b) The following definitions in other chapters apply to this chapter:
12 "Applicant" section 28-5-102.
13 "Beneficiary" section 28-5-102.
14 "Broker" section 28-8-102.
15 "Certificated security" section 28-8-102.
16 "Check" section 28-3-104.
17 "Clearing corporation" section 28-8-102.
18 "Contract for sale" section 28-2-106.
19 "Customer" section 28-4-104.
20 "Entitlement holder" section 28-8-102.
21 "Financial asset" section 28-8-102.
22 "Holder in due course" section 28-3-302.
23 "Issuer" (with respect to a letter of credit
24 or letter of credit right) section 28-5-102.
25 "Issuer" (with respect to a security) section 28-8-201.
26 "Lease" section 28-12-103.
27 "Lease agreement" section 28-12-103.
28 "Lease contract" section 28-12-103.
29 "Leasehold interest" section 28-12-103.
30 "Lessee" section 28-12-103.
31 "Lessee in ordinary course of business" section 28-12-103.
32 "Lessor" section 28-12-103.
33 "Lessor's residual interest" section 28-12-103.
34 "Letter of credit" section 28-5-102.
35 "Merchant" section 28-2-104.
36 "Negotiable instrument" section 28-3-104.
37 "Nominated person" section 28-5-102.
38 "Note" section 28-3-104.
39 "Proceeds of a letter of credit" section 28-5-114.
40 "Prove" section 28-3-103.
41 "Sale" section 28-2-106.
42 "Securities account" section 28-8-501.
43 "Securities intermediary" section 28-8-102.
44 "Security" section 28-8-102.
45 "Security certificate" section 28-8-102.
46 "Security entitlement" section 28-8-102.
47 "Uncertificated security" section 28-8-102.
48 (c) Chapter 1, title 28, contains general definitions and principles of
49 construction and interpretation applicable throughout this chapter.
50 28-9-103. PURCHASE-MONEY SECURITY INTEREST -- APPLICATION OF PAYMENTS --
51 BURDEN OF ESTABLISHING. (a) In this section:
52 (1) "Purchase-money collateral" means goods or software that secures a
53 purchase-money obligation incurred with respect to that collateral; and
54 (2) "Purchase-money obligation" means an obligation of an obligor incur-
14
1 red as all or part of the price of the collateral or for value given to
2 enable the debtor to acquire rights in or the use of the collateral if the
3 value is in fact so used.
4 (b) A security interest in goods is a purchase-money security interest:
5 (1) To the extent that the goods are purchase-money collateral with
6 respect to that security interest;
7 (2) If the security interest is in inventory that is or was purchase-
8 money collateral, also to the extent that the security interest secures a
9 purchase-money obligation incurred with respect to other inventory in
10 which the secured party holds or held a purchase-money security interest;
11 and
12 (3) Also to the extent that the security interest secures a purchase-
13 money obligation incurred with respect to software in which the secured
14 party holds or held a purchase-money security interest.
15 (c) A security interest in software is a purchase-money security interest
16 to the extent that the security interest also secures a purchase-money obliga-
17 tion incurred with respect to goods in which the secured party holds or held a
18 purchase-money security interest if:
19 (1) The debtor acquired its interest in the software in an integrated
20 transaction in which it acquired an interest in the goods; and
21 (2) The debtor acquired its interest in the software for the principal
22 purpose of using the software in the goods.
23 (d) The security interest of a consignor in goods that are the subject of
24 a consignment is a purchase-money security interest in inventory.
25 (e) If the extent to which a security interest is a purchase-money secu-
26 rity interest depends on the application of a payment to a particular obliga-
27 tion, the payment must be applied:
28 (1) In accordance with any reasonable method of application to which the
29 parties agree;
30 (2) In the absence of the parties' agreement to a reasonable method, in
31 accordance with any intention of the obligor manifested at or before the
32 time of payment; or
33 (3) In the absence of an agreement to a reasonable method and a timely
34 manifestation of the obligor's intention, in the following order:
35 (A) to obligations that are not secured; and
36 (B) if more than one (1) obligation is secured, to obligations
37 secured by purchase-money security interests in the order in which
38 those obligations were incurred.
39 (f) A purchase-money security interest does not lose its status as such,
40 even if:
41 (1) The purchase-money collateral also secures an obligation that is not
42 a purchase-money obligation;
43 (2) Collateral that is not purchase-money collateral also secures the
44 purchase-money obligation; or
45 (3) The purchase-money obligation has been renewed, refinanced, consoli-
46 dated or restructured.
47 (g) A secured party claiming a purchase-money security interest has the
48 burden of establishing the extent to which the security interest is a
49 purchase-money security interest.
50 28-9-104. CONTROL OF DEPOSIT ACCOUNT. (a) A secured party has control of
51 a deposit account if:
52 (1) The secured party is the bank with which the deposit account is main-
53 tained;
54 (2) The debtor, secured party, and bank have agreed in an authenticated
15
1 record that the bank will comply with instructions originated by the
2 secured party directing disposition of the funds in the deposit account
3 without further consent by the debtor; or
4 (3) The secured party becomes the bank's customer with respect to the
5 deposit account.
6 (b) A secured party that has satisfied subsection (a) of this section has
7 control, even if the debtor retains the right to direct the disposition of
8 funds from the deposit account.
9 28-9-105. CONTROL OF ELECTRONIC CHATTEL PAPER. A secured party has con-
10 trol of electronic chattel paper if the record or records comprising the chat-
11 tel paper are created, stored and assigned in such a manner that:
12 (1) A single authoritative copy of the record or records exists which is
13 unique, identifiable and, except as otherwise provided in subsections (4), (5)
14 and (6) of this section, unalterable;
15 (2) The authoritative copy identifies the secured party as the assignee
16 of the record or records;
17 (3) The authoritative copy is communicated to and maintained by the
18 secured party or its designated custodian;
19 (4) Copies or revisions that add or change an identified assignee of the
20 authoritative copy can be made only with the participation of the secured
21 party;
22 (5) Each copy of the authoritative copy and any copy of a copy is readily
23 identifiable as a copy that is not the authoritative copy; and
24 (6) Any revision of the authoritative copy is readily identifiable as an
25 authorized or unauthorized revision.
26 28-9-106. CONTROL OF INVESTMENT PROPERTY. (a) A person has control of a
27 certificated security, uncertificated security, or security entitlement as
28 provided in section 28-8-106.
29 (b) A secured party has control of a commodity contract if:
30 (1) The secured party is the commodity intermediary with which the com-
31 modity contract is carried; or
32 (2) The commodity customer, secured party and commodity intermediary have
33 agreed that the commodity intermediary will apply any value distributed on
34 account of the commodity contract as directed by the secured party without
35 further consent by the commodity customer.
36 (c) A secured party having control of all security entitlements or com-
37 modity contracts carried in a securities account or commodity account has con-
38 trol over the securities account or commodity account.
39 28-9-107. CONTROL OF LETTER OF CREDIT RIGHT. A secured party has control
40 of a letter of credit right to the extent of any right to payment or perfor-
41 mance by the issuer or any nominated person if the issuer or nominated person
42 has consented to an assignment of proceeds of the letter of credit under sec-
43 tion 28-5-114(3) or otherwise applicable law or practice.
44 28-9-108. SUFFICIENCY OF DESCRIPTION. (a) Except as otherwise provided in
45 subsections (c), (d) and (e) of this section, a description of personal or
46 real property is sufficient, whether or not it is specific, if it reasonably
47 identifies what is described.
48 (b) Except as otherwise provided in subsection (d) of this section, a
49 description of collateral reasonably identifies the collateral if it identi-
50 fies the collateral by:
51 (1) Specific listing;
16
1 (2) Category;
2 (3) Except as otherwise provided in subsection (e) of this section, a
3 type of collateral defined in the uniform commercial code;
4 (4) Quantity;
5 (5) Computational or allocational formula or procedure; or
6 (6) Except as otherwise provided in subsection (c) of this section, any
7 other method, if the identity of the collateral is objectively determin-
8 able.
9 (c) A description of collateral as "all the debtor's assets" or "all the
10 debtor's personal property" or using words of similar import does not reason-
11 ably identify the collateral.
12 (d) Except as otherwise provided in subsection (e) of this section, a
13 description of a security entitlement, securities account or commodity account
14 is sufficient if it describes:
15 (1) The collateral by those terms or as investment property; or
16 (2) The underlying financial asset or commodity contract.
17 (e) A description only by type of collateral defined in the uniform com-
18 mercial code is an insufficient description of:
19 (1) A commercial tort claim; or
20 (2) In a consumer transaction, consumer goods, a security entitlement, a
21 securities account or a commodity account.
22 28-9-109. SCOPE. (a) Except as otherwise provided in subsections (c) and
23 (d), this chapter applies to:
24 (1) A transaction, regardless of its form, that creates a security inter-
25 est in personal property or fixtures by contract;
26 (2) An agricultural lien;
27 (3) A sale of accounts, chattel paper, payment intangibles or promissory
28 notes;
29 (4) A consignment;
30 (5) A security interest arising under section 28-2-401, 28-2-505,
31 28-2-711(3)or 28-12-508(5), as provided in section 28-9-110; and
32 (6) A security interest arising under section 28-4-210 or 28-5-120.
33 (b) The application of this chapter to a security interest in a secured
34 obligation is not affected by the fact that the obligation is itself secured
35 by a transaction or interest to which this chapter does not apply.
36 (c) This chapter does not apply to the extent that:
37 (1) A statute, regulation, or treaty of the United States preempts this
38 chapter;
39 (2) Another statute of this state expressly governs the creation, perfec-
40 tion, priority or enforcement of a security interest created by this state
41 or a governmental unit of this state;
42 (3) A statute of another state, a foreign country, or a governmental unit
43 of another state or a foreign country, other than a statute generally
44 applicable to security interests, expressly governs creation, perfection,
45 priority or enforcement of a security interest created by the state, coun-
46 try or governmental unit; or
47 (4) The rights of a transferee beneficiary or nominated person under a
48 letter of credit are independent and superior under section 28-5-114.
49 (d) This chapter does not apply to:
50 (1) A landlord's lien, other than an agricultural lien;
51 (2) A lien, other than an agricultural lien, given by statute or other
52 rule of law for services or materials, but section 28-9-333 applies with
53 respect to priority of the lien;
54 (3) An assignment of a claim for wages, salary or other compensation of
17
1 an employee;
2 (4) A sale of accounts, chattel paper, payment intangibles or promissory
3 notes as part of a sale of the business out of which they arose;
4 (5) An assignment of accounts, chattel paper, payment intangibles or
5 promissory notes which is for the purpose of collection only;
6 (6) An assignment of a right to payment under a contract to an assignee
7 that is also obligated to perform under the contract;
8 (7) An assignment of a single account, payment intangible or promissory
9 note to an assignee in full or partial satisfaction of a preexisting
10 indebtedness;
11 (8) A transfer of an interest in or an assignment of a claim under a pol-
12 icy of insurance, other than an assignment by or to a health care provider
13 of a health care insurance receivable and any subsequent assignment of the
14 right to payment, but sections 28-9-315 and 28-9-322 apply with respect to
15 proceeds and priorities in proceeds;
16 (9) An assignment of a right represented by a judgment, other than a
17 judgment taken on a right to payment that was collateral;
18 (10) A right of recoupment or set-off, but:
19 (A) section 28-9-340 applies with respect to the effectiveness of
20 rights of recoupment or set-off against deposit accounts; and
21 (B) section 28-9-404 applies with respect to defenses or claims of
22 an account debtor;
23 (11) The creation or transfer of an interest in or lien on real property,
24 including a lease or rents thereunder, except to the extent that provision
25 is made for:
26 (A) liens on real property in sections 28-9-203 and 28-9-308;
27 (B) fixtures in section 28-9-334;
28 (C) fixture filings in sections 28-9-501, 28-9-502, 28-9-512,
29 28-9-516 and 28-9-519; and
30 (D) security agreements covering personal and real property in sec-
31 tion 28-9-604; or
32 (12) An assignment of a claim arising in tort, other than a commercial
33 tort claim, but sections 28-9-315 and 28-9-322 apply with respect to pro-
34 ceeds and priorities in proceeds.
35 28-9-110. SECURITY INTERESTS ARISING UNDER CHAPTER 2 OR 12, TITLE 28,
36 IDAHO CODE. A security interest arising under section 28-2-401, 28-2-505,
37 28-2-711(3) or 28-12-508(5) is subject to this chapter. However, until the
38 debtor obtains possession of the goods:
39 (1) The security interest is enforceable, even if section
40 28-9-203(b)(3) has not been satisfied;
41 (2) Filing is not required to perfect the security interest;
42 (3) The rights of the secured party after default by the debtor are gov-
43 erned by chapter 2 or 12, title 28, Idaho Code; and
44 (4) The security interest has priority over a conflicting security inter-
45 est created by the debtor.
46 PART 2
47 EFFECTIVENESS OF SECURITY AGREEMENT --
48 ATTACHMENT OF SECURITY INTEREST --
49 RIGHTS OF PARTIES TO SECURITY AGREEMENT
50 28-9-201. GENERAL EFFECTIVENESS OF SECURITY AGREEMENT. (a) Except as
51 otherwise provided in the uniform commercial code, a security agreement is
52 effective according to its terms between the parties, against purchasers of
18
1 the collateral, and against creditors.
2 (b) A transaction subject to this chapter is subject to any applicable
3 rule of law which establishes a different rule for consumers, to the Idaho
4 credit code, chapters 41 through 49, title 28, Idaho Code, and any rules pro-
5 mulgated thereunder and to the Idaho credit union act, chapter 21, title 26,
6 Idaho Code, and any rules promulgated thereunder.
7 (c) In case of conflict between this chapter and a rule of law, statute
8 or rule described in subsection (b) of this section, the rule of law, statute
9 or rule controls. Failure to comply with a statute or rule described in sub-
10 section (b) of this section has only the effect the statute or rule specifies.
11 (d) This chapter does not:
12 (1) Validate any rate, charge, agreement or practice that violates a rule
13 of law, statute or rule described in subsection (b) of this section; or
14 (2) Extend the application of the rule of law, statute or rule to a
15 transaction not otherwise subject to it.
16 28-9-202. TITLE TO COLLATERAL IMMATERIAL. Except as otherwise provided
17 with respect to consignments or sales of accounts, chattel paper, payment
18 intangibles or promissory notes, the provisions of this chapter with regard to
19 rights and obligations apply whether title to collateral is in the secured
20 party or the debtor.
21 28-9-203. ATTACHMENT AND ENFORCEABILITY OF SECURITY INTEREST -- PROCEEDS
22 -- SUPPORTING OBLIGATIONS -- FORMAL REQUISITES. (a) A security interest
23 attaches to collateral when it becomes enforceable against the debtor with
24 respect to the collateral, unless an agreement expressly postpones the time of
25 attachment.
26 (b) Except as otherwise provided in subsections (c) through (i) of this
27 section, a security interest is enforceable against the debtor and third par-
28 ties with respect to the collateral only if:
29 (1) Value has been given;
30 (2) The debtor has rights in the collateral or the power to transfer
31 rights in the collateral to a secured party; and
32 (3) One (1) of the following conditions is met:
33 (A) the debtor has authenticated a security agreement that provides
34 a description of the collateral and, if the security interest covers
35 timber to be cut, a description of the land concerned;
36 (B) the collateral is not a certificated security and is in the pos-
37 session of the secured party under section 28-9-313 pursuant to the
38 debtor's security agreement;
39 (C) the collateral is a certificated security in registered form and
40 the security certificate has been delivered to the secured party
41 under section 28-8-301 pursuant to the debtor's security agreement;
42 or
43 (D) the collateral is deposit accounts, electronic chattel paper,
44 investment property, or letter of credit rights, and the secured
45 party has control under section 28-9-104, 28-9-105, 28-9-106 or
46 28-9-107 pursuant to the debtor's security agreement.
47 (c) Subsection (b) is subject to section 28-4-210 on the security inter-
48 est of a collecting bank, section 28-5-120 on the security interest of a let-
49 ter of credit issuer or nominated person, section 28-9-110 on a security
50 interest arising under chapter 2 or 12, title 28, and section 28-9-206 on
51 security interests in investment property.
52 (d) A person becomes bound as debtor by a security agreement entered into
53 by another person if, by operation of law other than this chapter or by con-
19
1 tract:
2 (1) The security agreement becomes effective to create a security inter-
3 est in the person's property; or
4 (2) The person becomes generally obligated for the obligations of the
5 other person, including the obligation secured under the security agree-
6 ment, and acquires or succeeds to all or substantially all of the assets
7 of the other person.
8 (e) If a new debtor becomes bound as debtor by a security agreement
9 entered into by another person:
10 (1) The agreement satisfies subsection (b)(3) of this section with
11 respect to existing or after-acquired property of the new debtor to the
12 extent the property is described in the agreement; and
13 (2) Another agreement is not necessary to make a security interest in the
14 property enforceable.
15 (f) The attachment of a security interest in collateral gives the secured
16 party the rights to proceeds provided by section 28-9-315 and is also attach-
17 ment of a security interest in a supporting obligation for the collateral.
18 (g) The attachment of a security interest in a right to payment or per-
19 formance secured by a security interest or other lien on personal or real
20 property is also attachment of a security interest in the security interest,
21 mortgage or other lien.
22 (h) The attachment of a security interest in a securities account is also
23 attachment of a security interest in the security entitlements carried in the
24 securities account.
25 (i) The attachment of a security interest in a commodity account is also
26 attachment of a security interest in the commodity contracts carried in the
27 commodity account.
28 28-9-204. AFTER-ACQUIRED PROPERTY -- FUTURE ADVANCES. (a) Except as
29 otherwise provided in subsection (b) of this section, a security agreement may
30 create or provide for a security interest in after-acquired collateral.
31 (b) A security interest does not attach under a term constituting an
32 after-acquired property clause to:
33 (1) Consumer goods, other than an accession when given as additional
34 security, unless the debtor acquires rights in them within ten (10) days
35 after the secured party gives value; or
36 (2) A commercial tort claim.
37 (c) A security agreement may provide that collateral secures, or that
38 accounts, chattel paper, payment intangibles or promissory notes are sold in
39 connection with, future advances or other value, whether or not the advances
40 or value are given pursuant to commitment.
41 28-9-205. USE OR DISPOSITION OF COLLATERAL PERMISSIBLE. (a) A security
42 interest is not invalid or fraudulent against creditors solely because:
43 (1) The debtor has the right or ability to:
44 (A) use, commingle or dispose of all or part of the collateral,
45 including returned or repossessed goods;
46 (B) collect, compromise, enforce or otherwise deal with collateral;
47 (C) accept the return of collateral or make repossessions; or
48 (D) use, commingle or dispose of proceeds; or
49 (2) The secured party fails to require the debtor to account for proceeds
50 or replace collateral.
51 (b) This section does not relax the requirements of possession if attach-
52 ment, perfection or enforcement of a security interest depends upon possession
53 of the collateral by the secured party.
20
1 28-9-206. SECURITY INTEREST ARISING IN PURCHASE OR DELIVERY OF FINANCIAL
2 ASSET. (a) A security interest in favor of a securities intermediary attaches
3 to a person's security entitlement if:
4 (1) The person buys a financial asset through the securities intermediary
5 in a transaction in which the person is obligated to pay the purchase
6 price to the securities intermediary at the time of the purchase; and
7 (2) The securities intermediary credits the financial asset to the
8 buyer's securities account before the buyer pays the securities intermedi-
9 ary.
10 (b) The security interest described in subsection (a) of this section
11 secures the person's obligation to pay for the financial asset.
12 (c) A security interest in favor of a person that delivers a certificated
13 security or other financial asset represented by a writing attaches to the
14 security or other financial asset if:
15 (1) The security or other financial asset:
16 (A) in the ordinary course of business is transferred by delivery
17 with any necessary indorsement or assignment; and
18 (B) is delivered under an agreement between persons in the business
19 of dealing with such securities or financial assets; and
20 (2) The agreement calls for delivery against payment.
21 (d) The security interest described in subsection (c) of this section
22 secures the obligation to make payment for the delivery.
23 28-9-207. RIGHTS AND DUTIES OF SECURED PARTY HAVING POSSESSION OR CONTROL
24 OF COLLATERAL. (a) Except as otherwise provided in subsection (d) of this sec-
25 tion, a secured party shall use reasonable care in the custody and preserva-
26 tion of collateral in the secured party's possession. In the case of chattel
27 paper or an instrument, reasonable care includes taking necessary steps to
28 preserve rights against prior parties unless otherwise agreed.
29 (b) Except as otherwise provided in subsection (d) of this section, if a
30 secured party has possession of collateral:
31 (1) Reasonable expenses, including the cost of insurance and payment of
32 taxes or other charges, incurred in the custody, preservation, use or
33 operation of the collateral are chargeable to the debtor and are secured
34 by the collateral;
35 (2) The risk of accidental loss or damage is on the debtor to the extent
36 of a deficiency in any effective insurance coverage;
37 (3) The secured party shall keep the collateral identifiable, but fungi-
38 ble collateral may be commingled; and
39 (4) The secured party may use or operate the collateral:
40 (A) for the purpose of preserving the collateral or its value;
41 (B) as permitted by an order of a court having competent jurisdic-
42 tion; or
43 (C) except in the case of consumer goods, in the manner and to the
44 extent agreed by the debtor.
45 (c) Except as otherwise provided in subsection (d) of this section, a
46 secured party having possession of collateral or control of collateral under
47 section 28-9-104, 28-9-105, 28-9-106 or 28-9-107:
48 (1) May hold as additional security any proceeds, except money or funds,
49 received from the collateral;
50 (2) Shall apply money or funds received from the collateral to reduce the
51 secured obligation, unless remitted to the debtor; and
52 (3) May create a security interest in the collateral.
53 (d) If the secured party is a buyer of accounts, chattel paper, payment
54 intangibles, or promissory notes or a consignor:
21
1 (1) Subsection (a) of this section does not apply unless the secured
2 party is entitled under an agreement:
3 (A) to charge back uncollected collateral; or
4 (B) otherwise to full or limited recourse against the debtor or a
5 secondary obligor based on the nonpayment or other default of an
6 account debtor or other obligor on the collateral; and
7 (2) Subsections (b) and (c) of this section do not apply.
8 28-9-208. ADDITIONAL DUTIES OF SECURED PARTY HAVING CONTROL OF COLLAT-
9 ERAL. (a) This section applies to cases in which there is no outstanding
10 secured obligation and the secured party is not committed to make advances,
11 incur obligations, or otherwise give value.
12 (b) Within ten (10) days after receiving an authenticated demand by the
13 debtor:
14 (1) A secured party having control of a deposit account under section
15 28-9-104(a)(2) shall send to the bank with which the deposit account is
16 maintained an authenticated statement that releases the bank from any fur-
17 ther obligation to comply with instructions originated by the secured
18 party;
19 (2) A secured party having control of a deposit account under section
20 28-9-104(a)(3) shall:
21 (A) pay the debtor the balance on deposit in the deposit account; or
22 (B) transfer the balance on deposit into a deposit account in the
23 debtor's name;
24 (3) A secured party, other than a buyer, having control of electronic
25 chattel paper under section 28-9-105 shall:
26 (A) communicate the authoritative copy of the electronic chattel
27 paper to the debtor or its designated custodian;
28 (B) if the debtor designates a custodian that is the designated cus-
29 todian with which the authoritative copy of the electronic chattel
30 paper is maintained for the secured party, communicate to the custo-
31 dian an authenticated record releasing the designated custodian from
32 any further obligation to comply with instructions originated by the
33 secured party and instructing the custodian to comply with instruc-
34 tions originated by the debtor; and
35 (C) take appropriate action to enable the debtor or its designated
36 custodian to make copies of or revisions to the authoritative copy
37 which add or change an identified assignee of the authoritative copy
38 without the consent of the secured party;
39 (4) A secured party having control of investment property under section
40 28-8-106(4)(b) or 28-9-106(b) shall send to the securities intermediary or
41 commodity intermediary with which the security entitlement or commodity
42 contract is maintained an authenticated record that releases the securi-
43 ties intermediary or commodity intermediary from any further obligation to
44 comply with entitlement orders or directions originated by the secured
45 party; and
46 (5) A secured party having control of a letter of credit right under sec-
47 tion 28-9-107 shall send to each person having an unfulfilled obligation
48 to pay or deliver proceeds of the letter of credit to the secured party an
49 authenticated release from any further obligation to pay or deliver pro-
50 ceeds of the letter of credit to the secured party.
51 28-9-209. DUTIES OF SECURED PARTY IF ACCOUNT DEBTOR HAS BEEN NOTIFIED OF
52 ASSIGNMENT. (a) Except as otherwise provided in subsection (c), this section
53 applies if:
22
1 (1) There is no outstanding secured obligation; and
2 (2) The secured party is not committed to make advances, incur obliga-
3 tions, or otherwise give value.
4 (b) Within ten (10) days after receiving an authenticated demand by the
5 debtor, a secured party shall send to an account debtor that has received
6 notification of an assignment to the secured party as assignee under section
7 28-9-406(a) an authenticated record that releases the account debtor from any
8 further obligation to the secured party.
9 (c) This section does not apply to an assignment constituting the sale of
10 an account, chattel paper or payment intangible.
11 28-9-210. REQUEST FOR ACCOUNTING -- REQUEST REGARDING LIST OF COLLATERAL
12 OR STATEMENT OF ACCOUNT. (a) In this section:
13 (1) "Request" means a record of a type described in paragraph (2), (3) or
14 (4) of this subsection.
15 (2) "Request for an accounting" means a record authenticated by a debtor
16 requesting that the recipient provide an accounting of the unpaid obliga-
17 tions secured by collateral and reasonably identifying the transaction or
18 relationship that is the subject of the request.
19 (3) "Request regarding a list of collateral" means a record authenticated
20 by a debtor requesting that the recipient approve or correct a list of
21 what the debtor believes to be the collateral securing an obligation and
22 reasonably identifying the transaction or relationship that is the subject
23 of the request.
24 (4) "Request regarding a statement of account" means a record authenti-
25 cated by a debtor requesting that the recipient approve or correct a
26 statement indicating what the debtor believes to be the aggregate amount
27 of unpaid obligations secured by collateral as of a specified date and
28 reasonably identifying the transaction or relationship that is the subject
29 of the request.
30 (b) Subject to subsections (c), (d), (e) and (f) of this section, a
31 secured party, other than a buyer of accounts, chattel paper, payment intangi-
32 bles, or promissory notes or a consignor, shall comply with a request within
33 fourteen (14) days after receipt:
34 (1) In the case of a request for an accounting, by authenticating and
35 sending to the debtor an accounting; and
36 (2) In the case of a request regarding a list of collateral or a request
37 regarding a statement of account, by authenticating and sending to the
38 debtor an approval or correction.
39 (c) A secured party that claims a security interest in all of a particu-
40 lar type of collateral owned by the debtor may comply with a request regarding
41 a list of collateral by sending to the debtor an authenticated record includ-
42 ing a statement to that effect within fourteen (14) days after receipt.
43 (d) A person that receives a request regarding a list of collateral,
44 claims no interest in the collateral when it receives the request, and claimed
45 an interest in the collateral at an earlier time shall comply with the request
46 within fourteen (14) days after receipt by sending to the debtor an authenti-
47 cated record:
48 (1) Disclaiming any interest in the collateral; and
49 (2) If known to the recipient, providing the name and mailing address of
50 any assignee of or successor to the recipient's interest in the collat-
51 eral.
52 (e) A person that receives a request for an accounting or a request
53 regarding a statement of account, claims no interest in the obligations when
54 it receives the request, and claimed an interest in the obligations at an ear-
23
1 lier time shall comply with the request within fourteen (14) days after
2 receipt by sending to the debtor an authenticated record:
3 (1) Disclaiming any interest in the obligations; and
4 (2) If known to the recipient, providing the name and mailing address of
5 any assignee of or successor to the recipient's interest in the obliga-
6 tions.
7 (f) A debtor is entitled without charge to one (1) response to a request
8 under this section during any six (6) month period. The secured party may
9 require payment of a charge not exceeding twenty-five dollars ($25.00) for
10 each additional response.
11 PART 3
12 PERFECTION AND PRIORITY
13 28-9-301. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS.
14 Except as otherwise provided in sections 28-9-303 through 28-9-306, the fol-
15 lowing rules determine the law governing perfection, the effect of perfection
16 or nonperfection, and the priority of a security interest in collateral:
17 (1) Except as otherwise provided in this section, while a debtor is
18 located in a jurisdiction, the local law of that jurisdiction governs perfec-
19 tion, the effect of perfection or nonperfection, and the priority of a secu-
20 rity interest in collateral.
21 (2) While collateral is located in a jurisdiction, the local law of that
22 jurisdiction governs perfection, the effect of perfection or nonperfection,
23 and the priority of a possessory security interest in that collateral.
24 (3) Except as otherwise provided in subsection (4) of this section, while
25 negotiable documents, goods, instruments, money or tangible chattel paper is
26 located in a jurisdiction, the local law of that jurisdiction governs:
27 (A) Perfection of a security interest in the goods by filing a fixture
28 filing;
29 (B) Perfection of a security interest in timber to be cut; and
30 (C) The effect of perfection or nonperfection and the priority of a
31 nonpossessory security interest in the collateral.
32 (4) The local law of the jurisdiction in which the wellhead or minehead
33 is located governs perfection, the effect of perfection or nonperfection, and
34 the priority of a security interest in as-extracted collateral.
35 28-9-302. LAW GOVERNING PERFECTION AND PRIORITY OF AGRICULTURAL LIENS.
36 While farm products are located in a jurisdiction, the local law of that
37 jurisdiction governs perfection, the effect of perfection or nonperfection,
38 and the priority of an agricultural lien on the farm products.
39 28-9-303. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
40 GOODS COVERED BY A CERTIFICATE OF TITLE. (a) This section applies to goods
41 covered by a certificate of title, even if there is no other relationship
42 between the jurisdiction under whose certificate of title the goods are cov-
43 ered and the goods or the debtor.
44 (b) Goods become covered by a certificate of title when a valid applica-
45 tion for the certificate of title and the applicable fee are delivered to the
46 appropriate authority. Goods cease to be covered by a certificate of title at
47 the earlier of the time the certificate of title ceases to be effective under
48 the law of the issuing jurisdiction or the time the goods become covered sub-
49 sequently by a certificate of title issued by another jurisdiction.
50 (c) The local law of the jurisdiction under whose certificate of title
51 the goods are covered governs perfection, the effect of perfection or
24
1 nonperfection, and the priority of a security interest in goods covered by a
2 certificate of title from the time the goods become covered by the certificate
3 of title until the goods cease to be covered by the certificate of title.
4 28-9-304. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
5 DEPOSIT ACCOUNTS. (a) The local law of a bank's jurisdiction governs perfec-
6 tion, the effect of perfection or nonperfection, and the priority of a secu-
7 rity interest in a deposit account maintained with that bank.
8 (b) The following rules determine a bank's jurisdiction for purposes of
9 this part:
10 (1) If an agreement between the bank and the debtor governing the deposit
11 account expressly provides that a particular jurisdiction is the bank's
12 jurisdiction for purposes of this part, this chapter, or the uniform com-
13 mercial code, that jurisdiction is the bank's jurisdiction.
14 (2) If paragraph (1) of this subsection does not apply and an agreement
15 between the bank and its customer governing the deposit account expressly
16 provides that the agreement is governed by the law of a particular juris-
17 diction, that jurisdiction is the bank's jurisdiction.
18 (3) If neither paragraph (1) nor (2) of this subsection applies and an
19 agreement between the bank and its customer governing the deposit account
20 expressly provides that the deposit account is maintained at an office in
21 a particular jurisdiction, that jurisdiction is the bank's jurisdiction.
22 (4) If none of the preceding paragraphs apply, the bank's jurisdiction is
23 the jurisdiction in which the office identified in an account statement as
24 the office serving the customer's account is located.
25 (5) If none of the preceding paragraphs apply, the bank's jurisdiction is
26 the jurisdiction in which the chief executive office of the bank is
27 located.
28 28-9-305. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
29 INVESTMENT PROPERTY. (a) Except as otherwise provided in subsection (c) of
30 this section, the following rules apply:
31 (1) While a security certificate is located in a jurisdiction, the local
32 law of that jurisdiction governs perfection, the effect of perfection or
33 nonperfection, and the priority of a security interest in the certificated
34 security represented thereby.
35 (2) The local law of the issuer's jurisdiction as specified in section
36 28-8-110(4) governs perfection, the effect of perfection or nonperfection,
37 and the priority of a security interest in an uncertificated security.
38 (3) The local law of the securities intermediary's jurisdiction as speci-
39 fied in section 28-8-110(5) governs perfection, the effect of perfection
40 or nonperfection, and the priority of a security interest in a security
41 entitlement or securities account.
42 (4) The local law of the commodity intermediary's jurisdiction governs
43 perfection, the effect of perfection or nonperfection, and the priority of
44 a security interest in a commodity contract or commodity account.
45 (b) The following rules determine a commodity intermediary's jurisdiction
46 for purposes of this part:
47 (1) If an agreement between the commodity intermediary and commodity cus-
48 tomer governing the commodity account expressly provides that a particular
49 jurisdiction is the commodity intermediary's jurisdiction for purposes of
50 this part, this chapter, or the uniform commercial code, that jurisdiction
51 is the commodity intermediary's jurisdiction.
52 (2) If paragraph (1) of this subsection does not apply and an agreement
53 between the commodity intermediary and commodity customer governing the
25
1 commodity account expressly provides that the agreement is governed by the
2 law of a particular jurisdiction, that jurisdiction is the commodity
3 intermediary's jurisdiction.
4 (3) If neither paragraph (1) nor (2) of this subsection applies and an
5 agreement between the commodity intermediary and commodity customer gov-
6 erning the commodity account expressly provides that the commodity account
7 is maintained at an office in a particular jurisdiction, that jurisdiction
8 is the commodity intermediary's jurisdiction.
9 (4) If none of the preceding paragraphs apply, the commodity
10 intermediary's jurisdiction is the jurisdiction in which the office iden-
11 tified in an account statement as the office serving the commodity
12 customer's account is located.
