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91_SB1231eng
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1 AN ACT in relation to secured transactions.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Uniform Commercial Code is amended by
5 changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106,
6 9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115,
7 9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1,
8 9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305,
9 9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308,
10 9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316,
11 9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405,
12 9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504,
13 9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections
14 9-209, 9-210, 9-315.01, 9-315.02, 9-319, 9-320, 9-320.1,
15 9-320.2, 9-321, 9-322, 9-323, 9-324, 9-325, 9-326, 9-327,
16 9-328, 9-329, 9-330, 9-331, 9-332, 9-333, 9-334, 9-335,
17 9-336, 9-337, 9-338, 9-339, 9-340, 9-341, 9-342, 9-409,
18 9-508, 9-509, 9-510, 9-511, 9-512, 9-513, 9-514, 9-515,
19 9-516, 9-517, 9-518, 9-519, 9-520, 9-521, 9-522, 9-523,
20 9-524, 9-525, 9-526, 9-527, 9-601, 9-602, 9-603, 9-604,
21 9-605, 9-606, 9-607, 9-608, 9-609, 9-610, 9-611, 9-612,
22 9-613, 9-614, 9-615, 9-616, 9-617, 9-618, 9-619, 9-620,
23 9-621, 9-622, 9-623, 9-624, 9-625, 9-626, 9-627, 9-628,
24 9-701, 9-702, 9-703, 9-704, 9-705, 9-706, 9-707, 9-708,
25 9-709, and 9-710, changing the headings of Article 9 and
26 Parts 1, 2, 3, 4, 5, and 99 of Article 9, and adding headings
27 of Parts 6 and 7 of Article 9, Subparts 1 and 2 of Part 1 of
28 Article 9, Subparts 1 and 2 of Part 2 of Article 9, Subparts
29 1, 2, 3, and 4 of Part 3 of Article 9, Subparts 1 and 2 of
30 Part 5 of Article 9, and Subparts 1 and 2 of Part 6 of
31 Article 9 as follows:
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1 (810 ILCS 5/Art. 9 heading)
2 ARTICLE 9
3 SECURED TRANSACTIONS: SALES OF ACCOUNTS,
4 CONTRACT RIGHTS AND CHATTEL PAPER
5 (810 ILCS 5/Art. 9, Part 1 heading)
6 PART 1. GENERAL PROVISIONS
7 SHORT TITLE, APPLICABILITY AND DEFINITIONS
8 (810 ILCS 5/Art. 9, Part 1, Subpart 1 heading new)
9 SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
10 (810 ILCS 5/9-101) (from Ch. 26, par. 9-101)
11 Sec. 9-101. Short title. This Article may be cited as
12 Uniform Commercial Code-Secured Transactions. Short title.
13 This Article shall be known and may be cited as Uniform
14 Commercial Code--Secured Transactions.
15 (Source: Laws 1961, p. 2101.)
16 (810 ILCS 5/9-102) (from Ch. 26, par. 9-102)
17 Sec. 9-102. Definitions and index of definitions.
18 (a) Article 9 definitions. In this Article:
19 (1) "Accession" means goods that are physically
20 united with other goods in such a manner that the
21 identity of the original goods is not lost.
22 (2) "Account", except as used in "account for",
23 means a right to payment of a monetary obligation,
24 whether or not earned by performance, (i) for property
25 that has been or is to be sold, leased, licensed,
26 assigned, or otherwise disposed of, (ii) for services
27 rendered or to be rendered, (iii) for a policy of
28 insurance issued or to be issued, (iv) for a secondary
29 obligation incurred or to be incurred, (v) for energy
30 provided or to be provided, (vi) for the use or hire of a
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1 vessel under a charter or other contract, (vii) arising
2 out of the use of a credit or charge card or information
3 contained on or for use with the card, or (viii) as
4 winnings in a lottery or other game of chance operated or
5 sponsored by a State, governmental unit of a State, or
6 person licensed or authorized to operate the game by a
7 State or governmental unit of a State. The term includes
8 health-care-insurance receivables. The term does not
9 include (i) rights to payment evidenced by chattel paper
10 or an instrument, (ii) commercial tort claims, (iii)
11 deposit accounts, (iv) investment property, (v)
12 letter-of-credit rights or letters of credit, or (vi)
13 rights to payment for money or funds advanced or sold,
14 other than rights arising out of the use of a credit or
15 charge card or information contained on or for use with
16 the card.
17 (3) "Account debtor" means a person obligated on an
18 account, chattel paper, or general intangible. The term
19 does not include persons obligated to pay a negotiable
20 instrument, even if the instrument constitutes part of
21 chattel paper.
22 (4) "Accounting", except as used in "accounting
23 for", means a record:
24 (A) authenticated by a secured party;
25 (B) indicating the aggregate unpaid secured
26 obligations as of a date not more than 35 days
27 earlier or 35 days later than the date of the
28 record; and
29 (C) identifying the components of the
30 obligations in reasonable detail.
31 (5) "Agricultural lien" means an interest, other
32 than a security interest, in farm products:
33 (A) which secures payment or performance of an
34 obligation for:
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1 (i) goods or services furnished in
2 connection with a debtor's farming operation;
3 or
4 (ii) rent on real property leased by a
5 debtor in connection with its farming
6 operation;
7 (B) which is created by statute in favor of a
8 person that:
9 (i) in the ordinary course of its
10 business furnished goods or services to a
11 debtor in connection with a debtor's farming
12 operation; or
13 (ii) leased real property to a debtor in
14 connection with the debtor's farming operation;
15 and
16 (C) whose effectiveness does not depend on the
17 person's possession of the personal property.
18 (6) "As-extracted collateral" means:
19 (A) oil, gas, or other minerals that are
20 subject to a security interest that:
21 (i) is created by a debtor having an
22 interest in the minerals before extraction; and
23 (ii) attaches to the minerals as
24 extracted; or
25 (B) accounts arising out of the sale at the
26 wellhead or minehead of oil, gas, or other minerals
27 in which the debtor had an interest before
28 extraction.
29 (7) "Authenticate" means:
30 (A) to sign; or
31 (B) to execute or otherwise adopt a symbol, or
32 encrypt or similarly process a record in whole or in
33 part, with the present intent of the authenticating
34 person to identify the person and adopt or accept a
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1 record.
2 (8) "Bank" means an organization that is engaged in
3 the business of banking. The term includes savings
4 banks, savings and loan associations, credit unions, and
5 trust companies.
6 (9) "Cash proceeds" means proceeds that are money,
7 checks, deposit accounts, or the like.
8 (10) "Certificate of title" means a certificate of
9 title with respect to which a statute provides for the
10 security interest in question to be indicated on the
11 certificate as a condition or result of the security
12 interest's obtaining priority over the rights of a lien
13 creditor with respect to the collateral.
14 (11) "Chattel paper" means a record or records that
15 evidence both a monetary obligation and a security
16 interest in specific goods, a security interest in
17 specific goods and software used in the goods, a security
18 interest in specific goods and license of software used
19 in the goods, a lease of specific goods, or a lease of
20 specified goods and a license of software used in the
21 goods. In this paragraph, "monetary obligation" means a
22 monetary obligation secured by the goods or owed under a
23 lease of the goods and includes a monetary obligation
24 with respect to software used in the goods. The term
25 does not include (i) charters or other contracts
26 involving the use or hire of a vessel or (ii) records
27 that evidence a right to payment arising out of the use
28 of a credit or charge card or information contained on or
29 for use with the card. If a transaction is evidenced by
30 records that include an instrument or series of
31 instruments, the group of records taken together
32 constitutes chattel paper.
33 (12) "Collateral" means the property subject to a
34 security interest or agricultural lien. The term
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1 includes:
2 (A) proceeds to which a security interest
3 attaches;
4 (B) accounts, chattel paper, payment
5 intangibles, and promissory notes that have been
6 sold; and
7 (C) goods that are the subject of a
8 consignment.
9 (13) "Commercial tort claim" means a claim arising
10 in tort with respect to which:
11 (A) the claimant is an organization; or
12 (B) the claimant is an individual and the
13 claim:
14 (i) arose in the course of the claimant's
15 business or profession; and
16 (ii) does not include damages arising out
17 of personal injury to or the death of an
18 individual.
19 (14) "Commodity account" means an account
20 maintained by a commodity intermediary in which a
21 commodity contract is carried for a commodity customer.
22 (15) "Commodity contract" means a commodity futures
23 contract, an option on a commodity futures contract, a
24 commodity option, or another contract if the contract or
25 option is:
26 (A) traded on or subject to the rules of a
27 board of trade that has been designated as a
28 contract market for such a contract pursuant to
29 federal commodities laws; or
30 (B) traded on a foreign commodity board of
31 trade, exchange, or market, and is carried on the
32 books of a commodity intermediary for a commodity
33 customer.
34 (16) "Commodity customer" means a person for which
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1 a commodity intermediary carries a commodity contract on
2 its books.
3 (17) "Commodity intermediary" means a person that:
4 (A) is registered as a futures commission
5 merchant under federal commodities law; or
6 (B) in the ordinary course of its business
7 provides clearance or settlement services for a
8 board of trade that has been designated as a
9 contract market pursuant to federal commodities law.
10 (18) "Communicate" means:
11 (A) to send a written or other tangible
12 record;
13 (B) to transmit a record by any means agreed
14 upon by the persons sending and receiving the
15 record; or
16 (C) in the case of transmission of a record to
17 or by a filing office, to transmit a record by any
18 means prescribed by filing-office rule.
19 (19) "Consignee" means a merchant to which goods
20 are delivered in a consignment.
21 (20) "Consignment" means a transaction, regardless
22 of its form, in which a person delivers goods to a
23 merchant for the purpose of sale and:
24 (A) the merchant:
25 (i) deals in goods of that kind under a
26 name other than the name of the person making
27 delivery;
28 (ii) is not an auctioneer; and
29 (iii) is not generally known by its
30 creditors to be substantially engaged in
31 selling the goods of others;
32 (B) with respect to each delivery, the
33 aggregate value of the goods is $1,000 or more at
34 the time of delivery;
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1 (C) the goods are not consumer goods
2 immediately before delivery; and
3 (D) the transaction does not create a security
4 interest that secures an obligation.
5 (21) "Consignor" means a person that delivers goods
6 to a consignee in a consignment.
7 (22) "Consumer debtor" means a debtor in a consumer
8 transaction.
9 (23) "Consumer goods" means goods that are used or
10 bought for use primarily for personal, family, or
11 household purposes.
12 (24) "Consumer-goods transaction" means a consumer
13 transaction in which:
14 (A) an individual incurs an obligation
15 primarily for personal, family, or household
16 purposes; and
17 (B) a security interest in consumer goods
18 secures the obligation.
19 (25) "Consumer obligor" means an obligor who is an
20 individual and who incurred the obligation as part of a
21 transaction entered into primarily for personal, family,
22 or household purposes.
23 (26) "Consumer transaction" means a transaction in
24 which (i) an individual incurs an obligation primarily
25 for personal, family, or household purposes, (ii) a
26 security interest secures the obligation, and (iii) the
27 collateral is held or acquired primarily for personal,
28 family, or household purposes. The term includes
29 consumer-goods transactions.
30 (27) "Continuation statement" means an amendment of
31 a financing statement which:
32 (A) identifies, by its file number, the
33 initial financing statement to which it relates; and
34 (B) indicates that it is a continuation
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1 statement for, or that it is filed to continue the
2 effectiveness of, the identified financing
3 statement.
4 (28) "Debtor" means:
5 (A) a person having an interest, other than a
6 security interest or other lien, in the collateral,
7 whether or not the person is an obligor;
8 (B) a seller of accounts, chattel paper,
9 payment intangibles, or promissory notes; or
10 (C) a consignee.
11 (29) "Deposit account" means a demand, time,
12 savings, passbook, nonnegotiable certificates of deposit,
13 uncertificated certificates of deposit, nontransferrable
14 certificates of deposit, or similar account maintained
15 with a bank. The term does not include investment
16 property or accounts evidenced by an instrument.
17 (30) "Document" means a document of title or a
18 receipt of the type described in Section 7-201(2).
19 (31) "Electronic chattel paper" means chattel paper
20 evidenced by a record or records consisting of
21 information stored in an electronic medium.
22 (32) "Encumbrance" means a right, other than an
23 ownership interest, in real property. The term includes
24 mortgages and other liens on real property.
25 (33) "Equipment" means goods other than inventory,
26 farm products, or consumer goods.
27 (34) "Farm products" means goods, other than
28 standing timber, with respect to which the debtor is
29 engaged in a farming operation and which are:
30 (A) crops grown, growing, or to be grown,
31 including:
32 (i) crops produced on trees, vines, and
33 bushes; and
34 (ii) aquatic goods produced in
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1 aquacultural operations;
2 (B) livestock, born or unborn, including
3 aquatic goods produced in aquacultural operations;
4 (C) supplies used or produced in a farming
5 operation; or
6 (D) products of crops or livestock in their
7 unmanufactured states.
8 (35) "Farming operation" means raising,
9 cultivating, propagating, fattening, grazing, or any
10 other farming, livestock, or aquacultural operation.
11 (36) "File number" means the number assigned to an
12 initial financing statement pursuant to Section 9-519(a).
13 (37) "Filing office" means an office designated in
14 Section 9-501 as the place to file a financing statement.
15 (38) "Filing-office rule" means a rule adopted
16 pursuant to Section 9-526.
17 (39) "Financing statement" means a record or
18 records composed of an initial financing statement and
19 any filed record relating to the initial financing
20 statement.
21 (40) "Fixture filing" means the filing of a
22 financing statement covering goods that are or are to
23 become fixtures and satisfying Section 9-502(a) and (b).
24 The term includes the filing of a financing statement
25 covering goods of a transmitting utility which are or are
26 to become fixtures.
27 (41) "Fixtures" means goods that have become so
28 related to particular real property that an interest in
29 them arises under real property law.
30 (42) "General intangible" means any personal
31 property, including things in action, other than
32 accounts, chattel paper, commercial tort claims, deposit
33 accounts, documents, goods, instruments, investment
34 property, letter-of-credit rights, letters of credit,
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1 money, and oil, gas, or other minerals before extraction.
2 The term includes payment intangibles and software.
3 (43) "Good faith" means honesty in fact and the
4 observance of reasonable commercial standards of fair
5 dealing.
6 (44) "Goods" means all things that are movable when
7 a security interest attaches. The term includes (i)
8 fixtures, (ii) standing timber that is to be cut and
9 removed under a conveyance or contract for sale, (iii)
10 the unborn young of animals, (iv) crops grown, growing,
11 or to be grown, even if the crops are produced on trees,
12 vines, or bushes, and (v) manufactured homes. The term
13 also includes a computer program embedded in goods and
14 any supporting information provided in connection with a
15 transaction relating to the program if (i) the program is
16 associated with the goods in such a manner that it
17 customarily is considered part of the goods, or (ii) by
18 becoming the owner of the goods, a person acquires a
19 right to use the program in connection with the goods.
20 The term does not include a computer program embedded in
21 goods that consist solely of the medium in which the
22 program is embedded. The term also does not include
23 accounts, chattel paper, commercial tort claims, deposit
24 accounts, documents, general intangibles, instruments,
25 investment property, letter-of-credit rights, letters of
26 credit, money, or oil, gas, or other minerals before
27 extraction.
28 (45) "Governmental unit" means a subdivision,
29 agency, department, county, parish, municipality, or
30 other unit of the government of the United States, a
31 State, or a foreign country. The term includes an
32 organization having a separate corporate existence if the
33 organization is eligible to issue debt on which interest
34 is exempt from income taxation under the laws of the
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1 United States.
2 (46) "Health-care-insurance receivable" means an
3 interest in or claim under a policy of insurance which is
4 a right to payment of a monetary obligation for
5 health-care goods or services provided.
6 (47) "Instrument" means a negotiable instrument or
7 any other writing that evidences a right to the payment
8 of a monetary obligation, is not itself a security
9 agreement or lease, and is of a type that in ordinary
10 course of business is transferred by delivery with any
11 necessary indorsement or assignment. The term does not
12 include (i) investment property, (ii) letters of credit,
13 (iii) nonnegotiable certificates of deposit, (iv)
14 uncertificated certificates of deposit, (v)
15 nontransferrable certificates of deposit, or (vi)
16 writings that evidence a right to payment arising out of
17 the use of a credit or charge card or information
18 contained on or for use with the card.
19 (48) "Inventory" means goods, other than farm
20 products, which:
21 (A) are leased by a person as lessor;
22 (B) are held by a person for sale or lease or
23 to be furnished under a contract of service;
24 (C) are furnished by a person under a contract
25 of service; or
26 (D) consist of raw materials, work in process,
27 or materials used or consumed in a business.
28 (49) "Investment property" means a security,
29 whether certificated or uncertificated, security
30 entitlement, securities account, commodity contract, or
31 commodity account.
32 (50) "Jurisdiction of organization", with respect
33 to a registered organization, means the jurisdiction
34 under whose law the organization is organized.
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1 (51) "Letter-of-credit right" means a right to
2 payment or performance under a letter of credit, whether
3 or not the beneficiary has demanded or is at the time
4 entitled to demand payment or performance. The term does
5 not include the right of a beneficiary to demand payment
6 or performance under a letter of credit.
7 (52) "Lien creditor" means:
8 (A) a creditor that has acquired a lien on the
9 property involved by attachment, levy, or the like;
10 (B) an assignee for benefit of creditors from
11 the time of assignment;
12 (C) a trustee in bankruptcy from the date of
13 the filing of the petition; or
14 (D) a receiver in equity from the time of
15 appointment.
16 (53) "Manufactured home" means a structure,
17 transportable in one or more sections, which, in the
18 traveling mode, is eight body feet or more in width or 40
19 body feet or more in length, or, when erected on site, is
20 320 or more square feet, and which is built on a
21 permanent chassis and designed to be used as a dwelling
22 with or without a permanent foundation when connected to
23 the required utilities, and includes the plumbing,
24 heating, air-conditioning, and electrical systems
25 contained therein. The term includes any structure that
26 meets all of the requirements of this paragraph except
27 the size requirements and with respect to which the
28 manufacturer voluntarily files a certification required
29 by the United States Secretary of Housing and Urban
30 Development and complies with the standards established
31 under Title 42 of the United States Code.
32 (54) "Manufactured-home transaction" means a
33 secured transaction:
34 (A) that creates a purchase-money security
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1 interest in a manufactured home, other than a
2 manufactured home held as inventory; or
3 (B) in which a manufactured home, other than a
4 manufactured home held as inventory, is the primary
5 collateral.
6 (55) "Mortgage" means a consensual interest in real
7 property, including fixtures, which secures payment or
8 performance of an obligation.
9 (56) "New debtor" means a person that becomes bound
10 as debtor under Section 9-203(d) by a security agreement
11 previously entered into by another person.
12 (57) "New value" means (i) money, (ii) money's
13 worth in property, services, or new credit, or (iii)
14 release by a transferee of an interest in property
15 previously transferred to the transferee. The term does
16 not include an obligation substituted for another
17 obligation.
18 (58) "Noncash proceeds" means proceeds other than
19 cash proceeds.
20 (59) "Obligor" means a person that, with respect to
21 an obligation secured by a security interest in or an
22 agricultural lien on the collateral, (i) owes payment or
23 other performance of the obligation, (ii) has provided
24 property other than the collateral to secure payment or
25 other performance of the obligation, or (iii) is
26 otherwise accountable in whole or in part for payment or
27 other performance of the obligation. The term does not
28 include issuers or nominated persons under a letter of
29 credit.
30 (60) "Original debtor", except as used in Section
31 9-310(c), means a person that, as debtor, entered into a
32 security agreement to which a new debtor has become bound
33 under Section 9-203(d).
34 (61) "Payment intangible" means a general
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1 intangible under which the account debtor's principal
2 obligation is a monetary obligation.
3 (62) "Person related to", with respect to an
4 individual, means:
5 (A) the spouse of the individual;
6 (B) a brother, brother-in-law, sister, or
7 sister-in-law of the individual;
8 (C) an ancestor or lineal descendant of the
9 individual or the individual's spouse; or
10 (D) any other relative, by blood or marriage,
11 of the individual or the individual's spouse who
12 shares the same home with the individual.
13 (63) "Person related to", with respect to an
14 organization, means:
15 (A) a person directly or indirectly
16 controlling, controlled by, or under common control
17 with the organization;
18 (B) an officer or director of, or a person
19 performing similar functions with respect to, the
20 organization;
21 (C) an officer or director of, or a person
22 performing similar functions with respect to, a
23 person described in subparagraph (A);
24 (D) the spouse of an individual described in
25 subparagraph (A), (B), or (C); or
26 (E) an individual who is related by blood or
27 marriage to an individual described in subparagraph
28 (A), (B), (C), or (D) and shares the same home with
29 the individual.
30 (64) "Proceeds", except as used in Section
31 9-609(b), means the following property:
32 (A) whatever is acquired upon the sale, lease,
33 license, exchange, or other disposition of
34 collateral;
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1 (B) whatever is collected on, or distributed
2 on account of, collateral;
3 (C) rights arising out of collateral;
4 (D) to the extent of the value of collateral,
5 claims arising out of the loss, nonconformity, or
6 interference with the use of, defects or
7 infringement of rights in, or damage to, the
8 collateral; or
9 (E) to the extent of the value of collateral
10 and to the extent payable to the debtor or the
11 secured party, insurance payable by reason of the
12 loss or nonconformity of, defects or infringement of
13 rights in, or damage to, the collateral.
14 (65) "Promissory note" means an instrument that
15 evidences a promise to pay a monetary obligation, does
16 not evidence an order to pay, and does not contain an
17 acknowledgment by a bank that the bank has received for
18 deposit a sum of money or funds.
19 (66) "Proposal" means a record authenticated by a
20 secured party which includes the terms on which the
21 secured party is willing to accept collateral in full or
22 partial satisfaction of the obligation it secures
23 pursuant to Sections 9-620, 9-621, and 9-622.
24 (67) "Public-finance transaction" means a secured
25 transaction in connection with which:
26 (A) debt securities are issued;
27 (B) all or a portion of the securities issued
28 have an initial stated maturity of at least 20
29 years; and
30 (C) the debtor, obligor, secured party,
31 account debtor or other person obligated on
32 collateral, assignor or assignee of a secured
33 obligation, or assignor or assignee of a security
34 interest is a State or a governmental unit of a
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1 State.
2 (68) "Pursuant to commitment", with respect to an
3 advance made or other value given by a secured party,
4 means pursuant to the secured party's obligation, whether
5 or not a subsequent event of default or other event not
6 within the secured party's control has relieved or may
7 relieve the secured party from its obligation.
8 (69) "Record", except as used in "for record", "of
9 record", "record or legal title", and "record owner",
10 means information that is inscribed on a tangible medium
11 or which is stored in an electronic or other medium and
12 is retrievable in perceivable form.
13 (70) "Registered organization" means an
14 organization organized solely under the law of a single
15 State or the United States and as to which the State or
16 the United States must maintain a public record showing
17 the organization to have been organized.
18 (71) "Secondary obligor" means an obligor to the
19 extent that:
20 (A) the obligor's obligation is secondary; or
21 (B) the obligor has a right of recourse with
22 respect to an obligation secured by collateral
23 against the debtor, another obligor, or property of
24 either.
25 (72) "Secured party" means:
26 (A) a person in whose favor a security
27 interest is created or provided for under a security
28 agreement, whether or not any obligation to be
29 secured is outstanding;
30 (B) a person that holds an agricultural lien;
31 (C) a consignor;
32 (D) a person to which accounts, chattel paper,
33 payment intangibles, or promissory notes have been
34 sold;
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1 (E) a trustee, indenture trustee, agent,
2 collateral agent, or other representative in whose
3 favor a security interest or agricultural lien is
4 created or provided for; or
5 (F) a person that holds a security interest
6 arising under Section 2-401, 2-505, 2-711(3),
7 2A-508(5), 4-210, or 5-118.
8 (73) "Security agreement" means an agreement that
9 creates or provides for a security interest.
10 (74) "Send", in connection with a record or
11 notification, means:
12 (A) to deposit in the mail, deliver for
13 transmission, or transmit by any other usual means
14 of communication, with postage or cost of
15 transmission provided for, addressed to any address
16 reasonable under the circumstances; or
17 (B) to cause the record or notification to be
18 received within the time that it would have been
19 received if properly sent under subparagraph (A).
20 (75) "Software" means a computer program and any
21 supporting information provided in connection with a
22 transaction relating to the program. The term does not
23 include a computer program that is included in the
24 definition of goods.
25 (76) "State" means a State of the United States,
26 the District of Columbia, Puerto Rico, the United States
27 Virgin Islands, or any territory or insular possession
28 subject to the jurisdiction of the United States.
29 (77) "Supporting obligation" means a
30 letter-of-credit right or secondary obligation that
31 supports the payment or performance of an account,
32 chattel paper, a document, a general intangible, an
33 instrument, or investment property.
34 (78) "Tangible chattel paper" means chattel paper
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1 evidenced by a record or records consisting of
2 information that is inscribed on a tangible medium.
3 (79) "Termination statement" means an amendment of
4 a financing statement which:
5 (A) identifies, by its file number, the
6 initial financing statement to which it relates; and
7 (B) indicates either that it is a termination
8 statement or that the identified financing statement
9 is no longer effective.
10 (80) "Transmitting utility" means a person
11 primarily engaged in the business of:
12 (A) operating a railroad, subway, street
13 railway, or trolley bus;
14 (B) transmitting communications electrically,
15 electromagnetically, or by light;
16 (C) transmitting goods by pipeline or sewer;
17 or
18 (D) transmitting or producing and transmitting
19 electricity, steam, gas, or water.
20 (b) Definitions in other Articles. The following
21 definitions in other Articles apply to this Article:
22 "Applicant". Section 5-102.
23 "Beneficiary". Section 5-102.
24 "Broker". Section 8-102.
25 "Certificated security". Section 8-102.
26 "Check". Section 3-104.
27 "Clearing corporation". Section 8-102.
28 "Contract for sale". Section 2-106.
29 "Customer". Section 4-104.
30 "Entitlement holder". Section 8-102.
31 "Financial asset". Section 8-102.
32 "Holder in due course". Section 3-302.
33 "Issuer" (with respect to a letter of credit or
34 letter-of-credit right). Section 5-102.
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1 "Issuer" (with respect to a security). Section 8-201.
2 "Lease". Section 2A-103.
3 "Lease agreement". Section 2A-103.
4 "Lease contract". Section 2A-103.
5 "Leasehold interest". Section 2A-103.
6 "Lessee". Section 2A-103.
7 "Lessee in ordinary course of business". Section 2A-103.
8 "Lessor". Section 2A-103.
9 "Lessor's residual interest". Section 2A-103.
10 "Letter of credit". Section 5-102.
11 "Merchant". Section 2-104.
12 "Negotiable instrument". Section 3-104.
13 "Nominated person". Section 5-102.
14 "Note". Section 3-104.
15 "Proceeds of a letter of credit". Section 5-114.
16 "Prove". Section 3-103.
17 "Sale". Section 2-106.
18 "Securities account". Section 8-501.
19 "Securities intermediary". Section 8-102.
20 "Security". Section 8-102.
21 "Security certificate". Section 8-102.
22 "Security entitlement". Section 8-102.
23 "Uncertificated security". Section 8-102.
24 (c) Article 1 definitions and principles. Article 1
25 contains general definitions and principles of construction
26 and interpretation applicable throughout this Article. Policy
27 and Subject Matter of Article.
28 (1) Except as otherwise provided in Section 9--104 on
29 excluded transactions, this Article applies
30 (a) to any transaction (regardless of its form)
31 which is intended to create a security interest in personal
32 property or fixtures including goods, documents, instruments,
33 general intangibles, chattel paper or accounts; and also
34 (b) to any sale of accounts or chattel paper.
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1 (2) This Article applies to security interests created
2 by contract including pledge, assignment, chattel mortgage,
3 chattel trust, trust deed, factor's lien, equipment trust,
4 conditional sale, trust receipt, other lien or title
5 retention contract and lease or consignment intended as
6 security. This Article does not apply to statutory liens
7 except as provided in Section 9--310.
8 (3) The application of this Article to a security
9 interest in a secured obligation is not affected by the fact
10 that the obligation is itself secured by a transaction or
11 interest to which this Article does not apply.
12 (4) The application of this Article to a security
13 interest in a deposit account shall not displace a common law
14 right of set-off of the secured party as to a deposit account
15 maintained with the secured party.
16 (Source: P.A. 87-1037.)
17 (810 ILCS 5/9-103) (from Ch. 26, par. 9-103)
18 Sec. 9-103. Purchase-money security interest; application
19 of payments; burden of establishing.
20 (a) Definitions. In this Section:
21 (1) "purchase-money collateral" means goods or
22 software that secures a purchase-money obligation
23 incurred with respect to that collateral; and
24 (2) "purchase-money obligation" means an obligation
25 of an obligor incurred as all or part of the price of the
26 collateral or for value given to enable the debtor to
27 acquire rights in or the use of the collateral if the
28 value is in fact so used.
29 (b) Purchase-money security interest in goods. A
30 security interest in goods is a purchase-money security
31 interest:
32 (1) to the extent that the goods are purchase-money
33 collateral with respect to that security interest;
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1 (2) if the security interest is in inventory that
2 is or was purchase-money collateral, also to the extent
3 that the security interest secures a purchase-money
4 obligation incurred with respect to other inventory in
5 which the secured party holds or held a purchase-money
6 security interest; and
7 (3) also to the extent that the security interest
8 secures a purchase-money obligation incurred with respect
9 to software in which the secured party holds or held a
10 purchase-money security interest.
11 (c) Purchase-money security interest in software. A
12 security interest in software is a purchase-money security
13 interest to the extent that the security interest also
14 secures a purchase-money obligation incurred with respect to
15 goods in which the secured party holds or held a
16 purchase-money security interest if:
17 (1) the debtor acquired its interest in the
18 software in an integrated transaction in which it
19 acquired an interest in the goods; and
20 (2) the debtor acquired its interest in the
21 software for the principal purpose of using the software
22 in the goods.
23 (d) Consignor's inventory purchase-money security
24 interest. The security interest of a consignor in goods that
25 are the subject of a consignment is a purchase-money security
26 interest in inventory.
27 (e) Application of payment in non-consumer-goods
28 transaction. In a transaction other than a consumer-goods
29 transaction, if the extent to which a security interest is a
30 purchase-money security interest depends on the application
31 of a payment to a particular obligation, the payment must be
32 applied:
33 (1) in accordance with any reasonable method of
34 application to which the parties agree;
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1 (2) in the absence of the parties' agreement to a
2 reasonable method, in accordance with any intention of
3 the obligor manifested at or before the time of payment;
4 or
5 (3) in the absence of an agreement to a reasonable
6 method and a timely manifestation of the obligor's
7 intention, in the following order:
8 (A) to obligations that are not secured; and
9 (B) if more than one obligation is secured, to
10 obligations secured by purchase-money security
11 interests in the order in which those obligations
12 were incurred.
13 (f) No loss of status of purchase-money security
14 interest in non-consumer-goods transaction. In a transaction
15 other than a consumer-goods transaction, a purchase-money
16 security interest does not lose its status as such, even if:
17 (1) the purchase-money collateral also secures an
18 obligation that is not a purchase-money obligation;
19 (2) collateral that is not purchase-money
20 collateral also secures the purchase-money obligation; or
21 (3) the purchase-money obligation has been renewed,
22 refinanced, consolidated, or restructured.
23 (g) Burden of proof in non-consumer-goods transaction.
24 In a transaction other than a consumer-goods transaction, a
25 secured party claiming a purchase-money security interest has
26 the burden of establishing the extent to which the security
27 interest is a purchase-money security interest.
28 (h) Non-consumer-goods transactions; no inference. The
29 limitation of the rules in subsections (e), (f), and (g) to
30 transactions other than consumer-goods transactions is
31 intended to leave to the court the determination of the
32 proper rules in consumer-goods transactions. The court may
33 not infer from that limitation the nature of the proper rule
34 in consumer-goods transactions and may continue to apply
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1 established approaches. Perfection of Security Interests in
2 Multiple State Transactions.
3 (1) Documents, instruments, letters of credit, and
4 ordinary goods.
5 (a) This subsection applies to documents,
6 instruments, rights to proceeds of written letters of
7 credit, and goods other than those covered by a
8 certificate of title described in subsection (2), mobile
9 goods described in subsection (3), and minerals described
10 in subsection (5).
11 (b) Except as otherwise provided in this
12 subsection, perfection and the effect of perfection or
13 non-perfection of a security interest in collateral are
14 governed by the law of the jurisdiction where the
15 collateral is when the last event occurs on which is
16 based the assertion that the security interest is
17 perfected or unperfected.
18 (c) If the parties to a transaction creating a
19 purchase money security interest in goods in one
20 jurisdiction understand at the time that the security
21 interest attaches that the goods will be kept in another
22 jurisdiction, then the law of the other jurisdiction
23 governs the perfection and the effect of perfection or
24 non-perfection of the security interest from the time it
25 attaches until 30 days after the debtor receives
26 possession of the goods and thereafter if the goods are
27 taken to the other jurisdiction before the end of the
28 30-day period.
29 (d) When collateral is brought into and kept in
30 this State while subject to a security interest perfected
31 under the law of the jurisdiction from which the
32 collateral was removed, the security interest remains
33 perfected, but if action is required by Part 3 of this
34 Article to perfect the security interest,
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1 (i) if the action is not taken before the
2 expiration of the period of perfection in the other
3 jurisdiction or the end of 4 months after the
4 collateral is brought into this State, whichever
5 period first expires, the security interest becomes
6 unperfected at the end of that period and is
7 thereafter deemed to have been unperfected as
8 against a person who became a purchaser after
9 removal;
10 (ii) if the action is taken before the
11 expiration of the period specified in subparagraph
12 (i), the security interest continues perfected
13 thereafter;
14 (iii) for the purpose of priority over a buyer
15 of consumer goods (subsection (2) of Section 9-307),
16 the period of the effectiveness of a filing in the
17 jurisdiction from which the collateral is removed is
18 governed by the rules with respect to perfection in
19 subparagraphs (i) and (ii).
20 (2) Certificate of title.
21 (a) This subsection applies to goods covered by a
22 certificate of title issued under a statute of this State
23 or of another jurisdiction under the law of which
24 indication of a security interest on the certificate is
25 required as a condition of perfection.
26 (b) Except as otherwise provided in this
27 subsection, perfection and the effect of perfection or
28 non-perfection of the security interest are governed by
29 the law (including the conflict of laws rules) of the
30 jurisdiction issuing the certificate until 4 months after
31 the goods are removed from that jurisdiction and
32 thereafter until the goods are registered in another
33 jurisdiction, but in any event not beyond surrender of
34 the certificate. After the expiration of that period,
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1 the goods are not covered by the certificate of title
2 within the meaning of this Section.
3 (c) Except with respect to the rights of a buyer
4 described in the next paragraph, a security interest,
5 perfected in another jurisdiction otherwise than by
6 notation on a certificate of title, in goods brought into
7 this State and thereafter covered by a certificate of
8 title issued by this State is subject to the rules stated
9 in paragraph (d) of subsection (1).
10 (d) If goods are brought into this State while a
11 security interest therein is perfected in any manner
12 under the law of the jurisdiction from which the goods
13 are removed and a certificate of title is issued by this
14 State and the certificate does not show that the goods
15 are subject to the security interest or that they may be
16 subject to security interests not shown on the
17 certificate, the security interest is subordinate to the
18 rights of a buyer of the goods to the extent that he
19 gives value and receives delivery of the goods after
20 issuance of the certificate and without knowledge of the
21 security interest.
22 (3) Accounts, general intangibles and mobile goods.
23 (a) This subsection applies to accounts (other than
24 an account described in subsection (5) on minerals) and
25 general intangibles (other than uncertificated
26 securities) and to goods which are mobile and which are
27 of a type normally used in more than one jurisdiction,
28 such as motor vehicles, trailers, rolling stock,
29 airplanes, shipping containers, road building and
30 construction machinery and commercial harvesting
31 machinery and the like, if the goods are equipment or are
32 inventory leased or held for lease by the debtor to
33 others, and are not covered by a certificate of title
34 described in subsection (2).
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1 (b) The law (including the conflict of laws rules)
2 of the jurisdiction in which the debtor is located
3 governs the perfection and the effect of perfection or
4 non-perfection of the security interest.
5 (c) If, however, the debtor is located in a
6 jurisdiction which is not a part of the United States,
7 and which does not provide for perfection of the security
8 interest by filing or recording in that jurisdiction, the
9 law of the jurisdiction in the United States in which the
10 debtor has its major executive office in the United
11 States governs the perfection and the effect of
12 perfection or non-perfection of the security interest
13 through filing. In the alternative, if the debtor is
14 located in a jurisdiction which is not a part of the
15 United States or Canada and the collateral is accounts or
16 general intangibles for money due or to become due, the
17 security interest may be perfected by notification to the
18 account debtor. As used in this paragraph, "United
19 States" includes its territories and possessions and the
20 Commonwealth of Puerto Rico.
21 (d) A debtor shall be deemed located at his place
22 of business if he has one, at his chief executive office
23 if he has more than one place of business, otherwise at
24 his residence. If, however, the debtor is a foreign air
25 carrier under the Federal Aviation Act of 1958, as
26 amended, it shall be deemed located at the designated
27 office of the agent upon whom service of process may be
28 made on behalf of the foreign air carrier.
29 (e) A security interest perfected under the law of
30 the jurisdiction of the location of the debtor is
31 perfected until the expiration of 4 months after a change
32 of the debtor's location to another jurisdiction, or
33 until perfection would have ceased by the law of the
34 first jurisdiction, whichever period first expires.
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1 Unless perfected in the new jurisdiction before the end
2 of that period, it becomes unperfected thereafter and is
3 deemed to have been unperfected as against a person who
4 became a purchaser after the change.
5 (4) Chattel paper. The rules stated for goods in
6 subsection (1) apply to a possessory security interest in
7 chattel paper. The rules stated for accounts in subsection
8 (3) apply to a non-possessory security interest in chattel
9 paper, but the security interest may not be perfected by
10 notification to the account debtor.
11 (5) Minerals. Perfection and the effect of perfection
12 or non-perfection of a security interest which is created by
13 a debtor who has an interest in minerals or the like
14 (including oil and gas) before extraction and which attaches
15 thereto as extracted, or which attaches to an account
16 resulting from the sale thereof at the wellhead or minehead
17 are governed by the law (including the conflict of laws
18 rules) of the jurisdiction wherein the wellhead or minehead
19 is located.
20 (6) Investment property.
21 (a) This subsection applies to investment property.
22 (b) Except as otherwise provided in paragraph (f),
23 during the time that a security certificate is located in
24 a jurisdiction, perfection of a security interest, the
25 effect of perfection or non-perfection, and the priority
26 of a security interest in the certificated security
27 represented thereby are governed by the local law of that
28 jurisdiction.
29 (c) Except as otherwise provided in paragraph (f),
30 perfection of a security interest, the effect of
31 perfection or non-perfection, and the priority of a
32 security interest in an uncertificated security are
33 governed by the local law of the issuer's jurisdiction as
34 specified in Section 8-110(d).
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1 (d) Except as otherwise provided in paragraph (f),
2 perfection of a security interest, the effect of
3 perfection or non-perfection, and the priority of a
4 security interest in a security entitlement or securities
5 account are governed by the local law of the securities
6 intermediary's jurisdiction as specified in Section
7 8-110(e).
8 (e) 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 a commodity contract or commodity
12 account are governed by the local law of the commodity
13 intermediary's jurisdiction. The following rules
14 determine a "commodity intermediary's jurisdiction" for
15 purposes of this paragraph:
16 (i) If an agreement between the commodity
17 intermediary and commodity customer specifies that
18 it is governed by the law of a particular
19 jurisdiction, that jurisdiction is the commodity
20 intermediary's jurisdiction.
21 (ii) If an agreement between the commodity
22 intermediary and commodity customer does not specify
23 the governing law as provided in subparagraph (i),
24 but expressly specifies that the commodity account
25 is maintained at an office in a particular
26 jurisdiction, that jurisdiction is the commodity
27 intermediary's jurisdiction.
28 (iii) If an agreement between the commodity
29 intermediary and commodity customer does not specify
30 a jurisdiction as provided in subparagraphs (i) or
31 (ii), the commodity intermediary's jurisdiction is
32 the jurisdiction in which is located the office
33 identified in an account statement as the office
34 serving the commodity customer's account.
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1 (iv) If an agreement between the commodity
2 intermediary and commodity customer does not specify
3 a jurisdiction as provided in subparagraphs (i) or
4 (ii) and an account statement does not identify an
5 office serving the commodity customer's account as
6 provided in subparagraph (iii), the commodity
7 intermediary's jurisdiction is the jurisdiction in
8 which is located the chief executive office of the
9 commodity intermediary.
10 (f) Perfection of a security interest by filing,
11 automatic perfection of a security interest in investment
12 property granted by a broker or securities intermediary,
13 and automatic perfection of a security interest in a
14 commodity contract or commodity account granted by a
15 commodity intermediary are governed by the local law of
16 the jurisdiction in which the debtor is located.
17 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
18 89-626, eff. 8-9-96.)
19 (810 ILCS 5/9-104) (from Ch. 26, par. 9-104)
20 Sec. 9-104. Control of deposit account.
21 (a) Requirements for control. A secured party has
22 control of a deposit account if:
23 (1) the secured party is the bank with which the
24 deposit account is maintained;
25 (2) the debtor, secured party, and bank have agreed
26 in an authenticated record that the bank will comply with
27 instructions originated by the secured party directing
28 disposition of the funds in the deposit account without
29 further consent by the debtor; or
30 (3) the secured party becomes the bank's customer
31 with respect to the deposit account.
32 (b) Debtor's right to direct disposition. A secured
33 party that has satisfied subsection (a) has control, even if
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1 the debtor retains the right to direct the disposition of
2 funds from the deposit account. Transactions excluded from
3 Article.
4 This Article does not apply
5 (a) to a security interest subject to any statute
6 of the United States to the extent that such statute
7 governs the rights of parties to and third parties
8 affected by transactions in particular types of property;
9 or
10 (b) to a landlord's lien; or
11 (c) to a lien given by statute or other rule of law
12 for services or materials except as provided in Section
13 9-310 on priority of such liens; or
14 (d) to a transfer of a claim for wages, salary or
15 other compensation of an employee; or
16 (e) to a transfer by a government or governmental
17 subdivision or agency; or
18 (f) to a sale of accounts or chattel paper as part
19 of a sale of the business out of which they arose, or an
20 assignment of accounts or chattel paper which is for the
21 purpose of collection only, or a transfer of a right to
22 payment under a contract to an assignee who is also to do
23 the performance under the contract or a transfer of a
24 single account to an assignee in whole or partial
25 satisfaction of a preexisting indebtedness; or
26 (g) to a transfer of an interest or claim in or
27 under any policy of insurance, except as provided with
28 respect to proceeds (Section 9-306) and priorities in
29 proceeds (Section 9-312); or
30 (h) to a right represented by a judgment (other
31 than a judgment taken on a right to payment which was
32 collateral); or
33 (i) to any right of set-off; or
34 (j) except to the extent that provision is made for
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1 fixtures in Section 9-313, to the creation or transfer of
2 an interest in or lien on real estate, including a lease
3 or rents thereunder; or
4 (k) to a transfer in whole or in part of any claim
5 arising out of tort; or
6 (l) to a transfer of an interest in a letter of
7 credit other than the rights to proceeds of a written
8 letter of credit.
9 (Source: P.A. 89-534, eff. 1-1-97.)
10 (810 ILCS 5/9-105) (from Ch. 26, par. 9-105)
11 Sec. 9-105. Control of electronic chattel paper. A
12 secured party has control of electronic chattel paper if the
13 record or records comprising the chattel paper are created,
14 stored, and assigned in such a manner that:
15 (1) a single authoritative copy of the record or
16 records exists which is unique, identifiable and, except
17 as otherwise provided in paragraphs (4), (5), and (6),
18 unalterable;
19 (2) the authoritative copy identifies the secured
20 party as the assignee of the record or records;
21 (3) the authoritative copy is communicated to and
22 maintained by the secured party or its designated
23 custodian;
24 (4) copies or revisions that add or change an
25 identified assignee of the authoritative copy can be made
26 only with the participation of the secured party;
27 (5) each copy of the authoritative copy and any
28 copy of a copy is readily identifiable as a copy that is
29 not the authoritative copy; and
30 (6) any revision of the authoritative copy is
31 readily identifiable as an authorized or unauthorized
32 revision. Definitions and index of definitions.
33 (1) In this Article unless the context otherwise
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1 requires:
2 (a) "Account debtor" means the person who is
3 obligated on an account, chattel paper or general
4 intangible;
5 (b) "Chattel paper" means a writing or writings
6 which evidence both a monetary obligation and a security
7 interest in or a lease of specific goods, but a charter
8 or other contract involving the use or hire of a vessel
9 is not chattel paper. When a transaction is evidenced
10 both by such a security agreement or a lease and by an
11 instrument or a series of instruments, the group of
12 writings taken together constitutes chattel paper;
13 (c) "Collateral" means the property subject to a
14 security interest, and includes accounts and chattel
15 paper which have been sold;
16 (d) "Debtor" means the person who owes payment or
17 other performance of the obligation secured, whether or
18 not he owns or has rights in the collateral, and includes
19 the seller of accounts or chattel paper. Where the debtor
20 and the owner of the collateral are not the same person,
21 the term "debtor" means the owner of the collateral in
22 any provision of the Article dealing with the collateral,
23 the obligor in any provision dealing with the obligation,
24 and may include both where the context so requires;
25 (e) "Deposit account" means a demand, time,
26 savings, passbook or like account maintained with a bank,
27 as defined in subsection (1) of Section 4-105, other than
28 an account evidenced by a certificate of deposit;
29 (f) "Document" means document of title as defined
30 in the general definitions of Article 1 (Section 1-201),
31 and a receipt of the kind described in subsection (2) of
32 Section 7-201;
33 (g) "Encumbrance" includes real estate mortgages
34 and other liens on real estate and all other rights in
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1 real estate that are not ownership interests;
2 (h) "Goods" includes all things which are movable
3 at the time the security interest attaches or which are
4 fixtures (Section 9-313), but does not include money,
5 documents, instruments, investment property, commodity
6 contracts, accounts, chattel paper, general intangibles,
7 or minerals or the like (including oil and gas) before
8 extraction. "Goods" also includes standing timber which
9 is to be cut and removed under a conveyance or contract
10 for sale, the unborn young of animals, and growing crops;
11 (i) "Instrument" means a negotiable instrument
12 (defined in Section 3-104), a non-transferable
13 certificate of deposit, a non-negotiable certificate of
14 deposit, or any other writing which evidences a right to
15 the payment of money and is not itself a security
16 agreement or lease and is of a type which is in ordinary
17 course of business transferred by delivery with any
18 necessary indorsement or assignment. The term does not
19 include investment property;
20 (j) "Mortgage" means a consensual interest created
21 by a real estate mortgage, a trust deed on real estate,
22 or the like;
23 (j-5) "Non-negotiable certificate of deposit" means
24 a written document issued by a bank, as defined in
25 subsection (1) of Section 4-105, that contains an
26 acknowledgement that a sum of money has been received by
27 the issuer and a promise by the issuer to repay the sum
28 of money, and is not a negotiable instrument as defined
29 in Section 3-104;
30 (j-7) "Non-transferable certificate of deposit"
31 means a non-negotiable certificate of deposit which may
32 not be transferred except on the books of the issuer,
33 with the consent of the issuer, or is subject to other
34 restrictions or conditions of the issuer on transfer;
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1 (k) An advance is made "pursuant to commitment" if
2 the secured party has bound himself to make it, whether
3 or not a subsequent event of default or other event not
4 within his control has relieved or may relieve him from
5 his obligation;
6 (l) "Security agreement" means an agreement which
7 creates or provides for a security interest;
8 (m) "Secured party" means a lender, seller or other
9 person in whose favor there is a security interest,
10 including a person to whom accounts or chattel paper have
11 been sold. When the holders of obligations issued under
12 an indenture of trust, equipment trust agreement or the
13 like are represented by a trustee or other person, the
14 representative is the secured party;
15 -10t(n) "Transmitting utility" means any person primarily
16 engaged in the railroad, street railway or trolley bus
17 business, the electric or electronics communications
18 transmission business, the transmission of goods by
19 pipeline, or the distribution, transmission, or the
20 production and transmission of electricity, steam, gas or
21 water, or the provision of sewer service.
