2009 Kentucky Revised Statutes Article 9 Secured Transactions -- Sales of Accounts, Contract Rights, and Chattel Paper 355.9.408 Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective.
355.9-408 Restrictions on assignment of promissory notes, health-care-insurance
receivables, and certain general intangibles ineffective.
(1) Except as otherwise provided in subsection (2) of this section, a term in a
promissory note or in an agreement between an account debtor and a debtor which <br>relates to a health-care-insurance receivable or a general intangible, including a <br>contract, permit, license, or franchise, and which term prohibits, restricts, or <br>requires the consent of the person obligated on the promissory note or the account <br>debtor to, the assignment or transfer of, or creation, attachment, or perfection of a <br>security interest in, the promissory note, health-care-insurance receivable, or general <br>intangible, is ineffective to the extent that the term: <br>(a) Would impair the creation, attachment, or perfection of a security interest; or <br>(b) Provides that the assignment or transfer or the creation, attachment, or
perfection of the security interest may give rise to a default, breach, right of <br>recoupment, claim, defense, termination, right of termination, or remedy <br>under the promissory note, health-care-insurance receivable, or general <br>intangible.
(2) Subsection (1) of this section applies to a security interest in a payment intangible
or promissory note only if the security interest arises out of a sale of the payment <br>intangible or promissory note.
(3) A rule of law, statute, or regulation that prohibits, restricts, or requires the consent
of a government, governmental body or official, person obligated on a promissory <br>note, or account debtor to the assignment or transfer of, or creation of a security <br>interest in, a promissory note, health-care-insurance receivable, or general <br>intangible, including a contract, permit, license, or franchise between an account <br>debtor and a debtor, is ineffective to the extent that the rule of law, statute, or <br>regulation: <br>(a) Would impair the creation, attachment, or perfection of a security interest; or <br>(b) Provides that the assignment or transfer or the creation, attachment, or
perfection of the security interest may give rise to a default, breach, right of <br>recoupment, claim, defense, termination, right of termination, or remedy <br>under the promissory note, health-care-insurance receivable, or general <br>intangible.
(4) To the extent that a term in a promissory note or in an agreement between an
account debtor and a debtor which relates to a health-care-insurance receivable or <br>general intangible or a rule of law, statute, or regulation described in subsection (3) <br>of this section would be effective under law other than this article but is ineffective <br>under subsection (1) or (3) of this section, the creation, attachment, or perfection of <br>a security interest in the promissory note, health-care-insurance receivable, or <br>general intangible: <br>(a) Is not enforceable against the person obligated on the promissory note or the
account debtor;
(b) Does not impose a duty or obligation on the person obligated on the
promissory note or the account debtor;
(c) Does not require the person obligated on the promissory note or the account
debtor to recognize the security interest, pay or render performance to the <br>secured party, or accept payment or performance from the secured party;
(d) Does not entitle the secured party to use or assign the debtor's rights under the
promissory note, health-care-insurance receivable, or general intangible, <br>including any related information or materials furnished to the debtor in the <br>transaction giving rise to the promissory note, health-care-insurance <br>receivable, or general intangible;
(e) Does not entitle the secured party to use, assign, possess, or have access to any
trade secrets or confidential information of the person obligated on the <br>promissory note or the account debtor; and
(f) Does not entitle the secured party to enforce the security interest in the
promissory note, health-care-insurance receivable, or general intangible.
(5) This section prevails over any inconsistent provisions of the following statutes and
any administrative regulations based on those statutes: KRS 56.230(2), 138.320(3), <br>138.665(4), 138.720(5), 139.250, 154A.400(3), 190.047(1), 190.070(2)(c), <br>217B.535(2), 228.070(2), 230.300(11), 234.330(10), 243.630(2), 260.815, 286.4-<br>460(2), 292.320(2)(b), 286.8-036(3), 304.3-410(2)(f), 304.3-520(5), 333.080, <br>350.135(1), 365.430(27), and 286.9-070(2).
(6) Subsection (3) of this section does not apply to the following statutes and to
administrative regulations promulgated under the authority of those statutes: KRS <br>304.2-260, KRS 304.24-420, Subtitle 33 of KRS Chapter 304, and Subtitle 37 of <br>KRS Chapter 304.
Effective: June 25, 2009 <br>History: Amended 2009 Ky. Acts ch. 80, sec. 11, effective June 25, 2009. -- Amended
2002 Ky. Acts ch. 31, sec. 1, effective July 15, 2002. -- Repealed and reenacted 2001 <br>Ky. Acts ch. 119, sec. 13, effective July 1, 2001. -- Created 2000 Ky. Acts ch. 408, <br>sec. 90, effective July 1, 2001.
Legislative Research Commission Note (7/12/2006). 2006 Ky. Acts ch. 247 instructs
the Reviser of Statutes to adjust KRS references throughout the statutes to conform <br>with the 2006 renumbering of the Financial Services Code, KRS Chapter 286. Such <br>an adjustment has been made in this statute.
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