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91_SB1231
LRB9106284WHdv
1 AN ACT in relation to secured transactions.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Uniform Commercial Code is amended by
5 changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106,
6 9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115,
7 9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1,
8 9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305,
9 9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308,
10 9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316,
11 9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405,
12 9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504,
13 9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections
14 9-209, 9-210, 9-319, 9-320, 9-321, 9-322, 9-323, 9-324,
15 9-325, 9-326, 9-327, 9-328, 9-329, 9-330, 9-331, 9-332,
16 9-333, 9-334, 9-335, 9-336, 9-337, 9-338, 9-339, 9-340,
17 9-341, 9-342, 9-409, 9-508, 9-509, 9-510, 9-511, 9-512,
18 9-513, 9-514, 9-515, 9-516, 9-517, 9-518, 9-519, 9-520,
19 9-521, 9-522, 9-523, 9-524, 9-525, 9-526, 9-527, 9-601,
20 9-602, 9-603, 9-604, 9-605, 9-606, 9-607, 9-608, 9-609,
21 9-610, 9-611, 9-612, 9-613, 9-614, 9-615, 9-616, 9-617,
22 9-618, 9-619, 9-620, 9-621, 9-622, 9-623, 9-624, 9-625,
23 9-626, 9-627, 9-628, 9-701, 9-702, 9-703, 9-704, 9-705,
24 9-706, 9-707, and 9-708, changing the headings of Article 9
25 and Parts 1, 2, 3, 4, 5, and 99 of Article 9, and adding
26 headings of Parts 6 and 7 of Article 9, Subparts 1 and 2 of
27 Part 1 of Article 9, Subparts 1 and 2 of Part 2 of Article 9,
28 Subparts 1, 2, 3, and 4 of Part 3 of Article 9, Subparts 1
29 and 2 of Part 5 of Article 9, and Subparts 1 and 2 of Part 6
30 of Article 9 as follows:
31 (810 ILCS 5/Art. 9 heading)
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1 ARTICLE 9
2 SECURED TRANSACTIONS: SALES OF ACCOUNTS,
3 CONTRACT RIGHTS AND CHATTEL PAPER
4 (810 ILCS 5/Art. 9, Part 1 heading)
5 PART 1. GENERAL PROVISIONS
6 SHORT TITLE, APPLICABILITY AND DEFINITIONS
7 (810 ILCS 5/Art. 9, Part 1, Subpart 1 heading new)
8 SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
9 (810 ILCS 5/9-101) (from Ch. 26, par. 9-101)
10 Sec. 9-101. Short title. This Article may be cited as
11 Uniform Commercial Code-Secured Transactions. Short title.
12 This Article shall be known and may be cited as Uniform
13 Commercial Code--Secured Transactions.
14 (Source: Laws 1961, p. 2101.)
15 (810 ILCS 5/9-102) (from Ch. 26, par. 9-102)
16 Sec. 9-102. Definitions and index of definitions.
17 (a) Article 9 definitions. In this Article:
18 (1) "Accession" means goods that are physically
19 united with other goods in such a manner that the
20 identity of the original goods is not lost.
21 (2) "Account", except as used in "account for",
22 means a right to payment of a monetary obligation,
23 whether or not earned by performance, (i) for property
24 that has been or is to be sold, leased, licensed,
25 assigned, or otherwise disposed of, (ii) for services
26 rendered or to be rendered, (iii) for a policy of
27 insurance issued or to be issued, (iv) for a secondary
28 obligation incurred or to be incurred, (v) for energy
29 provided or to be provided, (vi) for the use or hire of a
30 vessel under a charter or other contract, (vii) arising
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1 out of the use of a credit or charge card or information
2 contained on or for use with the card, or (viii) as
3 winnings in a lottery or other game of chance operated or
4 sponsored by a State, governmental unit of a State, or
5 person licensed or authorized to operate the game by a
6 State or governmental unit of a State. The term includes
7 health-care-insurance receivables. The term does not
8 include (i) rights to payment evidenced by chattel paper
9 or an instrument, (ii) commercial tort claims, (iii)
10 deposit accounts, (iv) investment property, (v)
11 letter-of-credit rights or letters of credit, or (vi)
12 rights to payment for money or funds advanced or sold,
13 other than rights arising out of the use of a credit or
14 charge card or information contained on or for use with
15 the card.
16 (3) "Account debtor" means a person obligated on an
17 account, chattel paper, or general intangible. The term
18 does not include persons obligated to pay a negotiable
19 instrument, even if the instrument constitutes part of
20 chattel paper.
21 (4) "Accounting", except as used in "accounting
22 for", means a record:
23 (A) authenticated by a secured party;
24 (B) indicating the aggregate unpaid secured
25 obligations as of a date not more than 35 days
26 earlier or 35 days later than the date of the
27 record; and
28 (C) identifying the components of the
29 obligations in reasonable detail.
30 (5) "Agricultural lien" means an interest, other
31 than a security interest, in farm products:
32 (A) which secures payment or performance of an
33 obligation for:
34 (i) goods or services furnished in
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1 connection with a debtor's farming operation;
2 or
3 (ii) rent on real property leased by a
4 debtor in connection with its farming
5 operation;
6 (B) which is created by statute in favor of a
7 person that:
8 (i) in the ordinary course of its
9 business furnished goods or services to a
10 debtor in connection with a debtor's farming
11 operation; or
12 (ii) leased real property to a debtor in
13 connection with the debtor's farming operation;
14 and
15 (C) whose effectiveness does not depend on the
16 person's possession of the personal property.
17 (6) "As-extracted collateral" means:
18 (A) oil, gas, or other minerals that are
19 subject to a security interest that:
20 (i) is created by a debtor having an
21 interest in the minerals before extraction; and
22 (ii) attaches to the minerals as
23 extracted; or
24 (B) accounts arising out of the sale at the
25 wellhead or minehead of oil, gas, or other minerals
26 in which the debtor had an interest before
27 extraction.
28 (7) "Authenticate" means:
29 (A) to sign; or
30 (B) to execute or otherwise adopt a symbol, or
31 encrypt or similarly process a record in whole or in
32 part, with the present intent of the authenticating
33 person to identify the person and adopt or accept a
34 record.
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1 (8) "Bank" means an organization that is engaged in
2 the business of banking. The term includes savings
3 banks, savings and loan associations, credit unions, and
4 trust companies.
5 (9) "Cash proceeds" means proceeds that are money,
6 checks, deposit accounts, or the like.
7 (10) "Certificate of title" means a certificate of
8 title with respect to which a statute provides for the
9 security interest in question to be indicated on the
10 certificate as a condition or result of the security
11 interest's obtaining priority over the rights of a lien
12 creditor with respect to the collateral.
13 (11) "Chattel paper" means a record or records that
14 evidence both a monetary obligation and a security
15 interest in specific goods, a security interest in
16 specific goods and software used in the goods, or a lease
17 of specific goods. The term does not include charters or
18 other contracts involving the use or hire of a vessel.
19 If a transaction is evidenced both by a security
20 agreement or lease and by an instrument or series of
21 instruments, the group of records taken together
22 constitutes chattel paper.
23 (12) "Collateral" means the property subject to a
24 security interest or agricultural lien. The term
25 includes:
26 (A) proceeds to which a security interest
27 attaches;
28 (B) accounts, chattel paper, payment
29 intangibles, and promissory notes that have been
30 sold; and
31 (C) goods that are the subject of a
32 consignment.
33 (13) "Commercial tort claim" means a claim arising
34 in tort with respect to which:
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1 (A) the claimant is an organization; or
2 (B) the claimant is an individual and the
3 claim:
4 (i) arose in the course of the claimant's
5 business or profession; and
6 (ii) does not include damages arising out
7 of personal injury to or the death of an
8 individual.
9 (14) "Commodity account" means an account
10 maintained by a commodity intermediary in which a
11 commodity contract is carried for a commodity customer.
12 (15) "Commodity contract" means a commodity futures
13 contract, an option on a commodity futures contract, a
14 commodity option, or another contract if the contract or
15 option is:
16 (A) traded on or subject to the rules of a
17 board of trade that has been designated as a
18 contract market for such a contract pursuant to
19 federal commodities laws; or
20 (B) traded on a foreign commodity board of
21 trade, exchange, or market, and is carried on the
22 books of a commodity intermediary for a commodity
23 customer.
24 (16) "Commodity customer" means a person for which
25 a commodity intermediary carries a commodity contract on
26 its books.
27 (17) "Commodity intermediary" means a person that:
28 (A) is registered as a futures commission
29 merchant under federal commodities law; or
30 (B) in the ordinary course of its business
31 provides clearance or settlement services for a
32 board of trade that has been designated as a
33 contract market pursuant to federal commodities law.
34 (18) "Communicate" means:
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1 (A) to send a written or other tangible
2 record;
3 (B) to transmit a record by any means agreed
4 upon by the persons sending and receiving the
5 record; or
6 (C) in the case of transmission of a record to
7 or by a filing office, to transmit a record by any
8 means prescribed by filing-office rule.
9 (19) "Consignee" means a merchant to which goods
10 are delivered in a consignment.
11 (20) "Consignment" means a transaction, regardless
12 of its form, in which a person delivers goods to a
13 merchant for the purpose of sale and:
14 (A) the merchant:
15 (i) deals in goods of that kind under a
16 name other than the name of the person making
17 delivery;
18 (ii) is not an auctioneer; and
19 (iii) is not generally known by its
20 creditors to be substantially engaged in
21 selling the goods of others;
22 (B) with respect to each delivery, the
23 aggregate value of the goods is $1,000 or more at
24 the time of delivery;
25 (C) the goods are not consumer goods
26 immediately before delivery; and
27 (D) the transaction does not create a security
28 interest that secures an obligation.
29 (21) "Consignor" means a person that delivers goods
30 to a consignee in a consignment.
31 (22) "Consumer debtor" means a debtor in a consumer
32 transaction.
33 (23) "Consumer goods" means goods that are used or
34 bought for use primarily for personal, family, or
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1 household purposes.
2 (24) "Consumer-goods transaction" means a consumer
3 transaction in which:
4 (A) an individual incurs an obligation
5 primarily for personal, family, or household
6 purposes; and
7 (B) a security interest in consumer goods
8 secures the obligation.
9 (25) "Consumer obligor" means an obligor who is an
10 individual and who incurred the obligation as part of a
11 transaction entered into primarily for personal, family,
12 or household purposes.
13 (26) "Consumer transaction" means a transaction in
14 which (i) an individual incurs an obligation primarily
15 for personal, family, or household purposes, (ii) a
16 security interest secures the obligation, and (iii) the
17 collateral is held or acquired primarily for personal,
18 family, or household purposes. The term includes
19 consumer-goods transactions.
20 (27) "Continuation statement" means an amendment of
21 a financing statement which:
22 (A) identifies, by its file number, the
23 initial financing statement to which it relates; and
24 (B) indicates that it is a continuation
25 statement for, or that it is filed to continue the
26 effectiveness of, the identified financing
27 statement.
28 (28) "Debtor" means:
29 (A) a person having an interest, other than a
30 security interest or other lien, in the collateral,
31 whether or not the person is an obligor;
32 (B) a seller of accounts, chattel paper,
33 payment intangibles, or promissory notes; or
34 (C) a consignee.
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1 (29) "Deposit account" means a demand, time,
2 savings, passbook, or similar account maintained with a
3 bank. The term does not include investment property or
4 accounts evidenced by an instrument.
5 (30) "Document" means a document of title or a
6 receipt of the type described in Section 7-201(2).
7 (31) "Electronic chattel paper" means chattel paper
8 evidenced by a record or records consisting of
9 information stored in an electronic medium.
10 (32) "Encumbrance" means a right, other than an
11 ownership interest, in real property. The term includes
12 mortgages and other liens on real property.
13 (33) "Equipment" means goods other than inventory,
14 farm products, or consumer goods.
15 (34) "Farm products" means goods, other than
16 standing timber, with respect to which the debtor is
17 engaged in a farming operation and which are:
18 (A) crops grown, growing, or to be grown,
19 including:
20 (i) crops produced on trees, vines, and
21 bushes; and
22 (ii) aquatic goods produced in
23 aquacultural operations;
24 (B) livestock, born or unborn, including
25 aquatic goods produced in aquacultural operations;
26 (C) supplies used or produced in a farming
27 operation; or
28 (D) products of crops or livestock in their
29 unmanufactured states.
30 (35) "Farming operation" means raising,
31 cultivating, propagating, fattening, grazing, or any
32 other farming, livestock, or aquacultural operation.
33 (36) "File number" means the number assigned to an
34 initial financing statement pursuant to Section 9-519(a).
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1 (37) "Filing office" means an office designated in
2 Section 9-501 as the place to file a financing statement.
3 (38) "Filing-office rule" means a rule adopted
4 pursuant to Section 9-526.
5 (39) "Financing statement" means a record or
6 records composed of an initial financing statement and
7 any filed record relating to the initial financing
8 statement.
9 (40) "Fixture filing" means the filing of a
10 financing statement covering goods that are or are to
11 become fixtures and satisfying Section 9-502(a) and (b).
12 The term includes the filing of a financing statement
13 covering goods of a transmitting utility which are or are
14 to become fixtures.
15 (41) "Fixtures" means goods that have become so
16 related to particular real property that an interest in
17 them arises under real property law.
18 (42) "General intangible" means any personal
19 property, including things in action, other than
20 accounts, chattel paper, commercial tort claims, deposit
21 accounts, documents, goods, instruments, investment
22 property, letter-of-credit rights, letters of credit,
23 money, and oil, gas, or other minerals before extraction.
24 The term includes payment intangibles and software.
25 (43) "Good faith" means honesty in fact and the
26 observance of reasonable commercial standards of fair
27 dealing.
28 (44) "Goods" means all things that are movable when
29 a security interest attaches. The term includes (i)
30 fixtures, (ii) standing timber that is to be cut and
31 removed under a conveyance or contract for sale, (iii)
32 the unborn young of animals, (iv) crops grown, growing,
33 or to be grown, even if the crops are produced on trees,
34 vines, or bushes, and (v) manufactured homes. The term
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1 also includes a computer program embedded in goods and
2 any supporting information provided in connection with a
3 transaction relating to the program if (i) the program is
4 associated with the goods in such a manner that it
5 customarily is considered part of the goods, or (ii) by
6 becoming the owner of the goods, a person acquires a
7 right to use the program in connection with the goods.
8 The term does not include a computer program embedded in
9 goods that consist solely of the medium in which the
10 program is embedded. The term also does not include
11 accounts, chattel paper, commercial tort claims, deposit
12 accounts, documents, general intangibles, instruments,
13 investment property, letter-of-credit rights, letters of
14 credit, money, or oil, gas, or other minerals before
15 extraction.
16 (45) "Governmental unit" means a subdivision,
17 agency, department, county, parish, municipality, or
18 other unit of the government of the United States, a
19 State, or a foreign country. The term includes an
20 organization having a separate corporate existence if the
21 organization is eligible to issue debt on which interest
22 is exempt from income taxation under the laws of the
23 United States.
24 (46) "Health-care-insurance receivable" means an
25 interest in or claim under a policy of insurance which is
26 a right to payment of a monetary obligation for
27 health-care goods or services provided.
28 (47) "Instrument" means a negotiable instrument or
29 any other writing that evidences a right to the payment
30 of a monetary obligation, is not itself a security
31 agreement or lease, and is of a type that in ordinary
32 course of business is transferred by delivery with any
33 necessary indorsement or assignment. The term does not
34 include (i) investment property, (ii) letters of credit,
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1 or (iii) writings that evidence a right to payment
2 arising out of the use of a credit or charge card or
3 information contained on or for use with the card.
4 (48) "Inventory" means goods, other than farm
5 products, which:
6 (A) are leased by a person as lessor;
7 (B) are held by a person for sale or lease or
8 to be furnished under a contract of service;
9 (C) are furnished by a person under a contract
10 of service; or
11 (D) consist of raw materials, work in process,
12 or materials used or consumed in a business.
13 (49) "Investment property" means a security,
14 whether certificated or uncertificated, security
15 entitlement, securities account, commodity contract, or
16 commodity account.
17 (50) "Jurisdiction of organization", with respect
18 to a registered organization, means the jurisdiction
19 under whose law the organization is organized.
20 (51) "Letter-of-credit right" means a right to
21 payment or performance under a letter of credit, whether
22 or not the beneficiary has demanded or is at the time
23 entitled to demand payment or performance. The term does
24 not include the right of a beneficiary to demand payment
25 or performance under a letter of credit.
26 (52) "Lien creditor" means:
27 (A) a creditor that has acquired a lien on the
28 property involved by attachment, levy, or the like;
29 (B) an assignee for benefit of creditors from
30 the time of assignment;
31 (C) a trustee in bankruptcy from the date of
32 the filing of the petition; or
33 (D) a receiver in equity from the time of
34 appointment.
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1 (53) "Manufactured home" means a structure,
2 transportable in one or more sections, which, in the
3 traveling mode, is eight body feet or more in width or 40
4 body feet or more in length, or, when erected on site, is
5 320 or more square feet, and which is built on a
6 permanent chassis and designed to be used as a dwelling
7 with or without a permanent foundation when connected to
8 the required utilities, and includes the plumbing,
9 heating, air-conditioning, and electrical systems
10 contained therein. The term includes any structure that
11 meets all of the requirements of this paragraph except
12 the size requirements and with respect to which the
13 manufacturer voluntarily files a certification required
14 by the United States Secretary of Housing and Urban
15 Development and complies with the standards established
16 under Title 42 of the United States Code.
17 (54) "Manufactured-home transaction" means a
18 secured transaction:
19 (A) that creates a purchase-money security
20 interest in a manufactured home, other than a
21 manufactured home held as inventory; or
22 (B) in which a manufactured home, other than a
23 manufactured home held as inventory, is the primary
24 collateral.
25 (55) "Mortgage" means a consensual interest in real
26 property, including fixtures, which secures payment or
27 performance of an obligation.
28 (56) "New debtor" means a person that becomes bound
29 as debtor under Section 9-203(d) by a security agreement
30 previously entered into by another person.
31 (57) "New value" means (i) money, (ii) money's
32 worth in property, services, or new credit, or (iii)
33 release by a transferee of an interest in property
34 previously transferred to the transferee. The term does
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1 not include an obligation substituted for another
2 obligation.
3 (58) "Noncash proceeds" means proceeds other than
4 cash proceeds.
5 (59) "Obligor" means a person that, with respect to
6 an obligation secured by a security interest in or an
7 agricultural lien on the collateral, (i) owes payment or
8 other performance of the obligation, (ii) has provided
9 property other than the collateral to secure payment or
10 other performance of the obligation, or (iii) is
11 otherwise accountable in whole or in part for payment or
12 other performance of the obligation. The term does not
13 include issuers or nominated persons under a letter of
14 credit.
15 (60) "Original debtor" means a person that, as
16 debtor, entered into a security agreement to which a new
17 debtor has become bound under Section 9-203(d).
18 (61) "Payment intangible" means a general
19 intangible under which the account debtor's principal
20 obligation is a monetary obligation.
21 (62) "Person related to", with respect to an
22 individual, means:
23 (A) the spouse of the individual;
24 (B) a brother, brother-in-law, sister, or
25 sister-in-law of the individual;
26 (C) an ancestor or lineal descendant of the
27 individual or the individual's spouse; or
28 (D) any other relative, by blood or marriage,
29 of the individual or the individual's spouse who
30 shares the same home with the individual.
31 (63) "Person related to", with respect to an
32 organization, means:
33 (A) a person directly or indirectly
34 controlling, controlled by, or under common control
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1 with the organization;
2 (B) an officer or director of, or a person
3 performing similar functions with respect to, the
4 organization;
5 (C) an officer or director of, or a person
6 performing similar functions with respect to, a
7 person described in subparagraph (A);
8 (D) the spouse of an individual described in
9 subparagraph (A), (B), or (C); or
10 (E) an individual who is related by blood or
11 marriage to an individual described in subparagraph
12 (A), (B), (C), or (D) and shares the same home with
13 the individual.
14 (64) "Proceeds" means the following property:
15 (A) whatever is acquired upon the sale, lease,
16 license, exchange, or other disposition of
17 collateral;
18 (B) whatever is collected on, or distributed
19 on account of, collateral;
20 (C) rights arising out of collateral;
21 (D) to the extent of the value of collateral,
22 claims arising out of the loss, nonconformity, or
23 interference with the use of, defects or
24 infringement of rights in, or damage to, the
25 collateral; or
26 (E) to the extent of the value of collateral
27 and to the extent payable to the debtor or the
28 secured party, insurance payable by reason of the
29 loss or nonconformity of, defects or infringement of
30 rights in, or damage to, the collateral.
31 (65) "Promissory note" means an instrument that
32 evidences a promise to pay a monetary obligation, does
33 not evidence an order to pay, and does not contain an
34 acknowledgment by a bank that the bank has received for
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1 deposit a sum of money or funds.
2 (66) "Proposal" means a record authenticated by a
3 secured party which includes the terms on which the
4 secured party is willing to accept collateral in full or
5 partial satisfaction of the obligation it secures
6 pursuant to Sections 9-620, 9-621, and 9-622.
7 (67) "Public-finance transaction" means a secured
8 transaction in connection with which:
9 (A) debt securities are issued;
10 (B) all or a portion of the securities issued
11 have an initial stated maturity of at least 20
12 years; and
13 (C) the debtor, obligor, secured party,
14 account debtor or other person obligated on
15 collateral, assignor or assignee of a secured
16 obligation, or assignor or assignee of a security
17 interest is a State or a governmental unit of a
18 State.
19 (68) "Pursuant to commitment", with respect to an
20 advance made or other value given by a secured party,
21 means pursuant to the secured party's obligation, whether
22 or not a subsequent event of default or other event not
23 within the secured party's control has relieved or may
24 relieve the secured party from its obligation.
25 (69) "Record", except as used in "for record", "of
26 record", "record or legal title", and "record owner",
27 means information that is inscribed on a tangible medium
28 or which is stored in an electronic or other medium and
29 is retrievable in perceivable form.
30 (70) "Registered organization" means an
31 organization organized solely under the law of a single
32 State or the United States and as to which the State or
33 the United States must maintain a public record showing
34 the organization to have been organized.
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1 (71) "Secondary obligor" means an obligor to the
2 extent that:
3 (A) the obligor's obligation is secondary; or
4 (B) the obligor has a right of recourse with
5 respect to an obligation secured by collateral
6 against the debtor, another obligor, or property of
7 either.
8 (72) "Secured party" means:
9 (A) a person in whose favor a security
10 interest is created or provided for under a security
11 agreement, whether or not any obligation to be
12 secured is outstanding;
13 (B) a person that holds an agricultural lien;
14 (C) a consignor;
15 (D) a person to which accounts, chattel paper,
16 payment intangibles, or promissory notes have been
17 sold;
18 (E) a trustee, indenture trustee, agent,
19 collateral agent, or other representative in whose
20 favor a security interest or agricultural lien is
21 created or provided for; or
22 (F) a person that holds a security interest
23 arising under Section 2-401, 2-505, 2-711(3),
24 2A-508(5), 4-210, or 5-118.
25 (73) "Security agreement" means an agreement that
26 creates or provides for a security interest.
27 (74) "Send", in connection with a record or
28 notification, means:
29 (A) to deposit in the mail, deliver for
30 transmission, or transmit by any other usual means
31 of communication, with postage or cost of
32 transmission provided for, addressed to any address
33 reasonable under the circumstances; or
34 (B) to cause the record or notification to be
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1 received within the time that it would have been
2 received if properly sent under subparagraph (A).
3 (75) "Software" means a computer program and any
4 supporting information provided in connection with a
5 transaction relating to the program. The term does not
6 include a computer program that is included in the
7 definition of goods.
8 (76) "State" means a State of the United States,
9 the District of Columbia, Puerto Rico, the United States
10 Virgin Islands, or any territory or insular possession
11 subject to the jurisdiction of the United States.
12 (77) "Supporting obligation" means a
13 letter-of-credit right or secondary obligation that
14 supports the payment or performance of an account,
15 chattel paper, a document, a general intangible, an
16 instrument, or investment property.
17 (78) "Tangible chattel paper" means chattel paper
18 evidenced by a record or records consisting of
19 information that is inscribed on a tangible medium.
20 (79) "Termination statement" means an amendment of
21 a financing statement which:
22 (A) identifies, by its file number, the
23 initial financing statement to which it relates; and
24 (B) indicates either that it is a termination
25 statement or that the identified financing statement
26 is no longer effective.
27 (80) "Transmitting utility" means a person
28 primarily engaged in the business of:
29 (A) operating a railroad, subway, street
30 railway, or trolley bus;
31 (B) transmitting communications electrically,
32 electromagnetically, or by light;
33 (C) transmitting goods by pipeline or sewer;
34 or
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1 (D) transmitting or producing and transmitting
2 electricity, steam, gas, or water.
3 (b) Definitions in other Articles. The following
4 definitions in other Articles apply to this Article:
5 "Applicant". Section 5-102.
6 "Beneficiary". Section 5-102.
7 "Broker". Section 8-102.
8 "Certificated security". Section 8-102.
9 "Check". Section 3-104.
10 "Clearing corporation". Section 8-102.
11 "Contract for sale". Section 2-106.
12 "Customer". Section 4-104.
13 "Entitlement holder". Section 8-102.
14 "Financial asset". Section 8-102.
15 "Holder in due course". Section 3-302.
16 "Issuer" (with respect to a letter of Credit or
17 letter-of-credit right). Section 5-102.
18 "Issuer" (with respect to a security). Section 8-201.
19 "Lease". Section 2A-103.
20 "Lease agreement". Section 2A-103.
21 "Lease contract". Section 2A-103.
22 "Leasehold interest". Section 2A-103.
23 "Lessee". Section 2A-103.
24 "Lessee in ordinary course of business". Section 2A-103.
25 "Lessor". Section 2A-103.
26 "Lessor's residual interest". Section 2A-103.
27 "Letter of credit". Section 5-102.
28 "Merchant". Section 2-104.
29 "Negotiable instrument". Section 3-104.
30 "Nominated person". Section 5-102.
31 "Note". Section 3-104.
32 "Proceeds of a letter of credit". Section 5-114.
33 "Prove". Section 3-103.
34 "Sale". Section 2-106.
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1 "Securities account". Section 8-501.
2 "Securities intermediary". Section 8-102.
3 "Security". Section 8-102.
4 "Security certificate". Section 8-102.
5 "Security entitlement". Section 8-102.
6 "Uncertificated security". Section 8-102.
7 (c) Article 1 definitions and principles. Article 1
8 contains general definitions and principles of construction
9 and interpretation applicable throughout this Article. Policy
10 and Subject Matter of Article.
11 (1) Except as otherwise provided in Section 9--104 on
12 excluded transactions, this Article applies
13 (a) to any transaction (regardless of its form)
14 which is intended to create a security interest in personal
15 property or fixtures including goods, documents, instruments,
16 general intangibles, chattel paper or accounts; and also
17 (b) to any sale of accounts or chattel paper.
18 (2) This Article applies to security interests created
19 by contract including pledge, assignment, chattel mortgage,
20 chattel trust, trust deed, factor's lien, equipment trust,
21 conditional sale, trust receipt, other lien or title
22 retention contract and lease or consignment intended as
23 security. This Article does not apply to statutory liens
24 except as provided in Section 9--310.
25 (3) The application of this Article to a security
26 interest in a secured obligation is not affected by the fact
27 that the obligation is itself secured by a transaction or
28 interest to which this Article does not apply.
29 (4) The application of this Article to a security
30 interest in a deposit account shall not displace a common law
31 right of set-off of the secured party as to a deposit account
32 maintained with the secured party.
33 (Source: P.A. 87-1037.)
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1 (810 ILCS 5/9-103) (from Ch. 26, par. 9-103)
2 Sec. 9-103. Purchase-money security interest; application
3 of payments; burden of establishing.
4 (a) Definitions. In this Section:
5 (1) "purchase-money collateral" means goods or
6 software that secures a purchase-money obligation
7 incurred with respect to that collateral; and
8 (2) "purchase-money obligation" means an obligation
9 of an obligor incurred as all or part of the price of the
10 collateral or for value given to enable the debtor to
11 acquire rights in or the use of the collateral if the
12 value is in fact so used.
13 (b) Purchase-money security interest in goods. A
14 security interest in goods is a purchase-money security
15 interest:
16 (1) to the extent that the goods are purchase-money
17 collateral with respect to that security interest;
18 (2) if the security interest is in inventory that
19 is or was purchase-money collateral, also to the extent
20 that the security interest secures a purchase-money
21 obligation incurred with respect to other inventory in
22 which the secured party holds or held a purchase-money
23 security interest; and
24 (3) also to the extent that the security interest
25 secures a purchase-money obligation incurred with respect
26 to software in which the secured party holds or held a
27 purchase-money security interest.
28 (c) Purchase-money security interest in software. A
29 security interest in software is a purchase-money security
30 interest to the extent that the security interest also
31 secures a purchase-money obligation incurred with respect to
32 goods in which the secured party holds or held a
33 purchase-money security interest if:
34 (1) the debtor acquired its interest in the
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1 software in an integrated transaction in which it
2 acquired an interest in the goods; and
3 (2) the debtor acquired its interest in the
4 software for the principal purpose of using the software
5 in the goods.
6 (d) Consignor's inventory purchase-money security
7 interest. The security interest of a consignor in goods that
8 are the subject of a consignment is a purchase-money security
9 interest in inventory.
10 (e) Application of payment in non-consumer-goods
11 transaction. In a transaction other than a consumer-goods
12 transaction, if the extent to which a security interest is a
13 purchase-money security interest depends on the application
14 of a payment to a particular obligation, the payment must be
15 applied:
16 (1) in accordance with any reasonable method of
17 application to which the parties agree;
18 (2) in the absence of the parties' agreement to a
19 reasonable method, in accordance with any intention of
20 the obligor manifested at or before the time of payment;
21 or
22 (3) in the absence of an agreement to a reasonable
23 method and a timely manifestation of the obligor's
24 intention, in the following order:
25 (A) to obligations that are not secured; and
26 (B) if more than one obligation is secured, to
27 obligations secured by purchase-money security
28 interests in the order in which those obligations
29 were incurred.
30 (f) No loss of status of purchase-money security
31 interest in non-consumer-goods transaction. In a transaction
32 other than a consumer-goods transaction, a purchase-money
33 security interest does not lose its status as such, even if:
34 (1) the purchase-money collateral also secures an
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1 obligation that is not a purchase-money obligation;
2 (2) collateral that is not purchase-money
3 collateral also secures the purchase-money obligation; or
4 (3) the purchase-money obligation has been renewed,
5 refinanced, consolidated, or restructured.
6 (g) Burden of proof in non-consumer-goods transaction.
7 In a transaction other than a consumer-goods transaction, a
8 secured party claiming a purchase-money security interest has
9 the burden of establishing the extent to which the security
10 interest is a purchase-money security interest.
11 (h) Non-consumer-goods transactions; no inference. The
12 limitation of the rules in subsections (e), (f), and (g) to
13 transactions other than consumer-goods transactions is
14 intended to leave to the court the determination of the
15 proper rules in consumer-goods transactions. The court may
16 not infer from that limitation the nature of the proper rule
17 in consumer-goods transactions and may continue to apply
18 established approaches. Perfection of Security Interests in
19 Multiple State Transactions.
20 (1) Documents, instruments, letters of credit, and
21 ordinary goods.
22 (a) This subsection applies to documents,
23 instruments, rights to proceeds of written letters of
24 credit, and goods other than those covered by a
25 certificate of title described in subsection (2), mobile
26 goods described in subsection (3), and minerals described
27 in subsection (5).
28 (b) Except as otherwise provided in this
29 subsection, perfection and the effect of perfection or
30 non-perfection of a security interest in collateral are
31 governed by the law of the jurisdiction where the
32 collateral is when the last event occurs on which is
33 based the assertion that the security interest is
34 perfected or unperfected.
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1 (c) If the parties to a transaction creating a
2 purchase money security interest in goods in one
3 jurisdiction understand at the time that the security
4 interest attaches that the goods will be kept in another
5 jurisdiction, then the law of the other jurisdiction
6 governs the perfection and the effect of perfection or
7 non-perfection of the security interest from the time it
8 attaches until 30 days after the debtor receives
9 possession of the goods and thereafter if the goods are
10 taken to the other jurisdiction before the end of the
11 30-day period.
12 (d) When collateral is brought into and kept in
13 this State while subject to a security interest perfected
14 under the law of the jurisdiction from which the
15 collateral was removed, the security interest remains
16 perfected, but if action is required by Part 3 of this
17 Article to perfect the security interest,
18 (i) if the action is not taken before the
19 expiration of the period of perfection in the other
20 jurisdiction or the end of 4 months after the
21 collateral is brought into this State, whichever
22 period first expires, the security interest becomes
23 unperfected at the end of that period and is
24 thereafter deemed to have been unperfected as
25 against a person who became a purchaser after
26 removal;
27 (ii) if the action is taken before the
28 expiration of the period specified in subparagraph
29 (i), the security interest continues perfected
30 thereafter;
31 (iii) for the purpose of priority over a buyer
32 of consumer goods (subsection (2) of Section 9-307),
33 the period of the effectiveness of a filing in the
34 jurisdiction from which the collateral is removed is
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1 governed by the rules with respect to perfection in
2 subparagraphs (i) and (ii).
3 (2) Certificate of title.
4 (a) This subsection applies to goods covered by a
5 certificate of title issued under a statute of this State
6 or of another jurisdiction under the law of which
7 indication of a security interest on the certificate is
8 required as a condition of perfection.
9 (b) Except as otherwise provided in this
10 subsection, perfection and the effect of perfection or
11 non-perfection of the security interest are governed by
12 the law (including the conflict of laws rules) of the
13 jurisdiction issuing the certificate until 4 months after
14 the goods are removed from that jurisdiction and
15 thereafter until the goods are registered in another
16 jurisdiction, but in any event not beyond surrender of
17 the certificate. After the expiration of that period,
18 the goods are not covered by the certificate of title
19 within the meaning of this Section.
20 (c) Except with respect to the rights of a buyer
21 described in the next paragraph, a security interest,
22 perfected in another jurisdiction otherwise than by
23 notation on a certificate of title, in goods brought into
24 this State and thereafter covered by a certificate of
25 title issued by this State is subject to the rules stated
26 in paragraph (d) of subsection (1).
27 (d) If goods are brought into this State while a
28 security interest therein is perfected in any manner
29 under the law of the jurisdiction from which the goods
30 are removed and a certificate of title is issued by this
31 State and the certificate does not show that the goods
32 are subject to the security interest or that they may be
33 subject to security interests not shown on the
34 certificate, the security interest is subordinate to the
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1 rights of a buyer of the goods to the extent that he
2 gives value and receives delivery of the goods after
3 issuance of the certificate and without knowledge of the
4 security interest.
5 (3) Accounts, general intangibles and mobile goods.
6 (a) This subsection applies to accounts (other than
7 an account described in subsection (5) on minerals) and
8 general intangibles (other than uncertificated
9 securities) and to goods which are mobile and which are
10 of a type normally used in more than one jurisdiction,
11 such as motor vehicles, trailers, rolling stock,
12 airplanes, shipping containers, road building and
13 construction machinery and commercial harvesting
14 machinery and the like, if the goods are equipment or are
15 inventory leased or held for lease by the debtor to
16 others, and are not covered by a certificate of title
17 described in subsection (2).
18 (b) The law (including the conflict of laws rules)
19 of the jurisdiction in which the debtor is located
20 governs the perfection and the effect of perfection or
21 non-perfection of the security interest.
22 (c) If, however, the debtor is located in a
23 jurisdiction which is not a part of the United States,
24 and which does not provide for perfection of the security
25 interest by filing or recording in that jurisdiction, the
26 law of the jurisdiction in the United States in which the
27 debtor has its major executive office in the United
28 States governs the perfection and the effect of
29 perfection or non-perfection of the security interest
30 through filing. In the alternative, if the debtor is
31 located in a jurisdiction which is not a part of the
32 United States or Canada and the collateral is accounts or
33 general intangibles for money due or to become due, the
34 security interest may be perfected by notification to the
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1 account debtor. As used in this paragraph, "United
2 States" includes its territories and possessions and the
3 Commonwealth of Puerto Rico.
4 (d) A debtor shall be deemed located at his place
5 of business if he has one, at his chief executive office
6 if he has more than one place of business, otherwise at
7 his residence. If, however, the debtor is a foreign air
8 carrier under the Federal Aviation Act of 1958, as
9 amended, it shall be deemed located at the designated
10 office of the agent upon whom service of process may be
11 made on behalf of the foreign air carrier.
12 (e) A security interest perfected under the law of
13 the jurisdiction of the location of the debtor is
14 perfected until the expiration of 4 months after a change
15 of the debtor's location to another jurisdiction, or
16 until perfection would have ceased by the law of the
17 first jurisdiction, whichever period first expires.
18 Unless perfected in the new jurisdiction before the end
19 of that period, it becomes unperfected thereafter and is
20 deemed to have been unperfected as against a person who
21 became a purchaser after the change.
22 (4) Chattel paper. The rules stated for goods in
23 subsection (1) apply to a possessory security interest in
24 chattel paper. The rules stated for accounts in subsection
25 (3) apply to a non-possessory security interest in chattel
26 paper, but the security interest may not be perfected by
27 notification to the account debtor.
28 (5) Minerals. Perfection and the effect of perfection
29 or non-perfection of a security interest which is created by
30 a debtor who has an interest in minerals or the like
31 (including oil and gas) before extraction and which attaches
32 thereto as extracted, or which attaches to an account
33 resulting from the sale thereof at the wellhead or minehead
34 are governed by the law (including the conflict of laws
-28- LRB9106284WHdv
1 rules) of the jurisdiction wherein the wellhead or minehead
2 is located.
3 (6) Investment property.
4 (a) This subsection applies to investment property.
5 (b) Except as otherwise provided in paragraph (f),
6 during the time that a security certificate is located in
7 a jurisdiction, perfection of a security interest, the
8 effect of perfection or non-perfection, and the priority
9 of a security interest in the certificated security
10 represented thereby are governed by the local law of that
11 jurisdiction.
12 (c) Except as otherwise provided in paragraph (f),
13 perfection of a security interest, the effect of
14 perfection or non-perfection, and the priority of a
15 security interest in an uncertificated security are
16 governed by the local law of the issuer's jurisdiction as
17 specified in Section 8-110(d).
18 (d) Except as otherwise provided in paragraph (f),
19 perfection of a security interest, the effect of
20 perfection or non-perfection, and the priority of a
21 security interest in a security entitlement or securities
22 account are governed by the local law of the securities
23 intermediary's jurisdiction as specified in Section
24 8-110(e).
25 (e) Except as otherwise provided in paragraph (f),
26 perfection of a security interest, the effect of
27 perfection or non-perfection, and the priority of a
28 security interest in a commodity contract or commodity
29 account are governed by the local law of the commodity
30 intermediary's jurisdiction. The following rules
31 determine a "commodity intermediary's jurisdiction" for
32 purposes of this paragraph:
33 (i) If an agreement between the commodity
34 intermediary and commodity customer specifies that
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1 it is governed by the law of a particular
2 jurisdiction, that jurisdiction is the commodity
3 intermediary's jurisdiction.
4 (ii) If an agreement between the commodity
5 intermediary and commodity customer does not specify
6 the governing law as provided in subparagraph (i),
7 but expressly specifies that the commodity account
8 is maintained at an office in a particular
9 jurisdiction, that jurisdiction is the commodity
10 intermediary's jurisdiction.
11 (iii) If an agreement between the commodity
12 intermediary and commodity customer does not specify
13 a jurisdiction as provided in subparagraphs (i) or
14 (ii), the commodity intermediary's jurisdiction is
15 the jurisdiction in which is located the office
16 identified in an account statement as the office
17 serving the commodity customer's account.
18 (iv) If an agreement between the commodity
19 intermediary and commodity customer does not specify
20 a jurisdiction as provided in subparagraphs (i) or
21 (ii) and an account statement does not identify an
22 office serving the commodity customer's account as
23 provided in subparagraph (iii), the commodity
24 intermediary's jurisdiction is the jurisdiction in
25 which is located the chief executive office of the
26 commodity intermediary.
27 (f) Perfection of a security interest by filing,
28 automatic perfection of a security interest in investment
29 property granted by a broker or securities intermediary,
30 and automatic perfection of a security interest in a
31 commodity contract or commodity account granted by a
32 commodity intermediary are governed by the local law of
33 the jurisdiction in which the debtor is located.
34 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
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1 89-626, eff. 8-9-96.)
2 (810 ILCS 5/9-104) (from Ch. 26, par. 9-104)
3 Sec. 9-104. Control of deposit account.
4 (a) Requirements for control. A secured party has
5 control of a deposit account if:
6 (1) the secured party is the bank with which the
7 deposit account is maintained;
8 (2) the debtor, secured party, and bank have agreed
9 in an authenticated record that the bank will comply with
10 instructions originated by the secured party directing
11 disposition of the funds in the account without further
12 consent by the debtor; or
13 (3) the secured party becomes the bank's customer
14 with respect to the deposit account.
15 (b) Debtor's right to direct disposition. A secured
16 party that has satisfied subsection (a) has control, even if
17 the debtor retains the right to direct the disposition of
18 funds from the deposit account. Transactions excluded from
19 Article.
20 This Article does not apply
21 (a) to a security interest subject to any statute
22 of the United States to the extent that such statute
23 governs the rights of parties to and third parties
24 affected by transactions in particular types of property;
25 or
26 (b) to a landlord's lien; or
27 (c) to a lien given by statute or other rule of law
28 for services or materials except as provided in Section
29 9-310 on priority of such liens; or
30 (d) to a transfer of a claim for wages, salary or
31 other compensation of an employee; or
32 (e) to a transfer by a government or governmental
33 subdivision or agency; or
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1 (f) to a sale of accounts or chattel paper as part
2 of a sale of the business out of which they arose, or an
3 assignment of accounts or chattel paper which is for the
4 purpose of collection only, or a transfer of a right to
5 payment under a contract to an assignee who is also to do
6 the performance under the contract or a transfer of a
7 single account to an assignee in whole or partial
8 satisfaction of a preexisting indebtedness; or
9 (g) to a transfer of an interest or claim in or
10 under any policy of insurance, except as provided with
11 respect to proceeds (Section 9-306) and priorities in
12 proceeds (Section 9-312); or
13 (h) to a right represented by a judgment (other
14 than a judgment taken on a right to payment which was
15 collateral); or
16 (i) to any right of set-off; or
17 (j) except to the extent that provision is made for
18 fixtures in Section 9-313, to the creation or transfer of
19 an interest in or lien on real estate, including a lease
20 or rents thereunder; or
21 (k) to a transfer in whole or in part of any claim
22 arising out of tort; or
23 (l) to a transfer of an interest in a letter of
24 credit other than the rights to proceeds of a written
25 letter of credit.
26 (Source: P.A. 89-534, eff. 1-1-97.)
27 (810 ILCS 5/9-105) (from Ch. 26, par. 9-105)
28 Sec. 9-105. Control of electronic chattel paper. A
29 secured party has control of electronic chattel paper if the
30 record or records comprising the chattel paper are created,
31 stored, and assigned in such a manner that:
32 (1) a single authoritative copy of the record or
33 records exists which is unique, identifiable and, except
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1 as otherwise provided in paragraphs (4), (5), and (6),
2 unalterable;
3 (2) the authoritative copy identifies the secured
4 party as the assignee of the record or records;
5 (3) the authoritative copy is communicated to and
6 maintained by the secured party or its designated
7 custodian;
8 (4) copies or revisions that add or change an
9 identified assignee of the authoritative copy can be made
10 only with the participation of the secured party;
11 (5) each copy of the authoritative copy and any
12 copy of a copy is readily identifiable as a copy that is
13 not the authoritative copy; and
14 (6) any revision of the authoritative copy is
15 readily identifiable as an authorized or unauthorized
16 revision. Definitions and index of definitions.
17 (1) In this Article unless the context otherwise
18 requires:
19 (a) "Account debtor" means the person who is
20 obligated on an account, chattel paper or general
21 intangible;
22 (b) "Chattel paper" means a writing or writings
23 which evidence both a monetary obligation and a security
24 interest in or a lease of specific goods, but a charter
25 or other contract involving the use or hire of a vessel
26 is not chattel paper. When a transaction is evidenced
27 both by such a security agreement or a lease and by an
28 instrument or a series of instruments, the group of
29 writings taken together constitutes chattel paper;
30 (c) "Collateral" means the property subject to a
31 security interest, and includes accounts and chattel
32 paper which have been sold;
33 (d) "Debtor" means the person who owes payment or
34 other performance of the obligation secured, whether or
-33- LRB9106284WHdv
1 not he owns or has rights in the collateral, and includes
2 the seller of accounts or chattel paper. Where the debtor
3 and the owner of the collateral are not the same person,
4 the term "debtor" means the owner of the collateral in
5 any provision of the Article dealing with the collateral,
6 the obligor in any provision dealing with the obligation,
7 and may include both where the context so requires;
8 (e) "Deposit account" means a demand, time,
9 savings, passbook or like account maintained with a bank,
10 as defined in subsection (1) of Section 4-105, other than
11 an account evidenced by a certificate of deposit;
12 (f) "Document" means document of title as defined
13 in the general definitions of Article 1 (Section 1-201),
14 and a receipt of the kind described in subsection (2) of
15 Section 7-201;
16 (g) "Encumbrance" includes real estate mortgages
17 and other liens on real estate and all other rights in
18 real estate that are not ownership interests;
19 (h) "Goods" includes all things which are movable
20 at the time the security interest attaches or which are
21 fixtures (Section 9-313), but does not include money,
22 documents, instruments, investment property, commodity
23 contracts, accounts, chattel paper, general intangibles,
24 or minerals or the like (including oil and gas) before
25 extraction. "Goods" also includes standing timber which
26 is to be cut and removed under a conveyance or contract
27 for sale, the unborn young of animals, and growing crops;
28 (i) "Instrument" means a negotiable instrument
29 (defined in Section 3-104), a non-transferable
30 certificate of deposit, a non-negotiable certificate of
31 deposit, or any other writing which evidences a right to
32 the payment of money and is not itself a security
33 agreement or lease and is of a type which is in ordinary
34 course of business transferred by delivery with any
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1 necessary indorsement or assignment. The term does not
2 include investment property;
3 (j) "Mortgage" means a consensual interest created
4 by a real estate mortgage, a trust deed on real estate,
5 or the like;
6 (j-5) "Non-negotiable certificate of deposit" means
7 a written document issued by a bank, as defined in
8 subsection (1) of Section 4-105, that contains an
9 acknowledgement that a sum of money has been received by
10 the issuer and a promise by the issuer to repay the sum
11 of money, and is not a negotiable instrument as defined
12 in Section 3-104;
13 (j-7) "Non-transferable certificate of deposit"
14 means a non-negotiable certificate of deposit which may
15 not be transferred except on the books of the issuer,
16 with the consent of the issuer, or is subject to other
17 restrictions or conditions of the issuer on transfer;
18 (k) An advance is made "pursuant to commitment" if
19 the secured party has bound himself to make it, whether
20 or not a subsequent event of default or other event not
21 within his control has relieved or may relieve him from
22 his obligation;
23 (l) "Security agreement" means an agreement which
24 creates or provides for a security interest;
25 (m) "Secured party" means a lender, seller or other
26 person in whose favor there is a security interest,
27 including a person to whom accounts or chattel paper have
28 been sold. When the holders of obligations issued under
29 an indenture of trust, equipment trust agreement or the
30 like are represented by a trustee or other person, the
31 representative is the secured party;
32 (n) "Transmitting utility" means any person
33 primarily engaged in the railroad, street railway or
34 trolley bus business, the electric or electronics
-35- LRB9106284WHdv
1 communications transmission business, the transmission of
2 goods by pipeline, or the distribution, transmission, or
3 the production and transmission of electricity, steam,
4 gas or water, or the provision of sewer service.
5 (o) "Uncertificated certificate of deposit" means an
6 obligation of a bank, as defined in subsection (1) of Section
7 4-105, to repay a sum of money it has received, that is not a
8 deposit account and is not represented by a writing, but only
9 by an entry on the books of the bank and any documentation
10 given to the customer by the bank.
11 (2) Other definitions applying to this Article and the
12 Sections in which they appear are:
13 "Account". Section 9-106.
14 "Attach". Section 9-203.
15 "Commodity contract". Section 9-115.
16 "Commodity customer". Section 9-115.
17 "Commodity intermediary". Section 9-115.
18 "Construction mortgage". Section 9-313 (1).
19 "Consumer goods". Section 9-109 (1).
20 "Control". Section 9-115.
21 "Equipment". Section 9-109 (2).
22 "Farm products". Section 9-109 (3).
23 "Fixture". Section 9-313 (1).
24 "Fixture filing". Section 9-313 (1).
25 "General intangibles". Section 9-106.
26 "Inventory". Section 9-109 (4).
27 "Investment property". Section 9-115.
28 "Lien creditor". Section 9-301 (3).
29 "Proceeds". Section 9-306 (1).
30 "Purchase money security interest". Section 9-107.
31 "United States". Section 9-103.
32 (3) The following definitions in other Articles apply to
33 this Article:
34 "Bank". Section 4-105.
-36- LRB9106284WHdv
1 "Broker". Section 8-102.
2 "Certificated security". Section 8-102.
3 "Check". Section 3-104.
4 "Clearing corporation". Section 8-102.
5 "Contract for sale". Section 2-106.
6 "Control". Section 8-106.
7 "Delivery". Section 8-301.
8 "Entitlement holder". Section 8-102.
9 "Financial asset". Section 8-102.
10 "Holder in due course". Section 3-302.
11 "Letter of credit". Section 5-102.
12 "Note". Section 3-104.
13 "Proceeds of a letter of credit". Section 5-114(a).
14 "Sale". Section 2-106.
15 "Securities intermediary". Section 8-102.
16 "Security". Section 8-102.
17 "Security certificate". Section 8-102.
18 "Security entitlement". Section 8-102.
19 "Uncertificated security". Section 8-102.
20 (4) In addition Article 1 contains general definitions
21 and principles of construction and interpretation applicable
22 throughout this Article.
23 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
24 90-665, eff. 7-30-98.)
25 (810 ILCS 5/9-106) (from Ch. 26, par. 9-106)
26 Sec. 9-106. Control of investment property.
27 (a) Control under Section 8-106. A person has control
28 of a certificated security, uncertificated security, or
29 security entitlement as provided in Section 8-106.
30 (b) Control of commodity contract. A secured party has
31 control of a commodity contract if:
32 (1) the secured party is the commodity intermediary
33 with which the commodity contract is carried; or
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1 (2) the commodity customer, secured party, and
2 commodity intermediary have agreed that the commodity
3 intermediary will apply any value distributed on account
4 of the commodity contract as directed by the secured
5 party without further consent by the commodity customer.
6 (c) Effect of control of securities account or commodity
7 account. A secured party having control of all security
8 entitlements or commodity contracts carried in a securities
9 account or commodity account has control over the securities
10 account or commodity account. Definitions: "account";
11 "general intangibles". "Account" means any right to payment
12 for goods sold or leased or for services rendered which is
13 not evidenced by an instrument or chattel paper, whether or
14 not it has been earned by performance. "General intangibles"
15 means any personal property (including things in action)
16 other than goods, accounts, chattel paper, documents,
17 instruments, investment property, rights to proceeds of
18 written letters of credit, deposit accounts, uncertificated
19 certificates of deposit, and money. All rights to payment
20 earned or unearned under a charter or other contract
21 involving the use or hire of a vessel and all rights incident
22 to the charter or contract are accounts.
23 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
24 90-665, eff. 7-30-98.)
25 (810 ILCS 5/9-107) (from Ch. 26, par. 9-107)
26 Sec. 9-107. Control of letter-of-credit right. A
27 secured party has control of a letter-of-credit right to the
28 extent of any right to payment or performance by the issuer
29 or any nominated person if the issuer or nominated person has
30 consented to an assignment of proceeds of the letter of
31 credit under Section 5-114(c) or otherwise applicable law or
32 practice. Definitions: "purchase money security interest".
33 A security interest is a "purchase money security
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1 interest" to the extent that it is
2 (a) taken or retained by the seller of the
3 collateral to secure all or part of its price; or
4 (b) taken by a person who by making advances or
5 incurring an obligation gives value to enable the debtor to
6 acquire rights in or the use of collateral if such value is
7 in fact so used.
8 (Source: Laws 1961, p. 2101.)
9 (810 ILCS 5/9-108) (from Ch. 26, par. 9-108)
10 Sec. 9-108. Sufficiency of description.
11 (a) Sufficiency of description. Except as otherwise
12 provided in subsections (c), (d), and (e), a description of
13 personal or real property is sufficient, whether or not it is
14 specific, if it reasonably identifies what is described.
15 (b) Examples of reasonable identification. Except as
16 otherwise provided in subsection (d), a description of
17 collateral reasonably identifies the collateral if it
18 identifies the collateral by:
19 (1) specific listing;
20 (2) category;
21 (3) except as otherwise provided in subsection (e),
22 a type of collateral defined in the Uniform Commercial
23 Code;
24 (4) quantity;
25 (5) computational or allocational formula or
26 procedure; or
27 (6) except as otherwise provided in subsection (c),
28 any other method, if the identity of the collateral is
29 objectively determinable.
30 (c) Supergeneric description not sufficient. A
31 description of collateral as "all the debtor's assets" or
32 "all the debtor's personal property" or using words of
33 similar import does not reasonably identify the collateral.
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1 (d) Investment property. Except as otherwise provided
2 in subsection (e), a description of a security entitlement,
3 securities account, or commodity account is sufficient if it
4 describes:
5 (1) the collateral by those terms or as investment
6 property; or
7 (2) the underlying financial asset or commodity
8 contract.
9 (e) When description by type insufficient. A
10 description only by type of collateral defined in the Uniform
11 Commercial Code is an insufficient description of:
12 (1) a commercial tort claim; or
13 (2) in a consumer transaction, consumer goods, a
14 security entitlement, a securities account, or a
15 commodity account. When after-acquired collateral not
16 security for antecedent debt.
17 Where a secured party makes an advance, incurs an
18 obligation, releases a perfected security interest, or
19 otherwise gives new value which is to be secured in whole or
20 in part by after-acquired property his security interest in
21 the after-acquired collateral shall be deemed to be taken for
22 new value and not as security for an antecedent debt if the
23 debtor acquires his rights in such collateral either in the
24 ordinary course of his business or under a contract of
25 purchase made pursuant to the security agreement within a
26 reasonable time after new value is given.
27 (Source: Laws 1961, p. 2101.)
28 (810 ILCS 5/Art. 9, Part 1, Subpart 2 heading new)
29 SUBPART 2. APPLICABILITY OF ARTICLE
30 (810 ILCS 5/9-109) (from Ch. 26, par. 9-109)
31 Sec. 9-109. Scope.
32 (a) General scope of Article. Except as otherwise
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1 provided in subsections (c) and (d), this Article applies to:
2 (1) a transaction, regardless of its form, that
3 creates a security interest in personal property or
4 fixtures by contract;
5 (2) an agricultural lien;
6 (3) a sale of accounts, chattel paper, payment
7 intangibles, or promissory notes;
8 (4) a consignment;
9 (5) a security interest arising under Section
10 2-401, 2-505, 2-711(3), or 2A-508(5), as provided in
11 Section 9-110; and
12 (6) a security interest arising under Section 4-210
13 or 5-118.