22 (o) "Uncertificated certificate of deposit" means an
23 obligation of a bank, as defined in subsection (1) of Section
24 4-105, to repay a sum of money it has received, that is not a
25 deposit account and is not represented by a writing, but only
26 by an entry on the books of the bank and any documentation
27 given to the customer by the bank.
28 (2) Other definitions applying to this Article and the
29 Sections in which they appear are:
30 "Account". Section 9-106.
31 "Attach". Section 9-203.
32 "Commodity contract". Section 9-115.
33 "Commodity customer". Section 9-115.
34 "Commodity intermediary". Section 9-115.
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1 "Construction mortgage". Section 9-313 (1).
2 "Consumer goods". Section 9-109 (1).
3 "Control". Section 9-115.
4 "Equipment". Section 9-109 (2).
5 "Farm products". Section 9-109 (3).
6 "Fixture". Section 9-313 (1).
7 "Fixture filing". Section 9-313 (1).
8 "General intangibles". Section 9-106.
9 "Inventory". Section 9-109 (4).
10 "Investment property". Section 9-115.
11 "Lien creditor". Section 9-301 (3).
12 "Proceeds". Section 9-306 (1).
13 "Purchase money security interest". Section 9-107.
14 "United States". Section 9-103.
15 (3) The following definitions in other Articles apply to
16 this Article:
17 "Bank". Section 4-105.
18 "Broker". Section 8-102.
19 "Certificated security". Section 8-102.
20 "Check". Section 3-104.
21 "Clearing corporation". Section 8-102.
22 "Contract for sale". Section 2-106.
23 "Control". Section 8-106.
24 "Delivery". Section 8-301.
25 "Entitlement holder". Section 8-102.
26 "Financial asset". Section 8-102.
27 "Holder in due course". Section 3-302.
28 "Letter of credit". Section 5-102.
29 "Note". Section 3-104.
30 "Proceeds of a letter of credit". Section 5-114(a).
31 "Sale". Section 2-106.
32 "Securities intermediary". Section 8-102.
33 "Security". Section 8-102.
34 "Security certificate". Section 8-102.
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1 "Security entitlement". Section 8-102.
2 "Uncertificated security". Section 8-102.
3 (4) In addition Article 1 contains general definitions
4 and principles of construction and interpretation applicable
5 throughout this Article.
6 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
7 90-665, eff. 7-30-98.)
8 (810 ILCS 5/9-106) (from Ch. 26, par. 9-106)
9 Sec. 9-106. Control of investment property.
10 (a) Control under Section 8-106. A person has control
11 of a certificated security, uncertificated security, or
12 security entitlement as provided in Section 8-106.
13 (b) Control of commodity contract. A secured party has
14 control of a commodity contract if:
15 (1) the secured party is the commodity intermediary
16 with which the commodity contract is carried; or
17 (2) the commodity customer, secured party, and
18 commodity intermediary have agreed that the commodity
19 intermediary will apply any value distributed on account
20 of the commodity contract as directed by the secured
21 party without further consent by the commodity customer.
22 (c) Effect of control of securities account or commodity
23 account. A secured party having control of all security
24 entitlements or commodity contracts carried in a securities
25 account or commodity account has control over the securities
26 account or commodity account. Definitions: "account";
27 "general intangibles". "Account" means any right to payment
28 for goods sold or leased or for services rendered which is
29 not evidenced by an instrument or chattel paper, whether or
30 not it has been earned by performance. "General intangibles"
31 means any personal property (including things in action)
32 other than goods, accounts, chattel paper, documents,
33 instruments, investment property, rights to proceeds of
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1 written letters of credit, deposit accounts, uncertificated
2 certificates of deposit, and money. All rights to payment
3 earned or unearned under a charter or other contract
4 involving the use or hire of a vessel and all rights incident
5 to the charter or contract are accounts.
6 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
7 90-665, eff. 7-30-98.)
8 (810 ILCS 5/9-107) (from Ch. 26, par. 9-107)
9 Sec. 9-107. Control of letter-of-credit right. A
10 secured party has control of a letter-of-credit right to the
11 extent of any right to payment or performance by the issuer
12 or any nominated person if the issuer or nominated person has
13 consented to an assignment of proceeds of the letter of
14 credit under Section 5-114(c) or otherwise applicable law or
15 practice. Definitions: "purchase money security interest".
16 A security interest is a "purchase money security
17 interest" to the extent that it is
18 (a) taken or retained by the seller of the
19 collateral to secure all or part of its price; or
20 (b) taken by a person who by making advances or
21 incurring an obligation gives value to enable the debtor to
22 acquire rights in or the use of collateral if such value is
23 in fact so used.
24 (Source: Laws 1961, p. 2101.)
25 (810 ILCS 5/9-108) (from Ch. 26, par. 9-108)
26 Sec. 9-108. Sufficiency of description.
27 (a) Sufficiency of description. Except as otherwise
28 provided in subsections (c), (d), and (e), a description of
29 personal or real property is sufficient, whether or not it is
30 specific, if it reasonably identifies what is described.
31 (b) Examples of reasonable identification. Except as
32 otherwise provided in subsection (d), a description of
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1 collateral reasonably identifies the collateral if it
2 identifies the collateral by:
3 (1) specific listing;
4 (2) category;
5 (3) except as otherwise provided in subsection (e),
6 a type of collateral defined in the Uniform Commercial
7 Code;
8 (4) quantity;
9 (5) computational or allocational formula or
10 procedure; or
11 (6) except as otherwise provided in subsection (c),
12 any other method, if the identity of the collateral is
13 objectively determinable.
14 (c) Supergeneric description not sufficient. A
15 description of collateral as "all the debtor's assets" or
16 "all the debtor's personal property" or using words of
17 similar import does not reasonably identify the collateral.
18 (d) Investment property. Except as otherwise provided
19 in subsection (e), a description of a security entitlement,
20 securities account, or commodity account is sufficient if it
21 describes:
22 (1) the collateral by those terms or as investment
23 property; or
24 (2) the underlying financial asset or commodity
25 contract.
26 (e) When description by type insufficient. A
27 description only by type of collateral defined in the Uniform
28 Commercial Code is an insufficient description of:
29 (1) a commercial tort claim; or
30 (2) in a consumer transaction, consumer goods, a
31 security entitlement, a securities account, or a
32 commodity account. When after-acquired collateral not
33 security for antecedent debt.
34 Where a secured party makes an advance, incurs an
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1 obligation, releases a perfected security interest, or
2 otherwise gives new value which is to be secured in whole or
3 in part by after-acquired property his security interest in
4 the after-acquired collateral shall be deemed to be taken for
5 new value and not as security for an antecedent debt if the
6 debtor acquires his rights in such collateral either in the
7 ordinary course of his business or under a contract of
8 purchase made pursuant to the security agreement within a
9 reasonable time after new value is given.
10 (Source: Laws 1961, p. 2101.)
11 (810 ILCS 5/Art. 9, Part 1, Subpart 2 heading new)
12 SUBPART 2. APPLICABILITY OF ARTICLE
13 (810 ILCS 5/9-109) (from Ch. 26, par. 9-109)
14 Sec. 9-109. Scope.
15 (a) General scope of Article. Except as otherwise
16 provided in subsections (c) and (d), this Article applies to:
17 (1) a transaction, regardless of its form, that
18 creates a security interest in personal property or
19 fixtures by contract;
20 (2) an agricultural lien;
21 (3) a sale of accounts, chattel paper, payment
22 intangibles, or promissory notes;
23 (4) a consignment;
24 (5) a security interest arising under Section
25 2-401, 2-505, 2-711(3), or 2A-508(5), as provided in
26 Section 9-110; and
27 (6) a security interest arising under Section 4-210
28 or 5-118.
29 (b) Security interest in secured obligation. The
30 application of this Article to a security interest in a
31 secured obligation is not affected by the fact that the
32 obligation is itself secured by a transaction or interest to
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1 which this Article does not apply.
2 (c) Extent to which Article does not apply. This
3 Article does not apply to the extent that:
4 (1) a statute, regulation, or treaty of the United
5 States preempts this Article;
6 (2) another statute of this State expressly governs
7 the creation, perfection, priority, or enforcement of a
8 security interest created by this State or a governmental
9 unit of this State;
10 (3) a statute of another State, a foreign country,
11 or a governmental unit of another State or a foreign
12 country, other than a statute generally applicable to
13 security interests, expressly governs creation,
14 perfection, priority, or enforcement of a security
15 interest created by the State, country, or governmental
16 unit;
17 (4) the rights of a transferee beneficiary or
18 nominated person under a letter of credit are independent
19 and superior under Section 5-114;
20 (5) this Article is in conflict with Section
21 205-410 of the Department of Agriculture Law of the Civil
22 Administrative Code of Illinois or the Grain Code; or
23 (6) this Article is in conflict with Section 18-107
24 of the Public Utilities Act.
25 (d) Inapplicability of Article. This Article does not
26 apply to:
27 (1) a landlord's lien, other than an agricultural
28 lien;
29 (2) a lien, other than an agricultural lien, given
30 by statute or other rule of law for services or
31 materials, but Section 9-333 applies with respect to
32 priority of the lien;
33 (3) an assignment of a claim for wages, salary, or
34 other compensation of an employee;
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1 (4) a sale of accounts, chattel paper, payment
2 intangibles, or promissory notes as part of a sale of the
3 business out of which they arose;
4 (5) an assignment of accounts, chattel paper,
5 payment intangibles, or promissory notes which is for the
6 purpose of collection only;
7 (6) an assignment of a right to payment under a
8 contract to an assignee that is also obligated to perform
9 under the contract;
10 (7) an assignment of a single account, payment
11 intangible, or promissory note to an assignee in full or
12 partial satisfaction of a preexisting indebtedness;
13 (8) a transfer of an interest in or an assignment
14 of a claim under a policy of insurance, other than an
15 assignment by or to a health-care provider of a
16 health-care-insurance receivable and any subsequent
17 assignment of the right to payment, but Sections 9-315
18 and 9-322 apply with respect to proceeds and priorities
19 in proceeds;
20 (9) an assignment of a right represented by a
21 judgment, other than a judgment taken on a right to
22 payment that was collateral;
23 (10) a right of recoupment or set-off, but:
24 (A) Section 9-340 applies with respect to the
25 effectiveness of rights of recoupment or set-off
26 against deposit accounts; and
27 (B) Section 9-404 applies with respect to
28 defenses or claims of an account debtor;
29 (11) the creation or transfer of an interest in or
30 lien on real property, including a lease or rents
31 thereunder, except to the extent that provision is made
32 for:
33 (A) liens on real property in Sections 9-203
34 and 9-308;
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1 (B) fixtures in Section 9-334;
2 (C) fixture filings in Sections 9-501, 9-502,
3 9-512, 9-516, and 9-519; and
4 (D) security agreements covering personal and
5 real property in Section 9-604; or
6 (12) an assignment of a claim arising in tort,
7 other than a commercial tort claim, but Sections 9-315
8 and 9-322 apply with respect to proceeds and priorities
9 in proceeds. Classification of goods; "consumer goods";
10 "equipment"; "farm products"; "inventory". Goods are
11 (1) "consumer goods" if they are used or bought for use
12 primarily for personal, family or household purposes;
13 (2) "equipment" if they are used or bought for use
14 primarily in business (including farming or a profession) or
15 by a debtor who is a non-profit organization or a
16 governmental subdivision or agency or if the goods are not
17 included in the definitions of inventory, farm products or
18 consumer goods;
19 (3) "farm products" if they are crops or livestock or
20 supplies used or produced in farming operations or if they
21 are products of crops or livestock in their unmanufactured
22 states (such as ginned cotton, wool-clip, maple syrup, milk
23 and eggs) or if they are aquatic products as defined in the
24 Aquaculture Development Act, and if they are in the
25 possession of a debtor engaged in raising, fattening, grazing
26 or other farming or aquacultural operations. If goods are
27 farm products they are neither equipment nor inventory;
28 (4) "inventory" if they are held by a person who holds
29 them for sale or lease or to be furnished under contracts of
30 service or if he has so furnished them, or if they are raw
31 materials, work in process or materials used or consumed in a
32 business. Inventory of a person is not to be classified as
33 his equipment.
34 (Source: P.A. 85-856.)
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1 (810 ILCS 5/9-110) (from Ch. 26, par. 9-110)
2 Sec. 9-110. Security interests arising under Article 2
3 or 2A. A security interest arising under Section 2-401,
4 2-505, 2-711(3), or 2A-508(5) is subject to this Article.
5 However, until the debtor obtains possession of the goods:
6 (1) the security interest is enforceable, even if
7 Section 9-203(b)(3) has not been satisfied;
8 (2) filing is not required to perfect the security
9 interest;
10 (3) the rights of the secured party after default
11 by the debtor are governed by Article 2 or 2A; and
12 (4) the security interest has priority over a
13 conflicting security interest created by the debtor.
14 Sufficiency of description.
15 For the purposes of this Article any description of
16 personal property or real estate is sufficient whether or not
17 it is specific if it reasonably identifies what is described.
18 (Source: Laws 1961, p. 2101.)
19 (810 ILCS 5/9-112) (from Ch. 26, par. 9-112)
20 Sec. 9-112. (Blank). Where collateral is not owned by
21 debtor.
22 Unless otherwise agreed, when a secured party knows that
23 collateral is owned by a person who is not the debtor, the
24 owner of the collateral is entitled to receive from the
25 secured party any surplus under Section 9-- 502(2) or under
26 Section 9--504(1), and is not liable for the debt or for any
27 deficiency after resale, and he has the same right as the
28 debtor
29 (a) to receive statements under Section 9--208;
30 (b) to receive notice of and to object to a secured
31 party's proposal to retain the collateral in satisfaction of
32 the indebtedness under Section 9--505;
33 (c) to redeem the collateral under Section 9--506;
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1 (d) to obtain injunctive or other relief under
2 Section 9--507(1); and
3 (e) to recover losses caused to him under Section
4 9--208(2).
5 (Source: Laws 1961, 1st S.S., p. 7.)
6 (810 ILCS 5/9-113) (from Ch. 26, par. 9-113)
7 Sec. 9-113. (Blank). Security interests arising under
8 Article on Sales or under Article on Leases.
9 A security interest arising solely under the Article on
10 Sales (Article 2) or the Article on Leases (Article 2A) is
11 subject to the provisions of this Article except that to the
12 extent that and so long as the debtor does not have or does
13 not lawfully obtain possession of the goods
14 (a) no security agreement is necessary to make the
15 security interest enforceable; and
16 (b) no filing is required to perfect the security
17 interest; and
18 (c) the rights of the secured party on default by
19 the debtor are governed (i) by the Article on Sales
20 (Article 2) in the case of a security interest arising
21 solely under such Article or (ii) by the Article on
22 Leases (Article 2A) in the case of a security interest
23 arising solely under such Article.
24 (Source: P.A. 87-493.)
25 (810 ILCS 5/9-114) (from Ch. 26, par. 9-114)
26 Sec. 9-114. (Blank). Consignment.
27 (1) A person who delivers goods under a consignment
28 which is not a security interest and who would be required to
29 file under this Article by paragraph (3) (c) of Section 2-326
30 has priority over a secured party who is or becomes a
31 creditor of the consignee and who would have a perfected
32 security interest in the goods if they were the property of
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1 the consignee, and also has priority with respect to
2 identifiable cash proceeds received on or before delivery of
3 the goods to a buyer, if
4 (a) the consignor complies with the filing provision of
5 the Article on Sales with respect to consignments (paragraph
6 (3) (c) of Section 2-326 before the consignee receives
7 possession of the goods; and
8 (b) the consignor gives notification in writing to the
9 holder of the security interest if the holder has filed a
10 financing statement covering the same types of goods before
11 the date of the filing made by the consignor; and
12 (c) the holder of the security interest receives the
13 notification within 5 years before the consignee receives
14 possession of the goods; and
15 (d) the notification states that the consignor expects
16 to deliver goods on consignment to the consignee, describing
17 the goods by item or type.
18 (2) In the case of a consignment which is not a security
19 interest and in which the requirements of the preceding
20 subsection have not been met, a person who delivers goods to
21 another is subordinate to a person who would have a perfected
22 security interest in the goods if they were the property of
23 the debtor.
24 (Source: P. A. 78-238.)
25 (810 ILCS 5/9-115) (from Ch. 26, par. 9-115)
26 Sec. 9-115. (Blank). Investment property.
27 (1) In this Article:
28 (a) "Commodity account" means an account maintained
29 by a commodity intermediary in which a commodity contract
30 is carried for a commodity customer.
31 (b) "Commodity contract" means a commodity futures
32 contract, an option on a commodity futures contract, a
33 commodity option, or other contract that, in each case,
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1 is:
2 (i) traded on or subject to the rules of a
3 board of trade that has been designated as a
4 contract market for such a contract pursuant to the
5 federal commodities laws; or
6 (ii) traded on a foreign commodity board of
7 trade, exchange, or market, and is carried on the
8 books of a commodity intermediary for a commodity
9 customer.
10 (c) "Commodity customer" means a person for whom a
11 commodity intermediary carries a commodity contract on
12 its books.
13 (d) "Commodity intermediary" means:
14 (i) a person who is registered as a futures
15 commission merchant under the federal commodities
16 laws; or
17 (ii) a person who in the ordinary course of
18 its business provides clearance or settlement
19 services for a board of trade that has been
20 designated as a contract market pursuant to the
21 federal commodities laws.
22 (e) "Control" with respect to a certificated
23 security, uncertificated security, or security
24 entitlement has the meaning specified in Section 8-106.
25 A secured party has control over a commodity contract if
26 by agreement among the commodity customer, the commodity
27 intermediary, and the secured party, the commodity
28 intermediary has agreed that it will apply any value
29 distributed on account of the commodity contract as
30 directed by the secured party without further consent by
31 the commodity customer. If a commodity customer grants a
32 security interest in a commodity contract to its own
33 commodity intermediary, the commodity intermediary as
34 secured party has control. A secured party has control
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1 over a securities account or commodity account if the
2 secured party has control over all security entitlements
3 or commodity contracts carried in the securities account
4 or commodity account.
5 (f) "Investment property" means:
6 (i) a security, whether certificated or
7 uncertificated;
8 (ii) a security entitlement;
9 (iii) a securities account;
10 (iv) a commodity contract; or
11 (v) a commodity account.
12 (2) Attachment or perfection of a security interest in a
13 securities account is also attachment or perfection of a
14 security interest in all security entitlements carried in the
15 securities account. Attachment or perfection of a security
16 interest in a commodity account is also attachment or
17 perfection of a security interest in all commodity contracts
18 carried in the commodity account.
19 (3) A description of collateral in a security agreement
20 or financing statement is sufficient to create or perfect a
21 security interest in a certificated security, uncertificated
22 security, security entitlement, securities account, commodity
23 contract, or commodity account whether it describes the
24 collateral by those terms, or as investment property, or by
25 description of the underlying security, financial asset, or
26 commodity contract. A description of investment property
27 collateral in a security agreement or financing statement is
28 sufficient if it identifies the collateral by specific
29 listing, by category, by quantity, by a computational or
30 allocational formula or procedure, or by any other method, if
31 the identity of the collateral is objectively determinable.
32 (4) Perfection of a security interest in investment
33 property is governed by the following rules:
34 (a) A security interest in investment property may
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1 be perfected by control.
2 (b) Except as otherwise provided in paragraphs (c)
3 and (d), a security interest in investment property may
4 be perfected by filing.
5 (c) If the debtor is a broker or securities
6 intermediary a security interest in investment property
7 is perfected when it attaches. The filing of a financing
8 statement with respect to a security interest in
9 investment property granted by a broker or securities
10 intermediary has no effect for purposes of perfection or
11 priority with respect to that security interest.
12 (d) If a debtor is a commodity intermediary, a
13 security interest in a commodity contract or a commodity
14 account is perfected when it attaches. The filing of a
15 financing statement with respect to a security interest
16 in a commodity contract or a commodity account granted by
17 a commodity intermediary has no effect for purposes of
18 perfection or priority with respect to that security
19 interest.
20 (5) Priority between conflicting security interests in
21 the same investment property is governed by the following
22 rules:
23 (a) A security interest of a secured party who has
24 control over investment property has priority over a
25 security interest of a secured party who does not have
26 control over the investment property.
27 (b) Except as otherwise provided in paragraphs (c)
28 and (d), conflicting security interests of secured
29 parties each of whom has control rank equally.
30 (c) Except as otherwise agreed by the securities
31 intermediary, a security interest in a security
32 entitlement or a securities account granted to the
33 debtor's own securities intermediary has priority over
34 any security interest granted by the debtor to another
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1 secured party.
2 (d) Except as otherwise agreed by the commodity
3 intermediary, a security interest in a commodity contract
4 or a commodity account granted to the debtor's own
5 commodity intermediary has priority over any security
6 interest granted by the debtor to another secured party.
7 (e) Conflicting security interests granted by a
8 broker, a securities intermediary, or a commodity
9 intermediary which are perfected without control rank
10 equally.
11 (f) In all other cases, priority between
12 conflicting security interests in investment property is
13 governed by Section 9-312(5), (6), and (7). Section
14 9-312(4) does not apply to investment property.
15 (6) If a security certificate in registered form is
16 delivered to a secured party pursuant to agreement, a written
17 security agreement is not required for attachment or
18 enforceability of the security interest, delivery suffices
19 for perfection of the security interest, and the security
20 interest has priority over a conflicting security interest
21 perfected by means other than control, even if a necessary
22 indorsement is lacking.
23 (Source: P.A. 89-364, eff. 1-1-96.)
24 (810 ILCS 5/9-116)
25 Sec. 9-116. (Blank). Security interest arising in
26 purchase or delivery of financial asset.
27 (1) If a person buys a financial asset through a
28 securities intermediary in a transaction in which the buyer
29 is obligated to pay the purchase price to the securities
30 intermediary at the time of the purchase, and the securities
31 intermediary credits the financial asset to the buyer's
32 securities account before the buyer pays the securities
33 intermediary, the securities intermediary has a security
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1 interest in the buyer's security entitlement securing the
2 buyer's obligation to pay. A security agreement is not
3 required for attachment or enforceability of the security
4 interest, and the security interest is automatically
5 perfected.
6 (2) If a certificated security, or other financial asset
7 represented by a writing which in the ordinary course of
8 business is transferred by delivery with any necessary
9 indorsement or assignment is delivered pursuant to an
10 agreement between persons in the business of dealing with
11 such securities or financial assets and the agreement calls
12 for delivery versus payment, the person delivering the
13 certificate or other financial asset has a security interest
14 in the certificated security or other financial asset
15 securing the seller's right to receive payment. A security
16 agreement is not required for attachment or enforceability of
17 the security interest, and the security interest is
18 automatically perfected.
19 (Source: P.A. 89-364, eff. 1-1-96.)
20 (810 ILCS 5/9-150)
21 Sec. 9-150. (Blank). Secretary of State; rules. The
22 Secretary of State, under the Illinois Administrative
23 Procedure Act, may adopt rules necessary to administer the
24 Secretary of State's responsibilities under this Article.
25 (Source: P.A. 89-364, eff. 1-1-96.)
26 (810 ILCS 5/Art. 9, Part 2 heading)
27 PART 2. EFFECTIVENESS OF SECURITY AGREEMENT;
28 ATTACHMENT OF SECURITY INTEREST;
29 RIGHTS OF PARTIES TO SECURITY AGREEMENT
30 VALIDITY OF SECURITY AGREEMENT
31 AND RIGHTS OF PARTIES THERETO
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1 (810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new)
2 SUBPART 1. EFFECTIVENESS AND ATTACHMENT
3 (810 ILCS 5/9-201) (from Ch. 26, par. 9-201)
4 Sec. 9-201. General effectiveness of security agreement.
5 (a) General effectiveness. Except as otherwise provided
6 in the Uniform Commercial Code, a security agreement is
7 effective according to its terms between the parties, against
8 purchasers of the collateral, and against creditors.
9 (b) Applicable consumer laws and other law. A
10 transaction subject to this Article is subject to any
11 applicable rule of law, statute, or regulation which
12 establishes a different rule for consumers, including:
13 (1) the Retail Installment Sales Act;
14 (2) the Motor Vehicle Retail Installment Sales Act;
15 (3) Article II of Chapter 3 of the Illinois Vehicle
16 Code;
17 (4) Article IIIB of the Boat Registration and
18 Safety Act;
19 (5) the Pawnbroker Regulation Act;
20 (6) the Motor Vehicle Leasing Act;
21 (7) the Consumer Installment Loan Act; and
22 (8) the Consumer Deposit Security Act of 1987.
23 (c) Other applicable law controls. In case of conflict
24 between this Article and a rule of law, statute, or
25 regulation described in subsection (b), the rule of law,
26 statute, or regulation controls. Failure to comply with a
27 rule of law, statute, or regulation described in subsection
28 (b) has only the effect such rule of law, statute, or
29 regulation specifies.
30 (d) Further deference to other applicable law. This
31 Article does not:
32 (1) validate any rate, charge, agreement, or
33 practice that violates a rule of law, statute, or
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1 regulation described in subsection (b); or
2 (2) extend the application of the rule of law,
3 statute, or regulation to a transaction not otherwise
4 subject to it. General validity of security agreement.
5 Except as otherwise provided by this Act a security
6 agreement is effective according to its terms between the
7 parties, against purchasers of the collateral and against
8 creditors. Nothing in this Article validates any charge or
9 practice illegal under any statute or regulation thereunder
10 governing usury, small loans, retail installment sales, or
11 the like, or extends the application of any such statute or
12 regulation to any transaction not otherwise subject thereto.
13 (Source: Laws 1961, p. 2101.)
14 (810 ILCS 5/9-202) (from Ch. 26, par. 9-202)
15 Sec. 9-202. Title to collateral immaterial. Except as
16 otherwise provided with respect to consignments or sales of
17 accounts, chattel paper, payment intangibles, or promissory
18 notes, the provisions of this Article with regard to rights
19 and obligations apply whether title to collateral is in the
20 secured party or the debtor.
21 Each provision of this Article with regard to rights,
22 obligations and remedies applies whether title to collateral
23 is in the secured party or in the debtor.
24 (Source: Laws 1961, p. 2101.)
25 (810 ILCS 5/9-203) (from Ch. 26, par. 9-203)
26 Sec. 9-203. Attachment and enforceability of security
27 interest; proceeds; supporting obligations; formal
28 requisites.
29 (a) Attachment. A security interest attaches to
30 collateral when it becomes enforceable against the debtor
31 with respect to the collateral, unless an agreement expressly
32 postpones the time of attachment.
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1 (b) Enforceability. Except as otherwise provided in
2 subsections (c) through (i), a security interest is
3 enforceable against the debtor and third parties with respect
4 to the collateral only if:
5 (1) value has been given;
6 (2) the debtor has rights in the collateral or the
7 power to transfer rights in the collateral to a secured
8 party; and
9 (3) one of the following conditions is met:
10 (A) the debtor has authenticated a security
11 agreement that provides a description of the
12 collateral and, if the security interest covers
13 timber to be cut, a description of the land
14 concerned;
15 (B) the collateral is not a certificated
16 security and is in the possession of the secured
17 party under Section 9-313 pursuant to the debtor's
18 security agreement;
19 (C) the collateral is a certificated security
20 in registered form and the security certificate has
21 been delivered to the secured party under Section
22 8-301 pursuant to the debtor's security agreement;
23 or
24 (D) the collateral is deposit accounts,
25 electronic chattel paper, investment property, or
26 letter-of-credit rights, and the secured party has
27 control under Section 9-104, 9-105, 9-106, or 9-107
28 pursuant to the debtor's security agreement.
29 (c) Other UCC provisions. Subsection (b) is subject to
30 Section 4-210 on the security interest of a collecting bank,
31 Section 5-118 on the security interest of a letter-of-credit
32 issuer or nominated person, Section 9-110 on a security
33 interest arising under Article 2 or 2A, and Section 9-206 on
34 security interests in investment property.
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1 (d) When person becomes bound by another person's
2 security agreement. A person becomes bound as debtor by a
3 security agreement entered into by another person if, by
4 operation of law other than this Article or by contract:
5 (1) the security agreement becomes effective to
6 create a security interest in the person's property; or
7 (2) the person becomes generally obligated for the
8 obligations of the other person, including the obligation
9 secured under the security agreement, and acquires or
10 succeeds to all or substantially all of the assets of the
11 other person.
12 (e) Effect of new debtor becoming bound. If a new
13 debtor becomes bound as debtor by a security agreement
14 entered into by another person:
15 (1) the agreement satisfies subsection (b)(3) with
16 respect to existing or after-acquired property of the new
17 debtor to the extent the property is described in the
18 agreement; and
19 (2) another agreement is not necessary to make a
20 security interest in the property enforceable.
21 (f) Proceeds and supporting obligations. The attachment
22 of a security interest in collateral gives the secured party
23 the rights to proceeds provided by Section 9-315 and is also
24 attachment of a security interest in a supporting obligation
25 for the collateral.
26 (g) Lien securing right to payment. The attachment of a
27 security interest in a right to payment or performance
28 secured by a security interest or other lien on personal or
29 real property is also attachment of a security interest in
30 the security interest, mortgage, or other lien.
31 (h) Security entitlement carried in securities account.
32 The attachment of a security interest in a securities account
33 is also attachment of a security interest in the security
34 entitlements carried in the securities account.
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1 (i) Commodity contracts carried in commodity account.
2 The attachment of a security interest in a commodity account
3 is also attachment of a security interest in the commodity
4 contracts carried in the commodity account. Attachment and
5 Enforceability of Security Interest; Proceeds; Requisites.
6 (1) Subject to the provisions of Section 4-208 on the
7 security interest of a collecting bank, Sections 9-115 and
8 9-116 on security interests in investment property, and
9 Section 9-113 on a security interest arising under the
10 Article on Sales, a security interest is not enforceable
11 against the debtor or third parties with respect to the
12 collateral and does not attach unless:
13 (a) the collateral is in the possession of the
14 secured party pursuant to agreement, the collateral is
15 investment property and the secured party has control
16 pursuant to agreement, or the debtor has signed a
17 security agreement which contains a description of the
18 collateral and, in addition, a description of the land
19 when the security agreement covers (i) crops growing or
20 to be grown and is signed by the debtor prior to January
21 1, 1996, or (ii) timber to be cut;
22 (b) value has been given; and
23 (c) the debtor has rights in the collateral.
24 (2) A security interest attaches when it becomes
25 enforceable against the debtor with respect to the
26 collateral. Attachment occurs as soon as all of the events
27 specified in subsection (1) have taken place unless explicit
28 agreement postpones the time of attaching.
29 (3) Unless otherwise agreed a security agreement gives
30 the secured party the rights to proceeds provided by Section
31 9-306.
32 (4) A transaction, although subject to this Article, is
33 also subject to the "Consumer Finance Act", approved July 10,
34 1935, as now or hereafter amended; the "Retail Installment
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1 Sales Act", approved July 28, 1967, as now or hereafter
2 amended; the "Motor Vehicle Retail Installment Sales Act",
3 approved July 28, 1967, as now or hereafter amended; Article
4 II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of
5 the "Boat Registration and Safety Act", as now or hereafter
6 amended; and "An Act for the regulation of pawnbrokers, and
7 repealing a certain act therein named", approved June 9,
8 1909, as now or hereafter amended; and in the case of
9 conflict between the provisions of this Article and any such
10 statute, the provisions of such statute control. Failure to
11 comply with any applicable statute has only the effect which
12 is specified therein.
13 (Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96;
14 89-626, eff. 8-9-96.)
15 (810 ILCS 5/9-204) (from Ch. 26, par. 9-204)
16 Sec. 9-204. After-acquired property; future advances.
17 (a) After-acquired collateral. Except as otherwise
18 provided in subsection (b), a security agreement may create
19 or provide for a security interest in after-acquired
20 collateral.
21 (b) When after-acquired property clause not effective.
22 A security interest does not attach under a term constituting
23 an after-acquired property clause to:
24 (1) consumer goods, other than an accession when
25 given as additional security, unless the debtor acquires
26 rights in them within 10 days after the secured party
27 gives value; or
28 (2) a commercial tort claim.
29 (c) Future advances and other value. A security
30 agreement may provide that collateral secures, or that
31 accounts, chattel paper, payment intangibles, or promissory
32 notes are sold in connection with, future advances or other
33 value, whether or not the advances or value are given
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1 pursuant to commitment. After-acquired property; future
2 advances.
3 (1) Except as provided in Subsection (2), a security
4 agreement may provide that any obligations covered by the
5 security agreement are to be secured by after-acquired
6 collateral.
7 (2) No security interest attaches under an
8 after-acquired property clause to consumer goods other than
9 accessions (Section 9-314) when given as additional security
10 unless the debtor acquires rights in them within 10 days
11 after the secured party gives value.
12 (3) Obligations covered by a security agreement may
13 include future advances or other value whether or not the
14 advances or value are given pursuant to commitment
15 (subsection (1) of Section 9-105).
16 (Source: P. A. 77-2810.)
17 (810 ILCS 5/9-205) (from Ch. 26, par. 9-205)
18 Sec. 9-205. Use or disposition of collateral
19 permissible.
20 (a) When security interest not invalid or fraudulent. A
21 security interest is not invalid or fraudulent against
22 creditors solely because:
23 (1) the debtor has the right or ability to:
24 (A) use, commingle, or dispose of all or part
25 of the collateral, including returned or repossessed
26 goods;
27 (B) collect, compromise, enforce, or otherwise
28 deal with collateral;
29 (C) accept the return of collateral or make
30 repossessions; or
31 (D) use, commingle, or dispose of proceeds; or
32 (2) the secured party fails to require the debtor
33 to account for proceeds or replace collateral.
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1 (b) Requirements of possession not relaxed. This
2 Section does not relax the requirements of possession if
3 attachment, perfection, or enforcement of a security interest
4 depends upon possession of the collateral by the secured
5 party. Use or Disposition of Collateral Without Accounting
6 Permissible.
7 A security interest is not invalid or fraudulent against
8 creditors by reason of liberty in the debtor to use,
9 commingle or dispose of all or part of the collateral
10 (including returned or repossessed goods) or to collect or
11 compromise accounts or chattel paper, or to accept the return
12 of goods or make repossessions, or to use, commingle or
13 dispose of proceeds, or by reason of the failure of the
14 secured party to require the debtor to account for proceeds
15 or replace collateral. This Section does not relax the
16 requirements of possession where perfection of a security
17 interest depends upon possession of the collateral by the
18 secured party or by a bailee.
19 (Source: P.A. 77-2810.)
20 (810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1)
21 Sec. 9-205.1. Listing by debtor of purchasers or
22 receivers of collateral. A secured party may require that
23 the debtor include as part of the security agreement a list
24 of persons to whom the debtor desires to sell or otherwise
25 dispose of the collateral. The debtor shall not sell or
26 otherwise dispose of the collateral to a person not included
27 in that list unless the debtor has notified the secured party
28 of his desire to sell or otherwise dispose of the collateral
29 to such person at least 7 days prior to the sale or other
30 disposition.
31 (Source: P.A. 83-69.)
32 (810 ILCS 5/9-206) (from Ch. 26, par. 9-206)
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1 Sec. 9-206. Security interest arising in purchase or
2 delivery of financial asset.
3 (a) Security interest when person buys through
4 securities intermediary. A security interest in favor of a
5 securities intermediary attaches to a person's security
6 entitlement if:
7 (1) the person buys a financial asset through the
8 securities intermediary in a transaction in which the
9 person is obligated to pay the purchase price to the
10 securities intermediary at the time of the purchase; and
11 (2) the securities intermediary credits the
12 financial asset to the buyer's securities account before
13 the buyer pays the securities intermediary.
14 (b) Security interest secures obligation to pay for
15 financial asset. The security interest described in
16 subsection (a) secures the person's obligation to pay for the
17 financial asset.
18 (c) Security interest in payment against delivery
19 transaction. A security interest in favor of a person that
20 delivers a certificated security or other financial asset
21 represented by a writing attaches to the security or other
22 financial asset if:
23 (1) the security or other financial asset:
24 (A) in the ordinary course of business is
25 transferred by delivery with any necessary
26 indorsement or assignment; and
27 (B) is delivered under an agreement between
28 persons in the business of dealing with such
29 securities or financial assets; and
30 (2) the agreement calls for delivery against
31 payment.
32 (d) Security interest secures obligation to pay for
33 delivery. The security interest described in subsection (c)
34 secures the obligation to make payment for the delivery.
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1 Agreement not to assert defenses against assignee;
2 modification of sales warranties where security agreement
3 exists.
4 (1) Subject to any statute or decision which establishes
5 a different rule for buyers or lessees of consumer goods, an
6 agreement by a buyer or lessee that he will not assert
7 against an assignee any claim or defense which he may have
8 against the seller or lessor is enforceable by an assignee
9 who takes his assignment for value, in good faith and without
10 notice of a claim or defense, except as to defenses of a type
11 which may be asserted against a holder in due course of a
12 negotiable instrument under the Article on Commercial Paper
13 (Article 3). A buyer who as part of one transaction signs
14 both a negotiable instrument and a security agreement makes
15 such an agreement.
16 (2) When a seller retains a purchase money security
17 interest in goods the Article on Sales (Article 2) governs
18 the sale and any disclaimer, limitation or modification of
19 the seller's warranties.
20 (Source: Laws 1965, p. 803.)
21 (810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new)
22 SUBPART 2. RIGHTS AND DUTIES
23 (810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
24 Sec. 9-207. Rights and duties of secured party having
25 possession or control of collateral.
26 (a) Duty of care when secured party in possession.
27 Except as otherwise provided in subsection (d), a secured
28 party shall use reasonable care in the custody and
29 preservation of collateral in the secured party's possession.
30 In the case of chattel paper or an instrument, reasonable
31 care includes taking necessary steps to preserve rights
32 against prior parties unless otherwise agreed.
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1 (b) Expenses, risks, duties, and rights when secured
2 party in possession. Except as otherwise provided in
3 subsection (d), if a secured party has possession of
4 collateral:
5 (1) reasonable expenses, including the cost of
6 insurance and payment of taxes or other charges, incurred
7 in the custody, preservation, use, or operation of the
8 collateral are chargeable to the debtor and are secured
9 by the collateral;
10 (2) the risk of accidental loss or damage is on the
11 debtor to the extent of a deficiency in any effective
12 insurance coverage;
13 (3) the secured party shall keep the collateral
14 identifiable, but fungible collateral may be commingled;
15 and
16 (4) the secured party may use or operate the
17 collateral:
18 (A) for the purpose of preserving the
19 collateral or its value;
20 (B) as permitted by an order of a court having
21 competent jurisdiction; or
22 (C) except in the case of consumer goods, in
23 the manner and to the extent agreed by the debtor.
24 (c) Duties and rights when secured party in possession
25 or control. Except as otherwise provided in subsection (d), a
26 secured party having possession of collateral or control of
27 collateral under Section 9-104, 9-105, 9-106, or 9-107:
28 (1) may hold as additional security any proceeds,
29 except money or funds, received from the collateral;
30 (2) shall apply money or funds received from the
31 collateral to reduce the secured obligation, unless
32 remitted to the debtor; and
33 (3) may create a security interest in the
34 collateral.
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1 (d) Buyer of certain rights to payment. If the secured
2 party is a buyer of accounts, chattel paper, payment
3 intangibles, or promissory notes or a consignor:
4 (1) subsection (a) does not apply unless the
5 secured party is entitled under an agreement:
6 (A) to charge back uncollected collateral; or
7 (B) otherwise to full or limited recourse
8 against the debtor or a secondary obligor based on
9 the nonpayment or other default of an account debtor
10 or other obligor on the collateral; and
11 (2) subsections (b) and (c) do not apply. Rights
12 and duties when collateral is in secured party's
13 possession.
14 (1) A secured party must use reasonable care in the
15 custody and preservation of collateral in his possession. In
16 the case of an instrument or chattel paper reasonable care
17 includes taking necessary steps to preserve rights against
18 prior parties unless otherwise agreed.
19 (2) Unless otherwise agreed, when collateral is in the
20 secured party's possession
21 (a) reasonable expenses (including the cost of any
22 insurance and payment of taxes or other charges) incurred in
23 the custody, preservation, use or operation of the collateral
24 are chargeable to the debtor and are secured by the
25 collateral;
26 (b) the risk of accidental loss or damage is on the
27 debtor to the extent of any deficiency in any effective
28 insurance coverage;
29 (c) the secured party may hold as additional
30 security any increase or profits (except money) received from
31 the collateral, but money so received, unless remitted to the
32 debtor, shall be applied in reduction of the secured
33 obligation;
34 (d) the secured party must keep the collateral
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1 identifiable but fungible collateral may be commingled;
2 (e) the secured party may repledge the collateral
3 upon terms which do not impair the debtor's right to redeem
4 it.
5 (3) A secured party is liable for any loss caused by his
6 failure to meet any obligation imposed by the preceding
7 subsections but does not lose his security interest.
8 (4) A secured party may use or operate the collateral
9 for the purpose of preserving the collateral or its value or
10 pursuant to the order of a court of appropriate jurisdiction
11 or, except in the case of consumer goods, in the manner and
12 to the extent provided in the security agreement.
13 (Source: Laws 1961, p. 2101.)
14 (810 ILCS 5/9-208) (from Ch. 26, par. 9-208)
15 Sec. 9-208. Additional duties of secured party having
16 control of collateral.
17 (a) Applicability of Section. This Section applies to
18 cases in which there is no outstanding secured obligation and
19 the secured party is not committed to make advances, incur
20 obligations, or otherwise give value.
21 (b) Duties of secured party after receiving demand from
22 debtor. Within 10 days after receiving an authenticated
23 demand by the debtor:
24 (1) a secured party having control of a deposit
25 account under Section 9-104(a)(2) shall send to the bank
26 with which the deposit account is maintained an
27 authenticated statement that releases the bank from any
28 further obligation to comply with instructions originated
29 by the secured party;
30 (2) a secured party having control of a deposit
31 account under Section 9-104(a)(3) shall:
32 (A) pay the debtor the balance on deposit in
33 the deposit account; or
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1 (B) transfer the balance on deposit into a
2 deposit account in the debtor's name;
3 (3) a secured party, other than a buyer, having
4 control of electronic chattel paper under Section 9-105
5 shall:
6 (A) communicate the authoritative copy of the
7 electronic chattel paper to the debtor or its
8 designated custodian;
9 (B) if the debtor designates a custodian that
10 is the designated custodian with which the
11 authoritative copy of the electronic chattel paper
12 is maintained for the secured party, communicate to
13 the custodian an authenticated record releasing the
14 designated custodian from any further obligation to
15 comply with instructions originated by the secured
16 party and instructing the custodian to comply with
17 instructions originated by the debtor; and
18 (C) take appropriate action to enable the
19 debtor or its designated custodian to make copies of
20 or revisions to the authoritative copy which add or
21 change an identified assignee of the authoritative
22 copy without the consent of the secured party;
23 (4) a secured party having control of investment
24 property under Section 8-106(d)(2) or 9-106(b) shall send
25 to the securities intermediary or commodity intermediary
26 with which the security entitlement or commodity contract
27 is maintained an authenticated record that releases the
28 securities intermediary or commodity intermediary from
29 any further obligation to comply with entitlement orders
30 or directions originated by the secured party; and
31 (5) a secured party having control of a
32 letter-of-credit right under Section 9-107 shall send to
33 each person having an unfulfilled obligation to pay or
34 deliver proceeds of the letter of credit to the secured
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1 party an authenticated release from any further
2 obligation to pay or deliver proceeds of the letter of
3 credit to the secured party. Request for statement of
4 account or list of collateral.
5 (1) A debtor may sign a statement indicating what he
6 believes to be the aggregate amount of unpaid indebtedness as
7 of a specified date and may send it to the secured party with
8 a request that the statement be approved or corrected and
9 returned to the debtor. When the security agreement or any
10 other record kept by the secured party identifies the
11 collateral a debtor may similarly request the secured party
12 to approve or correct a list of the collateral.
13 (2) The secured party must comply with such a request
14 within two weeks after receipt by sending a written
15 correction or approval. If the secured party claims a
16 security interest in all of a particular type of collateral
17 owned by the debtor he may indicate that fact in his reply
18 and need not approve or correct an itemized list of such
19 collateral. If the secured party without reasonable excuse
20 fails to comply he is liable for any loss caused to the
21 debtor thereby; and if the debtor has properly included in
22 his request a good faith statement of the obligation or a
23 list of the collateral or both the secured party may claim a
24 security interest only as shown in the statement against
25 persons misled by his failure to comply. If he no longer has
26 an interest in the obligation or collateral at the time the
27 request is received he must disclose the name and address of
28 any successor in interest known to him and he is liable for
29 any loss caused to the debtor as a result of failure to
30 disclose. A successor in interest is not subject to this
31 Section until a request is received by him.
32 (3) A debtor is entitled to such a statement once every
33 6 months without charge. The secured party may require
34 payment of a charge not exceeding $10 for each additional
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1 statement furnished.
2 (Source: Laws 1961, p. 2101.)
3 (810 ILCS 5/9-209 new)
4 Sec. 9-209. Duties of secured party if account debtor
5 has been notified of assignment.
6 (a) Applicability of Section. Except as otherwise
7 provided in subsection (c), this Section applies if:
8 (1) there is no outstanding secured obligation; and
9 (2) the secured party is not committed to make
10 advances, incur obligations, or otherwise give value.
11 (b) Duties of secured party after receiving demand from
12 debtor. Within 10 days after receiving an authenticated
13 demand by the debtor, a secured party shall send to an
14 account debtor that has received notification of an
15 assignment to the secured party as assignee under Section
16 9-406(a) an authenticated record that releases the account
17 debtor from any further obligation to the secured party.
18 (c) Inapplicability to sales. This Section does not
19 apply to an assignment constituting the sale of an account,
20 chattel paper, or payment intangible.
21 (810 ILCS 5/9-210 new)
22 Sec. 9-210. Request for accounting; request regarding
23 list of collateral or statement of account.
24 (a) Definitions. In this Section:
25 (1) "Request" means a record of a type described in
26 paragraph (2), (3), or (4).
27 (2) "Request for an accounting" means a record
28 authenticated by a debtor requesting that the recipient
29 provide an accounting of the unpaid obligations secured
30 by collateral and reasonably identifying the transaction
31 or relationship that is the subject of the request.
32 (3) "Request regarding a list of collateral" means
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1 a record authenticated by a debtor requesting that the
2 recipient approve or correct a list of what the debtor
3 believes to be the collateral securing an obligation and
4 reasonably identifying the transaction or relationship
5 that is the subject of the request.
6 (4) "Request regarding a statement of account"
7 means a record authenticated by a debtor requesting that
8 the recipient approve or correct a statement indicating
9 what the debtor believes to be the aggregate amount of
10 unpaid obligations secured by collateral as of a
11 specified date and reasonably identifying the transaction
12 or relationship that is the subject of the request.
13 (b) Duty to respond to requests. Subject to subsections
14 (c), (d), (e), and (f), a secured party, other than a buyer
15 of accounts, chattel paper, payment intangibles, or
16 promissory notes or a consignor, shall comply with a request
17 within 14 days after receipt:
18 (1) in the case of a request for an accounting, by
19 authenticating and sending to the debtor an accounting;
20 and
21 (2) in the case of a request regarding a list of
22 collateral or a request regarding a statement of account,
23 by authenticating and sending to the debtor an approval
24 or correction.
25 (c) Request regarding list of collateral; statement
26 concerning type of collateral. A secured party that claims a
27 security interest in all of a particular type of collateral
28 owned by the debtor may comply with a request regarding a
29 list of collateral by sending to the debtor an authenticated
30 record including a statement to that effect within 14 days
31 after receipt.
32 (d) Request regarding list of collateral; no interest
33 claimed. A person that receives a request regarding a list
34 of collateral, claims no interest in the collateral when it
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1 receives the request, and claimed an interest in the
2 collateral at an earlier time shall comply with the request
3 within 14 days after receipt by sending to the debtor an
4 authenticated record:
5 (1) disclaiming any interest in the collateral; and
6 (2) if known to the recipient, providing the name
7 and mailing address of any assignee of or successor to
8 the recipient's interest in the collateral.
