2016 Kentucky Revised Statutes CHAPTER 355 - UNIFORM COMMERCIAL CODE Article 9 - Secured Transactions -- Sales of Accounts, Contract Rights, and Chattel Paper 355.9-615 Application of proceeds of disposition -- Liability for deficiency and right to surplus.
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355.9-615 Application of proceeds of disposition -- Liability for deficiency and
right to surplus.
(1)
(2)
(3)
(4)
(5)
(6)
A secured party shall apply or pay over for application the cash proceeds of
disposition under KRS 355.9-610 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 an authenticated 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 an authenticated demand for proceeds before
distribution of the proceeds is completed.
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 subsection (1)(c) of this section.
A secured party need not apply or pay over for application noncash proceeds of
disposition under KRS 355.9-610 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.
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) of this section and permitted by subsection (3) of this section:
(a) Unless subsection (1)(d) of this section 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.
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.
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
(7)
of this article 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.
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.
Effective: July 1, 2001
History: Created 2000 Ky. Acts ch. 408, sec. 133, effective July 1, 2001.
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