13 (5) If none of the preceding paragraphs apply, the commodity
14 intermediary's jurisdiction is the jurisdiction in which the chief execu-
15 tive office of the commodity intermediary is located.
16 (c) The local law of the jurisdiction in which the debtor is located gov-
17 erns:
18 (1) Perfection of a security interest in investment property by filing;
19 (2) Automatic perfection of a security interest in investment property
20 created by a broker or securities intermediary; and
21 (3) Automatic perfection of a security interest in a commodity contract
22 or commodity account created by a commodity intermediary.
23 28-9-306. LAW GOVERNING PERFECTION AND PRIORITY OF SECURITY INTERESTS IN
24 LETTER OF CREDIT RIGHTS. (a) Subject to subsection (c) of this section, the
25 local law of the issuer's jurisdiction or a nominated person's jurisdiction
26 governs perfection, the effect of perfection or nonperfection, and the prior-
27 ity of a security interest in a letter of credit right if the issuer's juris-
28 diction or nominated person's jurisdiction is a state.
29 (b) For purposes of this part, an issuer's jurisdiction or nominated
30 person's jurisdiction is the jurisdiction whose law governs the liability of
31 the issuer or nominated person with respect to the letter of credit right as
32 provided in section 28-5-116.
33 (c) This section does not apply to a security interest that is perfected
34 only under section 28-9-308(d).
35 28-9-307. LOCATION OF DEBTOR. (a) In this section, "place of business"
36 means a place where a debtor conducts its affairs.
37 (b) Except as otherwise provided in this section, the following rules
38 determine a debtor's location:
39 (1) A debtor who is an individual is located at the individual's princi-
40 pal residence.
41 (2) A debtor that is an organization and has only one (1) place of busi-
42 ness is located at its place of business.
43 (3) A debtor that is an organization and has more than one (1) place of
44 business is located at its chief executive office.
45 (c) Subsection (b) of this section applies only if a debtor's residence,
46 place of business, or chief executive office, as applicable, is located in a
47 jurisdiction whose law generally requires information concerning the existence
48 of a nonpossessory security interest to be made generally available in a fil-
49 ing, recording or registration system as a condition or result of the security
50 interest's obtaining priority over the rights of a lien creditor with respect
51 to the collateral. If subsection (b) of this section does not apply, the
52 debtor is located in the District of Columbia.
53 (d) A person that ceases to exist, have a residence, or have a place of
26
1 business continues to be located in the jurisdiction specified by subsections
2 (b) and (c) of this section.
3 (e) A registered organization that is organized under the law of a state
4 is located in that state.
5 (f) Except as otherwise provided in subsection (i) of this section, a
6 registered organization that is organized under the law of the United States
7 and a branch or agency of a bank that is not organized under the law of the
8 United States or a state are located:
9 (1) In the state that the law of the United States designates, if the law
10 designates a state of location;
11 (2) In the state that the registered organization, branch or agency des-
12 ignates, if the law of the United States authorizes the registered organi-
13 zation, branch or agency to designate its state of location; or
14 (3) In the District of Columbia, if neither paragraph (1) nor paragraph
15 (2) of this subsection applies.
16 (g) A registered organization continues to be located in the jurisdiction
17 specified by subsection (e) or (f) of this section notwithstanding:
18 (1) The suspension, revocation, forfeiture or lapse of the registered
19 organization's status as such in its jurisdiction of organization; or
20 (2) The dissolution, winding up, or cancellation of the existence of the
21 registered organization.
22 (h) The United States is located in the District of Columbia.
23 (i) A branch or agency of a bank that is not organized under the law of
24 the United States or a state is located in the state in which the branch or
25 agency is licensed, if all branches and agencies of the bank are licensed in
26 only one (1) state.
27 (j) A foreign air carrier under the federal aviation act of 1958, as
28 amended, is located at the designated office of the agent upon which service
29 of process may be made on behalf of the carrier.
30 (k) This section applies only for purposes of this part.
31 28-9-308. WHEN SECURITY INTEREST OR AGRICULTURAL LIEN IS PERFECTED --
32 CONTINUITY OF PERFECTION. (a) Except as otherwise provided in this section and
33 section 28-9-309, a security interest is perfected if it has attached and all
34 of the applicable requirements for perfection in sections 28-9-310 through
35 28-9-316 have been satisfied. A security interest is perfected when it
36 attaches if the applicable requirements are satisfied before the security
37 interest attaches.
38 (b) An agricultural lien is perfected if it has become effective and all
39 of the applicable requirements for perfection in section 28-9-310 have been
40 satisfied. An agricultural lien is perfected when it becomes effective if the
41 applicable requirements are satisfied before the agricultural lien becomes
42 effective.
43 (c) A security interest or agricultural lien is perfected continuously if
44 it is originally perfected by one (1) method under this chapter and is later
45 perfected by another method under this chapter, without an intermediate period
46 when it was unperfected.
47 (d) Perfection of a security interest in collateral also perfects a secu-
48 rity interest in a supporting obligation for the collateral.
49 (e) Perfection of a security interest in a right to payment or perfor-
50 mance also perfects a security interest in a security interest, mortgage or
51 other lien on personal or real property securing the right.
52 (f) Perfection of a security interest in a securities account also per-
53 fects a security interest in the security entitlements carried in the securi-
54 ties account.
27
1 (g) Perfection of a security interest in a commodity account also per-
2 fects a security interest in the commodity contracts carried in the commodity
3 account.
4 28-9-309. SECURITY INTEREST PERFECTED UPON ATTACHMENT. The following
5 security interests are perfected when they attach:
6 (1) A purchase-money security interest in consumer goods, except as
7 otherwise provided in section 28-9-311(b) with respect to consumer goods that
8 are subject to a statute or treaty described in section 28-9-311(a);
9 (2) An assignment of accounts or payment intangibles which does not by
10 itself or in conjunction with other assignments to the same assignee transfer
11 a significant part of the assignor's outstanding accounts or payment intangi-
12 bles;
13 (3) A sale of a payment intangible;
14 (4) A sale of a promissory note;
15 (5) A security interest created by the assignment of a health care insur-
16 ance receivable to the provider of the health care goods or services;
17 (6) A security interest arising under section 28-2-401, 28-2-505,
18 28-2-711(3) or 28-12-508(5), until the debtor obtains possession of the col-
19 lateral;
20 (7) A security interest of a collecting bank arising under section
21 28-4-210;
22 (8) A security interest of an issuer or nominated person arising under
23 section 28-5-120;
24 (9) A security interest arising in the delivery of a financial asset
25 under section 28-9-206(c);
26 (10) A security interest in investment property created by a broker or
27 securities intermediary;
28 (11) A security interest in a commodity contract or a commodity account
29 created by a commodity intermediary;
30 (12) An assignment for the benefit of all creditors of the transferor and
31 subsequent transfers by the assignee thereunder; and
32 (13) A security interest created by an assignment of a beneficial interest
33 in a decedent's estate.
34 28-9-310. WHEN FILING REQUIRED TO PERFECT SECURITY INTEREST OR AGRICUL-
35 TURAL LIEN -- SECURITY INTERESTS AND AGRICULTURAL LIENS TO WHICH FILING PROVI-
36 SIONS DO NOT APPLY. (a) Except as otherwise provided in subsection (b) of this
37 section and section 28-9-312(b), a financing statement must be filed to per-
38 fect all security interests and agricultural liens.
39 (b) The filing of a financing statement is not necessary to perfect a
40 security interest:
41 (1) That is perfected under section 28-9-308(d), (e), (f) or (g);
42 (2) That is perfected under section 28-9-309 when it attaches;
43 (3) In property subject to a statute, regulation or treaty described in
44 section 28-9-311(a);
45 (4) In goods in possession of a bailee which is perfected under section
46 28-9-312(d)(1) or (2);
47 (5) In certificated securities, documents, goods or instruments which is
48 perfected without filing or possession under section 28-9-312(e), (f) or
49 (g);
50 (6) In collateral in the secured party's possession under section
51 28-9-313;
52 (7) In a certificated security which is perfected by delivery of the
53 security certificate to the secured party under section 28-9-313;
28
1 (8) In deposit accounts, electronic chattel paper, investment property,
2 or letter of credit rights which is perfected by control under section
3 28-9-314;
4 (9) In proceeds which is perfected under section 28-9-315; or
5 (10) That is perfected under section 28-9-316.
6 (c) If a secured party assigns a perfected security interest or agricul-
7 tural lien, a filing under this chapter is not required to continue the per-
8 fected status of the security interest against creditors of and transferees
9 from the original debtor.
10 28-9-311. PERFECTION OF SECURITY INTERESTS IN PROPERTY SUBJECT TO CERTAIN
11 STATUTES, REGULATIONS AND TREATIES. (a) Except as otherwise provided in sub-
12 section (d) of this section, the filing of a financing statement is not neces-
13 sary or effective to perfect a security interest in property subject to:
14 (1) A statute, regulation or treaty of the United States whose require-
15 ments for a security interest's obtaining priority over the rights of a
16 lien creditor with respect to the property preempt section 28-9-310(a);
17 (2) Section 49-510, Idaho Code; or
18 (3) A certificate of title statute of another jurisdiction which provides
19 for a security interest to be indicated on the certificate as a condition
20 or result of the security interest's obtaining priority over the rights of
21 a lien creditor with respect to the property.
22 (b) Compliance with the requirements of a statute, regulation or treaty
23 described in subsection (a) of this section for obtaining priority over the
24 rights of a lien creditor is equivalent to the filing of a financing statement
25 under this chapter. Except as otherwise provided in subsection (d) of this
26 section and sections 28-9-313 and 28-9-316(d) and (e) for goods covered by a
27 certificate of title, a security interest in property subject to a statute,
28 regulation or treaty described in subsection (a) of this section may be per-
29 fected only by compliance with those requirements, and a security interest so
30 perfected remains perfected notwithstanding a change in the use or transfer of
31 possession of the collateral.
32 (c) Except as otherwise provided in subsection (d) of this section and
33 section 28-9-316(d) and (e), duration and renewal of perfection of a security
34 interest perfected by compliance with the requirements prescribed by a stat-
35 ute, regulation or treaty described in subsection (a) of this section are gov-
36 erned by the statute, regulation or treaty. In other respects, the security
37 interest is subject to this chapter.
38 (d) During any period in which collateral is inventory held for sale or
39 lease by a person or leased by that person as lessor and that person is in the
40 business of selling or leasing goods of that kind, this section does not apply
41 to a security interest in that collateral created by that person as debtor.
42 28-9-312. PERFECTION OF SECURITY INTERESTS IN CHATTEL PAPER, DEPOSIT
43 ACCOUNTS, DOCUMENTS, GOODS COVERED BY DOCUMENTS, INSTRUMENTS, INVESTMENT PROP-
44 ERTY, LETTER OF CREDIT RIGHTS AND MONEY -- PERFECTION BY PERMISSIVE FILING --
45 TEMPORARY PERFECTION WITHOUT FILING OR TRANSFER OF POSSESSION. (a) A security
46 interest in chattel paper, negotiable documents, instruments or investment
47 property may be perfected by filing.
48 (b) Except as otherwise provided in section 28-9-315(c) and (d) for pro-
49 ceeds:
50 (1) A security interest in a deposit account may be perfected only by
51 control under section 28-9-314;
52 (2) And except as otherwise provided in section 28-9-308(d), a security
53 interest in a letter of credit right may be perfected only by control
29
1 under section 28-9-314; and
2 (3) A security interest in money may be perfected only by the secured
3 party's taking possession under section 28-9-313.
4 (c) While goods are in the possession of a bailee that has issued a nego-
5 tiable document covering the goods:
6 (1) A security interest in the goods may be perfected by perfecting a
7 security interest in the document; and
8 (2) A security interest perfected in the document has priority over any
9 security interest that becomes perfected in the goods by another method
10 during that time.
11 (d) While goods are in the possession of a bailee that has issued a non-
12 negotiable document covering the goods, a security interest in the goods may
13 be perfected by:
14 (1) Issuance of a document in the name of the secured party;
15 (2) The bailee's receipt of notification of the secured party's interest;
16 or
17 (3) Filing as to the goods.
18 (e) A security interest in certificated securities, negotiable documents
19 or instruments is perfected without filing or the taking of possession for a
20 period of twenty (20) days from the time it attaches to the extent that it
21 arises for new value given under an authenticated security agreement.
22 (f) A perfected security interest in a negotiable document or goods in
23 possession of a bailee, other than one that has issued a negotiable document
24 for the goods, remains perfected for twenty (20) days without filing if the
25 secured party makes available to the debtor the goods or documents represent-
26 ing the goods for the purpose of:
27 (1) Ultimate sale or exchange; or
28 (2) Loading, unloading, storing, shipping, transshipping, manufacturing,
29 processing or otherwise dealing with them in a manner preliminary to their
30 sale or exchange.
31 (g) A perfected security interest in a certificated security or instru-
32 ment remains perfected for twenty (20) days without filing if the secured
33 party delivers the security certificate or instrument to the debtor for the
34 purpose of:
35 (1) Ultimate sale or exchange; or
36 (2) Presentation, collection, enforcement, renewal or registration of
37 transfer.
38 (h) After the twenty (20) day period specified in subsection (e), (f) or
39 (g) of this section expires, perfection depends upon compliance with this
40 chapter.
41 28-9-313. WHEN POSSESSION BY OR DELIVERY TO SECURED PARTY PERFECTS SECU-
42 RITY INTEREST WITHOUT FILING. (a) Except as otherwise provided in subsection
43 (b) of this section, a secured party may perfect a security interest in nego-
44 tiable documents, goods, instruments, money or tangible chattel paper by tak-
45 ing possession of the collateral. A secured party may perfect a security
46 interest in certificated securities by taking delivery of the certificated
47 securities under section 28-8-301.
48 (b) With respect to goods covered by a certificate of title issued by
49 this state, a secured party may perfect a security interest in the goods by
50 taking possession of the goods only in the circumstances described in section
51 28-9-316(d).
52 (c) With respect to collateral other than certificated securities and
53 goods covered by a document, a secured party takes possession of collateral in
54 the possession of a person other than the debtor, the secured party or a les-
30
1 see of the collateral from the debtor in the ordinary course of the debtor's
2 business, when:
3 (1) The person in possession authenticates a record acknowledging that it
4 holds possession of the collateral for the secured party's benefit; or
5 (2) The person takes possession of the collateral after having authenti-
6 cated a record acknowledging that it will hold possession of collateral
7 for the secured party's benefit.
8 (d) If perfection of a security interest depends upon possession of the
9 collateral by a secured party, perfection occurs no earlier than the time the
10 secured party takes possession and continues only while the secured party
11 retains possession.
12 (e) A security interest in a certificated security in registered form is
13 perfected by delivery when delivery of the certificated security occurs under
14 section 28-8-301, and remains perfected by delivery until the debtor obtains
15 possession of the security certificate.
16 (f) A person in possession of collateral is not required to acknowledge
17 that it holds possession for a secured party's benefit.
18 (g) If a person acknowledges that it holds possession for the secured
19 party's benefit:
20 (1) The acknowledgment is effective under subsection (c) of this section
21 or section 28-8-301(1), even if the acknowledgment violates the rights of
22 a debtor; and
23 (2) Unless the person otherwise agrees, or law other than this chapter
24 otherwise provides, the person does not owe any duty to the secured party
25 and is not required to confirm the acknowledgment to another person.
26 (h) A secured party having possession of collateral does not relinquish
27 possession by delivering the collateral to a person other than the debtor or a
28 lessee of the collateral from the debtor in the ordinary course of the
29 debtor's business if the person was instructed before the delivery or is
30 instructed contemporaneously with the delivery:
31 (1) To hold possession of the collateral for the secured party's benefit;
32 or
33 (2) To redeliver the collateral to the secured party.
34 (i) A secured party does not relinquish possession, even if a delivery
35 under subsection (h) of this section violates the rights of a debtor. A per-
36 son to which collateral is delivered under subsection (h) of this section does
37 not owe any duty to the secured party and is not required to confirm the
38 delivery to another person unless the person otherwise agrees, or law other
39 than this chapter otherwise provides.
40 28-9-314. PERFECTION BY CONTROL. (a) A security interest in investment
41 property, deposit accounts, letter of credit rights, or electronic chattel
42 paper may be perfected by control of the collateral under section 28-9-104,
43 28-9-105, 28-9-106 or 28-9-107.
44 (b) A security interest in deposit accounts, electronic chattel paper, or
45 letter of credit rights is perfected by control under section 28-9-104,
46 28-9-105 or 28-9-107, when the secured party obtains control and remains per-
47 fected by control only while the secured party retains control.
48 (c) A security interest in investment property is perfected by control
49 under section 28-9-106 from the time the secured party obtains control and
50 remains perfected by control until:
51 (1) The secured party does not have control; and
52 (2) One (1) of the following occurs:
53 (A) if the collateral is a certificated security, the debtor has or
54 acquires possession of the security certificate;
31
1 (B) if the collateral is an uncertificated security, the issuer has
2 registered or registers the debtor as the registered owner; or
3 (C) if the collateral is a security entitlement, the debtor is or
4 becomes the entitlement holder.
5 28-9-315. SECURED PARTY'S RIGHTS ON DISPOSITION OF COLLATERAL AND IN PRO-
6 CEEDS. (a) Except as otherwise provided in this chapter and in section
7 28-2-403(2):
8 (1) A security interest or agricultural lien continues in collateral not-
9 withstanding sale, lease, license, exchange or other disposition thereof
10 unless the secured party authorized the disposition free of the security
11 interest or agricultural lien; and
12 (2) A security interest attaches to any identifiable proceeds of collat-
13 eral.
14 (b) Proceeds that are commingled with other property are identifiable
15 proceeds:
16 (1) If the proceeds are goods, to the extent provided by section
17 28-9-336; and
18 (2) If the proceeds are not goods, to the extent that the secured party
19 identifies the proceeds by a method of tracing, including application of
20 equitable principles, that is permitted under law other than this chapter
21 with respect to commingled property of the type involved.
22 (c) A security interest in proceeds is a perfected security interest if
23 the security interest in the original collateral was perfected.
24 (d) A perfected security interest in proceeds becomes unperfected on the
25 twenty-first day after the security interest attaches to the proceeds unless:
26 (1) The following conditions are satisfied:
27 (A) a filed financing statement covers the original collateral;
28 (B) the proceeds are collateral in which a security interest may be
29 perfected by filing in the office in which the financing statement
30 has been filed; and
31 (C) the proceeds are not acquired with cash proceeds;
32 (2) The proceeds are identifiable cash proceeds; or
33 (3) The security interest in the proceeds is perfected other than under
34 subsection (c) of this section when the security interest attaches to the
35 proceeds or within twenty (20) days thereafter.
36 (e) If a filed financing statement covers the original collateral, a
37 security interest in proceeds which remains perfected under subsection (d)(1)
38 of this section becomes unperfected at the later of:
39 (1) When the effectiveness of the filed financing statement lapses under
40 section 28-9-515 or is terminated under section 28-9-513; or
41 (2) The twenty-first day after the security interest attaches to the pro-
42 ceeds.
43 28-9-316. CONTINUED PERFECTION OF SECURITY INTEREST FOLLOWING CHANGE IN
44 GOVERNING LAW. (a) A security interest perfected pursuant to the law of the
45 jurisdiction designated in section 28-9-301(1) or 28-9-305(c) remains per-
46 fected until the earliest of:
47 (1) The time perfection would have ceased under the law of that jurisdic-
48 tion;
49 (2) The expiration of four (4) months after a change of the debtor's
50 location to another jurisdiction; or
51 (3) The expiration of one (1) year after a transfer of collateral to a
52 person that thereby becomes a debtor and is located in another jurisdic-
53 tion.
32
1 (b) If a security interest described in subsection (a) of this section
2 becomes perfected under the law of the other jurisdiction before the earliest
3 time or event described in that subsection, it remains perfected thereafter.
4 If the security interest does not become perfected under the law of the other
5 jurisdiction before the earliest time or event, it becomes unperfected and is
6 deemed never to have been perfected as against a purchaser of the collateral
7 for value.
8 (c) A possessory security interest in collateral, other than goods cov-
9 ered by a certificate of title and as-extracted collateral consisting of
10 goods, remains continuously perfected if:
11 (1) The collateral is located in one (1) jurisdiction and subject to a
12 security interest perfected under the law of that jurisdiction;
13 (2) Thereafter the collateral is brought into another jurisdiction; and
14 (3) Upon entry into the other jurisdiction, the security interest is per-
15 fected under the law of the other jurisdiction.
16 (d) Except as otherwise provided in subsection (e) of this section, a
17 security interest in goods covered by a certificate of title which is per-
18 fected by any method under the law of another jurisdiction when the goods
19 become covered by a certificate of title from this state remains perfected
20 until the security interest would have become unperfected under the law of the
21 other jurisdiction had the goods not become so covered.
22 (e) A security interest described in subsection (d) of this section
23 becomes unperfected as against a purchaser of the goods for value and is
24 deemed never to have been perfected as against a purchaser of the goods for
25 value if the applicable requirements for perfection under section 28-9-311(b)
26 or 28-9-313 are not satisfied before the earlier of:
27 (1) The time the security interest would have become unperfected under
28 the law of the other jurisdiction had the goods not become covered by a
29 certificate of title from this state; or
30 (2) The expiration of four (4) months after the goods had become so cov-
31 ered.
32 (f) A security interest in deposit accounts, letter of credit rights, or
33 investment property which is perfected under the law of the bank's jurisdic-
34 tion, the issuer's jurisdiction, a nominated person's jurisdiction, the secu-
35 rities intermediary's jurisdiction, or the commodity intermediary's jurisdic-
36 tion, as applicable, remains perfected until the earlier of:
37 (1) The time the security interest would have become unperfected under
38 the law of that jurisdiction; or
39 (2) The expiration of four (4) months after a change of the applicable
40 jurisdiction to another jurisdiction.
41 (g) If a security interest described in subsection (f) of this section
42 becomes perfected under the law of the other jurisdiction before the earlier
43 of the time or the end of the period described in that subsection, it remains
44 perfected thereafter. If the security interest does not become perfected
45 under the law of the other jurisdiction before the earlier of that time or the
46 end of that period, it becomes unperfected and is deemed never to have been
47 perfected as against a purchaser of the collateral for value.
48 28-9-317. INTERESTS THAT TAKE PRIORITY OVER OR TAKE FREE OF SECURITY
49 INTEREST OR AGRICULTURAL LIEN. (a) A security interest or agricultural lien is
50 subordinate to the rights of:
51 (1) A person entitled to priority under section 28-9-322; and
52 (2) Except as otherwise provided in subsection (e) of this section, a
53 person that becomes a lien creditor before the earlier of the time the
54 security interest or agricultural lien is perfected or a financing state-
33
1 ment covering the collateral is filed.
2 (b) Except as otherwise provided in subsection (e) of this section, a
3 buyer, other than a secured party, of tangible chattel paper, documents,
4 goods, instruments or a security certificate takes free of a security interest
5 or agricultural lien if the buyer gives value and receives delivery of the
6 collateral without knowledge of the security interest or agricultural lien and
7 before it is perfected.
8 (c) Except as otherwise provided in subsection (e) of this section, a
9 lessee of goods takes free of a security interest or agricultural lien if the
10 lessee gives value and receives delivery of the collateral without knowledge
11 of the security interest or agricultural lien and before it is perfected.
12 (d) A licensee of a general intangible or a buyer, other than a secured
13 party, of accounts, electronic chattel paper, general intangibles, or invest-
14 ment property other than a certificated security takes free of a security
15 interest if the licensee or buyer gives value without knowledge of the secu-
16 rity interest and before it is perfected.
17 (e) Except as otherwise provided in sections 28-9-320 and 28-9-321, if a
18 person files a financing statement with respect to a purchase-money security
19 interest before or within twenty (20) days after the debtor receives delivery
20 of the collateral, the security interest takes priority over the rights of a
21 buyer, lessee, or lien creditor which arise between the time the security
22 interest attaches and the time of filing.
23 28-9-318. NO INTEREST RETAINED IN RIGHT TO PAYMENT THAT IS SOLD -- RIGHTS
24 AND TITLE OF SELLER OF ACCOUNT OR CHATTEL PAPER WITH RESPECT TO CREDITORS AND
25 PURCHASERS. (a) A debtor that has sold an account, chattel paper, payment
26 intangible or promissory note does not retain a legal or equitable interest in
27 the collateral sold.
28 (b) For purposes of determining the rights of creditors of, and pur-
29 chasers for value of an account or chattel paper from, a debtor that has sold
30 an account or chattel paper, while the buyer's security interest is unper-
31 fected, the debtor is deemed to have rights and title to the account or chat-
32 tel paper identical to those the debtor sold.
33 28-9-319. RIGHTS AND TITLE OF CONSIGNEE WITH RESPECT TO CREDITORS AND
34 PURCHASERS. (a) Except as otherwise provided in subsection (b) of this sec-
35 tion, for purposes of determining the rights of creditors of, and purchasers
36 for value of goods from, a consignee, while the goods are in the possession of
37 the consignee, the consignee is deemed to have rights and title to the goods
38 identical to those the consignor had or had power to transfer.
39 (b) For purposes of determining the rights of a creditor of a consignee,
40 law other than this chapter determines the rights and title of a consignee
41 while goods are in the consignee's possession if, under this part, a perfected
42 security interest held by the consignor would have priority over the rights of
43 the creditor.
44 28-9-320. BUYER OF GOODS. (a) Except as otherwise provided in subsection
45 (e) of this section, a buyer in ordinary course of business, other than a per-
46 son buying farm products from a person engaged in farming operations, takes
47 free of a security interest created by the buyer's seller, even if the secu-
48 rity interest is perfected and the buyer knows of its existence. A buyer who,
49 in the ordinary course of business, buys farm products from a person engaged
50 in farming operations or a commission merchant or selling agent who in the
51 ordinary course of business sells farm products for a person engaged in farm-
52 ing operations shall take and sell free of a security interest created by his
34
1 seller, even though the security interest is perfected and the buyer or com-
2 mission merchant or selling agent knows of the existence of such interest, if
3 he has registered with the secretary of state pursuant to section 28-9-523(h)
4 and the security interest is not listed on the most recent master list or
5 cumulative supplement distributed by the secretary of state pursuant to sec-
6 tion 28-9-523(i), unless he has received written notification, as that term is
7 used in applicable federal law and regulation, of the security interest from
8 the secretary of state, his seller or the secured party.
9 (b) Except as otherwise provided in subsection (e) of this section, a
10 buyer of goods from a person who used or bought the goods for use primarily
11 for personal, family or household purposes takes free of a security interest,
12 even if perfected, if the buyer buys:
13 (1) Without knowledge of the security interest;
14 (2) For value;
15 (3) Primarily for the buyer's personal, family or household purposes; and
16 (4) Before the filing of a financing statement covering the goods.
17 (c) To the extent that it affects the priority of a security interest
18 over a buyer of goods under subsection (b) of this section, the period of
19 effectiveness of a filing made in the jurisdiction in which the seller is
20 located is governed by section 28-9-316(a) and (b).
21 (d) A buyer in ordinary course of business buying oil, gas, or other min-
22 erals at the wellhead or minehead or after extraction takes free of an inter-
23 est arising out of an encumbrance.
24 (e) Subsections (a) and (b) of this section do not affect a security
25 interest in goods in the possession of the secured party under section
26 28-9-313.
27 28-9-321. LICENSEE OF GENERAL INTANGIBLE AND LESSEE OF GOODS IN ORDINARY
28 COURSE OF BUSINESS. (a) In this section, "licensee in ordinary course of busi-
29 ness" means a person that becomes a licensee of a general intangible in good
30 faith, without knowledge that the license violates the rights of another per-
31 son in the general intangible, and in the ordinary course from a person in the
32 business of licensing general intangibles of that kind. A person becomes a
33 licensee in the ordinary course if the license to the person comports with the
34 usual or customary practices in the kind of business in which the licensor is
35 engaged or with the licensor's own usual or customary practices.
36 (b) A licensee in ordinary course of business takes its rights under a
37 nonexclusive license free of a security interest in the general intangible
38 created by the licensor, even if the security interest is perfected and the
39 licensee knows of its existence.
40 (c) A lessee in ordinary course of business takes its leasehold interest
41 free of a security interest in the goods created by the lessor, even if the
42 security interest is perfected and the lessee knows of its existence.
43 28-9-322. PRIORITIES AMONG CONFLICTING SECURITY INTERESTS IN AND AGRICUL-
44 TURAL LIENS ON SAME COLLATERAL. (a) Except as otherwise provided in this sec-
45 tion, priority among conflicting security interests and agricultural liens in
46 the same collateral is determined according to the following rules:
47 (1) Conflicting perfected security interests and agricultural liens rank
48 according to priority in time of filing or perfection. Priority dates
49 from the earlier of the time a filing covering the collateral is first
50 made or the security interest or agricultural lien is first perfected, if
51 there is no period thereafter when there is neither filing nor perfection.
52 (2) A perfected security interest or agricultural lien has priority over
53 a conflicting unperfected security interest or agricultural lien.
35
1 (3) The first security interest or agricultural lien to attach or become
2 effective has priority if conflicting security interests and agricultural
3 liens are unperfected.
4 (b) For the purposes of subsection (a)(1) of this section:
5 (1) The time of filing or perfection as to a security interest in collat-
6 eral is also the time of filing or perfection as to a security interest in
7 proceeds; and
8 (2) The time of filing or perfection as to a security interest in collat-
9 eral supported by a supporting obligation is also the time of filing or
10 perfection as to a security interest in the supporting obligation.
11 (c) Except as otherwise provided in subsection (f) of this section, a
12 security interest in collateral which qualifies for priority over a conflict-
13 ing security interest under section 28-9-327, 28-9-328, 28-9-329, 28-9-330 or
14 28-9-331 also has priority over a conflicting security interest in:
15 (1) Any supporting obligation for the collateral; and
16 (2) Proceeds of the collateral if:
17 (A) the security interest in proceeds is perfected;
18 (B) the proceeds are cash proceeds or of the same type as the col-
19 lateral; and
20 (C) in the case of proceeds that are proceeds of proceeds, all
21 intervening proceeds are cash proceeds, proceeds of the same type as
22 the collateral, or an account relating to the collateral.
23 (d) Subject to subsection (e) of this section and except as otherwise
24 provided in subsection (f) of this section, if a security interest in chattel
25 paper, deposit accounts, negotiable documents, instruments, investment prop-
26 erty, or letter of credit rights is perfected by a method other than filing,
27 conflicting perfected security interests in proceeds of the collateral rank
28 according to priority in time of filing.
29 (e) Subsection (d) of this section applies only if the proceeds of the
30 collateral are not cash proceeds, chattel paper, negotiable documents, instru-
31 ments, investment property or letter of credit rights.
32 (f) Subsections (a) through (e) of this section are subject to:
33 (1) Subsection (g) of this section and the other provisions of this part;
34 (2) Section 28-4-210 with respect to a security interest of a collecting
35 bank;
36 (3) Section 28-5-120 with respect to a security interest of an issuer or
37 nominated person; and
38 (4) Section 28-9-110 with respect to a security interest arising under
39 chapter 2 or 12.
40 (g) A perfected agricultural lien on collateral has priority over a con-
41 flicting security interest in or agricultural lien on the same collateral if
42 the statute creating the agricultural lien so provides.
43 (h) A perfected security interest in crops for new value given to enable
44 the debtor to produce the crops during the production season and given not
45 more than three (3) months before the crops become growing crops by planting
46 or otherwise takes priority over an earlier perfected security interest to the
47 extent that such earlier interest secures obligations due more than six (6)
48 months before the crops become growing crops by planting or otherwise, even
49 though the person giving new value had knowledge of the earlier security
50 interest.
51 28-9-323. FUTURE ADVANCES. (a) Except as otherwise provided in subsection
52 (c) of this section, for purposes of determining the priority of a perfected
53 security interest under section 28-9-322(a)(1), perfection of the security
54 interest dates from the time an advance is made to the extent that the secu-
36
1 rity interest secures an advance that:
2 (1) Is made while the security interest is perfected only:
3 (A) under section 28-9-309 when it attaches; or
4 (B) temporarily under Section 28-9-312(e), (f) or (g); and
5 (2) Is not made pursuant to a commitment entered into before or while the
6 security interest is perfected by a method other than under section
7 28-9-309 or 28-9-312(e), (f) or (g).
8 (b) Except as otherwise provided in subsection (c) of this section, a
9 security interest is subordinate to the rights of a person that becomes a lien
10 creditor to the extent that the security interest secures an advance made more
11 than forty-five (45) days after the person becomes a lien creditor unless the
12 advance is made:
13 (1) Without knowledge of the lien; or
14 (2) Pursuant to a commitment entered into without knowledge of the lien.
15 (c) Subsections (a) and (b) of this section do not apply to a security
16 interest held by a secured party that is a buyer of accounts, chattel paper,
17 payment intangibles, or promissory notes or a consignor.
18 (d) Except as otherwise provided in subsection (e) of this section, a
19 buyer of goods other than a buyer in ordinary course of business takes free of
20 a security interest to the extent that it secures advances made after the ear-
21 lier of:
22 (1) The time the secured party acquires knowledge of the buyer's pur-
23 chase; or
24 (2) Forty-five (45) days after the purchase.
25 (e) Subsection (d) of this section does not apply if the advance is made
26 pursuant to a commitment entered into without knowledge of the buyer's pur-
27 chase and before the expiration of the forty-five (45) day period.
28 (f) Except as otherwise provided in subsection (g) of this section, a
29 lessee of goods, other than a lessee in ordinary course of business, takes the
30 leasehold interest free of a security interest to the extent that it secures
31 advances made after the earlier of:
32 (1) The time the secured party acquires knowledge of the lease; or
33 (2) Forty-five (45) days after the lease contract becomes enforceable.
34 (g) Subsection (f) of this section does not apply if the advance is made
35 pursuant to a commitment entered into without knowledge of the lease and
36 before the expiration of the forty-five (45) day period.
