§ 25-9-608. Application of proceeds of collection or enforcement; liability for deficiency and right to surplus. - North Carolina Statutes

§25‑9‑608.  Application of proceeds of collection or enforcement;liability for deficiency and right to surplus.

(a)        Application ofproceeds, surplus, and deficiency if obligation secured. – If a securityinterest or agricultural lien secures payment or performance of an obligation,the following rules apply:

(1)        A secured partyshall apply or pay over for application the cash proceeds of collection orenforcement under G.S. 25‑9‑607 in the following order to:

a.         The reasonableexpenses of collection and enforcement and, to the extent provided for byagreement and not prohibited by law, reasonable attorney's fees and legalexpenses incurred by the secured party;

b.         The satisfaction ofobligations secured by the security interest or agricultural lien under whichthe collection or enforcement is made; and

c.         The satisfaction ofobligations secured by any subordinate security interest in or other lien onthe collateral subject to the security interest or agricultural lien underwhich the collection or enforcement is made if the secured party receives anauthenticated demand for proceeds before distribution of the proceeds iscompleted.

(2)        If requested by asecured party, a holder of a subordinate security interest or other lien shallfurnish reasonable proof of the interest or lien within a reasonable time.Unless the holder complies, the secured party need not comply with the holder'sdemand under sub‑subdivision (a)(1)c. of this section.

(3)        A secured party neednot apply or pay over for application noncash proceeds of collection andenforcement under G.S. 25‑9‑607 unless the failure to do so wouldbe commercially unreasonable. A secured party that applies or pays over forapplication noncash proceeds shall do so in a commercially reasonable manner.

(4)        A secured partyshall account to and pay a debtor for any surplus, and the obligor is liablefor any deficiency.

(b)        No surplus ordeficiency in sales of certain rights to payment. – If the underlyingtransaction is a sale of accounts, chattel paper, payment intangibles, orpromissory notes, the debtor is not entitled to any surplus, and the obligor isnot liable for any deficiency. (1961, c. 574; 1965, c. 700,s. 1; 1975, c. 862, s. 7; 2000‑169, s. 1.)