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91_SB1231sam002
LRB9106284JSpcam04
1 AMENDMENT TO SENATE BILL 1231
2 AMENDMENT NO. . Amend Senate Bill 1231, AS AMENDED,
3 by replacing the title with the following:
4 "AN ACT in relation to secured transactions."; and
5 by replacing everything after the enacting clause with the
6 following:
7 "Section 5. The Uniform Commercial Code is amended by
8 changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106,
9 9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115,
10 9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1,
11 9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305,
12 9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308,
13 9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316,
14 9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405,
15 9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504,
16 9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections
17 9-209, 9-210, 9-315.01, 9-315.02, 9-319, 9-320, 9-320.1,
18 9-320.2, 9-321, 9-322, 9-323, 9-324, 9-325, 9-326, 9-327,
19 9-328, 9-329, 9-330, 9-331, 9-332, 9-333, 9-334, 9-335,
20 9-336, 9-337, 9-338, 9-339, 9-340, 9-341, 9-342, 9-409,
21 9-508, 9-509, 9-510, 9-511, 9-512, 9-513, 9-514, 9-515,
22 9-516, 9-517, 9-518, 9-519, 9-520, 9-521, 9-522, 9-523,
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1 9-524, 9-525, 9-526, 9-527, 9-601, 9-602, 9-603, 9-604,
2 9-605, 9-606, 9-607, 9-608, 9-609, 9-610, 9-611, 9-612,
3 9-613, 9-614, 9-615, 9-616, 9-617, 9-618, 9-619, 9-620,
4 9-621, 9-622, 9-623, 9-624, 9-625, 9-626, 9-627, 9-628,
5 9-701, 9-702, 9-703, 9-704, 9-705, 9-706, 9-707, 9-708,
6 9-709, and 9-710 changing the headings of Article 9 and Parts
7 1, 2, 3, 4, 5, and 99 of Article 9, and adding headings of
8 Parts 6 and 7 of Article 9, Subparts 1 and 2 of Part 1 of
9 Article 9, Subparts 1 and 2 of Part 2 of Article 9, Subparts
10 1, 2, 3, and 4 of Part 3 of Article 9, Subparts 1 and 2 of
11 Part 5 of Article 9, and Subparts 1 and 2 of Part 6 of
12 Article 9 as follows:
13 (810 ILCS 5/Art. 9 heading)
14 ARTICLE 9
15 SECURED TRANSACTIONS: SALES OF ACCOUNTS,
16 CONTRACT RIGHTS AND CHATTEL PAPER
17 (810 ILCS 5/Art. 9, Part 1 heading)
18 PART 1. GENERAL PROVISIONS
19 SHORT TITLE, APPLICABILITY AND DEFINITIONS
20 (810 ILCS 5/Art. 9, Part 1, Subpart 1 heading new)
21 SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
22 (810 ILCS 5/9-101) (from Ch. 26, par. 9-101)
23 Sec. 9-101. Short title. This Article may be cited as
24 Uniform Commercial Code-Secured Transactions. Short title.
25 This Article shall be known and may be cited as Uniform
26 Commercial Code--Secured Transactions.
27 (Source: Laws 1961, p. 2101.)
28 (810 ILCS 5/9-102) (from Ch. 26, par. 9-102)
29 Sec. 9-102. Definitions and index of definitions.
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1 (a) Article 9 definitions. In this Article:
2 (1) "Accession" means goods that are physically
3 united with other goods in such a manner that the
4 identity of the original goods is not lost.
5 (2) "Account", except as used in "account for",
6 means a right to payment of a monetary obligation,
7 whether or not earned by performance, (i) for property
8 that has been or is to be sold, leased, licensed,
9 assigned, or otherwise disposed of, (ii) for services
10 rendered or to be rendered, (iii) for a policy of
11 insurance issued or to be issued, (iv) for a secondary
12 obligation incurred or to be incurred, (v) for energy
13 provided or to be provided, (vi) for the use or hire of a
14 vessel under a charter or other contract, (vii) arising
15 out of the use of a credit or charge card or information
16 contained on or for use with the card, or (viii) as
17 winnings in a lottery or other game of chance operated or
18 sponsored by a State, governmental unit of a State, or
19 person licensed or authorized to operate the game by a
20 State or governmental unit of a State. The term includes
21 health-care-insurance receivables. The term does not
22 include (i) rights to payment evidenced by chattel paper
23 or an instrument, (ii) commercial tort claims, (iii)
24 deposit accounts, (iv) investment property, (v)
25 letter-of-credit rights or letters of credit, or (vi)
26 rights to payment for money or funds advanced or sold,
27 other than rights arising out of the use of a credit or
28 charge card or information contained on or for use with
29 the card.
30 (3) "Account debtor" means a person obligated on an
31 account, chattel paper, or general intangible. The term
32 does not include persons obligated to pay a negotiable
33 instrument, even if the instrument constitutes part of
34 chattel paper.
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1 (4) "Accounting", except as used in "accounting
2 for", means a record:
3 (A) authenticated by a secured party;
4 (B) indicating the aggregate unpaid secured
5 obligations as of a date not more than 35 days
6 earlier or 35 days later than the date of the
7 record; and
8 (C) identifying the components of the
9 obligations in reasonable detail.
10 (5) "Agricultural lien" means an interest, other
11 than a security interest, in farm products:
12 (A) which secures payment or performance of an
13 obligation for:
14 (i) goods or services furnished in
15 connection with a debtor's farming operation;
16 or
17 (ii) rent on real property leased by a
18 debtor in connection with its farming
19 operation;
20 (B) which is created by statute in favor of a
21 person that:
22 (i) in the ordinary course of its
23 business furnished goods or services to a
24 debtor in connection with a debtor's farming
25 operation; or
26 (ii) leased real property to a debtor in
27 connection with the debtor's farming operation;
28 and
29 (C) whose effectiveness does not depend on the
30 person's possession of the personal property.
31 (6) "As-extracted collateral" means:
32 (A) oil, gas, or other minerals that are
33 subject to a security interest that:
34 (i) is created by a debtor having an
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1 interest in the minerals before extraction; and
2 (ii) attaches to the minerals as
3 extracted; or
4 (B) accounts arising out of the sale at the
5 wellhead or minehead of oil, gas, or other minerals
6 in which the debtor had an interest before
7 extraction.
8 (7) "Authenticate" means:
9 (A) to sign; or
10 (B) to execute or otherwise adopt a symbol, or
11 encrypt or similarly process a record in whole or in
12 part, with the present intent of the authenticating
13 person to identify the person and adopt or accept a
14 record.
15 (8) "Bank" means an organization that is engaged in
16 the business of banking. The term includes savings
17 banks, savings and loan associations, credit unions, and
18 trust companies.
19 (9) "Cash proceeds" means proceeds that are money,
20 checks, deposit accounts, or the like.
21 (10) "Certificate of title" means a certificate of
22 title with respect to which a statute provides for the
23 security interest in question to be indicated on the
24 certificate as a condition or result of the security
25 interest's obtaining priority over the rights of a lien
26 creditor with respect to the collateral.
27 (11) "Chattel paper" means a record or records that
28 evidence both a monetary obligation and a security
29 interest in specific goods, a security interest in
30 specific goods and software used in the goods, a security
31 interest in specific goods and license of software used
32 in the goods, a lease of specific goods, or a lease of
33 specified goods and a license of software used in the
34 goods. In this paragraph, "monetary obligation" means a
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1 monetary obligation secured by the goods or owed under a
2 lease of the goods and includes a monetary obligation
3 with respect to software used in the goods. The term
4 does not include (i) charters or other contracts
5 involving the use or hire of a vessel or (ii) records
6 that evidence a right to payment arising out of the use
7 of a credit or charge card or information contained on or
8 for use with the card. If a transaction is evidenced by
9 records that include an instrument or series of
10 instruments, the group of records taken together
11 constitutes chattel paper.
12 (12) "Collateral" means the property subject to a
13 security interest or agricultural lien. The term
14 includes:
15 (A) proceeds to which a security interest
16 attaches;
17 (B) accounts, chattel paper, payment
18 intangibles, and promissory notes that have been
19 sold; and
20 (C) goods that are the subject of a
21 consignment.
22 (13) "Commercial tort claim" means a claim arising
23 in tort with respect to which:
24 (A) the claimant is an organization; or
25 (B) the claimant is an individual and the
26 claim:
27 (i) arose in the course of the claimant's
28 business or profession; and
29 (ii) does not include damages arising out
30 of personal injury to or the death of an
31 individual.
32 (14) "Commodity account" means an account
33 maintained by a commodity intermediary in which a
34 commodity contract is carried for a commodity customer.
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1 (15) "Commodity contract" means a commodity futures
2 contract, an option on a commodity futures contract, a
3 commodity option, or another contract if the contract or
4 option is:
5 (A) traded on or subject to the rules of a
6 board of trade that has been designated as a
7 contract market for such a contract pursuant to
8 federal commodities laws; or
9 (B) traded on a foreign commodity board of
10 trade, exchange, or market, and is carried on the
11 books of a commodity intermediary for a commodity
12 customer.
13 (16) "Commodity customer" means a person for which
14 a commodity intermediary carries a commodity contract on
15 its books.
16 (17) "Commodity intermediary" means a person that:
17 (A) is registered as a futures commission
18 merchant under federal commodities law; or
19 (B) in the ordinary course of its business
20 provides clearance or settlement services for a
21 board of trade that has been designated as a
22 contract market pursuant to federal commodities law.
23 (18) "Communicate" means:
24 (A) to send a written or other tangible
25 record;
26 (B) to transmit a record by any means agreed
27 upon by the persons sending and receiving the
28 record; or
29 (C) in the case of transmission of a record to
30 or by a filing office, to transmit a record by any
31 means prescribed by filing-office rule.
32 (19) "Consignee" means a merchant to which goods
33 are delivered in a consignment.
34 (20) "Consignment" means a transaction, regardless
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1 of its form, in which a person delivers goods to a
2 merchant for the purpose of sale and:
3 (A) the merchant:
4 (i) deals in goods of that kind under a
5 name other than the name of the person making
6 delivery;
7 (ii) is not an auctioneer; and
8 (iii) is not generally known by its
9 creditors to be substantially engaged in
10 selling the goods of others;
11 (B) with respect to each delivery, the
12 aggregate value of the goods is $1,000 or more at
13 the time of delivery;
14 (C) the goods are not consumer goods
15 immediately before delivery; and
16 (D) the transaction does not create a security
17 interest that secures an obligation.
18 (21) "Consignor" means a person that delivers goods
19 to a consignee in a consignment.
20 (22) "Consumer debtor" means a debtor in a consumer
21 transaction.
22 (23) "Consumer goods" means goods that are used or
23 bought for use primarily for personal, family, or
24 household purposes.
25 (24) "Consumer-goods transaction" means a consumer
26 transaction in which:
27 (A) an individual incurs an obligation
28 primarily for personal, family, or household
29 purposes; and
30 (B) a security interest in consumer goods
31 secures the obligation.
32 (25) "Consumer obligor" means an obligor who is an
33 individual and who incurred the obligation as part of a
34 transaction entered into primarily for personal, family,
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1 or household purposes.
2 (26) "Consumer transaction" means a transaction in
3 which (i) an individual incurs an obligation primarily
4 for personal, family, or household purposes, (ii) a
5 security interest secures the obligation, and (iii) the
6 collateral is held or acquired primarily for personal,
7 family, or household purposes. The term includes
8 consumer-goods transactions.
9 (27) "Continuation statement" means an amendment of
10 a financing statement which:
11 (A) identifies, by its file number, the
12 initial financing statement to which it relates; and
13 (B) indicates that it is a continuation
14 statement for, or that it is filed to continue the
15 effectiveness of, the identified financing
16 statement.
17 (28) "Debtor" means:
18 (A) a person having an interest, other than a
19 security interest or other lien, in the collateral,
20 whether or not the person is an obligor;
21 (B) a seller of accounts, chattel paper,
22 payment intangibles, or promissory notes; or
23 (C) a consignee.
24 (29) "Deposit account" means a demand, time,
25 savings, passbook, nonnegotiable certificates of deposit,
26 uncertificated certificates of deposit, nontransferrable
27 certificates of deposit, or similar account maintained
28 with a bank. The term does not include investment
29 property or accounts evidenced by an instrument.
30 (30) "Document" means a document of title or a
31 receipt of the type described in Section 7-201(2).
32 (31) "Electronic chattel paper" means chattel paper
33 evidenced by a record or records consisting of
34 information stored in an electronic medium.
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1 (32) "Encumbrance" means a right, other than an
2 ownership interest, in real property. The term includes
3 mortgages and other liens on real property.
4 (33) "Equipment" means goods other than inventory,
5 farm products, or consumer goods.
6 (34) "Farm products" means goods, other than
7 standing timber, with respect to which the debtor is
8 engaged in a farming operation and which are:
9 (A) crops grown, growing, or to be grown,
10 including:
11 (i) crops produced on trees, vines, and
12 bushes; and
13 (ii) aquatic goods produced in
14 aquacultural operations;
15 (B) livestock, born or unborn, including
16 aquatic goods produced in aquacultural operations;
17 (C) supplies used or produced in a farming
18 operation; or
19 (D) products of crops or livestock in their
20 unmanufactured states.
21 (35) "Farming operation" means raising,
22 cultivating, propagating, fattening, grazing, or any
23 other farming, livestock, or aquacultural operation.
24 (36) "File number" means the number assigned to an
25 initial financing statement pursuant to Section 9-519(a).
26 (37) "Filing office" means an office designated in
27 Section 9-501 as the place to file a financing statement.
28 (38) "Filing-office rule" means a rule adopted
29 pursuant to Section 9-526.
30 (39) "Financing statement" means a record or
31 records composed of an initial financing statement and
32 any filed record relating to the initial financing
33 statement.
34 (40) "Fixture filing" means the filing of a
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1 financing statement covering goods that are or are to
2 become fixtures and satisfying Section 9-502(a) and (b).
3 The term includes the filing of a financing statement
4 covering goods of a transmitting utility which are or are
5 to become fixtures.
6 (41) "Fixtures" means goods that have become so
7 related to particular real property that an interest in
8 them arises under real property law.
9 (42) "General intangible" means any personal
10 property, including things in action, other than
11 accounts, chattel paper, commercial tort claims, deposit
12 accounts, documents, goods, instruments, investment
13 property, letter-of-credit rights, letters of credit,
14 money, and oil, gas, or other minerals before extraction.
15 The term includes payment intangibles and software.
16 (43) "Good faith" means honesty in fact and the
17 observance of reasonable commercial standards of fair
18 dealing.
19 (44) "Goods" means all things that are movable when
20 a security interest attaches. The term includes (i)
21 fixtures, (ii) standing timber that is to be cut and
22 removed under a conveyance or contract for sale, (iii)
23 the unborn young of animals, (iv) crops grown, growing,
24 or to be grown, even if the crops are produced on trees,
25 vines, or bushes, and (v) manufactured homes. The term
26 also includes a computer program embedded in goods and
27 any supporting information provided in connection with a
28 transaction relating to the program if (i) the program is
29 associated with the goods in such a manner that it
30 customarily is considered part of the goods, or (ii) by
31 becoming the owner of the goods, a person acquires a
32 right to use the program in connection with the goods.
33 The term does not include a computer program embedded in
34 goods that consist solely of the medium in which the
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1 program is embedded. The term also does not include
2 accounts, chattel paper, commercial tort claims, deposit
3 accounts, documents, general intangibles, instruments,
4 investment property, letter-of-credit rights, letters of
5 credit, money, or oil, gas, or other minerals before
6 extraction.
7 (45) "Governmental unit" means a subdivision,
8 agency, department, county, parish, municipality, or
9 other unit of the government of the United States, a
10 State, or a foreign country. The term includes an
11 organization having a separate corporate existence if the
12 organization is eligible to issue debt on which interest
13 is exempt from income taxation under the laws of the
14 United States.
15 (46) "Health-care-insurance receivable" means an
16 interest in or claim under a policy of insurance which is
17 a right to payment of a monetary obligation for
18 health-care goods or services provided.
19 (47) "Instrument" means a negotiable instrument or
20 any other writing that evidences a right to the payment
21 of a monetary obligation, is not itself a security
22 agreement or lease, and is of a type that in ordinary
23 course of business is transferred by delivery with any
24 necessary indorsement or assignment. The term does not
25 include (i) investment property, (ii) letters of credit,
26 (iii) nonnegotiable certificates of deposit, (iv)
27 uncertificated certificates of deposit, (v)
28 nontransferrable certificates of deposit, or (vi)
29 writings that evidence a right to payment arising out of
30 the use of a credit or charge card or information
31 contained on or for use with the card.
32 (48) "Inventory" means goods, other than farm
33 products, which:
34 (A) are leased by a person as lessor;
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1 (B) are held by a person for sale or lease or
2 to be furnished under a contract of service;
3 (C) are furnished by a person under a contract
4 of service; or
5 (D) consist of raw materials, work in process,
6 or materials used or consumed in a business.
7 (49) "Investment property" means a security,
8 whether certificated or uncertificated, security
9 entitlement, securities account, commodity contract, or
10 commodity account.
11 (50) "Jurisdiction of organization", with respect
12 to a registered organization, means the jurisdiction
13 under whose law the organization is organized.
14 (51) "Letter-of-credit right" means a right to
15 payment or performance under a letter of credit, whether
16 or not the beneficiary has demanded or is at the time
17 entitled to demand payment or performance. The term does
18 not include the right of a beneficiary to demand payment
19 or performance under a letter of credit.
20 (52) "Lien creditor" means:
21 (A) a creditor that has acquired a lien on the
22 property involved by attachment, levy, or the like;
23 (B) an assignee for benefit of creditors from
24 the time of assignment;
25 (C) a trustee in bankruptcy from the date of
26 the filing of the petition; or
27 (D) a receiver in equity from the time of
28 appointment.
29 (53) "Manufactured home" means a structure,
30 transportable in one or more sections, which, in the
31 traveling mode, is eight body feet or more in width or 40
32 body feet or more in length, or, when erected on site, is
33 320 or more square feet, and which is built on a
34 permanent chassis and designed to be used as a dwelling
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1 with or without a permanent foundation when connected to
2 the required utilities, and includes the plumbing,
3 heating, air-conditioning, and electrical systems
4 contained therein. The term includes any structure that
5 meets all of the requirements of this paragraph except
6 the size requirements and with respect to which the
7 manufacturer voluntarily files a certification required
8 by the United States Secretary of Housing and Urban
9 Development and complies with the standards established
10 under Title 42 of the United States Code.
11 (54) "Manufactured-home transaction" means a
12 secured transaction:
13 (A) that creates a purchase-money security
14 interest in a manufactured home, other than a
15 manufactured home held as inventory; or
16 (B) in which a manufactured home, other than a
17 manufactured home held as inventory, is the primary
18 collateral.
19 (55) "Mortgage" means a consensual interest in real
20 property, including fixtures, which secures payment or
21 performance of an obligation.
22 (56) "New debtor" means a person that becomes bound
23 as debtor under Section 9-203(d) by a security agreement
24 previously entered into by another person.
25 (57) "New value" means (i) money, (ii) money's
26 worth in property, services, or new credit, or (iii)
27 release by a transferee of an interest in property
28 previously transferred to the transferee. The term does
29 not include an obligation substituted for another
30 obligation.
31 (58) "Noncash proceeds" means proceeds other than
32 cash proceeds.
33 (59) "Obligor" means a person that, with respect to
34 an obligation secured by a security interest in or an
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1 agricultural lien on the collateral, (i) owes payment or
2 other performance of the obligation, (ii) has provided
3 property other than the collateral to secure payment or
4 other performance of the obligation, or (iii) is
5 otherwise accountable in whole or in part for payment or
6 other performance of the obligation. The term does not
7 include issuers or nominated persons under a letter of
8 credit.
9 (60) "Original debtor", except as used in Section
10 9-310(c), means a person that, as debtor, entered into a
11 security agreement to which a new debtor has become bound
12 under Section 9-203(d).
13 (61) "Payment intangible" means a general
14 intangible under which the account debtor's principal
15 obligation is a monetary obligation.
16 (62) "Person related to", with respect to an
17 individual, means:
18 (A) the spouse of the individual;
19 (B) a brother, brother-in-law, sister, or
20 sister-in-law of the individual;
21 (C) an ancestor or lineal descendant of the
22 individual or the individual's spouse; or
23 (D) any other relative, by blood or marriage,
24 of the individual or the individual's spouse who
25 shares the same home with the individual.
26 (63) "Person related to", with respect to an
27 organization, means:
28 (A) a person directly or indirectly
29 controlling, controlled by, or under common control
30 with the organization;
31 (B) an officer or director of, or a person
32 performing similar functions with respect to, the
33 organization;
34 (C) an officer or director of, or a person
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1 performing similar functions with respect to, a
2 person described in subparagraph (A);
3 (D) the spouse of an individual described in
4 subparagraph (A), (B), or (C); or
5 (E) an individual who is related by blood or
6 marriage to an individual described in subparagraph
7 (A), (B), (C), or (D) and shares the same home with
8 the individual.
9 (64) "Proceeds", except as used in Section
10 9-609(b), means the following property:
11 (A) whatever is acquired upon the sale, lease,
12 license, exchange, or other disposition of
13 collateral;
14 (B) whatever is collected on, or distributed
15 on account of, collateral;
16 (C) rights arising out of collateral;
17 (D) to the extent of the value of collateral,
18 claims arising out of the loss, nonconformity, or
19 interference with the use of, defects or
20 infringement of rights in, or damage to, the
21 collateral; or
22 (E) to the extent of the value of collateral
23 and to the extent payable to the debtor or the
24 secured party, insurance payable by reason of the
25 loss or nonconformity of, defects or infringement of
26 rights in, or damage to, the collateral.
27 (65) "Promissory note" means an instrument that
28 evidences a promise to pay a monetary obligation, does
29 not evidence an order to pay, and does not contain an
30 acknowledgment by a bank that the bank has received for
31 deposit a sum of money or funds.
32 (66) "Proposal" means a record authenticated by a
33 secured party which includes the terms on which the
34 secured party is willing to accept collateral in full or
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1 partial satisfaction of the obligation it secures
2 pursuant to Sections 9-620, 9-621, and 9-622.
3 (67) "Public-finance transaction" means a secured
4 transaction in connection with which:
5 (A) debt securities are issued;
6 (B) all or a portion of the securities issued
7 have an initial stated maturity of at least 20
8 years; and
9 (C) the debtor, obligor, secured party,
10 account debtor or other person obligated on
11 collateral, assignor or assignee of a secured
12 obligation, or assignor or assignee of a security
13 interest is a State or a governmental unit of a
14 State.
15 (68) "Pursuant to commitment", with respect to an
16 advance made or other value given by a secured party,
17 means pursuant to the secured party's obligation, whether
18 or not a subsequent event of default or other event not
19 within the secured party's control has relieved or may
20 relieve the secured party from its obligation.
21 (69) "Record", except as used in "for record", "of
22 record", "record or legal title", and "record owner",
23 means information that is inscribed on a tangible medium
24 or which is stored in an electronic or other medium and
25 is retrievable in perceivable form.
26 (70) "Registered organization" means an
27 organization organized solely under the law of a single
28 State or the United States and as to which the State or
29 the United States must maintain a public record showing
30 the organization to have been organized.
31 (71) "Secondary obligor" means an obligor to the
32 extent that:
33 (A) the obligor's obligation is secondary; or
34 (B) the obligor has a right of recourse with
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1 respect to an obligation secured by collateral
2 against the debtor, another obligor, or property of
3 either.
4 (72) "Secured party" means:
5 (A) a person in whose favor a security
6 interest is created or provided for under a security
7 agreement, whether or not any obligation to be
8 secured is outstanding;
9 (B) a person that holds an agricultural lien;
10 (C) a consignor;
11 (D) a person to which accounts, chattel paper,
12 payment intangibles, or promissory notes have been
13 sold;
14 (E) a trustee, indenture trustee, agent,
15 collateral agent, or other representative in whose
16 favor a security interest or agricultural lien is
17 created or provided for; or
18 (F) a person that holds a security interest
19 arising under Section 2-401, 2-505, 2-711(3),
20 2A-508(5), 4-210, or 5-118.
21 (73) "Security agreement" means an agreement that
22 creates or provides for a security interest.
23 (74) "Send", in connection with a record or
24 notification, means:
25 (A) to deposit in the mail, deliver for
26 transmission, or transmit by any other usual means
27 of communication, with postage or cost of
28 transmission provided for, addressed to any address
29 reasonable under the circumstances; or
30 (B) to cause the record or notification to be
31 received within the time that it would have been
32 received if properly sent under subparagraph (A).
33 (75) "Software" means a computer program and any
34 supporting information provided in connection with a
-19- LRB9106284JSpcam04
1 transaction relating to the program. The term does not
2 include a computer program that is included in the
3 definition of goods.
4 (76) "State" means a State of the United States,
5 the District of Columbia, Puerto Rico, the United States
6 Virgin Islands, or any territory or insular possession
7 subject to the jurisdiction of the United States.
8 (77) "Supporting obligation" means a
9 letter-of-credit right or secondary obligation that
10 supports the payment or performance of an account,
11 chattel paper, a document, a general intangible, an
12 instrument, or investment property.
13 (78) "Tangible chattel paper" means chattel paper
14 evidenced by a record or records consisting of
15 information that is inscribed on a tangible medium.
16 (79) "Termination statement" means an amendment of
17 a financing statement which:
18 (A) identifies, by its file number, the
19 initial financing statement to which it relates; and
20 (B) indicates either that it is a termination
21 statement or that the identified financing statement
22 is no longer effective.
23 (80) "Transmitting utility" means a person
24 primarily engaged in the business of:
25 (A) operating a railroad, subway, street
26 railway, or trolley bus;
27 (B) transmitting communications electrically,
28 electromagnetically, or by light;
29 (C) transmitting goods by pipeline or sewer;
30 or
31 (D) transmitting or producing and transmitting
32 electricity, steam, gas, or water.
33 (b) Definitions in other Articles. The following
34 definitions in other Articles apply to this Article:
-20- LRB9106284JSpcam04
1 "Applicant". Section 5-102.
2 "Beneficiary". Section 5-102.
3 "Broker". Section 8-102.
4 "Certificated security". Section 8-102.
5 "Check". Section 3-104.
6 "Clearing corporation". Section 8-102.
7 "Contract for sale". Section 2-106.
8 "Customer". Section 4-104.
9 "Entitlement holder". Section 8-102.
10 "Financial asset". Section 8-102.
11 "Holder in due course". Section 3-302.
12 "Issuer" (with respect to a letter of Credit or
13 letter-of-credit right). Section 5-102.
14 "Issuer" (with respect to a security). Section 8-201.
15 "Lease". Section 2A-103.
16 "Lease agreement". Section 2A-103.
17 "Lease contract". Section 2A-103.
18 "Leasehold interest". Section 2A-103.
19 "Lessee". Section 2A-103.
20 "Lessee in ordinary course of business". Section 2A-103.
21 "Lessor". Section 2A-103.
22 "Lessor's residual interest". Section 2A-103.
23 "Letter of credit". Section 5-102.
24 "Merchant". Section 2-104.
25 "Negotiable instrument". Section 3-104.
26 "Nominated person". Section 5-102.
27 "Note". Section 3-104.
28 "Proceeds of a letter of credit". Section 5-114.
29 "Prove". Section 3-103.
30 "Sale". Section 2-106.
31 "Securities account". Section 8-501.
32 "Securities intermediary". Section 8-102.
33 "Security". Section 8-102.
34 "Security certificate". Section 8-102.
-21- LRB9106284JSpcam04
1 "Security entitlement". Section 8-102.
2 "Uncertificated security". Section 8-102.
3 (c) Article 1 definitions and principles. Article 1
4 contains general definitions and principles of construction
5 and interpretation applicable throughout this Article. Policy
6 and Subject Matter of Article.
7 (1) Except as otherwise provided in Section 9--104 on
8 excluded transactions, this Article applies
9 (a) to any transaction (regardless of its form)
10 which is intended to create a security interest in personal
11 property or fixtures including goods, documents, instruments,
12 general intangibles, chattel paper or accounts; and also
13 (b) to any sale of accounts or chattel paper.
14 (2) This Article applies to security interests created
15 by contract including pledge, assignment, chattel mortgage,
16 chattel trust, trust deed, factor's lien, equipment trust,
17 conditional sale, trust receipt, other lien or title
18 retention contract and lease or consignment intended as
19 security. This Article does not apply to statutory liens
20 except as provided in Section 9--310.
21 (3) The application of this Article to a security
22 interest in a secured obligation is not affected by the fact
23 that the obligation is itself secured by a transaction or
24 interest to which this Article does not apply.
25 (4) The application of this Article to a security
26 interest in a deposit account shall not displace a common law
27 right of set-off of the secured party as to a deposit account
28 maintained with the secured party.
29 (Source: P.A. 87-1037.)
30 (810 ILCS 5/9-103) (from Ch. 26, par. 9-103)
31 Sec. 9-103. Purchase-money security interest; application
32 of payments; burden of establishing.
33 (a) Definitions. In this Section:
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1 (1) "purchase-money collateral" means goods or
2 software that secures a purchase-money obligation
3 incurred with respect to that collateral; and
4 (2) "purchase-money obligation" means an obligation
5 of an obligor incurred as all or part of the price of the
6 collateral or for value given to enable the debtor to
7 acquire rights in or the use of the collateral if the
8 value is in fact so used.
9 (b) Purchase-money security interest in goods. A
10 security interest in goods is a purchase-money security
11 interest:
12 (1) to the extent that the goods are purchase-money
13 collateral with respect to that security interest;
14 (2) if the security interest is in inventory that
15 is or was purchase-money collateral, also to the extent
16 that the security interest secures a purchase-money
17 obligation incurred with respect to other inventory in
18 which the secured party holds or held a purchase-money
19 security interest; and
20 (3) also to the extent that the security interest
21 secures a purchase-money obligation incurred with respect
22 to software in which the secured party holds or held a
23 purchase-money security interest.
24 (c) Purchase-money security interest in software. A
25 security interest in software is a purchase-money security
26 interest to the extent that the security interest also
27 secures a purchase-money obligation incurred with respect to
28 goods in which the secured party holds or held a
29 purchase-money security interest if:
30 (1) the debtor acquired its interest in the
31 software in an integrated transaction in which it
32 acquired an interest in the goods; and
33 (2) the debtor acquired its interest in the
34 software for the principal purpose of using the software
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1 in the goods.
2 (d) Consignor's inventory purchase-money security
3 interest. The security interest of a consignor in goods that
4 are the subject of a consignment is a purchase-money security
5 interest in inventory.
6 (e) Application of payment in non-consumer-goods
7 transaction. In a transaction other than a consumer-goods
8 transaction, if the extent to which a security interest is a
9 purchase-money security interest depends on the application
10 of a payment to a particular obligation, the payment must be
11 applied:
12 (1) in accordance with any reasonable method of
13 application to which the parties agree;
14 (2) in the absence of the parties' agreement to a
15 reasonable method, in accordance with any intention of
16 the obligor manifested at or before the time of payment;
17 or
18 (3) in the absence of an agreement to a reasonable
19 method and a timely manifestation of the obligor's
20 intention, in the following order:
21 (A) to obligations that are not secured; and
22 (B) if more than one obligation is secured, to
23 obligations secured by purchase-money security
24 interests in the order in which those obligations
25 were incurred.
26 (f) No loss of status of purchase-money security
27 interest in non-consumer-goods transaction. In a transaction
28 other than a consumer-goods transaction, a purchase-money
29 security interest does not lose its status as such, even if:
30 (1) the purchase-money collateral also secures an
31 obligation that is not a purchase-money obligation;
32 (2) collateral that is not purchase-money
33 collateral also secures the purchase-money obligation; or
34 (3) the purchase-money obligation has been renewed,
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1 refinanced, consolidated, or restructured.
2 (g) Burden of proof in non-consumer-goods transaction.
3 In a transaction other than a consumer-goods transaction, a
4 secured party claiming a purchase-money security interest has
5 the burden of establishing the extent to which the security
6 interest is a purchase-money security interest.
7 (h) Non-consumer-goods transactions; no inference. The
8 limitation of the rules in subsections (e), (f), and (g) to
9 transactions other than consumer-goods transactions is
10 intended to leave to the court the determination of the
11 proper rules in consumer-goods transactions. The court may
12 not infer from that limitation the nature of the proper rule
13 in consumer-goods transactions and may continue to apply
14 established approaches. Perfection of Security Interests in
15 Multiple State Transactions.
16 (1) Documents, instruments, letters of credit, and
17 ordinary goods.
18 (a) This subsection applies to documents,
19 instruments, rights to proceeds of written letters of
20 credit, and goods other than those covered by a
21 certificate of title described in subsection (2), mobile
22 goods described in subsection (3), and minerals described
23 in subsection (5).
24 (b) Except as otherwise provided in this
25 subsection, perfection and the effect of perfection or
26 non-perfection of a security interest in collateral are
27 governed by the law of the jurisdiction where the
28 collateral is when the last event occurs on which is
29 based the assertion that the security interest is
30 perfected or unperfected.
31 (c) If the parties to a transaction creating a
32 purchase money security interest in goods in one
33 jurisdiction understand at the time that the security
34 interest attaches that the goods will be kept in another
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1 jurisdiction, then the law of the other jurisdiction
2 governs the perfection and the effect of perfection or
3 non-perfection of the security interest from the time it
4 attaches until 30 days after the debtor receives
5 possession of the goods and thereafter if the goods are
6 taken to the other jurisdiction before the end of the
7 30-day period.
8 (d) When collateral is brought into and kept in
9 this State while subject to a security interest perfected
10 under the law of the jurisdiction from which the
11 collateral was removed, the security interest remains
12 perfected, but if action is required by Part 3 of this
13 Article to perfect the security interest,
14 (i) if the action is not taken before the
15 expiration of the period of perfection in the other
16 jurisdiction or the end of 4 months after the
17 collateral is brought into this State, whichever
18 period first expires, the security interest becomes
19 unperfected at the end of that period and is
20 thereafter deemed to have been unperfected as
21 against a person who became a purchaser after
22 removal;
23 (ii) if the action is taken before the
24 expiration of the period specified in subparagraph
25 (i), the security interest continues perfected
26 thereafter;
27 (iii) for the purpose of priority over a buyer
28 of consumer goods (subsection (2) of Section 9-307),
29 the period of the effectiveness of a filing in the
30 jurisdiction from which the collateral is removed is
31 governed by the rules with respect to perfection in
32 subparagraphs (i) and (ii).
33 (2) Certificate of title.
34 (a) This subsection applies to goods covered by a
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1 certificate of title issued under a statute of this State
2 or of another jurisdiction under the law of which
3 indication of a security interest on the certificate is
4 required as a condition of perfection.
5 (b) Except as otherwise provided in this
6 subsection, perfection and the effect of perfection or
7 non-perfection of the security interest are governed by
8 the law (including the conflict of laws rules) of the
9 jurisdiction issuing the certificate until 4 months after
10 the goods are removed from that jurisdiction and
11 thereafter until the goods are registered in another
12 jurisdiction, but in any event not beyond surrender of
13 the certificate. After the expiration of that period,
14 the goods are not covered by the certificate of title
15 within the meaning of this Section.
16 (c) Except with respect to the rights of a buyer
17 described in the next paragraph, a security interest,
18 perfected in another jurisdiction otherwise than by
19 notation on a certificate of title, in goods brought into
20 this State and thereafter covered by a certificate of
21 title issued by this State is subject to the rules stated
22 in paragraph (d) of subsection (1).
23 (d) If goods are brought into this State while a
24 security interest therein is perfected in any manner
25 under the law of the jurisdiction from which the goods
26 are removed and a certificate of title is issued by this
27 State and the certificate does not show that the goods
28 are subject to the security interest or that they may be
29 subject to security interests not shown on the
30 certificate, the security interest is subordinate to the
31 rights of a buyer of the goods to the extent that he
32 gives value and receives delivery of the goods after
33 issuance of the certificate and without knowledge of the
34 security interest.
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1 (3) Accounts, general intangibles and mobile goods.
2 (a) This subsection applies to accounts (other than
3 an account described in subsection (5) on minerals) and
4 general intangibles (other than uncertificated
5 securities) and to goods which are mobile and which are
6 of a type normally used in more than one jurisdiction,
7 such as motor vehicles, trailers, rolling stock,
8 airplanes, shipping containers, road building and
9 construction machinery and commercial harvesting
10 machinery and the like, if the goods are equipment or are
11 inventory leased or held for lease by the debtor to
12 others, and are not covered by a certificate of title
13 described in subsection (2).
14 (b) The law (including the conflict of laws rules)
15 of the jurisdiction in which the debtor is located
16 governs the perfection and the effect of perfection or
17 non-perfection of the security interest.
18 (c) If, however, the debtor is located in a
19 jurisdiction which is not a part of the United States,
20 and which does not provide for perfection of the security
21 interest by filing or recording in that jurisdiction, the
22 law of the jurisdiction in the United States in which the
23 debtor has its major executive office in the United
24 States governs the perfection and the effect of
25 perfection or non-perfection of the security interest
26 through filing. In the alternative, if the debtor is
27 located in a jurisdiction which is not a part of the
28 United States or Canada and the collateral is accounts or
29 general intangibles for money due or to become due, the
30 security interest may be perfected by notification to the
31 account debtor. As used in this paragraph, "United
32 States" includes its territories and possessions and the
33 Commonwealth of Puerto Rico.
34 (d) A debtor shall be deemed located at his place
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1 of business if he has one, at his chief executive office
2 if he has more than one place of business, otherwise at
3 his residence. If, however, the debtor is a foreign air
4 carrier under the Federal Aviation Act of 1958, as
5 amended, it shall be deemed located at the designated
6 office of the agent upon whom service of process may be
7 made on behalf of the foreign air carrier.
8 (e) A security interest perfected under the law of
9 the jurisdiction of the location of the debtor is
10 perfected until the expiration of 4 months after a change
11 of the debtor's location to another jurisdiction, or
12 until perfection would have ceased by the law of the
13 first jurisdiction, whichever period first expires.
14 Unless perfected in the new jurisdiction before the end
15 of that period, it becomes unperfected thereafter and is
16 deemed to have been unperfected as against a person who
17 became a purchaser after the change.
18 (4) Chattel paper. The rules stated for goods in
19 subsection (1) apply to a possessory security interest in
20 chattel paper. The rules stated for accounts in subsection
21 (3) apply to a non-possessory security interest in chattel
22 paper, but the security interest may not be perfected by
23 notification to the account debtor.
24 (5) Minerals. Perfection and the effect of perfection
25 or non-perfection of a security interest which is created by
26 a debtor who has an interest in minerals or the like
27 (including oil and gas) before extraction and which attaches
28 thereto as extracted, or which attaches to an account
29 resulting from the sale thereof at the wellhead or minehead
30 are governed by the law (including the conflict of laws
31 rules) of the jurisdiction wherein the wellhead or minehead
32 is located.
33 (6) Investment property.
34 (a) This subsection applies to investment property.
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1 (b) Except as otherwise provided in paragraph (f),
2 during the time that a security certificate is located in
3 a jurisdiction, perfection of a security interest, the
4 effect of perfection or non-perfection, and the priority
5 of a security interest in the certificated security
6 represented thereby are governed by the local law of that
7 jurisdiction.
8 (c) Except as otherwise provided in paragraph (f),
9 perfection of a security interest, the effect of
10 perfection or non-perfection, and the priority of a
11 security interest in an uncertificated security are
12 governed by the local law of the issuer's jurisdiction as
13 specified in Section 8-110(d).
14 (d) Except as otherwise provided in paragraph (f),
15 perfection of a security interest, the effect of
16 perfection or non-perfection, and the priority of a
17 security interest in a security entitlement or securities
18 account are governed by the local law of the securities
19 intermediary's jurisdiction as specified in Section
20 8-110(e).
21 (e) Except as otherwise provided in paragraph (f),
22 perfection of a security interest, the effect of
23 perfection or non-perfection, and the priority of a
24 security interest in a commodity contract or commodity
25 account are governed by the local law of the commodity
26 intermediary's jurisdiction. The following rules
27 determine a "commodity intermediary's jurisdiction" for
28 purposes of this paragraph:
29 (i) If an agreement between the commodity
30 intermediary and commodity customer specifies that
31 it is governed by the law of a particular
32 jurisdiction, that jurisdiction is the commodity
33 intermediary's jurisdiction.
34 (ii) If an agreement between the commodity
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1 intermediary and commodity customer does not specify
2 the governing law as provided in subparagraph (i),
3 but expressly specifies that the commodity account
4 is maintained at an office in a particular
5 jurisdiction, that jurisdiction is the commodity
6 intermediary's jurisdiction.
7 (iii) If an agreement between the commodity
8 intermediary and commodity customer does not specify
9 a jurisdiction as provided in subparagraphs (i) or
10 (ii), the commodity intermediary's jurisdiction is
11 the jurisdiction in which is located the office
12 identified in an account statement as the office
13 serving the commodity customer's account.
14 (iv) If an agreement between the commodity
15 intermediary and commodity customer does not specify
16 a jurisdiction as provided in subparagraphs (i) or
17 (ii) and an account statement does not identify an
18 office serving the commodity customer's account as
19 provided in subparagraph (iii), the commodity
20 intermediary's jurisdiction is the jurisdiction in
21 which is located the chief executive office of the
22 commodity intermediary.
23 (f) Perfection of a security interest by filing,
24 automatic perfection of a security interest in investment
25 property granted by a broker or securities intermediary,
26 and automatic perfection of a security interest in a
27 commodity contract or commodity account granted by a
28 commodity intermediary are governed by the local law of
29 the jurisdiction in which the debtor is located.
30 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
31 89-626, eff. 8-9-96.)
32 (810 ILCS 5/9-104) (from Ch. 26, par. 9-104)
33 Sec. 9-104. Control of deposit account.
-31- LRB9106284JSpcam04
1 (a) Requirements for control. A secured party has
2 control of a deposit account if:
3 (1) the secured party is the bank with which the
4 deposit account is maintained;
5 (2) the debtor, secured party, and bank have agreed
6 in an authenticated record that the bank will comply with
7 instructions originated by the secured party directing
8 disposition of the funds in the deposit account without
9 further consent by the debtor; or
10 (3) the secured party becomes the bank's customer
11 with respect to the deposit account.
12 (b) Debtor's right to direct disposition. A secured
13 party that has satisfied subsection (a) has control, even if
14 the debtor retains the right to direct the disposition of
15 funds from the deposit account. Transactions excluded from
16 Article.
17 This Article does not apply
18 (a) to a security interest subject to any statute
19 of the United States to the extent that such statute
20 governs the rights of parties to and third parties
21 affected by transactions in particular types of property;
22 or
23 (b) to a landlord's lien; or
24 (c) to a lien given by statute or other rule of law
25 for services or materials except as provided in Section
26 9-310 on priority of such liens; or
27 (d) to a transfer of a claim for wages, salary or
28 other compensation of an employee; or
29 (e) to a transfer by a government or governmental
30 subdivision or agency; or
31 (f) to a sale of accounts or chattel paper as part
32 of a sale of the business out of which they arose, or an
33 assignment of accounts or chattel paper which is for the
34 purpose of collection only, or a transfer of a right to
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1 payment under a contract to an assignee who is also to do
2 the performance under the contract or a transfer of a
3 single account to an assignee in whole or partial
4 satisfaction of a preexisting indebtedness; or
5 (g) to a transfer of an interest or claim in or
6 under any policy of insurance, except as provided with
7 respect to proceeds (Section 9-306) and priorities in
8 proceeds (Section 9-312); or
9 (h) to a right represented by a judgment (other
10 than a judgment taken on a right to payment which was
11 collateral); or
12 (i) to any right of set-off; or
13 (j) except to the extent that provision is made for
14 fixtures in Section 9-313, to the creation or transfer of
15 an interest in or lien on real estate, including a lease
16 or rents thereunder; or
17 (k) to a transfer in whole or in part of any claim
18 arising out of tort; or
19 (l) to a transfer of an interest in a letter of
20 credit other than the rights to proceeds of a written
21 letter of credit.
22 (Source: P.A. 89-534, eff. 1-1-97.)
23 (810 ILCS 5/9-105) (from Ch. 26, par. 9-105)
24 Sec. 9-105. Control of electronic chattel paper. A
25 secured party has control of electronic chattel paper if the
26 record or records comprising the chattel paper are created,
27 stored, and assigned in such a manner that:
28 (1) a single authoritative copy of the record or
29 records exists which is unique, identifiable and, except
30 as otherwise provided in paragraphs (4), (5), and (6),
31 unalterable;
32 (2) the authoritative copy identifies the secured
33 party as the assignee of the record or records;
-33- LRB9106284JSpcam04
1 (3) the authoritative copy is communicated to and
2 maintained by the secured party or its designated
3 custodian;
4 (4) copies or revisions that add or change an
5 identified assignee of the authoritative copy can be made
6 only with the participation of the secured party;
7 (5) each copy of the authoritative copy and any
8 copy of a copy is readily identifiable as a copy that is
9 not the authoritative copy; and
10 (6) any revision of the authoritative copy is
11 readily identifiable as an authorized or unauthorized
12 revision. Definitions and index of definitions.
13 (1) In this Article unless the context otherwise
14 requires:
15 (a) "Account debtor" means the person who is
16 obligated on an account, chattel paper or general
17 intangible;
18 (b) "Chattel paper" means a writing or writings
19 which evidence both a monetary obligation and a security
20 interest in or a lease of specific goods, but a charter
21 or other contract involving the use or hire of a vessel
22 is not chattel paper. When a transaction is evidenced
23 both by such a security agreement or a lease and by an
24 instrument or a series of instruments, the group of
25 writings taken together constitutes chattel paper;
26 (c) "Collateral" means the property subject to a
27 security interest, and includes accounts and chattel
28 paper which have been sold;
29 (d) "Debtor" means the person who owes payment or
30 other performance of the obligation secured, whether or
31 not he owns or has rights in the collateral, and includes
32 the seller of accounts or chattel paper. Where the debtor
33 and the owner of the collateral are not the same person,
34 the term "debtor" means the owner of the collateral in
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1 any provision of the Article dealing with the collateral,
2 the obligor in any provision dealing with the obligation,
3 and may include both where the context so requires;
4 (e) "Deposit account" means a demand, time,
5 savings, passbook or like account maintained with a bank,
6 as defined in subsection (1) of Section 4-105, other than
7 an account evidenced by a certificate of deposit;
8 (f) "Document" means document of title as defined
9 in the general definitions of Article 1 (Section 1-201),
10 and a receipt of the kind described in subsection (2) of
11 Section 7-201;
12 (g) "Encumbrance" includes real estate mortgages
13 and other liens on real estate and all other rights in
14 real estate that are not ownership interests;
15 (h) "Goods" includes all things which are movable
16 at the time the security interest attaches or which are
17 fixtures (Section 9-313), but does not include money,
18 documents, instruments, investment property, commodity
19 contracts, accounts, chattel paper, general intangibles,
20 or minerals or the like (including oil and gas) before
21 extraction. "Goods" also includes standing timber which
22 is to be cut and removed under a conveyance or contract
23 for sale, the unborn young of animals, and growing crops;
24 (i) "Instrument" means a negotiable instrument
25 (defined in Section 3-104), a non-transferable
26 certificate of deposit, a non-negotiable certificate of
27 deposit, or any other writing which evidences a right to
28 the payment of money and is not itself a security
29 agreement or lease and is of a type which is in ordinary
30 course of business transferred by delivery with any
31 necessary indorsement or assignment. The term does not
32 include investment property;
33 (j) "Mortgage" means a consensual interest created
34 by a real estate mortgage, a trust deed on real estate,
-35- LRB9106284JSpcam04
1 or the like;
2 (j-5) "Non-negotiable certificate of deposit" means
3 a written document issued by a bank, as defined in
4 subsection (1) of Section 4-105, that contains an
5 acknowledgement that a sum of money has been received by
6 the issuer and a promise by the issuer to repay the sum
7 of money, and is not a negotiable instrument as defined
8 in Section 3-104;
9 (j-7) "Non-transferable certificate of deposit"
10 means a non-negotiable certificate of deposit which may
11 not be transferred except on the books of the issuer,
12 with the consent of the issuer, or is subject to other
13 restrictions or conditions of the issuer on transfer;
14 (k) An advance is made "pursuant to commitment" if
15 the secured party has bound himself to make it, whether
16 or not a subsequent event of default or other event not
17 within his control has relieved or may relieve him from
18 his obligation;
19 (l) "Security agreement" means an agreement which
20 creates or provides for a security interest;
21 (m) "Secured party" means a lender, seller or other
22 person in whose favor there is a security interest,
23 including a person to whom accounts or chattel paper have
24 been sold. When the holders of obligations issued under
25 an indenture of trust, equipment trust agreement or the
26 like are represented by a trustee or other person, the
27 representative is the secured party;
28 -10t(n) "Transmitting utility" means any person primarily
29 engaged in the railroad, street railway or trolley bus
30 business, the electric or electronics communications
31 transmission business, the transmission of goods by
32 pipeline, or the distribution, transmission, or the
33 production and transmission of electricity, steam, gas or
34 water, or the provision of sewer service.
-36- LRB9106284JSpcam04
1 (o) "Uncertificated certificate of deposit" means an
2 obligation of a bank, as defined in subsection (1) of Section
3 4-105, to repay a sum of money it has received, that is not a
4 deposit account and is not represented by a writing, but only
5 by an entry on the books of the bank and any documentation
6 given to the customer by the bank.
7 (2) Other definitions applying to this Article and the
8 Sections in which they appear are:
9 "Account". Section 9-106.
10 "Attach". Section 9-203.
11 "Commodity contract". Section 9-115.
12 "Commodity customer". Section 9-115.
13 "Commodity intermediary". Section 9-115.
14 "Construction mortgage". Section 9-313 (1).
15 "Consumer goods". Section 9-109 (1).
16 "Control". Section 9-115.
17 "Equipment". Section 9-109 (2).
18 "Farm products". Section 9-109 (3).
19 "Fixture". Section 9-313 (1).
20 "Fixture filing". Section 9-313 (1).
21 "General intangibles". Section 9-106.
22 "Inventory". Section 9-109 (4).
23 "Investment property". Section 9-115.
24 "Lien creditor". Section 9-301 (3).
25 "Proceeds". Section 9-306 (1).
26 "Purchase money security interest". Section 9-107.
27 "United States". Section 9-103.
28 (3) The following definitions in other Articles apply to
29 this Article:
30 "Bank". Section 4-105.
31 "Broker". Section 8-102.
32 "Certificated security". Section 8-102.
33 "Check". Section 3-104.
34 "Clearing corporation". Section 8-102.
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1 "Contract for sale". Section 2-106.
2 "Control". Section 8-106.
3 "Delivery". Section 8-301.
4 "Entitlement holder". Section 8-102.
5 "Financial asset". Section 8-102.
6 "Holder in due course". Section 3-302.
7 "Letter of credit". Section 5-102.
8 "Note". Section 3-104.
9 "Proceeds of a letter of credit". Section 5-114(a).
10 "Sale". Section 2-106.
11 "Securities intermediary". Section 8-102.
12 "Security". Section 8-102.
13 "Security certificate". Section 8-102.
14 "Security entitlement". Section 8-102.
15 "Uncertificated security". Section 8-102.
16 (4) In addition Article 1 contains general definitions
17 and principles of construction and interpretation applicable
18 throughout this Article.
19 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
20 90-665, eff. 7-30-98.)
21 (810 ILCS 5/9-106) (from Ch. 26, par. 9-106)
22 Sec. 9-106. Control of investment property.
23 (a) Control under Section 8-106. A person has control
24 of a certificated security, uncertificated security, or
25 security entitlement as provided in Section 8-106.
26 (b) Control of commodity contract. A secured party has
27 control of a commodity contract if:
28 (1) the secured party is the commodity intermediary
29 with which the commodity contract is carried; or
30 (2) the commodity customer, secured party, and
31 commodity intermediary have agreed that the commodity
32 intermediary will apply any value distributed on account
33 of the commodity contract as directed by the secured
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1 party without further consent by the commodity customer.
2 (c) Effect of control of securities account or commodity
3 account. A secured party having control of all security
4 entitlements or commodity contracts carried in a securities
5 account or commodity account has control over the securities
6 account or commodity account. Definitions: "account";
7 "general intangibles". "Account" means any right to payment
8 for goods sold or leased or for services rendered which is
9 not evidenced by an instrument or chattel paper, whether or
10 not it has been earned by performance. "General intangibles"
11 means any personal property (including things in action)
12 other than goods, accounts, chattel paper, documents,
13 instruments, investment property, rights to proceeds of
14 written letters of credit, deposit accounts, uncertificated
15 certificates of deposit, and money. All rights to payment
16 earned or unearned under a charter or other contract
17 involving the use or hire of a vessel and all rights incident
18 to the charter or contract are accounts.
19 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
20 90-665, eff. 7-30-98.)
21 (810 ILCS 5/9-107) (from Ch. 26, par. 9-107)
22 Sec. 9-107. Control of letter-of-credit right. A
23 secured party has control of a letter-of-credit right to the
24 extent of any right to payment or performance by the issuer
25 or any nominated person if the issuer or nominated person has
26 consented to an assignment of proceeds of the letter of
27 credit under Section 5-114(c) or otherwise applicable law or
28 practice. Definitions: "purchase money security interest".
29 A security interest is a "purchase money security
30 interest" to the extent that it is
31 (a) taken or retained by the seller of the
32 collateral to secure all or part of its price; or
33 (b) taken by a person who by making advances or
-39- LRB9106284JSpcam04
1 incurring an obligation gives value to enable the debtor to
2 acquire rights in or the use of collateral if such value is
3 in fact so used.
4 (Source: Laws 1961, p. 2101.)
5 (810 ILCS 5/9-108) (from Ch. 26, par. 9-108)
6 Sec. 9-108. Sufficiency of description.
7 (a) Sufficiency of description. Except as otherwise
8 provided in subsections (c), (d), and (e), a description of
9 personal or real property is sufficient, whether or not it is
10 specific, if it reasonably identifies what is described.
11 (b) Examples of reasonable identification. Except as
12 otherwise provided in subsection (d), a description of
13 collateral reasonably identifies the collateral if it
14 identifies the collateral by:
15 (1) specific listing;
16 (2) category;
17 (3) except as otherwise provided in subsection (e),
18 a type of collateral defined in the Uniform Commercial
19 Code;
20 (4) quantity;
21 (5) computational or allocational formula or
22 procedure; or
23 (6) except as otherwise provided in subsection (c),
24 any other method, if the identity of the collateral is
25 objectively determinable.
26 (c) Supergeneric description not sufficient. A
27 description of collateral as "all the debtor's assets" or
28 "all the debtor's personal property" or using words of
29 similar import does not reasonably identify the collateral.
30 (d) Investment property. Except as otherwise provided
31 in subsection (e), a description of a security entitlement,
32 securities account, or commodity account is sufficient if it
33 describes:
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1 (1) the collateral by those terms or as investment
2 property; or
3 (2) the underlying financial asset or commodity
4 contract.
5 (e) When description by type insufficient. A
6 description only by type of collateral defined in the Uniform
7 Commercial Code is an insufficient description of:
8 (1) a commercial tort claim; or
9 (2) in a consumer transaction, consumer goods, a
10 security entitlement, a securities account, or a
11 commodity account. When after-acquired collateral not
12 security for antecedent debt.
13 Where a secured party makes an advance, incurs an
14 obligation, releases a perfected security interest, or
15 otherwise gives new value which is to be secured in whole or
16 in part by after-acquired property his security interest in
17 the after-acquired collateral shall be deemed to be taken for
18 new value and not as security for an antecedent debt if the
19 debtor acquires his rights in such collateral either in the
20 ordinary course of his business or under a contract of
21 purchase made pursuant to the security agreement within a
22 reasonable time after new value is given.
23 (Source: Laws 1961, p. 2101.)
24 (810 ILCS 5/Art. 9, Part 1, Subpart 2 heading new)
25 SUBPART 2. APPLICABILITY OF ARTICLE
26 (810 ILCS 5/9-109) (from Ch. 26, par. 9-109)
27 Sec. 9-109. Scope.
28 (a) General scope of Article. Except as otherwise
29 provided in subsections (c) and (d), this Article applies to:
30 (1) a transaction, regardless of its form, that
31 creates a security interest in personal property or
32 fixtures by contract;
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1 (2) an agricultural lien;
2 (3) a sale of accounts, chattel paper, payment
3 intangibles, or promissory notes;
4 (4) a consignment;
5 (5) a security interest arising under Section
6 2-401, 2-505, 2-711(3), or 2A-508(5), as provided in
7 Section 9-110; and
8 (6) a security interest arising under Section 4-210
9 or 5-118.
10 (b) Security interest in secured obligation. The
11 application of this Article to a security interest in a
12 secured obligation is not affected by the fact that the
13 obligation is itself secured by a transaction or interest to
14 which this Article does not apply.
