8.9A-615 - A-615. Application of proceeds of disposition; liability for deficiency and right to surplus.
§ 8.9A-615. Application of proceeds of disposition; liability for deficiencyand right to surplus.
(a) Application of proceeds. A secured party shall apply or pay over forapplication the cash proceeds of disposition under § 8.9A-610 in thefollowing order to:
(1) the reasonable expenses of retaking, holding, preparing for disposition,processing, and disposing, and, to the extent provided for by agreement andnot prohibited by law, reasonable attorney's fees and legal expenses incurredby the secured party;
(2) the satisfaction of obligations secured by the security interest oragricultural lien under which the disposition is made;
(3) the satisfaction of obligations secured by any subordinate securityinterest in or other subordinate lien on the collateral if:
(A) the secured party receives from the holder of the subordinate securityinterest or other lien an authenticated demand for proceeds beforedistribution of the proceeds is completed; and
(B) in a case in which a consignor has an interest in the collateral, thesubordinate security interest or other lien is senior to the interest of theconsignor; and
(4) a secured party that is a consignor of the collateral if the securedparty receives from the consignor an authenticated demand for proceeds beforedistribution of the proceeds is completed.
(b) Proof of subordinate interest. If requested by a secured party, a holderof a subordinate security interest or other lien shall furnish reasonableproof of the interest or lien within a reasonable time. Unless the holderdoes so, the secured party need not comply with the holder's demand undersubsection (a) (3).
(c) Application of noncash proceeds. A secured party need not apply or payover for application noncash proceeds of disposition under § 8.9A-610 unlessthe failure to do so would be commercially unreasonable. A secured party thatapplies or pays over for application noncash proceeds shall do so in acommercially reasonable manner.
(d) Surplus or deficiency if obligation secured. If the security interestunder which a disposition is made secures payment or performance of anobligation, after making the payments and applications required by subsection(a) and permitted by subsection (c):
(1) unless subsection (a) (4) requires the secured party to apply or pay overcash proceeds to a consignor, the secured party shall account to and pay adebtor for any surplus; and
(2) the obligor is liable for any deficiency.
(e) No surplus or deficiency in sales of certain rights to payment. If theunderlying transaction is a sale of accounts, chattel paper, paymentintangibles, or promissory notes:
(1) the debtor is not entitled to any surplus; and
(2) the obligor is not liable for any deficiency.
(f) Calculation of surplus or deficiency in disposition to person related tosecured party. The surplus or deficiency following a disposition iscalculated based on the amount of proceeds that would have been realized in adisposition complying with this part to a transferee other than the securedparty, a person related to the secured party, or a secondary obligor if:
(1) the transferee in the disposition is the secured party, a person relatedto the secured party, or a secondary obligor; and
(2) the amount of proceeds of the disposition is significantly below therange of proceeds that a complying disposition to a person other than thesecured party, a person related to the secured party, or a secondary obligorwould have brought.
(1964, c. 219, § 8.9-504; 1973, c. 509; 2000, c. 1007.)