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47-9103. Purchase money security interest; application of payments; burden of establishing

A. In this section:

1. "Purchase money collateral" means goods or software that secures a purchase money obligation incurred with respect to that collateral.

2. "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.

B. A security interest in goods is a purchase money security interest:

1. To the extent that the goods are purchase money collateral with respect to that security interest;

2. 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

3. 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.

C. 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:

1. The debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and

2. The debtor acquired its interest in the software for the principal purpose of using the software in the goods.

D. The security interest of a consignor in goods that are the subject of a consignment is a purchase money security interest in inventory.

E. 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:

1. In accordance with any reasonable method of application to which the parties agree;

2. 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

3. In the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:

(a) To obligations that are not secured; and

(b) If more than one obligation is secured, to obligations secured by purchase money security interests in the order in which those obligations were incurred.

F. In a transaction other than a consumer goods transaction, a purchase money security interest does not lose its status as such, even if:

1. The purchase money collateral also secures an obligation that is not a purchase money obligation;

2. Collateral that is not purchase money collateral also secures the purchase money obligation; or

3. The purchase money obligation has been renewed, refinanced, consolidated or restructured.

G. 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.

H. The limitation of the rules in subsections E, F and G 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.