2006 New York Code - Rights And Duties Of Secured Party Having Possession Or Control Of Collateral.

 
  Section 9--207. Rights  and Duties of Secured Party Having Possession or
                    Control of Collateral.
    (a) Duty of care when secured party in possession. Except as otherwise
  provided in subsection (d), a secured party shall use reasonable care in
  the custody and  preservation  of  collateral  in  the  secured  party's
  possession.  In  the  case of chattel paper or an instrument, reasonable
  care includes taking necessary steps to preserve  rights  against  prior
  parties unless otherwise agreed.
    (b) Expenses,   risks,  duties,  and  rights  when  secured  party  in
  possession. Except as otherwise provided in subsection (d), if a secured
  party has possession of collateral:
         (1) reasonable expenses, including  the  cost  of  insurance  and
             payment  of  taxes or other charges, incurred in the custody,
             preservation,  use,  or  operation  of  the  collateral   are
             chargeable to the debtor and are secured by the collateral;
         (2) the risk of accidental loss or damage is on the debtor to the
             extent of a deficiency in any effective insurance coverage;
         (3) the secured party shall keep the collateral identifiable, but
             fungible collateral may be commingled; and
         (4) the secured party may use or operate the collateral:
             (A) for  the  purpose  of  preserving  the  collateral or its
                 value;
             (B) as permitted by an order  of  a  court  having  competent
                 jurisdiction; or
             (C) except  in  the case of consumer goods, in the manner and
                 to the extent agreed by the debtor.
    (c) Duties and rights when secured party  in  possession  or  control.
  Except  as  otherwise provided in subsection (d), a secured party having
  possession of collateral or control of collateral under Section  9--104,
  9--105, 9--106, or 9--107:
         (1) may hold as additional security any proceeds, except money or
             funds, received from the collateral;
         (2) shall  apply  money  or funds received from the collateral to
             reduce the secured obligation, unless remitted to the debtor;
             and
         (3) may create a security interest in the collateral.
    (d) Buyer of certain rights to payment. If  the  secured  party  is  a
  buyer  of  accounts,  chattel  paper, payment intangibles, or promissory
  notes or a consignor:
         (1) subsection (a) does not apply unless  the  secured  party  is
             entitled under an agreement:
             (A) to charge back uncollected collateral; or
             (B) otherwise  to full or limited recourse against the debtor
                 or a secondary obligor based on the nonpayment  or  other
                 default  of  an  account  debtor  or other obligor on the
                 collateral; and
         (2) subsections (b) and (c) do not apply.