37 28-9-324. PRIORITY OF PURCHASE-MONEY SECURITY INTERESTS. (a) Except as
38 otherwise provided in subsection (g) of this section, a perfected purchase-
39 money security interest in goods other than inventory or livestock has prior-
40 ity over a conflicting security interest in the same goods, and, except as
41 otherwise provided in section 28-9-327, a perfected security interest in its
42 identifiable proceeds also has priority, if the purchase-money security inter-
43 est is perfected when the debtor receives possession of the collateral or
44 within twenty (20) days thereafter.
45 (b) Subject to subsection (c) of this section and except as otherwise
46 provided in subsection (g) of this section, a perfected purchase-money secu-
47 rity interest in inventory has priority over a conflicting security interest
48 in the same inventory, has priority over a conflicting security interest in
49 chattel paper or an instrument constituting proceeds of the inventory and in
50 proceeds of the chattel paper, if so provided in section 28-9-330, and, except
51 as otherwise provided in section 28-9-327, also has priority in identifiable
52 cash proceeds of the inventory to the extent the identifiable cash proceeds
53 are received on or before the delivery of the inventory to a buyer, if:
54 (1) The purchase-money security interest is perfected when the debtor
37
1 receives possession of the inventory;
2 (2) The purchase-money secured party sends an authenticated notification
3 to the holder of the conflicting security interest;
4 (3) The holder of the conflicting security interest receives the notifi-
5 cation within five (5) years before the debtor receives possession of the
6 inventory; and
7 (4) The notification states that the person sending the notification has
8 or expects to acquire a purchase-money security interest in inventory of
9 the debtor and describes the inventory.
10 (c) Subsections (b)(2) through (b)(4) of this section apply only if the
11 holder of the conflicting security interest had filed a financing statement
12 covering the same types of inventory:
13 (1) If the purchase-money security interest is perfected by filing,
14 before the date of the filing; or
15 (2) If the purchase-money security interest is temporarily perfected
16 without filing or possession under section 28-9-312(f), before the begin-
17 ning of the twenty (20) day period thereunder.
18 (d) Subject to subsection (e) of this section and except as otherwise
19 provided in subsection (g) of this section, a perfected purchase-money secu-
20 rity interest in livestock that are farm products has priority over a con-
21 flicting security interest in the same livestock, and, except as otherwise
22 provided in section 28-9-327, a perfected security interest in their identifi-
23 able proceeds and identifiable products in their unmanufactured states also
24 has priority, if:
25 (1) The purchase-money security interest is perfected when the debtor
26 receives possession of the livestock;
27 (2) The purchase-money secured party sends an authenticated notification
28 to the holder of the conflicting security interest;
29 (3) The holder of the conflicting security interest receives the notifi-
30 cation within six (6) months before the debtor receives possession of the
31 livestock; and
32 (4) The notification states that the person sending the notification has
33 or expects to acquire a purchase-money security interest in livestock of
34 the debtor and describes the livestock.
35 (e) Subsections (d)(2) through (d)(4) of this section apply only if the
36 holder of the conflicting security interest had filed a financing statement
37 covering the same types of livestock:
38 (1) If the purchase-money security interest is perfected by filing,
39 before the date of the filing; or
40 (2) If the purchase-money security interest is temporarily perfected
41 without filing or possession under section 28-9-312(f), before the begin-
42 ning of the twenty (20) day period thereunder.
43 (f) Except as otherwise provided in subsection (g) of this section, a
44 perfected purchase-money security interest in software has priority over a
45 conflicting security interest in the same collateral, and, except as otherwise
46 provided in section 28-9-327, a perfected security interest in its identifi-
47 able proceeds also has priority, to the extent that the purchase-money secu-
48 rity interest in the goods in which the software was acquired for use has pri-
49 ority in the goods and proceeds of the goods under this section.
50 (g) If more than one (1) security interest qualifies for priority in the
51 same collateral under subsection (a), (b), (d) or (f) of this section:
52 (1) A security interest securing an obligation incurred as all or part of
53 the price of the collateral has priority over a security interest securing
54 an obligation incurred for value given to enable the debtor to acquire
55 rights in or the use of collateral; and
38
1 (2) In all other cases, section 28-9-322(a) applies to the qualifying
2 security interests.
3 28-9-325. PRIORITY OF SECURITY INTERESTS IN TRANSFERRED COLLATERAL. (a)
4 Except as otherwise provided in subsection (b) of this section, a security
5 interest created by a debtor is subordinate to a security interest in the same
6 collateral created by another person if:
7 (1) The debtor acquired the collateral subject to the security interest
8 created by the other person;
9 (2) The security interest created by the other person was perfected when
10 the debtor acquired the collateral; and
11 (3) There is no period thereafter when the security interest is unper-
12 fected.
13 (b) Subsection (a) of this section subordinates a security interest only
14 if the security interest:
15 (1) Otherwise would have priority solely under section 28-9-322(a) or
16 28-9-324; or
17 (2) Arose solely under section 28-2-711(3) or 28-12-508(5).
18 28-9-326. PRIORITY OF SECURITY INTERESTS CREATED BY NEW DEBTOR. (a) Sub-
19 ject to subsection (b) of this section, a security interest created by a new
20 debtor which is perfected by a filed financing statement that is effective
21 solely under section 28-9-508 in collateral in which a new debtor has or
22 acquires rights is subordinate to a security interest in the same collateral
23 which is perfected other than by a filed financing statement that is effective
24 solely under section 28-9-508.
25 (b) The other provisions of this part determine the priority among con-
26 flicting security interests in the same collateral perfected by filed financ-
27 ing statements that are effective solely under section 28-9-508. However, if
28 the security agreements to which a new debtor became bound as debtor were not
29 entered into by the same original debtor, the conflicting security interests
30 rank according to priority in time of the new debtor's having become bound.
31 28-9-327. PRIORITY OF SECURITY INTERESTS IN DEPOSIT ACCOUNT. The follow-
32 ing rules govern priority among conflicting security interests in the same
33 deposit account:
34 (1) A security interest held by a secured party having control of the
35 deposit account under section 28-9-104 has priority over a conflicting secu-
36 rity interest held by a secured party that does not have control.
37 (2) Except as otherwise provided in subsections (3) and (4) of this sec-
38 tion, security interests perfected by control under section 28-9-314 rank
39 according to priority in time of obtaining control.
40 (3) Except as otherwise provided in subsection (4) of this section, a
41 security interest held by the bank with which the deposit account is main-
42 tained has priority over a conflicting security interest held by another
43 secured party.
44 (4) A security interest perfected by control under section 28-9-104(a)(3)
45 has priority over a security interest held by the bank with which the deposit
46 account is maintained.
47 28-9-328. PRIORITY OF SECURITY INTERESTS IN INVESTMENT PROPERTY. The fol-
48 lowing rules govern priority among conflicting security interests in the same
49 investment property:
50 (1) A security interest held by a secured party having control of invest-
51 ment property under section 28-9-106 has priority over a security interest
39
1 held by a secured party that does not have control of the investment property.
2 (2) Except as otherwise provided in subsections (3) and (4) of this sec-
3 tion, conflicting security interests held by secured parties each of which has
4 control under section 28-9-106 rank according to priority in time of:
5 (A) If the collateral is a security, obtaining control;
6 (B) If the collateral is a security entitlement carried in a securities
7 account and:
8 (i) if the secured party obtained control under section
9 28-8-106(4)(a), the secured party's becoming the person for which the
10 securities account is maintained;
11 (ii) if the secured party obtained control under section
12 28-8-106(4)(b), the securities intermediary's agreement to comply
13 with the secured party's entitlement orders with respect to security
14 entitlements carried or to be carried in the securities account; or
15 (iii) if the secured party obtained control through another person
16 under section 28-8-106(4)(c), the time on which priority would be
17 based under this paragraph if the other person were the secured
18 party; or
19 (C) If the collateral is a commodity contract carried with a commodity
20 intermediary, the satisfaction of the requirement for control specified in
21 section 28-9-106(b)(2) with respect to commodity contracts carried or to
22 be carried with the commodity intermediary.
23 (3) A security interest held by a securities intermediary in a security
24 entitlement or a securities account maintained with the securities intermedi-
25 ary has priority over a conflicting security interest held by another secured
26 party.
27 (4) A security interest held by a commodity intermediary in a commodity
28 contract or a commodity account maintained with the commodity intermediary has
29 priority over a conflicting security interest held by another secured party.
30 (5) A security interest in a certificated security in registered form
31 which is perfected by taking delivery under section 28-9-313(a) and not by
32 control under section 28-9-314 has priority over a conflicting security inter-
33 est perfected by a method other than control.
34 (6) Conflicting security interests created by a broker, securities inter-
35 mediary or commodity intermediary which are perfected without control under
36 section 28-9-106 rank equally.
37 (7) In all other cases, priority among conflicting security interests in
38 investment property is governed by sections 28-9-322 and 28-9-323.
39 28-9-329. PRIORITY OF SECURITY INTERESTS IN LETTER OF CREDIT RIGHT. The
40 following rules govern priority among conflicting security interests in the
41 same letter of credit right:
42 (1) A security interest held by a secured party having control of the
43 letter of credit right under section 28-9-107 has priority to the extent of
44 its control over a conflicting security interest held by a secured party that
45 does not have control.
46 (2) Security interests perfected by control under section 28-9-314 rank
47 according to priority in time of obtaining control.
48 28-9-330. PRIORITY OF PURCHASER OF CHATTEL PAPER OR INSTRUMENT. (a) A
49 purchaser of chattel paper has priority over a security interest in the chat-
50 tel paper which is claimed merely as proceeds of inventory subject to a secu-
51 rity interest if:
52 (1) In good faith and in the ordinary course of the purchaser's business,
53 the purchaser gives new value and takes possession of the chattel paper or
40
1 obtains control of the chattel paper under section 28-9-105; and
2 (2) The chattel paper does not indicate that it has been assigned to an
3 identified assignee other than the purchaser.
4 (b) A purchaser of chattel paper has priority over a security interest in
5 the chattel paper which is claimed other than merely as proceeds of inventory
6 subject to a security interest if the purchaser gives new value and takes pos-
7 session of the chattel paper or obtains control of the chattel paper under
8 section 28-9-105 in good faith, in the ordinary course of the purchaser's
9 business, and without knowledge that the purchase violates the rights of the
10 secured party.
11 (c) Except as otherwise provided in section 28-9-327, a purchaser having
12 priority in chattel paper under subsection (a) or (b) of this section also has
13 priority in proceeds of the chattel paper to the extent that:
14 (1) Section 28-9-322 provides for priority in the proceeds; or
15 (2) The proceeds consist of the specific goods covered by the chattel
16 paper or cash proceeds of the specific goods, even if the purchaser's
17 security interest in the proceeds is unperfected.
18 (d) Except as otherwise provided in section 28-9-331(a), a purchaser of
19 an instrument has priority over a security interest in the instrument per-
20 fected by a method other than possession if the purchaser gives value and
21 takes possession of the instrument in good faith and without knowledge that
22 the purchase violates the rights of the secured party.
23 (e) For purposes of subsections (a) and (b) of this section, the holder
24 of a purchase-money security interest in inventory gives new value for chattel
25 paper constituting proceeds of the inventory.
26 (f) For purposes of subsections (b) and (d) of this section, if chattel
27 paper or an instrument indicates that it has been assigned to an identified
28 secured party other than the purchaser, a purchaser of the chattel paper or
29 instrument has knowledge that the purchase violates the rights of the secured
30 party.
31 28-9-331. PRIORITY OF RIGHTS OF PURCHASERS OF INSTRUMENTS, DOCUMENTS AND
32 SECURITIES UNDER OTHER CHAPTERS -- PRIORITY OF INTERESTS IN FINANCIAL ASSETS
33 AND SECURITY ENTITLEMENTS UNDER CHAPTER 8. (a) This chapter does not limit the
34 rights of a holder in due course of a negotiable instrument, a holder to which
35 a negotiable document of title has been duly negotiated, or a protected pur-
36 chaser of a security. These holders or purchasers take priority over an ear-
37 lier security interest, even if perfected, to the extent provided in chapters
38 3, 7 and 8.
39 (b) This chapter does not limit the rights of or impose liability on a
40 person to the extent that the person is protected against the assertion of a
41 claim under chapter 8.
42 (c) Filing under this chapter does not constitute notice of a claim or
43 defense to the holders, or purchasers, or persons described in subsections (a)
44 and (b) of this section.
45 28-9-332. TRANSFER OF MONEY -- TRANSFER OF FUNDS FROM DEPOSIT ACCOUNT.
46 (a) A transferee of money takes the money free of a security interest unless
47 the transferee acts in collusion with the debtor in violating the rights of
48 the secured party.
49 (b) A transferee of funds from a deposit account takes the funds free of
50 a security interest in the deposit account unless the transferee acts in col-
51 lusion with the debtor in violating the rights of the secured party.
52 28-9-333. PRIORITY OF CERTAIN LIENS ARISING BY OPERATION OF LAW. (a) In
41
1 this section, "possessory lien" means an interest, other than a security
2 interest or an agricultural lien:
3 (1) Which secures payment or performance of an obligation for services or
4 materials furnished with respect to goods by a person in the ordinary
5 course of the person's business;
6 (2) Which is created by statute or rule of law in favor of the person;
7 and
8 (3) Whose effectiveness depends on the person's possession of the goods.
9 (b) A possessory lien on goods has priority over a security interest in
10 the goods unless the lien is created by a statute that expressly provides
11 otherwise.
12 28-9-334. PRIORITY OF SECURITY INTERESTS IN FIXTURES AND CROPS. (a) A
13 security interest under this chapter may be created in goods that are fixtures
14 or may continue in goods that become fixtures. A security interest does not
15 exist under this chapter in ordinary building materials incorporated into an
16 improvement on land.
17 (b) This chapter does not prevent creation of an encumbrance upon fix-
18 tures under real property law.
19 (c) In cases not governed by subsections (d) through (h) of this section,
20 a security interest in fixtures is subordinate to a conflicting interest of an
21 encumbrancer or owner of the related real property other than the debtor.
22 (d) Except as otherwise provided in section (h) of this section, a per-
23 fected security interest in fixtures has priority over a conflicting interest
24 of an encumbrancer or owner of the real property if the debtor has an interest
25 of record in or is in possession of the real property and:
26 (1) The security interest is a purchase-money security interest;
27 (2) The interest of the encumbrancer or owner arises before the goods
28 become fixtures; and
29 (3) The security interest is perfected by a fixture filing before the
30 goods become fixtures or within twenty (20) days thereafter.
31 (e) A perfected security interest in fixtures has priority over a con-
32 flicting interest of an encumbrancer or owner of the real property if:
33 (1) The debtor has an interest of record in the real property or is in
34 possession of the real property and the security interest:
35 (A) is perfected by a fixture filing before the interest of the
36 encumbrancer or owner is of record; and
37 (B) has priority over any conflicting interest of a predecessor in
38 title of the encumbrancer or owner;
39 (2) Before the goods become fixtures, the security interest is perfected
40 by any method permitted by this chapter and the fixtures are readily
41 removable:
42 (A) factory or office machines;
43 (B) equipment that is not primarily used or leased for use in the
44 operation of the real property; or
45 (C) replacements of domestic appliances that are consumer goods;
46 (3) The conflicting interest is a lien on the real property obtained by
47 legal or equitable proceedings after the security interest was perfected
48 by any method permitted by this chapter; or
49 (4) The security interest is:
50 (A) created in a manufactured home in a manufactured home transac-
51 tion; and
52 (B) perfected pursuant to a statute described in section
53 28-9-311(a)(2).
54 (f) A security interest in fixtures, whether or not perfected, has prior-
42
1 ity over a conflicting interest of an encumbrancer or owner of the real prop-
2 erty if:
3 (1) The encumbrancer or owner has, in an authenticated record, consented
4 to the security interest or disclaimed an interest in the goods as fix-
5 tures; or
6 (2) The debtor has a right to remove the goods as against the encum-
7 brancer or owner.
8 (g) The priority of the security interest under subsection (f)(2) of this
9 section continues for a reasonable time if the debtor's right to remove the
10 goods as against the encumbrancer or owner terminates.
11 (h) A mortgage is a construction mortgage to the extent that it secures
12 an obligation incurred for the construction of an improvement on land, includ-
13 ing the acquisition cost of the land, if a recorded record of the mortgage so
14 indicates. Except as otherwise provided in subsections (e) and (f) of this
15 section, a security interest in fixtures is subordinate to a construction
16 mortgage if a record of the mortgage is recorded before the goods become fix-
17 tures and the goods become fixtures before the completion of the construction.
18 A mortgage has this priority to the same extent as a construction mortgage to
19 the extent that it is given to refinance a construction mortgage.
20 (i) A perfected security interest in crops growing on real property has
21 priority over a conflicting interest of an encumbrancer or owner of the real
22 property if the debtor has an interest of record in or is in possession of the
23 real property.
24 28-9-335. ACCESSIONS. (a) A security interest may be created in an acces-
25 sion and continues in collateral that becomes an accession.
26 (b) If a security interest is perfected when the collateral becomes an
27 accession, the security interest remains perfected in the collateral.
28 (c) Except as otherwise provided in subsection (d) of this section, the
29 other provisions of this part determine the priority of a security interest in
30 an accession.
31 (d) A security interest in an accession is subordinate to a security
32 interest in the whole which is perfected by compliance with the requirements
33 of a certificate of title statute under section 28-9-311(b).
34 (e) After default, subject to part 6, a secured party may remove an
35 accession from other goods if the security interest in the accession has pri-
36 ority over the claims of every person having an interest in the whole.
37 (f) A secured party that removes an accession from other goods under sub-
38 section (e) of this section shall promptly reimburse any holder of a security
39 interest or other lien on, or owner of, the whole or of the other goods, other
40 than the debtor, for the cost of repair of any physical injury to the whole or
41 the other goods. The secured party need not reimburse the holder or owner for
42 any diminution in value of the whole or the other goods caused by the absence
43 of the accession removed or by any necessity for replacing it. A person enti-
44 tled to reimbursement may refuse permission to remove until the secured party
45 gives adequate assurance for the performance of the obligation to reimburse.
46 28-9-336. COMMINGLED GOODS. (a) In this section, "commingled goods" means
47 goods that are physically united with other goods in such a manner that their
48 identity is lost in a product or mass.
49 (b) A security interest does not exist in commingled goods as such. How-
50 ever, a security interest may attach to a product or mass that results when
51 goods become commingled goods.
52 (c) If collateral becomes commingled goods, a security interest attaches
53 to the product or mass.
43
1 (d) If a security interest in collateral is perfected before the collat-
2 eral becomes commingled goods, the security interest that attaches to the
3 product or mass under subsection (c) of this section is perfected.
4 (e) Except as otherwise provided in subsection (f) of this section, the
5 other provisions of this part determine the priority of a security interest
6 that attaches to the product or mass under subsection (c) of this section.
7 (f) If more than one (1) security interest attaches to the product or
8 mass under subsection (c) of this section, the following rules determine pri-
9 ority:
10 (1) A security interest that is perfected under subsection (d) of this
11 section has priority over a security interest that is unperfected at the
12 time the collateral becomes commingled goods.
13 (2) If more than one (1) security interest is perfected under subsection
14 (d) of this section, the security interests rank equally in proportion to
15 the value of the collateral at the time it became commingled goods.
16 28-9-337. PRIORITY OF SECURITY INTERESTS IN GOODS COVERED BY CERTIFICATE
17 OF TITLE. If, while a security interest in goods is perfected by any method
18 under the law of another jurisdiction, this state issues a certificate of
19 title that does not show that the goods are subject to the security interest
20 or contain a statement that they may be subject to security interests not
21 shown on the certificate:
22 (1) A buyer of the goods, other than a person in the business of selling
23 goods of that kind, takes free of the security interest if the buyer gives
24 value and receives delivery of the goods after issuance of the certificate and
25 without knowledge of the security interest; and
26 (2) The security interest is subordinate to a conflicting security inter-
27 est in the goods that attaches, and is perfected under section 28-9-311(b),
28 after issuance of the certificate and without the conflicting secured party's
29 knowledge of the security interest.
30 28-9-338. PRIORITY OF SECURITY INTEREST OR AGRICULTURAL LIEN PERFECTED BY
31 FILED FINANCING STATEMENT PROVIDING CERTAIN INCORRECT INFORMATION. If a secu-
32 rity interest or agricultural lien is perfected by a filed financing statement
33 providing information described in section 28-9-516(b)(5) which is incorrect
34 at the time the financing statement is filed:
35 (1) The security interest or agricultural lien is subordinate to a con-
36 flicting perfected security interest in the collateral to the extent that the
37 holder of the conflicting security interest gives value in reasonable reliance
38 upon the incorrect information; and
39 (2) A purchaser, other than a secured party, of the collateral takes free
40 of the security interest or agricultural lien to the extent that, in reason-
41 able reliance upon the incorrect information, the purchaser gives value and,
42 in the case of chattel paper, documents, goods, instruments, or a security
43 certificate, receives delivery of the collateral.
44 28-9-339. PRIORITY SUBJECT TO SUBORDINATION. This article does not pre-
45 clude subordination by agreement by a person entitled to priority.
46 28-9-340. EFFECTIVENESS OF RIGHT OF RECOUPMENT OR SET-OFF AGAINST DEPOSIT
47 ACCOUNT. (a) Except as otherwise provided in subsection (c) of this section, a
48 bank with which a deposit account is maintained may exercise any right of
49 recoupment or set-off against a secured party that holds a security interest
50 in the deposit account.
51 (b) Except as otherwise provided in subsection (c) of this section, the
44
1 application of this chapter to a security interest in a deposit account does
2 not affect a right of recoupment or set-off of the secured party as to a
3 deposit account maintained with the secured party.
4 (c) The exercise by a bank of a set-off against a deposit account is
5 ineffective against a secured party that holds a security interest in the
6 deposit account which is perfected by control under section 28-9-104(a)(3), if
7 the set-off is based on a claim against the debtor.
8 28-9-341. BANK'S RIGHTS AND DUTIES WITH RESPECT TO DEPOSIT ACCOUNT.
9 Except as otherwise provided in section 28-9-340(c), and unless the bank
10 otherwise agrees in an authenticated record, a bank's rights and duties with
11 respect to a deposit account maintained with the bank are not terminated, sus-
12 pended or modified by:
13 (1) The creation, attachment or perfection of a security interest in the
14 deposit account;
15 (2) The bank's knowledge of the security interest; or
16 (3) The bank's receipt of instructions from the secured party.
17 28-9-342. BANK'S RIGHT TO REFUSE TO ENTER INTO OR DISCLOSE EXISTENCE OF
18 CONTROL AGREEMENT. This chapter does not require a bank to enter into an
19 agreement of the kind described in section 28-9-104(a)(2), even if its cus-
20 tomer so requests or directs. A bank that has entered into such an agreement
21 is not required to confirm the existence of the agreement to another person
22 unless requested to do so by its customer.
23 PART 4
24 RIGHTS OF THIRD PARTIES
25 28-9-401. ALIENABILITY OF DEBTOR'S RIGHTS. (a) Except as otherwise pro-
26 vided in subsection (b) of this section and sections 28-9-406, 28-9-407,
27 28-9-408 and 28-9-409, whether a debtor's rights in collateral may be volun-
28 tarily or involuntarily transferred is governed by law other than this chap-
29 ter.
30 (b) An agreement between the debtor and secured party which prohibits a
31 transfer of the debtor's rights in collateral or makes the transfer a default
32 does not prevent the transfer from taking effect.
33 28-9-402. SECURED PARTY NOT OBLIGATED ON CONTRACT OF DEBTOR OR IN TORT.
34 The existence of a security interest, agricultural lien, or authority given to
35 a debtor to dispose of or use collateral, without more, does not subject a
36 secured party to liability in contract or tort for the debtor's acts or omis-
37 sions.
38 28-9-403. AGREEMENT NOT TO ASSERT DEFENSES AGAINST ASSIGNEE. (a) In this
39 section, "value" has the meaning provided in section 28-3-303(1).
40 (b) Except as otherwise provided in this section, an agreement between an
41 account debtor and an assignor not to assert against an assignee any claim or
42 defense that the account debtor may have against the assignor is enforceable
43 by an assignee that takes an assignment:
44 (1) For value;
45 (2) In good faith;
46 (3) Without notice of a claim of a property or possessory right to the
47 property assigned; and
48 (4) Without notice of a defense or claim in recoupment of the type that
49 may be asserted against a person entitled to enforce a negotiable instru-
45
1 ment under section 28-3-305(1).
2 (c) Subsection (b) of this section does not apply to defenses of a type
3 that may be asserted against a holder in due course of a negotiable instrument
4 under Section 28-3-305(2).
5 (d) In a consumer transaction, if a record evidences the account debtor's
6 obligation, law other than this chapter requires that the record include a
7 statement to the effect that the rights of an assignee are subject to claims
8 or defenses that the account debtor could assert against the original obligee,
9 and the record does not include such a statement:
10 (1) The record has the same effect as if the record included such a
11 statement; and
12 (2) The account debtor may assert against an assignee those claims and
13 defenses that would have been available if the record included such a
14 statement.
15 (e) This section is subject to law other than this chapter which estab-
16 lishes a different rule for an account debtor who is an individual and who
17 incurred the obligation primarily for personal, family or household purposes.
18 (f) Except as otherwise provided in subsection (d) of this section, this
19 section does not displace law other than this chapter which gives effect to an
20 agreement by an account debtor not to assert a claim or defense against an
21 assignee.
22 28-9-404. RIGHTS ACQUIRED BY ASSIGNEE -- CLAIMS AND DEFENSES AGAINST
23 ASSIGNEE. (a) Unless an account debtor has made an enforceable agreement not
24 to assert defenses or claims, and subject to subsections (b) through (e) of
25 this section, the rights of an assignee are subject to:
26 (1) All terms of the agreement between the account debtor and assignor
27 and any defense or claim in recoupment arising from the transaction that
28 gave rise to the contract; and
29 (2) Any other defense or claim of the account debtor against the assignor
30 which accrues before the account debtor receives a notification of the
31 assignment authenticated by the assignor or the assignee.
32 (b) Subject to subsection (c) of this section and except as otherwise
33 provided in subsection (d) of this section, the claim of an account debtor
34 against an assignor may be asserted against an assignee under subsection (a)
35 of this section only to reduce the amount the account debtor owes.
36 (c) This section is subject to law other than this chapter which estab-
37 lishes a different rule for an account debtor who is an individual and who
38 incurred the obligation primarily for personal, family or household purposes.
39 (d) In a consumer transaction, if a record evidences the account debtor's
40 obligation, law other than this chapter requires that the record include a
41 statement to the effect that the account debtor's recovery against an assignee
42 with respect to claims and defenses against the assignor may not exceed
43 amounts paid by the account debtor under the record, and the record does not
44 include such a statement, the extent to which a claim of an account debtor
45 against the assignor may be asserted against an assignee is determined as if
46 the record included such a statement.
47 (e) This section does not apply to an assignment of a health care insur-
48 ance receivable.
49 28-9-405. MODIFICATION OF ASSIGNED CONTRACT. (a) A modification of or
50 substitution for an assigned contract is effective against an assignee if made
51 in good faith. The assignee acquires corresponding rights under the modified
52 or substituted contract. The assignment may provide that the modification or
53 substitution is a breach of contract by the assignor. This subsection is sub-
46
1 ject to subsections (b) through (d) of this section.
2 (b) Subsection (a) of this section applies to the extent that:
3 (1) The right to payment or a part thereof under an assigned contract has
4 not been fully earned by performance; or
5 (2) The right to payment or a part thereof has been fully earned by per-
6 formance and the account debtor has not received notification of the
7 assignment under section 28-9-406(a).
8 (c) This section is subject to law other than this chapter which estab-
9 lishes a different rule for an account debtor who is an individual and who
10 incurred the obligation primarily for personal, family or household purposes.
11 (d) This section does not apply to an assignment of a health care insur-
12 ance receivable.
13 28-9-406. DISCHARGE OF ACCOUNT DEBTOR -- NOTIFICATION OF ASSIGNMENT --
14 IDENTIFICATION AND PROOF OF ASSIGNMENT -- RESTRICTIONS ON ASSIGNMENT OF
15 ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES AND PROMISSORY NOTES INEFFECTIVE.
16 (a) Subject to subsections (b) through (i) of this section, an account debtor
17 on an account, chattel paper or a payment intangible may discharge its obliga-
18 tion by paying the assignor until, but not after, the account debtor receives
19 a notification, authenticated by the assignor or the assignee, that the amount
20 due or to become due has been assigned and that payment is to be made to the
21 assignee. After receipt of the notification, the account debtor may discharge
22 its obligation by paying the assignee and may not discharge the obligation by
23 paying the assignor.
24 (b) Subject to subsection (h) of this section, notification is ineffec-
25 tive under subsection (a) of this section:
26 (1) If it does not reasonably identify the rights assigned;
27 (2) To the extent that an agreement between an account debtor and a
28 seller of a payment intangible limits the account debtor's duty to pay a
29 person other than the seller and the limitation is effective under law
30 other than this chapter; or
31 (3) At the option of an account debtor, if the notification notifies the
32 account debtor to make less than the full amount of any installment or
33 other periodic payment to the assignee, even if:
34 (A) only a portion of the account, chattel paper or general intangi-
35 ble has been assigned to that assignee;
36 (B) a portion has been assigned to another assignee; or
37 (C) the account debtor knows that the assignment to that assignee is
38 limited.
39 (c) Subject to subsection (h) of this section, if requested by the
40 account debtor, an assignee shall seasonably furnish reasonable proof that the
41 assignment has been made. Unless the assignee complies, the account debtor may
42 discharge its obligation by paying the assignor, even if the account debtor
43 has received a notification under subsection (a) of this section.
44 (d) Except as otherwise provided in subsection (e) of this section and
45 sections 28-9-407 and 28-12-303, and subject to subsection (h) of this sec-
46 tion, a term in an agreement between an account debtor and an assignor or in a
47 promissory note is ineffective to the extent that it:
48 (1) Prohibits, restricts or requires the consent of the account debtor or
49 person obligated on the promissory note to the assignment or transfer of,
50 or the creation, attachment, perfection or enforcement of a security
51 interest in, the account, chattel paper, payment intangible, or promissory
52 note; or
53 (2) Provides that the assignment or transfer or the creation, attachment,
54 perfection, or enforcement of the security interest may give rise to a
47
1 default, breach, right of recoupment, claim, defense, termination, right
2 of termination, or remedy under the account, chattel paper, payment intan-
3 gible or promissory note.
4 (e) Subsection (d) of this section does not apply to the sale of a pay-
5 ment intangible or promissory note.
6 (f) Except as otherwise provided in sections 28-9-407 and 28-12-303 and
7 subject to subsections (h) and (i) of this section, a rule of law, statute,
8 rule or regulation that prohibits, restricts, or requires the consent of a
9 government, governmental body or official, or account debtor to the assignment
10 or transfer of, or creation of a security interest in, an account or chattel
11 paper is ineffective to the extent that the rule of law, statute, rule or reg-
12 ulation:
13 (1) Prohibits, restricts or requires the consent of the government, gov-
14 ernmental body or official, or account debtor to the assignment or trans-
15 fer of, or the creation, attachment, perfection, or enforcement of a secu-
16 rity interest in the account or chattel paper; or
17 (2) Provides that the assignment or transfer or the creation, attachment,
18 perfection or enforcement of the security interest may give rise to a
19 default, breach, right of recoupment, claim, defense, termination, right
20 of termination or remedy under the account or chattel paper.
21 (g) Subject to subsection (h) of this section, an account debtor may not
22 waive or vary its option under subsection (b)(3) of this section.
23 (h) This section is subject to law other than this chapter which estab-
24 lishes a different rule for an account debtor who is an individual and who
25 incurred the obligation primarily for personal, family or household purposes.
26 (i) This section does not apply to an assignment of a health care insur-
27 ance receivable, an award of compensation made pursuant to the crime victims
28 compensation act, chapter 10, title 72, Idaho Code, or a lottery prize subject
29 to the provisions of chapter 74, title 67, Idaho Code.
30 28-9-407. RESTRICTIONS ON CREATION OR ENFORCEMENT OF SECURITY INTEREST IN
31 LEASEHOLD INTEREST OR IN LESSOR'S RESIDUAL INTEREST. (a) Except as otherwise
32 provided in subsection (b) of this section, a term in a lease agreement is
33 ineffective to the extent that it:
34 (1) Prohibits, restricts or requires the consent of a party to the lease
35 to the assignment or transfer of, or the creation, attachment, perfection,
36 or enforcement of a security interest in, an interest of a party under the
37 lease contract or in the lessor's residual interest in the goods; or
38 (2) Provides that the assignment or transfer or the creation, attachment,
39 perfection or enforcement of the security interest may give rise to a
40 default, breach, right of recoupment, claim, defense, termination, right
41 of termination, or remedy under the lease.
42 (b) Except as otherwise provided in section 28-12-303(7), a term
43 described in subsection (a)(2) of this section is effective to the extent that
44 there is:
45 (1) A transfer by the lessee of the lessee's right of possession or use
46 of the goods in violation of the term; or
47 (2) A delegation of a material performance of either party to the lease
48 contract in violation of the term.
49 (c) The creation, attachment, perfection or enforcement of a security
50 interest in the lessor's interest under the lease contract or the lessor's
51 residual interest in the goods is not a transfer that materially impairs the
52 lessee's prospect of obtaining return performance or materially changes the
53 duty of or materially increases the burden or risk imposed on the lessee
54 within the purview of section 28-12-303(4) unless, and then only to the extent
48
1 that, enforcement actually results in a delegation of material performance of
2 the lessor.