15 (c) Extent to which Article does not apply. This
16 Article does not apply to the extent that:
17 (1) a statute, regulation, or treaty of the United
18 States preempts this Article;
19 (2) another statute of this State expressly governs
20 the creation, perfection, priority, or enforcement of a
21 security interest created by this State or a governmental
22 unit of this State;
23 (3) a statute of another State, a foreign country,
24 or a governmental unit of another State or a foreign
25 country, other than a statute generally applicable to
26 security interests, expressly governs creation,
27 perfection, priority, or enforcement of a security
28 interest created by the State, country, or governmental
29 unit;
30 (4) the rights of a transferee beneficiary or
31 nominated person under a letter of credit are independent
32 and superior under Section 5-114;
33 (5) this Article is in conflict with Section
34 205-410 of the Department of Agriculture Law of the Civil
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1 Administrative Code of Illinois or the Grain Code; or
2 (6) this Article is in conflict with Section 18-107
3 of the Public Utilities Act.
4 (d) Inapplicability of Article. This Article does not
5 apply to:
6 (1) a landlord's lien, other than an agricultural
7 lien;
8 (2) a lien, other than an agricultural lien, given
9 by statute or other rule of law for services or
10 materials, but Section 9-333 applies with respect to
11 priority of the lien;
12 (3) an assignment of a claim for wages, salary, or
13 other compensation of an employee;
14 (4) a sale of accounts, chattel paper, payment
15 intangibles, or promissory notes as part of a sale of the
16 business out of which they arose;
17 (5) an assignment of accounts, chattel paper,
18 payment intangibles, or promissory notes which is for the
19 purpose of collection only;
20 (6) an assignment of a right to payment under a
21 contract to an assignee that is also obligated to perform
22 under the contract;
23 (7) an assignment of a single account, payment
24 intangible, or promissory note to an assignee in full or
25 partial satisfaction of a preexisting indebtedness;
26 (8) a transfer of an interest in or an assignment
27 of a claim under a policy of insurance, other than an
28 assignment by or to a health-care provider of a
29 health-care-insurance receivable and any subsequent
30 assignment of the right to payment, but Sections 9-315
31 and 9-322 apply with respect to proceeds and priorities
32 in proceeds;
33 (9) an assignment of a right represented by a
34 judgment, other than a judgment taken on a right to
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1 payment that was collateral;
2 (10) a right of recoupment or set-off, but:
3 (A) Section 9-340 applies with respect to the
4 effectiveness of rights of recoupment or set-off
5 against deposit accounts; and
6 (B) Section 9-404 applies with respect to
7 defenses or claims of an account debtor;
8 (11) the creation or transfer of an interest in or
9 lien on real property, including a lease or rents
10 thereunder, except to the extent that provision is made
11 for:
12 (A) liens on real property in Sections 9-203
13 and 9-308;
14 (B) fixtures in Section 9-334;
15 (C) fixture filings in Sections 9-501, 9-502,
16 9-512, 9-516, and 9-519; and
17 (D) security agreements covering personal and
18 real property in Section 9-604; or
19 (12) an assignment of a claim arising in tort,
20 other than a commercial tort claim, but Sections 9-315
21 and 9-322 apply with respect to proceeds and priorities
22 in proceeds. Classification of goods; "consumer goods";
23 "equipment"; "farm products"; "inventory". Goods are
24 (1) "consumer goods" if they are used or bought for use
25 primarily for personal, family or household purposes;
26 (2) "equipment" if they are used or bought for use
27 primarily in business (including farming or a profession) or
28 by a debtor who is a non-profit organization or a
29 governmental subdivision or agency or if the goods are not
30 included in the definitions of inventory, farm products or
31 consumer goods;
32 (3) "farm products" if they are crops or livestock or
33 supplies used or produced in farming operations or if they
34 are products of crops or livestock in their unmanufactured
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1 states (such as ginned cotton, wool-clip, maple syrup, milk
2 and eggs) or if they are aquatic products as defined in the
3 Aquaculture Development Act, and if they are in the
4 possession of a debtor engaged in raising, fattening, grazing
5 or other farming or aquacultural operations. If goods are
6 farm products they are neither equipment nor inventory;
7 (4) "inventory" if they are held by a person who holds
8 them for sale or lease or to be furnished under contracts of
9 service or if he has so furnished them, or if they are raw
10 materials, work in process or materials used or consumed in a
11 business. Inventory of a person is not to be classified as
12 his equipment.
13 (Source: P.A. 85-856.)
14 (810 ILCS 5/9-110) (from Ch. 26, par. 9-110)
15 Sec. 9-110. Security interests arising under Article 2
16 or 2A. A security interest arising under Section 2-401,
17 2-505, 2-711(3), or 2A-508(5) is subject to this Article.
18 However, until the debtor obtains possession of the goods:
19 (1) the security interest is enforceable, even if
20 Section 9-203(b)(3) has not been satisfied;
21 (2) filing is not required to perfect the security
22 interest;
23 (3) the rights of the secured party after default
24 by the debtor are governed by Article 2 or 2A; and
25 (4) the security interest has priority over a
26 conflicting security interest created by the debtor.
27 Sufficiency of description.
28 For the purposes of this Article any description of
29 personal property or real estate is sufficient whether or not
30 it is specific if it reasonably identifies what is described.
31 (Source: Laws 1961, p. 2101.)
32 (810 ILCS 5/9-112) (from Ch. 26, par. 9-112)
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1 Sec. 9-112. (Blank). Where collateral is not owned by
2 debtor.
3 Unless otherwise agreed, when a secured party knows that
4 collateral is owned by a person who is not the debtor, the
5 owner of the collateral is entitled to receive from the
6 secured party any surplus under Section 9-- 502(2) or under
7 Section 9--504(1), and is not liable for the debt or for any
8 deficiency after resale, and he has the same right as the
9 debtor
10 (a) to receive statements under Section 9--208;
11 (b) to receive notice of and to object to a secured
12 party's proposal to retain the collateral in satisfaction of
13 the indebtedness under Section 9--505;
14 (c) to redeem the collateral under Section 9--506;
15 (d) to obtain injunctive or other relief under
16 Section 9--507(1); and
17 (e) to recover losses caused to him under Section
18 9--208(2).
19 (Source: Laws 1961, 1st S.S., p. 7.)
20 (810 ILCS 5/9-113) (from Ch. 26, par. 9-113)
21 Sec. 9-113. (Blank). Security interests arising under
22 Article on Sales or under Article on Leases.
23 A security interest arising solely under the Article on
24 Sales (Article 2) or the Article on Leases (Article 2A) is
25 subject to the provisions of this Article except that to the
26 extent that and so long as the debtor does not have or does
27 not lawfully obtain possession of the goods
28 (a) no security agreement is necessary to make the
29 security interest enforceable; and
30 (b) no filing is required to perfect the security
31 interest; and
32 (c) the rights of the secured party on default by
33 the debtor are governed (i) by the Article on Sales
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1 (Article 2) in the case of a security interest arising
2 solely under such Article or (ii) by the Article on
3 Leases (Article 2A) in the case of a security interest
4 arising solely under such Article.
5 (Source: P.A. 87-493.)
6 (810 ILCS 5/9-114) (from Ch. 26, par. 9-114)
7 Sec. 9-114. (Blank). Consignment.
8 (1) A person who delivers goods under a consignment
9 which is not a security interest and who would be required to
10 file under this Article by paragraph (3) (c) of Section 2-326
11 has priority over a secured party who is or becomes a
12 creditor of the consignee and who would have a perfected
13 security interest in the goods if they were the property of
14 the consignee, and also has priority with respect to
15 identifiable cash proceeds received on or before delivery of
16 the goods to a buyer, if
17 (a) the consignor complies with the filing provision of
18 the Article on Sales with respect to consignments (paragraph
19 (3) (c) of Section 2-326 before the consignee receives
20 possession of the goods; and
21 (b) the consignor gives notification in writing to the
22 holder of the security interest if the holder has filed a
23 financing statement covering the same types of goods before
24 the date of the filing made by the consignor; and
25 (c) the holder of the security interest receives the
26 notification within 5 years before the consignee receives
27 possession of the goods; and
28 (d) the notification states that the consignor expects
29 to deliver goods on consignment to the consignee, describing
30 the goods by item or type.
31 (2) In the case of a consignment which is not a security
32 interest and in which the requirements of the preceding
33 subsection have not been met, a person who delivers goods to
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1 another is subordinate to a person who would have a perfected
2 security interest in the goods if they were the property of
3 the debtor.
4 (Source: P. A. 78-238.)
5 (810 ILCS 5/9-115) (from Ch. 26, par. 9-115)
6 Sec. 9-115. (Blank). Investment property.
7 (1) In this Article:
8 (a) "Commodity account" means an account maintained
9 by a commodity intermediary in which a commodity contract
10 is carried for a commodity customer.
11 (b) "Commodity contract" means a commodity futures
12 contract, an option on a commodity futures contract, a
13 commodity option, or other contract that, in each case,
14 is:
15 (i) traded on or subject to the rules of a
16 board of trade that has been designated as a
17 contract market for such a contract pursuant to the
18 federal commodities laws; or
19 (ii) traded on a foreign commodity board of
20 trade, exchange, or market, and is carried on the
21 books of a commodity intermediary for a commodity
22 customer.
23 (c) "Commodity customer" means a person for whom a
24 commodity intermediary carries a commodity contract on
25 its books.
26 (d) "Commodity intermediary" means:
27 (i) a person who is registered as a futures
28 commission merchant under the federal commodities
29 laws; or
30 (ii) a person who in the ordinary course of
31 its business provides clearance or settlement
32 services for a board of trade that has been
33 designated as a contract market pursuant to the
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1 federal commodities laws.
2 (e) "Control" with respect to a certificated
3 security, uncertificated security, or security
4 entitlement has the meaning specified in Section 8-106.
5 A secured party has control over a commodity contract if
6 by agreement among the commodity customer, the commodity
7 intermediary, and the secured party, the commodity
8 intermediary has agreed that it will apply any value
9 distributed on account of the commodity contract as
10 directed by the secured party without further consent by
11 the commodity customer. If a commodity customer grants a
12 security interest in a commodity contract to its own
13 commodity intermediary, the commodity intermediary as
14 secured party has control. A secured party has control
15 over a securities account or commodity account if the
16 secured party has control over all security entitlements
17 or commodity contracts carried in the securities account
18 or commodity account.
19 (f) "Investment property" means:
20 (i) a security, whether certificated or
21 uncertificated;
22 (ii) a security entitlement;
23 (iii) a securities account;
24 (iv) a commodity contract; or
25 (v) a commodity account.
26 (2) Attachment or perfection of a security interest in a
27 securities account is also attachment or perfection of a
28 security interest in all security entitlements carried in the
29 securities account. Attachment or perfection of a security
30 interest in a commodity account is also attachment or
31 perfection of a security interest in all commodity contracts
32 carried in the commodity account.
33 (3) A description of collateral in a security agreement
34 or financing statement is sufficient to create or perfect a
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1 security interest in a certificated security, uncertificated
2 security, security entitlement, securities account, commodity
3 contract, or commodity account whether it describes the
4 collateral by those terms, or as investment property, or by
5 description of the underlying security, financial asset, or
6 commodity contract. A description of investment property
7 collateral in a security agreement or financing statement is
8 sufficient if it identifies the collateral by specific
9 listing, by category, by quantity, by a computational or
10 allocational formula or procedure, or by any other method, if
11 the identity of the collateral is objectively determinable.
12 (4) Perfection of a security interest in investment
13 property is governed by the following rules:
14 (a) A security interest in investment property may
15 be perfected by control.
16 (b) Except as otherwise provided in paragraphs (c)
17 and (d), a security interest in investment property may
18 be perfected by filing.
19 (c) If the debtor is a broker or securities
20 intermediary a security interest in investment property
21 is perfected when it attaches. The filing of a financing
22 statement with respect to a security interest in
23 investment property granted by a broker or securities
24 intermediary has no effect for purposes of perfection or
25 priority with respect to that security interest.
26 (d) If a debtor is a commodity intermediary, a
27 security interest in a commodity contract or a commodity
28 account is perfected when it attaches. The filing of a
29 financing statement with respect to a security interest
30 in a commodity contract or a commodity account granted by
31 a commodity intermediary has no effect for purposes of
32 perfection or priority with respect to that security
33 interest.
34 (5) Priority between conflicting security interests in
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1 the same investment property is governed by the following
2 rules:
3 (a) A security interest of a secured party who has
4 control over investment property has priority over a
5 security interest of a secured party who does not have
6 control over the investment property.
7 (b) Except as otherwise provided in paragraphs (c)
8 and (d), conflicting security interests of secured
9 parties each of whom has control rank equally.
10 (c) Except as otherwise agreed by the securities
11 intermediary, a security interest in a security
12 entitlement or a securities account granted to the
13 debtor's own securities intermediary has priority over
14 any security interest granted by the debtor to another
15 secured party.
16 (d) Except as otherwise agreed by the commodity
17 intermediary, a security interest in a commodity contract
18 or a commodity account granted to the debtor's own
19 commodity intermediary has priority over any security
20 interest granted by the debtor to another secured party.
21 (e) Conflicting security interests granted by a
22 broker, a securities intermediary, or a commodity
23 intermediary which are perfected without control rank
24 equally.
25 (f) In all other cases, priority between
26 conflicting security interests in investment property is
27 governed by Section 9-312(5), (6), and (7). Section
28 9-312(4) does not apply to investment property.
29 (6) If a security certificate in registered form is
30 delivered to a secured party pursuant to agreement, a written
31 security agreement is not required for attachment or
32 enforceability of the security interest, delivery suffices
33 for perfection of the security interest, and the security
34 interest has priority over a conflicting security interest
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1 perfected by means other than control, even if a necessary
2 indorsement is lacking.
3 (Source: P.A. 89-364, eff. 1-1-96.)
4 (810 ILCS 5/9-116)
5 Sec. 9-116. (Blank). Security interest arising in
6 purchase or delivery of financial asset.
7 (1) If a person buys a financial asset through a
8 securities intermediary in a transaction in which the buyer
9 is obligated to pay the purchase price to the securities
10 intermediary at the time of the purchase, and the securities
11 intermediary credits the financial asset to the buyer's
12 securities account before the buyer pays the securities
13 intermediary, the securities intermediary has a security
14 interest in the buyer's security entitlement securing the
15 buyer's obligation to pay. A security agreement is not
16 required for attachment or enforceability of the security
17 interest, and the security interest is automatically
18 perfected.
19 (2) If a certificated security, or other financial asset
20 represented by a writing which in the ordinary course of
21 business is transferred by delivery with any necessary
22 indorsement or assignment is delivered pursuant to an
23 agreement between persons in the business of dealing with
24 such securities or financial assets and the agreement calls
25 for delivery versus payment, the person delivering the
26 certificate or other financial asset has a security interest
27 in the certificated security or other financial asset
28 securing the seller's right to receive payment. A security
29 agreement is not required for attachment or enforceability of
30 the security interest, and the security interest is
31 automatically perfected.
32 (Source: P.A. 89-364, eff. 1-1-96.)
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1 (810 ILCS 5/9-150)
2 Sec. 9-150. (Blank). Secretary of State; rules. The
3 Secretary of State, under the Illinois Administrative
4 Procedure Act, may adopt rules necessary to administer the
5 Secretary of State's responsibilities under this Article.
6 (Source: P.A. 89-364, eff. 1-1-96.)
7 (810 ILCS 5/Art. 9, Part 2 heading)
8 PART 2. EFFECTIVENESS OF SECURITY AGREEMENT;
9 ATTACHMENT OF SECURITY INTEREST;
10 RIGHTS OF PARTIES TO SECURITY AGREEMENT
11 VALIDITY OF SECURITY AGREEMENT
12 AND RIGHTS OF PARTIES THERETO
13 (810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new)
14 SUBPART 1. EFFECTIVENESS AND ATTACHMENT
15 (810 ILCS 5/9-201) (from Ch. 26, par. 9-201)
16 Sec. 9-201. General effectiveness of security agreement.
17 (a) General effectiveness. Except as otherwise provided
18 in the Uniform Commercial Code, a security agreement is
19 effective according to its terms between the parties, against
20 purchasers of the collateral, and against creditors.
21 (b) Applicable consumer laws and other law. A
22 transaction subject to this Article is subject to any
23 applicable rule of law, statute, or regulation which
24 establishes a different rule for consumers, including:
25 (1) the Retail Installment Sales Act;
26 (2) the Motor Vehicle Retail Installment Sales Act;
27 (3) Article II of Chapter 3 of the Illinois Vehicle
28 Code;
29 (4) Article IIIB of the Boat Registration and
30 Safety Act;
31 (5) the Pawnbroker Regulation Act;
-53- LRB9106284JSpcam04
1 (6) the Motor Vehicle Leasing Act;
2 (7) the Consumer Installment Loan Act; and
3 (8) the Consumer Deposit Security Act of 1987.
4 (c) Other applicable law controls. In case of conflict
5 between this Article and a rule of law, statute, or
6 regulation described in subsection (b), the rule of law,
7 statute, or regulation controls. Failure to comply with a
8 rule of law, statute, or regulation described in subsection
9 (b) has only the effect such rule of law, statute, or
10 regulation specifies.
11 (d) Further deference to other applicable law. This
12 Article does not:
13 (1) validate any rate, charge, agreement, or
14 practice that violates a rule of law, statute, or
15 regulation described in subsection (b); or
16 (2) extend the application of the rule of law,
17 statute, or regulation to a transaction not otherwise
18 subject to it. General validity of security agreement.
19 Except as otherwise provided by this Act a security
20 agreement is effective according to its terms between the
21 parties, against purchasers of the collateral and against
22 creditors. Nothing in this Article validates any charge or
23 practice illegal under any statute or regulation thereunder
24 governing usury, small loans, retail installment sales, or
25 the like, or extends the application of any such statute or
26 regulation to any transaction not otherwise subject thereto.
27 (Source: Laws 1961, p. 2101.)
28 (810 ILCS 5/9-202) (from Ch. 26, par. 9-202)
29 Sec. 9-202. Title to collateral immaterial. Except as
30 otherwise provided with respect to consignments or sales of
31 accounts, chattel paper, payment intangibles, or promissory
32 notes, the provisions of this Article with regard to rights
33 and obligations apply whether title to collateral is in the
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1 secured party or the debtor.
2 Each provision of this Article with regard to rights,
3 obligations and remedies applies whether title to collateral
4 is in the secured party or in the debtor.
5 (Source: Laws 1961, p. 2101.)
6 (810 ILCS 5/9-203) (from Ch. 26, par. 9-203)
7 Sec. 9-203. Attachment and enforceability of security
8 interest; proceeds; supporting obligations; formal
9 requisites.
10 (a) Attachment. A security interest attaches to
11 collateral when it becomes enforceable against the debtor
12 with respect to the collateral, unless an agreement expressly
13 postpones the time of attachment.
14 (b) Enforceability. Except as otherwise provided in
15 subsections (c) through (i), a security interest is
16 enforceable against the debtor and third parties with respect
17 to the collateral only if :
18 (1) value has been given;
19 (2) the debtor has rights in the collateral or the
20 power to transfer rights in the collateral to a secured
21 party; and
22 (3) one of the following conditions is met:
23 (A) the debtor has authenticated a security
24 agreement that provides a description of the
25 collateral and, if the security interest covers
26 timber to be cut, a description of the land
27 concerned;
28 (B) the collateral is not a certificated
29 security and is in the possession of the secured
30 party under Section 9-313 pursuant to the debtor's
31 security agreement;
32 (C) the collateral is a certificated security
33 in registered form and the security certificate has
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1 been delivered to the secured party under Section
2 8-301 pursuant to the debtor's security agreement;
3 or
4 (D) the collateral is deposit accounts,
5 electronic chattel paper, investment property, or
6 letter-of-credit rights, and the secured party has
7 control under Section 9-104, 9-105, 9-106, or 9-107
8 pursuant to the debtor's security agreement.
9 (c) Other UCC provisions. Subsection (b) is subject to
10 Section 4-210 on the security interest of a collecting bank,
11 Section 5-118 on the security interest of a letter-of-credit
12 issuer or nominated person, Section 9-110 on a security
13 interest arising under Article 2 or 2A, and Section 9-206 on
14 security interests in investment property.
15 (d) When person becomes bound by another person's
16 security agreement. A person becomes bound as debtor by a
17 security agreement entered into by another person if, by
18 operation of law other than this Article or by contract:
19 (1) the security agreement becomes effective to
20 create a security interest in the person's property; or
21 (2) the person becomes generally obligated for the
22 obligations of the other person, including the obligation
23 secured under the security agreement, and acquires or
24 succeeds to all or substantially all of the assets of the
25 other person.
26 (e) Effect of new debtor becoming bound. If a new
27 debtor becomes bound as debtor by a security agreement
28 entered into by another person:
29 (1) the agreement satisfies subsection (b)(3) with
30 respect to existing or after-acquired property of the new
31 debtor to the extent the property is described in the
32 agreement; and
33 (2) another agreement is not necessary to make a
34 security interest in the property enforceable.
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1 (f) Proceeds and supporting obligations. The attachment
2 of a security interest in collateral gives the secured party
3 the rights to proceeds provided by Section 9-315 and is also
4 attachment of a security interest in a supporting obligation
5 for the collateral.
6 (g) Lien securing right to payment. The attachment of a
7 security interest in a right to payment or performance
8 secured by a security interest or other lien on personal or
9 real property is also attachment of a security interest in
10 the security interest, mortgage, or other lien.
11 (h) Security entitlement carried in securities account.
12 The attachment of a security interest in a securities account
13 is also attachment of a security interest in the security
14 entitlements carried in the securities account.
15 (i) Commodity contracts carried in commodity account.
16 The attachment of a security interest in a commodity account
17 is also attachment of a security interest in the commodity
18 contracts carried in the commodity account. Attachment and
19 Enforceability of Security Interest; Proceeds; Requisites.
20 (1) Subject to the provisions of Section 4-208 on the
21 security interest of a collecting bank, Sections 9-115 and
22 9-116 on security interests in investment property, and
23 Section 9-113 on a security interest arising under the
24 Article on Sales, a security interest is not enforceable
25 against the debtor or third parties with respect to the
26 collateral and does not attach unless:
27 (a) the collateral is in the possession of the
28 secured party pursuant to agreement, the collateral is
29 investment property and the secured party has control
30 pursuant to agreement, or the debtor has signed a
31 security agreement which contains a description of the
32 collateral and, in addition, a description of the land
33 when the security agreement covers (i) crops growing or
34 to be grown and is signed by the debtor prior to January
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1 1, 1996, or (ii) timber to be cut;
2 (b) value has been given; and
3 (c) the debtor has rights in the collateral.
4 (2) A security interest attaches when it becomes
5 enforceable against the debtor with respect to the
6 collateral. Attachment occurs as soon as all of the events
7 specified in subsection (1) have taken place unless explicit
8 agreement postpones the time of attaching.
9 (3) Unless otherwise agreed a security agreement gives
10 the secured party the rights to proceeds provided by Section
11 9-306.
12 (4) A transaction, although subject to this Article, is
13 also subject to the "Consumer Finance Act", approved July 10,
14 1935, as now or hereafter amended; the "Retail Installment
15 Sales Act", approved July 28, 1967, as now or hereafter
16 amended; the "Motor Vehicle Retail Installment Sales Act",
17 approved July 28, 1967, as now or hereafter amended; Article
18 II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of
19 the "Boat Registration and Safety Act", as now or hereafter
20 amended; and "An Act for the regulation of pawnbrokers, and
21 repealing a certain act therein named", approved June 9,
22 1909, as now or hereafter amended; and in the case of
23 conflict between the provisions of this Article and any such
24 statute, the provisions of such statute control. Failure to
25 comply with any applicable statute has only the effect which
26 is specified therein.
27 (Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96;
28 89-626, eff. 8-9-96.)
29 (810 ILCS 5/9-204) (from Ch. 26, par. 9-204)
30 Sec. 9-204. After-acquired property; future advances.
31 (a) After-acquired collateral. Except as otherwise
32 provided in subsection (b), a security agreement may create
33 or provide for a security interest in after-acquired
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1 collateral.
2 (b) When after-acquired property clause not effective.
3 A security interest does not attach under a term constituting
4 an after-acquired property clause to:
5 (1) consumer goods, other than an accession when
6 given as additional security, unless the debtor acquires
7 rights in them within 10 days after the secured party
8 gives value; or
9 (2) a commercial tort claim.
10 (c) Future advances and other value. A security
11 agreement may provide that collateral secures, or that
12 accounts, chattel paper, payment intangibles, or promissory
13 notes are sold in connection with, future advances or other
14 value, whether or not the advances or value are given
15 pursuant to commitment. After-acquired property; future
16 advances.
17 (1) Except as provided in Subsection (2), a security
18 agreement may provide that any obligations covered by the
19 security agreement are to be secured by after-acquired
20 collateral.
21 (2) No security interest attaches under an
22 after-acquired property clause to consumer goods other than
23 accessions (Section 9-314) when given as additional security
24 unless the debtor acquires rights in them within 10 days
25 after the secured party gives value.
26 (3) Obligations covered by a security agreement may
27 include future advances or other value whether or not the
28 advances or value are given pursuant to commitment
29 (subsection (1) of Section 9-105).
30 (Source: P. A. 77-2810.)
31 (810 ILCS 5/9-205) (from Ch. 26, par. 9-205)
32 Sec. 9-205. Use or disposition of collateral
33 permissible.
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1 (a) When security interest not invalid or fraudulent. A
2 security interest is not invalid or fraudulent against
3 creditors solely because:
4 (1) the debtor has the right or ability to:
5 (A) use, commingle, or dispose of all or part
6 of the collateral, including returned or repossessed
7 goods;
8 (B) collect, compromise, enforce, or otherwise
9 deal with collateral;
10 (C) accept the return of collateral or make
11 repossessions; or
12 (D) use, commingle, or dispose of proceeds; or
13 (2) the secured party fails to require the debtor
14 to account for proceeds or replace collateral.
15 (b) Requirements of possession not relaxed. This
16 Section does not relax the requirements of possession if
17 attachment, perfection, or enforcement of a security interest
18 depends upon possession of the collateral by the secured
19 party. Use or Disposition of Collateral Without Accounting
20 Permissible.
21 A security interest is not invalid or fraudulent against
22 creditors by reason of liberty in the debtor to use,
23 commingle or dispose of all or part of the collateral
24 (including returned or repossessed goods) or to collect or
25 compromise accounts or chattel paper, or to accept the return
26 of goods or make repossessions, or to use, commingle or
27 dispose of proceeds, or by reason of the failure of the
28 secured party to require the debtor to account for proceeds
29 or replace collateral. This Section does not relax the
30 requirements of possession where perfection of a security
31 interest depends upon possession of the collateral by the
32 secured party or by a bailee.
33 (Source: P.A. 77-2810.)
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1 (810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1)
2 Sec. 9-205.1. Listing by debtor of purchasers or
3 receivers of collateral. A secured party may require that
4 the debtor include as part of the security agreement a list
5 of persons to whom the debtor desires to sell or otherwise
6 dispose of the collateral. The debtor shall not sell or
7 otherwise dispose of the collateral to a person not included
8 in that list unless the debtor has notified the secured party
9 of his desire to sell or otherwise dispose of the collateral
10 to such person at least 7 days prior to the sale or other
11 disposition.
12 (Source: P.A. 83-69.)
13 (810 ILCS 5/9-206) (from Ch. 26, par. 9-206)
14 Sec. 9-206. Security interest arising in purchase or
15 delivery of financial asset.
16 (a) Security interest when person buys through
17 securities intermediary. A security interest in favor of a
18 securities intermediary attaches to a person's security
19 entitlement if:
20 (1) the person buys a financial asset through the
21 securities intermediary in a transaction in which the
22 person is obligated to pay the purchase price to the
23 securities intermediary at the time of the purchase; and
24 (2) the securities intermediary credits the
25 financial asset to the buyer's securities account before
26 the buyer pays the securities intermediary.
27 (b) Security interest secures obligation to pay for
28 financial asset. The security interest described in
29 subsection (a) secures the person's obligation to pay for the
30 financial asset.
31 (c) Security interest in payment against delivery
32 transaction. A security interest in favor of a person that
33 delivers a certificated security or other financial asset
-61- LRB9106284JSpcam04
1 represented by a writing attaches to the security or other
2 financial asset if:
3 (1) the security or other financial asset:
4 (A) in the ordinary course of business is
5 transferred by delivery with any necessary
6 indorsement or assignment; and
7 (B) is delivered under an agreement between
8 persons in the business of dealing with such
9 securities or financial assets; and
10 (2) the agreement calls for delivery against
11 payment.
12 (d) Security interest secures obligation to pay for
13 delivery. The security interest described in subsection (c)
14 secures the obligation to make payment for the delivery.
15 Agreement not to assert defenses against assignee;
16 modification of sales warranties where security agreement
17 exists.
18 (1) Subject to any statute or decision which establishes
19 a different rule for buyers or lessees of consumer goods, an
20 agreement by a buyer or lessee that he will not assert
21 against an assignee any claim or defense which he may have
22 against the seller or lessor is enforceable by an assignee
23 who takes his assignment for value, in good faith and without
24 notice of a claim or defense, except as to defenses of a type
25 which may be asserted against a holder in due course of a
26 negotiable instrument under the Article on Commercial Paper
27 (Article 3). A buyer who as part of one transaction signs
28 both a negotiable instrument and a security agreement makes
29 such an agreement.
30 (2) When a seller retains a purchase money security
31 interest in goods the Article on Sales (Article 2) governs
32 the sale and any disclaimer, limitation or modification of
33 the seller's warranties.
34 (Source: Laws 1965, p. 803.)
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1 (810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new)
2 SUBPART 2. RIGHTS AND DUTIES
3 (810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
4 Sec. 9-207. Rights and duties of secured party having
5 possession or control of collateral.
6 (a) Duty of care when secured party in possession.
7 Except as otherwise provided in subsection (d), a secured
8 party shall use reasonable care in the custody and
9 preservation of collateral in the secured party's possession.
10 In the case of chattel paper or an instrument, reasonable
11 care includes taking necessary steps to preserve rights
12 against prior parties unless otherwise agreed.
13 (b) Expenses, risks, duties, and rights when secured
14 party in possession. Except as otherwise provided in
15 subsection (d), if a secured party has possession of
16 collateral:
17 (1) reasonable expenses, including the cost of
18 insurance and payment of taxes or other charges, incurred
19 in the custody, preservation, use, or operation of the
20 collateral are chargeable to the debtor and are secured
21 by the collateral;
22 (2) the risk of accidental loss or damage is on the
23 debtor to the extent of a deficiency in any effective
24 insurance coverage;
25 (3) the secured party shall keep the collateral
26 identifiable, but fungible collateral may be commingled;
27 and
28 (4) the secured party may use or operate the
29 collateral:
30 (A) for the purpose of preserving the
31 collateral or its value;
32 (B) as permitted by an order of a court having
33 competent jurisdiction; or
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1 (C) except in the case of consumer goods, in
2 the manner and to the extent agreed by the debtor.
3 (c) Duties and rights when secured party in possession
4 or control. Except as otherwise provided in subsection (d), a
5 secured party having possession of collateral or control of
6 collateral under Section 9-104, 9-105, 9-106, or 9-107:
7 (1) may hold as additional security any proceeds,
8 except money or funds, received from the collateral;
9 (2) shall apply money or funds received from the
10 collateral to reduce the secured obligation, unless
11 remitted to the debtor; and
12 (3) may create a security interest in the
13 collateral.
14 (d) Buyer of certain rights to payment. If the secured
15 party is a buyer of accounts, chattel paper, payment
16 intangibles, or promissory notes or a consignor:
17 (1) subsection (a) does not apply unless the
18 secured party is entitled under an agreement:
19 (A) to charge back uncollected collateral; or
20 (B) otherwise to full or limited recourse
21 against the debtor or a secondary obligor based on
22 the nonpayment or other default of an account debtor
23 or other obligor on the collateral; and
24 (2) subsections (b) and (c) do not apply. Rights
25 and duties when collateral is in secured party's
26 possession.
27 (1) A secured party must use reasonable care in the
28 custody and preservation of collateral in his possession. In
29 the case of an instrument or chattel paper reasonable care
30 includes taking necessary steps to preserve rights against
31 prior parties unless otherwise agreed.
32 (2) Unless otherwise agreed, when collateral is in the
33 secured party's possession
34 (a) reasonable expenses (including the cost of any
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1 insurance and payment of taxes or other charges) incurred in
2 the custody, preservation, use or operation of the collateral
3 are chargeable to the debtor and are secured by the
4 collateral;
5 (b) the risk of accidental loss or damage is on the
6 debtor to the extent of any deficiency in any effective
7 insurance coverage;
8 (c) the secured party may hold as additional
9 security any increase or profits (except money) received from
10 the collateral, but money so received, unless remitted to the
11 debtor, shall be applied in reduction of the secured
12 obligation;
13 (d) the secured party must keep the collateral
14 identifiable but fungible collateral may be commingled;
15 (e) the secured party may repledge the collateral
16 upon terms which do not impair the debtor's right to redeem
17 it.
18 (3) A secured party is liable for any loss caused by his
19 failure to meet any obligation imposed by the preceding
20 subsections but does not lose his security interest.
21 (4) A secured party may use or operate the collateral
22 for the purpose of preserving the collateral or its value or
23 pursuant to the order of a court of appropriate jurisdiction
24 or, except in the case of consumer goods, in the manner and
25 to the extent provided in the security agreement.
26 (Source: Laws 1961, p. 2101.)
27 (810 ILCS 5/9-208) (from Ch. 26, par. 9-208)
28 Sec. 9-208. Additional duties of secured party having
29 control of collateral.
30 (a) Applicability of Section. This Section applies to
31 cases in which there is no outstanding secured obligation and
32 the secured party is not committed to make advances, incur
33 obligations, or otherwise give value.
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1 (b) Duties of secured party after receiving demand from
2 debtor. Within 10 days after receiving an authenticated
3 demand by the debtor:
4 (1) a secured party having control of a deposit
5 account under Section 9-104(a)(2) shall send to the bank
6 with which the deposit account is maintained an
7 authenticated statement that releases the bank from any
8 further obligation to comply with instructions originated
9 by the secured party;
10 (2) a secured party having control of a deposit
11 account under Section 9-104(a)(3) shall:
12 (A) pay the debtor the balance on deposit in
13 the deposit account; or
14 (B) transfer the balance on deposit into a
15 deposit account in the debtor's name;
16 (3) a secured party, other than a buyer, having
17 control of electronic chattel paper under Section 9-105
18 shall:
19 (A) communicate the authoritative copy of the
20 electronic chattel paper to the debtor or its
21 designated custodian;
22 (B) if the debtor designates a custodian that
23 is the designated custodian with which the
24 authoritative copy of the electronic chattel paper
25 is maintained for the secured party, communicate to
26 the custodian an authenticated record releasing the
27 designated custodian from any further obligation to
28 comply with instructions originated by the secured
29 party and instructing the custodian to comply with
30 instructions originated by the debtor; and
31 (C) take appropriate action to enable the
32 debtor or its designated custodian to make copies of
33 or revisions to the authoritative copy which add or
34 change an identified assignee of the authoritative
-66- LRB9106284JSpcam04
1 copy without the consent of the secured party;
2 (4) a secured party having control of investment
3 property under Section 8-106(d)(2) or 9-106(b) shall send
4 to the securities intermediary or commodity intermediary
5 with which the security entitlement or commodity contract
6 is maintained an authenticated record that releases the
7 securities intermediary or commodity intermediary from
8 any further obligation to comply with entitlement orders
9 or directions originated by the secured party; and
10 (5) a secured party having control of a
11 letter-of-credit right under Section 9-107 shall send to
12 each person having an unfulfilled obligation to pay or
13 deliver proceeds of the letter of credit to the secured
14 party an authenticated release from any further
15 obligation to pay or deliver proceeds of the letter of
16 credit to the secured party. Request for statement of
17 account or list of collateral.
18 (1) A debtor may sign a statement indicating what he
19 believes to be the aggregate amount of unpaid indebtedness as
20 of a specified date and may send it to the secured party with
21 a request that the statement be approved or corrected and
22 returned to the debtor. When the security agreement or any
23 other record kept by the secured party identifies the
24 collateral a debtor may similarly request the secured party
25 to approve or correct a list of the collateral.
26 (2) The secured party must comply with such a request
27 within two weeks after receipt by sending a written
28 correction or approval. If the secured party claims a
29 security interest in all of a particular type of collateral
30 owned by the debtor he may indicate that fact in his reply
31 and need not approve or correct an itemized list of such
32 collateral. If the secured party without reasonable excuse
33 fails to comply he is liable for any loss caused to the
34 debtor thereby; and if the debtor has properly included in
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1 his request a good faith statement of the obligation or a
2 list of the collateral or both the secured party may claim a
3 security interest only as shown in the statement against
4 persons misled by his failure to comply. If he no longer has
5 an interest in the obligation or collateral at the time the
6 request is received he must disclose the name and address of
7 any successor in interest known to him and he is liable for
8 any loss caused to the debtor as a result of failure to
9 disclose. A successor in interest is not subject to this
10 Section until a request is received by him.
11 (3) A debtor is entitled to such a statement once every
12 6 months without charge. The secured party may require
13 payment of a charge not exceeding $10 for each additional
14 statement furnished.
15 (Source: Laws 1961, p. 2101.)
16 (810 ILCS 5/9-209 new)
17 Sec. 9-209. Duties of secured party if account debtor
18 has been notified of assignment.
19 (a) Applicability of Section. Except as otherwise
20 provided in subsection (c), this Section applies if:
21 (1) there is no outstanding secured obligation; and
22 (2) the secured party is not committed to make
23 advances, incur obligations, or otherwise give value.
24 (b) Duties of secured party after receiving demand from
25 debtor. Within 10 days after receiving an authenticated
26 demand by the debtor, a secured party shall send to an
27 account debtor that has received notification of an
28 assignment to the secured party as assignee under Section
29 9-406(a) an authenticated record that releases the account
30 debtor from any further obligation to the secured party.
31 (c) Inapplicability to sales. This Section does not
32 apply to an assignment constituting the sale of an account,
33 chattel paper, or payment intangible.
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1 (810 ILCS 5/9-210 new)
2 Sec. 9-210. Request for accounting; request regarding
3 list of collateral or statement of account.
4 (a) Definitions. In this Section:
5 (1) "Request" means a record of a type described in
6 paragraph (2), (3), or (4).
7 (2) "Request for an accounting" means a record
8 authenticated by a debtor requesting that the recipient
9 provide an accounting of the unpaid obligations secured
10 by collateral and reasonably identifying the transaction
11 or relationship that is the subject of the request.
12 (3) "Request regarding a list of collateral" means
13 a record authenticated by a debtor requesting that the
14 recipient approve or correct a list of what the debtor
15 believes to be the collateral securing an obligation and
16 reasonably identifying the transaction or relationship
17 that is the subject of the request.
18 (4) "Request regarding a statement of account"
19 means a record authenticated by a debtor requesting that
20 the recipient approve or correct a statement indicating
21 what the debtor believes to be the aggregate amount of
22 unpaid obligations secured by collateral as of a
23 specified date and reasonably identifying the transaction
24 or relationship that is the subject of the request.
25 (b) Duty to respond to requests. Subject to subsections
26 (c), (d), (e), and (f), a secured party, other than a buyer
27 of accounts, chattel paper, payment intangibles, or
28 promissory notes or a consignor, shall comply with a request
29 within 14 days after receipt:
30 (1) in the case of a request for an accounting, by
31 authenticating and sending to the debtor an accounting;
32 and
33 (2) in the case of a request regarding a list of
34 collateral or a request regarding a statement of account,
-69- LRB9106284JSpcam04
1 by authenticating and sending to the debtor an approval
2 or correction.
3 (c) Request regarding list of collateral; statement
4 concerning type of collateral. A secured party that claims a
5 security interest in all of a particular type of collateral
6 owned by the debtor may comply with a request regarding a
7 list of collateral by sending to the debtor an authenticated
8 record including a statement to that effect within 14 days
9 after receipt.
10 (d) Request regarding list of collateral; no interest
11 claimed. A person that receives a request regarding a list
12 of collateral, claims no interest in the collateral when it
13 receives the request, and claimed an interest in the
14 collateral at an earlier time shall comply with the request
15 within 14 days after receipt by sending to the debtor an
16 authenticated record:
17 (1) disclaiming any interest in the collateral; and
18 (2) if known to the recipient, providing the name
19 and mailing address of any assignee of or successor to
20 the recipient's interest in the collateral.
21 (e) Request for accounting or regarding statement of
22 account; no interest in obligation claimed. A person that
23 receives a request for an accounting or a request regarding a
24 statement of account, claims no interest in the obligations
25 when it receives the request, and claimed an interest in the
26 obligations at an earlier time shall comply with the request
27 within 14 days after receipt by sending to the debtor an
28 authenticated record:
29 (1) disclaiming any interest in the obligations;
30 and
31 (2) if known to the recipient, providing the name
32 and mailing address of any assignee of or successor to
33 the recipient's interest in the obligations.
34 (f) Charges for responses. A debtor is entitled without
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1 charge to one response to a request under this Section during
2 any six-month period. The secured party may require payment
3 of a charge not exceeding $25 for each additional response.
4 (810 ILCS 5/Art. 9, Part 3 heading)
5 PART 3. PERFECTION AND PRIORITY
6 RIGHTS OF THIRD PARTIES;
7 PERFECTED AND UNPERFECTED SECURITY
8 INTERESTS: RULES OF PRIORITY
9 (810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new)
10 SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
11 (810 ILCS 5/9-301) (from Ch. 26, par. 9-301)
12 Sec. 9-301. Law governing perfection and priority of
13 security interests. Except as otherwise provided in Sections
14 9-303 through 9-306, the following rules determine the law
15 governing perfection, the effect of perfection or
16 nonperfection, and the priority of a security interest in
17 collateral:
18 (1) Except as otherwise provided in this Section,
19 while a debtor is located in a jurisdiction, the local
20 law of that jurisdiction governs perfection, the effect
21 of perfection or nonperfection, and the priority of a
22 security interest in collateral.
23 (2) While collateral is located in a jurisdiction,
24 the local law of that jurisdiction governs perfection,
25 the effect of perfection or nonperfection, and the
26 priority of a possessory security interest in that
27 collateral.
28 (3) Except as otherwise provided in paragraph (4),
29 while negotiable documents, goods, instruments, money, or
30 tangible chattel paper is located in a jurisdiction, the
31 local law of that jurisdiction governs:
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1 (A) perfection of a security interest in the
2 goods by filing a fixture filing;
3 (B) perfection of a security interest in
4 timber to be cut; and
5 (C) the effect of perfection or nonperfection
6 and the priority of a nonpossessory security
7 interest in the collateral.
8 (4) The local law of the jurisdiction in which the
9 wellhead or minehead is located governs perfection, the
10 effect of perfection or nonperfection, and the priority
11 of a security interest in as-extracted collateral.
12 Persons Who Take Priority Over Unperfected Security
13 Interests; Rights of "Lien Creditor".
14 (1) Except as otherwise provided in subsection (2), an
15 unperfected security interest is subordinate to the rights of
16 (a) persons entitled to priority under Section
17 9-312;
18 (b) a person who becomes a lien creditor before the
19 security interest is perfected;
20 (c) in the case of goods, instruments, documents,
21 and chattel paper, a person who is not a secured party
22 and who is a transferee in bulk or other buyer not in
23 ordinary course of business or is a buyer of farm
24 products in ordinary course of business, to the extent
25 that he gives value and receives delivery of the
26 collateral without knowledge of the security interest and
27 before it is perfected;
28 (d) in the case of accounts, general intangibles,
29 and investment property, a person who is not a secured
30 party and who is a transferee to the extent that he gives
31 value without knowledge of the security interest and
32 before it is perfected;
33 provided, however, that an unperfected security interest
34 shall take priority over the rights of a lien creditor if (i)
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1 the lien creditor is a trustee or receiver of a state or
2 federally chartered financial institution acting in
3 furtherance of its supervisory authority over the financial
4 institution and (ii) a security interest is granted by the
5 financial institution to secure a deposit of public funds
6 with the financial institution or a repurchase agreement with
7 the financial institution pursuant to the Government
8 Securities Act of 1986, as amended.
9 (2) If the secured party files with respect to a
10 purchase money security interest before or within 20 days
11 after the debtor receives possession of the collateral, he
12 takes priority over the rights of a transferee in bulk or of
13 a lien creditor which arise between the time the security
14 interest attaches and the time of filing.
15 (3) A "lien creditor" means a creditor who has acquired
16 a lien on the property involved by attachment, levy or the
17 like and includes an assignee for benefit of creditors from
18 the time of assignment, and a trustee in bankruptcy from the
19 date of the filing of the petition or a receiver in equity
20 from the time of appointment.
21 (4) A person who becomes a lien creditor while a
22 security interest is perfected takes subject to the security
23 interest only to the extent that it secures advances made
24 before he becomes a lien creditor or within 45 days
25 thereafter or made without knowledge of the lien or pursuant
26 to a commitment entered into without knowledge of the lien.
27 (Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.)
28 (810 ILCS 5/9-302) (from Ch. 26, par. 9-302)
29 Sec. 9-302. Law governing perfection and priority of
30 agricultural liens. While farm products are located in a
31 jurisdiction, the local law of that jurisdiction governs
32 perfection, the effect of perfection or nonperfection, and
33 the priority of an agricultural lien on the farm products.
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1 When filing is required to perfect security interest;
2 security interests to which filing provisions of this Article
3 do not apply.
4 (1) A financing statement must be filed to perfect all
5 security interests except the following:
6 (a) a security interest in collateral in possession
7 of the secured party under Section 9-305;
8 (b) a security interest temporarily perfected in
9 instruments, certificated securities, or documents
10 without delivery under Section 9-304 or in proceeds for a
11 20 day period under Section 9-306;
12 (c) a security interest created by an assignment of
13 a beneficial interest in a trust or a decedent's estate;
14 (d) a purchase money security interest in consumer
15 goods; but filing is required for a motor vehicle
16 required to be registered; and fixture filing is required
17 for priority over conflicting interests in fixtures to
18 the extent provided in Section 9-313;
19 (e) an assignment of accounts which does not alone
20 or in conjunction with other assignments to the same
21 assignee transfer a significant part of the outstanding
22 accounts of the assignor;
23 (f) a security interest of a collecting bank
24 (Section 4-208) or arising under the Article on Sales
25 (see Section 9-113) or covered in subsection (3) of this
26 Section;
27 (g) an assignment for the benefit of all creditors
28 of the transferor, and subsequent transfers by the
29 assignee thereunder;
30 (h) a security interest in investment property
31 which is perfected without filing under Section 9-115 or
32 Section 9-116;
33 (i) a security interest in a deposit account. Such
34 a security interest is perfected:
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1 (i) as to a deposit account maintained with
2 the secured party, when the security agreement is
3 executed;
4 (ii) as to a deposit account maintained with
5 any organization other than the secured party, when
6 notice thereof is given in writing to the
7 organization with whom the deposit account is
8 maintained and that organization provides written
9 acknowledgement of and consent to the notice of the
10 secured party.
11 (j) a security interest in an uncertificated
12 certificate of deposit. Such a security interest is
13 perfected;
14 (i) as to an uncertificated certificate of
15 deposit issued by the secured party, when the
16 security agreement is executed;
17 (ii) as to an uncertificated certificate of
18 deposit issued by any organization other than the
19 secured party, when notice thereof is given in
20 writing to the issuer of the uncertificated
21 certificate of deposit and the issuer provides
22 written acknowledgement of and consent to the notice
23 of the secured party.
24 (2) If a secured party assigns a perfected security
25 interest, no filing under this Article is required in order
26 to continue the perfected status of the security interest
27 against creditors of and transferees from the original
28 debtor.
29 (3) The filing of a financing statement otherwise
30 required by this Article is not necessary or effective to
31 perfect a security interest in property subject to
32 (a) a statute or treaty of the United States which
33 provides for a national or international registration or
34 a national or international certificate of title or which
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1 specifies a place of filing different from that specified
2 in this Article for filing of the security interest; or
3 (b) the following statutes of this State: the
4 Illinois Vehicle Code; the Boat Registration and Safety
5 Act; but during any period in which collateral is
6 inventory held for sale by a person who is in the
7 business of selling goods of that kind, the filing
8 provisions of this Article (Part 4) apply to a security
9 interest in that collateral created by him as debtor; or
10 (c) a certificate of title statute of another
11 jurisdiction under the law of which indication of a
12 security interest on the certificate is required as a
13 condition of perfection (subsection (2) of Section
14 9-103).
15 (4) Compliance with a statute or treaty described in
16 subsection (3) is equivalent to the filing of a financing
17 statement under this Article, and a security interest in
18 property subject to the statute or treaty can be perfected
19 only by compliance therewith except as provided in Section
20 9-103 on multiple state transactions. Duration and renewal of
21 perfection of a security interest perfected by compliance
22 with the statute or treaty are governed by the provisions of
23 the statute or treaty; in other respects the security
24 interest is subject to this Article.
25 (Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.)
26 (810 ILCS 5/9-303) (from Ch. 26, par. 9-303)
27 Sec. 9-303. Law governing perfection and priority of
28 security interests in goods covered by a certificate of
29 title.
30 (a) Applicability of Section. This Section applies to
31 goods covered by a certificate of title, even if there is no
32 other relationship between the jurisdiction under whose
33 certificate of title the goods are covered and the goods or
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1 the debtor.
2 (b) When goods covered by certificate of title. Goods
3 become covered by a certificate of title when a valid
4 application for the certificate of title and the applicable
5 fee are delivered to the appropriate authority. Goods cease
6 to be covered by a certificate of title at the earlier of the
7 time the certificate of title ceases to be effective under
8 the law of the issuing jurisdiction or the time the goods
9 become covered subsequently by a certificate of title issued
10 by another jurisdiction.
11 (c) Applicable law. The local law of the jurisdiction
12 under whose certificate of title the goods are covered
13 governs perfection, the effect of perfection or
14 nonperfection, and the priority of a security interest in
15 goods covered by a certificate of title from the time the
16 goods become covered by the certificate of title until the
17 goods cease to be covered by the certificate of title. When
18 security interest is perfected; continuity of perfection.
19 (1) A security interest is perfected when it has
20 attached and when all of the applicable steps required for
21 perfection have been taken. Such steps are specified in
22 Sections 9--302, 9--304, 9--305 and 9--306. If such steps are
23 taken before the security interest attaches, it is perfected
24 at the time when it attaches.
25 (2) If a security interest is originally perfected in
26 any way permitted under this Article and is subsequently
27 perfected in some other way under this Article, without an
28 intermediate period when it was unperfected, the security
29 interest shall be deemed to be perfected continuously for the
30 purposes of this Article.
31 (Source: Laws 1961, p. 2101.)
32 (810 ILCS 5/9-304) (from Ch. 26, par. 9-304)
33 Sec. 9-304. Law governing perfection and priority of
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1 security interests in deposit accounts.
2 (a) Law of bank's jurisdiction governs. The local law
3 of a bank's jurisdiction governs perfection, the effect of
4 perfection or nonperfection, and the priority of a security
5 interest in a deposit account maintained with that bank.
6 (b) Bank's jurisdiction. The following rules determine
7 a bank's jurisdiction for purposes of this Part:
8 (1) If an agreement between the bank and the debtor
9 governing the deposit account expressly provides that a
10 particular jurisdiction is the bank's jurisdiction for
11 purposes of this Part, this Article, or the Uniform
12 Commercial Code, that jurisdiction is the bank's
13 jurisdiction.
14 (2) If paragraph (1) does not apply and an
15 agreement between the bank and its customer governing the
16 deposit account expressly provides that the agreement is
17 governed by the law of a particular jurisdiction, that
18 jurisdiction is the bank's jurisdiction.
19 (3) If neither paragraph (1) nor paragraph (2)
20 applies and an agreement between the bank and its
21 customer governing the deposit account expressly provides
22 that the deposit account is maintained at an office in a
23 particular jurisdiction, that jurisdiction is the bank's
24 jurisdiction.
25 (4) If none of the preceding paragraphs applies,
26 the bank's jurisdiction is the jurisdiction in which the
27 office identified in an account statement as the office
28 serving the customer's account is located.
29 (5) If none of the preceding paragraphs applies,
30 the bank's jurisdiction is the jurisdiction in which the
31 chief executive office of the bank is located. Perfection
32 of security interest in instruments, documents, proceeds
33 of a written letter of credit, and goods covered by
34 documents; perfection by permissive filing; temporary
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1 perfection without filing or transfer of possession.
2 (1) A security interest in chattel paper or negotiable
3 documents may be perfected by filing. A security interest in
4 the rights to proceeds of a written letter of credit can be
5 perfected only by the secured party's taking possession of
6 the letter of credit. A security interest in money or
7 instruments (other than instruments which constitute part of
8 chattel paper) can be perfected only by the secured party's
9 taking possession, except as provided in subsections (4) and
10 (5) of this Section and subsections (2) and (3) of Section
11 9-306 on proceeds.
12 (2) During the period that goods are in the possession
13 of the issuer of a negotiable document therefor, a security
14 interest in the goods is perfected by perfecting a security
15 interest in the document, and any security interest in the
16 goods otherwise perfected during such period is subject
17 thereto.
18 (3) A security interest in goods in the possession of a
19 bailee other than one who has issued a negotiable document
20 therefor is perfected by issuance of a document in the name
21 of the secured party or by the bailee's receipt of
22 notification of the secured party's interest or by filing as
23 to the goods.
24 (4) A security interest in instruments, certificated
25 securities, or negotiable documents is perfected without
26 filing or the taking of possession for a period of 21 days
27 from the time it attaches to the extent that it arises for
28 new value given under a written security agreement.
29 (5) A security interest remains perfected for a period
30 of 21 days without filing where a secured party having a
31 perfected security interest in an instrument, a certificated
32 security, a negotiable document, or goods in possession of a
33 bailee other than one who has issued a negotiable document
34 therefor.
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1 (a) makes available to the debtor the goods or
2 documents representing the goods for the purpose of
3 ultimate sale or exchange or for the purpose of loading,
4 unloading, storing, shipping, transshipping,
5 manufacturing, processing or otherwise dealing with them
6 in a manner preliminary to their sale or exchange, but
7 priority between conflicting security interests in the
8 goods is subject to subsection (3) of Section 9-312; or
9 (b) delivers the instrument or certificated
10 security to the debtor for the purpose of ultimate sale
11 or exchange or of presentation, collection, renewal or
12 registration of transfer.
13 (6) After the 21 day period in subsections (4) and (5)
14 perfection depends upon compliance with applicable provisions
15 of this Article.
16 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
17 (810 ILCS 5/9-305) (from Ch. 26, par. 9-305)
18 Sec. 9-305. Law governing perfection and priority of
19 security interests in investment property.
20 (a) Governing law: general rules. Except as otherwise
21 provided in subsection (c), the following rules apply:
22 (1) While a security certificate is located in a
23 jurisdiction, the local law of that jurisdiction governs
24 perfection, the effect of perfection or nonperfection,
25 and the priority of a security interest in the
26 certificated security represented thereby.
27 (2) The local law of the issuer's jurisdiction as
28 specified in Section 8-110(d) governs perfection, the
29 effect of perfection or nonperfection, and the priority
30 of a security interest in an uncertificated security.
31 (3) The local law of the securities intermediary's
32 jurisdiction as specified in Section 8-110(e) governs
33 perfection, the effect of perfection or nonperfection,
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1 and the priority of a security interest in a security
2 entitlement or securities account.
3 (4) The local law of the commodity intermediary's
4 jurisdiction governs perfection, the effect of perfection
5 or nonperfection, and the priority of a security interest
6 in a commodity contract or commodity account.
7 (b) Commodity intermediary's jurisdiction. The
8 following rules determine a commodity intermediary's
9 jurisdiction for purposes of this Part:
10 (1) If an agreement between the commodity
11 intermediary and commodity customer governing the
12 commodity account expressly provides that a particular
13 jurisdiction is the commodity intermediary's jurisdiction
14 for purposes of this Part, this Article, or the Uniform
15 Commercial Code, that jurisdiction is the commodity
16 intermediary's jurisdiction.
17 (2) If paragraph (1) does not apply and an
18 agreement between the commodity intermediary and
19 commodity customer governing the commodity account
20 expressly provides that the agreement is governed by the
21 law of a particular jurisdiction, that jurisdiction is
22 the commodity intermediary's jurisdiction.
23 (3) If neither paragraph (1) nor paragraph (2)
24 applies and an agreement between the commodity
25 intermediary and commodity customer governing the
26 commodity account expressly provides that the commodity
27 account is maintained at an office in a particular
28 jurisdiction, that jurisdiction is the commodity
29 intermediary's jurisdiction.
30 (4) If none of the preceding paragraphs applies,
31 the commodity intermediary's jurisdiction is the
32 jurisdiction in which the office identified in an account
33 statement as the office serving the commodity customer's
34 account is located.
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1 (5) If none of the preceding paragraphs applies,
2 the commodity intermediary's jurisdiction is the
3 jurisdiction in which the chief executive office of the
4 commodity intermediary is located.