9 (e) Request for accounting or regarding statement of
10 account; no interest in obligation claimed. A person that
11 receives a request for an accounting or a request regarding a
12 statement of account, claims no interest in the obligations
13 when it receives the request, and claimed an interest in the
14 obligations 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 obligations;
18 and
19 (2) if known to the recipient, providing the name
20 and mailing address of any assignee of or successor to
21 the recipient's interest in the obligations.
22 (f) Charges for responses. A debtor is entitled without
23 charge to one response to a request under this Section during
24 any six-month period. The secured party may require payment
25 of a charge not exceeding $25 for each additional response.
26 (810 ILCS 5/Art. 9, Part 3 heading)
27 PART 3. PERFECTION AND PRIORITY
28 RIGHTS OF THIRD PARTIES;
29 PERFECTED AND UNPERFECTED SECURITY
30 INTERESTS: RULES OF PRIORITY
31 (810 ILCS 5/Art. 9, Part 3, Subpart 1 heading new)
32 SUBPART 1. LAW GOVERNING PERFECTION AND PRIORITY
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1 (810 ILCS 5/9-301) (from Ch. 26, par. 9-301)
2 Sec. 9-301. Law governing perfection and priority of
3 security interests. Except as otherwise provided in Sections
4 9-303 through 9-306, the following rules determine the law
5 governing perfection, the effect of perfection or
6 nonperfection, and the priority of a security interest in
7 collateral:
8 (1) Except as otherwise provided in this Section,
9 while a debtor is located in a jurisdiction, the local
10 law of that jurisdiction governs perfection, the effect
11 of perfection or nonperfection, and the priority of a
12 security interest in collateral.
13 (2) While collateral is located in a jurisdiction,
14 the local law of that jurisdiction governs perfection,
15 the effect of perfection or nonperfection, and the
16 priority of a possessory security interest in that
17 collateral.
18 (3) Except as otherwise provided in paragraph (4),
19 while negotiable documents, goods, instruments, money, or
20 tangible chattel paper is located in a jurisdiction, the
21 local law of that jurisdiction governs:
22 (A) perfection of a security interest in the
23 goods by filing a fixture filing;
24 (B) perfection of a security interest in
25 timber to be cut; and
26 (C) the effect of perfection or nonperfection
27 and the priority of a nonpossessory security
28 interest in the collateral.
29 (4) The local law of the jurisdiction in which the
30 wellhead or minehead is located governs perfection, the
31 effect of perfection or nonperfection, and the priority
32 of a security interest in as-extracted collateral.
33 Persons Who Take Priority Over Unperfected Security
34 Interests; Rights of "Lien Creditor".
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1 (1) Except as otherwise provided in subsection (2), an
2 unperfected security interest is subordinate to the rights of
3 (a) persons entitled to priority under Section
4 9-312;
5 (b) a person who becomes a lien creditor before the
6 security interest is perfected;
7 (c) in the case of goods, instruments, documents,
8 and chattel paper, a person who is not a secured party
9 and who is a transferee in bulk or other buyer not in
10 ordinary course of business or is a buyer of farm
11 products in ordinary course of business, to the extent
12 that he gives value and receives delivery of the
13 collateral without knowledge of the security interest and
14 before it is perfected;
15 (d) in the case of accounts, general intangibles,
16 and investment property, a person who is not a secured
17 party and who is a transferee to the extent that he gives
18 value without knowledge of the security interest and
19 before it is perfected;
20 provided, however, that an unperfected security interest
21 shall take priority over the rights of a lien creditor if (i)
22 the lien creditor is a trustee or receiver of a state or
23 federally chartered financial institution acting in
24 furtherance of its supervisory authority over the financial
25 institution and (ii) a security interest is granted by the
26 financial institution to secure a deposit of public funds
27 with the financial institution or a repurchase agreement with
28 the financial institution pursuant to the Government
29 Securities Act of 1986, as amended.
30 (2) If the secured party files with respect to a
31 purchase money security interest before or within 20 days
32 after the debtor receives possession of the collateral, he
33 takes priority over the rights of a transferee in bulk or of
34 a lien creditor which arise between the time the security
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1 interest attaches and the time of filing.
2 (3) A "lien creditor" means a creditor who has acquired
3 a lien on the property involved by attachment, levy or the
4 like and includes an assignee for benefit of creditors from
5 the time of assignment, and a trustee in bankruptcy from the
6 date of the filing of the petition or a receiver in equity
7 from the time of appointment.
8 (4) A person who becomes a lien creditor while a
9 security interest is perfected takes subject to the security
10 interest only to the extent that it secures advances made
11 before he becomes a lien creditor or within 45 days
12 thereafter or made without knowledge of the lien or pursuant
13 to a commitment entered into without knowledge of the lien.
14 (Source: P.A. 89-364, eff. 1-1-96; 90-696, eff. 8-7-98.)
15 (810 ILCS 5/9-302) (from Ch. 26, par. 9-302)
16 Sec. 9-302. Law governing perfection and priority of
17 agricultural liens. While farm products are located in a
18 jurisdiction, the local law of that jurisdiction governs
19 perfection, the effect of perfection or nonperfection, and
20 the priority of an agricultural lien on the farm products.
21 When filing is required to perfect security interest;
22 security interests to which filing provisions of this Article
23 do not apply.
24 (1) A financing statement must be filed to perfect all
25 security interests except the following:
26 (a) a security interest in collateral in possession
27 of the secured party under Section 9-305;
28 (b) a security interest temporarily perfected in
29 instruments, certificated securities, or documents
30 without delivery under Section 9-304 or in proceeds for a
31 20 day period under Section 9-306;
32 (c) a security interest created by an assignment of
33 a beneficial interest in a trust or a decedent's estate;
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1 (d) a purchase money security interest in consumer
2 goods; but filing is required for a motor vehicle
3 required to be registered; and fixture filing is required
4 for priority over conflicting interests in fixtures to
5 the extent provided in Section 9-313;
6 (e) an assignment of accounts which does not alone
7 or in conjunction with other assignments to the same
8 assignee transfer a significant part of the outstanding
9 accounts of the assignor;
10 (f) a security interest of a collecting bank
11 (Section 4-208) or arising under the Article on Sales
12 (see Section 9-113) or covered in subsection (3) of this
13 Section;
14 (g) an assignment for the benefit of all creditors
15 of the transferor, and subsequent transfers by the
16 assignee thereunder;
17 (h) a security interest in investment property
18 which is perfected without filing under Section 9-115 or
19 Section 9-116;
20 (i) a security interest in a deposit account. Such
21 a security interest is perfected:
22 (i) as to a deposit account maintained with
23 the secured party, when the security agreement is
24 executed;
25 (ii) as to a deposit account maintained with
26 any organization other than the secured party, when
27 notice thereof is given in writing to the
28 organization with whom the deposit account is
29 maintained and that organization provides written
30 acknowledgement of and consent to the notice of the
31 secured party.
32 (j) a security interest in an uncertificated
33 certificate of deposit. Such a security interest is
34 perfected;
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1 (i) as to an uncertificated certificate of
2 deposit issued by the secured party, when the
3 security agreement is executed;
4 (ii) as to an uncertificated certificate of
5 deposit issued by any organization other than the
6 secured party, when notice thereof is given in
7 writing to the issuer of the uncertificated
8 certificate of deposit and the issuer provides
9 written acknowledgement of and consent to the notice
10 of the secured party.
11 (2) If a secured party assigns a perfected security
12 interest, no filing under this Article is required in order
13 to continue the perfected status of the security interest
14 against creditors of and transferees from the original
15 debtor.
16 (3) The filing of a financing statement otherwise
17 required by this Article is not necessary or effective to
18 perfect a security interest in property subject to
19 (a) a statute or treaty of the United States which
20 provides for a national or international registration or
21 a national or international certificate of title or which
22 specifies a place of filing different from that specified
23 in this Article for filing of the security interest; or
24 (b) the following statutes of this State: the
25 Illinois Vehicle Code; the Boat Registration and Safety
26 Act; but during any period in which collateral is
27 inventory held for sale by a person who is in the
28 business of selling goods of that kind, the filing
29 provisions of this Article (Part 4) apply to a security
30 interest in that collateral created by him as debtor; or
31 (c) a certificate of title statute of another
32 jurisdiction under the law of which indication of a
33 security interest on the certificate is required as a
34 condition of perfection (subsection (2) of Section
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1 9-103).
2 (4) Compliance with a statute or treaty described in
3 subsection (3) is equivalent to the filing of a financing
4 statement under this Article, and a security interest in
5 property subject to the statute or treaty can be perfected
6 only by compliance therewith except as provided in Section
7 9-103 on multiple state transactions. Duration and renewal of
8 perfection of a security interest perfected by compliance
9 with the statute or treaty are governed by the provisions of
10 the statute or treaty; in other respects the security
11 interest is subject to this Article.
12 (Source: P.A. 89-364, eff. 1-1-96; 90-665, eff. 7-30-98.)
13 (810 ILCS 5/9-303) (from Ch. 26, par. 9-303)
14 Sec. 9-303. Law governing perfection and priority of
15 security interests in goods covered by a certificate of
16 title.
17 (a) Applicability of Section. This Section applies to
18 goods covered by a certificate of title, even if there is no
19 other relationship between the jurisdiction under whose
20 certificate of title the goods are covered and the goods or
21 the debtor.
22 (b) When goods covered by certificate of title. Goods
23 become covered by a certificate of title when a valid
24 application for the certificate of title and the applicable
25 fee are delivered to the appropriate authority. Goods cease
26 to be covered by a certificate of title at the earlier of the
27 time the certificate of title ceases to be effective under
28 the law of the issuing jurisdiction or the time the goods
29 become covered subsequently by a certificate of title issued
30 by another jurisdiction.
31 (c) Applicable law. The local law of the jurisdiction
32 under whose certificate of title the goods are covered
33 governs perfection, the effect of perfection or
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1 nonperfection, and the priority of a security interest in
2 goods covered by a certificate of title from the time the
3 goods become covered by the certificate of title until the
4 goods cease to be covered by the certificate of title. When
5 security interest is perfected; continuity of perfection.
6 (1) A security interest is perfected when it has
7 attached and when all of the applicable steps required for
8 perfection have been taken. Such steps are specified in
9 Sections 9--302, 9--304, 9--305 and 9--306. If such steps are
10 taken before the security interest attaches, it is perfected
11 at the time when it attaches.
12 (2) If a security interest is originally perfected in
13 any way permitted under this Article and is subsequently
14 perfected in some other way under this Article, without an
15 intermediate period when it was unperfected, the security
16 interest shall be deemed to be perfected continuously for the
17 purposes of this Article.
18 (Source: Laws 1961, p. 2101.)
19 (810 ILCS 5/9-304) (from Ch. 26, par. 9-304)
20 Sec. 9-304. Law governing perfection and priority of
21 security interests in deposit accounts.
22 (a) Law of bank's jurisdiction governs. The local law
23 of a bank's jurisdiction governs perfection, the effect of
24 perfection or nonperfection, and the priority of a security
25 interest in a deposit account maintained with that bank.
26 (b) Bank's jurisdiction. The following rules determine
27 a bank's jurisdiction for purposes of this Part:
28 (1) If an agreement between the bank and the debtor
29 governing the deposit account expressly provides that a
30 particular jurisdiction is the bank's jurisdiction for
31 purposes of this Part, this Article, or the Uniform
32 Commercial Code, that jurisdiction is the bank's
33 jurisdiction.
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1 (2) If paragraph (1) does not apply and an
2 agreement between the bank and its customer governing the
3 deposit account expressly provides that the agreement is
4 governed by the law of a particular jurisdiction, that
5 jurisdiction is the bank's jurisdiction.
6 (3) If neither paragraph (1) nor paragraph (2)
7 applies and an agreement between the bank and its
8 customer governing the deposit account expressly provides
9 that the deposit account is maintained at an office in a
10 particular jurisdiction, that jurisdiction is the bank's
11 jurisdiction.
12 (4) If none of the preceding paragraphs applies,
13 the bank's jurisdiction is the jurisdiction in which the
14 office identified in an account statement as the office
15 serving the customer's account is located.
16 (5) If none of the preceding paragraphs applies,
17 the bank's jurisdiction is the jurisdiction in which the
18 chief executive office of the bank is located. Perfection
19 of security interest in instruments, documents, proceeds
20 of a written letter of credit, and goods covered by
21 documents; perfection by permissive filing; temporary
22 perfection without filing or transfer of possession.
23 (1) A security interest in chattel paper or negotiable
24 documents may be perfected by filing. A security interest in
25 the rights to proceeds of a written letter of credit can be
26 perfected only by the secured party's taking possession of
27 the letter of credit. A security interest in money or
28 instruments (other than instruments which constitute part of
29 chattel paper) can be perfected only by the secured party's
30 taking possession, except as provided in subsections (4) and
31 (5) of this Section and subsections (2) and (3) of Section
32 9-306 on proceeds.
33 (2) During the period that goods are in the possession
34 of the issuer of a negotiable document therefor, a security
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1 interest in the goods is perfected by perfecting a security
2 interest in the document, and any security interest in the
3 goods otherwise perfected during such period is subject
4 thereto.
5 (3) A security interest in goods in the possession of a
6 bailee other than one who has issued a negotiable document
7 therefor is perfected by issuance of a document in the name
8 of the secured party or by the bailee's receipt of
9 notification of the secured party's interest or by filing as
10 to the goods.
11 (4) A security interest in instruments, certificated
12 securities, or negotiable documents is perfected without
13 filing or the taking of possession for a period of 21 days
14 from the time it attaches to the extent that it arises for
15 new value given under a written security agreement.
16 (5) A security interest remains perfected for a period
17 of 21 days without filing where a secured party having a
18 perfected security interest in an instrument, a certificated
19 security, a negotiable document, or goods in possession of a
20 bailee other than one who has issued a negotiable document
21 therefor.
22 (a) makes available to the debtor the goods or
23 documents representing the goods for the purpose of
24 ultimate sale or exchange or for the purpose of loading,
25 unloading, storing, shipping, transshipping,
26 manufacturing, processing or otherwise dealing with them
27 in a manner preliminary to their sale or exchange, but
28 priority between conflicting security interests in the
29 goods is subject to subsection (3) of Section 9-312; or
30 (b) delivers the instrument or certificated
31 security to the debtor for the purpose of ultimate sale
32 or exchange or of presentation, collection, renewal or
33 registration of transfer.
34 (6) After the 21 day period in subsections (4) and (5)
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1 perfection depends upon compliance with applicable provisions
2 of this Article.
3 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
4 (810 ILCS 5/9-305) (from Ch. 26, par. 9-305)
5 Sec. 9-305. Law governing perfection and priority of
6 security interests in investment property.
7 (a) Governing law: general rules. Except as otherwise
8 provided in subsection (c), the following rules apply:
9 (1) While a security certificate is located in a
10 jurisdiction, the local law of that jurisdiction governs
11 perfection, the effect of perfection or nonperfection,
12 and the priority of a security interest in the
13 certificated security represented thereby.
14 (2) The local law of the issuer's jurisdiction as
15 specified in Section 8-110(d) governs perfection, the
16 effect of perfection or nonperfection, and the priority
17 of a security interest in an uncertificated security.
18 (3) The local law of the securities intermediary's
19 jurisdiction as specified in Section 8-110(e) governs
20 perfection, the effect of perfection or nonperfection,
21 and the priority of a security interest in a security
22 entitlement or securities account.
23 (4) The local law of the commodity intermediary's
24 jurisdiction governs perfection, the effect of perfection
25 or nonperfection, and the priority of a security interest
26 in a commodity contract or commodity account.
27 (b) Commodity intermediary's jurisdiction. The
28 following rules determine a commodity intermediary's
29 jurisdiction for purposes of this Part:
30 (1) If an agreement between the commodity
31 intermediary and commodity customer governing the
32 commodity account expressly provides that a particular
33 jurisdiction is the commodity intermediary's jurisdiction
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1 for purposes of this Part, this Article, or the Uniform
2 Commercial Code, that jurisdiction is the commodity
3 intermediary's jurisdiction.
4 (2) If paragraph (1) does not apply and an
5 agreement between the commodity intermediary and
6 commodity customer governing the commodity account
7 expressly provides that the agreement is governed by the
8 law of a particular jurisdiction, that jurisdiction is
9 the commodity intermediary's jurisdiction.
10 (3) If neither paragraph (1) nor paragraph (2)
11 applies and an agreement between the commodity
12 intermediary and commodity customer governing the
13 commodity account expressly provides that the commodity
14 account is maintained at an office in a particular
15 jurisdiction, that jurisdiction is the commodity
16 intermediary's jurisdiction.
17 (4) If none of the preceding paragraphs applies,
18 the commodity intermediary's jurisdiction is the
19 jurisdiction in which the office identified in an account
20 statement as the office serving the commodity customer's
21 account is located.
22 (5) If none of the preceding paragraphs applies,
23 the commodity intermediary's jurisdiction is the
24 jurisdiction in which the chief executive office of the
25 commodity intermediary is located.
26 (c) When perfection governed by law of jurisdiction
27 where debtor located. The local law of the jurisdiction in
28 which the debtor is located governs:
29 (1) perfection of a security interest in investment
30 property by filing;
31 (2) automatic perfection of a security interest in
32 investment property created by a broker or securities
33 intermediary; and
34 (3) automatic perfection of a security interest in
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1 a commodity contract or commodity account created by a
2 commodity intermediary. When possession by secured party
3 perfects security interest without filing. A security
4 interest in goods, instruments, money, negotiable
5 documents, or chattel paper may be perfected by the
6 secured party's taking possession of the collateral. A
7 security interest in the right to proceeds of a written
8 letter of credit may be perfected by the secured party's
9 taking possession of the letter of credit. If such
10 collateral other than goods covered by a negotiable
11 document is held by a bailee, the secured party is deemed
12 to have possession from the time the bailee receives
13 notification of the secured party's interest. A security
14 interest is perfected by possession from the time
15 possession is taken without relation back and continues
16 only so long as possession is retained, unless otherwise
17 specified in this Article. The security interest may be
18 otherwise perfected as provided in this Article before or
19 after the period of possession by the secured party.
20 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
21 (810 ILCS 5/9-306) (from Ch. 26, par. 9-306)
22 Sec. 9-306. Law governing perfection and priority of
23 security interests in letter-of-credit rights.
24 (a) Governing law: issuer's or nominated person's
25 jurisdiction. Subject to subsection (c), the local law of the
26 issuer's jurisdiction or a nominated person's jurisdiction
27 governs perfection, the effect of perfection or
28 nonperfection, and the priority of a security interest in a
29 letter-of-credit right if the issuer's jurisdiction or
30 nominated person's jurisdiction is a State.
31 (b) Issuer's or nominated person's jurisdiction. For
32 purposes of this Part, an issuer's jurisdiction or nominated
33 person's jurisdiction is the jurisdiction whose law governs
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1 the liability of the issuer or nominated person with respect
2 to the letter-of-credit right as provided in Section 5-116.
3 (c) When Section not applicable. This Section does not
4 apply to a security interest that is perfected only under
5 Section 9-308(d). "Proceeds"; Secured Party's Rights on
6 Disposition of Collateral.
7 (1) "Proceeds" includes whatever is received upon the
8 sale, exchange, collection or other disposition of collateral
9 or proceeds. Insurance payable by reason of loss or damage to
10 the collateral is proceeds, except to the extent that it is
11 payable to a person other than a party to the security
12 agreement. Any payments or distributions made with respect to
13 investment property collateral are proceeds. Money, checks,
14 deposit accounts, and the like are "cash proceeds". All other
15 proceeds are "non-cash proceeds".
16 (2) Except where this Article otherwise provides, a
17 security interest continues in collateral notwithstanding
18 sale, exchange or other disposition thereof unless the
19 disposition was authorized by the secured party in the
20 security agreement or otherwise, and also continues in any
21 identifiable proceeds including collections received by the
22 debtor.
23 (3) The security interest in proceeds is a continuously
24 perfected security interest if the interest in the original
25 collateral was perfected but it ceases to be a perfected
26 security interest and becomes unperfected 20 days after
27 receipt of the proceeds by the debtor unless
28 (a) a filed financing statement covers the original
29 collateral and the proceeds are collateral in which a
30 security interest may be perfected by filing in the
31 office or offices where the financing statement has been
32 filed and, if the proceeds are acquired with cash
33 proceeds, the description of collateral in the financing
34 statement indicates the types of property constituting
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1 the proceeds; or
2 (b) a filed financing statement covers the original
3 collateral and the proceeds are identifiable cash
4 proceeds;
5 (c) the original collateral was investment property
6 and the proceeds are identifiable cash proceeds; or
7 (d) the security interest in the proceeds is
8 perfected before the expiration of the 20 day period.
9 Except as provided in this Section, a security interest
10 in proceeds can be perfected only by the methods or under the
11 circumstances permitted in this Article for original
12 collateral of the same type.
13 (4) In the event of insolvency proceedings instituted by
14 or against a debtor, a secured party with a perfected
15 security interest in proceeds has a perfected security
16 interest only in the following proceeds:
17 (a) in identifiable non-cash proceeds and in
18 separate deposit accounts containing only proceeds;
19 (b) in identifiable cash proceeds in the form of
20 money which is neither commingled with other money nor
21 deposited in a deposit account prior to the insolvency
22 proceedings;
23 (c) in identifiable cash proceeds in the form of
24 checks and the like which are not deposited in a deposit
25 account prior to the insolvency proceedings; and
26 (d) in all cash and deposit accounts of the debtor
27 in which proceeds have been commingled with other funds,
28 but the perfected security interest under this paragraph
29 (d) is
30 (i) subject to any right to set-off; and
31 (ii) limited to an amount not greater than the
32 amount of any cash proceeds received by the debtor
33 within 20 days before the institution of the
34 insolvency proceedings less the sum of (I) the
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1 payments to the secured party on account of cash
2 proceeds received by the debtor during such period
3 and (II) the cash proceeds received by the debtor
4 during such period to which the secured party is
5 entitled under paragraphs (a) through (c) of this
6 subsection (4).
7 (5) If a sale of goods results in an account or chattel
8 paper which is transferred by the seller to a secured party,
9 and if the goods are returned to or are repossessed by the
10 seller or the secured party, the following rules determine
11 priorities:
12 (a) If the goods were collateral at the time of
13 sale, for an indebtedness of the seller which is still
14 unpaid, the original security interest attaches again to
15 the goods and continues as a perfected security interest
16 if it was perfected at the time when the goods were sold.
17 If the security interest was originally perfected by a
18 filing which is still effective, nothing further is
19 required to continue the perfected status; in any other
20 case, the secured party must take possession of the
21 returned or repossessed goods or must file.
22 (b) An unpaid transferee of the chattel paper has a
23 security interest in the goods against the transferor.
24 Such security interest is prior to a security interest
25 asserted under paragraph (a) to the extent that the
26 transferee of the chattel paper was entitled to priority
27 under Section 9-308.
28 (c) An unpaid transferee of the account has a
29 security interest in the goods against the transferor.
30 Such security interest is subordinate to a security
31 interest asserted under paragraph (a).
32 (d) A security interest of an unpaid transferee
33 asserted under paragraph (b) or (c) must be perfected for
34 protection against creditors of the transferor and
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1 purchasers of the returned or repossessed goods.
2 (Source: P.A. 89-364, eff. 1-1-96.)
3 (810 ILCS 5/9-306.01) (from Ch. 26, par. 9-306.01)
4 Sec. 9-306.01. (Blank). Debtor disposing of collateral
5 and failing to pay secured party amount due under security
6 agreement; penalties for violation.
7 (1) It is unlawful for a debtor under the terms of a
8 security agreement (a) who has no right of sale or other
9 disposition of the collateral or (b) who has a right of sale
10 or other disposition of the collateral and is to account to
11 the secured party for the proceeds of any sale or other
12 disposition of the collateral, to sell or otherwise dispose
13 of the collateral and willfully and wrongfully to fail to pay
14 the secured party the amount of said proceeds due under the
15 security agreement. Failure to pay such proceeds to the
16 secured party within 10 days after the sale or other
17 disposition of the collateral is prima facie evidence of a
18 willful and wanton failure to pay.
19 (2) An individual convicted of a violation of this
20 Section shall be guilty of a Class 3 felony.
21 (3) A corporation convicted of a violation of this
22 Section shall be guilty of a business offense and shall be
23 fined not less than two thousand dollars nor more than ten
24 thousand dollars.
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 3 felony.
30 (Source: P.A. 83-69.)
31 (810 ILCS 5/9-306.02) (from Ch. 26, par. 9-306.02)
32 Sec. 9-306.02. (Blank). (1) Where, pursuant to Section
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1 9-205.1, a secured party has required that before the debtor
2 sells or otherwise disposes of collateral in the debtor's
3 possession he disclose to the secured party the persons to
4 whom he desires to sell or otherwise dispose of such
5 collateral, it is unlawful for the debtor to sell or
6 otherwise dispose of the collateral to a person other than a
7 person so disclosed to the secured party.
8 (2) An individual convicted of a violation of this
9 Section shall be guilty of a Class A misdemeanor.
10 (3) A corporation convicted of a violation of this
11 Section shall be guilty of a business offense and shall be
12 fined not less than $2,000 nor more than $10,000.
13 (4) In the event the debtor under the terms of a
14 security agreement is a corporation or a partnership, any
15 officer, director, manager or managerial agent of the debtor
16 who violates this Section or causes the debtor to violate
17 this Section shall be guilty of a Class A misdemeanor.
18 (5) It is an affirmative defense to a prosecution for
19 the violation of this Section that the debtor has paid to the
20 secured party the proceeds from the sale or other disposition
21 of the collateral within 10 days after such sale or
22 disposition.
23 (Source: P.A. 84-1372.)
24 (810 ILCS 5/9-307) (from Ch. 26, par. 9-307)
25 Sec. 9-307. Location of debtor.
26 (a) "Place of business." In this Section, "place of
27 business" means a place where a debtor conducts its affairs.
28 (b) Debtor's location: general rules. Except as
29 otherwise provided in this Section, the following rules
30 determine a debtor's location:
31 (1) A debtor who is an individual is located at the
32 individual's principal residence.
33 (2) A debtor that is an organization and has only
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1 one place of business is located at its place of
2 business.
3 (3) A debtor that is an organization and has more
4 than one place of business is located at its chief
5 executive office.
6 (c) Limitation of applicability of subsection (b).
7 Subsection (b) applies only if a debtor's residence, place of
8 business, or chief executive office, as applicable, is
9 located in a jurisdiction whose law generally requires
10 information concerning the existence of a nonpossessory
11 security interest to be made generally available in a filing,
12 recording, or registration system as a condition or result of
13 the security interest's obtaining priority over the rights of
14 a lien creditor with respect to the collateral. If
15 subsection (b) does not apply, the debtor is located in the
16 District of Columbia.
17 (d) Continuation of location: cessation of existence,
18 etc. A person that ceases to exist, have a residence, or
19 have a place of business continues to be located in the
20 jurisdiction specified by subsections (b) and (c).
21 (e) Location of registered organization organized under
22 State law. A registered organization that is organized under
23 the law of a State is located in that State.
24 (f) Location of registered organization organized under
25 federal law; bank branches and agencies. Except as otherwise
26 provided in subsection (i), a registered organization that is
27 organized under the law of the United States and a branch or
28 agency of a bank that is not organized under the law of the
29 United States or a State are located:
30 (1) in the State that the law of the United States
31 designates, if the law designates a State of location;
32 (2) in the State that the registered organization,
33 branch, or agency designates, if the law of the United
34 States authorizes the registered organization, branch, or
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1 agency to designate its State of location; or
2 (3) in the District of Columbia, if neither
3 paragraph (1) nor paragraph (2) applies.
4 (g) Continuation of location: change in status of
5 registered organization. A registered organization continues
6 to be located in the jurisdiction specified by subsection (e)
7 or (f) notwithstanding:
8 (1) the suspension, revocation, forfeiture, or
9 lapse of the registered organization's status as such in
10 its jurisdiction of organization; or
11 (2) the dissolution, winding up, or cancellation of
12 the existence of the registered organization.
13 (h) Location of United States. The United States is
14 located in the District of Columbia.
15 (i) Location of foreign bank branch or agency if
16 licensed in only one State. A branch or agency of a bank
17 that is not organized under the law of the United States or a
18 State is located in the State in which the branch or agency
19 is licensed, if all branches and agencies of the bank are
20 licensed in only one State.
21 (j) Location of foreign air carrier. A foreign air
22 carrier under the Federal Aviation Act of 1958, as amended,
23 is located at the designated office of the agent upon which
24 service of process may be made on behalf of the carrier.
25 (k) Section applies only to this Part. This Section
26 applies only for purposes of this Part. Protection of Buyers
27 of Goods.
28 (1) Except as provided in subsection (4), a buyer in the
29 ordinary course of business, as defined in subsection (9) of
30 Section 1-201, takes free of a security interest created by
31 his seller even though the security interest is perfected and
32 even though the buyer knows of its existence.
33 (2) In the case of consumer goods, a buyer takes free of
34 a security interest even though perfected if he buys without
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1 knowledge of the security interest, for value and for his own
2 personal, family or household purposes unless prior to the
3 purchase the secured party has filed a financing statement
4 covering such goods.
5 (3) A buyer other than a buyer in ordinary course of
6 business (subsection (1) of this Section) takes free of a
7 security interest to the extent that it secures future
8 advances made after the secured party acquires knowledge of
9 the purchase, or more than 45 days after the purchase,
10 whichever first occurs, unless made pursuant to a commitment
11 entered into without knowledge of the purchase and before the
12 expiration of the 45 day period.
13 (4) A buyer of farm products takes subject to a security
14 interest created by the seller if:
15 (a) within one year before the sale of the farm
16 products, the buyer has received from the secured party
17 or the seller written notice of the security interest
18 organized according to farm products that:
19 (i) is an original or reproduced copy thereof;
20 (ii) contains,
21 (I) the name and address of the secured
22 party;
23 (II) the name and address of the person
24 indebted to the secured party;
25 (III) the social security number of the
26 debtor or, in the case of a debtor doing
27 business other than as an individual, the
28 Internal Revenue Service taxpayer
29 identification number of such debtor;
30 (IV) a description of the farm products
31 subject to the security interest created by the
32 debtor, including the amount of such products
33 where applicable, crop year, county, and a
34 reasonable description of the property;
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1 (iii) must be amended in writing, within 3
2 months, similarly signed and transmitted, to reflect
3 material changes;
4 (iv) will lapse on either the expiration
5 period of the statement or the transmission of a
6 notice signed by the secured party that the
7 statement has lapsed, whichever occurs first; and
8 (v) sets forth any payment obligations imposed
9 on the buyer by the secured party as conditions for
10 waiver or release of the security interest; and
11 (b) the buyer has failed to perform the payment
12 obligations.
13 For the purposes of this subsection (4), a buyer of farm
14 products has received notice from the secured party or seller
15 when written notice of the security interest is sent to the
16 buyer by registered or certified mail.
17 (Source: P.A. 84-1372; revised 10-31-98.)
18 (810 ILCS 5/9-307.1) (from Ch. 26, par. 9-307.1)
19 Sec. 9-307.1. (Blank). A commission merchant or selling
20 agent who sells a farm product for others shall be subject to
21 a security interest created by the seller in such farm
22 product if-
23 (a) within one year before the sale of the farm
24 products, the buyer has received from the secured party or
25 the seller written notice of the security interest organized
26 according to farm products that:
27 (i) is an original or reproduced copy thereof;
28 (ii) contains,
29 (I) the name and address of the secured party;
30 (II) the name and address of the person indebted to the
31 secured party;
32 (III) the social security number of the debtor or, in
33 the case of a debtor doing business other than as an
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1 individual, the Internal Revenue Service taxpayer
2 identification number of such debtor;
3 (IV) a description of the farm products subject to the
4 security interest created by the debtor, including the amount
5 of such products where applicable, crop year, county, and a
6 reasonable description of the property;
7 (iii) must be amended in writing, within 3 months,
8 similarly signed and transmitted, to reflect material
9 changes;
10 (iv) will lapse on either the expiration period of the
11 statement or the transmission of a notice signed by the
12 secured party that the statement has lapsed, whichever occurs
13 first; and
14 (v) sets forth any payment obligations imposed on the
15 buyer by the secured party as conditions for waiver or
16 release of the security interest; and
17 (b) the commission merchant or selling agent has failed
18 to perform the payment obligations.
19 For the purposes of this Section, a commission merchant
20 or selling agent has received notice from the secured party
21 or seller when written notice of the security interest is
22 sent to the commission merchant or selling agent by
23 registered or certified mail.
24 (Source: P.A. 84-1372.)
25 (810 ILCS 5/9-307.2) (from Ch. 26, par. 9-307.2)
26 Sec. 9-307.2. (Blank). A commission merchant or
27 selling agent who sells farm products for others, and
28 any person buying farm products in the ordinary course
29 of business from a person engaged in farming operations,
30 shall post at each licensed location where said
31 merchant, agent or person buying farm products in the
32 ordinary course of business does business a notice
33 which shall read as follows:
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1 "NOTICE TO SELLERS OF FARM PRODUCTS
2 It is a criminal offense to sell farm products subject to
3 a security interest without making payment to the secured
4 party. You should notify the purchaser if there is a security
5 interest in the farm products you are selling."
6 Such notice shall be posted in a conspicuous manner and
7 shall be in contrasting type, large enough to be read from a
8 distance of 10 feet.
9 (Source: P.A. 83-69.)
10 (810 ILCS 5/Art. 9, Part 3, Subpart 2 heading new)
11 SUBPART 2. PERFECTION
12 (810 ILCS 5/9-308) (from Ch. 26, par. 9-308)
13 Sec. 9-308. When security interest or agricultural lien
14 is perfected; continuity of perfection.
15 (a) Perfection of security interest. Except as
16 otherwise provided in this Section and Section 9-309, a
17 security interest is perfected if it has attached and all of
18 the applicable requirements for perfection in Sections 9-310
19 through 9-316 have been satisfied. A security interest is
20 perfected when it attaches if the applicable requirements are
21 satisfied before the security interest attaches.
22 (b) Perfection of agricultural lien. An agricultural
23 lien is perfected if it has become effective and all of the
24 applicable requirements for perfection in Section 9-310 have
25 been satisfied. An agricultural lien is perfected when it
26 becomes effective if the applicable requirements are
27 satisfied before the agricultural lien becomes effective.
28 (c) Continuous perfection; perfection by different
29 methods. A security interest or agricultural lien is
30 perfected continuously if it is originally perfected by one
31 method under this Article and is later perfected by another
32 method under this Article, without an intermediate period
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1 when it was unperfected.
2 (d) Supporting obligation. Perfection of a security
3 interest in collateral also perfects a security interest in a
4 supporting obligation for the collateral.
5 (e) Lien securing right to payment. Perfection of a
6 security interest in a right to payment or performance also
7 perfects a security interest in a security interest,
8 mortgage, or other lien on personal or real property securing
9 the right.
10 (f) Security entitlement carried in securities account.
11 Perfection of a security interest in a securities account
12 also perfects a security interest in the security
13 entitlements carried in the securities account.
14 (g) Commodity contract carried in commodity account.
15 Perfection of a security interest in a commodity account also
16 perfects a security interest in the commodity contracts
17 carried in the commodity account. Purchase of Chattel Paper
18 and Instruments.
19 A purchaser of chattel paper or an instrument who gives
20 new value and takes possession of it in the ordinary course
21 of his business has priority over a security interest in the
22 chattel paper or instrument
23 (a) which is perfected under Section 9-304 (permissive
24 filing and temporary perfection) or under Section 9-306
25 (perfection as to proceeds) if he acts without knowledge that
26 the specific paper or instrument is subject to a security
27 interest; or
28 (b) which is claimed merely as proceeds of inventory
29 subject to a security interest (Section 9-306) even though he
30 knows that the specific paper or instrument is subject to the
31 security interest.
32 (Source: P. A. 77-2810.)
33 (810 ILCS 5/9-309) (from Ch. 26, par. 9-309)
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1 Sec. 9-309. Security interest perfected upon attachment.
2 The following security interests are perfected when they
3 attach:
4 (1) a purchase-money security interest in consumer
5 goods, except as otherwise provided in Section 9-311(b)
6 with respect to consumer goods that are subject to a
7 statute or treaty described in Section 9-311(a);
8 (2) an assignment of accounts or payment
9 intangibles which does not by itself or in conjunction
10 with other assignments to the same assignee transfer a
11 significant part of the assignor's outstanding accounts
12 or payment intangibles;
13 (3) a sale of a payment intangible;
14 (4) a sale of a promissory note;
15 (5) a security interest created by the assignment
16 of a health-care-insurance receivable to the provider of
17 the health-care goods or services;
18 (6) a security interest arising under Section
19 2-401, 2-505, 2-711(3), or 2A-508(5), until the debtor
20 obtains possession of the collateral;
21 (7) a security interest of a collecting bank
22 arising under Section 4-210;
23 (8) a security interest of an issuer or nominated
24 person arising under Section 5-118;
25 (9) a security interest arising in the delivery of
26 a financial asset under Section 9-206(c);
27 (10) a security interest in investment property
28 created by a broker or securities intermediary;
29 (11) a security interest in a commodity contract or
30 a commodity account created by a commodity intermediary;
31 (12) an assignment for the benefit of all creditors
32 of the transferor and subsequent transfers by the
33 assignee thereunder; and
34 (13) a security interest created by an assignment
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1 of a beneficial interest in a decedent's estate.
2 Protection of purchasers of instruments, documents and
3 securities. Nothing in this Article limits the rights of
4 a holder in due course of a negotiable instrument
5 (Section 3-302) or a holder to whom a negotiable document
6 of title has been duly negotiated (Section 7-501) or a
7 protected purchaser of a security (Section 8-303) and
8 such holders or purchasers take priority over an earlier
9 security interest even though perfected. Filing under
10 this Article does not constitute notice of the security
11 interest to such holders or purchasers.
12 (Source: P.A. 89-364, eff. 1-1-96.)
13 (810 ILCS 5/9-310) (from Ch. 26, par. 9-310)
14 Sec. 9-310. When filing required to perfect security
15 interest or agricultural lien; security interests and
16 agricultural liens to which filing provisions do not apply.
17 (a) General rule: perfection by filing. Except as
18 otherwise provided in subsection (b) and Section 9-312(b), a
19 financing statement must be filed to perfect all security
20 interests and agricultural liens.
21 (b) Exceptions: filing not necessary. The filing of a
22 financing statement is not necessary to perfect a security
23 interest:
24 (1) that is perfected under Section 9-308(d), (e),
25 (f), or (g);
26 (2) that is perfected under Section 9-309 when it
27 attaches;
28 (3) in property subject to a statute, regulation,
29 or treaty described in Section 9-311(a);
30 (4) in goods in possession of a bailee which is
31 perfected under Section 9-312(d)(1) or (2);
32 (5) in certificated securities, documents, goods,
33 or instruments which is perfected without filing or
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1 possession under Section 9-312(e), (f), or (g);
2 (6) in collateral in the secured party's possession
3 under Section 9-313;
4 (7) in a certificated security which is perfected
5 by delivery of the security certificate to the secured
6 party under Section 9-313;
7 (8) in deposit accounts, electronic chattel paper,
8 investment property, or letter-of-credit rights which is
9 perfected by control under Section 9-314;
10 (9) in proceeds which is perfected under Section
11 9-315; or
12 (10) that is perfected under Section 9-316.
13 (c) Assignment of perfected security interest. If a
14 secured party assigns a perfected security interest or
15 agricultural lien, a filing under this Article is not
16 required to continue the perfected status of the security
17 interest against creditors of and transferees from the
18 original debtor. Priority of certain liens arising by
19 operation of law.
20 When a person in the ordinary course of his business
21 furnishes services or materials with respect to goods subject
22 to a security interest, a lien upon goods in the possession
23 of such person given by statute or rule of law for such
24 materials or services takes priority over a perfected
25 security interest unless the lien is statutory and the
26 statute expressly provides otherwise.
27 (Source: Laws 1961, p. 2101.)
28 (810 ILCS 5/9-311) (from Ch. 26, par. 9-311)
29 Sec. 9-311. Perfection of security interests in property
30 subject to certain statutes, regulations, and treaties.
31 (a) Security interest subject to other law. Except as
32 otherwise provided in subsection (d), the filing of a
33 financing statement is not necessary or effective to perfect
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1 a security interest in property subject to:
2 (1) a statute, regulation, or treaty of the United
3 States whose requirements for a security interest's
4 obtaining priority over the rights of a lien creditor
5 with respect to the property preempt Section 9-310(a);
6 (2) the Illinois Vehicle Code or the Boat
7 Registration and Safety Act; or
8 (3) a certificate-of-title statute of another
9 jurisdiction which provides for a security interest to be
10 indicated on the certificate as a condition or result of
11 the security interest's obtaining priority over the
12 rights of a lien creditor with respect to the property.
13 (b) Compliance with other law. Compliance with the
14 requirements of a statute, regulation, or treaty described in
15 subsection (a) for obtaining priority over the rights of a
16 lien creditor is equivalent to the filing of a financing
17 statement under this Article. Except as otherwise provided
18 in subsection (d) and Sections 9-313 and 9-316(d) and (e) for
19 goods covered by a certificate of title, a security interest
20 in property subject to a statute, regulation, or treaty
21 described in subsection (a) may be perfected only by
22 compliance with those requirements, and a security interest
23 so perfected remains perfected notwithstanding a change in
24 the use or transfer of possession of the collateral.
25 (c) Duration and renewal of perfection. Except as
26 otherwise provided in subsection (d) and Section 9-316(d) and
27 (e), duration and renewal of perfection of a security
28 interest perfected by compliance with the requirements
29 prescribed by a statute, regulation, or treaty described in
30 subsection (a) are governed by the statute, regulation, or
31 treaty. In other respects, the security interest is subject
32 to this Article.
33 (d) Inapplicability to certain inventory. During any
34 period in which collateral subject to a statute specified in
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1 subsection (a)(2) is inventory held for sale or lease by a
2 person or leased by that person as lessor and that person is
3 in the business of selling or leasing goods of that kind,
4 this Section does not apply to a security interest in that
5 collateral created by that person as debtor. Alienability of
6 debtor's rights: judicial process.
7 The debtor's rights in collateral may be voluntarily or
8 involuntarily transferred (by way of sale, creation of a
9 security interest, attachment, levy, garnishment or other
10 judicial process) notwithstanding a provision in the security
11 agreement prohibiting any transfer or making the transfer
12 constitute a default.
13 (Source: Laws 1961, p. 2101.)
14 (810 ILCS 5/9-312) (from Ch. 26, par. 9-312)
15 Sec. 9-312. Perfection of security interests in chattel
16 paper, deposit accounts, documents, goods covered by
17 documents, instruments, investment property, letter-of-credit
18 rights, and money; perfection by permissive filing; temporary
19 perfection without filing or transfer of possession.
20 (a) Perfection by filing permitted. A security interest
21 in chattel paper, negotiable documents, instruments, or
22 investment property may be perfected by filing.
23 (b) Control or possession of certain collateral. Except
24 as otherwise provided in Section 9-315(c) and (d) for
25 proceeds:
26 (1) a security interest in a deposit account may be
27 perfected only by control under Section 9-314;
28 (2) and except as otherwise provided in Section
29 9-308(d), a security interest in a letter-of-credit right
30 may be perfected only by control under Section 9-314; and
31 (3) a security interest in money may be perfected
32 only by the secured party's taking possession under
33 Section 9-313.
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1 (c) Goods covered by negotiable document. While goods
2 are in the possession of a bailee that has issued a
3 negotiable document covering the goods:
4 (1) a security interest in the goods may be
5 perfected by perfecting a security interest in the
6 document; and
7 (2) a security interest perfected in the document
8 has priority over any security interest that becomes
9 perfected in the goods by another method during that
10 time.
11 (d) Goods covered by nonnegotiable document. While
12 goods are in the possession of a bailee that has issued a
13 nonnegotiable document covering the goods, a security
14 interest in the goods may be perfected by:
15 (1) issuance of a document in the name of the
16 secured party;
17 (2) the bailee's receipt of notification of the
18 secured party's interest; or
19 (3) filing as to the goods.
20 (e) Temporary perfection: new value. A security
21 interest in certificated securities, negotiable documents, or
22 instruments is perfected without filing or the taking of
23 possession for a period of 20 days from the time it attaches
24 to the extent that it arises for new value given under an
25 authenticated security agreement.
26 (f) Temporary perfection: goods or documents made
27 available to debtor. A perfected security interest in a
28 negotiable document or goods in possession of a bailee, other
29 than one that has issued a negotiable document for the goods,
30 remains perfected for 20 days without filing if the secured
31 party makes available to the debtor the goods or documents
32 representing the goods for the purpose of:
33 (1) ultimate sale or exchange; or
34 (2) loading, unloading, storing, shipping,
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1 transshipping, manufacturing, processing, or otherwise
2 dealing with them in a manner preliminary to their sale
3 or exchange.
4 (g) Temporary perfection: delivery of security
5 certificate or instrument to debtor. A perfected security
6 interest in a certificated security or instrument remains
7 perfected for 20 days without filing if the secured party
8 delivers the security certificate or instrument to the debtor
9 for the purpose of:
10 (1) ultimate sale or exchange; or
11 (2) presentation, collection, enforcement, renewal,
12 or registration of transfer.
13 (h) Expiration of temporary perfection. After the
14 20-day period specified in subsection (e), (f), or (g)
15 expires, perfection depends upon compliance with this
16 Article. Priorities Among Conflicting Security Interests in
17 the Same Collateral.
18 (1) The rules of priority stated in other Sections of
19 this Part and in the following Sections shall govern when
20 applicable: Section 4-210 with respect to the security
21 interests of collecting banks in items being collected,
22 accompanying documents and proceeds; Section 9-103 on
23 security interests related to other jurisdictions; Section
24 9-114 on consignments; Section 9-115 on security interests in
25 investment property.
26 (2) A perfected security interest in crops for new value
27 given to enable the debtor to produce the crops during the
28 production season and given not more than three months before
29 the crops become growing crops by planting or otherwise takes
30 priority over an earlier perfected security interest to the
31 extent that such earlier interest secures obligations due
32 more than six months before the crops become growing crops by
33 planting or otherwise, even though the person giving new
34 value had knowledge of the earlier security interest.
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1 (3) A perfected purchase money security interest in
2 inventory has priority over a conflicting security interest
3 in the same inventory and also has priority in identifiable
4 cash proceeds received on or before the delivery of the
5 inventory to a buyer if
6 (a) the purchase money security interest is
7 perfected at the time the debtor receives possession of
8 the inventory; and
9 (b) the purchase money secured party gives
10 notification in writing to the holder of the conflicting
11 security interest if the holder had filed a financing
12 statement covering the same types of inventory (i) before
13 the date of the filing made by the purchase money secured
14 party, or (ii) before the beginning of the 21 day period
15 where the purchase money security interest is temporarily
16 perfected without filing or possession (subsection (5) of
17 Section 9-304); and
18 (c) the holder of the conflicting security interest
19 receives the notification within 5 years before the
20 debtor receives possession of the inventory; and
21 (d) the notification states that the person giving
22 the notice has or expects to acquire a purchase money
23 security interest in inventory of the debtor, describing
24 such inventory by item or type.
25 (4) A purchase money security interest in collateral
26 other than inventory has priority over a conflicting security
27 interest in the same collateral or its proceeds if the
28 purchase money security interest is perfected at the time the
29 debtor receives possession of the collateral or within 20
30 days thereafter.
31 (5) In all cases not governed by other rules stated in
32 this Section (including cases of purchase money security
33 interests which do not qualify for the special priorities set
34 forth in subsections (3) and (4) of this Section), priority
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1 between conflicting security interests in the same collateral
2 shall be determined according to the following rules:
3 (a) Conflicting security interests rank according
4 to priority in time of filing or perfection. Priority
5 dates from the time a filing is first made covering the
6 collateral or the time the security interest is first
7 perfected, whichever is earlier, provided that there is
8 no period thereafter when there is neither filing nor
9 perfection.
10 (b) So long as conflicting security interests are
11 unperfected, the first to attach has priority.
12 (6) For the purposes of subsection (5) a date of filing
13 or perfection as to collateral is also a date of filing or
14 perfection as to proceeds.
15 (7) If future advances are made while a security
16 interest is perfected by filing, the taking of possession or
17 under Section 9-115 or 9-116 on investment property, the
18 security interest has the same priority for the purposes of
19 subsection (5) with respect to the future advances as it does
20 with respect to the first advance. If a commitment is made
21 before or while the security interest is so perfected, the
22 security interest has the same priority with respect to
23 advances made pursuant thereto. In other cases a perfected
24 security interest has priority from the date the advance is
25 made.