3 28-9-408. RESTRICTIONS ON ASSIGNMENT OF PROMISSORY NOTES, HEALTH CARE
4 INSURANCE RECEIVABLES, AND CERTAIN GENERAL INTANGIBLES INEFFECTIVE. (a) Except
5 as otherwise provided in subsection (b) of this section, a term in a promis-
6 sory note or in an agreement between an account debtor and a debtor which
7 relates to a health care insurance receivable or a general intangible, includ-
8 ing a contract, permit, license, or franchise, and which term prohibits,
9 restricts, or requires the consent of the person obligated on the promissory
10 note or the account debtor to, the assignment or transfer of, or creation,
11 attachment, or perfection of a security interest in, the promissory note,
12 health care insurance receivable, or general intangible, is ineffective to the
13 extent that the term:
14 (1) Would impair the creation, attachment or perfection of a security
15 interest; or
16 (2) Provides that the assignment or transfer or the creation, attachment,
17 or perfection of the security interest may give rise to a default, breach,
18 right of recoupment, claim, defense, termination, right of termination, or
19 remedy under the promissory note, health care insurance receivable, or
20 general intangible.
21 (b) Subsection (a) of this section applies to a security interest in a
22 payment intangible or promissory note only if the security interest arises out
23 of a sale of the payment intangible or promissory note.
24 (c) A rule of law, statute, rule or regulation that prohibits, restricts,
25 or requires the consent of a government, governmental body or official, person
26 obligated on a promissory note, or account debtor to the assignment or trans-
27 fer of, or creation of a security interest in, a promissory note, health care
28 insurance receivable, or general intangible, including a contract, permit,
29 license, or franchise between an account debtor and a debtor, is ineffective
30 to the extent that the rule of law, statute, or regulation:
31 (1) Would impair the creation, attachment or perfection of a security
32 interest; or
33 (2) Provides that the assignment or transfer or the creation, attachment,
34 or perfection of the security interest may give rise to a default, breach,
35 right of recoupment, claim, defense, termination, right of termination, or
36 remedy under the promissory note, health care insurance receivable, or
37 general intangible.
38 (d) To the extent that a term in a promissory note or in an agreement
39 between an account debtor and a debtor which relates to a health care insur-
40 ance receivable or general intangible or a rule of law, statute, or regulation
41 described in subsection (c) of this section would be effective under law other
42 than this chapter but is ineffective under subsection (a) or (c) of this sec-
43 tion, the creation, attachment, or perfection of a security interest in the
44 promissory note, health care insurance receivable, or general intangible:
45 (1) Is not enforceable against the person obligated on the promissory
46 note or the account debtor;
47 (2) Does not impose a duty or obligation on the person obligated on the
48 promissory note or the account debtor;
49 (3) Does not require the person obligated on the promissory note or the
50 account debtor to recognize the security interest, pay or render perfor-
51 mance to the secured party, or accept payment or performance from the
52 secured party;
53 (4) Does not entitle the secured party to use or assign the debtor's
54 rights under the promissory note, health care insurance receivable, or
49
1 general intangible, including any related information or materials fur-
2 nished to the debtor in the transaction giving rise to the promissory
3 note, health care insurance receivable, or general intangible;
4 (5) Does not entitle the secured party to use, assign, possess, or have
5 access to any trade secrets or confidential information of the person
6 obligated on the promissory note or the account debtor; and
7 (6) Does not entitle the secured party to enforce the security interest
8 in the promissory note, health care insurance receivable, or general
9 intangible.
10 28-9-409. RESTRICTIONS ON ASSIGNMENT OF LETTER OF CREDIT RIGHTS INEFFEC-
11 TIVE. (a) A term in a letter of credit or a rule of law, statute, rule, regu-
12 lation, custom or practice applicable to the letter of credit which prohibits,
13 restricts or requires the consent of an applicant, issuer or nominated person
14 to a beneficiary's assignment of or creation of a security interest in a let-
15 ter of credit right is ineffective to the extent that the term or rule of law,
16 statute, rule, regulation, custom or practice:
17 (1) Would impair the creation, attachment or perfection of a security
18 interest in the letter of credit right; or
19 (2) Provides that the assignment or the creation, attachment or perfec-
20 tion of the security interest may give rise to a default, breach, right of
21 recoupment, claim, defense, termination, right of termination, or remedy
22 under the letter of credit right.
23 (b) To the extent that a term in a letter of credit is ineffective under
24 subsection (a) of this section but would be effective under law other than
25 this chapter or a custom or practice applicable to the letter of credit, to
26 the transfer of a right to draw or otherwise demand performance under the let-
27 ter of credit, or to the assignment of a right to proceeds of the letter of
28 credit, the creation, attachment, or perfection of a security interest in the
29 letter of credit right:
30 (1) Is not enforceable against the applicant, issuer, nominated person or
31 transferee beneficiary;
32 (2) Imposes no duties or obligations on the applicant, issuer, nominated
33 person or transferee beneficiary; and
34 (3) Does not require the applicant, issuer, nominated person or trans-
35 feree beneficiary to recognize the security interest, pay or render per-
36 formance to the secured party, or accept payment or other performance from
37 the secured party.
38 PART 5
39 FILING
40 28-9-501. FILING OFFICE. (a) Except as otherwise provided in subsection
41 (b) of this section, if the local law of this state governs perfection of a
42 security interest or agricultural lien, the office in which to file a financ-
43 ing statement to perfect the security interest or agricultural lien is:
44 (1) The office designated for the filing or recording of a record of a
45 mortgage on the related real property, if:
46 (A) the collateral is as-extracted collateral or timber to be cut;
47 or
48 (B) the financing statement is filed as a fixture filing and the
49 collateral is goods that are or are to become fixtures; or
50 (2) The office of the secretary of state or any office duly authorized by
51 the secretary of state, in all other cases, including a case in which the
52 collateral is goods that are or are to become fixtures and the financing
50
1 statement is not filed as a fixture filing.
2 (b) The office in which to file a financing statement to perfect a secu-
3 rity interest in collateral, including fixtures, of a transmitting utility is
4 the office of the secretary of state. The financing statement also constitutes
5 a fixture filing as to the collateral indicated in the financing statement
6 which is or is to become fixtures.
7 28-9-502. CONTENTS OF FINANCING STATEMENT -- RECORD OF MORTGAGE AS
8 FINANCING STATEMENT -- TIME OF FILING FINANCING STATEMENT -- FARM PRODUCTS.
9 (a) Subject to subsection (b) of this section, a financing statement is suffi-
10 cient only if it:
11 (1) Provides the name of the debtor;
12 (2) Provides the name of the secured party or a representative of the
13 secured party; and
14 (3) Indicates the collateral covered by the financing statement.
15 (b) Except as otherwise provided in section 28-9-501(b), to be suffi-
16 cient, a financing statement that covers as-extracted collateral or timber to
17 be cut, or which is filed as a fixture filing and covers goods that are or are
18 to become fixtures, must satisfy subsection (a) of this section and also:
19 (1) Indicate that it covers this type of collateral;
20 (2) Indicate that it is to be filed in the real property records;
21 (3) Provide a description of the real property to which the collateral is
22 related sufficient to give constructive notice of a mortgage under the law
23 of this state if the description were contained in a record of the mort-
24 gage of the real property; and
25 (4) If the debtor does not have an interest of record in the real prop-
26 erty, provide the name of a record owner.
27 (c) A record of a mortgage is effective, from the date of recording, as a
28 financing statement filed as a fixture filing or as a financing statement cov-
29 ering as-extracted collateral or timber to be cut only if:
30 (1) The record indicates the goods or accounts that it covers;
31 (2) The goods are or are to become fixtures related to the real property
32 described in the record or the collateral is related to the real property
33 described in the record and is as-extracted collateral or timber to be
34 cut;
35 (3) The record satisfies the requirements for a financing statement in
36 this section other than an indication that it is to be filed in the real
37 property records; and
38 (4) The record is recorded.
39 (d) A financing statement may be filed before a security agreement is
40 made or a security interest otherwise attaches.
41 (e) A financing statement covering farm products is sufficient if it con-
42 tains the following information:
43 (1) The name and address of the debtor;
44 (2) The debtor's signature;
45 (3) The name, address, and signature of the secured party;
46 (4) The social security number of the debtor, or in the case of a debtor
47 doing business other than as an individual, the debtor's internal revenue
48 service taxpayer identification number;
49 (5) A description by category of the farm products subject to the secu-
50 rity interest and the amount of such products, where applicable;
51 (6) A reasonable description of the real estate where the farm products
52 are produced or located. This provision may be satisfied by a designation
53 of the county or counties, and a legal description is not required.
54 (f) A financing statement described in subsection (e) of this section
51
1 must be amended in writing within three (3) months, and similarly signed and
2 filed, to reflect any material changes. In the event such form is not incorpo-
3 rated within the financing statement, the effectiveness and continuation of
4 that form is to be treated as if it were a part of the financing statement
5 with which it is filed.
6 28-9-503. NAME OF DEBTOR AND SECURED PARTY. (a) A financing statement
7 sufficiently provides the name of the debtor:
8 (1) If the debtor is a registered organization, only if the financing
9 statement provides the name of the debtor indicated on the public record
10 of the debtor's jurisdiction of organization which shows the debtor to
11 have been organized;
12 (2) If the debtor is a decedent's estate, only if the financing statement
13 provides the name of the decedent and indicates that the debtor is an
14 estate;
15 (3) If the debtor is a trust or a trustee acting with respect to property
16 held in trust, only if the financing statement:
17 (A) provides the name specified for the trust in its organic docu-
18 ments or, if no name is specified, provides the name of the settlor
19 and additional information sufficient to distinguish the debtor from
20 other trusts having one (1) or more of the same settlors; and
21 (B) indicates, in the debtor's name or otherwise, that the debtor is
22 a trust or is a trustee acting with respect to property held in
23 trust; and
24 (4) In other cases:
25 (A) if the debtor has a name, only if it provides the individual or
26 organizational name of the debtor; and
27 (B) if the debtor does not have a name, only if it provides the
28 names of the partners, members, associates or other persons compris-
29 ing the debtor.
30 (b) A financing statement that provides the name of the debtor in accor-
31 dance with subsection (a) of this section is not rendered ineffective by the
32 absence of:
33 (1) A trade name or other name of the debtor; or
34 (2) Unless required under subsection (a)(4)(B) of this section, names of
35 partners, members, associates or other persons comprising the debtor.
36 (c) A financing statement that provides only the debtor's trade name does
37 not sufficiently provide the name of the debtor.
38 (d) Failure to indicate the representative capacity of a secured party or
39 representative of a secured party does not affect the sufficiency of a financ-
40 ing statement.
41 (e) A financing statement may provide the name of more than one (1)
42 debtor and the name of more than one (1) secured party.
43 28-9-504. INDICATION OF COLLATERAL. A financing statement sufficiently
44 indicates the collateral that it covers if the financing statement provides:
45 (1) A description of the collateral pursuant to section 28-9-108; or
46 (2) An indication that the financing statement covers all assets or all
47 personal property.
48 28-9-505. FILING AND COMPLIANCE WITH OTHER STATUTES AND TREATIES FOR
49 CONSIGNMENTS, LEASES, OTHER BAILMENTS, AND OTHER TRANSACTIONS. (a) A con-
50 signor, lessor, or other bailor of goods, a licensor, or a buyer of a payment
51 intangible or promissory note may file a financing statement, or may comply
52 with a statute or treaty described in section 28-9-311(a), using the terms
52
1 "consignor," "consignee," "lessor," "lessee," "bailor," "bailee," "licensor,"
2 "licensee," "owner," "registered owner," "buyer," "seller," or words of simi-
3 lar import, instead of the terms "secured party" and "debtor."
4 (b) This part applies to the filing of a financing statement under sub-
5 section (a) of this section and, as appropriate, to compliance that is equiva-
6 lent to filing a financing statement under section 28-9-311(b), but the filing
7 or compliance is not of itself a factor in determining whether the collateral
8 secures an obligation. If it is determined for another reason that the col-
9 lateral secures an obligation, a security interest held by the consignor, les-
10 sor, bailor, licensor, owner or buyer which attaches to the collateral is per-
11 fected by the filing or compliance.
12 28-9-506. EFFECT OF ERRORS OR OMISSIONS. (a) A financing statement sub-
13 stantially satisfying the requirements of this part is effective, even if it
14 has minor errors or omissions, unless the errors or omissions make the financ-
15 ing statement seriously misleading.
16 (b) Except as otherwise provided in subsection (c) of this section, a
17 financing statement that fails sufficiently to provide the name of the debtor
18 in accordance with section 28-9-503(a) is seriously misleading.
19 (c) If a search of the records of the filing office under the debtor's
20 correct name, using the filing office's standard search logic, if any, would
21 disclose a financing statement that fails sufficiently to provide the name of
22 the debtor in accordance with section 28-9-503(a), the name provided does not
23 make the financing statement seriously misleading.
24 (d) For purposes of section 28-9-508(b), the "debtor's correct name" in
25 subsection (c) of this section means the correct name of the new debtor.
26 28-9-507. EFFECT OF CERTAIN EVENTS ON EFFECTIVENESS OF FINANCING STATE-
27 MENT. (a) A filed financing statement remains effective with respect to col-
28 lateral that is sold, exchanged, leased, licensed, or otherwise disposed of
29 and in which a security interest or agricultural lien continues, even if the
30 secured party knows of or consents to the disposition.
31 (b) Except as otherwise provided in subsection (c) of this section and
32 section 28-9-508, a financing statement is not rendered ineffective if, after
33 the financing statement is filed, the information provided in the financing
34 statement becomes seriously misleading under section 28-9-506.
35 (c) If a debtor so changes its name that a filed financing statement
36 becomes seriously misleading under section 28-9-506:
37 (1) The financing statement is effective to perfect a security interest
38 in collateral acquired by the debtor before, or within four (4) months
39 after, the change; and
40 (2) The financing statement is not effective to perfect a security inter-
41 est in collateral acquired by the debtor more than four (4) months after
42 the change, unless an amendment to the financing statement which renders
43 the financing statement not seriously misleading is filed within four (4)
44 months after the change.
45 28-9-508. EFFECTIVENESS OF FINANCING STATEMENT IF NEW DEBTOR BECOMES
46 BOUND BY SECURITY AGREEMENT. (a) Except as otherwise provided in this section,
47 a filed financing statement naming an original debtor is effective to perfect
48 a security interest in collateral in which a new debtor has or acquires rights
49 to the extent that the financing statement would have been effective had the
50 original debtor acquired rights in the collateral.
51 (b) If the difference between the name of the original debtor and that of
52 the new debtor causes a filed financing statement that is effective under sub-
53
1 section (a) of this section to be seriously misleading under section 28-9-506:
2 (1) The financing statement is effective to perfect a security interest
3 in collateral acquired by the new debtor before, and within four (4)
4 months after, the new debtor becomes bound under section 28-9-203(d); and
5 (2) The financing statement is not effective to perfect a security inter-
6 est in collateral acquired by the new debtor more than four (4) months
7 after the new debtor becomes bound under section 28-9-203(d) unless an
8 initial financing statement providing the name of the new debtor is filed
9 before the expiration of that time.
10 (c) This section does not apply to collateral as to which a filed financ-
11 ing statement remains effective against the new debtor under section
12 28-9-507(a).
13 28-9-509. PERSONS ENTITLED TO FILE A RECORD. (a) A person may file an
14 initial financing statement, amendment that adds collateral covered by a
15 financing statement, or amendment that adds a debtor to a financing statement
16 only if:
17 (1) The debtor authorizes the filing in an authenticated record; or
18 (2) The person holds an agricultural lien that has become effective at
19 the time of filing and the financing statement covers only collateral in
20 which the person holds an agricultural lien.
21 (b) By authenticating or becoming bound as debtor by a security agree-
22 ment, a debtor or new debtor authorizes the filing of an initial financing
23 statement, and an amendment, covering:
24 (1) The collateral described in the security agreement; and
25 (2) Property that becomes collateral under section 28-9-315(a)(2),
26 whether or not the security agreement expressly covers proceeds.
27 (c) By acquiring collateral in which a security interest or agricultural
28 lien continues under section 28-9-315(a)(1), a debtor authorizes the filing of
29 an initial financing statement, and an amendment, covering the collateral and
30 property that becomes collateral under section 28-9-315(a)(2).
31 (d) A person may file an amendment other than an amendment that adds col-
32 lateral covered by a financing statement or an amendment that adds a debtor to
33 a financing statement only if:
34 (1) The secured party of record authorizes the filing; or
35 (2) The amendment is a termination statement for a financing statement as
36 to which the secured party of record has failed to file or send a termina-
37 tion statement as required by section 28-9-513(a) or (c), the debtor
38 authorizes the filing, and the termination statement indicates that the
39 debtor authorized it to be filed.
40 (e) If there is more than one (1) secured party of record for a financing
41 statement, each secured party of record may authorize the filing of an amend-
42 ment under subsection (d) of this section.
43 28-9-510. EFFECTIVENESS OF FILED RECORD. (a) A filed record is effective
44 only to the extent that it was filed by a person that may file it under sec-
45 tion 28-9-509.
46 (b) A record authorized by one (1) secured party of record does not
47 affect the financing statement with respect to another secured party of
48 record.
49 (c) A continuation statement that is not filed within the six (6) month
50 period prescribed by section 28-9-515(d) is ineffective.
51 28-9-511. SECURED PARTY OF RECORD. (a) A secured party of record with
52 respect to a financing statement is a person whose name is provided as the
54
1 name of the secured party or a representative of the secured party in an ini-
2 tial financing statement that has been filed. If an initial financing state-
3 ment is filed under section 28-9-514(a), the assignee named in the initial
4 financing statement is the secured party of record with respect to the financ-
5 ing statement.
6 (b) If an amendment of a financing statement which provides the name of a
7 person as a secured party or a representative of a secured party is filed, the
8 person named in the amendment is a secured party of record. If an amendment is
9 filed under section 28-9-514(b), the assignee named in the amendment is a
10 secured party of record.
11 (c) A person remains a secured party of record until the filing of an
12 amendment of the financing statement which deletes the person.
13 28-9-512. AMENDMENT OF FINANCING STATEMENT. (a) Subject to section
14 28-9-509, a person may add or delete collateral covered by, continue or termi-
15 nate the effectiveness of, or, subject to subsection (e) of this section,
16 otherwise amend the information provided in, a financing statement by filing
17 an amendment that:
18 (1) Identifies, by its file number, the initial financing statement to
19 which the amendment relates; and
20 (2) If the amendment relates to an initial financing statement filed or
21 recorded in a filing office described in section 28-9-501(a)(1), provides
22 the information specified in section 28-9-502(b).
23 (b) Except as otherwise provided in section 28-9-515, the filing of an
24 amendment does not extend the period of effectiveness of the financing state-
25 ment.
26 (c) A financing statement that is amended by an amendment that adds col-
27 lateral is effective as to the added collateral only from the date of the fil-
28 ing of the amendment.
29 (d) A financing statement that is amended by an amendment that adds a
30 debtor is effective as to the added debtor only from the date of the filing of
31 the amendment.
32 (e) An amendment is ineffective to the extent it:
33 (1) Purports to delete all debtors and fails to provide the name of a
34 debtor to be covered by the financing statement; or
35 (2) Purports to delete all secured parties of record and fails to provide
36 the name of a new secured party of record.
37 28-9-513. TERMINATION STATEMENT. (a) A secured party shall cause the
38 secured party of record for a financing statement to file a termination state-
39 ment for the financing statement if the financing statement covers consumer
40 goods and:
41 (1) There is no obligation secured by the collateral covered by the
42 financing statement and no commitment to make an advance, incur an obliga-
43 tion, or otherwise give value; or
44 (2) The debtor did not authorize the filing of the initial financing
45 statement.
46 (b) To comply with subsection (a) of this section, a secured party shall
47 cause the secured party of record to file the termination statement:
48 (1) Within one (1) month after there is no obligation secured by the col-
49 lateral covered by the financing statement and no commitment to make an
50 advance, incur an obligation, or otherwise give value; or
51 (2) If earlier, within twenty (20) days after the secured party receives
52 an authenticated demand from a debtor.
53 (c) In cases not governed by subsection (a) of this section, within
55
1 twenty (20) days after a secured party receives an authenticated demand from a
2 debtor, the secured party shall cause the secured party of record for a
3 financing statement to send to the debtor a termination statement for the
4 financing statement or file the termination statement in the filing office if:
5 (1) Except in the case of a financing statement covering accounts or
6 chattel paper that has been sold or goods that are the subject of a con-
7 signment, there is no obligation secured by the collateral covered by the
8 financing statement and no commitment to make an advance, incur an obliga-
9 tion, or otherwise give value;
10 (2) The financing statement covers accounts or chattel paper that has
11 been sold but as to which the account debtor or other person obligated has
12 discharged its obligation;
13 (3) The financing statement covers goods that were the subject of a con-
14 signment to the debtor but are not in the debtor's possession; or
15 (4) The debtor did not authorize the filing of the initial financing
16 statement.
17 (d) Except as otherwise provided in section 28-9-510, upon the filing of
18 a termination statement with the filing office, the financing statement to
19 which the termination statement relates ceases to be effective.
20 28-9-514. ASSIGNMENT OF POWERS OF SECURED PARTY OF RECORD. (a) Except as
21 otherwise provided in subsection (c) of this section, an initial financing
22 statement may reflect an assignment of all of the secured party's power to
23 authorize an amendment to the financing statement by providing the name and
24 mailing address of the assignee as the name and address of the secured party.
25 (b) Except as otherwise provided in subsection (c) of this section, a
26 secured party of record may assign of record all or part of its power to
27 authorize an amendment to a financing statement by filing in the filing office
28 an amendment of the financing statement which:
29 (1) Identifies, by its file number, the initial financing statement to
30 which it relates;
31 (2) Provides the name of the assignor; and
32 (3) Provides the name and mailing address of the assignee.
33 (c) An assignment of record of a security interest in a fixture covered
34 by a record of a mortgage which is effective as a financing statement filed as
35 a fixture filing under section 28-9-502(c) may be made only by an assignment
36 of record of the mortgage in the manner provided by law of this state other
37 than the uniform commercial code.
38 28-9-515. DURATION AND EFFECTIVENESS OF FINANCING STATEMENT -- EFFECT OF
39 LAPSED FINANCING STATEMENT. (a) Except as otherwise provided in subsections
40 (b), (e), (f) and (g) of this section, a filed financing statement is effec-
41 tive for a period of five (5) years after the date of filing.
42 (b) Except as otherwise provided in subsections (e), (f) and (g) of this
43 section, an initial financing statement filed in connection with a public
44 finance transaction or manufactured home transaction is effective for a period
45 of thirty (30) years after the date of filing if it indicates that it is filed
46 in connection with a public finance transaction or manufactured home transac-
47 tion.
48 (c) The effectiveness of a filed financing statement lapses on the expi-
49 ration of the period of its effectiveness unless before the lapse a continua-
50 tion statement is filed pursuant to subsection (d) of this section. Upon
51 lapse, a financing statement ceases to be effective and any security interest
52 or agricultural lien that was perfected by the financing statement becomes
53 unperfected, unless the security interest is perfected otherwise. If the secu-
56
1 rity interest or agricultural lien becomes unperfected upon lapse, it is
2 deemed never to have been perfected as against a purchaser of the collateral
3 for value.
4 (d) A continuation statement may be filed only within six (6) months
5 before the expiration of the five (5) year period specified in subsection (a)
6 of this section or the thirty (30) year period specified in subsection (b) of
7 this section, whichever is applicable.
8 (e) Except as otherwise provided in section 28-9-510, upon timely filing
9 of a continuation statement, the effectiveness of the initial financing state-
10 ment continues for a period of five (5) years commencing on the day on which
11 the financing statement would have become ineffective in the absence of the
12 filing. Upon the expiration of the five (5) year period, the financing state-
13 ment lapses in the same manner as provided in subsection (c) of this section,
14 unless, before the lapse, another continuation statement is filed pursuant to
15 subsection (d) of this section. Succeeding continuation statements may be
16 filed in the same manner to continue the effectiveness of the initial financ-
17 ing statement.
18 (f) If a debtor is a transmitting utility and a filed financing statement
19 so indicates, the financing statement is effective until a termination state-
20 ment is filed.
21 (g) A record of a mortgage that is effective as a financing statement
22 filed as a fixture filing under section 28-9-502(c) remains effective as a
23 financing statement filed as a fixture filing until the mortgage is released
24 or satisfied of record or its effectiveness otherwise terminates as to the
25 real property.
26 28-9-516. WHAT CONSTITUTES FILING -- EFFECTIVENESS OF FILING. (a) Except
27 as otherwise provided in subsection (b) of this section, communication of a
28 record to a filing office and tender of the filing fee or acceptance of the
29 record by the filing office constitutes filing.
30 (b) Filing does not occur with respect to a record that a filing office
31 refuses to accept because:
32 (1) The record is not communicated by a method or medium of communication
33 authorized by the filing office;
34 (2) An amount equal to or greater than the applicable filing fee is not
35 tendered;
36 (3) The filing office is unable to index the record because:
37 (A) in the case of an initial financing statement, the record does
38 not provide a name for the debtor;
39 (B) in the case of an amendment or correction statement, the record:
40 (i) does not identify the initial financing statement as
41 required by section 28-9-512 or 28-9-518, as applicable; or
42 (ii) identifies an initial financing statement whose effective-
43 ness has lapsed under section 28-9-515;
44 (C) in the case of an initial financing statement that provides the
45 name of a debtor identified as an individual or an amendment that
46 provides a name of a debtor identified as an individual which was not
47 previously provided in the financing statement to which the record
48 relates, the record does not identify the debtor's last name; or
49 (D) in the case of a record filed, or recorded, in the filing office
50 described in section 28-9-501(a)(1), the record does not provide a
51 sufficient description of the real property to which it relates;
52 (4) In the case of an initial financing statement or an amendment that
53 adds a secured party of record, the record does not provide a name and
54 mailing address for the secured party of record;
57
1 (5) In the case of an initial financing statement or an amendment that
2 provides a name of a debtor which was not previously provided in the
3 financing statement to which the amendment relates, the record does not:
4 (A) provide a mailing address for the debtor;
5 (B) indicate whether the debtor is an individual or an organization;
6 or
7 (C) if the financing statement indicates that the debtor is an orga-
8 nization, provide:
9 (i) a type of organization for the debtor;
10 (ii) a jurisdiction of organization for the debtor; or
11 (iii) an organizational identification number for the debtor or
12 indicate that the debtor has none;
13 (6) In the case of an assignment reflected in an initial financing state-
14 ment under section 28-9-514(a) or an amendment filed under section
15 28-9-514(b), the record does not provide a name and mailing address for
16 the assignee;
17 (7) In the case of a continuation statement, the record is not filed
18 within the six (6) month period prescribed by section 28-9-515(d);
19 (8) In the case of a financing statement covering farm products, the
20 financing statement does not contain all of the information specified in
21 section 28-9-502(e) and does not conform to the official form for farm
22 products financing statements promulgated by the secretary of state by
23 administrative rule; or
24 (9) In the case of an amendment or correction statement relating to a
25 financing statement covering farm products, the amendment or correction
26 statement does not conform to the official form for amendment or correc-
27 tion statements relating to financing statements covering farm products
28 promulgated by the secretary of state by administrative rule.
29 (c) For purposes of subsection (b) of this section:
30 (1) A record does not provide information if the filing office is unable
31 to read or decipher the information; and
32 (2) A record that does not indicate that it is an amendment or identify
33 an initial financing statement to which it relates, as required by section
34 28-9-512, 28-9-514 or 28-9-518, is an initial financing statement.
35 (d) A record that is communicated to the filing office with tender of the
36 filing fee, but which the filing office refuses to accept for a reason other
37 than one set forth in subsection (b) of this section, is effective as a filed
38 record except as against a purchaser of the collateral which gives value in
39 reasonable reliance upon the absence of the record from the files.
40 28-9-517. EFFECT OF INDEXING ERRORS. The failure of the filing office to
41 index a record correctly does not affect the effectiveness of the filed
42 record.
43 28-9-518. CLAIM CONCERNING INACCURATE OR WRONGFULLY FILED RECORD. (a) A
44 person may file in the filing office a correction statement with respect to a
45 record indexed there under the person's name if the person believes that the
46 record is inaccurate or was wrongfully filed.
47 (b) A correction statement must:
48 (1) Identify the record to which it relates by the file number assigned
49 to the initial financing statement to which the record relates;
50 (2) Indicate that it is a correction statement; and
51 (3) Provide the basis for the person's belief that the record is inaccu-
52 rate and indicate the manner in which the person believes the record
53 should be amended to cure any inaccuracy or provide the basis for the
58
1 person's belief that the record was wrongfully filed.
2 (c) The filing of a correction statement does not affect the effective-
3 ness of an initial financing statement or other filed record.
4 28-9-519. NUMBERING, MAINTAINING, AND INDEXING RECORDS -- COMMUNICATING
5 INFORMATION PROVIDED IN RECORDS. (a) For each record filed in a filing office,
6 the filing office shall:
7 (1) Assign a unique number to the filed record;
8 (2) Create a record that bears the number assigned to the filed record
9 and the date and time of filing;
10 (3) Maintain the filed record for public inspection; and
11 (4) Index the filed record in accordance with subsections (c), (d) and
12 (e) of this section.
13 (b) A file number assigned after January 1, 2002, must include a digit
14 that:
15 (1) Is mathematically derived from or related to the other digits of the
16 file number; and
17 (2) Aids the filing office in determining whether a number communicated
18 as the file number includes a single digit or transpositional error.
19 (c) Except as otherwise provided in subsections (d) and (e) of this sec-
20 tion, the filing office shall:
21 (1) Index an initial financing statement according to the name of the
22 debtor and index all filed records relating to the initial financing
23 statement in a manner that associates with one another an initial financ-
24 ing statement and all filed records relating to the initial financing
25 statement; and
26 (2) Index a record that provides a name of a debtor which was not previ-
27 ously provided in the financing statement to which the record relates also
28 according to the name that was not previously provided.
29 (d) If a financing statement is filed as a fixture filing or covers as-
30 extracted collateral or timber to be cut, it must be filed for record and the
31 filing office shall index it:
32 (1) Under the names of the debtor and of each owner of record shown on
33 the financing statement as if they were the mortgagors under a mortgage of
34 the real property described; and
35 (2) To the extent that the law of this state provides for indexing of
36 records of mortgages under the name of the mortgagee, under the name of
37 the secured party as if the secured party were the mortgagee thereunder,
38 or, if indexing is by description, as if the financing statement were a
39 record of a mortgage of the real property described.
40 (e) If a financing statement is filed as a fixture filing or covers as-
41 extracted collateral or timber to be cut, the filing office shall index an
42 assignment filed under section 28-9-514(a) or an amendment filed under section
43 28-9-514(b):
44 (1) Under the name of the assignor as grantor; and
45 (2) To the extent that the law of this state provides for indexing a
46 record of the assignment of a mortgage under the name of the assignee,
47 under the name of the assignee.
48 (f) The filing office shall maintain a capability:
49 (1) To retrieve a record by the name of the debtor and by the file number
50 assigned to the initial financing statement to which the record relates;
51 and
52 (2) To associate and retrieve with one another an initial financing
53 statement and each filed record relating to the initial financing state-
54 ment.
59
1 (g) The filing office may not remove a debtor's name from the index until
2 one (1) year after the effectiveness of a financing statement naming the
3 debtor lapses under section 28-9-515 with respect to all secured parties of
4 record.
5 (h) The filing office shall perform the acts required by subsections (a)
6 through (e) of this section at the time and in the manner prescribed by filing
7 office rule, but not later than two (2) business days after the filing office
8 receives the record in question.
9 (i) Subsections (b) and (h) of this section do not apply to a filing
10 office described in section 28-9-501(a)(1).
11 28-9-520. ACCEPTANCE AND REFUSAL TO ACCEPT RECORD. (a) A filing office
12 shall refuse to accept a record for filing for a reason set forth in section
13 28-9-516(b) and may refuse to accept a record for filing only for a reason set
14 forth in section 28-9-516(b).
15 (b) If a filing office refuses to accept a record for filing, it shall
16 communicate to the person that presented the record the fact of and reason for
17 the refusal and the date and time the record would have been filed had the
18 filing office accepted it. The communication must be made at the time and in
19 the manner prescribed by filing office rule but, in the case of a filing
20 office described in section 28-9-501(a)(2), in no event more than two (2)
21 business days after the filing office receives the record.
22 (c) A filed financing statement satisfying section 28-9-502(a) and (b) is
23 effective, even if the filing office is required to refuse to accept it for
24 filing under subsection (a) of this section. However, section 28-9-338 applies
25 to a filed financing statement providing information described in section
26 28-9-516(b)(5) which is incorrect at the time the financing statement is
27 filed.
28 (d) If a record communicated to a filing office provides information that
29 relates to more than one (1) debtor, this part applies as to each debtor sepa-
30 rately.
60
1 28-9-521. UNIFORM FORM OF WRITTEN FINANCING STATEMENT AND AMENDMENT. (a)
2 A filing office that accepts written records may not refuse to accept a writ-
3 ten initial financing statement in the following form and format except for a
4 reason set forth in section 28-9-516(b):
61
62
1 (b) A filing office that accepts written records may not refuse to accept
2 a written record in the following form and format except for a reason set
3 forth in section 28-9-516(b):
63
64
1 28-9-522. MAINTENANCE AND DESTRUCTION OF RECORDS. (a) The filing office
2 shall maintain a record of the information provided in a filed financing
3 statement for at least one (1) year after the effectiveness of the financing
4 statement has lapsed under section 28-9-515 with respect to all secured par-
5 ties of record. The record must be retrievable by using the name of the
6 debtor and by using the file number assigned to the initial financing state-
7 ment to which the record relates.
8 (b) Except to the extent that a statute governing disposition of public
9 records provides otherwise, the filing office immediately may destroy any
10 written record evidencing a financing statement. However, if the filing
11 office destroys a written record, it shall maintain another record of the
12 financing statement which complies with subsection (a) of this section.
13 28-9-523. INFORMATION FROM FILING OFFICE -- SALE OR LICENSE OF RECORDS --
14 FARM PRODUCTS -- MASTER LISTS. (a) If a person that files a written record
15 requests an acknowledgment of the filing, the filing office shall send to the
16 person an image of the record showing the number assigned to the record pursu-
17 ant to section 28-9-519(a)(1) and the date and time of the filing of the
18 record. However, if the person furnishes a copy of the record to the filing
19 office, the filing office may instead:
20 (1) Note upon the copy the number assigned to the record pursuant to sec-
21 tion 28-9-519(a)(1) and the date and time of the filing of the record; and
22 (2) Send the copy to the person.
