41-09-111. (9-615) Application of proceeds of disposition - Liability for deficiency and
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right to surplus.
1. A secured party shall apply or pay over for application the cash proceeds of disposition
under section 41-09-107 in the following order to:
a. The reasonable expenses of retaking, holding, preparing for disposition,
processing, and disposing, and, to the extent provided for by agreement and not
prohibited by law, reasonable attorney's fees and legal expenses incurred by the
secured party;
b. The satisfaction of obligations secured by the security interest or agricultural lien
under which the disposition is made;
c. The satisfaction of obligations secured by any subordinate security interest in or
other subordinate lien on the collateral if:
(1)The secured party receives from the holder of the subordinate security
interest or other lien a signed demand for proceeds before distribution of the
proceeds is completed; and
(2)In a case in which a consignor has an interest in the collateral, the
subordinate security interest or other lien is senior to the interest of the
consignor; and
d. A secured party that is a consignor of the collateral if the secured party receives
from the consignor a signed demand for proceeds before distribution of the
proceeds is completed.
2. If requested by a secured party, a holder of a subordinate security interest or other lien
shall furnish reasonable proof of the interest or lien within a reasonable time. Unless
the holder does so, the secured party need not comply with the holder's demand under
subdivision c of subsection 1.
3. A secured party need not apply or pay over for application noncash proceeds of
disposition under section 41-09-107 unless the failure to do so would be commercially
unreasonable. A secured party that applies or pays over for application noncash
proceeds shall do so in a commercially reasonable manner.
4. If the security interest under which a disposition is made secures payment or
performance of an obligation, after making the payments and applications required by
subsection 1 and permitted by subsection 3:
a. Unless subdivision d of subsection 1 requires the secured party to apply or pay
over cash proceeds to a consignor, the secured party shall account to and pay a
debtor for any surplus; and
b. The obligor is liable for any deficiency.
5. If the underlying transaction is a sale of accounts, chattel paper, payment intangibles,
or promissory notes:
a. The debtor is not entitled to any surplus; and
b. The obligor is not liable for any deficiency. 6. The surplus or deficiency following a disposition is calculated based on the amount of
proceeds that would have been realized in a disposition complying with this part to a
transferee other than the secured party, a person related to the secured party, or a
secondary obligor if:
a. The transferee in the disposition is the secured party, a person related to the
secured party, or a secondary obligor; and
b. The amount of proceeds of the disposition is significantly below the range of
proceeds that a complying disposition to a person other than the secured party, a
person related to the secured party, or a secondary obligor would have brought. 7. A secured party that receives cash proceeds of a disposition in good faith and without
knowledge that the receipt violates the rights of the holder of a security interest or
other lien that is not subordinate to the security interest or agricultural lien under which
the disposition is made:
a. Takes the cash proceeds free of the security interest or other lien;
b. Is not obligated to apply the proceeds of the disposition to the satisfaction of
obligations secured by the security interest or other lien; and
c. Is not obligated to account to or pay the holder of the security interest or other
lien for any surplus.
41-09-112. (9-617) Rights of transferee of collateral. 1. A secured party's disposition of collateral after default:
a. Transfers to a transferee for value all of the debtor's rights in the collateral;
b. Discharges the security interest under which the disposition is made; and
c. Discharges any subordinate security interest or other subordinate lien. 2. A transferee that acts in good faith takes free of the rights and interests described in
subsection 1, even if the secured party fails to comply with this chapter or the
requirements of any judicial proceeding. 3. If a transferee does not take free of the rights and interests described in subsection 1,
the transferee takes the collateral subject to:
a. The debtor's rights in the collateral;
b. The security interest or agricultural lien under which the disposition is made; and
c. Any other security interest or other lien.
41-09-113. (9-618) Rights and duties of certain secondary obligors. 1. A secondary obligor acquires the rights and becomes obligated to perform the duties
of the secured party after the secondary obligor:
a. Receives an assignment of a secured obligation from the secured party;
b. Receives a transfer of collateral from the secured party and agrees to accept the
rights and assume the duties of the secured party; or
c. Is subrogated to the rights of a secured party with respect to collateral. 2. An assignment, transfer, or subrogation described in subsection 1:
a. Is not a disposition of collateral under section 41-09-107; and
b. Relieves the secured party of further duties under this chapter.
41-09-114. (9-619) Transfer of record or legal title. 1. In this section, "transfer statement" means a record signed by a secured party stating:
a. That the debtor has defaulted in connection with an obligation secured by
specified collateral;
b. That the secured party has exercised its postdefault remedies with respect to the
collateral;
c. That, by reason of the exercise, a transferee has acquired the rights of the debtor
in the collateral; and
d. The name and mailing address of the secured party, debtor, and transferee.
2. A transfer statement entitles the transferee to the transfer of record of all rights of the
debtor in the collateral specified in the statement in any official filing, recording,
registration, or certificate-of-title system covering the collateral. If a transfer statement
is presented with the applicable fee and request form to the official or office
responsible for maintaining the system, the official or office shall:
a. Accept the transfer statement;
b. Promptly amend its records to reflect the transfer; and
c. If applicable, issue a new appropriate certificate of title in the name of the
transferee.
3. A transfer of the record or legal title to collateral to a secured party under subsection 2
or otherwise is not of itself a disposition of collateral under this chapter and does not of
itself relieve the secured party of its duties under this chapter.