Sec. 42a-9-615. Application of proceeds of disposition. Liability for deficiency and right to surplus.
Sec. 42a-9-615. Application of proceeds of disposition. Liability for deficiency
and right to surplus. (a) A secured party shall apply or pay over for application the
cash proceeds of disposition under section 42a-9-610 in the following order to:
(1) 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;
(2) The satisfaction of obligations secured by the security interest or agricultural
lien under which the disposition is made;
(3) The satisfaction of obligations secured by any subordinate security interest in
or other subordinate lien on the collateral if:
(A) 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
(B) 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
(4) 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.
(b) 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 subdivision (3) of subsection (a) of this section.
(c) A secured party need not apply or pay over for application noncash proceeds of
disposition under section 42a-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.
(d) 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 (a) and permitted by subsection (c):
(1) Unless subdivision (4) of subsection (a) 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
(2) The obligor is liable for any deficiency.
(e) If the underlying transaction is a sale of accounts, chattel paper, payment intangibles or promissory notes:
(1) The debtor is not entitled to any surplus; and
(2) The obligor is not liable for any deficiency.
(f) 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 to a transferee other than the secured party, a person related to the secured party or
a secondary obligor if:
(1) The transferee in the disposition is the secured party, a person related to the
secured party or a secondary obligor; and
(2) 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.
(g) 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:
(1) Takes the cash proceeds free of the security interest or other lien;
(2) Is not obligated to apply the proceeds of the disposition to the satisfaction of
obligations secured by the security interest or other lien; and
(3) Is not obligated to account to or pay the holder of the security interest or other
lien for any surplus.
(P.A. 01-132, S. 112.)
Annotation to former section 42a-9-504(2):
Cited. 227 C. 270.