23 (b) If a person files a record other than a written record, the filing
24 office shall communicate to the person an acknowledgment that provides:
25 (1) The information in the record;
26 (2) The number assigned to the record pursuant to section 28-9-519(a)(1);
27 and
28 (3) The date and time of the filing of the record.
29 (c) The filing office shall communicate or otherwise make available in a
30 record the following information to any person that requests it:
31 (1) Whether there is on file on a date and time specified by the filing
32 office, but not a date earlier than three (3) business days before the
33 filing office receives the request, any financing statement that:
34 (A) designates a particular debtor;
35 (B) has not lapsed under section 28-9-515 with respect to all
36 secured parties of record; and
37 (C) if the request so states, has lapsed under section 28-9-515 and
38 a record of which is maintained by the filing office under section
39 28-9-522(a);
40 (2) The date and time of filing of each financing statement; and
41 (3) The information provided in each financing statement.
42 (d) In complying with its duty under subsection (c) of this section, the
43 filing office may communicate information in any medium. However, if
44 requested, the filing office shall communicate information by issuing a record
45 that can be admitted into evidence in the courts of this state without extrin-
46 sic evidence of its authenticity.
47 (e) The filing office shall perform the acts required by subsections (a)
48 through (d) of this section at the time and in the manner prescribed by filing
49 office rule, but in the case of a filing office described in section
50 28-9-501(a)(2), not later than two (2) business days after the filing office
51 receives the request.
52 (f) At least weekly, the filing office shall offer to sell or license to
53 the public on a nonexclusive basis, in bulk, copies of all records filed in it
54 under this part, in every medium from time to time available to the filing
65
1 office.
2 (g) The secretary of state shall maintain a central filing system con-
3 taining the information filed with his office pursuant to section 28-9-502(e).
4 Under this system the secretary shall record the date and time of filing and
5 compile the information into a master list organized according to farm prod-
6 ucts. The list shall be organized within each farm product category in alpha-
7 betical order according to the last name of the borrower or, in the case of
8 borrowers doing business other than as individuals, the first word in the name
9 of such borrower. The list shall be further organized according to and contain
10 information required by federal law and regulation. The secretary of state
11 shall, by duly adopted administrative rule, designate the categories of farm
12 products to be used in compiling the master list. The secretary of state may
13 establish and maintain, pursuant to duly adopted administrative rule, a sepa-
14 rate system for filing of financing statements and search, retrieval and dis-
15 semination of information relating to financing statements for farm products,
16 and require separate search requests for such information pursuant to a fee
17 schedule to be established in such administrative rule.
18 (h) The secretary of state shall maintain a list of all buyers of farm
19 products, commission merchants, and selling agents who register with the sec-
20 retary of state indicating an interest in receiving the lists described in
21 subsection (i) of this section.
22 (i) The secretary of state shall distribute complete master lists for
23 each farm product category at least quarterly to each buyer, commission mer-
24 chant and selling agent registered under subsection (h) of this section and
25 distribute either complete lists or cumulative supplements, which supplements
26 shall be issued not less frequently than semimonthly, of financing statements
27 covering farm products filed subsequent to the last date of filing for financ-
28 ing statements on the last preceding quarterly master list, which the buyer,
29 commission merchant or selling agent has requested. The date of receipt for
30 lists and supplements shall be the third calendar day following the date of
31 mailing by the secretary of state, or in the event the mail is not delivered
32 on that day, the first day thereafter on which mail is delivered.
33 (j) Upon the request of any person the secretary of state shall provide,
34 within twenty-four (24) hours, an oral confirmation of the filing of the
35 financing statement covering farm products followed by a written confirmation.
36 (k) Upon request of any person, the filing officer shall furnish copies
37 of particular filed financing statements covering farm products or statements
38 of assignment covering farm products at a uniform cost of one dollar ($1.00)
39 per page if the requestor provides the filing officer with the file numbers of
40 the statement to be copied.
41 28-9-524. DELAY BY FILING OFFICE. Delay by the filing office beyond a
42 time limit prescribed by this part is excused if:
43 (1) The delay is caused by interruption of communication or computer
44 facilities, war, emergency conditions, failure of equipment, or other circum-
45 stances beyond control of the filing office; and
46 (2) The filing office exercises reasonable diligence under the circum-
47 stances.
48 28-9-525. FEES. (a) Except as otherwise provided in subsection (e) of
49 this section, the fee for filing and indexing a record under this part, other
50 than an initial financing statement of the kind described in section
51 28-9-502(c), is:
52 (1) Six dollars ($6.00) if the record is communicated in writing and con-
66
1 sists of one (1) or two (2) pages;
2 (2) Twelve dollars ($12.00) if the record is communicated in writing and
3 consists of more than two (2) pages; and
4 (3) Three dollars ($3.00) if the record is communicated by another medium
5 authorized by filing office rule.
6 (b) Except as otherwise provided in subsection (e) of this section, the
7 fee for filing and indexing an initial financing statement of the kind
8 described in section 28-9-502(c) is the amount specified in subsection (c) of
9 this section, if applicable.
10 (c) The number of names required to be indexed does not affect the amount
11 of the fee in subsections (a) and (b) of this section.
12 (d) The fee for responding to a request for information from the filing
13 office, including for issuing a certificate showing whether there is on file
14 any financing statement naming a particular debtor, is twelve dollars
15 ($12.00).
16 (e) This section does not require a fee with respect to a record of a
17 mortgage which is effective as a financing statement filed as a fixture filing
18 or as a financing statement covering as-extracted collateral or timber to be
19 cut under section 28-9-502(c). However, the recording and satisfaction fees
20 that otherwise would be applicable to the record of the mortgage apply.
21 (f) The secretary of state shall, by administrative rule, establish a fee
22 schedule for filing and indexing and other matters relating to filing of
23 financing statements covering farm products and for public access to the sec-
24 retary of state's files which are open to public inspection. A secured party
25 shall provide an itemization of fees paid by the secured party for filing,
26 searches or other matters related to filing of financing statements covering
27 farm products pertaining to that debtor.
28 28-9-526. FILING OFFICE RULES. (a) The secretary of state shall promul-
29 gate rules to implement this chapter. The filing office rules must be:
30 (1) Consistent with this chapter; and
31 (2) Promulgated in accordance with the administrative procedure act,
32 chapter 52, title 67, Idaho Code.
33 (b) To keep the filing office rules and practices of the filing office in
34 harmony with the rules and practices of filing offices in other jurisdictions
35 that enact substantially this part, and to keep the technology used by the
36 filing office compatible with the technology used by filing offices in other
37 jurisdictions that enact substantially this part, the secretary of state, so
38 far as is consistent with the purposes, policies and provisions of this chap-
39 ter, in adopting, amending and repealing filing office rules, shall:
40 (1) Consult with filing offices in other jurisdictions that enact sub-
41 stantially this part; and
42 (2) Consult the most recent version of the model rules promulgated by the
43 international association of corporate administrators or any successor
44 organization; and
45 (3) Take into consideration the rules and practices of, and the technol-
46 ogy used by, filing offices in other jurisdictions that enact substan-
47 tially this part.
48 PART 6
49 DEFAULT
50 28-9-601. RIGHTS AFTER DEFAULT -- JUDICIAL ENFORCEMENT -- CONSIGNOR OR
51 BUYER OF ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES OR PROMISSORY NOTES. (a)
52 After default, a secured party has the rights provided in this part and,
67
1 except as otherwise provided in section 28-9-602, those provided by agreement
2 of the parties. A secured party:
3 (1) May reduce a claim to judgment, foreclose or otherwise enforce the
4 claim, security interest or agricultural lien by any available judicial
5 procedure; and
6 (2) If the collateral is documents, may proceed either as to the docu-
7 ments or as to the goods they cover.
8 (b) A secured party in possession of collateral or control of collateral
9 under section 28-9-104, 28-9-105, 28-9-106 or 28-9-107 has the rights and
10 duties provided in section 28-9-207.
11 (c) The rights under subsections (a) and (b) of this section are cumula-
12 tive and may be exercised simultaneously.
13 (d) Except as otherwise provided in subsection (g) of this section and
14 section 28-9-605, after default, a debtor and an obligor have the rights pro-
15 vided in this part and by agreement of the parties.
16 (e) If a secured party has reduced its claim to judgment, the lien of any
17 levy that may be made upon the collateral by virtue of an execution based upon
18 the judgment relates back to the earliest of:
19 (1) The date of perfection of the security interest or agricultural lien
20 in the collateral;
21 (2) The date of filing a financing statement covering the collateral; or
22 (3) Any date specified in a statute under which the agricultural lien was
23 created.
24 (f) A sale pursuant to an execution is a foreclosure of the security
25 interest or agricultural lien by judicial procedure within the meaning of this
26 section. A secured party may purchase at the sale and thereafter hold the col-
27 lateral free of any other requirements of this chapter.
28 (g) Except as otherwise provided in section 28-9-607(c), this part
29 imposes no duties upon a secured party that is a consignor or is a buyer of
30 accounts, chattel paper, payment intangibles, or promissory notes.
31 28-9-602. WAIVER AND VARIANCE OF RIGHTS AND DUTIES. Except as otherwise
32 provided in section 28-9-624, to the extent that they give rights to a debtor
33 or obligor and impose duties on a secured party, the debtor or obligor may not
34 waive or vary the rules stated in the following listed sections:
35 (1) Section 28-9-207(b)(4)(C), which deals with use and operation of the
36 collateral by the secured party;
37 (2) Section 28-9-210, which deals with requests for an accounting and
38 requests concerning a list of collateral and statement of account;
39 (3) Section 28-9-607(c), which deals with collection and enforcement of
40 collateral;
41 (4) Sections 28-9-608(a) and 28-9-615(c) to the extent that they deal
42 with application or payment of noncash proceeds of collection, enforcement, or
43 disposition;
44 (5) Sections 28-9-608(a) and 28-9-615(d) to the extent that they require
45 accounting for or payment of surplus proceeds of collateral;
46 (6) Section 28-9-609 to the extent that it imposes upon a secured party
47 that takes possession of collateral without judicial process the duty to do so
48 without breach of the peace;
49 (7) Sections 28-9-610(b), 28-9-611, 28-9-613 and 28-9-614, which deal
50 with disposition of collateral;
51 (8) Section 28-9-615(f), which deals with calculation of a deficiency or
52 surplus when a disposition is made to the secured party, a person related to
53 the secured party, or a secondary obligor;
54 (9) Section 28-9-616, which deals with explanation of the calculation of
68
1 a surplus or deficiency;
2 (10) Sections 28-9-620, 28-9-621 and 28-9-622, which deal with acceptance
3 of collateral in satisfaction of obligation;
4 (11) Section 28-9-623, which deals with redemption of collateral;
5 (12) Section 28-9-624, which deals with permissible waivers; and
6 (13) Sections 28-9-625 and 28-9-626, which deal with the secured party's
7 liability for failure to comply with this chapter.
8 28-9-603. AGREEMENT ON STANDARDS CONCERNING RIGHTS AND DUTIES. (a) The
9 parties may determine by agreement the standards measuring the fulfillment of
10 the rights of a debtor or obligor and the duties of a secured party under a
11 rule stated in section 28-9-602 if the standards are not manifestly unreason-
12 able.
13 (b) Subsection (a) of this section does not apply to the duty under sec-
14 tion 28-9-609 to refrain from breaching the peace.
15 28-9-604. PROCEDURE IF SECURITY AGREEMENT COVERS REAL PROPERTY OR FIX-
16 TURES. (a) If a security agreement covers both personal and real property, a
17 secured party may proceed:
18 (1) Under this part as to the personal property without prejudicing any
19 rights with respect to the real property; or
20 (2) As to both the personal property and the real property in accordance
21 with the rights with respect to the real property, in which case the other
22 provisions of this part do not apply.
23 (b) Subject to subsection (c) of this section, if a security agreement
24 covers goods that are or become fixtures, a secured party may proceed:
25 (1) Under this part; or
26 (2) In accordance with the rights with respect to real property, in which
27 case the other provisions of this part do not apply.
28 (c) Subject to the other provisions of this part, if a secured party
29 holding a security interest in fixtures has priority over all owners and
30 encumbrancers of the real property, the secured party, after default, may
31 remove the collateral from the real property.
32 (d) A secured party that removes collateral shall promptly reimburse any
33 encumbrancer or owner of the real property, other than the debtor, for the
34 cost of repair of any physical injury caused by the removal. The secured party
35 need not reimburse the encumbrancer or owner for any diminution in value of
36 the real property caused by the absence of the goods removed or by any neces-
37 sity of replacing them. A person entitled to reimbursement may refuse permis-
38 sion to remove until the secured party gives adequate assurance for the per-
39 formance of the obligation to reimburse.
40 28-9-605. UNKNOWN DEBTOR OR SECONDARY OBLIGOR. A secured party does not
41 owe a duty based on its status as secured party:
42 (1) To a person that is a debtor or obligor, unless the secured party
43 knows:
44 (A) That the person is a debtor or obligor;
45 (B) The identity of the person; and
46 (C) How to communicate with the person; or
47 (2) To a secured party or lienholder that has filed a financing statement
48 against a person, unless the secured party knows:
49 (A) That the person is a debtor; and
50 (B) The identity of the person.
51 28-9-606. TIME OF DEFAULT FOR AGRICULTURAL LIEN. For purposes of this
69
1 part, a default occurs in connection with an agricultural lien at the time the
2 secured party becomes entitled to enforce the lien in accordance with the
3 statute under which it was created.
4 28-9-607. COLLECTION AND ENFORCEMENT BY SECURED PARTY. (a) If so agreed,
5 and in any event after default, a secured party:
6 (1) May notify an account debtor or other person obligated on collateral
7 to make payment or otherwise render performance to or for the benefit of
8 the secured party;
9 (2) May take any proceeds to which the secured party is entitled under
10 section 28-9-315;
11 (3) May enforce the obligations of an account debtor or other person
12 obligated on collateral and exercise the rights of the debtor with respect
13 to the obligation of the account debtor or other person obligated on col-
14 lateral to make payment or otherwise render performance to the debtor, and
15 with respect to any property that secures the obligations of the account
16 debtor or other person obligated on the collateral;
17 (4) If it holds a security interest in a deposit account perfected by
18 control under section 28-9-104(a)(1), may apply the balance of the deposit
19 account to the obligation secured by the deposit account; and
20 (5) If it holds a security interest in a deposit account perfected by
21 control under section 28-9-104(a)(2) or (3), may instruct the bank to pay
22 the balance of the deposit account to or for the benefit of the secured
23 party.
24 (b) If necessary to enable a secured party to exercise, under subsection
25 (a)(3) of this section, the right of a debtor to enforce a mortgage
26 nonjudicially, the secured party may record in the office in which a record of
27 the mortgage is recorded:
28 (1) A copy of the security agreement that creates or provides for a secu-
29 rity interest in the obligation secured by the mortgage; and
30 (2) The secured party's sworn affidavit in recordable form stating that:
31 (A) a default has occurred; and
32 (B) the secured party is entitled to enforce the mortgage
33 nonjudicially.
34 (c) A secured party shall proceed in a commercially reasonable manner if
35 the secured party:
36 (1) Undertakes to collect from or enforce an obligation of an account
37 debtor or other person obligated on collateral; and
38 (2) Is entitled to charge back uncollected collateral or otherwise to
39 full or limited recourse against the debtor or a secondary obligor.
40 (d) A secured party may deduct from the collections made pursuant to sub-
41 section (c) of this section reasonable expenses of collection and enforcement,
42 including reasonable attorney's fees and legal expenses incurred by the
43 secured party.
44 (e) This section does not determine whether an account debtor, bank, or
45 other person obligated on collateral owes a duty to a secured party.
46 28-9-608. APPLICATION OF PROCEEDS OF COLLECTION OR ENFORCEMENT -- LIABIL-
47 ITY FOR DEFICIENCY AND RIGHT TO SURPLUS. (a) If a security interest or agri-
48 cultural lien secures payment or performance of an obligation, the following
49 rules apply:
50 (1) A secured party shall apply or pay over for application the cash pro-
51 ceeds of collection or enforcement under this section in the following
52 order to:
53 (A) the reasonable expenses of collection and enforcement and, to
70
1 the extent provided for by agreement and not prohibited by law, rea-
2 sonable attorney's fees and legal expenses incurred by the secured
3 party;
4 (B) the satisfaction of obligations secured by the security interest
5 or agricultural lien under which the collection or enforcement is
6 made; and
7 (C) the satisfaction of obligations secured by any subordinate secu-
8 rity interest in or other lien on the collateral subject to the secu-
9 rity interest or agricultural lien under which the collection or
10 enforcement is made if the secured party receives an authenticated
11 demand for proceeds before distribution of the proceeds is completed.
12 (2) If requested by a secured party, a holder of a subordinate security
13 interest or other lien shall furnish reasonable proof of the interest or
14 lien within a reasonable time. Unless the holder complies, the secured
15 party need not comply with the holder's demand under subsection (1)(C) of
16 this section.
17 (3) A secured party need not apply or pay over for application noncash
18 proceeds of collection and enforcement under this section unless the fail-
19 ure to do so would be commercially unreasonable. A secured party that
20 applies or pays over for application noncash proceeds shall do so in a
21 commercially reasonable manner.
22 (4) A secured party shall account to and pay a debtor for any surplus,
23 and the obligor is liable for any deficiency.
24 (b) If the underlying transaction is a sale of accounts, chattel paper,
25 payment intangibles or promissory notes, the debtor is not entitled to any
26 surplus, and the obligor is not liable for any deficiency.
27 28-9-609. SECURED PARTY'S RIGHT TO TAKE POSSESSION AFTER DEFAULT. (a)
28 After default, a secured party:
29 (1) May take possession of the collateral; and
30 (2) Without removal, may render equipment unusable and dispose of collat-
31 eral on a debtor's premises under section 28-9-610.
32 (b) A secured party may proceed under subsection (a) of this section:
33 (1) Pursuant to judicial process; or
34 (2) Without judicial process, if it proceeds without breach of the peace.
35 (c) If so agreed, and in any event after default, a secured party may
36 require the debtor to assemble the collateral and make it available to the
37 secured party at a place to be designated by the secured party which is rea-
38 sonably convenient to both parties.
39 28-9-610. DISPOSITION OF COLLATERAL AFTER DEFAULT. (a) After default, a
40 secured party may sell, lease, license or otherwise dispose of any or all of
41 the collateral in its present condition or following any commercially reason-
42 able preparation or processing.
43 (b) Every aspect of a disposition of collateral, including the method,
44 manner, time, place, and other terms, must be commercially reasonable. If com-
45 mercially reasonable, a secured party may dispose of collateral by public or
46 private proceedings, by one (1) or more contracts, as a unit or in parcels,
47 and at any time and place and on any terms.
48 (c) A secured party may purchase collateral:
49 (1) At a public disposition; or
50 (2) At a private disposition only if the collateral is of a kind that is
51 customarily sold on a recognized market or the subject of widely distrib-
52 uted standard price quotations.
53 (d) A contract for sale, lease, license, or other disposition includes
71
1 the warranties relating to title, possession, quiet enjoyment, and the like
2 which by operation of law accompany a voluntary disposition of property of the
3 kind subject to the contract.
4 (e) A secured party may disclaim or modify warranties under subsection
5 (d) of this section:
6 (1) In a manner that would be effective to disclaim or modify the warran-
7 ties in a voluntary disposition of property of the kind subject to the
8 contract of disposition; or
9 (2) By communicating to the purchaser a record evidencing the contract
10 for disposition and including an express disclaimer or modification of the
11 warranties.
12 (f) A record is sufficient to disclaim warranties under subsection (e) of
13 this section if it indicates "There is no warranty relating to title, posses-
14 sion, quiet enjoyment, or the like in this disposition" or uses words of simi-
15 lar import.
16 28-9-611. NOTIFICATION BEFORE DISPOSITION OF COLLATERAL. (a) In this sec-
17 tion, "notification date" means the earlier of the date on which:
18 (1) A secured party sends to the debtor and any secondary obligor an
19 authenticated notification of disposition; or
20 (2) The debtor and any secondary obligor waive the right to notification.
21 (b) Except as otherwise provided in subsection (d) of this section, a
22 secured party that disposes of collateral under section 28-9-610 shall send to
23 the persons specified in subsection (c) of this section a reasonable authenti-
24 cated notification of disposition.
25 (c) To comply with subsection (b) of this section, the secured party
26 shall send an authenticated notification of disposition to:
27 (1) The debtor;
28 (2) Any secondary obligor; and
29 (3) If the collateral is other than consumer goods:
30 (A) any other person from which the secured party has received,
31 before the notification date, an authenticated notification of a
32 claim of an interest in the collateral;
33 (B) any other secured party or lienholder that, ten (10) days before
34 the notification date, held a security interest in or other lien on
35 the collateral perfected by the filing of a financing statement that:
36 (i) identified the collateral;
37 (ii) was indexed under the debtor's name as of that date; and
38 (iii) was filed in the office in which to file a financing
39 statement against the debtor covering the collateral as of that
40 date; and
41 (C) any other secured party that, ten (10) days before the notifica-
42 tion date, held a security interest in the collateral perfected by
43 compliance with a statute, regulation, or treaty described in section
44 28-9-311(a).
45 (d) Subsection (b) of this section does not apply if the collateral is
46 perishable or threatens to decline speedily in value or is of a type custom-
47 arily sold on a recognized market.
48 (e) A secured party complies with the requirement for notification pre-
49 scribed by subsection (c)(3)(B) of this section if:
50 (1) Not later than twenty (20) days or earlier than thirty (30) days
51 before the notification date, the secured party requests, in a commer-
52 cially reasonable manner, information concerning financing statements
53 indexed under the debtor's name in the office indicated in subsection
54 (c)(3)(B) of this section; and
72
1 (2) Before the notification date, the secured party:
2 (A) did not receive a response to the request for information; or
3 (B) received a response to the request for information and sent an
4 authenticated notification of disposition to each secured party or
5 other lienholder named in that response whose financing statement
6 covered the collateral.
7 28-9-612. TIMELINESS OF NOTIFICATION BEFORE DISPOSITION OF COLLATERAL.
8 (a) Except as otherwise provided in subsection (b) of this section, whether a
9 notification is sent within a reasonable time is a question of fact.
10 (b) A notification of disposition sent after default and ten (10) days or
11 more before the earliest time of disposition set forth in the notification is
12 sent within a reasonable time before the disposition.
13 28-9-613. CONTENTS AND FORM OF NOTIFICATION BEFORE DISPOSITION OF COLLAT-
14 ERAL -- GENERAL. Except in a consumer goods transaction, the following rules
15 apply:
16 (1) The contents of a notification of disposition are sufficient if the
17 notification:
18 (A) Describes the debtor and the secured party;
19 (B) Describes the collateral that is the subject of the intended disposi-
20 tion;
21 (C) States the method of intended disposition;
22 (D) States that the debtor is entitled to an accounting of the unpaid
23 indebtedness and states the charge, if any, for an accounting; and
24 (E) States the time and place of a public sale or the time after which
25 any other disposition is to be made.
26 (2) Whether the contents of a notification that lacks any of the informa-
27 tion specified in subsection (1) of this section are nevertheless sufficient
28 is a question of fact.
29 (3) The contents of a notification providing substantially the informa-
30 tion specified in subsection (1) of this section are sufficient, even if the
31 notification includes:
32 (A) Information not specified by that paragraph; or
33 (B) Minor errors that are not seriously misleading.
34 (4) A particular phrasing of the notification is not required.
35 (5) The following form of notification and the form appearing in section
36 28-9-614(3), when completed, each provides sufficient information:
37 NOTIFICATION OF DISPOSITION OF COLLATERAL
38 To: .................(Name of debtor, obligor, or other person to
39 which the notification is sent).............
40 From: ...................(Name, address, and telephone number of
41 secured party)..............
42 Name of Debtor(s): ...........(Include only if debtor(s) are not an
43 addressee)..........
44 (For a public disposition:)
45 We will sell (or lease or license, as applicable) the ........(describe
46 collateral)....... (to the highest qualified bidder) in public as follows:
47 Day and Date: ................................................
48 Time: ................................................
49 Place: ................................................
50 (For a private disposition:)
51 We will sell (or lease or license, as applicable) the ........(describe
52 collateral)......... privately sometime after ................(day and
73
1 date)..........
2 You are entitled to an accounting of the unpaid indebtedness secured by
3 the property that we intend to sell (or lease or license, as applicable) (for
4 a charge of $.........). You may request an accounting by calling us at
5 .........(telephone number)........
6 28-9-614. CONTENTS AND FORM OF NOTIFICATION BEFORE DISPOSITION OF COLLAT-
7 ERAL -- CONSUMER GOODS TRANSACTION. In a consumer goods transaction, the fol-
8 lowing rules apply:
9 (1) A notification of disposition must provide the following information:
10 (A) The information specified in section 28-9-613(1);
11 (B) A description of any liability for a deficiency of the person to
12 which the notification is sent;
13 (C) A telephone number from which the amount that must be paid to the
14 secured party to redeem the collateral under section 28-9-623 is avail-
15 able; and
16 (D) A telephone number or mailing address from which additional informa-
17 tion concerning the disposition and the obligation secured is available.
18 (2) A particular phrasing of the notification is not required.
19 (3) The following form of notification, when completed, provides suffi-
20 cient information:
21 ........(Name and address of secured party).............
22 ........(Date)..........................................
23 NOTICE OF OUR PLAN TO SELL PROPERTY
24 ........(Name and address of any obligor who is also a debtor)..........
25 Subject: .........(Identification of Transaction).......................
26 We have your ............(describe collateral)..........., because you
27 broke promises in our agreement.
28 (For a public disposition:)
29 We will sell .................(describe collateral)................ at
30 public sale. A sale could include a lease or license. The sale will be held
31 as follows:
32 Date: ............................
33 Time: ............................
34 Place: ............................
35 You may attend the sale and bring bidders if you want.
36 (For a private disposition:)
37 We will sell ...............(describe collateral).............. at private
38 sale sometime after .........(date)....... A sale could include a lease or
39 license.
40 The money that we get from the sale (after paying our costs) will reduce
41 the amount you owe. If we get less money than you owe, you ..............(will
42 or will not, as applicable)....... still owe us the difference. If we get
43 more money than you owe, you will get the extra money, unless we must pay it
44 to someone else.
45 You can get the property back at any time before we sell it by paying us
46 the full amount you owe (not just the past due payments), including our
47 expenses. To learn the exact amount you must pay, call us at
48 .......(telephone number).......
49 If you want us to explain to you in writing how we have figured the amount
50 that you owe us, you may call us at ..........(telephone number).......... (or
74
1 write us at ..........(secured party's address)............) and request a
2 written explanation. (We will charge you $............. for the explanation
3 if we sent you another written explanation of the amount you owe us within the
4 last six months.)
5 If you need more information about the sale call us at .....(telephone
6 number)..... (or write us at ............(secured party's
7 address)................). We are sending this notice to the following other
8 people who have an interest in .............(describe collat-
9 eral)............... or who owe money under your agreement: ............(Names
10 of all other debtors and obligors, if any)...........
11 (4) A notification in the form of subsection (3) of this section is suf-
12 ficient, even if additional information appears at the end of the form.
13 (5) A notification in the form of subsection (3) of this section is suf-
14 ficient, even if it includes errors in information not required by subsection
15 (1) of this section, unless the error is misleading with respect to rights
16 arising under this article.
17 (6) If a notification under this section is not in the form of subsection
18 (3) of this section, law other than this chapter determines the effect of
19 including information not required by subsection (1) of this section.
20 28-9-615. APPLICATION OF PROCEEDS OF DISPOSITION -- LIABILITY FOR DEFI-
21 CIENCY AND RIGHT TO SURPLUS. (a) A secured party shall apply or pay over for
22 application the cash proceeds of disposition in the following order to:
23 (1) The reasonable expenses of retaking, holding, preparing for disposi-
24 tion, processing and disposing, and, to the extent provided for by agree-
25 ment and not prohibited by law, reasonable attorney's fees and legal
26 expenses incurred by the secured party;
27 (2) The satisfaction of obligations secured by the security interest or
28 agricultural lien under which the disposition is made;
29 (3) The satisfaction of obligations secured by any subordinate security
30 interest in or other subordinate lien on the collateral if:
31 (A) the secured party receives from the holder of the subordinate
32 security interest or other lien an authenticated demand for proceeds
33 before distribution of the proceeds is completed; and
34 (B) in a case in which a consignor has an interest in the collat-
35 eral, the subordinate security interest or other lien is senior to
36 the interest of the consignor; and
37 (4) A secured party that is a consignor of the collateral if the secured
38 party receives from the consignor an authenticated demand for proceeds
39 before distribution of the proceeds is completed.
40 (b) If requested by a secured party, a holder of a subordinate security
41 interest or other lien shall furnish reasonable proof of the interest or lien
42 within a reasonable time. Unless the holder does so, the secured party need
43 not comply with the holder's demand under subsection (a)(3) of this section.
44 (c) A secured party need not apply or pay over for application noncash
45 proceeds of disposition under this section unless the failure to do so would
46 be commercially unreasonable. A secured party that applies or pays over for
47 application noncash proceeds shall do so in a commercially reasonable manner.
48 (d) If the security interest under which a disposition is made secures
49 payment or performance of an obligation, after making the payments and appli-
50 cations required by subsection (a) of this section and permitted by subsection
51 (c) of this section:
52 (1) Unless subsection (a)(4) of this section requires the secured party
53 to apply or pay over cash proceeds to a consignor, the secured party shall
54 account to and pay a debtor for any surplus; and
75
1 (2) The obligor is liable for any deficiency.
2 (e) If the underlying transaction is a sale of accounts, chattel paper,
3 payment intangibles or promissory notes:
4 (1) The debtor is not entitled to any surplus; and
5 (2) The obligor is not liable for any deficiency.
6 (f) The surplus or deficiency following a disposition is calculated based
7 on the amount of proceeds that would have been realized in a disposition com-
8 plying with this part to a transferee other than the secured party, a person
9 related to the secured party, or a secondary obligor if:
10 (1) The transferee in the disposition is the secured party, a person
11 related to the secured party or a secondary obligor; and
12 (2) The amount of proceeds of the disposition is significantly below the
13 range of proceeds that a complying disposition to a person other than the
14 secured party, a person related to the secured party, or a secondary obli-
15 gor would have brought.
16 (g) A secured party that receives cash proceeds of a disposition in good
17 faith and without knowledge that the receipt violates the rights of the holder
18 of a security interest or other lien that is not subordinate to the security
19 interest or agricultural lien under which the disposition is made:
20 (1) Takes the cash proceeds free of the security interest or other lien;
21 (2) Is not obligated to apply the proceeds of the disposition to the sat-
22 isfaction of obligations secured by the security interest or other lien;
23 and
24 (3) Is not obligated to account to or pay the holder of the security
25 interest or other lien for any surplus.
26 28-9-616. EXPLANATION OF CALCULATION OF SURPLUS OR DEFICIENCY. (a) In
27 this section:
28 (1) "Explanation" means a writing that:
29 (A) states the amount of the surplus or deficiency;
30 (B) provides an explanation in accordance with subsection (c) of
31 this section of how the secured party calculated the surplus or defi-
32 ciency;
33 (C) states, if applicable, that future debits, credits, charges,
34 including additional credit service charges or interest, rebates, and
35 expenses may affect the amount of the surplus or deficiency; and
36 (D) provides a telephone number or mailing address from which addi-
37 tional information concerning the transaction is available.
38 (2) "Request" means a record:
39 (A) authenticated by a debtor or consumer obligor;
40 (B) requesting that the recipient provide an explanation; and
41 (C) sent after disposition of the collateral under section 28-9-610.
42 (b) In a consumer goods transaction in which the debtor is entitled to a
43 surplus or a consumer obligor is liable for a deficiency under section
44 28-9-615, the secured party shall:
45 (1) Send an explanation to the debtor or consumer obligor, as applicable,
46 after the disposition and:
47 (A) before or when the secured party accounts to the debtor and pays
48 any surplus or first makes written demand on the consumer obligor
49 after the disposition for payment of the deficiency; and
50 (B) within fourteen (14) days after receipt of a request; or
51 (2) In the case of a consumer obligor who is liable for a deficiency,
52 within fourteen (14) days after receipt of a request, send to the consumer
53 obligor a record waiving the secured party's right to a deficiency.
54 (c) To comply with subsection (a)(1)(B) of this section, a writing must
76
1 provide the following information in the following order:
2 (1) The aggregate amount of obligations secured by the security interest
3 under which the disposition was made, and, if the amount reflects a rebate
4 of unearned interest or credit service charge, an indication of that fact,
5 calculated as of a specified date:
6 (A) if the secured party takes or receives possession of the collat-
7 eral after default, not more than thirty-five (35) days before the
8 secured party takes or receives possession; or
9 (B) if the secured party takes or receives possession of the collat-
10 eral before default or does not take possession of the collateral,
11 not more than thirty-five (35) days before the disposition;
12 (2) The amount of proceeds of the disposition;
13 (3) The aggregate amount of the obligations after deducting the amount of
14 proceeds;
15 (4) The amount, in the aggregate or by type, and types of expenses,
16 including expenses of retaking, holding, preparing for disposition, proc-
17 essing, and disposing of the collateral, and attorney's fees secured by
18 the collateral which are known to the secured party and relate to the cur-
19 rent disposition;
20 (5) The amount, in the aggregate or by type, and types of credits,
21 including rebates of interest or credit service charges, to which the
22 obligor is known to be entitled and which are not reflected in the amount
23 in paragraph (1) of this subsection; and
24 (6) The amount of the surplus or deficiency.
25 (d) A particular phrasing of the explanation is not required. An explana-
26 tion complying substantially with the requirements of subsection (a) of this
27 section is sufficient, even if it includes minor errors that are not seriously
28 misleading.