14 (b) Security interest in secured obligation. The
15 application of this Article to a security interest in a
16 secured obligation is not affected by the fact that the
17 obligation is itself secured by a transaction or interest to
18 which this Article does not apply.
19 (c) Extent to which Article does not apply. This
20 Article does not apply to the extent that:
21 (1) a statute, regulation, or treaty of the United
22 States preempts this Article;
23 (2) another statute of this State expressly governs
24 the creation, perfection, priority, or enforcement of a
25 security interest created by this State or a governmental
26 unit of this State;
27 (3) a statute of another State, a foreign country,
28 or a governmental unit of another State or a foreign
29 country, other than a statute generally applicable to
30 security interests, expressly governs creation,
31 perfection, priority, or enforcement of a security
32 interest created by the State, country, or governmental
33 unit; or
34 (4) the rights of a transferee beneficiary or
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1 nominated person under a letter of credit are independent
2 and superior under Section 5-114.
3 (d) Inapplicability of Article. This Article does not
4 apply to:
5 (1) a landlord's lien, other than an agricultural
6 lien;
7 (2) a lien, other than an agricultural lien, given
8 by statute or other rule of law for services or
9 materials, but Section 9-333 applies with respect to
10 priority of the lien;
11 (3) an assignment of a claim for wages, salary, or
12 other compensation of an employee;
13 (4) a sale of accounts, chattel paper, payment
14 intangibles, or promissory notes as part of a sale of the
15 business out of which they arose;
16 (5) an assignment of accounts, chattel paper,
17 payment intangibles, or promissory notes which is for the
18 purpose of collection only;
19 (6) an assignment of a right to payment under a
20 contract to an assignee that is also obligated to perform
21 under the contract;
22 (7) an assignment of a single account, payment
23 intangible, or promissory note to an assignee in full or
24 partial satisfaction of a preexisting indebtedness;
25 (8) a transfer of an interest in or an assignment
26 of a claim under a policy of insurance, other than an
27 assignment by or to a health-care provider of a
28 health-care-insurance receivable and any subsequent
29 assignment of the right to payment, but Sections 9-315
30 and 9-322 apply with respect to proceeds and priorities
31 in proceeds;
32 (9) an assignment of a right represented by a
33 judgment, other than a judgment taken on a right to
34 payment that was collateral;
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1 (10) a right of recoupment or set-off, but:
2 (A) Section 9-340 applies with respect to the
3 effectiveness of rights of recoupment or set-off
4 against deposit accounts; and
5 (B) Section 9-404 applies with respect to
6 defenses or claims of an account debtor;
7 (11) the creation or transfer of an interest in or
8 lien on real property, including a lease or rents
9 thereunder, except to the extent that provision is made
10 for:
11 (A) liens on real property in Sections 9-203
12 and 9-308;
13 (B) fixtures in Section 9-334;
14 (C) fixture filings in Sections 9-501, 9-502,
15 9-512, 9-516, and 9-519; and
16 (D) security agreements covering personal and
17 real property in Section 9-604;
18 (12) an assignment of a claim arising in tort,
19 other than a commercial tort claim, but Sections 9-315
20 and 9-322 apply with respect to proceeds and priorities
21 in proceeds; or
22 (13) an assignment of a deposit account in a
23 consumer transaction, but Sections 9-315 and 9-322 apply
24 with respect to proceeds and priorities in proceeds.
25 Classification of goods; "consumer goods"; "equipment";
26 "farm products"; "inventory". Goods are
27 (1) "consumer goods" if they are used or bought for use
28 primarily for personal, family or household purposes;
29 (2) "equipment" if they are used or bought for use
30 primarily in business (including farming or a profession) or
31 by a debtor who is a non-profit organization or a
32 governmental subdivision or agency or if the goods are not
33 included in the definitions of inventory, farm products or
34 consumer goods;
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1 (3) "farm products" if they are crops or livestock or
2 supplies used or produced in farming operations or if they
3 are products of crops or livestock in their unmanufactured
4 states (such as ginned cotton, wool-clip, maple syrup, milk
5 and eggs) or if they are aquatic products as defined in the
6 Aquaculture Development Act, and if they are in the
7 possession of a debtor engaged in raising, fattening, grazing
8 or other farming or aquacultural operations. If goods are
9 farm products they are neither equipment nor inventory;
10 (4) "inventory" if they are held by a person who holds
11 them for sale or lease or to be furnished under contracts of
12 service or if he has so furnished them, or if they are raw
13 materials, work in process or materials used or consumed in a
14 business. Inventory of a person is not to be classified as
15 his equipment.
16 (Source: P.A. 85-856.)
17 (810 ILCS 5/9-110) (from Ch. 26, par. 9-110)
18 Sec. 9-110. Security interests arising under Article 2
19 or 2A. A security interest arising under Section 2-401,
20 2-505, 2-711(3), or 2A-508(5) is subject to this Article.
21 However, until the debtor obtains possession of the goods:
22 (1) the security interest is enforceable, even if
23 Section 9-203(b)(3) has not been satisfied;
24 (2) filing is not required to perfect the security
25 interest;
26 (3) the rights of the secured party after default
27 by the debtor are governed by Article 2 or 2A; and
28 (4) the security interest has priority over a
29 conflicting security interest created by the debtor.
30 Sufficiency of description.
31 For the purposes of this Article any description of
32 personal property or real estate is sufficient whether or not
33 it is specific if it reasonably identifies what is described.
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1 Where collateral is not owned by
5 debtor.
6 Unless otherwise agreed, when a secured party knows that
7 collateral is owned by a person who is not the debtor, the
8 owner of the collateral is entitled to receive from the
9 secured party any surplus under Section 9-- 502(2) or under
10 Section 9--504(1), and is not liable for the debt or for any
11 deficiency after resale, and he has the same right as the
12 debtor
13 (a) to receive statements under Section 9--208;
14 (b) to receive notice of and to object to a secured
15 party's proposal to retain the collateral in satisfaction of
16 the indebtedness under Section 9--505;
17 (c) to redeem the collateral under Section 9--506;
18 (d) to obtain injunctive or other relief under
19 Section 9--507(1); and
20 (e) to recover losses caused to him under Section
21 9--208(2).
22 (Source: Laws 1961, 1st S.S., p. 7.)
23 (810 ILCS 5/9-113) (from Ch. 26, par. 9-113)
24 Sec. 9-113. (Blank). Security interests arising under
25 Article on Sales or under Article on Leases.
26 A security interest arising solely under the Article on
27 Sales (Article 2) or the Article on Leases (Article 2A) is
28 subject to the provisions of this Article except that to the
29 extent that and so long as the debtor does not have or does
30 not lawfully obtain possession of the goods
31 (a) no security agreement is necessary to make the
32 security interest enforceable; and
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1 (b) no filing is required to perfect the security
2 interest; and
3 (c) the rights of the secured party on default by
4 the debtor are governed (i) by the Article on Sales
5 (Article 2) in the case of a security interest arising
6 solely under such Article or (ii) by the Article on
7 Leases (Article 2A) in the case of a security interest
8 arising solely under such Article.
9 (Source: P.A. 87-493.)
10 (810 ILCS 5/9-114) (from Ch. 26, par. 9-114)
11 Sec. 9-114. (Blank). Consignment.
12 (1) A person who delivers goods under a consignment
13 which is not a security interest and who would be required to
14 file under this Article by paragraph (3) (c) of Section 2-326
15 has priority over a secured party who is or becomes a
16 creditor of the consignee and who would have a perfected
17 security interest in the goods if they were the property of
18 the consignee, and also has priority with respect to
19 identifiable cash proceeds received on or before delivery of
20 the goods to a buyer, if
21 (a) the consignor complies with the filing provision of
22 the Article on Sales with respect to consignments (paragraph
23 (3) (c) of Section 2-326 before the consignee receives
24 possession of the goods; and
25 (b) the consignor gives notification in writing to the
26 holder of the security interest if the holder has filed a
27 financing statement covering the same types of goods before
28 the date of the filing made by the consignor; and
29 (c) the holder of the security interest receives the
30 notification within 5 years before the consignee receives
31 possession of the goods; and
32 (d) the notification states that the consignor expects
33 to deliver goods on consignment to the consignee, describing
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1 the goods by item or type.
2 (2) In the case of a consignment which is not a security
3 interest and in which the requirements of the preceding
4 subsection have not been met, a person who delivers goods to
5 another is subordinate to a person who would have a perfected
6 security interest in the goods if they were the property of
7 the debtor.
8 (Source: P. A. 78-238.)
9 (810 ILCS 5/9-115) (from Ch. 26, par. 9-115)
10 Sec. 9-115. (Blank). Investment property.
11 (1) In this Article:
12 (a) "Commodity account" means an account maintained
13 by a commodity intermediary in which a commodity contract
14 is carried for a commodity customer.
15 (b) "Commodity contract" means a commodity futures
16 contract, an option on a commodity futures contract, a
17 commodity option, or other contract that, in each case,
18 is:
19 (i) traded on or subject to the rules of a
20 board of trade that has been designated as a
21 contract market for such a contract pursuant to the
22 federal commodities laws; or
23 (ii) traded on a foreign commodity board of
24 trade, exchange, or market, and is carried on the
25 books of a commodity intermediary for a commodity
26 customer.
27 (c) "Commodity customer" means a person for whom a
28 commodity intermediary carries a commodity contract on
29 its books.
30 (d) "Commodity intermediary" means:
31 (i) a person who is registered as a futures
32 commission merchant under the federal commodities
33 laws; or
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1 (ii) a person who in the ordinary course of
2 its business provides clearance or settlement
3 services for a board of trade that has been
4 designated as a contract market pursuant to the
5 federal commodities laws.
6 (e) "Control" with respect to a certificated
7 security, uncertificated security, or security
8 entitlement has the meaning specified in Section 8-106.
9 A secured party has control over a commodity contract if
10 by agreement among the commodity customer, the commodity
11 intermediary, and the secured party, the commodity
12 intermediary has agreed that it will apply any value
13 distributed on account of the commodity contract as
14 directed by the secured party without further consent by
15 the commodity customer. If a commodity customer grants a
16 security interest in a commodity contract to its own
17 commodity intermediary, the commodity intermediary as
18 secured party has control. A secured party has control
19 over a securities account or commodity account if the
20 secured party has control over all security entitlements
21 or commodity contracts carried in the securities account
22 or commodity account.
23 (f) "Investment property" means:
24 (i) a security, whether certificated or
25 uncertificated;
26 (ii) a security entitlement;
27 (iii) a securities account;
28 (iv) a commodity contract; or
29 (v) a commodity account.
30 (2) Attachment or perfection of a security interest in a
31 securities account is also attachment or perfection of a
32 security interest in all security entitlements carried in the
33 securities account. Attachment or perfection of a security
34 interest in a commodity account is also attachment or
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1 perfection of a security interest in all commodity contracts
2 carried in the commodity account.
3 (3) A description of collateral in a security agreement
4 or financing statement is sufficient to create or perfect a
5 security interest in a certificated security, uncertificated
6 security, security entitlement, securities account, commodity
7 contract, or commodity account whether it describes the
8 collateral by those terms, or as investment property, or by
9 description of the underlying security, financial asset, or
10 commodity contract. A description of investment property
11 collateral in a security agreement or financing statement is
12 sufficient if it identifies the collateral by specific
13 listing, by category, by quantity, by a computational or
14 allocational formula or procedure, or by any other method, if
15 the identity of the collateral is objectively determinable.
16 (4) Perfection of a security interest in investment
17 property is governed by the following rules:
18 (a) A security interest in investment property may
19 be perfected by control.
20 (b) Except as otherwise provided in paragraphs (c)
21 and (d), a security interest in investment property may
22 be perfected by filing.
23 (c) If the debtor is a broker or securities
24 intermediary a security interest in investment property
25 is perfected when it attaches. The filing of a financing
26 statement with respect to a security interest in
27 investment property granted by a broker or securities
28 intermediary has no effect for purposes of perfection or
29 priority with respect to that security interest.
30 (d) If a debtor is a commodity intermediary, a
31 security interest in a commodity contract or a commodity
32 account is perfected when it attaches. The filing of a
33 financing statement with respect to a security interest
34 in a commodity contract or a commodity account granted by
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1 a commodity intermediary has no effect for purposes of
2 perfection or priority with respect to that security
3 interest.
4 (5) Priority between conflicting security interests in
5 the same investment property is governed by the following
6 rules:
7 (a) A security interest of a secured party who has
8 control over investment property has priority over a
9 security interest of a secured party who does not have
10 control over the investment property.
11 (b) Except as otherwise provided in paragraphs (c)
12 and (d), conflicting security interests of secured
13 parties each of whom has control rank equally.
14 (c) Except as otherwise agreed by the securities
15 intermediary, a security interest in a security
16 entitlement or a securities account granted to the
17 debtor's own securities intermediary has priority over
18 any security interest granted by the debtor to another
19 secured party.
20 (d) Except as otherwise agreed by the commodity
21 intermediary, a security interest in a commodity contract
22 or a commodity account granted to the debtor's own
23 commodity intermediary has priority over any security
24 interest granted by the debtor to another secured party.
25 (e) Conflicting security interests granted by a
26 broker, a securities intermediary, or a commodity
27 intermediary which are perfected without control rank
28 equally.
29 (f) In all other cases, priority between
30 conflicting security interests in investment property is
31 governed by Section 9-312(5), (6), and (7). Section
32 9-312(4) does not apply to investment property.
33 (6) If a security certificate in registered form is
34 delivered to a secured party pursuant to agreement, a written
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1 security agreement is not required for attachment or
2 enforceability of the security interest, delivery suffices
3 for perfection of the security interest, and the security
4 interest has priority over a conflicting security interest
5 perfected by means other than control, even if a necessary
6 indorsement is lacking.
7 (Source: P.A. 89-364, eff. 1-1-96.)
8 (810 ILCS 5/9-116)
9 Sec. 9-116. (Blank). Security interest arising in
10 purchase or delivery of financial asset.
11 (1) If a person buys a financial asset through a
12 securities intermediary in a transaction in which the buyer
13 is obligated to pay the purchase price to the securities
14 intermediary at the time of the purchase, and the securities
15 intermediary credits the financial asset to the buyer's
16 securities account before the buyer pays the securities
17 intermediary, the securities intermediary has a security
18 interest in the buyer's security entitlement securing the
19 buyer's obligation to pay. A security agreement is not
20 required for attachment or enforceability of the security
21 interest, and the security interest is automatically
22 perfected.
23 (2) If a certificated security, or other financial asset
24 represented by a writing which in the ordinary course of
25 business is transferred by delivery with any necessary
26 indorsement or assignment is delivered pursuant to an
27 agreement between persons in the business of dealing with
28 such securities or financial assets and the agreement calls
29 for delivery versus payment, the person delivering the
30 certificate or other financial asset has a security interest
31 in the certificated security or other financial asset
32 securing the seller's right to receive payment. A security
33 agreement is not required for attachment or enforceability of
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1 the security interest, and the security interest is
2 automatically perfected.
3 (Source: P.A. 89-364, eff. 1-1-96.)
4 (810 ILCS 5/9-150)
5 Sec. 9-150. (Blank). Secretary of State; rules. The
6 Secretary of State, under the Illinois Administrative
7 Procedure Act, may adopt rules necessary to administer the
8 Secretary of State's responsibilities under this Article.
9 (Source: P.A. 89-364, eff. 1-1-96.)
10 (810 ILCS 5/Art. 9, Part 2 heading)
11 PART 2. EFFECTIVENESS OF SECURITY AGREEMENT;
12 ATTACHMENT OF SECURITY INTEREST;
13 RIGHTS OF PARTIES TO SECURITY AGREEMENT
14 VALIDITY OF SECURITY AGREEMENT
15 AND RIGHTS OF PARTIES THERETO
16 (810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new)
17 SUBPART 1. EFFECTIVENESS AND ATTACHMENT
18 (810 ILCS 5/9-201) (from Ch. 26, par. 9-201)
19 Sec. 9-201. General effectiveness of security agreement.
20 (a) General effectiveness. Except as otherwise provided
21 in the Uniform Commercial Code, a security agreement is
22 effective according to its terms between the parties, against
23 purchasers of the collateral, and against creditors.
24 (b) Applicable consumer laws and other law. A
25 transaction subject to this Article is subject to any
26 applicable rule of law which establishes a different rule for
27 consumers and insert reference to (i) any other statute or
28 regulation that regulates the rates, charges, agreements, and
29 practices for loans, credit sales, or other extensions of
30 credit and (ii) any consumer-protection statute or regulation
-52- LRB9106284WHdv
1 5D.
2 (c) Other applicable law controls. In case of conflict
3 between this Article and a rule of law, statute, or
4 regulation described in subsection (b), the rule of law,
5 statute, or regulation controls. Failure to comply with a
6 statute or regulation described in subsection (b) has only
7 the effect the statute or regulation specifies.
8 (d) Further deference to other applicable law. This
9 Article does not:
10 (1) validate any rate, charge, agreement, or
11 practice that violates a rule of law, statute, or
12 regulation described in subsection (b); or
13 (2) extend the application of the rule of law,
14 statute, or regulation to a transaction not otherwise
15 subject to it. General validity of security agreement.
16 Except as otherwise provided by this Act a security
17 agreement is effective according to its terms between the
18 parties, against purchasers of the collateral and against
19 creditors. Nothing in this Article validates any charge or
20 practice illegal under any statute or regulation thereunder
21 governing usury, small loans, retail installment sales, or
22 the like, or extends the application of any such statute or
23 regulation to any transaction not otherwise subject thereto.
24 (Source: Laws 1961, p. 2101.)
25 (810 ILCS 5/9-202) (from Ch. 26, par. 9-202)
26 Sec. 9-202. Title to collateral immaterial. Except as
27 otherwise provided with respect to consignments or sales of
28 accounts, chattel paper, payment intangibles, or promissory
29 notes, the provisions of this Article with regard to rights
30 and obligations apply whether title to collateral is in the
31 secured party or the debtor.
32 Each provision of this Article with regard to rights,
33 obligations and remedies applies whether title to collateral
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1 is in the secured party or in the debtor.
2 (Source: Laws 1961, p. 2101.)
3 (810 ILCS 5/9-203) (from Ch. 26, par. 9-203)
4 Sec. 9-203. Attachment and enforceability of security
5 interest; proceeds; supporting obligations; formal
6 requisites.
7 (a) Attachment. A security interest attaches to
8 collateral when it becomes enforceable against the debtor
9 with respect to the collateral, unless an agreement expressly
10 postpones the time of attachment.
11 (b) Enforceability. Except as otherwise provided in
12 subsections (c) through (i), a security interest is
13 enforceable against the debtor and third parties with respect
14 to the collateral only if :
15 (1) value has been given;
16 (2) the debtor has rights in the collateral or the
17 power to transfer rights in the collateral to a secured
18 party; and
19 (3) one of the following conditions is met:
20 (A) the debtor has authenticated a security
21 agreement that provides a description of the
22 collateral and, if the security interest covers
23 timber to be cut, a description of the land
24 concerned;
25 (B) the collateral is not a certificated
26 security and is in the possession of the secured
27 party under Section 9-313 pursuant to the debtor's
28 security agreement;
29 (C) the collateral is a certificated security
30 in registered form and the security certificate has
31 been delivered to the secured party under Section
32 8-301 pursuant to the debtor's security agreement;
33 or
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1 (D) the collateral is deposit accounts,
2 electronic chattel paper, investment property, or
3 letter-of-credit rights, and the secured party has
4 control under Section 9-104, 9-105, 9-106, or 9-107
5 pursuant to the debtor's security agreement.
6 (c) Other UCC provisions. Subsection (b) is subject to
7 Section 4-210 on the security interest of a collecting bank,
8 Section 5-118 on the security interest of a letter-of-credit
9 issuer or nominated person, Section 9-110 on a security
10 interest arising under Article 2 or 2A, and Section 9-206 on
11 security interests in investment property.
12 (d) When person becomes bound by another person's
13 security agreement. A person becomes bound as debtor by a
14 security agreement entered into by another person if, by
15 operation of law other than this Article or by contract:
16 (1) the security agreement becomes effective to
17 create a security interest in the person's property; or
18 (2) the person becomes generally obligated for the
19 obligations of the other person, including the obligation
20 secured under the security agreement, and acquires or
21 succeeds to all or substantially all of the assets of the
22 other person.
23 (e) Effect of new debtor becoming bound. If a new
24 debtor becomes bound as debtor by a security agreement
25 entered into by another person:
26 (1) the agreement satisfies subsection (b)(3) with
27 respect to existing or after-acquired property of the new
28 debtor to the extent the property is described in the
29 agreement; and
30 (2) another agreement is not necessary to make a
31 security interest in the property enforceable.
32 (f) Proceeds and supporting obligations. The attachment
33 of a security interest in collateral gives the secured party
34 the rights to proceeds provided by Section 9-315 and is also
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1 attachment of a security interest in a supporting obligation
2 for the collateral.
3 (g) Lien securing right to payment. The attachment of a
4 security interest in a right to payment or performance
5 secured by a security interest or other lien on personal or
6 real property is also attachment of a security interest in
7 the security interest, mortgage, or other lien.
8 (h) Security entitlement carried in securities account.
9 The attachment of a security interest in a securities account
10 is also attachment of a security interest in the security
11 entitlements carried in the securities account.
12 (i) Commodity contracts carried in commodity account.
13 The attachment of a security interest in a commodity account
14 is also attachment of a security interest in the commodity
15 contracts carried in the commodity account. Attachment and
16 Enforceability of Security Interest; Proceeds; Requisites.
17 (1) Subject to the provisions of Section 4-208 on the
18 security interest of a collecting bank, Sections 9-115 and
19 9-116 on security interests in investment property, and
20 Section 9-113 on a security interest arising under the
21 Article on Sales, a security interest is not enforceable
22 against the debtor or third parties with respect to the
23 collateral and does not attach unless:
24 (a) the collateral is in the possession of the
25 secured party pursuant to agreement, the collateral is
26 investment property and the secured party has control
27 pursuant to agreement, or the debtor has signed a
28 security agreement which contains a description of the
29 collateral and, in addition, a description of the land
30 when the security agreement covers (i) crops growing or
31 to be grown and is signed by the debtor prior to January
32 1, 1996, or (ii) timber to be cut;
33 (b) value has been given; and
34 (c) the debtor has rights in the collateral.
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1 (2) A security interest attaches when it becomes
2 enforceable against the debtor with respect to the
3 collateral. Attachment occurs as soon as all of the events
4 specified in subsection (1) have taken place unless explicit
5 agreement postpones the time of attaching.
6 (3) Unless otherwise agreed a security agreement gives
7 the secured party the rights to proceeds provided by Section
8 9-306.
9 (4) A transaction, although subject to this Article, is
10 also subject to the "Consumer Finance Act", approved July 10,
11 1935, as now or hereafter amended; the "Retail Installment
12 Sales Act", approved July 28, 1967, as now or hereafter
13 amended; the "Motor Vehicle Retail Installment Sales Act",
14 approved July 28, 1967, as now or hereafter amended; Article
15 II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of
16 the "Boat Registration and Safety Act", as now or hereafter
17 amended; and "An Act for the regulation of pawnbrokers, and
18 repealing a certain act therein named", approved June 9,
19 1909, as now or hereafter amended; and in the case of
20 conflict between the provisions of this Article and any such
21 statute, the provisions of such statute control. Failure to
22 comply with any applicable statute has only the effect which
23 is specified therein.
24 (Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96;
25 89-626, eff. 8-9-96.)
26 (810 ILCS 5/9-204) (from Ch. 26, par. 9-204)
27 Sec. 9-204. After-acquired property; future advances.
28 (a) After-acquired collateral. Except as otherwise
29 provided in subsection (b), a security agreement may create
30 or provide for a security interest in after-acquired
31 collateral.
32 (b) When after-acquired property clause not effective.
33 A security interest does not attach under a term constituting
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1 an after-acquired property clause to:
2 (1) consumer goods, other than an accession when
3 given as additional security, unless the debtor acquires
4 rights in them within 10 days after the secured party
5 gives value; or
6 (2) a commercial tort claim.
7 (c) Future advances and other value. A security
8 agreement may provide that collateral secures, or that
9 accounts, chattel paper, payment intangibles, or promissory
10 notes are sold in connection with, future advances or other
11 value, whether or not the advances or value are given
12 pursuant to commitment. After-acquired property; future
13 advances.
14 (1) Except as provided in Subsection (2), a security
15 agreement may provide that any obligations covered by the
16 security agreement are to be secured by after-acquired
17 collateral.
18 (2) No security interest attaches under an
19 after-acquired property clause to consumer goods other than
20 accessions (Section 9-314) when given as additional security
21 unless the debtor acquires rights in them within 10 days
22 after the secured party gives value.
23 (3) Obligations covered by a security agreement may
24 include future advances or other value whether or not the
25 advances or value are given pursuant to commitment
26 (subsection (1) of Section 9-105).
27 (Source: P. A. 77-2810.)
28 (810 ILCS 5/9-205) (from Ch. 26, par. 9-205)
29 Sec. 9-205. Use or disposition of collateral
30 permissible.
31 (a) When security interest not invalid or fraudulent. A
32 security interest is not invalid or fraudulent against
33 creditors solely because:
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1 (1) the debtor has the right or ability to:
2 (A) use, commingle, or dispose of all or part
3 of the collateral, including returned or repossessed
4 goods;
5 (B) collect, compromise, enforce, or otherwise
6 deal with collateral;
7 (C) accept the return of collateral or make
8 repossessions; or
9 (D) use, commingle, or dispose of proceeds; or
10 (2) the secured party fails to require the debtor
11 to account for proceeds or replace collateral.
12 (b) Requirements of possession not relaxed. This
13 Section does not relax the requirements of possession if
14 attachment, perfection, or enforcement of a security interest
15 depends upon possession of the collateral by the secured
16 party. Use or Disposition of Collateral Without Accounting
17 Permissible.
18 A security interest is not invalid or fraudulent against
19 creditors by reason of liberty in the debtor to use,
20 commingle or dispose of all or part of the collateral
21 (including returned or repossessed goods) or to collect or
22 compromise accounts or chattel paper, or to accept the return
23 of goods or make repossessions, or to use, commingle or
24 dispose of proceeds, or by reason of the failure of the
25 secured party to require the debtor to account for proceeds
26 or replace collateral. This Section does not relax the
27 requirements of possession where perfection of a security
28 interest depends upon possession of the collateral by the
29 secured party or by a bailee.
30 (Source: P.A. 77-2810.)
31 (810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1)
32 Sec. 9-205.1. (Blank). A secured party may require that
33 the debtor include as part of the security agreement a list
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1 of persons to whom the debtor desires to sell or otherwise
2 dispose of the collateral. The debtor shall not sell or
3 otherwise dispose of the collateral to a person not included
4 in that list unless the debtor has notified the secured party
5 of his desire to sell or otherwise dispose of the collateral
6 to such person at least 7 days prior to the sale or other
7 disposition.
8 (Source: P.A. 83-69.)
9 (810 ILCS 5/9-206) (from Ch. 26, par. 9-206)
10 Sec. 9-206. Security interest arising in purchase or
11 delivery of financial asset.
12 (a) Security interest when person buys through
13 securities intermediary. A security interest in favor of a
14 securities intermediary attaches to a person's security
15 entitlement if:
16 (1) the person buys a financial asset through the
17 securities intermediary in a transaction in which the
18 person is obligated to pay the purchase price to the
19 securities intermediary at the time of the purchase; and
20 (2) the securities intermediary credits the
21 financial asset to the buyer's securities account before
22 the buyer pays the securities intermediary.
23 (b) Security interest secures obligation to pay for
24 financial asset. The security interest described in
25 subsection (a) secures the person's obligation to pay for the
26 financial asset.
27 (c) Security interest in payment against delivery
28 transaction. A security interest in favor of a person that
29 delivers a certificated security or other financial asset
30 represented by a writing attaches to the security or other
31 financial asset if:
32 (1) the security or other financial asset:
33 (A) in the ordinary course of business is
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1 transferred by delivery with any necessary
2 indorsement or assignment; and
3 (B) is delivered under an agreement between
4 persons in the business of dealing with such
5 securities or financial assets; and
6 (2) the agreement calls for delivery against
7 payment.
8 (d) Security interest secures obligation to pay for
9 delivery. The security interest described in subsection (c)
10 secures the obligation to make payment for the delivery.
11 Agreement not to assert defenses against assignee;
12 modification of sales warranties where security agreement
13 exists.
14 (1) Subject to any statute or decision which establishes
15 a different rule for buyers or lessees of consumer goods, an
16 agreement by a buyer or lessee that he will not assert
17 against an assignee any claim or defense which he may have
18 against the seller or lessor is enforceable by an assignee
19 who takes his assignment for value, in good faith and without
20 notice of a claim or defense, except as to defenses of a type
21 which may be asserted against a holder in due course of a
22 negotiable instrument under the Article on Commercial Paper
23 (Article 3). A buyer who as part of one transaction signs
24 both a negotiable instrument and a security agreement makes
25 such an agreement.
26 (2) When a seller retains a purchase money security
27 interest in goods the Article on Sales (Article 2) governs
28 the sale and any disclaimer, limitation or modification of
29 the seller's warranties.
30 (Source: Laws 1965, p. 803.)
31 (810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new)
32 SUBPART 2. RIGHTS AND DUTIES
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1 (810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
2 Sec. 9-207. Rights and duties of secured party having
3 possession or control of collateral.
4 (a) Duty of care when secured party in possession.
5 Except as otherwise provided in subsection (d), a secured
6 party shall use reasonable care in the custody and
7 preservation of collateral in the secured party's possession.
8 In the case of chattel paper or an instrument, reasonable
9 care includes taking necessary steps to preserve rights
10 against prior parties unless otherwise agreed.
11 (b) Expenses, risks, duties, and rights when secured
12 party in possession. Except as otherwise provided in
13 subsection (d), if a secured party has possession of
14 collateral:
15 (1) reasonable expenses, including the cost of
16 insurance and payment of taxes or other charges, incurred
17 in the custody, preservation, use, or operation of the
18 collateral are chargeable to the debtor and are secured
19 by the collateral;
20 (2) the risk of accidental loss or damage is on the
21 debtor to the extent of a deficiency in any effective
22 insurance coverage;
23 (3) the secured party shall keep the collateral
24 identifiable, but fungible collateral may be commingled;
25 and
26 (4) the secured party may use or operate the
27 collateral:
28 (A) for the purpose of preserving the
29 collateral or its value;
30 (B) as permitted by an order of a court having
31 competent jurisdiction; or
32 (C) except in the case of consumer goods, in
33 the manner and to the extent agreed by the debtor.
34 (c) Duties and rights when secured party in possession
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1 or control. Except as otherwise provided in subsection (d), a
2 secured party having possession of collateral or control of
3 collateral under Section 9-104, 9-105, 9-106, or 9-107:
4 (1) may hold as additional security any proceeds,
5 except money or funds, received from the collateral;
6 (2) shall apply money or funds received from the
7 collateral to reduce the secured obligation, unless
8 remitted to the debtor; and
9 (3) may create a security interest in the
10 collateral.
11 (d) Buyer of certain rights to payment. If the secured
12 party is a buyer of accounts, chattel paper, payment
13 intangibles, or promissory notes or a consignor:
14 (1) subsection (a) does not apply unless the
15 secured party is entitled under an agreement:
16 (A) to charge back uncollected collateral; or
17 (B) otherwise to full or limited recourse
18 against the debtor or a secondary obligor based on
19 the nonpayment or other default of an account debtor
20 or other obligor on the collateral; and
21 (2) subsections (b) and (c) do not apply. Rights
22 and duties when collateral is in secured party's
23 possession.
24 (1) A secured party must use reasonable care in the
25 custody and preservation of collateral in his possession. In
26 the case of an instrument or chattel paper reasonable care
27 includes taking necessary steps to preserve rights against
28 prior parties unless otherwise agreed.
29 (2) Unless otherwise agreed, when collateral is in the
30 secured party's possession
31 (a) reasonable expenses (including the cost of any
32 insurance and payment of taxes or other charges) incurred in
33 the custody, preservation, use or operation of the collateral
34 are chargeable to the debtor and are secured by the
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1 collateral;
2 (b) the risk of accidental loss or damage is on the
3 debtor to the extent of any deficiency in any effective
4 insurance coverage;
5 (c) the secured party may hold as additional
6 security any increase or profits (except money) received from
7 the collateral, but money so received, unless remitted to the
8 debtor, shall be applied in reduction of the secured
9 obligation;
10 (d) the secured party must keep the collateral
11 identifiable but fungible collateral may be commingled;
12 (e) the secured party may repledge the collateral
13 upon terms which do not impair the debtor's right to redeem
14 it.
15 (3) A secured party is liable for any loss caused by his
16 failure to meet any obligation imposed by the preceding
17 subsections but does not lose his security interest.
18 (4) A secured party may use or operate the collateral
19 for the purpose of preserving the collateral or its value or
20 pursuant to the order of a court of appropriate jurisdiction
21 or, except in the case of consumer goods, in the manner and
22 to the extent provided in the security agreement.
23 (Source: Laws 1961, p. 2101.)
24 (810 ILCS 5/9-208) (from Ch. 26, par. 9-208)
25 Sec. 9-208. Additional duties of secured party having
26 control of collateral.
27 (a) Applicability of Section. This Section applies to
28 cases in which there is no outstanding secured obligation and
29 the secured party is not committed to make advances, incur
30 obligations, or otherwise give value.
31 (b) Duties of secured party after receiving demand from
32 debtor. Within 10 days after receiving an authenticated
33 demand by the debtor:
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1 (1) a secured party having control of a deposit
2 account under Section 9-104(a)(2) shall send to the bank
3 with which the deposit account is maintained an
4 authenticated statement that releases the bank from any
5 further obligation to comply with instructions originated
6 by the secured party;
7 (2) a secured party having control of a deposit
8 account under Section 9-104(a)(3) shall:
9 (A) pay the debtor the balance on deposit in
10 the deposit account; or
11 (B) transfer the balance on deposit into a
12 deposit account in the debtor's name;
13 (3) a secured party, other than a buyer, having
14 control of electronic chattel paper under Section 9-105
15 shall:
16 (A) communicate the authoritative copy of the
17 electronic chattel paper to the debtor or its
18 designated custodian;
19 (B) if the debtor designates a custodian that
20 is the designated custodian with which the
21 authoritative copy of the electronic chattel paper
22 is maintained for the secured party, communicate to
23 the custodian an authenticated record releasing the
24 designated custodian from any further obligation to
25 comply with instructions originated by the secured
26 party and instructing the custodian to comply with
27 instructions originated by the debtor; and
28 (C) take appropriate action to enable the
29 debtor or its designated custodian to make copies of
30 or revisions to the authoritative copy which add or
31 change an identified assignee of the authoritative
32 copy without the consent of the secured party;
33 (4) a secured party having control of investment
34 property under Section 8-106(d)(2) or 9-106(b) shall send
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1 to the securities intermediary or commodity intermediary
2 with which the security entitlement or commodity contract
3 is maintained an authenticated record that releases the
4 securities intermediary or commodity intermediary from
5 any further obligation to comply with entitlement orders
6 or directions originated by the secured party; and
7 (5) a secured party having control of a
8 letter-of-credit right under Section 9-107 shall send to
9 each person having an unfulfilled obligation to pay or
10 deliver proceeds of the letter of credit to the secured
11 party an authenticated release from any further
12 obligation to pay or deliver proceeds of the letter of
13 credit to the secured party. Request for statement of
14 account or list of collateral.
15 (1) A debtor may sign a statement indicating what he
16 believes to be the aggregate amount of unpaid indebtedness as
17 of a specified date and may send it to the secured party with
18 a request that the statement be approved or corrected and
19 returned to the debtor. When the security agreement or any
20 other record kept by the secured party identifies the
21 collateral a debtor may similarly request the secured party
22 to approve or correct a list of the collateral.
23 (2) The secured party must comply with such a request
24 within two weeks after receipt by sending a written
25 correction or approval. If the secured party claims a
26 security interest in all of a particular type of collateral
27 owned by the debtor he may indicate that fact in his reply
28 and need not approve or correct an itemized list of such
29 collateral. If the secured party without reasonable excuse
30 fails to comply he is liable for any loss caused to the
31 debtor thereby; and if the debtor has properly included in
32 his request a good faith statement of the obligation or a
33 list of the collateral or both the secured party may claim a
34 security interest only as shown in the statement against
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1 persons misled by his failure to comply. If he no longer has
2 an interest in the obligation or collateral at the time the
3 request is received he must disclose the name and address of
4 any successor in interest known to him and he is liable for
5 any loss caused to the debtor as a result of failure to
6 disclose. A successor in interest is not subject to this
7 Section until a request is received by him.
8 (3) A debtor is entitled to such a statement once every
9 6 months without charge. The secured party may require
10 payment of a charge not exceeding $10 for each additional
11 statement furnished.
12 (Source: Laws 1961, p. 2101.)
13 (810 ILCS 5/9-209 new)
14 Sec. 9-209. Duties of secured party if account debtor
15 has been notified of assignment.
16 (a) Applicability of Section. Except as otherwise
17 provided in subsection (c), this Section applies if:
18 (1) there is no outstanding secured obligation; and
19 (2) the secured party is not committed to make
20 advances, incur obligations, or otherwise give value.
21 (b) Duties of secured party after receiving demand from
22 debtor. Within 10 days after receiving an authenticated
23 demand by the debtor, a secured party shall send to an
24 account debtor that has received notification of an
25 assignment to the secured party as assignee under Section
26 9-406(a) an authenticated record that releases the account
27 debtor from any further obligation to the secured party.
28 (c) Inapplicability to sales. This Section does not
29 apply to an assignment constituting the sale of an account,
30 chattel paper, or payment intangible.
31 (810 ILCS 5/9-210 new)
32 Sec. 9-210. Request for accounting; request regarding
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1 list of collateral or statement of account.
2 (a) Definitions. In this Section:
3 (1) "Request" means a record of a type described in
4 paragraph (2), (3), or (4).
5 (2) "Request for an accounting" means a record
6 authenticated by a debtor requesting that the recipient
7 provide an accounting of the unpaid obligations secured
8 by collateral and reasonably identifying the transaction
9 or relationship that is the subject of the request.
10 (3) "Request regarding a list of collateral" means
11 a record authenticated by a debtor requesting that the
12 recipient approve or correct a list of what the debtor
13 believes to be the collateral securing an obligation and
14 reasonably identifying the transaction or relationship
15 that is the subject of the request.
16 (4) "Request regarding a statement of account"
17 means a record authenticated by a debtor requesting that
18 the recipient approve or correct a statement indicating
19 what the debtor believes to be the aggregate amount of
20 unpaid obligations secured by collateral as of a
21 specified date and reasonably identifying the transaction
22 or relationship that is the subject of the request.
23 (b) Duty to respond to requests. Subject to subsections
24 (c), (d), (e), and (f), a secured party, other than a buyer
25 of accounts, chattel paper, payment intangibles, or
26 promissory notes or a consignor, shall comply with a request
27 within 14 days after receipt:
28 (1) in the case of a request for an accounting, by
29 authenticating and sending to the debtor an accounting;
30 and
31 (2) in the case of a request regarding a list of
32 collateral or a request regarding a statement of account,
33 by authenticating and sending to the debtor an approval
34 or correction.
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1 (c) Request regarding list of collateral; statement
2 concerning type of collateral. A secured party that claims a
3 security interest in all of a particular type of collateral
4 owned by the debtor may comply with a request regarding a
5 list of collateral by sending to the debtor an authenticated
6 record including a statement to that effect within 14 days
7 after receipt.
8 (d) Request regarding list of collateral; no interest
9 claimed. A person that receives a request regarding a list
10 of collateral, claims no interest in the collateral when it
11 receives the request, and claimed an interest in the
12 collateral at an earlier time shall comply with the request
13 within 14 days after receipt by sending to the debtor an
14 authenticated record:
15 (1) disclaiming any interest in the collateral; and
16 (2) if known to the recipient, providing the name
17 and mailing address of any assignee of or successor to
18 the recipient's security interest in the collateral.
19 (e) Request for accounting or regarding statement of
20 account; no interest in obligation claimed. A person that
21 receives a request for an accounting or a request regarding a
22 statement of account, claims no interest in the obligations
23 when it receives the request, and claimed an interest in the
24 obligations at an earlier time shall comply with the request
25 within 14 days after receipt by sending to the debtor an
26 authenticated record:
27 (1) disclaiming any interest in the obligations;
28 and
29 (2) if known to the recipient, providing the name
30 and mailing address of any assignee of or successor to
31 the recipient's interest in the obligations.
32 (f) Charges for responses. A debtor is entitled without
33 charge to one response to a request under this Section during
34 any six-month period. The secured party may require payment
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1 of a charge not exceeding $25 for each additional response.
2 (810 ILCS 5/Art. 9, Part 3 heading)
3 PART 3. PERFECTION AND PRIORITY
4 RIGHTS OF THIRD PARTIES;
5 PERFECTED AND UNPERFECTED SECURITY
6 INTERESTS: RULES OF PRIORITY
7 (810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new)
8 SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
9 (810 ILCS 5/9-301) (from Ch. 26, par. 9-301)
10 Sec. 9-301. Law governing perfection and priority of
11 security interests. Except as otherwise provided in Sections
12 9-303 through 9-306, the following rules determine the law
13 governing perfection, the effect of perfection or
14 nonperfection, and the priority of a security interest in
15 collateral:
16 (1) Except as otherwise provided in this Section,
17 while a debtor is located in a jurisdiction, the local
18 law of that jurisdiction governs perfection, the effect
19 of perfection or nonperfection, and the priority of a
20 security interest in collateral.
21 (2) While collateral is located in a jurisdiction,
22 the local law of that jurisdiction governs perfection,
23 the effect of perfection or nonperfection, and the
24 priority of a possessory security interest in that
25 collateral.
26 (3) Except as otherwise provided in paragraph (4),
27 while negotiable documents, goods, instruments, money, or
28 tangible chattel paper is located in a jurisdiction, the
29 local law of that jurisdiction governs:
30 (A) perfection of a security interest in the
31 goods by filing a fixture filing;
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1 (B) perfection of a security interest in
2 timber to be cut; and
3 (C) the effect of perfection or nonperfection
4 and the priority of a nonpossessory security
5 interest in the collateral.
6 (4) The local law of the jurisdiction in which the
7 wellhead or minehead is located governs perfection, the
8 effect of perfection or nonperfection, and the priority
9 of a security interest in as-extracted collateral.
10 Persons Who Take Priority Over Unperfected Security
11 Interests; Rights of "Lien Creditor".
12 (1) Except as otherwise provided in subsection (2), an
13 unperfected security interest is subordinate to the rights of
14 (a) persons entitled to priority under Section
15 9-312;
16 (b) a person who becomes a lien creditor before the
17 security interest is perfected;
18 (c) in the case of goods, instruments, documents,
19 and chattel paper, a person who is not a secured party
20 and who is a transferee in bulk or other buyer not in
21 ordinary course of business or is a buyer of farm
22 products in ordinary course of business, to the extent
23 that he gives value and receives delivery of the
24 collateral without knowledge of the security interest and
25 before it is perfected;
26 (d) in the case of accounts, general intangibles,
27 and investment property, a person who is not a secured
28 party and who is a transferee to the extent that he gives
29 value without knowledge of the security interest and
30 before it is perfected;
31 provided, however, that an unperfected security interest
32 shall take priority over the rights of a lien creditor if (i)
33 the lien creditor is a trustee or receiver of a state or
34 federally chartered financial institution acting in
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1 furtherance of its supervisory authority over the financial
2 institution and (ii) a security interest is granted by the
3 financial institution to secure a deposit of public funds
4 with the financial institution or a repurchase agreement with
5 the financial institution pursuant to the Government
6 Securities Act of 1986, as amended.
7 (2) If the secured party files with respect to a
8 purchase money security interest before or within 20 days
9 after the debtor receives possession of the collateral, he
10 takes priority over the rights of a transferee in bulk or of
11 a lien creditor which arise between the time the security
12 interest attaches and the time of filing.
13 (3) A "lien creditor" means a creditor who has acquired
14 a lien on the property involved by attachment, levy or the
15 like and includes an assignee for benefit of creditors from
16 the time of assignment, and a trustee in bankruptcy from the
17 date of the filing of the petition or a receiver in equity
18 from the time of appointment.
19 (4) A person who becomes a lien creditor while a
20 security interest is perfected takes subject to the security
21 interest only to the extent that it secures advances made
22 before he becomes a lien creditor or within 45 days
23 thereafter or made without knowledge of the lien or pursuant
24 to a commitment entered into without knowledge of the lien.
25 (Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.)
26 (810 ILCS 5/9-302) (from Ch. 26, par. 9-302)
27 Sec. 9-302. Law governing perfection and priority of
28 agricultural liens. While farm products are located in a
29 jurisdiction, the local law of that jurisdiction governs
30 perfection, the effect of perfection or nonperfection, and
31 the priority of an agricultural lien on the farm products.
32 When filing is required to perfect security interest;
33 security interests to which filing provisions of this Article
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1 do not apply.
2 (1) A financing statement must be filed to perfect all
3 security interests except the following:
4 (a) a security interest in collateral in possession
5 of the secured party under Section 9-305;
6 (b) a security interest temporarily perfected in
7 instruments, certificated securities, or documents
8 without delivery under Section 9-304 or in proceeds for a
9 20 day period under Section 9-306;
10 (c) a security interest created by an assignment of
11 a beneficial interest in a trust or a decedent's estate;
12 (d) a purchase money security interest in consumer
13 goods; but filing is required for a motor vehicle
14 required to be registered; and fixture filing is required
15 for priority over conflicting interests in fixtures to
16 the extent provided in Section 9-313;
17 (e) an assignment of accounts which does not alone
18 or in conjunction with other assignments to the same
19 assignee transfer a significant part of the outstanding
20 accounts of the assignor;
21 (f) a security interest of a collecting bank
22 (Section 4-208) or arising under the Article on Sales
23 (see Section 9-113) or covered in subsection (3) of this
24 Section;
25 (g) an assignment for the benefit of all creditors
26 of the transferor, and subsequent transfers by the
27 assignee thereunder;
28 (h) a security interest in investment property
29 which is perfected without filing under Section 9-115 or
30 Section 9-116;
31 (i) a security interest in a deposit account. Such
32 a security interest is perfected:
33 (i) as to a deposit account maintained with
34 the secured party, when the security agreement is
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1 executed;
2 (ii) as to a deposit account maintained with
3 any organization other than the secured party, when
4 notice thereof is given in writing to the
5 organization with whom the deposit account is
6 maintained and that organization provides written
7 acknowledgement of and consent to the notice of the
8 secured party.
9 (j) a security interest in an uncertificated
10 certificate of deposit. Such a security interest is
11 perfected;
12 (i) as to an uncertificated certificate of
13 deposit issued by the secured party, when the
14 security agreement is executed;
15 (ii) as to an uncertificated certificate of
16 deposit issued by any organization other than the
17 secured party, when notice thereof is given in
18 writing to the issuer of the uncertificated
19 certificate of deposit and the issuer provides
20 written acknowledgement of and consent to the notice
21 of the secured party.
22 (2) If a secured party assigns a perfected security
23 interest, no filing under this Article is required in order
24 to continue the perfected status of the security interest
25 against creditors of and transferees from the original
26 debtor.
27 (3) The filing of a financing statement otherwise
28 required by this Article is not necessary or effective to
29 perfect a security interest in property subject to
30 (a) a statute or treaty of the United States which
31 provides for a national or international registration or
32 a national or international certificate of title or which
33 specifies a place of filing different from that specified
34 in this Article for filing of the security interest; or
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1 (b) the following statutes of this State: the
2 Illinois Vehicle Code; the Boat Registration and Safety
3 Act; but during any period in which collateral is
4 inventory held for sale by a person who is in the
5 business of selling goods of that kind, the filing
6 provisions of this Article (Part 4) apply to a security
7 interest in that collateral created by him as debtor; or
8 (c) a certificate of title statute of another
9 jurisdiction under the law of which indication of a
10 security interest on the certificate is required as a
11 condition of perfection (subsection (2) of Section
12 9-103).
13 (4) Compliance with a statute or treaty described in
14 subsection (3) is equivalent to the filing of a financing
15 statement under this Article, and a security interest in
16 property subject to the statute or treaty can be perfected
17 only by compliance therewith except as provided in Section
18 9-103 on multiple state transactions. Duration and renewal of
19 perfection of a security interest perfected by compliance
20 with the statute or treaty are governed by the provisions of
21 the statute or treaty; in other respects the security
22 interest is subject to this Article.
23 (Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.)
24 (810 ILCS 5/9-303) (from Ch. 26, par. 9-303)
25 Sec. 9-303. Law governing perfection and priority of
26 security interests in goods covered by a certificate of
27 title.
28 (a) Applicability of Section. This Section applies to
29 goods covered by a certificate of title, even if there is no
30 other relationship between the jurisdiction under whose
31 certificate of title the goods are covered and the goods or
32 the debtor.
33 (b) When goods covered by certificate of title. Goods
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1 become covered by a certificate of title when a valid
2 application for the certificate of title and the applicable
3 fee are delivered to the appropriate authority. Goods cease
4 to be covered by a certificate of title at the earlier of the
5 time the certificate of title ceases to be effective under
6 the law of the issuing jurisdiction or the time the goods
7 become covered subsequently by a certificate of title issued
8 by another jurisdiction.
9 (c) Applicable law. The local law of the jurisdiction
10 under whose certificate of title the goods are covered
11 governs perfection, the effect of perfection or
12 nonperfection, and the priority of a security interest in
13 goods covered by a certificate of title from the time the
14 goods become covered by the certificate of title until the
15 goods cease to be covered by the certificate of title. When
16 security interest is perfected; continuity of perfection.
17 (1) A security interest is perfected when it has
18 attached and when all of the applicable steps required for
19 perfection have been taken. Such steps are specified in
20 Sections 9--302, 9--304, 9--305 and 9--306. If such steps are
21 taken before the security interest attaches, it is perfected
22 at the time when it attaches.
23 (2) If a security interest is originally perfected in
24 any way permitted under this Article and is subsequently
25 perfected in some other way under this Article, without an
26 intermediate period when it was unperfected, the security
27 interest shall be deemed to be perfected continuously for the
28 purposes of this Article.
29 (Source: Laws 1961, p. 2101.)
30 (810 ILCS 5/9-304) (from Ch. 26, par. 9-304)
31 Sec. 9-304. Law governing perfection and priority of
32 security interests in deposit accounts.
33 (a) Law of bank's jurisdiction governs. The local law
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1 of a bank's jurisdiction governs perfection, the effect of
2 perfection or nonperfection, and the priority of a security
3 interest in a deposit account maintained with that bank.
4 (b) Bank's jurisdiction. The following rules determine
5 a bank's jurisdiction for purposes of this Part:
6 (1) If an agreement between the bank and the debtor
7 governing the deposit account expressly provides that a
8 particular jurisdiction is the bank's jurisdiction for
9 purposes of this Part, this Article, or the Uniform
10 Commercial Code, that jurisdiction is the bank's
11 jurisdiction.
12 (2) If paragraph (1) does not apply and an
13 agreement between the bank and its customer governing the
14 deposit account expressly provides that the agreement is
15 governed by the law of a particular jurisdiction, that
16 jurisdiction is the bank's jurisdiction.
17 (3) If neither paragraph (1) nor paragraph (2)
18 applies and an agreement between the bank and its
19 customer governing the deposit account expressly provides
20 that the deposit account is maintained at an office in a
21 particular jurisdiction, that jurisdiction is the bank's
22 jurisdiction.
23 (4) If none of the preceding paragraphs applies,
24 the bank's jurisdiction is the jurisdiction in which the
25 office identified in an account statement as the office
26 serving the customer's account is located.
27 (5) If none of the preceding paragraphs applies,
28 the bank's jurisdiction is the jurisdiction in which the
29 chief executive office of the bank is located. Perfection
30 of security interest in instruments, documents, proceeds
31 of a written letter of credit, and goods covered by
32 documents; perfection by permissive filing; temporary
33 perfection without filing or transfer of possession.
34 (1) A security interest in chattel paper or negotiable
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1 documents may be perfected by filing. A security interest in
2 the rights to proceeds of a written letter of credit can be
3 perfected only by the secured party's taking possession of
4 the letter of credit. A security interest in money or
5 instruments (other than instruments which constitute part of
6 chattel paper) can be perfected only by the secured party's
7 taking possession, except as provided in subsections (4) and
8 (5) of this Section and subsections (2) and (3) of Section
9 9-306 on proceeds.
10 (2) During the period that goods are in the possession
11 of the issuer of a negotiable document therefor, a security
12 interest in the goods is perfected by perfecting a security
13 interest in the document, and any security interest in the
14 goods otherwise perfected during such period is subject
15 thereto.
16 (3) A security interest in goods in the possession of a
17 bailee other than one who has issued a negotiable document
18 therefor is perfected by issuance of a document in the name
19 of the secured party or by the bailee's receipt of
20 notification of the secured party's interest or by filing as
21 to the goods.
22 (4) A security interest in instruments, certificated
23 securities, or negotiable documents is perfected without
24 filing or the taking of possession for a period of 21 days
25 from the time it attaches to the extent that it arises for
26 new value given under a written security agreement.
27 (5) A security interest remains perfected for a period
28 of 21 days without filing where a secured party having a
29 perfected security interest in an instrument, a certificated
30 security, a negotiable document, or goods in possession of a
31 bailee other than one who has issued a negotiable document
32 therefor.
33 (a) makes available to the debtor the goods or
34 documents representing the goods for the purpose of
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1 ultimate sale or exchange or for the purpose of loading,
2 unloading, storing, shipping, transshipping,
3 manufacturing, processing or otherwise dealing with them
4 in a manner preliminary to their sale or exchange, but
5 priority between conflicting security interests in the
6 goods is subject to subsection (3) of Section 9-312; or
7 (b) delivers the instrument or certificated
8 security to the debtor for the purpose of ultimate sale
9 or exchange or of presentation, collection, renewal or
10 registration of transfer.
11 (6) After the 21 day period in subsections (4) and (5)
12 perfection depends upon compliance with applicable provisions
13 of this Article.
14 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
15 (810 ILCS 5/9-305) (from Ch. 26, par. 9-305)
16 Sec. 9-305. Law governing perfection and priority of
17 security interests in investment property.
18 (a) Governing law: general rules. Except as otherwise
19 provided in subsection (c), the following rules apply:
20 (1) While a security certificate is located in a
21 jurisdiction, the local law of that jurisdiction governs
22 perfection, the effect of perfection or nonperfection,
23 and the priority of a security interest in the
24 certificated security represented thereby.
