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355.9-103 Purchase-money security interest -- Application of payments -- Burden
of establishing.
(1)
(2)
(3)
(4)
(5)
In this section:
(a) "Purchase-money collateral" means goods or software that secures a purchasemoney obligation incurred with respect to that collateral; and
(b) "Purchase-money obligation" means an obligation of an obligor incurred as all
or part of the price of the collateral or for value given to enable the debtor to
acquire rights in or the use of the collateral if the value is in fact so used.
A security interest in goods is a purchase-money security interest:
(a) To the extent that the goods are purchase-money collateral with respect to that
security interest;
(b) If the security interest is in inventory that is or was purchase-money collateral,
also to the extent that the security interest secures a purchase-money
obligation incurred with respect to other inventory in which the secured party
holds or held a purchase-money security interest; and
(c) Also to the extent that the security interest secures a purchase-money
obligation incurred with respect to software in which the secured party holds
or held a purchase-money security interest.
A security interest in software is a purchase-money security interest to the extent
that the security interest also secures a purchase-money obligation incurred with
respect to goods in which the secured party holds or held a purchase-money security
interest if:
(a) The debtor acquired its interest in the software in an integrated transaction in
which it acquired an interest in the goods; and
(b) The debtor acquired its interest in the software for the principal purpose of
using the software in the goods.
The security interest of a consignor in goods that are the subject of a consignment is
a purchase-money security interest in inventory.
In a transaction other than a consumer-goods transaction, if the extent to which a
security interest is a purchase-money security interest depends on the application of
a payment to a particular obligation, the payment must be applied:
(a) In accordance with any reasonable method of application to which the parties
agree;
(b) In the absence of the parties' agreement to a reasonable method, in accordance
with any intention of the obligor manifested at or before the time of payment;
or
(c) In the absence of an agreement to a reasonable method and a timely
manifestation of the obligor's intention, in the following order:
1.
To obligations that are not secured; and
2.
If more than one (1) obligation is secured, to obligations secured by
purchase-money security interests in the order in which those obligations
(6)
(7)
(8)
were incurred.
In a transaction other than a consumer-goods transaction, a purchase-money security
interest does not lose its status as such, even if:
(a) The purchase-money collateral also secures an obligation that is not a
purchase-money obligation;
(b) Collateral that is not purchase-money collateral also secures the purchasemoney obligation; or
(c) The purchase-money obligation has been renewed, refinanced, consolidated,
or restructured.
In a transaction other than a consumer-goods transaction, a secured party claiming a
purchase-money security interest has the burden of establishing the extent to which
the security interest is a purchase-money security interest.
The limitation of the rules in subsections (5), (6), and (7) of this section to
transactions other than consumer-goods transactions is intended to leave to the court
the determination of the proper rules in consumer-goods transactions. The court
may not infer from that limitation the nature of the proper rule in consumer-goods
transactions and may continue to apply established approaches.
Effective: July 1, 2001
History: Repealed and reenacted 2000 Ky. Acts ch. 408, sec. 23, effective July 1, 2001.
-- Amended 1996 Ky. Acts ch. 130, sec. 165, effective January 1, 1997. -- Amended
1986 Ky. Acts ch. 118, sec. 55, effective July 1, 1987. -- Created 1958 Ky. Acts ch.
77, sec. 9-103, effective July 1, 1960.
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