29 (e) A debtor or consumer obligor is entitled without charge to one (1)
30 response to a request under this section during any six (6) month period in
31 which the secured party did not send to the debtor or consumer obligor an
32 explanation pursuant to subsection (b)(1) of this section. The secured party
33 may require payment of a charge not exceeding twenty-five dollars ($25.00) for
34 each additional response.
35 28-9-617. RIGHTS OF TRANSFEREE OF COLLATERAL. (a) A secured party's dis-
36 position of collateral after default:
37 (1) Transfers to a transferee for value all of the debtor's rights in the
38 collateral;
39 (2) Discharges the security interest under which the disposition is made;
40 and
41 (3) Discharges any subordinate security interest or other subordinate
42 lien.
43 (b) A transferee that acts in good faith takes free of the rights and
44 interests described in subsection (a) of this section, even if the secured
45 party fails to comply with this chapter or the requirements of any judicial
46 proceeding.
47 (c) If a transferee does not take free of the rights and interests
48 described in subsection (a) of this section, the transferee takes the collat-
49 eral subject to:
50 (1) The debtor's rights in the collateral;
51 (2) The security interest or agricultural lien under which the disposi-
52 tion is made; and
53 (3) Any other security interest or other lien.
77
1 28-9-618. RIGHTS AND DUTIES OF CERTAIN SECONDARY OBLIGORS. (a) A second-
2 ary obligor acquires the rights and becomes obligated to perform the duties of
3 the secured party after the secondary obligor:
4 (1) Receives an assignment of a secured obligation from the secured
5 party;
6 (2) Receives a transfer of collateral from the secured party and agrees
7 to accept the rights and assume the duties of the secured party; or
8 (3) Is subrogated to the rights of a secured party with respect to col-
9 lateral.
10 (b) An assignment, transfer, or subrogation described in subsection (a)
11 of this section:
12 (1) Is not a disposition of collateral under section 28-9-610; and
13 (2) Relieves the secured party of further duties under this chapter.
14 28-9-619. TRANSFER OF RECORD OR LEGAL TITLE. (a) In this section,
15 "transfer statement" means a record authenticated by a secured party stating:
16 (1) That the debtor has defaulted in connection with an obligation
17 secured by specified collateral;
18 (2) That the secured party has exercised its postdefault remedies with
19 respect to the collateral;
20 (3) That, by reason of the exercise, a transferee has acquired the rights
21 of the debtor in the collateral; and
22 (4) The name and mailing address of the secured party, debtor and trans-
23 feree.
24 (b) A transfer statement entitles the transferee to the transfer of
25 record of all rights of the debtor in the collateral specified in the state-
26 ment in any official filing, recording, registration, or certificate of title
27 system covering the collateral. If a transfer statement is presented with the
28 applicable fee and request form to the official or office responsible for
29 maintaining the system, the official or office shall:
30 (1) Accept the transfer statement;
31 (2) Promptly amend its records to reflect the transfer; and
32 (3) If applicable, issue a new appropriate certificate of title in the
33 name of the transferee.
34 (c) A transfer of the record or legal title to collateral to a secured
35 party under subsection (b) of this section or otherwise is not of itself a
36 disposition of collateral under this chapter and does not of itself relieve
37 the secured party of its duties under this chapter.
38 28-9-620. ACCEPTANCE OF COLLATERAL IN FULL OR PARTIAL SATISFACTION OF
39 OBLIGATION -- COMPULSORY DISPOSITION OF COLLATERAL. (a) A secured party may
40 accept collateral in full or partial satisfaction of the obligation it secures
41 only if:
42 (1) The debtor consents to the acceptance under subsection (c) of this
43 section;
44 (2) The secured party does not receive, within the time set forth in sub-
45 section (d) of this section, a notification of objection to the proposal
46 authenticated by:
47 (A) a person to which the secured party was required to send a pro-
48 posal under section 28-9-621; or
49 (B) any other person, other than the debtor, holding an interest in
50 the collateral subordinate to the security interest that is the sub-
51 ject of the proposal; and
52 (3) Subsection (e) of this section does not require the secured party to
53 dispose of the collateral or the debtor waives the requirement pursuant to
78
1 section 28-9-624.
2 (b) A purported or apparent acceptance of collateral under this section
3 is ineffective unless:
4 (1) The secured party consents to the acceptance in an authenticated
5 record or sends a proposal to the debtor; and
6 (2) The conditions of subsection (a) of this section are met.
7 (c) For purposes of this section:
8 (1) A debtor consents to an acceptance of collateral in partial satisfac-
9 tion of the obligation it secures only if the debtor agrees to the terms
10 of the acceptance in a record authenticated after default; and
11 (2) A debtor consents to an acceptance of collateral in full satisfaction
12 of the obligation it secures only if the debtor agrees to the terms of the
13 acceptance in a record authenticated after default or the secured party:
14 (A) sends to the debtor after default a proposal that is uncondi-
15 tional or subject only to a condition that collateral not in the pos-
16 session of the secured party be preserved or maintained;
17 (B) in the proposal, proposes to accept collateral in full satisfac-
18 tion of the obligation it secures; and
19 (C) does not receive a notification of objection authenticated by
20 the debtor within twenty (20) days after the proposal is sent.
21 (d) To be effective under subsection (a)(2) of this section, a notifica-
22 tion of objection must be received by the secured party:
23 (1) In the case of a person to which the proposal was sent pursuant to
24 section 28-9-621, within twenty (20) days after notification was sent to
25 that person; and
26 (2) In other cases:
27 (A) within twenty (20) days after the last notification was sent
28 pursuant to section 28-9-621; or
29 (B) if a notification was not sent, before the debtor consents to
30 the acceptance under subsection (c) of this section.
31 (e) A secured party that has taken possession of collateral shall dispose
32 of the collateral pursuant to section 28-9-610 within the time specified in
33 subsection (f) of this section if:
34 (1) Sixty percent (60%) of the cash price has been paid in the case of a
35 purchase-money security interest in consumer goods; or
36 (2) Sixty percent (60%) of the principal amount of the obligation secured
37 has been paid in the case of a nonpurchase-money security interest in con-
38 sumer goods.
39 (f) To comply with subsection (e) of this section, the secured party
40 shall dispose of the collateral:
41 (1) Within ninety (90) days after taking possession; or
42 (2) Within any longer period to which the debtor and all secondary obli-
43 gors have agreed in an agreement to that effect entered into and authenti-
44 cated after default.
45 28-9-621. NOTIFICATION OF PROPOSAL TO ACCEPT COLLATERAL. (a) A secured
46 party that desires to accept collateral in full or partial satisfaction of the
47 obligation it secures shall send its proposal to:
48 (1) Any person from which the secured party has received, before the
49 debtor consented to the acceptance, an authenticated notification of a
50 claim of an interest in the collateral;
51 (2) Any other secured party or lienholder that, ten (10) days before the
52 debtor consented to the acceptance, held a security interest in or other
53 lien on the collateral perfected by the filing of a financing statement
54 that:
79
1 (A) identified the collateral;
2 (B) was indexed under the debtor's name as of that date; and
3 (C) was filed in the office or offices in which to file a financing
4 statement against the debtor covering the collateral as of that date;
5 and
6 (3) Any other secured party that, ten (10) days before the debtor con-
7 sented to the acceptance, held a security interest in the collateral per-
8 fected by compliance with a statute, regulation, or treaty described in
9 section 28-9-311(a).
10 (b) A secured party that desires to accept collateral in partial satis-
11 faction of the obligation it secures shall send its proposal to any secondary
12 obligor in addition to the persons described in subsection (a) of this sec-
13 tion.
14 28-9-622. EFFECT OF ACCEPTANCE OF COLLATERAL. (a) A secured party's
15 acceptance of collateral in full or partial satisfaction of the obligation it
16 secures:
17 (1) Discharges the obligation to the extent consented to by the debtor;
18 (2) Transfers to the secured party all of a debtor's rights in the col-
19 lateral;
20 (3) Discharges the security interest or agricultural lien that is the
21 subject of the debtor's consent and any subordinate security interest or
22 other subordinate lien; and
23 (4) Terminates any other subordinate interest.
24 (b) A subordinate interest is discharged or terminated under subsection
25 (a) of this section, even if the secured party fails to comply with this chap-
26 ter.
27 28-9-623. RIGHT TO REDEEM COLLATERAL. (a) A debtor, any secondary obli-
28 gor, or any other secured party or lienholder may redeem collateral.
29 (b) To redeem collateral, a person shall tender:
30 (1) Fulfillment of all obligations secured by the collateral; and
31 (2) The reasonable expenses and attorney's fees described in section
32 28-9-615(a)(1).
33 (c) A redemption may occur at any time before a secured party:
34 (1) Has collected collateral under section 28-9-607;
35 (2) Has disposed of collateral or entered into a contract for its dispo-
36 sition under section 28-9-610; or
37 (3) Has accepted collateral in full or partial satisfaction of the obli-
38 gation it secures under section 28-9-622.
39 28-9-624. WAIVER. (a) A debtor or secondary obligor may waive the right
40 to notification of disposition of collateral under section 28-9-611 only by an
41 agreement to that effect entered into and authenticated after default.
42 (b) A debtor may waive the right to require disposition of collateral
43 under section 28-9-620(e) only by an agreement to that effect entered into and
44 authenticated after default.
45 (c) Except in a consumer goods transaction, a debtor or secondary obligor
46 may waive the right to redeem collateral under section 28-9-623 only by an
47 agreement to that effect entered into and authenticated after default.
48 28-9-625. REMEDIES FOR SECURED PARTY'S FAILURE TO COMPLY WITH CHAPTER.
49 (a) If it is established that a secured party is not proceeding in accordance
50 with this chapter, a court may order or restrain collection, enforcement or
51 disposition of collateral on appropriate terms and conditions.
80
1 (b) Subject to subsections (c) and (d) of this section, a person is lia-
2 ble for damages in the amount of any loss caused by a failure to comply with
3 this chapter. Loss caused by a failure to comply with a request under section
4 28-9-210 may include loss resulting from the debtor's inability to obtain, or
5 increased costs of, alternative financing.
6 (c) Except as otherwise provided in section 28-9-628:
7 (1) A person that, at the time of the failure, was a debtor, was an obli-
8 gor, or held a security interest in or other lien on the collateral may
9 recover damages under subsection (b) of this section for its loss; and
10 (2) If the collateral is consumer goods, a person that was a debtor or a
11 secondary obligor at the time a secured party failed to comply with this
12 part may recover for that failure in any event, an amount not less than
13 the credit service charge plus ten percent (10%) of the principal amount
14 of the obligation or the time price differential plus ten percent (10%) of
15 the cash price.
16 (d) A debtor whose deficiency is eliminated under section 28-9-626 may
17 recover damages for the loss of any surplus. However, a debtor or secondary
18 obligor whose deficiency is eliminated or reduced under section 28-9-626 may
19 not otherwise recover under subsection (b) of this section for noncompliance
20 with the provisions of this part relating to collection, enforcement, disposi-
21 tion or acceptance.
22 (e) In addition to any damages recoverable under subsection (b) of this
23 section, the debtor, consumer obligor or person named as a debtor in a filed
24 record, as applicable, may recover one hundred dollars ($100) in each case
25 from a person that:
26 (1) Files a record that the person is not entitled to file under section
27 28-9-509(a);
28 (2) Fails to cause the secured party of record to file or send a termina-
29 tion statement as required by section 28-9-513(a) or (c).
30 (f) If a secured party fails to comply with a request regarding a list of
31 collateral or a statement of account under section 28-9-210, the secured party
32 may claim a security interest only as shown in the statement included in the
33 request as against a person that is reasonably misled by the failure.
34 28-9-626. ACTION IN WHICH DEFICIENCY OR SURPLUS IS IN ISSUE. In an action
35 arising from a transaction, other than a consumer transaction, in which the
36 amount of a deficiency or surplus is in issue, the following rules apply:
37 (a) A secured party need not prove compliance with the provisions of this
38 part relating to collection, enforcement, disposition or acceptance unless the
39 debtor or a secondary obligor places the secured party's compliance in issue.
40 (b) If the secured party's compliance is placed in issue, the secured
41 party has the burden of establishing that the collection, enforcement, dispo-
42 sition or acceptance was conducted in accordance with this part.
43 (c) Except as otherwise provided in Section 28-9-628, if a secured party
44 fails to prove that the collection, enforcement, disposition or acceptance was
45 conducted in accordance with the provisions of this part relating to collec-
46 tion, enforcement, disposition or acceptance, the liability of a debtor or a
47 secondary obligor for a deficiency is limited to an amount by which the sum of
48 the secured obligation, expenses and attorney's fees exceeds the greater of:
49 (1) The proceeds of the collection, enforcement, disposition or accep-
50 tance; or
51 (2) The amount of proceeds that would have been realized had the noncom-
52 plying secured party proceeded in accordance with the provisions of this
53 part relating to collection, enforcement, disposition or acceptance.
54 (d) For purposes of subsection (c)(2) of this section, the amount of pro-
81
1 ceeds that would have been realized is equal to the sum of the secured obliga-
2 tion, expenses and attorney's fees unless the secured party proves that the
3 amount is less than that sum.
4 (e) If a deficiency or surplus is calculated under section 28-9-615(f),
5 the debtor or obligor has the burden of establishing that the amount of pro-
6 ceeds of the disposition is significantly below the range of prices that a
7 complying disposition to a person other than the secured party, a person
8 related to the secured party, or a secondary obligor would have brought.
9 28-9-627. DETERMINATION OF WHETHER CONDUCT WAS COMMERCIALLY REASONABLE.
10 (a) The fact that a greater amount could have been obtained by a collection,
11 enforcement, disposition or acceptance at a different time or in a different
12 method from that selected by the secured party is not of itself sufficient to
13 preclude the secured party from establishing that the collection, enforcement,
14 disposition or acceptance was made in a commercially reasonable manner.
15 (b) A disposition of collateral is made in a commercially reasonable man-
16 ner if the disposition is made:
17 (1) In the usual manner on any recognized market;
18 (2) At the price current in any recognized market at the time of the dis-
19 position; or
20 (3) Otherwise in conformity with reasonable commercial practices among
21 dealers in the type of property that was the subject of the disposition.
22 (c) A collection, enforcement, disposition or acceptance is commercially
23 reasonable if it has been approved:
24 (1) In a judicial proceeding;
25 (2) By a bona fide creditors' committee;
26 (3) By a representative of creditors; or
27 (4) By an assignee for the benefit of creditors.
28 (d) Approval under subsection (c) of this section need not be obtained,
29 and lack of approval does not mean that the collection, enforcement, disposi-
30 tion or acceptance is not commercially reasonable.
31 28-9-628. NONLIABILITY AND LIMITATION ON LIABILITY OF SECURED PARTY --
32 LIABILITY OF SECONDARY OBLIGOR. (a) Unless a secured party knows that a person
33 is a debtor or obligor, knows the identity of the person, and knows how to
34 communicate with the person:
35 (1) The secured party is not liable to the person, or to a secured party
36 or lienholder that has filed a financing statement against the person, for
37 failure to comply with this chapter; and
38 (2) The secured party's failure to comply with this chapter does not
39 affect the liability of the person for a deficiency.
40 (b) A secured party is not liable because of its status as secured party:
41 (1) To a person that is a debtor or obligor, unless the secured party
42 knows:
43 (A) that the person is a debtor or obligor;
44 (B) the identity of the person; and
45 (C) how to communicate with the person; or
46 (2) To a secured party or lienholder that has filed a financing statement
47 against a person, unless the secured party knows:
48 (A) that the person is a debtor; and
49 (B) the identity of the person.
50 (c) A secured party is not liable to any person, and a person's liability
51 for a deficiency is not affected, because of any act or omission arising out
52 of the secured party's reasonable belief that a transaction is not a consumer
53 goods transaction or a consumer transaction or that goods are not consumer
82
1 goods, if the secured party's belief is based on its reasonable reliance on:
2 (1) A debtor's representation concerning the purpose for which collateral
3 was to be used, acquired or held; or
4 (2) An obligor's representation concerning the purpose for which a
5 secured obligation was incurred.
6 (d) A secured party is not liable to any person under section
7 28-9-625(c)(2) for its failure to comply with section 28-9-616.
8 (e) A secured party is not liable under section 28-9-625(c)(2) more than
9 once with respect to any one (1) secured obligation.
10 PART 7
11 TRANSITION
12 28-9-701. [RESERVED.]
13 28-9-702. SAVINGS CLAUSE. (a) Except as otherwise provided in this part,
14 this act applies to a transaction or lien within its scope, even if the trans-
15 action or lien was entered into or created before this act takes effect.
16 (b) Except as otherwise provided in subsection (c) of this section and
17 sections 28-9-703 through 28-9-708:
18 (1) Transactions and liens that were not governed by former chapter 9,
19 title 28, Idaho Code, were validly entered into or created before this act
20 takes effect, and would be subject to this act if they had been entered
21 into or created after this act takes effect, and the rights, duties, and
22 interests flowing from those transactions and liens remain valid after
23 this act takes effect; and
24 (2) The transactions and liens may be terminated, completed, consummated
25 and enforced as required or permitted by this act or by the law that
26 otherwise would apply if this act had not taken effect.
27 (c) This act does not affect an action, case or proceeding commenced
28 before this act takes effect.
29 28-9-703. SECURITY INTEREST PERFECTED BEFORE EFFECTIVE DATE. (a) A secu-
30 rity interest that is enforceable immediately before this act takes effect and
31 would have priority over the rights of a person that becomes a lien creditor
32 at that time is a perfected security interest under this act if, when this act
33 takes effect, the applicable requirements for enforceability and perfection
34 under this act are satisfied without further action.
35 (b) Except as otherwise provided in section 28-9-705, if, immediately
36 before this act takes effect, a security interest is enforceable and would
37 have priority over the rights of a person that becomes a lien creditor at that
38 time, but the applicable requirements for enforceability or perfection under
39 this act are not satisfied when this act takes effect, the security interest:
40 (1) Is a perfected security interest for one (1) year after this act
41 takes effect;
42 (2) Remains enforceable thereafter only if the security interest becomes
43 enforceable under section 28-9-203 before the year expires; and
44 (3) Remains perfected thereafter only if the applicable requirements for
45 perfection under this act are satisfied before the year expires.
46 28-9-704. SECURITY INTEREST UNPERFECTED BEFORE EFFECTIVE DATE. A security
47 interest that is enforceable immediately before this act takes effect but
48 which would be subordinate to the rights of a person that becomes a lien cred-
49 itor at that time:
50 (1) Remains an enforceable security interest for one (1) year after this
83
1 act takes effect;
2 (2) Remains enforceable thereafter if the security interest becomes
3 enforceable under section 28-9-203 when this act takes effect or within one
4 (1)year thereafter; and
5 (3) Becomes perfected:
6 (A) Without further action, when this act takes effect if the applicable
7 requirements for perfection under this act are satisfied before or at that
8 time; or
9 (B) When the applicable requirements for perfection are satisfied if the
10 requirements are satisfied after that time.
11 28-9-705. EFFECTIVENESS OF ACTION TAKEN BEFORE EFFECTIVE DATE. (a) If
12 action, other than the filing of a financing statement, is taken before this
13 act takes effect and the action would have resulted in priority of a security
14 interest over the rights of a person that becomes a lien creditor had the
15 security interest become enforceable before this act takes effect, the action
16 is effective to perfect a security interest that attaches under this act
17 within one (1) year after this act takes effect. An attached security interest
18 becomes unperfected one (1) year after this act takes effect unless the secu-
19 rity interest becomes a perfected security interest under this act before the
20 expiration of that period.
21 (b) The filing of a financing statement before this act takes effect is
22 effective to perfect a security interest to the extent the filing would sat-
23 isfy the applicable requirements for perfection under this act.
24 (c) This act does not render ineffective an effective financing statement
25 that, before this act takes effect, is filed and satisfies the applicable
26 requirements for perfection under the law of the jurisdiction governing per-
27 fection as provided in former section 28-9-103. However, except as otherwise
28 provided in subsections (d) and (e) of this section and section 28-9-706, the
29 financing statement ceases to be effective at the earlier of:
30 (1) The time the financing statement would have ceased to be effective
31 under the law of the jurisdiction in which it is filed; or
32 (2) June 30, 2006.
33 (d) The filing of a continuation statement after this act takes effect
34 does not continue the effectiveness of the financing statement filed before
35 this act takes effect. However, upon the timely filing of a continuation
36 statement after this act takes effect and in accordance with the law of the
37 jurisdiction governing perfection as provided in part 3, the effectiveness of
38 a financing statement filed in the same office in that jurisdiction before
39 this act takes effect continues for the period provided by the law of that
40 jurisdiction.
41 (e) Subsection (c)(2) of this section applies to a financing statement
42 that, before this act takes effect, is filed against a transmitting utility
43 and satisfies the applicable requirements for perfection under the law of the
44 jurisdiction governing perfection as provided in former section 28-9-103 only
45 to the extent that part 3 provides that the law of a jurisdiction other than
46 jurisdiction in which the financing statement is filed governs perfection of a
47 security interest in collateral covered by the financing statement.
48 (f) A financing statement that includes a financing statement filed
49 before this act takes effect and a continuation statement filed after this act
50 takes effect is effective only to the extent that it satisfies the require-
51 ments of part 5 for an initial financing statement.
52 28-9-706. WHEN INITIAL FINANCING STATEMENT SUFFICES TO CONTINUE EFFEC-
53 TIVENESS OF FINANCING STATEMENT. (a) The filing of an initial financing state-
84
1 ment in the office specified in section 28-9-501 continues the effectiveness
2 of a financing statement filed before this act takes effect if:
3 (1) The filing of an initial financing statement in that office would be
4 effective to perfect a security interest under this act;
5 (2) The preeffective date financing statement was filed in an office in
6 another state or another office in this state; and
7 (3) The initial financing statement satisfies subsection (c) of this sec-
8 tion.
9 (b) The filing of an initial financing statement under subsection (a) of
10 this section continues the effectiveness of the preeffective date financing
11 statement:
12 (1) If the initial financing statement is filed before this act takes
13 effect, for the period provided in former section 28-9-403 with respect to
14 a financing statement; and
15 (2) If the initial financing statement is filed after this act takes
16 effect, for the period provided in section 28-9-515 with respect to an
17 initial financing statement.
18 (c) To be effective for purposes of subsection (a) of this section, an
19 initial financing statement must:
20 (1) Satisfy the requirements of part 5 for an initial financing state-
21 ment;
22 (2) Identify the preeffective date financing statement by indicating the
23 office in which the financing statement was filed and providing the dates
24 of filing and file numbers, if any, of the financing statement and of the
25 most recent continuation statement filed with respect to the financing
26 statement; and
27 (3) Indicate that the preeffective date financing statement remains
28 effective.
29 28-9-707. PERSONS ENTITLED TO FILE INITIAL FINANCING STATEMENT OR CONTIN-
30 UATION STATEMENT. A person may file an initial financing statement or a con-
31 tinuation statement under this part if:
32 (1) The secured party of record authorizes the filing; and
33 (2) The filing is necessary under this part:
34 (A) To continue the effectiveness of a financing statement filed before
35 this act takes effect; or
36 (B) To perfect or continue the perfection of a security interest.
37 28-9-708. PRIORITY. (a) This act determines the priority of conflicting
38 claims to collateral. However, if the relative priorities of the claims were
39 established before this act takes effect, chapter 9, title 28, determines pri-
40 ority.
41 (b) For purposes of section 28-9-322(a), the priority of a security
42 interest that becomes enforceable under section 28-9-203 of this act dates
43 from the time this act takes effect if the security interest is perfected
44 under this act by the filing of a financing statement before this act takes
45 effect which would not have been effective to perfect the security interest
46 under former chapter 9, title 28. This subsection does not apply to conflict-
47 ing security interests, each of which is perfected by the filing of such a
48 financing statement.
49 SECTION 3. That Section 28-1-105, Idaho Code, be, and the same is hereby
50 amended to read as follows:
51 28-1-105. TERRITORIAL APPLICATION OF THE ACT -- PARTIES' POWER TO CHOOSE
85
1 APPLICABLE LAW. (1) Except as provided hereafter in this section, when a
2 transaction bears a reasonable relation to this state and also to another
3 state or nation the parties may agree that the law either of this state or of
4 such other state or nation shall govern their rights and duties. Failing such
5 agreement this act applies to transactions bearing an appropriate relation to
6 this state.
7 (2) Where one (1) of the following provisions of this act specifies the
8 applicable law, that provision governs and a contrary agreement is effective
9 only to the extent permitted by the law, (including the conflict of laws
10 rules), so specified:
11 Rights of creditors against sold goods. Section 28-2-402.
12 Applicability of the chapter on Lleases. Sections 28-12-105 and 28-12-106.
13 Applicability of the chapter on Bbank Ddeposits and Ccollections. Section
14 28-4-102.
15 Governing law in the part on Ffunds Ttransfers. Section 28-4-638.
16 Letters of Ccredit. Section 28-5-116.
17 Applicability of the chapter on Iinvestment Ssecurities. Section 28-8-110.
18 Policy and scope of the chapter on Secured Transactions. Sections 28-9-102
19 and 28-9-103.
20 Law governing perfection, the effect of perfection or nonperfection, the
21 priority of security interests and agricultural liens. Sections 28-9-301
22 through 28-9-307.
23 SECTION 4. That Section 28-1-201, Idaho Code, be, and the same is hereby
24 amended to read as follows:
25 28-1-201. GENERAL DEFINITIONS. Subject to additional definitions con-
26 tained in the subsequent chapters of this act which are applicable to specific
27 chapters or parts thereof, and unless the context otherwise requires, in this
28 act:
29 (1) "Action" in the sense of a judicial proceeding includes recoupment,
30 counterclaim, set-off, suit in equity and any other proceedings in which
31 rights are determined.
32 (2) "Aggrieved party" means a party entitled to resort to a remedy.
33 (3) "Agreement" means the bargain of the parties in fact as found in
34 their language or by implication from other circumstances including course of
35 dealing or usage of trade or course of performance as provided in this act
36 (sections 28-1-205 and 28-2-208). Whether an agreement has legal consequences
37 is determined by the provisions of this act, if applicable; otherwise by the
38 law of contracts (section 28-1-103). (Compare "contract.")
39 (4) "Bank" means any person engaged in the business of banking, including
40 any insured bank, whether chartered by federal or state law, any insured sav-
41 ings and loan association, whether insured by federal or state law, and any
42 insured credit union, whether chartered by federal or state law, offering
43 deposit or other accounts on which the depositor or account holder is permit-
44 ted to make withdrawals by negotiable or transferable instrument, payment
45 orders of withdrawal, telephone transfers, or other similar items for the pur-
46 pose of making payments or transfers to third persons or others, including
47 demand deposits, negotiable order of withdrawal accounts, savings deposits
48 subject to automatic transfers, and share draft accounts.
49 (5) "Bearer" means the person in possession of an instrument, document of
50 title, or security payable to bearer or indorsed in blank.
51 (6) "Bill of lading" means a document evidencing the receipt of goods for
52 shipment issued by a person engaged in the business of transporting or for-
53 warding goods, and includes an airbill. "Airbill" means a document serving
86
1 for air transportation as a bill of lading does for marine or rail transporta-
2 tion, and includes an air consignment note or air waybill.
3 (7) "Branch" includes a separately incorporated foreign branch of a bank.
4 (8) "Burden of establishing" a fact means the burden of persuading the
5 triers of fact that the existence of the fact is more probable than its nonex-
6 istence.
7 (9) "Buyer in ordinary course of business" means a person who that buys
8 goods in good faith, and without knowledge that the sale to him is in viola-
9 tion of violates the ownership rights or security interest of a third party
10 another person in the goods, and buys in the ordinary course from a person,
11 other than a pawnbroker, in the business of selling goods of that kind. but
12 does not include a pawnbroker. All persons who sell minerals or the like
13 (including oil and gas) at wellhead or minehead shall be deemed to be persons
14 A person buys goods in the ordinary course if the sale to the person comports
15 with the usual or customary practices in the kind of business in which the
16 seller is engaged or with the seller's own usual or customary practices. A
17 person that sells oil, gas or other minerals at the wellhead or minehead is a
18 person in the business of selling goods of that kind. "Buying" A buyer in
19 ordinary course of business may be buy for cash, or by exchange of other prop-
20 erty, or on secured or unsecured credit, and includes receiving may acquire
21 goods or documents of title under a pre-existing preexisting contract for
22 sale. but does not include a transfer in bulk or as security for or in total
23 or partial satisfaction of a money debt. Only a buyer that takes possession of
24 the goods or has a right to recover the goods from the seller under chapter 2,
25 title 28, Idaho Code, may be a buyer in ordinary course of business. A person
26 that acquires goods in a transfer in bulk or as security for or in total or
27 partial satisfaction of a money debt is not a buyer in ordinary course of
28 business.
29 (10) "Conspicuous." A term or clause is conspicuous when it is so written
30 that a reasonable person against whom it is to operate ought to have noticed
31 it. A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is con-
32 spicuous. Language in the body of a form is "conspicuous" if it is in larger
33 or other contrasting type or color. But in a telegram any stated term is
34 "conspicuous." Whether a term or clause is "conspicuous" or not is for deci-
35 sion by the court.
36 (11) "Contract" means the total legal obligation which results from the
37 parties' agreement as affected by this act and any other applicable rules of
38 law. (Compare "agreement.")
39 (12) "Creditor" includes a general creditor, a secured creditor, a lien
40 creditor and any representative of creditors, including an assignee for the
41 benefit of creditors, a trustee in bankruptcy, a receiver in equity and an
42 executor or administrator of an insolvent debtor's or assignor's estate.
43 (13) "Defendant" includes a person in the position of defendant in a
44 cross-action or counterclaim.
45 (14) "Delivery" with respect to instruments, documents of title, chattel
46 paper or securities means voluntary transfer of possession.
47 (15) "Document of title" includes bill of lading, dock warrant, dock
48 receipt, warehouse receipt or order for the delivery of goods, and also any
49 other document which in the regular course of business or financing is treated
50 as adequately evidencing that the person in possession of it is entitled to
51 receive, hold and dispose of the document and the goods it covers. To be a
52 document of title a document must purport to be issued by or addressed to a
53 bailee and purport to cover goods in the bailee's possession which are either
54 identified or are fungible portions of an identified mass.
55 (16) "Fault" means wrongful act, omission or breach.
87
1 (17) "Fungible" with respect to goods or securities means goods or securi-
2 ties of which any unit is, by nature or usage of trade, the equivalent of any
3 other like unit. Goods which are not fungible shall be deemed fungible for the
4 purposes of this act to the extent that under a particular agreement or docu-
5 ment unlike units are treated as equivalents.
6 (18) "Genuine" means free of forgery or counterfeiting.
7 (19) "Good faith" means honesty in fact in the conduct or transaction con-
8 cerned.
9 (20) "Holder" with respect to a negotiable instrument, means the person in
10 possession if the instrument is payable to bearer or, in the case of an
11 instrument payable to an identified person, if the identified person is in
12 possession. "Holder" with respect to a document of title, means the person in
13 possession if the goods are deliverable to bearer or to the order of the per-
14 son in possession.
15 (21) To "honor" is to pay or to accept and pay, or where a credit so
16 engages to purchase or discount a draft complying with the terms of the
17 credit.
18 (22) "Insolvency proceedings" includes any assignment for the benefit of
19 creditors or other proceedings intended to liquidate or rehabilitate the
20 estate of the person involved.
21 (23) A person is "insolvent" who either has ceased to pay his debts in the
22 ordinary course of business or cannot pay his debts as they become due or is
23 insolvent within the meaning of the federal bankruptcy law.
24 (24) "Money" means a medium of exchange authorized or adopted by a domes-
25 tic or foreign government and includes a monetary unit of account established
26 by an intergovernmental organization or by agreement between two (2) or more
27 nations.
28 (25) A person has "notice" of a fact when:
29 (a) hHe has actual knowledge of it; or
30 (b) hHe has received a notice or notification of it; or
31 (c) fFrom all the facts and circumstances known to him at the time in
32 question he has reason to know that it exists.
33 A person "knows" or has "knowledge" of a fact when he has actual knowledge
34 of it. "Discover" or "learn" or a word or phrase of similar import refers to
35 knowledge rather than to reason to know. The time and circumstances under
36 which a notice or notification may cease to be effective are not determined by
37 this act.
38 (26) A person "notifies" or "gives" a notice or notification to another by
39 taking such steps as may be reasonably required to inform the other in ordi-
40 nary course whether or not such other actually comes to know of it. A person
41 "receives" a notice or notification when:
42 (a) iIt comes to his attention; or
43 (b) iIt is duly delivered at the place of business through which the con-
44 tract was made or at any other place held out by him as the place for
45 receipt of such communications.
46 (27) Notice, knowledge or a notice or notification received by an organi-
47 zation is effective for a particular transaction from the time when it is
48 brought to the attention of the individual conducting that transaction, and in
49 any event from the time when it would have been brought to his attention if
50 the organization had exercised due diligence. An organization exercises due
51 diligence if it maintains reasonable routines for communicating significant
52 information to the person conducting the transaction and there is reasonable
53 compliance with the routines. Due diligence does not require an individual
54 acting for the organization to communicate information unless such communica-
55 tion is part of his regular duties or unless he has reason to know of the
88
1 transaction and that the transaction would be materially affected by the
2 information.
3 (28) "Organization" includes a corporation, government or governmental
4 subdivision or agency, business trust, estate, trust, partnership or associa-
5 tion, two (2) or more persons having a joint or common interest, or any other
6 legal or commercial entity.
7 (29) "Party," as distinct from "third party," means a person who has
8 engaged in a transaction or made an agreement within this act.
9 (30) "Person" includes an individual or an organization (See section
10 28-1-102).
11 (31) "Presumption" or "presumed" means that the trier of fact must find
12 the existence of the fact presumed unless and until evidence is introduced
13 which would support a finding of its nonexistence.
14 (32) "Purchase" includes taking by sale, discount, negotiation, mortgage,
15 pledge, lien, security interest, issue or reissue, gift or any other voluntary
16 transaction creating an interest in property.