26 (Source: P.A. 89-364, eff. 1-1-96.)
27 (810 ILCS 5/9-313) (from Ch. 26, par. 9-313)
28 Sec. 9-313. When possession by or delivery to secured
29 party perfects security interest without filing.
30 (a) Perfection by possession or delivery. Except as
31 otherwise provided in subsection (b), a secured party may
32 perfect a security interest in negotiable documents, goods,
33 instruments, money, or tangible chattel paper by taking
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1 possession of the collateral. A secured party may perfect a
2 security interest in certificated securities by taking
3 delivery of the certificated securities under Section 8-301.
4 (b) Goods covered by certificate of title. With respect
5 to goods covered by a certificate of title issued by this
6 State, a secured party may perfect a security interest in the
7 goods by taking possession of the goods only in the
8 circumstances described in Section 9-316(d).
9 (c) Collateral in possession of person other than
10 debtor. With respect to collateral other than certificated
11 securities and goods covered by a document, a secured party
12 takes possession of collateral in the possession of a person
13 other than the debtor, the secured party, or a lessee of the
14 collateral from the debtor in the ordinary course of the
15 debtor's business, when:
16 (1) the person in possession authenticates a record
17 acknowledging that it holds possession of the collateral
18 for the secured party's benefit; or
19 (2) the person takes possession of the collateral
20 after having authenticated a record acknowledging that it
21 will hold possession of collateral for the secured
22 party's benefit.
23 (d) Time of perfection by possession; continuation of
24 perfection. If perfection of a security interest depends upon
25 possession of the collateral by a secured party, perfection
26 occurs no earlier than the time the secured party takes
27 possession and continues only while the secured party retains
28 possession.
29 (e) Time of perfection by delivery; continuation of
30 perfection. A security interest in a certificated security in
31 registered form is perfected by delivery when delivery of the
32 certificated security occurs under Section 8-301 and remains
33 perfected by delivery until the debtor obtains possession of
34 the security certificate.
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1 (f) Acknowledgment not required. A person in possession
2 of collateral is not required to acknowledge that it holds
3 possession for a secured party's benefit.
4 (g) Effectiveness of acknowledgment; no duties or
5 confirmation. If a person acknowledges that it holds
6 possession for the secured party's benefit:
7 (1) the acknowledgment is effective under
8 subsection (c) or Section 8-301(a), even if the
9 acknowledgment violates the rights of a debtor; and
10 (2) unless the person otherwise agrees or law other
11 than this Article otherwise provides, the person does not
12 owe any duty to the secured party and is not required to
13 confirm the acknowledgment to another person.
14 (h) Secured party's delivery to person other than
15 debtor. A secured party having possession of collateral does
16 not relinquish possession by delivering the collateral to a
17 person other than the debtor or a lessee of the collateral
18 from the debtor in the ordinary course of the debtor's
19 business if the person was instructed before the delivery or
20 is instructed contemporaneously with the delivery:
21 (1) to hold possession of the collateral for the
22 secured party's benefit; or
23 (2) to redeliver the collateral to the secured
24 party.
25 (i) Effect of delivery under subsection (h); no duties
26 or confirmation. A secured party does not relinquish
27 possession, even if a delivery under subsection (h) violates
28 the rights of a debtor. A person to which collateral is
29 delivered under subsection (h) does not owe any duty to the
30 secured party and is not required to confirm the delivery to
31 another person unless the person otherwise agrees or law
32 other than this Article otherwise provides.
33 Priority of Security Interests in Fixtures.
34 (1) In this Section and in the provisions of Part 4 of
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1 this Article referring to fixture filing, unless the context
2 otherwise requires
3 (a) Goods are "fixtures" when they become so
4 related to particular real estate that an interest in
5 them arises under real estate law
6 (b) A "fixture filing" is the filing in the office
7 where a mortgage on the real estate would be filed or
8 recorded of a financing statement covering goods which
9 are or are to become fixtures and conforming to the
10 requirements of subsection (5) of Section 9-402
11 (c) A mortgage is a "construction mortgage" to the
12 extent that it secures an obligation incurred for the
13 construction of an improvement on land including the
14 acquisition cost of the land, if the recorded writing so
15 indicates.
16 (2) A security interest under this Article may be
17 created in goods which are fixtures or may continue in goods
18 which become fixtures, but no security interest exists under
19 this Article in ordinary building materials incorporated into
20 an improvement on land.
21 (3) This Article does not prevent creation of an
22 encumbrance upon fixtures pursuant to real estate law.
23 (4) A perfected security interest in fixtures has
24 priority over the conflicting interest of an encumbrancer or
25 owner of the real estate where
26 (a) the security interest is a purchase money
27 security interest, the interest of the encumbrancer or
28 owner arises before the goods become fixtures, the
29 security interest is perfected by a fixture filing before
30 the goods become fixtures or within 10 days thereafter,
31 and the debtor has an interest of record in the real
32 estate or is in possession of the real estate; or
33 (b) the security interest is perfected by a fixture
34 filing before the interest of the encumbrancer or owner
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1 is of record, the security interest has priority over any
2 conflicting interest of a predecessor in title of the
3 encumbrancer or owner, and the debtor has an interest of
4 record in the real estate or is in possession of the real
5 estate; or
6 (c) the fixtures are readily removable factory or
7 office machines or readily removable replacements of
8 domestic appliances which are consumer goods, and before
9 the goods become fixtures the security interest is
10 perfected by any method permitted by this Article; or
11 (d) the conflicting interest is a lien on the real
12 estate obtained by legal or equitable proceedings after
13 the security interest was perfected by any method
14 permitted by this Article.
15 (5) A security interest in fixtures, whether or not
16 perfected, has priority over the conflicting interest of an
17 encumbrancer or owner of the real estate where
18 (a) the encumbrancer or owner has consented in
19 writing to the security interest or has disclaimed an
20 interest in the goods as fixtures; or
21 (b) the debtor has a right to remove the goods as
22 against the encumbrancer or owner. If the debtor's right
23 terminates, the priority of the security interest
24 continues for a reasonable time.
25 (6) Notwithstanding paragraph (a) of subsection (4) but
26 otherwise subject to subsections (4) and (5), a security
27 interest in fixtures is subordinate to a construction
28 mortgage recorded before the goods become fixtures if the
29 goods become fixtures before the completion of the
30 construction. To the extent that it is given to refinance a
31 construction mortgage, a mortgage has this priority to the
32 same extent as the construction mortgage.
33 (7) In cases not within the preceding subsections, a
34 security interest in fixtures is subordinate to the
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1 conflicting interest of an encumbrancer or owner of the
2 related real estate who is not the debtor.
3 (8) When the secured party has priority over all owners
4 and encumbrancers of the real estate, he may, on default,
5 subject to the provisions of Part 5, remove his collateral
6 from the real estate but he must reimburse any encumbrancer
7 or owner of the real estate who is not the debtor and who has
8 not otherwise agreed for the cost of repair of any physical
9 injury, but not for any diminution in value of the real
10 estate caused by the absence of the goods removed or by any
11 necessity of replacing them. A person entitled to
12 reimbursement may refuse permission to remove until the
13 secured party gives adequate security for the performance of
14 this obligation.
15 (Source: P. A. 78-238; revised 10-31-98.)
16 (810 ILCS 5/9-314) (from Ch. 26, par. 9-314)
17 Sec. 9-314. Perfection by control.
18 (a) Perfection by control. A security interest in
19 investment property, deposit accounts, letter-of-credit
20 rights, or electronic chattel paper may be perfected by
21 control of the collateral under Section 9-104, 9-105, 9-106,
22 or 9-107.
23 (b) Specified collateral: time of perfection by
24 control; continuation of perfection. A security interest in
25 deposit accounts, electronic chattel paper, or
26 letter-of-credit rights is perfected by control under Section
27 9-104, 9-105, or 9-107 when the secured party obtains control
28 and remains perfected by control only while the secured party
29 retains control.
30 (c) Investment property: time of perfection by control;
31 continuation of perfection. A security interest in
32 investment property is perfected by control under Section
33 9-106 from the time the secured party obtains control and
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1 remains perfected by control until:
2 (1) the secured party does not have control; and
3 (2) one of the following occurs:
4 (A) if the collateral is a certificated
5 security, the debtor has or acquires possession of
6 the security certificate;
7 (B) if the collateral is an uncertificated
8 security, the issuer has registered or registers the
9 debtor as the registered owner; or
10 (C) if the collateral is a security
11 entitlement, the debtor is or becomes the
12 entitlement holder. Accessions.
13 (1) A security interest in goods which attaches before
14 they are installed in or affixed to other goods takes
15 priority as to the goods installed or affixed (called in this
16 section "accessions") over the claims of all persons to the
17 whole except as stated in subsection (3) and subject to
18 Section 9--315(1).
19 (2) A security interest which attaches to goods after
20 they become part of a whole is valid against all persons
21 subsequently acquiring interests in the whole except as
22 stated in subsection (3) but is invalid against any person
23 with an interest in the whole at the time the security
24 interest attaches to the goods who has not in writing
25 consented to the security interest or disclaimed an interest
26 in the goods as part of the whole.
27 (3) The security interests described in subsections (1)
28 and (2) do not take priority over
29 (a) a subsequent purchaser for value of any
30 interest in the whole; or
31 (b) a creditor with a lien on the whole
32 subsequently obtained by judicial proceedings; or
33 (c) a creditor with a prior perfected security
34 interest in the whole to the extent that he makes subsequent
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1 advances if the subsequent purchase is made, the lien by
2 judicial proceedings obtained or the subsequent advance under
3 the prior perfected security interest is made or contracted
4 for without knowledge of the security interest and before it
5 is perfected. A purchaser of the whole at a foreclosure sale
6 other than the holder of a perfected security interest
7 purchasing at his own foreclosure sale is a subsequent
8 purchaser within this Section.
9 (4) When under subsections (1) or (2) and (3) a secured
10 party has an interest in accessions which has priority over
11 the claims of all persons who have interests in the whole, he
12 may on default subject to the provisions of Part 5 remove his
13 collateral from the whole but he must reimburse any
14 encumbrancer or owner of the whole who is not the debtor and
15 who has not otherwise agreed for the cost of repair of any
16 physical injury but not for any diminution in value of the
17 whole caused by the absence of the goods removed or by any
18 necessity for replacing them. A person entitled to
19 reimbursement may refuse permission to remove until the
20 secured party gives adequate security for the performance of
21 this obligation.
22 (Source: Laws 1961, p. 2101.)
23 (810 ILCS 5/9-315) (from Ch. 26, par. 9-315)
24 Sec. 9-315. Secured party's rights on disposition of
25 collateral and in proceeds.
26 (a) Disposition of collateral: continuation of security
27 interest or agricultural lien; proceeds. Except as otherwise
28 provided in this Article and in Section 2-403(2):
29 (1) a security interest or agricultural lien
30 continues in collateral notwithstanding sale, lease,
31 license, exchange, or other disposition thereof unless
32 the secured party authorized the disposition free of the
33 security interest or agricultural lien; and
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1 (2) a security interest attaches to any
2 identifiable proceeds of collateral.
3 (b) When commingled proceeds identifiable. Proceeds
4 that are commingled with other property are identifiable
5 proceeds:
6 (1) if the proceeds are goods, to the extent
7 provided by Section 9-336; and
8 (2) if the proceeds are not goods, to the extent
9 that the secured party identifies the proceeds by a
10 method of tracing, including application of equitable
11 principles, that is permitted under law other than this
12 Article with respect to commingled property of the type
13 involved.
14 (c) Perfection of security interest in proceeds. A
15 security interest in proceeds is a perfected security
16 interest if the security interest in the original collateral
17 was perfected.
18 (d) Continuation of perfection. A perfected security
19 interest in proceeds becomes unperfected on the 21st day
20 after the security interest attaches to the proceeds unless:
21 (1) the following conditions are satisfied:
22 (A) a filed financing statement covers the
23 original collateral;
24 (B) the proceeds are collateral in which a
25 security interest may be perfected by filing in the
26 office in which the financing statement has been
27 filed; and
28 (C) the proceeds are not acquired with cash
29 proceeds;
30 (2) the proceeds are identifiable cash proceeds; or
31 (3) the security interest in the proceeds is
32 perfected other than under subsection (c) when the
33 security interest attaches to the proceeds or within 20
34 days thereafter.
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1 (e) When perfected security interest in proceeds becomes
2 unperfected. If a filed financing statement covers the
3 original collateral, a security interest in proceeds which
4 remains perfected under subsection (d)(1) becomes unperfected
5 at the later of:
6 (1) when the effectiveness of the filed financing
7 statement lapses under Section 9-515 or is terminated
8 under Section 9-513; or
9 (2) the 21st day after the security interest
10 attaches to the proceeds. Priority when goods are
11 commingled or processed.
12 (1) If a security interest in goods was perfected and
13 subsequently the goods or a part thereof have become part of
14 a product or mass, the security interest continues in the
15 product or mass if
16 (a) the goods are so manufactured, processed,
17 assembled or commingled that their identity is lost in the
18 product or mass; or
19 (b) a financing statement covering the original
20 goods also covers the product into which the goods have been
21 manufactured, processed or assembled. In a case to which
22 paragraph (b) applies, no separate security interest in that
23 part of the original goods which has been manufactured,
24 processed or assembled into the product may be claimed under
25 Section 9--314.
26 (2) When under subsection (1) more than one security
27 interest attaches to the product or mass, they rank equally
28 according to the ratio that the cost of the goods to which
29 each interest originally attached bears to the cost of the
30 total product or mass.
31 (Source: Laws 1961, p. 2101.)
32 (810 ILCS 5/9-315.01 new)
33 Sec. 9-315.01. Debtor disposing of collateral and
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1 failing to pay secured party amount due under security
2 agreement; penalties for violation.
3 (1) It is unlawful for a debtor under the terms of a
4 security agreement (a) who has no right of sale or other
5 disposition of the collateral or (b) who has a right of sale
6 or other disposition of the collateral and is to account to
7 the secured party for the proceeds of any sale or other
8 disposition of the collateral, to sell or otherwise dispose
9 of the collateral and willfully and wrongfully to fail to pay
10 the secured party the amount of said proceeds due under the
11 security agreement. Failure to pay such proceeds to the
12 secured party within 10 days after the sale or other
13 disposition of the collateral is prima facie evidence of a
14 willful and wanton failure to pay.
15 (2) An individual convicted of a violation of this
16 Section shall be guilty of a Class 3 felony.
17 (3) A corporation convicted of a violation of this
18 Section shall be guilty of a business offense and shall be
19 fined not less than $2,000 nor more than $10,000.
20 (4) In the event the debtor under the terms of a
21 security agreement is a corporation or a partnership, any
22 officer, director, manager, or managerial agent of the debtor
23 who violates this Section or causes the debtor to violate
24 this Section shall be guilty of a Class 3 felony.
25 (810 ILCS 5/9-315.02 new)
26 Sec. 315.02. Disposal of collateral by debtor to persons
27 other than those previously disclosed to secured
28 party-penalties for violation-defense.
29 (1) Where, pursuant to Section 9-205.1, a secured party
30 has required that before the debtor sells or otherwise
31 disposes of collateral in the debtor's possession he disclose
32 to the secured party the persons to whom he desires to sell
33 or otherwise dispose of such collateral, it is unlawful for
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1 the debtor to sell or otherwise dispose of the collateral to
2 a person other than a person so disclosed to the secured
3 party.
4 (2) An individual convicted of a violation of this
5 Section shall be guilty of a Class A misdemeanor.
6 (3) A corporation convicted of a violation of this
7 Section shall be guilty of a business offense and shall be
8 fined not less than $2,000 nor more than $10,000.
9 (4) In the event the debtor under the terms of a
10 security agreement is a corporation or a partnership, any
11 officer, director, manager, or managerial agent of the debtor
12 who violates this Section or causes the debtor to violate
13 this Section shall be guilty of a Class A misdemeanor.
14 (5) It is an affirmative defense to a prosecution for
15 the violation of this Section that the debtor has paid to the
16 secured party the proceeds from the sale or other disposition
17 of the collateral within 10 days after such sale or
18 disposition.
19 (810 ILCS 5/9-316) (from Ch. 26, par. 9-316)
20 Sec. 9-316. Continued perfection of security interest
21 following change in governing law.
22 (a) General rule: effect on perfection of change in
23 governing law. A security interest perfected pursuant to the
24 law of the jurisdiction designated in Section 9-301(1) or
25 9-305(c) remains perfected until the earliest of:
26 (1) the time perfection would have ceased under the
27 law of that jurisdiction;
28 (2) the expiration of four months after a change of
29 the debtor's location to another jurisdiction; or
30 (3) the expiration of one year after a transfer of
31 collateral to a person that thereby becomes a debtor and
32 is located in another jurisdiction.
33 (b) Security interest perfected or unperfected under law
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1 of new jurisdiction. If a security interest described in
2 subsection (a) becomes perfected under the law of the other
3 jurisdiction before the earliest time or event described in
4 that subsection, it remains perfected thereafter. If the
5 security interest does not become perfected under the law of
6 the other jurisdiction before the earliest time or event, it
7 becomes unperfected and is deemed never to have been
8 perfected as against a purchaser of the collateral for value.
9 (c) Possessory security interest in collateral moved to
10 new jurisdiction. A possessory security interest in
11 collateral, other than goods covered by a certificate of
12 title and as-extracted collateral consisting of goods,
13 remains continuously perfected if:
14 (1) the collateral is located in one jurisdiction
15 and subject to a security interest perfected under the
16 law of that jurisdiction;
17 (2) thereafter the collateral is brought into
18 another jurisdiction; and
19 (3) upon entry into the other jurisdiction, the
20 security interest is perfected under the law of the other
21 jurisdiction.
22 (d) Goods covered by certificate of title from this
23 State. Except as otherwise provided in subsection (e), a
24 security interest in goods covered by a certificate of title
25 which is perfected by any method under the law of another
26 jurisdiction when the goods become covered by a certificate
27 of title from this State remains perfected until the security
28 interest would have become unperfected under the law of the
29 other jurisdiction had the goods not become so covered.
30 (e) When subsection (d) security interest becomes
31 unperfected against purchasers. A security interest
32 described in subsection (d) becomes unperfected as against a
33 purchaser of the goods for value and is deemed never to have
34 been perfected as against a purchaser of the goods for value
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1 if the applicable requirements for perfection under Section
2 9-311(b) or 9-313 are not satisfied before the earlier of:
3 (1) the time the security interest would have
4 become unperfected under the law of the other
5 jurisdiction had the goods not become covered by a
6 certificate of title from this State; or
7 (2) the expiration of four months after the goods
8 had become so covered.
9 (f) Change in jurisdiction of bank, issuer, nominated
10 person, securities intermediary, or commodity intermediary.
11 A security interest in deposit accounts, letter-of-credit
12 rights, or investment property which is perfected under the
13 law of the bank's jurisdiction, the issuer's jurisdiction, a
14 nominated person's jurisdiction, the securities
15 intermediary's jurisdiction, or the commodity intermediary's
16 jurisdiction, as applicable, remains perfected until the
17 earlier of:
18 (1) the time the security interest would have
19 become unperfected under the law of that jurisdiction; or
20 (2) the expiration of four months after a change of
21 the applicable jurisdiction to another jurisdiction.
22 (g) Subsection (f) security interest perfected or
23 unperfected under law of new jurisdiction. If a security
24 interest described in subsection (f) becomes perfected under
25 the law of the other jurisdiction before the earlier of the
26 time or the end of the period described in that subsection,
27 it remains perfected thereafter. If the security interest
28 does not become perfected under the law of the other
29 jurisdiction before the earlier of that time or the end of
30 that period, it becomes unperfected and is deemed never to
31 have been perfected as against a purchaser of the collateral
32 for value. Priority subject to subordination.
33 Nothing in this Article prevents subordination by
34 agreement by any person entitled to priority.
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1 (Source: Laws 1961, p. 2101.)
2 (810 ILCS 5/Art. 9, Part 3, Subpart 3 heading new)
3 SUBPART 3. PRIORITY
4 (810 ILCS 5/9-317) (from Ch. 26, par. 9-317)
5 Sec. 9-317. Interests that take priority over or take
6 free of security interest or agricultural lien.
7 (a) Conflicting security interests and rights of lien
8 creditors. A security interest or agricultural lien is
9 subordinate to the rights of:
10 (1) a person entitled to priority under Section
11 9-322; and
12 (2) except as otherwise provided in subsection (e)
13 or (f), a person that becomes a lien creditor before the
14 earlier of the time:
15 (A) the security interest or agricultural lien
16 is perfected; or
17 (B) one of the conditions specified in Section
18 9-203(b)(3) is met and a financing statement
19 covering the collateral is filed.
20 (b) Buyers that receive delivery. Except as otherwise
21 provided in subsection (e), a buyer, other than a secured
22 party, of tangible chattel paper, documents, goods,
23 instruments, or a security certificate takes free of a
24 security interest or agricultural lien if the buyer gives
25 value and receives delivery of the collateral without
26 knowledge of the security interest or agricultural lien and
27 before it is perfected.
28 (c) Lessees that receive delivery. Except as otherwise
29 provided in subsection (e), a lessee of goods takes free of a
30 security interest or agricultural lien if the lessee gives
31 value and receives delivery of the collateral without
32 knowledge of the security interest or agricultural lien and
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1 before it is perfected.
2 (d) Licensees and buyers of certain collateral. A
3 licensee of a general intangible or a buyer, other than a
4 secured party, of accounts, electronic chattel paper, general
5 intangibles, or investment property other than a certificated
6 security takes free of a security interest if the licensee or
7 buyer gives value without knowledge of the security interest
8 and before it is perfected.
9 (e) Purchase-money security interest. Except as
10 otherwise provided in Sections 9-320 and 9-321, if a person
11 files a financing statement with respect to a purchase-money
12 security interest before or within 20 days after the debtor
13 receives delivery of the collateral, the security interest
14 takes priority over the rights of a buyer, lessee, or lien
15 creditor which arise between the time the security interest
16 attaches and the time of filing.
17 (f) Public deposits. An unperfected security interest
18 shall take priority over the rights of a lien creditor if (i)
19 the lien creditor is a trustee or receiver of a bank or
20 acting in furtherance of its supervisory authority over such
21 bank and (ii) a security interest is granted by the bank to
22 secure a deposit of public funds with the bank or a
23 repurchase agreement with the bank pursuant to the Government
24 Securities Act of 1986, as amended. Secured party not
25 obligated on contract of debtor.
26 The mere existence of a security interest or authority
27 given to the debtor to dispose of or use collateral does not
28 impose contract or tort liability upon the secured party for
29 the debtor's acts or omissions.
30 (Source: Laws 1961, p. 2101.)
31 (810 ILCS 5/9-318) (from Ch. 26, par. 9-318)
32 Sec. 9-318. No interest retained in right to payment
33 that is sold; rights and title of seller of account or
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1 chattel paper with respect to creditors and purchasers.
2 (a) Seller retains no interest. A debtor that has sold
3 an account, chattel paper, payment intangible, or promissory
4 note does not retain a legal or equitable interest in the
5 collateral sold.
6 (b) Deemed rights of debtor if buyer's security interest
7 unperfected. For purposes of determining the rights of
8 creditors of, and purchasers for value of an account or
9 chattel paper from, a debtor that has sold an account or
10 chattel paper, while the buyer's security interest is
11 unperfected, the debtor is deemed to have rights and title to
12 the account or chattel paper identical to those the debtor
13 sold. Defenses Against Assignee; Modification of Contract
14 After Notification of Assignment; Term Prohibiting Assignment
15 Ineffective; Identification and Proof of Assignment.
16 (1) Unless an account debtor has made an enforceable
17 agreement not to assert defenses or claims arising out of a
18 sale as provided in Section 9-- 206 the rights of an assignee
19 are subject to
20 (a) all the terms of the contract between the
21 account debtor and assignor and any defense or claim arising
22 therefrom; and
23 (b) any other defense or claim of the account
24 debtor against the assignor which accrues before the account
25 debtor receives notification of the assignment.
26 (2) So far as the right to payment or a part thereof
27 under an assigned contract has not been fully earned by
28 performance, and notwithstanding notification of the
29 assignment, any modification of or substitution for the
30 contract made in good faith and in accordance with reasonable
31 commercial standards is effective against an assignee unless
32 the account debtor has otherwise agreed but the assignee
33 acquires corresponding rights under the modified or
34 substituted contract. The assignment may provide that such
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1 modification or substitution is a breach by the assignor.
2 (3) The account debtor is authorized to pay the assignor
3 until the account debtor receives notification that the
4 amount due or to become due has been assigned and that
5 payment is to be made to the assignee. A notification which
6 does not reasonably identify the rights assigned is
7 ineffective. If requested by the account debtor, the assignee
8 must seasonably furnish reasonable proof that the assignment
9 has been made and unless he does so the account debtor may
10 pay the assignor.
11 (4) A term in any contract between an account debtor and
12 an assignor is ineffective if it prohibits assignment of an
13 account or prohibits creation of a security interest in a
14 general intangible for money due or to become due or requires
15 the account debtor's consent to such assignment or security
16 interest.
17 (Source: P. A. 77-2810.)
18 (810 ILCS 5/9-319 new)
19 Sec. 9-319. Rights and title of consignee with respect
20 to creditors and purchasers.
21 (a) Consignee has consignor's rights. Except as
22 otherwise provided in subsection (b), for purposes of
23 determining the rights of creditors of, and purchasers for
24 value of goods from, a consignee, while the goods are in the
25 possession of the consignee, the consignee is deemed to have
26 rights and title to the goods identical to those the
27 consignor had or had power to transfer.
28 (b) Applicability of other law. For purposes of
29 determining the rights of a creditor of a consignee, law
30 other than this Article determines the rights and title of a
31 consignee while goods are in the consignee's possession if,
32 under this Part, a perfected security interest held by the
33 consignor would have priority over the rights of the
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1 creditor.
2 (810 ILCS 5/9-320 new)
3 Sec. 9-320. Buyer of goods and farm products.
4 (a) Buyer in ordinary course of business. Except as
5 otherwise provided in subsections (e) and (f), a buyer in the
6 ordinary course of business takes free of a security interest
7 created by the buyer's seller, even if the security interest
8 is perfected and the buyer knows of its existence.
9 (b) Buyer of consumer goods. Except as otherwise
10 provided in subsection (e), a buyer of goods from a person
11 who used or bought the goods for use primarily for personal,
12 family, or household purposes takes free of a security
13 interest, even if perfected, if the buyer buys:
14 (1) without knowledge of the security interest;
15 (2) for value;
16 (3) primarily for the buyer's personal, family, or
17 household purposes; and
18 (4) before the filing of a financing statement
19 covering the goods.
20 (c) Effectiveness of filing for subsection (b). To the
21 extent that it affects the priority of a security interest
22 over a buyer of goods under subsection (b), the period of
23 effectiveness of a filing made in the jurisdiction in which
24 the seller is located is governed by Section 9-316(a) and
25 (b).
26 (d) Buyer in ordinary course of business at wellhead or
27 minehead. A buyer in ordinary course of business buying oil,
28 gas, or other minerals at the wellhead or minehead or after
29 extraction takes free of an interest arising out of an
30 encumbrance.
31 (e) Possessory security interest not affected.
32 Subsections (a) and (b) do not affect a security interest in
33 goods in the possession of the secured party under Section
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1 9-313.
2 (f) Buyer of farm products.
3 (1) A buyer of farm products takes subject to a
4 security interest created by the seller if:
5 (A) within one year before the sale of the
6 farm products, the buyer has received from the
7 secured party or the seller written notice of the
8 security interest in a record organized according to
9 farm products that:
10 (i) in an original or reproduced copy
11 thereof;
12 (ii) contains: (a) the name and address
13 of the secured party; (b) the name and address
14 of the person indebted to the secured party;
15 (c) the social security number of the debtor
16 or, in the case of a debtor doing business
17 other than as an individual, the Internal
18 Revenue Service taxpayer identification number
19 of such debtor; (d) a description of the farm
20 products subject to the security interest
21 created by the debtor, including the amount of
22 such products where applicable, crop year,
23 county, and a reasonable description of the
24 property;
25 (iii) must be amended in writing, within
26 3 months, similarly signed and transmitted, to
27 reflect material changes;
28 (iv) will lapse on either the expiration
29 period of the statement or the transmission of
30 a notice signed by the secured party that the
31 statement has lapsed, whichever occurs first;
32 and
33 (v) sets forth any payment obligations
34 imposed on the buyer by the secured party as
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1 conditions for waiver or release of the
2 security interest; and
3 (B) the buyer has failed to perform the
4 payment obligations.
5 (2) For the purposes of this subsection (f), a
6 buyer of farm products has received notice from the
7 secured party or seller when written notice of the
8 security interest is sent to the buyer by registered or
9 certified mail.
10 (810 ILCS 5/9-320.1 new)
11 Sec. 9-320.1. Liability of commission merchant or
12 selling agent engaged in sale of livestock or other farm
13 products to holder of security interest.
14 (a) A commission merchant or selling agent who sells a
15 farm product for others shall be subject to a security
16 interest created by the seller in such farm product if:
17 (1) within one year before the sale of the farm
18 products, the buyer has received from the secured party
19 or the seller written notice of the security interest in
20 a record that:
21 (A) is an original or reproduced copy thereof;
22 (B) contains: (i) the name and address of the
23 secured party; (ii) the name and address of the
24 person indebted to the secured party; (iii) the
25 social security number of the debtor or, in case of
26 a debtor doing business other than as an individual,
27 the Internal Revenue Service taxpayer identification
28 number of such debtor; (iv) a description of the
29 farm products subject to the security interest
30 created by the debtor, including the amount of such
31 products where applicable, crop year, county, and a
32 reasonable description of the property;
33 (C) must be amended in writing, within 3
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1 months, similarly signed and transmitted, to reflect
2 material changes;
3 (D) will lapse on either the expiration period
4 of the statement or the transmission of a notice
5 signed by the secured party that the statement has
6 lapsed, whichever occurs first; and
7 (E) sets forth any payment obligations imposed
8 on the buyer by the secured party as conditions for
9 waiver or release of the security interest; and
10 (2) the commission merchant or selling agent has
11 failed to perform the payment obligations.
12 (b) For the purposes of this Section, a commission
13 merchant or selling agent has received notice from the
14 secured party or seller when written notice of the security
15 interest is sent to the commission merchant or selling agent
16 by registered or certified mail.
17 (810 ILCS 5/9-320.2 new)
18 Sec. 9-320.2. Notice to seller of farm products. A
19 commission merchant or selling agent who sells farm products
20 for others, and any person buying farm products in the
21 ordinary course of business from a person engaged in farming
22 operations, shall post at each licensed location where the
23 merchant, agent, or person buying farm products in the
24 ordinary course of business does business a notice that shall
25 read as follows:
26 "NOTICE TO SELLERS OF FARM PRODUCTS
27 It is a criminal offense to sell farm products subject to
28 a security interest without making payment to the secured
29 party. You should notify the purchaser if there is a
30 security interest in the farm products you are selling.".
31 The notice shall be posted in a conspicuous manner and
32 shall be in contrasting type, large enough to be read from a
33 distance of 10 feet.
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1 (810 ILCS 5/9-321 new)
2 Sec. 9-321. Licensee of general intangible and lessee of
3 goods in ordinary course of business.
4 (a) "Licensee in ordinary course of business." In this
5 Section, "licensee in ordinary course of business" means a
6 person that becomes a licensee of a general intangible in
7 good faith, without knowledge that the license violates the
8 rights of another person in the general intangible, and in
9 the ordinary course from a person in the business of
10 licensing general intangibles of that kind. A person becomes
11 a licensee in the ordinary course if the license to the
12 person comports with the usual or customary practices in the
13 kind of business in which the licensor is engaged or with the
14 licensor's own usual or customary practices.
15 (b) Rights of licensee in ordinary course of business.
16 A licensee in ordinary course of business takes its rights
17 under a nonexclusive license free of a security interest in
18 the general intangible created by the licensor, even if the
19 security interest is perfected and the licensee knows of its
20 existence.
21 (c) Rights of lessee in ordinary course of business. A
22 lessee in ordinary course of business takes its leasehold
23 interest free of a security interest in the goods created by
24 the lessor, even if the security interest is perfected and
25 the lessee knows of its existence.
26 (810 ILCS 5/9-322 new)
27 Sec. 9-322. Priorities among conflicting security
28 interests in and agricultural liens on same collateral.
29 (a) General priority rules. Except as otherwise
30 provided in this Section, priority among conflicting security
31 interests and agricultural liens in the same collateral is
32 determined according to the following rules:
33 (1) Conflicting perfected security interests and
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1 agricultural liens rank according to priority in time of
2 filing or perfection. Priority dates from the earlier of
3 the time a filing covering the collateral is first made
4 or the security interest or agricultural lien is first
5 perfected, if there is no period thereafter when there is
6 neither filing nor perfection.
7 (2) A perfected security interest or agricultural
8 lien has priority over a conflicting unperfected security
9 interest or agricultural lien.
10 (3) The first security interest or agricultural
11 lien to attach or become effective has priority if
12 conflicting security interests and agricultural liens are
13 unperfected.
14 (b) Time of perfection: proceeds and supporting
15 obligations. For the purposes of subsection (a)(1):
16 (1) the time of filing or perfection as to a
17 security interest in collateral is also the time of
18 filing or perfection as to a security interest in
19 proceeds; and
20 (2) the time of filing or perfection as to a
21 security interest in collateral supported by a supporting
22 obligation is also the time of filing or perfection as to
23 a security interest in the supporting obligation.
24 (c) Special priority rules: proceeds and supporting
25 obligations. Except as otherwise provided in subsection (f),
26 a security interest in collateral which qualifies for
27 priority over a conflicting security interest under Section
28 9-327, 9-328, 9-329, 9-330, or 9-331 also has priority over a
29 conflicting security interest in:
30 (1) any supporting obligation for the collateral;
31 and
32 (2) proceeds of the collateral if:
33 (A) the security interest in proceeds is
34 perfected;
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1 (B) the proceeds are cash proceeds or of the
2 same type as the collateral; and
3 (C) in the case of proceeds that are proceeds
4 of proceeds, all intervening proceeds are cash
5 proceeds, proceeds of the same type as the
6 collateral, or an account relating to the
7 collateral.
8 (d) First-to-file priority rule for certain collateral.
9 Subject to subsection (e) and except as otherwise provided in
10 subsection (f), if a security interest in chattel paper,
11 deposit accounts, negotiable documents, instruments,
12 investment property, or letter-of-credit rights is perfected
13 by a method other than filing, conflicting perfected security
14 interests in proceeds of the collateral rank according to
15 priority in time of filing.
16 (e) Applicability of subsection (d). Subsection (d)
17 applies only if the proceeds of the collateral are not cash
18 proceeds, chattel paper, negotiable documents, instruments,
19 investment property, or letter-of-credit rights.
20 (f) Limitations on subsections (a) through (e).
21 Subsections (a) through (e) are subject to:
22 (1) subsection (g) and the other provisions of this
23 Part;
24 (2) Section 4-210 with respect to a security
25 interest of a collecting bank;
26 (3) Section 5-118 with respect to a security
27 interest of an issuer or nominated person; and
28 (4) Section 9-110 with respect to a security
29 interest arising under Article 2 or 2A.
30 (g) Priority under agricultural lien statute. A
31 perfected agricultural lien on collateral has priority over a
32 conflicting security interest in or agricultural lien on the
33 same collateral if the statute creating the agricultural lien
34 so provides.
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1 (810 ILCS 5/9-323 new)
2 Sec. 9-323. Future advances.
3 (a) When priority based on time of advance. Except as
4 otherwise provided in subsection (c), for purposes of
5 determining the priority of a perfected security interest
6 under Section 9-322(a)(1), perfection of the security
7 interest dates from the time an advance is made to the extent
8 that the security interest secures an advance that:
9 (1) is made while the security interest is
10 perfected only:
11 (A) under Section 9-309 when it attaches; or
12 (B) temporarily under Section 9-312(e), (f),
13 or (g); and
14 (2) is not made pursuant to a commitment entered
15 into before or while the security interest is perfected
16 by a method other than under Section 9-309 or 9-312(e),
17 (f), or (g).
18 (b) Lien creditor. Except as otherwise provided in
19 subsection (c), a security interest is subordinate to the
20 rights of a person that becomes a lien creditor to the extent
21 that the security interest secures an advance made more than
22 45 days after the person becomes a lien creditor unless the
23 advance is made:
24 (1) without knowledge of the lien; or
25 (2) pursuant to a commitment entered into without
26 knowledge of the lien.
27 (c) Buyer of receivables. Subsections (a) and (b) do
28 not apply to a security interest held by a secured party that
29 is a buyer of accounts, chattel paper, payment intangibles,
30 or promissory notes or a consignor.
31 (d) Buyer of goods. Except as otherwise provided in
32 subsection (e), a buyer of goods other than a buyer in
33 ordinary course of business takes free of a security interest
34 to the extent that it secures advances made after the earlier
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1 of:
2 (1) the time the secured party acquires knowledge
3 of the buyer's purchase; or
4 (2) 45 days after the purchase.
5 (e) Advances made pursuant to commitment: priority of
6 buyer of goods. Subsection (d) does not apply if the advance
7 is made pursuant to a commitment entered into without
8 knowledge of the buyer's purchase and before the expiration
9 of the 45-day period.
10 (f) Lessee of goods. Except as otherwise provided in
11 subsection (g), a lessee of goods, other than a lessee in
12 ordinary course of business, takes the leasehold interest
13 free of a security interest to the extent that it secures
14 advances made after the earlier of:
15 (1) the time the secured party acquires knowledge
16 of the lease; or
17 (2) 45 days after the lease contract becomes
18 enforceable.
19 (g) Advances made pursuant to commitment: priority of
20 lessee of goods. Subsection (f) does not apply if the
21 advance is made pursuant to a commitment entered into without
22 knowledge of the lease and before the expiration of the
23 45-day period.
24 (810 ILCS 5/9-324 new)
25 Sec. 9-324. Priority of purchase-money security
26 interests.
27 (a) General rule: purchase-money priority. Except as
28 otherwise provided in subsection (g), a perfected
29 purchase-money security interest in goods other than
30 inventory or livestock has priority over a conflicting
31 security interest in the same goods, and, except as otherwise
32 provided in Section 9-327, a perfected security interest in
33 its identifiable proceeds also has priority, if the
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1 purchase-money security interest is perfected when the debtor
2 receives possession of the collateral or within 20 days
3 thereafter.
4 (b) Inventory purchase-money priority. Subject to
5 subsection (c) and except as otherwise provided in subsection
6 (g), a perfected purchase-money security interest in
7 inventory has priority over a conflicting security interest
8 in the same inventory, has priority over a conflicting
9 security interest in chattel paper or an instrument
10 constituting proceeds of the inventory and in proceeds of the
11 chattel paper, if so provided in Section 9-330, and, except
12 as otherwise provided in Section 9-327, also has priority in
13 identifiable cash proceeds of the inventory to the extent the
14 identifiable cash proceeds are received on or before the
15 delivery of the inventory to a buyer, if:
16 (1) the purchase-money security interest is
17 perfected when the debtor receives possession of the
18 inventory;
19 (2) the purchase-money secured party sends an
20 authenticated notification to the holder of the
21 conflicting security interest;
22 (3) the holder of the conflicting security interest
23 receives the notification within five years before the
24 debtor receives possession of the inventory; and
25 (4) the notification states that the person sending
26 the notification has or expects to acquire a
27 purchase-money security interest in inventory of the
28 debtor and describes the inventory.
29 (c) Holders of conflicting inventory security interests
30 to be notified. Subsections (b)(2) through (4) apply only if
31 the holder of the conflicting security interest had filed a
32 financing statement covering the same types of inventory:
33 (1) if the purchase-money security interest is
34 perfected by filing, before the date of the filing; or
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1 (2) if the purchase-money security interest is
2 temporarily perfected without filing or possession under
3 Section 9-312(f), before the beginning of the 20-day
4 period thereunder.
5 (d) Livestock purchase-money priority. Subject to
6 subsection (e) and except as otherwise provided in subsection
7 (g), a perfected purchase-money security interest in
8 livestock that are farm products has priority over a
9 conflicting security interest in the same livestock, and,
10 except as otherwise provided in Section 9-327, a perfected
11 security interest in their identifiable proceeds and
12 identifiable products in their unmanufactured states also has
13 priority, if:
14 (1) the purchase-money security interest is
15 perfected when the debtor receives possession of the
16 livestock;
17 (2) the purchase-money secured party sends an
18 authenticated notification to the holder of the
19 conflicting security interest;
20 (3) the holder of the conflicting security interest
21 receives the notification within six months before the
22 debtor receives possession of the livestock; and
23 (4) the notification states that the person sending
24 the notification has or expects to acquire a
25 purchase-money security interest in livestock of the
26 debtor and describes the livestock.
27 (e) Holders of conflicting livestock security interests
28 to be notified. Subsections (d)(2) through (4) apply only if
29 the holder of the conflicting security interest had filed a
30 financing statement covering the same types of livestock:
31 (1) if the purchase-money security interest is
32 perfected by filing, before the date of the filing; or
33 (2) if the purchase-money security interest is
34 temporarily perfected without filing or possession under
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1 Section 9-312(f), before the beginning of the 20-day
2 period thereunder.
3 (f) Software purchase-money priority. Except as
4 otherwise provided in subsection (g), a perfected
5 purchase-money security interest in software has priority
6 over a conflicting security interest in the same collateral,
7 and, except as otherwise provided in Section 9-327, a
8 perfected security interest in its identifiable proceeds also
9 has priority, to the extent that the purchase-money security
10 interest in the goods in which the software was acquired for
11 use has priority in the goods and proceeds of the goods under
12 this Section.
13 (g) Conflicting purchase-money security interests. If
14 more than one security interest qualifies for priority in the
15 same collateral under subsection (a), (b), (d), or (f):
16 (1) a security interest securing an obligation
17 incurred as all or part of the price of the collateral
18 has priority over a security interest securing an
19 obligation incurred for value given to enable the debtor
20 to acquire rights in or the use of collateral; and
21 (2) in all other cases, Section 9-322(a) applies to
22 the qualifying security interests.
23 (810 ILCS 5/9-325 new)
24 Sec. 9-325. Priority of security interests in
25 transferred collateral.
26 (a) Subordination of security interest in transferred
27 collateral. Except as otherwise provided in subsection (b), a
28 security interest created by a debtor is subordinate to a
29 security interest in the same collateral created by another
30 person if:
31 (1) the debtor acquired the collateral subject to
32 the security interest created by the other person;
33 (2) the security interest created by the other
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1 person was perfected when the debtor acquired the
2 collateral; and
3 (3) there is no period thereafter when the security
4 interest is unperfected.
5 (b) Limitation of subsection (a) subordination.
6 Subsection (a) subordinates a security interest only if the
7 security interest:
8 (1) otherwise would have priority solely under
9 Section 9-322(a) or 9-324; or
10 (2) arose solely under Section 2-711(3) or
11 2A-508(5).
12 (810 ILCS 5/9-326 new)
13 Sec. 9-326. Priority of security interests created by
14 new debtor.
15 (a) Subordination of security interest created by new
16 debtor. Subject to subsection (b), a security interest
17 created by a new debtor which is perfected by a filed
18 financing statement that is effective solely under Section
19 9-508 in collateral in which a new debtor has or acquires
20 rights is subordinate to a security interest in the same
21 collateral which is perfected other than by a filed financing
22 statement that is effective solely under Section 9-508.
23 (b) Priority under other provisions; multiple original
24 debtors. The other provisions of this Part determine the
25 priority among conflicting security interests in the same
26 collateral perfected by filed financing statements that are
27 effective solely under Section 9-508. However, if the
28 security agreements to which a new debtor became bound as
29 debtor were not entered into by the same original debtor, the
30 conflicting security interests rank according to priority in
31 time of the new debtor's having become bound.
32 (810 ILCS 5/9-327 new)
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1 Sec. 9-327. Priority of security interests in deposit
2 account. The following rules govern priority among
3 conflicting security interests in the same deposit account:
4 (1) A security interest held by a secured party having
5 control of the deposit account under Section 9-104 has
6 priority over a conflicting security interest held by a
7 secured party that does not have control.
8 (2) Except as otherwise provided in paragraphs (3) and
9 (4), security interests perfected by control under Section
10 9-314 rank according to priority in time of obtaining
11 control.
12 (3) Except as otherwise provided in paragraph (4), a
13 security interest held by the bank with which the deposit
14 account is maintained has priority over a conflicting
15 security interest held by another secured party.
16 (4) A security interest perfected by control under
17 Section 9-104(a)(3) has priority over a security interest
18 held by the bank with which the deposit account is
19 maintained.
20 (810 ILCS 5/9-328 new)
21 Sec. 9-328. Priority of security interests in investment
22 property. The following rules govern priority among
23 conflicting security interests in the same investment
24 property:
25 (1) A security interest held by a secured party having
26 control of investment property under Section 9-106 has
27 priority over a security interest held by a secured party
28 that does not have control of the investment property.
29 (2) Except as otherwise provided in paragraphs (3) and
30 (4), conflicting security interests held by secured parties
31 each of which has control under Section 9-106 rank according
32 to priority in time of:
33 (A) if the collateral is a security, obtaining
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1 control;
2 (B) if the collateral is a security entitlement
3 carried in a securities account and:
4 (i) if the secured party obtained control
5 under Section 8-106(d)(1), the secured party's
6 becoming the person for which the securities account
7 is maintained;
8 (ii) if the secured party obtained control
9 under Section 8-106(d)(2), the securities
10 intermediary's agreement to comply with the secured
11 party's entitlement orders with respect to security
12 entitlements carried or to be carried in the
13 securities account; or
14 (iii) if the secured party obtained control
15 through another person under Section 8-106(d)(3),
16 the time on which priority would be based under this
17 paragraph if the other person were the secured
18 party; or
19 (C) if the collateral is a commodity contract
20 carried with a commodity intermediary, the satisfaction
21 of the requirement for control specified in Section
22 9-106(b)(2) with respect to commodity contracts carried
23 or to be carried with the commodity intermediary.
24 (3) A security interest held by a securities
25 intermediary in a security entitlement or a securities
26 account maintained with the securities intermediary has
27 priority over a conflicting security interest held by another
28 secured party.
29 (4) A security interest held by a commodity intermediary
30 in a commodity contract or a commodity account maintained
31 with the commodity intermediary has priority over a
32 conflicting security interest held by another secured party.
33 (5) A security interest in a certificated security in
34 registered form which is perfected by taking delivery under
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1 Section 9-313(a) and not by control under Section 9-314 has
2 priority over a conflicting security interest perfected by a
3 method other than control.
4 (6) Conflicting security interests created by a broker,
5 securities intermediary, or commodity intermediary which are
6 perfected without control under Section 9-106 rank equally.
7 (7) In all other cases, priority among conflicting
8 security interests in investment property is governed by
9 Sections 9-322 and 9-323.
10 (810 ILCS 5/9-329 new)
11 Sec. 9-329. Priority of security interests in
12 letter-of-credit right. The following rules govern priority
13 among conflicting security interests in the same
14 letter-of-credit right:
15 (1) A security interest held by a secured party
16 having control of the letter-of-credit right under
17 Section 9-107 has priority to the extent of its control
18 over a conflicting security interest held by a secured
19 party that does not have control.
20 (2) Security interests perfected by control under
21 Section 9-314 rank according to priority in time of
22 obtaining control.
23 (810 ILCS 5/9-330 new)
24 Sec. 9-330. Priority of purchaser of chattel paper or
25 instrument.
26 (a) Purchaser's priority: security interest claimed
27 merely as proceeds. A purchaser of chattel paper has
28 priority over a security interest in the chattel paper which
29 is claimed merely as proceeds of inventory subject to a
30 security interest if:
31 (1) in good faith and in the ordinary course of the
32 purchaser's business, the purchaser gives new value and
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1 takes possession of the chattel paper or obtains control
2 of the chattel paper under Section 9-105; and
3 (2) the chattel paper does not indicate that it has
4 been assigned to an identified assignee other than the
5 purchaser.
6 (b) Purchaser's priority: other security interests. A
7 purchaser of chattel paper has priority over a security
8 interest in the chattel paper which is claimed other than
9 merely as proceeds of inventory subject to a security
10 interest if the purchaser gives new value and takes
11 possession of the chattel paper or obtains control of the
12 chattel paper under Section 9-105 in good faith, in the
13 ordinary course of the purchaser's business, and without
14 knowledge that the purchase violates the rights of the
15 secured party.
