400.9-615. Application of proceeds of disposition--liability for deficiency and right to surplus. - Missouri Statutes

Application of proceeds of disposition--liability for deficiency andright to surplus.

400.9-615. (a) A secured party shall apply or pay over forapplication the cash proceeds of disposition under section 400.9-610 in thefollowing order to:

(1) The reasonable expenses of retaking, holding, preparing fordisposition, processing, and disposing, and, to the extent provided for byagreement and not prohibited by law, reasonable attorney's fees and legalexpenses incurred by the secured party;

(2) The satisfaction of obligations secured by the security interestor agricultural lien under which the disposition is made;

(3) The satisfaction of obligations secured by any subordinatesecurity interest in or other subordinate lien on the collateral if:

(A) The secured party receives from the holder of the subordinatesecurity interest 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,the subordinate security interest or other lien is senior to the interestof the consignor; and

(4) A secured party that is a consignor of the collateral if thesecured party receives from the consignor an authenticated demand forproceeds before distribution of the proceeds is completed.

(b) If requested by a secured party, a holder of a subordinatesecurity interest or other lien shall furnish reasonable proof of theinterest or lien within a reasonable time. Unless the holder does so, thesecured party need not comply with the holder's demand under subsection(a)(3).

(c) A secured party need not apply or pay over for applicationnoncash proceeds of disposition under section 400.9-610 unless the failureto do so would be commercially unreasonable. A secured party that appliesor pays over for application noncash proceeds shall do so in a commerciallyreasonable manner.

(d) If the security interest under which a disposition is madesecures payment or performance of an obligation, after making the paymentsand applications required by subsection (a) and permitted by subsection(c):

(1) Unless subsection (a)(4) requires the secured party to apply orpay over cash proceeds to a consignor, the secured party shall account toand 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, chattelpaper, 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 calculatedbased 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 personrelated to the secured party, or a secondary obligor; and

(2) The amount of proceeds of the disposition is significantly belowthe range of proceeds that a complying disposition to a person other thanthe secured party, a person related to the secured party, or a secondaryobligor would have brought.

(g) A secured party that receives cash proceeds of a disposition ingood faith and without notice that the receipt violates the rights of theholder of a security interest or other lien that is not subordinate to thesecurity interest under which the disposition is made:

(1) Takes the cash proceeds free of the security interest or otherlien;

(2) Is not obligated to apply the proceeds of the disposition to thesatisfaction of obligations secured by the security interest or other lien;and

(3) Is not obligated to account to or pay the holder of the securityinterest or other lien for any surplus.

(L. 2001 S.B. 288, A.L. 2002 S.B. 895)