17 (33) "Purchaser" means a person who takes by purchase.
18 (34) "Remedy" means any remedial right to which an aggrieved party is
19 entitled with or without resort to a tribunal.
20 (35) "Representative" includes an agent, an officer of a corporation or
21 association, and a trustee, executor or administrator of an estate, or any
22 other person empowered to act for another.
23 (36) "Rights" include remedies.
24 (37) "Security interest" means an interest in personal property or fix-
25 tures which secures payment or performance of an obligation. The retention or
26 reservation of title by a seller of goods notwithstanding shipment or delivery
27 to the buyer (section 28-2-401) is limited in effect to a reservation of a
28 "security interest." The term also includes any interest of a consignor and a
29 buyer of accounts, or chattel paper, which a payment intangible, or a promis-
30 sory note in a transaction that is subject to chapter 9, title 28, Idaho Code.
31 The special property interest of a buyer of goods on identification of those
32 goods to a contract for sale under section 28-2-401 is not a "security inter-
33 est," but a buyer may also acquire a "security interest" by complying with
34 chapter 9, title 28, Idaho Code. Unless a consignment is intended as security,
35 reservation of title thereunder is not a "security interest" but a consignment
36 in any event is subject to the provisions on consignment sales (section
37 28-2-326). Except as otherwise provided in section 28-2-205, the right of a
38 seller or lessor of goods under chapter 2 or chapter 12, title 28, Idaho Code,
39 to retain or acquire possession of the goods is not a "security interest," but
40 a seller or lessor may also acquire a "security interest" by complying with
41 chapter 9, title 28, Idaho Code. The retention or reservation of title by a
42 seller of goods notwithstanding shipment or delivery to the buyer (section
43 28-2-401) is limited in effect to a reservation of a "security interest."
44 Whether a transaction creates a lease or security interest is determined
45 by the facts of each case; however, a transaction creates a security interest
46 if the consideration the lessee is to pay the lessor for the right to posses-
47 sion and use of the goods is an obligation for the term of the lease not sub-
48 ject to termination by the lessee, and:
49 (a) tThe original term of the lease is equal to or greater than the
50 remaining economic life of the goods; or
51 (b) tThe lessee is bound to renew the lease for the remaining economic
52 life of the goods or is bound to become the owner of the goods; or
53 (c) tThe lessee has an option to renew the lease for the remaining eco-
54 nomic life of the goods for no additional consideration or nominal addi-
55 tional consideration upon compliance with the lease agreement; or
89
1 (d) tThe lessee has an option to become the owner of the goods for no
2 additional consideration or nominal additional consideration upon compli-
3 ance with the lease agreement.
4 A transaction does not create a security interest merely because it pro-
5 vides that:
6 (a) tThe present value of the consideration the lessee is obligated to
7 pay the lessor for the right to possession and use of the goods is sub-
8 stantially equal to or is greater than the fair market value of the goods
9 at the time the lease is entered into; or
10 (b) tThe lessee assumes risk of loss of the goods, or agrees to pay
11 taxes, insurance, filing, recording, or registration fees, or service or
12 maintenance costs with respect to the goods; or
13 (c) tThe lessee has an option to renew the lease or to become the owner
14 of the goods; or
15 (d) tThe lessee has an option to renew the lease for a fixed rent that is
16 equal to or greater than the reasonably predictable fair market rent for
17 the use of the goods for the term of the renewal at the time the option is
18 to be performed; or
19 (e) tThe lessee has an option to become the owner of the goods for a
20 fixed price that is equal to or greater than the reasonably predictable
21 fair market value of the goods at the time the option is to be performed.
22 For purposes of this subsection (37):
23 Additional consideration is not nominal if (i) when the option to renew
24 the lease is granted to the lessee the rent is stated to be the fair market
25 rent for the use of the goods for the term of the renewal determined at the
26 time the option is to be performed, or (ii) when the option to become the
27 owner of the goods is granted to the lessee the price is stated to be the fair
28 market value of the goods determined at the time the option is to be per-
29 formed.
30 Additional consideration is nominal if it is less than the lessee's rea-
31 sonably predictable cost of performing under the lease agreement if the option
32 is not exercised.
33 "Reasonably predictable" and "remaining economic life of the goods" are to
34 be determined with reference to the facts and circumstances at the time the
35 transaction is entered into.
36 "Present value" means the amount as of a date certain of one (1) or more
37 sums payable in the future, discounted to the date certain. The discount is
38 determined by the interest rate specified by the parties if the rate is not
39 manifestly unreasonable at the time the transaction is entered into; other-
40 wise, the discount is determined by a commercially reasonable rate that takes
41 into account the facts and circumstances of each case at the time the transac-
42 tion was entered into.
43 (38) "Send" in connection with any writing or notice means to deposit in
44 the mail or deliver for transmission by any other usual means of communication
45 with postage or cost of transmission provided for and properly addressed and
46 in the case of an instrument to an address specified thereon or otherwise
47 agreed, or if there be none to any address reasonable under the circumstances.
48 The receipt of any writing or notice within the time at which it would have
49 arrived if properly sent has the effect of a proper sending.
50 (39) "Signed" includes any symbol executed or adopted by a party with
51 present intention to authenticate a writing.
52 (40) "Surety" includes guarantor.
53 (41) "Telegram" includes a message transmitted by radio, teletype, cable,
54 any mechanical method of transmission, or the like.
55 (42) "Term" means that portion of an agreement which relates to a particu-
90
1 lar matter.
2 (43) "Unauthorized" signature means one made without actual, implied or
3 apparent authority and includes a forgery.
4 (44) "Value." Except as otherwise provided with respect to negotiable
5 instruments and bank collections (sections 28-3-303, 28-4-208 and 28-4-209) a
6 person gives "value" for rights if he acquires them:
7 (a) iIn return for a binding commitment to extend credit or for the
8 extension of immediately available credit whether or not drawn upon and
9 whether or not a chargeback is provided for in the event of difficulties
10 in collection; or
11 (b) aAs security for or in total or partial satisfaction of a pre-
12 existing preexisting claim; or
13 (c) bBy accepting delivery pursuant to a pre-existing preexisting con-
14 tract for purchase; or
15 (d) gGenerally, in return for any consideration sufficient to support a
16 simple contract.
17 (45) "Warehouse receipt" means a receipt issued by a person engaged in the
18 business of storing goods for hire.
19 (46) "Written" or "writing" includes printing, typewriting or any other
20 intentional reduction to tangible form.
21 SECTION 5. That Section 28-2-103, Idaho Code, be, and the same is hereby
22 amended to read as follows:
23 28-2-103. DEFINITIONS AND INDEX OF DEFINITIONS. (1) In this chapter
24 unless the context otherwise requires:
25 (a) "Buyer" means a person who buys or contracts to buy goods.
26 (b) "Good faith" in the case of a merchant means honesty in fact and the
27 observance of reasonable commercial standards of fair dealing in the
28 trade.
29 (c) "Receipt" of goods means taking physical possession of them.
30 (d) "Seller" means a person who sells or contracts to sell goods.
31 (2) Other definitions applying to this chapter or to specified Pparts
32 thereof, and the sections in which they appear are:
33 "Acceptance." Section 28-2-606.
34 "Banker's credit." Section 28-2-325.
35 "Between merchants." Section 28-2-104.
36 "Cancellation." Section 28-2-106.
37 "Commercial unit." Section 28-2-105.
38 "Confirmed credit." Section 28-2-325.
39 "Conforming to contract." Section 28-2-106.
40 "Contract for sale." Section 28-2-106.
41 "Cover." Section 28-2-712.
42 "Entrusting." Section 28-2-403.
43 "Financing agency." Section 28-2-104.
44 "Future goods." Section 28-2-105.
45 "Goods." Section 28-2-105.
46 "Identification." Section 28-2-501.
47 "InstalmentInstallment contract." Section 28-2-612.
48 "Letter of credit." Section 28-2-325.
49 "Lot." Section 28-2-105.
50 "Merchant." Section 28-2-104.
51 "Overseas." Section 28-2-323.
52 "Person in position of seller." Section 28-2-707.
53 "Present sale." Section 28-2-106.
91
1 "Sale." Section 28-2-106.
2 "Sale on approval." Section 28-2-326.
3 "Sale or return." Section 28-2-326.
4 "Termination." Section 28-2-106.
5 (3) The following definitions in other chapters apply to this chapter:
6 "Check." Section 28-3-104.
7 "Consignee." Section 28-7-102.
8 "Consignor." Section 28-7-102.
9 "Consumer goods." Section 28-9-1092.
10 "Dishonor." Section 28-3-5072.
11 "Draft." Section 28-3-104.
12 (4) In addition chapter 1, title 28, Idaho Code, contains general defini-
13 tions and principles of construction and interpretation applicable throughout
14 this chapter.
15 SECTION 6. That Section 28-2-210, Idaho Code, be, and the same is hereby
16 amended to read as follows:
17 28-2-210. DELEGATION OF PERFORMANCE -- ASSIGNMENT OF RIGHTS. (1) A party
18 may perform his duty through a delegate unless otherwise agreed or unless the
19 other party has a substantial interest in having his original promisor perform
20 or control the acts required by the contract. No delegation of performance
21 relieves the party delegating of any duty to perform or any liability for
22 breach.
23 (2) Except as otherwise provided in section 28-9-406, uUnless otherwise
24 agreed, all rights of either seller or buyer can be assigned except where the
25 assignment would materially change the duty of the other party, or increase
26 materially the burden or risk imposed on him by his contract, or impair mate-
27 rially his chance of obtaining return performance. A right to damages for
28 breach of the whole contract or a right arising out of the assignor's due per-
29 formance of his entire obligation can be assigned despite agreement otherwise.
30 (3) The creation, attachment, perfection or enforcement of a security
31 interest in the seller's interest under a contract is not a transfer that
32 materially changes the duty of or increases materially the burden or risk
33 imposed on the buyer or impairs materially the buyer's chance of obtaining
34 return performance within the purview of subsection (2) of this section
35 unless, and then only to the extent that, enforcement actually results in a
36 delegation of material performance of the seller. Even in that event, the cre-
37 ation, attachment, perfection and enforcement of the security interest remain
38 effective, but (i) the seller is liable to the buyer for damages caused by the
39 delegation to the extent that the damages could not reasonably be prevented by
40 the buyer, and (ii) a court having jurisdiction may grant other appropriate
41 relief, including cancellation of the contract for sale or an injunction
42 against enforcement of the security interest or consummation of the enforce-
43 ment.
44 (4) Unless the circumstances indicate the contrary a prohibition of
45 assignment of "the contract" is to be construed as barring only the delegation
46 to the assignee of the assignor's performance.
47 (45) An assignment of "the contract" or of "all my rights under the con-
48 tract" or an assignment in similar general terms is an assignment of rights
49 and unless the language or the circumstances, (as in an assignment for secu-
50 rity), indicate the contrary, it is a delegation of performance of the duties
51 of the assignor and its acceptance by the assignee constitutes a promise by
52 him to perform those duties. This promise is enforceable by either the
53 assignor or the other party to the original contract.
92
1 (56) The other party may treat any assignment which delegates performance
2 as creating reasonable grounds for insecurity and may without prejudice to his
3 rights against the assignor demand assurances from the assignee (section
4 28-2-609).
5 SECTION 7. That Section 28-2-326, Idaho Code, be, and the same is hereby
6 amended to read as follows:
7 28-2-326. SALE ON APPROVAL AND SALE OR RETURN -- CONSIGNMENT SALES AND
8 RIGHTS OF CREDITORS. (1) Unless otherwise agreed, if delivered goods may be
9 returned by the buyer even though they conform to the contract, the transac-
10 tion is:
11 (a) aA "sale on approval" if the goods are delivered primarily for use,;
12 and
13 (b) aA "sale or return" if the goods are delivered primarily for resale.
14 (2) Except as provided in subsection (3), gGoods held on approval are not
15 subject to the claims of the buyer's creditors until acceptance; goods held on
16 sale or return are subject to such claims while in the buyer's possession.
17 (3) Where goods are delivered to a person for sale and such person main-
18 tains a place of business at which he deals in goods of the kind involved,
19 under a name other than the name of the person making delivery, then with
20 respect to claims of creditors of the person conducting the business the goods
21 are deemed to be on sale or return. The provisions of this subsection are
22 applicable even though an agreement purports to reserve title to the person
23 making delivery until payment or resale or uses such words as "on consignment"
24 or "on memorandum." However, this subsection is not applicable if the person
25 making delivery
26 (a) complies with an applicable law providing for a consignor's interest
27 or the like to be evidenced by a sign, or
28 (b) establishes that the person conducting the business is generally
29 known by his creditors to be substantially engaged in selling the goods of
30 others, or
31 (c) complies with the filing provisions of the chapter on Secured Trans-
32 actions (chapter 9).
33 (4) Any "or return" term of a contract for sale is to be treated as a sep-
34 arate contract for sale within the statute of frauds section of this chapter
35 (section 28-2-201) and as contradicting the sale aspect of the contract within
36 the provisions of this chapter on parol or extrinsic evidence (section
37 28-2-202).
38 SECTION 8. That Section 28-2-502, Idaho Code, be, and the same is hereby
39 amended to read as follows:
40 28-2-502. BUYER'S RIGHT TO GOODS ON SELLER'S REPUDIATION, FAILURE TO
41 DELIVER, OR INSOLVENCY. (1) Subject to subsections (2) and (3) and even though
42 the goods have not been shipped a buyer who has paid a part or all of the
43 price of goods in which he has a special property under the provisions of the
44 immediately preceding section 28-2-501, may on making and keeping good a ten-
45 der of any unpaid portion of their price recover them from the seller if:
46 (a) In the case of goods bought for personal, family or household pur-
47 poses, the seller repudiates or fails to deliver as required by the con-
48 tract; or
49 (b) In all cases, the seller becomes insolvent within ten (10) days after
50 receipt of the first instalment installment on their price.
51 (2) The buyer's right to recover the goods under subsection (1)(a) vests
93
1 upon acquisition of a special property, even if the seller had not then
2 repudiated or failed to deliver.
3 (3) If the identification creating his special property has been made by
4 the buyer he acquires the right to recover the goods only if they conform to
5 the contract for sale.
6 SECTION 9. That Section 28-2-716, Idaho Code, be, and the same is hereby
7 amended to read as follows:
8 28-2-716. BUYER'S RIGHT TO SPECIFIC PERFORMANCE OR CLAIM AND DELIVERY.
9 (1) Specific performance may be decreed where the goods are unique or in other
10 proper circumstances.
11 (2) The decree for specific performance may include such terms and condi-
12 tions as to payment of the price, damages, or other relief as the court may
13 deem just.
14 (3) The buyer has a right to maintain a claim and delivery action for
15 goods identified to the contract if after reasonable effort he is unable to
16 effect cover for such goods or the circumstances reasonably indicate that such
17 effort will be unavailing or if the goods have been shipped under reservation
18 and satisfaction of the security interest in them has been made or tendered.
19 In the case of goods bought for personal, family or household purposes, the
20 buyer's right of replevin vests upon acquisition of a special property, even
21 if the seller had not then repudiated or failed to deliver.
22 SECTION 10. That Section 28-4-210, Idaho Code, be, and the same is hereby
23 amended to read as follows:
24 28-4-210. SECURITY INTEREST OF COLLECTING BANK IN ITEMS, ACCOMPANYING
25 DOCUMENTS AND PROCEEDS. (1) A collecting bank has a security interest in an
26 item and any accompanying documents or the proceeds of either:
27 (a) iIn case of an item deposited in an account, to the extent to which
28 credit given for the item has been withdrawn or applied;
29 (b) iIn case of an item for which it has given credit available for with-
30 drawal as of right, to the extent of the credit given, whether or not the
31 credit is drawn upon or there is a right of charge-back; or
32 (c) iIf it makes an advance on or against the item.
33 (2) If credit given for several items received at one (1) time or pursu-
34 ant to a single agreement is withdrawn or applied in part, the security inter-
35 est remains upon all the items, any accompanying documents or the proceeds of
36 either. For the purpose of this section, credits first given are first with-
37 drawn.
38 (3) Receipt by a collecting bank of a final settlement for an item is a
39 realization on its security interest in the item, accompanying documents and
40 proceeds. So long as the bank does not receive final settlement for the item
41 or give up possession of the item or accompanying documents for purposes other
42 than collection, the security interest continues to that extent and is subject
43 to the provisions of chapter 9, title 28, Idaho Code, but:
44 (a) nNo security agreement is necessary to make the security interest
45 enforceable (section 28-9-203(1b)(3)(aA));
46 (b) nNo filing is required to perfect the security interest; and
47 (c) tThe security interest has priority over conflicting perfected secu-
48 rity interests in the item, accompanying documents or proceeds.
49 SECTION 11. That Chapter 5, Part 1, Title 28, Idaho Code, be, and the
50 same is hereby amended by the addition thereto of a NEW SECTION, to be known
94
1 and designated as Section 28-5-120, Idaho Code, and to read as follows:
2 28-5-120. SECURITY INTEREST OF ISSUER OR NOMINATED PERSON. (a) An issuer
3 or nominated person has a security interest in a document presented under a
4 letter of credit to the extent that the issuer or nominated person honors or
5 gives value for the presentation.
6 (b) So long as and to the extent that an issuer or nominated person has
7 not been reimbursed or has not otherwise recovered the value given with
8 respect to a security interest in a document under subsection (a) of this sec-
9 tion, the security interest continues and is subject to chapter 9, title 28,
10 Idaho Code, but:
11 (1) A security agreement is not necessary to make the security interest
12 enforceable under section 28-9-203(b)(3);
13 (2) If the document is presented in a medium other than a written or
14 other tangible medium, the security interest is perfected; and
15 (3) If the document is presented in a written or other tangible medium
16 and is not a certificated security, chattel paper, a document of title, an
17 instrument, or a letter of credit, the security interest is perfected and
18 has priority over a conflicting security interest in the document so long
19 as the debtor does not have possession of the document. This act applies
20 to a letter of credit that is issued on or after the effective date of
21 this act. This act does not apply to a transaction, event, obligation, or
22 duty arising out of or associated with a letter of credit that was issued
23 before the effective date of this act.
24 SECTION 12. That Section 28-7-503, Idaho Code, be, and the same is hereby
25 amended to read as follows:
26 28-7-503. DOCUMENT OF TITLE TO GOODS DEFEATED IN CERTAIN CASES. (1) A
27 document of title confers no right in goods against a person who before issu-
28 ance of the document had a legal interest or a perfected security interest in
29 them and who neither:
30 (a) dDelivered or entrusted them or any document of title covering them
31 to the bailor or his nominee with actual or apparent authority to ship,
32 store or sell or with power to obtain delivery under this chapter (section
33 28-7-403) or with power of disposition under this act (sections 28-2-403
34 and 28-9-30720) or other statute or rule of law; nor
35 (b) aAcquiesced in the procurement by the bailor or his nominee of any
36 document of title.
37 (2) Title to goods based upon an unaccepted delivery order is subject to
38 the rights of anyone to whom a negotiable warehouse receipt or bill of lading
39 covering the goods has been duly negotiated. Such a title may be defeated
40 under the next section 28-7-504, Idaho Code, to the same extent as the rights
41 of the issuer or a transferee from the issuer.
42 (3) Title to goods based upon a bill of lading issued to a freight for-
43 warder is subject to the rights of anyone to whom a bill issued by the freight
44 forwarder is duly negotiated; but delivery by the carrier in accordance with
45 Ppart 4 of this chapter pursuant to its own bill of lading discharges the
46 carrier's obligation to deliver.
47 SECTION 13. That Section 28-8-103, Idaho Code, be, and the same is hereby
48 amended to read as follows:
49 28-8-103. RULES FOR DETERMINING WHETHER CERTAIN OBLIGATIONS AND INTERESTS
50 ARE SECURITIES OR FINANCIAL ASSETS. (1) A share or similar equity interest
95
1 issued by a corporation, business trust, joint stock company or similar entity
2 is a security.
3 (2) An "investment company security" is a security. "Investment company
4 security" means a share or similar equity interest issued by an entity that is
5 registered as an investment company under the federal investment company laws,
6 an interest in a unit investment trust that is so registered, or a face-amount
7 certificate issued by a face-amount certificate company that is so registered.
8 Investment company security does not include an insurance policy or endowment
9 policy or annuity contract issued by an insurance company.
10 (3) An interest in a partnership or limited liability company is not a
11 security unless it is dealt in or traded on securities exchanges or in securi-
12 ties markets, its terms expressly provide that it is a security governed by
13 this chapter, or it is an investment company security. However, an interest
14 in a partnership or limited liability company is a financial asset if it is
15 held in a securities account.
16 (4) A writing that is a security certificate is governed by this chapter
17 and not by chapter 3, title 28, even though it also meets the requirements of
18 chapter 3, title 28. However, a negotiable instrument governed by chapter 3,
19 title 28, is a financial asset if it is held in a securities account.
20 (5) An option or similar obligation issued by a clearing corporation to
21 its participants is not a security, but is a financial asset.
22 (6) A commodity contract, as defined in section 28-9-11502(a)(15), is not
23 a security or a financial asset.
24 SECTION 14. That Section 28-8-106, Idaho Code, be, and the same is hereby
25 amended to read as follows:
26 28-8-106. CONTROL. (1) A purchaser has "control" of a certificated secu-
27 rity in bearer form if the certificated security is delivered to the pur-
28 chaser.
29 (2) A purchaser has "control" of a certificated security in registered
30 form if the certificated security is delivered to the purchaser, and:
31 (a) The certificate is indorsed to the purchaser or in blank by an effec-
32 tive indorsement; or
33 (b) The certificate is registered in the name of the purchaser, upon
34 original issue or registration of transfer by the issuer.
35 (3) A purchaser has "control" of an uncertificated security if:
36 (a) The uncertificated security is delivered to the purchaser; or
37 (b) The issuer has agreed that it will comply with instructions origi-
38 nated by the purchaser without further consent by the registered owner.
39 (4) A purchaser has "control" of a security entitlement if:
40 (a) The purchaser becomes the entitlement holder; or
41 (b) The securities intermediary has agreed that it will comply with enti-
42 tlement orders originated by the purchaser without further consent by the
43 entitlement holder; or
44 (c) Another person has control of the security entitlement on behalf of
45 the purchaser or, having previously acquired control of the security enti-
46 tlement, acknowledges that it has control on behalf of the purchaser.
47 (5) If an interest in a security entitlement is granted by the entitle-
48 ment holder to the entitlement holder's own securities intermediary, the secu-
49 rities intermediary has control.
50 (6) A purchaser who has satisfied the requirements of subsection (3)(b)
51 or (4)(b) of this section has control, even if the registered owner in the
52 case of subsection (3)(b) of this section, or the entitlement holder in the
53 case of subsection (4)(b) of this section, retains the right to make substitu-
96
1 tions for the uncertificated security or security entitlement, to originate
2 instructions or entitlement orders to the issuer or securities intermediary,
3 or otherwise to deal with the uncertificated security or security entitlement.
4 (7) An issuer or a securities intermediary may not enter into an agree-
5 ment of the kind described in subsection (3)(b) or (4)(b) of this section
6 without the consent of the registered owner or entitlement holder, but an
7 issuer or a securities intermediary is not required to enter into such an
8 agreement even though the registered owner or entitlement holder so directs.
9 An issuer or securities intermediary that has entered into such an agreement
10 is not required to confirm the existence of the agreement to another party
11 unless requested to do so by the registered owner or entitlement holder.
12 SECTION 15. That Section 28-8-110, Idaho Code, be, and the same is hereby
13 amended to read as follows:
14 28-8-110. APPLICABILITY AND CHOICE OF LAW. (1) The local law of the
15 issuer's jurisdiction, as specified in subsection (4) of this section, gov-
16 erns:
17 (a) The validity of a security;
18 (b) The rights and duties of the issuer with respect to registration of
19 transfer;
20 (c) The effectiveness of registration of transfer by the issuer;
21 (d) Whether the issuer owes any duties to an adverse claimant to a secu-
22 rity; and
23 (e) Whether an adverse claim can be asserted against a person to whom
24 transfer of a certificated or uncertificated security is registered or a
25 person who obtains control of an uncertificated security.
26 (2) The local law of the securities intermediary's jurisdiction, as spec-
27 ified in subsection (5) of this section, governs:
28 (a) Acquisition of a security entitlement from the securities intermedi-
29 ary;
30 (b) The rights and duties of the securities intermediary and entitlement
31 holder arising out of a security entitlement;
32 (c) Whether the securities intermediary owes any duties to an adverse
33 claimant to a security entitlement; and
34 (d) Whether an adverse claim can be asserted against a person who
35 acquires a security entitlement from the securities intermediary or a
36 person who purchases a security entitlement or interest therein from an
37 entitlement holder.
38 (3) The local law of the jurisdiction in which a security certificate is
39 located at the time of delivery governs whether an adverse claim can be
40 asserted against a person to whom the security certificate is delivered.
41 (4) "Issuer's jurisdiction" means the jurisdiction under which the issuer
42 of the security is organized or, if permitted by the law of that jurisdiction,
43 the law of another jurisdiction specified by the issuer. An issuer organized
44 under the law of this state may specify the law of another jurisdiction as the
45 law governing the matters specified in subsections (1)(b) through (1)(e) of
46 this section.
47 (5) The following rules determine a "securities intermediary's jurisdic-
48 tion" for purposes of this section:
49 (a) If an agreement between the securities intermediary and its entitle-
50 ment holder specifies that it is governed by the law of a particular
51 jurisdiction governing the securities account expressly provides that a
52 particular jurisdiction is the securities intermediary's jurisdiction for
53 purposes of this part, this chapter, or this act, that jurisdiction is the
97
1 securities intermediary's jurisdiction.
2 (b) If paragraph (a) of this subsection does not apply and an agreement
3 between the securities intermediary and its entitlement holder governing
4 the securities account expressly provides that the agreement is governed
5 by the law of a particular jurisdiction, that jurisdiction is the securi-
6 ties intermediary's jurisdiction.
7 (c) If neither paragraph (a) nor paragraph (b) of this section applies and
8 an agreement between the securities intermediary and its entitlement
9 holder does not specify the governing law as provided in paragraph (a) of
10 this subsection, but governing the securities account expressly specifies
11 provides that the securities account is maintained at an office in a par-
12 ticular jurisdiction, that jurisdiction is the securities intermediary's
13 jurisdiction.
14 (cd) If an agreement between the securities intermediary and its entitle-
15 ment holder does not specify a jurisdiction as provided in paragraph (a)
16 or (b) of this subsection none of the preceding paragraphs apply, the
17 securities intermediary's jurisdiction is the jurisdiction in which is
18 located the office identified in an account statement as the office serv-
19 ing the entitlement holder's account is located.
20 (de) If an agreement between the securities intermediary and its entitle-
21 ment holder does not specify a jurisdiction as provided in paragraph (a)
22 or (b) of this subsection, and an account statement does not identify an
23 office serving the entitlement holder's account as provided in paragraph
24 (c) of this subsection none of the preceding paragraphs apply, the securi-
25 ties intermediary's jurisdiction is the jurisdiction in which is located
26 the chief executive office of the securities intermediary is located.
27 (6) A securities intermediary's jurisdiction is not determined by the
28 physical location of certificates representing financial assets, or by the
29 jurisdiction in which is organized the issuer of the financial asset with
30 respect to which an entitlement holder has a security entitlement, or by the
31 location of facilities for data processing or other record keeping recordkeep-
32 ing concerning the account.
33 SECTION 16. That Section 28-8-301, Idaho Code, be, and the same is hereby
34 amended to read as follows:
35 28-8-301. DELIVERY. (1) Delivery of a certificated security to a pur-
36 chaser occurs when:
37 (a) The purchaser acquires possession of the security certificate;
38 (b) Another person, other than a securities intermediary, either acquires
39 possession of the security certificate on behalf of the purchaser or, hav-
40 ing previously acquired possession of the certificate, acknowledges that
41 it holds for the purchaser; or
42 (c) A securities intermediary acting on behalf of the purchaser acquires
43 possession of the security certificate, only if the certificate is in reg-
44 istered form and has been is: (i) registered in the name of the purchaser,
45 (ii) payable to the order of the purchaser, or (iii) specially indorsed to
46 the purchaser by an effective indorsement and has not been indorsed to the
47 securities intermediary or in blank.
48 (2) Delivery of an uncertificated security to a purchaser occurs when:
49 (a) The issuer registers the purchaser as the registered owner, upon
50 original issue or registration of transfer; or
51 (b) Another person, other than a securities intermediary, either becomes
52 the registered owner of the uncertificated security on behalf of the pur-
53 chaser or, having previously become the registered owner, acknowledges
98
1 that it holds for the purchaser.
2 SECTION 17. That Section 28-8-302, Idaho Code, be, and the same is hereby
3 amended to read as follows:
4 28-8-302. RIGHTS OF PURCHASER. (1) Except as otherwise provided in sub-
5 sections (2) and (3) of this section, upon delivery a purchaser of a certifi-
6 cated or uncertificated security to a purchaser, the purchaser acquires all
7 rights in the security that the transferor had or had power to transfer.
8 (2) A purchaser of a limited interest acquires rights only to the extent
9 of the interest purchased.
10 (3) A purchaser of a certificated security who as a previous holder had
11 notice of an adverse claim does not improve its position by taking from a pro-
12 tected purchaser.
13 SECTION 18. That Section 28-8-510, Idaho Code, be, and the same is hereby
14 amended to read as follows:
15 28-8-510. RIGHTS OF PURCHASER OF SECURITY ENTITLEMENT FROM ENTITLEMENT
16 HOLDER. (1) In a case not covered by the priority rules in chapter 9, title
17 28, Idaho Code, or the rules stated in subsection (3) of this section, aAn
18 action based on an adverse claim to a financial asset or security entitlement,
19 whether framed in conversion, replevin, constructive trust, equitable lien, or
20 other theory, may not be asserted against a person who purchases a security
21 entitlement, or an interest therein, from an entitlement holder if the pur-
22 chaser gives value, does not have notice of the adverse claim, and obtains
23 control.
24 (2) If an adverse claim could not have been asserted against an entitle-
25 ment holder under section 28-8-502, the adverse claim cannot be asserted
26 against a person who purchases a security entitlement, or an interest therein,
27 from the entitlement holder.
28 (3) In a case not covered by the priority rules in chapter 9, title 28,
29 Idaho Code, a purchaser for value of a security entitlement, or an interest
30 therein, who obtains control has priority over a purchaser of a security enti-
31 tlement, or an interest therein, who does not obtain control. Except as other-
32 wise provided in subsection (4) of this section, pPurchasers who have control
33 rank equally, except that a according to priority in time of:
34 (a) The purchaser's becoming the person for whom the securities account,
35 in which the security entitlement is carried, is maintained, if the pur-
36 chaser obtained control under section 28-8-106(4)(a);
37 (b) The securities intermediary's agreement to comply with the
38 purchaser's entitlement orders with respect to security entitlements car-
39 ried or to be carried in the securities account in which the security
40 entitlement is carried, if the purchaser obtained control under section
41 28-8-106(4)(b); or
42 (c) If the purchaser obtained control through another person under sec-
43 tion 28-8-106(4)(c), the time on which priority would be based under this
44 subsection if the other person were the secured party.
45 (4) A securities intermediary as purchaser has priority over a conflict-
46 ing purchaser who has control unless otherwise agreed by the securities inter-
47 mediary.
48 SECTION 19. That Section 28-12-103, Idaho Code, be, and the same is
49 hereby amended to read as follows:
99
1 28-12-103. DEFINITIONS AND INDEX OF DEFINITIONS. (1) In this chapter
2 unless the context otherwise requires:
3 (a) "Buyer in ordinary course of business" means a person who in good
4 faith and without knowledge that the sale to him is in violation of the
5 ownership rights or security interest or leasehold interest of a third
6 party in the goods, buys in ordinary course from a person in the business
7 of selling goods of that kind but does not include a pawnbroker. "Buying"
8 may be for cash or by exchange of other property or on secured or unse-
9 cured credit and includes receiving goods or documents of title under a
10 pre-existing preexisting contract for sale but does not include a transfer
11 in bulk or as security for or in total or partial satisfaction of a money
12 debt.
13 (b) "Cancellation" occurs when either party puts an end to the lease con-
14 tract for default by the other party.
15 (c) "Commercial unit" means such a unit of goods as by commercial usage
16 is a single whole for purposes of lease and division of which materially
17 impairs its character or value on the market or in use. A commercial unit
18 may be a single article, as a machine, or a set of articles, as a suite of
19 furniture or a line of machinery, or a quantity, as a gross or carload, or
20 any other unit treated in use or in the relevant market as a single whole.
21 (d) "Conforming" goods or performance under a lease contract means goods
22 or performance that are in accordance with the obligations under the lease
23 contract.
24 (e) "Consumer lease" means a lease that a lessor regularly engaged in the
25 business of leasing or selling makes to a lessee who is an individual and
26 who takes under the lease primarily for a personal, family or household
27 purpose, if the total payments to be made under the lease contract,
28 excluding payments for options to renew or buy, do not exceed twenty-five
29 thousand dollars ($25,000).
30 (f) "Fault" means wrongful act, omission, breach or default.