25 (2) The local law of the issuer's jurisdiction as
26 specified in Section 8-110(d) governs perfection, the
27 effect of perfection or nonperfection, and the priority
28 of a security interest in an uncertificated security.
29 (3) The local law of the securities intermediary's
30 jurisdiction as specified in Section 8-110(e) governs
31 perfection, the effect of perfection or nonperfection,
32 and the priority of a security interest in a security
33 entitlement or securities account.
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1 (4) The local law of the commodity intermediary's
2 jurisdiction governs perfection, the effect of perfection
3 or nonperfection, and the priority of a security interest
4 in a commodity contract or commodity account.
5 (b) Commodity intermediary's jurisdiction. The
6 following rules determine a commodity intermediary's
7 jurisdiction for purposes of this Part:
8 (1) If an agreement between the commodity
9 intermediary and commodity customer governing the
10 commodity account expressly provides that a particular
11 jurisdiction is the commodity intermediary's jurisdiction
12 for purposes of this Part, this Article, or the Uniform
13 Commercial Code, that jurisdiction is the commodity
14 intermediary's jurisdiction.
15 (2) If paragraph (1) does not apply and an
16 agreement between the commodity intermediary and
17 commodity customer governing the commodity account
18 expressly provides that the agreement is governed by the
19 law of a particular jurisdiction, that jurisdiction is
20 the commodity intermediary's jurisdiction.
21 (3) If neither paragraph (1) nor paragraph (2)
22 applies and an agreement between the commodity
23 intermediary and commodity customer governing the
24 commodity account expressly provides that the commodity
25 account is maintained at an office in a particular
26 jurisdiction, that jurisdiction is the commodity
27 intermediary's jurisdiction.
28 (4) If none of the preceding paragraphs applies,
29 the commodity intermediary's jurisdiction is the
30 jurisdiction in which the office identified in an account
31 statement as the office serving the commodity customer's
32 account is located.
33 (5) If none of the preceding paragraphs applies,
34 the commodity intermediary's jurisdiction is the
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1 jurisdiction in which the chief executive office of the
2 commodity intermediary is located.
3 (c) When perfection governed by law of jurisdiction
4 where debtor located. The local law of the jurisdiction in
5 which the debtor is located governs:
6 (1) perfection of a security interest in investment
7 property by filing;
8 (2) automatic perfection of a security interest in
9 investment property created by a broker or securities
10 intermediary; and
11 (3) automatic perfection of a security interest in
12 a commodity contract or commodity account created by a
13 commodity intermediary. When possession by secured party
14 perfects security interest without filing. A security
15 interest in goods, instruments, money, negotiable
16 documents, or chattel paper may be perfected by the
17 secured party's taking possession of the collateral. A
18 security interest in the right to proceeds of a written
19 letter of credit may be perfected by the secured party's
20 taking possession of the letter of credit. If such
21 collateral other than goods covered by a negotiable
22 document is held by a bailee, the secured party is deemed
23 to have possession from the time the bailee receives
24 notification of the secured party's interest. A security
25 interest is perfected by possession from the time
26 possession is taken without relation back and continues
27 only so long as possession is retained, unless otherwise
28 specified in this Article. The security interest may be
29 otherwise perfected as provided in this Article before or
30 after the period of possession by the secured party.
31 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
32 (810 ILCS 5/9-306) (from Ch. 26, par. 9-306)
33 Sec. 9-306. Law governing perfection and priority of
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1 security interests in letter-of-credit rights.
2 (a) Governing law: issuers or nominated person's
3 jurisdiction. Subject to subsection (c), the local law of the
4 issuer's jurisdiction or a nominated person's jurisdiction
5 governs perfection, the effect of perfection or
6 nonperfection, and the priority of a security interest in a
7 letter-of-credit right if the issuer's jurisdiction or
8 nominated person's jurisdiction is a State.
9 (b) Issuer's or nominated person's jurisdiction. For
10 purposes of this Part, an issuer's jurisdiction or nominated
11 person's jurisdiction is the jurisdiction whose law governs
12 the liability of the issuer or nominated person with respect
13 to the letter-of-credit right as provided in Section 5-116.
14 (c) When Section not applicable. This Section does not
15 apply to a security interest that is perfected only under
16 Section 9-308(d). "Proceeds"; Secured Party's Rights on
17 Disposition of Collateral.
18 (1) "Proceeds" includes whatever is received upon the
19 sale, exchange, collection or other disposition of collateral
20 or proceeds. Insurance payable by reason of loss or damage to
21 the collateral is proceeds, except to the extent that it is
22 payable to a person other than a party to the security
23 agreement. Any payments or distributions made with respect to
24 investment property collateral are proceeds. Money, checks,
25 deposit accounts, and the like are "cash proceeds". All other
26 proceeds are "non-cash proceeds".
27 (2) Except where this Article otherwise provides, a
28 security interest continues in collateral notwithstanding
29 sale, exchange or other disposition thereof unless the
30 disposition was authorized by the secured party in the
31 security agreement or otherwise, and also continues in any
32 identifiable proceeds including collections received by the
33 debtor.
34 (3) The security interest in proceeds is a continuously
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1 perfected security interest if the interest in the original
2 collateral was perfected but it ceases to be a perfected
3 security interest and becomes unperfected 20 days after
4 receipt of the proceeds by the debtor unless
5 (a) a filed financing statement covers the original
6 collateral and the proceeds are collateral in which a
7 security interest may be perfected by filing in the
8 office or offices where the financing statement has been
9 filed and, if the proceeds are acquired with cash
10 proceeds, the description of collateral in the financing
11 statement indicates the types of property constituting
12 the proceeds; or
13 (b) a filed financing statement covers the original
14 collateral and the proceeds are identifiable cash
15 proceeds;
16 (c) the original collateral was investment property
17 and the proceeds are identifiable cash proceeds; or
18 (d) the security interest in the proceeds is
19 perfected before the expiration of the 20 day period.
20 Except as provided in this Section, a security interest
21 in proceeds can be perfected only by the methods or under the
22 circumstances permitted in this Article for original
23 collateral of the same type.
24 (4) In the event of insolvency proceedings instituted by
25 or against a debtor, a secured party with a perfected
26 security interest in proceeds has a perfected security
27 interest only in the following proceeds:
28 (a) in identifiable non-cash proceeds and in
29 separate deposit accounts containing only proceeds;
30 (b) in identifiable cash proceeds in the form of
31 money which is neither commingled with other money nor
32 deposited in a deposit account prior to the insolvency
33 proceedings;
34 (c) in identifiable cash proceeds in the form of
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1 checks and the like which are not deposited in a deposit
2 account prior to the insolvency proceedings; and
3 (d) in all cash and deposit accounts of the debtor
4 in which proceeds have been commingled with other funds,
5 but the perfected security interest under this paragraph
6 (d) is
7 (i) subject to any right to set-off; and
8 (ii) limited to an amount not greater than the
9 amount of any cash proceeds received by the debtor
10 within 20 days before the institution of the
11 insolvency proceedings less the sum of (I) the
12 payments to the secured party on account of cash
13 proceeds received by the debtor during such period
14 and (II) the cash proceeds received by the debtor
15 during such period to which the secured party is
16 entitled under paragraphs (a) through (c) of this
17 subsection (4).
18 (5) If a sale of goods results in an account or chattel
19 paper which is transferred by the seller to a secured party,
20 and if the goods are returned to or are repossessed by the
21 seller or the secured party, the following rules determine
22 priorities:
23 (a) If the goods were collateral at the time of
24 sale, for an indebtedness of the seller which is still
25 unpaid, the original security interest attaches again to
26 the goods and continues as a perfected security interest
27 if it was perfected at the time when the goods were sold.
28 If the security interest was originally perfected by a
29 filing which is still effective, nothing further is
30 required to continue the perfected status; in any other
31 case, the secured party must take possession of the
32 returned or repossessed goods or must file.
33 (b) An unpaid transferee of the chattel paper has a
34 security interest in the goods against the transferor.
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1 Such security interest is prior to a security interest
2 asserted under paragraph (a) to the extent that the
3 transferee of the chattel paper was entitled to priority
4 under Section 9-308.
5 (c) An unpaid transferee of the account has a
6 security interest in the goods against the transferor.
7 Such security interest is subordinate to a security
8 interest asserted under paragraph (a).
9 (d) A security interest of an unpaid transferee
10 asserted under paragraph (b) or (c) must be perfected for
11 protection against creditors of the transferor and
12 purchasers of the returned or repossessed goods.
13 (Source: P.A. 89-364, eff. 1-1-96.)
14 (810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01)
15 Sec. 9-306.01. (Blank). Debtor disposing of collateral
16 and failing to pay secured party amount due under security
17 agreement; penalties for violation.
18 (1) It is unlawful for a debtor under the terms of a
19 security agreement (a) who has no right of sale or other
20 disposition of the collateral or (b) who has a right of sale
21 or other disposition of the collateral and is to account to
22 the secured party for the proceeds of any sale or other
23 disposition of the collateral, to sell or otherwise dispose
24 of the collateral and willfully and wrongfully to fail to pay
25 the secured party the amount of said proceeds due under the
26 security agreement. Failure to pay such proceeds to the
27 secured party within 10 days after the sale or other
28 disposition of the collateral is prima facie evidence of a
29 willful and wanton failure to pay.
30 (2) An individual convicted of a violation of this
31 Section shall be guilty of a Class 3 felony.
32 (3) A corporation convicted of a violation of this
33 Section shall be guilty of a business offense and shall be
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1 fined not less than two thousand dollars nor more than ten
2 thousand dollars.
3 (4) In the event the debtor under the terms of a
4 security agreement is a corporation or a partnership, any
5 officer, director, manager, or managerial agent of the debtor
6 who violates this Section or causes the debtor to violate
7 this Section shall be guilty of a Class 3 felony.
8 (Source: P.A. 83-69.)
9 (810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02)
10 Sec. 9-306.02. (Blank). (1) Where, pursuant to Section
11 9-205.1, a secured party has required that before the debtor
12 sells or otherwise disposes of collateral in the debtor's
13 possession he disclose to the secured party the persons to
14 whom he desires to sell or otherwise dispose of such
15 collateral, it is unlawful for the debtor to sell or
16 otherwise dispose of the collateral to a person other than a
17 person so disclosed to the secured party.
18 (2) An individual convicted of a violation of this
19 Section shall be guilty of a Class A misdemeanor.
20 (3) A corporation convicted of a violation of this
21 Section shall be guilty of a business offense and shall be
22 fined not less than $2,000 nor more than $10,000.
23 (4) In the event the debtor under the terms of a
24 security agreement is a corporation or a partnership, any
25 officer, director, manager or managerial agent of the debtor
26 who violates this Section or causes the debtor to violate
27 this Section shall be guilty of a Class A misdemeanor.
28 (5) It is an affirmative defense to a prosecution for
29 the violation of this Section that the debtor has paid to the
30 secured party the proceeds from the sale or other disposition
31 of the collateral within 10 days after such sale or
32 disposition.
33 (Source: P.A. 84-1372.)
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1 (810 ILCS 5/9-307) (from Ch. 26, par. 9-307)
2 Sec. 9-307. Location of debtor.
3 (a) "Place of business." In this Section, "place of
4 business" means a place where a debtor conducts its affairs.
5 (b) Debtor's location: general rules. Except as
6 otherwise provided in this Section, the following rules
7 determine a debtor's location:
8 (1) An debtor who is an individual is located at
9 the individual's principal residence.
10 (2) A debtor that is an organization and has only
11 one place of business is located at its place of
12 business.
13 (3) A debtor that is an organization and has more
14 than one place of business is located at its chief
15 executive office.
16 (c) Limitation of applicability of subsection (b).
17 Subsection (b) applies only if a debtor's residence, place of
18 business, or chief executive office, as applicable, is
19 located in a jurisdiction whose law generally requires
20 information concerning the existence of a nonpossessory
21 security interest to be made generally available in a filing,
22 recording, or registration system as a condition or result of
23 the security interest's obtaining priority over the rights of
24 a lien creditor with respect to the collateral. If
25 subsection (b) does not apply, the debtor is located in the
26 District of Columbia.
27 (d) Continuation of location: cessation of existence,
28 etc. A person that ceases to exist, have a residence, or
29 have a place of business continues to be located in the
30 jurisdiction specified by subsections (b) and (c).
31 (e) Location of registered organization organized under
32 State law. A registered organization that is organized under
33 the law of a State is located in that State.
34 (f) Location of registered organization organized under
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1 federal law; bank branches and agencies. Except as otherwise
2 provided in subsection (i), a registered organization that is
3 organized under the law of the United States and a branch or
4 agency of a bank that is not organized under the law of the
5 United States or a State are located:
6 (1) in the State that the law of the United States
7 designates, if the law designates a State of location;
8 (2) in the State that the registered organization,
9 branch, or agency designates, if the law of the United
10 States authorizes the registered organization, branch, or
11 agency to designate its State of location; or
12 (3) in the District of Columbia, if neither
13 paragraph (1) nor paragraph (2) applies.
14 (g) Continuation of location: change in status of
15 registered organization. A registered organization continues
16 to be located in the jurisdiction specified by subsection (e)
17 or (f) notwithstanding:
18 (1) the suspension, revocation, forfeiture, or
19 lapse of the registered organization's status as such in
20 its jurisdiction of organization; or
21 (2) the dissolution, winding up, or cancellation of
22 the existence of the registered organization.
23 (h) Location of United States. The United States is
24 located in the District of Columbia.
25 (i) Location of foreign bank branch or agency if
26 licensed in only one State. A branch or agency of a bank
27 that is not organized under the law of the United States or a
28 State is located in the State in which the branch or agency
29 is licensed, if all branches and agencies of the bank are
30 licensed in only one State.
31 (j) Location of foreign air carrier. A foreign air
32 carrier under the Federal Aviation Act of 1958, as amended,
33 is located at the designated office of the agent upon which
34 service of process may be made on behalf of the carrier.
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1 (k) Section applies only to this Part. This Section
2 applies only for purposes of this Part. Protection of Buyers
3 of Goods.
4 (1) Except as provided in subsection (4), a buyer in the
5 ordinary course of business, as defined in subsection (9) of
6 Section 1-201, takes free of a security interest created by
7 his seller even though the security interest is perfected and
8 even though the buyer knows of its existence.
9 (2) In the case of consumer goods, a buyer takes free of
10 a security interest even though perfected if he buys without
11 knowledge of the security interest, for value and for his own
12 personal, family or household purposes unless prior to the
13 purchase the secured party has filed a financing statement
14 covering such goods.
15 (3) A buyer other than a buyer in ordinary course of
16 business (subsection (1) of this Section) takes free of a
17 security interest to the extent that it secures future
18 advances made after the secured party acquires knowledge of
19 the purchase, or more than 45 days after the purchase,
20 whichever first occurs, unless made pursuant to a commitment
21 entered into without knowledge of the purchase and before the
22 expiration of the 45 day period.
23 (4) A buyer of farm products takes subject to a security
24 interest created by the seller if:
25 (a) within one year before the sale of the farm
26 products, the buyer has received from the secured party
27 or the seller written notice of the security interest
28 organized according to farm products that:
29 (i) is an original or reproduced copy thereof;
30 (ii) contains,
31 (I) the name and address of the secured
32 party;
33 (II) the name and address of the person
34 indebted to the secured party;
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1 (III) the social security number of the
2 debtor or, in the case of a debtor doing
3 business other than as an individual, the
4 Internal Revenue Service taxpayer
5 identification number of such debtor;
6 (IV) a description of the farm products
7 subject to the security interest created by the
8 debtor, including the amount of such products
9 where applicable, crop year, county, and a
10 reasonable description of the property;
11 (iii) must be amended in writing, within 3
12 months, similarly signed and transmitted, to reflect
13 material changes;
14 (iv) will lapse on either the expiration
15 period of the statement or the transmission of a
16 notice signed by the secured party that the
17 statement has lapsed, whichever occurs first; and
18 (v) sets forth any payment obligations imposed
19 on the buyer by the secured party as conditions for
20 waiver or release of the security interest; and
21 (b) the buyer has failed to perform the payment
22 obligations.
23 For the purposes of this subsection (4), a buyer of farm
24 products has received notice from the secured party or seller
25 when written notice of the security interest is sent to the
26 buyer by registered or certified mail.
27 (Source: P.A. 84-1372; revised 10-31-98.)
28 (810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1)
29 Sec. 9-307.1. (Blank). A commission merchant or selling
30 agent who sells a farm product for others shall be subject to
31 a security interest created by the seller in such farm
32 product if-
33 (a) within one year before the sale of the farm
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1 products, the buyer has received from the secured party or
2 the seller written notice of the security interest organized
3 according to farm products that:
4 (i) is an original or reproduced copy thereof;
5 (ii) contains,
6 (I) the name and address of the secured party;
7 (II) the name and address of the person indebted to the
8 secured party;
9 (III) the social security number of the debtor or, in
10 the case of a debtor doing business other than as an
11 individual, the Internal Revenue Service taxpayer
12 identification number of such debtor;
13 (IV) a description of the farm products subject to the
14 security interest created by the debtor, including the amount
15 of such products where applicable, crop year, county, and a
16 reasonable description of the property;
17 (iii) must be amended in writing, within 3 months,
18 similarly signed and transmitted, to reflect material
19 changes;
20 (iv) will lapse on either the expiration period of the
21 statement or the transmission of a notice signed by the
22 secured party that the statement has lapsed, whichever occurs
23 first; and
24 (v) sets forth any payment obligations imposed on the
25 buyer by the secured party as conditions for waiver or
26 release of the security interest; and
27 (b) the commission merchant or selling agent has failed
28 to perform the payment obligations.
29 For the purposes of this Section, a commission merchant
30 or selling agent has received notice from the secured party
31 or seller when written notice of the security interest is
32 sent to the commission merchant or selling agent by
33 registered or certified mail.
34 (Source: P.A. 84-1372.)
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1 (810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2)
2 Sec. 9-307.2. (Blank). A commission merchant or
3 selling agent who sells farm products for others, and
4 any person buying farm products in the ordinary course
5 of business from a person engaged in farming operations,
6 shall post at each licensed location where said
7 merchant, agent or person buying farm products in the
8 ordinary course of business does business a notice
9 which shall read as follows:
10 "NOTICE TO SELLERS OF FARM PRODUCTS
11 It is a criminal offense to sell farm products subject to
12 a security interest without making payment to the secured
13 party. You should notify the purchaser if there is a security
14 interest in the farm products you are selling."
15 Such notice shall be posted in a conspicuous manner and
16 shall be in contrasting type, large enough to be read from a
17 distance of 10 feet.
18 (Source: P.A. 83-69.)
19 (810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new)
20 SUBPART 2. PERFECTION
21 (810 ILCS 5/9-308) (from Ch. 26, par. 9-308)
22 Sec. 9-308. When security interest or agricultural lien
23 is perfected; continuity of perfection.
24 (a) Perfection of security interest. Except as
25 otherwise provided in this Section and Section 9-309, a
26 security interest is perfected if it has attached and all of
27 the applicable requirements for perfection in Sections 9-310
28 through 9-316 have been satisfied. A security interest is
29 perfected when it attaches if the applicable requirements are
30 satisfied before the security interest attaches.
31 (b) Perfection of agricultural lien. An agricultural
32 lien is perfected if it has become effective and all of the
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1 applicable requirements for perfection in Section 9-310 have
2 been satisfied. An agricultural lien is perfected when it
3 becomes effective if the applicable requirements are
4 satisfied before the agricultural lien becomes effective.
5 (c) Continuous perfection; perfection by different
6 methods. A security interest or agricultural lien is
7 perfected continuously if it is originally perfected by one
8 method under this Article and is later perfected by another
9 method under this Article, without an intermediate period
10 when it was unperfected.
11 (d) Supporting obligation. Perfection of a security
12 interest in collateral also perfects a security interest in a
13 supporting obligation for the collateral.
14 (e) Lien securing right to payment. Perfection of a
15 security interest in a right to payment or performance also
16 perfects a security interest in a security interest,
17 mortgage, or other lien on personal or real property securing
18 the right.
19 (f) Security entitlement carried in securities account.
20 Perfection of a security interest in a securities account
21 also perfects a security interest in the security
22 entitlements carried in the securities account.
23 (g) Commodity contract carried in commodity account.
24 Perfection of a security interest in a commodity account also
25 perfects a security interest in the commodity contracts
26 carried in the commodity account. Purchase of Chattel Paper
27 and Instruments.
28 A purchaser of chattel paper or an instrument who gives
29 new value and takes possession of it in the ordinary course
30 of his business has priority over a security interest in the
31 chattel paper or instrument
32 (a) which is perfected under Section 9-304 (permissive
33 filing and temporary perfection) or under Section 9-306
34 (perfection as to proceeds) if he acts without knowledge that
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1 the specific paper or instrument is subject to a security
2 interest; or
3 (b) which is claimed merely as proceeds of inventory
4 subject to a security interest (Section 9-306) even though he
5 knows that the specific paper or instrument is subject to the
6 security interest.
7 (Source: P. A. 77-2810.)
8 (810 ILCS 5/9-309) (from Ch. 26, par. 9-309)
9 Sec. 9-309. Security interest perfected upon attachment.
10 The following security interests are perfected when they
11 attach:
12 (1) a purchase-money security interest in consumer
13 goods, except as otherwise provided in Section 9-311(b)
14 with respect to consumer goods that are subject to a
15 statute or treaty described in Section 9-311(a);
16 (2) an assignment of accounts or payment
17 intangibles which does not by itself or in conjunction
18 with other assignments to the same assignee transfer a
19 significant part of the assignor's outstanding accounts
20 or payment intangibles;
21 (3) a sale of a payment intangible;
22 (4) a sale of a promissory note;
23 (5) a security interest created by the assignment
24 of a health-care-insurance receivable to the provider of
25 the health-care goods or services;
26 (6) a security interest arising under Section
27 2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor
28 obtains possession of the collateral;
29 (7) a security interest of a collecting bank
30 arising under Section 4-210;
31 (8) a security interest of an issuer or nominated
32 person arising under Section 5-118;
33 (9) a security interest arising in the delivery of
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1 a financial asset under Section 9-206(c);
2 (10) a security interest in investment property
3 created by a broker or securities intermediary;
4 (11) a security interest in a commodity contract or
5 a commodity account created by a commodity intermediary;
6 (12) an assignment for the benefit of all creditors
7 of the transferor and subsequent transfers by the
8 assignee thereunder; and
9 (13) a security interest created by an assignment
10 of a beneficial interest in a decedent's estate.
11 Protection of purchasers of instruments, documents and
12 securities. Nothing in this Article limits the rights of
13 a holder in due course of a negotiable instrument
14 (Section 3-302) or a holder to whom a negotiable document
15 of title has been duly negotiated (Section 7-501) or a
16 protected purchaser of a security (Section 8-303) and
17 such holders or purchasers take priority over an earlier
18 security interest even though perfected. Filing under
19 this Article does not constitute notice of the security
20 interest to such holders or purchasers.
21 (Source: P.A. 89-364, eff. 1-1-96.)
22 (810 ILCS 5/9-310) (from Ch. 26, par. 9-310)
23 Sec. 9-310. When filing required to perfect security
24 interest or agricultural lien; security interests and
25 agricultural liens to which filing provisions do not apply.
26 (a) General rule: perfection by filing. Except as
27 otherwise provided in subsection (b) and Section 9-312(b), a
28 financing statement must be filed to perfect all security
29 interests and agricultural liens.
30 (b) Exceptions: filing not necessary. The filing of a
31 financing statement is not necessary to perfect a security
32 interest:
33 (1) that is perfected under Section 9-308(d), (e),
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1 (f), or (g);
2 (2) that is perfected under Section 9-309 when it
3 attaches;
4 (3) in property subject to a statute, regulation,
5 or treaty described in Section 9-311(a);
6 (4) in goods in possession of a bailee which is
7 perfected under Section 9-312(d)(1) or (2);
8 (5) in certificated securities, documents, goods,
9 or instruments which is perfected without filing or
10 possession under Section 9-312(e), (f), or (g);
11 (6) in collateral in the secured party's possession
12 under Section 9-313;
13 (7) in a certificated security which is perfected
14 by delivery of the security certificate to the secured
15 party under Section 9-313;
16 (8) in deposit accounts, electronic chattel paper,
17 investment property, or letter-of-credit rights which is
18 perfected by control under Section 9-314;
19 (9) in proceeds which is perfected under Section
20 9-315; or
21 (10) that is perfected under Section 9-316.
22 (c) Assignment of perfected security interest. If a
23 secured party assigns a perfected security interest or
24 agricultural lien, a filing under this Article is not
25 required to continue the perfected status of the security
26 interest against creditors of and transferees from the
27 original debtor. Priority of certain liens arising by
28 operation of law.
29 When a person in the ordinary course of his business
30 furnishes services or materials with respect to goods subject
31 to a security interest, a lien upon goods in the possession
32 of such person given by statute or rule of law for such
33 materials or services takes priority over a perfected
34 security interest unless the lien is statutory and the
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1 statute expressly provides otherwise.
2 (Source: Laws 1961, p. 2101.)
3 (810 ILCS 5/9-311) (from Ch. 26, par. 9-311)
4 Sec. 9-311. Perfection of security interests in property
5 subject to certain statutes, regulations, and treaties.
6 (a) Security interest subject to other law. Except as
7 otherwise provided in subsection (d), the filing of a
8 financing statement is not necessary or effective to perfect
9 a security interest in property subject to:
10 (1) a statute, regulation, or treaty of the United
11 States whose requirements for a security interest's
12 obtaining priority over the rights of a lien creditor
13 with respect to the property preempt Section 9-310(a);
14 (2) list any certificate-of-title statute covering
15 automobiles, trailers, mobile homes, boats, farm
16 tractors, or the like, which provides for a security
17 interest to be indicated on the certificate as a
18 condition or result of perfection, and any non-Uniform
19 Commercial Code central filing statute; or
20 (3) a certificate-of-title statute of another
21 jurisdiction which provides for a security interest to be
22 indicated on the certificate as a condition or result of
23 the security interest's obtaining priority over the
24 rights of a lien creditor with respect to the property.
25 (b) Compliance with other law. Compliance with the
26 requirements of a statute, regulation, or treaty described in
27 subsection (a) for obtaining priority over the rights of a
28 lien creditor is equivalent to the filing of a financing
29 statement under this Article. Except as otherwise provided
30 in subsection (d) and Sections 9-313 and 9-316(d) and (e) for
31 goods covered by a certificate of title, a security interest
32 in property subject to a statute, regulation, or treaty
33 described in subsection (a) may be perfected only by
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1 compliance with those requirements, and a security interest
2 so perfected remains perfected notwithstanding a change in
3 the use or transfer of possession of the collateral.
4 (c) Duration and renewal of perfection. Except as
5 otherwise provided in subsection (d) and Section 9-316(d) and
6 (e), duration and renewal of perfection of a security
7 interest perfected by compliance with the requirements
8 prescribed by a statute, regulation, or treaty described in
9 subsection (a) are governed by the statute, regulation, or
10 treaty. In other respects, the security interest is subject
11 to this Article.
12 (d) Inapplicability to certain inventory. During any
13 period in which collateral is inventory held for sale or
14 lease by a person or leased by that person as lessor and that
15 person is in the business of selling or leasing goods of that
16 kind, this Section does not apply to a security interest in
17 that collateral created by that person as debtor.
18 Alienability of debtor's rights: judicial process.
19 The debtor's rights in collateral may be voluntarily or
20 involuntarily transferred (by way of sale, creation of a
21 security interest, attachment, levy, garnishment or other
22 judicial process) notwithstanding a provision in the security
23 agreement prohibiting any transfer or making the transfer
24 constitute a default.
25 (Source: Laws 1961, p. 2101.)
26 (810 ILCS 5/9-312) (from Ch. 26, par. 9-312)
27 Sec. 9-312. Perfection of security interests in chattel
28 paper, deposit accounts, documents, goods covered by
29 documents, instruments, investment property, letter-of-credit
30 rights, and money; perfection by permissive filing; temporary
31 perfection without filing or transfer of possession.
32 (a) Perfection by filing permitted. A security interest
33 in chattel paper, negotiable documents, instruments, or
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1 investment property may be perfected by filing.
2 (b) Control or possession of certain collateral. Except
3 as otherwise provided in Section 9-315(c) and (d) for
4 proceeds:
5 (1) a security interest in a deposit account may be
6 perfected only by control under Section 9-314;
7 (2) and except as otherwise provided in Section
8 9-308(d), a security interest in a letter-of-credit right
9 may be perfected only by control under Section 9-314; and
10 (3) a security interest in money may be perfected
11 only by the secured party's taking possession under
12 Section 9-313.
13 (c) Goods covered by negotiable document. While goods
14 are in the possession of a bailee that has issued a
15 negotiable document covering the goods:
16 (1) a security interest in the goods may be
17 perfected by perfecting a security interest in the
18 document; and
19 (2) a security interest perfected in the document
20 has priority over any security interest that becomes
21 perfected in the goods by another method during that
22 time.
23 (d) Goods covered by nonnegotiable document. While
24 goods are in the possession of a bailee that has issued a
25 nonnegotiable document covering the goods, a security
26 interest in the goods may be perfected by:
27 (1) issuance of a document in the name of the
28 secured party;
29 (2) the bailee's receipt of notification of the
30 secured party's interest; or
31 (3) filing as to the goods.
32 (e) Temporary perfection: new value. A security
33 interest in certificated securities, negotiable documents, or
34 instruments is perfected without filing or the taking of
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1 possession for a period of 20 days from the time it attaches
2 to the extent that it arises for new value given under an
3 authenticated security agreement.
4 (f) Temporary perfection: goods or documents made
5 available to debtor. A perfected security interest in a
6 negotiable document or goods in possession of a bailee, other
7 than one that has issued a negotiable document for the goods,
8 remains perfected for 20 days without filing if the secured
9 party makes available to the debtor the goods or documents
10 representing the goods for the purpose of:
11 (1) ultimate sale or exchange; or
12 (2) loading, unloading, storing, shipping,
13 transshipping, manufacturing, processing, or otherwise
14 dealing with them in a manner preliminary to their sale
15 or exchange.
16 (g) Temporary perfection: delivery of security
17 certificate or instrument to debtor. A perfected security
18 interest in a certificated security or instrument remains
19 perfected for 20 days without filing if the secured party
20 delivers the security certificate or instrument to the debtor
21 for the purpose of:
22 (1) ultimate sale or exchange; or
23 (2) presentation, collection, enforcement, renewal,
24 or registration of transfer.
25 (h) Expiration of temporary perfection. After the
26 20-day period specified in subsection (e), (f), or (g)
27 expires, perfection depends upon compliance with this
28 Article. Priorities Among Conflicting Security Interests in
29 the Same Collateral.
30 (1) The rules of priority stated in other Sections of
31 this Part and in the following Sections shall govern when
32 applicable: Section 4-210 with respect to the security
33 interests of collecting banks in items being collected,
34 accompanying documents and proceeds; Section 9-103 on
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1 security interests related to other jurisdictions; Section
2 9-114 on consignments; Section 9-115 on security interests in
3 investment property.
4 (2) A perfected security interest in crops for new value
5 given to enable the debtor to produce the crops during the
6 production season and given not more than three months before
7 the crops become growing crops by planting or otherwise takes
8 priority over an earlier perfected security interest to the
9 extent that such earlier interest secures obligations due
10 more than six months before the crops become growing crops by
11 planting or otherwise, even though the person giving new
12 value had knowledge of the earlier security interest.
13 (3) A perfected purchase money security interest in
14 inventory has priority over a conflicting security interest
15 in the same inventory and also has priority in identifiable
16 cash proceeds received on or before the delivery of the
17 inventory to a buyer if
18 (a) the purchase money security interest is
19 perfected at the time the debtor receives possession of
20 the inventory; and
21 (b) the purchase money secured party gives
22 notification in writing to the holder of the conflicting
23 security interest if the holder had filed a financing
24 statement covering the same types of inventory (i) before
25 the date of the filing made by the purchase money secured
26 party, or (ii) before the beginning of the 21 day period
27 where the purchase money security interest is temporarily
28 perfected without filing or possession (subsection (5) of
29 Section 9-304); and
30 (c) the holder of the conflicting security interest
31 receives the notification within 5 years before the
32 debtor receives possession of the inventory; and
33 (d) the notification states that the person giving
34 the notice has or expects to acquire a purchase money
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1 security interest in inventory of the debtor, describing
2 such inventory by item or type.
3 (4) A purchase money security interest in collateral
4 other than inventory has priority over a conflicting security
5 interest in the same collateral or its proceeds if the
6 purchase money security interest is perfected at the time the
7 debtor receives possession of the collateral or within 20
8 days thereafter.
9 (5) In all cases not governed by other rules stated in
10 this Section (including cases of purchase money security
11 interests which do not qualify for the special priorities set
12 forth in subsections (3) and (4) of this Section), priority
13 between conflicting security interests in the same collateral
14 shall be determined according to the following rules:
15 (a) Conflicting security interests rank according
16 to priority in time of filing or perfection. Priority
17 dates from the time a filing is first made covering the
18 collateral or the time the security interest is first
19 perfected, whichever is earlier, provided that there is
20 no period thereafter when there is neither filing nor
21 perfection.
22 (b) So long as conflicting security interests are
23 unperfected, the first to attach has priority.
24 (6) For the purposes of subsection (5) a date of filing
25 or perfection as to collateral is also a date of filing or
26 perfection as to proceeds.
27 (7) If future advances are made while a security
28 interest is perfected by filing, the taking of possession or
29 under Section 9-115 or 9-116 on investment property, the
30 security interest has the same priority for the purposes of
31 subsection (5) with respect to the future advances as it does
32 with respect to the first advance. If a commitment is made
33 before or while the security interest is so perfected, the
34 security interest has the same priority with respect to
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1 advances made pursuant thereto. In other cases a perfected
2 security interest has priority from the date the advance is
3 made.
4 (Source: P.A. 89-364, eff. 1-1-96.)
5 (810 ILCS 5/9-313) (from Ch. 26, par. 9-313)
6 Sec. 9-313. When possession by or delivery to secured
7 party perfects security interest without filing.
8 (a) Perfection by possession or delivery. Except as
9 otherwise provided in subsection (b), a secured party may
10 perfect a security interest in negotiable documents, goods,
11 instruments, money, or tangible chattel paper by taking
12 possession of the collateral. A secured party may perfect a
13 security interest in certificated securities by taking
14 delivery of the certificated securities under Section 8-301.
15 (b) Goods covered by certificate of title. With respect
16 to goods covered by a certificate of title issued by this
17 State, a secured party may perfect a security interest in the
18 goods by taking possession of the goods only in the
19 circumstances described in Section 9-316(d).
20 (c) Collateral in possession of person other than
21 debtor. With respect to collateral other than certificated
22 securities and goods covered by a document, a secured party
23 takes possession of collateral in the possession of a person
24 other than the debtor, the secured party, or a lessee of the
25 collateral from the debtor in the ordinary course of the
26 debtor's business, when:
27 (1) the person in possession authenticates a record
28 acknowledging that it holds possession of the collateral
29 for the secured party's benefit; or
30 (2) the person takes possession of the collateral
31 after having authenticated a record acknowledging that it
32 will hold possession of collateral for the secured
33 party's benefit.
-103- LRB9106284WHdv
1 (d) Time of perfection by possession; continuation of
2 perfection. If perfection of a security interest depends upon
3 possession of the collateral by a secured party, perfection
4 occurs no earlier than the time the secured party takes
5 possession and continues only while the secured party retains
6 possession.
7 (e) Time of perfection by delivery; continuation of
8 perfection. A security interest in a certificated security in
9 registered form is perfected by delivery when delivery of the
10 certificated security occurs under Section 8-301 and remains
11 perfected by delivery until the debtor obtains possession of
12 the security certificate.
13 (f) Acknowledgment not required. A person in possession
14 of collateral is not required to acknowledge that it holds
15 possession for a secured party's benefit.
16 (g) Effectiveness of acknowledgment; no duties or
17 confirmation. If a person acknowledges that it holds
18 possession for the secured party's benefit:
19 (1) the acknowledgment is effective under
20 subsection (c) or Section 8-301(a), even if the
21 acknowledgment violates the rights of a debtor; and
22 (2) unless the person otherwise agrees or law other
23 than this Article otherwise provides, the person does not
24 owe any duty to the secured party and is not required to
25 confirm the acknowledgment to another person.
26 (h) Secured party's delivery to person other than
27 debtor. A secured party having possession of collateral does
28 not relinquish possession by delivering the collateral to a
29 person other than the debtor or a lessee of the collateral
30 from the debtor in the ordinary course of the debtor's
31 business if the person was instructed before the delivery or
32 is instructed contemporaneously with the delivery:
33 (1) to hold possession of the collateral for the
34 secured party's benefit; or
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1 (2) to redeliver the collateral to the secured
2 party.
3 (i) Effect of delivery under subsection (h); no duties
4 or confirmation. A secured party does not relinquish
5 possession, even if a delivery under subsection (h) violates
6 the rights of a debtor. A person to which collateral is
7 delivered under subsection (h) does not owe any duty to the
8 secured party and is not required to confirm the delivery to
9 another person unless the person otherwise agrees or law
10 other than this Article otherwise provides.
11 Priority of Security Interests in Fixtures.
12 (1) In this Section and in the provisions of Part 4 of
13 this Article referring to fixture filing, unless the context
14 otherwise requires
15 (a) Goods are "fixtures" when they become so
16 related to particular real estate that an interest in
17 them arises under real estate law
18 (b) A "fixture filing" is the filing in the office
19 where a mortgage on the real estate would be filed or
20 recorded of a financing statement covering goods which
21 are or are to become fixtures and conforming to the
22 requirements of subsection (5) of Section 9-402
23 (c) A mortgage is a "construction mortgage" to the
24 extent that it secures an obligation incurred for the
25 construction of an improvement on land including the
26 acquisition cost of the land, if the recorded writing so
27 indicates.
28 (2) A security interest under this Article may be
29 created in goods which are fixtures or may continue in goods
30 which become fixtures, but no security interest exists under
31 this Article in ordinary building materials incorporated into
32 an improvement on land.
33 (3) This Article does not prevent creation of an
34 encumbrance upon fixtures pursuant to real estate law.
-105- LRB9106284WHdv
1 (4) A perfected security interest in fixtures has
2 priority over the conflicting interest of an encumbrancer or
3 owner of the real estate where
4 (a) the security interest is a purchase money
5 security interest, the interest of the encumbrancer or
6 owner arises before the goods become fixtures, the
7 security interest is perfected by a fixture filing before
8 the goods become fixtures or within 10 days thereafter,
9 and the debtor has an interest of record in the real
10 estate or is in possession of the real estate; or
11 (b) the security interest is perfected by a fixture
12 filing before the interest of the encumbrancer or owner
13 is of record, the security interest has priority over any
14 conflicting interest of a predecessor in title of the
15 encumbrancer or owner, and the debtor has an interest of
16 record in the real estate or is in possession of the real
17 estate; or
18 (c) the fixtures are readily removable factory or
19 office machines or readily removable replacements of
20 domestic appliances which are consumer goods, and before
21 the goods become fixtures the security interest is
22 perfected by any method permitted by this Article; or
23 (d) the conflicting interest is a lien on the real
24 estate obtained by legal or equitable proceedings after
25 the security interest was perfected by any method
26 permitted by this Article.
27 (5) A security interest in fixtures, whether or not
28 perfected, has priority over the conflicting interest of an
29 encumbrancer or owner of the real estate where
30 (a) the encumbrancer or owner has consented in
31 writing to the security interest or has disclaimed an
32 interest in the goods as fixtures; or
33 (b) the debtor has a right to remove the goods as
34 against the encumbrancer or owner. If the debtor's right
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1 terminates, the priority of the security interest
2 continues for a reasonable time.
3 (6) Notwithstanding paragraph (a) of subsection (4) but
4 otherwise subject to subsections (4) and (5), a security
5 interest in fixtures is subordinate to a construction
6 mortgage recorded before the goods become fixtures if the
7 goods become fixtures before the completion of the
8 construction. To the extent that it is given to refinance a
9 construction mortgage, a mortgage has this priority to the
10 same extent as the construction mortgage.
11 (7) In cases not within the preceding subsections, a
12 security interest in fixtures is subordinate to the
13 conflicting interest of an encumbrancer or owner of the
14 related real estate who is not the debtor.
15 (8) When the secured party has priority over all owners
16 and encumbrancers of the real estate, he may, on default,
17 subject to the provisions of Part 5, remove his collateral
18 from the real estate but he must reimburse any encumbrancer
19 or owner of the real estate who is not the debtor and who has
20 not otherwise agreed for the cost of repair of any physical
21 injury, but not for any diminution in value of the real
22 estate caused by the absence of the goods removed or by any
23 necessity of replacing them. A person entitled to
24 reimbursement may refuse permission to remove until the
25 secured party gives adequate security for the performance of
26 this obligation.
27 (Source: P. A. 78-238; revised 10-31-98.)
28 (810 ILCS 5/9-314) (from Ch. 26, par. 9-314)
29 Sec. 9-314. Perfection by control.
30 (a) Perfection by control. A security interest in
31 investment property, deposit accounts, letter-of-credit
32 rights, or electronic chattel paper may be perfected by
33 control of the collateral under Section 9-104, 9-105, 9-106,
-107- LRB9106284WHdv
1 or 9-107.
2 (b) Specified collateral: time of perfection by
3 control; continuation of perfection. A security interest in
4 deposit accounts, electronic chattel paper, or
5 letter-of-credit rights is perfected by control under Section
6 9-104, 9-105, or 9-107 when the secured party obtains control
7 and remains perfected by control only while the secured party
8 retains control.
9 (c) Investment property: time of perfection by control;
10 continuation of perfection. A security interest in
11 investment property is perfected by control under Section
12 9-106 from the time the secured party obtains control and
13 remains perfected by control until:
14 (1) the secured party does not have control; and
15 (2) one of the following occurs:
16 (A) if the collateral is a certificated
17 security, the debtor has or acquires possession of
18 the security certificate;
19 (B) if the collateral is an uncertificated
20 security, the issuer has registered or registers the
21 debtor as the registered owner; or
22 (C) if the collateral is a security
23 entitlement, the debtor is or becomes the
24 entitlement holder. Accessions.
25 (1) A security interest in goods which attaches before
26 they are installed in or affixed to other goods takes
27 priority as to the goods installed or affixed (called in this
28 section "accessions") over the claims of all persons to the
29 whole except as stated in subsection (3) and subject to
30 Section 9--315(1).
31 (2) A security interest which attaches to goods after
32 they become part of a whole is valid against all persons
33 subsequently acquiring interests in the whole except as
34 stated in subsection (3) but is invalid against any person
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1 with an interest in the whole at the time the security
2 interest attaches to the goods who has not in writing
3 consented to the security interest or disclaimed an interest
4 in the goods as part of the whole.
5 (3) The security interests described in subsections (1)
6 and (2) do not take priority over
7 (a) a subsequent purchaser for value of any
8 interest in the whole; or
9 (b) a creditor with a lien on the whole
10 subsequently obtained by judicial proceedings; or
11 (c) a creditor with a prior perfected security
12 interest in the whole to the extent that he makes subsequent
13 advances if the subsequent purchase is made, the lien by
14 judicial proceedings obtained or the subsequent advance under
15 the prior perfected security interest is made or contracted
16 for without knowledge of the security interest and before it
17 is perfected. A purchaser of the whole at a foreclosure sale
18 other than the holder of a perfected security interest
19 purchasing at his own foreclosure sale is a subsequent
20 purchaser within this Section.
21 (4) When under subsections (1) or (2) and (3) a secured
22 party has an interest in accessions which has priority over
23 the claims of all persons who have interests in the whole, he
24 may on default subject to the provisions of Part 5 remove his
25 collateral from the whole but he must reimburse any
26 encumbrancer or owner of the whole who is not the debtor and
27 who has not otherwise agreed for the cost of repair of any
28 physical injury but not for any diminution in value of the
29 whole caused by the absence of the goods removed or by any
30 necessity for replacing them. A person entitled to
31 reimbursement may refuse permission to remove until the
32 secured party gives adequate security for the performance of
33 this obligation.
34 (Source: Laws 1961, p. 2101.)
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1 (810 ILCS 5/9-315) (from Ch. 26, par. 9-315)
2 Sec. 9-315. Secured party's rights on disposition of
3 collateral and in proceeds.
4 (a) Disposition of collateral: continuation of security
5 interest or agricultural lien; proceeds. Except as otherwise
6 provided in this Article and in Section 2-403(2):
7 (1) a security interest or agricultural lien
8 continues in collateral notwithstanding sale, lease,
9 license, exchange, or other disposition thereof unless
10 the secured party authorized the disposition free of the
11 security interest or agricultural lien; and
12 (2) a security interest attaches to any
13 identifiable proceeds of collateral.
14 (b) When commingled proceeds identifiable. Proceeds
15 that are commingled with other property are identifiable
16 proceeds:
17 (1) if the proceeds are goods, to the extent
18 provided by Section 9-336; and
19 (2) if the proceeds are not goods, to the extent
20 that the secured party identifies the proceeds by a
21 method of tracing, including application of equitable
22 principles, that is permitted under law other than this
23 Article with respect to commingled property of the type
24 involved.
25 (c) Perfection of security interest in proceeds. A
26 security interest in proceeds is a perfected security
27 interest if the security interest in the original collateral
28 was perfected.
29 (d) Continuation of perfection. A perfected security
30 interest in proceeds becomes unperfected on the 21st day
31 after the security interest attaches to the proceeds unless:
32 (1) the following conditions are satisfied:
33 (A) a filed financing statement covers the
34 original collateral;
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1 (B) the proceeds are collateral in which a
2 security interest may be perfected by filing in the
3 office in which the financing statement has been
4 filed; and
5 (C) the proceeds are not acquired with cash
6 proceeds;
7 (2) the proceeds are identifiable cash proceeds; or
8 (3) the security interest in the proceeds is
9 perfected other than under subsection (c) when the
10 security interest attaches to the proceeds or within 20
11 days thereafter.
12 (e) When perfected security interest in proceeds becomes
13 unperfected. If a filed financing statement covers the
14 original collateral, a security interest in proceeds which
15 remains perfected under subsection (d)(1) becomes unperfected
16 at the later of:
17 (1) when the effectiveness of the filed financing
18 statement lapses under Section 9-515 or is terminated
19 under Section 9-513; or
20 (2) the 21st day after the security interest
21 attaches to the proceeds. Priority when goods are
22 commingled or processed.
23 (1) If a security interest in goods was perfected and
24 subsequently the goods or a part thereof have become part of
25 a product or mass, the security interest continues in the
26 product or mass if
27 (a) the goods are so manufactured, processed,
28 assembled or commingled that their identity is lost in the
29 product or mass; or
30 (b) a financing statement covering the original
31 goods also covers the product into which the goods have been
32 manufactured, processed or assembled. In a case to which
33 paragraph (b) applies, no separate security interest in that
34 part of the original goods which has been manufactured,
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1 processed or assembled into the product may be claimed under
2 Section 9--314.
3 (2) When under subsection (1) more than one security
4 interest attaches to the product or mass, they rank equally
5 according to the ratio that the cost of the goods to which
6 each interest originally attached bears to the cost of the
7 total product or mass.
8 (Source: Laws 1961, p. 2101.)
9 (810 ILCS 5/9-316) (from Ch. 26, par. 9-316)
10 Sec. 9-316. Continued perfection of security interest
11 following change in governing law.
12 (a) General rule: effect on perfection of change in
13 governing law. A security interest perfected pursuant to the
14 law of the jurisdiction designated in Section 9-301(1) or
15 9-305(c) remains perfected until the earliest of:
16 (1) the time perfection would have ceased under the
17 law of that jurisdiction;
18 (2) the expiration of four months after a change of
19 the debtor's location to another jurisdiction; or
20 (3) the expiration of one year after a transfer of
21 collateral to a person that thereby becomes a debtor and
22 is located in another jurisdiction.
23 (b) Security interest perfected or unperfected under law
24 of new jurisdiction. If a security interest described in
25 subsection (a) becomes perfected under the law of the other
26 jurisdiction before the earliest time or event described in
27 that subsection, it remains perfected thereafter. If the
28 security interest does not become perfected under the law of
29 the other jurisdiction before the earliest time or event, it
30 becomes unperfected and is deemed never to have been
31 perfected as against a purchaser of the collateral for value.
32 (c) Possessory security interest in collateral moved to
33 new jurisdiction. A possessory security interest in
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1 collateral, other than goods covered by a certificate of
2 title and as-extracted collateral consisting of goods,
3 remains continuously perfected if:
4 (1) the collateral is located in one jurisdiction
5 and subject to a security interest perfected under the
6 law of that jurisdiction;
7 (2) thereafter the collateral is brought into
8 another jurisdiction; and
9 (3) upon entry into the other jurisdiction, the
10 security interest is perfected under the law of the other
11 jurisdiction.
12 (d) Goods covered by certificate of title from this
13 State. Except as otherwise provided in subsection (e), a
14 security interest in goods covered by a certificate of title
15 which is perfected by any method under the law of another
16 jurisdiction when the goods become covered by a certificate
17 of title from this State remains perfected until the security
18 interest would have become unperfected under the law of the
19 other jurisdiction had the goods not become so covered.
20 (e) When subsection (d) security interests becomes
21 unperfected against purchasers. A security interest
22 described in subsection (d) becomes unperfected as against a
23 purchaser of the goods for value and is deemed never to have
24 been perfected as against a purchaser of the goods for value
25 if the applicable requirements for perfection under Section
26 9-311(b) or 9-313 are not satisfied before the earlier of:
27 (1) the time the security interest would have
28 become unperfected under the law of the other
29 jurisdiction had the goods not become covered by a
30 certificate of title from this State; or
31 (2) the expiration of four months after the goods
32 had become so covered.
33 (f) Change in jurisdiction of bank, issuer, nominated
34 person, securities intermediary, or commodity intermediary.
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1 A security interest in deposit accounts, letter-of-credit
2 rights, or investment property which is perfected under the
3 law of the bank's jurisdiction, the issuer's jurisdiction, a
4 nominated person's jurisdiction, the securities
5 intermediary's jurisdiction, or the commodity intermediary's
6 jurisdiction, as applicable, remains perfected until the
7 earlier of:
8 (1) the time the security interest would have
9 become unperfected under the law of that jurisdiction; or
10 (2) the expiration of four months after a change of
11 the applicable jurisdiction to another jurisdiction.
12 (g) Subsection (f) security interest perfected or
13 unperfected under law of new jurisdiction. If a security
14 interest described in subsection (f) becomes perfected under
15 the law of the other jurisdiction before the earlier of the
16 time or the end of the period described in that subsection,
17 it remains perfected thereafter. If the security interest
18 does not become perfected under the law of the other
19 jurisdiction before the earlier of that time or the end of
20 that period, it becomes unperfected and is deemed never to
21 have been perfected as against a purchaser of the collateral
22 for value. Priority subject to subordination.
23 Nothing in this Article prevents subordination by
24 agreement by any person entitled to priority.
25 (Source: Laws 1961, p. 2101.)
26 (810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new)
27 SUBPART 3. PRIORITY
28 (810 ILCS 5/9-317) (from Ch. 26, par. 9-317)
29 Sec. 9-317. Interests that take priority over or take
30 free of unperfected security interest or agricultural lien.
31 (a) Conflicting security interests and rights of lien
32 creditors. An unperfected security interest or agricultural
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1 lien is subordinate to the rights of:
2 (1) a person entitled to priority under Section
3 9-322; and
4 (2) except as otherwise provided in subsection (e),
5 a person that becomes a lien creditor before the earlier
6 of the time the security interest or agricultural lien is
7 perfected or a financing statement covering the
8 collateral is filed.
9 (b) Buyers that receive delivery. Except as otherwise
10 provided in subsection (e), a buyer, other than a secured
11 party, of tangible chattel paper, documents, goods,
12 instruments, or a security certificate takes free of a
13 security interest or agricultural lien if the buyer gives
14 value and receives delivery of the collateral without
15 knowledge of the security interest or agricultural lien and
16 before it is perfected.
17 (c) Lessees that receive delivery. Except as otherwise
18 provided in subsection (e), a lessee of goods takes free of a
19 security interest or agricultural lien if the lessee gives
20 value and receives delivery of the collateral without
21 knowledge of the security interest or agricultural lien and
22 before it is perfected.
23 (d) Licensees and buyers of certain collateral. A
24 licensee of a general intangible or a buyer, other than a
25 secured party, of accounts, electronic chattel paper, general
26 intangibles, or investment property other than a certificated
27 security takes free of a security interest if the licensee or
28 buyer gives value without knowledge of the security interest
29 and before it is perfected.
30 (e) Purchase-money security interest. Except as
31 otherwise provided in Sections 9-320 and 9-321, if a person
32 files a financing statement with respect to a purchase-money
33 security interest before or within 20 days after the debtor
34 receives delivery of the collateral, the security interest
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1 takes priority over the rights of a buyer, lessee, or lien
2 creditor which arise between the time the security interest
3 attaches and the time of filing. Secured party not obligated
4 on contract of debtor.
5 The mere existence of a security interest or authority
6 given to the debtor to dispose of or use collateral does not
7 impose contract or tort liability upon the secured party for
8 the debtor's acts or omissions.
9 (Source: Laws 1961, p. 2101.)
10 (810 ILCS 5/9-318) (from Ch. 26, par. 9-318)
11 Sec. 9-318. No interest retained in right to payment
12 that is sold; rights and title of seller of account or
13 chattel paper with respect to creditors and purchasers.
14 (a) Seller retains no interest. A debtor that has sold
15 an account, chattel paper, payment intangible, or promissory
16 note does not retain a legal or equitable interest in the
17 collateral sold.
18 (b) Deemed rights of debtor if buyer's security interest
19 unperfected. For purposes of determining the rights of
20 creditors of, and purchasers for value of an account or
21 chattel paper from, a debtor that has sold an account or
22 chattel paper, while the buyer's security interest is
23 unperfected, the debtor is deemed to have rights and title to
24 the account or chattel paper identical to those the debtor
25 sold. Defenses Against Assignee; Modification of Contract
26 After Notification of Assignment; Term Prohibiting Assignment
27 Ineffective; Identification and Proof of Assignment.
28 (1) Unless an account debtor has made an enforceable
29 agreement not to assert defenses or claims arising out of a
30 sale as provided in Section 9-- 206 the rights of an assignee
31 are subject to
32 (a) all the terms of the contract between the
33 account debtor and assignor and any defense or claim arising
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1 therefrom; and
2 (b) any other defense or claim of the account
3 debtor against the assignor which accrues before the account
4 debtor receives notification of the assignment.
5 (2) So far as the right to payment or a part thereof
6 under an assigned contract has not been fully earned by
7 performance, and notwithstanding notification of the
8 assignment, any modification of or substitution for the
9 contract made in good faith and in accordance with reasonable
10 commercial standards is effective against an assignee unless
11 the account debtor has otherwise agreed but the assignee
12 acquires corresponding rights under the modified or
13 substituted contract. The assignment may provide that such
14 modification or substitution is a breach by the assignor.