5 (c) When perfection governed by law of jurisdiction
6 where debtor located. The local law of the jurisdiction in
7 which the debtor is located governs:
8 (1) perfection of a security interest in investment
9 property by filing;
10 (2) automatic perfection of a security interest in
11 investment property created by a broker or securities
12 intermediary; and
13 (3) automatic perfection of a security interest in
14 a commodity contract or commodity account created by a
15 commodity intermediary. When possession by secured party
16 perfects security interest without filing. A security
17 interest in goods, instruments, money, negotiable
18 documents, or chattel paper may be perfected by the
19 secured party's taking possession of the collateral. A
20 security interest in the right to proceeds of a written
21 letter of credit may be perfected by the secured party's
22 taking possession of the letter of credit. If such
23 collateral other than goods covered by a negotiable
24 document is held by a bailee, the secured party is deemed
25 to have possession from the time the bailee receives
26 notification of the secured party's interest. A security
27 interest is perfected by possession from the time
28 possession is taken without relation back and continues
29 only so long as possession is retained, unless otherwise
30 specified in this Article. The security interest may be
31 otherwise perfected as provided in this Article before or
32 after the period of possession by the secured party.
33 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
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1 (810 ILCS 5/9-306) (from Ch. 26, par. 9-306)
2 Sec. 9-306. Law governing perfection and priority of
3 security interests in letter-of-credit rights.
4 (a) Governing law: issuer's or nominated person's
5 jurisdiction. Subject to subsection (c), the local law of the
6 issuer's jurisdiction or a nominated person's jurisdiction
7 governs perfection, the effect of perfection or
8 nonperfection, and the priority of a security interest in a
9 letter-of-credit right if the issuer's jurisdiction or
10 nominated person's jurisdiction is a State.
11 (b) Issuer's or nominated person's jurisdiction. For
12 purposes of this Part, an issuer's jurisdiction or nominated
13 person's jurisdiction is the jurisdiction whose law governs
14 the liability of the issuer or nominated person with respect
15 to the letter-of-credit right as provided in Section 5-116.
16 (c) When Section not applicable. This Section does not
17 apply to a security interest that is perfected only under
18 Section 9-308(d). "Proceeds"; Secured Party's Rights on
19 Disposition of Collateral.
20 (1) "Proceeds" includes whatever is received upon the
21 sale, exchange, collection or other disposition of collateral
22 or proceeds. Insurance payable by reason of loss or damage to
23 the collateral is proceeds, except to the extent that it is
24 payable to a person other than a party to the security
25 agreement. Any payments or distributions made with respect to
26 investment property collateral are proceeds. Money, checks,
27 deposit accounts, and the like are "cash proceeds". All other
28 proceeds are "non-cash proceeds".
29 (2) Except where this Article otherwise provides, a
30 security interest continues in collateral notwithstanding
31 sale, exchange or other disposition thereof unless the
32 disposition was authorized by the secured party in the
33 security agreement or otherwise, and also continues in any
34 identifiable proceeds including collections received by the
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1 debtor.
2 (3) The security interest in proceeds is a continuously
3 perfected security interest if the interest in the original
4 collateral was perfected but it ceases to be a perfected
5 security interest and becomes unperfected 20 days after
6 receipt of the proceeds by the debtor unless
7 (a) a filed financing statement covers the original
8 collateral and the proceeds are collateral in which a
9 security interest may be perfected by filing in the
10 office or offices where the financing statement has been
11 filed and, if the proceeds are acquired with cash
12 proceeds, the description of collateral in the financing
13 statement indicates the types of property constituting
14 the proceeds; or
15 (b) a filed financing statement covers the original
16 collateral and the proceeds are identifiable cash
17 proceeds;
18 (c) the original collateral was investment property
19 and the proceeds are identifiable cash proceeds; or
20 (d) the security interest in the proceeds is
21 perfected before the expiration of the 20 day period.
22 Except as provided in this Section, a security interest
23 in proceeds can be perfected only by the methods or under the
24 circumstances permitted in this Article for original
25 collateral of the same type.
26 (4) In the event of insolvency proceedings instituted by
27 or against a debtor, a secured party with a perfected
28 security interest in proceeds has a perfected security
29 interest only in the following proceeds:
30 (a) in identifiable non-cash proceeds and in
31 separate deposit accounts containing only proceeds;
32 (b) in identifiable cash proceeds in the form of
33 money which is neither commingled with other money nor
34 deposited in a deposit account prior to the insolvency
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1 proceedings;
2 (c) in identifiable cash proceeds in the form of
3 checks and the like which are not deposited in a deposit
4 account prior to the insolvency proceedings; and
5 (d) in all cash and deposit accounts of the debtor
6 in which proceeds have been commingled with other funds,
7 but the perfected security interest under this paragraph
8 (d) is
9 (i) subject to any right to set-off; and
10 (ii) limited to an amount not greater than the
11 amount of any cash proceeds received by the debtor
12 within 20 days before the institution of the
13 insolvency proceedings less the sum of (I) the
14 payments to the secured party on account of cash
15 proceeds received by the debtor during such period
16 and (II) the cash proceeds received by the debtor
17 during such period to which the secured party is
18 entitled under paragraphs (a) through (c) of this
19 subsection (4).
20 (5) If a sale of goods results in an account or chattel
21 paper which is transferred by the seller to a secured party,
22 and if the goods are returned to or are repossessed by the
23 seller or the secured party, the following rules determine
24 priorities:
25 (a) If the goods were collateral at the time of
26 sale, for an indebtedness of the seller which is still
27 unpaid, the original security interest attaches again to
28 the goods and continues as a perfected security interest
29 if it was perfected at the time when the goods were sold.
30 If the security interest was originally perfected by a
31 filing which is still effective, nothing further is
32 required to continue the perfected status; in any other
33 case, the secured party must take possession of the
34 returned or repossessed goods or must file.
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1 (b) An unpaid transferee of the chattel paper has a
2 security interest in the goods against the transferor.
3 Such security interest is prior to a security interest
4 asserted under paragraph (a) to the extent that the
5 transferee of the chattel paper was entitled to priority
6 under Section 9-308.
7 (c) An unpaid transferee of the account has a
8 security interest in the goods against the transferor.
9 Such security interest is subordinate to a security
10 interest asserted under paragraph (a).
11 (d) A security interest of an unpaid transferee
12 asserted under paragraph (b) or (c) must be perfected for
13 protection against creditors of the transferor and
14 purchasers of the returned or repossessed goods.
15 (Source: P.A. 89-364, eff. 1-1-96.)
16 (810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01)
17 Sec. 9-306.01. (Blank). Debtor disposing of collateral
18 and failing to pay secured party amount due under security
19 agreement; penalties for violation.
20 (1) It is unlawful for a debtor under the terms of a
21 security agreement (a) who has no right of sale or other
22 disposition of the collateral or (b) who has a right of sale
23 or other disposition of the collateral and is to account to
24 the secured party for the proceeds of any sale or other
25 disposition of the collateral, to sell or otherwise dispose
26 of the collateral and willfully and wrongfully to fail to pay
27 the secured party the amount of said proceeds due under the
28 security agreement. Failure to pay such proceeds to the
29 secured party within 10 days after the sale or other
30 disposition of the collateral is prima facie evidence of a
31 willful and wanton failure to pay.
32 (2) An individual convicted of a violation of this
33 Section shall be guilty of a Class 3 felony.
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1 (3) A corporation convicted of a violation of this
2 Section shall be guilty of a business offense and shall be
3 fined not less than two thousand dollars nor more than ten
4 thousand dollars.
5 (4) In the event the debtor under the terms of a
6 security agreement is a corporation or a partnership, any
7 officer, director, manager, or managerial agent of the debtor
8 who violates this Section or causes the debtor to violate
9 this Section shall be guilty of a Class 3 felony.
10 (Source: P.A. 83-69.)
11 (810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02)
12 Sec. 9-306.02. (Blank). (1) Where, pursuant to Section
13 9-205.1, a secured party has required that before the debtor
14 sells or otherwise disposes of collateral in the debtor's
15 possession he disclose to the secured party the persons to
16 whom he desires to sell or otherwise dispose of such
17 collateral, it is unlawful for the debtor to sell or
18 otherwise dispose of the collateral to a person other than a
19 person so disclosed to the secured party.
20 (2) An individual convicted of a violation of this
21 Section shall be guilty of a Class A misdemeanor.
22 (3) A corporation convicted of a violation of this
23 Section shall be guilty of a business offense and shall be
24 fined not less than $2,000 nor more than $10,000.
25 (4) In the event the debtor under the terms of a
26 security agreement is a corporation or a partnership, any
27 officer, director, manager or managerial agent of the debtor
28 who violates this Section or causes the debtor to violate
29 this Section shall be guilty of a Class A misdemeanor.
30 (5) It is an affirmative defense to a prosecution for
31 the violation of this Section that the debtor has paid to the
32 secured party the proceeds from the sale or other disposition
33 of the collateral within 10 days after such sale or
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1 disposition.
2 (Source: P.A. 84-1372.)
3 (810 ILCS 5/9-307) (from Ch. 26, par. 9-307)
4 Sec. 9-307. Location of debtor.
5 (a) "Place of business." In this Section, "place of
6 business" means a place where a debtor conducts its affairs.
7 (b) Debtor's location: general rules. Except as
8 otherwise provided in this Section, the following rules
9 determine a debtor's location:
10 (1) A debtor who is an individual is located at the
11 individual's principal residence.
12 (2) A debtor that is an organization and has only
13 one place of business is located at its place of
14 business.
15 (3) A debtor that is an organization and has more
16 than one place of business is located at its chief
17 executive office.
18 (c) Limitation of applicability of subsection (b).
19 Subsection (b) applies only if a debtor's residence, place of
20 business, or chief executive office, as applicable, is
21 located in a jurisdiction whose law generally requires
22 information concerning the existence of a nonpossessory
23 security interest to be made generally available in a filing,
24 recording, or registration system as a condition or result of
25 the security interest's obtaining priority over the rights of
26 a lien creditor with respect to the collateral. If
27 subsection (b) does not apply, the debtor is located in the
28 District of Columbia.
29 (d) Continuation of location: cessation of existence,
30 etc. A person that ceases to exist, have a residence, or
31 have a place of business continues to be located in the
32 jurisdiction specified by subsections (b) and (c).
33 (e) Location of registered organization organized under
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1 State law. A registered organization that is organized under
2 the law of a State is located in that State.
3 (f) Location of registered organization organized under
4 federal law; bank branches and agencies. Except as otherwise
5 provided in subsection (i), a registered organization that is
6 organized under the law of the United States and a branch or
7 agency of a bank that is not organized under the law of the
8 United States or a State are located:
9 (1) in the State that the law of the United States
10 designates, if the law designates a State of location;
11 (2) in the State that the registered organization,
12 branch, or agency designates, if the law of the United
13 States authorizes the registered organization, branch, or
14 agency to designate its State of location; or
15 (3) in the District of Columbia, if neither
16 paragraph (1) nor paragraph (2) applies.
17 (g) Continuation of location: change in status of
18 registered organization. A registered organization continues
19 to be located in the jurisdiction specified by subsection (e)
20 or (f) notwithstanding:
21 (1) the suspension, revocation, forfeiture, or
22 lapse of the registered organization's status as such in
23 its jurisdiction of organization; or
24 (2) the dissolution, winding up, or cancellation of
25 the existence of the registered organization.
26 (h) Location of United States. The United States is
27 located in the District of Columbia.
28 (i) Location of foreign bank branch or agency if
29 licensed in only one State. A branch or agency of a bank
30 that is not organized under the law of the United States or a
31 State is located in the State in which the branch or agency
32 is licensed, if all branches and agencies of the bank are
33 licensed in only one State.
34 (j) Location of foreign air carrier. A foreign air
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1 carrier under the Federal Aviation Act of 1958, as amended,
2 is located at the designated office of the agent upon which
3 service of process may be made on behalf of the carrier.
4 (k) Section applies only to this Part. This Section
5 applies only for purposes of this Part. Protection of Buyers
6 of Goods.
7 (1) Except as provided in subsection (4), a buyer in the
8 ordinary course of business, as defined in subsection (9) of
9 Section 1-201, takes free of a security interest created by
10 his seller even though the security interest is perfected and
11 even though the buyer knows of its existence.
12 (2) In the case of consumer goods, a buyer takes free of
13 a security interest even though perfected if he buys without
14 knowledge of the security interest, for value and for his own
15 personal, family or household purposes unless prior to the
16 purchase the secured party has filed a financing statement
17 covering such goods.
18 (3) A buyer other than a buyer in ordinary course of
19 business (subsection (1) of this Section) takes free of a
20 security interest to the extent that it secures future
21 advances made after the secured party acquires knowledge of
22 the purchase, or more than 45 days after the purchase,
23 whichever first occurs, unless made pursuant to a commitment
24 entered into without knowledge of the purchase and before the
25 expiration of the 45 day period.
26 (4) A buyer of farm products takes subject to a security
27 interest created by the seller if:
28 (a) within one year before the sale of the farm
29 products, the buyer has received from the secured party
30 or the seller written notice of the security interest
31 organized according to farm products that:
32 (i) is an original or reproduced copy thereof;
33 (ii) contains,
34 (I) the name and address of the secured
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1 party;
2 (II) the name and address of the person
3 indebted to the secured party;
4 (III) the social security number of the
5 debtor or, in the case of a debtor doing
6 business other than as an individual, the
7 Internal Revenue Service taxpayer
8 identification number of such debtor;
9 (IV) a description of the farm products
10 subject to the security interest created by the
11 debtor, including the amount of such products
12 where applicable, crop year, county, and a
13 reasonable description of the property;
14 (iii) must be amended in writing, within 3
15 months, similarly signed and transmitted, to reflect
16 material changes;
17 (iv) will lapse on either the expiration
18 period of the statement or the transmission of a
19 notice signed by the secured party that the
20 statement has lapsed, whichever occurs first; and
21 (v) sets forth any payment obligations imposed
22 on the buyer by the secured party as conditions for
23 waiver or release of the security interest; and
24 (b) the buyer has failed to perform the payment
25 obligations.
26 For the purposes of this subsection (4), a buyer of farm
27 products has received notice from the secured party or seller
28 when written notice of the security interest is sent to the
29 buyer by registered or certified mail.
30 (Source: P.A. 84-1372; revised 10-31-98.)
31 (810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1)
32 Sec. 9-307.1. (Blank). A commission merchant or selling
33 agent who sells a farm product for others shall be subject to
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1 a security interest created by the seller in such farm
2 product if-
3 (a) within one year before the sale of the farm
4 products, the buyer has received from the secured party or
5 the seller written notice of the security interest organized
6 according to farm products that:
7 (i) is an original or reproduced copy thereof;
8 (ii) contains,
9 (I) the name and address of the secured party;
10 (II) the name and address of the person indebted to the
11 secured party;
12 (III) the social security number of the debtor or, in
13 the case of a debtor doing business other than as an
14 individual, the Internal Revenue Service taxpayer
15 identification number of such debtor;
16 (IV) a description of the farm products subject to the
17 security interest created by the debtor, including the amount
18 of such products where applicable, crop year, county, and a
19 reasonable description of the property;
20 (iii) must be amended in writing, within 3 months,
21 similarly signed and transmitted, to reflect material
22 changes;
23 (iv) will lapse on either the expiration period of the
24 statement or the transmission of a notice signed by the
25 secured party that the statement has lapsed, whichever occurs
26 first; and
27 (v) sets forth any payment obligations imposed on the
28 buyer by the secured party as conditions for waiver or
29 release of the security interest; and
30 (b) the commission merchant or selling agent has failed
31 to perform the payment obligations.
32 For the purposes of this Section, a commission merchant
33 or selling agent has received notice from the secured party
34 or seller when written notice of the security interest is
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1 sent to the commission merchant or selling agent by
2 registered or certified mail.
3 (Source: P.A. 84-1372.)
4 (810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2)
5 Sec. 9-307.2. (Blank). A commission merchant or
6 selling agent who sells farm products for others, and
7 any person buying farm products in the ordinary course
8 of business from a person engaged in farming operations,
9 shall post at each licensed location where said
10 merchant, agent or person buying farm products in the
11 ordinary course of business does business a notice
12 which shall read as follows:
13 "NOTICE TO SELLERS OF FARM PRODUCTS
14 It is a criminal offense to sell farm products subject to
15 a security interest without making payment to the secured
16 party. You should notify the purchaser if there is a security
17 interest in the farm products you are selling."
18 Such notice shall be posted in a conspicuous manner and
19 shall be in contrasting type, large enough to be read from a
20 distance of 10 feet.
21 (Source: P.A. 83-69.)
22 (810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new)
23 SUBPART 2. PERFECTION
24 (810 ILCS 5/9-308) (from Ch. 26, par. 9-308)
25 Sec. 9-308. When security interest or agricultural lien
26 is perfected; continuity of perfection.
27 (a) Perfection of security interest. Except as
28 otherwise provided in this Section and Section 9-309, a
29 security interest is perfected if it has attached and all of
30 the applicable requirements for perfection in Sections 9-310
31 through 9-316 have been satisfied. A security interest is
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1 perfected when it attaches if the applicable requirements are
2 satisfied before the security interest attaches.
3 (b) Perfection of agricultural lien. An agricultural
4 lien is perfected if it has become effective and all of the
5 applicable requirements for perfection in Section 9-310 have
6 been satisfied. An agricultural lien is perfected when it
7 becomes effective if the applicable requirements are
8 satisfied before the agricultural lien becomes effective.
9 (c) Continuous perfection; perfection by different
10 methods. A security interest or agricultural lien is
11 perfected continuously if it is originally perfected by one
12 method under this Article and is later perfected by another
13 method under this Article, without an intermediate period
14 when it was unperfected.
15 (d) Supporting obligation. Perfection of a security
16 interest in collateral also perfects a security interest in a
17 supporting obligation for the collateral.
18 (e) Lien securing right to payment. Perfection of a
19 security interest in a right to payment or performance also
20 perfects a security interest in a security interest,
21 mortgage, or other lien on personal or real property securing
22 the right.
23 (f) Security entitlement carried in securities account.
24 Perfection of a security interest in a securities account
25 also perfects a security interest in the security
26 entitlements carried in the securities account.
27 (g) Commodity contract carried in commodity account.
28 Perfection of a security interest in a commodity account also
29 perfects a security interest in the commodity contracts
30 carried in the commodity account. Purchase of Chattel Paper
31 and Instruments.
32 A purchaser of chattel paper or an instrument who gives
33 new value and takes possession of it in the ordinary course
34 of his business has priority over a security interest in the
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1 chattel paper or instrument
2 (a) which is perfected under Section 9-304 (permissive
3 filing and temporary perfection) or under Section 9-306
4 (perfection as to proceeds) if he acts without knowledge that
5 the specific paper or instrument is subject to a security
6 interest; or
7 (b) which is claimed merely as proceeds of inventory
8 subject to a security interest (Section 9-306) even though he
9 knows that the specific paper or instrument is subject to the
10 security interest.
11 (Source: P. A. 77-2810.)
12 (810 ILCS 5/9-309) (from Ch. 26, par. 9-309)
13 Sec. 9-309. Security interest perfected upon attachment.
14 The following security interests are perfected when they
15 attach:
16 (1) a purchase-money security interest in consumer
17 goods, except as otherwise provided in Section 9-311(b)
18 with respect to consumer goods that are subject to a
19 statute or treaty described in Section 9-311(a);
20 (2) an assignment of accounts or payment
21 intangibles which does not by itself or in conjunction
22 with other assignments to the same assignee transfer a
23 significant part of the assignor's outstanding accounts
24 or payment intangibles;
25 (3) a sale of a payment intangible;
26 (4) a sale of a promissory note;
27 (5) a security interest created by the assignment
28 of a health-care-insurance receivable to the provider of
29 the health-care goods or services;
30 (6) a security interest arising under Section
31 2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor
32 obtains possession of the collateral;
33 (7) a security interest of a collecting bank
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1 arising under Section 4-210;
2 (8) a security interest of an issuer or nominated
3 person arising under Section 5-118;
4 (9) a security interest arising in the delivery of
5 a financial asset under Section 9-206(c);
6 (10) a security interest in investment property
7 created by a broker or securities intermediary;
8 (11) a security interest in a commodity contract or
9 a commodity account created by a commodity intermediary;
10 (12) an assignment for the benefit of all creditors
11 of the transferor and subsequent transfers by the
12 assignee thereunder; and
13 (13) a security interest created by an assignment
14 of a beneficial interest in a decedent's estate.
15 Protection of purchasers of instruments, documents and
16 securities. Nothing in this Article limits the rights of
17 a holder in due course of a negotiable instrument
18 (Section 3-302) or a holder to whom a negotiable document
19 of title has been duly negotiated (Section 7-501) or a
20 protected purchaser of a security (Section 8-303) and
21 such holders or purchasers take priority over an earlier
22 security interest even though perfected. Filing under
23 this Article does not constitute notice of the security
24 interest to such holders or purchasers.
25 (Source: P.A. 89-364, eff. 1-1-96.)
26 (810 ILCS 5/9-310) (from Ch. 26, par. 9-310)
27 Sec. 9-310. When filing required to perfect security
28 interest or agricultural lien; security interests and
29 agricultural liens to which filing provisions do not apply.
30 (a) General rule: perfection by filing. Except as
31 otherwise provided in subsection (b) and Section 9-312(b), a
32 financing statement must be filed to perfect all security
33 interests and agricultural liens.
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1 (b) Exceptions: filing not necessary. The filing of a
2 financing statement is not necessary to perfect a security
3 interest:
4 (1) that is perfected under Section 9-308(d), (e),
5 (f), or (g);
6 (2) that is perfected under Section 9-309 when it
7 attaches;
8 (3) in property subject to a statute, regulation,
9 or treaty described in Section 9-311(a);
10 (4) in goods in possession of a bailee which is
11 perfected under Section 9-312(d)(1) or (2);
12 (5) in certificated securities, documents, goods,
13 or instruments which is perfected without filing or
14 possession under Section 9-312(e), (f), or (g);
15 (6) in collateral in the secured party's possession
16 under Section 9-313;
17 (7) in a certificated security which is perfected
18 by delivery of the security certificate to the secured
19 party under Section 9-313;
20 (8) in deposit accounts, electronic chattel paper,
21 investment property, or letter-of-credit rights which is
22 perfected by control under Section 9-314;
23 (9) in proceeds which is perfected under Section
24 9-315; or
25 (10) that is perfected under Section 9-316.
26 (c) Assignment of perfected security interest. If a
27 secured party assigns a perfected security interest or
28 agricultural lien, a filing under this Article is not
29 required to continue the perfected status of the security
30 interest against creditors of and transferees from the
31 original debtor. Priority of certain liens arising by
32 operation of law.
33 When a person in the ordinary course of his business
34 furnishes services or materials with respect to goods subject
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1 to a security interest, a lien upon goods in the possession
2 of such person given by statute or rule of law for such
3 materials or services takes priority over a perfected
4 security interest unless the lien is statutory and the
5 statute expressly provides otherwise.
6 (Source: Laws 1961, p. 2101.)
7 (810 ILCS 5/9-311) (from Ch. 26, par. 9-311)
8 Sec. 9-311. Perfection of security interests in property
9 subject to certain statutes, regulations, and treaties.
10 (a) Security interest subject to other law. Except as
11 otherwise provided in subsection (d), the filing of a
12 financing statement is not necessary or effective to perfect
13 a security interest in property subject to:
14 (1) a statute, regulation, or treaty of the United
15 States whose requirements for a security interest's
16 obtaining priority over the rights of a lien creditor
17 with respect to the property preempt Section 9-310(a);
18 (2) the Illinois Vehicle Code or the Boat
19 Registration and Safety Act; 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 subject to a statute specified in
14 subsection (a)(2) is inventory held for sale or lease by a
15 person or leased by that person as lessor and that person is
16 in the business of selling or leasing goods of that kind,
17 this Section does not apply to a security interest in that
18 collateral created by that person as debtor. Alienability of
19 debtor's rights: judicial process.
20 The debtor's rights in collateral may be voluntarily or
21 involuntarily transferred (by way of sale, creation of a
22 security interest, attachment, levy, garnishment or other
23 judicial process) notwithstanding a provision in the security
24 agreement prohibiting any transfer or making the transfer
25 constitute a default.
26 (Source: Laws 1961, p. 2101.)
27 (810 ILCS 5/9-312) (from Ch. 26, par. 9-312)
28 Sec. 9-312. Perfection of security interests in chattel
29 paper, deposit accounts, documents, goods covered by
30 documents, instruments, investment property, letter-of-credit
31 rights, and money; perfection by permissive filing; temporary
32 perfection without filing or transfer of possession.
33 (a) Perfection by filing permitted. A security interest
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1 in chattel paper, negotiable documents, instruments, or
2 investment property may be perfected by filing.
3 (b) Control or possession of certain collateral. Except
4 as otherwise provided in Section 9-315(c) and (d) for
5 proceeds:
6 (1) a security interest in a deposit account may be
7 perfected only by control under Section 9-314;
8 (2) and except as otherwise provided in Section
9 9-308(d), a security interest in a letter-of-credit right
10 may be perfected only by control under Section 9-314; and
11 (3) a security interest in money may be perfected
12 only by the secured party's taking possession under
13 Section 9-313.
14 (c) Goods covered by negotiable document. While goods
15 are in the possession of a bailee that has issued a
16 negotiable document covering the goods:
17 (1) a security interest in the goods may be
18 perfected by perfecting a security interest in the
19 document; and
20 (2) a security interest perfected in the document
21 has priority over any security interest that becomes
22 perfected in the goods by another method during that
23 time.
24 (d) Goods covered by nonnegotiable document. While
25 goods are in the possession of a bailee that has issued a
26 nonnegotiable document covering the goods, a security
27 interest in the goods may be perfected by:
28 (1) issuance of a document in the name of the
29 secured party;
30 (2) the bailee's receipt of notification of the
31 secured party's interest; or
32 (3) filing as to the goods.
33 (e) Temporary perfection: new value. A security
34 interest in certificated securities, negotiable documents, or
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1 instruments is perfected without filing or the taking of
2 possession for a period of 20 days from the time it attaches
3 to the extent that it arises for new value given under an
4 authenticated security agreement.
5 (f) Temporary perfection: goods or documents made
6 available to debtor. A perfected security interest in a
7 negotiable document or goods in possession of a bailee, other
8 than one that has issued a negotiable document for the goods,
9 remains perfected for 20 days without filing if the secured
10 party makes available to the debtor the goods or documents
11 representing the goods for the purpose of:
12 (1) ultimate sale or exchange; or
13 (2) loading, unloading, storing, shipping,
14 transshipping, manufacturing, processing, or otherwise
15 dealing with them in a manner preliminary to their sale
16 or exchange.
17 (g) Temporary perfection: delivery of security
18 certificate or instrument to debtor. A perfected security
19 interest in a certificated security or instrument remains
20 perfected for 20 days without filing if the secured party
21 delivers the security certificate or instrument to the debtor
22 for the purpose of:
23 (1) ultimate sale or exchange; or
24 (2) presentation, collection, enforcement, renewal,
25 or registration of transfer.
26 (h) Expiration of temporary perfection. After the
27 20-day period specified in subsection (e), (f), or (g)
28 expires, perfection depends upon compliance with this
29 Article. Priorities Among Conflicting Security Interests in
30 the Same Collateral.
31 (1) The rules of priority stated in other Sections of
32 this Part and in the following Sections shall govern when
33 applicable: Section 4-210 with respect to the security
34 interests of collecting banks in items being collected,
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1 accompanying documents and proceeds; Section 9-103 on
2 security interests related to other jurisdictions; Section
3 9-114 on consignments; Section 9-115 on security interests in
4 investment property.
5 (2) A perfected security interest in crops for new value
6 given to enable the debtor to produce the crops during the
7 production season and given not more than three months before
8 the crops become growing crops by planting or otherwise takes
9 priority over an earlier perfected security interest to the
10 extent that such earlier interest secures obligations due
11 more than six months before the crops become growing crops by
12 planting or otherwise, even though the person giving new
13 value had knowledge of the earlier security interest.
14 (3) A perfected purchase money security interest in
15 inventory has priority over a conflicting security interest
16 in the same inventory and also has priority in identifiable
17 cash proceeds received on or before the delivery of the
18 inventory to a buyer if
19 (a) the purchase money security interest is
20 perfected at the time the debtor receives possession of
21 the inventory; and
22 (b) the purchase money secured party gives
23 notification in writing to the holder of the conflicting
24 security interest if the holder had filed a financing
25 statement covering the same types of inventory (i) before
26 the date of the filing made by the purchase money secured
27 party, or (ii) before the beginning of the 21 day period
28 where the purchase money security interest is temporarily
29 perfected without filing or possession (subsection (5) of
30 Section 9-304); and
31 (c) the holder of the conflicting security interest
32 receives the notification within 5 years before the
33 debtor receives possession of the inventory; and
34 (d) the notification states that the person giving
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1 the notice has or expects to acquire a purchase money
2 security interest in inventory of the debtor, describing
3 such inventory by item or type.
4 (4) A purchase money security interest in collateral
5 other than inventory has priority over a conflicting security
6 interest in the same collateral or its proceeds if the
7 purchase money security interest is perfected at the time the
8 debtor receives possession of the collateral or within 20
9 days thereafter.
10 (5) In all cases not governed by other rules stated in
11 this Section (including cases of purchase money security
12 interests which do not qualify for the special priorities set
13 forth in subsections (3) and (4) of this Section), priority
14 between conflicting security interests in the same collateral
15 shall be determined according to the following rules:
16 (a) Conflicting security interests rank according
17 to priority in time of filing or perfection. Priority
18 dates from the time a filing is first made covering the
19 collateral or the time the security interest is first
20 perfected, whichever is earlier, provided that there is
21 no period thereafter when there is neither filing nor
22 perfection.
23 (b) So long as conflicting security interests are
24 unperfected, the first to attach has priority.
25 (6) For the purposes of subsection (5) a date of filing
26 or perfection as to collateral is also a date of filing or
27 perfection as to proceeds.
28 (7) If future advances are made while a security
29 interest is perfected by filing, the taking of possession or
30 under Section 9-115 or 9-116 on investment property, the
31 security interest has the same priority for the purposes of
32 subsection (5) with respect to the future advances as it does
33 with respect to the first advance. If a commitment is made
34 before or while the security interest is so perfected, the
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1 security interest has the same priority with respect to
2 advances made pursuant thereto. In other cases a perfected
3 security interest has priority from the date the advance is
4 made.
5 (Source: P.A. 89-364, eff. 1-1-96.)
6 (810 ILCS 5/9-313) (from Ch. 26, par. 9-313)
7 Sec. 9-313. When possession by or delivery to secured
8 party perfects security interest without filing.
9 (a) Perfection by possession or delivery. Except as
10 otherwise provided in subsection (b), a secured party may
11 perfect a security interest in negotiable documents, goods,
12 instruments, money, or tangible chattel paper by taking
13 possession of the collateral. A secured party may perfect a
14 security interest in certificated securities by taking
15 delivery of the certificated securities under Section 8-301.
16 (b) Goods covered by certificate of title. With respect
17 to goods covered by a certificate of title issued by this
18 State, a secured party may perfect a security interest in the
19 goods by taking possession of the goods only in the
20 circumstances described in Section 9-316(d).
21 (c) Collateral in possession of person other than
22 debtor. With respect to collateral other than certificated
23 securities and goods covered by a document, a secured party
24 takes possession of collateral in the possession of a person
25 other than the debtor, the secured party, or a lessee of the
26 collateral from the debtor in the ordinary course of the
27 debtor's business, when:
28 (1) the person in possession authenticates a record
29 acknowledging that it holds possession of the collateral
30 for the secured party's benefit; or
31 (2) the person takes possession of the collateral
32 after having authenticated a record acknowledging that it
33 will hold possession of collateral for the secured
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1 party's benefit.
2 (d) Time of perfection by possession; continuation of
3 perfection. If perfection of a security interest depends upon
4 possession of the collateral by a secured party, perfection
5 occurs no earlier than the time the secured party takes
6 possession and continues only while the secured party retains
7 possession.
8 (e) Time of perfection by delivery; continuation of
9 perfection. A security interest in a certificated security in
10 registered form is perfected by delivery when delivery of the
11 certificated security occurs under Section 8-301 and remains
12 perfected by delivery until the debtor obtains possession of
13 the security certificate.
14 (f) Acknowledgment not required. A person in possession
15 of collateral is not required to acknowledge that it holds
16 possession for a secured party's benefit.
17 (g) Effectiveness of acknowledgment; no duties or
18 confirmation. If a person acknowledges that it holds
19 possession for the secured party's benefit:
20 (1) the acknowledgment is effective under
21 subsection (c) or Section 8-301(a), even if the
22 acknowledgment violates the rights of a debtor; and
23 (2) unless the person otherwise agrees or law other
24 than this Article otherwise provides, the person does not
25 owe any duty to the secured party and is not required to
26 confirm the acknowledgment to another person.
27 (h) Secured party's delivery to person other than
28 debtor. A secured party having possession of collateral does
29 not relinquish possession by delivering the collateral to a
30 person other than the debtor or a lessee of the collateral
31 from the debtor in the ordinary course of the debtor's
32 business if the person was instructed before the delivery or
33 is instructed contemporaneously with the delivery:
34 (1) to hold possession of the collateral for the
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1 secured party's benefit; or
2 (2) to redeliver the collateral to the secured
3 party.
4 (i) Effect of delivery under subsection (h); no duties
5 or confirmation. A secured party does not relinquish
6 possession, even if a delivery under subsection (h) violates
7 the rights of a debtor. A person to which collateral is
8 delivered under subsection (h) does not owe any duty to the
9 secured party and is not required to confirm the delivery to
10 another person unless the person otherwise agrees or law
11 other than this Article otherwise provides.
12 Priority of Security Interests in Fixtures.
13 (1) In this Section and in the provisions of Part 4 of
14 this Article referring to fixture filing, unless the context
15 otherwise requires
16 (a) Goods are "fixtures" when they become so
17 related to particular real estate that an interest in
18 them arises under real estate law
19 (b) A "fixture filing" is the filing in the office
20 where a mortgage on the real estate would be filed or
21 recorded of a financing statement covering goods which
22 are or are to become fixtures and conforming to the
23 requirements of subsection (5) of Section 9-402
24 (c) A mortgage is a "construction mortgage" to the
25 extent that it secures an obligation incurred for the
26 construction of an improvement on land including the
27 acquisition cost of the land, if the recorded writing so
28 indicates.
29 (2) A security interest under this Article may be
30 created in goods which are fixtures or may continue in goods
31 which become fixtures, but no security interest exists under
32 this Article in ordinary building materials incorporated into
33 an improvement on land.
34 (3) This Article does not prevent creation of an
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1 encumbrance upon fixtures pursuant to real estate law.
2 (4) A perfected security interest in fixtures has
3 priority over the conflicting interest of an encumbrancer or
4 owner of the real estate where
5 (a) the security interest is a purchase money
6 security interest, the interest of the encumbrancer or
7 owner arises before the goods become fixtures, the
8 security interest is perfected by a fixture filing before
9 the goods become fixtures or within 10 days thereafter,
10 and the debtor has an interest of record in the real
11 estate or is in possession of the real estate; or
12 (b) the security interest is perfected by a fixture
13 filing before the interest of the encumbrancer or owner
14 is of record, the security interest has priority over any
15 conflicting interest of a predecessor in title of the
16 encumbrancer or owner, and the debtor has an interest of
17 record in the real estate or is in possession of the real
18 estate; or
19 (c) the fixtures are readily removable factory or
20 office machines or readily removable replacements of
21 domestic appliances which are consumer goods, and before
22 the goods become fixtures the security interest is
23 perfected by any method permitted by this Article; or
24 (d) the conflicting interest is a lien on the real
25 estate obtained by legal or equitable proceedings after
26 the security interest was perfected by any method
27 permitted by this Article.
28 (5) A security interest in fixtures, whether or not
29 perfected, has priority over the conflicting interest of an
30 encumbrancer or owner of the real estate where
31 (a) the encumbrancer or owner has consented in
32 writing to the security interest or has disclaimed an
33 interest in the goods as fixtures; or
34 (b) the debtor has a right to remove the goods as
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1 against the encumbrancer or owner. If the debtor's right
2 terminates, the priority of the security interest
3 continues for a reasonable time.
4 (6) Notwithstanding paragraph (a) of subsection (4) but
5 otherwise subject to subsections (4) and (5), a security
6 interest in fixtures is subordinate to a construction
7 mortgage recorded before the goods become fixtures if the
8 goods become fixtures before the completion of the
9 construction. To the extent that it is given to refinance a
10 construction mortgage, a mortgage has this priority to the
11 same extent as the construction mortgage.
12 (7) In cases not within the preceding subsections, a
13 security interest in fixtures is subordinate to the
14 conflicting interest of an encumbrancer or owner of the
15 related real estate who is not the debtor.
16 (8) When the secured party has priority over all owners
17 and encumbrancers of the real estate, he may, on default,
18 subject to the provisions of Part 5, remove his collateral
19 from the real estate but he must reimburse any encumbrancer
20 or owner of the real estate who is not the debtor and who has
21 not otherwise agreed for the cost of repair of any physical
22 injury, but not for any diminution in value of the real
23 estate caused by the absence of the goods removed or by any
24 necessity of replacing them. A person entitled to
25 reimbursement may refuse permission to remove until the
26 secured party gives adequate security for the performance of
27 this obligation.
28 (Source: P. A. 78-238; revised 10-31-98.)
29 (810 ILCS 5/9-314) (from Ch. 26, par. 9-314)
30 Sec. 9-314. Perfection by control.
31 (a) Perfection by control. A security interest in
32 investment property, deposit accounts, letter-of-credit
33 rights, or electronic chattel paper may be perfected by
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1 control of the collateral under Section 9-104, 9-105, 9-106,
2 or 9-107.
3 (b) Specified collateral: time of perfection by
4 control; continuation of perfection. A security interest in
5 deposit accounts, electronic chattel paper, or
6 letter-of-credit rights is perfected by control under Section
7 9-104, 9-105, or 9-107 when the secured party obtains control
8 and remains perfected by control only while the secured party
9 retains control.
10 (c) Investment property: time of perfection by control;
11 continuation of perfection. A security interest in
12 investment property is perfected by control under Section
13 9-106 from the time the secured party obtains control and
14 remains perfected by control until:
15 (1) the secured party does not have control; and
16 (2) one of the following occurs:
17 (A) if the collateral is a certificated
18 security, the debtor has or acquires possession of
19 the security certificate;
20 (B) if the collateral is an uncertificated
21 security, the issuer has registered or registers the
22 debtor as the registered owner; or
23 (C) if the collateral is a security
24 entitlement, the debtor is or becomes the
25 entitlement holder. Accessions.
26 (1) A security interest in goods which attaches before
27 they are installed in or affixed to other goods takes
28 priority as to the goods installed or affixed (called in this
29 section "accessions") over the claims of all persons to the
30 whole except as stated in subsection (3) and subject to
31 Section 9--315(1).
32 (2) A security interest which attaches to goods after
33 they become part of a whole is valid against all persons
34 subsequently acquiring interests in the whole except as
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1 stated in subsection (3) but is invalid against any person
2 with an interest in the whole at the time the security
3 interest attaches to the goods who has not in writing
4 consented to the security interest or disclaimed an interest
5 in the goods as part of the whole.
6 (3) The security interests described in subsections (1)
7 and (2) do not take priority over
8 (a) a subsequent purchaser for value of any
9 interest in the whole; or
10 (b) a creditor with a lien on the whole
11 subsequently obtained by judicial proceedings; or
12 (c) a creditor with a prior perfected security
13 interest in the whole to the extent that he makes subsequent
14 advances if the subsequent purchase is made, the lien by
15 judicial proceedings obtained or the subsequent advance under
16 the prior perfected security interest is made or contracted
17 for without knowledge of the security interest and before it
18 is perfected. A purchaser of the whole at a foreclosure sale
19 other than the holder of a perfected security interest
20 purchasing at his own foreclosure sale is a subsequent
21 purchaser within this Section.
22 (4) When under subsections (1) or (2) and (3) a secured
23 party has an interest in accessions which has priority over
24 the claims of all persons who have interests in the whole, he
25 may on default subject to the provisions of Part 5 remove his
26 collateral from the whole but he must reimburse any
27 encumbrancer or owner of the whole who is not the debtor and
28 who has not otherwise agreed for the cost of repair of any
29 physical injury but not for any diminution in value of the
30 whole caused by the absence of the goods removed or by any
31 necessity for replacing them. A person entitled to
32 reimbursement may refuse permission to remove until the
33 secured party gives adequate security for the performance of
34 this obligation.
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1 (Source: Laws 1961, p. 2101.)
2 (810 ILCS 5/9-315) (from Ch. 26, par. 9-315)
3 Sec. 9-315. Secured party's rights on disposition of
4 collateral and in proceeds.
5 (a) Disposition of collateral: continuation of security
6 interest or agricultural lien; proceeds. Except as otherwise
7 provided in this Article and in Section 2-403(2):
8 (1) a security interest or agricultural lien
9 continues in collateral notwithstanding sale, lease,
10 license, exchange, or other disposition thereof unless
11 the secured party authorized the disposition free of the
12 security interest or agricultural lien; and
13 (2) a security interest attaches to any
14 identifiable proceeds of collateral.
15 (b) When commingled proceeds identifiable. Proceeds
16 that are commingled with other property are identifiable
17 proceeds:
18 (1) if the proceeds are goods, to the extent
19 provided by Section 9-336; and
20 (2) if the proceeds are not goods, to the extent
21 that the secured party identifies the proceeds by a
22 method of tracing, including application of equitable
23 principles, that is permitted under law other than this
24 Article with respect to commingled property of the type
25 involved.
26 (c) Perfection of security interest in proceeds. A
27 security interest in proceeds is a perfected security
28 interest if the security interest in the original collateral
29 was perfected.
30 (d) Continuation of perfection. A perfected security
31 interest in proceeds becomes unperfected on the 21st day
32 after the security interest attaches to the proceeds unless:
33 (1) the following conditions are satisfied:
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1 (A) a filed financing statement covers the
2 original collateral;
3 (B) the proceeds are collateral in which a
4 security interest may be perfected by filing in the
5 office in which the financing statement has been
6 filed; and
7 (C) the proceeds are not acquired with cash
8 proceeds;
9 (2) the proceeds are identifiable cash proceeds; or
10 (3) the security interest in the proceeds is
11 perfected other than under subsection (c) when the
12 security interest attaches to the proceeds or within 20
13 days thereafter.
14 (e) When perfected security interest in proceeds becomes
15 unperfected. If a filed financing statement covers the
16 original collateral, a security interest in proceeds which
17 remains perfected under subsection (d)(1) becomes unperfected
18 at the later of:
19 (1) when the effectiveness of the filed financing
20 statement lapses under Section 9-515 or is terminated
21 under Section 9-513; or
22 (2) the 21st day after the security interest
23 attaches to the proceeds. Priority when goods are
24 commingled or processed.
25 (1) If a security interest in goods was perfected and
26 subsequently the goods or a part thereof have become part of
27 a product or mass, the security interest continues in the
28 product or mass if
29 (a) the goods are so manufactured, processed,
30 assembled or commingled that their identity is lost in the
31 product or mass; or
32 (b) a financing statement covering the original
33 goods also covers the product into which the goods have been
34 manufactured, processed or assembled. In a case to which
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1 paragraph (b) applies, no separate security interest in that
2 part of the original goods which has been manufactured,
3 processed or assembled into the product may be claimed under
4 Section 9--314.
5 (2) When under subsection (1) more than one security
6 interest attaches to the product or mass, they rank equally
7 according to the ratio that the cost of the goods to which
8 each interest originally attached bears to the cost of the
9 total product or mass.
10 (Source: Laws 1961, p. 2101.)
11 (810 ILCS 5/9-315.01 new)
12 Sec. 9-315.01. Debtor disposing of collateral and
13 failing to pay secured party amount due under security
14 agreement; penalties for violation.
15 (1) It is unlawful for a debtor under the terms of a
16 security agreement (a) who has no right of sale or other
17 disposition of the collateral or (b) who has a right of sale
18 or other disposition of the collateral and is to account to
19 the secured party for the proceeds of any sale or other
20 disposition of the collateral, to sell or otherwise dispose
21 of the collateral and willfully and wrongfully to fail to pay
22 the secured party the amount of said proceeds due under the
23 security agreement. Failure to pay such proceeds to the
24 secured party within 10 days after the sale or other
25 disposition of the collateral is prima facie evidence of a
26 willful and wanton failure to pay.
27 (2) An individual convicted of a violation of this
28 Section shall be guilty of a Class 3 felony.
29 (3) A corporation convicted of a violation of this
30 Section shall be guilty of a business offense and shall be
31 fined not less than $2,000 nor more than $10,000.
32 (4) In the event the debtor under the terms of a
33 security agreement is a corporation or a partnership, any
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1 officer, director, manager, or managerial agent of the debtor
2 who violates this Section or causes the debtor to violate
3 this Section shall be guilty of a Class 3 felony.
4 (810 ILCS 5/9-315.02 new)
5 Sec. 315.02. Disposal of collateral by debtor to persons
6 other than those previously disclosed to secured
7 party-penalties for violation-defense.
8 (1) Where, pursuant to Section 9-205.1, a secured party
9 has required that before the debtor sells or otherwise
10 disposes of collateral in the debtor's possession he disclose
11 to the secured party the persons to whom he desires to sell
12 or otherwise dispose of such collateral, it is unlawful for
13 the debtor to sell or otherwise dispose of the collateral to
14 a person other than a person so disclosed to the secured
15 party.
16 (2) An individual convicted of a violation of this
17 Section shall be guilty of a Class A misdemeanor.
18 (3) A corporation convicted of a violation of this
19 Section shall be guilty of a business offense and shall be
20 fined not less than $2,000 nor more than $10,000.
21 (4) In the event the debtor under the terms of a
22 security agreement is a corporation or a partnership, any
23 officer, director, manager, or managerial agent of the debtor
24 who violates this Section or causes the debtor to violate
25 this Section shall be guilty of a Class A misdemeanor.
26 (5) It is an affirmative defense to a prosecution for
27 the violation of this Section that the debtor has paid to the
28 secured party the proceeds from the sale or other disposition
29 of the collateral within 10 days after such sale or
30 disposition.
31 (810 ILCS 5/9-316) (from Ch. 26, par. 9-316)
32 Sec. 9-316. Continued perfection of security interest
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1 following change in governing law.
2 (a) General rule: effect on perfection of change in
3 governing law. A security interest perfected pursuant to the
4 law of the jurisdiction designated in Section 9-301(1) or
5 9-305(c) remains perfected until the earliest of:
6 (1) the time perfection would have ceased under the
7 law of that jurisdiction;
8 (2) the expiration of four months after a change of
9 the debtor's location to another jurisdiction; or
10 (3) the expiration of one year after a transfer of
11 collateral to a person that thereby becomes a debtor and
12 is located in another jurisdiction.
13 (b) Security interest perfected or unperfected under law
14 of new jurisdiction. If a security interest described in
15 subsection (a) becomes perfected under the law of the other
16 jurisdiction before the earliest time or event described in
17 that subsection, it remains perfected thereafter. If the
18 security interest does not become perfected under the law of
19 the other jurisdiction before the earliest time or event, it
20 becomes unperfected and is deemed never to have been
21 perfected as against a purchaser of the collateral for value.
22 (c) Possessory security interest in collateral moved to
23 new jurisdiction. A possessory security interest in
24 collateral, other than goods covered by a certificate of
25 title and as-extracted collateral consisting of goods,
26 remains continuously perfected if:
27 (1) the collateral is located in one jurisdiction
28 and subject to a security interest perfected under the
29 law of that jurisdiction;
30 (2) thereafter the collateral is brought into
31 another jurisdiction; and
32 (3) upon entry into the other jurisdiction, the
33 security interest is perfected under the law of the other
34 jurisdiction.
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1 (d) Goods covered by certificate of title from this
2 State. Except as otherwise provided in subsection (e), a
3 security interest in goods covered by a certificate of title
4 which is perfected by any method under the law of another
5 jurisdiction when the goods become covered by a certificate
6 of title from this State remains perfected until the security
7 interest would have become unperfected under the law of the
8 other jurisdiction had the goods not become so covered.
9 (e) When subsection (d) security interest becomes
10 unperfected against purchasers. A security interest
11 described in subsection (d) becomes unperfected as against a
12 purchaser of the goods for value and is deemed never to have
13 been perfected as against a purchaser of the goods for value
14 if the applicable requirements for perfection under Section
15 9-311(b) or 9-313 are not satisfied before the earlier of:
16 (1) the time the security interest would have
17 become unperfected under the law of the other
18 jurisdiction had the goods not become covered by a
19 certificate of title from this State; or
20 (2) the expiration of four months after the goods
21 had become so covered.
22 (f) Change in jurisdiction of bank, issuer, nominated
23 person, securities intermediary, or commodity intermediary.
24 A security interest in deposit accounts, letter-of-credit
25 rights, or investment property which is perfected under the
26 law of the bank's jurisdiction, the issuer's jurisdiction, a
27 nominated person's jurisdiction, the securities
28 intermediary's jurisdiction, or the commodity intermediary's
29 jurisdiction, as applicable, remains perfected until the
30 earlier of:
31 (1) the time the security interest would have
32 become unperfected under the law of that jurisdiction; or
33 (2) the expiration of four months after a change of
34 the applicable jurisdiction to another jurisdiction.
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1 (g) Subsection (f) security interest perfected or
2 unperfected under law of new jurisdiction. If a security
3 interest described in subsection (f) becomes perfected under
4 the law of the other jurisdiction before the earlier of the
5 time or the end of the period described in that subsection,
6 it remains perfected thereafter. If the security interest
7 does not become perfected under the law of the other
8 jurisdiction before the earlier of that time or the end of
9 that period, it becomes unperfected and is deemed never to
10 have been perfected as against a purchaser of the collateral
11 for value. Priority subject to subordination.
12 Nothing in this Article prevents subordination by
13 agreement by any person entitled to priority.
14 (Source: Laws 1961, p. 2101.)
15 (810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new)
16 SUBPART 3. PRIORITY
17 (810 ILCS 5/9-317) (from Ch. 26, par. 9-317)
18 Sec. 9-317. Interests that take priority over or take
19 free of security interest or agricultural lien.
20 (a) Conflicting security interests and rights of lien
21 creditors. A security interest or agricultural lien is
22 subordinate to the rights of:
23 (1) a person entitled to priority under Section
24 9-322; and
25 (2) except as otherwise provided in subsection (e)
26 or (f), a person that becomes a lien creditor before the
27 earlier of the time:
28 (A) the security interest or agricultural lien
29 is perfected; or
30 (B) one of the conditions specified in Section
31 9-203(b)(3) is met and a financing statement
32 covering the collateral is filed.
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1 (b) Buyers that receive delivery. Except as otherwise
2 provided in subsection (e), a buyer, other than a secured
3 party, of tangible chattel paper, documents, goods,
4 instruments, or a security certificate takes free of a
5 security interest or agricultural lien if the buyer gives
6 value and receives delivery of the collateral without
7 knowledge of the security interest or agricultural lien and
8 before it is perfected.
9 (c) Lessees that receive delivery. Except as otherwise
10 provided in subsection (e), a lessee of goods takes free of a
11 security interest or agricultural lien if the lessee gives
12 value and receives delivery of the collateral without
13 knowledge of the security interest or agricultural lien and
14 before it is perfected.
15 (d) Licensees and buyers of certain collateral. A
16 licensee of a general intangible or a buyer, other than a
17 secured party, of accounts, electronic chattel paper, general
18 intangibles, or investment property other than a certificated
19 security takes free of a security interest if the licensee or
20 buyer gives value without knowledge of the security interest
21 and before it is perfected.
22 (e) Purchase-money security interest. Except as
23 otherwise provided in Sections 9-320 and 9-321, if a person
24 files a financing statement with respect to a purchase-money
25 security interest before or within 20 days after the debtor
26 receives delivery of the collateral, the security interest
27 takes priority over the rights of a buyer, lessee, or lien
28 creditor which arise between the time the security interest
29 attaches and the time of filing.
30 (f) Public deposits. An unperfected security interest
31 shall take priority over the rights of a lien creditor if (i)
32 the lien creditor is a trustee or receiver of a bank or
33 acting in furtherance of its supervisory authority over such
34 bank and (ii) a security interest is granted by the bank to
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1 secure a deposit of public funds with the bank or a
2 repurchase agreement with the bank pursuant to the Government
3 Securities Act of 1986, as amended. Secured party not
4 obligated 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 and farm products.
17 (a) Buyer in ordinary course of business. Except as
18 otherwise provided in subsections (e) and (f), a buyer in the
19 ordinary course of business takes free of a security interest
20 created by the buyer's seller, even if the security interest
21 is perfected and the buyer knows of its existence.
22 (b) Buyer of consumer goods. Except as otherwise
23 provided in subsection (e), a buyer of goods from a person
24 who used or bought the goods for use primarily for personal,
25 family, or household purposes takes free of a security
26 interest, even if perfected, if the buyer buys:
27 (1) without knowledge of the security interest;
28 (2) for value;
29 (3) primarily for the buyer's personal, family, or
30 household purposes; and
31 (4) before the filing of a financing statement
32 covering the goods.
33 (c) Effectiveness of filing for subsection (b). To the
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1 extent that it affects the priority of a security interest
2 over a buyer of goods under subsection (b), the period of
3 effectiveness of a filing made in the jurisdiction in which
4 the seller is located is governed by Section 9-316(a) and
5 (b).
6 (d) Buyer in ordinary course of business at wellhead or
7 minehead. A buyer in ordinary course of business buying oil,
8 gas, or other minerals at the wellhead or minehead or after
9 extraction takes free of an interest arising out of an
10 encumbrance.
11 (e) Possessory security interest not affected.
12 Subsections (a) and (b) do not affect a security interest in
13 goods in the possession of the secured party under Section
14 9-313.
15 (f) Buyer of farm products.
16 (1) A buyer of farm products takes subject to a
17 security interest created by the seller if:
18 (A) within one year before the sale of the
19 farm products, the buyer has received from the
20 secured party or the seller written notice of the
21 security interest in a record organized according to
22 farm products that:
23 (i) in an original or reproduced copy
24 thereof;
25 (ii) contains: (a) the name and address
26 of the secured party; (b) the name and address
27 of the person indebted to the secured party;
28 (c) the social security number of the debtor
29 or, in the case of a debtor doing business
30 other than as an individual, the Internal
31 Revenue Service taxpayer identification number
32 of such debtor; (d) a description of the farm
33 products subject to the security interest
34 created by the debtor, including the amount of
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1 such products where applicable, crop year,
2 county, and a reasonable description of the
3 property;
4 (iii) must be amended in writing, within
5 3 months, similarly signed and transmitted, to
6 reflect material changes;
7 (iv) will lapse on either the expiration
8 period of the statement or the transmission of
9 a notice signed by the secured party that the
10 statement has lapsed, whichever occurs first;
11 and
12 (v) sets forth any payment obligations
13 imposed on the buyer by the secured party as
14 conditions for waiver or release of the
15 security interest; and
16 (B) the buyer has failed to perform the
17 payment obligations.
18 (2) For the purposes of this subsection (f), a
19 buyer of farm products has received notice from the
20 secured party or seller when written notice of the
21 security interest is sent to the buyer by registered or
22 certified mail.
23 (810 ILCS 5/9-320.1 new)
24 Sec. 9-320.1. Liability of commission merchant or
25 selling agent engaged in sale of livestock or other farm
26 products to holder of security interest.
27 (a) A commission merchant or selling agent who sells a
28 farm product for others shall be subject to a security
29 interest created by the seller in such farm product if:
30 (1) within one year before the sale of the farm
31 products, the buyer has received from the secured party
32 or the seller written notice of the security interest in
33 a record that:
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1 (A) is an original or reproduced copy thereof;
2 (B) contains: (i) the name and address of the
3 secured party; (ii) the name and address of the
4 person indebted to the secured party; (iii) the
5 social security number of the debtor or, in case of
6 a debtor doing business other than as an individual,
7 the Internal Revenue Service taxpayer identification
8 number of such debtor; (iv) a description of the
9 farm products subject to the security interest
10 created by the debtor, including the amount of such
11 products where applicable, crop year, county, and a
12 reasonable description of the property;
13 (C) must be amended in writing, within 3
14 months, similarly signed and transmitted, to reflect
15 material changes;
16 (D) will lapse on either the expiration period
17 of the statement or the transmission of a notice
18 signed by the secured party that the statement has
19 lapsed, whichever occurs first; and
20 (E) sets forth any payment obligations imposed
21 on the buyer by the secured party as conditions for
22 waiver or release of the security interest; and
23 (2) the commission merchant or selling agent has
24 failed to perform the payment obligations.
25 (b) For the purposes of this Section, a commission
26 merchant or selling agent has received notice from the
27 secured party or seller when written notice of the security
28 interest is sent to the commission merchant or selling agent
29 by registered or certified mail.
30 (810 ILCS 5/9-320.2 new)
31 Sec. 9-320.2 Notice to seller of farm products. A
32 commission merchant or selling agent who sells farm products
33 for others, and any person buying farm products in the
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1 ordinary course of business from a person engaged in farming
2 operations, shall post at each licensed location where the
3 merchant, agent, or person buying farm products in the
4 ordinary course of business does business a notice that shall
5 read as follows:
6 "NOTICE TO SELLERS OF FARM PRODUCTS
7 It is a criminal offense to sell farm products subject to
8 a security interest without making payment to the secured
9 party. You should notify the purchaser if there is a
10 security interest in the farm products you are selling.".