16 (c) Chattel paper purchaser's priority in proceeds.
17 Except as otherwise provided in Section 9-327, a purchaser
18 having priority in chattel paper under subsection (a) or (b)
19 also has priority in proceeds of the chattel paper to the
20 extent that:
21 (1) Section 9-322 provides for priority in the
22 proceeds; or
23 (2) the proceeds consist of the specific goods
24 covered by the chattel paper or cash proceeds of the
25 specific goods, even if the purchaser's security interest
26 in the proceeds is unperfected.
27 (d) Instrument purchaser's priority. Except as
28 otherwise provided in Section 9-331(a), a purchaser of an
29 instrument has priority over a security interest in the
30 instrument perfected by a method other than possession if the
31 purchaser gives value and takes possession of the instrument
32 in good faith and without knowledge that the purchase
33 violates the rights of the secured party.
34 (e) Holder of purchase-money security interest gives new
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1 value. For purposes of subsections (a) and (b), the holder of
2 a purchase-money security interest in inventory gives new
3 value for chattel paper constituting proceeds of the
4 inventory.
5 (f) Indication of assignment gives knowledge. For
6 purposes of subsections (b) and (d), if chattel paper or an
7 instrument indicates that it has been assigned to an
8 identified secured party other than the purchaser, a
9 purchaser of the chattel paper or instrument has knowledge
10 that the purchase violates the rights of the secured party.
11 (810 ILCS 5/9-331 new)
12 Sec. 9-331. Priority of rights of purchasers of
13 instruments, documents, and securities under other Articles;
14 priority of interests in financial assets and security
15 entitlements under Article 8.
16 (a) Rights under Articles 3, 7, and 8 not limited. This
17 Article does not limit the rights of a holder in due course
18 of a negotiable instrument, a holder to which a negotiable
19 document of title has been duly negotiated, or a protected
20 purchaser of a security. These holders or purchasers take
21 priority over an earlier security interest, even if
22 perfected, to the extent provided in Articles 3, 7, and 8.
23 (b) Protection under Article 8. This Article does not
24 limit the rights of or impose liability on a person to the
25 extent that the person is protected against the assertion of
26 a claim under Article 8.
27 (c) Filing not notice. Filing under this Article does
28 not constitute notice of a claim or defense to the holders,
29 or purchasers, or persons described in subsections (a) and
30 (b).
31 (810 ILCS 5/9-332 new)
32 Sec. 9-332. Transfer of money; transfer of funds from
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1 deposit account.
2 (a) Transferee of money. A transferee of money takes
3 the money free of a security interest unless the transferee
4 acts in collusion with the debtor in violating the rights of
5 the secured party.
6 (b) Transferee of funds from deposit account. A
7 transferee of funds from a deposit account takes the funds
8 free of a security interest in the deposit account unless the
9 transferee acts in collusion with the debtor in violating the
10 rights of the secured party.
11 (810 ILCS 5/9-333 new)
12 Sec. 9-333. Priority of certain liens arising by
13 operation of law.
14 (a) "Possessory lien." In this Section, "possessory
15 lien" means an interest, other than a security interest or an
16 agricultural lien:
17 (1) which secures payment or performance of an
18 obligation for services or materials furnished with
19 respect to goods by a person in the ordinary course of
20 the person's business;
21 (2) which is created by statute or rule of law in
22 favor of the person; and
23 (3) whose effectiveness depends on the person's
24 possession of the goods.
25 (b) Priority of possessory lien. A possessory lien on
26 goods has priority over a security interest in the goods
27 unless the lien is created by a statute that expressly
28 provides otherwise.
29 (810 ILCS 5/9-334 new)
30 Sec. 9-334. Priority of security interests in fixtures
31 and crops.
32 (a) Security interest in fixtures under this Article. A
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1 security interest under this Article may be created in goods
2 that are fixtures or may continue in goods that become
3 fixtures. A security interest does not exist under this
4 Article in ordinary building materials incorporated into an
5 improvement on land.
6 (b) Security interest in fixtures under real-property
7 law. This Article does not prevent creation of an
8 encumbrance upon fixtures under real property law.
9 (c) General rule: subordination of security interest in
10 fixtures. In cases not governed by subsections (d) through
11 (h), a security interest in fixtures is subordinate to a
12 conflicting interest of an encumbrancer or owner of the
13 related real property other than the debtor.
14 (d) Fixtures purchase-money priority. Except as
15 otherwise provided in subsection (h), a perfected security
16 interest in fixtures has priority over a conflicting interest
17 of an encumbrancer or owner of the real property if the
18 debtor has an interest of record in or is in possession of
19 the real property and:
20 (1) the security interest is a purchase-money
21 security interest;
22 (2) the interest of the encumbrancer or owner
23 arises before the goods become fixtures; and
24 (3) the security interest is perfected by a fixture
25 filing before the goods become fixtures or within 20 days
26 thereafter.
27 (e) Priority of security interest in fixtures over
28 interests in real property. A perfected security interest in
29 fixtures has priority over a conflicting interest of an
30 encumbrancer or owner of the real property if:
31 (1) the debtor has an interest of record in the
32 real property or is in possession of the real property
33 and the security interest:
34 (A) is perfected by a fixture filing before
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1 the interest of the encumbrancer or owner is of
2 record; and
3 (B) has priority over any conflicting interest
4 of a predecessor in title of the encumbrancer or
5 owner;
6 (2) before the goods become fixtures, the security
7 interest is perfected by any method permitted by this
8 Article and the fixtures are readily removable:
9 (A) factory or office machines;
10 (B) equipment that is not primarily used or
11 leased for use in the operation of the real
12 property; or
13 (C) replacements of domestic appliances that
14 are consumer goods;
15 (3) the conflicting interest is a lien on the real
16 property obtained by legal or equitable proceedings after
17 the security interest was perfected by any method
18 permitted by this Article; or
19 (4) the security interest is:
20 (A) created in a manufactured home in a
21 manufactured-home transaction; and
22 (B) perfected pursuant to a statute described
23 in Section 9-311(a)(2).
24 (f) Priority based on consent, disclaimer, or right to
25 remove. A security interest in fixtures, whether or not
26 perfected, has priority over a conflicting interest of an
27 encumbrancer or owner of the real property if:
28 (1) the encumbrancer or owner has, in an
29 authenticated record, consented to the security interest
30 or disclaimed an interest in the goods as fixtures; or
31 (2) the debtor has a right to remove the goods as
32 against the encumbrancer or owner.
33 (g) Continuation of subsection (f)(2) priority. The
34 priority of the security interest under subsection (f)(2)
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1 continues for a reasonable time if the debtor's right to
2 remove the goods as against the encumbrancer or owner
3 terminates.
4 (h) Priority of construction mortgage. A mortgage is a
5 construction mortgage to the extent that it secures an
6 obligation incurred for the construction of an improvement on
7 land, including the acquisition cost of the land, if a
8 recorded record of the mortgage so indicates. Except as
9 otherwise provided in subsections (e) and (f), a security
10 interest in fixtures is subordinate to a construction
11 mortgage if a record of the mortgage is recorded before the
12 goods become fixtures and the goods become fixtures before
13 the completion of the construction. A mortgage has this
14 priority to the same extent as a construction mortgage to the
15 extent that it is given to refinance a construction mortgage.
16 (i) Priority of security interest in crops.
17 (1) Subject to Section 9-322(g), a perfected
18 security interest in crops growing on real property has
19 priority over:
20 (A) a conflicting interest of an encumbrancer
21 or owner of the real property; and
22 (B) the rights of a holder of an obligation
23 secured by a collateral assignment of beneficial
24 interest in a land trust, including rights by virtue
25 of an equitable lien.
26 (2) For purposes of this subsection:
27 (A) "Collateral assignment of beneficial
28 interest" means any pledge or assignment of the
29 beneficial interest in a land trust to a person to
30 secure a debt to other obligation.
31 (B) "Land trust" means any trust arrangement
32 under which the legal and equitable title to real
33 estate is held by a trustee, the interest of the
34 beneficiary of the trust is personal property, and
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1 the beneficiary or any person designated in writing
2 by the beneficiary has (i) the exclusive power to
3 direct or control the trustee in dealing with the
4 title to the trust property, (ii) the exclusive
5 control of the management, operation, renting, and
6 selling of the trust property, and (iii) the
7 exclusive right to the earnings, avails, and
8 proceeds of trust property.
9 (810 ILCS 5/9-335 new)
10 Sec. 9-335. Accessions.
11 (a) Creation of security interest in accession. A
12 security interest may be created in an accession and
13 continues in collateral that becomes an accession.
14 (b) Perfection of security interest. If a security
15 interest is perfected when the collateral becomes an
16 accession, the security interest remains perfected in the
17 collateral.
18 (c) Priority of security interest. Except as otherwise
19 provided in subsection (d), the other provisions of this Part
20 determine the priority of a security interest in an
21 accession.
22 (d) Compliance with certificate-of-title statute. A
23 security interest in an accession is subordinate to a
24 security interest in the whole which is perfected by
25 compliance with the requirements of a certificate-of-title
26 statute under Section 9-311(b).
27 (e) Removal of accession after default. After default,
28 subject to Part 6, a secured party may remove an accession
29 from other goods if the security interest in the accession
30 has priority over the claims of every person having an
31 interest in the whole.
32 (f) Reimbursement following removal. A secured party
33 that removes an accession from other goods under subsection
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1 (e) shall promptly reimburse any holder of a security
2 interest or other lien on, or owner of, the whole or of the
3 other goods, other than the debtor, for the cost of repair of
4 any physical injury to the whole or the other goods. The
5 secured party need not reimburse the holder or owner for any
6 diminution in value of the whole or the other goods caused by
7 the absence of the accession removed or by any necessity for
8 replacing it. A person entitled to reimbursement may refuse
9 permission to remove until the secured party gives adequate
10 assurance for the performance of the obligation to reimburse.
11 (810 ILCS 5/9-336 new)
12 Sec. 9-336. Commingled goods.
13 (a) "Commingled goods." In this Section, "commingled
14 goods" means goods that are physically united with other
15 goods in such a manner that their identity is lost in a
16 product or mass.
17 (b) No security interest in commingled goods as such. A
18 security interest does not exist in commingled goods as such.
19 However, a security interest may attach to a product or mass
20 that results when goods become commingled goods.
21 (c) Attachment of security interest to product or mass.
22 If collateral becomes commingled goods, a security interest
23 attaches to the product or mass.
24 (d) Perfection of security interest. If a security
25 interest in collateral is perfected before the collateral
26 becomes commingled goods, the security interest that attaches
27 to the product or mass under subsection (c) is perfected.
28 (e) Priority of security interest. Except as otherwise
29 provided in subsection (f), the other provisions of this Part
30 determine the priority of a security interest that attaches
31 to the product or mass under subsection (c).
32 (f) Conflicting security interests in product or mass
33 If more than one security interest attaches to the product or
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1 mass under subsection (c), the following rules determine
2 priority:
3 (1) A security interest that is perfected under
4 subsection (d) has priority over a security interest that
5 is unperfected at the time the collateral becomes
6 commingled goods.
7 (2) If more than one security interest is perfected
8 under subsection (d), the security interests rank equally
9 in proportion to the value of the collateral at the time
10 it became commingled goods.
11 (810 ILCS 5/9-337 new)
12 Sec. 9-337. Priority of security interests in goods
13 covered by certificate of title. If, while a security
14 interest in goods is perfected by any method under the law of
15 another jurisdiction, this State issues a certificate of
16 title that does not show that the goods are subject to the
17 security interest or contain a statement that they may be
18 subject to security interests not shown on the certificate:
19 (1) a buyer of the goods, other than a person in
20 the business of selling goods of that kind, takes free of
21 the security interest if the buyer gives value and
22 receives delivery of the goods after issuance of the
23 certificate and without knowledge of the security
24 interest; and
25 (2) the security interest is subordinate to a
26 conflicting security interest in the goods that attaches,
27 and is perfected under Section 9-311(b), after issuance
28 of the certificate and without the conflicting secured
29 party's knowledge of the security interest.
30 (810 ILCS 5/9-338 new)
31 Sec. 9-338. Priority of security interest or
32 agricultural lien perfected by filed financing statement
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1 providing certain incorrect information. If a security
2 interest or agricultural lien is perfected by a filed
3 financing statement providing information described in
4 Section 9-516(b)(5) which is incorrect at the time the
5 financing statement is filed:
6 (1) the security interest or agricultural lien is
7 subordinate to a conflicting perfected security interest
8 in the collateral to the extent that the holder of the
9 conflicting security interest gives value in reasonable
10 reliance upon the incorrect information; and
11 (2) a purchaser, other than a secured party, of the
12 collateral takes free of the security interest or
13 agricultural lien to the extent that, in reasonable
14 reliance upon the incorrect information, the purchaser
15 gives value and, in the case of chattel paper, documents,
16 goods, instruments, or a security certificate, receives
17 delivery of the collateral.
18 (810 ILCS 5/9-339 new)
19 Sec. 9-339. Priority subject to subordination. This
20 Article does not preclude subordination by agreement by a
21 person entitled to priority.
22 (810 ILCS 5/Art. 9, Part 3, Subpart 4 heading new)
23 SUBPART 4. RIGHTS OF BANK
24 (810 ILCS 5/9-340 new)
25 Sec. 9-340. Effectiveness of right of recoupment or
26 set-off against deposit account.
27 (a) Exercise of recoupment or set-off. Except as
28 otherwise provided in subsection (c), a bank with which a
29 deposit account is maintained may exercise any right of
30 recoupment or set-off against a secured party that holds a
31 security interest in the deposit account.
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1 (b) Recoupment or set-off not affected by security
2 interest. Except as otherwise provided in subsection (c), the
3 application of this Article to a security interest in a
4 deposit account does not affect a right of recoupment or
5 set-off of the secured party as to a deposit account
6 maintained with the secured party.
7 (c) When set-off ineffective. The exercise by a bank of
8 a set-off against a deposit account is ineffective against a
9 secured party that holds a security interest in the deposit
10 account which is perfected by control under Section
11 9-104(a)(3), if the set-off is based on a claim against the
12 debtor.
13 (810 ILCS 5/9-341 new)
14 Sec. 9-341. Bank's rights and duties with respect to
15 deposit account. Except as otherwise provided in Section
16 9-340(c), and unless the bank otherwise agrees in an
17 authenticated record, a bank's rights and duties with respect
18 to a deposit account maintained with the bank are not
19 terminated, suspended, or modified by:
20 (1) the creation, attachment, or perfection of a
21 security interest in the deposit account;
22 (2) the bank's knowledge of the security interest;
23 or
24 (3) the bank's receipt of instructions from the
25 secured party.
26 (810 ILCS 5/9-342 new)
27 Sec. 9-342. Bank's right to refuse to enter into or
28 disclose existence of control agreement. This Article does
29 not require a bank to enter into an agreement of the kind
30 described in Section 9-104(a)(2), even if its customer so
31 requests or directs. A bank that has entered into such an
32 agreement is not required to confirm the existence of the
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1 agreement to another person unless requested to do so by its
2 customer.
3 (810 ILCS 5/Art. 9, Part 4 heading)
4 PART 4. RIGHTS OF THIRD PARTIES FILING
5 (810 ILCS 5/9-401) (from Ch. 26, par. 9-401)
6 Sec. 9-401. Alienability of debtor's rights.
7 (a) Other law governs alienability; exceptions. Except
8 as otherwise provided in subsection (b) and Sections 9-406,
9 9-407, 9-408, and 9-409, whether a debtor's rights in
10 collateral may be voluntarily or involuntarily transferred is
11 governed by law other than this Article.
12 (b) Agreement does not prevent transfer. An agreement
13 between the debtor and secured party which prohibits a
14 transfer of the debtor's rights in collateral or makes the
15 transfer a default does not prevent the transfer from taking
16 effect. Place of Filing; Erroneous Filing; Removal of
17 Collateral.
18 (1) The proper place to file in order to perfect a
19 security interest is as follows:
20 (a) when the collateral is consumer goods, then in
21 the office of the recorder in the county of the debtor's
22 residence or if the debtor is not a resident of this
23 State then in the office of the Recorder of Deeds in the
24 county where the goods are kept;
25 (b) when the collateral is timber to be cut or is
26 minerals or the like (including oil and gas) or accounts
27 subject to subsection (5) of Section 9-103, or when the
28 financing statement is filed as a fixture filing (Section
29 9-313) and the collateral is goods which are or are to
30 become fixtures, then in the office where a mortgage on
31 the real estate would be filed or recorded;
32 (c) in all other cases, in the office of the
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1 Secretary of State.
2 (2) A filing which is made in good faith in an improper
3 place or not in all of the places required by this section is
4 nevertheless effective with regard to any collateral as to
5 which the filing complied with the requirements of this
6 Article and is also effective with regard to collateral
7 covered by the financing statement against any person who has
8 knowledge of the contents of such financing statement.
9 (3) A filing which is made in the proper place in this
10 State continues effective even though the debtor's residence
11 or place of business or the location of the collateral or its
12 use, whichever controlled the original filing, is thereafter
13 changed.
14 (4) The rules stated in Section 9-103 determine whether
15 filing is necessary in this State.
16 (5) Notwithstanding the preceding subsections, and
17 subject to subsection (3) of Section 9-302, the proper place
18 to file in order to perfect a security interest in
19 collateral, including fixtures, of a transmitting utility is
20 the office of the Secretary of State. This filing constitutes
21 a fixture filing (Section 9-313) as to the collateral
22 described therein which is or is to become fixtures.
23 (6) For the purposes of this Section, the residence of
24 an organization is its place of business if it has one or its
25 chief executive office if it has more than one place of
26 business.
27 (Source: P.A. 90-300, eff. 1-1-98.)
28 (810 ILCS 5/9-401A)
29 Sec. 9-401A. (Blank). Continuation of certain financing
30 statements filed before January 1, 1998. The following rules
31 apply to a financing statement or continuation statement that
32 was properly filed before January 1, 1998 in the office of a
33 county recorder, but which, if filed on or after January 1,
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1 1998, is required by Section 9-401 to be filed in the office
2 of the Secretary of State:
3 (1) The financing statement shall remain effective until
4 it lapses as provided in Section 9-403.
5 (2) The effectiveness of the financing statement may be
6 continued only by filing a continuation statement in the
7 office of the Secretary of State that provides the name and
8 address of the debtor and secured party, indicates the county
9 where the financing statement is filed, complies with the
10 requirements of Section 9-403, and either:
11 (A) indicates the types or describes the items of
12 collateral included in the original financing statement
13 as modified by any releases or amendments; or
14 (B) has attached a copy of the originally filed
15 financing statement together with amendments,
16 assignments, and releases affecting it.
17 A continuation statement filed as provided in this item
18 (2) may be further continued by a continuation statement that
19 complies with the requirements of Section 9-403.
20 (3) The financing statement may be terminated, assigned,
21 released, or amended only by an appropriate filing in the
22 office of the county recorder where it is filed, except that
23 if the financing statement has been continued as provided in
24 item (2) of this Section, it may thereafter be terminated,
25 assigned, released, or amended only by an appropriate filing
26 in the office of the Secretary of State.
27 (Source: P.A. 90-300, eff. 1-1-98.)
28 (810 ILCS 5/9-402) (from Ch. 26, par. 9-402)
29 Sec. 9-402. Secured party not obligated on contract of
30 debtor or in tort. The existence of a security interest,
31 agricultural lien, or authority given to a debtor to dispose
32 of or use collateral, without more, does not subject a
33 secured party to liability in contract or tort for the
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1 debtor's acts or omissions. Formal requisites of financing
2 statement; amendments; mortgage as financing statement.
3 (1) A financing statement is sufficient if it gives the
4 names of the debtor and the secured party, is signed by the
5 debtor, gives an address of the secured party from which
6 information concerning the security interest may be obtained,
7 gives a mailing address of the debtor and contains a
8 statement indicating the types, or describing the items, of
9 collateral. A financing statement may be filed before a
10 security agreement is made or a security interest otherwise
11 attaches. When a financing statement filed prior to January
12 1, 1996, covers crops growing or to be grown, the statement
13 must also contain a legal description of the real estate
14 concerned. If a financing statement covers crops growing or
15 to be grown and includes a description of the real estate
16 concerned, the description is sufficient if it includes the
17 quarter section, section, township and range, and the name of
18 a record owner if other than the debtor, of the real estate
19 concerned. When the financing statement covers timber to be
20 cut or covers minerals or the like (including oil and gas) or
21 accounts subject to subsection (5) of Section 9-103, or when
22 the financing statement is filed as a fixture filing (Section
23 9-313) and the collateral is goods which are or are to become
24 fixtures, the statement must also comply with subsection (5).
25 A copy of the security agreement is sufficient as a financing
26 statement if it contains the above information and is signed
27 by the debtor. A carbon, photographic or other reproduction
28 of a security agreement or a financing statement is
29 sufficient as a financing statement if the security agreement
30 so provides or if the original has been filed in this State.
31 (2) A financing statement which otherwise complies with
32 subsection (1) is sufficient when it is signed by the secured
33 party instead of the debtor if it is filed to perfect a
34 security interest in
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1 (a) collateral already subject to a security
2 interest in another jurisdiction when it is brought into
3 this State, or when the debtor's location is changed to
4 this State. Such a financing statement must state that
5 the collateral was brought into this State or that the
6 debtor's location was changed to this State under such
7 circumstances; or
8 (b) proceeds under Section 9-306 if the security
9 interest in the original collateral was perfected. Such a
10 financing statement must describe the original
11 collateral; or
12 (c) collateral as to which the filing has lapsed;
13 or
14 (d) collateral acquired after a change of name,
15 identity or corporate structure of the debtor (subsection
16 (7).
17 (3) A form substantially as follows is sufficient to
18 comply with subsection (1):
19 Name of debtor (or assignor) .......................
20 Address .......................................
21 Name of secured party (or assignee) ...........
22 Address .......................................
23 1. This financing statement covers the following
24 types (or items) of property:
25 (Describe) .........................................
26 2. (Blank).
27 3. (If applicable) The above goods are to become
28 fixtures on *
29 *Where appropriate substitute either "The above
30 timber is standing on ...." or "The above minerals or the
31 like (including oil and gas) or accounts will be financed
32 at the wellhead or minehead of the well or mine located
33 on ...."
34 (Describe Real Estate) .............................
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1 and this financing statement is to be filed in the real
2 estate records. (If the debtor does not have an interest
3 of record) The name of a record owner is ................
4 4. (If products of collateral are claimed) Products
5 of the collateral are also covered.
6 Signature of Debtor (or Assignor) ..................
7 Signature of Secured Party (or Assignee) ...........
8 (use whichever is applicable)
9 (4) A financing statement may be amended by filing a
10 writing signed by both the debtor and the secured party. An
11 amendment does not extend the period of effectiveness of a
12 financing statement. If any amendment adds collateral, it is
13 effective as to the added collateral only from the filing
14 date of the amendment. In this Article, unless the context
15 otherwise requires, the term "financing statement" means the
16 original financing statement and any amendments.
17 (5) A financing statement covering timber to be cut or
18 covering minerals or the like (including oil and gas) or
19 accounts subject to subsection (5) of Section 9-103, or a
20 financing statement filed as a fixture filing (Section 9-313)
21 where the debtor is not a transmitting utility, must show
22 that it covers this type of collateral, must recite that it
23 is to be filed in the real estate records, and the financing
24 statement must contain a description of the real estate. If
25 the debtor does not have an interest of record in the real
26 estate, the financing statement must show the name of a
27 record owner.
28 (6) A mortgage is effective as a financing statement
29 filed as a fixture filing from the date of its recording if
30 (a) the goods are described in the mortgage by item
31 or type,
32 (b) the goods are or are to become fixtures related
33 to the real estate described in the mortgage,
34 (c) the mortgage complies with the requirements for
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1 a financing statement in this Section other than a
2 recital that it is to be filed in the real estate
3 records, and
4 (d) the mortgage is duly recorded.
5 No fee with reference to the financing statement is
6 required other than the regular recording and satisfaction
7 fees with respect to the mortgage.
8 (7) A financing statement sufficiently shows the name of
9 the debtor if it gives the individual, partnership or
10 corporate name of the debtor, whether or not it adds other
11 trade names or names of partners. Where the debtor so changes
12 his name or in the case of an organization its name, identity
13 or corporate structure that a filed financing statement
14 becomes seriously misleading, the filing is not effective to
15 perfect a security interest in collateral acquired by the
16 debtor more than 4 months after the change, unless a new
17 appropriate financing statement is filed before the
18 expiration of that time. A filed financing statement remains
19 effective with respect to collateral transferred by the
20 debtor even though the secured party knows of or consents to
21 the transfer.
22 (8) A financing statement substantially complying with
23 the requirements of this Section is effective even though it
24 contains minor errors which are not seriously misleading.
25 (Source: P.A. 89-228, eff. 1-1-96; revised 10-31-98.)
26 (810 ILCS 5/9-403) (from Ch. 26, par. 9-403)
27 Sec. 9-403. Agreement not to assert defenses against
28 assignee.
29 (a) "Value." In this Section, "value" has the meaning
30 provided in Section 3-303(a).
31 (b) Agreement not to assert claim or defense. Except as
32 otherwise provided in this Section, an agreement between an
33 account debtor and an assignor not to assert against an
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1 assignee any claim or defense that the account debtor may
2 have against the assignor is enforceable by an assignee that
3 takes an assignment:
4 (1) for value;
5 (2) in good faith;
6 (3) without notice of a claim of a property or
7 possessory right to the property assigned; and
8 (4) without notice of a defense or claim in
9 recoupment of the type that may be asserted against a
10 person entitled to enforce a negotiable instrument under
11 Section 3-305(a).
12 (c) When subsection (b) not applicable. Subsection (b)
13 does not apply to defenses of a type that may be asserted
14 against a holder in due course of a negotiable instrument
15 under Section 3-305(b).
16 (d) Omission of required statement in consumer
17 transaction. In a consumer transaction, if a record
18 evidences the account debtor's obligation, law other than
19 this Article requires that the record include a statement to
20 the effect that the rights of an assignee are subject to
21 claims or defenses that the account debtor could assert
22 against the original obligee, and the record does not include
23 such a statement:
24 (1) the record has the same effect as if the record
25 included such a statement; and
26 (2) the account debtor may assert against an
27 assignee those claims and defenses that would have been
28 available if the record included such a statement.
29 (e) Rule for individual under other law. This Section
30 is subject to law other than this Article which establishes a
31 different rule for an account debtor who is an individual and
32 who incurred the obligation primarily for personal, family,
33 or household purposes.
34 (f) Other law not displaced. Except as otherwise
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1 provided in subsection (d), this Section does not displace
2 law other than this Article which gives effect to an
3 agreement by an account debtor not to assert a claim or
4 defense against an assignee. What constitutes filing;
5 duration of filing; effect of lapsed filing; duties of filing
6 officer; fees.
7 (1) Presentation for filing of a financing statement and
8 tender of the filing fee or acceptance of the statement by
9 the filing officer constitutes filing under this Article.
10 (2) Except as provided in subsection (6) a filed
11 financing statement is effective for a period of 5 years from
12 the date of filing. The effectiveness of a filed financing
13 statement lapses on the expiration of the 5 year period
14 unless a continuation statement is filed prior to the lapse.
15 If a security interest perfected by filing exists at the time
16 insolvency proceedings are commenced by or against the
17 debtor, the security interest remains perfected until
18 termination of the insolvency proceedings and thereafter for
19 a period of 60 days or until expiration of the 5 year period,
20 whichever occurs later. Upon lapse the security interest
21 becomes unperfected, unless it is perfected without filing.
22 If the security interest becomes unperfected upon lapse, it
23 is deemed to have been unperfected as against a person who
24 became a purchaser or lien creditor before lapse.
25 (3) A continuation statement may be filed by the secured
26 party within 6 months prior to the expiration of the 5 year
27 period specified in subsection (2). Any such continuation
28 statement must be signed by the secured party, identify the
29 original statement by file number and state that the original
30 statement is still effective. A continuation statement signed
31 by a person other than the secured party of record must be
32 accompanied by a separate written statement of assignment
33 signed by the secured party of record and complying with
34 subsection (2) of Section 9-405, including payment of the
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1 required fee. Upon timely filing of the continuation
2 statement, the effectiveness of the original statement is
3 continued for 5 years after the last date to which the filing
4 was effective whereupon it lapses in the same manner as
5 provided in subsection (2) unless another continuation
6 statement is filed prior to such lapse. Succeeding
7 continuation statements may be filed in the same manner to
8 continue the effectiveness of the original statement. Unless
9 a statute on disposition of public records provides
10 otherwise, the filing officer may remove a lapsed statement
11 from the files and destroy it immediately if he has retained
12 a microfilm or other photographic record, or in other cases
13 after one year after the lapse. The filing officer shall so
14 arrange matters by physical annexation of financing
15 statements to continuation statements or other related
16 filings, or by other means, that if he physically destroys
17 the financing statements of a period more than 5 years past,
18 those which have been continued by a continuation statement
19 or which are still effective under subsection (6) shall be
20 retained.
21 (4) Except as provided in subsection (7) a filing
22 officer shall mark each statement with a file number and with
23 the date and hour of filing and shall hold the statement or a
24 microfilm or other photographic copy thereof for public
25 inspection. In addition the filing officer shall index the
26 statement according to the name of the debtor and shall note
27 in the index the file number and the address of the debtor
28 given in the statement.
29 (5) The uniform fee for filing and indexing and for
30 stamping a copy furnished by the secured party to show the
31 date and place of filing for an original financing statement,
32 amended statement, or for a continuation statement shall be
33 $20.
34 (6) If the debtor is a transmitting utility (subsection
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1 (5) of Section 9-401 and a filed financing statement so
2 states, it is effective until a termination statement is
3 filed. A real estate mortgage which is effective as a fixture
4 filing under subsection (6) of Section 9-402 remains
5 effective as a fixture filing until the mortgage is released
6 or satisfied of record or its effectiveness otherwise
7 terminates as to the real estate.
8 (7) When a financing statement covers timber to be cut
9 or covers minerals or the like (including oil and gas) or
10 accounts subject to subsection (5) of Section 9-103, or is
11 filed as a fixture filing, the filing officer shall index it
12 under the names of the debtor and any owner of record shown
13 on the financing statement in the same fashion as if they
14 were the mortgagors in a mortgage of the real estate
15 described, and, to the extent that the law of this State
16 provides for indexing of mortgages under the name of the
17 mortgagee, under the name of the secured party as if he were
18 the mortgagee thereunder, or where indexing is by description
19 in the same fashion as if the financing statement were a
20 mortgage of the real estate described.
21 (8) For financing statements filed on or after January
22 1, 1998 as to a debtor who is a resident of the State of
23 Illinois, if the collateral is equipment used in farming
24 operations, farm products, or accounts or general intangibles
25 arising from the sale of farm products by a farmer, the
26 secured party shall, within 30 days after filing with the
27 office of the Secretary of State, remit to the office of the
28 recorder in the county of the debtor's residence a fee of $10
29 together with a copy of the financing statement filed in the
30 office of the Secretary of State. This fee is in addition to
31 payment of the fee provided in subsection (5) of this Section
32 and is imposed to defray the cost of converting the county
33 recorder's document storage system to computers or
34 micrographics. The copy of the financing statement provided
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1 to the office of the recorder shall be for informational
2 purposes only and shall not be for filing with the office of
3 the recorder nor shall the provision of the informational
4 copy be subject to imposition of any filing fee under Section
5 3-5018 of the Counties Code or otherwise. The provisions of
6 this subsection (8) other than this sentence, are inoperative
7 after the earlier of (i) July 1, 1999 or (ii) the effective
8 date of a change to the Illinois Uniform Commercial Code
9 which adopts a recommendation by the National Conference of
10 Commissioners on Uniform State Laws to amend Section 9-401 of
11 this Code to make the office of the Secretary of State the
12 proper place to file a financing statement described in this
13 subsection (8).
14 (9) The failure to send an informational copy of a
15 financing statement to the appropriate office of the recorder
16 or to pay the fee as set forth in subsection (8) shall not in
17 any manner affect the existence, validity, perfection,
18 priority, or enforceability of the security interest of the
19 secured party.
20 (Source: P.A. 89-503, eff. 1-1-97; 90-300, eff. 1-1-98;
21 revised 10-31-98.)
22 (810 ILCS 5/9-404) (from Ch. 26, par. 9-404)
23 Sec. 9-404. Rights acquired by assignee; claims and
24 defenses against assignee.
25 (a) Assignee's rights subject to terms, claims, and
26 defenses; exceptions. Unless an account debtor has made an
27 enforceable agreement not to assert defenses or claims, and
28 subject to subsections (b) through (e), the rights of an
29 assignee are subject to:
30 (1) all terms of the agreement between the account
31 debtor and assignor and any defense or claim in
32 recoupment arising from the transaction that gave rise to
33 the contract; and
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1 (2) any other defense or claim of the account
2 debtor against the assignor which accrues before the
3 account debtor receives a notification of the assignment
4 authenticated by the assignor or the assignee.
5 (b) Account debtor's claim reduces amount owed to
6 assignee. Subject to subsection (c) and except as otherwise
7 provided in subsection (d), the claim of an account debtor
8 against an assignor may be asserted against an assignee under
9 subsection (a) only to reduce the amount the account debtor
10 owes.
11 (c) Rule for individual under other law. This Section
12 is subject to law other than this Article which establishes a
13 different rule for an account debtor who is an individual and
14 who incurred the obligation primarily for personal, family,
15 or household purposes.
16 (d) Omission of required statement in consumer
17 transaction. In a consumer transaction, if a record
18 evidences the account debtor's obligation, law other than
19 this Article requires that the record include a statement to
20 the effect that the account debtor's recovery against an
21 assignee with respect to claims and defenses against the
22 assignor may not exceed amounts paid by the account debtor
23 under the record, and the record does not include such a
24 statement, the extent to which a claim of an account debtor
25 against the assignor may be asserted against an assignee is
26 determined as if the record included such a statement.
27 (e) Inapplicability to health-care-insurance receivable.
28 This Section does not apply to an assignment of a
29 health-care-insurance receivable. Termination Statement;
30 Duties of Filing Officer.
31 (1) If a financing statement covering consumer goods is
32 filed on or after the effective date of this amendatory Act
33 of 1972, then within one month or within 10 days following
34 written demand by the debtor after there is no outstanding
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1 secured obligation and no commitment to make advances, incur
2 obligations or otherwise give value, the secured party must
3 file with each filing officer with whom the financing
4 statement was filed, a termination statement to the effect
5 that he no longer claims a security interest under the
6 financing statement, which shall be identified by file
7 number. In other cases whenever there is no outstanding
8 secured obligation and no commitment to make advances, incur
9 obligations or otherwise give value, the secured party must
10 on written demand by the debtor send the debtor, for each
11 filing officer with whom the financing statement was filed, a
12 termination statement to the effect that he no longer claims
13 a security interest under the financing statement, which
14 shall be identified by file number. A termination statement
15 signed by a person other than the secured party of record
16 must be accompanied by a separate written statement of
17 assignment signed by the secured party of record and
18 complying with subsection (2) of Section 9-405, including
19 payment of the required fee. If the affected secured party
20 fails to file such a termination statement as required by
21 this subsection, or to send such a termination statement
22 within 10 days after proper demand therefor, he shall be
23 liable to the debtor for $100 and in addition for any loss
24 caused to the debtor by such failure.
25 (2) On presentation to the filing officer of such a
26 termination statement he must note it in the index. If he has
27 received the termination statement in duplicate, he shall
28 return one copy of the termination statement to the secured
29 party stamped to show the time of receipt thereof. If the
30 filing officer has a microfilm or other photographic record
31 of the financing statement, and of any related continuation
32 statement, statement of assignment and statement of release,
33 he may remove the originals from the files at any time after
34 receipt of the termination statement, or if he has no such
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1 record, he may remove them from the files at any time after
2 one year after receipt of the termination statement.
3 (Source: P.A. 89-503, eff. 1-1-97.)
4 (810 ILCS 5/9-405) (from Ch. 26, par. 9-405)
5 Sec. 9-405. Modification of assigned contract.
6 (a) Effect of modification on assignee. A modification
7 of or substitution for an assigned contract is effective
8 against an assignee if made in good faith. The assignee
9 acquires corresponding rights under the modified or
10 substituted contract. The assignment may provide that the
11 modification or substitution is a breach of contract by the
12 assignor. This subsection is subject to subsections (b)
13 through (d).
14 (b) Applicability of subsection (a). Subsection (a)
15 applies to the extent that:
16 (1) the right to payment or a part thereof under an
17 assigned contract has not been fully earned by
18 performance; or
19 (2) the right to payment or a part thereof has been
20 fully earned by performance and the account debtor has
21 not received notification of the assignment under Section
22 9-406(a).
23 (c) Rule for individual under other law. This Section
24 is subject to law other than this Article which establishes a
25 different rule for an account debtor who is an individual and
26 who incurred the obligation primarily for personal, family,
27 or household purposes.
28 (d) Inapplicability to health-care-insurance receivable.
29 This Section does not apply to an assignment of a
30 health-care-insurance receivable. Assignment of Security
31 Interest; Duties of Filing Officer; Fees.
32 (1) A financing statement may disclose an assignment of
33 a security interest in the collateral described in the
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1 financing statement by indication in the financing statement
2 of the name and address of the assignee or by an assignment
3 itself or a copy thereof on the face or back of the
4 statement. On presentation to the filing officer of such a
5 financing statement the filing officer shall mark the same as
6 provided in Section 9-403 (4). The uniform fee for filing,
7 indexing and furnishing filing data for a financing statement
8 so indicating an assignment shall be $20.
9 (2) A secured party may assign of record all or a part
10 of his rights under a financing statement by the filing in
11 the place where the original financing statement was filed of
12 a separate written statement of assignment signed by the
13 secured party of record and setting forth the name of the
14 secured party of record and the debtor, the file number and
15 the date of filing of the financing statement and the name
16 and address of the assignee and containing a description of
17 the collateral assigned. A copy of the assignment is
18 sufficient as a separate statement if it complies with the
19 preceding sentence. On presentation to the filing officer of
20 such a separate statement, the filing officer shall mark such
21 separate statement with the date and hour of the filing. He
22 shall note the assignment on the index of the financing
23 statement, or in the case of a fixture filing, or a filing
24 covering timber to be cut, or covering minerals or the like
25 (including oil and gas) or accounts subject to subsection (5)
26 of Section 9-103, he shall index the assignment under the
27 name of the assignor as grantor and, to the extent that the
28 law of this State provides for indexing the assignment of a
29 mortgage under the name of the assignee, he shall index the
30 assignment of the financing statement under the name of the
31 assignee. The uniform fee for filing, indexing and furnishing
32 filing data about such a separate statement of assignment
33 shall be $20. Notwithstanding the provisions of this
34 subsection, an assignment of record of a security interest in
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1 a fixture contained in a mortgage effective as a fixture
2 filing (subsection (6) of Section 9-402 may be made only by
3 an assignment of the mortgage in the manner provided by the
4 law of this State other than this Act.
5 (3) After the disclosure or filing of an assignment
6 under this Section, the assignee is the secured party of
7 record.
8 (Source: P.A. 89-503, eff. 1-1-97.)
9 (810 ILCS 5/9-406) (from Ch. 26, par. 9-406)
10 Sec. 9-406. Discharge of account debtor; notification of
11 assignment; identification and proof of assignment;
12 restrictions on assignment of accounts, chattel paper,
13 payment intangibles, and promissory notes ineffective.
14 (a) Discharge of account debtor; effect of notification.
15 Subject to subsections (b) through (i), an account debtor on
16 an account, chattel paper, or a payment intangible may
17 discharge its obligation by paying the assignor until, but
18 not after, the account debtor receives a notification,
19 authenticated by the assignor or the assignee, that the
20 amount due or to become due has been assigned and that
21 payment is to be made to the assignee. After receipt of the
22 notification, the account debtor may discharge its obligation
23 by paying the assignee and may not discharge the obligation
24 by paying the assignor.
25 (b) When notification ineffective. Subject to
26 subsection (h), notification is ineffective under subsection
27 (a):
28 (1) if it does not reasonably identify the rights
29 assigned;
30 (2) to the extent that an agreement between an
31 account debtor and a seller of a payment intangible
32 limits the account debtor's duty to pay a person other
33 than the seller and the limitation is effective under law
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1 other than this Article; or
2 (3) at the option of an account debtor, if the
3 notification notifies the account debtor to make less
4 than the full amount of any installment or other periodic
5 payment to the assignee, even if:
6 (A) only a portion of the account, chattel
7 paper, or payment intangible has been assigned to
8 that assignee;
9 (B) a portion has been assigned to another
10 assignee; or
11 (C) the account debtor knows that the
12 assignment to that assignee is limited.
13 (c) Proof of assignment. Subject to subsection (h), if
14 requested by the account debtor, an assignee shall seasonably
15 furnish reasonable proof that the assignment has been made.
16 Unless the assignee complies, the account debtor may
17 discharge its obligation by paying the assignor, even if the
18 account debtor has received a notification under subsection
19 (a).
20 (d) Term restricting assignment generally ineffective.
21 Except as otherwise provided in subsection (e) and Sections
22 2A-303 and 9-407, and subject to subsection (h), a term in an
23 agreement between an account debtor and an assignor or in a
24 promissory note is ineffective to the extent that it:
25 (1) prohibits, restricts, or requires the consent
26 of the account debtor or person obligated on the
27 promissory note to the assignment or transfer of, or the
28 creation, attachment, perfection, or enforcement of a
29 security interest in, the account, chattel paper, payment
30 intangible, or promissory note; or
31 (2) provides that the assignment or transfer or the
32 creation, attachment, perfection, or enforcement of the
33 security interest may give rise to a default, breach,
34 right of recoupment, claim, defense, termination, right
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1 of termination, or remedy under the account, chattel
2 paper, payment intangible, or promissory note.
3 (e) Inapplicability of subsection (d) to certain sales.
4 Subsection (d) does not apply to the sale of a payment
5 intangible or promissory note.
6 (f) Legal restrictions on assignment generally
7 ineffective. Except as otherwise provided in Sections 2A-303
8 and 9-407 and subject to subsections (h) and (i), a rule of
9 law, statute, or regulation that prohibits, restricts, or
10 requires the consent of a government, governmental body or
11 official, or account debtor to the assignment or transfer of,
12 or creation of a security interest in, an account or chattel
13 paper is ineffective to the extent that the rule of law,
14 statute, or regulation:
15 (1) prohibits, restricts, or requires the consent
16 of the government, governmental body or official, or
17 account debtor to the assignment or transfer of, or the
18 creation, attachment, perfection, or enforcement of a
19 security interest in the account or chattel paper; or
20 (2) provides that the assignment or transfer or the
21 creation, attachment, perfection, or enforcement of the
22 security interest may give rise to a default, breach,
23 right of recoupment, claim, defense, termination, right
24 of termination, or remedy under the account or chattel
25 paper.
26 (g) Subsection (b)(3) not waivable. Subject to
27 subsection (h), an account debtor may not waive or vary its
28 option under subsection (b)(3).
29 (h) Rule for individual under other law. This Section
30 is subject to law other than this Article which establishes a
31 different rule for an account debtor who is an individual and
32 who incurred the obligation primarily for personal, family,
33 or household purposes.
34 (i) Inapplicability to health-care-insurance receivable.
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1 This Section does not apply to an assignment of a
2 health-care-insurance receivable.
3 Release of Collateral; Duties of Filing Officer; Fees. A
4 secured party of record may by his signed statement release
5 all or a part of any collateral described in a filed
6 financing statement. The statement of release is sufficient
7 if it contains a description of the collateral being
8 released, the name and address of the debtor, the name and
9 address of the secured party, and the file number of the
10 financing statement. A statement of release signed by a
11 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 presentation of such a statement of
16 release to the filing officer he shall mark the statement
17 with the hour and date of filing and shall note the same upon
18 the margin of the index of the filing of the financing
19 statement. The uniform fee for filing and noting such a
20 statement of release shall be $20.
21 (Source: P.A. 89-503, eff. 1-1-97.)
22 (810 ILCS 5/9-407) (from Ch. 26, par. 9-407)
23 Sec. 9-407. Restrictions on creation or enforcement of
24 security interest in leasehold interest or in lessor's
25 residual interest.
26 (a) Term restricting assignment generally ineffective.
27 Except as otherwise provided in subsection (b), a term in a
28 lease agreement is ineffective to the extent that it:
29 (1) prohibits, restricts, or requires the consent
30 of a party to the lease to the assignment or transfer or
31 the creation, attachment, perfection, or enforcement of a
32 security interest in an interest of a party under the
33 lease contract or in the lessor's residual interest in
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1 the goods; or
2 (2) provides that the assignment or transfer or the
3 creation, attachment, perfection, or enforcement of the
4 security interest may give rise to a default, breach,
5 right of recoupment, claim, defense, termination, right
6 of termination, or remedy under the lease.
7 (b) Effectiveness of certain terms. Except as otherwise
8 provided in Section 2A-303(7), a term described in subsection
9 (a)(2) is effective to the extent that there is:
10 (1) a transfer by the lessee of the lessee's right
11 of possession or use of the goods in violation of the
12 term; or
13 (2) a delegation of a material performance of
14 either party to the lease contract in violation of the
15 term.
16 (c) Security interest not material impairment. The
17 creation, attachment, perfection, or enforcement of a
18 security interest in the lessor's interest under the lease
19 contract or the lessor's residual interest in the goods is
20 not a transfer that materially impairs the lessee's prospect
21 of obtaining return performance or materially changes the
22 duty of or materially increases the burden or risk imposed on
23 the lessee within the purview of Section 2A-303(4) unless,
24 and then only to the extent that, enforcement actually
25 results in a delegation of material performance of the
26 lessor. Information from Filing Officer; Fees.
27 (1) If the person filing any financing statement,
28 termination statement, statement of assignment, or statement
29 of release, furnishes the filing officer a copy thereof, the
30 filing officer shall upon request note upon the copy the file
31 number and date and hour of the filing of the original and
32 deliver or send the copy to such person.
33 (2) Upon request of any person, the filing officer shall
34 issue his certificate showing whether there is on file on the
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1 date and hour stated therein, any presently effective
2 financing statement naming a particular debtor and any
3 statement of assignment thereof and if there is, giving the
4 date and hour of filing of each such statement and the names
5 and addresses of each secured party therein. The uniform fee
6 for such a certificate shall be $10 per name searched. Upon
7 request the filing officer shall furnish a copy of any filed
8 financing statement or statement of assignment for a uniform
9 fee of $1.00 per page.
10 (Source: P.A. 86-343.)
11 (810 ILCS 5/9-408) (from Ch. 26, par. 9-408)
12 Sec. 9-408. Restrictions on assignment of promissory
13 notes, health-care-insurance receivables, and certain general
14 intangibles ineffective.
15 (a) Term restricting assignment generally ineffective.
16 Except as otherwise provided in subsection (b), a term in a
17 promissory note or in an agreement between an account debtor
18 and a debtor which relates to a health-care-insurance
19 receivable or a general intangible, including a contract,
20 permit, license, or franchise, and which term prohibits,
21 restricts, or requires the consent of the person obligated on
22 the promissory note or the account debtor to, the assignment
23 or transfer of, or creation, attachment, or perfection of a
24 security interest in, the promissory note,
25 health-care-insurance receivable, or general intangible, is
26 ineffective to the extent that the term:
27 (1) would impair the creation, attachment, or
28 perfection of a security interest; or
29 (2) provides that the assignment or transfer or the
30 creation, attachment, or perfection of the security
31 interest may give rise to a default, breach, right of
32 recoupment, claim, defense, termination, right of
33 termination, or remedy under the promissory note,
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1 health-care-insurance receivable, or general intangible.
2 (b) Applicability of subsection (a) to sales of certain
3 rights to payment. Subsection (a) applies to a security
4 interest in a payment intangible or promissory note only if
5 the security interest arises out of a sale of the payment
6 intangible or promissory note.