15 (3) The account debtor is authorized to pay the assignor
16 until the account debtor receives notification that the
17 amount due or to become due has been assigned and that
18 payment is to be made to the assignee. A notification which
19 does not reasonably identify the rights assigned is
20 ineffective. If requested by the account debtor, the assignee
21 must seasonably furnish reasonable proof that the assignment
22 has been made and unless he does so the account debtor may
23 pay the assignor.
24 (4) A term in any contract between an account debtor and
25 an assignor is ineffective if it prohibits assignment of an
26 account or prohibits creation of a security interest in a
27 general intangible for money due or to become due or requires
28 the account debtor's consent to such assignment or security
29 interest.
30 (Source: P. A. 77-2810.)
31 (810 ILCS 5/9-319 new)
32 Sec. 9-319. Rights and title of consignee with respect
33 to creditors and purchasers.
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1 (a) Consignee has consignor's rights. Except as
2 otherwise provided in subsection (b), for purposes of
3 determining the rights of creditors of, and purchasers for
4 value of goods from, a consignee, while the goods are in the
5 possession of the consignee, the consignee is deemed to have
6 rights and title to the goods identical to those the
7 consignor had or had power to transfer.
8 (b) Applicability of other law. For purposes of
9 determining the rights of a creditor of a consignee, law
10 other than this Article determines the rights and title of a
11 consignee while goods are in the consignee's possession if,
12 under this Part, a perfected security interest held by the
13 consignor would have priority over the rights of the
14 creditor.
15 (810 ILCS 5/9-320 new)
16 Sec. 9-320. Buyer of goods.
17 (a) Buyer in ordinary course of business. Except as
18 otherwise provided in subsection (e), a buyer in ordinary
19 course of business, other than a person buying farm products
20 from a person engaged in farming operations, takes free of a
21 security interest created by the buyer's seller, even if the
22 security interest is perfected and the buyer knows of its
23 existence.
24 (b) Buyer of consumer goods. Except as otherwise
25 provided in subsection (e), a buyer of goods from a person
26 who used or bought the goods for use primarily for personal,
27 family, or household purposes takes free of a security
28 interest, even if perfected, if the buyer buys:
29 (1) without knowledge of the security interest;
30 (2) for value;
31 (3) primarily for the buyer's personal, family, or
32 household purposes; and
33 (4) before the filing of a financing statement
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1 covering the goods.
2 (c) Effectiveness of filing for subsection (b). To the
3 extent that it affects the priority of a security interest
4 over a buyer of goods under subsection (b), the period of
5 effectiveness of a filing made in the jurisdiction in which
6 the seller is located is governed by Section 9-316(a) and
7 (b).
8 (d) Buyer in ordinary course of business at wellhead or
9 minehead. A buyer in ordinary course of business buying oil,
10 gas, or other minerals at the wellhead or minehead or after
11 extraction takes free of an interest arising out of an
12 encumbrance.
13 (e) Possessory security interest not affected.
14 Subsections (a) and (b) do not affect a security interest in
15 goods in the possession of the secured party under Section
16 9-313.
17 (810 ILCS 5/9-321 new)
18 Sec. 9-321. Licensee of general intangible and lessee of
19 goods in ordinary course of business.
20 (a) "Licensee in ordinary course of business." In this
21 Section, "licensee in ordinary course of business" means a
22 person that becomes a licensee of a general intangible in
23 good faith, without knowledge that the license violates the
24 rights of another person in the general intangible, and in
25 the ordinary course from a person in the business of
26 licensing general intangibles of that kind. A person becomes
27 a licensee in the ordinary course if the license to the
28 person comports with the usual or customary practices in the
29 kind of business in which the licensor is engaged or with the
30 licensor's own usual or customary practices.
31 (b) Rights of licensee in ordinary course of business.
32 A licensee in ordinary course of business takes its rights
33 under a nonexclusive license free of a security interest in
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1 the general intangible created by the licensor, even if the
2 security interest is perfected and the licensee knows of its
3 existence.
4 (c) Rights of lessee in ordinary course of business. A
5 lessee in ordinary course of business takes its leasehold
6 interest free of a security interest in the goods created by
7 the lessor, even if the security interest is perfected and
8 the lessee knows of its existence.
9 (810 ILCS 5/9-322 new)
10 Sec. 9-322. Priorities among conflicting security
11 interests in and agricultural liens on same collateral.
12 (a) General priority rules. Except as otherwise
13 provided in this Section, priority among conflicting security
14 interests and agricultural liens in the same collateral is
15 determined according to the following rules:
16 (1) Conflicting perfected security interests and
17 agricultural liens rank according to priority in time of
18 filing or perfection. Priority dates from the earlier of
19 the time a filing covering the collateral is first made
20 or the security interest or agricultural lien is first
21 perfected, if there is no period thereafter when there is
22 neither filing nor perfection.
23 (2) A perfected security interest or agricultural
24 lien has priority over a conflicting unperfected security
25 interest or agricultural lien.
26 (3) The first security interest or agricultural
27 lien to attach or become effective has priority if
28 conflicting security interests and agricultural liens are
29 unperfected.
30 (b) Time of perfection: proceeds and supporting
31 obligations. For the purposes subsection (a)(1):
32 (1) the time of filing or perfection as to a
33 security interest in collateral is also the time of
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1 filing or perfection as to a security interest in
2 proceeds; and
3 (2) the time of filing or perfection as to a
4 security interest in collateral supported by a supporting
5 obligation is also the time of filing or perfection as to
6 a security interest in the supporting obligation.
7 (c) Special priority rules: proceeds and supporting
8 obligations. Except as otherwise provided in subsection (f),
9 a security interest in collateral which qualifies for
10 priority over a conflicting security interest under Section
11 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a
12 conflicting security interest in:
13 (1) any supporting obligation for the collateral;
14 and
15 (2) proceeds of the collateral if:
16 (A) the security interest in proceeds is
17 perfected;
18 (B) the proceeds are cash proceeds or of the
19 same type as the collateral; and
20 (C) in the case of proceeds that are proceeds
21 of proceeds, all intervening proceeds are cash
22 proceeds, proceeds of the same type as the
23 collateral, or an account relating to the
24 collateral.
25 (d) First-to-file priority rule for certain collateral.
26 Subject to subsection (e) and except as otherwise provided in
27 subsection (f), if a security interest in chattel paper,
28 deposit accounts, negotiable documents, instruments,
29 investment property, or letter-of-credit rights is perfected
30 by a method other than filing, conflicting perfected security
31 interests in proceeds of the collateral rank according to
32 priority in time of filing.
33 (e) Applicability of subsection (d). Subsection (d)
34 applies only if the proceeds of the collateral are not cash
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1 proceeds, chattel paper, negotiable documents, instruments,
2 investment property, or letter-of-credit rights.
3 (f) Limitations on subsections (a) through (e).
4 Subsections (a) through (e) are subject to:
5 (1) subsection (g) and the other provisions of this
6 Part;
7 (2) Section 4-210 with respect to a security
8 interest of a collecting bank;
9 (3) Section 5-118 with respect to a security
10 interest of an issuer or nominated person; and
11 (4) Section 9-110 with respect to a security
12 interest arising under Article 2 or 2A.
13 (g) Priority under agricultural lien statute. A
14 perfected agricultural lien on collateral has priority over a
15 conflicting security interest in or agricultural lien on the
16 same collateral if the statute creating the agricultural lien
17 so provides.
18 (810 ILCS 5/9-323 new)
19 Sec. 9-323. Future advances.
20 (a) When priority based on time of advance. Except as
21 otherwise provided in subsection (c), for purposes of
22 determining the priority of a perfected security interest
23 under Section 9-322(a)(1), perfection of the security
24 interest dates from the time an advance is made to the extent
25 that the security interest secures an advance that:
26 (1) is made while the security interest is
27 perfected only:
28 (A) under Section 9-309 when it attaches; or
29 (B) temporarily under Section 9-312(e), (f),
30 or (g); and
31 (2) is not made pursuant to a commitment entered
32 into before or while the security interest is perfected
33 by a method other than under Section 9-309 or 9-312(e),
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1 (f), or (g).
2 (b) Lien creditor. Except as otherwise provided in
3 subsection (c), a security interest is subordinate to the
4 rights of a person that becomes a lien creditor while the
5 security interest is perfected only to the extent that it
6 secures advances made more than 45 days after the person
7 becomes a lien creditor unless the advance is made:
8 (1) without knowledge of the lien; or
9 (2) pursuant to a commitment entered into without
10 knowledge of the lien.
11 (c) Buyer of receivables. Subsections (a) and (b) do
12 not apply to a security interest held by a secured party that
13 is a buyer of accounts, chattel paper, payment intangibles,
14 or promissory notes or a consignor.
15 (d) Buyer of goods. Except as otherwise provided in
16 subsection (e), a buyer of goods other than a buyer in
17 ordinary course of business takes free of a security interest
18 to the extent that it secures advances made after the earlier
19 of:
20 (1) the time the secured party acquires knowledge
21 of the buyer's purchase; or
22 (2) 45 days after the purchase.
23 (e) Advances made pursuant to commitment: priority of
24 buyer of goods. Subsection (d) does not apply if the advance
25 is made pursuant to a commitment entered into without
26 knowledge of the buyer's purchase and before the expiration
27 of the 45-day period.
28 (f) Lessee of goods. Except as otherwise provided in
29 subsection (g), a lessee of goods, other than a lessee in
30 ordinary course of business, takes the leasehold interest
31 free of a security interest to the extent that it secures
32 advances made after the earlier of:
33 (1) the time the secured party acquires knowledge
34 of the lease; or
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1 (2) 45 days after the lease contract becomes
2 enforceable.
3 (g) Advances made pursuant to commitment: priority of
4 lessee of goods. Subsection (f) does not apply if the
5 advance is made pursuant to a commitment entered into without
6 knowledge of the lease and before the expiration of the
7 45-day period.
8 (810 ILCS 5/9-324 new)
9 Sec. 9-324. Priority of purchase-money security
10 interests.
11 (a) General rule: purchase-money priority. Except as
12 otherwise provided in subsection (g), a perfected
13 purchase-money security interest in goods other than
14 inventory or livestock has priority over a conflicting
15 security interest in the same goods, and, except as otherwise
16 provided in Section 9-327, a perfected security interest in
17 its identifiable proceeds also has priority, if the
18 purchase-money security interest is perfected when the debtor
19 receives possession of the collateral or within 20 days
20 thereafter.
21 (b) Inventory purchase-money priority. Subject to
22 subsection (c) and except as otherwise provided in subsection
23 (g), a perfected purchase-money security interest in
24 inventory has priority over a conflicting security interest
25 in the same inventory, has priority over a conflicting
26 security interest in chattel paper or an instrument
27 constituting proceeds of the inventory and in proceeds of the
28 chattel paper, if so provided in Section 9-330, and, except
29 as otherwise provided in Section 9-327, also has priority in
30 identifiable cash proceeds of the inventory to the extent the
31 identifiable cash proceeds are received on or before the
32 delivery of the inventory to a buyer, if:
33 (1) the purchase-money security interest is
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1 perfected when the debtor receives possession of the
2 inventory;
3 (2) the purchase-money secured party sends an
4 authenticated notification to the holder of the
5 conflicting security interest;
6 (3) the holder of the conflicting security interest
7 receives the notification within five years before the
8 debtor receives possession of the inventory; and
9 (4) the notification states that the person sending
10 the notification has or expects to acquire a
11 purchase-money security interest in inventory of the
12 debtor and describes the inventory.
13 (c) Holders of conflicting inventory security interests
14 to be notified. Subsections (b)(2) through (4) apply only if
15 the holder of the conflicting security interest had filed a
16 financing statement covering the same types of inventory:
17 (1) if the purchase-money security interest is
18 perfected by filing, before the date of the filing; or
19 (2) if the purchase-money security interest is
20 temporarily perfected without filing or possession under
21 Section 9-312(f), before the beginning of the 20-day
22 period thereunder.
23 (d) Livestock purchase-money priority. Subject to
24 subsection (e) and except as otherwise provided in subsection
25 (g), a perfected purchase-money security interest in
26 livestock that are farm products has priority over a
27 conflicting security interest in the same livestock, and,
28 except as otherwise provided in Section 9-327, a perfected
29 security interest in their identifiable proceeds and
30 identifiable products in their unmanufactured states also has
31 priority, if:
32 (1) the purchase-money security interest is
33 perfected when the debtor receives possession of the
34 livestock;
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1 (2) the purchase-money secured party sends an
2 authenticated notification to the holder of the
3 conflicting security interest;
4 (3) the holder of the conflicting security interest
5 receives the notification within six months before the
6 debtor receives possession of the livestock; and
7 (4) the notification states that the person sending
8 the notification has or expects to acquire a
9 purchase-money security interest in livestock of the
10 debtor and describes the livestock.
11 (e) Holders of conflicting livestock security interests
12 to be notified. Subsections (d)(2) through (4) apply only if
13 the holder of the conflicting security interest had filed a
14 financing statement covering the same types of livestock:
15 (1) if the purchase-money security interest is
16 perfected by filing, before the date of the filing; or
17 (2) if the purchase-money security interest is
18 temporarily perfected without filing or possession under
19 Section 9-312(f), before the beginning of the 20-day
20 period thereunder.
21 (f) Software purchase-money priority. Except as
22 otherwise provided in subsection (g), a perfected
23 purchase-money security interest in software has priority
24 over a conflicting security interest in the same collateral,
25 and, except as otherwise provided in Section 9-327, a
26 perfected security interest in its identifiable proceeds also
27 has priority, to the extent that the purchase-money security
28 interest in the goods in which the software was acquired for
29 use has priority in the goods and proceeds of the goods under
30 this Section.
31 (g) Conflicting purchase-money security interests. If
32 more than one security interest qualifies for priority in the
33 same collateral under subsection (a), (b), (d), or (f):
34 (1) a security interest securing an obligation
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1 incurred as all or part of the price of the collateral
2 has priority over a security interest securing an
3 obligation incurred for value given to enable the debtor
4 to acquire rights in or the use of collateral; and
5 (2) in all other cases, Section 9-322(a) applies to
6 the qualifying security interests.
7 (810 ILCS 5/9-325 new)
8 Sec. 9-325. Priority of security interests in
9 transferred collateral.
10 (a) Subordination of security interest in transferred
11 collateral. Except as otherwise provided in subsection (b), a
12 security interest created by a debtor is subordinate to a
13 security interest in the same collateral created by another
14 person if:
15 (1) the debtor acquired the collateral subject to
16 the security interest created by the other person;
17 (2) the security interest created by the other
18 person was perfected when the debtor acquired the
19 collateral; and
20 (3) there is no period thereafter when the security
21 interest is unperfected.
22 (b) Limitation of subsection (a) subordination.
23 Subsection (a) subordinates a security interest only if the
24 security interest:
25 (1) otherwise would have priority solely under
26 Section 9-322(a) or 9-324; or
27 (2) arose solely under Section 2-711(3) or
28 2A-508(5).
29 (810 ILCS 5/9-326 new)
30 Sec. 9-326. Priority of security interests created by
31 new debtor.
32 (a) Subordination of security interest created by new
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1 debtor. Subject to subsection (b), a security interest
2 created by a new debtor which is perfected by a filed
3 financing statement that is effective solely under Section
4 9-508 in collateral in which a new debtor has or acquires
5 rights is subordinate to a security interest in the same
6 collateral which is perfected other than by a filed financing
7 statement that is effective solely under Section 9-508.
8 (b) Priority under other provisions; multiple original
9 debtors. The other provisions of this Part determine the
10 priority among conflicting security interests in the same
11 collateral perfected by filed financing statements that are
12 effective solely under Section 9-508. However, if the
13 security agreements to which a new debtor became bound as
14 debtor were not entered into by the same original debtor, the
15 conflicting security interests rank according to priority in
16 time of the new debtor's having become bound.
17 (810 ILCS 5/9-327 new)
18 Sec. 9-327. Priority of security interests in deposit
19 account. The following rules govern priority among
20 conflicting security interests in the same deposit account:
21 (1) A security interest held by a secured party having
22 control of the deposit account under Section 9-104 has
23 priority over a conflicting security interest held by a
24 secured party that does not have control.
25 (2) Except as otherwise provided in paragraphs (3) and
26 (4), security interests perfected by control under Section
27 9-314 rank according to priority in time of obtaining
28 control.
29 (3) Except as otherwise provided in paragraph (4), a
30 security interest held by the bank with which the deposit
31 account is maintained has priority over a conflicting
32 security interest held by another secured party.
33 (4) A security interest perfected by control under
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1 Section 9-104(a)(3) has priority over a security interest
2 held by the bank with which the deposit account is
3 maintained.
4 (810 ILCS 5/9-328 new)
5 Sec. 9-328. Priority of security interests in investment
6 property. The following rules govern priority among
7 conflicting security interests in the same investment
8 property:
9 (1) A security interest held by a secured party having
10 control of investment property under Section 9-106 has
11 priority over a security interest held by a secured party
12 that does not have control of the investment property.
13 (2) Except as otherwise provided in paragraphs (3) and
14 (4), conflicting security interests held by secured parties
15 each of which has control under Section 9-106 rank according
16 to priority in time of:
17 (A) if the collateral is a security, obtaining
18 control;
19 (B) if the collateral is a security entitlement
20 carried in a securities account and:
21 (i) if the secured party obtained control
22 under Section 8-106(d)(1), the secured party's
23 becoming the person for which the securities account
24 is maintained;
25 (ii) if the secured party obtained control
26 under Section 8-106(d)(2), the securities
27 intermediary's agreement to comply with the secured
28 party's entitlement orders with respect to security
29 entitlements carried or to be carried in the
30 securities account; or
31 (iii) if the secured party obtained control
32 through another person under Section 8-106(d)(3),
33 the time on which priority would be based under this
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1 paragraph if the other person were the secured
2 party; or
3 (C) if the collateral is a commodity contract
4 carried with a commodity intermediary, the satisfaction
5 of the requirement for control specified in Section
6 9-106(b)(2) with respect to commodity contracts carried
7 or to be carried with the commodity intermediary.
8 (3) A security interest held by a securities
9 intermediary in a security entitlement or a securities
10 account maintained with the securities intermediary has
11 priority over a conflicting security interest held by another
12 secured party.
13 (4) A security interest held by a commodity intermediary
14 in a commodity contract or a commodity account maintained
15 with the commodity intermediary has priority over a
16 conflicting security interest held by another secured party.
17 (5) A security interest in a certificated security in
18 registered form which is perfected by taking delivery under
19 Section 9-313(a) and not by control under Section 9-314 has
20 priority over a conflicting security interest perfected by a
21 method other than control.
22 (6) Conflicting security interests created by a broker,
23 securities intermediary, or commodity intermediary which are
24 perfected without control under Section 9-106 rank equally.
25 (7) In all other cases, priority among conflicting
26 security interests in investment property is governed by
27 Sections 9-322 and 9-323.
28 (810 ILCS 5/9-329 new)
29 Sec. 9-329. Priority of security interests in
30 letter-of-credit right. The following rules govern priority
31 among conflicting security interests in the same
32 letter-of-credit right:
33 (1) A security interest held by a secured party
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1 having control of the letter-of-credit right under
2 Section 9-107 has priority to the extent of its control
3 over a conflicting security interest held by a secured
4 party that does not have control.
5 (2) Security interests perfected by control under
6 Section 9-314 rank according to priority in time of
7 obtaining control.
8 (810 ILCS 5/9-330 new)
9 Sec. 9-330. Priority of purchaser of chattel paper or
10 instrument.
11 (a) Purchaser's priority: security interest claimed
12 merely as proceeds. A purchaser of chattel paper has
13 priority over a security interest in the chattel paper which
14 is claimed merely as proceeds of inventory subject to a
15 security interest if:
16 (1) in good faith and in the ordinary course of the
17 purchaser's business, the purchaser gives new value and
18 takes possession of the chattel paper or obtains control
19 of the chattel paper under Section 9-105; and
20 (2) the chattel paper does not indicate that it has
21 been assigned to an identified assignee other than the
22 purchaser.
23 (b) Purchaser's priority: other security interests. A
24 purchaser of chattel paper has priority over a security
25 interest in the chattel paper which is claimed other than
26 merely as proceeds of inventory subject to a security
27 interest if the purchaser gives new value and takes
28 possession of the chattel paper or obtains control of the
29 chattel paper under Section 9-105 in good faith, in the
30 ordinary course of the purchaser's business, and without
31 knowledge that the purchase violates the rights of the
32 secured party.
33 (c) Chattel paper purchaser's priority in proceeds.
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1 Except as otherwise provided in Section 9-327, a purchaser
2 having priority in chattel paper under subsection (a) or (b)
3 also has priority in proceeds of the chattel paper to the
4 extent that:
5 (1) Section 9-322 provides for priority in the
6 proceeds; or
7 (2) the proceeds consist of the specific goods
8 covered by the chattel paper or cash proceeds of the
9 specific goods, even if the purchaser's security interest
10 in the proceeds is unperfected.
11 (d) Instrument purchaser's priority. Except as
12 otherwise provided in Section 9-331(a), a purchaser of an
13 instrument has priority over a security interest in the
14 instrument perfected by a method other than possession if the
15 purchaser gives value and takes possession of the instrument
16 in good faith and without knowledge that the purchase
17 violates the rights of the secured party.
18 (e) Holder of purchase-money security interest gives new
19 value. For purposes of subsections (a) and (b), the holder of
20 a purchase-money security interest in inventory gives new
21 value for chattel paper constituting proceeds of the
22 inventory.
23 (f) Indication of assignment gives knowledge. For
24 purposes of subsections (b) and (d), if chattel paper or an
25 instrument indicates that it has been assigned to an
26 identified secured party other than the purchaser, a
27 purchaser of the chattel paper or instrument has knowledge
28 that the purchase violates the rights of the secured party.
29 (810 ILCS 5/9-331 new)
30 Sec. 9-331. Priority of rights of purchasers of
31 instruments, documents, and securities under other Articles;
32 priority of interests in financial assets and security
33 entitlements under Article 8.
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1 (a) Rights under Articles 3, 7, and 8 not limited. This
2 Article does not limit the rights of a holder in due course
3 of a negotiable instrument, a holder to which a negotiable
4 document of title has been duly negotiated, or a protected
5 purchaser of a security. These holders or purchasers take
6 priority over an earlier security interest, even if
7 perfected, to the extent provided in Articles 3, 7, and 8.
8 (b) Protection under Article 8. This Article does not
9 limit the rights of or impose liability on a person to the
10 extent that the person is protected against the assertion of
11 an adverse claim under Article 8.
12 (c) Filing not notice. Filing under this Article does
13 not constitute notice of a claim or defense to the holders,
14 or purchasers, or persons described in subsections (a) and
15 (b).
16 (810 ILCS 5/9-332 new)
17 Sec. 9-332. Transfer of money; transfer of funds from
18 deposit account.
19 (a) Transferee of money. A transferee of money takes
20 the money free of a security interest unless the transferee
21 acts in collusion with the debtor in violating the rights of
22 the secured party.
23 (b) Transferee of funds from deposit account. A
24 transferee of funds from a deposit account takes the funds
25 free of a security interest in the deposit account unless the
26 transferee acts in collusion with the debtor in violating the
27 rights of the secured party.
28 (810 ILCS 5/9-333 new)
29 Sec. 9-333. Priority of certain liens arising by
30 operation of law.
31 (a) "Possessory lien." In this Section, "possessory
32 lien" means an interest, other than a security interest or an
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1 agricultural lien:
2 (1) which secures payment or performance of an
3 obligation for services or materials furnished with
4 respect to goods by a person in the ordinary course of
5 the person's business;
6 (2) which is created by statute or rule of law in
7 favor of the person; and
8 (3) whose effectiveness depends on the person's
9 possession of the goods.
10 (b) Priority of possessory lien. A possessory lien on
11 goods has priority over a security interest in the goods
12 unless the lien is created by a statute that expressly
13 provides otherwise.
14 (810 ILCS 5/9-334 new)
15 Sec. 9-334. Priority of security interests in fixtures
16 and crops.
17 (a) Security interest in fixtures under this Article. A
18 security interest under this Article may be created in goods
19 that are fixtures or may continue in goods that become
20 fixtures. A security interest does not exist under this
21 Article in ordinary building materials incorporated into an
22 improvement on land.
23 (b) Security interest in fixtures under real-property
24 law. This Article does not prevent creation of an
25 encumbrance upon fixtures under real property law.
26 (c) General rule: subordination of security interest in
27 fixtures. In cases not governed by subsections (d) through
28 (h), a security interest in fixtures is subordinate to a
29 conflicting interest of an encumbrancer or owner of the
30 related real property other than the debtor.
31 (d) Fixtures purchase-money priority. Except as
32 otherwise provided in subsection (h), a perfected security
33 interest in fixtures has priority over a conflicting interest
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1 of an encumbrancer or owner of the real property if the
2 debtor has an interest of record in or is in possession of
3 the real property and:
4 (1) the security interest is a purchase-money
5 security interest;
6 (2) the interest of the encumbrancer or owner
7 arises before the goods become fixtures; and
8 (3) the security interest is perfected by a fixture
9 filing before the goods become fixtures or within 20 days
10 thereafter.
11 (e) Priority of security interest in fixtures over
12 interests in real property. A perfected security interest in
13 fixtures has priority over a conflicting interest of an
14 encumbrancer or owner of the real property if:
15 (1) the debtor has an interest of record in the
16 real property or is in possession of the real property
17 and the security interest:
18 (A) is perfected by a fixture filing before
19 the interest of the encumbrancer or owner is of
20 record; and
21 (B) has priority over any conflicting interest
22 of a predecessor in title of the encumbrancer or
23 owner;
24 (2) before the goods become fixtures, the security
25 interest is perfected by any method permitted by this
26 Article and the fixtures are readily removable:
27 (A) factory or office machines;
28 (B) equipment that is not primarily used or
29 leased for use in the operation of the real
30 property; or
31 (C) replacements of domestic appliances that
32 are consumer goods;
33 (3) the conflicting interest is a lien on the real
34 property obtained by legal or equitable proceedings after
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1 the security interest was perfected by any method
2 permitted by this Article; or
3 (4) the security interest is:
4 (A) created in a manufactured home in a
5 manufactured-home transaction; and
6 (B) perfected pursuant to a statute described
7 in Section 9-311(a)(2).
8 (f) Priority based on consent, disclaimer, or right to
9 remove. A security interest in fixtures, whether or not
10 perfected, has priority over a conflicting interest of an
11 encumbrancer or owner of the real property if:
12 (1) the encumbrancer or owner has, in an
13 authenticated record, consented to the security interest
14 or disclaimed an interest in the goods as fixtures; or
15 (2) the debtor has a right to remove the goods as
16 against the encumbrancer or owner.
17 (g) Continuation of subsection (f) priority. The
18 priority of the security interest under subsection (f)
19 continues for a reasonable time if the debtor's right to
20 remove the goods as against the encumbrancer or owner
21 terminates.
22 (h) Priority of construction mortgage. A mortgage is a
23 construction mortgage to the extent that it secures an
24 obligation incurred for the construction of an improvement on
25 land, including the acquisition cost of the land, if a
26 recorded record of the mortgage so indicates. Except as
27 otherwise provided in subsections (e) and (f), a security
28 interest in fixtures is subordinate to a construction
29 mortgage if a record of the mortgage is recorded before the
30 goods become fixtures and the goods become fixtures before
31 the completion of the construction. A mortgage has this
32 priority to the same extent as a construction mortgage to the
33 extent that it is given to refinance a construction mortgage.
34 (i) Priority of security interest in crops. A perfected
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1 security interest in crops growing on real property has
2 priority over a conflicting interest of an encumbrancer or
3 owner of the real property if the debtor has an interest of
4 record in or is in possession of the real property.
5 (810 ILCS 5/9-335 new)
6 Sec. 9-335. Accessions.
7 (a) Creation of security interest in accession. A
8 security interest may be created in an accession and
9 continues in collateral that becomes an accession.
10 (b) Perfection of security interest. If a security
11 interest is perfected when the collateral becomes an
12 accession, the security interest remains perfected in the
13 collateral.
14 (c) Priority of security interest. Except as otherwise
15 provided in subsection (d), the other provisions of this Part
16 determine the priority of a security interest in an
17 accession.
18 (d) Compliance with certificate-of-title statute. A
19 security interest in an accession is subordinate to a
20 security interest in the whole which is perfected by
21 compliance with the requirements of a certificate-of-title
22 statute under Section 9-311(b).
23 (e) Removal of accession after default. After default,
24 subject to Part 6, a secured party may remove an accession
25 from other goods if the security interest in the accession
26 has priority over the claims of every person having an
27 interest in the whole.
28 (f) Reimbursement following removal. A secured party
29 that removes an accession from other goods under subsection
30 (e) shall promptly reimburse any holder of a security
31 interest or other lien on, or owner of, the whole or of the
32 other goods, other than the debtor, for the cost of repair of
33 any physical injury to the whole or the other goods. The
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1 secured party need not reimburse the holder or owner for any
2 diminution in value of the whole or the other goods caused by
3 the absence of the accession removed or by any necessity for
4 replacing it. A person entitled to reimbursement may refuse
5 permission to remove until the secured party gives adequate
6 assurance for the performance of the obligation to reimburse.
7
8 (810 ILCS 5/9-336 new)
9 Sec. 9-336. Commingled goods.
10 (a) "Commingled goods." In this Section, "commingled
11 goods" means goods that are physically united with other
12 goods in such a manner that their identity is lost in a
13 product or mass.
14 (b) No security interest in commingled goods as such. A
15 security interest does not exist in commingled goods as such.
16 However, a security interest may attach to a product or mass
17 that results when goods become commingled goods.
18 (c) Attachment of security interest to product or mass.
19 If collateral becomes commingled goods, a security interest
20 attaches to the product or mass.
21 (d) Perfection of security interest. If a security
22 interest in collateral is perfected before the collateral
23 becomes commingled goods, the security interest that attaches
24 to the product or mass under subsection (c) is perfected.
25 (e) Priority of security interest. Except as otherwise
26 provided in subsection (f), the other provisions of this Part
27 determine the priority of a security interest that attaches
28 to the product or mass under subsection (c).
29 (f) Conflicting security interests in product or mass
30 If more than one security interest attaches to the product or
31 mass under subsection (c), the following rules determine
32 priority:
33 (1) A security interest that is perfected under
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1 subsection (d) has priority over a security interest that
2 is unperfected at the time the collateral becomes
3 commingled goods.
4 (2) If more than one security interest is perfected
5 under subsection (d), the security interests rank equally
6 in proportion to value of the collateral at the time it
7 became commingled goods.
8 (810 ILCS 5/9-337 new)
9 Sec. 9-337. Priority of security interests in goods
10 covered by certificate of title. If, while a security
11 interest in goods is perfected by any method under the law of
12 another jurisdiction, this State issues a certificate of
13 title that does not show that the goods are subject to the
14 security interest or contain a statement that they may be
15 subject to security interests not shown on the certificate:
16 (1) a buyer of the goods, other than a person in
17 the business of selling goods of that kind, takes free of
18 the security interest if the buyer gives value and
19 receives delivery of the goods after issuance of the
20 certificate and without knowledge of the security
21 interest; and
22 (2) the security interest is subordinate to a
23 conflicting security interest in the goods that attaches,
24 and is perfected under Section 9-311(b), after issuance
25 of the certificate and without the conflicting secured
26 party's knowledge of the security interest.
27 (810 ILCS 5/9-338 new)
28 Sec. 9-338. Priority of security interest or
29 agricultural lien perfected by filed financing statement
30 providing certain incorrect information. If a security
31 interest or agricultural lien is perfected by a filed
32 financing statement providing information described in
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1 Section 9-516(b)(5) which is incorrect at the time the
2 financing statement is filed:
3 (1) the security interest or agricultural lien is
4 subordinate to a conflicting perfected security interest
5 in the collateral to the extent that the holder of the
6 conflicting security interest gives value in reasonable
7 reliance upon the incorrect information; and
8 (2) a purchaser, other than a secured party, of the
9 collateral takes free of the security interest or
10 agricultural lien to the extent that, in reasonable
11 reliance upon the incorrect information, the purchaser
12 gives value and, in the case of chattel paper, documents,
13 goods, instruments, or a security certificate, receives
14 delivery of the collateral.
15 (810 ILCS 5/9-339 new)
16 Sec. 9-339. Priority subject to subordination. This
17 Article does not preclude subordination by agreement by a
18 person entitled to priority.
19 (810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new)
20 SUBPART 4. RIGHTS OF BANK
21 (810 ILCS 5/9-340 new)
22 Sec. 9-340. Effectiveness of right of recoupment or
23 set-off against deposit account.
24 (a) Exercise of recoupment or set-off. Except as
25 otherwise provided in subsection (c), a bank with which a
26 deposit account is maintained may exercise any right of
27 recoupment or set-off against a secured party that holds a
28 security interest in the deposit account.
29 (b) Recoupment or setoff not affected by security
30 interest. Except as otherwise provided in subsection (c), the
31 application of this Article to a security interest in a
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1 deposit account does not affect a right of recoupment or
2 set-off of the secured party as to a deposit account
3 maintained with the secured party.
4 (c) When set-off ineffective. The exercise by a bank of
5 a set-off against a deposit account is ineffective against a
6 secured party that holds a security interest in the deposit
7 account which is perfected by control under Section
8 9-104(a)(3), if the set-off is based on a claim against the
9 debtor.
10 (810 ILCS 5/9-341 new)
11 Sec. 9-341. Bank's rights and duties with respect to
12 deposit account. Except as otherwise provided in Section
13 9-340(c), and unless the bank otherwise agrees in an
14 authenticated record, a bank's rights and duties with respect
15 to a deposit account maintained with the bank are not
16 terminated, suspended, or modified by:
17 (1) the creation, attachment, or perfection of a
18 security interest in the deposit account;
19 (2) the bank's knowledge of the security interest;
20 or
21 (3) the bank's receipt of instructions from the
22 secured party.
23 (810 ILCS 5/9-342 new)
24 Sec. 9-342. Bank's right to refuse to enter into or
25 disclose existence of control agreement. This Article does
26 not require a bank to enter into an agreement of the kind
27 described in Section 9-104(a)(2), even if its customer so
28 requests or directs. A bank that has entered into such an
29 agreement is not required to confirm the existence of the
30 agreement to another person unless requested to do so by its
31 customer.
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1 (810 ILCS 5/Art. 9, Part 4 heading)
2 PART 4. RIGHTS OF THIRD PARTIES FILING
3 (810 ILCS 5/9-401) (from Ch. 26, par. 9-401)
4 Sec. 9-401. Alienability of debtor's rights.
5 (a) Other law governs alienability; exceptions. Except
6 as otherwise provided in subsection (b) and Sections 9-406,
7 9-407, 9-408, and 9-409, whether a debtor's rights in
8 collateral may be voluntarily or involuntarily transferred is
9 governed by law other than this Article.
10 (b) Agreement does not prevent transfer. An agreement
11 between the debtor and secured party which prohibits a
12 transfer of the debtor's rights in collateral or makes the
13 transfer a default does not prevent the transfer from taking
14 effect. Place of Filing; Erroneous Filing; Removal of
15 Collateral.
16 (1) The proper place to file in order to perfect a
17 security interest is as follows:
18 (a) when the collateral is consumer goods, then in
19 the office of the recorder in the county of the debtor's
20 residence or if the debtor is not a resident of this
21 State then in the office of the Recorder of Deeds in the
22 county where the goods are kept;
23 (b) when the collateral is timber to be cut or is
24 minerals or the like (including oil and gas) or accounts
25 subject to subsection (5) of Section 9-103, or when the
26 financing statement is filed as a fixture filing (Section
27 9-313) and the collateral is goods which are or are to
28 become fixtures, then in the office where a mortgage on
29 the real estate would be filed or recorded;
30 (c) in all other cases, in the office of the
31 Secretary of State.
32 (2) A filing which is made in good faith in an improper
33 place or not in all of the places required by this section is
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1 nevertheless effective with regard to any collateral as to
2 which the filing complied with the requirements of this
3 Article and is also effective with regard to collateral
4 covered by the financing statement against any person who has
5 knowledge of the contents of such financing statement.
6 (3) A filing which is made in the proper place in this
7 State continues effective even though the debtor's residence
8 or place of business or the location of the collateral or its
9 use, whichever controlled the original filing, is thereafter
10 changed.
11 (4) The rules stated in Section 9-103 determine whether
12 filing is necessary in this State.
13 (5) Notwithstanding the preceding subsections, and
14 subject to subsection (3) of Section 9-302, the proper place
15 to file in order to perfect a security interest in
16 collateral, including fixtures, of a transmitting utility is
17 the office of the Secretary of State. This filing constitutes
18 a fixture filing (Section 9-313) as to the collateral
19 described therein which is or is to become fixtures.
20 (6) For the purposes of this Section, the residence of
21 an organization is its place of business if it has one or its
22 chief executive office if it has more than one place of
23 business.
24 (Source: P.A. 90-300, eff. 1-1-98.)
25 (810 ILCS 5/9-401A)
26 Sec. 9-401A. (Blank). Continuation of certain financing
27 statements filed before January 1, 1998. The following rules
28 apply to a financing statement or continuation statement that
29 was properly filed before January 1, 1998 in the office of a
30 county recorder, but which, if filed on or after January 1,
31 1998, is required by Section 9-401 to be filed in the office
32 of the Secretary of State:
33 (1) The financing statement shall remain effective until
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1 it lapses as provided in Section 9-403.
2 (2) The effectiveness of the financing statement may be
3 continued only by filing a continuation statement in the
4 office of the Secretary of State that provides the name and
5 address of the debtor and secured party, indicates the county
6 where the financing statement is filed, complies with the
7 requirements of Section 9-403, and either:
8 (A) indicates the types or describes the items of
9 collateral included in the original financing statement
10 as modified by any releases or amendments; or
11 (B) has attached a copy of the originally filed
12 financing statement together with amendments,
13 assignments, and releases affecting it.
14 A continuation statement filed as provided in this item
15 (2) may be further continued by a continuation statement that
16 complies with the requirements of Section 9-403.
17 (3) The financing statement may be terminated, assigned,
18 released, or amended only by an appropriate filing in the
19 office of the county recorder where it is filed, except that
20 if the financing statement has been continued as provided in
21 item (2) of this Section, it may thereafter be terminated,
22 assigned, released, or amended only by an appropriate filing
23 in the office of the Secretary of State.
24 (Source: P.A. 90-300, eff. 1-1-98.)
25 (810 ILCS 5/9-402) (from Ch. 26, par. 9-402)
26 Sec. 9-402. Secured party not obligated on contract of
27 debtor or in tort. The existence of a security interest,
28 agricultural lien, or authority given to a debtor to dispose
29 of or use collateral, without more, does not subject a
30 secured party to liability in contract or tort for the
31 debtor's acts or omissions. Formal requisites of financing
32 statement; amendments; mortgage as financing statement.
33 (1) A financing statement is sufficient if it gives the
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1 names of the debtor and the secured party, is signed by the
2 debtor, gives an address of the secured party from which
3 information concerning the security interest may be obtained,
4 gives a mailing address of the debtor and contains a
5 statement indicating the types, or describing the items, of
6 collateral. A financing statement may be filed before a
7 security agreement is made or a security interest otherwise
8 attaches. When a financing statement filed prior to January
9 1, 1996, covers crops growing or to be grown, the statement
10 must also contain a legal description of the real estate
11 concerned. If a financing statement covers crops growing or
12 to be grown and includes a description of the real estate
13 concerned, the description is sufficient if it includes the
14 quarter section, section, township and range, and the name of
15 a record owner if other than the debtor, of the real estate
16 concerned. When the financing statement covers timber to be
17 cut or covers minerals or the like (including oil and gas) or
18 accounts subject to subsection (5) of Section 9-103, or when
19 the financing statement is filed as a fixture filing (Section
20 9-313) and the collateral is goods which are or are to become
21 fixtures, the statement must also comply with subsection (5).
22 A copy of the security agreement is sufficient as a financing
23 statement if it contains the above information and is signed
24 by the debtor. A carbon, photographic or other reproduction
25 of a security agreement or a financing statement is
26 sufficient as a financing statement if the security agreement
27 so provides or if the original has been filed in this State.
28 (2) A financing statement which otherwise complies with
29 subsection (1) is sufficient when it is signed by the secured
30 party instead of the debtor if it is filed to perfect a
31 security interest in
32 (a) collateral already subject to a security
33 interest in another jurisdiction when it is brought into
34 this State, or when the debtor's location is changed to
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1 this State. Such a financing statement must state that
2 the collateral was brought into this State or that the
3 debtor's location was changed to this State under such
4 circumstances; or
5 (b) proceeds under Section 9-306 if the security
6 interest in the original collateral was perfected. Such a
7 financing statement must describe the original
8 collateral; or
9 (c) collateral as to which the filing has lapsed;
10 or
11 (d) collateral acquired after a change of name,
12 identity or corporate structure of the debtor (subsection
13 (7).
14 (3) A form substantially as follows is sufficient to
15 comply with subsection (1):
16 Name of debtor (or assignor) .......................
17 Address .......................................
18 Name of secured party (or assignee) ...........
19 Address .......................................
20 1. This financing statement covers the following
21 types (or items) of property:
22 (Describe) .........................................
23 2. (Blank).
24 3. (If applicable) The above goods are to become
25 fixtures on *
26 *Where appropriate substitute either "The above
27 timber is standing on ...." or "The above minerals or the
28 like (including oil and gas) or accounts will be financed
29 at the wellhead or minehead of the well or mine located
30 on ...."
31 (Describe Real Estate) .............................
32 and this financing statement is to be filed in the real
33 estate records. (If the debtor does not have an interest
34 of record) The name of a record owner is ................
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1 4. (If products of collateral are claimed) Products
2 of the collateral are also covered.
3 Signature of Debtor (or Assignor) ..................
4 Signature of Secured Party (or Assignee) ...........
5 (use whichever is applicable)
6 (4) A financing statement may be amended by filing a
7 writing signed by both the debtor and the secured party. An
8 amendment does not extend the period of effectiveness of a
9 financing statement. If any amendment adds collateral, it is
10 effective as to the added collateral only from the filing
11 date of the amendment. In this Article, unless the context
12 otherwise requires, the term "financing statement" means the
13 original financing statement and any amendments.
14 (5) A financing statement covering timber to be cut or
15 covering minerals or the like (including oil and gas) or
16 accounts subject to subsection (5) of Section 9-103, or a
17 financing statement filed as a fixture filing (Section 9-313)
18 where the debtor is not a transmitting utility, must show
19 that it covers this type of collateral, must recite that it
20 is to be filed in the real estate records, and the financing
21 statement must contain a description of the real estate. If
22 the debtor does not have an interest of record in the real
23 estate, the financing statement must show the name of a
24 record owner.
25 (6) A mortgage is effective as a financing statement
26 filed as a fixture filing from the date of its recording if
27 (a) the goods are described in the mortgage by item
28 or type,
29 (b) the goods are or are to become fixtures related
30 to the real estate described in the mortgage,
31 (c) the mortgage complies with the requirements for
32 a financing statement in this Section other than a
33 recital that it is to be filed in the real estate
34 records, and
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1 (d) the mortgage is duly recorded.
2 No fee with reference to the financing statement is
3 required other than the regular recording and satisfaction
4 fees with respect to the mortgage.
5 (7) A financing statement sufficiently shows the name of
6 the debtor if it gives the individual, partnership or
7 corporate name of the debtor, whether or not it adds other
8 trade names or names of partners. Where the debtor so changes
9 his name or in the case of an organization its name, identity
10 or corporate structure that a filed financing statement
11 becomes seriously misleading, the filing is not effective to
12 perfect a security interest in collateral acquired by the
13 debtor more than 4 months after the change, unless a new
14 appropriate financing statement is filed before the
15 expiration of that time. A filed financing statement remains
16 effective with respect to collateral transferred by the
17 debtor even though the secured party knows of or consents to
18 the transfer.
19 (8) A financing statement substantially complying with
20 the requirements of this Section is effective even though it
21 contains minor errors which are not seriously misleading.
22 (Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.)
23 (810 ILCS 5/9-403) (from Ch. 26, par. 9-403)
24 Sec. 9-403. Agreement not to assert defenses against
25 assignee.
26 (a) "Value." In this Section, "value" has the meaning
27 provided in Section 3-303(a).
28 (b) Agreement not to assert claim or defense. Except as
29 otherwise provided in this Section, an agreement between an
30 account debtor and an assignor not to assert against an
31 assignee any claim or defense that the account debtor may
32 have against the assignor is enforceable by an assignee that
33 takes an assignment:
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1 (1) for value;
2 (2) in good faith;
3 (3) without notice of a claim of a property or
4 possessory right to the property assigned; and
5 (4) without notice of a defense or claim in
6 recoupment of the type that may be asserted against a
7 person entitled to enforce a negotiable instrument under
8 Section 3-305(a).
9 (c) When subsection (b) not applicable. Subsection (b)
10 does not apply to defenses of a type that may be asserted
11 against a holder in due course of a negotiable instrument
12 under Section 3-305(b).
13 (d) Omission of required statement in consumer
14 transaction. In a consumer transaction, if a record
15 evidences the account debtor's obligation, law other than
16 this Article requires that the record include a statement to
17 the effect that the rights of an assignee are subject to
18 claims or defenses that the account debtor could assert
19 against the original obligee, and the record does not include
20 such a statement:
21 (1) the record has the same effect as if the record
22 included such a statement; and
23 (2) the account debtor may assert against an
24 assignee those claims and defenses that would have been
25 available if the record included such a statement.
26 (e) Rule for individual under other law. This Section
27 is subject to law other than this Article which establishes a
28 different rule for an account debtor who is an individual and
29 who incurred the obligation primarily for personal, family,
30 or household purposes.
31 (f) Other law not displaced. Except as otherwise
32 provided in subsection (d), this Section does not displace
33 law other than this Article which gives effect to an
34 agreement by an account debtor not to assert a claim or
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1 defense against an assignee. What constitutes filing;
2 duration of filing; effect of lapsed filing; duties of filing
3 officer; fees.
4 (1) Presentation for filing of a financing statement and
5 tender of the filing fee or acceptance of the statement by
6 the filing officer constitutes filing under this Article.
7 (2) Except as provided in subsection (6) a filed
8 financing statement is effective for a period of 5 years from
9 the date of filing. The effectiveness of a filed financing
10 statement lapses on the expiration of the 5 year period
11 unless a continuation statement is filed prior to the lapse.
12 If a security interest perfected by filing exists at the time
13 insolvency proceedings are commenced by or against the
14 debtor, the security interest remains perfected until
15 termination of the insolvency proceedings and thereafter for
16 a period of 60 days or until expiration of the 5 year period,
17 whichever occurs later. Upon lapse the security interest
18 becomes unperfected, unless it is perfected without filing.
19 If the security interest becomes unperfected upon lapse, it
20 is deemed to have been unperfected as against a person who
21 became a purchaser or lien creditor before lapse.
22 (3) A continuation statement may be filed by the secured
23 party within 6 months prior to the expiration of the 5 year
24 period specified in subsection (2). Any such continuation
25 statement must be signed by the secured party, identify the
26 original statement by file number and state that the original
27 statement is still effective. A continuation statement signed
28 by a person other than the secured party of record must be
29 accompanied by a separate written statement of assignment
30 signed by the secured party of record and complying with
31 subsection (2) of Section 9-405, including payment of the
32 required fee. Upon timely filing of the continuation
33 statement, the effectiveness of the original statement is
34 continued for 5 years after the last date to which the filing
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1 was effective whereupon it lapses in the same manner as
2 provided in subsection (2) unless another continuation
3 statement is filed prior to such lapse. Succeeding
4 continuation statements may be filed in the same manner to
5 continue the effectiveness of the original statement. Unless
6 a statute on disposition of public records provides
7 otherwise, the filing officer may remove a lapsed statement
8 from the files and destroy it immediately if he has retained
9 a microfilm or other photographic record, or in other cases
10 after one year after the lapse. The filing officer shall so
11 arrange matters by physical annexation of financing
12 statements to continuation statements or other related
13 filings, or by other means, that if he physically destroys
14 the financing statements of a period more than 5 years past,
15 those which have been continued by a continuation statement
16 or which are still effective under subsection (6) shall be
17 retained.
18 (4) Except as provided in subsection (7) a filing
19 officer shall mark each statement with a file number and with
20 the date and hour of filing and shall hold the statement or a
21 microfilm or other photographic copy thereof for public
22 inspection. In addition the filing officer shall index the
23 statement according to the name of the debtor and shall note
24 in the index the file number and the address of the debtor
25 given in the statement.
26 (5) The uniform fee for filing and indexing and for
27 stamping a copy furnished by the secured party to show the
28 date and place of filing for an original financing statement,
29 amended statement, or for a continuation statement shall be
30 $20.
31 (6) If the debtor is a transmitting utility (subsection
32 (5) of Section 9-401 and a filed financing statement so
33 states, it is effective until a termination statement is
34 filed. A real estate mortgage which is effective as a fixture
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1 filing under subsection (6) of Section 9-402 remains
2 effective as a fixture filing until the mortgage is released
3 or satisfied of record or its effectiveness otherwise
4 terminates as to the real estate.
5 (7) When a financing statement covers timber to be cut
6 or covers minerals or the like (including oil and gas) or
7 accounts subject to subsection (5) of Section 9-103, or is
8 filed as a fixture filing, the filing officer shall index it
9 under the names of the debtor and any owner of record shown
10 on the financing statement in the same fashion as if they
11 were the mortgagors in a mortgage of the real estate
12 described, and, to the extent that the law of this State
13 provides for indexing of mortgages under the name of the
14 mortgagee, under the name of the secured party as if he were
15 the mortgagee thereunder, or where indexing is by description
16 in the same fashion as if the financing statement were a
17 mortgage of the real estate described.
18 (8) For financing statements filed on or after January
19 1, 1998 as to a debtor who is a resident of the State of
20 Illinois, if the collateral is equipment used in farming
21 operations, farm products, or accounts or general intangibles
22 arising from the sale of farm products by a farmer, the
23 secured party shall, within 30 days after filing with the
24 office of the Secretary of State, remit to the office of the
25 recorder in the county of the debtor's residence a fee of $10
26 together with a copy of the financing statement filed in the
27 office of the Secretary of State. This fee is in addition to
28 payment of the fee provided in subsection (5) of this Section
29 and is imposed to defray the cost of converting the county
30 recorder's document storage system to computers or
31 micrographics. The copy of the financing statement provided
32 to the office of the recorder shall be for informational
33 purposes only and shall not be for filing with the office of
34 the recorder nor shall the provision of the informational
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1 copy be subject to imposition of any filing fee under Section
2 3-5018 of the Counties Code or otherwise. The provisions of
3 this subsection (8) other than this sentence, are inoperative
4 after the earlier of (i) July 1, 1999 or (ii) the effective
5 date of a change to the Illinois Uniform Commercial Code
6 which adopts a recommendation by the National Conference of
7 Commissioners on Uniform State Laws to amend Section 9-401 of
8 this Code to make the office of the Secretary of State the
9 proper place to file a financing statement described in this
10 subsection (8).
11 (9) The failure to send an informational copy of a
12 financing statement to the appropriate office of the recorder
13 or to pay the fee as set forth in subsection (8) shall not in
14 any manner affect the existence, validity, perfection,
15 priority, or enforceability of the security interest of the
16 secured party.
17 (Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98;
18 revised 10-31-98.)
19 (810 ILCS 5/9-404) (from Ch. 26, par. 9-404)
20 Sec. 9-404. Rights acquired by assignee; claims and
21 defenses against assignee.
22 (a) Assignee's rights subject to terms, claims, and
23 defenses; exceptions. Unless an account debtor has made an
24 enforceable agreement not to assert defenses or claims, and
25 subject to subsections (b) through (e), the rights of an
26 assignee are subject to:
27 (1) all terms of the agreement between the account
28 debtor and assignor and any defense or claim in
29 recoupment arising from the transaction that gave rise to
30 the contract; and
31 (2) any other defense or claim of the account
32 debtor against the assignor which accrues before the
33 account debtor receives a notification of the assignment
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1 authenticated by the assignor or the assignee.
2 (b) Account debtor's claim reduces amount owed to
3 assignee. Subject to subsection (c) and except as otherwise
4 provided in subsection (d), the claim of an account debtor
5 against an assignor may be asserted against an assignee under
6 subsection (a) only to reduce the amount the account debtor
7 owes.
8 (c) Rule for individual under other law. This Section
9 is subject to law other than this Article which establishes a
10 different rule for an account debtor who is an individual and
11 who incurred the obligation primarily for personal, family,
12 or household purposes.
13 (d) Omission of required statement in consumer
14 transaction. In a consumer transaction, if a record
15 evidences the account debtor's obligation, law other than
16 this Article requires that the record include a statement to
17 the effect that the account debtor's recovery against an
18 assignee with respect to claims and defenses against the
19 assignor may not exceed amounts paid by the account debtor
20 under the record, and the record does not include such a
21 statement, the extent to which a claim of an account debtor
22 against the assignor may be asserted against an assignee is
23 determined as if the record included such a statement.
24 (e) Inapplicability to health-care-insurance receivable.
25 This Section does not apply to an assignment of a
26 health-care-insurance receivable. Termination Statement;
27 Duties of Filing Officer.
28 (1) If a financing statement covering consumer goods is
29 filed on or after the effective date of this amendatory Act
30 of 1972, then within one month or within 10 days following
31 written demand by the debtor after there is no outstanding
32 secured obligation and no commitment to make advances, incur
33 obligations or otherwise give value, the secured party must
34 file with each filing officer with whom the financing
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1 statement was filed, a termination statement to the effect
2 that he no longer claims a security interest under the
3 financing statement, which shall be identified by file
4 number. In other cases whenever there is no outstanding
5 secured obligation and no commitment to make advances, incur
6 obligations or otherwise give value, the secured party must
7 on written demand by the debtor send the debtor, for each
8 filing officer with whom the financing statement was filed, a
9 termination statement to the effect that he no longer claims
10 a security interest under the financing statement, which
11 shall be identified by file number. A termination statement
12 signed by a person other than the secured party of record
13 must be accompanied by a separate written statement of
14 assignment signed by the secured party of record and
15 complying with subsection (2) of Section 9-405, including
16 payment of the required fee. If the affected secured party
17 fails to file such a termination statement as required by
18 this subsection, or to send such a termination statement
19 within 10 days after proper demand therefor, he shall be
20 liable to the debtor for $100 and in addition for any loss
21 caused to the debtor by such failure.
22 (2) On presentation to the filing officer of such a
23 termination statement he must note it in the index. If he has
24 received the termination statement in duplicate, he shall
25 return one copy of the termination statement to the secured
26 party stamped to show the time of receipt thereof. If the
27 filing officer has a microfilm or other photographic record
28 of the financing statement, and of any related continuation
29 statement, statement of assignment and statement of release,
30 he may remove the originals from the files at any time after
31 receipt of the termination statement, or if he has no such
32 record, he may remove them from the files at any time after
33 one year after receipt of the termination statement.
34 (Source: P.A. 89-503, eff. 1-1-97.)