11 The notice shall be posted in a conspicuous manner and
12 shall be in contrasting type, large enough to be read from a
13 distance of 10 feet.
14 (810 ILCS 5/9-321 new)
15 Sec. 9-321. Licensee of general intangible and lessee of
16 goods in ordinary course of business.
17 (a) "Licensee in ordinary course of business." In this
18 Section, "licensee in ordinary course of business" means a
19 person that becomes a licensee of a general intangible in
20 good faith, without knowledge that the license violates the
21 rights of another person in the general intangible, and in
22 the ordinary course from a person in the business of
23 licensing general intangibles of that kind. A person becomes
24 a licensee in the ordinary course if the license to the
25 person comports with the usual or customary practices in the
26 kind of business in which the licensor is engaged or with the
27 licensor's own usual or customary practices.
28 (b) Rights of licensee in ordinary course of business.
29 A licensee in ordinary course of business takes its rights
30 under a nonexclusive license free of a security interest in
31 the general intangible created by the licensor, even if the
32 security interest is perfected and the licensee knows of its
33 existence.
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1 (c) Rights of lessee in ordinary course of business. A
2 lessee in ordinary course of business takes its leasehold
3 interest free of a security interest in the goods created by
4 the lessor, even if the security interest is perfected and
5 the lessee knows of its existence.
6 (810 ILCS 5/9-322 new)
7 Sec. 9-322. Priorities among conflicting security
8 interests in and agricultural liens on same collateral.
9 (a) General priority rules. Except as otherwise
10 provided in this Section, priority among conflicting security
11 interests and agricultural liens in the same collateral is
12 determined according to the following rules:
13 (1) Conflicting perfected security interests and
14 agricultural liens rank according to priority in time of
15 filing or perfection. Priority dates from the earlier of
16 the time a filing covering the collateral is first made
17 or the security interest or agricultural lien is first
18 perfected, if there is no period thereafter when there is
19 neither filing nor perfection.
20 (2) A perfected security interest or agricultural
21 lien has priority over a conflicting unperfected security
22 interest or agricultural lien.
23 (3) The first security interest or agricultural
24 lien to attach or become effective has priority if
25 conflicting security interests and agricultural liens are
26 unperfected.
27 (b) Time of perfection: proceeds and supporting
28 obligations. For the purposes of subsection (a)(1):
29 (1) the time of filing or perfection as to a
30 security interest in collateral is also the time of
31 filing or perfection as to a security interest in
32 proceeds; and
33 (2) the time of filing or perfection as to a
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1 security interest in collateral supported by a supporting
2 obligation is also the time of filing or perfection as to
3 a security interest in the supporting obligation.
4 (c) Special priority rules: proceeds and supporting
5 obligations. Except as otherwise provided in subsection (f),
6 a security interest in collateral which qualifies for
7 priority over a conflicting security interest under Section
8 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a
9 conflicting security interest in:
10 (1) any supporting obligation for the collateral;
11 and
12 (2) proceeds of the collateral if:
13 (A) the security interest in proceeds is
14 perfected;
15 (B) the proceeds are cash proceeds or of the
16 same type as the collateral; and
17 (C) in the case of proceeds that are proceeds
18 of proceeds, all intervening proceeds are cash
19 proceeds, proceeds of the same type as the
20 collateral, or an account relating to the
21 collateral.
22 (d) First-to-file priority rule for certain collateral.
23 Subject to subsection (e) and except as otherwise provided in
24 subsection (f), if a security interest in chattel paper,
25 deposit accounts, negotiable documents, instruments,
26 investment property, or letter-of-credit rights is perfected
27 by a method other than filing, conflicting perfected security
28 interests in proceeds of the collateral rank according to
29 priority in time of filing.
30 (e) Applicability of subsection (d). Subsection (d)
31 applies only if the proceeds of the collateral are not cash
32 proceeds, chattel paper, negotiable documents, instruments,
33 investment property, or letter-of-credit rights.
34 (f) Limitations on subsections (a) through (e).
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1 Subsections (a) through (e) are subject to:
2 (1) subsection (g) and the other provisions of this
3 Part;
4 (2) Section 4-210 with respect to a security
5 interest of a collecting bank;
6 (3) Section 5-118 with respect to a security
7 interest of an issuer or nominated person; and
8 (4) Section 9-110 with respect to a security
9 interest arising under Article 2 or 2A.
10 (g) Priority under agricultural lien statute. A
11 perfected agricultural lien on collateral has priority over a
12 conflicting security interest in or agricultural lien on the
13 same collateral if the statute creating the agricultural lien
14 so provides.
15 (810 ILCS 5/9-323 new)
16 Sec. 9-323. Future advances.
17 (a) When priority based on time of advance. Except as
18 otherwise provided in subsection (c), for purposes of
19 determining the priority of a perfected security interest
20 under Section 9-322(a)(1), perfection of the security
21 interest dates from the time an advance is made to the extent
22 that the security interest secures an advance that:
23 (1) is made while the security interest is
24 perfected only:
25 (A) under Section 9-309 when it attaches; or
26 (B) temporarily under Section 9-312(e), (f),
27 or (g); and
28 (2) is not made pursuant to a commitment entered
29 into before or while the security interest is perfected
30 by a method other than under Section 9-309 or 9-312(e),
31 (f), or (g).
32 (b) Lien creditor. Except as otherwise provided in
33 subsection (c), a security interest is subordinate to the
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1 rights of a person that becomes a lien creditor to the extent
2 that the security interest secures an advance made more than
3 45 days after the person becomes a lien creditor unless the
4 advance is made:
5 (1) without knowledge of the lien; or
6 (2) pursuant to a commitment entered into without
7 knowledge of the lien.
8 (c) Buyer of receivables. Subsections (a) and (b) do
9 not apply to a security interest held by a secured party that
10 is a buyer of accounts, chattel paper, payment intangibles,
11 or promissory notes or a consignor.
12 (d) Buyer of goods. Except as otherwise provided in
13 subsection (e), a buyer of goods other than a buyer in
14 ordinary course of business takes free of a security interest
15 to the extent that it secures advances made after the earlier
16 of:
17 (1) the time the secured party acquires knowledge
18 of the buyer's purchase; or
19 (2) 45 days after the purchase.
20 (e) Advances made pursuant to commitment: priority of
21 buyer of goods. Subsection (d) does not apply if the advance
22 is made pursuant to a commitment entered into without
23 knowledge of the buyer's purchase and before the expiration
24 of the 45-day period.
25 (f) Lessee of goods. Except as otherwise provided in
26 subsection (g), a lessee of goods, other than a lessee in
27 ordinary course of business, takes the leasehold interest
28 free of a security interest to the extent that it secures
29 advances made after the earlier of:
30 (1) the time the secured party acquires knowledge
31 of the lease; or
32 (2) 45 days after the lease contract becomes
33 enforceable.
34 (g) Advances made pursuant to commitment: priority of
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1 lessee of goods. Subsection (f) does not apply if the
2 advance is made pursuant to a commitment entered into without
3 knowledge of the lease and before the expiration of the
4 45-day period.
5 (810 ILCS 5/9-324 new)
6 Sec. 9-324. Priority of purchase-money security
7 interests.
8 (a) General rule: purchase-money priority. Except as
9 otherwise provided in subsection (g), a perfected
10 purchase-money security interest in goods other than
11 inventory or livestock has priority over a conflicting
12 security interest in the same goods, and, except as otherwise
13 provided in Section 9-327, a perfected security interest in
14 its identifiable proceeds also has priority, if the
15 purchase-money security interest is perfected when the debtor
16 receives possession of the collateral or within 20 days
17 thereafter.
18 (b) Inventory purchase-money priority. Subject to
19 subsection (c) and except as otherwise provided in subsection
20 (g), a perfected purchase-money security interest in
21 inventory has priority over a conflicting security interest
22 in the same inventory, has priority over a conflicting
23 security interest in chattel paper or an instrument
24 constituting proceeds of the inventory and in proceeds of the
25 chattel paper, if so provided in Section 9-330, and, except
26 as otherwise provided in Section 9-327, also has priority in
27 identifiable cash proceeds of the inventory to the extent the
28 identifiable cash proceeds are received on or before the
29 delivery of the inventory to a buyer, if:
30 (1) the purchase-money security interest is
31 perfected when the debtor receives possession of the
32 inventory;
33 (2) the purchase-money secured party sends an
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1 authenticated notification to the holder of the
2 conflicting security interest;
3 (3) the holder of the conflicting security interest
4 receives the notification within five years before the
5 debtor receives possession of the inventory; and
6 (4) the notification states that the person sending
7 the notification has or expects to acquire a
8 purchase-money security interest in inventory of the
9 debtor and describes the inventory.
10 (c) Holders of conflicting inventory security interests
11 to be notified. Subsections (b)(2) through (4) apply only if
12 the holder of the conflicting security interest had filed a
13 financing statement covering the same types of inventory:
14 (1) if the purchase-money security interest is
15 perfected by filing, before the date of the filing; or
16 (2) if the purchase-money security interest is
17 temporarily perfected without filing or possession under
18 Section 9-312(f), before the beginning of the 20-day
19 period thereunder.
20 (d) Livestock purchase-money priority. Subject to
21 subsection (e) and except as otherwise provided in subsection
22 (g), a perfected purchase-money security interest in
23 livestock that are farm products has priority over a
24 conflicting security interest in the same livestock, and,
25 except as otherwise provided in Section 9-327, a perfected
26 security interest in their identifiable proceeds and
27 identifiable products in their unmanufactured states also has
28 priority, if:
29 (1) the purchase-money security interest is
30 perfected when the debtor receives possession of the
31 livestock;
32 (2) the purchase-money secured party sends an
33 authenticated notification to the holder of the
34 conflicting security interest;
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1 (3) the holder of the conflicting security interest
2 receives the notification within six months before the
3 debtor receives possession of the livestock; and
4 (4) the notification states that the person sending
5 the notification has or expects to acquire a
6 purchase-money security interest in livestock of the
7 debtor and describes the livestock.
8 (e) Holders of conflicting livestock security interests
9 to be notified. Subsections (d)(2) through (4) apply only if
10 the holder of the conflicting security interest had filed a
11 financing statement covering the same types of livestock:
12 (1) if the purchase-money security interest is
13 perfected by filing, before the date of the filing; or
14 (2) if the purchase-money security interest is
15 temporarily perfected without filing or possession under
16 Section 9-312(f), before the beginning of the 20-day
17 period thereunder.
18 (f) Software purchase-money priority. Except as
19 otherwise provided in subsection (g), a perfected
20 purchase-money security interest in software has priority
21 over a conflicting security interest in the same collateral,
22 and, except as otherwise provided in Section 9-327, a
23 perfected security interest in its identifiable proceeds also
24 has priority, to the extent that the purchase-money security
25 interest in the goods in which the software was acquired for
26 use has priority in the goods and proceeds of the goods under
27 this Section.
28 (g) Conflicting purchase-money security interests. If
29 more than one security interest qualifies for priority in the
30 same collateral under subsection (a), (b), (d), or (f):
31 (1) a security interest securing an obligation
32 incurred as all or part of the price of the collateral
33 has priority over a security interest securing an
34 obligation incurred for value given to enable the debtor
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1 to acquire rights in or the use of collateral; and
2 (2) in all other cases, Section 9-322(a) applies to
3 the qualifying security interests.
4 (810 ILCS 5/9-325 new)
5 Sec. 9-325. Priority of security interests in
6 transferred collateral.
7 (a) Subordination of security interest in transferred
8 collateral. Except as otherwise provided in subsection (b), a
9 security interest created by a debtor is subordinate to a
10 security interest in the same collateral created by another
11 person if:
12 (1) the debtor acquired the collateral subject to
13 the security interest created by the other person;
14 (2) the security interest created by the other
15 person was perfected when the debtor acquired the
16 collateral; and
17 (3) there is no period thereafter when the security
18 interest is unperfected.
19 (b) Limitation of subsection (a) subordination.
20 Subsection (a) subordinates a security interest only if the
21 security interest:
22 (1) otherwise would have priority solely under
23 Section 9-322(a) or 9-324; or
24 (2) arose solely under Section 2-711(3) or
25 2A-508(5).
26 (810 ILCS 5/9-326 new)
27 Sec. 9-326. Priority of security interests created by
28 new debtor.
29 (a) Subordination of security interest created by new
30 debtor. Subject to subsection (b), a security interest
31 created by a new debtor which is perfected by a filed
32 financing statement that is effective solely under Section
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1 9-508 in collateral in which a new debtor has or acquires
2 rights is subordinate to a security interest in the same
3 collateral which is perfected other than by a filed financing
4 statement that is effective solely under Section 9-508.
5 (b) Priority under other provisions; multiple original
6 debtors. The other provisions of this Part determine the
7 priority among conflicting security interests in the same
8 collateral perfected by filed financing statements that are
9 effective solely under Section 9-508. However, if the
10 security agreements to which a new debtor became bound as
11 debtor were not entered into by the same original debtor, the
12 conflicting security interests rank according to priority in
13 time of the new debtor's having become bound.
14 (810 ILCS 5/9-327 new)
15 Sec. 9-327. Priority of security interests in deposit
16 account. The following rules govern priority among
17 conflicting security interests in the same deposit account:
18 (1) A security interest held by a secured party having
19 control of the deposit account under Section 9-104 has
20 priority over a conflicting security interest held by a
21 secured party that does not have control.
22 (2) Except as otherwise provided in paragraphs (3) and
23 (4), security interests perfected by control under Section
24 9-314 rank according to priority in time of obtaining
25 control.
26 (3) Except as otherwise provided in paragraph (4), a
27 security interest held by the bank with which the deposit
28 account is maintained has priority over a conflicting
29 security interest held by another secured party.
30 (4) A security interest perfected by control under
31 Section 9-104(a)(3) has priority over a security interest
32 held by the bank with which the deposit account is
33 maintained.
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1 (810 ILCS 5/9-328 new)
2 Sec. 9-328. Priority of security interests in investment
3 property. The following rules govern priority among
4 conflicting security interests in the same investment
5 property:
6 (1) A security interest held by a secured party having
7 control of investment property under Section 9-106 has
8 priority over a security interest held by a secured party
9 that does not have control of the investment property.
10 (2) Except as otherwise provided in paragraphs (3) and
11 (4), conflicting security interests held by secured parties
12 each of which has control under Section 9-106 rank according
13 to priority in time of:
14 (A) if the collateral is a security, obtaining
15 control;
16 (B) if the collateral is a security entitlement
17 carried in a securities account and:
18 (i) if the secured party obtained control
19 under Section 8-106(d)(1), the secured party's
20 becoming the person for which the securities account
21 is maintained;
22 (ii) if the secured party obtained control
23 under Section 8-106(d)(2), the securities
24 intermediary's agreement to comply with the secured
25 party's entitlement orders with respect to security
26 entitlements carried or to be carried in the
27 securities account; or
28 (iii) if the secured party obtained control
29 through another person under Section 8-106(d)(3),
30 the time on which priority would be based under this
31 paragraph if the other person were the secured
32 party; or
33 (C) if the collateral is a commodity contract
34 carried with a commodity intermediary, the satisfaction
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1 of the requirement for control specified in Section
2 9-106(b)(2) with respect to commodity contracts carried
3 or to be carried with the commodity intermediary.
4 (3) A security interest held by a securities
5 intermediary in a security entitlement or a securities
6 account maintained with the securities intermediary has
7 priority over a conflicting security interest held by another
8 secured party.
9 (4) A security interest held by a commodity intermediary
10 in a commodity contract or a commodity account maintained
11 with the commodity intermediary has priority over a
12 conflicting security interest held by another secured party.
13 (5) A security interest in a certificated security in
14 registered form which is perfected by taking delivery under
15 Section 9-313(a) and not by control under Section 9-314 has
16 priority over a conflicting security interest perfected by a
17 method other than control.
18 (6) Conflicting security interests created by a broker,
19 securities intermediary, or commodity intermediary which are
20 perfected without control under Section 9-106 rank equally.
21 (7) In all other cases, priority among conflicting
22 security interests in investment property is governed by
23 Sections 9-322 and 9-323.
24 (810 ILCS 5/9-329 new)
25 Sec. 9-329. Priority of security interests in
26 letter-of-credit right. The following rules govern priority
27 among conflicting security interests in the same
28 letter-of-credit right:
29 (1) A security interest held by a secured party
30 having control of the letter-of-credit right under
31 Section 9-107 has priority to the extent of its control
32 over a conflicting security interest held by a secured
33 party that does not have control.
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1 (2) Security interests perfected by control under
2 Section 9-314 rank according to priority in time of
3 obtaining control.
4 (810 ILCS 5/9-330 new)
5 Sec. 9-330. Priority of purchaser of chattel paper or
6 instrument.
7 (a) Purchaser's priority: security interest claimed
8 merely as proceeds. A purchaser of chattel paper has
9 priority over a security interest in the chattel paper which
10 is claimed merely as proceeds of inventory subject to a
11 security interest if:
12 (1) in good faith and in the ordinary course of the
13 purchaser's business, the purchaser gives new value and
14 takes possession of the chattel paper or obtains control
15 of the chattel paper under Section 9-105; and
16 (2) the chattel paper does not indicate that it has
17 been assigned to an identified assignee other than the
18 purchaser.
19 (b) Purchaser's priority: other security interests. A
20 purchaser of chattel paper has priority over a security
21 interest in the chattel paper which is claimed other than
22 merely as proceeds of inventory subject to a security
23 interest if the purchaser gives new value and takes
24 possession of the chattel paper or obtains control of the
25 chattel paper under Section 9-105 in good faith, in the
26 ordinary course of the purchaser's business, and without
27 knowledge that the purchase violates the rights of the
28 secured party.
29 (c) Chattel paper purchaser's priority in proceeds.
30 Except as otherwise provided in Section 9-327, a purchaser
31 having priority in chattel paper under subsection (a) or (b)
32 also has priority in proceeds of the chattel paper to the
33 extent that:
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1 (1) Section 9-322 provides for priority in the
2 proceeds; or
3 (2) the proceeds consist of the specific goods
4 covered by the chattel paper or cash proceeds of the
5 specific goods, even if the purchaser's security interest
6 in the proceeds is unperfected.
7 (d) Instrument purchaser's priority. Except as
8 otherwise provided in Section 9-331(a), a purchaser of an
9 instrument has priority over a security interest in the
10 instrument perfected by a method other than possession if the
11 purchaser gives value and takes possession of the instrument
12 in good faith and without knowledge that the purchase
13 violates the rights of the secured party.
14 (e) Holder of purchase-money security interest gives new
15 value. For purposes of subsections (a) and (b), the holder of
16 a purchase-money security interest in inventory gives new
17 value for chattel paper constituting proceeds of the
18 inventory.
19 (f) Indication of assignment gives knowledge. For
20 purposes of subsections (b) and (d), if chattel paper or an
21 instrument indicates that it has been assigned to an
22 identified secured party other than the purchaser, a
23 purchaser of the chattel paper or instrument has knowledge
24 that the purchase violates the rights of the secured party.
25 (810 ILCS 5/9-331 new)
26 Sec. 9-331. Priority of rights of purchasers of
27 instruments, documents, and securities under other Articles;
28 priority of interests in financial assets and security
29 entitlements under Article 8.
30 (a) Rights under Articles 3, 7, and 8 not limited. This
31 Article does not limit the rights of a holder in due course
32 of a negotiable instrument, a holder to which a negotiable
33 document of title has been duly negotiated, or a protected
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1 purchaser of a security. These holders or purchasers take
2 priority over an earlier security interest, even if
3 perfected, to the extent provided in Articles 3, 7, and 8.
4 (b) Protection under Article 8. This Article does not
5 limit the rights of or impose liability on a person to the
6 extent that the person is protected against the assertion of
7 a claim under Article 8.
8 (c) Filing not notice. Filing under this Article does
9 not constitute notice of a claim or defense to the holders,
10 or purchasers, or persons described in subsections (a) and
11 (b).
12 (810 ILCS 5/9-332 new)
13 Sec. 9-332. Transfer of money; transfer of funds from
14 deposit account.
15 (a) Transferee of money. A transferee of money takes
16 the money free of a security interest unless the transferee
17 acts in collusion with the debtor in violating the rights of
18 the secured party.
19 (b) Transferee of funds from deposit account. A
20 transferee of funds from a deposit account takes the funds
21 free of a security interest in the deposit account unless the
22 transferee acts in collusion with the debtor in violating the
23 rights of the secured party.
24 (810 ILCS 5/9-333 new)
25 Sec. 9-333. Priority of certain liens arising by
26 operation of law.
27 (a) "Possessory lien." In this Section, "possessory
28 lien" means an interest, other than a security interest or an
29 agricultural lien:
30 (1) which secures payment or performance of an
31 obligation for services or materials furnished with
32 respect to goods by a person in the ordinary course of
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1 the person's business;
2 (2) which is created by statute or rule of law in
3 favor of the person; and
4 (3) whose effectiveness depends on the person's
5 possession of the goods.
6 (b) Priority of possessory lien. A possessory lien on
7 goods has priority over a security interest in the goods
8 unless the lien is created by a statute that expressly
9 provides otherwise.
10 (810 ILCS 5/9-334 new)
11 Sec. 9-334. Priority of security interests in fixtures
12 and crops.
13 (a) Security interest in fixtures under this Article. A
14 security interest under this Article may be created in goods
15 that are fixtures or may continue in goods that become
16 fixtures. A security interest does not exist under this
17 Article in ordinary building materials incorporated into an
18 improvement on land.
19 (b) Security interest in fixtures under real-property
20 law. This Article does not prevent creation of an
21 encumbrance upon fixtures under real property law.
22 (c) General rule: subordination of security interest in
23 fixtures. In cases not governed by subsections (d) through
24 (h), a security interest in fixtures is subordinate to a
25 conflicting interest of an encumbrancer or owner of the
26 related real property other than the debtor.
27 (d) Fixtures purchase-money priority. Except as
28 otherwise provided in subsection (h), a perfected security
29 interest in fixtures has priority over a conflicting interest
30 of an encumbrancer or owner of the real property if the
31 debtor has an interest of record in or is in possession of
32 the real property and:
33 (1) the security interest is a purchase-money
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1 security interest;
2 (2) the interest of the encumbrancer or owner
3 arises before the goods become fixtures; and
4 (3) the security interest is perfected by a fixture
5 filing before the goods become fixtures or within 20 days
6 thereafter.
7 (e) Priority of security interest in fixtures over
8 interests in real property. A perfected security interest in
9 fixtures has priority over a conflicting interest of an
10 encumbrancer or owner of the real property if:
11 (1) the debtor has an interest of record in the
12 real property or is in possession of the real property
13 and the security interest:
14 (A) is perfected by a fixture filing before
15 the interest of the encumbrancer or owner is of
16 record; and
17 (B) has priority over any conflicting interest
18 of a predecessor in title of the encumbrancer or
19 owner;
20 (2) before the goods become fixtures, the security
21 interest is perfected by any method permitted by this
22 Article and the fixtures are readily removable:
23 (A) factory or office machines;
24 (B) equipment that is not primarily used or
25 leased for use in the operation of the real
26 property; or
27 (C) replacements of domestic appliances that
28 are consumer goods;
29 (3) the conflicting interest is a lien on the real
30 property obtained by legal or equitable proceedings after
31 the security interest was perfected by any method
32 permitted by this Article; or
33 (4) the security interest is:
34 (A) created in a manufactured home in a
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1 manufactured-home transaction; and
2 (B) perfected pursuant to a statute described
3 in Section 9-311(a)(2).
4 (f) Priority based on consent, disclaimer, or right to
5 remove. A security interest in fixtures, whether or not
6 perfected, has priority over a conflicting interest of an
7 encumbrancer or owner of the real property if:
8 (1) the encumbrancer or owner has, in an
9 authenticated record, consented to the security interest
10 or disclaimed an interest in the goods as fixtures; or
11 (2) the debtor has a right to remove the goods as
12 against the encumbrancer or owner.
13 (g) Continuation of subsection (f)(2) priority. The
14 priority of the security interest under subsection (f)(2)
15 continues for a reasonable time if the debtor's right to
16 remove the goods as against the encumbrancer or owner
17 terminates.
18 (h) Priority of construction mortgage. A mortgage is a
19 construction mortgage to the extent that it secures an
20 obligation incurred for the construction of an improvement on
21 land, including the acquisition cost of the land, if a
22 recorded record of the mortgage so indicates. Except as
23 otherwise provided in subsections (e) and (f), a security
24 interest in fixtures is subordinate to a construction
25 mortgage if a record of the mortgage is recorded before the
26 goods become fixtures and the goods become fixtures before
27 the completion of the construction. A mortgage has this
28 priority to the same extent as a construction mortgage to the
29 extent that it is given to refinance a construction mortgage.
30 (i) Priority of security interest in crops.
31 (1) Subject to Section 9-322(g), a perfected
32 security interest in crops growing on real property has
33 priority over:
34 (A) a conflicting interest of an encumbrancer
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1 or owner of the real property; and
2 (B) the rights of a holder of an obligation
3 secured by a collateral assignment of beneficial
4 interest in a land trust, including rights by virtue
5 of an equitable lien.
6 (2) For purposes of this subsection:
7 (A) "Collateral assignment of beneficial
8 interest" means any pledge or assignment of the
9 beneficial interest in a land trust to a person to
10 secure a debt to other obligation.
11 (B) "Land trust" means any trust arrangement
12 under which the legal and equitable title to real
13 estate is held by a trustee, the interest of the
14 beneficiary of the trust is personal property, and
15 the beneficiary or any person designated in writing
16 by the beneficiary has (i) the exclusive power to
17 direct or control the trustee in dealing with the
18 title to the trust property, (ii) the exclusive
19 control of the management, operation, renting, and
20 selling of the trust property, and (iii) the
21 exclusive right to the earnings, avails, and
22 proceeds of trust property.
23 (810 ILCS 5/9-335 new)
24 Sec. 9-335. Accessions.
25 (a) Creation of security interest in accession. A
26 security interest may be created in an accession and
27 continues in collateral that becomes an accession.
28 (b) Perfection of security interest. If a security
29 interest is perfected when the collateral becomes an
30 accession, the security interest remains perfected in the
31 collateral.
32 (c) Priority of security interest. Except as otherwise
33 provided in subsection (d), the other provisions of this Part
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1 determine the priority of a security interest in an
2 accession.
3 (d) Compliance with certificate-of-title statute. A
4 security interest in an accession is subordinate to a
5 security interest in the whole which is perfected by
6 compliance with the requirements of a certificate-of-title
7 statute under Section 9-311(b).
8 (e) Removal of accession after default. After default,
9 subject to Part 6, a secured party may remove an accession
10 from other goods if the security interest in the accession
11 has priority over the claims of every person having an
12 interest in the whole.
13 (f) Reimbursement following removal. A secured party
14 that removes an accession from other goods under subsection
15 (e) shall promptly reimburse any holder of a security
16 interest or other lien on, or owner of, the whole or of the
17 other goods, other than the debtor, for the cost of repair of
18 any physical injury to the whole or the other goods. The
19 secured party need not reimburse the holder or owner for any
20 diminution in value of the whole or the other goods caused by
21 the absence of the accession removed or by any necessity for
22 replacing it. A person entitled to reimbursement may refuse
23 permission to remove until the secured party gives adequate
24 assurance for the performance of the obligation to reimburse.
25 (810 ILCS 5/9-336 new)
26 Sec. 9-336. Commingled goods.
27 (a) "Commingled goods." In this Section, "commingled
28 goods" means goods that are physically united with other
29 goods in such a manner that their identity is lost in a
30 product or mass.
31 (b) No security interest in commingled goods as such. A
32 security interest does not exist in commingled goods as such.
33 However, a security interest may attach to a product or mass
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1 that results when goods become commingled goods.
2 (c) Attachment of security interest to product or mass.
3 If collateral becomes commingled goods, a security interest
4 attaches to the product or mass.
5 (d) Perfection of security interest. If a security
6 interest in collateral is perfected before the collateral
7 becomes commingled goods, the security interest that attaches
8 to the product or mass under subsection (c) is perfected.
9 (e) Priority of security interest. Except as otherwise
10 provided in subsection (f), the other provisions of this Part
11 determine the priority of a security interest that attaches
12 to the product or mass under subsection (c).
13 (f) Conflicting security interests in product or mass
14 If more than one security interest attaches to the product or
15 mass under subsection (c), the following rules determine
16 priority:
17 (1) A security interest that is perfected under
18 subsection (d) has priority over a security interest that
19 is unperfected at the time the collateral becomes
20 commingled goods.
21 (2) If more than one security interest is perfected
22 under subsection (d), the security interests rank equally
23 in proportion to the value of the collateral at the time
24 it became commingled goods.
25 (810 ILCS 5/9-337 new)
26 Sec. 9-337. Priority of security interests in goods
27 covered by certificate of title. If, while a security
28 interest in goods is perfected by any method under the law of
29 another jurisdiction, this State issues a certificate of
30 title that does not show that the goods are subject to the
31 security interest or contain a statement that they may be
32 subject to security interests not shown on the certificate:
33 (1) a buyer of the goods, other than a person in
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1 the business of selling goods of that kind, takes free of
2 the security interest if the buyer gives value and
3 receives delivery of the goods after issuance of the
4 certificate and without knowledge of the security
5 interest; and
6 (2) the security interest is subordinate to a
7 conflicting security interest in the goods that attaches,
8 and is perfected under Section 9-311(b), after issuance
9 of the certificate and without the conflicting secured
10 party's knowledge of the security interest.
11 (810 ILCS 5/9-338 new)
12 Sec. 9-338. Priority of security interest or
13 agricultural lien perfected by filed financing statement
14 providing certain incorrect information. If a security
15 interest or agricultural lien is perfected by a filed
16 financing statement providing information described in
17 Section 9-516(b)(5) which is incorrect at the time the
18 financing statement is filed:
19 (1) the security interest or agricultural lien is
20 subordinate to a conflicting perfected security interest
21 in the collateral to the extent that the holder of the
22 conflicting security interest gives value in reasonable
23 reliance upon the incorrect information; and
24 (2) a purchaser, other than a secured party, of the
25 collateral takes free of the security interest or
26 agricultural lien to the extent that, in reasonable
27 reliance upon the incorrect information, the purchaser
28 gives value and, in the case of chattel paper, documents,
29 goods, instruments, or a security certificate, receives
30 delivery of the collateral.
31 (810 ILCS 5/9-339 new)
32 Sec. 9-339. Priority subject to subordination. This
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1 Article does not preclude subordination by agreement by a
2 person entitled to priority.
3 (810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new)
4 SUBPART 4. RIGHTS OF BANK
5 (810 ILCS 5/9-340 new)
6 Sec. 9-340. Effectiveness of right of recoupment or
7 set-off against deposit account.
8 (a) Exercise of recoupment or set-off. Except as
9 otherwise provided in subsection (c), a bank with which a
10 deposit account is maintained may exercise any right of
11 recoupment or set-off against a secured party that holds a
12 security interest in the deposit account.
13 (b) Recoupment or set-off not affected by security
14 interest. Except as otherwise provided in subsection (c), the
15 application of this Article to a security interest in a
16 deposit account does not affect a right of recoupment or
17 set-off of the secured party as to a deposit account
18 maintained with the secured party.
19 (c) When set-off ineffective. The exercise by a bank of
20 a set-off against a deposit account is ineffective against a
21 secured party that holds a security interest in the deposit
22 account which is perfected by control under Section
23 9-104(a)(3), if the set-off is based on a claim against the
24 debtor.
25 (810 ILCS 5/9-341 new)
26 Sec. 9-341. Bank's rights and duties with respect to
27 deposit account. Except as otherwise provided in Section
28 9-340(c), and unless the bank otherwise agrees in an
29 authenticated record, a bank's rights and duties with respect
30 to a deposit account maintained with the bank are not
31 terminated, suspended, or modified by:
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1 (1) the creation, attachment, or perfection of a
2 security interest in the deposit account;
3 (2) the bank's knowledge of the security interest;
4 or
5 (3) the bank's receipt of instructions from the
6 secured party.
7 (810 ILCS 5/9-342 new)
8 Sec. 9-342. Bank's right to refuse to enter into or
9 disclose existence of control agreement. This Article does
10 not require a bank to enter into an agreement of the kind
11 described in Section 9-104(a)(2), even if its customer so
12 requests or directs. A bank that has entered into such an
13 agreement is not required to confirm the existence of the
14 agreement to another person unless requested to do so by its
15 customer.
16 (810 ILCS 5/Art. 9, Part 4 heading)
17 PART 4. RIGHTS OF THIRD PARTIES FILING
18 (810 ILCS 5/9-401) (from Ch. 26, par. 9-401)
19 Sec. 9-401. Alienability of debtor's rights.
20 (a) Other law governs alienability; exceptions. Except
21 as otherwise provided in subsection (b) and Sections 9-406,
22 9-407, 9-408, and 9-409, whether a debtor's rights in
23 collateral may be voluntarily or involuntarily transferred is
24 governed by law other than this Article.
25 (b) Agreement does not prevent transfer. An agreement
26 between the debtor and secured party which prohibits a
27 transfer of the debtor's rights in collateral or makes the
28 transfer a default does not prevent the transfer from taking
29 effect. Place of Filing; Erroneous Filing; Removal of
30 Collateral.
31 (1) The proper place to file in order to perfect a
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1 security interest is as follows:
2 (a) when the collateral is consumer goods, then in
3 the office of the recorder in the county of the debtor's
4 residence or if the debtor is not a resident of this
5 State then in the office of the Recorder of Deeds in the
6 county where the goods are kept;
7 (b) when the collateral is timber to be cut or is
8 minerals or the like (including oil and gas) or accounts
9 subject to subsection (5) of Section 9-103, or when the
10 financing statement is filed as a fixture filing (Section
11 9-313) and the collateral is goods which are or are to
12 become fixtures, then in the office where a mortgage on
13 the real estate would be filed or recorded;
14 (c) in all other cases, in the office of the
15 Secretary of State.
16 (2) A filing which is made in good faith in an improper
17 place or not in all of the places required by this section is
18 nevertheless effective with regard to any collateral as to
19 which the filing complied with the requirements of this
20 Article and is also effective with regard to collateral
21 covered by the financing statement against any person who has
22 knowledge of the contents of such financing statement.
23 (3) A filing which is made in the proper place in this
24 State continues effective even though the debtor's residence
25 or place of business or the location of the collateral or its
26 use, whichever controlled the original filing, is thereafter
27 changed.
28 (4) The rules stated in Section 9-103 determine whether
29 filing is necessary in this State.
30 (5) Notwithstanding the preceding subsections, and
31 subject to subsection (3) of Section 9-302, the proper place
32 to file in order to perfect a security interest in
33 collateral, including fixtures, of a transmitting utility is
34 the office of the Secretary of State. This filing constitutes
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1 a fixture filing (Section 9-313) as to the collateral
2 described therein which is or is to become fixtures.
3 (6) For the purposes of this Section, the residence of
4 an organization is its place of business if it has one or its
5 chief executive office if it has more than one place of
6 business.
7 (Source: P.A. 90-300, eff. 1-1-98.)
8 (810 ILCS 5/9-401A)
9 Sec. 9-401A. (Blank). Continuation of certain financing
10 statements filed before January 1, 1998. The following rules
11 apply to a financing statement or continuation statement that
12 was properly filed before January 1, 1998 in the office of a
13 county recorder, but which, if filed on or after January 1,
14 1998, is required by Section 9-401 to be filed in the office
15 of the Secretary of State:
16 (1) The financing statement shall remain effective until
17 it lapses as provided in Section 9-403.
18 (2) The effectiveness of the financing statement may be
19 continued only by filing a continuation statement in the
20 office of the Secretary of State that provides the name and
21 address of the debtor and secured party, indicates the county
22 where the financing statement is filed, complies with the
23 requirements of Section 9-403, and either:
24 (A) indicates the types or describes the items of
25 collateral included in the original financing statement
26 as modified by any releases or amendments; or
27 (B) has attached a copy of the originally filed
28 financing statement together with amendments,
29 assignments, and releases affecting it.
30 A continuation statement filed as provided in this item
31 (2) may be further continued by a continuation statement that
32 complies with the requirements of Section 9-403.
33 (3) The financing statement may be terminated, assigned,
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1 released, or amended only by an appropriate filing in the
2 office of the county recorder where it is filed, except that
3 if the financing statement has been continued as provided in
4 item (2) of this Section, it may thereafter be terminated,
5 assigned, released, or amended only by an appropriate filing
6 in the office of the Secretary of State.
7 (Source: P.A. 90-300, eff. 1-1-98.)
8 (810 ILCS 5/9-402) (from Ch. 26, par. 9-402)
9 Sec. 9-402. Secured party not obligated on contract of
10 debtor or in tort. The existence of a security interest,
11 agricultural lien, or authority given to a debtor to dispose
12 of or use collateral, without more, does not subject a
13 secured party to liability in contract or tort for the
14 debtor's acts or omissions. Formal requisites of financing
15 statement; amendments; mortgage as financing statement.
16 (1) A financing statement is sufficient if it gives the
17 names of the debtor and the secured party, is signed by the
18 debtor, gives an address of the secured party from which
19 information concerning the security interest may be obtained,
20 gives a mailing address of the debtor and contains a
21 statement indicating the types, or describing the items, of
22 collateral. A financing statement may be filed before a
23 security agreement is made or a security interest otherwise
24 attaches. When a financing statement filed prior to January
25 1, 1996, covers crops growing or to be grown, the statement
26 must also contain a legal description of the real estate
27 concerned. If a financing statement covers crops growing or
28 to be grown and includes a description of the real estate
29 concerned, the description is sufficient if it includes the
30 quarter section, section, township and range, and the name of
31 a record owner if other than the debtor, of the real estate
32 concerned. When the financing statement covers timber to be
33 cut or covers minerals or the like (including oil and gas) or
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1 accounts subject to subsection (5) of Section 9-103, or when
2 the financing statement is filed as a fixture filing (Section
3 9-313) and the collateral is goods which are or are to become
4 fixtures, the statement must also comply with subsection (5).
5 A copy of the security agreement is sufficient as a financing
6 statement if it contains the above information and is signed
7 by the debtor. A carbon, photographic or other reproduction
8 of a security agreement or a financing statement is
9 sufficient as a financing statement if the security agreement
10 so provides or if the original has been filed in this State.
11 (2) A financing statement which otherwise complies with
12 subsection (1) is sufficient when it is signed by the secured
13 party instead of the debtor if it is filed to perfect a
14 security interest in
15 (a) collateral already subject to a security
16 interest in another jurisdiction when it is brought into
17 this State, or when the debtor's location is changed to
18 this State. Such a financing statement must state that
19 the collateral was brought into this State or that the
20 debtor's location was changed to this State under such
21 circumstances; or
22 (b) proceeds under Section 9-306 if the security
23 interest in the original collateral was perfected. Such a
24 financing statement must describe the original
25 collateral; or
26 (c) collateral as to which the filing has lapsed;
27 or
28 (d) collateral acquired after a change of name,
29 identity or corporate structure of the debtor (subsection
30 (7).
31 (3) A form substantially as follows is sufficient to
32 comply with subsection (1):
33 Name of debtor (or assignor) .......................
34 Address .......................................
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1 Name of secured party (or assignee) ...........
2 Address .......................................
3 1. This financing statement covers the following
4 types (or items) of property:
5 (Describe) .........................................
6 2. (Blank).
7 3. (If applicable) The above goods are to become
8 fixtures on *
9 *Where appropriate substitute either "The above
10 timber is standing on ...." or "The above minerals or the
11 like (including oil and gas) or accounts will be financed
12 at the wellhead or minehead of the well or mine located
13 on ...."
14 (Describe Real Estate) .............................
15 and this financing statement is to be filed in the real
16 estate records. (If the debtor does not have an interest
17 of record) The name of a record owner is ................
18 4. (If products of collateral are claimed) Products
19 of the collateral are also covered.
20 Signature of Debtor (or Assignor) ..................
21 Signature of Secured Party (or Assignee) ...........
22 (use whichever is applicable)
23 (4) A financing statement may be amended by filing a
24 writing signed by both the debtor and the secured party. An
25 amendment does not extend the period of effectiveness of a
26 financing statement. If any amendment adds collateral, it is
27 effective as to the added collateral only from the filing
28 date of the amendment. In this Article, unless the context
29 otherwise requires, the term "financing statement" means the
30 original financing statement and any amendments.
31 (5) A financing statement covering timber to be cut or
32 covering minerals or the like (including oil and gas) or
33 accounts subject to subsection (5) of Section 9-103, or a
34 financing statement filed as a fixture filing (Section 9-313)
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1 where the debtor is not a transmitting utility, must show
2 that it covers this type of collateral, must recite that it
3 is to be filed in the real estate records, and the financing
4 statement must contain a description of the real estate. If
5 the debtor does not have an interest of record in the real
6 estate, the financing statement must show the name of a
7 record owner.
8 (6) A mortgage is effective as a financing statement
9 filed as a fixture filing from the date of its recording if
10 (a) the goods are described in the mortgage by item
11 or type,
12 (b) the goods are or are to become fixtures related
13 to the real estate described in the mortgage,
14 (c) the mortgage complies with the requirements for
15 a financing statement in this Section other than a
16 recital that it is to be filed in the real estate
17 records, and
18 (d) the mortgage is duly recorded.
19 No fee with reference to the financing statement is
20 required other than the regular recording and satisfaction
21 fees with respect to the mortgage.
22 (7) A financing statement sufficiently shows the name of
23 the debtor if it gives the individual, partnership or
24 corporate name of the debtor, whether or not it adds other
25 trade names or names of partners. Where the debtor so changes
26 his name or in the case of an organization its name, identity
27 or corporate structure that a filed financing statement
28 becomes seriously misleading, the filing is not effective to
29 perfect a security interest in collateral acquired by the
30 debtor more than 4 months after the change, unless a new
31 appropriate financing statement is filed before the
32 expiration of that time. A filed financing statement remains
33 effective with respect to collateral transferred by the
34 debtor even though the secured party knows of or consents to
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1 the transfer.
2 (8) A financing statement substantially complying with
3 the requirements of this Section is effective even though it
4 contains minor errors which are not seriously misleading.
5 (Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.)
6 (810 ILCS 5/9-403) (from Ch. 26, par. 9-403)
7 Sec. 9-403. Agreement not to assert defenses against
8 assignee.
9 (a) "Value." In this Section, "value" has the meaning
10 provided in Section 3-303(a).
11 (b) Agreement not to assert claim or defense. Except as
12 otherwise provided in this Section, an agreement between an
13 account debtor and an assignor not to assert against an
14 assignee any claim or defense that the account debtor may
15 have against the assignor is enforceable by an assignee that
16 takes an assignment:
17 (1) for value;
18 (2) in good faith;
19 (3) without notice of a claim of a property or
20 possessory right to the property assigned; and
21 (4) without notice of a defense or claim in
22 recoupment of the type that may be asserted against a
23 person entitled to enforce a negotiable instrument under
24 Section 3-305(a).
25 (c) When subsection (b) not applicable. Subsection (b)
26 does not apply to defenses of a type that may be asserted
27 against a holder in due course of a negotiable instrument
28 under Section 3-305(b).
29 (d) Omission of required statement in consumer
30 transaction. In a consumer transaction, if a record
31 evidences the account debtor's obligation, law other than
32 this Article requires that the record include a statement to
33 the effect that the rights of an assignee are subject to
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1 claims or defenses that the account debtor could assert
2 against the original obligee, and the record does not include
3 such a statement:
4 (1) the record has the same effect as if the record
5 included such a statement; and
6 (2) the account debtor may assert against an
7 assignee those claims and defenses that would have been
8 available if the record included such a statement.
9 (e) Rule for individual under other law. This Section
10 is subject to law other than this Article which establishes a
11 different rule for an account debtor who is an individual and
12 who incurred the obligation primarily for personal, family,
13 or household purposes.
14 (f) Other law not displaced. Except as otherwise
15 provided in subsection (d), this Section does not displace
16 law other than this Article which gives effect to an
17 agreement by an account debtor not to assert a claim or
18 defense against an assignee. What constitutes filing;
19 duration of filing; effect of lapsed filing; duties of filing
20 officer; fees.
21 (1) Presentation for filing of a financing statement and
22 tender of the filing fee or acceptance of the statement by
23 the filing officer constitutes filing under this Article.
24 (2) Except as provided in subsection (6) a filed
25 financing statement is effective for a period of 5 years from
26 the date of filing. The effectiveness of a filed financing
27 statement lapses on the expiration of the 5 year period
28 unless a continuation statement is filed prior to the lapse.
29 If a security interest perfected by filing exists at the time
30 insolvency proceedings are commenced by or against the
31 debtor, the security interest remains perfected until
32 termination of the insolvency proceedings and thereafter for
33 a period of 60 days or until expiration of the 5 year period,
34 whichever occurs later. Upon lapse the security interest
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1 becomes unperfected, unless it is perfected without filing.
2 If the security interest becomes unperfected upon lapse, it
3 is deemed to have been unperfected as against a person who
4 became a purchaser or lien creditor before lapse.
5 (3) A continuation statement may be filed by the secured
6 party within 6 months prior to the expiration of the 5 year
7 period specified in subsection (2). Any such continuation
8 statement must be signed by the secured party, identify the
9 original statement by file number and state that the original
10 statement is still effective. A continuation statement signed
11 by a person other than the secured party of record must be
12 accompanied by a separate written statement of assignment
13 signed by the secured party of record and complying with
14 subsection (2) of Section 9-405, including payment of the
15 required fee. Upon timely filing of the continuation
16 statement, the effectiveness of the original statement is
17 continued for 5 years after the last date to which the filing
18 was effective whereupon it lapses in the same manner as
19 provided in subsection (2) unless another continuation
20 statement is filed prior to such lapse. Succeeding
21 continuation statements may be filed in the same manner to
22 continue the effectiveness of the original statement. Unless
23 a statute on disposition of public records provides
24 otherwise, the filing officer may remove a lapsed statement
25 from the files and destroy it immediately if he has retained
26 a microfilm or other photographic record, or in other cases
27 after one year after the lapse. The filing officer shall so
28 arrange matters by physical annexation of financing
29 statements to continuation statements or other related
30 filings, or by other means, that if he physically destroys
31 the financing statements of a period more than 5 years past,
32 those which have been continued by a continuation statement
33 or which are still effective under subsection (6) shall be
34 retained.
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1 (4) Except as provided in subsection (7) a filing
2 officer shall mark each statement with a file number and with
3 the date and hour of filing and shall hold the statement or a
4 microfilm or other photographic copy thereof for public
5 inspection. In addition the filing officer shall index the
6 statement according to the name of the debtor and shall note
7 in the index the file number and the address of the debtor
8 given in the statement.
9 (5) The uniform fee for filing and indexing and for
10 stamping a copy furnished by the secured party to show the
11 date and place of filing for an original financing statement,
12 amended statement, or for a continuation statement shall be
13 $20.
14 (6) If the debtor is a transmitting utility (subsection
15 (5) of Section 9-401 and a filed financing statement so
16 states, it is effective until a termination statement is
17 filed. A real estate mortgage which is effective as a fixture
18 filing under subsection (6) of Section 9-402 remains
19 effective as a fixture filing until the mortgage is released
20 or satisfied of record or its effectiveness otherwise
21 terminates as to the real estate.
22 (7) When a financing statement covers timber to be cut
23 or covers minerals or the like (including oil and gas) or
24 accounts subject to subsection (5) of Section 9-103, or is
25 filed as a fixture filing, the filing officer shall index it
26 under the names of the debtor and any owner of record shown
27 on the financing statement in the same fashion as if they
28 were the mortgagors in a mortgage of the real estate
29 described, and, to the extent that the law of this State
30 provides for indexing of mortgages under the name of the
31 mortgagee, under the name of the secured party as if he were
32 the mortgagee thereunder, or where indexing is by description
33 in the same fashion as if the financing statement were a
34 mortgage of the real estate described.
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1 (8) For financing statements filed on or after January
2 1, 1998 as to a debtor who is a resident of the State of
3 Illinois, if the collateral is equipment used in farming
4 operations, farm products, or accounts or general intangibles
5 arising from the sale of farm products by a farmer, the
6 secured party shall, within 30 days after filing with the
7 office of the Secretary of State, remit to the office of the
8 recorder in the county of the debtor's residence a fee of $10
9 together with a copy of the financing statement filed in the
10 office of the Secretary of State. This fee is in addition to
11 payment of the fee provided in subsection (5) of this Section
12 and is imposed to defray the cost of converting the county
13 recorder's document storage system to computers or
14 micrographics. The copy of the financing statement provided
15 to the office of the recorder shall be for informational
16 purposes only and shall not be for filing with the office of
17 the recorder nor shall the provision of the informational
18 copy be subject to imposition of any filing fee under Section
19 3-5018 of the Counties Code or otherwise. The provisions of
20 this subsection (8) other than this sentence, are inoperative
21 after the earlier of (i) July 1, 1999 or (ii) the effective
22 date of a change to the Illinois Uniform Commercial Code
23 which adopts a recommendation by the National Conference of
24 Commissioners on Uniform State Laws to amend Section 9-401 of
25 this Code to make the office of the Secretary of State the
26 proper place to file a financing statement described in this
27 subsection (8).
28 (9) The failure to send an informational copy of a
29 financing statement to the appropriate office of the recorder
30 or to pay the fee as set forth in subsection (8) shall not in
31 any manner affect the existence, validity, perfection,
32 priority, or enforceability of the security interest of the
33 secured party.
34 (Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98;
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1 revised 10-31-98.)
2 (810 ILCS 5/9-404) (from Ch. 26, par. 9-404)
3 Sec. 9-404. Rights acquired by assignee; claims and
4 defenses against assignee.
5 (a) Assignee's rights subject to terms, claims, and
6 defenses; exceptions. Unless an account debtor has made an
7 enforceable agreement not to assert defenses or claims, and
8 subject to subsections (b) through (e), the rights of an
9 assignee are subject to:
10 (1) all terms of the agreement between the account
11 debtor and assignor and any defense or claim in
12 recoupment arising from the transaction that gave rise to
13 the contract; and
14 (2) any other defense or claim of the account
15 debtor against the assignor which accrues before the
16 account debtor receives a notification of the assignment
17 authenticated by the assignor or the assignee.
18 (b) Account debtor's claim reduces amount owed to
19 assignee. Subject to subsection (c) and except as otherwise
20 provided in subsection (d), the claim of an account debtor
21 against an assignor may be asserted against an assignee under
22 subsection (a) only to reduce the amount the account debtor
23 owes.
24 (c) 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 (d) Omission of required statement in consumer
30 transaction. In a consumer transaction, if a record
31 evidences the account debtor's obligation, law other than
32 this Article requires that the record include a statement to
33 the effect that the account debtor's recovery against an
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1 assignee with respect to claims and defenses against the
2 assignor may not exceed amounts paid by the account debtor
3 under the record, and the record does not include such a
4 statement, the extent to which a claim of an account debtor
5 against the assignor may be asserted against an assignee is
6 determined as if the record included such a statement.
7 (e) Inapplicability to health-care-insurance receivable.
8 This Section does not apply to an assignment of a
9 health-care-insurance receivable. Termination Statement;
10 Duties of Filing Officer.
11 (1) If a financing statement covering consumer goods is
12 filed on or after the effective date of this amendatory Act
13 of 1972, then within one month or within 10 days following
14 written demand by the debtor after there is no outstanding
15 secured obligation and no commitment to make advances, incur
16 obligations or otherwise give value, the secured party must
17 file with each filing officer with whom the financing
18 statement was filed, a termination statement to the effect
19 that he no longer claims a security interest under the
20 financing statement, which shall be identified by file
21 number. In other cases whenever there is no outstanding
22 secured obligation and no commitment to make advances, incur
23 obligations or otherwise give value, the secured party must
24 on written demand by the debtor send the debtor, for each
25 filing officer with whom the financing statement was filed, a
26 termination statement to the effect that he no longer claims
27 a security interest under the financing statement, which
28 shall be identified by file number. A termination statement
29 signed by a person other than the secured party of record
30 must be accompanied by a separate written statement of
31 assignment signed by the secured party of record and
32 complying with subsection (2) of Section 9-405, including
33 payment of the required fee. If the affected secured party
34 fails to file such a termination statement as required by
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1 this subsection, or to send such a termination statement
2 within 10 days after proper demand therefor, he shall be
3 liable to the debtor for $100 and in addition for any loss
4 caused to the debtor by such failure.
5 (2) On presentation to the filing officer of such a
6 termination statement he must note it in the index. If he has
7 received the termination statement in duplicate, he shall
8 return one copy of the termination statement to the secured
9 party stamped to show the time of receipt thereof. If the
10 filing officer has a microfilm or other photographic record
11 of the financing statement, and of any related continuation
12 statement, statement of assignment and statement of release,
13 he may remove the originals from the files at any time after
14 receipt of the termination statement, or if he has no such
15 record, he may remove them from the files at any time after
16 one year after receipt of the termination statement.
17 (Source: P.A. 89-503, eff. 1-1-97.)
18 (810 ILCS 5/9-405) (from Ch. 26, par. 9-405)
19 Sec. 9-405. Modification of assigned contract.
20 (a) Effect of modification on assignee. A modification
21 of or substitution for an assigned contract is effective
22 against an assignee if made in good faith. The assignee
23 acquires corresponding rights under the modified or
24 substituted contract. The assignment may provide that the
25 modification or substitution is a breach of contract by the
26 assignor. This subsection is subject to subsections (b)
27 through (d).
28 (b) Applicability of subsection (a). Subsection (a)
29 applies to the extent that:
30 (1) the right to payment or a part thereof under an
31 assigned contract has not been fully earned by
32 performance; or
33 (2) the right to payment or a part thereof has been
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1 fully earned by performance and the account debtor has
2 not received notification of the assignment under Section
3 9-406(a).
4 (c) Rule for individual under other law. This Section
5 is subject to law other than this Article which establishes a
6 different rule for an account debtor who is an individual and
7 who incurred the obligation primarily for personal, family,
8 or household purposes.
9 (d) Inapplicability to health-care-insurance receivable.
10 This Section does not apply to an assignment of a
11 health-care-insurance receivable. Assignment of Security
12 Interest; Duties of Filing Officer; Fees.
13 (1) A financing statement may disclose an assignment of
14 a security interest in the collateral described in the
15 financing statement by indication in the financing statement
16 of the name and address of the assignee or by an assignment
17 itself or a copy thereof on the face or back of the
18 statement. On presentation to the filing officer of such a
19 financing statement the filing officer shall mark the same as
20 provided in Section 9-403 (4). The uniform fee for filing,
21 indexing and furnishing filing data for a financing statement
22 so indicating an assignment shall be $20.
23 (2) A secured party may assign of record all or a part
24 of his rights under a financing statement by the filing in
25 the place where the original financing statement was filed of
26 a separate written statement of assignment signed by the
27 secured party of record and setting forth the name of the
28 secured party of record and the debtor, the file number and
29 the date of filing of the financing statement and the name
30 and address of the assignee and containing a description of
31 the collateral assigned. A copy of the assignment is
32 sufficient as a separate statement if it complies with the
33 preceding sentence. On presentation to the filing officer of
34 such a separate statement, the filing officer shall mark such
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1 separate statement with the date and hour of the filing. He
2 shall note the assignment on the index of the financing
3 statement, or in the case of a fixture filing, or a filing
4 covering timber to be cut, or covering minerals or the like
5 (including oil and gas) or accounts subject to subsection (5)
6 of Section 9-103, he shall index the assignment under the
7 name of the assignor as grantor and, to the extent that the
8 law of this State provides for indexing the assignment of a
9 mortgage under the name of the assignee, he shall index the
10 assignment of the financing statement under the name of the
11 assignee. The uniform fee for filing, indexing and furnishing
12 filing data about such a separate statement of assignment
13 shall be $20. Notwithstanding the provisions of this
14 subsection, an assignment of record of a security interest in
15 a fixture contained in a mortgage effective as a fixture
16 filing (subsection (6) of Section 9-402 may be made only by
17 an assignment of the mortgage in the manner provided by the
18 law of this State other than this Act.
19 (3) After the disclosure or filing of an assignment
20 under this Section, the assignee is the secured party of
21 record.
22 (Source: P.A. 89-503, eff. 1-1-97.)
23 (810 ILCS 5/9-406) (from Ch. 26, par. 9-406)
24 Sec. 9-406. Discharge of account debtor; notification of
25 assignment; identification and proof of assignment;
26 restrictions on assignment of accounts, chattel paper,
27 payment intangibles, and promissory notes ineffective.
28 (a) Discharge of account debtor; effect of notification.
29 Subject to subsections (b) through (i), an account debtor on
30 an account, chattel paper, or a payment intangible may
31 discharge its obligation by paying the assignor until, but
32 not after, the account debtor receives a notification,
33 authenticated by the assignor or the assignee, that the
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1 amount due or to become due has been assigned and that
2 payment is to be made to the assignee. After receipt of the
3 notification, the account debtor may discharge its obligation
4 by paying the assignee and may not discharge the obligation
5 by paying the assignor.