7 (c) Legal restrictions on assignment generally
8 ineffective. A rule of law, statute, or regulation that
9 prohibits, restricts, or requires the consent of a
10 government, governmental body or official, person obligated
11 on a promissory note, or account debtor to the assignment or
12 transfer of, or creation of a security interest in, a
13 promissory note, health-care-insurance receivable, or general
14 intangible, including a contract, permit, license, or
15 franchise between an account debtor and a debtor, is
16 ineffective to the extent that the rule of law, statute, or
17 regulation:
18 (1) would impair the creation, attachment, or
19 perfection of a security interest; or
20 (2) provides that the assignment or transfer or the
21 creation, attachment, or perfection of the security
22 interest may give rise to a default, breach, right of
23 recoupment, claim, defense, termination, right of
24 termination, or remedy under the promissory note,
25 health-care-insurance receivable, or general intangible.
26 (d) Limitation on ineffectiveness under subsections (a)
27 and (c). To the extent that a term in a promissory note or in
28 an agreement between an account debtor and a debtor which
29 relates to a health-care-insurance receivable or general
30 intangible or a rule of law, statute, or regulation described
31 in subsection (c) would be effective under law other than
32 this Article but is ineffective under subsection (a) or (c),
33 the creation, attachment, or perfection of a security
34 interest in the promissory note, health-care-insurance
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1 receivable, or general intangible:
2 (1) is not enforceable against the person obligated
3 on the promissory note or the account debtor;
4 (2) does not impose a duty or obligation on the
5 person obligated on the promissory note or the account
6 debtor;
7 (3) does not require the person obligated on the
8 promissory note or the account debtor to recognize the
9 security interest, pay or render performance to the
10 secured party, or accept payment or performance from the
11 secured party;
12 (4) does not entitle the secured party to use or
13 assign the debtor's rights under the promissory note,
14 health-care-insurance receivable, or general intangible,
15 including any related information or materials furnished
16 to the debtor in the transaction giving rise to the
17 promissory note, health-care-insurance receivable, or
18 general intangible;
19 (5) does not entitle the secured party to use,
20 assign, possess, or have access to any trade secrets or
21 confidential information of the person obligated on the
22 promissory note or the account debtor; and
23 (6) does not entitle the secured party to enforce
24 the security interest in the promissory note,
25 health-care-insurance receivable, or general intangible.
26 Financing Statements Covering Consigned or Leased Goods.
27 A consignor or lessor of goods may file a financing
28 statement using the terms "consignor," "consignee," "lessor,"
29 "lessee" or the like instead of the terms specified in
30 Section 9-402. The provisions of this part shall apply as
31 appropriate to such a financing statement but its filing
32 shall not of itself be a factor in determining whether or not
33 the consignment or lease is intended as security (Section
34 1-201 (37). However, if it is determined for other reasons
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1 that the consignment or lease is so intended, a security
2 interest of the consignor or lessor which attaches to the
3 consigned or leased goods is perfected by such filing.
4 (Source: P. A. 78-238.)
5 (810 ILCS 5/9-409 new)
6 Sec. 9-409. Restrictions on assignment of
7 letter-of-credit rights ineffective.
8 (a) Term or law restricting assignment generally
9 ineffective. A term in a letter of credit or a rule of law,
10 statute, regulation, custom, or practice applicable to the
11 letter of credit which prohibits, restricts, or requires the
12 consent of an applicant, issuer, or nominated person to a
13 beneficiary's assignment of or creation of a security
14 interest in a letter-of-credit right is ineffective to the
15 extent that the term or rule of law, statute, regulation,
16 custom, or practice:
17 (1) would impair the creation, attachment, or
18 perfection of a security interest in the letter-of-credit
19 right; or
20 (2) provides that the assignment or the creation,
21 attachment, or perfection of the security interest may
22 give rise to a default, breach, right of recoupment,
23 claim, defense, termination, right of termination, or
24 remedy under the letter-of-credit right.
25 (b) Limitation on ineffectiveness under subsection (a).
26 To the extent that a term in a letter of credit is
27 ineffective under subsection (a) but would be effective under
28 law other than this Article or a custom or practice
29 applicable to the letter of credit, to the transfer of a
30 right to draw or otherwise demand performance under the
31 letter of credit, or to the assignment of a right to proceeds
32 of the letter of credit, the creation, attachment, or
33 perfection of a security interest in the letter-of-credit
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1 right:
2 (1) is not enforceable against the applicant,
3 issuer, nominated person, or transferee beneficiary;
4 (2) imposes no duties or obligations on the
5 applicant, issuer, nominated person, or transferee
6 beneficiary; and
7 (3) does not require the applicant, issuer,
8 nominated person, or transferee beneficiary to recognize
9 the security interest, pay or render performance to the
10 secured party, or accept payment or other performance
11 from the secured party.
12 (810 ILCS 5/9-410)
13 Sec. 9-410. (Blank). Disposition of fees. Of the total
14 money collected for each filing with the Secretary of State
15 of an original financing statement, amended statement,
16 continuation, assignment, or for a release of collateral, $12
17 of the filing fee shall be paid into the Secretary of State
18 Special Services Fund. The remaining $8 shall be deposited
19 into the General Revenue Fund in the State Treasury.
20 (Source: P.A. 89-503, eff. 1-1-97; 89-697, eff. 1-6-97.)
21 (810 ILCS 5/Art. 9, Part 5 heading)
22 PART 5. FILING DEFAULT
23 (810 ILCS 5/Art. 9, Part 5, Subpart 1 heading new)
24 SUBPART 1. FILING OFFICE; CONTENTS AND
25 EFFECTIVENESS OF FINANCING STATEMENT
26 (810 ILCS 5/9-501) (from Ch. 26, par. 9-501)
27 Sec. 9-501. Filing office.
28 (a) Filing offices. Except as otherwise provided in
29 subsection (b), if the local law of this State governs
30 perfection of a security interest or agricultural lien, the
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1 office in which to file a financing statement to perfect the
2 security interest or agricultural lien is:
3 (1) the office designated for the filing or
4 recording of a record of a mortgage on the related real
5 property, if:
6 (A) the collateral is as-extracted collateral
7 or timber to be cut; or
8 (B) the financing statement is filed as a
9 fixture filing and the collateral is goods that are
10 or are to become fixtures; or
11 (2) the office of the Secretary of State in all
12 other cases, including a case in which the collateral is
13 goods that are or are to become fixtures and the
14 financing statement is not filed as a fixture filing.
15 (b) Filing office for transmitting utilities. The
16 office in which to file a financing statement to perfect a
17 security interest in collateral, including fixtures, of a
18 transmitting utility is the office of the Secretary of State.
19 The financing statement also constitutes a fixture filing as
20 to the collateral indicated in the financing statement which
21 is or is to become fixtures. Default; procedure when security
22 agreement covers both real and personal property.
23 (1) When a debtor is in default under a security
24 agreement, a secured party has the rights and remedies
25 provided in this Part and except as limited by subsection (3)
26 those provided in the security agreement. He may reduce his
27 claim to judgment, foreclose or otherwise enforce the
28 security interest by any available judicial procedure. If the
29 collateral is documents the secured party may proceed either
30 as to the documents or as to the goods covered thereby. A
31 secured party in possession has the rights, remedies and
32 duties provided in Section 9-207. The rights and remedies
33 referred to in this subsection are cumulative.
34 (2) After default, the debtor has the rights and
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1 remedies provided in this Part, those provided in the
2 security agreement and those provided in Section 9-207.
3 (3) To the extent that they give rights to the debtor
4 and impose duties on the secured party, the rules stated in
5 the subsections referred to below may not be waived or varied
6 except as provided with respect to compulsory disposition of
7 collateral (subsection (3) of Section 9-504 and Section 9-505
8 and with respect to redemption of collateral (Section 9-506)
9 but the parties may by agreement determine the standards by
10 which the fulfillment of these rights and duties is to be
11 measured if such standards are not manifestly unreasonable:
12 (a) subsection (2) of Section 9-502 and subsection
13 (2) of Section 9-504 insofar as they require accounting
14 for surplus proceeds of collateral;
15 (b) subsection (3) of Section 9-504 and subsection
16 (1) of Section 9-505 which deal with disposition of
17 collateral;
18 (c) subsection (2) of Section 9-505 which deals
19 with acceptance of collateral as discharge of obligation;
20 (d) Section 9-506 which deals with redemption of
21 collateral; and
22 (e) subsection (1) of Section 9-507 which deals
23 with the secured party's liability for failure to comply
24 with this Part.
25 (4) If the security agreement covers both real and
26 personal property, the secured party may proceed under this
27 Part as to the personal property or he may proceed as to both
28 the real and the personal property in accordance with his
29 rights and remedies in respect to the real property in which
30 case the provisions of this Part do not apply.
31 (5) When a secured party has reduced his claim to
32 judgment the lien of any levy which may be made upon his
33 collateral by virtue of such judgment shall relate back to
34 the date of the perfection of the security interest in such
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1 collateral. A judicial sale, pursuant to such judgment, is a
2 foreclosure of the security interest by judicial procedure
3 within the meaning of this Section, and the secured party may
4 purchase at the sale and thereafter hold the collateral free
5 of any other requirements of this Article.
6 (Source: P.A. 84-546; revised 10-31-98.)
7 (810 ILCS 5/9-502) (from Ch. 26, par. 9-502)
8 Sec. 9-502. Contents of financing statement; record of
9 mortgage as financing statement; time of filing financing
10 statement.
11 (a) Sufficiency of financing statement. Subject to
12 subsection (b), a financing statement is sufficient only if
13 it:
14 (1) provides the name of the debtor;
15 (2) provides the name of the secured party or a
16 representative of the secured party; and
17 (3) indicates the collateral covered by the
18 financing statement.
19 (b) Real-property-related financing statements. Except
20 as otherwise provided in Section 9-501(b), to be sufficient,
21 a financing statement that covers as-extracted collateral or
22 timber to be cut, or which is filed as a fixture filing and
23 covers goods that are or are to become fixtures, must satisfy
24 subsection (a) and also:
25 (1) indicate that it covers this type of
26 collateral;
27 (2) indicate that it is to be filed in the real
28 property records;
29 (3) provide a description of the real property to
30 which the collateral is related sufficient to give
31 constructive notice of a mortgage under the law of this
32 State if the description were contained in a record of
33 the mortgage of the real property; and
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1 (4) if the debtor does not have an interest of
2 record in the real property, provide the name of a record
3 owner.
4 (c) Record of mortgage as financing statement. A record
5 of a mortgage is effective, from the date of recording, as a
6 financing statement filed as a fixture filing or as a
7 financing statement covering as-extracted collateral or
8 timber to be cut only if:
9 (1) the record indicates the goods or accounts that
10 it covers;
11 (2) the goods are or are to become fixtures related
12 to the real property described in the record or the
13 collateral is related to the real property described in
14 the record and is as-extracted collateral or timber to be
15 cut;
16 (3) the record satisfies the requirements for a
17 financing statement in this Section other than an
18 indication that it is to be filed in the real property
19 records; and
20 (4) the record is recorded.
21 (d) Filing before security agreement or attachment. A
22 financing statement may be filed before a security agreement
23 is made or a security interest otherwise attaches. Collection
24 Rights of Secured Party.
25 (1) When so agreed and in any event on default the
26 secured party is entitled to notify an account debtor or the
27 obligor on an instrument to make payment to him whether or
28 not the assignor was theretofore making collections on the
29 collateral, and also to take control of any proceeds to which
30 he is entitled under Section 9-306.
31 (2) A secured party who by agreement is entitled to
32 charge back uncollected collateral or otherwise to full or
33 limited recourse against the debtor and who undertakes to
34 collect from the account debtors or obligors must proceed in
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1 a commercially reasonable manner and may deduct his
2 reasonable expenses of realization from the collections. If
3 the security agreement secures an indebtedness, the secured
4 party must account to the debtor for any surplus, and unless
5 otherwise agreed, the debtor is liable for any deficiency.
6 But, if the underlying transaction was a sale of accounts or
7 chattel paper, the debtor is entitled to any surplus or is
8 liable for any deficiency only if the security agreement so
9 provides.
10 (Source: P.A. 77-2810.)
11 (810 ILCS 5/9-503) (from Ch. 26, par. 9-503)
12 Sec. 9-503. Name of debtor and secured party.
13 (a) Sufficiency of debtor's name. A financing statement
14 sufficiently provides the name of the debtor:
15 (1) if the debtor is a registered organization,
16 only if the financing statement provides the name of the
17 debtor indicated on the public record of the debtor's
18 jurisdiction of organization which shows the debtor to
19 have been organized;
20 (2) if the debtor is a decedent's estate, only if
21 the financing statement provides the name of the decedent
22 and indicates that the debtor is an estate;
23 (3) if the debtor is a trust or a trustee acting
24 with respect to property held in trust, only if the
25 financing statement:
26 (A) provides the name specified for the trust
27 in its organic documents or, if no name is
28 specified, provides the name of the settlor and
29 additional information sufficient to distinguish the
30 debtor from other trusts having one or more of the
31 same settlors; and
32 (B) indicates, in the debtor's name or
33 otherwise, that the debtor is a trust or is a
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1 trustee acting with respect to property held in
2 trust; and
3 (4) in other cases:
4 (A) if the debtor has a name, only if it
5 provides the individual or organizational name of
6 the debtor; and
7 (B) if the debtor does not have a name, only
8 if it provides the names of the partners, members,
9 associates, or other persons comprising the debtor.
10 (b) Additional debtor-related information. A financing
11 statement that provides the name of the debtor in accordance
12 with subsection (a) is not rendered ineffective by the
13 absence of:
14 (1) a trade name or other name of the debtor; or
15 (2) unless required under subsection (a)(4)(B),
16 names of partners, members, associates, or other persons
17 comprising the debtor.
18 (c) Debtor's trade name insufficient. A financing
19 statement that provides only the debtor's trade name does not
20 sufficiently provide the name of the debtor.
21 (d) Representative capacity. Failure to indicate the
22 representative capacity of a secured party or representative
23 of a secured party does not affect the sufficiency of a
24 financing statement.
25 (e) Multiple debtors and secured parties. A financing
26 statement may provide the name of more than one debtor and
27 the name of more than one secured party. Secured party's
28 right to take possession after default.
29 Unless otherwise agreed a secured party has on default
30 the right to take possession of the collateral. In taking
31 possession a secured party may proceed without judicial
32 process if this can be done without breach of the peace or
33 may proceed by action.
34 If the security agreement so provides the secured party
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1 may require the debtor to assemble the collateral and make it
2 available to the secured party at a place to be designated by
3 the secured party which is reasonably convenient to both
4 parties. Without removal a secured party may render equipment
5 unusable, and may dispose of collateral on the debtor's
6 premises under Section 9--504.
7 (Source: Laws 1961, p. 2101.)
8 (810 ILCS 5/9-504) (from Ch. 26, par. 9-504)
9 Sec. 9-504. Indication of collateral. A financing
10 statement sufficiently indicates the collateral that it
11 covers if the financing statement provides:
12 (1) a description of the collateral pursuant to
13 Section 9-108; or
14 (2) an indication that the financing statement
15 covers all assets or all personal property.
16 Secured Party's Right to Dispose of Collateral After
17 Default; Effect of Disposition.
18 (1) A secured party after default may sell, lease or
19 otherwise dispose of any or all of the collateral in its then
20 condition or following any commercially reasonable
21 preparation or processing. Any sale of goods is subject to
22 the Article on Sales (Article 2). The proceeds of disposition
23 shall be applied in the order following to
24 (a) the reasonable expenses of retaking, holding,
25 preparing for sale or lease, selling, leasing and the like
26 and, to the extent provided for in the agreement and not
27 prohibited by law, the reasonable attorneys' fees and legal
28 expenses incurred by the secured party;
29 (b) the satisfaction of indebtedness secured by the
30 security interest under which the disposition is made;
31 (c) the satisfaction of indebtedness secured by any
32 subordinate security interest in the collateral if written
33 notification of demand therefor is received before
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1 distribution of the proceeds is completed. If requested by
2 the secured party, the holder of a subordinate security
3 interest must seasonably furnish reasonable proof of his
4 interest, and unless he does so, the secured party need not
5 comply with his demand.
6 (2) If the security interest secures an indebtedness,
7 the secured party must account to the debtor for any surplus,
8 and, unless otherwise agreed, the debtor is liable for any
9 deficiency. But if the underlying transaction was a sale of
10 accounts or chattel paper, the debtor is entitled to any
11 surplus or is liable for any deficiency only if the security
12 agreement so provides.
13 (3) Disposition of the collateral may be by public or
14 private proceedings and may be made by way of one or more
15 contracts. Sale or other disposition may be as a unit or in
16 parcels and at any time and place and on any terms but every
17 aspect of the disposition including the method, manner, time,
18 place and terms must be commercially reasonable. Unless
19 collateral is perishable or threatens to decline speedily in
20 value or is of a type customarily sold on a recognized
21 market, reasonable notification of the time and place of any
22 public sale or reasonable notification of the time after
23 which any private sale or other intended disposition is to be
24 made shall be sent by the secured party to the debtor, if he
25 has not signed after default a statement renouncing or
26 modifying his right to notification of sale. In the case of
27 consumer goods no other notification need be sent. In other
28 cases notification shall be sent to any other secured party
29 from whom the secured party has received (before sending his
30 notification to the debtor or before the debtor's
31 renunciation of his rights) written notice of a claim of an
32 interest in the collateral. The secured party may buy at any
33 public sale and if the collateral is of a type customarily
34 sold in a recognized market or is of a type which is the
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1 subject of widely distributed standard price quotations he
2 may buy at private sale.
3 (4) When collateral is disposed of by a secured party
4 after default, the disposition transfers to a purchaser for
5 value all of the debtor's rights therein, discharges the
6 security interest under which it is made and any security
7 interest or lien subordinate thereto. The purchaser takes
8 free of all such rights and interests even though the secured
9 party fails to comply with the requirements of this Part or
10 of any judicial proceedings
11 (a) in the case of a public sale, if the purchaser
12 has no knowledge of any defects in the sale and if he does
13 not buy in collusion with the secured party, other bidders or
14 the person conducting the sale; or
15 (b) in any other case, if the purchaser acts in
16 good faith.
17 (5) A person who is liable to a secured party under a
18 guaranty, indorsement, repurchase agreement or the like and
19 who receives a transfer of collateral from the secured party
20 or is subrogated to his rights has thereafter the rights and
21 duties of the secured party. Such a transfer of collateral is
22 not a sale or disposition of the collateral under this
23 Article.
24 (Source: P. A. 78-238.)
25 (810 ILCS 5/9-505) (from Ch. 26, par. 9-505)
26 Sec. 9-505. Filing and compliance with other statutes and
27 treaties for consignments, leases, other bailments, and other
28 transactions.
29 (a) Use of terms other than "debtor" and "secured
30 party." A consignor, lessor, or other bailor of goods, a
31 licensor, or a buyer of a payment intangible or promissory
32 note may file a financing statement, or may comply with a
33 statute or treaty described in Section 9-311(a), using the
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1 terms "consignor", "consignee", "lessor", "lessee", "bailor",
2 "bailee", "licensor", "licensee", "owner", "registered
3 owner", "buyer", "seller", or words of similar import,
4 instead of the terms "secured party" and "debtor".
5 (b) Effect of financing statement under subsection (a).
6 This part applies to the filing of a financing statement
7 under subsection (a) and, as appropriate, to compliance that
8 is equivalent to filing a financing statement under Section
9 9-311(b), but the filing or compliance is not of itself a
10 factor in determining whether the collateral secures an
11 obligation. If it is determined for another reason that the
12 collateral secures an obligation, a security interest held by
13 the consignor, lessor, bailor, licensor, owner, or buyer
14 which attaches to the collateral is perfected by the filing
15 or compliance. Compulsory Disposition of Collateral;
16 Acceptance of the Collateral as Discharge of Obligation.
17 (1) If the debtor has paid 60% of the cash price in the
18 case of a purchase money security interest in consumer goods
19 or 60% of the loan in the case of another security interest
20 in consumer goods, and has not signed after default a
21 statement renouncing or modifying his rights under this Part
22 a secured party who has taken possession of collateral must
23 dispose of it under Section 9--504 and if he fails to do so
24 within 90 days after he takes possession the debtor at his
25 option may recover in conversion or under Section 9--507(1)
26 on secured party's liability.
27 (2) In any other case involving consumer goods or any
28 other collateral a secured party in possession may, after
29 default, propose to retain the collateral in satisfaction of
30 the obligation. Written notice of such proposal shall be sent
31 to the debtor if he has not signed after default a statement
32 renouncing or modifying his rights under this subsection. In
33 the case of consumer goods no other notice need be given. In
34 other cases notice shall be sent to any other secured party
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1 from whom the secured party has received (before sending his
2 notice to the debtor or before the debtor's renunciation of
3 his rights) written notice of a claim of an interest in the
4 collateral. If the secured party receives objection in
5 writing from a person entitled to receive notification within
6 twenty-one days after the notice was sent, the secured party
7 must dispose of the collateral under Section 9-504. In the
8 absence of such written objection the secured party may
9 retain the collateral in satisfaction of the debtor's
10 obligation.
11 (Source: P.A. 77-2810.)
12 (810 ILCS 5/9-506) (from Ch. 26, par. 9-506)
13 Sec. 9-506. Effect of errors or omissions.
14 (a) Minor errors and omissions. A financing statement
15 substantially satisfying the requirements of this Part is
16 effective, even if it has minor errors or omissions, unless
17 the errors or omissions make the financing statement
18 seriously misleading.
19 (b) Financing statement seriously misleading. Except as
20 otherwise provided in subsection (c), a financing statement
21 that fails sufficiently to provide the name of the debtor in
22 accordance with Section 9-503(a) is seriously misleading.
23 (c) Financing statement not seriously misleading. If a
24 search of the records of the filing office under the debtor's
25 correct name, using the filing office's standard search
26 logic, if any, would disclose a financing statement that
27 fails sufficiently to provide the name of the debtor in
28 accordance with Section 9-503(a), the name provided does not
29 make the financing statement seriously misleading.
30 (d) "Debtor's correct name." For purposes of Section
31 9-508(b), the "debtor's correct name" in subsection (c) means
32 the correct name of the new debtor. Debtor's right to redeem
33 collateral.
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1 At any time before the secured party has disposed of
2 collateral or entered into a contract for its disposition
3 under Section 9--504 or before the obligation has been
4 discharged under Section 9--505(2) the debtor or any other
5 secured party may unless otherwise agreed in writing after
6 default redeem the collateral by tendering fulfillment of all
7 obligations secured by the collateral as well as the expenses
8 reasonably incurred by the secured party in retaking, holding
9 and preparing the collateral for disposition, in arranging
10 for the sale, and to the extent provided in the agreement and
11 not prohibited by law, his reasonable attorneys' fees and
12 legal expenses.
13 (Source: Laws 1961, p. 2101.)
14 (810 ILCS 5/9-507) (from Ch. 26, par. 9-507)
15 Sec. 9-507. Effect of certain events on effectiveness of
16 financing statement.
17 (a) Disposition. A filed financing statement remains
18 effective with respect to collateral that is sold, exchanged,
19 leased, licensed, or otherwise disposed of and in which a
20 security interest or agricultural lien continues, even if the
21 secured party knows of or consents to the disposition.
22 (b) Information becoming seriously misleading. Except
23 as otherwise provided in subsection (c) and Section 9-508, a
24 financing statement is not rendered ineffective if, after the
25 financing statement is filed, the information provided in the
26 financing statement becomes seriously misleading under
27 Section 9-506.
28 (c) Change in debtor's name. If a debtor so changes its
29 name that a filed financing statement becomes seriously
30 misleading under Section 9-506:
31 (1) the financing statement is effective to perfect
32 a security interest in collateral acquired by the debtor
33 before, or within four months after, the change; and
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1 (2) the financing statement is not effective to
2 perfect a security interest in collateral acquired by the
3 debtor more than four months after the change, unless an
4 amendment to the financing statement which renders the
5 financing statement not seriously misleading is filed
6 within four months after the change. Secured party's
7 liability for failure to comply with this part.
8 (1) If it is established that the secured party is not
9 proceeding in accordance with the provisions of this Part
10 disposition may be ordered or restrained on appropriate terms
11 and conditions. If the disposition has occurred the debtor or
12 any person entitled to notification or whose security
13 interest has been made known to the secured party prior to
14 the disposition has a right to recover from the secured party
15 any loss caused by a failure to comply with the provisions of
16 this Part. If the collateral is consumer goods, the debtor in
17 an individual action has a right to recover in any event an
18 amount not less than the credit service charge plus 10% of
19 the principal amount of the debt or the time price
20 differential plus 10% of the cash price.
21 (2) The fact that a better price could have been
22 obtained by a sale at a different time or in a different
23 method from that selected by the secured party is not of
24 itself sufficient to establish that the sale was not made in
25 a commercially reasonable manner. If the secured party either
26 sells the collateral in the usual manner in any recognized
27 market therefor or if he sells at the price current in such
28 market at the time of his sale or if he has otherwise sold in
29 conformity with reasonable commercial practices among dealers
30 in the type of property sold he has sold in a commercially
31 reasonable manner. The principles stated in the two preceding
32 sentences with respect to sales also apply as may be
33 appropriate to other types of disposition. A disposition
34 which has been approved in any judicial proceeding or by any
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1 bona fide creditors' committee or representative of creditors
2 shall conclusively be deemed to be commercially reasonable,
3 but this sentence does not indicate that any such approval
4 must be obtained in any case nor does it indicate that any
5 disposition not so approved is not commercially reasonable.
6 (Source: P.A. 90-214, eff. 7-25-97.)
7 (810 ILCS 5/9-508 new)
8 Sec. 9-508. Effectiveness of financing statement if new
9 debtor becomes bound by security agreement.
10 (a) Financing statement naming original debtor. Except
11 as otherwise provided in this Section, a filed financing
12 statement naming an original debtor is effective to perfect a
13 security interest in collateral in which a new debtor has or
14 acquires rights to the extent that the financing statement
15 would have been effective had the original debtor acquired
16 rights in the collateral.
17 (b) Financing statement becoming seriously misleading.
18 If the difference between the name of the original debtor and
19 that of the new debtor causes a filed financing statement
20 that is effective under subsection (a) to be seriously
21 misleading under Section 9-506:
22 (1) the financing statement is effective to perfect
23 a security interest in collateral acquired by the new
24 debtor before, and within four months after, the new
25 debtor becomes bound under Section 9-203(d); and
26 (2) the financing statement is not effective to
27 perfect a security interest in collateral acquired by the
28 new debtor more than four months after the new debtor
29 becomes bound under Section 9-203(d) unless an initial
30 financing statement providing the name of the new debtor
31 is filed before the expiration of that time.
32 (c) When Section not applicable. This Section does not
33 apply to collateral as to which a filed financing statement
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1 remains effective against the new debtor under Section
2 9-507(a).
3 (810 ILCS 5/9-509 new)
4 Sec. 9-509. Persons entitled to file a record.
5 (a) Person entitled to file record. A person may file
6 an initial financing statement, amendment that adds
7 collateral covered by a financing statement, or amendment
8 that adds a debtor to a financing statement only if:
9 (1) the debtor authorizes the filing in an
10 authenticated record or pursuant to subsection (b) or
11 (c); or
12 (2) the person holds an agricultural lien that has
13 become effective at the time of filing and the financing
14 statement covers only collateral in which the person
15 holds an agricultural lien.
16 (b) Security agreement as authorization. By
17 authenticating or becoming bound as debtor by a security
18 agreement, a debtor or new debtor authorizes the filing of an
19 initial financing statement, and an amendment, covering:
20 (1) the collateral described in the security
21 agreement; and
22 (2) property that becomes collateral under Section
23 9-315(a)(2), whether or not the security agreement
24 expressly covers proceeds.
25 (c) Acquisition of collateral as authorization. By
26 acquiring collateral in which a security interest or
27 agricultural lien continues under Section 9-315(a)(1), a
28 debtor authorizes the filing of an initial financing
29 statement, and an amendment, covering the collateral and
30 property that becomes collateral under Section 9-315(a)(2).
31 (d) Person entitled to file certain amendments. A
32 person may file an amendment other than an amendment that
33 adds collateral covered by a financing statement or an
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1 amendment that adds a debtor to a financing statement only
2 if:
3 (1) the secured party of record authorizes the
4 filing; or
5 (2) the amendment is a termination statement for a
6 financing statement as to which the secured party of
7 record has failed to file or send a termination statement
8 as required by Section 9-513(a) or (c), the debtor
9 authorizes the filing, and the termination statement
10 indicates that the debtor authorized it to be filed.
11 (e) Multiple secured parties of record. If there is
12 more than one secured party of record for a financing
13 statement, each secured party of record may authorize the
14 filing of an amendment under subsection (d).
15 (810 ILCS 5/9-510 new)
16 Sec. 9-510. Effectiveness of filed record.
17 (a) Filed record effective if authorized. A filed
18 record is effective only to the extent that it was filed by a
19 person that may file it under Section 9-509.
20 (b) Authorization by one secured party of record. A
21 record authorized by one secured party of record does not
22 affect the financing statement with respect to another
23 secured party of record.
24 (c) Continuation statement not timely filed. A
25 continuation statement that is not filed within the six-month
26 period prescribed by Section 9-515(d) is ineffective.
27 (810 ILCS 5/9-511 new)
28 Sec. 9-511. Secured party of record.
29 (a) Secured party of record. A secured party of record
30 with respect to a financing statement is a person whose name
31 is provided as the name of the secured party or a
32 representative of the secured party in an initial financing
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1 statement that has been filed. If an initial financing
2 statement is filed under Section 9-514(a), the assignee named
3 in the initial financing statement is the secured party of
4 record with respect to the financing statement.
5 (b) Amendment naming secured party of record. If an
6 amendment of a financing statement which provides the name of
7 a person as a secured party or a representative of a secured
8 party is filed, the person named in the amendment is a
9 secured party of record. If an amendment is filed under
10 Section 9-514(b), the assignee named in the amendment is a
11 secured party of record.
12 (c) Amendment deleting secured party of record. A
13 person remains a secured party of record until the filing of
14 an amendment of the financing statement which deletes the
15 person.
16 (810 ILCS 5/9-512 new)
17 Sec. 9-512. Amendment of financing statement.
18 (a) Amendment of information in financing statement.
19 Subject to Section 9-509, a person may add or delete
20 collateral covered by, continue or terminate the
21 effectiveness of, or, subject to subsection (e), otherwise
22 amend the information provided in, a financing statement by
23 filing an amendment that:
24 (1) identifies, by its file number, the initial
25 financing statement to which the amendment relates; and
26 (2) if the amendment relates to an initial
27 financing statement filed or recorded in a filing office
28 described in Section 9-501(a)(1), provides the date and
29 time that the initial financing statement was filed and
30 the information specified in Section 9-502(b).
31 (b) Period of effectiveness not affected. Except as
32 otherwise provided in Section 9-515, the filing of an
33 amendment does not extend the period of effectiveness of the
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1 financing statement.
2 (c) Effectiveness of amendment adding collateral. A
3 financing statement that is amended by an amendment that adds
4 collateral is effective as to the added collateral only from
5 the date of the filing of the amendment.
6 (d) Effectiveness of amendment adding debtor. A
7 financing statement that is amended by an amendment that adds
8 a debtor is effective as to the added debtor only from the
9 date of the filing of the amendment.
10 (e) Certain amendments ineffective. An amendment is
11 ineffective to the extent it:
12 (1) purports to delete all debtors and fails to
13 provide the name of a debtor to be covered by the
14 financing statement; or
15 (2) purports to delete all secured parties of
16 record and fails to provide the name of a new secured
17 party of record.
18 (810 ILCS 5/9-513 new)
19 Sec. 9-513. Termination statement.
20 (a) Consumer goods. A secured party shall cause the
21 secured party of record for a financing statement to file a
22 termination statement for the financing statement if the
23 financing statement covers consumer goods and:
24 (1) there is no obligation secured by the
25 collateral covered by the financing statement and no
26 commitment to make an advance, incur an obligation, or
27 otherwise give value; or
28 (2) the debtor did not authorize the filing of the
29 initial financing statement.
30 (b) Time for compliance with subsection (a). To comply
31 with subsection (a), a secured party shall cause the secured
32 party of record to file the termination statement:
33 (1) within one month after there is no obligation
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1 secured by the collateral covered by the financing
2 statement and no commitment to make an advance, incur an
3 obligation, or otherwise give value; or
4 (2) if earlier, within 20 days after the secured
5 party receives an authenticated demand from a debtor.
6 (c) Other collateral. In cases not governed by
7 subsection (a), within 20 days after a secured party receives
8 an authenticated demand from a debtor, the secured party
9 shall cause the secured party of record for a financing
10 statement to send to the debtor a termination statement for
11 the financing statement or file the termination statement in
12 the filing office if:
13 (1) except in the case of a financing statement
14 covering accounts or chattel paper that has been sold or
15 goods that are the subject of a consignment, there is no
16 obligation secured by the collateral covered by the
17 financing statement and no commitment to make an advance,
18 incur an obligation, or otherwise give value;
19 (2) the financing statement covers accounts or
20 chattel paper that has been sold but as to which the
21 account debtor or other person obligated has discharged
22 its obligation;
23 (3) the financing statement covers goods that were
24 the subject of a consignment to the debtor but are not in
25 the debtor's possession; or
26 (4) the debtor did not authorize the filing of the
27 initial financing statement.
28 (d) Effect of filing termination statement. Except as
29 otherwise provided in Section 9-510, upon the filing of a
30 termination statement with the filing office, the financing
31 statement to which the termination statement relates ceases
32 to be effective. Except as otherwise provided in Section
33 9-510, for purposes of Sections 9-519(g), 9-522(a), and
34 9-523(c) the filing with the filing office of a termination
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1 statement relating to a financing statement that indicates
2 that the debtor is a transmitting utility also causes the
3 effectiveness of the financing statement to lapse.
4 (810 ILCS 5/9-514 new)
5 Sec. 9-514. Assignment of powers of secured party of
6 record.
7 (a) Assignment reflected on initial financing statement.
8 Except as otherwise provided in subsection (c), an initial
9 financing statement may reflect an assignment of all of the
10 secured party's power to authorize an amendment to the
11 financing statement by providing the name and mailing address
12 of the assignee as the name and address of the secured party.
13 (b) Assignment of filed financing statement. Except as
14 otherwise provided in subsection (c), a secured party of
15 record may assign of record all or part of its power to
16 authorize an amendment to a financing statement by filing in
17 the filing office an amendment of the financing statement
18 which:
19 (1) identifies, by its file number, the initial
20 financing statement to which it relates;
21 (2) provides the name of the assignor; and
22 (3) provides the name and mailing address of the
23 assignee.
24 (c) Assignment of record of mortgage. An assignment of
25 record of a security interest in a fixture covered by a
26 record of a mortgage which is effective as a financing
27 statement filed as a fixture filing under Section 9-502(c)
28 may be made only by an assignment of record of the mortgage
29 in the manner provided by law of this State other than the
30 Uniform Commercial Code.
31 (810 ILCS 5/9-515 new)
32 Sec. 9-515. Duration and effectiveness of financing
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1 statement; effect of lapsed financing statement.
2 (a) Five-year effectiveness. Except as otherwise
3 provided in subsections (b), (e), (f), and (g), a filed
4 financing statement is effective for a period of five years
5 after the date of filing.
6 (b) Public-finance or manufactured-home transaction.
7 Except as otherwise provided in subsections (e), (f), and
8 (g), an initial financing statement filed in connection with
9 a public-finance transaction or manufactured-home transaction
10 is effective for a period of 30 years after the date of
11 filing if it indicates that it is filed in connection with a
12 public-finance transaction or manufactured-home transaction.
13 (c) Lapse and continuation of financing statement. The
14 effectiveness of a filed financing statement lapses on the
15 expiration of the period of its effectiveness unless before
16 the lapse a continuation statement is filed pursuant to
17 subsection (d). Upon lapse, a financing statement ceases to
18 be effective and any security interest or agricultural lien
19 that was perfected by the financing statement becomes
20 unperfected, unless the security interest is perfected
21 otherwise. If the security interest or agricultural lien
22 becomes unperfected upon lapse, it is deemed never to have
23 been perfected as against a purchaser of the collateral for
24 value.
25 (d) When continuation statement may be filed. A
26 continuation statement may be filed only within six months
27 before the expiration of the five-year period specified in
28 subsection (a) or the 30-year period specified in subsection
29 (b), whichever is applicable.
30 (e) Effect of filing continuation statement. Except as
31 otherwise provided in Section 9-510, upon timely filing of a
32 continuation statement, the effectiveness of the initial
33 financing statement continues for a period of five years
34 commencing on the day on which the financing statement would
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1 have become ineffective in the absence of the filing. Upon
2 the expiration of the five-year period, the financing
3 statement lapses in the same manner as provided in subsection
4 (c), unless, before the lapse, another continuation statement
5 is filed pursuant to subsection (d). Succeeding continuation
6 statements may be filed in the same manner to continue the
7 effectiveness of the initial financing statement.
8 (f) Transmitting utility financing statement. If a
9 debtor is a transmitting utility and a filed financing
10 statement so indicates, the financing statement is effective
11 until a termination statement is filed.
12 (g) Record of mortgage as financing statement. A record
13 of a mortgage that is effective as a financing statement
14 filed as a fixture filing under Section 9-502(c) remains
15 effective as a financing statement filed as a fixture filing
16 until the mortgage is released or satisfied of record or its
17 effectiveness otherwise terminates as to the real property.
18 (810 ILCS 5/9-516 new)
19 Sec. 9-516. What constitutes filing; effectiveness of
20 filing.
21 (a) What constitutes filing. Except as otherwise
22 provided in subsection (b), communication of a record to a
23 filing office and tender of the filing fee or acceptance of
24 the record by the filing office constitutes filing.
25 (b) Refusal to accept record; filing does not occur.
26 Filing does not occur with respect to a record that a filing
27 office refuses to accept because:
28 (1) the record is not communicated by a method or
29 medium of communication authorized by the filing office;
30 (2) an amount equal to or greater than the
31 applicable filing fee is not tendered;
32 (3) the filing office is unable to index the record
33 because:
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1 (A) in the case of an initial financing
2 statement, the record does not provide a name for
3 the debtor;
4 (B) in the case of an amendment or correction
5 statement, the record:
6 (i) does not identify the initial
7 financing statement as required by Section
8 9-512 or 9-518, as applicable; or
9 (ii) identifies an initial financing
10 statement whose effectiveness has lapsed under
11 Section 9-515;
12 (C) in the case of an initial financing
13 statement that provides the name of a debtor
14 identified as an individual or an amendment that
15 provides a name of a debtor identified as an
16 individual which was not previously provided in the
17 financing statement to which the record relates, the
18 record does not identify the debtor's last name; or
19 (D) in the case of a record filed or recorded
20 in the filing office described in Section
21 9-501(a)(1), the record does not provide a
22 sufficient description of the real property to which
23 it relates;
24 (4) in the case of an initial financing statement
25 or an amendment that adds a secured party of record, the
26 record does not provide a name and mailing address for
27 the secured party of record;
28 (5) in the case of an initial financing statement
29 or an amendment that provides a name of a debtor which
30 was not previously provided in the financing statement to
31 which the amendment relates, the record does not:
32 (A) provide a mailing address for the debtor;
33 (B) indicate whether the debtor is an
34 individual or an organization; or
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1 (C) if the financing statement indicates that
2 the debtor is an organization, provide:
3 (i) a type of organization for the
4 debtor;
5 (ii) a jurisdiction of organization for
6 the debtor; or
7 (iii) an organizational identification
8 number for the debtor or indicate that the
9 debtor has none;
10 (6) in the case of an assignment reflected in an
11 initial financing statement under Section 9-514(a) or an
12 amendment filed under Section 9-514(b), the record does
13 not provide a name and mailing address for the assignee;
14 or
15 (7) in the case of a continuation statement, the
16 record is not filed within the six-month period
17 prescribed by Section 9-515(d).
18 (c) Rules applicable to subsection (b). For purposes of
19 subsection (b):
20 (1) a record does not provide information if the
21 filing office is unable to read or decipher the
22 information; and
23 (2) a record that does not indicate that it is an
24 amendment or identify an initial financing statement to
25 which it relates, as required by Section 9-512, 9-514, or
26 9-518, is an initial financing statement.
27 (d) Refusal to accept record; record effective as filed
28 record. A record that is communicated to the filing office
29 with tender of the filing fee, but which the filing office
30 refuses to accept for a reason other than one set forth in
31 subsection (b), is effective as a filed record except as
32 against a purchaser of the collateral which gives value in
33 reasonable reliance upon the absence of the record from the
34 files.
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1 (810 ILCS 5/9-517 new)
2 Sec. 9-517. Effect of indexing errors. The failure of
3 the filing office to index a record correctly does not affect
4 the effectiveness of the filed record.
5 (810 ILCS 5/9-518 new)
6 Sec. 9-518. Claim concerning inaccurate or wrongfully
7 filed record.
8 (a) Correction statement. A person may file in the
9 filing office a correction statement with respect to a record
10 indexed there under the person's name if the person believes
11 that the record is inaccurate or was wrongfully filed.
12 (b) Sufficiency of correction statement. A correction
13 statement must:
14 (1) identify the record to which it relates by:
15 (A) the file number assigned to the initial
16 financing statement to which the record relates; and
17 (B) if the correction statement relates to a
18 record filed or recorded in a filing office
19 described in Section 9-501(a)(1), the date and time
20 that the initial financing statement was filed and
21 the information specified in Section 9-502(b);
22 (2) indicate that it is a correction statement; and
23 (3) provide the basis for the person's belief that
24 the record is inaccurate and indicate the manner in which
25 the person believes the record should be amended to cure
26 any inaccuracy or provide the basis for the person's
27 belief that the record was wrongfully filed.
28 (c) Record not affected by correction statement. The
29 filing of a correction statement does not affect the
30 effectiveness of an initial financing statement or other
31 filed record.
32 (810 ILCS 5/Art. 9, Part 5, Subpart 2 heading new)
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1 SUBPART 2. DUTIES AND OPERATION OF FILING OFFICE
2 (810 ILCS 5/9-519 new)
3 Sec. 9-519. Numbering, maintaining, and indexing
4 records; communicating information provided in records.
5 (a) Filing office duties. For each record filed in a
6 filing office, the filing office shall:
7 (1) assign a unique number to the filed record;
8 (2) create a record that bears the number assigned
9 to the filed record and the date and time of filing;
10 (3) maintain the filed record for public
11 inspection; and
12 (4) index the filed record in accordance with
13 subsections (c), (d), and (e).
14 (b) File number. A file number assigned after January
15 1, 2002, must include a digit that:
16 (1) is mathematically derived from or related to
17 the other digits of the file number; and
18 (2) aids the filing office in determining whether a
19 number communicated as the file number includes a
20 single-digit or transpositional error.
21 (c) Indexing: general. Except as otherwise provided in
22 subsections (d) and (e), the filing office shall:
23 (1) index an initial financing statement according
24 to the name of the debtor and index all filed records
25 relating to the initial financing statement in a manner
26 that associates with one another an initial financing
27 statement and all filed records relating to the initial
28 financing statement; and
29 (2) index a record that provides a name of a debtor
30 which was not previously provided in the financing
31 statement to which the record relates also according to
32 the name that was not previously provided.
33 (d) Indexing: real-property-related financing
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1 statement. If a financing statement is filed as a fixture
2 filing or covers as-extracted collateral or timber to be cut,
3 it must be filed for record and the filing office shall index
4 it:
5 (1) under the names of the debtor and of each owner
6 of record shown on the financing statement as if they
7 were the mortgagors under a mortgage of the real property
8 described; and
9 (2) to the extent that the law of this State
10 provides for indexing of records of mortgages under the
11 name of the mortgagee, under the name of the secured
12 party as if the secured party were the mortgagee
13 thereunder, or, if indexing is by description, as if the
14 financing statement were a record of a mortgage of the
15 real property described.
16 (e) Indexing: real-property-related assignment. If a
17 financing statement is filed as a fixture filing or covers
18 as-extracted collateral or timber to be cut, the filing
19 office shall index an assignment filed under Section 9-514(a)
20 or an amendment filed under Section 9-514(b):
21 (1) under the name of the assignor as grantor; and
22 (2) to the extent that the law of this State
23 provides for indexing a record of the assignment of a
24 mortgage under the name of the assignee, under the name
25 of the assignee.
26 (f) Retrieval and association capability. The filing
27 office shall maintain a capability:
28 (1) to retrieve a record by the name of the debtor
29 and by the file number assigned to the initial financing
30 statement to which the record relates; and
31 (2) to associate and retrieve with one another an
32 initial financing statement and each filed record
33 relating to the initial financing statement.
34 (g) Removal of debtor's name. The filing office may not
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1 remove a debtor's name from the index until one year after
2 the effectiveness of a financing statement naming the debtor
3 lapses under Section 9-515 with respect to all secured
4 parties of record.
5 (h) Timeliness of filing office performance. The filing
6 office shall perform the acts required by subsections (a)
7 through (e) at the time and in the manner prescribed by
8 filing-office rule, but not later than two business days
9 after the filing office receives the record in question.
10 (i) Inapplicability to real-property-related filing
11 office. Subsections (b) and (h) do not apply to a filing
12 office described in Section 9-501(a)(1).
13 (810 ILCS 5/9-520 new)
14 Sec. 9-520. Acceptance and refusal to accept record.
15 (a) Mandatory refusal to accept record. A filing office
16 shall refuse to accept a record for filing for a reason set
17 forth in Section 9-516(b) and may refuse to accept a record
18 for filing only for a reason set forth in Section 9-516(b).
19 (b) Communication concerning refusal. If a filing
20 office refuses to accept a record for filing, it shall
21 communicate to the person that presented the record the fact
22 of and reason for the refusal and the date and time the
23 record would have been filed had the filing office accepted
24 it. The communication must be made at the time and in the
25 manner prescribed by filing-office rule, but in the case of a
26 filing office described in Section 9-501(a)(2), in no event
27 more than two business days after the filing office receives
28 the record.
29 (c) When filed financing statement effective. A filed
30 financing statement satisfying Section 9-502(a) and (b) is
31 effective, even if the filing office is required to refuse to
32 accept it for filing under subsection (a). However, Section
33 9-338 applies to a filed financing statement providing
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1 information described in Section 9-516(b)(5) which is
2 incorrect at the time the financing statement is filed.
3 (d) Separate application to multiple debtors. If a
4 record communicated to a filing office provides information
5 that relates to more than one debtor, this Part applies as to
6 each debtor separately.
7 (810 ILCS 5/9-521 new)
8 Sec. 9-521. Uniform form of written financing statement
9 and amendment.
10 (a) Initial financing statement form. A filing office
11 that accepts written records may not refuse to accept a
12 written initial financing statement in the form and format
13 set forth in the final official text of the 1999 revisions to
14 Article 9 of the Uniform Commercial Code promulgated by the
15 American Law Institute and the National Conference of
16 Commissioners on Uniform State Laws, except for a reason set
17 forth in Section 9-516(b).
18 (b) Amendment form. A filing office that accepts
19 written records may not refuse to accept a written record in
20 the form and format set forth in the final official text of
21 the 1999 revisions to Article 9 of the Uniform Commercial
22 Code promulgated by the American Law Institute and the
23 National Conference of Commissioners on Uniform State Laws,
24 except for a reason set forth in Section 9-516(b).
25 (810 ILCS 5/9-522 new)
26 Sec. 9-522. Maintenance and destruction of records.
27 (a) Post-lapse maintenance and retrieval of information.
28 The filing office shall maintain a record of the information
29 provided in a filed financing statement for at least one year
30 after the effectiveness of the financing statement has lapsed
31 under Section 9-515 with respect to all secured parties of
32 record. The record must be retrievable by using the name of
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1 the debtor and:
2 (1) if the record was filed in the filing office
3 described in Section 9-501(a)(1), by using the file
4 number assigned to the initial financing statement to
5 which the record relates and the date and time that the
6 record was filed or recorded; or
7 (2) if the record was filed in the filing office
8 described in Section 9-501(a)(2), by using the file
9 number assigned to the initial financing statement to
10 which the record relates.
11 (b) Destruction of written records. Except to the
12 extent that a statute governing disposition of public records
13 provides otherwise, the filing office immediately may destroy
14 any written record evidencing a financing statement. However,
15 if the filing office destroys a written record, it shall
16 maintain another record of the financing statement which
17 complies with subsection (a).
18 (810 ILCS 5/9-523 new)
19 Sec. 9-523. Information from filing office; sale or
20 license of records.