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1 (810 ILCS 5/9-405) (from Ch. 26, par. 9-405)
2 Sec. 9-405. Modification of assigned contract.
3 (a) Effect of modification on assignee. A modification
4 of or substitution for an assigned contract is effective
5 against an assignee if made in good faith. The assignee
6 acquires corresponding rights under the modified or
7 substituted contract. The assignment may provide that the
8 modification or substitution is a breach of contract by the
9 assignor. This subsection is subject to subsections (b)
10 through (d).
11 (b) Applicability of subsection (a). Subsection (a)
12 applies to the extent that:
13 (1) the right to payment or a part thereof under an
14 assigned contract has not been fully earned by
15 performance; or
16 (2) the right to payment or a part thereof has been
17 fully earned by performance and the account debtor has
18 not received notification of the assignment under Section
19 9-406(a).
20 (c) Rule for individual under other law. This Section
21 is subject to law other than this Article which establishes a
22 different rule for an account debtor who is an individual and
23 who incurred the obligation primarily for personal, family,
24 or household purposes.
25 (d) Inapplicability to health-care-insurance receivable.
26 This Section does not apply to an assignment of a
27 health-care-insurance receivable. Assignment of Security
28 Interest; Duties of Filing Officer; Fees.
29 (1) A financing statement may disclose an assignment of
30 a security interest in the collateral described in the
31 financing statement by indication in the financing statement
32 of the name and address of the assignee or by an assignment
33 itself or a copy thereof on the face or back of the
34 statement. On presentation to the filing officer of such a
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1 financing statement the filing officer shall mark the same as
2 provided in Section 9-403 (4). The uniform fee for filing,
3 indexing and furnishing filing data for a financing statement
4 so indicating an assignment shall be $20.
5 (2) A secured party may assign of record all or a part
6 of his rights under a financing statement by the filing in
7 the place where the original financing statement was filed of
8 a separate written statement of assignment signed by the
9 secured party of record and setting forth the name of the
10 secured party of record and the debtor, the file number and
11 the date of filing of the financing statement and the name
12 and address of the assignee and containing a description of
13 the collateral assigned. A copy of the assignment is
14 sufficient as a separate statement if it complies with the
15 preceding sentence. On presentation to the filing officer of
16 such a separate statement, the filing officer shall mark such
17 separate statement with the date and hour of the filing. He
18 shall note the assignment on the index of the financing
19 statement, or in the case of a fixture filing, or a filing
20 covering timber to be cut, or covering minerals or the like
21 (including oil and gas) or accounts subject to subsection (5)
22 of Section 9-103, he shall index the assignment under the
23 name of the assignor as grantor and, to the extent that the
24 law of this State provides for indexing the assignment of a
25 mortgage under the name of the assignee, he shall index the
26 assignment of the financing statement under the name of the
27 assignee. The uniform fee for filing, indexing and furnishing
28 filing data about such a separate statement of assignment
29 shall be $20. Notwithstanding the provisions of this
30 subsection, an assignment of record of a security interest in
31 a fixture contained in a mortgage effective as a fixture
32 filing (subsection (6) of Section 9-402 may be made only by
33 an assignment of the mortgage in the manner provided by the
34 law of this State other than this Act.
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1 (3) After the disclosure or filing of an assignment
2 under this Section, the assignee is the secured party of
3 record.
4 (Source: P.A. 89-503, eff. 1-1-97.)
5 (810 ILCS 5/9-406) (from Ch. 26, par. 9-406)
6 Sec. 9-406. Discharge of account debtor; notification of
7 assignment; identification and proof of assignment;
8 restrictions on assignment of accounts, chattel paper,
9 payment intangibles, and promissory notes ineffective.
10 (a) Discharge of account debtor; effect of notification.
11 Subject to subsections (b) through (i), an account debtor on
12 an account, chattel paper, or a payment intangible may
13 discharge its obligation by paying the assignor until, but
14 not after, the account debtor receives a notification,
15 authenticated by the assignor or the assignee, that the
16 amount due or to become due has been assigned and that
17 payment is to be made to the assignee. After receipt of the
18 notification, the account debtor may discharge its obligation
19 by paying the assignee and may not discharge the obligation
20 by paying the assignor.
21 (b) When notification ineffective. Subject to
22 subsection (h), notification is ineffective under subsection
23 (a):
24 (1) if it does not reasonably identify the rights
25 assigned;
26 (2) to the extent that an agreement between an
27 account debtor and a seller of a payment intangible
28 limits the account debtor's duty to pay a person other
29 than the seller and the limitation is effective under law
30 other than this Article; or
31 (3) at the option of an account debtor, if the
32 notification notifies the account debtor to make less
33 than the full amount of any installment or other periodic
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1 payment to the assignee, even if:
2 (A) only a portion of the account, chattel
3 paper, or general intangible has been assigned to
4 that assignee;
5 (B) a portion has been assigned to another
6 assignee; or
7 (C) the account debtor knows that the
8 assignment to that assignee is limited.
9 (c) Proof of assignment. Subject to subsection (h), if
10 requested by the account debtor, an assignee shall seasonably
11 furnish reasonable proof that the assignment has been made.
12 Unless the assignee complies, the account debtor may
13 discharge its obligation by paying the assignor, even if the
14 account debtor has received a notification under subsection
15 (a).
16 (d) Term restricting assignment generally ineffective.
17 Except as otherwise provided in subsection (e) and Sections
18 2A-303 and 9-407, and subject to subsection (h), a term in an
19 agreement between an account debtor and an assignor or in a
20 promissory note is ineffective to the extent that it:
21 (1) prohibits, restricts, or requires the consent
22 of the account debtor or person obligated on the
23 promissory note to the assignment or transfer of, or the
24 creation, attachment, perfection, or enforcement of a
25 security interest in, the account, chattel paper, payment
26 intangible, or promissory note; or
27 (2) provides that the creation, attachment,
28 perfection, or enforcement of the security interest may
29 give rise to a default, breach, right of recoupment,
30 claim, defense, termination, right of termination, or
31 remedy under the account, chattel paper, payment
32 intangible, or promissory note.
33 (e) Inapplicability of subsection (d) to certain sales.
34 Subsection (d) does not apply to the sale of a payment
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1 intangible or promissory note.
2 (f) Legal restrictions on assignment generally
3 ineffective. Except as otherwise provided in Sections 2A-303
4 and 9-407 and subject to subsections (h) and (i), a rule of
5 law, statute, or regulation that prohibits, restricts, or
6 requires the consent of a government, governmental body or
7 official, or account debtor to the assignment or transfer of,
8 or creation of a security interest in, an account or chattel
9 paper is ineffective to the extent that the rule of law,
10 statute, or regulation:
11 (1) prohibits, restricts, or requires the consent
12 of the government, governmental body or official, or
13 account debtor to the assignment or transfer of, or the
14 creation, attachment, perfection, or enforcement of a
15 security interest in the account or chattel paper; or
16 (2) provides that the creation, attachment,
17 perfection, or enforcement of the security interest may
18 give rise to a default, breach, right of recoupment,
19 claim, defense, termination, right of termination, or
20 remedy under the account or chattel paper.
21 (g) Subsection (b)(3) not waivable. Subject to
22 subsection (h), an account debtor may not waive or vary its
23 option under subsection (b)(3).
24 (h) Rule for individual under other law. This Section
25 is subject to law other than this Article which establishes a
26 different rule for an account debtor who is an individual and
27 who incurred the obligation primarily for personal, family,
28 or household purposes.
29 (i) Inapplicability to health-care-insurance receivable.
30 This Section does not apply to an assignment of a
31 health-care-insurance receivable.
32 Release of Collateral; Duties of Filing Officer; Fees. A
33 secured party of record may by his signed statement release
34 all or a part of any collateral described in a filed
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1 financing statement. The statement of release is sufficient
2 if it contains a description of the collateral being
3 released, the name and address of the debtor, the name and
4 address of the secured party, and the file number of the
5 financing statement. A statement of release signed by a
6 person other than the secured party of record must be
7 accompanied by a separate written statement of assignment
8 signed by the secured party of record and complying with
9 subsection (2) of Section 9-405, including payment of the
10 required fee. Upon presentation of such a statement of
11 release to the filing officer he shall mark the statement
12 with the hour and date of filing and shall note the same upon
13 the margin of the index of the filing of the financing
14 statement. The uniform fee for filing and noting such a
15 statement of release shall be $20.
16 (Source: P.A. 89-503, eff. 1-1-97.)
17 (810 ILCS 5/9-407) (from Ch. 26, par. 9-407)
18 Sec. 9-407. Restrictions on creation or enforcement of
19 security interest in leasehold interest or in lessor's
20 residual interest.
21 (a) Term restricting assignment generally ineffective.
22 Except as otherwise provided in subsection (b), a term in a
23 lease agreement is ineffective to the extent that it:
24 (1) prohibits, restricts, or requires the consent
25 of a party to the lease to the creation, attachment,
26 perfection, or enforcement of a security interest in an
27 interest of a party under the lease contract or in the
28 lessor's residual interest in the goods; or
29 (2) provides that the creation, attachment,
30 perfection, or enforcement of the security interest may
31 give rise to a default, breach, right of recoupment,
32 claim, defense, termination, right of termination, or
33 remedy under the lease.
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1 (b) Effectiveness of certain terms. Except as otherwise
2 provided in Section 2A-303(7), a term described in subsection
3 (a)(2) is effective to the extent that there is:
4 (1) a transfer by the lessee of the lessee's right
5 of possession or use of the goods in violation of the
6 term; or
7 (2) a delegation of a material performance of
8 either party to the lease contract in violation of the
9 term.
10 (c) Security interest not material impairment. The
11 creation, attachment, perfection, or enforcement of a
12 security interest in the lessor's interest under the lease
13 contract or the lessor's residual interest in the goods is
14 not a transfer that materially impairs the lessee's prospect
15 of obtaining return performance or materially changes the
16 duty of or materially increases the burden or risk imposed on
17 the lessee within the purview of Section 2A-303(4) unless,
18 and then only to the extent that, enforcement actually
19 results in a delegation of material performance of the
20 lessor. Information from Filing Officer; Fees.
21 (1) If the person filing any financing statement,
22 termination statement, statement of assignment, or statement
23 of release, furnishes the filing officer a copy thereof, the
24 filing officer shall upon request note upon the copy the file
25 number and date and hour of the filing of the original and
26 deliver or send the copy to such person.
27 (2) Upon request of any person, the filing officer shall
28 issue his certificate showing whether there is on file on the
29 date and hour stated therein, any presently effective
30 financing statement naming a particular debtor and any
31 statement of assignment thereof and if there is, giving the
32 date and hour of filing of each such statement and the names
33 and addresses of each secured party therein. The uniform fee
34 for such a certificate shall be $10 per name searched. Upon
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1 request the filing officer shall furnish a copy of any filed
2 financing statement or statement of assignment for a uniform
3 fee of $1.00 per page.
4 (Source: P.A. 86-343.)
5 (810 ILCS 5/9-408) (from Ch. 26, par. 9-408)
6 Sec. 9-408. Restrictions on assignment of promissory
7 notes, health-care-insurance receivables, and certain general
8 intangibles ineffective.
9 (a) Term restricting assignment generally ineffective.
10 Except as otherwise provided in subsection (b), a term in a
11 promissory note or in an agreement between an account debtor
12 and a debtor which relates to a health-care-insurance
13 receivable or a general intangible, including a contract,
14 permit, license, or franchise, and which term prohibits,
15 restricts, or requires the consent of the person obligated on
16 the promissory note or the account debtor to, the assignment
17 or transfer of, or creation, attachment, or perfection of a
18 security interest in, the promissory note,
19 health-care-insurance receivable, or general intangible, is
20 ineffective to the extent that the term:
21 (1) would impair the creation, attachment, or
22 perfection of a security interest; or
23 (2) provides that the creation, attachment, or
24 perfection of the security interest may give rise to a
25 default, breach, right of recoupment, claim, defense,
26 termination, right of termination, or remedy under the
27 promissory note, health-care-insurance receivable, or
28 general intangible.
29 (b) Applicability of subsection (a) to sales of certain
30 rights to payment. Subsection (a) applies to a security
31 interest in a payment intangible or promissory note only if
32 the security interest arises out of a sale of the payment
33 intangible or promissory note.
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1 (c) Legal restrictions on assignment generally
2 ineffective. A rule of law, statute, or regulation that
3 prohibits, restricts, or requires the consent of a
4 government, governmental body or official, person obligated
5 on a promissory note, or account debtor to the assignment or
6 transfer of, or creation of a security interest in, a
7 promissory note, health-care-insurance receivable, or general
8 intangible, including a contract, permit, license, or
9 franchise between an account debtor and a debtor, is
10 ineffective to the extent that the rule of law, statute, or
11 regulation:
12 (1) would impair the creation, attachment, or
13 perfection of a security interest; or
14 (2) provides that the creation, attachment, or
15 perfection of the security interest may give rise to a
16 default, breach, right of recoupment, claim, defense,
17 termination, right of termination, or remedy under the
18 promissory note, health-care-insurance receivable, or
19 general intangible.
20 (d) Limitation on ineffectiveness under subsections (a)
21 and (c). To the extent that a term in a promissory note or in
22 an agreement between an account debtor and a debtor which
23 relates to a health-care-insurance receivable or general
24 intangible or a rule of law, statute, or regulation described
25 in subsection (c) would be effective under law other than
26 this Article but is ineffective under subsection (a) or (c),
27 the creation, attachment, or perfection of a security
28 interest in the promissory note, health-care-insurance
29 receivable, or general intangible:
30 (1) is not enforceable against the person obligated
31 on the promissory note or the account debtor;
32 (2) does not impose a duty or obligation on the
33 person obligated on the promissory note or the account
34 debtor;
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1 (3) does not require the person obligated on the
2 promissory note or the account debtor to recognize the
3 security interest, pay or render performance to the
4 secured party, or accept payment or performance from the
5 secured party;
6 (4) does not entitle the secured party to use or
7 assign the debtor's rights under the promissory note,
8 health-care-insurance receivable, or general intangible,
9 including any related information or materials furnished
10 to the debtor in the transaction giving rise to the
11 promissory note, health-care-insurance receivable, or
12 general intangible;
13 (5) does not entitle the secured party to use,
14 assign, possess, or have access to any trade secrets or
15 confidential information of the person obligated on the
16 promissory note or the account debtor; and
17 (6) does not entitle the secured party to enforce
18 the security interest in the promissory note,
19 health-care-insurance receivable, or general intangible.
20 Financing Statements Covering Consigned or Leased Goods.
21 A consignor or lessor of goods may file a financing
22 statement using the terms "consignor," "consignee," "lessor,"
23 "lessee" or the like instead of the terms specified in
24 Section 9-402. The provisions of this part shall apply as
25 appropriate to such a financing statement but its filing
26 shall not of itself be a factor in determining whether or not
27 the consignment or lease is intended as security (Section
28 1-201 (37). However, if it is determined for other reasons
29 that the consignment or lease is so intended, a security
30 interest of the consignor or lessor which attaches to the
31 consigned or leased goods is perfected by such filing.
32 (Source: P. A. 78-238.)
33 (810 ILCS 5/9-409 new)
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1 Sec. 9-409. Restrictions on assignment of
2 letter-of-credit rights ineffective.
3 (a) Term or law restricting assignment generally
4 ineffective. A term in a letter of credit or a rule of law,
5 statute, regulation, custom, or practice applicable to the
6 letter of credit which prohibits, restricts, or requires the
7 consent of an applicant, issuer, or nominated person to a
8 beneficiary's assignment of or creation of a security
9 interest in a letter-of-credit right is ineffective to the
10 extent that the term or rule of law, statute, regulation,
11 custom, or practice:
12 (1) would impair the creation, attachment, or
13 perfection of a security interest in the letter-of-credit
14 right; or
15 (2) provides that the creation, attachment, or
16 perfection of the security interest may give rise to a
17 default, breach, right of recoupment, claim, defense,
18 termination, right of termination, or remedy under the
19 letter-of-credit right.
20 (b) Limitation on ineffectiveness under subsection (a).
21 To the extent that a term in a letter of credit is
22 ineffective under subsection (a) but would be effective under
23 law other than this Article or a custom or practice
24 applicable to the letter of credit, to the transfer of a
25 right to draw or otherwise demand performance under the
26 letter of credit, or to the assignment of a right to proceeds
27 of the letter of credit, the creation, attachment, or
28 perfection of a security interest in the letter-of-credit
29 right:
30 (1) is not enforceable against the applicant,
31 issuer, nominated person, or transferee beneficiary;
32 (2) imposes no duties or obligations on the
33 applicant, issuer, nominated person, or transferee
34 beneficiary; and
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1 (3) does not require the applicant, issuer,
2 nominated person, or transferee beneficiary to recognize
3 the security interest, pay or render performance to the
4 secured party, or accept payment or other performance
5 from the secured party.
6 (810 ILCS 5/9-410)
7 Sec. 9-410. (Blank). Disposition of fees. Of the total
8 money collected for each filing with the Secretary of State
9 of an original financing statement, amended statement,
10 continuation, assignment, or for a release of collateral, $12
11 of the filing fee shall be paid into the Secretary of State
12 Special Services Fund. The remaining $8 shall be deposited
13 into the General Revenue Fund in the State Treasury.
14 (Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.)
15 (810 ILCS 5/Art. 9, Part 5 heading)
16 PART 5. FILING DEFAULT
17 (810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new)
18 SUBPART 1. FILING OFFICE; CONTENTS AND
19 EFFECTIVENESS OF FINANCING STATEMENT
20 (810 ILCS 5/9-501) (from Ch. 26, par. 9-501)
21 Sec. 9-501. Filing office.
22 (a) Filing offices. Except as otherwise provided in
23 subsection (b), if the local law of this State governs
24 perfection of a security interest or agricultural lien, the
25 office in which to file a financing statement to perfect the
26 security interest or agricultural lien is:
27 (1) the office designated for the filing or
28 recording of a record of a mortgage on the related real
29 property, if:
30 (A) the collateral is as-extracted collateral
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1 or timber to be cut; or
2 (B) the financing statement is filed as a
3 fixture filing and the collateral is goods that are
4 or are to become fixtures; or
5 (2) the office of the Secretary of State in all
6 other cases, including a case in which the collateral is
7 goods that are or are to become fixtures and the
8 financing statement is not filed as a fixture filing.
9 (b) Filing office for transmitting utilities. The
10 office in which to file a financing statement to perfect a
11 security interest in collateral, including fixtures, of a
12 transmitting utility is the office of the Secretary of State.
13 The financing statement also constitutes a fixture filing as
14 to the collateral indicated in the financing statement which
15 is or is to become fixtures. Default; procedure when security
16 agreement covers both real and personal property.
17 (1) When a debtor is in default under a security
18 agreement, a secured party has the rights and remedies
19 provided in this Part and except as limited by subsection (3)
20 those provided in the security agreement. He may reduce his
21 claim to judgment, foreclose or otherwise enforce the
22 security interest by any available judicial procedure. If the
23 collateral is documents the secured party may proceed either
24 as to the documents or as to the goods covered thereby. A
25 secured party in possession has the rights, remedies and
26 duties provided in Section 9-207. The rights and remedies
27 referred to in this subsection are cumulative.
28 (2) After default, the debtor has the rights and
29 remedies provided in this Part, those provided in the
30 security agreement and those provided in Section 9-207.
31 (3) To the extent that they give rights to the debtor
32 and impose duties on the secured party, the rules stated in
33 the subsections referred to below may not be waived or varied
34 except as provided with respect to compulsory disposition of
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1 collateral (subsection (3) of Section 9-504 and Section 9-505
2 and with respect to redemption of collateral (Section 9-506)
3 but the parties may by agreement determine the standards by
4 which the fulfillment of these rights and duties is to be
5 measured if such standards are not manifestly unreasonable:
6 (a) subsection (2) of Section 9-502 and subsection
7 (2) of Section 9-504 insofar as they require accounting
8 for surplus proceeds of collateral;
9 (b) subsection (3) of Section 9-504 and subsection
10 (1) of Section 9-505 which deal with disposition of
11 collateral;
12 (c) subsection (2) of Section 9-505 which deals
13 with acceptance of collateral as discharge of obligation;
14 (d) Section 9-506 which deals with redemption of
15 collateral; and
16 (e) subsection (1) of Section 9-507 which deals
17 with the secured party's liability for failure to comply
18 with this Part.
19 (4) If the security agreement covers both real and
20 personal property, the secured party may proceed under this
21 Part as to the personal property or he may proceed as to both
22 the real and the personal property in accordance with his
23 rights and remedies in respect to the real property in which
24 case the provisions of this Part do not apply.
25 (5) When a secured party has reduced his claim to
26 judgment the lien of any levy which may be made upon his
27 collateral by virtue of such judgment shall relate back to
28 the date of the perfection of the security interest in such
29 collateral. A judicial sale, pursuant to such judgment, is a
30 foreclosure of the security interest by judicial procedure
31 within the meaning of this Section, and the secured party may
32 purchase at the sale and thereafter hold the collateral free
33 of any other requirements of this Article.
34 (Source: P.A. 84-546; revised 10-31-98.)
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1 (810 ILCS 5/9-502) (from Ch. 26, par. 9-502)
2 Sec. 9-502. Contents of financing statement; record of
3 mortgage as financing statement; time of filing financing
4 statement.
5 (a) Sufficiency of financing statement. Subject to
6 subsection (b), a financing statement is sufficient only if
7 it:
8 (1) provides the name of the debtor;
9 (2) provides the name of the secured party or a
10 representative of the secured party; and
11 (3) indicates the collateral covered by the
12 financing statement.
13 (b) Real-property-related financing statements. Except
14 as otherwise provided in Section 9-501(b), to be sufficient,
15 a financing statement that covers as-extracted collateral or
16 timber to be cut, or which is filed as a fixture filing and
17 covers goods that are or are to become fixtures, must satisfy
18 subsection (a) and also:
19 (1) indicate that it covers this type of
20 collateral;
21 (2) indicate that it is to be filed for record in
22 the real property records;
23 (3) provide a description of the real property to
24 which the collateral is related sufficient to give
25 constructive notice of a mortgage under the law of this
26 State if the description were contained in a record of
27 the mortgage of the real property; and
28 (4) if the debtor does not have an interest of
29 record in the real property, provide the name of a record
30 owner.
31 (c) Record of mortgage as financing statement. A record
32 of a mortgage is effective, from the date of recording, as a
33 financing statement filed as a fixture filing or as a
34 financing statement covering as-extracted collateral or
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1 timber to be cut only if:
2 (1) the record indicates the goods or accounts that
3 it covers;
4 (2) the goods are or are to become fixtures related
5 to the real property described in the record or the
6 collateral is related to the real property described in
7 the record and is as-extracted collateral or timber to be
8 cut;
9 (3) the record satisfies the requirements for a
10 financing statement in this Section other than an
11 indication that it is to be filed in the real property
12 records; and
13 (4) the record is duly recorded.
14 (d) Filing before security agreement or attachment. A
15 financing statement may be filed before a security agreement
16 is made or a security interest otherwise attaches. Collection
17 Rights of Secured Party.
18 (1) When so agreed and in any event on default the
19 secured party is entitled to notify an account debtor or the
20 obligor on an instrument to make payment to him whether or
21 not the assignor was theretofore making collections on the
22 collateral, and also to take control of any proceeds to which
23 he is entitled under Section 9-306.
24 (2) A secured party who by agreement is entitled to
25 charge back uncollected collateral or otherwise to full or
26 limited recourse against the debtor and who undertakes to
27 collect from the account debtors or obligors must proceed in
28 a commercially reasonable manner and may deduct his
29 reasonable expenses of realization from the collections. If
30 the security agreement secures an indebtedness, the secured
31 party must account to the debtor for any surplus, and unless
32 otherwise agreed, the debtor is liable for any deficiency.
33 But, if the underlying transaction was a sale of accounts or
34 chattel paper, the debtor is entitled to any surplus or is
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1 liable for any deficiency only if the security agreement so
2 provides.
3 (Source: P.A. 77-2810.)
4 (810 ILCS 5/9-503) (from Ch. 26, par. 9-503)
5 Sec. 9-503. Name of debtor and secured party.
6 (a) Sufficiency of debtor's name. A financing statement
7 sufficiently provides the name of the debtor:
8 (1) if the debtor is a registered organization,
9 only if the financing statement provides the name of the
10 debtor indicated on the public record of the debtor's
11 jurisdiction of organization which shows the debtor to
12 have been organized;
13 (2) if the debtor is a decedent's estate, only if
14 the financing statement provides the name of the decedent
15 and indicates that the debtor is an estate;
16 (3) if the debtor is a trust or a trustee acting
17 with respect to property held in trust, only if the
18 financing statement:
19 (A) provides the name specified for the trust
20 in its organic documents or, if no name is
21 specified, provides the name of the settlor and
22 additional information sufficient to distinguish the
23 debtor from other trusts having one or more of the
24 same settlors; and
25 (B) indicates, in the debtor's name or
26 otherwise, that the debtor is a trust or is a
27 trustee acting with respect to property held in
28 trust; and
29 (4) in other cases:
30 (A) if the debtor has a name, only if it
31 provides the individual or organizational name of
32 the debtor; and
33 (B) if the debtor does not have a name, only
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1 if it provides the names of the partners, members,
2 associates, or other persons comprising the debtor.
3 (b) Additional debtor-related information. A financing
4 statement that provides the name of the debtor in accordance
5 with subsection (a) is not rendered ineffective by the
6 absence of:
7 (1) a trade name or other name of the debtor; or
8 (2) unless required under subsection (a)(4)(B),
9 names of partners, members, associates, or other persons
10 comprising the debtor.
11 (c) Debtor's trade name insufficient. A financing
12 statement that provides only the debtor's trade name does not
13 sufficiently provide the name of the debtor.
14 (d) Representative capacity. Failure to indicate the
15 representative capacity of a secured party or representative
16 of a secured party does not affect the sufficiency of a
17 financing statement.
18 (e) Multiple debtors and secured parties. A financing
19 statement may provide the name of more than one debtor and
20 the name of more than one secured party. Secured party's
21 right to take possession after default.
22 Unless otherwise agreed a secured party has on default
23 the right to take possession of the collateral. In taking
24 possession a secured party may proceed without judicial
25 process if this can be done without breach of the peace or
26 may proceed by action.
27 If the security agreement so provides the secured party
28 may require the debtor to assemble the collateral and make it
29 available to the secured party at a place to be designated by
30 the secured party which is reasonably convenient to both
31 parties. Without removal a secured party may render equipment
32 unusable, and may dispose of collateral on the debtor's
33 premises under Section 9--504.
34 (Source: Laws 1961, p. 2101.)
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1 (810 ILCS 5/9-504) (from Ch. 26, par. 9-504)
2 Sec. 9-504. Indication of collateral. A financing
3 statement sufficiently indicates the collateral that it
4 covers only if the financing statement provides:
5 (1) a description of the collateral pursuant to
6 Section 9-108; or
7 (2) an indication that the financing statement
8 covers all assets or all personal property.
9 Secured Party's Right to Dispose of Collateral After
10 Default; Effect of Disposition.
11 (1) A secured party after default may sell, lease or
12 otherwise dispose of any or all of the collateral in its then
13 condition or following any commercially reasonable
14 preparation or processing. Any sale of goods is subject to
15 the Article on Sales (Article 2). The proceeds of disposition
16 shall be applied in the order following to
17 (a) the reasonable expenses of retaking, holding,
18 preparing for sale or lease, selling, leasing and the like
19 and, to the extent provided for in the agreement and not
20 prohibited by law, the reasonable attorneys' fees and legal
21 expenses incurred by the secured party;
22 (b) the satisfaction of indebtedness secured by the
23 security interest under which the disposition is made;
24 (c) the satisfaction of indebtedness secured by any
25 subordinate security interest in the collateral if written
26 notification of demand therefor is received before
27 distribution of the proceeds is completed. If requested by
28 the secured party, the holder of a subordinate security
29 interest must seasonably furnish reasonable proof of his
30 interest, and unless he does so, the secured party need not
31 comply with his demand.
32 (2) If the security interest secures an indebtedness,
33 the secured party must account to the debtor for any surplus,
34 and, unless otherwise agreed, the debtor is liable for any
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1 deficiency. But if the underlying transaction was a sale of
2 accounts or chattel paper, the debtor is entitled to any
3 surplus or is liable for any deficiency only if the security
4 agreement so provides.
5 (3) Disposition of the collateral may be by public or
6 private proceedings and may be made by way of one or more
7 contracts. Sale or other disposition may be as a unit or in
8 parcels and at any time and place and on any terms but every
9 aspect of the disposition including the method, manner, time,
10 place and terms must be commercially reasonable. Unless
11 collateral is perishable or threatens to decline speedily in
12 value or is of a type customarily sold on a recognized
13 market, reasonable notification of the time and place of any
14 public sale or reasonable notification of the time after
15 which any private sale or other intended disposition is to be
16 made shall be sent by the secured party to the debtor, if he
17 has not signed after default a statement renouncing or
18 modifying his right to notification of sale. In the case of
19 consumer goods no other notification need be sent. In other
20 cases notification shall be sent to any other secured party
21 from whom the secured party has received (before sending his
22 notification to the debtor or before the debtor's
23 renunciation of his rights) written notice of a claim of an
24 interest in the collateral. The secured party may buy at any
25 public sale and if the collateral is of a type customarily
26 sold in a recognized market or is of a type which is the
27 subject of widely distributed standard price quotations he
28 may buy at private sale.
29 (4) When collateral is disposed of by a secured party
30 after default, the disposition transfers to a purchaser for
31 value all of the debtor's rights therein, discharges the
32 security interest under which it is made and any security
33 interest or lien subordinate thereto. The purchaser takes
34 free of all such rights and interests even though the secured
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1 party fails to comply with the requirements of this Part or
2 of any judicial proceedings
3 (a) in the case of a public sale, if the purchaser
4 has no knowledge of any defects in the sale and if he does
5 not buy in collusion with the secured party, other bidders or
6 the person conducting the sale; or
7 (b) in any other case, if the purchaser acts in
8 good faith.
9 (5) A person who is liable to a secured party under a
10 guaranty, indorsement, repurchase agreement or the like and
11 who receives a transfer of collateral from the secured party
12 or is subrogated to his rights has thereafter the rights and
13 duties of the secured party. Such a transfer of collateral is
14 not a sale or disposition of the collateral under this
15 Article.
16 (Source: P. A. 78-238.)
17 (810 ILCS 5/9-505) (from Ch. 26, par. 9-505)
18 Sec. 9-505. Filing and compliance with other statutes and
19 treaties for consignments, leases, other bailments, and other
20 transactions.
21 (a) Use of terms other than "debtor" and "secured
22 party." A consignor, lessor, or other bailor of goods, a
23 licensor, or a buyer of a payment intangible or promissory
24 note may file a financing statement, or may comply with a
25 statute or treaty described in Section 9-311(a), using the
26 terms "consignor", "consignee", "lessor", "lessee", "bailor",
27 "bailee", "licensor", "licensee", "owner", "registered
28 owner", "buyer", "seller", or words of similar import,
29 instead of the terms "secured party" and "debtor".
30 (b) Effect of financing statement under subsection (a).
31 This part applies to the filing of a financing statement
32 under subsection (a) and, as appropriate, to compliance that
33 is equivalent to filing a financing statement under Section
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1 9-311(b), but the filing or compliance is not of itself a
2 factor in determining whether the collateral secures an
3 obligation. If it is determined for another reason that the
4 collateral secures an obligation, a security interest held by
5 the consignor, lessor, bailor, licensor, owner, or buyer
6 which attaches to the collateral is perfected by the filing
7 or compliance. Compulsory Disposition of Collateral;
8 Acceptance of the Collateral as Discharge of Obligation.
9 (1) If the debtor has paid 60% of the cash price in the
10 case of a purchase money security interest in consumer goods
11 or 60% of the loan in the case of another security interest
12 in consumer goods, and has not signed after default a
13 statement renouncing or modifying his rights under this Part
14 a secured party who has taken possession of collateral must
15 dispose of it under Section 9--504 and if he fails to do so
16 within 90 days after he takes possession the debtor at his
17 option may recover in conversion or under Section 9--507(1)
18 on secured party's liability.
19 (2) In any other case involving consumer goods or any
20 other collateral a secured party in possession may, after
21 default, propose to retain the collateral in satisfaction of
22 the obligation. Written notice of such proposal shall be sent
23 to the debtor if he has not signed after default a statement
24 renouncing or modifying his rights under this subsection. In
25 the case of consumer goods no other notice need be given. In
26 other cases notice shall be sent to any other secured party
27 from whom the secured party has received (before sending his
28 notice to the debtor or before the debtor's renunciation of
29 his rights) written notice of a claim of an interest in the
30 collateral. If the secured party receives objection in
31 writing from a person entitled to receive notification within
32 twenty-one days after the notice was sent, the secured party
33 must dispose of the collateral under Section 9-504. In the
34 absence of such written objection the secured party may
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1 retain the collateral in satisfaction of the debtor's
2 obligation.
3 (Source: P.A. 77-2810.)
4 (810 ILCS 5/9-506) (from Ch. 26, par. 9-506)
5 Sec. 9-506. Effect of errors or omissions.
6 (a) Minor errors and omissions. A financing statement
7 substantially satisfying the requirements of this Part is
8 effective, even if it has minor errors or omissions, unless
9 the errors or omissions make the financing statement
10 seriously misleading.
11 (b) Financing statement seriously misleading. Except as
12 otherwise provided in subsection (c), a financing statement
13 that fails sufficiently to provide the name of the debtor in
14 accordance with Section 9-503(a) is seriously misleading.
15 (c) Financing statement not seriously misleading. If a
16 search of the records of the filing office under the debtor's
17 correct name, using the filing office's standard search
18 logic, if any, would disclose a financing statement that
19 fails sufficiently to provide the name of the debtor in
20 accordance with Section 9-503(a), the name provided does not
21 make the financing statement seriously misleading.
22 (d) "Debtor's correct name." For purposes of Section
23 9-508(b), the "debtor's correct name" in subsection (c) means
24 the correct name of the new debtor. Debtor's right to redeem
25 collateral.
26 At any time before the secured party has disposed of
27 collateral or entered into a contract for its disposition
28 under Section 9--504 or before the obligation has been
29 discharged under Section 9--505(2) the debtor or any other
30 secured party may unless otherwise agreed in writing after
31 default redeem the collateral by tendering fulfillment of all
32 obligations secured by the collateral as well as the expenses
33 reasonably incurred by the secured party in retaking, holding
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1 and preparing the collateral for disposition, in arranging
2 for the sale, and to the extent provided in the agreement and
3 not prohibited by law, his reasonable attorneys' fees and
4 legal expenses.
5 (Source: Laws 1961, p. 2101.)
6 (810 ILCS 5/9-507) (from Ch. 26, par. 9-507)
7 Sec. 9-507. Effect of certain events on effectiveness of
8 financing statement.
9 (a) Disposition. A filed financing statement remains
10 effective with respect to collateral that is sold, exchanged,
11 leased, licensed, or otherwise disposed of and in which a
12 security interest or agricultural lien continues, even if the
13 secured party knows of or consents to the disposition.
14 (b) Information becoming seriously misleading. Except
15 as otherwise provided in subsection (c) and Section 9-508, a
16 financing statement is not rendered ineffective if, after the
17 financing statement is filed, the information provided in the
18 financing statement becomes seriously misleading under
19 Section 9-506.
20 (c) Change in debtor's name. If a debtor so changes its
21 name that a filed financing statement becomes seriously
22 misleading under Section 9-506:
23 (1) the financing statement is effective to perfect
24 a security interest in collateral acquired by the debtor
25 before, or within four months after, the change; and
26 (2) the financing statement is not effective to
27 perfect a security interest in collateral acquired by the
28 debtor more than four months after the change, unless an
29 amendment to the financing statement which renders the
30 financing statement not seriously misleading is filed
31 within four months after the change. Secured party's
32 liability for failure to comply with this part.
33 (1) If it is established that the secured party is not
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1 proceeding in accordance with the provisions of this Part
2 disposition may be ordered or restrained on appropriate terms
3 and conditions. If the disposition has occurred the debtor or
4 any person entitled to notification or whose security
5 interest has been made known to the secured party prior to
6 the disposition has a right to recover from the secured party
7 any loss caused by a failure to comply with the provisions of
8 this Part. If the collateral is consumer goods, the debtor in
9 an individual action has a right to recover in any event an
10 amount not less than the credit service charge plus 10% of
11 the principal amount of the debt or the time price
12 differential plus 10% of the cash price.
13 (2) The fact that a better price could have been
14 obtained by a sale at a different time or in a different
15 method from that selected by the secured party is not of
16 itself sufficient to establish that the sale was not made in
17 a commercially reasonable manner. If the secured party either
18 sells the collateral in the usual manner in any recognized
19 market therefor or if he sells at the price current in such
20 market at the time of his sale or if he has otherwise sold in
21 conformity with reasonable commercial practices among dealers
22 in the type of property sold he has sold in a commercially
23 reasonable manner. The principles stated in the two preceding
24 sentences with respect to sales also apply as may be
25 appropriate to other types of disposition. A disposition
26 which has been approved in any judicial proceeding or by any
27 bona fide creditors' committee or representative of creditors
28 shall conclusively be deemed to be commercially reasonable,
29 but this sentence does not indicate that any such approval
30 must be obtained in any case nor does it indicate that any
31 disposition not so approved is not commercially reasonable.
32 (Source: P.A. 90-214, eff. 7-25-97.)
33 (810 ILCS 5/9-508 new)
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1 Sec. 9-508. Effectiveness of financing statement if new
2 debtor becomes bound by security agreement.
3 (a) Financing statement naming original debtor. Except
4 as otherwise provided in this Section, a filed financing
5 statement naming an original debtor is effective to perfect a
6 security interest in collateral in which a new debtor has or
7 acquires rights to the extent that the financing statement
8 would have been effective had the original debtor acquired
9 rights in the collateral.
10 (b) Financing statement becoming seriously misleading.
11 If the difference between the name of the original debtor and
12 that of the new debtor causes a filed financing statement
13 that is effective under subsection (a) to be seriously
14 misleading under Section 9-506:
15 (1) the financing statement is effective to perfect
16 a security interest in collateral acquired by the new
17 debtor before, and within four months after, the new
18 debtor becomes bound under Section 9-203(d); and
19 (2) the financing statement is not effective to
20 perfect a security interest in collateral acquired by the
21 new debtor more than four months after the new debtor
22 becomes bound under Section 9-203(d) unless an initial
23 financing statement providing the name of the new debtor
24 is filed before the expiration of that time.
25 (c) When Section not applicable. This Section does not
26 apply to collateral as to which a filed financing statement
27 remains effective against the new debtor under Section
28 9-507(a).
29 (810 ILCS 5/9-509 new)
30 Sec. 9-509. Persons entitled to file a record.
31 (a) Person entitled to file record. A person may file
32 an initial financing statement, amendment that adds
33 collateral covered by a financing statement, or amendment
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1 that adds a debtor to a financing statement only if:
2 (1) the debtor authorizes the filing in an
3 authenticated record; or
4 (2) the person holds an agricultural lien that has
5 become effective at the time of filing and the financing
6 statement covers only collateral in which the person
7 holds an agricultural lien.
8 (b) Security agreement as authorization. By
9 authenticating or becoming bound as debtor by a security
10 agreement, a debtor or new debtor authorizes the filing of an
11 initial financing statement, and an amendment, covering:
12 (1) the collateral described in the security
13 agreement; and
14 (2) property that becomes collateral under Section
15 9-315(a)(2), whether or not the security agreement
16 expressly covers proceeds.
17 (c) Acquisition of collateral as authorization. By
18 acquiring collateral in which a security interest or
19 agricultural lien continues under Section 9-315(a)(1), a
20 debtor authorizes the filing of an initial financing
21 statement, and an amendment, covering the collateral and
22 property that becomes collateral under Section 9-315(a)(2).
23 (d) Person entitled to file certain amendments. A
24 person may file an amendment other than an amendment that
25 adds collateral covered by a financing statement or an
26 amendment that adds a debtor to a financing statement only
27 if:
28 (1) the secured party of record authorizes the
29 filing; or
30 (2) the amendment is a termination statement for a
31 financing statement as to which the secured party of
32 record has failed to file or send a termination statement
33 as required by Section 9-513(a) or (c), the debtor
34 authorizes the filing, and the termination statement
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1 indicates that the debtor authorized it to be filed.
2 (e) Multiple secured parties of record. If there is
3 more than one secured party of record for a financing
4 statement, each secured party of record may authorize the
5 filing of an amendment under subsection (d).
6 (810 ILCS 5/9-510 new)
7 Sec. 9-510. Effectiveness of filed record.
8 (a) Filed record effective if authorized. A filed
9 record is effective only to the extent that it was filed by a
10 person that may file it under Section 9-509.
11 (b) Authorization by one secured party of record. A
12 record authorized by one secured party of record does not
13 affect the financing statement with respect to another
14 secured party of record.
15 (c) Continuation statement not timely filed. A
16 continuation statement that is not filed within the six-month
17 period prescribed by Section 9-515(d) is ineffective.
18 (810 ILCS 5/9-511 new)
19 Sec. 9-511. Secured party of record.
20 (a) Secured party of record. A secured party of record
21 with respect to a financing statement is a person whose name
22 is provided as the name of the secured party or a
23 representative of the secured party in an initial financing
24 statement that has been filed. If an initial financing
25 statement is filed under Section 9-514(a), the assignee named
26 in the initial financing statement is the secured party of
27 record with respect to the financing statement.
28 (b) Amendment naming secured party of record. If an
29 amendment of a financing statement which provides the name of
30 a person as a secured party or a representative of a secured
31 party is filed, the person named in the amendment is a
32 secured party of record. If an amendment is filed under
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1 Section 9-514(b), the assignee named in the amendment is a
2 secured party of record.
3 (c) Amendment deleting secured party of record. A
4 person remains a secured party of record until the filing of
5 an amendment of the financing statement which deletes the
6 person.
7 (810 ILCS 5/9-512 new)
8 Sec. 9-512. Amendment of financing statement.
9 (a) Amendment of information in financing statement.
10 Subject to Section 9-509, a person may add or delete
11 collateral covered by, continue or terminate the
12 effectiveness of, or, subject to subsection (e), otherwise
13 amend the information provided in, a financing statement by
14 filing an amendment that:
15 (1) identifies, by its file number, the initial
16 financing statement to which the amendment relates; and
17 (2) if the amendment relates to an initial
18 financing statement filed or recorded in a filing office
19 described in Section 9-501(a)(1), provides the
20 information specified in Section 9-502(b).
21 (b) Period of effectiveness not affected. Except as
22 otherwise provided in Section 9-515, the filing of an
23 amendment does not extend the period of effectiveness of the
24 financing statement.
25 (c) Effectiveness of amendment adding collateral. A
26 financing statement that is amended by an amendment that adds
27 collateral is effective as to the added collateral only from
28 the date of the filing of the amendment.
29 (d) Effectiveness of amendment adding debtor. A
30 financing statement that is amended by an amendment that adds
31 a debtor is effective as to the added debtor only from the
32 date of the filing of the amendment.
33 (e) Certain amendments ineffective. An amendment is
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1 ineffective to the extent it:
2 (1) purports to delete all debtors and fails to
3 provide the name of a debtor to be covered by the
4 financing statement; or
5 (2) purports to delete all secured parties of
6 record and fails to provide the name of a new secured
7 party of record.
8 (810 ILCS 5/9-513 new)
9 Sec. 9-513. Termination statement.
10 (a) Consumer goods. A secured party shall cause the
11 secured party of record for a financing statement to file a
12 termination statement for the financing statement if the
13 financing statement covers consumer goods and:
14 (1) there is no obligation secured by the
15 collateral covered by the financing statement and no
16 commitment to make an advance, incur an obligation, or
17 otherwise give value; or
18 (2) the debtor did not authorize the filing of the
19 initial financing statement.
20 (b) Time for compliance with subsection (a). To comply
21 with subsection (a), a secured party shall cause the secured
22 party of record to file the termination statement:
23 (1) within one month after there is no obligation
24 secured by the collateral covered by the financing
25 statement and no commitment to make an advance, incur an
26 obligation, or otherwise give value; or
27 (2) if earlier, within 20 days after the secured
28 party receives an authenticated demand from a debtor.
29 (c) Other collateral. In cases not governed by
30 subsection (a), within 20 days after a secured party receives
31 an authenticated demand from a debtor, the secured party
32 shall cause the secured party of record for a financing
33 statement to send to the debtor a termination statement for
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1 the financing statement or file the termination statement in
2 the filing office if:
3 (1) except in the case of a financing statement
4 covering accounts or chattel paper that has been sold or
5 goods that are the subject of a consignment, there is no
6 obligation secured by the collateral covered by the
7 financing statement and no commitment to make an advance,
8 incur an obligation, or otherwise give value;
9 (2) the financing statement covers accounts or
10 chattel paper that has been sold but as to which the
11 account debtor or other person obligated has discharged
12 its obligation;
13 (3) the financing statement covers goods that were
14 the subject of a consignment to the debtor but are not in
15 the debtor's possession; or
16 (4) the debtor did not authorize the filing of the
17 initial financing statement.
18 (d) Effect of filing termination statement. Except as
19 otherwise provided in Section 9-510, upon the filing of a
20 termination statement with the filing office, the financing
21 statement to which the termination statement relates ceases
22 to be effective.
23 (810 ILCS 5/9-514 new)
24 Sec. 9-514. Assignment of powers of secured party of
25 record.
26 (a) Assignment reflected on initial financing statement.
27 Except as otherwise provided in subsection (c), an initial
28 financing statement may reflect an assignment of all of the
29 secured party's power to authorize an amendment to the
30 financing statement by providing the name and mailing address
31 of the assignee as the name and address of the secured party.
32 (b) Assignment of filed financing statement. Except as
33 otherwise provided in subsection (c), a secured party of
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1 record may assign of record all or part of its power to
2 authorize an amendment to a financing statement by filing in
3 the filing office an amendment of the financing statement
4 which:
5 (1) identifies, by its file number, the initial
6 financing statement to which it relates;
7 (2) provides the name of the assignor; and
8 (3) provides the name and mailing address of the
9 assignee.
10 (c) Assignment of record of mortgage. An assignment of
11 record of a security interest in a fixture covered by a
12 record of a mortgage which is effective as a financing
13 statement filed as a fixture filing under Section 9-502(c)
14 may be made only by an assignment of record of the mortgage
15 in the manner provided by law of this State other than the
16 Uniform Commercial Code.
17 (810 ILCS 5/9-515 new)
18 Sec. 9-515. Duration and effectiveness of financing
19 statement; effect of lapsed financing statement.
20 (a) Five-year effectiveness. Except as otherwise
21 provided in subsections (b), (e), (f), and (g), a filed
22 financing statement is effective for a period of five years
23 after the date of filing.
24 (b) Public-finance or manufactured-home transaction.
25 Except as otherwise provided in subsections (e), (f), and
26 (g), an initial financing statement filed in connection with
27 a public-finance transaction or manufactured-home transaction
28 is effective for a period of 30 years after the date of
29 filing if it indicates that it is filed in connection with a
30 public-finance transaction or manufactured-home transaction.
31 (c) Lapse and continuation of financing statement. The
32 effectiveness of a filed financing statement lapses on the
33 expiration of the period of its effectiveness unless before
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1 the lapse a continuation statement is filed pursuant to
2 subsection (d). Upon lapse, a financing statement ceases to
3 be effective and any security interest or agricultural lien
4 that was perfected by the financing statement becomes
5 unperfected, unless the security interest is perfected
6 otherwise. If the security interest or agricultural lien
7 becomes unperfected upon lapse, it is deemed never to have
8 been perfected as against a purchaser of the collateral for
9 value.
10 (d) When continuation statement may be filed. A
11 continuation statement may be filed only within six months
12 before the expiration of the five-year period specified in
13 subsection (a) or the 30-year period specified in subsection
14 (b), whichever is applicable.
15 (e) Effect of filing continuation statement. Except as
16 otherwise provided in Section 9-510, upon timely filing of a
17 continuation statement, the effectiveness of the initial
18 financing statement continues for a period of five years
19 commencing on the day on which the financing statement would
20 have become ineffective in the absence of the filing. Upon
21 the expiration of the five-year period, the financing
22 statement lapses in the same manner as provided in subsection
23 (c), unless, before the lapse, another continuation statement
24 is filed pursuant to subsection (d). Succeeding continuation
25 statements may be filed in the same manner to continue the
26 effectiveness of the initial financing statement.
27 (f) Transmitting utility financing statement. If a
28 debtor is a transmitting utility and a filed financing
29 statement so indicates, the financing statement is effective
30 until a termination statement is filed.
31 (g) Record of mortgage as financing statement. A record
32 of a mortgage that is effective as a financing statement
33 filed as a fixture filing under Section 9-502(c) remains
34 effective as a financing statement filed as a fixture filing
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1 until the mortgage is released or satisfied of record or its
2 effectiveness otherwise terminates as to the real property.
3 (810 ILCS 5/9-516 new)
4 Sec. 9-516. What constitutes filing; effectiveness of
5 filing.
6 (a) What constitutes filing. Except as otherwise
7 provided in subsection (b), communication of a record to a
8 filing office and tender of the filing fee or acceptance of
9 the record by the filing office constitutes filing.
10 (b) Refusal to accept record; filing does not occur.
11 Filing does not occur with respect to a record that a filing
12 office refuses to accept because:
13 (1) the record is not communicated by a method or
14 medium of communication authorized by the filing office;
15 (2) an amount equal to or greater than the
16 applicable filing fee is not tendered;
17 (3) the filing office is unable to index the record
18 because:
19 (A) in the case of an initial financing
20 statement, the record does not provide a name for
21 the debtor;
22 (B) in the case of an amendment or correction
23 statement, the record:
24 (i) does not identify the initial
25 financing statement as required by Section
26 9-512 or 9-518, as applicable; or
27 (ii) identifies an initial financing
28 statement whose effectiveness has lapsed under
29 Section 9-515;
30 (C) in the case of an initial financing
31 statement that provides the name of a debtor
32 identified as an individual or an amendment that
33 provides a name of a debtor identified as an
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1 individual which was not previously provided in the
2 financing statement to which the record relates, the
3 record does not identify the debtor's last name; or
4 (D) in the case of a record filed or recorded
5 in the filing office described in Section
6 9-501(a)(1), the record does not provide a
7 sufficient description of the real property to which
8 it relates;
9 (4) in the case of an initial financing statement
10 or an amendment that adds a secured party of record, the
11 record does not provide a name and mailing address for
12 the secured party of record;
13 (5) in the case of an initial financing statement
14 or an amendment that provides a name of a debtor which
15 was not previously provided in the financing statement to
16 which the amendment relates, the record does not:
17 (A) provide a mailing address for the debtor;
18 (B) indicate whether the debtor is an
19 individual or an organization; or
20 (C) if the financing statement indicates that
21 the debtor is an organization, provide:
22 (i) a type of organization for the
23 debtor;
24 (ii) a jurisdiction of organization for
25 the debtor; or
26 (iii) an organizational identification
27 number for the debtor or indicate that the
28 debtor has none;
29 (6) in the case of an assignment reflected in an
30 initial financing statement under Section 9-514(a) or an
31 amendment filed under Section 9-514(b), the record does
32 not provide a name and mailing address for the assignee;
33 or
34 (7) in the case of a continuation statement, the
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1 record is not filed within the six-month period
2 prescribed by Section 9-515(d).
3 (c) Rules applicable to subsection (b). For purposes of
4 subsection (b):
5 (1) a record does not provide information if the
6 filing office is unable to read or decipher the
7 information; and
8 (2) a record that does not indicate that it is an
9 amendment or identify an initial financing statement to
10 which it relates, as required by Section 9-512, 9-514, or
11 9-518, is an initial financing statement.
12 (d) Refusal to accept record; record effective as filed
13 record. A record that is communicated to the filing office
14 with tender of the filing fee, but which the filing office
15 refuses to accept for a reason other than one set forth in
16 subsection (b), is effective as a filed record except as
17 against a purchaser of the collateral which gives value in
18 reasonable reliance upon the absence of the record from the
19 files.
20 (810 ILCS 5/9-517 new)
21 Sec. 9-517. Effect of indexing errors. The failure of
22 the filing office to index a record correctly does not affect
23 the effectiveness of the filed record.
24 (810 ILCS 5/9-518 new)
25 Sec. 9-518. Claim concerning inaccurate or wrongfully
26 filed record.
27 (a) Correction statement. A person may file in the
28 filing office a correction statement with respect to a record
29 indexed there under the person's name if the person believes
30 that the record is inaccurate or was wrongfully filed.
31 (b) Sufficiency of correction statement. A correction
32 statement must:
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1 (1) identify the record to which it relates by the
2 file number assigned to the initial financing statement
3 to which the record relates;
4 (2) indicate that it is a correction statement; and
5 (3) provide the basis for the person's belief that
6 the record is inaccurate and indicate the manner in which
7 the person believes the record should be amended to cure
8 any inaccuracy or provide the basis for the person's
9 belief that the record was wrongfully filed.
10 (c) Record not affected by correction statement. The
11 filing of a correction statement does not affect the
12 effectiveness of an initial financing statement or other
13 filed record.
14 (810 ILCS 5/Art. 9, Part 5, Subpart 2 heading new)
15 SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
16 (810 ILCS 5/9-519 new)
17 Sec. 9-519. Numbering, maintaining, and indexing
18 records; communicating information provided in records.
19 (a) Filing office duties. For each record filed in a
20 filing office, the filing office shall:
21 (1) assign a unique number to the filed record;
22 (2) create a record that bears the number assigned
23 to the filed record and the date and time of filing;
24 (3) maintain the filed record for public
25 inspection; and
26 (4) index the filed record in accordance with
27 subsections (c), (d), and (e).
28 (b) File number. A file number assigned after January
29 1, 2002, must include a digit that:
30 (1) is mathematically derived from or related to
31 the other digits of the file number; and
32 (2) aids the filing office in determining whether a
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1 number communicated as the file number includes a
2 single-digit or transpositional error.
3 (c) Indexing: general. Except as otherwise provided in
4 subsections (d) and (e), the filing office shall:
5 (1) index an initial financing statement according
6 to the name of the debtor and index all filed records
7 relating to the initial financing statement in a manner
8 that associates with one another an initial financing
9 statement and all filed records relating to the initial
10 financing statement; and
11 (2) index a record that provides a name of a debtor
12 which was not previously provided in the financing
13 statement to which the record relates also according to
14 the name that was not previously provided.
15 (d) Indexing: real-property-related financing
16 statement. If a financing statement is filed as a fixture
17 filing or covers as-extracted collateral or timber to be cut,
18 it must be filed for record and the filing office shall index
19 it:
20 (1) under the names of the debtor and of each owner
21 of record shown on the financing statement as if they
22 were the mortgagors under a mortgage of the real property
23 described; and
24 (2) to the extent that the law of this State
25 provides for indexing of records of mortgages under the
26 name of the mortgagee, under the name of the secured
27 party as if the secured party were the mortgagee
28 thereunder, or, if indexing is by description, as if the
29 financing statement were a record of a mortgage of the
30 real property described.