6 (b) When notification ineffective. Subject to
7 subsection (h), notification is ineffective under subsection
8 (a):
9 (1) if it does not reasonably identify the rights
10 assigned;
11 (2) to the extent that an agreement between an
12 account debtor and a seller of a payment intangible
13 limits the account debtor's duty to pay a person other
14 than the seller and the limitation is effective under law
15 other than this Article; or
16 (3) at the option of an account debtor, if the
17 notification notifies the account debtor to make less
18 than the full amount of any installment or other periodic
19 payment to the assignee, even if:
20 (A) only a portion of the account, chattel
21 paper, or payment intangible has been assigned to
22 that assignee;
23 (B) a portion has been assigned to another
24 assignee; or
25 (C) the account debtor knows that the
26 assignment to that assignee is limited.
27 (c) Proof of assignment. Subject to subsection (h), if
28 requested by the account debtor, an assignee shall seasonably
29 furnish reasonable proof that the assignment has been made.
30 Unless the assignee complies, the account debtor may
31 discharge its obligation by paying the assignor, even if the
32 account debtor has received a notification under subsection
33 (a).
34 (d) Term restricting assignment generally ineffective.
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1 Except as otherwise provided in subsection (e) and Sections
2 2A-303 and 9-407, and subject to subsection (h), a term in an
3 agreement between an account debtor and an assignor or in a
4 promissory note is ineffective to the extent that it:
5 (1) prohibits, restricts, or requires the consent
6 of the account debtor or person obligated on the
7 promissory note to the assignment or transfer of, or the
8 creation, attachment, perfection, or enforcement of a
9 security interest in, the account, chattel paper, payment
10 intangible, or promissory note; or
11 (2) provides that the assignment or transfer or the
12 creation, attachment, perfection, or enforcement of the
13 security interest may give rise to a default, breach,
14 right of recoupment, claim, defense, termination, right
15 of termination, or remedy under the account, chattel
16 paper, payment intangible, or promissory note.
17 (e) Inapplicability of subsection (d) to certain sales.
18 Subsection (d) does not apply to the sale of a payment
19 intangible or promissory note.
20 (f) Legal restrictions on assignment generally
21 ineffective. Except as otherwise provided in Sections 2A-303
22 and 9-407 and subject to subsections (h) and (i), a rule of
23 law, statute, or regulation that prohibits, restricts, or
24 requires the consent of a government, governmental body or
25 official, or account debtor to the assignment or transfer of,
26 or creation of a security interest in, an account or chattel
27 paper is ineffective to the extent that the rule of law,
28 statute, or regulation:
29 (1) prohibits, restricts, or requires the consent
30 of the government, governmental body or official, or
31 account debtor to the assignment or transfer of, or the
32 creation, attachment, perfection, or enforcement of a
33 security interest in the account or chattel paper; or
34 (2) provides that the assignment or transfer or the
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1 creation, attachment, perfection, or enforcement of the
2 security interest may give rise to a default, breach,
3 right of recoupment, claim, defense, termination, right
4 of termination, or remedy under the account or chattel
5 paper.
6 (g) Subsection (b)(3) not waivable. Subject to
7 subsection (h), an account debtor may not waive or vary its
8 option under subsection (b)(3).
9 (h) Rule for individual under other law. This Section
10 is subject to law other than this Article which establishes a
11 different rule for an account debtor who is an individual and
12 who incurred the obligation primarily for personal, family,
13 or household purposes.
14 (i) Inapplicability to health-care-insurance receivable.
15 This Section does not apply to an assignment of a
16 health-care-insurance receivable.
17 Release of Collateral; Duties of Filing Officer; Fees. A
18 secured party of record may by his signed statement release
19 all or a part of any collateral described in a filed
20 financing statement. The statement of release is sufficient
21 if it contains a description of the collateral being
22 released, the name and address of the debtor, the name and
23 address of the secured party, and the file number of the
24 financing statement. A statement of release signed by a
25 person other than the secured party of record must be
26 accompanied by a separate written statement of assignment
27 signed by the secured party of record and complying with
28 subsection (2) of Section 9-405, including payment of the
29 required fee. Upon presentation of such a statement of
30 release to the filing officer he shall mark the statement
31 with the hour and date of filing and shall note the same upon
32 the margin of the index of the filing of the financing
33 statement. The uniform fee for filing and noting such a
34 statement of release shall be $20.
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1 (Source: P.A. 89-503, eff. 1-1-97.)
2 (810 ILCS 5/9-407) (from Ch. 26, par. 9-407)
3 Sec. 9-407. Restrictions on creation or enforcement of
4 security interest in leasehold interest or in lessor's
5 residual interest.
6 (a) Term restricting assignment generally ineffective.
7 Except as otherwise provided in subsection (b), a term in a
8 lease agreement is ineffective to the extent that it:
9 (1) prohibits, restricts, or requires the consent
10 of a party to the lease to the assignment or transfer or
11 the creation, attachment, perfection, or enforcement of a
12 security interest in an interest of a party under the
13 lease contract or in the lessor's residual interest in
14 the goods; or
15 (2) provides that the assignment or transfer or the
16 creation, attachment, perfection, or enforcement of the
17 security interest may give rise to a default, breach,
18 right of recoupment, claim, defense, termination, right
19 of termination, or remedy under the lease.
20 (b) Effectiveness of certain terms. Except as otherwise
21 provided in Section 2A-303(7), a term described in subsection
22 (a)(2) is effective to the extent that there is:
23 (1) a transfer by the lessee of the lessee's right
24 of possession or use of the goods in violation of the
25 term; or
26 (2) a delegation of a material performance of
27 either party to the lease contract in violation of the
28 term.
29 (c) Security interest not material impairment. The
30 creation, attachment, perfection, or enforcement of a
31 security interest in the lessor's interest under the lease
32 contract or the lessor's residual interest in the goods is
33 not a transfer that materially impairs the lessee's prospect
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1 of obtaining return performance or materially changes the
2 duty of or materially increases the burden or risk imposed on
3 the lessee within the purview of Section 2A-303(4) unless,
4 and then only to the extent that, enforcement actually
5 results in a delegation of material performance of the
6 lessor. Information from Filing Officer; Fees.
7 (1) If the person filing any financing statement,
8 termination statement, statement of assignment, or statement
9 of release, furnishes the filing officer a copy thereof, the
10 filing officer shall upon request note upon the copy the file
11 number and date and hour of the filing of the original and
12 deliver or send the copy to such person.
13 (2) Upon request of any person, the filing officer shall
14 issue his certificate showing whether there is on file on the
15 date and hour stated therein, any presently effective
16 financing statement naming a particular debtor and any
17 statement of assignment thereof and if there is, giving the
18 date and hour of filing of each such statement and the names
19 and addresses of each secured party therein. The uniform fee
20 for such a certificate shall be $10 per name searched. Upon
21 request the filing officer shall furnish a copy of any filed
22 financing statement or statement of assignment for a uniform
23 fee of $1.00 per page.
24 (Source: P.A. 86-343.)
25 (810 ILCS 5/9-408) (from Ch. 26, par. 9-408)
26 Sec. 9-408. Restrictions on assignment of promissory
27 notes, health-care-insurance receivables, and certain general
28 intangibles ineffective.
29 (a) Term restricting assignment generally ineffective.
30 Except as otherwise provided in subsection (b), a term in a
31 promissory note or in an agreement between an account debtor
32 and a debtor which relates to a health-care-insurance
33 receivable or a general intangible, including a contract,
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1 permit, license, or franchise, and which term prohibits,
2 restricts, or requires the consent of the person obligated on
3 the promissory note or the account debtor to, the assignment
4 or transfer of, or creation, attachment, or perfection of a
5 security interest in, the promissory note,
6 health-care-insurance receivable, or general intangible, is
7 ineffective to the extent that the term:
8 (1) would impair the creation, attachment, or
9 perfection of a security interest; or
10 (2) provides that the assignment or transfer or the
11 creation, attachment, or perfection of the security
12 interest may give rise to a default, breach, right of
13 recoupment, claim, defense, termination, right of
14 termination, or remedy under the promissory note,
15 health-care-insurance receivable, or general intangible.
16 (b) Applicability of subsection (a) to sales of certain
17 rights to payment. Subsection (a) applies to a security
18 interest in a payment intangible or promissory note only if
19 the security interest arises out of a sale of the payment
20 intangible or promissory note.
21 (c) Legal restrictions on assignment generally
22 ineffective. A rule of law, statute, or regulation that
23 prohibits, restricts, or requires the consent of a
24 government, governmental body or official, person obligated
25 on a promissory note, or account debtor to the assignment or
26 transfer of, or creation of a security interest in, a
27 promissory note, health-care-insurance receivable, or general
28 intangible, including a contract, permit, license, or
29 franchise between an account debtor and a debtor, is
30 ineffective to the extent that the rule of law, statute, or
31 regulation:
32 (1) would impair the creation, attachment, or
33 perfection of a security interest; or
34 (2) provides that the assignment or transfer or the
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1 creation, attachment, or perfection of the security
2 interest may give rise to a default, breach, right of
3 recoupment, claim, defense, termination, right of
4 termination, or remedy under the promissory note,
5 health-care-insurance receivable, or general intangible.
6 (d) Limitation on ineffectiveness under subsections (a)
7 and (c). To the extent that a term in a promissory note or in
8 an agreement between an account debtor and a debtor which
9 relates to a health-care-insurance receivable or general
10 intangible or a rule of law, statute, or regulation described
11 in subsection (c) would be effective under law other than
12 this Article but is ineffective under subsection (a) or (c),
13 the creation, attachment, or perfection of a security
14 interest in the promissory note, health-care-insurance
15 receivable, or general intangible:
16 (1) is not enforceable against the person obligated
17 on the promissory note or the account debtor;
18 (2) does not impose a duty or obligation on the
19 person obligated on the promissory note or the account
20 debtor;
21 (3) does not require the person obligated on the
22 promissory note or the account debtor to recognize the
23 security interest, pay or render performance to the
24 secured party, or accept payment or performance from the
25 secured party;
26 (4) does not entitle the secured party to use or
27 assign the debtor's rights under the promissory note,
28 health-care-insurance receivable, or general intangible,
29 including any related information or materials furnished
30 to the debtor in the transaction giving rise to the
31 promissory note, health-care-insurance receivable, or
32 general intangible;
33 (5) does not entitle the secured party to use,
34 assign, possess, or have access to any trade secrets or
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1 confidential information of the person obligated on the
2 promissory note or the account debtor; and
3 (6) does not entitle the secured party to enforce
4 the security interest in the promissory note,
5 health-care-insurance receivable, or general intangible.
6 Financing Statements Covering Consigned or Leased Goods.
7 A consignor or lessor of goods may file a financing
8 statement using the terms "consignor," "consignee," "lessor,"
9 "lessee" or the like instead of the terms specified in
10 Section 9-402. The provisions of this part shall apply as
11 appropriate to such a financing statement but its filing
12 shall not of itself be a factor in determining whether or not
13 the consignment or lease is intended as security (Section
14 1-201 (37). However, if it is determined for other reasons
15 that the consignment or lease is so intended, a security
16 interest of the consignor or lessor which attaches to the
17 consigned or leased goods is perfected by such filing.
18 (Source: P. A. 78-238.)
19 (810 ILCS 5/9-409 new)
20 Sec. 9-409. Restrictions on assignment of
21 letter-of-credit rights ineffective.
22 (a) Term or law restricting assignment generally
23 ineffective. A term in a letter of credit or a rule of law,
24 statute, regulation, custom, or practice applicable to the
25 letter of credit which prohibits, restricts, or requires the
26 consent of an applicant, issuer, or nominated person to a
27 beneficiary's assignment of or creation of a security
28 interest in a letter-of-credit right is ineffective to the
29 extent that the term or rule of law, statute, regulation,
30 custom, or practice:
31 (1) would impair the creation, attachment, or
32 perfection of a security interest in the letter-of-credit
33 right; or
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1 (2) provides that the assignment or the creation,
2 attachment, or perfection of the security interest may
3 give rise to a default, breach, right of recoupment,
4 claim, defense, termination, right of termination, or
5 remedy under the letter-of-credit right.
6 (b) Limitation on ineffectiveness under subsection (a).
7 To the extent that a term in a letter of credit is
8 ineffective under subsection (a) but would be effective under
9 law other than this Article or a custom or practice
10 applicable to the letter of credit, to the transfer of a
11 right to draw or otherwise demand performance under the
12 letter of credit, or to the assignment of a right to proceeds
13 of the letter of credit, the creation, attachment, or
14 perfection of a security interest in the letter-of-credit
15 right:
16 (1) is not enforceable against the applicant,
17 issuer, nominated person, or transferee beneficiary;
18 (2) imposes no duties or obligations on the
19 applicant, issuer, nominated person, or transferee
20 beneficiary; and
21 (3) does not require the applicant, issuer,
22 nominated person, or transferee beneficiary to recognize
23 the security interest, pay or render performance to the
24 secured party, or accept payment or other performance
25 from the secured party.
26 (810 ILCS 5/9-410)
27 Sec. 9-410. (Blank). Disposition of fees. Of the total
28 money collected for each filing with the Secretary of State
29 of an original financing statement, amended statement,
30 continuation, assignment, or for a release of collateral, $12
31 of the filing fee shall be paid into the Secretary of State
32 Special Services Fund. The remaining $8 shall be deposited
33 into the General Revenue Fund in the State Treasury.
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1 (Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.)
2 (810 ILCS 5/Art. 9, Part 5 heading)
3 PART 5. FILING DEFAULT
4 (810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new)
5 SUBPART 1. FILING OFFICE; CONTENTS AND
6 EFFECTIVENESS OF FINANCING STATEMENT
7 (810 ILCS 5/9-501) (from Ch. 26, par. 9-501)
8 Sec. 9-501. Filing office.
9 (a) Filing offices. Except as otherwise provided in
10 subsection (b), if the local law of this State governs
11 perfection of a security interest or agricultural lien, the
12 office in which to file a financing statement to perfect the
13 security interest or agricultural lien is:
14 (1) the office designated for the filing or
15 recording of a record of a mortgage on the related real
16 property, if:
17 (A) the collateral is as-extracted collateral
18 or timber to be cut; or
19 (B) the financing statement is filed as a
20 fixture filing and the collateral is goods that are
21 or are to become fixtures; or
22 (2) the office of the Secretary of State in all
23 other cases, including a case in which the collateral is
24 goods that are or are to become fixtures and the
25 financing statement is not filed as a fixture filing.
26 (b) Filing office for transmitting utilities. The
27 office in which to file a financing statement to perfect a
28 security interest in collateral, including fixtures, of a
29 transmitting utility is the office of the Secretary of State.
30 The financing statement also constitutes a fixture filing as
31 to the collateral indicated in the financing statement which
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1 is or is to become fixtures. Default; procedure when security
2 agreement covers both real and personal property.
3 (1) When a debtor is in default under a security
4 agreement, a secured party has the rights and remedies
5 provided in this Part and except as limited by subsection (3)
6 those provided in the security agreement. He may reduce his
7 claim to judgment, foreclose or otherwise enforce the
8 security interest by any available judicial procedure. If the
9 collateral is documents the secured party may proceed either
10 as to the documents or as to the goods covered thereby. A
11 secured party in possession has the rights, remedies and
12 duties provided in Section 9-207. The rights and remedies
13 referred to in this subsection are cumulative.
14 (2) After default, the debtor has the rights and
15 remedies provided in this Part, those provided in the
16 security agreement and those provided in Section 9-207.
17 (3) To the extent that they give rights to the debtor
18 and impose duties on the secured party, the rules stated in
19 the subsections referred to below may not be waived or varied
20 except as provided with respect to compulsory disposition of
21 collateral (subsection (3) of Section 9-504 and Section 9-505
22 and with respect to redemption of collateral (Section 9-506)
23 but the parties may by agreement determine the standards by
24 which the fulfillment of these rights and duties is to be
25 measured if such standards are not manifestly unreasonable:
26 (a) subsection (2) of Section 9-502 and subsection
27 (2) of Section 9-504 insofar as they require accounting
28 for surplus proceeds of collateral;
29 (b) subsection (3) of Section 9-504 and subsection
30 (1) of Section 9-505 which deal with disposition of
31 collateral;
32 (c) subsection (2) of Section 9-505 which deals
33 with acceptance of collateral as discharge of obligation;
34 (d) Section 9-506 which deals with redemption of
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1 collateral; and
2 (e) subsection (1) of Section 9-507 which deals
3 with the secured party's liability for failure to comply
4 with this Part.
5 (4) If the security agreement covers both real and
6 personal property, the secured party may proceed under this
7 Part as to the personal property or he may proceed as to both
8 the real and the personal property in accordance with his
9 rights and remedies in respect to the real property in which
10 case the provisions of this Part do not apply.
11 (5) When a secured party has reduced his claim to
12 judgment the lien of any levy which may be made upon his
13 collateral by virtue of such judgment shall relate back to
14 the date of the perfection of the security interest in such
15 collateral. A judicial sale, pursuant to such judgment, is a
16 foreclosure of the security interest by judicial procedure
17 within the meaning of this Section, and the secured party may
18 purchase at the sale and thereafter hold the collateral free
19 of any other requirements of this Article.
20 (Source: P.A. 84-546; revised 10-31-98.)
21 (810 ILCS 5/9-502) (from Ch. 26, par. 9-502)
22 Sec. 9-502. Contents of financing statement; record of
23 mortgage as financing statement; time of filing financing
24 statement.
25 (a) Sufficiency of financing statement. Subject to
26 subsection (b), a financing statement is sufficient only if
27 it:
28 (1) provides the name of the debtor;
29 (2) provides the name of the secured party or a
30 representative of the secured party; and
31 (3) indicates the collateral covered by the
32 financing statement.
33 (b) Real-property-related financing statements. Except
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1 as otherwise provided in Section 9-501(b), to be sufficient,
2 a financing statement that covers as-extracted collateral or
3 timber to be cut, or which is filed as a fixture filing and
4 covers goods that are or are to become fixtures, must satisfy
5 subsection (a) and also:
6 (1) indicate that it covers this type of
7 collateral;
8 (2) indicate that it is to be filed in the real
9 property records;
10 (3) provide a description of the real property to
11 which the collateral is related sufficient to give
12 constructive notice of a mortgage under the law of this
13 State if the description were contained in a record of
14 the mortgage of the real property; and
15 (4) if the debtor does not have an interest of
16 record in the real property, provide the name of a record
17 owner.
18 (c) Record of mortgage as financing statement. A record
19 of a mortgage is effective, from the date of recording, as a
20 financing statement filed as a fixture filing or as a
21 financing statement covering as-extracted collateral or
22 timber to be cut only if:
23 (1) the record indicates the goods or accounts that
24 it covers;
25 (2) the goods are or are to become fixtures related
26 to the real property described in the record or the
27 collateral is related to the real property described in
28 the record and is as-extracted collateral or timber to be
29 cut;
30 (3) the record satisfies the requirements for a
31 financing statement in this Section other than an
32 indication that it is to be filed in the real property
33 records; and
34 (4) the record is recorded.
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1 (d) Filing before security agreement or attachment. A
2 financing statement may be filed before a security agreement
3 is made or a security interest otherwise attaches. Collection
4 Rights of Secured Party.
5 (1) When so agreed and in any event on default the
6 secured party is entitled to notify an account debtor or the
7 obligor on an instrument to make payment to him whether or
8 not the assignor was theretofore making collections on the
9 collateral, and also to take control of any proceeds to which
10 he is entitled under Section 9-306.
11 (2) A secured party who by agreement is entitled to
12 charge back uncollected collateral or otherwise to full or
13 limited recourse against the debtor and who undertakes to
14 collect from the account debtors or obligors must proceed in
15 a commercially reasonable manner and may deduct his
16 reasonable expenses of realization from the collections. If
17 the security agreement secures an indebtedness, the secured
18 party must account to the debtor for any surplus, and unless
19 otherwise agreed, the debtor is liable for any deficiency.
20 But, if the underlying transaction was a sale of accounts or
21 chattel paper, the debtor is entitled to any surplus or is
22 liable for any deficiency only if the security agreement so
23 provides.
24 (Source: P.A. 77-2810.)
25 (810 ILCS 5/9-503) (from Ch. 26, par. 9-503)
26 Sec. 9-503. Name of debtor and secured party.
27 (a) Sufficiency of debtor's name. A financing statement
28 sufficiently provides the name of the debtor:
29 (1) if the debtor is a registered organization,
30 only if the financing statement provides the name of the
31 debtor indicated on the public record of the debtor's
32 jurisdiction of organization which shows the debtor to
33 have been organized;
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1 (2) if the debtor is a decedent's estate, only if
2 the financing statement provides the name of the decedent
3 and indicates that the debtor is an estate;
4 (3) if the debtor is a trust or a trustee acting
5 with respect to property held in trust, only if the
6 financing statement:
7 (A) provides the name specified for the trust
8 in its organic documents or, if no name is
9 specified, provides the name of the settlor and
10 additional information sufficient to distinguish the
11 debtor from other trusts having one or more of the
12 same settlors; and
13 (B) indicates, in the debtor's name or
14 otherwise, that the debtor is a trust or is a
15 trustee acting with respect to property held in
16 trust; and
17 (4) in other cases:
18 (A) if the debtor has a name, only if it
19 provides the individual or organizational name of
20 the debtor; and
21 (B) if the debtor does not have a name, only
22 if it provides the names of the partners, members,
23 associates, or other persons comprising the debtor.
24 (b) Additional debtor-related information. A financing
25 statement that provides the name of the debtor in accordance
26 with subsection (a) is not rendered ineffective by the
27 absence of:
28 (1) a trade name or other name of the debtor; or
29 (2) unless required under subsection (a)(4)(B),
30 names of partners, members, associates, or other persons
31 comprising the debtor.
32 (c) Debtor's trade name insufficient. A financing
33 statement that provides only the debtor's trade name does not
34 sufficiently provide the name of the debtor.
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1 (d) Representative capacity. Failure to indicate the
2 representative capacity of a secured party or representative
3 of a secured party does not affect the sufficiency of a
4 financing statement.
5 (e) Multiple debtors and secured parties. A financing
6 statement may provide the name of more than one debtor and
7 the name of more than one secured party. Secured party's
8 right to take possession after default.
9 Unless otherwise agreed a secured party has on default
10 the right to take possession of the collateral. In taking
11 possession a secured party may proceed without judicial
12 process if this can be done without breach of the peace or
13 may proceed by action.
14 If the security agreement so provides the secured party
15 may require the debtor to assemble the collateral and make it
16 available to the secured party at a place to be designated by
17 the secured party which is reasonably convenient to both
18 parties. Without removal a secured party may render equipment
19 unusable, and may dispose of collateral on the debtor's
20 premises under Section 9--504.
21 (Source: Laws 1961, p. 2101.)
22 (810 ILCS 5/9-504) (from Ch. 26, par. 9-504)
23 Sec. 9-504. Indication of collateral. A financing
24 statement sufficiently indicates the collateral that it
25 covers if the financing statement provides:
26 (1) a description of the collateral pursuant to
27 Section 9-108; or
28 (2) an indication that the financing statement
29 covers all assets or all personal property.
30 Secured Party's Right to Dispose of Collateral After
31 Default; Effect of Disposition.
32 (1) A secured party after default may sell, lease or
33 otherwise dispose of any or all of the collateral in its then
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1 condition or following any commercially reasonable
2 preparation or processing. Any sale of goods is subject to
3 the Article on Sales (Article 2). The proceeds of disposition
4 shall be applied in the order following to
5 (a) the reasonable expenses of retaking, holding,
6 preparing for sale or lease, selling, leasing and the like
7 and, to the extent provided for in the agreement and not
8 prohibited by law, the reasonable attorneys' fees and legal
9 expenses incurred by the secured party;
10 (b) the satisfaction of indebtedness secured by the
11 security interest under which the disposition is made;
12 (c) the satisfaction of indebtedness secured by any
13 subordinate security interest in the collateral if written
14 notification of demand therefor is received before
15 distribution of the proceeds is completed. If requested by
16 the secured party, the holder of a subordinate security
17 interest must seasonably furnish reasonable proof of his
18 interest, and unless he does so, the secured party need not
19 comply with his demand.
20 (2) If the security interest secures an indebtedness,
21 the secured party must account to the debtor for any surplus,
22 and, unless otherwise agreed, the debtor is liable for any
23 deficiency. But if the underlying transaction was a sale of
24 accounts or chattel paper, the debtor is entitled to any
25 surplus or is liable for any deficiency only if the security
26 agreement so provides.
27 (3) Disposition of the collateral may be by public or
28 private proceedings and may be made by way of one or more
29 contracts. Sale or other disposition may be as a unit or in
30 parcels and at any time and place and on any terms but every
31 aspect of the disposition including the method, manner, time,
32 place and terms must be commercially reasonable. Unless
33 collateral is perishable or threatens to decline speedily in
34 value or is of a type customarily sold on a recognized
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1 market, reasonable notification of the time and place of any
2 public sale or reasonable notification of the time after
3 which any private sale or other intended disposition is to be
4 made shall be sent by the secured party to the debtor, if he
5 has not signed after default a statement renouncing or
6 modifying his right to notification of sale. In the case of
7 consumer goods no other notification need be sent. In other
8 cases notification shall be sent to any other secured party
9 from whom the secured party has received (before sending his
10 notification to the debtor or before the debtor's
11 renunciation of his rights) written notice of a claim of an
12 interest in the collateral. The secured party may buy at any
13 public sale and if the collateral is of a type customarily
14 sold in a recognized market or is of a type which is the
15 subject of widely distributed standard price quotations he
16 may buy at private sale.
17 (4) When collateral is disposed of by a secured party
18 after default, the disposition transfers to a purchaser for
19 value all of the debtor's rights therein, discharges the
20 security interest under which it is made and any security
21 interest or lien subordinate thereto. The purchaser takes
22 free of all such rights and interests even though the secured
23 party fails to comply with the requirements of this Part or
24 of any judicial proceedings
25 (a) in the case of a public sale, if the purchaser
26 has no knowledge of any defects in the sale and if he does
27 not buy in collusion with the secured party, other bidders or
28 the person conducting the sale; or
29 (b) in any other case, if the purchaser acts in
30 good faith.
31 (5) A person who is liable to a secured party under a
32 guaranty, indorsement, repurchase agreement or the like and
33 who receives a transfer of collateral from the secured party
34 or is subrogated to his rights has thereafter the rights and
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1 duties of the secured party. Such a transfer of collateral is
2 not a sale or disposition of the collateral under this
3 Article.
4 (Source: P. A. 78-238.)
5 (810 ILCS 5/9-505) (from Ch. 26, par. 9-505)
6 Sec. 9-505. Filing and compliance with other statutes and
7 treaties for consignments, leases, other bailments, and other
8 transactions.
9 (a) Use of terms other than "debtor" and "secured
10 party." A consignor, lessor, or other bailor of goods, a
11 licensor, or a buyer of a payment intangible or promissory
12 note may file a financing statement, or may comply with a
13 statute or treaty described in Section 9-311(a), using the
14 terms "consignor", "consignee", "lessor", "lessee", "bailor",
15 "bailee", "licensor", "licensee", "owner", "registered
16 owner", "buyer", "seller", or words of similar import,
17 instead of the terms "secured party" and "debtor".
18 (b) Effect of financing statement under subsection (a).
19 This part applies to the filing of a financing statement
20 under subsection (a) and, as appropriate, to compliance that
21 is equivalent to filing a financing statement under Section
22 9-311(b), but the filing or compliance is not of itself a
23 factor in determining whether the collateral secures an
24 obligation. If it is determined for another reason that the
25 collateral secures an obligation, a security interest held by
26 the consignor, lessor, bailor, licensor, owner, or buyer
27 which attaches to the collateral is perfected by the filing
28 or compliance. Compulsory Disposition of Collateral;
29 Acceptance of the Collateral as Discharge of Obligation.
30 (1) If the debtor has paid 60% of the cash price in the
31 case of a purchase money security interest in consumer goods
32 or 60% of the loan in the case of another security interest
33 in consumer goods, and has not signed after default a
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1 statement renouncing or modifying his rights under this Part
2 a secured party who has taken possession of collateral must
3 dispose of it under Section 9--504 and if he fails to do so
4 within 90 days after he takes possession the debtor at his
5 option may recover in conversion or under Section 9--507(1)
6 on secured party's liability.
7 (2) In any other case involving consumer goods or any
8 other collateral a secured party in possession may, after
9 default, propose to retain the collateral in satisfaction of
10 the obligation. Written notice of such proposal shall be sent
11 to the debtor if he has not signed after default a statement
12 renouncing or modifying his rights under this subsection. In
13 the case of consumer goods no other notice need be given. In
14 other cases notice shall be sent to any other secured party
15 from whom the secured party has received (before sending his
16 notice to the debtor or before the debtor's renunciation of
17 his rights) written notice of a claim of an interest in the
18 collateral. If the secured party receives objection in
19 writing from a person entitled to receive notification within
20 twenty-one days after the notice was sent, the secured party
21 must dispose of the collateral under Section 9-504. In the
22 absence of such written objection the secured party may
23 retain the collateral in satisfaction of the debtor's
24 obligation.
25 (Source: P.A. 77-2810.)
26 (810 ILCS 5/9-506) (from Ch. 26, par. 9-506)
27 Sec. 9-506. Effect of errors or omissions.
28 (a) Minor errors and omissions. A financing statement
29 substantially satisfying the requirements of this Part is
30 effective, even if it has minor errors or omissions, unless
31 the errors or omissions make the financing statement
32 seriously misleading.
33 (b) Financing statement seriously misleading. Except as
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1 otherwise provided in subsection (c), a financing statement
2 that fails sufficiently to provide the name of the debtor in
3 accordance with Section 9-503(a) is seriously misleading.
4 (c) Financing statement not seriously misleading. If a
5 search of the records of the filing office under the debtor's
6 correct name, using the filing office's standard search
7 logic, if any, would disclose a financing statement that
8 fails sufficiently to provide the name of the debtor in
9 accordance with Section 9-503(a), the name provided does not
10 make the financing statement seriously misleading.
11 (d) "Debtor's correct name." For purposes of Section
12 9-508(b), the "debtor's correct name" in subsection (c) means
13 the correct name of the new debtor. Debtor's right to redeem
14 collateral.
15 At any time before the secured party has disposed of
16 collateral or entered into a contract for its disposition
17 under Section 9--504 or before the obligation has been
18 discharged under Section 9--505(2) the debtor or any other
19 secured party may unless otherwise agreed in writing after
20 default redeem the collateral by tendering fulfillment of all
21 obligations secured by the collateral as well as the expenses
22 reasonably incurred by the secured party in retaking, holding
23 and preparing the collateral for disposition, in arranging
24 for the sale, and to the extent provided in the agreement and
25 not prohibited by law, his reasonable attorneys' fees and
26 legal expenses.
27 (Source: Laws 1961, p. 2101.)
28 (810 ILCS 5/9-507) (from Ch. 26, par. 9-507)
29 Sec. 9-507. Effect of certain events on effectiveness of
30 financing statement.
31 (a) Disposition. A filed financing statement remains
32 effective with respect to collateral that is sold, exchanged,
33 leased, licensed, or otherwise disposed of and in which a
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1 security interest or agricultural lien continues, even if the
2 secured party knows of or consents to the disposition.
3 (b) Information becoming seriously misleading. Except
4 as otherwise provided in subsection (c) and Section 9-508, a
5 financing statement is not rendered ineffective if, after the
6 financing statement is filed, the information provided in the
7 financing statement becomes seriously misleading under
8 Section 9-506.
9 (c) Change in debtor's name. If a debtor so changes its
10 name that a filed financing statement becomes seriously
11 misleading under Section 9-506:
12 (1) the financing statement is effective to perfect
13 a security interest in collateral acquired by the debtor
14 before, or within four months after, the change; and
15 (2) the financing statement is not effective to
16 perfect a security interest in collateral acquired by the
17 debtor more than four months after the change, unless an
18 amendment to the financing statement which renders the
19 financing statement not seriously misleading is filed
20 within four months after the change. Secured party's
21 liability for failure to comply with this part.
22 (1) If it is established that the secured party is not
23 proceeding in accordance with the provisions of this Part
24 disposition may be ordered or restrained on appropriate terms
25 and conditions. If the disposition has occurred the debtor or
26 any person entitled to notification or whose security
27 interest has been made known to the secured party prior to
28 the disposition has a right to recover from the secured party
29 any loss caused by a failure to comply with the provisions of
30 this Part. If the collateral is consumer goods, the debtor in
31 an individual action has a right to recover in any event an
32 amount not less than the credit service charge plus 10% of
33 the principal amount of the debt or the time price
34 differential plus 10% of the cash price.
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1 (2) The fact that a better price could have been
2 obtained by a sale at a different time or in a different
3 method from that selected by the secured party is not of
4 itself sufficient to establish that the sale was not made in
5 a commercially reasonable manner. If the secured party either
6 sells the collateral in the usual manner in any recognized
7 market therefor or if he sells at the price current in such
8 market at the time of his sale or if he has otherwise sold in
9 conformity with reasonable commercial practices among dealers
10 in the type of property sold he has sold in a commercially
11 reasonable manner. The principles stated in the two preceding
12 sentences with respect to sales also apply as may be
13 appropriate to other types of disposition. A disposition
14 which has been approved in any judicial proceeding or by any
15 bona fide creditors' committee or representative of creditors
16 shall conclusively be deemed to be commercially reasonable,
17 but this sentence does not indicate that any such approval
18 must be obtained in any case nor does it indicate that any
19 disposition not so approved is not commercially reasonable.
20 (Source: P.A. 90-214, eff. 7-25-97.)
21 (810 ILCS 5/9-508 new)
22 Sec. 9-508. Effectiveness of financing statement if new
23 debtor becomes bound by security agreement.
24 (a) Financing statement naming original debtor. Except
25 as otherwise provided in this Section, a filed financing
26 statement naming an original debtor is effective to perfect a
27 security interest in collateral in which a new debtor has or
28 acquires rights to the extent that the financing statement
29 would have been effective had the original debtor acquired
30 rights in the collateral.
31 (b) Financing statement becoming seriously misleading.
32 If the difference between the name of the original debtor and
33 that of the new debtor causes a filed financing statement
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1 that is effective under subsection (a) to be seriously
2 misleading under Section 9-506:
3 (1) the financing statement is effective to perfect
4 a security interest in collateral acquired by the new
5 debtor before, and within four months after, the new
6 debtor becomes bound under Section 9-203(d); and
7 (2) the financing statement is not effective to
8 perfect a security interest in collateral acquired by the
9 new debtor more than four months after the new debtor
10 becomes bound under Section 9-203(d) unless an initial
11 financing statement providing the name of the new debtor
12 is filed before the expiration of that time.
13 (c) When Section not applicable. This Section does not
14 apply to collateral as to which a filed financing statement
15 remains effective against the new debtor under Section
16 9-507(a).
17 (810 ILCS 5/9-509 new)
18 Sec. 9-509. Persons entitled to file a record.
19 (a) Person entitled to file record. A person may file
20 an initial financing statement, amendment that adds
21 collateral covered by a financing statement, or amendment
22 that adds a debtor to a financing statement only if:
23 (1) the debtor authorizes the filing in an
24 authenticated record or pursuant to subsection (b) or
25 (c); or
26 (2) the person holds an agricultural lien that has
27 become effective at the time of filing and the financing
28 statement covers only collateral in which the person
29 holds an agricultural lien.
30 (b) Security agreement as authorization. By
31 authenticating or becoming bound as debtor by a security
32 agreement, a debtor or new debtor authorizes the filing of an
33 initial financing statement, and an amendment, covering:
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1 (1) the collateral described in the security
2 agreement; and
3 (2) property that becomes collateral under Section
4 9-315(a)(2), whether or not the security agreement
5 expressly covers proceeds.
6 (c) Acquisition of collateral as authorization. By
7 acquiring collateral in which a security interest or
8 agricultural lien continues under Section 9-315(a)(1), a
9 debtor authorizes the filing of an initial financing
10 statement, and an amendment, covering the collateral and
11 property that becomes collateral under Section 9-315(a)(2).
12 (d) Person entitled to file certain amendments. A
13 person may file an amendment other than an amendment that
14 adds collateral covered by a financing statement or an
15 amendment that adds a debtor to a financing statement only
16 if:
17 (1) the secured party of record authorizes the
18 filing; or
19 (2) the amendment is a termination statement for a
20 financing statement as to which the secured party of
21 record has failed to file or send a termination statement
22 as required by Section 9-513(a) or (c), the debtor
23 authorizes the filing, and the termination statement
24 indicates that the debtor authorized it to be filed.
25 (e) Multiple secured parties of record. If there is
26 more than one secured party of record for a financing
27 statement, each secured party of record may authorize the
28 filing of an amendment under subsection (d).
29 (810 ILCS 5/9-510 new)
30 Sec. 9-510. Effectiveness of filed record.
31 (a) Filed record effective if authorized. A filed
32 record is effective only to the extent that it was filed by a
33 person that may file it under Section 9-509.
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1 (b) Authorization by one secured party of record. A
2 record authorized by one secured party of record does not
3 affect the financing statement with respect to another
4 secured party of record.
5 (c) Continuation statement not timely filed. A
6 continuation statement that is not filed within the six-month
7 period prescribed by Section 9-515(d) is ineffective.
8 (810 ILCS 5/9-511 new)
9 Sec. 9-511. Secured party of record.
10 (a) Secured party of record. A secured party of record
11 with respect to a financing statement is a person whose name
12 is provided as the name of the secured party or a
13 representative of the secured party in an initial financing
14 statement that has been filed. If an initial financing
15 statement is filed under Section 9-514(a), the assignee named
16 in the initial financing statement is the secured party of
17 record with respect to the financing statement.
18 (b) Amendment naming secured party of record. If an
19 amendment of a financing statement which provides the name of
20 a person as a secured party or a representative of a secured
21 party is filed, the person named in the amendment is a
22 secured party of record. If an amendment is filed under
23 Section 9-514(b), the assignee named in the amendment is a
24 secured party of record.
25 (c) Amendment deleting secured party of record. A
26 person remains a secured party of record until the filing of
27 an amendment of the financing statement which deletes the
28 person.
29 (810 ILCS 5/9-512 new)
30 Sec. 9-512. Amendment of financing statement.
31 (a) Amendment of information in financing statement.
32 Subject to Section 9-509, a person may add or delete
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1 collateral covered by, continue or terminate the
2 effectiveness of, or, subject to subsection (e), otherwise
3 amend the information provided in, a financing statement by
4 filing an amendment that:
5 (1) identifies, by its file number, the initial
6 financing statement to which the amendment relates; and
7 (2) if the amendment relates to an initial
8 financing statement filed or recorded in a filing office
9 described in Section 9-501(a)(1), provides the date and
10 time that the initial financing statement was filed and
11 the information specified in Section 9-502(b).
12 (b) Period of effectiveness not affected. Except as
13 otherwise provided in Section 9-515, the filing of an
14 amendment does not extend the period of effectiveness of the
15 financing statement.
16 (c) Effectiveness of amendment adding collateral. A
17 financing statement that is amended by an amendment that adds
18 collateral is effective as to the added collateral only from
19 the date of the filing of the amendment.
20 (d) Effectiveness of amendment adding debtor. A
21 financing statement that is amended by an amendment that adds
22 a debtor is effective as to the added debtor only from the
23 date of the filing of the amendment.
24 (e) Certain amendments ineffective. An amendment is
25 ineffective to the extent it:
26 (1) purports to delete all debtors and fails to
27 provide the name of a debtor to be covered by the
28 financing statement; or
29 (2) purports to delete all secured parties of
30 record and fails to provide the name of a new secured
31 party of record.
32 (810 ILCS 5/9-513 new)
33 Sec. 9-513. Termination statement.
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1 (a) Consumer goods. A secured party shall cause the
2 secured party of record for a financing statement to file a
3 termination statement for the financing statement if the
4 financing statement covers consumer goods and:
5 (1) there is no obligation secured by the
6 collateral covered by the financing statement and no
7 commitment to make an advance, incur an obligation, or
8 otherwise give value; or
9 (2) the debtor did not authorize the filing of the
10 initial financing statement.
11 (b) Time for compliance with subsection (a). To comply
12 with subsection (a), a secured party shall cause the secured
13 party of record to file the termination statement:
14 (1) within one month after there is no obligation
15 secured by the collateral covered by the financing
16 statement and no commitment to make an advance, incur an
17 obligation, or otherwise give value; or
18 (2) if earlier, within 20 days after the secured
19 party receives an authenticated demand from a debtor.
20 (c) Other collateral. In cases not governed by
21 subsection (a), within 20 days after a secured party receives
22 an authenticated demand from a debtor, the secured party
23 shall cause the secured party of record for a financing
24 statement to send to the debtor a termination statement for
25 the financing statement or file the termination statement in
26 the filing office if:
27 (1) except in the case of a financing statement
28 covering accounts or chattel paper that has been sold or
29 goods that are the subject of a consignment, there is no
30 obligation secured by the collateral covered by the
31 financing statement and no commitment to make an advance,
32 incur an obligation, or otherwise give value;
33 (2) the financing statement covers accounts or
34 chattel paper that has been sold but as to which the
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1 account debtor or other person obligated has discharged
2 its obligation;
3 (3) the financing statement covers goods that were
4 the subject of a consignment to the debtor but are not in
5 the debtor's possession; or
6 (4) the debtor did not authorize the filing of the
7 initial financing statement.
8 (d) Effect of filing termination statement. Except as
9 otherwise provided in Section 9-510, upon the filing of a
10 termination statement with the filing office, the financing
11 statement to which the termination statement relates ceases
12 to be effective. Except as otherwise provided in Section
13 9-510, for purposes of Sections 9-519(g), 9-522(a), and
14 9-523(c) the filing with the filing office of a termination
15 statement relating to a financing statement that indicates
16 that the debtor is a transmitting utility also causes the
17 effectiveness of the financing statement to lapse.
18 (810 ILCS 5/9-514 new)
19 Sec. 9-514. Assignment of powers of secured party of
20 record.
21 (a) Assignment reflected on initial financing statement.
22 Except as otherwise provided in subsection (c), an initial
23 financing statement may reflect an assignment of all of the
24 secured party's power to authorize an amendment to the
25 financing statement by providing the name and mailing address
26 of the assignee as the name and address of the secured party.
27 (b) Assignment of filed financing statement. Except as
28 otherwise provided in subsection (c), a secured party of
29 record may assign of record all or part of its power to
30 authorize an amendment to a financing statement by filing in
31 the filing office an amendment of the financing statement
32 which:
33 (1) identifies, by its file number, the initial
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1 financing statement to which it relates;
2 (2) provides the name of the assignor; and
3 (3) provides the name and mailing address of the
4 assignee.
5 (c) Assignment of record of mortgage. An assignment of
6 record of a security interest in a fixture covered by a
7 record of a mortgage which is effective as a financing
8 statement filed as a fixture filing under Section 9-502(c)
9 may be made only by an assignment of record of the mortgage
10 in the manner provided by law of this State other than the
11 Uniform Commercial Code.
12 (810 ILCS 5/9-515 new)
13 Sec. 9-515. Duration and effectiveness of financing
14 statement; effect of lapsed financing statement.
15 (a) Five-year effectiveness. Except as otherwise
16 provided in subsections (b), (e), (f), and (g), a filed
17 financing statement is effective for a period of five years
18 after the date of filing.
19 (b) Public-finance or manufactured-home transaction.
20 Except as otherwise provided in subsections (e), (f), and
21 (g), an initial financing statement filed in connection with
22 a public-finance transaction or manufactured-home transaction
23 is effective for a period of 30 years after the date of
24 filing if it indicates that it is filed in connection with a
25 public-finance transaction or manufactured-home transaction.
26 (c) Lapse and continuation of financing statement. The
27 effectiveness of a filed financing statement lapses on the
28 expiration of the period of its effectiveness unless before
29 the lapse a continuation statement is filed pursuant to
30 subsection (d). Upon lapse, a financing statement ceases to
31 be effective and any security interest or agricultural lien
32 that was perfected by the financing statement becomes
33 unperfected, unless the security interest is perfected
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1 otherwise. If the security interest or agricultural lien
2 becomes unperfected upon lapse, it is deemed never to have
3 been perfected as against a purchaser of the collateral for
4 value.
5 (d) When continuation statement may be filed. A
6 continuation statement may be filed only within six months
7 before the expiration of the five-year period specified in
8 subsection (a) or the 30-year period specified in subsection
9 (b), whichever is applicable.
10 (e) Effect of filing continuation statement. Except as
11 otherwise provided in Section 9-510, upon timely filing of a
12 continuation statement, the effectiveness of the initial
13 financing statement continues for a period of five years
14 commencing on the day on which the financing statement would
15 have become ineffective in the absence of the filing. Upon
16 the expiration of the five-year period, the financing
17 statement lapses in the same manner as provided in subsection
18 (c), unless, before the lapse, another continuation statement
19 is filed pursuant to subsection (d). Succeeding continuation
20 statements may be filed in the same manner to continue the
21 effectiveness of the initial financing statement.
22 (f) Transmitting utility financing statement. If a
23 debtor is a transmitting utility and a filed financing
24 statement so indicates, the financing statement is effective
25 until a termination statement is filed.
26 (g) Record of mortgage as financing statement. A record
27 of a mortgage that is effective as a financing statement
28 filed as a fixture filing under Section 9-502(c) remains
29 effective as a financing statement filed as a fixture filing
30 until the mortgage is released or satisfied of record or its
31 effectiveness otherwise terminates as to the real property.
32 (810 ILCS 5/9-516 new)
33 Sec. 9-516. What constitutes filing; effectiveness of
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1 filing.
2 (a) What constitutes filing. Except as otherwise
3 provided in subsection (b), communication of a record to a
4 filing office and tender of the filing fee or acceptance of
5 the record by the filing office constitutes filing.
6 (b) Refusal to accept record; filing does not occur.
7 Filing does not occur with respect to a record that a filing
8 office refuses to accept because:
9 (1) the record is not communicated by a method or
10 medium of communication authorized by the filing office;
11 (2) an amount equal to or greater than the
12 applicable filing fee is not tendered;
13 (3) the filing office is unable to index the record
14 because:
15 (A) in the case of an initial financing
16 statement, the record does not provide a name for
17 the debtor;
18 (B) in the case of an amendment or correction
19 statement, the record:
20 (i) does not identify the initial
21 financing statement as required by Section
22 9-512 or 9-518, as applicable; or
23 (ii) identifies an initial financing
24 statement whose effectiveness has lapsed under
25 Section 9-515;
26 (C) in the case of an initial financing
27 statement that provides the name of a debtor
28 identified as an individual or an amendment that
29 provides a name of a debtor identified as an
30 individual which was not previously provided in the
31 financing statement to which the record relates, the
32 record does not identify the debtor's last name; or
33 (D) in the case of a record filed or recorded
34 in the filing office described in Section
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1 9-501(a)(1), the record does not provide a
2 sufficient description of the real property to which
3 it relates;
4 (4) in the case of an initial financing statement
5 or an amendment that adds a secured party of record, the
6 record does not provide a name and mailing address for
7 the secured party of record;
8 (5) in the case of an initial financing statement
9 or an amendment that provides a name of a debtor which
10 was not previously provided in the financing statement to
11 which the amendment relates, the record does not:
12 (A) provide a mailing address for the debtor;
13 (B) indicate whether the debtor is an
14 individual or an organization; or
15 (C) if the financing statement indicates that
16 the debtor is an organization, provide:
17 (i) a type of organization for the
18 debtor;
19 (ii) a jurisdiction of organization for
20 the debtor; or
21 (iii) an organizational identification
22 number for the debtor or indicate that the
23 debtor has none;
24 (6) in the case of an assignment reflected in an
25 initial financing statement under Section 9-514(a) or an
26 amendment filed under Section 9-514(b), the record does
27 not provide a name and mailing address for the assignee;
28 or
29 (7) in the case of a continuation statement, the
30 record is not filed within the six-month period
31 prescribed by Section 9-515(d).
32 (c) Rules applicable to subsection (b). For purposes of
33 subsection (b):
34 (1) a record does not provide information if the
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1 filing office is unable to read or decipher the
2 information; and
3 (2) a record that does not indicate that it is an
4 amendment or identify an initial financing statement to
5 which it relates, as required by Section 9-512, 9-514, or
6 9-518, is an initial financing statement.
7 (d) Refusal to accept record; record effective as filed
8 record. A record that is communicated to the filing office
9 with tender of the filing fee, but which the filing office
10 refuses to accept for a reason other than one set forth in
11 subsection (b), is effective as a filed record except as
12 against a purchaser of the collateral which gives value in
13 reasonable reliance upon the absence of the record from the
14 files.
15 (810 ILCS 5/9-517 new)
16 Sec. 9-517. Effect of indexing errors. The failure of
17 the filing office to index a record correctly does not affect
18 the effectiveness of the filed record.
19 (810 ILCS 5/9-518 new)
20 Sec. 9-518. Claim concerning inaccurate or wrongfully
21 filed record.
22 (a) Correction statement. A person may file in the
23 filing office a correction statement with respect to a record
24 indexed there under the person's name if the person believes
25 that the record is inaccurate or was wrongfully filed.
26 (b) Sufficiency of correction statement. A correction
27 statement must:
28 (1) identify the record to which it relates by:
29 (A) the file number assigned to the initial
30 financing statement to which the record relates; and
31 (B) if the correction statement relates to a
32 record filed or recorded in a filing office
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1 described in Section 9-501(a)(1), the date and time
2 that the initial financing statement was filed and
3 the information specified in Section 9-502(b);
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 (i) Inapplicability to real-property-related filing
26 office. Subsections (b) and (h) do not apply to a filing
27 office described in Section 9-501(a)(1).
28 (810 ILCS 5/9-520 new)
29 Sec. 9-520. Acceptance and refusal to accept record.
30 (a) Mandatory refusal to accept record. A filing office
31 shall refuse to accept a record for filing for a reason set
32 forth in Section 9-516(b) and may refuse to accept a record
33 for filing only for a reason set forth in Section 9-516(b).
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1 (b) Communication concerning refusal. If a filing
2 office refuses to accept a record for filing, it shall
3 communicate to the person that presented the record the fact
4 of and reason for the refusal and the date and time the
5 record would have been filed had the filing office accepted
6 it. The communication must be made at the time and in the
7 manner prescribed by filing-office rule, but in the case of a
8 filing office described in Section 9-501(a)(2), in no event
9 more than two business days after the filing office receives
10 the record.
11 (c) When filed financing statement effective. A filed
12 financing statement satisfying Section 9-502(a) and (b) is
13 effective, even if the filing office is required to refuse to
14 accept it for filing under subsection (a). However, Section
15 9-338 applies to a filed financing statement providing
16 information described in Section 9-516(b)(5) which is
17 incorrect at the time the financing statement is filed.
18 (d) Separate application to multiple debtors. If a
19 record communicated to a filing office provides information
20 that relates to more than one debtor, this Part applies as to
21 each debtor separately.
22 (810 ILCS 5/9-521 new)
23 Sec. 9-521. Uniform form of written financing statement
24 and amendment.
25 (a) Initial financing statement form. A filing office
26 that accepts written records may not refuse to accept a
27 written initial financing statement in the form and format
28 set forth in the final official text of the 1999 revisions to
29 Article 9 of the Uniform Commercial Code promulgated by the
30 American Law Institute and the National Conference of
31 Commissioners on Uniform State Laws, except for a reason set
32 forth in Section 9-516(b).
33 (b) Amendment form. A filing office that accepts
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1 written records may not refuse to accept a written record in
2 the form and format set forth in the final official text of
3 the 1999 revisions to Article 9 of the Uniform Commercial
4 Code promulgated by the American Law Institute and the
5 National Conference of Commissioners on Uniform State Laws,
6 except for a reason set forth in Section 9-516(b).
7 (810 ILCS 5/9-522 new)
8 Sec. 9-522. Maintenance and destruction of records.
9 (a) Post-lapse maintenance and retrieval of information.
10 The filing office shall maintain a record of the information
11 provided in a filed financing statement for at least one year
12 after the effectiveness of the financing statement has lapsed
13 under Section 9-515 with respect to all secured parties of
14 record. The record must be retrievable by using the name of
15 the debtor and:
16 (1) if the record was filed in the filing office
17 described in Section 9-501(a)(1), by using the file
18 number assigned to the initial financing statement to
19 which the record relates and the date and time that the
20 record was filed or recorded; or
21 (2) if the record was filed in the filing office
22 described in Section 9-501(a)(2), by using the file
23 number assigned to the initial financing statement to
24 which the record relates.
25 (b) Destruction of written records. Except to the
26 extent that a statute governing disposition of public records
27 provides otherwise, the filing office immediately may destroy
28 any written record evidencing a financing statement. However,
29 if the filing office destroys a written record, it shall
30 maintain another record of the financing statement which
31 complies with subsection (a).
32 (810 ILCS 5/9-523 new)
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1 Sec. 9-523. Information from filing office; sale or
2 license of records.
3 (a) Acknowledgment of filing written record. If a
4 person that files a written record requests an acknowledgment
5 of the filing, the filing office shall send to the person an
6 image of the record showing the number assigned to the record
7 pursuant to Section 9-519(a)(1) and the date and time of the
8 filing of the record. However, if the person furnishes a
9 copy of the record to the filing office, the filing office
10 may instead:
11 (1) note upon the copy the number assigned to the
12 record pursuant to Section 9-519(a)(1) and the date and
13 time of the filing of the record; and
14 (2) send the copy to the person.
15 (b) Acknowledgment of filing other record. If a person
16 files a record other than a written record, the filing office
17 shall communicate to the person an acknowledgment that
18 provides:
19 (1) the information in the record;
20 (2) the number assigned to the record pursuant to
21 Section 9-519(a)(1); and
22 (3) the date and time of the filing of the record.
23 (c) Communication of requested information. The filing
24 office shall communicate or otherwise make available in a
25 record the following information to any person that requests
26 it:
27 (1) whether there is on file on a date and time
28 specified by the filing office, but not a date earlier
29 than three business days before the filing office
30 receives the request, any financing statement that:
31 (A) designates a particular debtor or, if the
32 request so states, designates a particular debtor at
33 the address specified in the request;
34 (B) has not lapsed under Section 9-515 with
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1 respect to all secured parties of record; and
2 (C) if the request so states, has lapsed under
3 Section 9-515 and a record of which is maintained by
4 the filing office under Section 9-522(a);
5 (2) the date and time of filing of each financing
6 statement; and
7 (3) the information provided in each financing
8 statement.
9 (d) Medium for communicating information. In complying
10 with its duty under subsection (c), the filing office may
11 communicate information in any medium. However, if
12 requested, the filing office shall communicate information by
13 issuing a record that can be admitted into evidence in the
14 courts of this State without extrinsic evidence of its
15 authenticity.
16 (e) Timeliness of filing office performance. The filing
17 office shall perform the acts required by subsections (a)
18 through (d) at the time and in the manner prescribed by
19 filing-office rule, but in the case of a filing office
20 described in Section 9-501(a)(2), not later than two business
21 days after the filing office receives the request.
22 (f) Public availability of records. At least weekly,
23 the Secretary of State shall offer to sell or license to the
24 public on a nonexclusive basis, in bulk, copies of all
25 records filed in it under this Part, in every medium from
26 time to time available to the filing office.
27 (810 ILCS 5/9-524 new)
28 Sec. 9-524. Delay by filing office. Delay by the filing
29 office beyond a time limit prescribed by this Part is excused
30 if:
31 (1) the delay is caused by interruption of
32 communication or computer facilities, war, emergency
33 conditions, failure of equipment, or other circumstances
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1 beyond control of the filing office; and
2 (2) the filing office exercises reasonable
3 diligence under the circumstances.
4 (810 ILCS 5/9-525 new)
5 Sec. 9-525. Fees.
6 (a) Initial financing statement or other record: general
7 rule. Except as otherwise provided in subsection (e), the fee
8 for filing and indexing a record under this Part, other than
9 an initial financing statement of the kind described in
10 subsection (b), is:
11 (1) $20 if the record is communicated in writing
12 and consists of one or two pages;
13 (2) $20 if the record is communicated in writing
14 and consists of more than two pages; and
15 (3) $20 if the record is communicated by another
16 medium authorized by filing-office rule.
17 (b) Initial financing statement: public-finance and
18 manufactured-housing transactions. Except as otherwise
19 provided in subsection (e), the fee for filing and indexing
20 an initial financing statement of the following kind is:
21 (1) $20 if the financing statement indicates that
22 it is filed in connection with a public-finance
23 transaction;
24 (2) $20 if the financing statement indicates that
25 it is filed in connection with a manufactured-home
26 transaction.
27 (c) Number of names. The number of names required to be
28 indexed does not affect the amount of the fee in subsections
29 (a) and (b).
30 (d) Response to information request. The fee for
31 responding to a request for information from the filing
32 office, including for issuing a certificate showing
33 communicating whether there is on file any financing
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1 statement naming a particular debtor, is:
2 (1) $10 if the request is communicated in writing;
3 and
4 (2) $10 if the request is communicated by another
5 medium authorized by filing-office rule.
