41-09-105. (9-608) Application of proceeds of collection or enforcement - Liability for
1,160 words·~5 min read·
/nd/title-41/chapter-41-09-secured-transactions/41-09-105·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
deficiency and right to surplus.
1. If a security interest or agricultural lien secures payment or performance of an
obligation, the following rules apply:
a. A secured party shall apply or pay over for application the cash proceeds of
collection or enforcement under section 41-09-104 in the following order to:
(1)The reasonable expenses of collection and enforcement and, to the extent
provided for by agreement and not prohibited by law, reasonable attorney's
fees and legal expenses incurred by the secured party;
(2)The satisfaction of obligations secured by the security interest or agricultural
lien under which the collection or enforcement is made; and
(3)The satisfaction of obligations secured by any subordinate security interest
in or other lien on the collateral subject to the security interest or agricultural
lien under which the collection or enforcement is made if the secured party
receives a signed demand for proceeds before distribution of the proceeds
is completed.
b. If requested by a secured party, a holder of a subordinate security interest or
other lien shall furnish reasonable proof of the interest or lien within a reasonable
time. Unless the holder complies, the secured party need not comply with the
holder's demand under subdivision c.
c. A secured party need not apply or pay over for application noncash proceeds of
collection and enforcement under section 41-09-104 unless the failure to do so
would be commercially unreasonable. A secured party that applies or pays over
for application noncash proceeds shall do so in a commercially reasonable
manner.
d. A secured party shall account to and pay a debtor for any surplus, and the obligor
is liable for any deficiency. 2. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles,
or promissory notes, the debtor is not entitled to any surplus, and the obligor is not
liable for any deficiency.
41-09-106. (9-609) Secured party's right to take possession after default. 1. After default, a secured party:
a. May take possession of the collateral; and
b. Without removal, may render equipment unusable and dispose of collateral on a
debtor's premises under section 41-09-107. 2. A secured party may proceed under subsection 1:
a. Pursuant to judicial process; or
b. Without judicial process, if it proceeds without breach of the peace. 3. If so agreed, and in any event after default, a secured party may require the debtor to
assemble the collateral and make it available to the secured party at a place to be
designated by the secured party which is reasonably convenient to both parties.
41-09-107. (9-610) Disposition of collateral after default. 1. After default, a secured party may sell, lease, license, or otherwise dispose of any or
all of the collateral in its present condition or following any commercially reasonable
preparation or processing. 2. Every aspect of a disposition of collateral, including the method, manner, time, place,
and other terms, must be commercially reasonable. If commercially reasonable, a
secured party may dispose of collateral by public or private proceedings, by one or
more contracts, as a unit or in parcels, and at any time and place and on any terms. 3. A secured party may purchase collateral:
a. At a public disposition; or
b. At a private disposition only if the collateral is of a kind that is customarily sold on
a recognized market or the subject of widely distributed standard price
quotations. 4. A contract for sale, lease, license, or other disposition includes the warranties relating
to title, possession, quiet enjoyment, and the like which by operation of law
accompany a voluntary disposition of property of the kind subject to the contract. 5. A secured party may disclaim or modify warranties under subsection 4:
a. In a manner that would be effective to disclaim or modify the warranties in a
voluntary disposition of property of the kind subject to the contract of disposition;
or
b. By communicating to the purchaser a record evidencing the contract for
disposition and including an express disclaimer or modification of the warranties. 6. A record is sufficient to disclaim warranties under subsection 5 if it indicates "there is
no warranty relating to title, possession, quiet enjoyment, or the like in this disposition"
or uses words of similar import.
41-09-108. (9-611) Notification before disposition of collateral. 1. In this section, "notification date" means the earlier of the date on which:
a. A secured party sends to the debtor and any secondary obligor a signed
notification of disposition; or
b. The debtor and any secondary obligor waive the right to notification. 2. Except as otherwise provided in subsection 4, a secured party that disposes of
collateral under section 41-09-107 shall send to the persons specified in subsection 3
a reasonable signed notification of disposition. 3. To comply with subsection 2, the secured party shall send a signed notification of
disposition to:
a. The debtor;
b. Any secondary obligor;
c. Any other person from which the secured party has received, before the
notification date, a signed notification of a claim of an interest in the collateral;
d. Any other secured party or lienholder that, ten days before the notification date,
held a security interest in or other lien on the collateral perfected by the filing of a
financing statement that:
(1)Identified the collateral;
(2)Was indexed under the debtor's name as of that date; and
(3)Was filed in the office in which to file a financing statement against the
debtor covering the collateral as of that date; and
e. Any other secured party that, ten days before the notification date, held a security
interest in the collateral perfected by compliance with a statute, regulation, or
treaty described in subsection 1 of section 41-09-31. 4. Subsection 2 does not apply if the collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market. 5. A secured party complies with the requirements for notification prescribed by
paragraph 2 of subdivision c of subsection 3 if:
a. Not later than twenty days or earlier than thirty days before the notification date,
the secured party requests, in a commercially reasonable manner, information
concerning financing statements indexed under the debtor's name in the office
indicated in paragraph 2 of subdivision c of subsection 3; and
b. Before the notification date, the secured party:
(1)Did not receive a response to the request for information; or
(2)Received a response to the request for information and sent a signed
notification of disposition to each secured party or other lienholder named in
that response whose financing statement covered the collateral.
41-09-109. (9-612) Timeliness of notification before disposition of collateral. 1. Except as otherwise provided in subsection 2, whether a notification is sent within a
reasonable time is a question of fact. 2. A notification of disposition sent after default and ten days before the earliest time of
disposition set forth in the notification is sent within a reasonable time before the
disposition.