31 (e) Indexing: real-property-related assignment. If a
32 financing statement is filed as a fixture filing or covers
33 as-extracted collateral or timber to be cut, the filing
34 office shall index an assignment filed under Section 9-514(a)
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1 or an amendment filed under Section 9-514(b):
2 (1) under the name of the assignor as grantor; and
3 (2) to the extent that the law of this State
4 provides for indexing a record of the assignment of a
5 mortgage under the name of the assignee, under the name
6 of the assignee.
7 (f) Retrieval and association capability. The filing
8 office shall maintain a capability:
9 (1) to retrieve a record by the name of the debtor
10 and by the file number assigned to the initial financing
11 statement to which the record relates; and
12 (2) to associate and retrieve with one another an
13 initial financing statement and each filed record
14 relating to the initial financing statement.
15 (g) Removal of debtor's name. The filing office may not
16 remove a debtor's name from the index until one year after
17 the effectiveness of a financing statement naming the debtor
18 lapses under Section 9-515 with respect to all secured
19 parties of record.
20 (h) Timeliness of filing office performance. The filing
21 office shall perform the acts required by subsections (a)
22 through (e) at the time and in the manner prescribed by
23 filing-office rule, but not later than two business days
24 after the filing office receives the record in question.
25 (810 ILCS 5/9-520 new)
26 Sec. 9-520. Acceptance and refusal to accept record.
27 (a) Mandatory refusal to accept record. A filing office
28 shall refuse to accept a record for filing for a reason set
29 forth in Section 9-516(b) and may refuse to accept a record
30 for filing only for a reason set forth in Section 9-516(b).
31 (b) Communication concerning refusal. If a filing
32 office refuses to accept a record for filing, it shall
33 communicate to the person that presented the record the fact
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1 of and reason for the refusal and the date and time the
2 record would have been filed had the filing office accepted
3 it. The communication must be made at the time and in the
4 manner prescribed by filing-office rule but in no event more
5 than two business days after the filing office receives the
6 record.
7 (c) When filed financing statement effective. A filed
8 financing statement satisfying Section 9-502(a) and (b) is
9 effective, even if the filing office is required to refuse to
10 accept it for filing under subsection (a). However, Section
11 9-338 applies to a filed financing statement providing
12 information described in Section 9-516(b)(5) which is
13 incorrect at the time the financing statement is filed.
14 (d) Separate application to multiple debtors. If a
15 record communicated to a filing office provides information
16 that relates to more than one debtor, this Part applies as to
17 each debtor separately.
18 (810 ILCS 5/9-521 new)
19 Sec. 9-521. Uniform form of written financing statement
20 and amendment.
21 (a) Initial financing statement form. A filing office
22 that accepts written records may not refuse to accept a
23 written initial financing statement in the form and format of
24 National UCC Financing Statement (Form UCC1, Revised
25 07/29/98, contained in the Revised Article 9 of the Uniform
26 Commercial Code approved and recommended for enactment by the
27 Natural Conference of Commissioners on Uniform State Laws)
28 except for a reason set forth in Section 9-516(b).
29 (b) Amendment form. A filing office that accepts
30 written records may not refuse to accept a written record in
31 the form and format of National UCC Financing Statement
32 Addendum (Form UCC1Ad, Revised 07/29/98, contained in the
33 Revised Article 9 of the Uniform Commercial Code approved and
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1 recommended for enactment by the National Conference of
2 Commissioners on Uniform State Laws) except for a reason set
3 forth in Section 9-516(b).
4 (810 ILCS 5/9-522 new)
5 Sec. 9-522. Maintenance and destruction of records.
6 (a) Post-lapse maintenance and retrieval of information.
7 The filing office shall maintain a record of the information
8 provided in a filed financing statement for at least one year
9 after the effectiveness of the financing statement has lapsed
10 under Section 9-515 with respect to all secured parties of
11 record. The record must be retrievable by using the name of
12 the debtor and by using the file number assigned to the
13 initial financing statement to which the record relates.
14 (b) Destruction of written records. Except to the
15 extent that a statute governing disposition of public records
16 provides otherwise, the filing office immediately may destroy
17 any written record evidencing a financing statement. However,
18 if the filing office destroys a written record, it shall
19 maintain another record of the financing statement which
20 complies with subsection (a).
21 (810 ILCS 5/9-523 new)
22 Sec. 9-523. Information from filing office; sale or
23 license of records.
24 (a) Acknowledgment of filing written record. If a
25 person that files a written record requests an acknowledgment
26 of the filing, the filing office shall send to the person an
27 image of the record showing the number assigned to the record
28 pursuant to Section 9-519(a)(1) and the date and time of the
29 filing of the record. However, if the person furnishes a
30 copy of the record to the filing office, the filing office
31 may instead:
32 (1) note upon the copy the number assigned to the
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1 record pursuant to Section 9-519(a)(1) and the date and
2 time of the filing of the record; and
3 (2) send the copy to the person.
4 (b) Acknowledgment of filing other record. If a person
5 files a record other than a written record, the filing office
6 shall communicate to the person an acknowledgment that
7 provides:
8 (1) the information in the record;
9 (2) the number assigned to the record pursuant to
10 Section 9-519(a)(1); and
11 (3) the date and time of the filing of the record.
12 (c) Communication of requested information. The filing
13 office shall communicate or otherwise make available in a
14 record the following information to any person that requests
15 it:
16 (1) whether there is on file on a date and time
17 specified by the filing office, but not a date earlier
18 than three business days before the filing office
19 receives the request, any financing statement that:
20 (A) designates a particular debtor or, if the
21 request so states, designates a particular debtor at
22 the address specified in the request;
23 (B) has not lapsed under Section 9-515 with
24 respect to all secured parties of record; and
25 (C) if the request so states, has lapsed under
26 Section 9-515 and a record of which is maintained by
27 the filing office under Section 9-522(a);
28 (2) the date and time of filing of each financing
29 statement; and
30 (3) the information provided in each financing
31 statement.
32 (d) Medium for communicating information. In complying
33 with its duty under subsection (c), the filing office may
34 communicate information in any medium. However, if
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1 requested, the filing office shall communicate information by
2 issuing its written certificate.
3 (e) Timeliness of filing office performance. The filing
4 office shall perform the acts required by subsections (a)
5 through (d) at the time and in the manner prescribed by
6 filing-office rule, but not later than two business days
7 after the filing office receives the request.
8 (f) Public availability of records. At least weekly,
9 the Secretary of State shall offer to sell or license to the
10 public on a nonexclusive basis, in bulk, copies of all
11 records filed in it under this Part, in every medium from
12 time to time available to the filing office.
13 (810 ILCS 5/9-524 new)
14 Sec. 9-524. Delay by filing office. Delay by the filing
15 office beyond a time limit prescribed by this Part is excused
16 if:
17 (1) the delay is caused by interruption of
18 communication or computer facilities, war, emergency
19 conditions, failure of equipment, or other circumstances
20 beyond control of the filing office; and
21 (2) the filing office exercises reasonable
22 diligence under the circumstances.
23 (810 ILCS 5/9-525 new)
24 Sec. 9-525. Fees.
25 (a) Initial financing statement: general. Except as
26 otherwise provided in subsection (e), the fee for filing and
27 indexing a record under this Part, other than an initial
28 financing statement of the kind described in Section
29 9-502(c), is:
30 (1) $20 if the record is communicated in writing
31 and consists of one or two pages;
32 (2) $20 if the record is communicated in writing
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1 and consists of more than two pages; and
2 (3) $20 if the record is communicated by another
3 medium authorized by filing-office rule.
4 (b) Initial financing statement: Section 9-502(c).
5 Except as otherwise provided in subsection (e), the fee for
6 filing and indexing an initial financing statement of the
7 kind described in Section 9-502(c) is:
8 (1) $20 if the financing statement indicates that
9 it is filed in connection with a public-finance
10 transaction;
11 (2) $20 if the financing statement indicates that
12 it is filed in connection with a manufactured-home
13 transaction.
14 (c) Number of names. The number of names required to be
15 indexed does not affect the amount of the fee in subsections
16 (a) and (b).
17 (d) Response to information request. The fee for
18 responding to a request for information from the filing
19 office, including for issuing a certificate showing
20 communicating whether there is on file any financing
21 statement naming a particular debtor, is:
22 (1) $10 if the request is communicated in writing;
23 and
24 (2) $10 if the request is communicated by another
25 medium authorized by filing-office rule.
26 (e) Record of mortgage. This Section does not require a
27 fee with respect to a record of a mortgage which is effective
28 as a financing statement filed as a fixture filing or as a
29 financing statement covering as-extracted collateral or
30 timber to be cut under Section 9-502(c). However, the
31 recording and satisfaction fees that otherwise would be
32 applicable to the record of the mortgage apply.
33 (810 ILCS 5/9-526 new)
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1 Sec. 9-526. Filing-office rules.
2 (a) Adoption of filing-office rules. The Secretary of
3 State shall adopt and publish rules to implement this
4 Article. The filing-office rules must be:
5 (1) consistent with this Article; and
6 (2) adopted and published in accordance with the
7 Illinois Administrative Procedure Act.
8 (b) Harmonization of rules. To keep the filing-office
9 rules and practices of the filing office in harmony with the
10 rules and practices of filing offices in other jurisdictions
11 that enact substantially this Part, and to keep the
12 technology used by the filing office compatible with the
13 technology used by filing offices in other jurisdictions that
14 enact substantially this Part, the Secretary of State, so far
15 as is consistent with the purposes, policies, and provisions
16 of this Article, in adopting, amending, and repealing
17 filing-office rules, shall:
18 (1) consult with filing offices in other
19 jurisdictions that enact substantially this Part; and
20 (2) consult the most recent version of the Model
21 Rules promulgated by the International Association of
22 Corporate Administrators or any successor organization;
23 and
24 (3) take into consideration the rules and practices
25 of, and the technology used by, filing offices in other
26 jurisdictions that enact substantially this Part.
27 (810 ILCS 5/9-527 new)
28 Sec. 9-527. Duty to report. The Secretary of State
29 shall report annually to the Governor and Legislature on the
30 operation of the filing office. The report must contain a
31 statement of the extent to which:
32 (1) the filing-office rules are not in harmony with
33 the rules of filing offices in other jurisdictions that
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1 enact substantially this Part and the reasons for these
2 variations; and
3 (2) the filing-office rules are not in harmony with
4 the most recent version of the Model Rules promulgated by
5 the International Association of Corporate
6 Administrators, or any successor organization, and the
7 reasons for these variations.
8 (810 ILCS 5/Art. 9, Part 6 heading new)
9 PART 6. DEFAULT
10 (810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new)
11 SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
12 (810 ILCS 5/9-601 new)
13 Sec. 9-601. Rights after default; judicial enforcement;
14 consignor or buyer of accounts, chattel paper, payment
15 intangibles, or promissory notes.
16 (a) Rights of secured party after default. After
17 default, a secured party has the rights provided in this Part
18 and, except as otherwise provided in Section 9-602, those
19 provided by agreement of the parties. A secured party:
20 (1) may reduce a claim to judgment, foreclose, or
21 otherwise enforce the claim, security interest, or
22 agricultural lien by any available judicial procedure;
23 and
24 (2) if the collateral is documents, may proceed
25 either as to the documents or as to the goods they cover.
26 (b) Rights and duties of secured party in possession or
27 control. A secured party in possession of collateral or
28 control of collateral under Section 9-104, 9-105, 9-106, or
29 9-107 has the rights and duties provided in Section 9-207.
30 (c) Rights cumulative; simultaneous exercise. The
31 rights under subsections (a) and (b) are cumulative and may
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1 be exercised simultaneously.
2 (d) Rights of debtor and obligor. Except as otherwise
3 provided in subsection (g) and Section 9-605, after default,
4 a debtor and an obligor have the rights provided in this Part
5 and by agreement of the parties.
6 (e) Lien of levy after judgment. If a secured party has
7 reduced its claim to judgment, the lien of any levy that may
8 be made upon the collateral by virtue of an execution based
9 upon the judgment relates back to the earliest of:
10 (1) the date of perfection of the security interest
11 or agricultural lien in the collateral;
12 (2) the date of filing a financing statement
13 covering the collateral; or
14 (3) any date specified in a statute under which the
15 agricultural lien was created.
16 (f) Execution sale. A sale pursuant to an execution is
17 a foreclosure of the security interest or agricultural lien
18 by judicial procedure within the meaning of this Section. A
19 secured party may purchase at the sale and thereafter hold
20 the collateral free of any other requirements of this
21 Article.
22 (g) Consignor or buyer of certain rights to payment.
23 Except as otherwise provided in Section 9-607(c), this Part
24 imposes no duties upon a secured party that is a consignor or
25 is a buyer of accounts, chattel paper, payment intangibles,
26 or promissory notes.
27 (810 ILCS 5/9-602 new)
28 Sec. 9-602. Waiver and variance of rights and duties.
29 Except as otherwise provided in Section 9-624, to the extent
30 that they give rights to a debtor or obligor and impose
31 duties on a secured party, the debtor or obligor may not
32 waive or vary the rules stated in the following listed
33 Sections:
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1 (1) Section 9-207(b)(4)(C), which deals with use
2 and operation of the collateral by the secured party;
3 (2) Section 9-210, which deals with requests for an
4 accounting and requests concerning a list of collateral
5 and statement of account;
6 (3) Section 9-607(c), which deals with collection
7 and enforcement of collateral;
8 (4) Sections 9-608(a) and 9-615(c) to the extent
9 that they deal with application or payment of noncash
10 proceeds of collection, enforcement, or disposition;
11 (5) Sections 9-608(a) and 9-615(d) to the extent
12 that they require accounting for or payment of surplus
13 proceeds of collateral;
14 (6) Section 9-609 to the extent that it imposes
15 upon a secured party that takes possession of collateral
16 without judicial process the duty to do so without breach
17 of the peace;
18 (7) Sections 9-610(b), 9-611, 9-613, and 9-614,
19 which deal with disposition of collateral;
20 (8) Section 9-615(f), which deals with calculation
21 of a deficiency or surplus when a disposition is made to
22 the secured party, a person related to the secured party,
23 or a secondary obligor;
24 (9) Section 9-616, which deals with explanation of
25 the calculation of a surplus or deficiency;
26 (10) Sections 9-620, 9-621, and 9-622, which deal
27 with acceptance of collateral in satisfaction of
28 obligation;
29 (11) Section 9-623, which deals with redemption of
30 collateral;
31 (12) Section 9-624, which deals with permissible
32 waivers; and
33 (13) Sections 9-625 and 9-626, which deal with the
34 secured party's liability for failure to comply with this
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1 Article.
2 (810 ILCS 5/9-603 new)
3 Sec. 9-603. Agreement on standards concerning rights and
4 duties.
5 (a) Agreed standards. The parties may determine by
6 agreement the standards measuring the fulfillment of the
7 rights of a debtor or obligor and the duties of a secured
8 party under a rule stated in Section 9-602 if the standards
9 are not manifestly unreasonable.
10 (b) Agreed standards inapplicable to breach of peace.
11 Subsection (a) does not apply to the duty under Section 9-609
12 to refrain from breaching the peace.
13 (810 ILCS 5/9-604 new)
14 Sec. 9-604. Procedure if security agreement covers real
15 property or fixtures.
16 (a) Enforcement: personal and real property. If a
17 security agreement covers both personal and real property, a
18 secured party may proceed:
19 (1) under this Part as to the personal property
20 without prejudicing any rights with respect to the real
21 property; or
22 (2) as to both the personal property and the real
23 property in accordance with the rights with respect to
24 the real property, in which case the other provisions of
25 this Part do not apply.
26 (b) Enforcement: fixtures. Subject to subsection (c),
27 if a security agreement covers goods that are or become
28 fixtures, a secured party may proceed:
29 (1) under this Part; or
30 (2) in accordance with the rights with respect to
31 real property, in which case the other provisions of this
32 Part do not apply.
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1 (c) Removal of fixtures. Subject to the other
2 provisions of this Part, if a secured party holding a
3 security interest in fixtures has priority over all owners
4 and encumbrancers of the real property, the secured party,
5 after default, may remove the collateral from the real
6 property.
7 (d) Injury caused by removal. A secured party that
8 removes collateral shall promptly reimburse any encumbrancer
9 or owner of the real property, other than the debtor, for the
10 cost of repair of any physical injury caused by the removal.
11 The secured party need not reimburse the encumbrancer or
12 owner for any diminution in value of the real property caused
13 by the absence of the goods removed or by any necessity of
14 replacing them. A person entitled to reimbursement may
15 refuse permission to remove until the secured party gives
16 adequate assurance for the performance of the obligation to
17 reimburse.
18 (810 ILCS 5/9-605 new)
19 Sec. 9-605. Unknown debtor or secondary obligor. A
20 secured party does not owe a duty based on its status as
21 secured party:
22 (1) to a person that is a debtor or obligor, unless
23 the secured party knows:
24 (A) that the person is a debtor or obligor;
25 (B) the identity of the person; and
26 (C) how to communicate with the person; or
27 (2) to a secured party or lienholder that has filed
28 a financing statement against a person, unless the
29 secured party knows:
30 (A) that the person is a debtor; and
31 (B) the identity of the person.
32 (810 ILCS 5/9-606 new)
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1 Sec. 9-606. Time of default for agricultural lien. For
2 purposes of this Part, a default occurs in connection with an
3 agricultural lien at the time the secured party becomes
4 entitled to enforce the lien in accordance with the statute
5 under which it was created.
6 (810 ILCS 5/9-607 new)
7 Sec. 9-607. Collection and enforcement by secured party.
8 (a) Collection and enforcement generally. If so agreed,
9 and in any event after default, a secured party:
10 (1) may notify an account debtor or other person
11 obligated on collateral to make payment or otherwise
12 render performance to or for the benefit of the secured
13 party;
14 (2) may take any proceeds to which the secured
15 party is entitled under Section 9-315;
16 (3) may enforce the obligations of an account
17 debtor or other person obligated on collateral and
18 exercise the rights of the debtor with respect to the
19 obligation of the account debtor or other person
20 obligated on collateral to make payment or otherwise
21 render performance to the debtor, and with respect to any
22 property that secures the obligations of the account
23 debtor or other person obligated on the collateral;
24 (4) if it holds a security interest in a deposit
25 account perfected by control under Section 9-104(a)(1),
26 may apply the balance of the deposit account to the
27 obligation secured by the deposit account; and
28 (5) if it holds a security interest in a deposit
29 account perfected by control under Section 9-104(a)(2) or
30 (3), may instruct the bank to pay the balance of the
31 deposit account to or for the benefit of the secured
32 party.
33 (b) Nonjudicial enforcement of mortgage. If necessary
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1 to enable a secured party to exercise under subsection (a)(3)
2 the right of a debtor to enforce a mortgage nonjudicially,
3 the secured party may record in the office in which a record
4 of the mortgage is recorded:
5 (1) a copy of the security agreement that creates
6 or provides for a security interest in the obligation
7 secured by the mortgage; and
8 (2) the secured party's sworn affidavit in
9 recordable form stating that:
10 (A) a default has occurred; and
11 (B) the secured party is entitled to enforce
12 the mortgage nonjudicially.
13 (c) Commercially reasonable collection and enforcement.
14 A secured party shall proceed in a commercially reasonable
15 manner if the secured party:
16 (1) undertakes to collect from or enforce an
17 obligation of an account debtor or other person obligated
18 on collateral; and
19 (2) is entitled to charge back uncollected
20 collateral or otherwise to full or limited recourse
21 against the debtor or a secondary obligor.
22 (d) Expenses of collection and enforcement. A secured
23 party may deduct from the collections made pursuant to
24 subsection (c) reasonable expenses of collection and
25 enforcement, including reasonable attorney's fees and legal
26 expenses incurred by the secured party.
27 (e) Duties to secured party not affected. This Section
28 does not determine whether an account debtor, bank, or other
29 person obligated on collateral owes a duty to a secured
30 party.
31 (810 ILCS 5/9-608 new)
32 Sec. 9-608. Application of proceeds of collection or
33 enforcement; liability for deficiency and right to surplus.
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1 (a) Application of proceeds, surplus, and deficiency if
2 obligation secured. If a security interest or agricultural
3 lien secures payment or performance of an obligation, the
4 following rules apply:
5 (1) A secured party shall apply or pay over for
6 application the cash proceeds of collection or
7 enforcement under this Section in the following order to:
8 (A) the reasonable expenses of collection and
9 enforcement and, to the extent provided for by
10 agreement and not prohibited by law, reasonable
11 attorney's fees and legal expenses incurred by the
12 secured party;
13 (B) the satisfaction of obligations secured by
14 the security interest or agricultural lien under
15 which the collection or enforcement is made; and
16 (C) the satisfaction of obligations secured by
17 any subordinate security interest in or other lien
18 on the collateral subject to the security interest
19 or agricultural lien under which the collection or
20 enforcement is made if the secured party receives an
21 authenticated demand for proceeds before
22 distribution of the proceeds is completed.
23 (2) If requested by a secured party, a holder of a
24 subordinate security interest or other lien shall furnish
25 reasonable proof of the interest or lien within a
26 reasonable time. Unless the holder complies, the secured
27 party need not comply with the holder's demand under
28 paragraph (1)(C).
29 (3) A secured party need not apply or pay over for
30 application noncash proceeds of collection and
31 enforcement under this Section unless the failure to do
32 so would be commercially unreasonable. A secured party
33 that applies or pays over for application noncash
34 proceeds shall do so in a commercially reasonable manner.
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1 (4) A secured party shall account to and pay a
2 debtor for any surplus, and the obligor is liable for any
3 deficiency.
4 (b) No surplus or deficiency in sales of certain rights
5 to payment. If the underlying transaction is a sale of
6 accounts, chattel paper, payment intangibles, or promissory
7 notes, the debtor is not entitled to any surplus, and the
8 obligor is not liable for any deficiency.
9 (810 ILCS 5/9-609 new)
10 Sec. 9-609. Secured party's right to take possession
11 after default.
12 (a) Possession; rendering equipment unusable;
13 disposition on debtor's premises. After default, a secured
14 party:
15 (1) may take possession of the collateral; and
16 (2) without removal, may render equipment unusable
17 and dispose of collateral on a debtor's premises under
18 Section 9-610.
19 (b) Judicial and nonjudicial process. A secured party
20 may proceed under subsection (a):
21 (1) pursuant to judicial process; or
22 (2) without judicial process, if it proceeds
23 without breach of the peace.
24 (c) Assembly of collateral. If so agreed, and in any
25 event after default, a secured party may require the debtor
26 to assemble the collateral and make it available to the
27 secured party at a place to be designated by the secured
28 party which is reasonably convenient to both parties.
29 (810 ILCS 5/9-610 new)
30 Sec. 9-610. Disposition of collateral after default.
31 (a) Disposition after default. After default, a secured
32 party may sell, lease, license, or otherwise dispose of any
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1 or all of the collateral in its present condition or
2 following any commercially reasonable preparation or
3 processing.
4 (b) Commercially reasonable disposition. Every aspect
5 of a disposition of collateral, including the method, manner,
6 time, place, and other terms, must be commercially
7 reasonable. If commercially reasonable, a secured party may
8 dispose of collateral by public or private proceedings, by
9 one or more contracts, as a unit or in parcels, and at any
10 time and place and on any terms.
11 (c) Purchase by secured party. A secured party may
12 purchase collateral:
13 (1) at a public disposition; or
14 (2) at a private disposition only if the collateral
15 is of a kind that is customarily sold on a recognized
16 market or the subject of widely distributed standard
17 price quotations.
18 (d) Warranties on disposition. A contract for sale,
19 lease, license, or other disposition includes the warranties
20 relating to title, possession, quiet enjoyment, and the like
21 which by operation of law accompany a voluntary disposition
22 of property of the kind subject to the contract.
23 (e) Disclaimer of warranties. A secured party may
24 disclaim or modify warranties under subsection (d):
25 (1) in a manner that would be effective to disclaim
26 or modify the warranties in a voluntary disposition of
27 property of the kind subject to the contract of
28 disposition; or
29 (2) by communicating to the purchaser a record
30 evidencing the contract for disposition and including an
31 express disclaimer or modification of the warranties.
32 (f) Record sufficient to disclaim warranties. A record
33 is sufficient to disclaim warranties under subsection (e) if
34 it indicates "There is no warranty relating to title,
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1 possession, quiet enjoyment, or the like in this disposition"
2 or uses words of similar import.
3 (810 ILCS 5/9-611 new)
4 Sec. 9-611. Notification before disposition of
5 collateral.
6 (a) "Notification date." In this Section, "notification
7 date" means the earlier of the date on which:
8 (1) a secured party sends to the debtor and any
9 secondary obligor an authenticated notification of
10 disposition; or
11 (2) the debtor and any secondary obligor waive the
12 right to notification.
13 (b) Notification of disposition required. Except as
14 otherwise provided in subsection (d), a secured party that
15 disposes of collateral under Section 9-610 shall send to the
16 persons specified in subsection (c) a reasonable
17 authenticated notification of disposition.
18 (c) Persons to be notified. To comply with subsection
19 (b), the secured party shall send an authenticated
20 notification of disposition to:
21 (1) the debtor;
22 (2) any secondary obligor; and
23 (3) if the collateral is other than consumer goods:
24 (A) any other person from which the secured
25 party has received, before the notification date, an
26 authenticated notification of a claim of an interest
27 in the collateral;
28 (B) any other secured party or lienholder
29 that, 10 days before the notification date, held a
30 security interest in or other lien on the collateral
31 perfected by the filing of a financing statement
32 that:
33 (i) identified the collateral;
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1 (ii) was indexed under the debtor's name
2 as of that date; and
3 (iii) was filed in the office in which to
4 file a financing statement against the debtor
5 covering the collateral as of that date; and
6 (C) any other secured party that, 10 days
7 before the notification date, held a security
8 interest in the collateral perfected by compliance
9 with a statute, regulation, or treaty described in
10 Section 9-311(a).
11 (d) Subsection (b) inapplicable: perishable collateral;
12 recognized market. Subsection (b) does not apply if the
13 collateral is perishable or threatens to decline speedily in
14 value or is of a type customarily sold on a recognized
15 market.
16 (e) Compliance with subsection (c)(3)(B). A secured
17 party complies with the requirement for notification
18 prescribed by subsection (c)(3)(B) if:
19 (1) not later than 20 days or earlier than 30 days
20 before the notification date, the secured party requests,
21 in a commercially reasonable manner, information
22 concerning financing statements indexed under the
23 debtor's name in the office indicated in subsection
24 (c)(3)(B); and
25 (2) before the notification date, the secured
26 party:
27 (A) did not receive a response to the request
28 for information; or
29 (B) received a response to the request for
30 information and sent an authenticated notification
31 of disposition to each secured party or other
32 lienholder named in that response whose financing
33 statement covered the collateral.
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1 (810 ILCS 5/9-612 new)
2 Sec. 9-612. Timeliness of notification before
3 disposition of collateral.
4 (a) Reasonable time is question of fact. Except as
5 otherwise provided in subsection (b), whether a notification
6 is sent within a reasonable time is a question of fact.
7 (b) 10-day period sufficient in non-consumer
8 transaction. In a transaction other than a consumer
9 transaction, a notification of disposition sent after default
10 and 10 days or more before the earliest time of disposition
11 set forth in the notification is sent within a reasonable
12 time before the disposition.
13 (810 ILCS 5/9-613 new)
14 Sec. 9-613. Contents and form of notification before
15 disposition of collateral: general. Except in a
16 consumer-goods transaction, the following rules apply:
17 (1) The contents of a notification of disposition
18 are sufficient if the notification:
19 (A) describes the debtor and the secured
20 party;
21 (B) describes the collateral that is the
22 subject of the intended disposition;
23 (C) states the method of intended disposition;
24 (D) states that the debtor is entitled to an
25 accounting of the unpaid indebtedness and states the
26 charge, if any, for an accounting; and
27 (E) states the time and place of a public sale
28 or the time after which any other disposition is to
29 be made.
30 (2) Whether the contents of a notification that
31 lacks any of the information specified in paragraph (1)
32 are nevertheless sufficient is a question of fact.
33 (3) The contents of a notification providing
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1 substantially the information specified in paragraph (1)
2 are sufficient, even if the notification includes:
3 (A) information not specified by that
4 paragraph; or
5 (B) minor errors that are not seriously
6 misleading.
7 (4) A particular phrasing of the notification is
8 not required.
9 (5) The following form of notification and the form
10 appearing in Section 9-614(3), when completed, each
11 provides sufficient information:
12 NOTIFICATION OF DISPOSITION OF COLLATERAL
13 To: ..................................... (Name of
14 debtor, obligor, or other person to which the
15 notification is sent)
16 From: ................................... (Name,
17 address, and telephone number of secured party)
18 Name of Debtor(s): ..................... (Include
19 only if debtor(s) are not an addressee)
20 For a public disposition:
21 We will sell or lease or license, as applicable, the
22 ............................ (describe collateral) to the
23 highest qualified bidder in public as follows:
24 Day and Date: ...................................
25 Time: ...........................................
26 Place: ..........................................
27 For a private disposition:
28 We will sell (or lease or license, as applicable)
29 the ........................... (describe collateral)
30 privately sometime after ................ (day and date).
31 You are entitled to an accounting of the unpaid
32 indebtedness secured by the property that we intend to
33 sell or lease or license, as applicable for a charge of
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1 $................. You may request an accounting by
2 calling us at .................. (telephone number).
3 (810 ILCS 5/9-614 new)
4 Sec. 9-614. Contents and form of notification before
5 disposition of collateral: consumer-goods transaction. In a
6 consumer-goods transaction, the following rules apply:
7 (1) A notification of disposition must provide the
8 following information:
9 (A) the information specified in Section
10 9-613(1);
11 (B) a description of any liability for a
12 deficiency of the person to which the notification
13 is sent;
14 (C) a telephone number from which the amount
15 that must be paid to the secured party to redeem the
16 collateral under Section 9-623 is available; and
17 (D) a telephone number or mailing address from
18 which additional information concerning the
19 disposition and the obligation secured is available.
20 (2) A particular phrasing of the notification is
21 not required.
22 (3) The following form of notification, when
23 completed, provides sufficient information:
24 ............. (Name and address of secured party)
25 ............. (Date)
26 NOTICE OF OUR PLAN TO SELL PROPERTY
27 ......................................................
28 (Name and address of any obligor who is also a debtor)
29 Subject: ..................................
30 (Identification of Transaction)
31 We have your ..................... (describe
32 collateral), because you broke promises in our agreement.
33 For a public disposition:
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1 We will sell ....................... (describe
2 collateral) at public sale. A sale could include a lease
3 or license. The sale will be held as follows:
4 Date: ................................
5 Time: ................................
6 Place: ................................
7 You may attend the sale and bring bidders if you
8 want.
9 For a private disposition:
10 We will sell ........................... (describe
11 collateral) at private sale sometime after
12 .................... (date). A sale could include a
13 lease or license.
14 The money that we get from the sale (after paying
15 our costs) will reduce the amount you owe. If we get
16 less money than you owe, you ............ (will or will
17 not, as applicable) still owe us the difference. If we
18 get more money than you owe, you will get the extra
19 money, unless we must pay it to someone else.
20 You can get the property back at any time before we
21 sell it by paying us the full amount you owe (not just
22 the past due payments), including our expenses. To learn
23 the exact amount you must pay, call us at
24 ................ (telephone number).
25 If you want us to explain to you in writing how we
26 have figured the amount that you owe us, you may call us
27 at .................. (telephone number) or write us at
28 .................................... (secured party's
29 address) and request a written explanation. We will
30 charge you $ ........... for the explanation if we sent
31 you another written explanation of the amount you owe us
32 within the last six months.
33 If you need more information about the sale call us
34 at .................. (telephone number) or write us at
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1 ......................... (secured party's address).
2 We are sending this notice to the following other
3 people who have an interest ......................
4 (describe collateral) or who owe money under your
5 agreement:
6 .................................................
7 (Names of all other debtors and obligors, if any)
8 (4) A notification in the form of paragraph (3) is
9 sufficient, even if additional information appears at the
10 end of the form.
11 (5) A notification in the form of paragraph (3) is
12 sufficient, even if it includes errors in information not
13 required by paragraph (1), unless the error is misleading
14 with respect to rights arising under this Article.
15 (6) If a notification under this Section is not in
16 the form of paragraph (3), law other than this Article
17 determines the effect of including information not
18 required by paragraph (1).
19 (810 ILCS 5/9-615 new)
20 Sec. 9-615. Application of proceeds of disposition;
21 liability for deficiency and right to surplus.
22 (a) Application of proceeds. A secured party shall
23 apply or pay over for application the cash proceeds of
24 disposition in the following order to:
25 (1) the reasonable expenses of retaking, holding,
26 preparing for disposition, processing, and disposing,
27 and, to the extent provided for by agreement and not
28 prohibited by law, reasonable attorney's fees and legal
29 expenses incurred by the secured party;
30 (2) the satisfaction of obligations secured by the
31 security interest or agricultural lien under which the
32 disposition is made;
33 (3) the satisfaction of obligations secured by any
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1 subordinate security interest in or other subordinate
2 lien on the collateral if:
3 (A) the secured party receives from the holder
4 of the subordinate security interest or other lien
5 an authenticated demand for proceeds before
6 distribution of the proceeds is completed; and
7 (B) in a case in which a consignor has an
8 interest in the collateral, the subordinate security
9 interest or other lien is senior to the interest of
10 the consignor; and
11 (4) a secured party that is a consignor of the
12 collateral if the secured party receives from the
13 consignor an authenticated demand for proceeds before
14 distribution of the proceeds is completed.
15 (b) Proof of subordinate interest. If requested by a
16 secured party, a holder of a subordinate security interest or
17 other lien shall furnish reasonable proof of the interest or
18 lien within a reasonable time. Unless the holder does so,
19 the secured party need not comply with the holder's demand
20 under subsection (a)(3).
21 (c) Application of noncash proceeds. A secured party
22 need not apply or pay over for application noncash proceeds
23 of disposition under this Section unless the failure to do so
24 would be commercially unreasonable. A secured party that
25 applies or pays over for application noncash proceeds shall
26 do so in a commercially reasonable manner.
27 (d) Surplus or deficiency if obligation secured. If the
28 security interest under which a disposition is made secures
29 payment or performance of an obligation, after making the
30 payments and applications required by subsection (a) and
31 permitted by subsection (c):
32 (1) unless subsection (a)(4) requires the secured
33 party to apply or pay over cash proceeds to a consignor,
34 the secured party shall account to and pay a debtor for
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1 any surplus; and
2 (2) the obligor is liable for any deficiency.
3 (e) No surplus or deficiency in sales of certain rights
4 to payment. If the underlying transaction is a sale of
5 accounts, chattel paper, payment intangibles, or promissory
6 notes:
7 (1) the debtor is not entitled to any surplus; and
8 (2) the obligor is not liable for any deficiency.
9 (f) Calculation of surplus or deficiency in disposition
10 to person related to secured party. The surplus or
11 deficiency following a disposition is calculated based on the
12 amount of proceeds that would have been realized in a
13 disposition complying with this Part to a transferee other
14 than the secured party, a person related to the secured
15 party, or a secondary obligor if:
16 (1) the transferee in the disposition is the
17 secured party, a person related to the secured party, or
18 a secondary obligor; and
19 (2) the amount of proceeds of the disposition is
20 significantly below the range of proceeds that a
21 complying disposition to a person other than the secured
22 party, a person related to the secured party, or a
23 secondary obligor would have brought.
24 (g) Cash proceeds received by junior secured party. A
25 secured party that receives cash proceeds of a disposition in
26 good faith and without knowledge that the receipt violates
27 the rights of the holder of a security interest or other lien
28 that is not subordinate to the security interest or
29 agricultural lien under which the disposition is made:
30 (1) takes the cash proceeds free of the security
31 interest or other lien;
32 (2) is not obligated to apply the proceeds of the
33 disposition to the satisfaction of obligations secured by
34 the security interest or other lien; and
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1 (3) is not obligated to account to or pay the
2 holder of the security interest or other lien for any
3 surplus.
4 (810 ILCS 5/9-616 new)
5 Sec. 9-616. Explanation of calculation of surplus or
6 deficiency.
7 (a) Definitions. In this Section:
8 (1) "Explanation" means a writing that:
9 (A) states the amount of the surplus or
10 deficiency;
11 (B) provides an explanation in accordance with
12 subsection (c) of how the secured party calculated
13 the surplus or deficiency;
14 (C) states, if applicable, that future debits,
15 credits, charges, including additional credit
16 service charges or interest, rebates, and expenses
17 may affect the amount of the surplus or deficiency;
18 and
19 (D) provides a telephone number or mailing
20 address from which additional information concerning
21 the transaction is available.
22 (2) "Request" means a record:
23 (A) authenticated by a debtor or consumer
24 obligor;
25 (B) requesting that the recipient provide an
26 explanation; and
27 (C) sent after disposition of the collateral
28 under Section 9-610.
29 (b) Explanation of calculation. In a consumer-goods
30 transaction in which the debtor is entitled to a surplus or a
31 consumer obligor is liable for a deficiency under Section
32 9-615, the secured party shall:
33 (1) send an explanation to the debtor or consumer
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1 obligor, as applicable, after the disposition and:
2 (A) before or when the secured party accounts
3 to the debtor and pays any surplus or first makes
4 written demand on the consumer obligor after the
5 disposition for payment of the deficiency; and
6 (B) within 14 days after receipt of a request;
7 or
8 (2) in the case of a consumer obligor who is liable
9 for a deficiency, within 14 days after receipt of a
10 request, send to the consumer obligor a record waiving
11 the secured party's right to a deficiency.
12 (c) Required information. To comply with subsection
13 (a)(1)(B), a writing must provide the following information
14 in the following order:
15 (1) the aggregate amount of obligations secured by
16 the security interest under which the disposition was
17 made, and, if the amount reflects a rebate of unearned
18 interest or credit service charge, an indication of that
19 fact, calculated as of a specified date:
20 (A) if the secured party takes or receives
21 possession of the collateral after default, not more
22 than 35 days before the secured party takes or
23 receives possession; or
24 (B) if the secured party takes or receives
25 possession of the collateral before default or does
26 not take possession of the collateral, not more than
27 35 days before the disposition;
28 (2) the amount of proceeds of the disposition;
29 (3) the aggregate amount of the obligations after
30 deducting the amount of proceeds;
31 (4) the amount, in the aggregate or by type, and
32 types of expenses, including expenses of retaking,
33 holding, preparing for disposition, processing, and
34 disposing of the collateral, and attorney's fees secured
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1 by the collateral which are known to the secured party
2 and relate to the current disposition;
3 (5) the amount, in the aggregate or by type, and
4 types of credits, including rebates of interest or credit
5 service charges, to which the obligor is known to be
6 entitled and which are not reflected in the amount in
7 paragraph (1); and
8 (6) the amount of the surplus or deficiency.
9 (d) Substantial compliance. A particular phrasing of
10 the explanation is not required. An explanation complying
11 substantially with the requirements of subsection (a) is
12 sufficient, even if it includes minor errors that are not
13 seriously misleading.
14 (e) Charges for responses. A debtor or consumer obligor
15 is entitled without charge to one response to a request under
16 this Section during any six-month period in which the secured
17 party did not send to the debtor or consumer obligor an
18 explanation pursuant to subsection (b)(1). The secured party
19 may require payment of a charge not exceeding $25 for each
20 additional response.
21 (810 ILCS 5/9-617 new)
22 Sec. 9-617. Rights of transferee of collateral.
23 (a) Effects of disposition. A secured party's
24 disposition of collateral after default:
25 (1) transfers to a transferee for value all of the
26 debtor's rights in the collateral;
27 (2) discharges the security interest under which
28 the disposition is made; and
29 (3) discharges any subordinate security interest or
30 other subordinate lien.
31 (b) Rights of good-faith transferee. A transferee that
32 acts in good faith takes free of the rights and interests
33 described in subsection (a), even if the secured party fails
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1 to comply with this Article or the requirements of any
2 judicial proceeding.
3 (c) Rights of other transferee. If a transferee does
4 not take free of the rights and interests described in
5 subsection (a), the transferee takes the collateral subject
6 to:
7 (1) the debtor's rights in the collateral;
8 (2) the security interest or agricultural lien
9 under which the disposition is made; and
10 (3) any other security interest or other lien.
11 (810 ILCS 5/9-618 new)
12 Sec. 9-618. Rights and duties of certain secondary
13 obligors.
14 (a) Rights and duties of secondary obligor. A secondary
15 obligor acquires the rights and becomes obligated to perform
16 the duties of the secured party after the secondary obligor:
17 (1) receives an assignment of a secured obligation
18 from the secured party;
19 (2) receives a transfer of collateral from the
20 secured party and agrees to accept the rights and assume
21 the duties of the secured party; or
22 (3) is subrogated to the rights of a secured party
23 with respect to collateral.
24 (b) Effect of assignment, transfer, or subrogation. An
25 assignment, transfer, or subrogation described in subsection
26 (a):
27 (1) is not a disposition of collateral under
28 Section 9-610; and
29 (2) relieves the secured party of further duties
30 under this Article.
31 (810 ILCS 5/9-619 new)
32 Sec. 9-619. Transfer of record or legal title.
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1 (a) "Transfer statement." In this Section, "transfer
2 statement" means a record authenticated by a secured party
3 stating:
4 (1) that the debtor has defaulted in connection
5 with an obligation secured by specified collateral;
6 (2) that the secured party has exercised its
7 post-default remedies with respect to the collateral;
8 (3) that, by reason of the exercise, a transferee
9 has acquired the rights of the debtor in the collateral;
10 and
11 (4) the name and mailing address of the secured
12 party, debtor, and transferee.
13 (b) Effect of transfer statement. A transfer statement
14 entitles the transferee to the transfer of record of all
15 rights of the debtor in the collateral specified in the
16 statement in any official filing, recording, registration, or
17 certificate-of-title system covering the collateral. If a
18 transfer statement is presented with the applicable fee and
19 request form to the official or office responsible for
20 maintaining the system, the official or office shall:
21 (1) accept the transfer statement;
22 (2) promptly amend its records to reflect the
23 transfer; and
24 (3) if applicable, issue a new appropriate
25 certificate of title in the name of the transferee.
26 (c) Transfer not a disposition; no relief of secured
27 party's duties. A transfer of the record or legal title to
28 collateral to a secured party under subsection (b) or
29 otherwise is not of itself a disposition of collateral under
30 this Article and does not of itself relieve the secured party
31 of its duties under this Article.
32 (810 ILCS 5/9-620 new)
33 Sec. 9-620. Acceptance of collateral in full or partial
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1 satisfaction of obligation; compulsory disposition of
2 collateral.
3 (a) Conditions to acceptance in satisfaction. Except as
4 otherwise provided in subsection (g), a secured party may
5 accept collateral in full or partial satisfaction of the
6 obligation it secures only if:
7 (1) the debtor consents to the acceptance under
8 subsection (c);
9 (2) the secured party does not receive, within the
10 time set forth in subsection (d), a notification of
11 objection to the proposal authenticated by:
12 (A) a person to which the secured party was
13 required to send a proposal under Section 9-621; or
14 (B) any other person, other than the debtor,
15 holding an interest in the collateral subordinate to
16 the security interest that is the subject of the
17 proposal;
18 (3) if the collateral is consumer goods, the
19 collateral is not in the possession of the debtor when
20 the debtor consents to the acceptance; and
21 (4) subsection (e) does not require the secured
22 party to dispose of the collateral or the debtor waives
23 the requirement pursuant to Section 9-624.
24 (b) Purported acceptance ineffective. A purported or
25 apparent acceptance of collateral under this Section is
26 ineffective unless:
27 (1) the secured party consents to the acceptance in
28 an authenticated record or sends a proposal to the
29 debtor; and
30 (2) the conditions of subsection (a) are met.
31 (c) Debtor's consent. For purposes of this Section:
32 (1) a debtor consents to an acceptance of
33 collateral in partial satisfaction of the obligation it
34 secures only if the debtor agrees to the terms of the
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1 acceptance in a record authenticated after default; and
2 (2) a debtor consents to an acceptance of
3 collateral in full satisfaction of the obligation it
4 secures only if the debtor agrees to the terms of the
5 acceptance in a record authenticated after default or the
6 secured party:
7 (A) sends to the debtor after default a
8 proposal that is unconditional or subject only to a
9 condition that collateral not in the possession of
10 the secured party be preserved or maintained;
11 (B) in the proposal, proposes to accept
12 collateral in full satisfaction of the obligation it
13 secures; and
14 (C) does not receive a notification of
15 objection authenticated by the debtor within 20 days
16 after the proposal is sent.
17 (d) Effectiveness of notification. To be effective
18 under subsection (a)(2), a notification of objection must be
19 received by the secured party:
20 (1) in the case of a person to which the proposal
21 was sent pursuant to Section 9-621, within 20 days after
22 notification was sent to that person; and
23 (2) in other cases:
24 (A) within 20 days after the last notification
25 was sent pursuant to Section 9-621; or
26 (B) if a notification was not sent, before the
27 debtor consents to the acceptance under subsection
28 (c).
29 (e) Mandatory disposition of consumer goods. A secured
30 party that has taken possession of collateral shall dispose
31 of the collateral pursuant to Section 9-610 within the time
32 specified in subsection (f) if:
33 (1) 60 percent of the cash price has been paid in
34 the case of a purchase-money security interest in
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1 consumer goods; or
2 (2) 60 percent of the principal amount of the
3 obligation secured has been paid in the case of a
4 non-purchase-money security interest in consumer goods.
5 (f) Compliance with mandatory disposition requirement.
6 To comply with subsection (e), the secured party shall
7 dispose of the collateral:
8 (1) within 90 days after taking possession; or
9 (2) within any longer period to which the debtor
10 and all secondary obligors have agreed in an agreement to
11 that effect entered into and authenticated after default.
12 (g) No partial satisfaction in consumer transaction. In
13 a consumer transaction, a secured party may not accept
14 collateral in partial satisfaction of the obligation it
15 secures.
16 (810 ILCS 5/9-621 new)
17 Sec. 9-621. Notification of proposal to accept
18 collateral.
19 (a) Persons to which proposal to be sent. A secured
20 party that desires to accept collateral in full or partial
21 satisfaction of the obligation it secures shall send its
22 proposal to:
23 (1) any person from which the secured party has
24 received, before the debtor consented to the acceptance,
25 an authenticated notification of a claim of an interest
26 in the collateral;
27 (2) any other secured party or lienholder that, 10
28 days before the debtor consented to the acceptance, held
29 a security interest in or other lien on the collateral
30 perfected by the filing of a financing statement that:
31 (A) identified the collateral;
32 (B) was indexed under the debtor's name as of
33 that date; and
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1 (C) was filed in the office or offices in
2 which to file a financing statement against the
3 debtor covering the collateral as of that date; and
4 (3) any other secured party that, 10 days before
5 the debtor consented to the acceptance, held a security
6 interest in the collateral perfected by compliance with a
7 statute, regulation, or treaty described in Section
8 9-311(a).
9 (b) Proposal to be sent to secondary obligor in partial
10 satisfaction. A secured party that desires to accept
11 collateral in partial satisfaction of the obligation it
12 secures shall send its proposal to any secondary obligor in
13 addition to the persons described in subsection (a).
14 (810 ILCS 5/9-622 new)
15 Sec. 9-622. Effect of acceptance of collateral.
16 (a) Effect of acceptance. A secured party's acceptance
17 of collateral in full or partial satisfaction of the
18 obligation it secures:
19 (1) discharges the obligation to the extent
20 consented to by the debtor;
21 (2) transfers to the secured party all of a
22 debtor's rights in the collateral;
23 (3) discharges the security interest or
24 agricultural lien that is the subject of the debtor's
25 consent and any subordinate security interest or other
26 subordinate lien; and
27 (4) terminates any other subordinate interest.
28 (b) Discharge of subordinate interest notwithstanding
29 noncompliance. A subordinate interest is discharged or
30 terminated under subsection (a), even if the secured party
31 fails to comply with this Article.
32 (810 ILCS 5/9-623 new)
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1 Sec. 9-623. Right to redeem collateral.
2 (a) Persons that may redeem. A debtor, any secondary
3 obligor, or any other secured party or lienholder may redeem
4 collateral.
5 (b) Requirements for redemption. To redeem collateral,
6 a person shall tender:
7 (1) fulfillment of all obligations secured by the
8 collateral; and
9 (2) the reasonable expenses and attorney's fees
10 described in Section 9-615(a)(1).
11 (c) When redemption may occur. A redemption may occur
12 at any time before a secured party:
13 (1) has collected collateral under Section 9-607;
14 (2) has disposed of collateral or entered into a
15 contract for its disposition under Section 9-610; or
16 (3) has accepted collateral in full or partial
17 satisfaction of the obligation it secures under Section
18 9-622.
19 (810 ILCS 5/9-624 new)
20 Sec. 9-624. Waiver.
21 (a) Waiver of disposition notification. A debtor or
22 secondary obligor may waive the right to notification of
23 disposition of collateral under Section 9-611 only by an
24 agreement to that effect entered into and authenticated after
25 default.
26 (b) Waiver of mandatory disposition. A debtor may waive
27 the right to require disposition of collateral under Section
28 9-620(e) only by an agreement to that effect entered into and
29 authenticated after default.
30 (c) Waiver of redemption right. Except in a
31 consumer-goods transaction, a debtor or secondary obligor may
32 waive the right to redeem collateral under Section 9-623 only
33 by an agreement to that effect entered into and authenticated
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1 after default.
2 (810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new)
3 SUBPART 2. NONCOMPLIANCE WITH ARTICLE
4 (810 ILCS 5/9-625 new)
5 Sec. 9-625. Remedies for secured party's failure to
6 comply with Article.
7 (a) Judicial orders concerning noncompliance. If it is
8 established that a secured party is not proceeding in
9 accordance with this Article, a court may order or restrain
10 collection, enforcement, or disposition of collateral on
11 appropriate terms and conditions.
12 (b) Damages for noncompliance. Subject to subsections
13 (c), (d), and (f), a person is liable for damages in the
14 amount of any loss caused by a failure to comply with this
15 Article. Loss caused by a failure to comply with a request
16 under Section 9-210 may include loss resulting from the
17 debtor's inability to obtain, or increased costs of,
18 alternative financing.
19 (c) Persons entitled to recover damages; statutory
20 damages in consumer-goods transaction. Except as otherwise
21 provided in Section 9-628:
22 (1) a person that, at the time of the failure, was
23 a debtor, was an obligor, or held a security interest in
24 or other lien on the collateral may recover damages under
25 subsection (b) for its loss; and
26 (2) if the collateral is consumer goods, a person
27 that was a debtor or a secondary obligor at the time a
28 secured party failed to comply with this Part may recover
29 for that failure in any event an amount not less than the
30 credit service charge plus 10 percent of the principal
31 amount of the obligation or the time-price differential
32 plus 10 percent of the cash price.
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1 (d) Recovery when deficiency eliminated or reduced. A
2 debtor whose deficiency is eliminated under Section 9-626 may
3 recover damages for the loss of any surplus. However, a
4 debtor or secondary obligor whose deficiency is eliminated or
5 reduced under Section 9-626 may not otherwise recover under
6 subsection (b) for noncompliance with the provisions of this
7 Part relating to collection, enforcement, disposition, or
8 acceptance.
9 (e) Statutory damages: noncompliance with specified
10 provisions. In addition to any damages recoverable under
11 subsection (b), the debtor, consumer obligor, or person named
12 as a debtor in a filed record, as applicable, may recover
13 $500 in each case from a person that:
14 (1) fails to comply with Section 9-208;
15 (2) fails to comply with Section 9-209;
16 (3) files a record that the person is not entitled
17 to file under Section 9-509(a);
18 (4) fails to cause the secured party of record to
19 file or send a termination statement as required by
20 Section 9-513(a) or (c);
21 (5) fails to comply with Section 9-616(b)(1) and
22 whose failure is part of a pattern, or consistent with a
23 practice, of noncompliance; or
24 (6) fails to comply with Section 9-616(b)(2).
25 (f) Statutory damages: noncompliance with Section
26 9-210. A debtor or consumer obligor may recover damages
27 under subsection (b) and, in addition, $500 in each case from
28 a person that, without reasonable cause, fails to comply with
29 a request under Section 9-210. A recipient of a request
30 under Section 9-210 which never claimed an interest in the
31 collateral or obligations that are the subject of a request
32 under that Section has a reasonable excuse for failure to
33 comply with the request within the meaning of this
34 subsection.
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1 (g) Limitation of security interest: noncompliance with
2 Section 9-210. If a secured party fails to comply with a
3 request regarding a list of collateral or a statement of
4 account under Section 9-210, the secured party may claim a
5 security interest only as shown in the statement included in
6 the request as against a person that is reasonably misled by
7 the failure.
8 (810 ILCS 5/9-626 new)
9 Sec. 9-626. Action in which deficiency or surplus is in
10 issue.
11 (a) Applicable rules if amount of deficiency or surplus
12 in issue. In an action arising from a transaction, other than
13 a consumer transaction, in which the amount of a deficiency
14 or surplus is in issue, the following rules apply:
15 (1) A secured party need not prove compliance with
16 the provisions of this Part relating to collection,
17 enforcement, disposition, or acceptance unless the debtor
18 or a secondary obligor places the secured party's
19 compliance in issue.
20 (2) If the secured party's compliance is placed in
21 issue, the secured party has the burden of establishing
22 that the collection, enforcement, disposition, or
23 acceptance was conducted in accordance with this Part.
24 (3) Except as otherwise provided in Section 9-628,
25 if a secured party fails to prove that the collection,
26 enforcement, disposition, or acceptance was conducted in
27 accordance with the provisions of this Part relating to
28 collection, enforcement, disposition, or acceptance, the
29 liability of a debtor or a secondary obligor for a
30 deficiency is limited to an amount by which the sum of
31 the secured obligation, expenses, and attorney's fees
32 exceeds the greater of:
33 (A) the proceeds of the collection,
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1 enforcement, disposition, or acceptance; or
2 (B) the amount of proceeds that would have
3 been realized had the noncomplying secured party
4 proceeded in accordance with the provisions of this
5 Part relating to collection, enforcement,
6 disposition, or acceptance.
7 (4) For purposes of paragraph (3)(B), the amount of
8 proceeds that would have been realized is equal to the
9 sum of the secured obligation, expenses, and attorney's
10 fees unless the secured party proves that the amount is
11 less than that sum.
12 (5) If a deficiency or surplus is calculated under
13 Section 9-615(f), the debtor or obligor has the burden of
14 establishing that the amount of proceeds of the
15 disposition is significantly below the range of prices
16 that a complying disposition to a person other than the
17 secured party, a person related to the secured party, or
18 a secondary obligor would have brought.
19 (b) Non-consumer transactions; no inference. The
20 limitation of the rules in subsection (a) to transactions
21 other than consumer transactions is intended to leave to the
22 court the determination of the proper rules in consumer
23 transactions. The court may not infer from that limitation
24 the nature of the proper rule in consumer transactions and
25 may continue to apply established approaches.