6 (e) Record of mortgage. This Section does not require a
7 fee with respect to a record of a mortgage which is effective
8 as a financing statement filed as a fixture filing or as a
9 financing statement covering as-extracted collateral or
10 timber to be cut under Section 9-502(c). However, the
11 recording and satisfaction fees that otherwise would be
12 applicable to the record of the mortgage apply.
13 (810 ILCS 5/9-526 new)
14 Sec. 9-526. Filing-office rules.
15 (a) Adoption of filing-office rules. The Secretary of
16 State shall adopt and publish rules to implement this
17 Article. The filing-office rules must be:
18 (1) consistent with this Article; and
19 (2) adopted and published in accordance with the
20 Illinois Administrative Procedure Act.
21 (b) Harmonization of rules. To keep the filing-office
22 rules and practices of the filing office in harmony with the
23 rules and practices of filing offices in other jurisdictions
24 that enact substantially this Part, and to keep the
25 technology used by the filing office compatible with the
26 technology used by filing offices in other jurisdictions that
27 enact substantially this Part, the Secretary of State, so far
28 as is consistent with the purposes, policies, and provisions
29 of this Article, in adopting, amending, and repealing
30 filing-office rules, shall:
31 (1) consult with filing offices in other
32 jurisdictions that enact substantially this Part; and
33 (2) consult the most recent version of the Model
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1 Rules promulgated by the International Association of
2 Corporate Administrators or any successor organization;
3 and
4 (3) take into consideration the rules and practices
5 of, and the technology used by, filing offices in other
6 jurisdictions that enact substantially this Part.
7 (810 ILCS 5/9-527 new)
8 Sec. 9-527. Duty to report. The Secretary of State
9 shall report annually to the Governor and Legislature on the
10 operation of the filing office. The report must contain a
11 statement of the extent to which:
12 (1) the filing-office rules are not in harmony with
13 the rules of filing offices in other jurisdictions that
14 enact substantially this Part and the reasons for these
15 variations; and
16 (2) the filing-office rules are not in harmony with
17 the most recent version of the Model Rules promulgated by
18 the International Association of Corporate
19 Administrators, or any successor organization, and the
20 reasons for these variations.
21 (810 ILCS 5/Art. 9, Part 6 heading new)
22 PART 6. DEFAULT
23 (810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new)
24 SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
25 (810 ILCS 5/9-601 new)
26 Sec. 9-601. Rights after default; judicial enforcement;
27 consignor or buyer of accounts, chattel paper, payment
28 intangibles, or promissory notes.
29 (a) Rights of secured party after default. After
30 default, a secured party has the rights provided in this Part
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1 and, except as otherwise provided in Section 9-602, those
2 provided by agreement of the parties. A secured party:
3 (1) may reduce a claim to judgment, foreclose, or
4 otherwise enforce the claim, security interest, or
5 agricultural lien by any available judicial procedure;
6 and
7 (2) if the collateral is documents, may proceed
8 either as to the documents or as to the goods they cover.
9 (b) Rights and duties of secured party in possession or
10 control. A secured party in possession of collateral or
11 control of collateral under Section 9-104, 9-105, 9-106, or
12 9-107 has the rights and duties provided in Section 9-207.
13 (c) Rights cumulative; simultaneous exercise. The
14 rights under subsections (a) and (b) are cumulative and may
15 be exercised simultaneously.
16 (d) Rights of debtor and obligor. Except as otherwise
17 provided in subsection (g) and Section 9-605, after default,
18 a debtor and an obligor have the rights provided in this Part
19 and by agreement of the parties.
20 (e) Lien of levy after judgment. If a secured party has
21 reduced its claim to judgment, the lien of any levy that may
22 be made upon the collateral by virtue of a judgment relates
23 back to the earliest of:
24 (1) the date of perfection of the security interest
25 or agricultural lien in the collateral;
26 (2) the date of filing a financing statement
27 covering the collateral; or
28 (3) any date specified in a statute under which the
29 agricultural lien was created.
30 (f) Execution sale. A sale pursuant to a judgment is a
31 foreclosure of the security interest or agricultural lien by
32 judicial procedure within the meaning of this Section. A
33 secured party may purchase at the sale and thereafter hold
34 the collateral free of any other requirements of this
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1 Article.
2 (g) Consignor or buyer of certain rights to payment.
3 Except as otherwise provided in Section 9-607(c), this Part
4 imposes no duties upon a secured party that is a consignor or
5 is a buyer of accounts, chattel paper, payment intangibles,
6 or promissory notes.
7 (810 ILCS 5/9-602 new)
8 Sec. 9-602. Waiver and variance of rights and duties.
9 Except as otherwise provided in Section 9-624, to the extent
10 that they give rights to a debtor or obligor and impose
11 duties on a secured party, the debtor or obligor may not
12 waive or vary the rules stated in the following listed
13 Sections:
14 (1) Section 9-207(b)(4)(C), which deals with use
15 and operation of the collateral by the secured party;
16 (2) Section 9-210, which deals with requests for an
17 accounting and requests concerning a list of collateral
18 and statement of account;
19 (3) Section 9-607(c), which deals with collection
20 and enforcement of collateral;
21 (4) Sections 9-608(a) and 9-615(c) to the extent
22 that they deal with application or payment of noncash
23 proceeds of collection, enforcement, or disposition;
24 (5) Sections 9-608(a) and 9-615(d) to the extent
25 that they require accounting for or payment of surplus
26 proceeds of collateral;
27 (6) Section 9-609 to the extent that it imposes
28 upon a secured party that takes possession of collateral
29 without judicial process the duty to do so without breach
30 of the peace;
31 (7) Sections 9-610(b), 9-611, 9-613, and 9-614,
32 which deal with disposition of collateral;
33 (8) Section 9-615(f), which deals with calculation
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1 of a deficiency or surplus when a disposition is made to
2 the secured party, a person related to the secured party,
3 or a secondary obligor;
4 (9) Section 9-616, which deals with explanation of
5 the calculation of a surplus or deficiency;
6 (10) Sections 9-620, 9-621, and 9-622, which deal
7 with acceptance of collateral in satisfaction of
8 obligation;
9 (11) Section 9-623, which deals with redemption of
10 collateral;
11 (12) Section 9-624, which deals with permissible
12 waivers; and
13 (13) Sections 9-625 and 9-626, which deal with the
14 secured party's liability for failure to comply with this
15 Article.
16 (810 ILCS 5/9-603 new)
17 Sec. 9-603. Agreement on standards concerning rights and
18 duties.
19 (a) Agreed standards. The parties may determine by
20 agreement the standards measuring the fulfillment of the
21 rights of a debtor or obligor and the duties of a secured
22 party under a rule stated in Section 9-602 if the standards
23 are not manifestly unreasonable.
24 (b) Agreed standards inapplicable to breach of peace.
25 Subsection (a) does not apply to the duty under Section 9-609
26 to refrain from breaching the peace.
27 (810 ILCS 5/9-604 new)
28 Sec. 9-604. Procedure if security agreement covers real
29 property or fixtures.
30 (a) Enforcement: personal and real property. If a
31 security agreement covers both personal and real property, a
32 secured party may proceed:
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1 (1) under this Part as to the personal property
2 without prejudicing any rights with respect to the real
3 property; or
4 (2) as to both the personal property and the real
5 property in accordance with the rights with respect to
6 the real property, in which case the other provisions of
7 this Part do not apply.
8 (b) Enforcement: fixtures. Subject to subsection (c),
9 if a security agreement covers goods that are or become
10 fixtures, a secured party may proceed:
11 (1) under this Part; or
12 (2) in accordance with the rights with respect to
13 real property, in which case the other provisions of this
14 Part do not apply.
15 (c) Removal of fixtures. Subject to the other
16 provisions of this Part, if a secured party holding a
17 security interest in fixtures has priority over all owners
18 and encumbrancers of the real property, the secured party,
19 after default, may remove the collateral from the real
20 property.
21 (d) Injury caused by removal. A secured party that
22 removes collateral shall promptly reimburse any encumbrancer
23 or owner of the real property, other than the debtor, for the
24 cost of repair of any physical injury caused by the removal.
25 The secured party need not reimburse the encumbrancer or
26 owner for any diminution in value of the real property caused
27 by the absence of the goods removed or by any necessity of
28 replacing them. A person entitled to reimbursement may
29 refuse permission to remove until the secured party gives
30 adequate assurance for the performance of the obligation to
31 reimburse.
32 (810 ILCS 5/9-605 new)
33 Sec. 9-605. Unknown debtor or secondary obligor. A
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1 secured party does not owe a duty based on its status as
2 secured party:
3 (1) to a person that is a debtor or obligor, unless
4 the secured party knows:
5 (A) that the person is a debtor or obligor;
6 (B) the identity of the person; and
7 (C) how to communicate with the person; or
8 (2) to a secured party or lienholder that has filed
9 a financing statement against a person, unless the
10 secured party knows:
11 (A) that the person is a debtor; and
12 (B) the identity of the person.
13 (810 ILCS 5/9-606 new)
14 Sec. 9-606. Time of default for agricultural lien. For
15 purposes of this Part, a default occurs in connection with an
16 agricultural lien at the time the secured party becomes
17 entitled to enforce the lien in accordance with the statute
18 under which it was created.
19 (810 ILCS 5/9-607 new)
20 Sec. 9-607. Collection and enforcement by secured party.
21 (a) Collection and enforcement generally. If so agreed,
22 and in any event after default, a secured party:
23 (1) may notify an account debtor or other person
24 obligated on collateral to make payment or otherwise
25 render performance to or for the benefit of the secured
26 party;
27 (2) may take any proceeds to which the secured
28 party is entitled under Section 9-315;
29 (3) may enforce the obligations of an account
30 debtor or other person obligated on collateral and
31 exercise the rights of the debtor with respect to the
32 obligation of the account debtor or other person
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1 obligated on collateral to make payment or otherwise
2 render performance to the debtor, and with respect to any
3 property that secures the obligations of the account
4 debtor or other person obligated on the collateral;
5 (4) if it holds a security interest in a deposit
6 account perfected by control under Section 9-104(a)(1),
7 may apply the balance of the deposit account to the
8 obligation secured by the deposit account; and
9 (5) if it holds a security interest in a deposit
10 account perfected by control under Section 9-104(a)(2) or
11 (3), may instruct the bank to pay the balance of the
12 deposit account to or for the benefit of the secured
13 party.
14 (b) Nonjudicial enforcement of mortgage. If necessary
15 to enable a secured party to exercise under subsection (a)(3)
16 the right of a debtor to enforce a mortgage nonjudicially,
17 the secured party may record in the office in which a record
18 of the mortgage is recorded:
19 (1) a copy of the security agreement that creates
20 or provides for a security interest in the obligation
21 secured by the mortgage; and
22 (2) the secured party's sworn affidavit in
23 recordable form stating that:
24 (A) a default has occurred; and
25 (B) the secured party is entitled to enforce
26 the mortgage nonjudicially.
27 (c) Commercially reasonable collection and enforcement.
28 A secured party shall proceed in a commercially reasonable
29 manner if the secured party:
30 (1) undertakes to collect from or enforce an
31 obligation of an account debtor or other person obligated
32 on collateral; and
33 (2) is entitled to charge back uncollected
34 collateral or otherwise to full or limited recourse
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1 against the debtor or a secondary obligor.
2 (d) Expenses of collection and enforcement. A secured
3 party may deduct from the collections made pursuant to
4 subsection (c) reasonable expenses of collection and
5 enforcement, including reasonable attorney's fees and legal
6 expenses incurred by the secured party.
7 (e) Duties to secured party not affected. This Section
8 does not determine whether an account debtor, bank, or other
9 person obligated on collateral owes a duty to a secured
10 party.
11 (810 ILCS 5/9-608 new)
12 Sec. 9-608. Application of proceeds of collection or
13 enforcement; liability for deficiency and right to surplus.
14 (a) Application of proceeds, surplus, and deficiency if
15 obligation secured. If a security interest or agricultural
16 lien secures payment or performance of an obligation, the
17 following rules apply:
18 (1) A secured party shall apply or pay over for
19 application the cash proceeds of collection or
20 enforcement under Section 9-607 in the following order
21 to:
22 (A) the reasonable expenses of collection and
23 enforcement and, to the extent provided for by
24 agreement and not prohibited by law, reasonable
25 attorney's fees and legal expenses incurred by the
26 secured party;
27 (B) the satisfaction of obligations secured by
28 the security interest or agricultural lien under
29 which the collection or enforcement is made; and
30 (C) the satisfaction of obligations secured by
31 any subordinate security interest in or other lien
32 on the collateral subject to the security interest
33 or agricultural lien under which the collection or
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1 enforcement is made if the secured party receives an
2 authenticated demand for proceeds before
3 distribution of the proceeds is completed.
4 (2) If requested by a secured party, a holder of a
5 subordinate security interest or other lien shall furnish
6 reasonable proof of the interest or lien within a
7 reasonable time. Unless the holder complies, the secured
8 party need not comply with the holder's demand under
9 paragraph (1)(C).
10 (3) A secured party need not apply or pay over for
11 application noncash proceeds of collection and
12 enforcement under Section 9-607 unless the failure to do
13 so would be commercially unreasonable. A secured party
14 that applies or pays over for application noncash
15 proceeds shall do so in a commercially reasonable manner.
16 (4) A secured party shall account to and pay a
17 debtor for any surplus, and the obligor is liable for any
18 deficiency.
19 (b) No surplus or deficiency in sales of certain rights
20 to payment. If the underlying transaction is a sale of
21 accounts, chattel paper, payment intangibles, or promissory
22 notes, the debtor is not entitled to any surplus, and the
23 obligor is not liable for any deficiency.
24 (810 ILCS 5/9-609 new)
25 Sec. 9-609. Secured party's right to take possession
26 after default.
27 (a) Possession; rendering equipment unusable;
28 disposition on debtor's premises. After default, a secured
29 party:
30 (1) may take possession of the collateral; and
31 (2) without removal, may render equipment unusable
32 and dispose of collateral on a debtor's premises under
33 Section 9-610.
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1 (b) Judicial and nonjudicial process. A secured party
2 may proceed under subsection (a):
3 (1) pursuant to judicial process; or
4 (2) without judicial process, if it proceeds
5 without breach of the peace.
6 (c) Assembly of collateral. If so agreed, and in any
7 event after default, a secured party may require the debtor
8 to assemble the collateral and make it available to the
9 secured party at a place to be designated by the secured
10 party which is reasonably convenient to both parties.
11 (810 ILCS 5/9-610 new)
12 Sec. 9-610. Disposition of collateral after default.
13 (a) Disposition after default. After default, a secured
14 party may sell, lease, license, or otherwise dispose of any
15 or all of the collateral in its present condition or
16 following any commercially reasonable preparation or
17 processing.
18 (b) Commercially reasonable disposition. Every aspect
19 of a disposition of collateral, including the method, manner,
20 time, place, and other terms, must be commercially
21 reasonable. If commercially reasonable, a secured party may
22 dispose of collateral by public or private proceedings, by
23 one or more contracts, as a unit or in parcels, and at any
24 time and place and on any terms.
25 (c) Purchase by secured party. A secured party may
26 purchase collateral:
27 (1) at a public disposition; or
28 (2) at a private disposition only if the collateral
29 is of a kind that is customarily sold on a recognized
30 market or the subject of widely distributed standard
31 price quotations.
32 (d) Warranties on disposition. A contract for sale,
33 lease, license, or other disposition includes the warranties
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1 relating to title, possession, quiet enjoyment, and the like
2 which by operation of law accompany a voluntary disposition
3 of property of the kind subject to the contract.
4 (e) Disclaimer of warranties. A secured party may
5 disclaim or modify warranties under subsection (d):
6 (1) in a manner that would be effective to disclaim
7 or modify the warranties in a voluntary disposition of
8 property of the kind subject to the contract of
9 disposition; or
10 (2) by communicating to the purchaser a record
11 evidencing the contract for disposition and including an
12 express disclaimer or modification of the warranties.
13 (f) Record sufficient to disclaim warranties. A record
14 is sufficient to disclaim warranties under subsection (e) if
15 it indicates "There is no warranty relating to title,
16 possession, quiet enjoyment, or the like in this disposition"
17 or uses words of similar import.
18 (810 ILCS 5/9-611 new)
19 Sec. 9-611. Notification before disposition of
20 collateral.
21 (a) "Notification date." In this Section, "notification
22 date" means the earlier of the date on which:
23 (1) a secured party sends to the debtor and any
24 secondary obligor an authenticated notification of
25 disposition; or
26 (2) the debtor and any secondary obligor waive the
27 right to notification.
28 (b) Notification of disposition required. Except as
29 otherwise provided in subsection (d), a secured party that
30 disposes of collateral under Section 9-610 shall send to the
31 persons specified in subsection (c) a reasonable
32 authenticated notification of disposition.
33 (c) Persons to be notified. To comply with subsection
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1 (b), the secured party shall send an authenticated
2 notification of disposition to:
3 (1) the debtor;
4 (2) any secondary obligor; and
5 (3) if the collateral is other than consumer goods:
6 (A) any other person from which the secured
7 party has received, before the notification date, an
8 authenticated notification of a claim of an interest
9 in the collateral;
10 (B) any other secured party or lienholder
11 that, 10 days before the notification date, held a
12 security interest in or other lien on the collateral
13 perfected by the filing of a financing statement
14 that:
15 (i) identified the collateral;
16 (ii) was indexed under the debtor's name
17 as of that date; and
18 (iii) was filed in the office in which to
19 file a financing statement against the debtor
20 covering the collateral as of that date; and
21 (C) any other secured party that, 10 days
22 before the notification date, held a security
23 interest in the collateral perfected by compliance
24 with a statute, regulation, or treaty described in
25 Section 9-311(a).
26 (d) Subsection (b) inapplicable: perishable collateral;
27 recognized market. Subsection (b) does not apply if the
28 collateral is perishable or threatens to decline speedily in
29 value or is of a type customarily sold on a recognized
30 market.
31 (e) Compliance with subsection (c)(3)(B). A secured
32 party complies with the requirement for notification
33 prescribed by subsection (c)(3)(B) if:
34 (1) not later than 20 days or earlier than 30 days
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1 before the notification date, the secured party requests,
2 in a commercially reasonable manner, information
3 concerning financing statements indexed under the
4 debtor's name in the office indicated in subsection
5 (c)(3)(B); and
6 (2) before the notification date, the secured
7 party:
8 (A) did not receive a response to the request
9 for information; or
10 (B) received a response to the request for
11 information and sent an authenticated notification
12 of disposition to each secured party or other
13 lienholder named in that response whose financing
14 statement covered the collateral.
15 (810 ILCS 5/9-612 new)
16 Sec. 9-612. Timeliness of notification before
17 disposition of collateral.
18 (a) Reasonable time is question of fact. Except as
19 otherwise provided in subsection (b), whether a notification
20 is sent within a reasonable time is a question of fact. The
21 limitation of the rule in subsection (b) to transactions
22 other than consumer-goods transactions is intended to leave
23 to the court the determination of the proper rules in
24 consumer-goods transactions. The court may not infer from
25 that limitation the nature of the proper rule in
26 consumer-goods transactions and may continue to apply
27 established approaches.
28 (b) 10-day period sufficient in non-consumer
29 transaction. In a transaction other than a consumer
30 transaction, a notification of disposition sent after default
31 and 10 days or more before the earliest time of disposition
32 set forth in the notification is sent within a reasonable
33 time before the disposition.
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1 (810 ILCS 5/9-613 new)
2 Sec. 9-613. Contents and form of notification before
3 disposition of collateral: general. Except in a
4 consumer-goods transaction, the following rules apply:
5 (1) The contents of a notification of disposition
6 are sufficient if the notification:
7 (A) describes the debtor and the secured
8 party;
9 (B) describes the collateral that is the
10 subject of the intended disposition;
11 (C) states the method of intended disposition;
12 (D) states that the debtor is entitled to an
13 accounting of the unpaid indebtedness and states the
14 charge, if any, for an accounting; and
15 (E) states the time and place of a public
16 disposition or the time after which any other
17 disposition is to be made.
18 (2) Whether the contents of a notification that
19 lacks any of the information specified in paragraph (1)
20 are nevertheless sufficient is a question of fact.
21 (3) The contents of a notification providing
22 substantially the information specified in paragraph (1)
23 are sufficient, even if the notification is accompanied
24 by or combined other notification or includes:
25 (A) information not specified by that
26 paragraph; or
27 (B) minor errors that are not seriously
28 misleading.
29 (4) A particular phrasing of the notification is
30 not required.
31 (5) The following form of notification and the form
32 appearing in Section 9-614(4), when completed, each
33 provides sufficient information:
34 NOTIFICATION OF DISPOSITION OF COLLATERAL
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1 To: ..................................... (Name of
2 debtor, obligor, or other person to which the
3 notification is sent)
4 From: ................................... (Name,
5 address, and telephone number of secured party)
6 Name of Debtor(s): ..................... (Include
7 only if debtor(s) are not an addressee)
8 For a public disposition:
9 We will sell or lease or license, as applicable, the
10 ............................ (describe collateral) to the
11 highest qualified bidder in public as follows:
12 Day and Date: ...................................
13 Time: ...........................................
14 Place: ..........................................
15 For a private disposition:
16 We will sell (or lease or license, as applicable)
17 the ........................... (describe collateral)
18 privately sometime after ................ (day and date).
19 You are entitled to an accounting of the unpaid
20 indebtedness secured by the property that we intend to
21 sell or lease or license, as applicable for a charge of
22 $................. You may request an accounting by
23 calling us at .................. (telephone number).
24 (810 ILCS 5/9-614 new)
25 Sec. 9-614. Contents and form of notification before
26 disposition of collateral: consumer-goods transaction. In a
27 consumer-goods transaction, the following rules apply:
28 (1) A notification of disposition must provide the
29 following information:
30 (A) the information specified in Section
31 9-613(1);
32 (B) a description of any liability for a
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1 deficiency of the person to which the notification
2 is sent;
3 (C) a telephone number from which the amount
4 that must be paid to the secured party to redeem the
5 collateral under Section 9-623 is available; and
6 (D) a telephone number or mailing address from
7 which additional information concerning the
8 disposition and the obligation secured is available.
9 (2) A particular phrasing of the notification is
10 not required.
11 (3) The contents of a notification providing
12 substantially the information specified in paragraph (1)
13 are sufficient, even if the notification:
14 (A) is accompanied by or combined with other
15 notifications;
16 (B) includes information not specified by that
17 paragraph; or
18 (C) includes minor errors that are not
19 seriously misleading.
20 (4) The following form of notification, when
21 completed, provides sufficient information:
22 ............. (Name and address of secured party)
23 ............. (Date)
24 NOTICE OF OUR PLAN TO SELL PROPERTY
25 ......................................................
26 (Name and address of any obligor who is also a debtor)
27 Subject: ..................................
28 (Identification of Transaction)
29 We have your ..................... (describe
30 collateral), because you broke promises in our agreement.
31 For a public disposition:
32 We will sell ....................... (describe
33 collateral) at public sale. A sale could include a lease
34 or license. The sale will be held as follows:
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1 Date: ................................
2 Time: ................................
3 Place: ................................
4 You may attend the sale and bring bidders if you
5 want.
6 For a private disposition:
7 We will sell ........................... (describe
8 collateral) at private sale sometime after
9 .................... (date). A sale could include a
10 lease or license.
11 The money that we get from the sale (after paying
12 our costs) will reduce the amount you owe. If we get
13 less money than you owe, you ............ (will or will
14 not, as applicable) still owe us the difference. If we
15 get more money than you owe, you will get the extra
16 money, unless we must pay it to someone else.
17 You can get the property back at any time before we
18 sell it by paying us the full amount you owe (not just
19 the past due payments), including our expenses. To learn
20 the exact amount you must pay, call us at
21 ................ (telephone number).
22 If you want us to explain to you in writing how we
23 have figured the amount that you owe us, you may call us
24 at .................. (telephone number) or write us at
25 .................................... (secured party's
26 address) and request a written explanation. We will
27 charge you $ ........... for the explanation if we sent
28 you another written explanation of the amount you owe us
29 within the last six months.
30 If you need more information about the sale call us
31 at .................. (telephone number) or write us at
32 ......................... (secured party's address).
33 We are sending this notice to the following other
34 people who have an interest ......................
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1 (describe collateral) or who owe money under your
2 agreement:
3 .................................................
4 (Names of all other debtors and obligors, if any)
5 (5) A notification in the form of paragraph (4) is
6 sufficient, even if it includes errors in information not
7 required by paragraph (1).
8 (6) If a notification under this Section is not in
9 the form of paragraph (4), law other than this Article
10 determines the effect of including information not
11 required by paragraph (1).
12 (810 ILCS 5/9-615 new)
13 Sec. 9-615. Application of proceeds of disposition;
14 liability for deficiency and right to surplus.
15 (a) Application of proceeds. A secured party shall
16 apply or pay over for application the cash proceeds of
17 disposition in the following order to:
18 (1) the reasonable expenses of retaking, holding,
19 preparing for disposition, processing, and disposing,
20 and, to the extent provided for by agreement and not
21 prohibited by law, reasonable attorney's fees and legal
22 expenses incurred by the secured party;
23 (2) the satisfaction of obligations secured by the
24 security interest or agricultural lien under which the
25 disposition is made;
26 (3) the satisfaction of obligations secured by any
27 subordinate security interest in or other subordinate
28 lien on the collateral if:
29 (A) the secured party receives from the holder
30 of the subordinate security interest or other lien
31 an authenticated demand for proceeds before
32 distribution of the proceeds is completed; and
33 (B) in a case in which a consignor has an
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1 interest in the collateral, the subordinate security
2 interest or other lien is senior to the interest of
3 the consignor; and
4 (4) a secured party that is a consignor of the
5 collateral if the secured party receives from the
6 consignor an authenticated demand for proceeds before
7 distribution of the proceeds is completed.
8 (b) Proof of subordinate interest. If requested by a
9 secured party, a holder of a subordinate security interest or
10 other lien shall furnish reasonable proof of the interest or
11 lien within a reasonable time. Unless the holder does so,
12 the secured party need not comply with the holder's demand
13 under subsection (a)(3).
14 (c) Application of noncash proceeds. A secured party
15 need not apply or pay over for application noncash proceeds
16 of disposition under this Section unless the failure to do so
17 would be commercially unreasonable. A secured party that
18 applies or pays over for application noncash proceeds shall
19 do so in a commercially reasonable manner.
20 (d) Surplus or deficiency if obligation secured. If the
21 security interest under which a disposition is made secures
22 payment or performance of an obligation, after making the
23 payments and applications required by subsection (a) and
24 permitted by subsection (c):
25 (1) unless subsection (a)(4) requires the secured
26 party to apply or pay over cash proceeds to a consignor,
27 the secured party shall account to and pay a debtor for
28 any surplus; and
29 (2) the obligor is liable for any deficiency.
30 (e) No surplus or deficiency in sales of certain rights
31 to payment. If the underlying transaction is a sale of
32 accounts, chattel paper, payment intangibles, or promissory
33 notes:
34 (1) the debtor is not entitled to any surplus; and
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1 (2) the obligor is not liable for any deficiency.
2 (f) Calculation of surplus or deficiency in disposition
3 to person related to secured party. The surplus or
4 deficiency following a disposition is calculated based on the
5 amount of proceeds that would have been realized in a
6 disposition complying with this Part and described in
7 subsection (f)(2) of this Section to a transferee other than
8 the secured party, a person related to the secured party, or
9 a secondary obligor if:
10 (1) the transferee in the disposition is the
11 secured party, a person related to the secured party, or
12 a secondary obligor; and
13 (2) the amount of proceeds of the disposition is
14 significantly below the range of proceeds that would have
15 been received from a complying disposition by a forced
16 sale without reserve to a willing buyer other than the
17 secured party, a person related to the secured party, or
18 a secondary obligor.
19 (g) Cash proceeds received by junior secured party. A
20 secured party that receives cash proceeds of a disposition in
21 good faith and without knowledge that the receipt violates
22 the rights of the holder of a security interest or other lien
23 that is not subordinate to the security interest or
24 agricultural lien under which the disposition is made:
25 (1) takes the cash proceeds free of the security
26 interest or other lien;
27 (2) is not obligated to apply the proceeds of the
28 disposition to the satisfaction of obligations secured by
29 the security interest or other lien; and
30 (3) is not obligated to account to or pay the
31 holder of the security interest or other lien for any
32 surplus.
33 (810 ILCS 5/9-616 new)
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1 Sec. 9-616. Explanation of calculation of surplus or
2 deficiency.
3 (a) Definitions. In this Section:
4 (1) "Explanation" means a writing that:
5 (A) states whether a surplus or deficiency is
6 owed and the amount of the surplus, if applicable;
7 (B) states, if applicable, that future debits,
8 credits, charges, including additional credit
9 service charges or interest, rebates, and expenses
10 may affect the amount of the surplus or deficiency;
11 (C) provides a telephone number or mailing
12 address from which the debtor or consumer obligor
13 may obtain additional information concerning the
14 transaction and from which such person may request
15 the amount of the deficiency and further information
16 regarding how the secured party calculated the
17 surplus or deficiency; and
18 (D) at the sender's option, the information
19 set forth in subsection (c).
20 (2) "Request" means a record:
21 (A) authenticated by a debtor or consumer
22 obligor;
23 (B) requesting that the recipient provide
24 information of how it calculated the surplus or
25 deficiency; and
26 (C) sent after disposition of the collateral
27 under Section 9-610.
28 (b) Explanation of calculation. In a consumer-goods
29 transaction in which the debtor is entitled to a surplus or a
30 consumer obligor is liable for a deficiency under Section
31 9-615, the secured party shall:
32 (1) send an explanation to the debtor or consumer
33 obligor, as applicable, after the disposition and:
34 (A) before or when the secured party accounts
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1 to the debtor and pays any surplus or first makes
2 written demand on the consumer obligor after the
3 disposition for payment of the deficiency, other
4 than in instances in which such demand is made by a
5 third-party debt collector covered by the Fair Debt
6 Collection Practices Act; and
7 (B) within 14 days after receipt of a request
8 made by the debtor or consumer obligor within one
9 year after the secured party has given an
10 explanation under this Section or notice to such
11 debtor or consumer obligor under Section 9-614 of
12 this Article; or
13 (2) in the case of a consumer obligor who is liable
14 for a deficiency, within 14 days after receipt of a
15 request, send to the consumer obligor a record waiving
16 the secured party's right to a deficiency.
17 (c) Required information for response to request. To
18 comply with a request, the secured party must provide a
19 response in writing which includes the following information:
20 (1) the aggregate amount of obligations secured by
21 the security interest under which the disposition was
22 made, and, if the amount reflects a rebate of unearned
23 interest or credit service charge, an indication of that
24 fact, calculated as of a specified date:
25 (A) if the secured party takes or receives
26 possession of the collateral after default, not more
27 than 35 days before the secured party takes or
28 receives possession; or
29 (B) if the secured party takes or receives
30 possession of the collateral before default or does
31 not take possession of the collateral, not more than
32 35 days before the disposition;
33 (2) the amount of proceeds of the disposition;
34 (3) the aggregate amount of the obligations after
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1 deducting the amount of proceeds;
2 (4) the amount, in the aggregate or by type, and
3 types of expenses, including expenses of retaking,
4 holding, preparing for disposition, processing, and
5 disposing of the collateral, and attorney's fees secured
6 by the collateral which are known to the secured party
7 and relate to the current disposition;
8 (5) the amount, in the aggregate or by type, and
9 types of credits, including rebates of interest or credit
10 service charges, to which the obligor is known to be
11 entitled and which are not reflected in the amount in
12 paragraph (1); and
13 (6) the amount of the surplus or deficiency.
14 (d) Substantial compliance. A particular phrasing of
15 the explanation or response to a request is not required. An
16 explanation or a response to a request complying
17 substantially with the requirements of this Section is
18 sufficient even if it is:
19 (1) accompanied by or combined with other
20 notifications;
21 (2) includes information not specified by this
22 Section;
23 (3) includes minor errors that are not seriously
24 misleading; or
25 (4) includes errors in information not required by
26 this Section.
27 (e) Charges for responses. A debtor or consumer obligor
28 is entitled without charge to one response to a request under
29 this Section during any six-month period in which the secured
30 party did not send to the debtor or consumer obligor an
31 explanation pursuant to subsection (b)(1). The secured party
32 may require payment of a charge not exceeding $25 for each
33 additional response.
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1 (810 ILCS 5/9-617 new)
2 Sec. 9-617. Rights of transferee of collateral.
3 (a) Effects of disposition. A secured party's
4 disposition of collateral after default:
5 (1) transfers to a transferee for value all of the
6 debtor's rights in the collateral;
7 (2) discharges the security interest under which
8 the disposition is made; and
9 (3) discharges any subordinate security interest or
10 other subordinate lien.
11 (b) Rights of good-faith transferee. A transferee that
12 acts in good faith takes free of the rights and interests
13 described in subsection (a), even if the secured party fails
14 to comply with this Article or the requirements of any
15 judicial proceeding.
16 (c) Rights of other transferee. If a transferee does
17 not take free of the rights and interests described in
18 subsection (a), the transferee takes the collateral subject
19 to:
20 (1) the debtor's rights in the collateral;
21 (2) the security interest or agricultural lien
22 under which the disposition is made; and
23 (3) any other security interest or other lien.
24 (810 ILCS 5/9-618 new)
25 Sec. 9-618. Rights and duties of certain secondary
26 obligors.
27 (a) Rights and duties of secondary obligor. A secondary
28 obligor acquires the rights and becomes obligated to perform
29 the duties of the secured party after the secondary obligor:
30 (1) receives an assignment of a secured obligation
31 from the secured party;
32 (2) receives a transfer of collateral from the
33 secured party and agrees to accept the rights and assume
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1 the duties of the secured party; or
2 (3) is subrogated to the rights of a secured party
3 with respect to collateral.
4 (b) Effect of assignment, transfer, or subrogation. An
5 assignment, transfer, or subrogation described in subsection
6 (a):
7 (1) is not a disposition of collateral under
8 Section 9-610; and
9 (2) relieves the secured party of further duties
10 under this Article.
11 (810 ILCS 5/9-619 new)
12 Sec. 9-619. Transfer of record or legal title.
13 (a) "Transfer statement." In this Section, "transfer
14 statement" means a record authenticated by a secured party
15 stating:
16 (1) that the debtor has defaulted in connection
17 with an obligation secured by specified collateral;
18 (2) that the secured party has exercised its
19 post-default remedies with respect to the collateral;
20 (3) that, by reason of the exercise, a transferee
21 has acquired the rights of the debtor in the collateral;
22 and
23 (4) the name and mailing address of the secured
24 party, debtor, and transferee.
25 (b) Effect of transfer statement. A transfer statement
26 entitles the transferee to the transfer of record of all
27 rights of the debtor in the collateral specified in the
28 statement in any official filing, recording, registration, or
29 certificate-of-title system covering the collateral. If a
30 transfer statement is presented with the applicable fee and
31 request form to the official or office responsible for
32 maintaining the system, the official or office shall:
33 (1) accept the transfer statement;
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1 (2) promptly amend its records to reflect the
2 transfer; and
3 (3) if applicable, issue a new appropriate
4 certificate of title in the name of the transferee.
5 (c) Transfer not a disposition; no relief of secured
6 party's duties. A transfer of the record or legal title to
7 collateral to a secured party under subsection (b) or
8 otherwise is not of itself a disposition of collateral under
9 this Article and does not of itself relieve the secured party
10 of its duties under this Article.
11 (810 ILCS 5/9-620 new)
12 Sec. 9-620. Acceptance of collateral in full or partial
13 satisfaction of obligation; compulsory disposition of
14 collateral.
15 (a) Conditions to acceptance in satisfaction. Except as
16 otherwise provided in subsection (g), a secured party may
17 accept collateral in full or partial satisfaction of the
18 obligation it secures only if:
19 (1) the debtor consents to the acceptance under
20 subsection (c);
21 (2) the secured party does not receive, within the
22 time set forth in subsection (d), a notification of
23 objection to the proposal authenticated by:
24 (A) a person to which the secured party was
25 required to send a proposal under Section 9-621; or
26 (B) any other person, other than the debtor,
27 holding an interest in the collateral subordinate to
28 the security interest that is the subject of the
29 proposal;
30 (3) if the collateral is consumer goods, the
31 collateral is not in the possession of the debtor when
32 the debtor consents to the acceptance; and
33 (4) subsection (e) does not require the secured
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1 party to dispose of the collateral or the debtor waives
2 the requirement pursuant to Section 9-624.
3 (b) Purported acceptance ineffective. A purported or
4 apparent acceptance of collateral under this Section is
5 ineffective unless:
6 (1) the secured party consents to the acceptance in
7 an authenticated record or sends a proposal to the
8 debtor; and
9 (2) the conditions of subsection (a) are met.
10 (c) Debtor's consent. For purposes of this Section:
11 (1) a debtor consents to an acceptance of
12 collateral in partial satisfaction of the obligation it
13 secures only if the debtor agrees to the terms of the
14 acceptance in a record authenticated after default; and
15 (2) a debtor consents to an acceptance of
16 collateral in full satisfaction of the obligation it
17 secures only if the debtor agrees to the terms of the
18 acceptance in a record authenticated after default or the
19 secured party:
20 (A) sends to the debtor after default a
21 proposal that is unconditional or subject only to a
22 condition that collateral not in the possession of
23 the secured party be preserved or maintained;
24 (B) in the proposal, proposes to accept
25 collateral in full satisfaction of the obligation it
26 secures; and
27 (C) does not receive a notification of
28 objection authenticated by the debtor within 20 days
29 after the proposal is sent.
30 (d) Effectiveness of notification. To be effective
31 under subsection (a)(2), a notification of objection must be
32 received by the secured party:
33 (1) in the case of a person to which the proposal
34 was sent pursuant to Section 9-621, within 20 days after
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1 notification was sent to that person; and
2 (2) in other cases:
3 (A) within 20 days after the last notification
4 was sent pursuant to Section 9-621; or
5 (B) if a notification was not sent, before the
6 debtor consents to the acceptance under subsection
7 (c).
8 (e) Mandatory disposition of consumer goods. A secured
9 party that has taken possession of collateral shall dispose
10 of the collateral pursuant to Section 9-610 within the time
11 specified in subsection (f) if:
12 (1) 60 percent of the cash price has been paid in
13 the case of a purchase-money security interest in
14 consumer goods; or
15 (2) 60 percent of the principal amount of the
16 obligation secured has been paid in the case of a
17 non-purchase-money security interest in consumer goods.
18 (f) Compliance with mandatory disposition requirement.
19 To comply with subsection (e), the secured party shall
20 dispose of the collateral:
21 (1) within 90 days after taking possession; or
22 (2) within any longer period to which the debtor
23 and all secondary obligors have agreed in an agreement to
24 that effect entered into and authenticated after default.
25 (g) No partial satisfaction in consumer transaction. In
26 a consumer transaction, a secured party may not accept
27 collateral in partial satisfaction of the obligation it
28 secures.
29 (810 ILCS 5/9-621 new)
30 Sec. 9-621. Notification of proposal to accept
31 collateral.
32 (a) Persons to which proposal to be sent. A secured
33 party that desires to accept collateral in full or partial
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1 satisfaction of the obligation it secures shall send its
2 proposal to:
3 (1) any person from which the secured party has
4 received, before the debtor consented to the acceptance,
5 an authenticated notification of a claim of an interest
6 in the collateral;
7 (2) any other secured party or lienholder that, 10
8 days before the debtor consented to the acceptance, held
9 a security interest in or other lien on the collateral
10 perfected by the filing of a financing statement that:
11 (A) identified the collateral;
12 (B) was indexed under the debtor's name as of
13 that date; and
14 (C) was filed in the office or offices in
15 which to file a financing statement against the
16 debtor covering the collateral as of that date; and
17 (3) any other secured party that, 10 days before
18 the debtor consented to the acceptance, held a security
19 interest in the collateral perfected by compliance with a
20 statute, regulation, or treaty described in Section
21 9-311(a).
22 (b) Proposal to be sent to secondary obligor in partial
23 satisfaction. A secured party that desires to accept
24 collateral in partial satisfaction of the obligation it
25 secures shall send its proposal to any secondary obligor in
26 addition to the persons described in subsection (a).
27 (810 ILCS 5/9-622 new)
28 Sec. 9-622. Effect of acceptance of collateral.
29 (a) Effect of acceptance. A secured party's acceptance
30 of collateral in full or partial satisfaction of the
31 obligation it secures:
32 (1) discharges the obligation to the extent
33 consented to by the debtor;
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1 (2) transfers to the secured party all of a
2 debtor's rights in the collateral;
3 (3) discharges the security interest or
4 agricultural lien that is the subject of the debtor's
5 consent and any subordinate security interest or other
6 subordinate lien; and
7 (4) terminates any other subordinate interest.
8 (b) Discharge of subordinate interest notwithstanding
9 noncompliance. A subordinate interest is discharged or
10 terminated under subsection (a), even if the secured party
11 fails to comply with this Article.
12 (810 ILCS 5/9-623 new)
13 Sec. 9-623. Right to redeem collateral.
14 (a) Persons that may redeem. A debtor, any secondary
15 obligor, or any other secured party or lienholder may redeem
16 collateral.
17 (b) Requirements for redemption. To redeem collateral,
18 a person shall tender:
19 (1) fulfillment of all obligations secured by the
20 collateral; and
21 (2) the reasonable expenses and attorney's fees
22 described in Section 9-615(a)(1).
23 (c) When redemption may occur. A redemption may occur
24 at any time before a secured party:
25 (1) has collected collateral under Section 9-607;
26 (2) has disposed of collateral or entered into a
27 contract for its disposition under Section 9-610; or
28 (3) has accepted collateral in full or partial
29 satisfaction of the obligation it secures under Section
30 9-622.
31 (810 ILCS 5/9-624 new)
32 Sec. 9-624. Waiver.
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1 (a) Waiver of disposition notification. A debtor or
2 secondary obligor may waive the right to notification of
3 disposition of collateral under Section 9-611 only by an
4 agreement to that effect entered into and authenticated after
5 default.
6 (b) Waiver of mandatory disposition. A debtor may waive
7 the right to require disposition of collateral under Section
8 9-620(e) only by an agreement to that effect entered into and
9 authenticated after default.
10 (c) Waiver of redemption right. A debtor or secondary
11 obligor may waive the right to redeem collateral under
12 Section 9-623 only by an agreement to that effect entered
13 into and authenticated after default.
14 (810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new)
15 SUBPART 2. NONCOMPLIANCE WITH ARTICLE
16 (810 ILCS 5/9-625 new)
17 Sec. 9-625. Remedies for secured party's failure to
18 comply with Article.
19 (a) Judicial orders concerning noncompliance. If it is
20 established that a secured party is not proceeding in
21 accordance with this Article, a court may order or restrain
22 collection, enforcement, or disposition of collateral on
23 appropriate terms and conditions.
24 (b) Damages for noncompliance. Subject to subsections
25 (c), (d), and (f), a person is liable for damages in the
26 amount of any loss caused by a failure to comply with this
27 Article. Loss caused by a failure to comply with a request
28 under Section 9-210 may include loss resulting from the
29 debtor's inability to obtain, or increased costs of,
30 alternative financing.
31 (c) Persons entitled to recover damages; statutory
32 damages in consumer-goods transaction. Except as otherwise
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1 provided in Section 9-628:
2 (1) a person that, at the time of the failure, was
3 a debtor, was an obligor, or held a security interest in
4 or other lien on the collateral may recover in an
5 individual action damages under subsection (b) for its
6 loss; and
7 (2) if the collateral is consumer goods, a person
8 that was a debtor or a secondary obligor at the time a
9 secured party failed to comply with this Part may recover
10 in an individual action for that failure in any event an
11 amount not less than the credit service charge plus 10
12 percent of the principal amount of the obligation or the
13 time-price differential plus 10 percent of the cash
14 price.
15 (d) Recovery when deficiency eliminated or reduced. A
16 debtor whose deficiency is eliminated under Section 9-626 may
17 recover damages for the loss of any surplus. However, a
18 debtor or secondary obligor whose deficiency is eliminated or
19 reduced under Section 9-626 may not otherwise recover under
20 subsection (b) for noncompliance with the provisions of this
21 Part relating to collection, enforcement, disposition, or
22 acceptance.
23 (e) Statutory damages: noncompliance with specified
24 provisions. In addition to any damages recoverable under
25 subsection (b), the debtor, consumer obligor, or person named
26 as a debtor in a filed record, as applicable, may recover in
27 an individual action $500 for each instance that a person:
28 (1) fails to comply with Section 9-208;
29 (2) fails to comply with Section 9-209;
30 (3) files a record that the person is not entitled
31 to file under Section 9-509(a); or
32 (4) fails to cause the secured party of record to
33 file or send a termination statement as required by
34 Section 9-513(a) or (c).
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1 (f) Statutory damages: noncompliance with Section
2 9-210. A debtor or consumer obligor may recover damages
3 under subsection (b) and, in addition, may in an individual
4 action recover $500 in each case from a person that, without
5 reasonable cause, fails to comply with a request under
6 Section 9-210. A recipient of a request under Section 9-210
7 which never claimed an interest in the collateral or
8 obligations that are the subject of a request under that
9 Section has a reasonable excuse for failure to comply with
10 the request within the meaning of this subsection.
11 (g) Limitation of security interest: noncompliance with
12 Section 9-210. If a secured party fails to comply with a
13 request regarding a list of collateral or a statement of
14 account under Section 9-210, the secured party may claim a
15 security interest only as shown in the statement included in
16 the request as against a person that is reasonably misled by
17 the failure.
18 (810 ILCS 5/9-626 new)
19 Sec. 9-626. Action in which deficiency or surplus is in
20 issue; applicable rules if amount of deficiency or surplus is
21 in issue. In an action in which the amount of a deficiency
22 or surplus is in issue, the following rules apply:
23 (1) A secured party need not prove compliance with
24 the provisions of this Part relating to collection,
25 enforcement, disposition, or acceptance unless the debtor
26 or a secondary obligor places the secured party's
27 compliance in issue.
28 (2) If the secured party's compliance is placed in
29 issue, the secured party has the burden of establishing
30 that the collection, enforcement, disposition, or
31 acceptance was conducted in accordance with this Part.
32 (3) Except as otherwise provided in Section 9-628,
33 if a secured party fails to prove that the collection,
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1 enforcement, disposition, or acceptance was conducted in
2 accordance with the provisions of this Part relating to
3 collection, enforcement, disposition, or acceptance, the
4 liability of a debtor or a secondary obligor for a
5 deficiency is limited to an amount by which the sum of
6 the secured obligation, expenses, and attorney's fees
7 exceeds the greater of:
8 (A) the proceeds of the collection,
9 enforcement, disposition, or acceptance; or
10 (B) the amount of proceeds that would have
11 been realized had the noncomplying secured party
12 proceeded in accordance with the provisions of this
13 Part relating to collection, enforcement,
14 disposition, or acceptance.
15 (4) For purposes of paragraph (3)(B), the amount of
16 proceeds that would have been realized is equal to the
17 sum of the secured obligation, expenses, and attorney's
18 fees unless the secured party proves that the amount is
19 less than that sum.
20 (5) If a deficiency or surplus is calculated under
21 Section 9-615(f), the debtor or obligor has the burden of
22 establishing that the amount of proceeds of the
23 disposition is significantly below the range of prices
24 that a complying disposition to a person other than the
25 secured party, a person related to the secured party, or
26 a secondary obligor would have brought.
27 (810 ILCS 5/9-627 new)
28 Sec. 9-627. Determination of whether conduct was
29 commercially reasonable.
30 (a) Greater amount obtainable under other circumstances;
31 no preclusion of commercial reasonableness. The fact that a
32 greater amount could have been obtained by a collection,
33 enforcement, disposition, or acceptance at a different time
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1 or in a different method from that selected by the secured
2 party is not of itself sufficient to preclude the secured
3 party from establishing that the collection, enforcement,
4 disposition, or acceptance was made in a commercially
5 reasonable manner.
6 (b) Dispositions that are commercially reasonable. A
7 disposition of collateral is made in a commercially
8 reasonable manner if the disposition is made:
9 (1) in the usual manner on any recognized market;
10 (2) at the price current in any recognized market
11 at the time of the disposition; or
12 (3) otherwise in conformity with reasonable
13 commercial practices among dealers in the type of
14 property that was the subject of the disposition.
15 (c) Approval by court or on behalf of creditors. A
16 collection, enforcement, disposition, or acceptance is
17 commercially reasonable if it has been approved:
18 (1) in a judicial proceeding;
19 (2) by a bona fide creditors' committee;
20 (3) by a representative of creditors; or
21 (4) by an assignee for the benefit of creditors.
22 (d) Approval under subsection (c) not necessary; absence
23 of approval has no effect. Approval under subsection (c)
24 need not be obtained, and lack of approval does not mean that
25 the collection, enforcement, disposition, or acceptance is
26 not commercially reasonable.
27 (810 ILCS 5/9-628 new)
28 Sec. 9-628. Nonliability and limitation on liability of
29 secured party; liability of secondary obligor.
30 (a) Limitation of liability to debtor or obligor.
31 Unless a secured party knows that a person is a debtor or
32 obligor, knows the identity of the person, and knows how to
33 communicate with the person:
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1 (1) the secured party is not liable to the person,
2 or to a secured party or lienholder that has filed a
3 financing statement against the person, for failure to
4 comply with this Article; and
5 (2) the secured party's failure to comply with this
6 Article does not affect the liability of the person for a
7 deficiency.
8 (b) Limitation of liability to debtor, obligor, another
9 secured party, or lienholder. A secured party is not liable
10 because of its status as secured party:
11 (1) to a person that is a debtor or obligor, unless
12 the secured party knows:
13 (A) that the person is a debtor or obligor;
14 (B) the identity of the person; and
15 (C) how to communicate with the person; or
16 (2) to a secured party or lienholder that has filed
17 a financing statement against a person, unless the
18 secured party knows:
19 (A) that the person is a debtor; and
20 (B) the identity of the person.
21 (c) Limitation of liability if reasonable belief that
22 transaction not a consumer-goods transaction or consumer
23 transaction. A secured party is not liable to any person,
24 and a person's liability for a deficiency is not affected,
25 because of any act or omission arising out of the secured
26 party's reasonable belief that a transaction is not a
27 consumer-goods transaction or a consumer transaction or that
28 goods are not consumer goods, if the secured party's belief
29 is based on its reasonable reliance on:
30 (1) a debtor's representation concerning the
31 purpose for which collateral was to be used, acquired, or
32 held; or
33 (2) an obligor's representation concerning the
34 purpose for which a secured obligation was incurred.
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1 (d) Limitation of liability for statutory damages. A
2 secured party is not liable to any person under Section
3 9-625(c)(2) for its failure to comply with Section 9-616.
4 (e) Limitation of multiple liability for statutory
5 damages. A secured party is not liable under Section
6 9-625(c)(2) more than once with respect to any one secured
7 obligation.
8 (810 ILCS 5/Art. 9, Part 7 heading new)
9 PART 7. TRANSITION
10 (810 ILCS 5/9-701 new)
11 Sec. 9-701. Effective date. (See Section 99 of the
12 Public Act adding this Section to this Act.)
13 (810 ILCS 5/9-702 new)
14 Sec. 9-702. Savings clause.
15 (a) Pre-effective-date transactions or liens. Except as
16 otherwise provided in this Part, this Act applies to a
17 transaction or lien within its scope, even if the transaction
18 or lien was entered into or created before the effective date
19 of this amendatory Act of the 91st General Assembly.
20 (b) Continuing validity. Except as otherwise provided
21 in subsection (c) and Sections 9-703 through 9-709:
22 (1) transactions and liens that were not governed
23 by Article 9 as it existed before the effective date of
24 this amendatory Act of the 91st General Assembly, were
25 validly entered into or created before the effective date
26 of this amendatory Act of the 91st General Assembly, and
27 would be subject to this Act if they had been entered
28 into or created after the effective date of this
29 amendatory Act of the 91st General Assembly, and the
30 rights, duties, and interests flowing from those
31 transactions and liens remain valid after the effective
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1 date of this amendatory Act of the 91st General Assembly;
2 and
3 (2) the transactions and liens may be terminated,
4 completed, consummated, and enforced as required or
5 permitted by this Act or by the law that otherwise would
6 apply if this Act had not taken effect.
7 (c) Pre-effective-date proceedings. This amendatory Act
8 of the 91st General Assembly does not affect an action, case,
9 or proceeding commenced before the effective date of this
10 amendatory Act of the 91st General Assembly.
11 (810 ILCS 5/9-703 new)
12 Sec. 9-703. Security interest perfected before effective
13 date.
14 (a) Continuing priority over lien creditor: perfection
15 requirements satisfied. A security interest that is
16 enforceable immediately before the effective date of this
17 amendatory Act of the 91st General Assembly and would have
18 priority over the rights of a person that becomes a lien
19 creditor at that time is a perfected security interest under
20 this Act if, on the effective date of this amendatory Act of
21 the 91st General Assembly, the applicable requirements for
22 enforceability and perfection under this Act are satisfied
23 without further action.
24 (b) Continuing priority over lien creditor: perfection
25 requirements not satisfied. Except as otherwise provided in
26 Section 9-705, if, immediately before the effective date of
27 this amendatory Act of the 91st General Assembly, a security
28 interest is enforceable and would have priority over the
29 rights of a person that becomes a lien creditor at that time,
30 but the applicable requirements for enforceability or
31 perfection under this Act are not satisfied on the effective
32 date of this amendatory Act of the 91st General Assembly, the
33 security interest:
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1 (1) is a perfected security interest for one year
2 after the effective date of this amendatory Act of the
3 91st General Assembly;
4 (2) remains enforceable thereafter only if the
5 security interest becomes enforceable under Section 9-203
6 before the year expires; and
7 (3) remains perfected thereafter only if the
8 applicable requirements for perfection under this Act are
9 satisfied before the year expires.
10 (810 ILCS 5/9-704 new)
11 Sec. 9-704. Security interest unperfected before
12 effective date. A security interest that is enforceable
13 immediately before the effective date of this amendatory Act
14 of the 91st General Assembly but which would be subordinate
15 to the rights of a person that becomes a lien creditor at
16 that time:
17 (1) remains an enforceable security interest for
18 one year after the effective date of this amendatory Act
19 of the 91st General Assembly;
20 (2) remains enforceable thereafter if the security
21 interest becomes enforceable under Section 9-203 on the
22 effective date of this amendatory Act of the 91st General
23 Assembly or within one year thereafter; and
24 (3) becomes perfected:
25 (A) without further action, on the effective date
26 of this amendatory Act of the 91st General Assembly if
27 the applicable requirements for perfection under this Act
28 are satisfied before or at that time; or
29 (B) when the applicable requirements for perfection
30 are satisfied if the requirements are satisfied after
31 that time.
32 (810 ILCS 5/9-705 new)
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1 Sec. 9-705. Effectiveness of action taken before
2 effective date.
3 (a) Pre-effective-date action; one-year perfection
4 period unless reperfected. If action, other than the filing
5 of a financing statement, is taken before the effective date
6 of this amendatory Act of the 91st General Assembly and the
7 action would have resulted in priority of a security interest
8 over the rights of a person that becomes a lien creditor had
9 the security interest become enforceable before the effective
10 date of this amendatory Act of the 91st General Assembly, the
11 action is effective to perfect a security interest that
12 attaches under this Act within one year after the effective
13 date of this amendatory Act of the 91st General Assembly. An
14 attached security interest becomes unperfected one year after
15 the effective date of this amendatory Act of the 91st General
16 Assembly unless the security interest becomes a perfected
17 security interest under this Act before the expiration of
18 that period.
19 (b) Pre-effective-date filing. The filing of a
20 financing statement before the effective date of this
21 amendatory Act of the 91st General Assembly is effective to
22 perfect a security interest to the extent the filing would
23 satisfy the applicable requirements for perfection under this
24 Act.
25 (c) Pre-effective-date filing in jurisdiction formerly
26 governing perfection. This Act does not render ineffective
27 an effective financing statement that, before the effective
28 date of this amendatory Act of the 91st General Assembly, is
29 filed and satisfies the applicable requirements for
30 perfection under the law of the jurisdiction governing
31 perfection as provided in Section 9-103 of the Uniform
32 Commercial Code as it existed before the effective date of
33 this amendatory Act of the 91st General Assembly. However,
34 except as otherwise provided in subsections (d) and (e) and
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1 Section 9-706, the financing statement ceases to be effective
2 at the earlier of:
3 (1) the time the financing statement would have
4 ceased to be effective under the law of the jurisdiction
5 in which it is filed; or
6 (2) June 30, 2006.
7 (d) Continuation statement. The filing of a
8 continuation statement after the effective date of this
9 amendatory Act of the 91st General Assembly does not continue
10 the effectiveness of the financing statement filed before the
11 effective date of this amendatory Act of the 91st General
12 Assembly. However, upon the timely filing of a continuation
13 statement after the effective date of this amendatory Act of
14 the 91st General Assembly and in accordance with the law of
15 the jurisdiction governing perfection as provided in Part 3,
16 the effectiveness of a financing statement filed in the same
17 office in that jurisdiction before the effective date of this
18 amendatory Act of the 91st General Assembly continues for the
19 period provided by the law of that jurisdiction.