31 (g) "Finance lease" means a lease with respect to which:
32 (i) The lessor does not select, manufacture, or supply the goods;
33 (ii) The lessor acquires the goods or the right to possession and
34 use of the goods in connection with the lease; and
35 (iii) One of the following occurs:
36 (A) The lessee receives a copy of the contract by which the
37 lessor acquired the goods or the right to possession and use of
38 the goods before signing the lease contract;
39 (B) The lessee's approval of the contract by which the lessor
40 acquired the goods or the right to possession and use of the
41 goods is a condition to effectiveness of the lease contract;
42 (C) The lessee, before signing the lease contract, receives an
43 accurate and complete statement designating the promises and
44 warranties, and any disclaimers of warranties, limitations or
45 modifications of remedies, or liquidated damages, including
46 those of a third party, such as the manufacturer of the goods,
47 provided to the lessor by the person supplying the goods in con-
48 nection with or as part of the contract by which the lessor
49 acquired the goods or the right to possession and use of the
50 goods; or
51 (D) If the lease is not a consumer lease, the lessor, before
52 the lessee signs the lease contract, informs the lessee in writ-
53 ing:
54 a. Of the identity of the person supplying the goods to
55 the lessor, unless the lessee has selected that person and
100
1 directed the lessor to acquire the goods or the right to
2 possession and use of the goods from that person;
3 b. That the lessee is entitled under this article chapter
4 to the promises and warranties, including those of any
5 third party, provided to the lessor by the person supplying
6 the goods in connection with or as part of the contract by
7 which the lessor acquired the goods or the right to posses-
8 sion and use of the goods; and
9 c. That the lessee may communicate with the person supply-
10 ing the goods to the lessor and receive an accurate and
11 complete statement of those promises and warranties,
12 including any disclaimers and limitations of them or of
13 remedies.
14 (h) "Goods" means all things that are movable at the time of identifica-
15 tion to the lease contract, or are fixtures (section 28-12-309), but the
16 term does not include money, documents, instruments, accounts, chattel
17 paper, general intangibles, or minerals or the like, including oil and
18 gas, before extraction. The term also includes the unborn young of ani-
19 mals.
20 (i) "Installment lease contract" means a lease contract that authorizes
21 or requires the delivery of goods in separate lots to be separately
22 accepted, even though the lease contract contains a clause "each delivery
23 is a separate lease" or its equivalent.
24 (j) "Lease" means a transfer of the right to possession and use of goods
25 for a term in return for consideration, but a sale, including a sale on
26 approval or a sale or return, or retention or creation of a security
27 interest is not a lease. Unless the context clearly indicates otherwise,
28 the term includes a sublease.
29 (k) "Lease agreement" means the bargain, with respect to the lease, of
30 the lessor and the lessee in fact as found in their language or by impli-
31 cation from other circumstances including course of dealing or usage of
32 trade or course of performance as provided in this chapter. Unless the
33 context clearly indicates otherwise, the term includes a sublease agree-
34 ment.
35 (l) "Lease contract" means the total legal obligation that results from
36 the lease agreement as affected by this chapter and any other applicable
37 rules of law. Unless the context clearly indicates otherwise, the term
38 includes a sublease contract.
39 (m) "Leasehold interest" means the interest of the lessor or the lessee
40 under a lease contract.
41 (n) "Lessee" means a person who acquires the right to possession and use
42 of goods under a lease. Unless the context clearly indicates otherwise,
43 the term includes a sublessee.
44 (o) "Lessee in ordinary course of business" means a person who in good
45 faith and without knowledge that the lease to him is in violation of the
46 ownership rights or security interest or leasehold interest of a third
47 party in the goods leases in ordinary course from a person in the business
48 of selling or leasing goods of that kind but does not include a pawnbro-
49 ker. "Leasing" may be for cash or by exchange of other property or on
50 secured or unsecured credit and includes receiving goods or documents of
51 title under a pre-existing preexisting lease contract but does not include
52 a transfer in bulk or as security for or in total or partial satisfaction
53 of a money debt.
54 (p) "Lessor" means a person who transfers the right to possession and use
55 of goods under a lease. Unless the context clearly indicates otherwise,
101
1 the term includes a sublessor.
2 (q) "Lessor's residual interest" means the lessor's interest in the goods
3 after expiration, termination or cancellation of the lease contract.
4 (r) "Lien" means a charge against or interest in goods to secure payment
5 of a debt or performance of an obligation, but the term does not include a
6 security interest.
7 (s) "Lot" means a parcel or a single article that is the subject matter
8 of a separate lease or delivery, whether or not it is sufficient to per-
9 form the lease contract.
10 (t) "Merchant lessee" means a lessee that is a merchant with respect to
11 goods of the kind subject to the lease.
12 (u) "Present value" means the amount as of a date certain of one (1) or
13 more sums payable in the future, discounted to the date certain. The dis-
14 count is determined by the interest rate specified by the parties if the
15 rate was not manifestly unreasonable at the time the transaction was
16 entered into; otherwise, the discount is determined by a commercially rea-
17 sonable rate that takes into account the facts and circumstances of each
18 case at the time the transaction was entered into.
19 (v) "Purchase" includes taking by sale, lease, mortgage, security inter-
20 est, pledge, gift or any other voluntary transaction creating an interest
21 in goods.
22 (w) "Sublease" means a lease of goods the right to possession and use of
23 which was acquired by the lessor as a lessee under an existing lease.
24 (x) "Supplier" means a person from whom a lessor buys or leases goods to
25 be leased under a finance lease.
26 (y) "Supply contract" means a contract under which a lessor buys or
27 leases goods to be leased.
28 (z) "Termination" occurs when either party pursuant to a power created by
29 agreement or law puts an end to the lease contract otherwise than for
30 default.
31 (2) Other definitions applying to this chapter and the sections in which
32 they appear are:
33 "Accessions." Section 28-12-310(1).
34 "Construction mortgage." Section 28-12-309(1)(d).
35 "Encumbrance." Section 28-12-309(1)(e).
36 "Fixtures." Section 28-12-309(1)(a).
37 "Fixture filing." Section 28-12-309(1)(b).
38 "Purchase money lease." Section 28-12-309(1)(c).
39 (3) The following definitions in other chapters apply to this chapter:
40 "Account." Section 28-9-1062(a)(2).
41 "Between merchants." Section 28-2-104(3).
42 "Buyer." Section 28-2-103(1)(a).
43 "Chattel paper." Section 28-9-1052(1a)(b11).
44 "Consumer goods." Section 28-9-1092(1a)(23).
45 "Document." Section 28-9-1052(1a)(f30).
46 "Entrusting." Section 28-2-403(3).
47 "General intangibles." Section 28-9-1062(a)(42).
48 "Good faith." Section 28-1-201(19).
49 "Instrument." Section 28-9-1052(1a)(i47).
50 "Merchant." Section 28-2-104(1).
51 "Mortgage." Section 28-9-1052(1a)(j55).
52 "Pursuant to commitment." Section 28-9-1052(1a)(k68).
53 "Receipt." Section 28-2-103(1)(c).
54 "Sale." Section 28-2-106(1).
55 "Sale on approval." Section 28-2-326.
102
1 "Sale or return." Section 28-2-326.
2 "Seller." Section 28-2-103(1)(d).
3 (4) In addition, chapter 1 contains general definitions and principles of
4 construction and interpretation applicable throughout this chapter.
5 SECTION 20. That Section 28-12-303, Idaho Code, be, and the same is
6 hereby amended to read as follows:
7 28-12-303. ALIENABILITY OF PARTY'S INTEREST UNDER LEASE CONTRACT OR OR OF
8 LESSOR'S RESIDUAL INTEREST IN GOODS -- DELEGATION OF PERFORMANCE -- TRANSFER
9 OF RIGHTS. (1) As used in this section, "creation of a security interest"
10 includes the sale of a lease contract that is subject to chapter 9, title 28,
11 Idaho Code, secured transactions, by reason of section 28-9-1029(1a)(b3).
12 (2) Except as provided in subsections (3) and (4) of this section and
13 section 28-9-407, a provision in a lease agreement which: (i) prohibits the
14 voluntary or involuntary transfer, including a transfer by sale, sublease,
15 creation or enforcement of a security interest, or attachment, levy, or other
16 judicial process, of an interest of a party under the lease contract or of the
17 lessor's residual interest in the goods, or (ii) makes such a transfer an
18 event of default, gives rise to the rights and remedies provided in subsection
19 (54) of this section, but a transfer that is prohibited or is an event of
20 default under the lease agreement is otherwise effective.
21 (3) A provision in a lease agreement which (i) prohibits the creation or
22 enforcement of a security interest in an interest of a party under the lease
23 contract or in the lessor's residual interest in the goods, or (ii) makes such
24 a transfer an event of default, is not enforceable unless, and then only to
25 the extent that, there is an actual transfer by the lessee of the lessee's
26 right of possession or use of the goods in violation of the provision or an
27 actual delegation of a material performance of either party to the lease con-
28 tract in violation of the provision. Neither the granting nor the enforcement
29 of a security interest in (i) the lessor's interest under the lease contract
30 or (ii) the lessor's residual interest in the goods is a transfer that materi-
31 ally impairs the prospect of obtaining return performance by, materially
32 changes the duty of, or materially increases the burden or risk imposed on,
33 the lessee within the purview of subsection (5) of this section unless, and
34 then only to the extent that, there is an actual delegation of a material per-
35 formance of the lessor.
36 (4) A provision in a lease agreement which: (i) prohibits a transfer of a
37 right to damages for default with respect to the whole lease contract or of a
38 right to payment arising out of the transferor's due performance of the
39 transferor's entire obligation, or (ii) makes such a transfer an event of
40 default, is not enforceable, and such a transfer is not a transfer that mate-
41 rially impairs the prospect of obtaining return performance by, materially
42 changes the duty of, or materially increases the burden or risk imposed on,
43 the other party to the lease contract within the purview of subsection (54) of
44 this section.
45 (54) Subject to the provisions of subsections (3) and (4) of this section
46 and section 28-9-407:
47 (a) If a transfer is made which is made an event of default under a lease
48 agreement, the party to the lease contract not making the transfer, unless
49 that party waives the default or otherwise agrees, has the rights and
50 remedies described in section 28-12-501(2);
51 (b) If paragraph (a) of this subsection is not applicable and if a trans-
52 fer is made that: (i) is prohibited under a lease agreement or (ii) mate-
53 rially impairs the prospect of obtaining return performance by, materially
103
1 changes the duty of, or materially increases the burden or risk imposed
2 on, the other party to the lease contract, unless the party not making the
3 transfer agrees at any time to the transfer in the lease contract or
4 otherwise, then, except as limited by contract, (i) the transferor is lia-
5 ble to the party not making the transfer for damages caused by the trans-
6 fer to the extent that the damages could not reasonably be prevented by
7 the party not making the transfer and (ii) a court having jurisdiction may
8 grant other appropriate relief, including cancellation of the lease con-
9 tract or an injunction against the transfer.
10 (65) A transfer of "the lease" or of "all my rights under the lease,", or
11 a transfer in similar general terms, is a transfer of rights and, unless the
12 language or the circumstances, as in a transfer for security, indicate the
13 contrary, the transfer is a delegation of duties by the transferor to the
14 transferee. Acceptance by the transferee constitutes a promise by the trans-
15 feree to perform those duties. The promise is enforceable by either the trans-
16 feror or the other party to the lease contract.
17 (76) Unless otherwise agreed by the lessor and the lessee, a delegation
18 of performance does not relieve the transferor as against the other party of
19 any duty to perform or of any liability for default.
20 (87) In a consumer lease, to prohibit the transfer of an interest of a
21 party under the lease contract or to make a transfer an event of default, the
22 language must be specific, by a writing, and conspicuous.
23 SECTION 21. That Section 28-12-307, Idaho Code, be, and the same is
24 hereby amended to read as follows:
25 28-12-307. PRIORITY OF LIENS ARISING BY ATTACHMENT OR LEVY ON, SECURITY
26 INTERESTS IN, AND OTHER CLAIMS TO GOODS. (1) Except as otherwise provided in
27 section 28-12-306, a creditor of a lessee takes subject to the lease contract.
28 (2) Except as otherwise provided in subsections (3) and (4) of this sec-
29 tion and in sections 28-12-306 and 28-12-308, a creditor of a lessor takes
30 subject to the lease contract unless:
31 (a) Tthe creditor holds a lien that attached to the goods before the
32 lease contract became enforceable;
33 (b) The creditor holds a security interest in the goods and the lessee
34 did not give value and receive delivery of the goods without knowledge of
35 the security interest; or
36 (c) The creditor holds a security interest in the goods which was per-
37 fected (section 28-9-303) before the lease contract became enforceable.
38 (3) A lessee in the ordinary course of business takes the leasehold
39 interest free of a security interest in the goods created by the lessor even
40 though the security interest is perfected (section 28-9-303) and the lessee
41 knows of its existence.
42 (4) A lessee other than a lessee in the ordinary course of business takes
43 the leasehold interest free of a security interest to the extent that it
44 secures future advances made after the secured party acquires knowledge of the
45 lease or more than forty-five (45) days after the lease contract becomes
46 enforceable, whichever first occurs, unless the future advances are made pur-
47 suant to a commitment entered into without knowledge of the lease and before
48 the expiration of the forty-five (45) day period.
49 (3) Except as otherwise provided in sections 28-9-317, 28-9-321 and
50 28-9-323, a lessee takes a leasehold interest subject to a security interest
51 held by a creditor of the lessor.
52 SECTION 22. That Section 28-12-309, Idaho Code, be, and the same is
104
1 hereby amended to read as follows:
2 28-12-309. LESSOR'S AND LESSEE'S RIGHTS WHEN GOODS BECOME FIXTURES. (1)
3 In this section:
4 (a) Goods are "fixtures" when they become so related to particular real
5 estate that an interest in them arises under real estate law;
6 (b) A "fixture filing" is the filing, in the office where a record of a
7 mortgage on the real estate would be filed or recorded, of a financing
8 statement covering goods that are or are to become fixtures and conforming
9 to the requirements of section 28-9-4502(5a) and (b);
10 (c) A lease is a "purchase money lease" unless the lessee has possession
11 or use of the goods or the right to possession or use of the goods before
12 the lease agreement is enforceable;
13 (d) A mortgage is a "construction mortgage" to the extent it secures an
14 obligation incurred for the construction of an improvement on land includ-
15 ing the acquisition cost of the land, if the recorded writing so indi-
16 cates; and
17 (e) "Encumbrance" includes real estate mortgages and other liens on real
18 estate and all other rights in real estate that are not ownership inter-
19 ests.
20 (2) Under this chapter a lease may be of goods that are fixtures or may
21 continue in goods that become fixtures, but no lease exists under this chapter
22 of ordinary building materials incorporated into an improvement on land.
23 (3) The provisions of this chapter do not prevent creation of a lease of
24 fixtures pursuant to real estate law.
25 (4) The perfected interest of a lessor of fixtures has priority over a
26 conflicting interest of an encumbrancer or owner of the real estate if:
27 (a) The lease is a purchase money lease, the conflicting interest of the
28 encumbrancer or owner arises before the goods become fixtures, the inter-
29 est of the lessor is perfected by a fixture filing before the goods
30 become fixtures or within ten (10) days thereafter, and the lessee has an
31 interest of record in the real estate or is in possession of the real
32 estate; or
33 (b) The interest of the lessor is perfected by a fixture filing before
34 the interest of the encumbrancer or owner is of record, the lessor's
35 interest has priority over any conflicting interest of a predecessor in
36 title of the encumbrancer or owner, and the lessee has an interest of
37 record in the real estate or is in possession of the real estate.
38 (5) The interest of a lessor of fixtures, whether or not perfected, has
39 priority over the conflicting interest of an encumbrancer or owner of the real
40 estate if:
41 (a) The fixtures are readily removable factory or office machines,
42 readily removable equipment that is not primarily used or leased for use
43 in the operation of the real estate, or readily removable replacements of
44 domestic appliances that are goods subject to a consumer lease, and before
45 the goods become fixtures the lease contract is enforceable; or
46 (b) The conflicting interest is a lien on the real estate obtained by
47 legal or equitable proceedings after the lease contract is enforceable; or
48 (c) The encumbrancer or owner has consented in writing to the lease or
49 has disclaimed an interest in the goods as fixtures; or
50 (d) The lessee has a right to remove the goods as against the encum-
51 brancer or owner. If the lessee's right to remove terminates, the priority
52 of the interest of the lessor continues for a reasonable time.
53 (6) Notwithstanding the provisions of subsection (4)(a) of this section
54 but otherwise subject to the provisions of subsections (4) and (5) of this
105
1 section, the interest of a lessor of fixtures, including the lessor's residual
2 interest, is subordinate to the conflicting interest of an encumbrancer of the
3 real estate under a construction mortgage recorded before the goods become
4 fixtures if the goods become fixtures before the completion of the construc-
5 tion. To the extent given to refinance a construction mortgage, the conflict-
6 ing interest of an encumbrancer of the real estate under a mortgage has this
7 priority to the same extent as the encumbrancer of the real estate under the
8 construction mortgage.
9 (7) In cases not within the preceding subsections, priority between the
10 interest of a lessor of fixtures, including the lessor's residual interest,
11 and the conflicting interest of an encumbrancer or owner of the real estate
12 who is not the lessee is determined by the priority rules governing conflict-
13 ing interests in real estate.
14 (8) If the interest of a lessor of fixtures, including the lessor's
15 residual interest, has priority over all conflicting interests of all owners
16 and encumbrancers of the real estate, the lessor or the lessee may: (i) on
17 default, expiration, termination, or cancellation of the lease agreement but
18 subject to the lease agreement and this chapter, or (ii) if necessary to
19 enforce his other rights and remedies of the lessor or lessee under this chap-
20 ter, remove the goods from the real estate, free and clear of all conflicting
21 interests of all owners and encumbrancers of the real estate, but the lessor
22 or lessee must reimburse any encumbrancer or owner of the real estate who is
23 not the lessee and who has not otherwise agreed for the cost of repair of any
24 physical injury, but not for any diminution in value of the real estate caused
25 by the absence of the goods removed or by any necessity of replacing them. A
26 person entitled to reimbursement may refuse permission to remove until the
27 party seeking removal gives adequate security for the performance of this
28 obligation.
29 (9) Even though the lease agreement does not create a security interest,
30 the interest of a lessor of fixtures, including the lessor's residual inter-
31 est, is perfected by filing a financing statement as a fixture filing for
32 leased goods that are or are to become fixtures in accordance with the rele-
33 vant provisions of the chapter on secured transactions (chapter 9, title 28,
34 Idaho Code).
35 SECTION 23. That Chapter 3, Title 45, Idaho Code, be, and the same is
36 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
37 ignated as Section 45-318, Idaho Code, and to read as follows:
38 45-318. APPLICABILITY OF UNIFORM COMMERCIAL CODE. The liens provided for
39 by this chapter are "agricultural liens" as defined in section 28-9-102, Idaho
40 Code. The perfection, effect of perfection or nonperfection, and priority of
41 the liens provided by this chapter are governed by uniform commercial code
42 article 9, secured transactions (chapter 9, title 28, Idaho Code). In the
43 event of any conflict between the provisions of this chapter relating to per-
44 fection, the effect of perfection or nonperfection and the priority of any
45 lien provided by this chapter and the provisions of chapter 9, title 28, Idaho
46 Code, relating to those same issues, the provisions of chapter 9, title 28,
47 Idaho Code, shall prevail.
48 SECTION 24. That Section 8-506A, Idaho Code, be, and the same is hereby
49 amended to read as follows:
50 8-506A. ATTACHMENT OF A DEBTOR'S INTEREST IN PERSONAL PROPERTY SUBJECT TO
51 SECURITY AGREEMENT -- ATTACHMENT OF DEFENDANT'S INTEREST IN MORTGAGE OR TRUST
106
1 DEED -- ATTACHMENT OF DEFENDANT'S INTEREST IN SECURITY AGREEMENT. Personal
2 property subject to a security interest, a defendant's equity of redemption in
3 personal property and a defendant's interest in a real estate mortgage or deed
4 of trust or as secured party under a security agreement may be attached by the
5 following methods, and no other:
6 (a) Personal property capable of manual delivery may be attached by tak-
7 ing possession, provided all secured parties with a perfected security inter-
8 est therein under the Idaho Uuniform Ccommercial Ccode consent thereto in
9 writing, and the attachment shall be subject to the rights of any secured
10 party under a perfected security agreement, but otherwise would be to the same
11 effect and in the same manner as if the property were not subject to the secu-
12 rity agreement.
13 (b) If any secured party with a perfected security interest does not con-
14 sent in writing that the sheriff take possession of the personal property, the
15 attaching creditor must pay or tender to the secured party the amount due on
16 the security agreement before the officer may take the property into posses-
17 sion. The attaching creditor upon so redeeming shall be subrogated to the
18 rights of the secured party under the security agreement, and the secured
19 party shall, upon payment or tender assign the security agreement, note or
20 notes so paid, and any filed financing statements to the attaching creditor.
21 Upon any sale by judicial proceedings, any amounts owing to the attaching
22 creditor on the security agreement so redeemed, with lawful interest thereon,
23 shall first be paid to the attaching creditor.
24 (c) If the attaching creditor so elects and instructs the sheriff, the
25 equity of redemption of the defendant in the personal property subject to a
26 perfected security agreement shall be attached. Such attachment is made by
27 serving upon the secured party, upon the defendant, and upon the person in
28 possession of the property, if other than the defendant or secured party, if
29 said parties can be found within the county where the property is situated, a
30 copy of the writ of attachment, together with a notice signed by the sheriff,
31 describing the property attached, giving the name of the secured party, and
32 stating the interest of the defendant in the property attached, and by causing
33 the notice to be filed in the office where a security agreement or financing
34 statement on said property should be filed to perfect the security according
35 to the Idaho Uuniform Ccommercial Ccode or other applicable law. The sheriff
36 shall make the filing by mail if in an office outside his county, and shall
37 also file with the notice in any office where a financing statement should be
38 filed for the property, a financing statement describing the property
39 attached, the prior security agreement, and signed by the attaching creditor
40 or his agent as secured party and for the defendant as debtor by the sheriff.
41 The filing officer shall receive and file the financing statement and index
42 the same pursuant to part 5, chapter 9, title 28, chapter 9, part 4, Idaho
43 Code. Service and filing as above provided shall operate as an attachment of
44 the property described in the notice, subject to the prior rights of the
45 secured party under the security agreement; possession of the property shall
46 not be taken by the sheriff. Compliance with the foregoing is constructive
47 notice to the world of the attachment. Provided, however, that this section
48 shall not be constructive notice to a bona fide purchaser for value of any
49 motor vehicle who has actual or constructive possession of the vehicle and who
50 has relied on the certificate of title for determination by said purchaser as
51 to secured parties shown thereon; nothing in this section shall relieve any
52 person from complying with section 49-504, Idaho Code.
53 When the sale of such property attached under this subdivision (c) is made
54 on writ of execution obtained by such creditor, the proceeds must be applied
55 as in the case of any other execution sale. The purchaser at any such sale
107
1 acquires all title and rights of the judgment debtor in the property sold, as
2 of the time the attachment was levied, subject to the perfected security
3 agreement including all liens if any thereunder, securing obligations to be
4 created after the security agreement was made in cases where such obligations
5 have actually been created, and are by law entitled to priority over attaching
6 creditors, and is entitled to the possession of such property subject, how-
7 ever, to the rights of the secured party.
8 Any transfer of encumbrance of the attached interest of the debtor-
9 defendant is void as against the attaching creditor, but this provision shall
10 not be construed as forbidding or invalidating any transfer or disposition of
11 the property lawfully made pursuant to the prior security agreement, or any
12 other right exercised or acquired thereunder.
13 (d) Any interest of the defendant as mortgagee of a real estate mortgage
14 or beneficiary of a trust deed on real estate whether held directly or as an
15 assignee, may be attached. The sheriff must record with the county recorder
16 where the real property is located a copy of the writ along with a notice in
17 writing, naming the defendant, describing the real property, and identifying
18 the recording information on the real estate mortgage or trust deed, and stat-
19 ing that the defendant's interest therein is attached, and by serving copies
20 of the notice and writ upon the defendant and upon the mortgagor of the mort-
21 gage or trustor of the trust deed if they can be located within the county
22 where the property is located. The recorder shall index the same as an assign-
23 ment of the defendant's interest in the mortgage or deed of trust, and it
24 shall be constructive notice to the world of the attachment. The attachment
25 shall be subject to the rights of a holder in due course of a note or notes
26 secured by the mortgage or trust deed, whether acquired before or after the
27 attachment.
28 (e) Any interest of the defendant as secured party of a security agree-
29 ment, whether held directly or as an assignee, shall be attached by the sher-
30 iff filing with the filing office where the security agreement or financing
31 statement pursuant thereto is or should by law be filed, a copy of the writ
32 along with a notice in writing, naming the defendant, describing the property
33 listed in the financing statement or filed security statement, identifying the
34 parties to the security agreement, and stating that the defendant's interest
35 therein is attached. The sheriff shall serve a copy of the notice and writ
36 upon the defendant and upon the debtor under the security agreement, if they
37 can be located within the county where the property is located. The sheriff
38 may file the copy of the writ or notice by mail if the filing officer is out-
39 side the county. The filing officer shall index the same as an assignment of
40 the defendant's interest in the security agreements, and it shall be construc-
41 tive notice to the world. The attachment shall be subject to the rights of a
42 holder in due course of a note or notes secured by the security agreement,
43 whether acquired before or after the attachment.
44 SECTION 25. That Section 31-2402, Idaho Code, be, and the same is hereby
45 amended to read as follows:
46 31-2402. INSTRUMENTS TO BE RECORDED. He must, upon the payment of his
47 fees for the same, record separately, in large and well-bound separate books,
48 in legible handwriting, typewriting or by photographic reproduction:
49 1. Deeds, grants, transfers and mortgages of real estate, releases of
50 mortgages, powers of attorney to convey real estate and leases which have been
51 acknowledged or proved and transcripts of judgments or decrees which affect
52 the title or possession of real property, including water rights, any part of
53 which is situate in the county of which the person is the recorder.
108
1 2. Certificates of marriage and marriage contracts.
2 3. Wills admitted to probate.
3 4. Official bonds.
4 5. Notices of mechanics' liens.
5 6. Transcripts of judgments which by law are made liens upon real estate.
6 7. Notices of attachments upon real estate.
7 8. Notices of the pendency of an action affecting real estate, the title
8 thereto or possession thereof.
9 9. Instruments describing or relating to the separate property of married
10 women.
11 10. Notices of preemption claims.
12 11. Certified copies of any petitions, with the schedules omitted, filed
13 in, and certified copies of any order or decree made or entered in, any pro-
14 ceeding under the Nnational Bbankruptcy Aact.
15 12. Financing statements under the Uuniform Ccommercial Ccode which cover
16 timber to be cut, minerals or the like (including oil and gas), accounts sub-
17 ject to subsection (5) of pursuant to section 28-9-103301, Idaho Code, or fix-
18 tures.
19 13. Notice of order of a general adjudication in conformance with section
20 42-1408A, Idaho Code.
21 14. Such other writings as are required or permitted by law to be
22 recorded.
23 SECTION 26. That Section 45-1909, Idaho Code, be, and the same is hereby
24 amended to read as follows:
25 45-1909. DUTIES OF SECRETARY OF STATE. (1) The secretary of state shall
26 maintain notices of state lien in his information management system in a form
27 that permits them to be reduced to written form.
28 (2) The secretary of state will provide information concerning state
29 liens on the same conditions and in the same form as he provides information
30 on financing statements pursuant to subsections (2) and (7) of section
31 28-9-407523, Idaho Code.
32 (3) The secretary of state will compile and publish a list of all effec-
33 tive notices of state lien which the filing agencies have identified as per-
34 taining to debtors who are agricultural producers. The list will be published
35 on the same schedule and conditions as the list of liens in farm crops which
36 is published pursuant to section 45-312, Idaho Code. The list of notices of
37 state lien may be appended to the list of liens in farm crops, and no fee
38 shall be charged in addition to the fee for the list of liens in farm crops.
39 Failure of a filing agency to identify a debtor as an agricultural producer
40 shall not adversely affect perfection of a state lien for any purpose.
41 SECTION 27. That Section 49-120, Idaho Code, be, and the same is hereby
42 amended to read as follows:
43 49-120. DEFINITIONS -- S.
44 (1) "Saddlemount combination" means a combination of vehicles in which a
45 truck or truck tractor tows one (1), two (2) or three (3) trucks or truck
46 tractors, each connected by a saddle to the frame or fifth wheel of the vehi-
47 cle in front of it. The saddle is a mechanism that connects the front axle of
48 the towed vehicle to the frame or fifth wheel of the vehicle in front and
49 functions like a fifth wheel kingpin connection. A smaller vehicle mounted
50 completely on the frame of either the first or last vehicle may be used in a
51 saddlemount combination.
109
1 (2) "Safety glazing materials" means glazing materials so constructed,
2 treated or combined with other materials as to reduce substantially, in com-
3 parison with ordinary sheet glass or plate glass, the likelihood of injury to
4 persons by objects from exterior sources or by these safety glazing materials
5 when they may be cracked or broken.
6 (3) "Safety zone" means the area or space officially set apart within a
7 highway for the exclusive use of pedestrians and which is protected or is so
8 marked or indicated by adequate signs as to be plainly visible at all times
9 while set apart as a safety zone.
10 (4) "Salvage pool" means a licensed vehicle dealer engaged primarily in
11 the business of disposing of salvage vehicles, recovered stolen vehicles, or
12 both.
13 (5) "School bus" means every motor vehicle that complies with the color
14 and identification requirements set forth in the most recent edition of
15 "Minimum Standards for School Buses" and is used to transport children to or
16 from school or in connection with school approved activities and includes
17 buses operated by contract carriers.
18 (6) "Secretary" means the secretary of transportation of the United
19 States.
20 (7) "Security agreement." (See section 28-9-1052, Idaho Code)
21 (8) "Security interest." (See section 28-1-201, Idaho Code)
22 (9) "Sell," "sold," "buy," and "purchase," mean and include, as used in
23 sections 49-2401 through 49-2406, Idaho Code, exchange, barter, gift, and
24 offer or contract to sell or buy.
25 (10) "Semitrailer." (See "Trailer,", section 49-121, Idaho Code)
26 (11) "Serious traffic violation" means conviction of an offense specified
27 in 49 CFR part 383 while operating a commercial motor vehicle.
28 (12) "Sidewalk" means that portion of a street between the curb lines, or
29 the lateral lines of a roadway, and the adjacent property lines intended for
30 use by pedestrians.
31 (13) "Signal." (See "Railroad sign,", section 49-119, Idaho Code)
32 (14) "Skills test" means an actual demonstration of ability to exercise
33 ordinary and reasonable control in the operation of a motor vehicle.
34 (15) "Slow moving vehicle" means any vehicle not normally operated upon
35 the highways.
36 (16) "Snow tire." (See "Tires,", section 49-121, Idaho Code)
37 (17) "Sold." (See "Sell,", "buy,", and "purchase,", this section)
38 (18) "Solid rubber tire." (See "Tires,", section 49-121, Idaho Code)
39 (19) "Special license plate" means a license plate that is made available
40 to the public as a personal alternative to the standard issue license plate.
41 This definition shall not include the plates issued under sections 49-403,
42 49-403A, 49-404, 49-410, 49-415 and 49-415B, Idaho Code.
43 (20) "Special mobile equipment" means every vehicle not designed or used
44 primarily for the transportation of persons or property and only incidentally
45 operated or moved over a highway, including: ditch-digging apparatus, well-
46 boring apparatus and road construction and maintenance machinery such as
47 asphalt spreaders, bituminous mixers, bucket loaders, tractors other than
48 truck tractors, ditchers, leveling graders, finishing machines, motor graders,
49 road rollers, scarifiers, earth moving carry-alls and scrapers, power shovels
50 and drag lines, and self-propelled cranes, and earth moving equipment. The
51 term does not include travel trailers, dump trucks, truck mounted transit
52 mixers, cranes or shovels, or other vehicles designed for the transportation
53 of persons or property to which machinery has been attached.
54 (21) "Specially constructed vehicle." (See "Vehicle,", section 49-123,
55 Idaho Code)
110
1 (22) "Stand" or "standing" means the halting of a vehicle, whether occu-
2 pied or not, otherwise than temporarily for the purpose of and while actually
3 engaged in receiving or discharging passengers.
4 (23) "State" means a state, territory or possession of the United States,
5 the District of Columbia, the Commonwealth of Puerto Rico or a province of
6 Canada.
7 (24) "Stop" means the act of or complete cessation from movement.
8 (25) "Stopping" means the act of any halting even momentarily of a vehi-
9 cle.
10 (26) "Street." (See "Highways,", section 49-109, Idaho Code)
11 (27) "Street rod" means any pre-1949 vehicle which has had a significant
12 drive train update from a more modern vehicle. Changes may include engine,
13 transmission, rear axle, and other suspension components. The body will be,
14 or resemble the same as the manufacturer's original issue after its first sale
15 after manufacture.
16 (28) "Studded tire." (See "Tires,", section 49-121, Idaho Code)
17 (29) "Substandard width lane" means a lane that is too narrow for a bicy-
18 cle and a motor vehicle to travel safely side by side within the lane.
19 (30) "Supplemental lot" means a physically separate location owned and
20 maintained by a licensed dealer or manufacturer within the same or adjacent
21 county as the principal place of business which meets all the requirements for
22 a principal place of business.
23 (31) "Suspension of driver's license" means the temporary withdrawal by
24 formal action of the department or as otherwise provided in this title of a
25 person's driver's license or privilege to operate a motor vehicle on the pub-
26 lic highways, which temporary withdrawal shall be for a period specifically
27 designated by the department.
28 (32) "Suspension of vehicle registration" means the temporary withdrawal
29 by formal action of the department or as otherwise provided in this title of a
30 person's vehicle registration or, in the case of fleets of vehicles, all vehi-
31 cle registrations in each fleet operated by a company. Upon suspension, the
32 privileges of operating the vehicle or vehicles on Idaho highways is termi-
33 nated until the difficulty that caused the suspension is corrected and notifi-
34 cation is provided that the suspension has been lifted.
35 SECTION 28. This act shall be in full force and effect on and after July
36 1, 2001.
STATEMENT OF PURPOSE
RS 09453C1
This legislation repeals existing Article 9 of the Uniform Commercial
Code covering Secured Transactions and enacts a new Article 9. The legislation is
a result of the work of the National Conference of Commissioners on Uniform
State Laws to update the laws governing secured transactions -- transactions
which involve the granting of credit secured by personal property.
FISCAL NOTE
The legislation will have no fiscal impact.
CONTACT: Idaho Commission on Uniform State Laws
Dale G. Higer, former Commissioner
(208) 387-4288
STATEMENT OF PURPOSE/FISCAL NOTE S 1395