26 (810 ILCS 5/9-627 new)
27 Sec. 9-627. Determination of whether conduct was
28 commercially reasonable.
29 (a) Greater amount obtainable under other circumstances;
30 no preclusion of commercial reasonableness. The fact that a
31 greater amount could have been obtained by a collection,
32 enforcement, disposition, or acceptance at a different time
33 or in a different method from that selected by the secured
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1 party is not of itself sufficient to preclude the secured
2 party from establishing that the collection, enforcement,
3 disposition, or acceptance was made in a commercially
4 reasonable manner.
5 (b) Dispositions that are commercially reasonable. A
6 disposition of collateral is made in a commercially
7 reasonable manner if the disposition is made:
8 (1) in the usual manner on any recognized market;
9 (2) at the price current in any recognized market
10 at the time of the disposition; or
11 (3) otherwise in conformity with reasonable
12 commercial practices among dealers in the type of
13 property that was the subject of the disposition.
14 (c) Approval by court or on behalf of creditors. A
15 collection, enforcement, disposition, or acceptance is
16 commercially reasonable if it has been approved:
17 (1) in a judicial proceeding;
18 (2) by a bona fide creditors' committee;
19 (3) by a representative of creditors; or
20 (4) by an assignee for the benefit of creditors.
21 (d) Approval under subsection (c) not necessary; absence
22 of approval has no effect. Approval under subsection (c)
23 need not be obtained, and lack of approval does not mean that
24 the collection, enforcement, disposition, or acceptance is
25 not commercially reasonable.
26 (810 ILCS 5/9-628 new)
27 Sec. 9-628. Nonliability and limitation on liability of
28 secured party; liability of secondary obligor.
29 (a) Limitation of liability to debtor or obligor.
30 Unless a secured party knows that a person is a debtor or
31 obligor, knows the identity of the person, and knows how to
32 communicate with the person:
33 (1) the secured party is not liable to the person,
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1 or to a secured party or lienholder that has filed a
2 financing statement against the person, for failure to
3 comply with this Article; and
4 (2) the secured party's failure to comply with this
5 Article does not affect the liability of the person for a
6 deficiency.
7 (b) Limitation of liability to debtor, obligor, another
8 secured party, or lienholder. A secured party is not liable
9 because of its status as secured party:
10 (1) to a person that is a debtor or obligor, unless
11 the secured party knows:
12 (A) that the person is a debtor or obligor;
13 (B) the identity of the person; and
14 (C) how to communicate with the person; or
15 (2) to a secured party or lienholder that has filed
16 a financing statement against a person, unless the
17 secured party knows:
18 (A) that the person is a debtor; and
19 (B) the identity of the person.
20 (c) Limitation of liability if reasonable belief that
21 transaction not a consumer-goods transaction or consumer
22 transaction. A secured party is not liable to any person,
23 and a person's liability for a deficiency is not affected,
24 because of any act or omission arising out of the secured
25 party's reasonable belief that a transaction is not a
26 consumer-goods transaction or a consumer transaction or that
27 goods are not consumer goods, if the secured party's belief
28 is based on its reasonable reliance on:
29 (1) a debtor's representation concerning the
30 purpose for which collateral was to be used, acquired, or
31 held; or
32 (2) an obligor's representation concerning the
33 purpose for which a secured obligation was incurred.
34 (d) Limitation of liability for statutory damages. A
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1 secured party is not liable to any person under Section
2 9-625(c)(2) for its failure to comply with Section 9-616.
3 (e) Limitation of multiple liability for statutory
4 damages. A secured party is not liable under Section
5 9-625(c)(2) more than once with respect to any one secured
6 obligation.
7 (810 ILCS 5/Art. 9, Part 7 heading new)
8 PART 7. TRANSITION
9 (810 ILCS 5/9-701 new)
10 Sec. 9-701. Effective date. (See Section 99 of the
11 Public Act adding this Section to this Act.)
12 (810 ILCS 5/9-702 new)
13 Sec. 9-702. Savings clause.
14 (a) Pre-effective-date transactions or liens. Except as
15 otherwise provided in this Part, this Act applies to a
16 transaction or lien within its scope, even if the transaction
17 or lien was entered into or created before the effective date
18 of this amendatory Act of the 91st General Assembly.
19 (b) Continuing validity. Except as otherwise provided
20 in subsection (c) and Sections 9-703 through 9-708:
21 (1) transactions and liens that were not governed
22 by Article 9 as it existed before the effective date of
23 this amendatory Act of the 91st General Assembly, were
24 validly entered into or created before the effective date
25 of this amendatory Act of the 91st General Assembly, and
26 would be subject to this Act if they had been entered
27 into or created after the effective date of this
28 amendatory Act of the 91st General Assembly, and the
29 rights, duties, and interests flowing from those
30 transactions and liens remain valid after the effective
31 date of this amendatory Act of the 91st General Assembly;
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1 and
2 (2) the transactions and liens may be terminated,
3 completed, consummated, and enforced as required or
4 permitted by this Act or by the law that otherwise would
5 apply if this Act had not taken effect.
6 (c) Pre-effective-date proceedings. This amendatory Act
7 of the 91st General Assembly does not affect an action, case,
8 or proceeding commenced before the effective date of this
9 amendatory Act of the 91st General Assembly.
10 (810 ILCS 5/9-703 new)
11 Sec. 9-703. Security interest perfected before effective
12 date.
13 (a) Continuing priority over lien creditor: perfection
14 requirements satisfied. A security interest that is
15 enforceable immediately before the effective date of this
16 amendatory Act of the 91st General Assembly and would have
17 priority over the rights of a person that becomes a lien
18 creditor at that time is a perfected security interest under
19 this Act if, on the effective date of this amendatory Act of
20 the 91st General Assembly, the applicable requirements for
21 enforceability and perfection under this Act are satisfied
22 without further action.
23 (b) Continuing priority over lien creditor: perfection
24 requirements not satisfied. Except as otherwise provided in
25 Section 9-705, if, immediately before the effective date of
26 this amendatory Act of the 91st General Assembly, a security
27 interest is enforceable and would have priority over the
28 rights of a person that becomes a lien creditor at that time,
29 but the applicable requirements for enforceability or
30 perfection under this Act are not satisfied on the effective
31 date of this amendatory Act of the 91st General Assembly, the
32 security interest:
33 (1) is a perfected security interest for one year
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1 after the effective date of this amendatory Act of the
2 91st General Assembly;
3 (2) remains enforceable thereafter only if the
4 security interest becomes enforceable under Section 9-203
5 before the year expires; and
6 (3) remains perfected thereafter only if the
7 applicable requirements for perfection under this Act are
8 satisfied before the year expires.
9 (810 ILCS 5/9-704 new)
10 Sec. 9-704. Security interest unperfected before
11 effective date. A security interest that is enforceable
12 immediately before the effective date of this amendatory Act
13 of the 91st General Assembly but which would be subordinate
14 to the rights of a person that becomes a lien creditor at
15 that time:
16 (1) remains an enforceable security interest for
17 one year after the effective date of this amendatory Act
18 of the 91st General Assembly;
19 (2) remains enforceable thereafter if the security
20 interest becomes enforceable under Section 9-203 on the
21 effective date of this amendatory Act of the 91st General
22 Assembly or within one year thereafter; and
23 (3) becomes perfected:
24 (A) without further action, on the effective date
25 of this amendatory Act of the 91st General Assembly if
26 the applicable requirements for perfection under this Act
27 are satisfied before or at that time; or
28 (B) when the applicable requirements for perfection
29 are satisfied if the requirements are satisfied after
30 that time.
31 (810 ILCS 5/9-705 new)
32 Sec. 9-705. Effectiveness of action taken before
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1 effective date.
2 (a) Pre-effective-date action; one-year perfection
3 period unless reperfected. If action, other than the filing
4 of a financing statement, is taken before the effective date
5 of this amendatory Act of the 91st General Assembly and the
6 action would have resulted in priority of a security interest
7 over the rights of a person that becomes a lien creditor had
8 the security interest become enforceable before the effective
9 date of this amendatory Act of the 91st General Assembly, the
10 action is effective to perfect a security interest that
11 attaches under this Act within one year after the effective
12 date of this amendatory Act of the 91st General Assembly. An
13 attached security interest becomes unperfected one year after
14 the effective date of this amendatory Act of the 91st General
15 Assembly unless the security interest becomes a perfected
16 security interest under this Act before the expiration of
17 that period.
18 (b) Pre-effective-date filing. The filing of a
19 financing statement before the effective date of this
20 amendatory Act of the 91st General Assembly is effective to
21 perfect a security interest to the extent the filing would
22 satisfy the applicable requirements for perfection under this
23 Act.
24 (c) Pre-effective-date filing in jurisdiction formerly
25 governing perfection. This Act does not render ineffective
26 an effective financing statement that, before the effective
27 date of this amendatory Act of the 91st General Assembly, is
28 filed and satisfies the applicable requirements for
29 perfection under the law of the jurisdiction governing
30 perfection as provided in former Section 9-103. However,
31 except as otherwise provided in subsections (d) and (e) and
32 Section 9-706, the financing statement ceases to be effective
33 at the earlier of:
34 (1) the time the financing statement would have
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1 ceased to be effective under the law of the jurisdiction
2 in which it is filed; or
3 (2) June 30, 2006.
4 (d) Continuation statement. The filing of a
5 continuation statement after the effective date of this
6 amendatory Act of the 91st General Assembly does not continue
7 the effectiveness of the financing statement filed before the
8 effective date of this amendatory Act of the 91st General
9 Assembly. However, upon the timely filing of a continuation
10 statement after the effective date of this amendatory Act of
11 the 91st General Assembly and in accordance with the law of
12 the jurisdiction governing perfection as provided in Part 3,
13 the effectiveness of a financing statement filed in the same
14 office in that jurisdiction before the effective date of this
15 amendatory Act of the 91st General Assembly continues for the
16 period provided by the law of that jurisdiction.
17 (e) Application of subsection (c)(2) to transmitting
18 utility financing statement. Subsection (c)(2) applies to a
19 financing statement that, before the effective date of this
20 amendatory Act of the 91st General Assembly, is filed against
21 a transmitting utility and satisfies the applicable
22 requirements for perfection under the law of the jurisdiction
23 governing perfection as provided in Section 9-103, as that
24 Section existed before the effective date of this amendatory
25 Act of the 91st General Assembly, only to the extent that
26 Part 3 provides that the law of a jurisdiction other than
27 jurisdiction in which the financing statement is filed
28 governs perfection of a security interest in collateral
29 covered by the financing statement.
30 (f) Application of Part 5. A financing statement that
31 includes a financing statement filed before the effective
32 date of this amendatory Act of the 91st General Assembly and
33 a continuation statement filed after the effective date of
34 this amendatory Act of the 91st General Assembly is effective
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1 only to the extent that it satisfies the requirements of Part
2 5 for an initial financing statement.
3 (810 ILCS 5/9-706 new)
4 Sec. 9-706. When initial financing statement suffices to
5 continue effectiveness of financing statement.
6 (a) Initial financing statement in lieu of continuation
7 statement. The filing of an initial financing statement in
8 the office specified in Section 9-501 continues the
9 effectiveness of a financing statement filed before the
10 effective date of this amendatory Act of the 91st General
11 Assembly if:
12 (1) the filing of an initial financing statement in
13 that office would be effective to perfect a security
14 interest under this Act;
15 (2) the pre-effective-date financing statement was
16 filed in an office in another State or another office in
17 this State; and
18 (3) the initial financing statement satisfies
19 subsection (c).
20 (b) Period of continued effectiveness. The filing of an
21 initial financing statement under subsection (a) continues
22 the effectiveness of the pre-effective-date financing
23 statement:
24 (1) if the initial financing statement is filed
25 before the effective date of this amendatory Act of the
26 91st General Assembly, for the period provided in former
27 Section 9-403 with respect to a financing statement; and
28 (2) if the initial financing statement is filed
29 after the effective date of this amendatory Act of the
30 91st General Assembly, for the period provided in Section
31 9-515 with respect to an initial financing statement.
32 (c) Requirements for initial financing statement under
33 subsection (a). To be effective for purposes of subsection
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1 (a), an initial financing statement must:
2 (1) satisfy the requirements of Part 5 for an
3 initial financing statement;
4 (2) identify the pre-effective-date financing
5 statement by indicating the office in which the financing
6 statement was filed and providing the dates of filing and
7 file numbers, if any, of the financing statement and of
8 the most recent continuation statement filed with respect
9 to the financing statement; and
10 (3) indicate that the pre-effective-date financing
11 statement remains effective.
12 (810 ILCS 5/9-707 new)
13 Sec. 9-707. Persons entitled to file initial financing
14 statement or continuation statement. A person may file an
15 initial financing statement or a continuation statement under
16 this Part if:
17 (1) the secured party of record authorizes the
18 filing; and
19 (2) the filing is necessary under this Part:
20 (A) to continue the effectiveness of a
21 financing statement filed before the effective date
22 of this amendatory Act of the 91st General Assembly;
23 or
24 (B) to perfect or continue the perfection of a
25 security interest.
26 (810 ILCS 5/9-708 new)
27 Sec. 9-708. Priority.
28 (a) Law governing priority. This Act determines the
29 priority of conflicting claims to collateral. However, if
30 the relative priorities of the claims were established before
31 the effective date of this amendatory Act of the 91st General
32 Assembly, Article 9 as it existed before the effective date
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1 of this amendatory Act of the 91st General Assembly
2 determines priority.
3 (b) Priority if security interest becomes enforceable
4 under Section 9-203. For purposes of Section 9-322(a), the
5 priority of a security interest that becomes enforceable
6 under Section 9-203 of this Act dates from the effective date
7 of this amendatory Act of the 91st General Assembly if the
8 security interest is perfected under this Act by the filing
9 of a financing statement before the effective date of this
10 amendatory Act of the 91st General Assembly which would not
11 have been effective to perfect the security interest under
12 Article 9 as it existed before the effective date of this
13 amendatory Act of the 91st General Assembly. This subsection
14 does not apply to conflicting security interests each of
15 which is perfected by the filing of such a financing
16 statement.
17 PART 99. (BLANK) MISCELLANEOUS ILLINOIS PROVISIONS
18 (810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901)
19 Sec. 9-9901. (Blank). Liability of Secretary of State.
20 Neither the Secretary of State nor any of the Secretary of
21 State's employees or agents shall be subject to personal
22 liability by reason of any error or omission in the
23 performance of any duty under this Article except in case of
24 wilful negligence.
25 (Source: P.A. 87-1047.)
26 (810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902)
27 Sec. 9-9902. (Blank). Security interests in crops.
28 (a) Legislative findings; purpose. The General Assembly
29 finds:
30 (1) it has been the accepted practice between
31 farmers and agricultural lenders for lenders to extend
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1 credit with repayment secured by a security interest in
2 crops perfected in accordance with the provisions of this
3 Article;
4 (2) in making these loans, it has been the accepted
5 practice of agricultural lenders to rely upon a search of
6 financing statements properly filed in accordance with
7 the provisions of this Article to determine the presence
8 of claims in favor of other lenders;
9 (3) recently, this long standing practice and the
10 expectations of agricultural lenders have been negated by
11 court decisions that hold that a mortgagee of real estate
12 who takes possession, during foreclosure proceedings, of
13 mortgaged real estate with unsevered crops has priority
14 over a perfected security interest in crops;
15 (4) as a result of these court decisions, the
16 documentation and expenses in connection with prudent
17 agricultural lending practices will significantly
18 increase, creating an undue burden on agricultural
19 lenders;
20 (5) the application of these court decisions to the
21 holders of obligations secured by the collateral
22 assignment of beneficial interests in land trusts will
23 result in the creation of claims against crops that
24 agricultural lenders will be unable to discover by public
25 record search;
26 (6) these court decisions defeat the legitimate
27 expectations of agricultural lenders, unnecessarily
28 increase the cost of agricultural credit and impede the
29 free flow and availability of agricultural credit,
30 constituting an undue burden on the Illinois farm
31 economy;
32 (7) the application of these court decisions to the
33 holders of obligations secured by the collateral
34 assignment of beneficial interests in land trusts will
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1 similarly defeat the expectations of agricultural
2 lenders, unnecessarily increase the cost of agricultural
3 credit and impede the free flow and availability of
4 agricultural credit, constituting an undue burden on the
5 Illinois farm economy;
6 (8) real estate lenders, frequently dealing with
7 farmers prior to the involvement of other agricultural
8 lenders, in the ordinary course of lending can perfect a
9 security interest in crops in accordance with the
10 provisions of this Article to the extent these lenders
11 are relying on that collateral;
12 (9) it is the purpose of this Section to restore an
13 efficient system of searching for the claims of lenders
14 and the protection afforded agricultural lenders by a
15 perfected security interest in crops under this Article,
16 and thereby to foster and encourage the availability of
17 agricultural credit.
18 (b) Definitions. In this Section the following meanings
19 apply:
20 (1) "Collateral assignment of beneficial interest"
21 means any pledge or assignment of the beneficial interest
22 in a land trust to a person to secure a debt or other
23 obligation.
24 (2) "Land trust" means any trust arrangement under
25 which the legal and equitable title to real estate is
26 held by a trustee, the interest of the beneficiary of the
27 trust is personal property and the beneficiary or any
28 person designated in writing by the beneficiary has (i)
29 the exclusive power to direct or control the trustee in
30 dealing with the title to the trust property, (ii) the
31 exclusive control of the management, operation, renting,
32 and selling of the trust property, and (iii) the
33 exclusive right to the earnings, avails, and proceeds of
34 the trust property.
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1 (c) Rights to crops. With respect to any crops growing
2 or to be grown on real estate held in a land trust, the
3 rights of a holder of an obligation secured by a collateral
4 assignment of beneficial interest in the land trust,
5 including rights by virtue of an equitable lien, shall be
6 subject to a security interest properly perfected under this
7 Article.
8 (d) Application of Section. This Section applies to the
9 holder of an obligation secured by a collateral assignment of
10 beneficial interest in a land trust who becomes entitled to
11 crops by obtaining possession on or after December 22, 1988.
12 (Source: P.A. 87-1047.)
13 Section 10. The Uniform Commercial Code is amended by
14 changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502,
15 2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103,
16 8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section
17 5-118 as follows:
18 (810 ILCS 5/1-105) (from Ch. 26, par. 1-105)
19 Sec. 1-105. Territorial application of the Act; parties'
20 power to choose applicable law.
21 (1) Except as provided in this Section, when a
22 transaction bears a reasonable relation to this State and
23 also to another state or nation the parties may agree that
24 the law either of this State or of the other state or nation
25 shall govern their rights and duties. Failing an agreement,
26 this Act applies to transactions bearing an appropriate
27 relation to this State.
28 (2) Where one of the following provisions of this Act
29 specifies the applicable law, that provision governs and a
30 contrary agreement is effective only to the extent permitted
31 by the law (including the conflict of laws rules) so
32 specified:
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1 Rights of creditors against sold goods. Section 2-402.
2 Applicability of the Article on Leases. Sections 2A-105
3 and 2A-106.
4 Applicability of the Article on Bank Deposits and
5 Collections. Section 4-102.
6 Governing law in the Article on Funds Transfers. Section
7 4A-507.
8 Letters of Credit. Section 5-116.
9 Applicability of the Article on Investment Securities.
10 Section 8-110.
11 Law governing perfection, the effect of perfection or
12 nonperfection, and the priority of security
13 interests. Sections 9-301 through 9-307.
14 Perfection provisions of the Article on Secured
15 Transactions. Section 9-103.
16 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
17 (810 ILCS 5/1-201) (from Ch. 26, par. 1-201)
18 Sec. 1-201. General Definitions. Subject to additional
19 definitions contained in the subsequent Articles of this Act
20 which are applicable to specific Articles or Parts thereof,
21 and unless the context otherwise requires, in this Act:
22 (1) "Action" in the sense of a judicial proceeding
23 includes recoupment, counterclaim, set-off, suit in equity
24 and any other proceedings in which rights are determined.
25 (2) "Aggrieved party" means a party entitled to resort
26 to a remedy.
27 (3) "Agreement" means the bargain of the parties in fact
28 as found in their language or by implication from other
29 circumstances including course of dealing or usage of trade
30 or course of performance as provided in this Act (Sections
31 1-205 and 2-208). Whether an agreement has legal consequences
32 is determined by the provisions of this Act, if applicable;
33 otherwise by the law of contracts (Section 1-103). (Compare
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1 "Contract".)
2 (4) "Bank" means any person engaged in the business of
3 banking.
4 (5) "Bearer" means the person in possession of an
5 instrument, document of title, or certificated security
6 payable to bearer or indorsed in blank.
7 (6) "Bill of lading" means a document evidencing the
8 receipt of goods for shipment issued by a person engaged in
9 the business of transporting or forwarding goods, and
10 includes an airbill. "Airbill" means a document serving for
11 air transportation as a bill of lading does for marine or
12 rail transportation, and includes an air consignment note or
13 air waybill.
14 (7) "Branch" includes a separately incorporated foreign
15 branch of a bank.
16 (8) "Burden of establishing" a fact means the burden of
17 persuading the triers of fact that the existence of the fact
18 is more probable than its non-existence.
19 (9) "Buyer in ordinary course of business" means a
20 person that buys goods who in good faith, and without
21 knowledge that the sale violates to him is in violation of
22 the ownership rights or security interest of another person a
23 third party in the goods, and buys in the ordinary course
24 from a person, other than a pawnbroker, in the business of
25 selling goods of that kind but does not include a pawnbroker.
26 A person buys goods in the ordinary course if the sale to the
27 person comports with the usual or customary practices in the
28 kind of business in which the seller is engaged or with the
29 seller's own usual or customary practices. A person that
30 sells oil, gas, or other minerals at the wellhead or minehead
31 is a person All persons who sell minerals or the like
32 (including oil and gas) at wellhead or minehead shall be
33 deemed to be persons in the business of selling goods of that
34 kind. A buyer in ordinary course of business "Buying" may
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1 buy be for cash, or by exchange of other property, or on
2 secured or unsecured credit, and may acquire includes
3 receiving goods or documents of title under a pre-existing
4 contract for sale. Only a buyer that takes possession of the
5 goods or has a right to recover the goods from the seller
6 under Article 2 may be a buyer in ordinary course of
7 business. A person that acquires goods in a transfer in bulk
8 or as security for or in total or partial satisfaction of a
9 money debt is not a buyer in ordinary course of business. but
10 does not include a transfer in bulk or as security for or in
11 total or partial satisfaction of a money debt.
12 (10) "Conspicuous": A term or clause is conspicuous when
13 it is so written that a reasonable person against whom it is
14 to operate ought to have noticed it. A printed heading in
15 capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous.
16 Language in the body of a form is "conspicuous" if it is in
17 larger or other contrasting type or color. But in a telegram
18 any stated term is "conspicuous". Whether a term or clause is
19 "conspicuous" or not is for decision by the court.
20 (11) "Contract" means the total legal obligation which
21 results from the parties' agreement as affected by this Act
22 and any other applicable rules of law. (Compare "Agreement".)
23 (12) "Creditor" includes a general creditor, a secured
24 creditor, a lien creditor and any representative of
25 creditors, including an assignee for the benefit of
26 creditors, a trustee in bankruptcy, a receiver in equity and
27 an executor or administrator of an insolvent debtor's or
28 assignor's estate.
29 (13) "Defendant" includes a person in the position of
30 defendant in a cross-action or counterclaim.
31 (14) "Delivery" with respect to instruments, documents
32 of title, chattel paper or certificated securities means
33 voluntary transfer of possession.
34 (15) "Document of title" includes bill of lading, dock
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1 warrant, dock receipt, warehouse receipt or order for the
2 delivery of goods, and also any other document which in the
3 regular course of business or financing is treated as
4 adequately evidencing that the person in possession of it is
5 entitled to receive, hold and dispose of the document and the
6 goods it covers. To be a document of title a document must
7 purport to be issued by or addressed to a bailee and purport
8 to cover goods in the bailee's possession which are either
9 identified or are fungible portions of an identified mass.
10 (16) "Fault" means wrongful act, omission or breach.
11 (17) "Fungible" with respect to goods or securities
12 means goods or securities of which any unit is, by nature or
13 usage of trade, the equivalent of any other like unit. Goods
14 which are not fungible shall be deemed fungible for the
15 purposes of this Act to the extent that under a particular
16 agreement or document unlike units are treated as
17 equivalents.
18 (18) "Genuine" means free of forgery or counterfeiting.
19 (19) "Good faith" means honesty in fact in the conduct
20 or transaction concerned.
21 (20) "Holder" with respect to a negotiable instrument
22 means the person in possession if the instrument is payable
23 to bearer or, in the case of an instrument payable to an
24 identified person, if the identified person is in possession.
25 "Holder" with respect to a document of title means the person
26 in possession if the goods are deliverable to bearer or to
27 the order of the person in possession.
28 (21) To "honor" is to pay or accept and pay, or where a
29 credit so engages to purchase or discount a draft complying
30 with the terms of the credit.
31 (22) "Insolvency proceedings" includes any assignment
32 for the benefit of creditors or other proceedings intended to
33 liquidate or rehabilitate the estate of the person involved.
34 (23) A person is "insolvent" who either has ceased to
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1 pay his debts in the ordinary course of business or cannot
2 pay his debts as they become due or is insolvent within the
3 meaning of the federal bankruptcy law.
4 (24) "Money" means a medium of exchange authorized or
5 adopted by a domestic or foreign government and includes a
6 monetary unit of account established by an intergovernmental
7 organization or by agreement between 2 or more nations.
8 (25) A person has "notice" of a fact when
9 (a) he has actual knowledge of it; or
10 (b) he has received a notice or notification of it;
11 or
12 (c) from all the facts and circumstances known to
13 him at the time in question he has reason to know that it
14 exists. A person "knows" or has "knowledge" of a fact
15 when he has actual knowledge of it. "Discover" or "learn"
16 or a word or phrase of similar import refers to knowledge
17 rather than to reason to know. The time and circumstances
18 under which a notice or notification may cease to be
19 effective are not determined by this Act.
20 (26) A person "notifies" or "gives" a notice or
21 notification to another by taking such steps as may be
22 reasonably required to inform the other in ordinary course
23 whether or not such other actually comes to know of it. A
24 person "receives" a notice or notification when
25 (a) it comes to his attention; or
26 (b) it is duly delivered at the place of business
27 through which the contract was made or at any other place
28 held out by him as the place for receipt of such
29 communications.
30 (27) Notice, knowledge or a notice or notification
31 received by an organization is effective for a particular
32 transaction from the time when it is brought to the attention
33 of the individual conducting that transaction, and in any
34 event from the time when it would have been brought to his
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1 attention if the organization had exercised due diligence. An
2 organization exercises due diligence if it maintains
3 reasonable routines for communicating significant information
4 to the person conducting the transaction and there is
5 reasonable compliance with the routines. Due diligence does
6 not require an individual acting for the organization to
7 communicate information unless such communication is part of
8 his regular duties or unless he has reason to know of the
9 transaction and that the transaction would be materially
10 affected by the information.
11 (28) "Organization" includes a corporation, government
12 or governmental subdivision or agency, business trust,
13 estate, trust, partnership or association, two or more
14 persons having a joint or common interest, or any other legal
15 or commercial entity.
16 (29) "Party", as distinct from "third party", means a
17 person who has engaged in a transaction or made an agreement
18 within this Act.
19 (30) "Person" includes an individual or an organization
20 (see Section 1-102).
21 (31) "Presumption" or "presumed" means that the trier of
22 fact must find the existence of the fact presumed unless and
23 until evidence is introduced which would support a finding of
24 its non-existence.
25 (32) "Purchase" includes taking by sale, discount,
26 negotiation, mortgage, pledge, lien, security interest, issue
27 or reissue, gift or any other voluntary transaction creating
28 an interest in property.
29 (33) "Purchaser" means a person who takes by purchase.
30 (34) "Remedy" means any remedial right to which an
31 aggrieved party is entitled with or without resort to a
32 tribunal.
33 (35) "Representative" includes an agent, an officer of a
34 corporation or association, and a trustee, executor or
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1 administrator of an estate, or any other person empowered to
2 act for another.
3 (36) "Rights" includes remedies.
4 (37) "Security interest" means an interest in personal
5 property or fixtures which secures payment or performance of
6 an obligation. The retention or reservation of title by a
7 seller of goods notwithstanding shipment or delivery to the
8 buyer (Section 2-401) is limited in effect to a reservation
9 of a "security interest". The term also includes any interest
10 of a consignor and a buyer of accounts, or chattel paper, a
11 payment intangible, or a promissory note in a transaction
12 that which is subject to Article 9. The special property
13 interest of a buyer of goods on identification of those goods
14 to a contract for sale under Section 2-401 is not a "security
15 interest", but a buyer may also acquire a "security
16 interest", by complying with Article 9. Except as otherwise
17 provided in Section 2-505, the right of a seller or lessor of
18 goods under Article 2 or 2A to retain or acquire possession
19 of the goods is not a "security interest", but a seller or
20 lessor may also acquire a "security interest" by complying
21 with Article 9. The retention or reservation of title by a
22 seller of goods notwithstanding shipment or delivery to the
23 buyer (Section 2-401) is limited in effect to a reservation
24 of a "security interest". Unless a consignment is intended as
25 security, reservation of title thereunder is not a "security
26 interest" but a consignment is in any event subject to the
27 provisions on consignment sales (Section 2-326).
28 Whether a transaction creates a lease or security
29 interest is determined by the facts of each case; however, a
30 transaction creates a security interest if the consideration
31 the lessee is to pay the lessor for the right to possession
32 and use of the goods is an obligation for the term of the
33 lease not subject to termination by the lessee; and
34 (a) the original term of the lease is equal to or
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1 greater than the remaining economic life of the goods;
2 (b) the lessee is bound to renew the lease for the
3 remaining economic life of the goods or is bound to
4 become the owner of the goods;
5 (c) the lessee has an option to renew the lease for
6 the remaining economic life of the goods for no
7 additional consideration or nominal additional
8 consideration upon compliance with the lease agreement;
9 or
10 (d) the lessee has an option to become the owner of
11 the goods for no additional consideration or nominal
12 additional consideration upon compliance with the lease
13 agreement.
14 A transaction does not create a security interest merely
15 because it provides that:
16 (a) the present value of the consideration the
17 lessee is obligated to pay the lessor for the right to
18 possession and use of the goods is substantially equal to
19 or is greater than the fair market value of the goods at
20 the time the lease is entered into;
21 (b) the lessee assumes risk of loss of the goods,
22 or agrees to pay taxes, insurance, filing, recording, or
23 registration fees, or service or maintenance costs with
24 respect to the goods;
25 (c) the lessee has an option to renew the lease or
26 to become the owner of the goods;
27 (d) the lessee has an option to renew the lease for
28 a fixed rent that is equal to or greater than the
29 reasonably predictable fair market rent for the use of
30 the goods for the term of the renewal at the time the
31 option is to be performed; or
32 (e) the lessee has an option to become the owner of
33 the goods for a fixed price that is equal to or greater
34 than the reasonably predictable fair market value of the
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1 goods at the time the option is to be performed.
2 For purposes of this subsection (37):
3 (x) Additional consideration is not nominal if (i)
4 when the option to renew the lease is granted to the
5 lessee the rent is stated to be the fair market rent for
6 the use of the goods for the term of the renewal
7 determined at the time the option is to be performed, or
8 (ii) when the option to become the owner of the goods is
9 granted to the lessee the price is stated to be the fair
10 market value of the goods determined at the time the
11 option is to be performed. Additional consideration is
12 nominal if it is less than the lessee's reasonably
13 predictable cost of performing under the lease agreement
14 if the option is not exercised;
15 (y) "Reasonably predictable" and "remaining
16 economic life of the goods" are to be determined with
17 reference to the facts and circumstances at the time the
18 transaction is entered into; and
19 (z) "Present value" means the amount as of a date
20 certain of one or more sums payable in the future,
21 discounted to the date certain. The discount is
22 determined by the interest rate specified by the parties
23 if the rate is not manifestly unreasonable at the time
24 the transaction is entered into; otherwise, the discount
25 is determined by a commercially reasonable rate that
26 takes into account the facts and circumstances as of each
27 case at the time the transaction was entered into.
28 (38) "Send" in connection with any writing or notice
29 means to deposit in the mail or deliver for transmission by
30 any other usual means of communication with postage or cost
31 of transmission provided for and properly addressed and in
32 the case of an instrument to an address specified thereon or
33 otherwise agreed, or if there be none to any address
34 reasonable under the circumstances. The receipt of any
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1 writing or notice within the time at which it would have
2 arrived if properly sent has the effect of a proper sending.
3 (39) "Signed" includes any symbol executed or adopted by
4 a party with present intention to authenticate a writing.
5 (40) "Surety" includes guarantor.
6 (41) "Telegram" includes a message transmitted by radio,
7 teletype, cable, any mechanical method of transmission, or
8 the like.
9 (42) "Term" means that portion of an agreement which
10 relates to a particular matter.
11 (43) "Unauthorized" signature means one made without
12 actual, implied, or apparent authority and includes a
13 forgery.
14 (44) "Value". Except as otherwise provided with respect
15 to negotiable instruments and bank collections (Sections
16 3-303, 4-208 and 4-209), a person gives "value" for rights if
17 he acquires them:
18 (a) in return for a binding commitment to extend
19 credit or for the extension of immediately available
20 credit whether or not drawn upon and whether or not a
21 charge-back is provided for in the event of difficulties
22 in collection; or
23 (b) as security for or in total or partial
24 satisfaction of a pre-existing claim; or
25 (c) by accepting delivery pursuant to a
26 pre-existing contract for purchase; or
27 (d) generally, in return for any consideration
28 sufficient to support a simple contract.
29 (45) "Warehouse receipt" means a receipt issued by a
30 person engaged in the business of storing goods for hire.
31 (46) "Written" or "writing" includes printing,
32 typewriting or any other intentional reduction to tangible
33 form.
34 (Source: P.A. 87-493; 87-582; 87-895; 87-1135.)
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1 (810 ILCS 5/2-103) (from Ch. 26, par. 2-103)
2 Sec. 2-103. Definitions and index of definitions.
3 (1) In this Article unless the context otherwise
4 requires
5 (a) "Buyer" means a person who buys or contracts to
6 buy goods.
7 (b) "Good faith" in the case of a merchant means
8 honesty in fact and the observance of reasonable commercial
9 standards of fair dealing in the trade.
10 (c) "Receipt" of goods means taking physical
11 possession of them.
12 (d) "Seller" means a person who sells or contracts
13 to sell goods.
14 (2) Other definitions applying to this Article or to
15 specified Parts thereof, and the sections in which they
16 appear are:
17 "Acceptance". Section 2--606.
18 "Banker's credit". Section 2--325.
19 "Between merchants". Section 2--104.
20 "Cancellation". Section 2--106(4).
21 "Commercial unit". Section 2--105.
22 "Confirmed credit". Section 2--325.
23 "Conforming to contract". Section 2--106.
24 "Contract for sale". Section 2--106.
25 "Cover". Section 2--712.
26 "Entrusting". Section 2--403.
27 "Financing agency". Section 2--104.
28 "Future goods". Section 2--105.
29 "Goods". Section 2--105.
30 "Identification". Section 2--501.
31 "Installment contract". Section 2--612.
32 "Letter of Credit". Section 2--325.
33 "Lot". Section 2--105.
34 "Merchant". Section 2--104.
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1 "Overseas". Section 2--323.
2 "Person in position of seller". Section 2--707.
3 "Present sale". Section 2--106.
4 "Sale". Section 2--106.
5 "Sale on approval". Section 2--326.
6 "Sale or return". Section 2--326.
7 "Termination". Section 2--106.
8 (3) The following definitions in other Articles apply to
9 this Article:
10 "Check". Section 3--104.
11 "Consignee". Section 7--102.
12 "Consignor". Section 7--102.
13 "Consumer goods". Section 9-102 9--109.
14 "Dishonor". Section 3-502 3--507.
15 "Draft". Section 3--104.
16 (4) In addition Article 1 contains general definitions
17 and principles of construction and interpretation applicable
18 throughout this Article.
19 (Source: Laws 1961, p. 2101.)
20 (810 ILCS 5/2-210) (from Ch. 26, par. 2-210)
21 Sec. 2-210. Delegation of performance; assignment of
22 rights.
23 (1) A party may perform his duty through a delegate
24 unless otherwise agreed or unless the other party has a
25 substantial interest in having his original promisor perform
26 or control the acts required by the contract. No delegation
27 of performance relieves the party delegating of any duty to
28 perform or any liability for breach.
29 (2) Except as otherwise provided in Section 9-406,
30 unless otherwise agreed all rights of either seller or buyer
31 can be assigned except where the assignment would materially
32 change the duty of the other party, or increase materially
33 the burden or risk imposed on him by his contract, or impair
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1 materially his chance of obtaining return performance. A
2 right to damages for breach of the whole contract or a right
3 arising out of the assignor's due performance of his entire
4 obligation can be assigned despite agreement otherwise.
5 (3) The creation, attachment, perfection, or enforcement
6 of a security interest in the seller's interest under a
7 contract is not a transfer that materially changes the duty
8 of or increases materially the burden or risk imposed on the
9 buyer or impairs materially the buyer's chance of obtaining
10 return performance with the purview of subsection (2) unless,
11 and then only to the extent that, enforcement actually
12 results in a delegation of material performance of the
13 seller. Even in that event, the creation, attachment,
14 perfection, and enforcement of the security interest remain
15 effective, but (i) the seller is liable to the buyer for
16 damages caused by the delegation to the extent that the
17 damages could not reasonably be prevented by the buyer, and
18 (ii) a court having jurisdiction may grant other appropriate
19 relief, including cancellation of the contract for sale or an
20 injunction against enforcement of the security interest or
21 consummation of the enforcement.
22 (4) (3) Unless the circumstances indicate the contrary a
23 prohibition of assignment of "the contract" is to be
24 construed as barring only the delegation to the assignee of
25 the assignor's performance.
26 (5) (4) An assignment of "the contract" or of "all my
27 rights under the contract" or an assignment in similar
28 general terms is an assignment of rights and unless the
29 language or the circumstances (as in an assignment for
30 security) indicate the contrary, it is a delegation of
31 performance of the duties of the assignor and its acceptance
32 by the assignee constitutes a promise by him to perform those
33 duties. This promise is enforceable by either the assignor or
34 the other party to the original contract.
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1 (6) (5) The other party may treat any assignment which
2 delegates performance as creating reasonable grounds for
3 insecurity and may without prejudice to his rights against
4 the assignor demand assurances from the assignee (Section
5 2--609).
6 (Source: Laws 1961, p. 2101.)
7 (810 ILCS 5/2-326) (from Ch. 26, par. 2-326)
8 Sec. 2-326. Sale on approval and sale or return;
9 consignment sales and rights of creditors.
10 (1) Unless otherwise agreed, if delivered goods may be
11 returned by the buyer even though they conform to the
12 contract, the transaction is
13 (a) a "sale on approval" if the goods are delivered
14 primarily for use, and
15 (b) a "sale or return" if the goods are delivered
16 primarily for resale.
17 (2) Except as provided in subsection (3), Goods held on
18 approval are not subject to the claims of the buyer's
19 creditors until acceptance; goods held on sale or return are
20 subject to such claims while in the buyer's possession.
21 (3) Where goods are delivered to a person for sale and
22 such person maintains a place of business at which he deals
23 in goods of the kind involved, under a name other than the
24 name of the person making delivery, then with respect to
25 claims of creditors of the person conducting the business the
26 goods are deemed to be on sale or return. The provisions of
27 this subsection are applicable even though an agreement
28 purports to reserve title to the person making delivery until
29 payment or resale or uses such words as "on consignment" or
30 "on memorandum". However, this subsection is not applicable
31 if the person making delivery
32 (a) complies with an applicable law providing for a
33 consignor's interest or the like to be evidenced by a sign,
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1 or
2 (b) establishes that the person conducting the
3 business is generally known by his creditors to be
4 substantially engaged in selling the goods of others, or
5 (c) complies with the filing provisions of the
6 Article on Secured Transactions (Article 9).
7 (4) Any "or return" term of a contract for sale is to be
8 treated as a separate contract for sale within the statute of
9 frauds section of this Article (Section 2--201) and as
10 contradicting the sale aspect of the contract within the
11 provisions of this Article on parol or extrinsic evidence
12 (Section 2--202).
13 (Source: Laws 1961, p. 2101.)
14 (810 ILCS 5/2-502) (from Ch. 26, par. 2-502)
15 Sec. 2-502. Buyer's right to goods on seller's
16 insolvency.
17 (1) Subject to subsections subsection (2) and (3) and
18 even though the goods have not been shipped a buyer who has
19 paid a part or all of the price of goods in which he has a
20 special property under the provisions of the immediately
21 preceding section may on making and keeping good a tender of
22 any unpaid portion of their price recover them from the
23 seller if:
24 (a) in the case of goods bought for personal,
25 family, or household purposes, the seller repudiates or
26 fails to deliver as required by the contract; or
27 (b) in all cases, the seller becomes insolvent
28 within 10 days after receipt of the first installment on
29 their price.
30 (2) The buyer's right to recover the goods under
31 subsection (1)(a) vests upon acquisition of a special
32 property, even if the seller had not then repudiated or
33 failed to deliver.
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1 (3) If the identification creating his special property
2 has been made by the buyer he acquires the right to recover
3 the goods only if they conform to the contract for sale.
4 (Source: Laws 1961, p. 2101.)
5 (810 ILCS 5/2-716) (from Ch. 26, par. 2-716)
6 Sec. 2-716. Buyer's right to specific performance or
7 replevin.
8 (1) Specific performance may be ordered where the goods
9 are unique or in other proper circumstances.
10 (2) The judgment for specific performance may include
11 such terms and conditions as to payment of the price,
12 damages, or other relief as the court may deem just.
13 (3) The buyer has a right of replevin for goods
14 identified to the contract if after reasonable effort he is
15 unable to effect cover for such goods or the circumstances
16 reasonably indicate that such effort will be unavailing or if
17 the goods have been shipped under reservation and
18 satisfaction of the security interest in them has been made
19 or tendered. In the case of goods bought for personal,
20 family, or household purposes, the buyer's right of replevin
21 vests upon acquisition of a special property, even if the
22 seller had not then repudiated or failed to deliver.
23 (Source: P.A. 84-545.)
24 (810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103)
25 Sec. 2A-103. Definitions and index of definitions.
26 (1) In this Article unless the context otherwise
27 requires:
28 (a) "Buyer in ordinary course of business" means a
29 person who, in good faith and without knowledge that the
30 sale to him or her is in violation of the ownership
31 rights or security interest or leasehold interest of a
32 third party in the goods, buys in ordinary course from a
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1 person in the business of selling goods of that kind but
2 does not include a pawnbroker. "Buying" may be for cash
3 or by exchange of other property or on secured or
4 unsecured credit and includes receiving goods or
5 documents of title under a pre-existing contract for sale
6 but does not include a transfer in bulk or as security
7 for or in total or partial satisfaction of a money debt.
8 (b) "Cancellation" occurs when either party puts an
9 end to the lease contract for default by the other party.
10 (c) "Commercial unit" means such a unit of goods as
11 by commercial usage is a single whole for purposes of
12 lease and division of which materially impairs its
13 character or value on the market or in use. A commercial
14 unit may be a single article, as a machine, or a set of
15 articles, as a suite of furniture or a line of machinery,
16 or a quantity, as a gross or carload, or any other unit
17 treated in use or in the relevant market as a single
18 whole.
19 (d) "Conforming" goods or performance under a lease
20 contract means goods or performance that are in
21 accordance with the obligations under the lease contract.
22 (e) "Consumer lease" means a lease that a lessor
23 regularly engaged in the business of leasing or selling
24 makes to a lessee who is an individual and who takes
25 under the lease primarily for a personal, family, or
26 household purpose, if the total payments to be made under
27 the lease contract, excluding payments for options to
28 renew or buy, do not exceed $40,000.
29 (f) "Fault" means wrongful act, omission, breach,
30 or default.
31 (g) "Finance lease" means a lease with respect to
32 which:
33 (i) the lessor does not select, manufacture,
34 or supply the goods;
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1 (ii) the lessor acquires the goods or the
2 right to possession and use of the goods in
3 connection with the lease; and
4 (iii) one of the following occurs:
5 (A) the lessee receives a copy of the
6 contract by which the lessor acquired the goods
7 or the right to possession and use of the goods
8 before signing the lease contract;
9 (B) the lessee's approval of the contract
10 by which the lessor acquired the goods or the
11 right to possession and use of the goods is a
12 condition to effectiveness of the lease
13 contract;
14 (C) the lessee, before signing the lease
15 contract, receives an accurate and complete
16 statement designating the promises and
17 warranties, and any disclaimers of warranties,
18 limitations or modifications of remedies, or
19 liquidated damages, including those of a third
20 party, such as the manufacturer of the goods,
21 provided to the lessor by the person supplying
22 the goods in connection with or as part of the
23 contract by which the lessor acquired the goods
24 or the right to possession and use of the
25 goods; or
26 (D) if the lease is not a consumer lease,
27 the lessor, before the lessee signs the lease
28 contract, informs the lessee in writing (a) of
29 the identity of the person supplying the goods
30 to the lessor, unless the lessee has selected
31 that person and directed the lessor to acquire
32 the goods or the right to possession and use of
33 the goods from that person, (b) that the lessee
34 is entitled under this Article to the promises
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1 and warranties, including those of any third
2 party, provided to the lessor by the person
3 supplying the goods in connection with or as
4 part of the contract by which the lessor
5 acquired the goods or the right to possession
6 and use of the goods, and (c) that the lessee
7 may communicate with the person supplying the
8 goods to the lessor and receive an accurate and
9 complete statement of those promises and
10 warranties, including any disclaimers and
11 limitations of them or of remedies.
12 (h) "Goods" means all things that are movable at
13 the time of identification to the lease contract, or are
14 fixtures (Section 2A-309), but the term does not include
15 money, documents, instruments, accounts, chattel paper,
16 general intangibles, or minerals or the like, including
17 oil and gas, before extraction. The term also includes
18 the unborn young of animals.
19 (i) "Installment lease contract" means a lease
20 contract that authorizes or requires the delivery of
21 goods in separate lots to be separately accepted, even
22 though the lease contract contains a clause "each
23 delivery is a separate lease" or its equivalent.
24 (j) "Lease" means a transfer of the right to
25 possession and use of goods for a term in return for
26 consideration, but a sale, including a sale on approval
27 or a sale or return, or retention or creation of a
28 security interest is not a lease. Unless the context
29 clearly indicates otherwise, the term includes a
30 sublease.
31 (k) "Lease agreement" means the bargain, with
32 respect to the lease, of the lessor and the lessee in
33 fact as found in their language or by implication from
34 other circumstances including course of dealing or usage
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1 of trade or course of performance as provided in this
2 Article. Unless the context clearly indicates otherwise,
3 the term includes a sublease agreement.
4 (l) "Lease contract" means the total legal
5 obligation that results from the lease agreement as
6 affected by this Article and any other applicable rules
7 of law. Unless the context clearly indicates otherwise,
8 the term includes a sublease contract.
9 (m) "Leasehold interest" means the interest of the
10 lessor or the lessee under a lease contact.
11 (n) "Lessee" means a person who acquires the right
12 to possession and use of goods under a lease. Unless the
13 context clearly indicates otherwise, the term includes a
14 sublessee.
15 (o) "Lessee in ordinary course of business" means a
16 person who in good faith and without knowledge that the
17 lease to him or her is in violation of the ownership
18 rights or security interest or leasehold interest of a
19 third party in the goods leases in ordinary course from a
20 person in the business of selling or leasing goods of
21 that kind but does not include a pawnbroker. "Leasing"
22 may be for cash or by exchange of other property or on
23 secured or unsecured credit and includes receiving goods
24 or documents of title under a pre-existing lease contract
25 but does not include a transfer in bulk or as security
26 for or in total or partial satisfaction of a money debt.
27 (p) "Lessor" means a person who transfers the right
28 to possession and use of goods under a lease. Unless the
29 context clearly indicates otherwise, the term includes a
30 sublessor.
31 (q) "Lessor's residual interest" means the lessor's
32 interest in the goods after expiration, termination, or
33 cancellation of the lease contract.
34 (r) "Lien" means a charge against or interest in
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1 goods to secure payment of a debt or performance of an
2 obligation, but the term does not include a security
3 interest.
4 (s) "Lot" means a parcel or a single article that
5 is the subject matter of a separate lease or delivery,
6 whether or not it is sufficient to perform the lease
7 contract.
8 (t) "Merchant lessee" means a lessee that is a
9 merchant with respect to goods of the kind subject to the
10 lease.
11 (u) "Present value" means the amount as of a date
12 certain of one or more sums payable in the future,
13 discounted to the date certain. The discount is
14 determined by the interest rate specified by the parties
15 if the rate was not manifestly unreasonable at the time
16 the transaction was entered into; otherwise, the discount
17 is determined by a commercially reasonable rate that
18 takes into account the facts and circumstances of each
19 case at the time the transaction was entered into.
20 (v) "Purchase" includes taking by sale, lease,
21 mortgage, security interest, pledge, gift, or any other
22 voluntary transaction creating an interest in goods.
23 (w) "Sublease" means a lease of goods the right to
24 possession and use of which was acquired by the lessor as
25 a lessee under an existing lease.
26 (x) "Supplier" means a person from whom a lessor
27 buys or leases goods to be leased under a finance lease.
28 (y) "Supply contract" means a contract under which
29 a lessor buys or leases goods to be leased.
30 (z) "Termination" occurs when either party pursuant
31 to a power created by agreement or law puts an end to the
32 lease contract otherwise than for default.
33 (2) Other definitions applying to this Article and the
34 Sections in which they appear are:
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1 "Accessions". Section 2A-310(1).
2 "Construction mortgage". Section 2A-309(1)(d).
3 "Encumbrance". Section 2A-309(1)(e).
4 "Fixtures". Section 2A-309(1)(a).
5 "Fixture filing". Section 2A-309(1)(b).
6 "Purchase money lease". Section 2A-309(1)(c).
7 (3) The following definitions in other Articles apply to
8 this Article:
9 "Account". Section 9-102(a)(2) 9-106.
10 "Between merchants". Section 2-104(3).
11 "Buyer". Section 2-103(1)(a).
12 "Chattel paper". Section 9-102(a)(11) 9-105 (1)(b).
13 "Consumer goods". Section 9-102(a)(23) 9-109(1).
14 "Document". Section 9-102(a)(30) 9-105 (1)(f).
15 "Entrusting". Section 2-403(3).
16 "General intangible intangibles". Section 9-102(a)(42)
17 9-106.
18 "Good faith". Section 2-103(1)(b).
19 "Instrument". Section 9-102(a)(47) 9-105 (1)(i).
20 "Merchant". Section 2-104(1).
21 "Mortgage". Section 9-102(a)(55) 9-105 (1)(j).
22 "Pursuant to commitment". Section 9-102(a)(68) 9-105
23 (1)(k).
24 "Receipt". Section 2-103(1)(c).
25 "Sale". Section 2-106(1).
26 "Sale on approval". Section 2-326.
27 "Sale or return". Section 2-326.
28 "Seller". Section 2-103(1)(d).
29 (4) In addition, Article 1 contains general definitions
30 and principles of construction and interpretation applicable
31 throughout this Article.
32 (Source: P.A. 87-493.)
33 (810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303)
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1 Sec. 2A-303. Alienability of party's interest under
2 lease contract or of lessor's residual interest in goods;
3 delegation of performance; transfer of rights.
4 (1) As used in this Section, "creation of a security
5 interest" includes the sale of a lease contract that is
6 subject to Article 9, Secured Transactions, by reason of
7 Section 9-109(a)(3) 9-102(1)(b).
8 (2) Except as provided in subsection subsections (3) and
9 Section 9-407 (4), a provision in a lease agreement which (i)
10 prohibits the voluntary or involuntary transfer, including a
11 transfer by sale, sublease, creation or enforcement of a
12 security interest, or attachment, levy, or other judicial
13 process, of an interest of a party under the lease contract
14 or of the lessor's residual interest in the goods, or (ii)
15 makes such a transfer an event of default, gives rise to the
16 rights and remedies provided in subsection (4) (5), but a
17 transfer that is prohibited or is an event of default under
18 the lease agreement is otherwise effective.
19 (3) A provision in a lease agreement which (i) prohibits
20 the creation or enforcement of a security interest in an
21 interest of a party under the lease contract or in the
22 lessor's residual interest in the goods, or (ii) makes such a
23 transfer an event of default, is not enforceable unless, and
24 then only to the extent that, there is an actual transfer by
25 the lessee of the lessee's right of possession or use of the
26 goods in violation of the provision or an actual delegation
27 of a material performance of either party to the lease
28 contract in violation of the provision. Neither the granting
29 nor the enforcement of a security interest in (i) the
30 lessor's interest under the lease contract or (ii) the
31 lessor's residual interest in the goods is a transfer that
32 materially impairs the prospect of obtaining return
33 performance by, materially changes the duty of, or materially
34 increases the burden or risk imposed on, the lessee within
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1 the purview of subsection (5) unless, and then only to the
2 extent that, there is an actual delegation of a material
3 performance of the lessor.
4 (4) A provision in a lease agreement which (i) prohibits
5 a transfer of a right to damages for default with respect to
6 the whole lease contract or of a right to payment arising out
7 of the transferor's due performance of the transferor's
8 entire obligation, or (ii) makes such a transfer an event of
9 default, is not enforceable, and such a transfer is not a
10 transfer that materially impairs the prospect of obtaining
11 return performance by, materially changes the duty of, or
12 materially increases the burden or risk imposed on, the other
13 party to the lease contract within the purview of subsection
14 (4) (5).
15 (4) (5) Subject to subsection subsections (3) and
16 Section 9-407 (4):
17 (a) if a transfer is made which is made an event of
18 default under a lease agreement, the party to the lease
19 contract not making the transfer, unless that party
20 waives the default or otherwise agrees, has the rights
21 and remedies described in Section 2A-501(2);
22 (b) if paragraph (a) is not applicable and if a
23 transfer is made that (i) is prohibited under a lease
24 agreement or (ii) materially impairs the prospect of
25 obtaining return performance by, materially changes the
26 duty of, or materially increases the burden of risk
27 imposed on, the other party to the lease contract, unless
28 the party not making the transfer agrees at any time to
29 the transfer in the lease contract or otherwise, then,
30 except as limited by contract, (i) the transferor is
31 liable to the party not making the transfer for damages
32 caused by the transfer to the extent that the damages
33 could not reasonably be prevented by the party not making
34 the transfer and (ii) a court having jurisdiction may
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1 grant other appropriate relief, including cancellation of
2 the lease contract or an injunction against the transfer.
3 (5) (6) A transfer of "the lease" or of "all my rights
4 under the lease", or a transfer in similar general terms, is
5 a transfer of rights and, unless the language or the
6 circumstances, as in a transfer for security, indicate the
7 contrary, the transfer is a delegation of duties by the
8 transferor to the transferee. Acceptance by the transferee
9 constitutes a promise by the transferee to perform those
10 duties. The promise is enforceable by either the transferor
11 or the other party to the lease contract.