20 (e) Application of subsection (c)(2) to transmitting
21 utility financing statement. Subsection (c)(2) applies to a
22 financing statement that, before the effective date of this
23 amendatory Act of the 91st General Assembly, is filed against
24 a transmitting utility and satisfies the applicable
25 requirements for perfection under the law of the jurisdiction
26 governing perfection as provided in Section 9-103, as that
27 Section existed before the effective date of this amendatory
28 Act of the 91st General Assembly, only to the extent that
29 Part 3 provides that the law of a jurisdiction other than
30 jurisdiction in which the financing statement is filed
31 governs perfection of a security interest in collateral
32 covered by the financing statement.
33 (f) Application of Part 5. A financing statement that
34 includes a financing statement filed before the effective
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1 date of this amendatory Act of the 91st General Assembly and
2 a continuation statement filed after the effective date of
3 this amendatory Act of the 91st General Assembly is effective
4 only to the extent that it satisfies the requirements of Part
5 5 for an initial financing statement.
6 (810 ILCS 5/9-706 new)
7 Sec. 9-706. When initial financing statement suffices to
8 continue effectiveness of financing statement.
9 (a) Initial financing statement in lieu of continuation
10 statement. The filing of an initial financing statement in
11 the office specified in Section 9-501 continues the
12 effectiveness of a financing statement filed before the
13 effective date of this amendatory Act of the 91st General
14 Assembly if:
15 (1) the filing of an initial financing statement in
16 that office would be effective to perfect a security
17 interest under this Act;
18 (2) the pre-effective-date financing statement was
19 filed in an office in another State or another office in
20 this State; and
21 (3) the initial financing statement satisfies
22 subsection (c).
23 (b) Period of continued effectiveness. The filing of an
24 initial financing statement under subsection (a) continues
25 the effectiveness of the pre-effective-date financing
26 statement:
27 (1) if the initial financing statement is filed
28 before the effective date of this amendatory Act of the
29 91st General Assembly, for the period provided in Section
30 9-403 of the Uniform Commercial Code as it existed before
31 the effective date of this amendatory Act of the 91st
32 General Assembly with respect to a financing statement;
33 and
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1 (2) if the initial financing statement is filed
2 after the effective date of this amendatory Act of the
3 91st General Assembly, for the period provided in Section
4 9-515 with respect to an initial financing statement.
5 (c) Requirements for initial financing statement under
6 subsection (a). To be effective for purposes of subsection
7 (a), an initial financing statement must:
8 (1) satisfy the requirements of Part 5 for an
9 initial financing statement;
10 (2) identify the pre-effective-date financing
11 statement by indicating the office in which the financing
12 statement was filed and providing the dates of filing and
13 file numbers, if any, of the financing statement and of
14 the most recent continuation statement filed with respect
15 to the financing statement; and
16 (3) indicate that the pre-effective-date financing
17 statement remains effective.
18 (810 ILCS 5/9-707 new)
19 Sec. 9-707. Amendment of pre-effective-date financing
20 statement.
21 (a) "Pre-effective-date financing statement". In this
22 Section, "pre-effective-date financing statement" means a
23 financing statement filed before the effective date of this
24 amendatory Act of the 91st General Assembly.
25 (b) Applicable law. After the effective date of this
26 amendatory Act of the 91st General Assembly, a person may add
27 or delete collateral covered by, continue or terminate the
28 effectiveness of, or otherwise amend the information provided
29 in, a pre-effective-date financing statement only in
30 accordance with the law of the jurisdiction governing
31 perfection as provided in Part 3. However, the effectiveness
32 of a pre-effective-date financing statement also may be
33 terminated in accordance with the law of the jurisdiction in
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1 which the financing statement is filed.
2 (c) Method of amending: general rule. Except as
3 otherwise provided in subsection (d), if the law of this
4 State governs perfection of a security interest, the
5 information in a pre-effective-date financing statement may
6 be amended after the effective date of this amendatory Act of
7 the 91st General Assembly only if:
8 (1) the pre-effective-date financing statement and
9 an amendment are filed in the office specified in Section
10 9-501;
11 (2) an amendment is filed in the office specified
12 in Section 9-501 concurrently with, or after the filing
13 in that office of, an initial financing statement that
14 satisfies Section 9-706(c); or
15 (3) an initial financing statement that provides
16 the information as amended and satisfies Section 9-706(c)
17 is filed in the office specified in Section 9-501.
18 (d) Method of amending: continuation. If the law of
19 this State governs perfection of a security interest, the
20 effectiveness of a pre-effective-date financing statement may
21 be continued only under Section 9-705(d) and (f) or Section
22 9-706.
23 (e) Method of amending: additional termination rule.
24 Whether or not the law of this State governs perfection of a
25 security interest, the effectiveness of a pre-effective-date
26 financing statement filed in this State may be terminated
27 after the effective date of this amendatory Act of the 91st
28 General Assembly by filing a termination statement in the
29 office in which the pre-effective-date financing statement is
30 filed, unless an initial financing statement that satisfies
31 Section 9-706(c) has been filed in the office specified by
32 the law of the jurisdiction governing perfection as provided
33 in Part 3 as the office in which to file a financing
34 statement.
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1 (810 ILCS 5/9-708 new)
2 Sec. 9-708. Persons entitled to file initial financing
3 statement or continuation statement. A person may file an
4 initial financing statement or a continuation statement under
5 this Part if:
6 (1) the secured party of record authorizes the
7 filing; and
8 (2) the filing is necessary under this Part:
9 (A) to continue the effectiveness of a
10 financing statement filed before the effective date
11 of this amendatory Act of the 91st General Assembly;
12 or
13 (B) to perfect or continue the perfection of a
14 security interest.
15 (810 ILCS 5/9-709 new)
16 Sec. 9-709. Priority.
17 (a) Law governing priority. This Act determines the
18 priority of conflicting claims to collateral. However, if
19 the relative priorities of the claims were established before
20 the effective date of this amendatory Act of the 91st General
21 Assembly, Article 9 as it existed before the effective date
22 of this amendatory Act of the 91st General Assembly
23 determines priority.
24 (b) Priority if security interest becomes enforceable
25 under Section 9-203. For purposes of Section 9-322(a), the
26 priority of a security interest that becomes enforceable
27 under Section 9-203 of this Act dates from the effective date
28 of this amendatory Act of the 91st General Assembly if the
29 security interest is perfected under this Act by the filing
30 of a financing statement before the effective date of this
31 amendatory Act of the 91st General Assembly which would not
32 have been effective to perfect the security interest under
33 Article 9 as it existed before the effective date of this
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1 amendatory Act of the 91st General Assembly. This subsection
2 does not apply to conflicting security interests each of
3 which is perfected by the filing of such a financing
4 statement.
5 (810 ILCS 5/9-710 new)
6 Sec. 9-710. Local-filing office responsibilities for
7 filings under the Uniform Commercial Code prior to this
8 amendatory Act of the 91st General Assembly.
9 (a) In this Section:
10 (1) "Local-filing office" means a filing office,
11 other than the office of the Secretary of State, that is
12 designated as the proper place to file a financing
13 statement under Section 9-401(1) of the Uniform
14 Commercial Code as in effect immediately before the
15 effective date of this amendatory Act of the 91st General
16 Assembly. The term applies only with respect to a record
17 that covers a type of collateral as to which the filing
18 office is designated in that Section as the proper place
19 to file.
20 (2) "Former-Article-9 records" means:
21 (A) financing statements and other records
22 that have been filed in a local-filing office before
23 July 1, 2001, and that are, or upon processing and
24 indexing will be, reflected in the index maintained,
25 as of June 30, 2001, by the local-filing office for
26 financing statements and other records filed in the
27 local filing office before July 1, 2001.
28 (B) the index as of June 30, 2001.
29 (b) Except for a record terminating a former-Article-9
30 record, a local-filing office must not accept for filing a
31 record presented after June 30, 2001, whether or not the
32 record relates to a financing statement filed in the
33 local-filing office before July 1, 2001. If the record
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1 terminating such former-Article-9 record statement is in the
2 standard form prescribed by the Secretary of State, the
3 uniform fee for filing and indexing the termination statement
4 in the office of a county recorder shall be $5 and otherwise
5 shall be $10, plus in each case an additional fee of $5 for
6 each name more than one at each address listed against which
7 the record is required to be indexed.
8 (c) Until July 1, 2001, each local-filing-office must
9 maintain all former-Article-9 records in accordance with the
10 Uniform Commercial Code as in effect immediately before the
11 effective date of this amendatory Act of the 91st General
12 Assembly. A former-Article-9 record that is not reflected on
13 the index maintained on June 30, 2001, by the local-filing
14 office must be processed and indexed, and reflected on the
15 index as of June 30, 2001, as soon as practicable but in any
16 event no later than July 30, 2001.
17 (d) Until at least June 30, 2008, each local-filing
18 office must respond to requests for information with respect
19 to former-Article-9 records relating to a debtor and issue
20 certificates, in accordance with the Uniform Commercial Code
21 as in effect immediately before this amendatory Act of the
22 91st General Assembly. The fees charged for responding to
23 requests for information relating to the debtor issuing the
24 certificates with respect to former-Article-9 records must be
25 the fees in effect under the Uniform Commercial Code as in
26 effect immediately before the effective date of this
27 amendatory Act of the 91st General Assembly on June 30, 2001,
28 unless a different fee is later set by the local filing
29 office. However, the different fee must not exceed $10 for
30 responding to a request for information relating to a debtor
31 or $10 for issuing a certificate.
32 (e) After June 30, 2008, each local-filing office may
33 remove and destroy, in accordance with any then applicable
34 record retention law of this State, all former-Article-9
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1 records, including the related index.
2 (f) This Section does not apply, with respect to
3 financing statements and other records, to a filing office in
4 which mortgages or records of mortgages on real property are
5 required to be filed or recorded if:
6 (1) the collateral is timber to be cut or
7 as-extracted collateral, or
8 (2) the record is or relates to a financing
9 statement filed as a fixture filing and the collateral is
10 goods that are or are to become fixtures.
11 PART 99. (BLANK) MISCELLANEOUS ILLINOIS PROVISIONS
12 (810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901)
13 Sec. 9-9901. (Blank). Liability of Secretary of State.
14 Neither the Secretary of State nor any of the Secretary of
15 State's employees or agents shall be subject to personal
16 liability by reason of any error or omission in the
17 performance of any duty under this Article except in case of
18 wilful negligence.
19 (Source: P.A. 87-1047.)
20 (810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902)
21 Sec. 9-9902. (Blank). Security interests in crops.
22 (a) Legislative findings; purpose. The General Assembly
23 finds:
24 (1) it has been the accepted practice between
25 farmers and agricultural lenders for lenders to extend
26 credit with repayment secured by a security interest in
27 crops perfected in accordance with the provisions of this
28 Article;
29 (2) in making these loans, it has been the accepted
30 practice of agricultural lenders to rely upon a search of
31 financing statements properly filed in accordance with
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1 the provisions of this Article to determine the presence
2 of claims in favor of other lenders;
3 (3) recently, this long standing practice and the
4 expectations of agricultural lenders have been negated by
5 court decisions that hold that a mortgagee of real estate
6 who takes possession, during foreclosure proceedings, of
7 mortgaged real estate with unsevered crops has priority
8 over a perfected security interest in crops;
9 (4) as a result of these court decisions, the
10 documentation and expenses in connection with prudent
11 agricultural lending practices will significantly
12 increase, creating an undue burden on agricultural
13 lenders;
14 (5) the application of these court decisions to the
15 holders of obligations secured by the collateral
16 assignment of beneficial interests in land trusts will
17 result in the creation of claims against crops that
18 agricultural lenders will be unable to discover by public
19 record search;
20 (6) these court decisions defeat the legitimate
21 expectations of agricultural lenders, unnecessarily
22 increase the cost of agricultural credit and impede the
23 free flow and availability of agricultural credit,
24 constituting an undue burden on the Illinois farm
25 economy;
26 (7) the application of these court decisions to the
27 holders of obligations secured by the collateral
28 assignment of beneficial interests in land trusts will
29 similarly defeat the expectations of agricultural
30 lenders, unnecessarily increase the cost of agricultural
31 credit and impede the free flow and availability of
32 agricultural credit, constituting an undue burden on the
33 Illinois farm economy;
34 (8) real estate lenders, frequently dealing with
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1 farmers prior to the involvement of other agricultural
2 lenders, in the ordinary course of lending can perfect a
3 security interest in crops in accordance with the
4 provisions of this Article to the extent these lenders
5 are relying on that collateral;
6 (9) it is the purpose of this Section to restore an
7 efficient system of searching for the claims of lenders
8 and the protection afforded agricultural lenders by a
9 perfected security interest in crops under this Article,
10 and thereby to foster and encourage the availability of
11 agricultural credit.
12 (b) Definitions. In this Section the following meanings
13 apply:
14 (1) "Collateral assignment of beneficial interest"
15 means any pledge or assignment of the beneficial interest
16 in a land trust to a person to secure a debt or other
17 obligation.
18 (2) "Land trust" means any trust arrangement under
19 which the legal and equitable title to real estate is
20 held by a trustee, the interest of the beneficiary of the
21 trust is personal property and the beneficiary or any
22 person designated in writing by the beneficiary has (i)
23 the exclusive power to direct or control the trustee in
24 dealing with the title to the trust property, (ii) the
25 exclusive control of the management, operation, renting,
26 and selling of the trust property, and (iii) the
27 exclusive right to the earnings, avails, and proceeds of
28 the trust property.
29 (c) Rights to crops. With respect to any crops growing
30 or to be grown on real estate held in a land trust, the
31 rights of a holder of an obligation secured by a collateral
32 assignment of beneficial interest in the land trust,
33 including rights by virtue of an equitable lien, shall be
34 subject to a security interest properly perfected under this
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1 Article.
2 (d) Application of Section. This Section applies to the
3 holder of an obligation secured by a collateral assignment of
4 beneficial interest in a land trust who becomes entitled to
5 crops by obtaining possession on or after December 22, 1988.
6 (Source: P.A. 87-1047.)
7 Section 10. The Uniform Commercial Code is amended by
8 changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502,
9 2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103,
10 8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section
11 5-118 as follows:
12 (810 ILCS 5/1-105) (from Ch. 26, par. 1-105)
13 Sec. 1-105. Territorial application of the Act; parties'
14 power to choose applicable law.
15 (1) Except as provided in this Section, when a
16 transaction bears a reasonable relation to this State and
17 also to another state or nation the parties may agree that
18 the law either of this State or of the other state or nation
19 shall govern their rights and duties. Failing an agreement,
20 this Act applies to transactions bearing an appropriate
21 relation to this State.
22 (2) Where one of the following provisions of this Act
23 specifies the applicable law, that provision governs and a
24 contrary agreement is effective only to the extent permitted
25 by the law (including the conflict of laws rules) so
26 specified:
27 Rights of creditors against sold goods. Section 2-402.
28 Applicability of the Article on Leases. Sections 2A-105
29 and 2A-106.
30 Applicability of the Article on Bank Deposits and
31 Collections. Section 4-102.
32 Governing law in the Article on Funds Transfers. Section
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1 4A-507.
2 Letters of Credit. Section 5-116.
3 Applicability of the Article on Investment Securities.
4 Section 8-110.
5 Law governing perfection, the effect of perfection or
6 nonperfection, and the priority of security
7 interests and agricultural liens. Sections 9-301
8 through 9-307.
9 Perfection provisions of the Article on Secured
10 Transactions. Section 9-103.
11 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
12 (810 ILCS 5/1-201) (from Ch. 26, par. 1-201)
13 Sec. 1-201. General Definitions. Subject to additional
14 definitions contained in the subsequent Articles of this Act
15 which are applicable to specific Articles or Parts thereof,
16 and unless the context otherwise requires, in this Act:
17 (1) "Action" in the sense of a judicial proceeding
18 includes recoupment, counterclaim, set-off, suit in equity
19 and any other proceedings in which rights are determined.
20 (2) "Aggrieved party" means a party entitled to resort
21 to a remedy.
22 (3) "Agreement" means the bargain of the parties in fact
23 as found in their language or by implication from other
24 circumstances including course of dealing or usage of trade
25 or course of performance as provided in this Act (Sections
26 1-205, and 2-208, and 2A-207). Whether an agreement has legal
27 consequences is determined by the provisions of this Act, if
28 applicable; otherwise by the law of contracts (Section
29 1-103). (Compare "Contract".)
30 (4) "Bank" means any person engaged in the business of
31 banking.
32 (5) "Bearer" means the person in possession of an
33 instrument, document of title, or certificated security
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1 payable to bearer or indorsed in blank.
2 (6) "Bill of lading" means a document evidencing the
3 receipt of goods for shipment issued by a person engaged in
4 the business of transporting or forwarding goods, and
5 includes an airbill. "Airbill" means a document serving for
6 air transportation as a bill of lading does for marine or
7 rail transportation, and includes an air consignment note or
8 air waybill.
9 (7) "Branch" includes a separately incorporated foreign
10 branch of a bank.
11 (8) "Burden of establishing" a fact means the burden of
12 persuading the triers of fact that the existence of the fact
13 is more probable than its non-existence.
14 (9) "Buyer in ordinary course of business" means a
15 person that buys goods who in good faith, and without
16 knowledge that the sale violates to him is in violation of
17 the ownership rights or security interest of another person a
18 third party in the goods, and buys in the ordinary course
19 from a person, other than a pawnbroker, in the business of
20 selling goods of that kind but does not include a pawnbroker.
21 A person buys goods in the ordinary course if the sale to the
22 person comports with the usual or customary practices in the
23 kind of business in which the seller is engaged or with the
24 seller's own usual or customary practices. A person that
25 sells oil, gas, or other minerals at the wellhead or minehead
26 is a person All persons who sell minerals or the like
27 (including oil and gas) at wellhead or minehead shall be
28 deemed to be persons in the business of selling goods of that
29 kind. A buyer in ordinary course of business "Buying" may
30 buy be for cash, or by exchange of other property, or on
31 secured or unsecured credit, and may acquire includes
32 receiving goods or documents of title under a pre-existing
33 contract for sale. Only a buyer that takes possession of the
34 goods or has a right to recover the goods from the seller
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1 under Article 2 may be a buyer in ordinary course of
2 business. A person that acquires goods in a transfer in bulk
3 or as security for or in total or partial satisfaction of a
4 money debt is not a buyer in ordinary course of business. but
5 does not include a transfer in bulk or as security for or in
6 total or partial satisfaction of a money debt.
7 (10) "Conspicuous": A term or clause is conspicuous when
8 it is so written that a reasonable person against whom it is
9 to operate ought to have noticed it. A printed heading in
10 capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous.
11 Language in the body of a form is "conspicuous" if it is in
12 larger or other contrasting type or color. But in a telegram
13 any stated term is "conspicuous". Whether a term or clause is
14 "conspicuous" or not is for decision by the court.
15 (11) "Contract" means the total legal obligation which
16 results from the parties' agreement as affected by this Act
17 and any other applicable rules of law. (Compare "Agreement".)
18 (12) "Creditor" includes a general creditor, a secured
19 creditor, a lien creditor and any representative of
20 creditors, including an assignee for the benefit of
21 creditors, a trustee in bankruptcy, a receiver in equity and
22 an executor or administrator of an insolvent debtor's or
23 assignor's estate.
24 (13) "Defendant" includes a person in the position of
25 defendant in a cross-action or counterclaim.
26 (14) "Delivery" with respect to instruments, documents
27 of title, chattel paper or certificated securities means
28 voluntary transfer of possession.
29 (15) "Document of title" includes bill of lading, dock
30 warrant, dock receipt, warehouse receipt or order for the
31 delivery of goods, and also any other document which in the
32 regular course of business or financing is treated as
33 adequately evidencing that the person in possession of it is
34 entitled to receive, hold and dispose of the document and the
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1 goods it covers. To be a document of title a document must
2 purport to be issued by or addressed to a bailee and purport
3 to cover goods in the bailee's possession which are either
4 identified or are fungible portions of an identified mass.
5 (16) "Fault" means wrongful act, omission or breach.
6 (17) "Fungible" with respect to goods or securities
7 means goods or securities of which any unit is, by nature or
8 usage of trade, the equivalent of any other like unit. Goods
9 which are not fungible shall be deemed fungible for the
10 purposes of this Act to the extent that under a particular
11 agreement or document unlike units are treated as
12 equivalents.
13 (18) "Genuine" means free of forgery or counterfeiting.
14 (19) "Good faith" means honesty in fact in the conduct
15 or transaction concerned.
16 (20) "Holder" with respect to a negotiable instrument
17 means the person in possession if the instrument is payable
18 to bearer or, in the case of an instrument payable to an
19 identified person, if the identified person is in possession.
20 "Holder" with respect to a document of title means the person
21 in possession if the goods are deliverable to bearer or to
22 the order of the person in possession.
23 (21) To "honor" is to pay or accept and pay, or where a
24 credit so engages to purchase or discount a draft complying
25 with the terms of the credit.
26 (22) "Insolvency proceedings" includes any assignment
27 for the benefit of creditors or other proceedings intended to
28 liquidate or rehabilitate the estate of the person involved.
29 (23) A person is "insolvent" who either has ceased to
30 pay his debts in the ordinary course of business or cannot
31 pay his debts as they become due or is insolvent within the
32 meaning of the federal bankruptcy law.
33 (24) "Money" means a medium of exchange authorized or
34 adopted by a domestic or foreign government and includes a
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1 monetary unit of account established by an intergovernmental
2 organization or by agreement between 2 or more nations.
3 (25) A person has "notice" of a fact when
4 (a) he has actual knowledge of it; or
5 (b) he has received a notice or notification of it;
6 or
7 (c) from all the facts and circumstances known to
8 him at the time in question he has reason to know that it
9 exists. A person "knows" or has "knowledge" of a fact
10 when he has actual knowledge of it. "Discover" or "learn"
11 or a word or phrase of similar import refers to knowledge
12 rather than to reason to know. The time and circumstances
13 under which a notice or notification may cease to be
14 effective are not determined by this Act.
15 (26) A person "notifies" or "gives" a notice or
16 notification to another by taking such steps as may be
17 reasonably required to inform the other in ordinary course
18 whether or not such other actually comes to know of it. A
19 person "receives" a notice or notification when
20 (a) it comes to his attention; or
21 (b) it is duly delivered at the place of business
22 through which the contract was made or at any other place
23 held out by him as the place for receipt of such
24 communications.
25 (27) Notice, knowledge or a notice or notification
26 received by an organization is effective for a particular
27 transaction from the time when it is brought to the attention
28 of the individual conducting that transaction, and in any
29 event from the time when it would have been brought to his
30 attention if the organization had exercised due diligence. An
31 organization exercises due diligence if it maintains
32 reasonable routines for communicating significant information
33 to the person conducting the transaction and there is
34 reasonable compliance with the routines. Due diligence does
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1 not require an individual acting for the organization to
2 communicate information unless such communication is part of
3 his regular duties or unless he has reason to know of the
4 transaction and that the transaction would be materially
5 affected by the information.
6 (28) "Organization" includes a corporation, government
7 or governmental subdivision or agency, business trust,
8 estate, trust, partnership or association, two or more
9 persons having a joint or common interest, or any other legal
10 or commercial entity.
11 (29) "Party", as distinct from "third party", means a
12 person who has engaged in a transaction or made an agreement
13 within this Act.
14 (30) "Person" includes an individual or an organization
15 (see Section 1-102).
16 (31) "Presumption" or "presumed" means that the trier of
17 fact must find the existence of the fact presumed unless and
18 until evidence is introduced which would support a finding of
19 its non-existence.
20 (32) "Purchase" includes taking by sale, discount,
21 negotiation, mortgage, pledge, lien, security interest, issue
22 or reissue, gift or any other voluntary transaction creating
23 an interest in property.
24 (33) "Purchaser" means a person who takes by purchase.
25 (34) "Remedy" means any remedial right to which an
26 aggrieved party is entitled with or without resort to a
27 tribunal.
28 (35) "Representative" includes an agent, an officer of a
29 corporation or association, and a trustee, executor or
30 administrator of an estate, or any other person empowered to
31 act for another.
32 (36) "Rights" includes remedies.
33 (37) "Security interest" means an interest in personal
34 property or fixtures which secures payment or performance of
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1 an obligation. The retention or reservation of title by a
2 seller of goods notwithstanding shipment or delivery to the
3 buyer (Section 2-401) is limited in effect to a reservation
4 of a "security interest". The term also includes any interest
5 of a consignor and a buyer of accounts, or chattel paper, a
6 payment intangible, or a promissory note in a transaction
7 that which is subject to Article 9. The special property
8 interest of a buyer of goods on identification of those goods
9 to a contract for sale under Section 2-401 is not a "security
10 interest", but a buyer may also acquire a "security
11 interest", by complying with Article 9. Except as otherwise
12 provided in Section 2-505, the right of a seller or lessor of
13 goods under Article 2 or 2A to retain or acquire possession
14 of the goods is not a "security interest", but a seller or
15 lessor may also acquire a "security interest" by complying
16 with Article 9. The retention or reservation of title by a
17 seller of goods notwithstanding shipment or delivery to the
18 buyer (Section 2-401) is limited in effect to a reservation
19 of a "security interest". Unless a consignment is intended as
20 security, reservation of title thereunder is not a "security
21 interest" but a consignment is in any event subject to the
22 provisions on consignment sales (Section 2-326).
23 Whether a transaction creates a lease or security
24 interest is determined by the facts of each case; however, a
25 transaction creates a security interest if the consideration
26 the lessee is to pay the lessor for the right to possession
27 and use of the goods is an obligation for the term of the
28 lease not subject to termination by the lessee; and
29 (a) the original term of the lease is equal to or
30 greater than the remaining economic life of the goods;
31 (b) the lessee is bound to renew the lease for the
32 remaining economic life of the goods or is bound to
33 become the owner of the goods;
34 (c) the lessee has an option to renew the lease for
-265- LRB9106284JSpcam04
1 the remaining economic life of the goods for no
2 additional consideration or nominal additional
3 consideration upon compliance with the lease agreement;
4 or
5 (d) the lessee has an option to become the owner of
6 the goods for no additional consideration or nominal
7 additional consideration upon compliance with the lease
8 agreement.
9 A transaction does not create a security interest merely
10 because it provides that:
11 (a) the present value of the consideration the
12 lessee is obligated to pay the lessor for the right to
13 possession and use of the goods is substantially equal to
14 or is greater than the fair market value of the goods at
15 the time the lease is entered into;
16 (b) the lessee assumes risk of loss of the goods,
17 or agrees to pay taxes, insurance, filing, recording, or
18 registration fees, or service or maintenance costs with
19 respect to the goods;
20 (c) the lessee has an option to renew the lease or
21 to become the owner of the goods;
22 (d) the lessee has an option to renew the lease for
23 a fixed rent that is equal to or greater than the
24 reasonably predictable fair market rent for the use of
25 the goods for the term of the renewal at the time the
26 option is to be performed; or
27 (e) the lessee has an option to become the owner of
28 the goods for a fixed price that is equal to or greater
29 than the reasonably predictable fair market value of the
30 goods at the time the option is to be performed.
31 For purposes of this subsection (37):
32 (x) Additional consideration is not nominal if (i)
33 when the option to renew the lease is granted to the
34 lessee the rent is stated to be the fair market rent for
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1 the use of the goods for the term of the renewal
2 determined at the time the option is to be performed, or
3 (ii) when the option to become the owner of the goods is
4 granted to the lessee the price is stated to be the fair
5 market value of the goods determined at the time the
6 option is to be performed. Additional consideration is
7 nominal if it is less than the lessee's reasonably
8 predictable cost of performing under the lease agreement
9 if the option is not exercised;
10 (y) "Reasonably predictable" and "remaining
11 economic life of the goods" are to be determined with
12 reference to the facts and circumstances at the time the
13 transaction is entered into; and
14 (z) "Present value" means the amount as of a date
15 certain of one or more sums payable in the future,
16 discounted to the date certain. The discount is
17 determined by the interest rate specified by the parties
18 if the rate is not manifestly unreasonable at the time
19 the transaction is entered into; otherwise, the discount
20 is determined by a commercially reasonable rate that
21 takes into account the facts and circumstances as of each
22 case at the time the transaction was entered into.
23 (38) "Send" in connection with any writing or notice
24 means to deposit in the mail or deliver for transmission by
25 any other usual means of communication with postage or cost
26 of transmission provided for and properly addressed and in
27 the case of an instrument to an address specified thereon or
28 otherwise agreed, or if there be none to any address
29 reasonable under the circumstances. The receipt of any
30 writing or notice within the time at which it would have
31 arrived if properly sent has the effect of a proper sending.
32 (39) "Signed" includes any symbol executed or adopted by
33 a party with present intention to authenticate a writing.
34 (40) "Surety" includes guarantor.
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1 (41) "Telegram" includes a message transmitted by radio,
2 teletype, cable, any mechanical method of transmission, or
3 the like.
4 (42) "Term" means that portion of an agreement which
5 relates to a particular matter.
6 (43) "Unauthorized" signature means one made without
7 actual, implied, or apparent authority and includes a
8 forgery.
9 (44) "Value". Except as otherwise provided with respect
10 to negotiable instruments and bank collections (Sections
11 3-303, 4-210, 4-208 and 4-211 4-209), a person gives "value"
12 for rights if he acquires them:
13 (a) in return for a binding commitment to extend
14 credit or for the extension of immediately available
15 credit whether or not drawn upon and whether or not a
16 charge-back is provided for in the event of difficulties
17 in collection; or
18 (b) as security for or in total or partial
19 satisfaction of a pre-existing claim; or
20 (c) by accepting delivery pursuant to a
21 pre-existing contract for purchase; or
22 (d) generally, in return for any consideration
23 sufficient to support a simple contract.
24 (45) "Warehouse receipt" means a receipt issued by a
25 person engaged in the business of storing goods for hire.
26 (46) "Written" or "writing" includes printing,
27 typewriting or any other intentional reduction to tangible
28 form.
29 (Source: P.A. 87-493; 87-582; 87-895; 87-1135.)
30 (810 ILCS 5/2-103) (from Ch. 26, par. 2-103)
31 Sec. 2-103. Definitions and index of definitions.
32 (1) In this Article unless the context otherwise
33 requires
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1 (a) "Buyer" means a person who buys or contracts to
2 buy goods.
3 (b) "Good faith" in the case of a merchant means
4 honesty in fact and the observance of reasonable commercial
5 standards of fair dealing in the trade.
6 (c) "Receipt" of goods means taking physical
7 possession of them.
8 (d) "Seller" means a person who sells or contracts
9 to sell goods.
10 (2) Other definitions applying to this Article or to
11 specified Parts thereof, and the sections in which they
12 appear are:
13 "Acceptance". Section 2--606.
14 "Banker's credit". Section 2--325.
15 "Between merchants". Section 2--104.
16 "Cancellation". Section 2--106(4).
17 "Commercial unit". Section 2--105.
18 "Confirmed credit". Section 2--325.
19 "Conforming to contract". Section 2--106.
20 "Contract for sale". Section 2--106.
21 "Cover". Section 2--712.
22 "Entrusting". Section 2--403.
23 "Financing agency". Section 2--104.
24 "Future goods". Section 2--105.
25 "Goods". Section 2--105.
26 "Identification". Section 2--501.
27 "Installment contract". Section 2--612.
28 "Letter of Credit". Section 2--325.
29 "Lot". Section 2--105.
30 "Merchant". Section 2--104.
31 "Overseas". Section 2--323.
32 "Person in position of seller". Section 2--707.
33 "Present sale". Section 2--106.
34 "Sale". Section 2--106.
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1 "Sale on approval". Section 2--326.
2 "Sale or return". Section 2--326.
3 "Termination". Section 2--106.
4 (3) The following definitions in other Articles apply to
5 this Article:
6 "Check". Section 3--104.
7 "Consignee". Section 7--102.
8 "Consignor". Section 7--102.
9 "Consumer goods". Section 9-102 9--109.
10 "Dishonor". Section 3-502 3--507.
11 "Draft". Section 3--104.
12 (4) In addition Article 1 contains general definitions
13 and principles of construction and interpretation applicable
14 throughout this Article.
15 (Source: Laws 1961, p. 2101.)
16 (810 ILCS 5/2-210) (from Ch. 26, par. 2-210)
17 Sec. 2-210. Delegation of performance; assignment of
18 rights.
19 (1) A party may perform his duty through a delegate
20 unless otherwise agreed or unless the other party has a
21 substantial interest in having his original promisor perform
22 or control the acts required by the contract. No delegation
23 of performance relieves the party delegating of any duty to
24 perform or any liability for breach.
25 (2) Except as otherwise provided in Section 9-406,
26 unless otherwise agreed all rights of either seller or buyer
27 can be assigned except where the assignment would materially
28 change the duty of the other party, or increase materially
29 the burden or risk imposed on him by his contract, or impair
30 materially his chance of obtaining return performance. A
31 right to damages for breach of the whole contract or a right
32 arising out of the assignor's due performance of his entire
33 obligation can be assigned despite agreement otherwise.
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1 (3) The creation, attachment, perfection, or enforcement
2 of a security interest in the seller's interest under a
3 contract is not a transfer that materially changes the duty
4 of or increases materially the burden or risk imposed on the
5 buyer or impairs materially the buyer's chance of obtaining
6 return performance with the purview of subsection (2) unless,
7 and then only to the extent that, enforcement actually
8 results in a delegation of material performance of the
9 seller. Even in that event, the creation, attachment,
10 perfection, and enforcement of the security interest remain
11 effective, but (i) the seller is liable to the buyer for
12 damages caused by the delegation to the extent that the
13 damages could not reasonably be prevented by the buyer, and
14 (ii) a court having jurisdiction may grant other appropriate
15 relief, including cancellation of the contract for sale or an
16 injunction against enforcement of the security interest or
17 consummation of the enforcement.
18 (4) (3) Unless the circumstances indicate the contrary a
19 prohibition of assignment of "the contract" is to be
20 construed as barring only the delegation to the assignee of
21 the assignor's performance.
22 (5) (4) An assignment of "the contract" or of "all my
23 rights under the contract" or an assignment in similar
24 general terms is an assignment of rights and unless the
25 language or the circumstances (as in an assignment for
26 security) indicate the contrary, it is a delegation of
27 performance of the duties of the assignor and its acceptance
28 by the assignee constitutes a promise by him to perform those
29 duties. This promise is enforceable by either the assignor or
30 the other party to the original contract.
31 (6) (5) The other party may treat any assignment which
32 delegates performance as creating reasonable grounds for
33 insecurity and may without prejudice to his rights against
34 the assignor demand assurances from the assignee (Section
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1 2--609).
2 (Source: Laws 1961, p. 2101.)
3 (810 ILCS 5/2-326) (from Ch. 26, par. 2-326)
4 Sec. 2-326. Sale on approval and sale or return;
5 consignment sales and rights of creditors.
6 (1) Unless otherwise agreed, if delivered goods may be
7 returned by the buyer even though they conform to the
8 contract, the transaction is
9 (a) a "sale on approval" if the goods are delivered
10 primarily for use, and
11 (b) a "sale or return" if the goods are delivered
12 primarily for resale.
13 (2) Except as provided in subsection (3), Goods held on
14 approval are not subject to the claims of the buyer's
15 creditors until acceptance; goods held on sale or return are
16 subject to such claims while in the buyer's possession.
17 (3) Where goods are delivered to a person for sale and
18 such person maintains a place of business at which he deals
19 in goods of the kind involved, under a name other than the
20 name of the person making delivery, then with respect to
21 claims of creditors of the person conducting the business the
22 goods are deemed to be on sale or return. The provisions of
23 this subsection are applicable even though an agreement
24 purports to reserve title to the person making delivery until
25 payment or resale or uses such words as "on consignment" or
26 "on memorandum". However, this subsection is not applicable
27 if the person making delivery
28 (a) complies with an applicable law providing for a
29 consignor's interest or the like to be evidenced by a sign,
30 or
31 (b) establishes that the person conducting the
32 business is generally known by his creditors to be
33 substantially engaged in selling the goods of others, or
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1 (c) complies with the filing provisions of the
2 Article on Secured Transactions (Article 9).
3 (4) Any "or return" term of a contract for sale is to be
4 treated as a separate contract for sale within the statute of
5 frauds section of this Article (Section 2--201) and as
6 contradicting the sale aspect of the contract within the
7 provisions of this Article on parol or extrinsic evidence
8 (Section 2--202).
9 (Source: Laws 1961, p. 2101.)
10 (810 ILCS 5/2-502) (from Ch. 26, par. 2-502)
11 Sec. 2-502. Buyer's right to goods on seller's
12 insolvency.
13 (1) Subject to subsections subsection (2) and (3) and
14 even though the goods have not been shipped a buyer who has
15 paid a part or all of the price of goods in which he has a
16 special property under the provisions of the immediately
17 preceding section may on making and keeping good a tender of
18 any unpaid portion of their price recover them from the
19 seller if:
20 (a) in the case of goods bought for personal,
21 family, or household purposes, the seller repudiates or
22 fails to deliver as required by the contract; or
23 (b) in all cases, the seller becomes insolvent
24 within 10 days after receipt of the first installment on
25 their price.
26 (2) The buyer's right to recover the goods under
27 subsection (1)(a) vests upon acquisition of a special
28 property, even if the seller had not then repudiated or
29 failed to deliver.
30 (3) If the identification creating his special property
31 has been made by the buyer he acquires the right to recover
32 the goods only if they conform to the contract for sale.
33 (Source: Laws 1961, p. 2101.)
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1 (810 ILCS 5/2-716) (from Ch. 26, par. 2-716)
2 Sec. 2-716. Buyer's right to specific performance or
3 replevin.
4 (1) Specific performance may be ordered where the goods
5 are unique or in other proper circumstances.
6 (2) The judgment for specific performance may include
7 such terms and conditions as to payment of the price,
8 damages, or other relief as the court may deem just.
9 (3) The buyer has a right of replevin for goods
10 identified to the contract if after reasonable effort he is
11 unable to effect cover for such goods or the circumstances
12 reasonably indicate that such effort will be unavailing or if
13 the goods have been shipped under reservation and
14 satisfaction of the security interest in them has been made
15 or tendered. In the case of goods bought for personal,
16 family, or household purposes, the buyer's right of replevin
17 vests upon acquisition of a special property, even if the
18 seller had not then repudiated or failed to deliver.
19 (Source: P.A. 84-545.)
20 (810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103)
21 Sec. 2A-103. Definitions and index of definitions.
22 (1) In this Article unless the context otherwise
23 requires:
24 (a) "Buyer in ordinary course of business" means a
25 person who, in good faith and without knowledge that the
26 sale to him or her is in violation of the ownership
27 rights or security interest or leasehold interest of a
28 third party in the goods, buys in ordinary course from a
29 person in the business of selling goods of that kind but
30 does not include a pawnbroker. "Buying" may be for cash
31 or by exchange of other property or on secured or
32 unsecured credit and includes receiving goods or
33 documents of title under a pre-existing contract for sale
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1 but does not include a transfer in bulk or as security
2 for or in total or partial satisfaction of a money debt.
3 (b) "Cancellation" occurs when either party puts an
4 end to the lease contract for default by the other party.
5 (c) "Commercial unit" means such a unit of goods as
6 by commercial usage is a single whole for purposes of
7 lease and division of which materially impairs its
8 character or value on the market or in use. A commercial
9 unit may be a single article, as a machine, or a set of
10 articles, as a suite of furniture or a line of machinery,
11 or a quantity, as a gross or carload, or any other unit
12 treated in use or in the relevant market as a single
13 whole.
14 (d) "Conforming" goods or performance under a lease
15 contract means goods or performance that are in
16 accordance with the obligations under the lease contract.
17 (e) "Consumer lease" means a lease that a lessor
18 regularly engaged in the business of leasing or selling
19 makes to a lessee who is an individual and who takes
20 under the lease primarily for a personal, family, or
21 household purpose, if the total payments to be made under
22 the lease contract, excluding payments for options to
23 renew or buy, do not exceed $40,000.
24 (f) "Fault" means wrongful act, omission, breach,
25 or default.
26 (g) "Finance lease" means a lease with respect to
27 which:
28 (i) the lessor does not select, manufacture,
29 or supply the goods;
30 (ii) the lessor acquires the goods or the
31 right to possession and use of the goods in
32 connection with the lease; and
33 (iii) one of the following occurs:
34 (A) the lessee receives a copy of the
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1 contract by which the lessor acquired the goods
2 or the right to possession and use of the goods
3 before signing the lease contract;
4 (B) the lessee's approval of the contract
5 by which the lessor acquired the goods or the
6 right to possession and use of the goods is a
7 condition to effectiveness of the lease
8 contract;
9 (C) the lessee, before signing the lease
10 contract, receives an accurate and complete
11 statement designating the promises and
12 warranties, and any disclaimers of warranties,
13 limitations or modifications of remedies, or
14 liquidated damages, including those of a third
15 party, such as the manufacturer of the goods,
16 provided to the lessor by the person supplying
17 the goods in connection with or as part of the
18 contract by which the lessor acquired the goods
19 or the right to possession and use of the
20 goods; or
21 (D) if the lease is not a consumer lease,
22 the lessor, before the lessee signs the lease
23 contract, informs the lessee in writing (a) of
24 the identity of the person supplying the goods
25 to the lessor, unless the lessee has selected
26 that person and directed the lessor to acquire
27 the goods or the right to possession and use of
28 the goods from that person, (b) that the lessee
29 is entitled under this Article to the promises
30 and warranties, including those of any third
31 party, provided to the lessor by the person
32 supplying the goods in connection with or as
33 part of the contract by which the lessor
34 acquired the goods or the right to possession
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1 and use of the goods, and (c) that the lessee
2 may communicate with the person supplying the
3 goods to the lessor and receive an accurate and
4 complete statement of those promises and
5 warranties, including any disclaimers and
6 limitations of them or of remedies.
7 (h) "Goods" means all things that are movable at
8 the time of identification to the lease contract, or are
9 fixtures (Section 2A-309), but the term does not include
10 money, documents, instruments, accounts, chattel paper,
11 general intangibles, or minerals or the like, including
12 oil and gas, before extraction. The term also includes
13 the unborn young of animals.
14 (i) "Installment lease contract" means a lease
15 contract that authorizes or requires the delivery of
16 goods in separate lots to be separately accepted, even
17 though the lease contract contains a clause "each
18 delivery is a separate lease" or its equivalent.
19 (j) "Lease" means a transfer of the right to
20 possession and use of goods for a term in return for
21 consideration, but a sale, including a sale on approval
22 or a sale or return, or retention or creation of a
23 security interest is not a lease. Unless the context
24 clearly indicates otherwise, the term includes a
25 sublease.
26 (k) "Lease agreement" means the bargain, with
27 respect to the lease, of the lessor and the lessee in
28 fact as found in their language or by implication from
29 other circumstances including course of dealing or usage
30 of trade or course of performance as provided in this
31 Article. Unless the context clearly indicates otherwise,
32 the term includes a sublease agreement.
33 (l) "Lease contract" means the total legal
34 obligation that results from the lease agreement as
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1 affected by this Article and any other applicable rules
2 of law. Unless the context clearly indicates otherwise,
3 the term includes a sublease contract.
4 (m) "Leasehold interest" means the interest of the
5 lessor or the lessee under a lease contact.
6 (n) "Lessee" means a person who acquires the right
7 to possession and use of goods under a lease. Unless the
8 context clearly indicates otherwise, the term includes a
9 sublessee.
10 (o) "Lessee in ordinary course of business" means a
11 person who in good faith and without knowledge that the
12 lease to him or her is in violation of the ownership
13 rights or security interest or leasehold interest of a
14 third party in the goods leases in ordinary course from a
15 person in the business of selling or leasing goods of
16 that kind but does not include a pawnbroker. "Leasing"
17 may be for cash or by exchange of other property or on
18 secured or unsecured credit and includes receiving goods
19 or documents of title under a pre-existing lease contract
20 but does not include a transfer in bulk or as security
21 for or in total or partial satisfaction of a money debt.
22 (p) "Lessor" means a person who transfers the right
23 to possession and use of goods under a lease. Unless the
24 context clearly indicates otherwise, the term includes a
25 sublessor.
26 (q) "Lessor's residual interest" means the lessor's
27 interest in the goods after expiration, termination, or
28 cancellation of the lease contract.
29 (r) "Lien" means a charge against or interest in
30 goods to secure payment of a debt or performance of an
31 obligation, but the term does not include a security
32 interest.
33 (s) "Lot" means a parcel or a single article that
34 is the subject matter of a separate lease or delivery,
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1 whether or not it is sufficient to perform the lease
2 contract.
3 (t) "Merchant lessee" means a lessee that is a
4 merchant with respect to goods of the kind subject to the
5 lease.
6 (u) "Present value" means the amount as of a date
7 certain of one or more sums payable in the future,
8 discounted to the date certain. The discount is
9 determined by the interest rate specified by the parties
10 if the rate was not manifestly unreasonable at the time
11 the transaction was entered into; otherwise, the discount
12 is determined by a commercially reasonable rate that
13 takes into account the facts and circumstances of each
14 case at the time the transaction was entered into.
15 (v) "Purchase" includes taking by sale, lease,
16 mortgage, security interest, pledge, gift, or any other
17 voluntary transaction creating an interest in goods.
18 (w) "Sublease" means a lease of goods the right to
19 possession and use of which was acquired by the lessor as
20 a lessee under an existing lease.
21 (x) "Supplier" means a person from whom a lessor
22 buys or leases goods to be leased under a finance lease.
23 (y) "Supply contract" means a contract under which
24 a lessor buys or leases goods to be leased.
25 (z) "Termination" occurs when either party pursuant
26 to a power created by agreement or law puts an end to the
27 lease contract otherwise than for default.
28 (2) Other definitions applying to this Article and the
29 Sections in which they appear are:
30 "Accessions". Section 2A-310(1).
31 "Construction mortgage". Section 2A-309(1)(d).
32 "Encumbrance". Section 2A-309(1)(e).
33 "Fixtures". Section 2A-309(1)(a).
34 "Fixture filing". Section 2A-309(1)(b).
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1 "Purchase money lease". Section 2A-309(1)(c).
2 (3) The following definitions in other Articles apply to
3 this Article:
4 "Account". Section 9-102(a)(2) 9-106.
5 "Between merchants". Section 2-104(3).
6 "Buyer". Section 2-103(1)(a).
7 "Chattel paper". Section 9-102(a)(11) 9-105 (1)(b).
8 "Consumer goods". Section 9-102(a)(23) 9-109(1).
9 "Document". Section 9-102(a)(30) 9-105 (1)(f).
10 "Entrusting". Section 2-403(3).
11 "General intangible intangibles". Section 9-102(a)(42)
12 9-106.
13 "Good faith". Section 2-103(1)(b).
14 "Instrument". Section 9-102(a)(47) 9-105 (1)(i).
15 "Merchant". Section 2-104(1).
16 "Mortgage". Section 9-102(a)(55) 9-105 (1)(j).
17 "Pursuant to commitment". Section 9-102(a)(68) 9-105
18 (1)(k).
19 "Receipt". Section 2-103(1)(c).
20 "Sale". Section 2-106(1).
21 "Sale on approval". Section 2-326.
22 "Sale or return". Section 2-326.
23 "Seller". Section 2-103(1)(d).
24 (4) In addition, Article 1 contains general definitions
25 and principles of construction and interpretation applicable
26 throughout this Article.
27 (Source: P.A. 87-493.)
28 (810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303)
29 Sec. 2A-303. Alienability of party's interest under
30 lease contract or of lessor's residual interest in goods;
31 delegation of performance; transfer of rights.
32 (1) As used in this Section, "creation of a security
33 interest" includes the sale of a lease contract that is
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1 subject to Article 9, Secured Transactions, by reason of
2 Section 9-109(a)(3) 9-102(1)(b).
3 (2) Except as provided in subsection subsections (3) and
4 Section 9-407 (4), a provision in a lease agreement which (i)
5 prohibits the voluntary or involuntary transfer, including a
6 transfer by sale, sublease, creation or enforcement of a
7 security interest, or attachment, levy, or other judicial
8 process, of an interest of a party under the lease contract
9 or of the lessor's residual interest in the goods, or (ii)
10 makes such a transfer an event of default, gives rise to the
11 rights and remedies provided in subsection (4) (5), but a
12 transfer that is prohibited or is an event of default under
13 the lease agreement is otherwise effective.
14 (3) A provision in a lease agreement which (i) prohibits
15 the creation or enforcement of a security interest in an
16 interest of a party under the lease contract or in the
17 lessor's residual interest in the goods, or (ii) makes such a
18 transfer an event of default, is not enforceable unless, and
19 then only to the extent that, there is an actual transfer by
20 the lessee of the lessee's right of possession or use of the
21 goods in violation of the provision or an actual delegation
22 of a material performance of either party to the lease
23 contract in violation of the provision. Neither the granting
24 nor the enforcement of a security interest in (i) the
25 lessor's interest under the lease contract or (ii) the
26 lessor's residual interest in the goods is a transfer that
27 materially impairs the prospect of obtaining return
28 performance by, materially changes the duty of, or materially
29 increases the burden or risk imposed on, the lessee within
30 the purview of subsection (5) unless, and then only to the
31 extent that, there is an actual delegation of a material
32 performance of the lessor.
33 (4) A provision in a lease agreement which (i) prohibits
34 a transfer of a right to damages for default with respect to
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1 the whole lease contract or of a right to payment arising out
2 of the transferor's due performance of the transferor's
3 entire obligation, or (ii) makes such a transfer an event of
4 default, is not enforceable, and such a transfer is not a
5 transfer that materially impairs the prospect of obtaining
6 return performance by, materially changes the duty of, or
7 materially increases the burden or risk imposed on, the other
8 party to the lease contract within the purview of subsection
9 (4) (5).
10 (4) (5) Subject to subsection subsections (3) and
11 Section 9-407 (4):
12 (a) if a transfer is made which is made an event of
13 default under a lease agreement, the party to the lease
14 contract not making the transfer, unless that party
15 waives the default or otherwise agrees, has the rights
16 and remedies described in Section 2A-501(2);
17 (b) if paragraph (a) is not applicable and if a
18 transfer is made that (i) is prohibited under a lease
19 agreement or (ii) materially impairs the prospect of
20 obtaining return performance by, materially changes the
21 duty of, or materially increases the burden of risk
22 imposed on, the other party to the lease contract, unless
23 the party not making the transfer agrees at any time to
24 the transfer in the lease contract or otherwise, then,
25 except as limited by contract, (i) the transferor is
26 liable to the party not making the transfer for damages
27 caused by the transfer to the extent that the damages
28 could not reasonably be prevented by the party not making
29 the transfer and (ii) a court having jurisdiction may
30 grant other appropriate relief, including cancellation of
31 the lease contract or an injunction against the transfer.
32 (5) (6) A transfer of "the lease" or of "all my rights
33 under the lease", or a transfer in similar general terms, is
34 a transfer of rights and, unless the language or the
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1 circumstances, as in a transfer for security, indicate the
2 contrary, the transfer is a delegation of duties by the
3 transferor to the transferee. Acceptance by the transferee
4 constitutes a promise by the transferee to perform those
5 duties. The promise is enforceable by either the transferor
6 or the other party to the lease contract.
7 (6) (7) Unless otherwise agreed by the lessor and the
8 lessee, a delegation of performance does not relieve the
9 transferor as against the other party of any duty to perform
10 or of any liability for default.
11 (7) (8) In a consumer lease, to prohibit the transfer of
12 an interest of a party under the lease contract or to make a
13 transfer an event of default, the language must be specific,
14 by a writing, and conspicuous.
15 (Source: P.A. 87-493.)
16 (810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307)
17 Sec. 2A-307. Priority of liens arising by attachment or
18 levy on, security interests in, and other claims to goods.
19 (1) Except as otherwise provided in Section 2A-306, a
20 creditor of a lessee takes subject to the lease contract.
21 (2) Except as otherwise provided in subsection
22 subsections (3) and (4) and in Sections 2A-306 and 2A-308, a
23 creditor of a lessor takes subject to the lease contract
24 unless: (a) the creditor holds a lien that attached to the
25 goods before the lease contract became enforceable,
26 (b) the creditor holds a security interest in the
27 goods and the lessee did not give value and receive
28 delivery of the goods without knowledge of the security
29 interest; or
30 (c) the creditor holds a security interest in the
31 goods which was perfected (Section 9-303) before the
32 lease contract became enforceable.
33 (3) Except as otherwise provided in Sections 9-317,
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1 9-321, and 9-323, a lessee takes a leasehold interest subject
2 to a security interest held by a creditor of the lessor. A
3 lessee in the ordinary course of business takes the leasehold
4 interest free of a security interest in the goods created by
5 the lessor even though the security interest is perfected
6 (Section 9-303) and the lessee knows of its existence.
7 (4) A lessee other than a lessee in the ordinary course
8 of business takes the leasehold interest free of a security
9 interest to the extent that it secures future advances made
10 after the secured party acquires knowledge of the lease or
11 more than 45 days after the lease contract becomes
12 enforceable, whichever first occurs, unless the future
13 advances are made pursuant to a commitment entered into
14 without knowledge of the lease and before the expiration of
15 the 45-day period.
16 (Source: P.A. 87-493.)
17 (810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309)
18 Sec. 2A-309. Lessor's and lessee's rights when goods
19 become fixtures.
20 (1) In this Section:
21 (a) goods are "fixtures" when they become so
22 related to particular real estate that an interest in
23 them arises under real estate law;
24 (b) a "fixture filing" is the filing, in the office
25 where a mortgage on the real estate would be filed or
26 recorded, of a financing statement covering goods that
27 are or are to become fixtures and conforming to the
28 requirements of Section 9-502(a) and (b) 9-402(5);
29 (c) a lease is a "purchase money lease" unless the
30 lessee has possession or use of the goods or the right to
31 possession or use of the goods before the lease agreement
32 is enforceable;
33 (d) a mortgage is a "construction mortgage" to the
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1 extent it secures an obligation incurred for the
2 construction of an improvement on land including the
3 acquisition cost of the land, if the recorded writing so
4 indicates; and
5 (e) "encumbrance" includes real estate mortgages
6 and other liens on real estate and all other rights in
7 real estate that are not ownership interests.
8 (2) Under this Article a lease may be of goods that are
9 fixtures or may continue in goods that become fixtures, but
10 no lease exists under this Article of ordinary building
11 materials incorporated into an improvement on land.
12 (3) This Article does not prevent creation of a lease of
13 fixtures pursuant to real estate law.
14 (4) The perfected interest of a lessor of fixtures has
15 priority over a conflicting interest of an encumbrancer or
16 owner of the real estate if:
17 (a) the lease is a purchase money lease, the
18 conflicting interest of the encumbrancer or owner arises
19 before the goods become fixtures, the interest of the
20 lessor is perfected by a fixture filing before the goods
21 become fixtures or within 10 days thereafter, and the
22 lessee has an interest of record in the real estate or is
23 in possession of the real estate; or
24 (b) the interest of the lessor is perfected by a
25 fixture filing before the interest of the encumbrancer or
26 owner is of record, the lessor's interest has priority
27 over any conflicting interest of a predecessor in title
28 of the encumbrancer or owner, and the lessee has an
29 interest of record in the real estate or is in possession
30 of the real estate.
31 (5) The interest of a lessor of fixtures, whether or not
32 perfected, has priority over the conflicting interest of an
33 encumbrancer or owner of the real estate if:
34 (a) the fixtures are readily removable factory or
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1 office machines, readily removable equipment that is not
2 primarily used or leased for use in the operation of the
3 real estate, or readily removable replacements of
4 domestic appliances that are goods subject to a consumer
5 lease, and before the goods become fixtures the lease
6 contract is enforceable; or
7 (b) the conflicting interest is a lien on the real
8 estate obtained by legal or equitable proceedings after
9 the lease contract is enforceable; or
10 (c) the encumbrancer or owner has consented in
11 writing to the lease or has disclaimed an interest in the
12 goods as fixtures; or
13 (d) the lessee has a right to remove the goods as
14 against the encumbrancer or owner. If the lessee's right
15 to remove terminates, the priority of the interest of the
16 lessor continues for a reasonable time.
17 (6) Notwithstanding subsection (4)(a) but otherwise
18 subject to subsections (4) and (5), the interest of a lessor
19 of fixtures, including the lessor's residual interest, is
20 subordinate to the conflicting interest of an encumbrancer of
21 the real estate under a construction mortgage recorded before
22 the goods become fixtures if the goods become fixtures before
23 the completion of the construction. To the extent given to
24 refinance a construction mortgage, the conflicting interest
25 of an encumbrancer of the real estate under a mortgage has
26 this priority to the same extent as the encumbrancer of the
27 real estate under the construction mortgage.
28 (7) In cases not within the preceding subsections,
29 priority between the interest of a lessor of fixtures,
30 including the lessor's residual interest, and the conflicting
31 interest of an encumbrancer or owner of the real estate who
32 is not the lessee is determined by the priority rules
33 governing conflicting interests in real estate.