21 (a) Acknowledgment of filing written record. If a
22 person that files a written record requests an acknowledgment
23 of the filing, the filing office shall send to the person an
24 image of the record showing the number assigned to the record
25 pursuant to Section 9-519(a)(1) and the date and time of the
26 filing of the record. However, if the person furnishes a
27 copy of the record to the filing office, the filing office
28 may instead:
29 (1) note upon the copy the number assigned to the
30 record pursuant to Section 9-519(a)(1) and the date and
31 time of the filing of the record; and
32 (2) send the copy to the person.
33 (b) Acknowledgment of filing other record. If a person
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1 files a record other than a written record, the filing office
2 shall communicate to the person an acknowledgment that
3 provides:
4 (1) the information in the record;
5 (2) the number assigned to the record pursuant to
6 Section 9-519(a)(1); and
7 (3) the date and time of the filing of the record.
8 (c) Communication of requested information. The filing
9 office shall communicate or otherwise make available in a
10 record the following information to any person that requests
11 it:
12 (1) whether there is on file on a date and time
13 specified by the filing office, but not a date earlier
14 than three business days before the filing office
15 receives the request, any financing statement that:
16 (A) designates a particular debtor or, if the
17 request so states, designates a particular debtor at
18 the address specified in the request;
19 (B) has not lapsed under Section 9-515 with
20 respect to all secured parties of record; and
21 (C) if the request so states, has lapsed under
22 Section 9-515 and a record of which is maintained by
23 the filing office under Section 9-522(a);
24 (2) the date and time of filing of each financing
25 statement; and
26 (3) the information provided in each financing
27 statement.
28 (d) Medium for communicating information. In complying
29 with its duty under subsection (c), the filing office may
30 communicate information in any medium. However, if
31 requested, the filing office shall communicate information by
32 issuing a record that can be admitted into evidence in the
33 courts of this State without extrinsic evidence of its
34 authenticity.
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1 (e) Timeliness of filing office performance. The filing
2 office shall perform the acts required by subsections (a)
3 through (d) at the time and in the manner prescribed by
4 filing-office rule, but in the case of a filing office
5 described in Section 9-501(a)(2), not later than two business
6 days after the filing office receives the request.
7 (f) Public availability of records. At least weekly,
8 the Secretary of State shall offer to sell or license to the
9 public on a nonexclusive basis, in bulk, copies of all
10 records filed in it under this Part, in every medium from
11 time to time available to the filing office.
12 (810 ILCS 5/9-524 new)
13 Sec. 9-524. Delay by filing office. Delay by the filing
14 office beyond a time limit prescribed by this Part is excused
15 if:
16 (1) the delay is caused by interruption of
17 communication or computer facilities, war, emergency
18 conditions, failure of equipment, or other circumstances
19 beyond control of the filing office; and
20 (2) the filing office exercises reasonable
21 diligence under the circumstances.
22 (810 ILCS 5/9-525 new)
23 Sec. 9-525. Fees.
24 (a) Initial financing statement or other record: general
25 rule. Except as otherwise provided in subsection (e), the fee
26 for filing and indexing a record under this Part, other than
27 an initial financing statement of the kind described in
28 subsection (b), is:
29 (1) $20 if the record is communicated in writing
30 and consists of one or two pages;
31 (2) $20 if the record is communicated in writing
32 and consists of more than two pages; and
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1 (3) $20 if the record is communicated by another
2 medium authorized by filing-office rule.
3 (b) Initial financing statement: public-finance and
4 manufactured-housing transactions. Except as otherwise
5 provided in subsection (e), the fee for filing and indexing
6 an initial financing statement of the following kind is:
7 (1) $20 if the financing statement indicates that
8 it is filed in connection with a public-finance
9 transaction;
10 (2) $20 if the financing statement indicates that
11 it is filed in connection with a manufactured-home
12 transaction.
13 (c) Number of names. The number of names required to be
14 indexed does not affect the amount of the fee in subsections
15 (a) and (b).
16 (d) Response to information request. The fee for
17 responding to a request for information from the filing
18 office, including for issuing a certificate showing
19 communicating whether there is on file any financing
20 statement naming a particular debtor, is:
21 (1) $10 if the request is communicated in writing;
22 and
23 (2) $10 if the request is communicated by another
24 medium authorized by filing-office rule.
25 (e) Record of mortgage. This Section does not require a
26 fee with respect to a record of a mortgage which is effective
27 as a financing statement filed as a fixture filing or as a
28 financing statement covering as-extracted collateral or
29 timber to be cut under Section 9-502(c). However, the
30 recording and satisfaction fees that otherwise would be
31 applicable to the record of the mortgage apply.
32 (810 ILCS 5/9-526 new)
33 Sec. 9-526. Filing-office rules.
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1 (a) Adoption of filing-office rules. The Secretary of
2 State shall adopt and publish rules to implement this
3 Article. The filing-office rules must be:
4 (1) consistent with this Article; and
5 (2) adopted and published in accordance with the
6 Illinois Administrative Procedure Act.
7 (b) Harmonization of rules. To keep the filing-office
8 rules and practices of the filing office in harmony with the
9 rules and practices of filing offices in other jurisdictions
10 that enact substantially this Part, and to keep the
11 technology used by the filing office compatible with the
12 technology used by filing offices in other jurisdictions that
13 enact substantially this Part, the Secretary of State, so far
14 as is consistent with the purposes, policies, and provisions
15 of this Article, in adopting, amending, and repealing
16 filing-office rules, shall:
17 (1) consult with filing offices in other
18 jurisdictions that enact substantially this Part; and
19 (2) consult the most recent version of the Model
20 Rules promulgated by the International Association of
21 Corporate Administrators or any successor organization;
22 and
23 (3) take into consideration the rules and practices
24 of, and the technology used by, filing offices in other
25 jurisdictions that enact substantially this Part.
26 (810 ILCS 5/9-527 new)
27 Sec. 9-527. Duty to report. The Secretary of State
28 shall report annually to the Governor and Legislature on the
29 operation of the filing office. The report must contain a
30 statement of the extent to which:
31 (1) the filing-office rules are not in harmony with
32 the rules of filing offices in other jurisdictions that
33 enact substantially this Part and the reasons for these
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1 variations; and
2 (2) the filing-office rules are not in harmony with
3 the most recent version of the Model Rules promulgated by
4 the International Association of Corporate
5 Administrators, or any successor organization, and the
6 reasons for these variations.
7 (810 ILCS 5/Art. 9, Part 6 heading new)
8 PART 6. DEFAULT
9 (810 ILCS 5/Art. 9, Part 6, Subpart 1 heading new)
10 SUBPART 1. DEFAULT AND ENFORCEMENT OF SECURITY INTEREST
11 (810 ILCS 5/9-601 new)
12 Sec. 9-601. Rights after default; judicial enforcement;
13 consignor or buyer of accounts, chattel paper, payment
14 intangibles, or promissory notes.
15 (a) Rights of secured party after default. After
16 default, a secured party has the rights provided in this Part
17 and, except as otherwise provided in Section 9-602, those
18 provided by agreement of the parties. A secured party:
19 (1) may reduce a claim to judgment, foreclose, or
20 otherwise enforce the claim, security interest, or
21 agricultural lien by any available judicial procedure;
22 and
23 (2) if the collateral is documents, may proceed
24 either as to the documents or as to the goods they cover.
25 (b) Rights and duties of secured party in possession or
26 control. A secured party in possession of collateral or
27 control of collateral under Section 9-104, 9-105, 9-106, or
28 9-107 has the rights and duties provided in Section 9-207.
29 (c) Rights cumulative; simultaneous exercise. The
30 rights under subsections (a) and (b) are cumulative and may
31 be exercised simultaneously.
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1 (d) Rights of debtor and obligor. Except as otherwise
2 provided in subsection (g) and Section 9-605, after default,
3 a debtor and an obligor have the rights provided in this Part
4 and by agreement of the parties.
5 (e) Lien of levy after judgment. If a secured party has
6 reduced its claim to judgment, the lien of any levy that may
7 be made upon the collateral by virtue of a judgment relates
8 back to the earliest of:
9 (1) the date of perfection of the security interest
10 or agricultural lien in the collateral;
11 (2) the date of filing a financing statement
12 covering the collateral; or
13 (3) any date specified in a statute under which the
14 agricultural lien was created.
15 (f) Execution sale. A sale pursuant to a judgment is a
16 foreclosure of the security interest or agricultural lien by
17 judicial procedure within the meaning of this Section. A
18 secured party may purchase at the sale and thereafter hold
19 the collateral free of any other requirements of this
20 Article.
21 (g) Consignor or buyer of certain rights to payment.
22 Except as otherwise provided in Section 9-607(c), this Part
23 imposes no duties upon a secured party that is a consignor or
24 is a buyer of accounts, chattel paper, payment intangibles,
25 or promissory notes.
26 (810 ILCS 5/9-602 new)
27 Sec. 9-602. Waiver and variance of rights and duties.
28 Except as otherwise provided in Section 9-624, to the extent
29 that they give rights to a debtor or obligor and impose
30 duties on a secured party, the debtor or obligor may not
31 waive or vary the rules stated in the following listed
32 Sections:
33 (1) Section 9-207(b)(4)(C), which deals with use
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1 and operation of the collateral by the secured party;
2 (2) Section 9-210, which deals with requests for an
3 accounting and requests concerning a list of collateral
4 and statement of account;
5 (3) Section 9-607(c), which deals with collection
6 and enforcement of collateral;
7 (4) Sections 9-608(a) and 9-615(c) to the extent
8 that they deal with application or payment of noncash
9 proceeds of collection, enforcement, or disposition;
10 (5) Sections 9-608(a) and 9-615(d) to the extent
11 that they require accounting for or payment of surplus
12 proceeds of collateral;
13 (6) Section 9-609 to the extent that it imposes
14 upon a secured party that takes possession of collateral
15 without judicial process the duty to do so without breach
16 of the peace;
17 (7) Sections 9-610(b), 9-611, 9-613, and 9-614,
18 which deal with disposition of collateral;
19 (8) Section 9-615(f), which deals with calculation
20 of a deficiency or surplus when a disposition is made to
21 the secured party, a person related to the secured party,
22 or a secondary obligor;
23 (9) Section 9-616, which deals with explanation of
24 the calculation of a surplus or deficiency;
25 (10) Sections 9-620, 9-621, and 9-622, which deal
26 with acceptance of collateral in satisfaction of
27 obligation;
28 (11) Section 9-623, which deals with redemption of
29 collateral;
30 (12) Section 9-624, which deals with permissible
31 waivers; and
32 (13) Sections 9-625 and 9-626, which deal with the
33 secured party's liability for failure to comply with this
34 Article.
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1 (810 ILCS 5/9-603 new)
2 Sec. 9-603. Agreement on standards concerning rights and
3 duties.
4 (a) Agreed standards. The parties may determine by
5 agreement the standards measuring the fulfillment of the
6 rights of a debtor or obligor and the duties of a secured
7 party under a rule stated in Section 9-602 if the standards
8 are not manifestly unreasonable.
9 (b) Agreed standards inapplicable to breach of peace.
10 Subsection (a) does not apply to the duty under Section 9-609
11 to refrain from breaching the peace.
12 (810 ILCS 5/9-604 new)
13 Sec. 9-604. Procedure if security agreement covers real
14 property or fixtures.
15 (a) Enforcement: personal and real property. If a
16 security agreement covers both personal and real property, a
17 secured party may proceed:
18 (1) under this Part as to the personal property
19 without prejudicing any rights with respect to the real
20 property; or
21 (2) as to both the personal property and the real
22 property in accordance with the rights with respect to
23 the real property, in which case the other provisions of
24 this Part do not apply.
25 (b) Enforcement: fixtures. Subject to subsection (c),
26 if a security agreement covers goods that are or become
27 fixtures, a secured party may proceed:
28 (1) under this Part; or
29 (2) in accordance with the rights with respect to
30 real property, in which case the other provisions of this
31 Part do not apply.
32 (c) Removal of fixtures. Subject to the other
33 provisions of this Part, if a secured party holding a
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1 security interest in fixtures has priority over all owners
2 and encumbrancers of the real property, the secured party,
3 after default, may remove the collateral from the real
4 property.
5 (d) Injury caused by removal. A secured party that
6 removes collateral shall promptly reimburse any encumbrancer
7 or owner of the real property, other than the debtor, for the
8 cost of repair of any physical injury caused by the removal.
9 The secured party need not reimburse the encumbrancer or
10 owner for any diminution in value of the real property caused
11 by the absence of the goods removed or by any necessity of
12 replacing them. A person entitled to reimbursement may
13 refuse permission to remove until the secured party gives
14 adequate assurance for the performance of the obligation to
15 reimburse.
16 (810 ILCS 5/9-605 new)
17 Sec. 9-605. Unknown debtor or secondary obligor. A
18 secured party does not owe a duty based on its status as
19 secured party:
20 (1) to a person that is a debtor or obligor, unless
21 the secured party knows:
22 (A) that the person is a debtor or obligor;
23 (B) the identity of the person; and
24 (C) how to communicate with the person; or
25 (2) to a secured party or lienholder that has filed
26 a financing statement against a person, unless the
27 secured party knows:
28 (A) that the person is a debtor; and
29 (B) the identity of the person.
30 (810 ILCS 5/9-606 new)
31 Sec. 9-606. Time of default for agricultural lien. For
32 purposes of this Part, a default occurs in connection with an
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1 agricultural lien at the time the secured party becomes
2 entitled to enforce the lien in accordance with the statute
3 under which it was created.
4 (810 ILCS 5/9-607 new)
5 Sec. 9-607. Collection and enforcement by secured party.
6 (a) Collection and enforcement generally. If so agreed,
7 and in any event after default, a secured party:
8 (1) may notify an account debtor or other person
9 obligated on collateral to make payment or otherwise
10 render performance to or for the benefit of the secured
11 party;
12 (2) may take any proceeds to which the secured
13 party is entitled under Section 9-315;
14 (3) may enforce the obligations of an account
15 debtor or other person obligated on collateral and
16 exercise the rights of the debtor with respect to the
17 obligation of the account debtor or other person
18 obligated on collateral to make payment or otherwise
19 render performance to the debtor, and with respect to any
20 property that secures the obligations of the account
21 debtor or other person obligated on the collateral;
22 (4) if it holds a security interest in a deposit
23 account perfected by control under Section 9-104(a)(1),
24 may apply the balance of the deposit account to the
25 obligation secured by the deposit account; and
26 (5) if it holds a security interest in a deposit
27 account perfected by control under Section 9-104(a)(2) or
28 (3), may instruct the bank to pay the balance of the
29 deposit account to or for the benefit of the secured
30 party.
31 (b) Nonjudicial enforcement of mortgage. If necessary
32 to enable a secured party to exercise under subsection (a)(3)
33 the right of a debtor to enforce a mortgage nonjudicially,
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1 the secured party may record in the office in which a record
2 of the mortgage is recorded:
3 (1) a copy of the security agreement that creates
4 or provides for a security interest in the obligation
5 secured by the mortgage; and
6 (2) the secured party's sworn affidavit in
7 recordable form stating that:
8 (A) a default has occurred; and
9 (B) the secured party is entitled to enforce
10 the mortgage nonjudicially.
11 (c) Commercially reasonable collection and enforcement.
12 A secured party shall proceed in a commercially reasonable
13 manner if the secured party:
14 (1) undertakes to collect from or enforce an
15 obligation of an account debtor or other person obligated
16 on collateral; and
17 (2) is entitled to charge back uncollected
18 collateral or otherwise to full or limited recourse
19 against the debtor or a secondary obligor.
20 (d) Expenses of collection and enforcement. A secured
21 party may deduct from the collections made pursuant to
22 subsection (c) reasonable expenses of collection and
23 enforcement, including reasonable attorney's fees and legal
24 expenses incurred by the secured party.
25 (e) Duties to secured party not affected. This Section
26 does not determine whether an account debtor, bank, or other
27 person obligated on collateral owes a duty to a secured
28 party.
29 (810 ILCS 5/9-608 new)
30 Sec. 9-608. Application of proceeds of collection or
31 enforcement; liability for deficiency and right to surplus.
32 (a) Application of proceeds, surplus, and deficiency if
33 obligation secured. If a security interest or agricultural
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1 lien secures payment or performance of an obligation, the
2 following rules apply:
3 (1) A secured party shall apply or pay over for
4 application the cash proceeds of collection or
5 enforcement under Section 9-607 in the following order
6 to:
7 (A) the reasonable expenses of collection and
8 enforcement and, to the extent provided for by
9 agreement and not prohibited by law, reasonable
10 attorney's fees and legal expenses incurred by the
11 secured party;
12 (B) the satisfaction of obligations secured by
13 the security interest or agricultural lien under
14 which the collection or enforcement is made; and
15 (C) the satisfaction of obligations secured by
16 any subordinate security interest in or other lien
17 on the collateral subject to the security interest
18 or agricultural lien under which the collection or
19 enforcement is made if the secured party receives an
20 authenticated demand for proceeds before
21 distribution of the proceeds is completed.
22 (2) If requested by a secured party, a holder of a
23 subordinate security interest or other lien shall furnish
24 reasonable proof of the interest or lien within a
25 reasonable time. Unless the holder complies, the secured
26 party need not comply with the holder's demand under
27 paragraph (1)(C).
28 (3) A secured party need not apply or pay over for
29 application noncash proceeds of collection and
30 enforcement under Section 9-607 unless the failure to do
31 so would be commercially unreasonable. A secured party
32 that applies or pays over for application noncash
33 proceeds shall do so in a commercially reasonable manner.
34 (4) A secured party shall account to and pay a
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1 debtor for any surplus, and the obligor is liable for any
2 deficiency.
3 (b) No surplus or deficiency in sales of certain rights
4 to payment. If the underlying transaction is a sale of
5 accounts, chattel paper, payment intangibles, or promissory
6 notes, the debtor is not entitled to any surplus, and the
7 obligor is not liable for any deficiency.
8 (810 ILCS 5/9-609 new)
9 Sec. 9-609. Secured party's right to take possession
10 after default.
11 (a) Possession; rendering equipment unusable;
12 disposition on debtor's premises. After default, a secured
13 party:
14 (1) may take possession of the collateral; and
15 (2) without removal, may render equipment unusable
16 and dispose of collateral on a debtor's premises under
17 Section 9-610.
18 (b) Judicial and nonjudicial process. A secured party
19 may proceed under subsection (a):
20 (1) pursuant to judicial process; or
21 (2) without judicial process, if it proceeds
22 without breach of the peace.
23 (c) Assembly of collateral. If so agreed, and in any
24 event after default, a secured party may require the debtor
25 to assemble the collateral and make it available to the
26 secured party at a place to be designated by the secured
27 party which is reasonably convenient to both parties.
28 (810 ILCS 5/9-610 new)
29 Sec. 9-610. Disposition of collateral after default.
30 (a) Disposition after default. After default, a secured
31 party may sell, lease, license, or otherwise dispose of any
32 or all of the collateral in its present condition or
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1 following any commercially reasonable preparation or
2 processing.
3 (b) Commercially reasonable disposition. Every aspect
4 of a disposition of collateral, including the method, manner,
5 time, place, and other terms, must be commercially
6 reasonable. If commercially reasonable, a secured party may
7 dispose of collateral by public or private proceedings, by
8 one or more contracts, as a unit or in parcels, and at any
9 time and place and on any terms.
10 (c) Purchase by secured party. A secured party may
11 purchase collateral:
12 (1) at a public disposition; or
13 (2) at a private disposition only if the collateral
14 is of a kind that is customarily sold on a recognized
15 market or the subject of widely distributed standard
16 price quotations.
17 (d) Warranties on disposition. A contract for sale,
18 lease, license, or other disposition includes the warranties
19 relating to title, possession, quiet enjoyment, and the like
20 which by operation of law accompany a voluntary disposition
21 of property of the kind subject to the contract.
22 (e) Disclaimer of warranties. A secured party may
23 disclaim or modify warranties under subsection (d):
24 (1) in a manner that would be effective to disclaim
25 or modify the warranties in a voluntary disposition of
26 property of the kind subject to the contract of
27 disposition; or
28 (2) by communicating to the purchaser a record
29 evidencing the contract for disposition and including an
30 express disclaimer or modification of the warranties.
31 (f) Record sufficient to disclaim warranties. A record
32 is sufficient to disclaim warranties under subsection (e) if
33 it indicates "There is no warranty relating to title,
34 possession, quiet enjoyment, or the like in this disposition"
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1 or uses words of similar import.
2 (810 ILCS 5/9-611 new)
3 Sec. 9-611. Notification before disposition of
4 collateral.
5 (a) "Notification date." In this Section, "notification
6 date" means the earlier of the date on which:
7 (1) a secured party sends to the debtor and any
8 secondary obligor an authenticated notification of
9 disposition; or
10 (2) the debtor and any secondary obligor waive the
11 right to notification.
12 (b) Notification of disposition required. Except as
13 otherwise provided in subsection (d), a secured party that
14 disposes of collateral under Section 9-610 shall send to the
15 persons specified in subsection (c) a reasonable
16 authenticated notification of disposition.
17 (c) Persons to be notified. To comply with subsection
18 (b), the secured party shall send an authenticated
19 notification of disposition to:
20 (1) the debtor;
21 (2) any secondary obligor; and
22 (3) if the collateral is other than consumer goods:
23 (A) any other person from which the secured
24 party has received, before the notification date, an
25 authenticated notification of a claim of an interest
26 in the collateral;
27 (B) any other secured party or lienholder
28 that, 10 days before the notification date, held a
29 security interest in or other lien on the collateral
30 perfected by the filing of a financing statement
31 that:
32 (i) identified the collateral;
33 (ii) was indexed under the debtor's name
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1 as of that date; and
2 (iii) was filed in the office in which to
3 file a financing statement against the debtor
4 covering the collateral as of that date; and
5 (C) any other secured party that, 10 days
6 before the notification date, held a security
7 interest in the collateral perfected by compliance
8 with a statute, regulation, or treaty described in
9 Section 9-311(a).
10 (d) Subsection (b) inapplicable: perishable collateral;
11 recognized market. Subsection (b) does not apply if the
12 collateral is perishable or threatens to decline speedily in
13 value or is of a type customarily sold on a recognized
14 market.
15 (e) Compliance with subsection (c)(3)(B). A secured
16 party complies with the requirement for notification
17 prescribed by subsection (c)(3)(B) if:
18 (1) not later than 20 days or earlier than 30 days
19 before the notification date, the secured party requests,
20 in a commercially reasonable manner, information
21 concerning financing statements indexed under the
22 debtor's name in the office indicated in subsection
23 (c)(3)(B); and
24 (2) before the notification date, the secured
25 party:
26 (A) did not receive a response to the request
27 for information; or
28 (B) received a response to the request for
29 information and sent an authenticated notification
30 of disposition to each secured party or other
31 lienholder named in that response whose financing
32 statement covered the collateral.
33 (810 ILCS 5/9-612 new)
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1 Sec. 9-612. Timeliness of notification before
2 disposition of collateral.
3 (a) Reasonable time is question of fact. Except as
4 otherwise provided in subsection (b), whether a notification
5 is sent within a reasonable time is a question of fact. The
6 limitation of the rule in subsection (b) to transactions
7 other than consumer-goods transactions is intended to leave
8 to the court the determination of the proper rules in
9 consumer-goods transactions. The court may not infer from
10 that limitation the nature of the proper rule in
11 consumer-goods transactions and may continue to apply
12 established approaches.
13 (b) 10-day period sufficient in non-consumer
14 transaction. In a transaction other than a consumer
15 transaction, a notification of disposition sent after default
16 and 10 days or more before the earliest time of disposition
17 set forth in the notification is sent within a reasonable
18 time before the disposition.
19 (810 ILCS 5/9-613 new)
20 Sec. 9-613. Contents and form of notification before
21 disposition of collateral: general. Except in a
22 consumer-goods transaction, the following rules apply:
23 (1) The contents of a notification of disposition
24 are sufficient if the notification:
25 (A) describes the debtor and the secured
26 party;
27 (B) describes the collateral that is the
28 subject of the intended disposition;
29 (C) states the method of intended disposition;
30 (D) states that the debtor is entitled to an
31 accounting of the unpaid indebtedness and states the
32 charge, if any, for an accounting; and
33 (E) states the time and place of a public
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1 disposition or the time after which any other
2 disposition is to be made.
3 (2) Whether the contents of a notification that
4 lacks any of the information specified in paragraph (1)
5 are nevertheless sufficient is a question of fact.
6 (3) The contents of a notification providing
7 substantially the information specified in paragraph (1)
8 are sufficient, even if the notification is accompanied
9 by or combined other notification or includes:
10 (A) information not specified by that
11 paragraph; or
12 (B) minor errors that are not seriously
13 misleading.
14 (4) A particular phrasing of the notification is
15 not required.
16 (5) The following form of notification and the form
17 appearing in Section 9-614(4), when completed, each
18 provides sufficient information:
19 NOTIFICATION OF DISPOSITION OF COLLATERAL
20 To: ..................................... (Name of
21 debtor, obligor, or other person to which the
22 notification is sent)
23 From: ................................... (Name,
24 address, and telephone number of secured party)
25 Name of Debtor(s): ..................... (Include
26 only if debtor(s) are not an addressee)
27 For a public disposition:
28 We will sell or lease or license, as applicable, the
29 ............................ (describe collateral) to the
30 highest qualified bidder in public as follows:
31 Day and Date: ...................................
32 Time: ...........................................
33 Place: ..........................................
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1 For a private disposition:
2 We will sell (or lease or license, as applicable)
3 the ........................... (describe collateral)
4 privately sometime after ................ (day and date).
5 You are entitled to an accounting of the unpaid
6 indebtedness secured by the property that we intend to
7 sell or lease or license, as applicable for a charge of
8 $................. You may request an accounting by
9 calling us at .................. (telephone number).
10 (810 ILCS 5/9-614 new)
11 Sec. 9-614. Contents and form of notification before
12 disposition of collateral: consumer-goods transaction. In a
13 consumer-goods transaction, the following rules apply:
14 (1) A notification of disposition must provide the
15 following information:
16 (A) the information specified in Section
17 9-613(1);
18 (B) a description of any liability for a
19 deficiency of the person to which the notification
20 is sent;
21 (C) a telephone number from which the amount
22 that must be paid to the secured party to redeem the
23 collateral under Section 9-623 is available; and
24 (D) a telephone number or mailing address from
25 which additional information concerning the
26 disposition and the obligation secured is available.
27 (2) A particular phrasing of the notification is
28 not required.
29 (3) The contents of a notification providing
30 substantially the information specified in paragraph (1)
31 are sufficient, even if the notification:
32 (A) is accompanied by or combined with other
33 notifications;
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1 (B) includes information not specified by that
2 paragraph; or
3 (C) includes minor errors that are not
4 seriously misleading.
5 (4) The following form of notification, when
6 completed, provides sufficient information:
7 ............. (Name and address of secured party)
8 ............. (Date)
9 NOTICE OF OUR PLAN TO SELL PROPERTY
10 ......................................................
11 (Name and address of any obligor who is also a debtor)
12 Subject: ..................................
13 (Identification of Transaction)
14 We have your ..................... (describe
15 collateral), because you broke promises in our agreement.
16 For a public disposition:
17 We will sell ....................... (describe
18 collateral) at public sale. A sale could include a lease
19 or license. The sale will be held as follows:
20 Date: ................................
21 Time: ................................
22 Place: ................................
23 You may attend the sale and bring bidders if you
24 want.
25 For a private disposition:
26 We will sell ........................... (describe
27 collateral) at private sale sometime after
28 .................... (date). A sale could include a
29 lease or license.
30 The money that we get from the sale (after paying
31 our costs) will reduce the amount you owe. If we get
32 less money than you owe, you ............ (will or will
33 not, as applicable) still owe us the difference. If we
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1 get more money than you owe, you will get the extra
2 money, unless we must pay it to someone else.
3 You can get the property back at any time before we
4 sell it by paying us the full amount you owe (not just
5 the past due payments), including our expenses. To learn
6 the exact amount you must pay, call us at
7 ................ (telephone number).
8 If you want us to explain to you in writing how we
9 have figured the amount that you owe us, you may call us
10 at .................. (telephone number) or write us at
11 .................................... (secured party's
12 address) and request a written explanation. We will
13 charge you $ ........... for the explanation if we sent
14 you another written explanation of the amount you owe us
15 within the last six months.
16 If you need more information about the sale call us
17 at .................. (telephone number) or write us at
18 ......................... (secured party's address).
19 We are sending this notice to the following other
20 people who have an interest ......................
21 (describe collateral) or who owe money under your
22 agreement:
23 .................................................
24 (Names of all other debtors and obligors, if any)
25 (5) A notification in the form of paragraph (4) is
26 sufficient, even if it includes errors in information not
27 required by paragraph (1).
28 (6) If a notification under this Section is not in
29 the form of paragraph (4), law other than this Article
30 determines the effect of including information not
31 required by paragraph (1).
32 (810 ILCS 5/9-615 new)
33 Sec. 9-615. Application of proceeds of disposition;
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1 liability for deficiency and right to surplus.
2 (a) Application of proceeds. A secured party shall
3 apply or pay over for application the cash proceeds of
4 disposition in the following order to:
5 (1) the reasonable expenses of retaking, holding,
6 preparing for disposition, processing, and disposing,
7 and, to the extent provided for by agreement and not
8 prohibited by law, reasonable attorney's fees and legal
9 expenses incurred by the secured party;
10 (2) the satisfaction of obligations secured by the
11 security interest or agricultural lien under which the
12 disposition is made;
13 (3) the satisfaction of obligations secured by any
14 subordinate security interest in or other subordinate
15 lien on the collateral if:
16 (A) the secured party receives from the holder
17 of the subordinate security interest or other lien
18 an authenticated demand for proceeds before
19 distribution of the proceeds is completed; and
20 (B) in a case in which a consignor has an
21 interest in the collateral, the subordinate security
22 interest or other lien is senior to the interest of
23 the consignor; and
24 (4) a secured party that is a consignor of the
25 collateral if the secured party receives from the
26 consignor an authenticated demand for proceeds before
27 distribution of the proceeds is completed.
28 (b) Proof of subordinate interest. If requested by a
29 secured party, a holder of a subordinate security interest or
30 other lien shall furnish reasonable proof of the interest or
31 lien within a reasonable time. Unless the holder does so,
32 the secured party need not comply with the holder's demand
33 under subsection (a)(3).
34 (c) Application of noncash proceeds. A secured party
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1 need not apply or pay over for application noncash proceeds
2 of disposition under this Section unless the failure to do so
3 would be commercially unreasonable. A secured party that
4 applies or pays over for application noncash proceeds shall
5 do so in a commercially reasonable manner.
6 (d) Surplus or deficiency if obligation secured. If the
7 security interest under which a disposition is made secures
8 payment or performance of an obligation, after making the
9 payments and applications required by subsection (a) and
10 permitted by subsection (c):
11 (1) unless subsection (a)(4) requires the secured
12 party to apply or pay over cash proceeds to a consignor,
13 the secured party shall account to and pay a debtor for
14 any surplus; and
15 (2) the obligor is liable for any deficiency.
16 (e) No surplus or deficiency in sales of certain rights
17 to payment. If the underlying transaction is a sale of
18 accounts, chattel paper, payment intangibles, or promissory
19 notes:
20 (1) the debtor is not entitled to any surplus; and
21 (2) the obligor is not liable for any deficiency.
22 (f) Calculation of surplus or deficiency in disposition
23 to person related to secured party. The surplus or
24 deficiency following a disposition is calculated based on the
25 amount of proceeds that would have been realized in a
26 disposition complying with this Part and described in
27 subsection (f)(2) of this Section to a transferee other than
28 the secured party, a person related to the secured party, or
29 a secondary obligor if:
30 (1) the transferee in the disposition is the
31 secured party, a person related to the secured party, or
32 a secondary obligor; and
33 (2) the amount of proceeds of the disposition is
34 significantly below the range of proceeds that would have
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1 been received from a complying disposition by a forced
2 sale without reserve to a willing buyer other than the
3 secured party, a person related to the secured party, or
4 a secondary obligor.
5 (g) Cash proceeds received by junior secured party. A
6 secured party that receives cash proceeds of a disposition in
7 good faith and without knowledge that the receipt violates
8 the rights of the holder of a security interest or other lien
9 that is not subordinate to the security interest or
10 agricultural lien under which the disposition is made:
11 (1) takes the cash proceeds free of the security
12 interest or other lien;
13 (2) is not obligated to apply the proceeds of the
14 disposition to the satisfaction of obligations secured by
15 the security interest or other lien; and
16 (3) is not obligated to account to or pay the
17 holder of the security interest or other lien for any
18 surplus.
19 (810 ILCS 5/9-616 new)
20 Sec. 9-616. Explanation of calculation of surplus or
21 deficiency.
22 (a) Definitions. In this Section:
23 (1) "Explanation" means a writing that:
24 (A) states whether a surplus or deficiency is
25 owed and the amount of the surplus, if applicable;
26 (B) states, if applicable, that future debits,
27 credits, charges, including additional credit
28 service charges or interest, rebates, and expenses
29 may affect the amount of the surplus or deficiency;
30 (C) provides a telephone number or mailing
31 address from which the debtor or consumer obligor
32 may obtain additional information concerning the
33 transaction and from which such person may request
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1 the amount of the deficiency and further information
2 regarding how the secured party calculated the
3 surplus or deficiency; and
4 (D) at the sender's option, the information
5 set forth in subsection (c).
6 (2) "Request" means a record:
7 (A) authenticated by a debtor or consumer
8 obligor;
9 (B) requesting that the recipient provide
10 information of how it calculated the surplus or
11 deficiency; and
12 (C) sent after disposition of the collateral
13 under Section 9-610.
14 (b) Explanation of calculation. In a consumer-goods
15 transaction in which the debtor is entitled to a surplus or a
16 consumer obligor is liable for a deficiency under Section
17 9-615, the secured party shall:
18 (1) send an explanation to the debtor or consumer
19 obligor, as applicable, after the disposition and:
20 (A) before or when the secured party accounts
21 to the debtor and pays any surplus or first makes
22 written demand on the consumer obligor after the
23 disposition for payment of the deficiency, other
24 than in instances in which such demand is made by a
25 third-party debt collector covered by the Fair Debt
26 Collection Practices Act; and
27 (B) within 14 days after receipt of a request
28 made by the debtor or consumer obligor within one
29 year after the secured party has given an
30 explanation under this Section or notice to such
31 debtor or consumer obligor under Section 9-614 of
32 this Article; or
33 (2) in the case of a consumer obligor who is liable
34 for a deficiency, within 14 days after receipt of a
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1 request, send to the consumer obligor a record waiving
2 the secured party's right to a deficiency.
3 (c) Required information for response to request. To
4 comply with a request, the secured party must provide a
5 response in writing which includes the following information:
6 (1) the aggregate amount of obligations secured by
7 the security interest under which the disposition was
8 made, and, if the amount reflects a rebate of unearned
9 interest or credit service charge, an indication of that
10 fact, calculated as of a specified date:
11 (A) if the secured party takes or receives
12 possession of the collateral after default, not more
13 than 35 days before the secured party takes or
14 receives possession; or
15 (B) if the secured party takes or receives
16 possession of the collateral before default or does
17 not take possession of the collateral, not more than
18 35 days before the disposition;
19 (2) the amount of proceeds of the disposition;
20 (3) the aggregate amount of the obligations after
21 deducting the amount of proceeds;
22 (4) the amount, in the aggregate or by type, and
23 types of expenses, including expenses of retaking,
24 holding, preparing for disposition, processing, and
25 disposing of the collateral, and attorney's fees secured
26 by the collateral which are known to the secured party
27 and relate to the current disposition;
28 (5) the amount, in the aggregate or by type, and
29 types of credits, including rebates of interest or credit
30 service charges, to which the obligor is known to be
31 entitled and which are not reflected in the amount in
32 paragraph (1); and
33 (6) the amount of the surplus or deficiency.
34 (d) Substantial compliance. A particular phrasing of
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1 the explanation or response to a request is not required. An
2 explanation or a response to a request complying
3 substantially with the requirements of this Section is
4 sufficient even if it is:
5 (1) accompanied by or combined with other
6 notifications;
7 (2) includes information not specified by this
8 Section;
9 (3) includes minor errors that are not seriously
10 misleading; or
11 (4) includes errors in information not required by
12 this Section.
13 (e) Charges for responses. A debtor or consumer obligor
14 is entitled without charge to one response to a request under
15 this Section during any six-month period in which the secured
16 party did not send to the debtor or consumer obligor an
17 explanation pursuant to subsection (b)(1). The secured party
18 may require payment of a charge not exceeding $25 for each
19 additional response.
20 (810 ILCS 5/9-617 new)
21 Sec. 9-617. Rights of transferee of collateral.
22 (a) Effects of disposition. A secured party's
23 disposition of collateral after default:
24 (1) transfers to a transferee for value all of the
25 debtor's rights in the collateral;
26 (2) discharges the security interest under which
27 the disposition is made; and
28 (3) discharges any subordinate security interest or
29 other subordinate lien.
30 (b) Rights of good-faith transferee. A transferee that
31 acts in good faith takes free of the rights and interests
32 described in subsection (a), even if the secured party fails
33 to comply with this Article or the requirements of any
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1 judicial proceeding.
2 (c) Rights of other transferee. If a transferee does
3 not take free of the rights and interests described in
4 subsection (a), the transferee takes the collateral subject
5 to:
6 (1) the debtor's rights in the collateral;
7 (2) the security interest or agricultural lien
8 under which the disposition is made; and
9 (3) any other security interest or other lien.
10 (810 ILCS 5/9-618 new)
11 Sec. 9-618. Rights and duties of certain secondary
12 obligors.
13 (a) Rights and duties of secondary obligor. A secondary
14 obligor acquires the rights and becomes obligated to perform
15 the duties of the secured party after the secondary obligor:
16 (1) receives an assignment of a secured obligation
17 from the secured party;
18 (2) receives a transfer of collateral from the
19 secured party and agrees to accept the rights and assume
20 the duties of the secured party; or
21 (3) is subrogated to the rights of a secured party
22 with respect to collateral.
23 (b) Effect of assignment, transfer, or subrogation. An
24 assignment, transfer, or subrogation described in subsection
25 (a):
26 (1) is not a disposition of collateral under
27 Section 9-610; and
28 (2) relieves the secured party of further duties
29 under this Article.
30 (810 ILCS 5/9-619 new)
31 Sec. 9-619. Transfer of record or legal title.
32 (a) "Transfer statement." In this Section, "transfer
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1 statement" means a record authenticated by a secured party
2 stating:
3 (1) that the debtor has defaulted in connection
4 with an obligation secured by specified collateral;
5 (2) that the secured party has exercised its
6 post-default remedies with respect to the collateral;
7 (3) that, by reason of the exercise, a transferee
8 has acquired the rights of the debtor in the collateral;
9 and
10 (4) the name and mailing address of the secured
11 party, debtor, and transferee.
12 (b) Effect of transfer statement. A transfer statement
13 entitles the transferee to the transfer of record of all
14 rights of the debtor in the collateral specified in the
15 statement in any official filing, recording, registration, or
16 certificate-of-title system covering the collateral. If a
17 transfer statement is presented with the applicable fee and
18 request form to the official or office responsible for
19 maintaining the system, the official or office shall:
20 (1) accept the transfer statement;
21 (2) promptly amend its records to reflect the
22 transfer; and
23 (3) if applicable, issue a new appropriate
24 certificate of title in the name of the transferee.
25 (c) Transfer not a disposition; no relief of secured
26 party's duties. A transfer of the record or legal title to
27 collateral to a secured party under subsection (b) or
28 otherwise is not of itself a disposition of collateral under
29 this Article and does not of itself relieve the secured party
30 of its duties under this Article.
31 (810 ILCS 5/9-620 new)
32 Sec. 9-620. Acceptance of collateral in full or partial
33 satisfaction of obligation; compulsory disposition of
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1 collateral.
2 (a) Conditions to acceptance in satisfaction. Except as
3 otherwise provided in subsection (g), a secured party may
4 accept collateral in full or partial satisfaction of the
5 obligation it secures only if:
6 (1) the debtor consents to the acceptance under
7 subsection (c);
8 (2) the secured party does not receive, within the
9 time set forth in subsection (d), a notification of
10 objection to the proposal authenticated by:
11 (A) a person to which the secured party was
12 required to send a proposal under Section 9-621; or
13 (B) any other person, other than the debtor,
14 holding an interest in the collateral subordinate to
15 the security interest that is the subject of the
16 proposal;
17 (3) if the collateral is consumer goods, the
18 collateral is not in the possession of the debtor when
19 the debtor consents to the acceptance; and
20 (4) subsection (e) does not require the secured
21 party to dispose of the collateral or the debtor waives
22 the requirement pursuant to Section 9-624.
23 (b) Purported acceptance ineffective. A purported or
24 apparent acceptance of collateral under this Section is
25 ineffective unless:
26 (1) the secured party consents to the acceptance in
27 an authenticated record or sends a proposal to the
28 debtor; and
29 (2) the conditions of subsection (a) are met.
30 (c) Debtor's consent. For purposes of this Section:
31 (1) a debtor consents to an acceptance of
32 collateral in partial satisfaction of the obligation it
33 secures only if the debtor agrees to the terms of the
34 acceptance in a record authenticated after default; and
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1 (2) a debtor consents to an acceptance of
2 collateral in full satisfaction of the obligation it
3 secures only if the debtor agrees to the terms of the
4 acceptance in a record authenticated after default or the
5 secured party:
6 (A) sends to the debtor after default a
7 proposal that is unconditional or subject only to a
8 condition that collateral not in the possession of
9 the secured party be preserved or maintained;
10 (B) in the proposal, proposes to accept
11 collateral in full satisfaction of the obligation it
12 secures; and
13 (C) does not receive a notification of
14 objection authenticated by the debtor within 20 days
15 after the proposal is sent.
16 (d) Effectiveness of notification. To be effective
17 under subsection (a)(2), a notification of objection must be
18 received by the secured party:
19 (1) in the case of a person to which the proposal
20 was sent pursuant to Section 9-621, within 20 days after
21 notification was sent to that person; and
22 (2) in other cases:
23 (A) within 20 days after the last notification
24 was sent pursuant to Section 9-621; or
25 (B) if a notification was not sent, before the
26 debtor consents to the acceptance under subsection
27 (c).
28 (e) Mandatory disposition of consumer goods. A secured
29 party that has taken possession of collateral shall dispose
30 of the collateral pursuant to Section 9-610 within the time
31 specified in subsection (f) if:
32 (1) 60 percent of the cash price has been paid in
33 the case of a purchase-money security interest in
34 consumer goods; or
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1 (2) 60 percent of the principal amount of the
2 obligation secured has been paid in the case of a
3 non-purchase-money security interest in consumer goods.
4 (f) Compliance with mandatory disposition requirement.
5 To comply with subsection (e), the secured party shall
6 dispose of the collateral:
7 (1) within 90 days after taking possession; or
8 (2) within any longer period to which the debtor
9 and all secondary obligors have agreed in an agreement to
10 that effect entered into and authenticated after default.
11 (g) No partial satisfaction in consumer transaction. In
12 a consumer transaction, a secured party may not accept
13 collateral in partial satisfaction of the obligation it
14 secures.
15 (810 ILCS 5/9-621 new)
16 Sec. 9-621. Notification of proposal to accept
17 collateral.
18 (a) Persons to which proposal to be sent. A secured
19 party that desires to accept collateral in full or partial
20 satisfaction of the obligation it secures shall send its
21 proposal to:
22 (1) any person from which the secured party has
23 received, before the debtor consented to the acceptance,
24 an authenticated notification of a claim of an interest
25 in the collateral;
26 (2) any other secured party or lienholder that, 10
27 days before the debtor consented to the acceptance, held
28 a security interest in or other lien on the collateral
29 perfected by the filing of a financing statement that:
30 (A) identified the collateral;
31 (B) was indexed under the debtor's name as of
32 that date; and
33 (C) was filed in the office or offices in
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1 which to file a financing statement against the
2 debtor covering the collateral as of that date; and
3 (3) any other secured party that, 10 days before
4 the debtor consented to the acceptance, held a security
5 interest in the collateral perfected by compliance with a
6 statute, regulation, or treaty described in Section
7 9-311(a).
8 (b) Proposal to be sent to secondary obligor in partial
9 satisfaction. A secured party that desires to accept
10 collateral in partial satisfaction of the obligation it
11 secures shall send its proposal to any secondary obligor in
12 addition to the persons described in subsection (a).
13 (810 ILCS 5/9-622 new)
14 Sec. 9-622. Effect of acceptance of collateral.
15 (a) Effect of acceptance. A secured party's acceptance
16 of collateral in full or partial satisfaction of the
17 obligation it secures:
18 (1) discharges the obligation to the extent
19 consented to by the debtor;
20 (2) transfers to the secured party all of a
21 debtor's rights in the collateral;
22 (3) discharges the security interest or
23 agricultural lien that is the subject of the debtor's
24 consent and any subordinate security interest or other
25 subordinate lien; and
26 (4) terminates any other subordinate interest.
27 (b) Discharge of subordinate interest notwithstanding
28 noncompliance. A subordinate interest is discharged or
29 terminated under subsection (a), even if the secured party
30 fails to comply with this Article.
31 (810 ILCS 5/9-623 new)
32 Sec. 9-623. Right to redeem collateral.
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1 (a) Persons that may redeem. A debtor, any secondary
2 obligor, or any other secured party or lienholder may redeem
3 collateral.
4 (b) Requirements for redemption. To redeem collateral,
5 a person shall tender:
6 (1) fulfillment of all obligations secured by the
7 collateral; and
8 (2) the reasonable expenses and attorney's fees
9 described in Section 9-615(a)(1).
10 (c) When redemption may occur. A redemption may occur
11 at any time before a secured party:
12 (1) has collected collateral under Section 9-607;
13 (2) has disposed of collateral or entered into a
14 contract for its disposition under Section 9-610; or
15 (3) has accepted collateral in full or partial
16 satisfaction of the obligation it secures under Section
17 9-622.
18 (810 ILCS 5/9-624 new)
19 Sec. 9-624. Waiver.
20 (a) Waiver of disposition notification. A debtor or
21 secondary obligor may waive the right to notification of
22 disposition of collateral under Section 9-611 only by an
23 agreement to that effect entered into and authenticated after
24 default.
25 (b) Waiver of mandatory disposition. A debtor may waive
26 the right to require disposition of collateral under Section
27 9-620(e) only by an agreement to that effect entered into and
28 authenticated after default.
29 (c) Waiver of redemption right. A debtor or secondary
30 obligor may waive the right to redeem collateral under
31 Section 9-623 only by an agreement to that effect entered
32 into and authenticated after default.
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1 (810 ILCS 5/Art. 9, Part 6, Subpart 2 heading new)
2 SUBPART 2. NONCOMPLIANCE WITH ARTICLE
3 (810 ILCS 5/9-625 new)
4 Sec. 9-625. Remedies for secured party's failure to
5 comply with Article.
6 (a) Judicial orders concerning noncompliance. If it is
7 established that a secured party is not proceeding in
8 accordance with this Article, a court may order or restrain
9 collection, enforcement, or disposition of collateral on
10 appropriate terms and conditions.
11 (b) Damages for noncompliance. Subject to subsections
12 (c), (d), and (f), a person is liable for damages in the
13 amount of any loss caused by a failure to comply with this
14 Article. Loss caused by a failure to comply with a request
15 under Section 9-210 may include loss resulting from the
16 debtor's inability to obtain, or increased costs of,
17 alternative financing.
18 (c) Persons entitled to recover damages; statutory
19 damages in consumer-goods transaction. Except as otherwise
20 provided in Section 9-628:
21 (1) a person that, at the time of the failure, was
22 a debtor, was an obligor, or held a security interest in
23 or other lien on the collateral may recover in an
24 individual action damages under subsection (b) for its
25 loss; and
26 (2) if the collateral is consumer goods, a person
27 that was a debtor or a secondary obligor at the time a
28 secured party failed to comply with this Part may recover
29 in an individual action for that failure in any event an
30 amount not less than the credit service charge plus 10
31 percent of the principal amount of the obligation or the
32 time-price differential plus 10 percent of the cash
33 price.
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1 (d) Recovery when deficiency eliminated or reduced. A
2 debtor whose deficiency is eliminated under Section 9-626 may
3 recover damages for the loss of any surplus. However, a
4 debtor or secondary obligor whose deficiency is eliminated or
5 reduced under Section 9-626 may not otherwise recover under
6 subsection (b) for noncompliance with the provisions of this
7 Part relating to collection, enforcement, disposition, or
8 acceptance.