12 (6) (7) Unless otherwise agreed by the lessor and the
13 lessee, a delegation of performance does not relieve the
14 transferor as against the other party of any duty to perform
15 or of any liability for default.
16 (7) (8) In a consumer lease, to prohibit the transfer of
17 an interest of a party under the lease contract or to make a
18 transfer an event of default, the language must be specific,
19 by a writing, and conspicuous.
20 (Source: P.A. 87-493.)
21 (810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307)
22 Sec. 2A-307. Priority of liens arising by attachment or
23 levy on, security interests in, and other claims to goods.
24 (1) Except as otherwise provided in Section 2A-306, a
25 creditor of a lessee takes subject to the lease contract.
26 (2) Except as otherwise provided in subsection
27 subsections (3) and (4) and in Sections 2A-306 and 2A-308, a
28 creditor of a lessor takes subject to the lease contract
29 unless: (a) the creditor holds a lien that attached to the
30 goods before the lease contract became enforceable,
31 (b) the creditor holds a security interest in the
32 goods and the lessee did not give value and receive
33 delivery of the goods without knowledge of the security
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1 interest; or
2 (c) the creditor holds a security interest in the
3 goods which was perfected (Section 9-303) before the
4 lease contract became enforceable.
5 (3) Except as otherwise provided in Sections 9-317,
6 9-321, and 9-323, a lessee takes a leasehold interest subject
7 to a security interest held by a creditor of the lessor. A
8 lessee in the ordinary course of business takes the leasehold
9 interest free of a security interest in the goods created by
10 the lessor even though the security interest is perfected
11 (Section 9-303) and the lessee knows of its existence.
12 (4) A lessee other than a lessee in the ordinary course
13 of business takes the leasehold interest free of a security
14 interest to the extent that it secures future advances made
15 after the secured party acquires knowledge of the lease or
16 more than 45 days after the lease contract becomes
17 enforceable, whichever first occurs, unless the future
18 advances are made pursuant to a commitment entered into
19 without knowledge of the lease and before the expiration of
20 the 45-day period.
21 (Source: P.A. 87-493.)
22 (810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309)
23 Sec. 2A-309. Lessor's and lessee's rights when goods
24 become fixtures.
25 (1) In this Section:
26 (a) goods are "fixtures" when they become so
27 related to particular real estate that an interest in
28 them arises under real estate law;
29 (b) a "fixture filing" is the filing, in the office
30 where a mortgage on the real estate would be filed or
31 recorded, of a financing statement covering goods that
32 are or are to become fixtures and conforming to the
33 requirements of Section 9-502(a) and (b) 9-402(5);
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1 (c) a lease is a "purchase money lease" unless the
2 lessee has possession or use of the goods or the right to
3 possession or use of the goods before the lease agreement
4 is enforceable;
5 (d) a mortgage is a "construction mortgage" to the
6 extent it secures an obligation incurred for the
7 construction of an improvement on land including the
8 acquisition cost of the land, if the recorded writing so
9 indicates; and
10 (e) "encumbrance" includes real estate mortgages
11 and other liens on real estate and all other rights in
12 real estate that are not ownership interests.
13 (2) Under this Article a lease may be of goods that are
14 fixtures or may continue in goods that become fixtures, but
15 no lease exists under this Article of ordinary building
16 materials incorporated into an improvement on land.
17 (3) This Article does not prevent creation of a lease of
18 fixtures pursuant to real estate law.
19 (4) The perfected interest of a lessor of fixtures has
20 priority over a conflicting interest of an encumbrancer or
21 owner of the real estate if:
22 (a) the lease is a purchase money lease, the
23 conflicting interest of the encumbrancer or owner arises
24 before the goods become fixtures, the interest of the
25 lessor is perfected by a fixture filing before the goods
26 become fixtures or within 10 days thereafter, and the
27 lessee has an interest of record in the real estate or is
28 in possession of the real estate; or
29 (b) the interest of the lessor is perfected by a
30 fixture filing before the interest of the encumbrancer or
31 owner is of record, the lessor's interest has priority
32 over any conflicting interest of a predecessor in title
33 of the encumbrancer or owner, and the lessee has an
34 interest of record in the real estate or is in possession
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1 of the real estate.
2 (5) The interest of a lessor of fixtures, whether or not
3 perfected, has priority over the conflicting interest of an
4 encumbrancer or owner of the real estate if:
5 (a) the fixtures are readily removable factory or
6 office machines, readily removable equipment that is not
7 primarily used or leased for use in the operation of the
8 real estate, or readily removable replacements of
9 domestic appliances that are goods subject to a consumer
10 lease, and before the goods become fixtures the lease
11 contract is enforceable; or
12 (b) the conflicting interest is a lien on the real
13 estate obtained by legal or equitable proceedings after
14 the lease contract is enforceable; or
15 (c) the encumbrancer or owner has consented in
16 writing to the lease or has disclaimed an interest in the
17 goods as fixtures; or
18 (d) the lessee has a right to remove the goods as
19 against the encumbrancer or owner. If the lessee's right
20 to remove terminates, the priority of the interest of the
21 lessor continues for a reasonable time.
22 (6) Notwithstanding subsection (4)(a) but otherwise
23 subject to subsections (4) and (5), the interest of a lessor
24 of fixtures, including the lessor's residual interest, is
25 subordinate to the conflicting interest of an encumbrancer of
26 the real estate under a construction mortgage recorded before
27 the goods become fixtures if the goods become fixtures before
28 the completion of the construction. To the extent given to
29 refinance a construction mortgage, the conflicting interest
30 of an encumbrancer of the real estate under a mortgage has
31 this priority to the same extent as the encumbrancer of the
32 real estate under the construction mortgage.
33 (7) In cases not within the preceding subsections,
34 priority between the interest of a lessor of fixtures,
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1 including the lessor's residual interest, and the conflicting
2 interest of an encumbrancer or owner of the real estate who
3 is not the lessee is determined by the priority rules
4 governing conflicting interests in real estate.
5 (8) If the interest of a lessor of fixtures, including
6 the lessor's residual interest, has priority over all
7 conflicting interests of all owners and encumbrancers of the
8 real estate, the lessor or the lessee may (i) on default,
9 expiration, termination, or cancellation of the lease
10 agreement but subject to the lease agreement and this
11 Article, or (ii) if necessary to enforce other rights and
12 remedies of the lessor or lessee under this Article, remove
13 the goods from the real estate, free and clear of all
14 conflicting interests of all owners and encumbrancers of the
15 real estate, but the lessor or lessee must reimburse any
16 encumbrancer or owner of the real estate who is not the
17 lessee and who has not otherwise agreed for the cost of
18 repair of any physical injury, but not for any diminution in
19 value of the real estate caused by the absence of the goods
20 removed or by any necessity of replacing them. A person
21 entitled to reimbursement may refuse permission to remove
22 until the party seeking removal gives adequate security for
23 the performance of this obligation.
24 (9) Even though the lease agreement does not create a
25 security interest, the interest of a lessor of fixtures,
26 including the lessor's residual interest, is perfected by
27 filing a financing statement as a fixture filing for leased
28 goods that are or are to become fixtures in accordance with
29 the relevant provisions of the Article on Secured
30 Transactions (Article 9).
31 (Source: P.A. 87-493.)
32 (810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
33 Sec. 4-210. Security interest of collecting bank in
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1 items, accompanying documents and proceeds.
2 (a) A collecting bank has a security interest in an item
3 and any accompanying documents or the proceeds of either:
4 (1) in case of an item deposited in an account, to
5 the extent to which credit given for the item has been
6 withdrawn or applied;
7 (2) in case of an item for which it has given
8 credit available for withdrawal as of right, to the
9 extent of the credit given, whether or not the credit is
10 drawn upon or there is a right of charge-back; or
11 (3) if it makes an advance on or against the item.
12 (b) If credit given for several items received at one
13 time or pursuant to a single agreement is withdrawn or
14 applied in part, the security interest remains upon all the
15 items, any accompanying documents or the proceeds of either.
16 For the purpose of this Section, credits first given are
17 first withdrawn.
18 (c) Receipt by a collecting bank of a final settlement
19 for an item is a realization on its security interest in the
20 item, accompanying documents, and proceeds. So long as the
21 bank does not receive final settlement for the item or give
22 up possession of the item or accompanying documents for
23 purposes other than collection, the security interest
24 continues to that extent and is subject to Article 9, but:
25 (1) no security agreement is necessary to make the
26 security interest enforceable Section 9-203(b)(3)(A)
27 9-203 (1)(a);
28 (2) no filing is required to perfect the security
29 interest; and
30 (3) the security interest has priority over
31 conflicting perfected security interests in the item,
32 accompanying documents, or proceeds.
33 (Source: P.A. 87-582; 87-1135.)
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1 (810 ILCS 5/5-118 new)
2 Sec. 5-118. Security interest of issuer or nominated
3 person.
4 (a) An issuer or nominated person has a security
5 interest in a document presented under a letter of credit to
6 the extent that the issuer or nominated person honors or
7 gives value for the presentation.
8 (b) So long as and to the extent that an issuer or
9 nominated person has not been reimbursed or has not otherwise
10 recovered the value given with respect to a security interest
11 in a document under subsection (a), the security interest
12 continues and is subject to Article 9, but:
13 (1) a security agreement is not necessary to make
14 the security interest enforceable under Section
15 9-203(b)(3);
16 (2) if the document is presented in a medium other
17 than a written or other tangible medium, the security
18 interest is perfected; and
19 (3) if the document is presented in a written or
20 other tangible medium and is not a certificated security,
21 chattel paper, a document of title, an instrument, or a
22 letter of credit, the security interest is perfected and
23 has priority over a conflicting security interest in the
24 document so long as the debtor does not have possession
25 of the document.
26 (810 ILCS 5/7-503) (from Ch. 26, par. 7-503)
27 Sec. 7-503. Document of title to goods defeated in
28 certain cases.
29 (1) A document of title confers no right in goods
30 against a person who before issuance of the document had a
31 legal interest or a perfected security interest in them and
32 who neither
33 (a) delivered or entrusted them or any document of
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1 title covering them to the bailor or his nominee with actual
2 or apparent authority to ship, store, or sell with power to
3 obtain delivery under this Article (Section 7--403) or with
4 power of disposition under this Act (Sections 2--403 and
5 9-320 9--307) or other statute or rule of law; nor
6 (b) acquiesced in the procurement by the bailor or
7 his nominee of any document of title.
8 (2) Title to goods based upon an unaccepted delivery
9 order is subject to the rights of anyone to whom a negotiable
10 warehouse receipt or bill of lading covering the goods has
11 been duly negotiated. Such a title may be defeated under the
12 next section to the same extent as the right of the issuer or
13 a transferee from the issuer.
14 (3) Title to goods based upon a bill of lading issued to
15 a freight forwarder is subject to the rights of anyone to
16 whom a bill issued by the freight forwarder is duly
17 negotiated; but delivery by the carrier in accordance with
18 Part 4 of this Article pursuant to its own bill of lading
19 discharges the carrier's obligation to deliver.
20 (Source: Laws 1961, p. 2101.)
21 (810 ILCS 5/8-103) (from Ch. 26, par. 8-103)
22 Sec. 8-103. Rules for determining whether certain
23 obligations and interests are securities or financial assets.
24 (a) A share or similar equity interest issued by a
25 corporation, business trust, joint stock company, or similar
26 entity is a security.
27 (b) An "investment company security" is a security.
28 "Investment company security" means a share or similar equity
29 interest issued by an entity that is registered as an
30 investment company under the federal investment company laws,
31 an interest in a unit investment trust that is so registered,
32 or a face-amount certificate issued by a face-amount
33 certificate company that is so registered. Investment
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1 company security does not include an insurance policy or
2 endowment policy or annuity contract issued by an insurance
3 company.
4 (c) An interest in a partnership or limited liability
5 company is not a security unless it is dealt in or traded on
6 securities exchanges or in securities markets, its terms
7 expressly provide that it is a security governed by this
8 Article, or it is an investment company security. However,
9 an interest in a partnership or limited liability company is
10 a financial asset if it is held in a securities account.
11 (d) A writing that is a security certificate is governed
12 by this Article and not by Article 3, even though it also
13 meets the requirements of that Article. However, a
14 negotiable instrument governed by Article 3 is a financial
15 asset if it is held in a securities account.
16 (e) An option or similar obligation issued by a clearing
17 corporation to its participants is not a security, but is a
18 financial asset.
19 (f) A commodity contract, as defined in Section
20 9-102(a)(15) 9-115, is not a security or a financial asset.
21 (Source: P.A. 89-364, eff. 1-1-96.)
22 (810 ILCS 5/8-106) (from Ch. 26, par. 8-106)
23 Sec. 8-106. Control.
24 (a) A purchaser has "control" of a certificated security
25 in bearer form if the certificated security is delivered to
26 the purchaser.
27 (b) A purchaser has "control" of a certificated security
28 in registered form if the certificated security is delivered
29 to the purchaser, and:
30 (1) the certificate is indorsed to the purchaser or
31 in blank by an effective indorsement; or
32 (2) the certificate is registered in the name of
33 the purchaser, upon original issue or registration of
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1 transfer by the issuer.
2 (c) A purchaser has "control" of an uncertificated
3 security if:
4 (1) the uncertificated security is delivered to the
5 purchaser; or
6 (2) the issuer has agreed that it will comply with
7 instructions originated by the purchaser without further
8 consent by the registered owner; or
9 (3) another person has control of the security
10 entitlement on behalf of the purchaser or, having
11 previously acquired control of the security entitlement,
12 acknowledges that it has control on behalf of the
13 purchaser.
14 (d) A purchaser has "control" of a security entitlement
15 if:
16 (1) the purchaser becomes the entitlement holder;
17 or
18 (2) the securities intermediary has agreed that it
19 will comply with entitlement orders originated by the
20 purchaser without further consent by the entitlement
21 holder.
22 (e) If an interest in a security entitlement is granted
23 by the entitlement holder to the entitlement holder's own
24 securities intermediary, the securities intermediary has
25 control.
26 (f) A purchaser who has satisfied the requirements of
27 subsection (c)(2) or (d)(2) has control even if the
28 registered owner in the case of subsection (c)(2) or the
29 entitlement holder in the case of subsection (d)(2) retains
30 the right to make substitutions for the uncertificated
31 security or security entitlement, to originate instructions
32 or entitlement orders to the issuer or securities
33 intermediary, or otherwise to deal with the uncertificated
34 security or security entitlement.
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1 (g) An issuer or a securities intermediary may not enter
2 into an agreement of the kind described in subsection (c)(2)
3 or (d)(2) without the consent of the registered owner or
4 entitlement holder, but an issuer or a securities
5 intermediary is not required to enter into such an agreement
6 even though the registered owner or entitlement holder so
7 directs. An issuer or securities intermediary that has
8 entered into such an agreement is not required to confirm the
9 existence of the agreement to another party unless requested
10 to do so by the registered owner or entitlement holder.
11 (Source: P.A. 89-364, eff. 1-1-96.)
12 (810 ILCS 5/8-110)
13 Sec. 8-110. Applicability; choice of law.
14 (a) The local law of the issuer's jurisdiction, as
15 specified in subsection (d), governs:
16 (1) the validity of a security;
17 (2) the rights and duties of the issuer with
18 respect to registration of transfer;
19 (3) the effectiveness of registration of transfer
20 by the issuer;
21 (4) whether the issuer owes any duties to an
22 adverse claimant to a security; and
23 (5) whether an adverse claim can be asserted
24 against a person to whom transfer of a certificated or
25 uncertificated security is registered or a person who
26 obtains control of an uncertificated security.
27 (b) The local law of the securities intermediary's
28 jurisdiction, as specified in subsection (e), governs:
29 (1) acquisition of a security entitlement from the
30 securities intermediary;
31 (2) the rights and duties of the securities
32 intermediary and entitlement holder arising out of a
33 security entitlement;
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1 (3) whether the securities intermediary owes any
2 duties to an adverse claimant to a security entitlement;
3 and
4 (4) whether an adverse claim can be asserted
5 against a person who acquires a security entitlement from
6 the securities intermediary or a person who purchases a
7 security entitlement or interest therein from an
8 entitlement holder.
9 (c) The local law of the jurisdiction in which a
10 security certificate is located at the time of delivery
11 governs whether an adverse claim can be asserted against a
12 person to whom the security certificate is delivered.
13 (d) "Issuer's jurisdiction" means the jurisdiction under
14 which the issuer of the security is organized or, if
15 permitted by the law of that jurisdiction, the law of another
16 jurisdiction specified by the issuer. An issuer organized
17 under the law of this State may specify the law of another
18 jurisdiction as the law governing the matters specified in
19 subsection (a)(2) through (5).
20 (e) The following rules determine a "securities
21 intermediary's jurisdiction" for purposes of this Section:
22 (1) If an agreement between the securities
23 intermediary and its entitlement holder governing the
24 securities account expressly provides that a particular
25 jurisdiction is the securities intermediary's
26 jurisdiction for purposes of this Part, this Article, or
27 this Act specifies that it is governed by the law of a
28 particular jurisdiction, that jurisdiction is the
29 securities intermediary's jurisdiction.
30 (2) If paragraph (1) does not apply and an
31 agreement between the securities intermediary and its
32 entitlement holder governing the securities account
33 expressly provides that the agreement is governed by the
34 law of a particular jurisdiction, that jurisdiction is
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1 the securities intermediary's jurisdiction.
2 (3) If neither paragraph (1) nor paragraph (2)
3 applies and an agreement between the securities
4 intermediary and its entitlement holder governing the
5 securities account does not specify the governing law as
6 provided in paragraph (1), but expressly provides
7 specifies that the securities account is maintained at an
8 office in a particular jurisdiction, that jurisdiction is
9 the securities intermediary's jurisdiction.
10 (4) (3) If none of the preceding paragraphs applies
11 an agreement between the securities intermediary and its
12 entitlement holder does not specify a jurisdiction as
13 provided in paragraph (1) or (2), the securities
14 intermediary's jurisdiction is the jurisdiction in which
15 is located the office identified in an account statement
16 as the office serving the entitlement holder's account is
17 located.
18 (5) (4) If none of the preceding paragraphs
19 applies, an agreement between the securities intermediary
20 and its entitlement holder does not specify a
21 jurisdiction as provided in paragraph (1) or (2) and an
22 account statement does not identify an office serving the
23 entitlement holder's account as provided in paragraph
24 (3), the securities intermediary's jurisdiction is the
25 jurisdiction in which is located the chief executive
26 office of the securities intermediary is located.
27 (f) A securities intermediary's jurisdiction is not
28 determined by the physical location of certificates
29 representing financial assets, or by the jurisdiction in
30 which is organized the issuer of the financial asset with
31 respect to which an entitlement holder has a security
32 entitlement, or by the location of facilities for data
33 processing or other record keeping concerning the account.
34 (Source: P.A. 89-364, eff. 1-1-96.)
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1 (810 ILCS 5/8-301) (from Ch. 26, par. 8-301)
2 Sec. 8-301. Delivery.
3 (a) Delivery of a certificated security to a purchaser
4 occurs when:
5 (1) the purchaser acquires possession of the
6 security certificate;
7 (2) another person, other than a securities
8 intermediary, either acquires possession of the security
9 certificate on behalf of the purchaser or, having
10 previously acquired possession of the certificate,
11 acknowledges that it holds for the purchaser; or
12 (3) a securities intermediary acting on behalf of
13 the purchaser acquires possession of the security
14 certificate, only if the certificate is in registered
15 form and is (i) registered in the name of the purchaser,
16 (ii) payable to the order of the purchaser, or (iii) has
17 been specially indorsed to the purchaser by an effective
18 indorsement and has not been indorsed to the securities
19 intermediary or in blank.
20 (b) Delivery of an uncertificated security to a
21 purchaser occurs when:
22 (1) the issuer registers the purchaser as the
23 registered owner, upon original issue or registration of
24 transfer; or
25 (2) another person, other than a securities
26 intermediary, either becomes the registered owner of the
27 uncertificated security on behalf of the purchaser or,
28 having previously become the registered owner,
29 acknowledges that it holds for the purchaser.
30 (Source: P.A. 89-364, eff. 1-1-96.)
31 (810 ILCS 5/8-302) (from Ch. 26, par. 8-302)
32 Sec. 8-302. Rights of purchaser.
33 (a) Except as otherwise provided in subsections (b) and
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1 (c), upon delivery of a certificated or uncertificated
2 security to a purchaser, the purchaser acquires all rights in
3 the security that the transferor had or had power to
4 transfer.
5 (b) A purchaser of a limited interest acquires rights
6 only to the extent of the interest purchased.
7 (c) A purchaser of a certificated security who as a
8 previous holder had notice of an adverse claim does not
9 improve its position by taking from a protected purchaser.
10 (Source: P.A. 89-364, eff. 1-1-96.)
11 (810 ILCS 5/8-510)
12 Sec. 8-510. Rights of purchaser of security entitlement
13 from entitlement holder.
14 (a) In a case not covered by the priority rules in
15 Article 9 or the rules stated in subsection (c), an action
16 based on an adverse claim to a financial asset or security
17 entitlement, whether framed in conversion, replevin,
18 constructive trust, equitable lien, or other theory, may not
19 be asserted against a person who purchases a security
20 entitlement, or an interest therein, from an entitlement
21 holder if the purchaser gives value, does not have notice of
22 the adverse claim, and obtains control.
23 (b) If an adverse claim could not have been asserted
24 against an entitlement holder under Section 8-502, the
25 adverse claim cannot be asserted against a person who
26 purchases a security entitlement, or an interest therein,
27 from the entitlement holder.
28 (c) In a case not covered by the priority rules in
29 Article 9, a purchaser for value of a security entitlement,
30 or an interest therein, who obtains control has priority over
31 a purchaser of a security entitlement, or an interest
32 therein, who does not obtain control. Except as otherwise
33 provided in subsection (d), purchasers who have control rank
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1 according to priority in time of:
2 (1) the purchaser's becoming the person for whom
3 the securities account, in which the security entitlement
4 is carried, is maintained, if the purchaser obtained
5 control under Section 8-106(d)(1);
6 (2) the securities intermediary's agreement to
7 comply with the purchaser's entitlement orders with
8 respect to security entitlements carried or to be
9 carried in the securities account in which the security
10 entitlement is carried, if the purchaser obtained control
11 under Section 8-106(d)(2); or
12 (3) if the purchaser obtained control through
13 another person under Section 8-106(d)(3), the time on
14 which priority would be based under this subsection if
15 the other person were the secured party.
16 (d) A equally, except that a securities intermediary as
17 purchaser has priority over a conflicting purchaser who has
18 control unless otherwise agreed by the securities
19 intermediary.
20 (Source: P.A. 89-364, eff. 1-1-96.)
21 Section 15. The Local Records Act is amended by changing
22 Section 14 as follows:
23 (50 ILCS 205/14) (from Ch. 116, par. 43.114)
24 Sec. 14. Part 5 4 of Article 9 of the "Uniform Commercial
25 Code", approved July 31, 1961, as amended, is subject to the
26 provisions of this Act, as now or hereafter amended.
27 (Source: P.A. 76-1708.)
28 Section 20. The Counties Code is amended by changing
29 Section 3-5018 as follows:
30 (55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018)
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1 Sec. 3-5018. Fees. The recorder elected as provided for
2 in this Division shall receive such fees as are or may be
3 provided for him by law, in case of provision therefor:
4 otherwise he shall receive the same fees as are or may be
5 provided in this Section, except when increased by county
6 ordinance pursuant to the provisions of this Section, to be
7 paid to the county clerk for his services in the office of
8 recorder for like services. No filing fee shall be charged
9 for providing informational copies of financing statements to
10 the recorder pursuant to subsection (8) of Section 9-403 of
11 the Uniform Commercial Code.
12 For recording deeds or other instruments $12 for the
13 first 4 pages thereof, plus $1 for each additional page
14 thereof, plus $1 for each additional document number therein
15 noted. The aggregate minimum fee for recording any one
16 instrument shall not be less than $12.
17 For recording deeds or other instruments wherein the
18 premises affected thereby are referred to by document number
19 and not by legal description a fee of $1 in addition to that
20 hereinabove referred to for each document number therein
21 noted.
22 For recording assignments of mortgages, leases or liens
23 $12 for the first 4 pages thereof, plus $1 for each
24 additional page thereof. However, except for leases and
25 liens pertaining to oil, gas and other minerals, whenever a
26 mortgage, lease or lien assignment assigns more than one
27 mortgage, lease or lien document, a $7 fee shall be charged
28 for the recording of each such mortgage, lease or lien
29 document after the first one.
30 For recording maps or plats of additions or subdivisions
31 approved by the county or municipality (including the
32 spreading of the same of record in map case or other proper
33 books) or plats of condominiums $50 for the first page, plus
34 $1 for each additional page thereof except that in the case
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1 of recording a single page, legal size 8 1/2 x 14, plat of
2 survey in which there are no more than two lots or parcels of
3 land, the fee shall be $12. In each county where such maps
4 or plats are to be recorded, the recorder may require the
5 same to be accompanied by such number of exact, true and
6 legible copies thereof as the recorder deems necessary for
7 the efficient conduct and operation of his office.
8 For certified copies of records the same fees as for
9 recording, but in no case shall the fee for a certified copy
10 of a map or plat of an addition, subdivision or otherwise
11 exceed $10.
12 Each certificate of such recorder of the recording of the
13 deed or other writing and of the date of recording the same
14 signed by such recorder, shall be sufficient evidence of the
15 recording thereof, and such certificate including the
16 indexing of record, shall be furnished upon the payment of
17 the fee for recording the instrument, and no additional fee
18 shall be allowed for the certificate or indexing.
19 The recorder shall charge an additional fee, in an amount
20 equal to the fee otherwise provided by law, for recording a
21 document (other than a document filed under the Plat Act or
22 the Uniform Commercial Code) that does not conform to the
23 following standards:
24 (1) The document shall consist of one or more
25 individual sheets measuring 8.5 inches by 11 inches, not
26 permanently bound and not a continuous form. Graphic
27 displays accompanying a document to be recorded that
28 measure up to 11 inches by 17 inches shall be recorded
29 without charging an additional fee.
30 (2) The document shall be legibly printed in black
31 ink, by hand, type, or computer. Signatures and dates
32 may be in contrasting colors if they will reproduce
33 clearly.
34 (3) The document shall be on white paper of not
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1 less than 20-pound weight and shall have a clean margin
2 of at least one-half inch on the top, the bottom, and
3 each side. Margins may be used for non-essential
4 notations that will not affect the validity of the
5 document, including but not limited to form numbers, page
6 numbers, and customer notations.
7 (4) The first page of the document shall contain a
8 blank space, measuring at least 3 inches by 5 inches,
9 from the upper right corner.
10 (5) The document shall not have any attachment
11 stapled or otherwise affixed to any page.
12 A document that does not conform to these standards shall not
13 be recorded except upon payment of the additional fee
14 required under this paragraph. This paragraph, as amended by
15 this amendatory Act of 1995, applies only to documents dated
16 after the effective date of this amendatory Act of 1995.
17 The county board of any county may provide for an
18 additional charge of $3 for filing every instrument, paper,
19 or notice for record, in order to defray the cost of
20 converting the county recorder's document storage system to
21 computers or micrographics.
22 A special fund shall be set up by the treasurer of the
23 county and such funds collected pursuant to Public Act
24 83-1321 shall be used solely for a document storage system to
25 provide the equipment, materials and necessary expenses
26 incurred to help defray the costs of implementing and
27 maintaining such a document records system.
28 The foregoing fees allowed by this Section are the
29 maximum fees that may be collected from any officer, agency,
30 department or other instrumentality of the State. The county
31 board may, however, by ordinance, increase the fees allowed
32 by this Section and collect such increased fees from all
33 persons and entities other than officers, agencies,
34 departments and other instrumentalities of the State if the
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1 increase is justified by an acceptable cost study showing
2 that the fees allowed by this Section are not sufficient to
3 cover the cost of providing the service.
4 A statement of the costs of providing each service,
5 program and activity shall be prepared by the county board.
6 All supporting documents shall be public record and subject
7 to public examination and audit. All direct and indirect
8 costs, as defined in the United States Office of Management
9 and Budget Circular A-87, may be included in the
10 determination of the costs of each service, program and
11 activity.
12 (Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.)
13 Section 25. The Public Utilities Act is amended by
14 changing Section 18-107 as follows:
15 (220 ILCS 5/18-107)
16 Sec. 18-107. Security interests in intangible transition
17 property and grantee instruments.
18 (a) Notwithstanding any other provision of law, neither
19 intangible transition property, grantee instruments nor any
20 right, title or interest therein, shall constitute property
21 in which a security interest may be created under the Uniform
22 Commercial Code nor shall any such rights be deemed proceeds
23 of any property which is not intangible transition property
24 or grantee instruments, as the case may be. For purposes of
25 the foregoing, the terms "account" and "general intangible"
26 (as defined under Section 9-102 9-106 of the Uniform
27 Commercial Code) and the term "instrument" (as defined under
28 Section 9-102 9-105 of the Uniform Commercial Code) shall, as
29 used in the Uniform Commercial Code, be deemed to exclude any
30 such intangible transition property, grantee instruments or
31 any right, title, or interest therein.
32 (b) The granting, perfection and enforcement of security
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1 interests in intangible transition property or grantee
2 instruments are governed by this Section rather than by
3 Article 9 of the Uniform Commercial Code.
4 (c) A valid and enforceable security interest in
5 intangible transition property and in grantee instruments
6 shall attach and be perfected only by the means set forth
7 below in this subsection (c) of Section 18-107:
8 (1) To the extent transitional funding instruments
9 or grantee instruments are purported to be secured by
10 intangible transition property or to the extent
11 transitional funding instruments are purported to be
12 secured by grantee instruments, as the case may be, as
13 specified in the applicable transitional funding order,
14 the lien of the transitional funding instruments and
15 grantee instruments, if any, shall attach automatically
16 to such intangible transition property and grantee
17 instruments, if any, from the time of issuance of the
18 transitional funding instruments and grantee instruments,
19 if any. Such lien shall be a valid and enforceable
20 security interest in the intangible transition property
21 or the grantee instruments, as the case may be, securing
22 the transitional funding instruments and grantee
23 instruments, if any, and shall be continuously perfected
24 if, before the date of issuance of the applicable
25 transitional funding instruments or grantee instruments,
26 if any, or within no more than 10 days thereafter, a
27 filing has been made by or on behalf of the holder with
28 the Chief Clerk of the Commission stating that such
29 transitional funding instruments or grantee instruments,
30 if any, have been issued. Any such filing made with the
31 Commission in respect to such transitional funding
32 instruments or grantee instruments shall take precedence
33 over any subsequent filing except as may otherwise be
34 provided in the applicable transitional funding order.
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1 (2) The liens under subparagraph (1) are
2 enforceable against the electric utility, any assignee,
3 grantee or issuer, and all third parties, including
4 judicial lien creditors, subject only to the rights of
5 any third parties holding security interests in the
6 intangible transition property or grantee instruments
7 previously perfected in the manner described in this
8 subsection if value has been given by the purchasers of
9 transitional funding instruments or grantee instruments.
10 A perfected lien in intangible transition property and
11 grantee instruments, if any, is a continuously perfected
12 security interest in all then existing or thereafter
13 arising revenues and proceeds arising with respect to the
14 associated intangible transition property or grantee
15 instruments, as the case may be, whether or not the
16 electric power and energy included in the calculation of
17 such revenues and proceeds have been provided. The lien
18 created under this subsection is perfected and ranks
19 prior to any other lien, including any judicial lien,
20 which subsequently attaches to the intangible transition
21 property or grantee instruments, as the case may be, and
22 to any other rights created by the transitional funding
23 order or any revenues or proceeds of the foregoing. The
24 relative priority of a lien created under this subsection
25 is not defeated or adversely affected by changes to the
26 transitional funding order or to the instrument funding
27 charges payable by any retail customer, class of retail
28 customers or other person or group of persons obligated
29 to pay such charges.
30 (3) The relative priority of a lien created under
31 this subsection is not defeated or adversely affected by
32 the commingling of revenues arising with respect to
33 intangible transition property or grantee instruments
34 with funds of the electric utility or other funds of the
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1 assignee, issuer or grantee.
2 (4) If an event of default occurs under
3 transitional funding instruments or grantee instruments,
4 the holders thereof or their authorized representatives,
5 as secured parties, may foreclose or otherwise enforce
6 the lien in the grantee instruments or in the intangible
7 transition property securing the transitional funding
8 instruments or grantee instruments, as applicable,
9 subject to the rights of any third parties holding prior
10 security interests in the intangible transition property
11 or grantee instruments previously perfected in the manner
12 provided in this subsection. Upon application by the
13 holders or their authorized representatives, without
14 limiting their other remedies, the Commission shall order
15 the sequestration and payment to the holders or their
16 authorized representatives of revenues arising with
17 respect to the intangible transition property or grantee
18 instruments pledged to the holders. An order under this
19 subsection shall remain in full force and effect
20 notwithstanding any bankruptcy, reorganization, or other
21 insolvency proceedings with respect to the electric
22 utility, grantee, assignee or issuer.
23 (5) The Commission shall maintain segregated
24 records which reflect the date and time of receipt of all
25 filings made under this subsection. The Commission may
26 provide that transfers of intangible transition property
27 or of grantee instruments be filed in accordance with the
28 same system.
29 (Source: P.A. 90-561, eff. 12-16-97.)
30 Section 30. The Illinois Vehicle Code is amended by
31 changing Section 3-114 as follows:
32 (625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114)
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1 Sec. 3-114. Transfer by operation of law.
2 (a) If the interest of an owner in a vehicle passes to
3 another other than by voluntary transfer, the transferee
4 shall, except as provided in paragraph (b), promptly mail or
5 deliver within 20 days to the Secretary of State the last
6 certificate of title, if available, proof of the transfer,
7 and his application for a new certificate in the form the
8 Secretary of State prescribes. It shall be unlawful for any
9 person having possession of a certificate of title for a
10 motor vehicle, semi-trailer, or house car by reason of his
11 having a lien or encumbrance on such vehicle, to fail or
12 refuse to deliver such certificate to the owner, upon the
13 satisfaction or discharge of the lien or encumbrance,
14 indicated upon such certificate of title.
15 (b) If the interest of an owner in a vehicle passes to
16 another under the provisions of the Small Estates provisions
17 of the Probate Act of 1975 the transferee shall promptly mail
18 or deliver to the Secretary of State, within 120 days, the
19 last certificate of title, if available, the documentation
20 required under the provisions of the Probate Act of 1975, and
21 an application for certificate of title. The Small Estate
22 Affidavit form shall be furnished by the Secretary of State.
23 The transfer may be to the transferee or to the nominee of
24 the transferee.
25 (c) If the interest of an owner in a vehicle passes to
26 another under other provisions of the Probate Act of 1975, as
27 amended, and the transfer is made by a representative or
28 guardian, such transferee shall promptly mail or deliver to
29 the Secretary of State, the last certificate of title, if
30 available, and a certified copy of the letters of office or
31 guardianship, and an application for certificate of title.
32 Such application shall be made before the estate is closed.
33 The transfer may be to the transferee or to the nominee of
34 the transferee.
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1 (d) If the interest of an owner in joint tenancy passes
2 to the other joint tenant with survivorship rights as
3 provided by law, the transferee shall promptly mail or
4 deliver to the Secretary of State, the last certificate of
5 title, if available, proof of death of the one joint tenant
6 and survivorship of the surviving joint tenant, and an
7 application for certificate of title. Such application shall
8 be made within 120 days after the death of the joint tenant.
9 The transfer may be to the transferee or to the nominee of
10 the transferee.
11 (e) The Secretary of State shall transfer a decedent's
12 vehicle title to any legatee, representative or heir of the
13 decedent who submits to the Secretary a death certificate and
14 an affidavit by an attorney at law on the letterhead
15 stationery of the attorney at law stating the facts of the
16 transfer.
17 (f) Repossession with assignment of title. In all cases
18 wherein a lienholder has repossessed a vehicle by other than
19 judicial process and holds it for resale under a security
20 agreement, and the owner of record has executed an assignment
21 of the existing certificate of title after default, the
22 lienholder may proceed to sell or otherwise dispose of the
23 vehicle as authorized under the Uniform Commercial Code.
24 Upon selling the vehicle to another person, the lienholder
25 need not send the certificate of title to the Secretary of
26 State, but shall promptly and within 20 days mail or deliver
27 to the purchaser as transferee the existing certificate of
28 title for the repossessed vehicle, reflecting the release of
29 the lienholder's security interest in the vehicle. The
30 application for a certificate of title made by the purchaser
31 shall comply with subsection (a) of Section 3-104 and be
32 accompanied by the existing certificate of title for the
33 repossessed vehicle. The lienholder shall execute the
34 assignment and warranty of title showing the name and address
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1 of the purchaser in the spaces provided therefor on the
2 certificate of title or as the Secretary of State prescribes.
3 The lienholder shall complete the assignment of title in the
4 certificate of title to reflect the transfer of the vehicle
5 to the lienholder and also a reassignment to reflect the
6 transfer from the lienholder to the purchaser. For this
7 purpose, the lienholder is specifically authorized to
8 complete and execute the space reserved in the certificate of
9 title for a dealer reassignment, notwithstanding that the
10 lienholder is not a licensed dealer. Nothing herein shall be
11 construed to mean that the lienholder is taking title to the
12 repossessed vehicle for purposes of liability for retailer
13 occupation, vehicle use, or other tax with respect to the
14 proceeds from the repossession sale. Delivery of the
15 existing certificate of title to the purchaser shall be
16 deemed disclosure to the purchaser of the owner of the
17 vehicle.
18 (f-5) Repossession without assignment of title. In all
19 cases wherein a lienholder has repossessed a vehicle by other
20 than judicial process and holds it for resale under a
21 security agreement, and the owner of record has not executed
22 an assignment of the existing certificate of title, the
23 lienholder shall comply with the following provisions:
24 (1) Prior to sale, the lienholder shall deliver or
25 mail to the owner at the owner's last known address and
26 to any other lienholder of record, a notice of redemption
27 setting forth the following information: (i) the name of
28 the owner of record and in bold type at or near the top
29 of the notice a statement that the owner's vehicle was
30 repossessed on a specified date for failure to make
31 payments on the loan (or other reason), (ii) a
32 description of the vehicle subject to the lien sufficient
33 to identify it, (iii) the right of the owner to redeem
34 the vehicle, (iv) the lienholder's intent to sell or
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1 otherwise dispose of the vehicle after the expiration of
2 21 days from the date of mailing or delivery of the
3 notice, and (v) the name, address, and telephone number
4 of the lienholder from whom information may be obtained
5 concerning the amount due to redeem the vehicle and from
6 whom the vehicle may be redeemed under Section 9-623
7 9-506 of the Uniform Commercial Code. At the
8 lienholder's option, the information required to be set
9 forth in this notice of redemption may be made a part of
10 or accompany the notification of sale or other
11 disposition required under subsection (3) of Section
12 9-611 9-504 of the Uniform Commercial Code, but none of
13 the information required by this notice shall be
14 construed to impose any requirement under Article 9 of
15 the Uniform Commercial Code.
16 (2) With respect to the repossession of a vehicle
17 used primarily for personal, family, or household
18 purposes, the lienholder shall also deliver or mail to
19 the owner at the owner's last known address an affidavit
20 of defense. The affidavit of defense shall accompany the
21 notice of redemption required in subdivision (f-5)(1) of
22 this Section. The affidavit of defense shall (i) identify
23 the lienholder, owner, and the vehicle; (ii) provide
24 space for the owner to state the defense claimed by the
25 owner; and (iii) include an acknowledgment by the owner
26 that the owner may be liable to the lienholder for fees,
27 charges, and costs incurred by the lienholder in
28 establishing the insufficiency or invalidity of the
29 owner's defense. To stop the transfer of title, the
30 affidavit of defense must be received by the lienholder
31 no later than 21 days after the date of mailing or
32 delivery of the notice required in subdivision (f-5)(1)
33 of this Section. If the lienholder receives the affidavit
34 from the owner in a timely manner, the lienholder must
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1 apply to a court of competent jurisdiction to determine
2 if the lienholder is entitled to possession of the
3 vehicle.
4 (3) Upon selling the vehicle to another person, the
5 lienholder need not send the certificate of title to the
6 Secretary of State, but shall promptly and within 20 days
7 mail or deliver to the purchaser as transferee (i) the
8 existing certificate of title for the repossessed
9 vehicle, reflecting the release of the lienholder's
10 security interest in the vehicle; and (ii) an affidavit
11 of repossession made by or on behalf of the lienholder
12 which provides the following information: that the
13 vehicle was repossessed, a description of the vehicle
14 sufficient to identify it, whether the vehicle has been
15 damaged in excess of 33 1/3% of its fair market value as
16 required under subdivision (b)(3) of Section 3-117.1,
17 that the owner and any other lienholder of record were
18 given the notice required in subdivision (f-5)(1) of this
19 Section, that the owner of record was given the affidavit
20 of defense required in subdivision (f-5)(2) of this
21 Section, that the interest of the owner was lawfully
22 terminated or sold pursuant to the terms of the security
23 agreement, and the purchaser's name and address. If the
24 vehicle is damaged in excess of 33 1/3% of its fair
25 market value, the lienholder shall make application for a
26 salvage certificate under Section 3-117.1 and transfer
27 the vehicle to a person eligible to receive assignments
28 of salvage certificates identified in Section 3-118.
29 (4) The application for a certificate of title made
30 by the purchaser shall comply with subsection (a) of
31 Section 3-104 and be accompanied by the affidavit of
32 repossession furnished by the lienholder and the existing
33 certificate of title for the repossessed vehicle. The
34 lienholder shall execute the assignment and warranty of
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1 title showing the name and address of the purchaser in
2 the spaces provided therefor on the certificate of title
3 or as the Secretary of State prescribes. The lienholder
4 shall complete the assignment of title in the certificate
5 of title to reflect the transfer of the vehicle to the
6 lienholder and also a reassignment to reflect the
7 transfer from the lienholder to the purchaser. For this
8 purpose, the lienholder is specifically authorized to
9 execute the assignment on behalf of the owner as seller
10 if the owner has not done so and to complete and execute
11 the space reserved in the certificate of title for a
12 dealer reassignment, notwithstanding that the lienholder
13 is not a licensed dealer. Nothing herein shall be
14 construed to mean that the lienholder is taking title to
15 the repossessed vehicle for purposes of liability for
16 retailer occupation, vehicle use, or other tax with
17 respect to the proceeds from the repossession sale.
18 Delivery of the existing certificate of title to the
19 purchaser shall be deemed disclosure to the purchaser of
20 the owner of the vehicle. In the event the lienholder
21 does not hold the certificate of title for the
22 repossessed vehicle, the lienholder shall make
23 application for and may obtain a new certificate of title
24 in the name of the lienholder upon furnishing information
25 satisfactory to the Secretary of State. Upon receiving
26 the new certificate of title, the lienholder may proceed
27 with the sale described in subdivision (f-5)(3), except
28 that upon selling the vehicle the lienholder shall
29 promptly and within 20 days mail or deliver to the
30 purchaser the new certificate of title reflecting the
31 assignment and transfer of title to the purchaser.
32 (5) Neither the lienholder nor the owner shall file
33 with the Office of the Secretary of State the notice of
34 redemption or affidavit of defense described in
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1 subdivisions (f-5)(1) and (f-5)(2) of this Section. The
2 Office of the Secretary of State shall not determine the
3 merits of an owner's affidavit of defense, nor consider
4 any allegations or assertions regarding the validity or
5 invalidity of a lienholder's claim to the vehicle or an
6 owner's asserted defenses to the repossession action.
7 (f-7) Notice of reinstatement in certain cases.
8 (1) If, at the time of repossession by a lienholder
9 that is seeking to transfer title pursuant to subsection
10 (f-5), the owner has paid an amount equal to 30% or more
11 of the deferred payment price or total of payments due,
12 the owner may, within 21 days of the date of
13 repossession, reinstate the contract or loan agreement
14 and recover the vehicle from the lienholder by tendering
15 in a lump sum (i) the total of all unpaid amounts,
16 including any unpaid delinquency or deferral charges due
17 at the date of reinstatement, without acceleration; and
18 (ii) performance necessary to cure any default other than
19 nonpayment of the amounts due; and (iii) all reasonable
20 costs and fees incurred by the lienholder in retaking,
21 holding, and preparing the vehicle for disposition and in
22 arranging for the sale of the vehicle. Reasonable costs
23 and fees incurred by the lienholder include without
24 limitation repossession and storage expenses and, if
25 authorized by the contract or loan agreement, reasonable
26 attorneys' fees and collection agency charges.
27 (2) Tender of payment and performance pursuant to
28 this limited right of reinstatement restores to the owner
29 his rights under the contract or loan agreement as though
30 no default had occurred. The owner has the right to
31 reinstate the contract or loan agreement and recover the
32 vehicle from the lienholder only once under this
33 subsection. The lienholder may, in the lienholder's sole
34 discretion, extend the period during which the owner may
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1 reinstate the contract or loan agreement and recover the
2 vehicle beyond the 21 days allowed under this subsection,
3 and the extension shall not subject the lienholder to
4 liability to the owner under the laws of this State.
5 (3) The lienholder shall deliver or mail written
6 notice to the owner at the owner's last known address,
7 within 3 business days of the date of repossession, of
8 the owner's right to reinstate the contract or loan
9 agreement and recover the vehicle pursuant to the limited
10 right of reinstatement described in this subsection. At
11 the lienholder's option, the information required to be
12 set forth in this notice of reinstatement may be made
13 part of or accompany the notice of redemption required in
14 subdivision (f-5)(1) of this Section and the notification
15 of sale or other disposition required under subsection
16 (3) of Section 9-611 9-504 of the Uniform Commercial
17 Code, but none of the information required by this notice
18 of reinstatement shall be construed to impose any
19 requirement under Article 9 of the Uniform Commercial
20 Code.
21 (4) The reinstatement period, if applicable, and
22 the redemption period described in subdivision (f-5)(1)
23 of this Section, shall run concurrently if the
24 information required to be set forth in the notice of
25 reinstatement is part of or accompanies the notice of
26 redemption. In any event, the 21 day redemption period
27 described in subdivision (f-5)(1) of this Section shall
28 commence on the date of mailing or delivery to the owner
29 of the information required to be set forth in the notice
30 of redemption, and the 21 day reinstatement period
31 described in this subdivision, if applicable, shall
32 commence on the date of mailing or delivery to the owner
33 of the information required to be set forth in the notice
34 of reinstatement.
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1 (5) The Office of the Secretary of State shall not
2 determine the merits of an owner's claim of right to
3 reinstatement, nor consider any allegations or assertions
4 regarding the validity or invalidity of a lienholder's
5 claim to the vehicle or an owner's asserted right to
6 reinstatement. Where a lienholder is subject to
7 licensing and regulatory supervision by the State of
8 Illinois, the lienholder shall be subject to all of the
9 powers and authority of the lienholder's primary State
10 regulator to enforce compliance with the procedures set
11 forth in this subsection (f-7).
12 (f-10) Repossession by judicial process. In all cases
13 wherein a lienholder has repossessed a vehicle by judicial
14 process and holds it for resale under a security agreement,
15 order for replevin, or other court order establishing the
16 lienholder's right to possession of the vehicle, the
17 lienholder may proceed to sell or otherwise dispose of the
18 vehicle as authorized under the Uniform Commercial Code or
19 the court order. Upon selling the vehicle to another person,
20 the lienholder need not send the certificate of title to the
21 Secretary of State, but shall promptly and within 20 days
22 mail or deliver to the purchaser as transferee (i) the
23 existing certificate of title for the repossessed vehicle
24 reflecting the release of the lienholder's security interest
25 in the vehicle; (ii) a certified copy of the court order; and
26 (iii) a bill of sale identifying the new owner's name and
27 address and the year, make, model, and vehicle identification
28 number of the vehicle. The application for a certificate of
29 title made by the purchaser shall comply with subsection (a)
30 of Section 3-104 and be accompanied by the certified copy of
31 the court order furnished by the lienholder and the existing
32 certificate of title for the repossessed vehicle. The
33 lienholder shall execute the assignment and warranty of title
34 showing the name and address of the purchaser in the spaces
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1 provided therefor on the certificate of title or as the
2 Secretary of State prescribes. The lienholder shall complete
3 the assignment of title in the certificate of title to
4 reflect the transfer of the vehicle to the lienholder and
5 also a reassignment to reflect the transfer from the
6 lienholder to the purchaser. For this purpose, the
7 lienholder is specifically authorized to execute the
8 assignment on behalf of the owner as seller if the owner has
9 not done so and to complete and execute the space reserved in
10 the certificate of title for a dealer reassignment,
11 notwithstanding that the lienholder is not a licensed dealer.
12 Nothing herein shall be construed to mean that the lienholder
13 is taking title to the repossessed vehicle for purposes of
14 liability for retailer occupation, vehicle use, or other tax
15 with respect to the proceeds from the repossession sale.
16 Delivery of the existing certificate of title to the
17 purchaser shall be deemed disclosure to the purchaser of the
18 owner of the vehicle. In the event the lienholder does not
19 hold the certificate of title for the repossessed vehicle,
20 the lienholder shall make application for and may obtain a
21 new certificate of title in the name of the lienholder upon
22 furnishing information satisfactory to the Secretary of
23 State. Upon receiving the new certificate of title, the
24 lienholder may proceed with the sale described in this
25 subsection, except that upon selling the vehicle the
26 lienholder shall promptly and within 20 days mail or deliver
27 to the purchaser the new certificate of title reflecting the
28 assignment and transfer of title to the purchaser.
29 (f-15) The Secretary of State shall not issue a
30 certificate of title to a purchaser under subsection (f),
31 (f-5), or (f-10) of this Section, unless the person from whom
32 the vehicle has been repossessed by the lienholder is shown
33 to be the last registered owner of the motor vehicle. The
34 Secretary of State may provide by rule for the standards to
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1 be followed by a lienholder in assigning and transferring
2 certificates of title with respect to repossessed vehicles.
3 (f-20) If applying for a salvage certificate or a
4 junking certificate, the lienholder shall within 20 days make
5 an application to the Secretary of State for a salvage
6 certificate or a junking certificate, as set forth in this
7 Code. The Secretary of State shall not issue a salvage
8 certificate or a junking certificate to such lienholder
9 unless the person from whom such vehicle has been repossessed
10 is shown to be the last registered owner of such motor
11 vehicle and such lienholder establishes to the satisfaction
12 of the Secretary of State that he is entitled to such salvage
13 certificate or junking certificate. The Secretary of State
14 may provide by rule for the standards to be followed by a
15 lienholder in order to obtain a salvage certificate or
16 junking certificate for a repossessed vehicle.
17 (g) A person holding a certificate of title whose
18 interest in the vehicle has been extinguished or transferred
19 other than by voluntary transfer shall mail or deliver the
20 certificate, within 20 days upon request of the Secretary of
21 State. The delivery of the certificate pursuant to the
22 request of the Secretary of State does not affect the rights
23 of the person surrendering the certificate, and the action of
24 the Secretary of State in issuing a new certificate of title
25 as provided herein is not conclusive upon the rights of an
26 owner or lienholder named in the old certificate.
27 (h) The Secretary of State may decline to process any
28 application for a transfer of an interest in a vehicle
29 hereunder if any fees or taxes due under this Act from the
30 transferor or the transferee have not been paid upon
31 reasonable notice and demand.
32 (i) The Secretary of State shall not be held civilly or
33 criminally liable to any person because any purported
34 transferor may not have had the power or authority to make a
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1 transfer of any interest in any vehicle or because a
2 certificate of title issued in error is subsequently used to
3 commit a fraudulent act.
4 (Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.)
5 Section 35. The Uniform Federal Lien Registration Act is
6 amended by changing Section 4 as follows:
7 (770 ILCS 110/4) (from Ch. 82, par. 404)
8 Sec. 4. (a) If a notice of federal lien, a refiling of a
9 notice of federal lien or a notice of revocation of any
10 certificate described in subsection (b) is presented to a
11 filing officer who is:
12 (1) the Secretary of State, he shall cause the notice to
13 be marked, held and indexed in accordance with the provisions
14 of Section 9-519 9-403(4) of the Uniform Commercial Code as
15 if the notice were a financing statement within the meaning
16 of that Code; or
17 (2) any other officer described in Section 2, he shall
18 endorse thereon his identification and the date and time of
19 receipt and forthwith file it alphabetically or enter it in
20 an alphabetical index showing the name and address of the
21 person named in the notice, the date and time of receipt, the
22 title and address of the official or entity certifying the
23 lien, the total amount appearing on the notice of lien, and
24 in the case of federal tax liens, the collector's serial
25 number of the notice.
26 (b) If a certificate of release, nonattachment,
27 discharge or subordination of any lien is presented to the
28 Secretary of State for filing he shall:
29 (1) cause a certificate of release or nonattachment to
30 be marked, held and indexed as if the certificate were a
31 termination statement within the meaning of the Uniform
32 Commercial Code, but the notice of lien to which the
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1 certificate relates may not be removed from the files; and
2 (2) cause a certificate of discharge or subordination to
3 be marked, held and indexed as if the certificate were a
4 release of collateral within the meaning of the Uniform
5 Commercial Code.
6 (c) If a refiled notice of federal lien referred to in
7 subsection (a) or any of the certificates or notices referred
8 to in subsection (b) is presented for filing to any other
9 filing officer specified in Section 2, he shall permanently
10 attach the refiled notice or the certificate to the original
11 notice of lien and enter the refiled notice or the
12 certificate with the date of filing in any alphabetical lien
13 index on the line where the original notice of lien is
14 entered.
15 (d) Upon request of any person, the filing officer shall
16 issue his certificate showing whether there is on file, on
17 the date and hour stated therein, any notice of lien or
18 certificate or notice affecting any lien filed under this Act
19 or "An Act in relation to liens of the United States of
20 America", approved June 27, 1923, as amended, naming a
21 particular person, and if a notice or certificate is on file,
22 giving the date and hour of filing of each notice or
23 certificate. The fee for a certificate is $5. Upon request,
24 the filing officer shall furnish a copy of any notice of
25 federal lien, or notice or certificate affecting a federal
26 lien, for a fee of 50¢ per page.
27 (Source: P.A. 86-254.)
28 Section 40. The Toxic Substances Disclosure to Employees
29 Act is amended by changing Section 6 as follows:
30 (820 ILCS 255/6) (from Ch. 48, par. 1406)
31 Sec. 6. Exemptions. This Act shall not apply to:
32 (a) Use of toxic substances, compounds or mixtures
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1 regulated by this Act which are:
2 (1) Intended for personal consumption by employees in
3 the workplace.
4 (2) Consumer goods used, stored or sold by an employer,
5 manufacturer, importer, retailer or supplier in the same
6 form, approximate amount, concentration and manner as they
7 are sold to consumers, provided that employee exposure to
8 such consumer goods is not significantly greater than
9 consumer exposure occurring during the principal consumer
10 uses of the consumer goods. For purposes of this Act,
11 "consumer goods" shall be defined as in Section 9-102 9-109.1
12