70A-9a-615 - Application of proceeds of disposition -- Liability for deficiency and right to surplus.
70A-9a-615. Application of proceeds of disposition -- Liability for deficiency andright to surplus.
(1) A secured party shall apply or pay over for application the cash proceeds ofdisposition under Section 70A-9a-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, reasonableattorney's fees and legal expenses incurred by the secured party;
(b) the satisfaction of obligations secured by the security interest or agricultural lien underwhich the disposition is made;
(c) the satisfaction of obligations secured by any subordinate security interest in or othersubordinate lien on the collateral if:
(i) the secured party receives from the holder of the subordinate security interest or otherlien an authenticated demand for proceeds before distribution of the proceeds is completed; and
(ii) in a case in which a consignor has an interest in the collateral, the subordinate securityinterest 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 fromthe consignor an authenticated demand for proceeds before distribution of the proceeds iscompleted.
(2) If requested by a secured party, a holder of a subordinate security interest or other lienshall furnish reasonable proof of the interest or lien within a reasonable time. Unless the holderdoes so, the secured party need not comply with the holder's demand under Subsection (1)(c).
(3) A secured party need not apply or pay over for application noncash proceeds ofdisposition under Section 70A-9a-610 unless the failure to do so would be commerciallyunreasonable. A secured party that applies or pays over for application noncash proceeds shall doso in a commercially reasonable manner.
(4) If the security interest under which a disposition is made secures payment orperformance of an obligation, after making the payments and applications required by Subsection(1) and permitted by Subsection (3):
(a) unless Subsection (1)(d) requires the secured party to apply or pay over cash proceedsto a consignor, the secured party shall account to and pay a debtor for any surplus; and
(b) the obligor is liable for any deficiency.
(5) 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.
(6) The surplus or deficiency following a disposition is calculated based on the amount ofproceeds that would have been realized in a disposition complying with this part to a transfereeother 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 securedparty, or a secondary obligor; and
(b) the amount of proceeds of the disposition is significantly below the range of proceedsthat a complying disposition to a person other than the secured party, a person related to thesecured party, or a secondary obligor would have brought.
(7) A secured party that receives cash proceeds of a disposition in good faith and withoutknowledge 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 ofobligations 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 forany surplus.
Enacted by Chapter 252, 2000 General Session