34 (8) If the interest of a lessor of fixtures, including
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1 the lessor's residual interest, has priority over all
2 conflicting interests of all owners and encumbrancers of the
3 real estate, the lessor or the lessee may (i) on default,
4 expiration, termination, or cancellation of the lease
5 agreement but subject to the lease agreement and this
6 Article, or (ii) if necessary to enforce other rights and
7 remedies of the lessor or lessee under this Article, remove
8 the goods from the real estate, free and clear of all
9 conflicting interests of all owners and encumbrancers of the
10 real estate, but the lessor or lessee must reimburse any
11 encumbrancer or owner of the real estate who is not the
12 lessee and who has not otherwise agreed for the cost of
13 repair of any physical injury, but not for any diminution in
14 value of the real estate caused by the absence of the goods
15 removed or by any necessity of replacing them. A person
16 entitled to reimbursement may refuse permission to remove
17 until the party seeking removal gives adequate security for
18 the performance of this obligation.
19 (9) Even though the lease agreement does not create a
20 security interest, the interest of a lessor of fixtures,
21 including the lessor's residual interest, is perfected by
22 filing a financing statement as a fixture filing for leased
23 goods that are or are to become fixtures in accordance with
24 the relevant provisions of the Article on Secured
25 Transactions (Article 9).
26 (Source: P.A. 87-493.)
27 (810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
28 Sec. 4-210. Security interest of collecting bank in
29 items, accompanying documents and proceeds.
30 (a) A collecting bank has a security interest in an item
31 and any accompanying documents or the proceeds of either:
32 (1) in case of an item deposited in an account, to
33 the extent to which credit given for the item has been
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1 withdrawn or applied;
2 (2) in case of an item for which it has given
3 credit available for withdrawal as of right, to the
4 extent of the credit given, whether or not the credit is
5 drawn upon or there is a right of charge-back; or
6 (3) if it makes an advance on or against the item.
7 (b) If credit given for several items received at one
8 time or pursuant to a single agreement is withdrawn or
9 applied in part, the security interest remains upon all the
10 items, any accompanying documents or the proceeds of either.
11 For the purpose of this Section, credits first given are
12 first withdrawn.
13 (c) Receipt by a collecting bank of a final settlement
14 for an item is a realization on its security interest in the
15 item, accompanying documents, and proceeds. So long as the
16 bank does not receive final settlement for the item or give
17 up possession of the item or accompanying documents for
18 purposes other than collection, the security interest
19 continues to that extent and is subject to Article 9, but:
20 (1) no security agreement is necessary to make the
21 security interest enforceable Section 9-203(b)(3)(A)
22 9-203 (1)(a);
23 (2) no filing is required to perfect the security
24 interest; and
25 (3) the security interest has priority over
26 conflicting perfected security interests in the item,
27 accompanying documents, or proceeds.
28 (Source: P.A. 87-582; 87-1135.)
29 (810 ILCS 5/5-118 new)
30 Sec. 5-118. Security interest of issuer or nominated
31 person.
32 (a) An issuer or nominated person has a security
33 interest in a document presented under a letter of credit to
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1 the extent that the issuer or nominated person honors or
2 gives value for the presentation.
3 (b) So long as and to the extent that an issuer or
4 nominated person has not been reimbursed or has not otherwise
5 recovered the value given with respect to a security interest
6 in a document under subsection (a), the security interest
7 continues and is subject to Article 9, but:
8 (1) a security agreement is not necessary to make
9 the security interest enforceable under Section
10 9-203(b)(3);
11 (2) if the document is presented in a medium other
12 than a written or other tangible medium, the security
13 interest is perfected; and
14 (3) if the document is presented in a written or
15 other tangible medium and is not a certificated security,
16 chattel paper, a document of title, an instrument, or a
17 letter of credit, the security interest is perfected and
18 has priority over a conflicting security interest in the
19 document so long as the debtor does not have possession
20 of the document.
21 (810 ILCS 5/7-503) (from Ch. 26, par. 7-503)
22 Sec. 7-503. Document of title to goods defeated in
23 certain cases.
24 (1) A document of title confers no right in goods
25 against a person who before issuance of the document had a
26 legal interest or a perfected security interest in them and
27 who neither
28 (a) delivered or entrusted them or any document of
29 title covering them to the bailor or his nominee with actual
30 or apparent authority to ship, store, or sell with power to
31 obtain delivery under this Article (Section 7--403) or with
32 power of disposition under this Act (Sections 2--403 and
33 9-320 9--307) or other statute or rule of law; nor
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1 (b) acquiesced in the procurement by the bailor or
2 his nominee of any document of title.
3 (2) Title to goods based upon an unaccepted delivery
4 order is subject to the rights of anyone to whom a negotiable
5 warehouse receipt or bill of lading covering the goods has
6 been duly negotiated. Such a title may be defeated under the
7 next section to the same extent as the right of the issuer or
8 a transferee from the issuer.
9 (3) Title to goods based upon a bill of lading issued to
10 a freight forwarder is subject to the rights of anyone to
11 whom a bill issued by the freight forwarder is duly
12 negotiated; but delivery by the carrier in accordance with
13 Part 4 of this Article pursuant to its own bill of lading
14 discharges the carrier's obligation to deliver.
15 (Source: Laws 1961, p. 2101.)
16 (810 ILCS 5/8-103) (from Ch. 26, par. 8-103)
17 Sec. 8-103. Rules for determining whether certain
18 obligations and interests are securities or financial assets.
19 (a) A share or similar equity interest issued by a
20 corporation, business trust, joint stock company, or similar
21 entity is a security.
22 (b) An "investment company security" is a security.
23 "Investment company security" means a share or similar equity
24 interest issued by an entity that is registered as an
25 investment company under the federal investment company laws,
26 an interest in a unit investment trust that is so registered,
27 or a face-amount certificate issued by a face-amount
28 certificate company that is so registered. Investment
29 company security does not include an insurance policy or
30 endowment policy or annuity contract issued by an insurance
31 company.
32 (c) An interest in a partnership or limited liability
33 company is not a security unless it is dealt in or traded on
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1 securities exchanges or in securities markets, its terms
2 expressly provide that it is a security governed by this
3 Article, or it is an investment company security. However,
4 an interest in a partnership or limited liability company is
5 a financial asset if it is held in a securities account.
6 (d) A writing that is a security certificate is governed
7 by this Article and not by Article 3, even though it also
8 meets the requirements of that Article. However, a
9 negotiable instrument governed by Article 3 is a financial
10 asset if it is held in a securities account.
11 (e) An option or similar obligation issued by a clearing
12 corporation to its participants is not a security, but is a
13 financial asset.
14 (f) A commodity contract, as defined in Section
15 9-102(a)(15) 9-115, is not a security or a financial asset.
16 (Source: P.A. 89-364, eff. 1-1-96.)
17 (810 ILCS 5/8-106) (from Ch. 26, par. 8-106)
18 Sec. 8-106. Control.
19 (a) A purchaser has "control" of a certificated security
20 in bearer form if the certificated security is delivered to
21 the purchaser.
22 (b) A purchaser has "control" of a certificated security
23 in registered form if the certificated security is delivered
24 to the purchaser, and:
25 (1) the certificate is indorsed to the purchaser or
26 in blank by an effective indorsement; or
27 (2) the certificate is registered in the name of
28 the purchaser, upon original issue or registration of
29 transfer by the issuer.
30 (c) A purchaser has "control" of an uncertificated
31 security if:
32 (1) the uncertificated security is delivered to the
33 purchaser; or
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1 (2) the issuer has agreed that it will comply with
2 instructions originated by the purchaser without further
3 consent by the registered owner; or
4 (3) another person has control of the security
5 entitlement on behalf of the purchaser or, having
6 previously acquired control of the security entitlement,
7 acknowledges that it has control on behalf of the
8 purchaser.
9 (d) A purchaser has "control" of a security entitlement
10 if:
11 (1) the purchaser becomes the entitlement holder;
12 or
13 (2) the securities intermediary has agreed that it
14 will comply with entitlement orders originated by the
15 purchaser without further consent by the entitlement
16 holder.
17 (e) If an interest in a security entitlement is granted
18 by the entitlement holder to the entitlement holder's own
19 securities intermediary, the securities intermediary has
20 control.
21 (f) A purchaser who has satisfied the requirements of
22 subsection (c)(2) or (d)(2) has control even if the
23 registered owner in the case of subsection (c)(2) or the
24 entitlement holder in the case of subsection (d)(2) retains
25 the right to make substitutions for the uncertificated
26 security or security entitlement, to originate instructions
27 or entitlement orders to the issuer or securities
28 intermediary, or otherwise to deal with the uncertificated
29 security or security entitlement.
30 (g) An issuer or a securities intermediary may not enter
31 into an agreement of the kind described in subsection (c)(2)
32 or (d)(2) without the consent of the registered owner or
33 entitlement holder, but an issuer or a securities
34 intermediary is not required to enter into such an agreement
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1 even though the registered owner or entitlement holder so
2 directs. An issuer or securities intermediary that has
3 entered into such an agreement is not required to confirm the
4 existence of the agreement to another party unless requested
5 to do so by the registered owner or entitlement holder.
6 (Source: P.A. 89-364, eff. 1-1-96.)
7 (810 ILCS 5/8-110)
8 Sec. 8-110. Applicability; choice of law.
9 (a) The local law of the issuer's jurisdiction, as
10 specified in subsection (d), governs:
11 (1) the validity of a security;
12 (2) the rights and duties of the issuer with
13 respect to registration of transfer;
14 (3) the effectiveness of registration of transfer
15 by the issuer;
16 (4) whether the issuer owes any duties to an
17 adverse claimant to a security; and
18 (5) whether an adverse claim can be asserted
19 against a person to whom transfer of a certificated or
20 uncertificated security is registered or a person who
21 obtains control of an uncertificated security.
22 (b) The local law of the securities intermediary's
23 jurisdiction, as specified in subsection (e), governs:
24 (1) acquisition of a security entitlement from the
25 securities intermediary;
26 (2) the rights and duties of the securities
27 intermediary and entitlement holder arising out of a
28 security entitlement;
29 (3) whether the securities intermediary owes any
30 duties to an adverse claimant to a security entitlement;
31 and
32 (4) whether an adverse claim can be asserted
33 against a person who acquires a security entitlement from
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1 the securities intermediary or a person who purchases a
2 security entitlement or interest therein from an
3 entitlement holder.
4 (c) The local law of the jurisdiction in which a
5 security certificate is located at the time of delivery
6 governs whether an adverse claim can be asserted against a
7 person to whom the security certificate is delivered.
8 (d) "Issuer's jurisdiction" means the jurisdiction under
9 which the issuer of the security is organized or, if
10 permitted by the law of that jurisdiction, the law of another
11 jurisdiction specified by the issuer. An issuer organized
12 under the law of this State may specify the law of another
13 jurisdiction as the law governing the matters specified in
14 subsection (a)(2) through (5).
15 (e) The following rules determine a "securities
16 intermediary's jurisdiction" for purposes of this Section:
17 (1) If an agreement between the securities
18 intermediary and its entitlement holder governing the
19 securities account expressly provides that a particular
20 jurisdiction is the securities intermediary's
21 jurisdiction for purposes of this Part, this Article, or
22 this Act specifies that it is governed by the law of a
23 particular jurisdiction, that jurisdiction is the
24 securities intermediary's jurisdiction.
25 (2) If paragraph (1) does not apply and an
26 agreement between the securities intermediary and its
27 entitlement holder governing the securities account
28 expressly provides that the agreement is governed by the
29 law of a particular jurisdiction, that jurisdiction is
30 the securities intermediary's jurisdiction.
31 (3) If neither paragraph (1) nor paragraph (2)
32 applies and an agreement between the securities
33 intermediary and its entitlement holder governing the
34 securities account does not specify the governing law as
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1 provided in paragraph (1), but expressly provides
2 specifies that the securities account is maintained at an
3 office in a particular jurisdiction, that jurisdiction is
4 the securities intermediary's jurisdiction.
5 (4) (3) If none of the preceding paragraphs applies
6 an agreement between the securities intermediary and its
7 entitlement holder does not specify a jurisdiction as
8 provided in paragraph (1) or (2), the securities
9 intermediary's jurisdiction is the jurisdiction in which
10 is located the office identified in an account statement
11 as the office serving the entitlement holder's account is
12 located.
13 (5) (4) If none of the preceding paragraphs
14 applies, an agreement between the securities intermediary
15 and its entitlement holder does not specify a
16 jurisdiction as provided in paragraph (1) or (2) and an
17 account statement does not identify an office serving the
18 entitlement holder's account as provided in paragraph
19 (3), the securities intermediary's jurisdiction is the
20 jurisdiction in which is located the chief executive
21 office of the securities intermediary is located.
22 (f) A securities intermediary's jurisdiction is not
23 determined by the physical location of certificates
24 representing financial assets, or by the jurisdiction in
25 which is organized the issuer of the financial asset with
26 respect to which an entitlement holder has a security
27 entitlement, or by the location of facilities for data
28 processing or other record keeping concerning the account.
29 (Source: P.A. 89-364, eff. 1-1-96.)
30 (810 ILCS 5/8-301) (from Ch. 26, par. 8-301)
31 Sec. 8-301. Delivery.
32 (a) Delivery of a certificated security to a purchaser
33 occurs when:
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1 (1) the purchaser acquires possession of the
2 security certificate;
3 (2) another person, other than a securities
4 intermediary, either acquires possession of the security
5 certificate on behalf of the purchaser or, having
6 previously acquired possession of the certificate,
7 acknowledges that it holds for the purchaser; or
8 (3) a securities intermediary acting on behalf of
9 the purchaser acquires possession of the security
10 certificate, only if the certificate is in registered
11 form and is (i) registered in the name of the purchaser,
12 (ii) payable to the order of the purchaser, or (iii) has
13 been specially indorsed to the purchaser by an effective
14 indorsement and has not been indorsed to the securities
15 intermediary or in blank.
16 (b) Delivery of an uncertificated security to a
17 purchaser occurs when:
18 (1) the issuer registers the purchaser as the
19 registered owner, upon original issue or registration of
20 transfer; or
21 (2) another person, other than a securities
22 intermediary, either becomes the registered owner of the
23 uncertificated security on behalf of the purchaser or,
24 having previously become the registered owner,
25 acknowledges that it holds for the purchaser.
26 (Source: P.A. 89-364, eff. 1-1-96.)
27 (810 ILCS 5/8-302) (from Ch. 26, par. 8-302)
28 Sec. 8-302. Rights of purchaser.
29 (a) Except as otherwise provided in subsections (b) and
30 (c), upon delivery of a certificated or uncertificated
31 security to a purchaser, the purchaser acquires all rights in
32 the security that the transferor had or had power to
33 transfer.
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1 (b) A purchaser of a limited interest acquires rights
2 only to the extent of the interest purchased.
3 (c) A purchaser of a certificated security who as a
4 previous holder had notice of an adverse claim does not
5 improve its position by taking from a protected purchaser.
6 (Source: P.A. 89-364, eff. 1-1-96.)
7 (810 ILCS 5/8-510)
8 Sec. 8-510. Rights of purchaser of security entitlement
9 from entitlement holder.
10 (a) In a case not covered by the priority rules in
11 Article 9 or the rules stated in subsection (c), an action
12 based on an adverse claim to a financial asset or security
13 entitlement, whether framed in conversion, replevin,
14 constructive trust, equitable lien, or other theory, may not
15 be asserted against a person who purchases a security
16 entitlement, or an interest therein, from an entitlement
17 holder if the purchaser gives value, does not have notice of
18 the adverse claim, and obtains control.
19 (b) If an adverse claim could not have been asserted
20 against an entitlement holder under Section 8-502, the
21 adverse claim cannot be asserted against a person who
22 purchases a security entitlement, or an interest therein,
23 from the entitlement holder.
24 (c) In a case not covered by the priority rules in
25 Article 9, a purchaser for value of a security entitlement,
26 or an interest therein, who obtains control has priority over
27 a purchaser of a security entitlement, or an interest
28 therein, who does not obtain control. Except as otherwise
29 provided in subsection (d), purchasers who have control rank
30 according to priority in time of:
31 (1) the purchaser's becoming the person for whom
32 the securities account, in which the security entitlement
33 is carried, is maintained, if the purchaser obtained
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1 control under Section 8-106(d)(1);
2 (2) the securities intermediary's agreement to
3 comply with the purchaser's entitlement orders with
4 respect to security entitlements carried or to be
5 carried in the securities account in which the security
6 entitlement is carried, if the purchaser obtained control
7 under Section 8-106(d)(2); or
8 (3) if the purchaser obtained control through
9 another person under Section 8-106(d)(3), the time on
10 which priority would be based under this subsection if
11 the other person were the secured party.
12 (d) A equally, except that a securities intermediary as
13 purchaser has priority over a conflicting purchaser who has
14 control unless otherwise agreed by the securities
15 intermediary.
16 (Source: P.A. 89-364, eff. 1-1-96.)
17 Section 15. The Local Records Act is amended by changing
18 Section 14 as follows:
19 (50 ILCS 205/14) (from Ch. 116, par. 43.114)
20 Sec. 14. Part 5 4 of Article 9 of the "Uniform Commercial
21 Code", approved July 31, 1961, as amended, is subject to the
22 provisions of this Act, as now or hereafter amended.
23 (Source: P.A. 76-1708.)
24 Section 20. The Counties Code is amended by changing
25 Section 3-5018 as follows:
26 (55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018)
27 Sec. 3-5018. Fees. The recorder elected as provided for
28 in this Division shall receive such fees as are or may be
29 provided for him by law, in case of provision therefor:
30 otherwise he shall receive the same fees as are or may be
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1 provided in this Section, except when increased by county
2 ordinance pursuant to the provisions of this Section, to be
3 paid to the county clerk for his services in the office of
4 recorder for like services. No filing fee shall be charged
5 for providing informational copies of financing statements to
6 the recorder pursuant to subsection (8) of Section 9-403 of
7 the Uniform Commercial Code.
8 For recording deeds or other instruments $12 for the
9 first 4 pages thereof, plus $1 for each additional page
10 thereof, plus $1 for each additional document number therein
11 noted. The aggregate minimum fee for recording any one
12 instrument shall not be less than $12.
13 For recording deeds or other instruments wherein the
14 premises affected thereby are referred to by document number
15 and not by legal description a fee of $1 in addition to that
16 hereinabove referred to for each document number therein
17 noted.
18 For recording assignments of mortgages, leases or liens
19 $12 for the first 4 pages thereof, plus $1 for each
20 additional page thereof. However, except for leases and
21 liens pertaining to oil, gas and other minerals, whenever a
22 mortgage, lease or lien assignment assigns more than one
23 mortgage, lease or lien document, a $7 fee shall be charged
24 for the recording of each such mortgage, lease or lien
25 document after the first one.
26 For recording maps or plats of additions or subdivisions
27 approved by the county or municipality (including the
28 spreading of the same of record in map case or other proper
29 books) or plats of condominiums $50 for the first page, plus
30 $1 for each additional page thereof except that in the case
31 of recording a single page, legal size 8 1/2 x 14, plat of
32 survey in which there are no more than two lots or parcels of
33 land, the fee shall be $12. In each county where such maps
34 or plats are to be recorded, the recorder may require the
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1 same to be accompanied by such number of exact, true and
2 legible copies thereof as the recorder deems necessary for
3 the efficient conduct and operation of his office.
4 For certified copies of records the same fees as for
5 recording, but in no case shall the fee for a certified copy
6 of a map or plat of an addition, subdivision or otherwise
7 exceed $10.
8 Each certificate of such recorder of the recording of the
9 deed or other writing and of the date of recording the same
10 signed by such recorder, shall be sufficient evidence of the
11 recording thereof, and such certificate including the
12 indexing of record, shall be furnished upon the payment of
13 the fee for recording the instrument, and no additional fee
14 shall be allowed for the certificate or indexing.
15 The recorder shall charge an additional fee, in an amount
16 equal to the fee otherwise provided by law, for recording a
17 document (other than a document filed under the Plat Act or
18 the Uniform Commercial Code) that does not conform to the
19 following standards:
20 (1) The document shall consist of one or more
21 individual sheets measuring 8.5 inches by 11 inches, not
22 permanently bound and not a continuous form. Graphic
23 displays accompanying a document to be recorded that
24 measure up to 11 inches by 17 inches shall be recorded
25 without charging an additional fee.
26 (2) The document shall be legibly printed in black
27 ink, by hand, type, or computer. Signatures and dates
28 may be in contrasting colors if they will reproduce
29 clearly.
30 (3) The document shall be on white paper of not
31 less than 20-pound weight and shall have a clean margin
32 of at least one-half inch on the top, the bottom, and
33 each side. Margins may be used for non-essential
34 notations that will not affect the validity of the
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1 document, including but not limited to form numbers, page
2 numbers, and customer notations.
3 (4) The first page of the document shall contain a
4 blank space, measuring at least 3 inches by 5 inches,
5 from the upper right corner.
6 (5) The document shall not have any attachment
7 stapled or otherwise affixed to any page.
8 A document that does not conform to these standards shall not
9 be recorded except upon payment of the additional fee
10 required under this paragraph. This paragraph, as amended by
11 this amendatory Act of 1995, applies only to documents dated
12 after the effective date of this amendatory Act of 1995.
13 The county board of any county may provide for an
14 additional charge of $3 for filing every instrument, paper,
15 or notice for record, in order to defray the cost of
16 converting the county recorder's document storage system to
17 computers or micrographics.
18 A special fund shall be set up by the treasurer of the
19 county and such funds collected pursuant to Public Act
20 83-1321 shall be used solely for a document storage system to
21 provide the equipment, materials and necessary expenses
22 incurred to help defray the costs of implementing and
23 maintaining such a document records system.
24 The foregoing fees allowed by this Section are the
25 maximum fees that may be collected from any officer, agency,
26 department or other instrumentality of the State. The county
27 board may, however, by ordinance, increase the fees allowed
28 by this Section and collect such increased fees from all
29 persons and entities other than officers, agencies,
30 departments and other instrumentalities of the State if the
31 increase is justified by an acceptable cost study showing
32 that the fees allowed by this Section are not sufficient to
33 cover the cost of providing the service.
34 A statement of the costs of providing each service,
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1 program and activity shall be prepared by the county board.
2 All supporting documents shall be public record and subject
3 to public examination and audit. All direct and indirect
4 costs, as defined in the United States Office of Management
5 and Budget Circular A-87, may be included in the
6 determination of the costs of each service, program and
7 activity.
8 (Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.)
9 Section 25. The Public Utilities Act is amended by
10 changing Section 18-107 as follows:
11 (220 ILCS 5/18-107)
12 Sec. 18-107. Security interests in intangible transition
13 property and grantee instruments.
14 (a) Notwithstanding any other provision of law, neither
15 intangible transition property, grantee instruments nor any
16 right, title or interest therein, shall constitute property
17 in which a security interest may be created under the Uniform
18 Commercial Code nor shall any such rights be deemed proceeds
19 of any property which is not intangible transition property
20 or grantee instruments, as the case may be. For purposes of
21 the foregoing, the terms "account", and "general intangible",
22 (as defined under Section 9-106 of the Uniform Commercial
23 Code) and the term "instrument", and "payment intangible" (as
24 defined under Section 9-102 9-105 of the Uniform Commercial
25 Code) shall, as used in the Uniform Commercial Code, be
26 deemed to exclude any such intangible transition property,
27 grantee instruments or any right, title, or interest therein.
28 (b) The granting, perfection and enforcement of security
29 interests in intangible transition property or grantee
30 instruments are governed by this Section rather than by
31 Article 9 of the Uniform Commercial Code.
32 (c) A valid and enforceable security interest in
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1 intangible transition property and in grantee instruments
2 shall attach and be perfected only by the means set forth
3 below in this subsection (c) of Section 18-107:
4 (1) To the extent transitional funding instruments
5 or grantee instruments are purported to be secured by
6 intangible transition property or to the extent
7 transitional funding instruments are purported to be
8 secured by grantee instruments, as the case may be, as
9 specified in the applicable transitional funding order,
10 the lien of the transitional funding instruments and
11 grantee instruments, if any, shall attach automatically
12 to such intangible transition property and grantee
13 instruments, if any, from the time of issuance of the
14 transitional funding instruments and grantee instruments,
15 if any. Such lien shall be a valid and enforceable
16 security interest in the intangible transition property
17 or the grantee instruments, as the case may be, securing
18 the transitional funding instruments and grantee
19 instruments, if any, and shall be continuously perfected
20 if, before the date of issuance of the applicable
21 transitional funding instruments or grantee instruments,
22 if any, or within no more than 10 days thereafter, a
23 filing has been made by or on behalf of the holder with
24 the Chief Clerk of the Commission stating that such
25 transitional funding instruments or grantee instruments,
26 if any, have been issued. Any such filing made with the
27 Commission in respect to such transitional funding
28 instruments or grantee instruments shall take precedence
29 over any subsequent filing except as may otherwise be
30 provided in the applicable transitional funding order.
31 (2) The liens under subparagraph (1) are
32 enforceable against the electric utility, any assignee,
33 grantee or issuer, and all third parties, including
34 judicial lien creditors, subject only to the rights of
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1 any third parties holding security interests in the
2 intangible transition property or grantee instruments
3 previously perfected in the manner described in this
4 subsection if value has been given by the purchasers of
5 transitional funding instruments or grantee instruments.
6 A perfected lien in intangible transition property and
7 grantee instruments, if any, is a continuously perfected
8 security interest in all then existing or thereafter
9 arising revenues and proceeds arising with respect to the
10 associated intangible transition property or grantee
11 instruments, as the case may be, whether or not the
12 electric power and energy included in the calculation of
13 such revenues and proceeds have been provided. The lien
14 created under this subsection is perfected and ranks
15 prior to any other lien, including any judicial lien,
16 which subsequently attaches to the intangible transition
17 property or grantee instruments, as the case may be, and
18 to any other rights created by the transitional funding
19 order or any revenues or proceeds of the foregoing. The
20 relative priority of a lien created under this subsection
21 is not defeated or adversely affected by changes to the
22 transitional funding order or to the instrument funding
23 charges payable by any retail customer, class of retail
24 customers or other person or group of persons obligated
25 to pay such charges.
26 (3) The relative priority of a lien created under
27 this subsection is not defeated or adversely affected by
28 the commingling of revenues arising with respect to
29 intangible transition property or grantee instruments
30 with funds of the electric utility or other funds of the
31 assignee, issuer or grantee.
32 (4) If an event of default occurs under
33 transitional funding instruments or grantee instruments,
34 the holders thereof or their authorized representatives,
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1 as secured parties, may foreclose or otherwise enforce
2 the lien in the grantee instruments or in the intangible
3 transition property securing the transitional funding
4 instruments or grantee instruments, as applicable,
5 subject to the rights of any third parties holding prior
6 security interests in the intangible transition property
7 or grantee instruments previously perfected in the manner
8 provided in this subsection. Upon application by the
9 holders or their authorized representatives, without
10 limiting their other remedies, the Commission shall order
11 the sequestration and payment to the holders or their
12 authorized representatives of revenues arising with
13 respect to the intangible transition property or grantee
14 instruments pledged to the holders. An order under this
15 subsection shall remain in full force and effect
16 notwithstanding any bankruptcy, reorganization, or other
17 insolvency proceedings with respect to the electric
18 utility, grantee, assignee or issuer.
19 (5) The Commission shall maintain segregated
20 records which reflect the date and time of receipt of all
21 filings made under this subsection. The Commission may
22 provide that transfers of intangible transition property
23 or of grantee instruments be filed in accordance with the
24 same system.
25 (Source: P.A. 90-561, eff. 12-16-97.)
26 Section 30. The Illinois Vehicle Code is amended by
27 changing Section 3-114 as follows:
28 (625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114)
29 Sec. 3-114. Transfer by operation of law.
30 (a) If the interest of an owner in a vehicle passes to
31 another other than by voluntary transfer, the transferee
32 shall, except as provided in paragraph (b), promptly mail or
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1 deliver within 20 days to the Secretary of State the last
2 certificate of title, if available, proof of the transfer,
3 and his application for a new certificate in the form the
4 Secretary of State prescribes. It shall be unlawful for any
5 person having possession of a certificate of title for a
6 motor vehicle, semi-trailer, or house car by reason of his
7 having a lien or encumbrance on such vehicle, to fail or
8 refuse to deliver such certificate to the owner, upon the
9 satisfaction or discharge of the lien or encumbrance,
10 indicated upon such certificate of title.
11 (b) If the interest of an owner in a vehicle passes to
12 another under the provisions of the Small Estates provisions
13 of the Probate Act of 1975 the transferee shall promptly mail
14 or deliver to the Secretary of State, within 120 days, the
15 last certificate of title, if available, the documentation
16 required under the provisions of the Probate Act of 1975, and
17 an application for certificate of title. The Small Estate
18 Affidavit form shall be furnished by the Secretary of State.
19 The transfer may be to the transferee or to the nominee of
20 the transferee.
21 (c) If the interest of an owner in a vehicle passes to
22 another under other provisions of the Probate Act of 1975, as
23 amended, and the transfer is made by a representative or
24 guardian, such transferee shall promptly mail or deliver to
25 the Secretary of State, the last certificate of title, if
26 available, and a certified copy of the letters of office or
27 guardianship, and an application for certificate of title.
28 Such application shall be made before the estate is closed.
29 The transfer may be to the transferee or to the nominee of
30 the transferee.
31 (d) If the interest of an owner in joint tenancy passes
32 to the other joint tenant with survivorship rights as
33 provided by law, the transferee shall promptly mail or
34 deliver to the Secretary of State, the last certificate of
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1 title, if available, proof of death of the one joint tenant
2 and survivorship of the surviving joint tenant, and an
3 application for certificate of title. Such application shall
4 be made within 120 days after the death of the joint tenant.
5 The transfer may be to the transferee or to the nominee of
6 the transferee.
7 (e) The Secretary of State shall transfer a decedent's
8 vehicle title to any legatee, representative or heir of the
9 decedent who submits to the Secretary a death certificate and
10 an affidavit by an attorney at law on the letterhead
11 stationery of the attorney at law stating the facts of the
12 transfer.
13 (f) Repossession with assignment of title. In all cases
14 wherein a lienholder has repossessed a vehicle by other than
15 judicial process and holds it for resale under a security
16 agreement, and the owner of record has executed an assignment
17 of the existing certificate of title after default, the
18 lienholder may proceed to sell or otherwise dispose of the
19 vehicle as authorized under the Uniform Commercial Code.
20 Upon selling the vehicle to another person, the lienholder
21 need not send the certificate of title to the Secretary of
22 State, but shall promptly and within 20 days mail or deliver
23 to the purchaser as transferee the existing certificate of
24 title for the repossessed vehicle, reflecting the release of
25 the lienholder's security interest in the vehicle. The
26 application for a certificate of title made by the purchaser
27 shall comply with subsection (a) of Section 3-104 and be
28 accompanied by the existing certificate of title for the
29 repossessed vehicle. The lienholder shall execute the
30 assignment and warranty of title showing the name and address
31 of the purchaser in the spaces provided therefor on the
32 certificate of title or as the Secretary of State prescribes.
33 The lienholder shall complete the assignment of title in the
34 certificate of title to reflect the transfer of the vehicle
-307- LRB9106284JSpcam04
1 to the lienholder and also a reassignment to reflect the
2 transfer from the lienholder to the purchaser. For this
3 purpose, the lienholder is specifically authorized to
4 complete and execute the space reserved in the certificate of
5 title for a dealer reassignment, notwithstanding that the
6 lienholder is not a licensed dealer. Nothing herein shall be
7 construed to mean that the lienholder is taking title to the
8 repossessed vehicle for purposes of liability for retailer
9 occupation, vehicle use, or other tax with respect to the
10 proceeds from the repossession sale. Delivery of the
11 existing certificate of title to the purchaser shall be
12 deemed disclosure to the purchaser of the owner of the
13 vehicle.
14 (f-5) Repossession without assignment of title. In all
15 cases wherein a lienholder has repossessed a vehicle by other
16 than judicial process and holds it for resale under a
17 security agreement, and the owner of record has not executed
18 an assignment of the existing certificate of title, the
19 lienholder shall comply with the following provisions:
20 (1) Prior to sale, the lienholder shall deliver or
21 mail to the owner at the owner's last known address and
22 to any other lienholder of record, a notice of redemption
23 setting forth the following information: (i) the name of
24 the owner of record and in bold type at or near the top
25 of the notice a statement that the owner's vehicle was
26 repossessed on a specified date for failure to make
27 payments on the loan (or other reason), (ii) a
28 description of the vehicle subject to the lien sufficient
29 to identify it, (iii) the right of the owner to redeem
30 the vehicle, (iv) the lienholder's intent to sell or
31 otherwise dispose of the vehicle after the expiration of
32 21 days from the date of mailing or delivery of the
33 notice, and (v) the name, address, and telephone number
34 of the lienholder from whom information may be obtained
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1 concerning the amount due to redeem the vehicle and from
2 whom the vehicle may be redeemed under Section 9-623
3 9-506 of the Uniform Commercial Code. At the
4 lienholder's option, the information required to be set
5 forth in this notice of redemption may be made a part of
6 or accompany the notification of sale or other
7 disposition required under subsection (3) of Section
8 9-611 9-504 of the Uniform Commercial Code, but none of
9 the information required by this notice shall be
10 construed to impose any requirement under Article 9 of
11 the Uniform Commercial Code.
12 (2) With respect to the repossession of a vehicle
13 used primarily for personal, family, or household
14 purposes, the lienholder shall also deliver or mail to
15 the owner at the owner's last known address an affidavit
16 of defense. The affidavit of defense shall accompany the
17 notice of redemption required in subdivision (f-5)(1) of
18 this Section. The affidavit of defense shall (i) identify
19 the lienholder, owner, and the vehicle; (ii) provide
20 space for the owner to state the defense claimed by the
21 owner; and (iii) include an acknowledgment by the owner
22 that the owner may be liable to the lienholder for fees,
23 charges, and costs incurred by the lienholder in
24 establishing the insufficiency or invalidity of the
25 owner's defense. To stop the transfer of title, the
26 affidavit of defense must be received by the lienholder
27 no later than 21 days after the date of mailing or
28 delivery of the notice required in subdivision (f-5)(1)
29 of this Section. If the lienholder receives the affidavit
30 from the owner in a timely manner, the lienholder must
31 apply to a court of competent jurisdiction to determine
32 if the lienholder is entitled to possession of the
33 vehicle.
34 (3) Upon selling the vehicle to another person, the
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1 lienholder need not send the certificate of title to the
2 Secretary of State, but shall promptly and within 20 days
3 mail or deliver to the purchaser as transferee (i) the
4 existing certificate of title for the repossessed
5 vehicle, reflecting the release of the lienholder's
6 security interest in the vehicle; and (ii) an affidavit
7 of repossession made by or on behalf of the lienholder
8 which provides the following information: that the
9 vehicle was repossessed, a description of the vehicle
10 sufficient to identify it, whether the vehicle has been
11 damaged in excess of 33 1/3% of its fair market value as
12 required under subdivision (b)(3) of Section 3-117.1,
13 that the owner and any other lienholder of record were
14 given the notice required in subdivision (f-5)(1) of this
15 Section, that the owner of record was given the affidavit
16 of defense required in subdivision (f-5)(2) of this
17 Section, that the interest of the owner was lawfully
18 terminated or sold pursuant to the terms of the security
19 agreement, and the purchaser's name and address. If the
20 vehicle is damaged in excess of 33 1/3% of its fair
21 market value, the lienholder shall make application for a
22 salvage certificate under Section 3-117.1 and transfer
23 the vehicle to a person eligible to receive assignments
24 of salvage certificates identified in Section 3-118.
25 (4) The application for a certificate of title made
26 by the purchaser shall comply with subsection (a) of
27 Section 3-104 and be accompanied by the affidavit of
28 repossession furnished by the lienholder and the existing
29 certificate of title for the repossessed vehicle. The
30 lienholder shall execute the assignment and warranty of
31 title showing the name and address of the purchaser in
32 the spaces provided therefor on the certificate of title
33 or as the Secretary of State prescribes. The lienholder
34 shall complete the assignment of title in the certificate
-310- LRB9106284JSpcam04
1 of title to reflect the transfer of the vehicle to the
2 lienholder and also a reassignment to reflect the
3 transfer from the lienholder to the purchaser. For this
4 purpose, the lienholder is specifically authorized to
5 execute the assignment on behalf of the owner as seller
6 if the owner has not done so and to complete and execute
7 the space reserved in the certificate of title for a
8 dealer reassignment, notwithstanding that the lienholder
9 is not a licensed dealer. Nothing herein shall be
10 construed to mean that the lienholder is taking title to
11 the repossessed vehicle for purposes of liability for
12 retailer occupation, vehicle use, or other tax with
13 respect to the proceeds from the repossession sale.
14 Delivery of the existing certificate of title to the
15 purchaser shall be deemed disclosure to the purchaser of
16 the owner of the vehicle. In the event the lienholder
17 does not hold the certificate of title for the
18 repossessed vehicle, the lienholder shall make
19 application for and may obtain a new certificate of title
20 in the name of the lienholder upon furnishing information
21 satisfactory to the Secretary of State. Upon receiving
22 the new certificate of title, the lienholder may proceed
23 with the sale described in subdivision (f-5)(3), except
24 that upon selling the vehicle the lienholder shall
25 promptly and within 20 days mail or deliver to the
26 purchaser the new certificate of title reflecting the
27 assignment and transfer of title to the purchaser.
28 (5) Neither the lienholder nor the owner shall file
29 with the Office of the Secretary of State the notice of
30 redemption or affidavit of defense described in
31 subdivisions (f-5)(1) and (f-5)(2) of this Section. The
32 Office of the Secretary of State shall not determine the
33 merits of an owner's affidavit of defense, nor consider
34 any allegations or assertions regarding the validity or
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1 invalidity of a lienholder's claim to the vehicle or an
2 owner's asserted defenses to the repossession action.
3 (f-7) Notice of reinstatement in certain cases.
4 (1) If, at the time of repossession by a lienholder
5 that is seeking to transfer title pursuant to subsection
6 (f-5), the owner has paid an amount equal to 30% or more
7 of the deferred payment price or total of payments due,
8 the owner may, within 21 days of the date of
9 repossession, reinstate the contract or loan agreement
10 and recover the vehicle from the lienholder by tendering
11 in a lump sum (i) the total of all unpaid amounts,
12 including any unpaid delinquency or deferral charges due
13 at the date of reinstatement, without acceleration; and
14 (ii) performance necessary to cure any default other than
15 nonpayment of the amounts due; and (iii) all reasonable
16 costs and fees incurred by the lienholder in retaking,
17 holding, and preparing the vehicle for disposition and in
18 arranging for the sale of the vehicle. Reasonable costs
19 and fees incurred by the lienholder include without
20 limitation repossession and storage expenses and, if
21 authorized by the contract or loan agreement, reasonable
22 attorneys' fees and collection agency charges.
23 (2) Tender of payment and performance pursuant to
24 this limited right of reinstatement restores to the owner
25 his rights under the contract or loan agreement as though
26 no default had occurred. The owner has the right to
27 reinstate the contract or loan agreement and recover the
28 vehicle from the lienholder only once under this
29 subsection. The lienholder may, in the lienholder's sole
30 discretion, extend the period during which the owner may
31 reinstate the contract or loan agreement and recover the
32 vehicle beyond the 21 days allowed under this subsection,
33 and the extension shall not subject the lienholder to
34 liability to the owner under the laws of this State.
-312- LRB9106284JSpcam04
1 (3) The lienholder shall deliver or mail written
2 notice to the owner at the owner's last known address,
3 within 3 business days of the date of repossession, of
4 the owner's right to reinstate the contract or loan
5 agreement and recover the vehicle pursuant to the limited
6 right of reinstatement described in this subsection. At
7 the lienholder's option, the information required to be
8 set forth in this notice of reinstatement may be made
9 part of or accompany the notice of redemption required in
10 subdivision (f-5)(1) of this Section and the notification
11 of sale or other disposition required under subsection
12 (3) of Section 9-611 9-504 of the Uniform Commercial
13 Code, but none of the information required by this notice
14 of reinstatement shall be construed to impose any
15 requirement under Article 9 of the Uniform Commercial
16 Code.
17 (4) The reinstatement period, if applicable, and
18 the redemption period described in subdivision (f-5)(1)
19 of this Section, shall run concurrently if the
20 information required to be set forth in the notice of
21 reinstatement is part of or accompanies the notice of
22 redemption. In any event, the 21 day redemption period
23 described in subdivision (f-5)(1) of this Section shall
24 commence on the date of mailing or delivery to the owner
25 of the information required to be set forth in the notice
26 of redemption, and the 21 day reinstatement period
27 described in this subdivision, if applicable, 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 reinstatement.
31 (5) The Office of the Secretary of State shall not
32 determine the merits of an owner's claim of right to
33 reinstatement, nor consider any allegations or assertions
34 regarding the validity or invalidity of a lienholder's
-313- LRB9106284JSpcam04
1 claim to the vehicle or an owner's asserted right to
2 reinstatement. Where a lienholder is subject to
3 licensing and regulatory supervision by the State of
4 Illinois, the lienholder shall be subject to all of the
5 powers and authority of the lienholder's primary State
6 regulator to enforce compliance with the procedures set
7 forth in this subsection (f-7).
8 (f-10) Repossession by judicial process. In all cases
9 wherein a lienholder has repossessed a vehicle by judicial
10 process and holds it for resale under a security agreement,
11 order for replevin, or other court order establishing the
12 lienholder's right to possession of the vehicle, the
13 lienholder may proceed to sell or otherwise dispose of the
14 vehicle as authorized under the Uniform Commercial Code or
15 the court order. Upon selling the vehicle to another person,
16 the lienholder need not send the certificate of title to the
17 Secretary of State, but shall promptly and within 20 days
18 mail or deliver to the purchaser as transferee (i) the
19 existing certificate of title for the repossessed vehicle
20 reflecting the release of the lienholder's security interest
21 in the vehicle; (ii) a certified copy of the court order; and
22 (iii) a bill of sale identifying the new owner's name and
23 address and the year, make, model, and vehicle identification
24 number of the vehicle. The application for a certificate of
25 title made by the purchaser shall comply with subsection (a)
26 of Section 3-104 and be accompanied by the certified copy of
27 the court order furnished by the lienholder and the existing
28 certificate of title for the repossessed vehicle. The
29 lienholder shall execute the assignment and warranty of title
30 showing the name and address of the purchaser in the spaces
31 provided therefor on the certificate of title or as the
32 Secretary of State prescribes. The lienholder shall complete
33 the assignment of title in the certificate of title to
34 reflect the transfer of the vehicle to the lienholder and
-314- LRB9106284JSpcam04
1 also a reassignment to reflect the transfer from the
2 lienholder to the purchaser. For this purpose, the
3 lienholder is specifically authorized to execute the
4 assignment on behalf of the owner as seller if the owner has
5 not done so and to complete and execute the space reserved in
6 the certificate of title for a dealer reassignment,
7 notwithstanding that the lienholder is not a licensed dealer.
8 Nothing herein shall be construed to mean that the lienholder
9 is taking title to the repossessed vehicle for purposes of
10 liability for retailer occupation, vehicle use, or other tax
11 with respect to the proceeds from the repossession sale.
12 Delivery of the existing certificate of title to the
13 purchaser shall be deemed disclosure to the purchaser of the
14 owner of the vehicle. In the event the lienholder does not
15 hold the certificate of title for the repossessed vehicle,
16 the lienholder shall make application for and may obtain a
17 new certificate of title in the name of the lienholder upon
18 furnishing information satisfactory to the Secretary of
19 State. Upon receiving the new certificate of title, the
20 lienholder may proceed with the sale described in this
21 subsection, except that upon selling the vehicle the
22 lienholder shall promptly and within 20 days mail or deliver
23 to the purchaser the new certificate of title reflecting the
24 assignment and transfer of title to the purchaser.
25 (f-15) The Secretary of State shall not issue a
26 certificate of title to a purchaser under subsection (f),
27 (f-5), or (f-10) of this Section, unless the person from whom
28 the vehicle has been repossessed by the lienholder is shown
29 to be the last registered owner of the motor vehicle. The
30 Secretary of State may provide by rule for the standards to
31 be followed by a lienholder in assigning and transferring
32 certificates of title with respect to repossessed vehicles.
33 (f-20) If applying for a salvage certificate or a
34 junking certificate, the lienholder shall within 20 days make
-315- LRB9106284JSpcam04
1 an application to the Secretary of State for a salvage
2 certificate or a junking certificate, as set forth in this
3 Code. The Secretary of State shall not issue a salvage
4 certificate or a junking certificate to such lienholder
5 unless the person from whom such vehicle has been repossessed
6 is shown to be the last registered owner of such motor
7 vehicle and such lienholder establishes to the satisfaction
8 of the Secretary of State that he is entitled to such salvage
9 certificate or junking certificate. The Secretary of State
10 may provide by rule for the standards to be followed by a
11 lienholder in order to obtain a salvage certificate or
12 junking certificate for a repossessed vehicle.
13 (g) A person holding a certificate of title whose
14 interest in the vehicle has been extinguished or transferred
15 other than by voluntary transfer shall mail or deliver the
16 certificate, within 20 days upon request of the Secretary of
17 State. The delivery of the certificate pursuant to the
18 request of the Secretary of State does not affect the rights
19 of the person surrendering the certificate, and the action of
20 the Secretary of State in issuing a new certificate of title
21 as provided herein is not conclusive upon the rights of an
22 owner or lienholder named in the old certificate.
23 (h) The Secretary of State may decline to process any
24 application for a transfer of an interest in a vehicle
25 hereunder if any fees or taxes due under this Act from the
26 transferor or the transferee have not been paid upon
27 reasonable notice and demand.
28 (i) The Secretary of State shall not be held civilly or
29 criminally liable to any person because any purported
30 transferor may not have had the power or authority to make a
31 transfer of any interest in any vehicle or because a
32 certificate of title issued in error is subsequently used to
33 commit a fraudulent act.
34 (Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.)
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1 Section 31. The Illinois Vehicle Code is amended by
2 changing Section 3-202 as follows:
3 (625 ILCS 5/3-202) (from Ch. 95 1/2, par. 3-202)
4 Sec. 3-202. Perfection of security interest.
5 (a) Unless excepted by Section 3-201, a security
6 interest in a vehicle of a type for which a certificate of
7 title is required is not valid against subsequent transferees
8 or lienholders of the vehicle unless perfected as provided in
9 this Act.
10 (b) A security interest is perfected by the delivery to
11 the Secretary of State of the existing certificate of title,
12 if any, an application for a certificate of title containing
13 the name and address of the lienholder and the required fee.
14 The security interest It is perfected as of the time of its
15 creation if the delivery to the Secretary of State is
16 completed within 21 days after the creation of the security
17 interest or receipt by the new lienholder of the existing
18 certificate of title from a prior lienholder or licensed
19 dealer thereafter, otherwise as of the time of the delivery.
20 (c) If a vehicle is subject to a security interest when
21 brought into this State, the validity of the security
22 interest is determined by the law of the jurisdiction where
23 the vehicle was when the security interest attached, subject
24 to the following:
25 1. If the parties understood at the time the security
26 interest attached that the vehicle would be kept in this
27 State and it was brought into this State within 30 days
28 thereafter for purposes other than transportation through
29 this State, the validity of the security interest in this
30 State is determined by the law of this State.
31 2. If the security interest was perfected under the law
32 of the jurisdiction where the vehicle was when the security
33 interest attached, the following rules apply:
-317- LRB9106284JSpcam04
1 (A) If the name of the lienholder is shown on an
2 existing certificate of title issued by that jurisdiction,
3 his security interest continues perfected in this State.
4 (B) If the name of the lienholder is not shown on an
5 existing certificate of title issued by that jurisdiction, a
6 security interest may be perfected by the lienholder
7 delivering to the Secretary of State the prescribed notice
8 and by payment of the required fee. Such security interest is
9 perfected as of the time of delivery of the prescribed notice
10 and payment of the required fee.
11 3. If the security interest was not perfected under the
12 law of the jurisdiction where the vehicle was when the
13 security interest attached, it may be perfected in this
14 State; in that case perfection dates from the time of
15 perfection in this State.
16 4. A security interest may be perfected under paragraph
17 3 of this subsection either as provided in subsection (b) or
18 by the lienholder delivering to the Secretary of State a
19 notice of security interest in the form the Secretary of
20 State prescribes and the required fee.
21 (Source: P.A. 81-557.)
22 Section 33. The Code of Civil Procedure is amended by
23 changing Section 9-316 as follows:
24 (735 ILCS 5/9-316) (from Ch. 110, par. 9-316)
25 Sec. 9-316. Lien upon crops. Every landlord shall have a
26 lien upon the crops grown or growing upon the demised
27 premises for the rent thereof, whether the same is payable
28 wholly or in part in money or specific articles of property
29 or products of the premises, or labor, and also for the
30 faithful performance of the terms of the lease. Such lien
31 shall continue for the period of 6 months after the
32 expiration of the term for which the premises are demised,
-318- LRB9106284JSpcam04
1 and may be enforced by distraint as provided in Part 3 of
2 Article IX of this Act.
3 A good faith purchaser shall, however, take such crops
4 free of any landlord's lien unless, within 6 months prior to
5 the purchase, the landlord provides written notice of his
6 lien to the purchaser by registered or certified mail. Such
7 notice shall contain the names and addresses of the landlord
8 and tenant, and clearly identify the leased property.
9 A landlord may require that, prior to his tenant's
10 selling any crops grown on the demised premises, the tenant
11 disclose the name of the person to whom the tenant intends to
12 sell those crops. Where such a requirement has been imposed,
13 the tenant shall not sell the crops to any person other than
14 a person who has been disclosed to the landlord as a
15 potential buyer of the crops.
16 A lien arising under this Section and duly perfected
17 under Article 9 of the Uniform Commercial Code shall have
18 priority over any other agricultural lien as defined in, and
19 over any security interest arising under, provisions of
20 Article 9 of the Uniform Commercial Code.
21 (Source: P.A. 83-70.)
22 Section 35. The Uniform Federal Lien Registration Act is
23 amended by changing Section 4 as follows:
24 (770 ILCS 110/4) (from Ch. 82, par. 404)
25 Sec. 4. (a) If a notice of federal lien, a refiling of a
26 notice of federal lien or a notice of revocation of any
27 certificate described in subsection (b) is presented to a
28 filing officer who is:
29 (1) the Secretary of State, he shall cause the notice to
30 be marked, held and indexed in accordance with the provisions
31 of Section 9-519 9-403(4) of the Uniform Commercial Code as
32 if the notice were a financing statement within the meaning
-319- LRB9106284JSpcam04
1 of that Code; or
2 (2) any other officer described in Section 2, he shall
3 endorse thereon his identification and the date and time of
4 receipt and forthwith file it alphabetically or enter it in
5 an alphabetical index showing the name and address of the
6 person named in the notice, the date and time of receipt, the
7 title and address of the official or entity certifying the
8 lien, the total amount appearing on the notice of lien, and
9 in the case of federal tax liens, the collector's serial
10 number of the notice.
11 (b) If a certificate of release, nonattachment,
12 discharge or subordination of any lien is presented to the
13 Secretary of State for filing he shall:
14 (1) cause a certificate of release or nonattachment to
15 be marked, held and indexed as if the certificate were a
16 termination statement within the meaning of the Uniform
17 Commercial Code, but the notice of lien to which the
18 certificate relates may not be removed from the files; and
19 (2) cause a certificate of discharge or subordination to
20 be marked, held and indexed as if the certificate were a
21 release of collateral within the meaning of the Uniform
22 Commercial Code.
23 (c) If a refiled notice of federal lien referred to in
24 subsection (a) or any of the certificates or notices referred
25 to in subsection (b) is presented for filing to any other
26 filing officer specified in Section 2, he shall permanently
27 attach the refiled notice or the certificate to the original
28 notice of lien and enter the refiled notice or the
29 certificate with the date of filing in any alphabetical lien
30 index on the line where the original notice of lien is
31 entered.
32 (d) Upon request of any person, the filing officer shall
33 issue his certificate showing whether there is on file, on
34 the date and hour stated therein, any notice of lien or
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1 certificate or notice affecting any lien filed under this Act
2 or "An Act in relation to liens of the United States of
3 America", approved June 27, 1923, as amended, naming a
4 particular person, and if a notice or certificate is on file,
5 giving the date and hour of filing of each notice or
6 certificate. The fee for a certificate is $5. Upon request,
7 the filing officer shall furnish a copy of any notice of
8 federal lien, or notice or certificate affecting a federal
9 lien, for a fee of 50¢ per page.
10 (Source: P.A. 86-254.)
11 Section 37. The Uniform Commercial Code is amended by
12 adding Section 9-404.5 as follows:
13 (810 ILCS 5/9-404.5 new)
14 Sec. 9-404.5 Termination statement; duties of filing
15 officer.
16 (1) If a financing statement covering consumer goods is
17 filed on or after July 1, 1973, then within one month or
18 within 10 days following written demand by the debtor after
19 there is no outstanding secured obligation and no commitment
20 to make advances, incur obligations or otherwise give value,
21 the secured party must file with each filing officer with
22 whom the financing statement was filed, a termination
23 statement to the effect that he no longer claims a security
24 interest under the financing statement, which shall be
25 identified by file number. In other cases whenever there is
26 no outstanding secured obligation and no commitment to make
27 advances, incur obligations or otherwise give value, the
28 secured party must on written demand by the debtor send the
29 debtor, for each filing officer with whom the financing
30 statement was filed, a termination statement to the effect
31 that he no longer claims a security interest under the
32 financing statement, which shall be identified by file
-321- LRB9106284JSpcam04
1 number. A termination statement signed by a person other than
2 the secured party of record must be accompanied by a separate
3 written statement of assignment signed by the secured party
4 of record. If the affected secured party fails to file such
5 a termination statement as required by this subsection, or to
6 send such a termination statement within 10 days after proper
7 demand therefor, he shall be liable to the debtor for $100
8 and in addition for any loss caused to the debtor by such
9 failure.
10 (2) On presentation to the filing officer of such a
11 termination statement he must note it in the index. If he has
12 received the termination statement in duplicate, he shall
13 return one copy of the termination statement to the secured
14 party stamped to show the time of receipt thereof. If the
15 filing officer has a microfilm or other photographic record
16 of the financing statement, and of any related continuation
17 statement, statement of assignment and statement of release,
18 he may remove the originals from the files at any time after
19 receipt of the termination statement, or if he has no such
20 record, he may remove them from the files at any time after
21 one year after receipt of the termination statement.
22 (3) If the termination statement is in the standard form
23 prescribed by the Secretary of State, the uniform fee for
24 filing and indexing the termination statement in the office
25 of a county recorder shall be $5 and otherwise shall be $10,
26 plus in each case an additional fee of $5 for each name more
27 than one at each address listed against which the termination
28 statement is required to be indexed.
29 Section 40. The Toxic Substances Disclosure to Employees
30 Act is amended by changing Section 6 as follows:
31 (820 ILCS 255/6) (from Ch. 48, par. 1406)
32 Sec. 6. Exemptions. This Act shall not apply to:
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1 (a) Use of toxic substances, compounds or mixtures
2 regulated by this Act which are:
3 (1) Intended for personal consumption by employees in
4 the workplace.
5 (2) Consumer goods used, stored or sold by an employer,
6 manufacturer, importer, retailer or supplier in the same
7 form, approximate amount, concentration and manner as they
8 are sold to consumers, provided that employee exposure to
9 such consumer goods is not significantly greater than
10 consumer exposure occurring during the principal consumer
11 uses of the consumer goods. For purposes of this Act,
12 "consumer goods" shall be defined as in Section 9-102 9-109.1
13 of the Uniform Commercial Code.
14 (3) Present in a concentration of less than 1%. In the
15 cases of carcinogens, mutagens or teratogens, only those
16 substances shall be exempt which are present in a
17 concentration of 0.1% or less. No substance shall be exempt
18 under this paragraph which is present in concentrations
19 exceeding threshold concentrations established by regulation
20 of the Department.
21 (b) Laboratories in which a toxic substance, compound or
22 mixture regulated by this Act is used by or under the direct
23 supervision of a technically qualified individual, provided
24 that the toxic substance or mixture is not produced in the
25 laboratories for commercial sale. The Department shall
26 promulgate rules prescribing the standards used in
27 determining whether a laboratory is under the direct
28 supervision of a technically qualified individual.
29 (c) All retail trade establishments as listed in the
30 "Standard Industrial Classification Manual" Division G,
31 Retail Trade, published by the U.S. Government Printing
32 Office, except the Act shall apply to those retail trade
33 establishments listed within Major Groups: 52 - Building
34 Materials, Hardware, Garden Supply, and Mobile Home Dealers;
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1 and 55 - Automotive Dealers and Gasoline Service Stations,
2 except for those activities involving the retail sales of
3 gasoline motor fuels or lubricants, or if the retail trade
4 establishments are engaged in any of the following specific
5 activities, this Act shall apply only to the retail trade
6 establishments' involvement in such specific activities:
7 paint mixing, other than the tinting of consumer sized
8 containers of paint; finishing or refinishing operations
9 using paint or paint related products; automobile battery
10 servicing, photo finishing operations; and dry cleaning
11 operations.
12 (Source: P.A. 85-506.)
13 Section 99. Effective date. This Act takes effect on
14 July 1, 2001, except that this Section and Sections 31 and 37
15 take effect upon becoming law.".