9 (e) Statutory damages: noncompliance with specified
10 provisions. In addition to any damages recoverable under
11 subsection (b), the debtor, consumer obligor, or person named
12 as a debtor in a filed record, as applicable, may recover in
13 an individual action $500 for each instance that a person:
14 (1) fails to comply with Section 9-208;
15 (2) fails to comply with Section 9-209;
16 (3) files a record that the person is not entitled
17 to file under Section 9-509(a); or
18 (4) fails to cause the secured party of record to
19 file or send a termination statement as required by
20 Section 9-513(a) or (c).
21 (f) Statutory damages: noncompliance with Section
22 9-210. A debtor or consumer obligor may recover damages
23 under subsection (b) and, in addition, may in an individual
24 action recover $500 in each case from a person that, without
25 reasonable cause, fails to comply with a request under
26 Section 9-210. A recipient of a request under Section 9-210
27 which never claimed an interest in the collateral or
28 obligations that are the subject of a request under that
29 Section has a reasonable excuse for failure to comply with
30 the request within the meaning of this subsection.
31 (g) Limitation of security interest: noncompliance with
32 Section 9-210. If a secured party fails to comply with a
33 request regarding a list of collateral or a statement of
34 account under Section 9-210, the secured party may claim a
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1 security interest only as shown in the statement included in
2 the request as against a person that is reasonably misled by
3 the failure.
4 (810 ILCS 5/9-626 new)
5 Sec. 9-626. Action in which deficiency or surplus is in
6 issue; applicable rules if amount of deficiency or surplus is
7 in issue. In an action in which the amount of a deficiency
8 or surplus is in issue, the following rules apply:
9 (1) A secured party need not prove compliance with
10 the provisions of this Part relating to collection,
11 enforcement, disposition, or acceptance unless the debtor
12 or a secondary obligor places the secured party's
13 compliance in issue.
14 (2) If the secured party's compliance is placed in
15 issue, the secured party has the burden of establishing
16 that the collection, enforcement, disposition, or
17 acceptance was conducted in accordance with this Part.
18 (3) Except as otherwise provided in Section 9-628,
19 if a secured party fails to prove that the collection,
20 enforcement, disposition, or acceptance was conducted in
21 accordance with the provisions of this Part relating to
22 collection, enforcement, disposition, or acceptance, the
23 liability of a debtor or a secondary obligor for a
24 deficiency is limited to an amount by which the sum of
25 the secured obligation, expenses, and attorney's fees
26 exceeds the greater of:
27 (A) the proceeds of the collection,
28 enforcement, disposition, or acceptance; or
29 (B) the amount of proceeds that would have
30 been realized had the noncomplying secured party
31 proceeded in accordance with the provisions of this
32 Part relating to collection, enforcement,
33 disposition, or acceptance.
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1 (4) For purposes of paragraph (3)(B), the amount of
2 proceeds that would have been realized is equal to the
3 sum of the secured obligation, expenses, and attorney's
4 fees unless the secured party proves that the amount is
5 less than that sum.
6 (5) If a deficiency or surplus is calculated under
7 Section 9-615(f), the debtor or obligor has the burden of
8 establishing that the amount of proceeds of the
9 disposition is significantly below the range of prices
10 that a complying disposition to a person other than the
11 secured party, a person related to the secured party, or
12 a secondary obligor would have brought.
13 (810 ILCS 5/9-627 new)
14 Sec. 9-627. Determination of whether conduct was
15 commercially reasonable.
16 (a) Greater amount obtainable under other circumstances;
17 no preclusion of commercial reasonableness. The fact that a
18 greater amount could have been obtained by a collection,
19 enforcement, disposition, or acceptance at a different time
20 or in a different method from that selected by the secured
21 party is not of itself sufficient to preclude the secured
22 party from establishing that the collection, enforcement,
23 disposition, or acceptance was made in a commercially
24 reasonable manner.
25 (b) Dispositions that are commercially reasonable. A
26 disposition of collateral is made in a commercially
27 reasonable manner if the disposition is made:
28 (1) in the usual manner on any recognized market;
29 (2) at the price current in any recognized market
30 at the time of the disposition; or
31 (3) otherwise in conformity with reasonable
32 commercial practices among dealers in the type of
33 property that was the subject of the disposition.
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1 (c) Approval by court or on behalf of creditors. A
2 collection, enforcement, disposition, or acceptance is
3 commercially reasonable if it has been approved:
4 (1) in a judicial proceeding;
5 (2) by a bona fide creditors' committee;
6 (3) by a representative of creditors; or
7 (4) by an assignee for the benefit of creditors.
8 (d) Approval under subsection (c) not necessary; absence
9 of approval has no effect. Approval under subsection (c)
10 need not be obtained, and lack of approval does not mean that
11 the collection, enforcement, disposition, or acceptance is
12 not commercially reasonable.
13 (810 ILCS 5/9-628 new)
14 Sec. 9-628. Nonliability and limitation on liability of
15 secured party; liability of secondary obligor.
16 (a) Limitation of liability to debtor or obligor.
17 Unless a secured party knows that a person is a debtor or
18 obligor, knows the identity of the person, and knows how to
19 communicate with the person:
20 (1) the secured party is not liable to the person,
21 or to a secured party or lienholder that has filed a
22 financing statement against the person, for failure to
23 comply with this Article; and
24 (2) the secured party's failure to comply with this
25 Article does not affect the liability of the person for a
26 deficiency.
27 (b) Limitation of liability to debtor, obligor, another
28 secured party, or lienholder. A secured party is not liable
29 because of its status as secured party:
30 (1) to a person that is a debtor or obligor, unless
31 the secured party knows:
32 (A) that the person is a debtor or obligor;
33 (B) the identity of the person; and
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1 (C) how to communicate with the person; or
2 (2) to a secured party or lienholder that has filed
3 a financing statement against a person, unless the
4 secured party knows:
5 (A) that the person is a debtor; and
6 (B) the identity of the person.
7 (c) Limitation of liability if reasonable belief that
8 transaction not a consumer-goods transaction or consumer
9 transaction. A secured party is not liable to any person,
10 and a person's liability for a deficiency is not affected,
11 because of any act or omission arising out of the secured
12 party's reasonable belief that a transaction is not a
13 consumer-goods transaction or a consumer transaction or that
14 goods are not consumer goods, if the secured party's belief
15 is based on its reasonable reliance on:
16 (1) a debtor's representation concerning the
17 purpose for which collateral was to be used, acquired, or
18 held; or
19 (2) an obligor's representation concerning the
20 purpose for which a secured obligation was incurred.
21 (d) Limitation of liability for statutory damages. A
22 secured party is not liable to any person under Section
23 9-625(c)(2) for its failure to comply with Section 9-616.
24 (e) Limitation of multiple liability for statutory
25 damages. A secured party is not liable under Section
26 9-625(c)(2) more than once with respect to any one secured
27 obligation.
28 (810 ILCS 5/Art. 9, Part 7 heading new)
29 PART 7. TRANSITION
30 (810 ILCS 5/9-701 new)
31 Sec. 9-701. Effective date. (See Section 99 of the
32 Public Act adding this Section to this Act.)
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1 (810 ILCS 5/9-702 new)
2 Sec. 9-702. Savings clause.
3 (a) Pre-effective-date transactions or liens. Except as
4 otherwise provided in this Part, this Act applies to a
5 transaction or lien within its scope, even if the transaction
6 or lien was entered into or created before the effective date
7 of this amendatory Act of the 91st General Assembly.
8 (b) Continuing validity. Except as otherwise provided
9 in subsection (c) and Sections 9-703 through 9-709:
10 (1) transactions and liens that were not governed
11 by Article 9 as it existed before the effective date of
12 this amendatory Act of the 91st General Assembly, were
13 validly entered into or created before the effective date
14 of this amendatory Act of the 91st General Assembly, and
15 would be subject to this Act if they had been entered
16 into or created after the effective date of this
17 amendatory Act of the 91st General Assembly, and the
18 rights, duties, and interests flowing from those
19 transactions and liens remain valid after the effective
20 date of this amendatory Act of the 91st General Assembly;
21 and
22 (2) the transactions and liens may be terminated,
23 completed, consummated, and enforced as required or
24 permitted by this Act or by the law that otherwise would
25 apply if this Act had not taken effect.
26 (c) Pre-effective-date proceedings. This amendatory Act
27 of the 91st General Assembly does not affect an action, case,
28 or proceeding commenced before the effective date of this
29 amendatory Act of the 91st General Assembly.
30 (810 ILCS 5/9-703 new)
31 Sec. 9-703. Security interest perfected before effective
32 date.
33 (a) Continuing priority over lien creditor: perfection
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1 requirements satisfied. A security interest that is
2 enforceable immediately before the effective date of this
3 amendatory Act of the 91st General Assembly and would have
4 priority over the rights of a person that becomes a lien
5 creditor at that time is a perfected security interest under
6 this Act if, on the effective date of this amendatory Act of
7 the 91st General Assembly, the applicable requirements for
8 enforceability and perfection under this Act are satisfied
9 without further action.
10 (b) Continuing priority over lien creditor: perfection
11 requirements not satisfied. Except as otherwise provided in
12 Section 9-705, if, immediately before the effective date of
13 this amendatory Act of the 91st General Assembly, a security
14 interest is enforceable and would have priority over the
15 rights of a person that becomes a lien creditor at that time,
16 but the applicable requirements for enforceability or
17 perfection under this Act are not satisfied on the effective
18 date of this amendatory Act of the 91st General Assembly, the
19 security interest:
20 (1) is a perfected security interest for one year
21 after the effective date of this amendatory Act of the
22 91st General Assembly;
23 (2) remains enforceable thereafter only if the
24 security interest becomes enforceable under Section 9-203
25 before the year expires; and
26 (3) remains perfected thereafter only if the
27 applicable requirements for perfection under this Act are
28 satisfied before the year expires.
29 (810 ILCS 5/9-704 new)
30 Sec. 9-704. Security interest unperfected before
31 effective date. A security interest that is enforceable
32 immediately before the effective date of this amendatory Act
33 of the 91st General Assembly but which would be subordinate
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1 to the rights of a person that becomes a lien creditor at
2 that time:
3 (1) remains an enforceable security interest for
4 one year after the effective date of this amendatory Act
5 of the 91st General Assembly;
6 (2) remains enforceable thereafter if the security
7 interest becomes enforceable under Section 9-203 on the
8 effective date of this amendatory Act of the 91st General
9 Assembly or within one year thereafter; and
10 (3) becomes perfected:
11 (A) without further action, on the effective date
12 of this amendatory Act of the 91st General Assembly if
13 the applicable requirements for perfection under this Act
14 are satisfied before or at that time; or
15 (B) when the applicable requirements for perfection
16 are satisfied if the requirements are satisfied after
17 that time.
18 (810 ILCS 5/9-705 new)
19 Sec. 9-705. Effectiveness of action taken before
20 effective date.
21 (a) Pre-effective-date action; one-year perfection
22 period unless reperfected. If action, other than the filing
23 of a financing statement, is taken before the effective date
24 of this amendatory Act of the 91st General Assembly and the
25 action would have resulted in priority of a security interest
26 over the rights of a person that becomes a lien creditor had
27 the security interest become enforceable before the effective
28 date of this amendatory Act of the 91st General Assembly, the
29 action is effective to perfect a security interest that
30 attaches under this Act within one year after the effective
31 date of this amendatory Act of the 91st General Assembly. An
32 attached security interest becomes unperfected one year after
33 the effective date of this amendatory Act of the 91st General
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1 Assembly unless the security interest becomes a perfected
2 security interest under this Act before the expiration of
3 that period.
4 (b) Pre-effective-date filing. The filing of a
5 financing statement before the effective date of this
6 amendatory Act of the 91st General Assembly is effective to
7 perfect a security interest to the extent the filing would
8 satisfy the applicable requirements for perfection under this
9 Act.
10 (c) Pre-effective-date filing in jurisdiction formerly
11 governing perfection. This Act does not render ineffective
12 an effective financing statement that, before the effective
13 date of this amendatory Act of the 91st General Assembly, is
14 filed and satisfies the applicable requirements for
15 perfection under the law of the jurisdiction governing
16 perfection as provided in Section 9-103 of the Uniform
17 Commercial Code as it existed before the effective date of
18 this amendatory Act of the 91st General Assembly. However,
19 except as otherwise provided in subsections (d) and (e) and
20 Section 9-706, the financing statement ceases to be effective
21 at the earlier of:
22 (1) the time the financing statement would have
23 ceased to be effective under the law of the jurisdiction
24 in which it is filed; or
25 (2) June 30, 2006.
26 (d) Continuation statement. The filing of a
27 continuation statement after the effective date of this
28 amendatory Act of the 91st General Assembly does not continue
29 the effectiveness of the financing statement filed before the
30 effective date of this amendatory Act of the 91st General
31 Assembly. However, upon the timely filing of a continuation
32 statement after the effective date of this amendatory Act of
33 the 91st General Assembly and in accordance with the law of
34 the jurisdiction governing perfection as provided in Part 3,
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1 the effectiveness of a financing statement filed in the same
2 office in that jurisdiction before the effective date of this
3 amendatory Act of the 91st General Assembly continues for the
4 period provided by the law of that jurisdiction.
5 (e) Application of subsection (c)(2) to transmitting
6 utility financing statement. Subsection (c)(2) applies to a
7 financing statement that, before the effective date of this
8 amendatory Act of the 91st General Assembly, is filed against
9 a transmitting utility and satisfies the applicable
10 requirements for perfection under the law of the jurisdiction
11 governing perfection as provided in Section 9-103, as that
12 Section existed before the effective date of this amendatory
13 Act of the 91st General Assembly, only to the extent that
14 Part 3 provides that the law of a jurisdiction other than
15 jurisdiction in which the financing statement is filed
16 governs perfection of a security interest in collateral
17 covered by the financing statement.
18 (f) Application of Part 5. A financing statement that
19 includes a financing statement filed before the effective
20 date of this amendatory Act of the 91st General Assembly and
21 a continuation statement filed after the effective date of
22 this amendatory Act of the 91st General Assembly is effective
23 only to the extent that it satisfies the requirements of Part
24 5 for an initial financing statement.
25 (810 ILCS 5/9-706 new)
26 Sec. 9-706. When initial financing statement suffices to
27 continue effectiveness of financing statement.
28 (a) Initial financing statement in lieu of continuation
29 statement. The filing of an initial financing statement in
30 the office specified in Section 9-501 continues the
31 effectiveness of a financing statement filed before the
32 effective date of this amendatory Act of the 91st General
33 Assembly if:
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1 (1) the filing of an initial financing statement in
2 that office would be effective to perfect a security
3 interest under this Act;
4 (2) the pre-effective-date financing statement was
5 filed in an office in another State or another office in
6 this State; and
7 (3) the initial financing statement satisfies
8 subsection (c).
9 (b) Period of continued effectiveness. The filing of an
10 initial financing statement under subsection (a) continues
11 the effectiveness of the pre-effective-date financing
12 statement:
13 (1) if the initial financing statement is filed
14 before the effective date of this amendatory Act of the
15 91st General Assembly, for the period provided in Section
16 9-403 of the Uniform Commercial Code as it existed before
17 the effective date of this amendatory Act of the 91st
18 General Assembly with respect to a financing statement;
19 and
20 (2) if the initial financing statement is filed
21 after the effective date of this amendatory Act of the
22 91st General Assembly, for the period provided in Section
23 9-515 with respect to an initial financing statement.
24 (c) Requirements for initial financing statement under
25 subsection (a). To be effective for purposes of subsection
26 (a), an initial financing statement must:
27 (1) satisfy the requirements of Part 5 for an
28 initial financing statement;
29 (2) identify the pre-effective-date financing
30 statement by indicating the office in which the financing
31 statement was filed and providing the dates of filing and
32 file numbers, if any, of the financing statement and of
33 the most recent continuation statement filed with respect
34 to the financing statement; and
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1 (3) indicate that the pre-effective-date financing
2 statement remains effective.
3 (810 ILCS 5/9-707 new)
4 Sec. 9-707. Amendment of pre-effective-date financing
5 statement.
6 (a) "Pre-effective-date financing statement". In this
7 Section, "pre-effective-date financing statement" means a
8 financing statement filed before the effective date of this
9 amendatory Act of the 91st General Assembly.
10 (b) Applicable law. After the effective date of this
11 amendatory Act of the 91st General Assembly, a person may add
12 or delete collateral covered by, continue or terminate the
13 effectiveness of, or otherwise amend the information provided
14 in, a pre-effective-date financing statement only in
15 accordance with the law of the jurisdiction governing
16 perfection as provided in Part 3. However, the effectiveness
17 of a pre-effective-date financing statement also may be
18 terminated in accordance with the law of the jurisdiction in
19 which the financing statement is filed.
20 (c) Method of amending: general rule. Except as
21 otherwise provided in subsection (d), if the law of this
22 State governs perfection of a security interest, the
23 information in a pre-effective-date financing statement may
24 be amended after the effective date of this amendatory Act of
25 the 91st General Assembly only if:
26 (1) the pre-effective-date financing statement and
27 an amendment are filed in the office specified in Section
28 9-501;
29 (2) an amendment is filed in the office specified
30 in Section 9-501 concurrently with, or after the filing
31 in that office of, an initial financing statement that
32 satisfies Section 9-706(c); or
33 (3) an initial financing statement that provides
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1 the information as amended and satisfies Section 9-706(c)
2 is filed in the office specified in Section 9-501.
3 (d) Method of amending: continuation. If the law of
4 this State governs perfection of a security interest, the
5 effectiveness of a pre-effective-date financing statement may
6 be continued only under Section 9-705(d) and (f) or Section
7 9-706.
8 (e) Method of amending: additional termination rule.
9 Whether or not the law of this State governs perfection of a
10 security interest, the effectiveness of a pre-effective-date
11 financing statement filed in this State may be terminated
12 after the effective date of this amendatory Act of the 91st
13 General Assembly by filing a termination statement in the
14 office in which the pre-effective-date financing statement is
15 filed, unless an initial financing statement that satisfies
16 Section 9-706(c) has been filed in the office specified by
17 the law of the jurisdiction governing perfection as provided
18 in Part 3 as the office in which to file a financing
19 statement.
20 (810 ILCS 5/9-708 new)
21 Sec. 9-708. Persons entitled to file initial financing
22 statement or continuation statement. A person may file an
23 initial financing statement or a continuation statement under
24 this Part if:
25 (1) the secured party of record authorizes the
26 filing; and
27 (2) the filing is necessary under this Part:
28 (A) to continue the effectiveness of a
29 financing statement filed before the effective date
30 of this amendatory Act of the 91st General Assembly;
31 or
32 (B) to perfect or continue the perfection of a
33 security interest.
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1 (810 ILCS 5/9-709 new)
2 Sec. 9-709. Priority.
3 (a) Law governing priority. This Act determines the
4 priority of conflicting claims to collateral. However, if
5 the relative priorities of the claims were established before
6 the effective date of this amendatory Act of the 91st General
7 Assembly, Article 9 as it existed before the effective date
8 of this amendatory Act of the 91st General Assembly
9 determines priority.
10 (b) Priority if security interest becomes enforceable
11 under Section 9-203. For purposes of Section 9-322(a), the
12 priority of a security interest that becomes enforceable
13 under Section 9-203 of this Act dates from the effective date
14 of this amendatory Act of the 91st General Assembly if the
15 security interest is perfected under this Act by the filing
16 of a financing statement before the effective date of this
17 amendatory Act of the 91st General Assembly which would not
18 have been effective to perfect the security interest under
19 Article 9 as it existed before the effective date of this
20 amendatory Act of the 91st General Assembly. This subsection
21 does not apply to conflicting security interests each of
22 which is perfected by the filing of such a financing
23 statement.
24 (810 ILCS 5/9-710 new)
25 Sec. 9-710. Local-filing office responsibilities for
26 filings under the Uniform Commercial Code prior to this
27 amendatory Act of the 91st General Assembly.
28 (a) In this Section:
29 (1) "Local-filing office" means a filing office,
30 other than the office of the Secretary of State, that is
31 designated as the proper place to file a financing
32 statement under Section 9-401(1) of the Uniform
33 Commercial Code as in effect immediately before the
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1 effective date of this amendatory Act of the 91st General
2 Assembly. The term applies only with respect to a record
3 that covers a type of collateral as to which the filing
4 office is designated in that Section as the proper place
5 to file.
6 (2) "Former-Article-9 records" means:
7 (A) financing statements and other records
8 that have been filed in a local-filing office before
9 July 1, 2001, and that are, or upon processing and
10 indexing will be, reflected in the index maintained,
11 as of June 30, 2001, by the local-filing office for
12 financing statements and other records filed in the
13 local filing office before July 1, 2001.
14 (B) the index as of June 30, 2001.
15 (b) Except for a record terminating a former-Article-9
16 record, a local-filing office must not accept for filing a
17 record presented after June 30, 2001, whether or not the
18 record relates to a financing statement filed in the
19 local-filing office before July 1, 2001. If the record
20 terminating such former-Article-9 record statement is in the
21 standard form prescribed by the Secretary of State, the
22 uniform fee for filing and indexing the termination statement
23 in the office of a county recorder shall be $5 and otherwise
24 shall be $10, plus in each case an additional fee of $5 for
25 each name more than one at each address listed against which
26 the record is required to be indexed.
27 (c) Until July 1, 2001, each local-filing office must
28 maintain all former-Article-9 records in accordance with the
29 Uniform Commercial Code as in effect immediately before the
30 effective date of this amendatory Act of the 91st General
31 Assembly. A former-Article-9 record that is not reflected on
32 the index maintained on June 30, 2001, by the local-filing
33 office must be processed and indexed, and reflected on the
34 index as of June 30, 2001, as soon as practicable but in any
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1 event no later than July 30, 2001.
2 (d) Until at least June 30, 2008, each local-filing
3 office must respond to requests for information with respect
4 to former-Article-9 records relating to a debtor and issue
5 certificates, in accordance with the Uniform Commercial Code
6 as in effect immediately before this amendatory Act of the
7 91st General Assembly. The fees charged for responding to
8 requests for information relating to the debtor issuing the
9 certificates with respect to former-Article-9 records must be
10 the fees in effect under the Uniform Commercial Code as in
11 effect immediately before the effective date of this
12 amendatory Act of the 91st General Assembly on June 30, 2001,
13 unless a different fee is later set by the local filing
14 office. However, the different fee must not exceed $10 for
15 responding to a request for information relating to a debtor
16 or $10 for issuing a certificate.
17 (e) After June 30, 2008, each local-filing office may
18 remove and destroy, in accordance with any then applicable
19 record retention law of this State, all former-Article-9
20 records, including the related index.
21 (f) This Section does not apply, with respect to
22 financing statements and other records, to a filing office in
23 which mortgages or records of mortgages on real property are
24 required to be filed or recorded if:
25 (1) the collateral is timber to be cut or
26 as-extracted collateral, or
27 (2) the record is or relates to a financing
28 statement filed as a fixture filing and the collateral is
29 goods that are or are to become fixtures.
30 PART 99. (BLANK) MISCELLANEOUS ILLINOIS PROVISIONS
31 (810 ILCS 5/9-9901) (from Ch. 26, par. 9-9901)
32 Sec. 9-9901. (Blank). Liability of Secretary of State.
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1 Neither the Secretary of State nor any of the Secretary of
2 State's employees or agents shall be subject to personal
3 liability by reason of any error or omission in the
4 performance of any duty under this Article except in case of
5 wilful negligence.
6 (Source: P.A. 87-1047.)
7 (810 ILCS 5/9-9902) (from Ch. 26, par. 9-9902)
8 Sec. 9-9902. (Blank). Security interests in crops.
9 (a) Legislative findings; purpose. The General Assembly
10 finds:
11 (1) it has been the accepted practice between
12 farmers and agricultural lenders for lenders to extend
13 credit with repayment secured by a security interest in
14 crops perfected in accordance with the provisions of this
15 Article;
16 (2) in making these loans, it has been the accepted
17 practice of agricultural lenders to rely upon a search of
18 financing statements properly filed in accordance with
19 the provisions of this Article to determine the presence
20 of claims in favor of other lenders;
21 (3) recently, this long standing practice and the
22 expectations of agricultural lenders have been negated by
23 court decisions that hold that a mortgagee of real estate
24 who takes possession, during foreclosure proceedings, of
25 mortgaged real estate with unsevered crops has priority
26 over a perfected security interest in crops;
27 (4) as a result of these court decisions, the
28 documentation and expenses in connection with prudent
29 agricultural lending practices will significantly
30 increase, creating an undue burden on agricultural
31 lenders;
32 (5) the application of these court decisions to the
33 holders of obligations secured by the collateral
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1 assignment of beneficial interests in land trusts will
2 result in the creation of claims against crops that
3 agricultural lenders will be unable to discover by public
4 record search;
5 (6) these court decisions defeat the legitimate
6 expectations of agricultural lenders, unnecessarily
7 increase the cost of agricultural credit and impede the
8 free flow and availability of agricultural credit,
9 constituting an undue burden on the Illinois farm
10 economy;
11 (7) the application of these court decisions to the
12 holders of obligations secured by the collateral
13 assignment of beneficial interests in land trusts will
14 similarly defeat the expectations of agricultural
15 lenders, unnecessarily increase the cost of agricultural
16 credit and impede the free flow and availability of
17 agricultural credit, constituting an undue burden on the
18 Illinois farm economy;
19 (8) real estate lenders, frequently dealing with
20 farmers prior to the involvement of other agricultural
21 lenders, in the ordinary course of lending can perfect a
22 security interest in crops in accordance with the
23 provisions of this Article to the extent these lenders
24 are relying on that collateral;
25 (9) it is the purpose of this Section to restore an
26 efficient system of searching for the claims of lenders
27 and the protection afforded agricultural lenders by a
28 perfected security interest in crops under this Article,
29 and thereby to foster and encourage the availability of
30 agricultural credit.
31 (b) Definitions. In this Section the following meanings
32 apply:
33 (1) "Collateral assignment of beneficial interest"
34 means any pledge or assignment of the beneficial interest
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1 in a land trust to a person to secure a debt or other
2 obligation.
3 (2) "Land trust" means any trust arrangement under
4 which the legal and equitable title to real estate is
5 held by a trustee, the interest of the beneficiary of the
6 trust is personal property and the beneficiary or any
7 person designated in writing by the beneficiary has (i)
8 the exclusive power to direct or control the trustee in
9 dealing with the title to the trust property, (ii) the
10 exclusive control of the management, operation, renting,
11 and selling of the trust property, and (iii) the
12 exclusive right to the earnings, avails, and proceeds of
13 the trust property.
14 (c) Rights to crops. With respect to any crops growing
15 or to be grown on real estate held in a land trust, the
16 rights of a holder of an obligation secured by a collateral
17 assignment of beneficial interest in the land trust,
18 including rights by virtue of an equitable lien, shall be
19 subject to a security interest properly perfected under this
20 Article.
21 (d) Application of Section. This Section applies to the
22 holder of an obligation secured by a collateral assignment of
23 beneficial interest in a land trust who becomes entitled to
24 crops by obtaining possession on or after December 22, 1988.
25 (Source: P.A. 87-1047.)
26 Section 10. The Uniform Commercial Code is amended by
27 changing Sections 1-105, 1-201, 2-103, 2-210, 2-326, 2-502,
28 2-716, 2A-103, 2A-303, 2A-307, 2A-309, 4-210, 7-503, 8-103,
29 8-106, 8-110, 8-301, 8-302, and 8-510 and by adding Section
30 5-118 as follows:
31 (810 ILCS 5/1-105) (from Ch. 26, par. 1-105)
32 Sec. 1-105. Territorial application of the Act; parties'
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1 power to choose applicable law.
2 (1) Except as provided in this Section, when a
3 transaction bears a reasonable relation to this State and
4 also to another state or nation the parties may agree that
5 the law either of this State or of the other state or nation
6 shall govern their rights and duties. Failing an agreement,
7 this Act applies to transactions bearing an appropriate
8 relation to this State.
9 (2) Where one of the following provisions of this Act
10 specifies the applicable law, that provision governs and a
11 contrary agreement is effective only to the extent permitted
12 by the law (including the conflict of laws rules) so
13 specified:
14 Rights of creditors against sold goods. Section 2-402.
15 Applicability of the Article on Leases. Sections 2A-105
16 and 2A-106.
17 Applicability of the Article on Bank Deposits and
18 Collections. Section 4-102.
19 Governing law in the Article on Funds Transfers. Section
20 4A-507.
21 Letters of Credit. Section 5-116.
22 Applicability of the Article on Investment Securities.
23 Section 8-110.
24 Law governing perfection, the effect of perfection or
25 nonperfection, and the priority of security
26 interests and agricultural liens. Sections 9-301
27 through 9-307.
28 Perfection provisions of the Article on Secured
29 Transactions. Section 9-103.
30 (Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97.)
31 (810 ILCS 5/1-201) (from Ch. 26, par. 1-201)
32 Sec. 1-201. General Definitions. Subject to additional
33 definitions contained in the subsequent Articles of this Act
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1 which are applicable to specific Articles or Parts thereof,
2 and unless the context otherwise requires, in this Act:
3 (1) "Action" in the sense of a judicial proceeding
4 includes recoupment, counterclaim, set-off, suit in equity
5 and any other proceedings in which rights are determined.
6 (2) "Aggrieved party" means a party entitled to resort
7 to a remedy.
8 (3) "Agreement" means the bargain of the parties in fact
9 as found in their language or by implication from other
10 circumstances including course of dealing or usage of trade
11 or course of performance as provided in this Act (Sections
12 1-205, and 2-208, and 2A-207). Whether an agreement has legal
13 consequences is determined by the provisions of this Act, if
14 applicable; otherwise by the law of contracts (Section
15 1-103). (Compare "Contract".)
16 (4) "Bank" means any person engaged in the business of
17 banking.
18 (5) "Bearer" means the person in possession of an
19 instrument, document of title, or certificated security
20 payable to bearer or indorsed in blank.
21 (6) "Bill of lading" means a document evidencing the
22 receipt of goods for shipment issued by a person engaged in
23 the business of transporting or forwarding goods, and
24 includes an airbill. "Airbill" means a document serving for
25 air transportation as a bill of lading does for marine or
26 rail transportation, and includes an air consignment note or
27 air waybill.
28 (7) "Branch" includes a separately incorporated foreign
29 branch of a bank.
30 (8) "Burden of establishing" a fact means the burden of
31 persuading the triers of fact that the existence of the fact
32 is more probable than its non-existence.
33 (9) "Buyer in ordinary course of business" means a
34 person that buys goods who in good faith, and without
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1 knowledge that the sale violates to him is in violation of
2 the ownership rights or security interest of another person a
3 third party in the goods, and buys in the ordinary course
4 from a person, other than a pawnbroker, in the business of
5 selling goods of that kind but does not include a pawnbroker.
6 A person buys goods in the ordinary course if the sale to the
7 person comports with the usual or customary practices in the
8 kind of business in which the seller is engaged or with the
9 seller's own usual or customary practices. A person that
10 sells oil, gas, or other minerals at the wellhead or minehead
11 is a person All persons who sell minerals or the like
12 (including oil and gas) at wellhead or minehead shall be
13 deemed to be persons in the business of selling goods of that
14 kind. A buyer in ordinary course of business "Buying" may
15 buy be for cash, or by exchange of other property, or on
16 secured or unsecured credit, and may acquire includes
17 receiving goods or documents of title under a pre-existing
18 contract for sale. Only a buyer that takes possession of the
19 goods or has a right to recover the goods from the seller
20 under Article 2 may be a buyer in ordinary course of
21 business. A person that acquires goods in a transfer in bulk
22 or as security for or in total or partial satisfaction of a
23 money debt is not a buyer in ordinary course of business. but
24 does not include a transfer in bulk or as security for or in
25 total or partial satisfaction of a money debt.
26 (10) "Conspicuous": A term or clause is conspicuous when
27 it is so written that a reasonable person against whom it is
28 to operate ought to have noticed it. A printed heading in
29 capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous.
30 Language in the body of a form is "conspicuous" if it is in
31 larger or other contrasting type or color. But in a telegram
32 any stated term is "conspicuous". Whether a term or clause is
33 "conspicuous" or not is for decision by the court.
34 (11) "Contract" means the total legal obligation which
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1 results from the parties' agreement as affected by this Act
2 and any other applicable rules of law. (Compare "Agreement".)
3 (12) "Creditor" includes a general creditor, a secured
4 creditor, a lien creditor and any representative of
5 creditors, including an assignee for the benefit of
6 creditors, a trustee in bankruptcy, a receiver in equity and
7 an executor or administrator of an insolvent debtor's or
8 assignor's estate.
9 (13) "Defendant" includes a person in the position of
10 defendant in a cross-action or counterclaim.
11 (14) "Delivery" with respect to instruments, documents
12 of title, chattel paper or certificated securities means
13 voluntary transfer of possession.
14 (15) "Document of title" includes bill of lading, dock
15 warrant, dock receipt, warehouse receipt or order for the
16 delivery of goods, and also any other document which in the
17 regular course of business or financing is treated as
18 adequately evidencing that the person in possession of it is
19 entitled to receive, hold and dispose of the document and the
20 goods it covers. To be a document of title a document must
21 purport to be issued by or addressed to a bailee and purport
22 to cover goods in the bailee's possession which are either
23 identified or are fungible portions of an identified mass.
24 (16) "Fault" means wrongful act, omission or breach.
25 (17) "Fungible" with respect to goods or securities
26 means goods or securities of which any unit is, by nature or
27 usage of trade, the equivalent of any other like unit. Goods
28 which are not fungible shall be deemed fungible for the
29 purposes of this Act to the extent that under a particular
30 agreement or document unlike units are treated as
31 equivalents.
32 (18) "Genuine" means free of forgery or counterfeiting.
33 (19) "Good faith" means honesty in fact in the conduct
34 or transaction concerned.
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1 (20) "Holder" with respect to a negotiable instrument
2 means the person in possession if the instrument is payable
3 to bearer or, in the case of an instrument payable to an
4 identified person, if the identified person is in possession.
5 "Holder" with respect to a document of title means the person
6 in possession if the goods are deliverable to bearer or to
7 the order of the person in possession.
8 (21) To "honor" is to pay or accept and pay, or where a
9 credit so engages to purchase or discount a draft complying
10 with the terms of the credit.
11 (22) "Insolvency proceedings" includes any assignment
12 for the benefit of creditors or other proceedings intended to
13 liquidate or rehabilitate the estate of the person involved.
14 (23) A person is "insolvent" who either has ceased to
15 pay his debts in the ordinary course of business or cannot
16 pay his debts as they become due or is insolvent within the
17 meaning of the federal bankruptcy law.
18 (24) "Money" means a medium of exchange authorized or
19 adopted by a domestic or foreign government and includes a
20 monetary unit of account established by an intergovernmental
21 organization or by agreement between 2 or more nations.
22 (25) A person has "notice" of a fact when
23 (a) he has actual knowledge of it; or
24 (b) he has received a notice or notification of it;
25 or
26 (c) from all the facts and circumstances known to
27 him at the time in question he has reason to know that it
28 exists. A person "knows" or has "knowledge" of a fact
29 when he has actual knowledge of it. "Discover" or "learn"
30 or a word or phrase of similar import refers to knowledge
31 rather than to reason to know. The time and circumstances
32 under which a notice or notification may cease to be
33 effective are not determined by this Act.
34 (26) A person "notifies" or "gives" a notice or
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1 notification to another by taking such steps as may be
2 reasonably required to inform the other in ordinary course
3 whether or not such other actually comes to know of it. A
4 person "receives" a notice or notification when
5 (a) it comes to his attention; or
6 (b) it is duly delivered at the place of business
7 through which the contract was made or at any other place
8 held out by him as the place for receipt of such
9 communications.
10 (27) Notice, knowledge or a notice or notification
11 received by an organization is effective for a particular
12 transaction from the time when it is brought to the attention
13 of the individual conducting that transaction, and in any
14 event from the time when it would have been brought to his
15 attention if the organization had exercised due diligence. An
16 organization exercises due diligence if it maintains
17 reasonable routines for communicating significant information
18 to the person conducting the transaction and there is
19 reasonable compliance with the routines. Due diligence does
20 not require an individual acting for the organization to
21 communicate information unless such communication is part of
22 his regular duties or unless he has reason to know of the
23 transaction and that the transaction would be materially
24 affected by the information.
25 (28) "Organization" includes a corporation, government
26 or governmental subdivision or agency, business trust,
27 estate, trust, partnership or association, two or more
28 persons having a joint or common interest, or any other legal
29 or commercial entity.
30 (29) "Party", as distinct from "third party", means a
31 person who has engaged in a transaction or made an agreement
32 within this Act.
33 (30) "Person" includes an individual or an organization
34 (see Section 1-102).
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1 (31) "Presumption" or "presumed" means that the trier of
2 fact must find the existence of the fact presumed unless and
3 until evidence is introduced which would support a finding of
4 its non-existence.
5 (32) "Purchase" includes taking by sale, discount,
6 negotiation, mortgage, pledge, lien, security interest, issue
7 or reissue, gift or any other voluntary transaction creating
8 an interest in property.
9 (33) "Purchaser" means a person who takes by purchase.
10 (34) "Remedy" means any remedial right to which an
11 aggrieved party is entitled with or without resort to a
12 tribunal.
13 (35) "Representative" includes an agent, an officer of a
14 corporation or association, and a trustee, executor or
15 administrator of an estate, or any other person empowered to
16 act for another.
17 (36) "Rights" includes remedies.
18 (37) "Security interest" means an interest in personal
19 property or fixtures which secures payment or performance of
20 an obligation. The retention or reservation of title by a
21 seller of goods notwithstanding shipment or delivery to the
22 buyer (Section 2-401) is limited in effect to a reservation
23 of a "security interest". The term also includes any interest
24 of a consignor and a buyer of accounts, or chattel paper, a
25 payment intangible, or a promissory note in a transaction
26 that which is subject to Article 9. The special property
27 interest of a buyer of goods on identification of those goods
28 to a contract for sale under Section 2-401 is not a "security
29 interest", but a buyer may also acquire a "security
30 interest", by complying with Article 9. Except as otherwise
31 provided in Section 2-505, the right of a seller or lessor of
32 goods under Article 2 or 2A to retain or acquire possession
33 of the goods is not a "security interest", but a seller or
34 lessor may also acquire a "security interest" by complying
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1 with Article 9. 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". Unless a consignment is intended as
5 security, reservation of title thereunder is not a "security
6 interest" but a consignment is in any event subject to the
7 provisions on consignment sales (Section 2-326).
8 Whether a transaction creates a lease or security
9 interest is determined by the facts of each case; however, a
10 transaction creates a security interest if the consideration
11 the lessee is to pay the lessor for the right to possession
12 and use of the goods is an obligation for the term of the
13 lease not subject to termination by the lessee; and
14 (a) the original term of the lease is equal to or
15 greater than the remaining economic life of the goods;
16 (b) the lessee is bound to renew the lease for the
17 remaining economic life of the goods or is bound to
18 become the owner of the goods;
19 (c) the lessee has an option to renew the lease for
20 the remaining economic life of the goods for no
21 additional consideration or nominal additional
22 consideration upon compliance with the lease agreement;
23 or
24 (d) the lessee has an option to become the owner of
25 the goods for no additional consideration or nominal
26 additional consideration upon compliance with the lease
27 agreement.
28 A transaction does not create a security interest merely
29 because it provides that:
30 (a) the present value of the consideration the
31 lessee is obligated to pay the lessor for the right to
32 possession and use of the goods is substantially equal to
33 or is greater than the fair market value of the goods at
34 the time the lease is entered into;
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1 (b) the lessee assumes risk of loss of the goods,
2 or agrees to pay taxes, insurance, filing, recording, or
3 registration fees, or service or maintenance costs with
4 respect to the goods;
5 (c) the lessee has an option to renew the lease or
6 to become the owner of the goods;
7 (d) the lessee has an option to renew the lease for
8 a fixed rent that is equal to or greater than the
9 reasonably predictable fair market rent for the use of
10 the goods for the term of the renewal at the time the
11 option is to be performed; or
12 (e) the lessee has an option to become the owner of
13 the goods for a fixed price that is equal to or greater
14 than the reasonably predictable fair market value of the
15 goods at the time the option is to be performed.
16 For purposes of this subsection (37):
17 (x) Additional consideration is not nominal if (i)
18 when the option to renew the lease is granted to the
19 lessee the rent is stated to be the fair market rent for
20 the use of the goods for the term of the renewal
21 determined at the time the option is to be performed, or
22 (ii) when the option to become the owner of the goods is
23 granted to the lessee the price is stated to be the fair
24 market value of the goods determined at the time the
25 option is to be performed. Additional consideration is
26 nominal if it is less than the lessee's reasonably
27 predictable cost of performing under the lease agreement
28 if the option is not exercised;
29 (y) "Reasonably predictable" and "remaining
30 economic life of the goods" are to be determined with
31 reference to the facts and circumstances at the time the
32 transaction is entered into; and
33 (z) "Present value" means the amount as of a date
34 certain of one or more sums payable in the future,
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1 discounted to the date certain. The discount is
2 determined by the interest rate specified by the parties
3 if the rate is not manifestly unreasonable at the time
4 the transaction is entered into; otherwise, the discount
5 is determined by a commercially reasonable rate that
6 takes into account the facts and circumstances as of each
7 case at the time the transaction was entered into.
8 (38) "Send" in connection with any writing or notice
9 means to deposit in the mail or deliver for transmission by
10 any other usual means of communication with postage or cost
11 of transmission provided for and properly addressed and in
12 the case of an instrument to an address specified thereon or
13 otherwise agreed, or if there be none to any address
14 reasonable under the circumstances. The receipt of any
15 writing or notice within the time at which it would have
16 arrived if properly sent has the effect of a proper sending.
17 (39) "Signed" includes any symbol executed or adopted by
18 a party with present intention to authenticate a writing.
19 (40) "Surety" includes guarantor.
20 (41) "Telegram" includes a message transmitted by radio,
21 teletype, cable, any mechanical method of transmission, or
22 the like.
23 (42) "Term" means that portion of an agreement which
24 relates to a particular matter.
25 (43) "Unauthorized" signature means one made without
26 actual, implied, or apparent authority and includes a
27 forgery.
28 (44) "Value". Except as otherwise provided with respect
29 to negotiable instruments and bank collections (Sections
30 3-303, 4-210, 4-208 and 4-211 4-209), a person gives "value"
31 for rights if he acquires them:
32 (a) in return for a binding commitment to extend
33 credit or for the extension of immediately available
34 credit whether or not drawn upon and whether or not a
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1 charge-back is provided for in the event of difficulties
2 in collection; or
3 (b) as security for or in total or partial
4 satisfaction of a pre-existing claim; or
5 (c) by accepting delivery pursuant to a
6 pre-existing contract for purchase; or
7 (d) generally, in return for any consideration
8 sufficient to support a simple contract.
9 (45) "Warehouse receipt" means a receipt issued by a
10 person engaged in the business of storing goods for hire.
11 (46) "Written" or "writing" includes printing,
12 typewriting or any other intentional reduction to tangible
13 form.
14 (Source: P.A. 87-493; 87-582; 87-895; 87-1135.)
15 (810 ILCS 5/2-103) (from Ch. 26, par. 2-103)
16 Sec. 2-103. Definitions and index of definitions.
17 (1) In this Article unless the context otherwise
18 requires
19 (a) "Buyer" means a person who buys or contracts to
20 buy goods.
21 (b) "Good faith" in the case of a merchant means
22 honesty in fact and the observance of reasonable commercial
23 standards of fair dealing in the trade.
24 (c) "Receipt" of goods means taking physical
25 possession of them.
26 (d) "Seller" means a person who sells or contracts
27 to sell goods.
28 (2) Other definitions applying to this Article or to
29 specified Parts thereof, and the sections in which they
30 appear are:
31 "Acceptance". Section 2--606.
32 "Banker's credit". Section 2--325.
33 "Between merchants". Section 2--104.
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1 "Cancellation". Section 2--106(4).
2 "Commercial unit". Section 2--105.
3 "Confirmed credit". Section 2--325.
4 "Conforming to contract". Section 2--106.
5 "Contract for sale". Section 2--106.
6 "Cover". Section 2--712.
7 "Entrusting". Section 2--403.
8 "Financing agency". Section 2--104.
9 "Future goods". Section 2--105.
10 "Goods". Section 2--105.
11 "Identification". Section 2--501.
12 "Installment contract". Section 2--612.
13 "Letter of Credit". Section 2--325.
14 "Lot". Section 2--105.
15 "Merchant". Section 2--104.
16 "Overseas". Section 2--323.
17 "Person in position of seller". Section 2--707.
18 "Present sale". Section 2--106.
19 "Sale". Section 2--106.
20 "Sale on approval". Section 2--326.
21 "Sale or return". Section 2--326.
22 "Termination". Section 2--106.
23 (3) The following definitions in other Articles apply to
24 this Article:
25 "Check". Section 3--104.
26 "Consignee". Section 7--102.
27 "Consignor". Section 7--102.
28 "Consumer goods". Section 9-102 9--109.
29 "Dishonor". Section 3-502 3--507.
30 "Draft". Section 3--104.
31 (4) In addition Article 1 contains general definitions
32 and principles of construction and interpretation applicable
33 throughout this Article.
34 (Source: Laws 1961, p. 2101.)
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1 (810 ILCS 5/2-210) (from Ch. 26, par. 2-210)
2 Sec. 2-210. Delegation of performance; assignment of
3 rights.
4 (1) A party may perform his duty through a delegate
5 unless otherwise agreed or unless the other party has a
6 substantial interest in having his original promisor perform
7 or control the acts required by the contract. No delegation
8 of performance relieves the party delegating of any duty to
9 perform or any liability for breach.
10 (2) Except as otherwise provided in Section 9-406,
11 unless otherwise agreed all rights of either seller or buyer
12 can be assigned except where the assignment would materially
13 change the duty of the other party, or increase materially
14 the burden or risk imposed on him by his contract, or impair
15 materially his chance of obtaining return performance. A
16 right to damages for breach of the whole contract or a right
17 arising out of the assignor's due performance of his entire
18 obligation can be assigned despite agreement otherwise.
19 (3) The creation, attachment, perfection, or enforcement
20 of a security interest in the seller's interest under a
21 contract is not a transfer that materially changes the duty
22 of or increases materially the burden or risk imposed on the
23 buyer or impairs materially the buyer's chance of obtaining
24 return performance with the purview of subsection (2) unless,
25 and then only to the extent that, enforcement actually
26 results in a delegation of material performance of the
27 seller. Even in that event, the creation, attachment,
28 perfection, and enforcement of the security interest remain
29 effective, but (i) the seller is liable to the buyer for
30 damages caused by the delegation to the extent that the
31 damages could not reasonably be prevented by the buyer, and
32 (ii) a court having jurisdiction may grant other appropriate
33 relief, including cancellation of the contract for sale or an
34 injunction against enforcement of the security interest or
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1 consummation of the enforcement.
2 (4) (3) Unless the circumstances indicate the contrary a
3 prohibition of assignment of "the contract" is to be
4 construed as barring only the delegation to the assignee of
5 the assignor's performance.
6 (5) (4) An assignment of "the contract" or of "all my
7 rights under the contract" or an assignment in similar
8 general terms is an assignment of rights and unless the
9 language or the circumstances (as in an assignment for
10 security) indicate the contrary, it is a delegation of
11 performance of the duties of the assignor and its acceptance
12 by the assignee constitutes a promise by him to perform those
13 duties. This promise is enforceable by either the assignor or
14 the other party to the original contract.
15 (6) (5) The other party may treat any assignment which
16 delegates performance as creating reasonable grounds for
17 insecurity and may without prejudice to his rights against
18 the assignor demand assurances from the assignee (Section
19 2--609).
20 (Source: Laws 1961, p. 2101.)
21 (810 ILCS 5/2-326) (from Ch. 26, par. 2-326)
22 Sec. 2-326. Sale on approval and sale or return;
23 consignment sales and rights of creditors.
24 (1) Unless otherwise agreed, if delivered goods may be
25 returned by the buyer even though they conform to the
26 contract, the transaction is
27 (a) a "sale on approval" if the goods are delivered
28 primarily for use, and
29 (b) a "sale or return" if the goods are delivered
30 primarily for resale.
31 (2) Except as provided in subsection (3), Goods held on
32 approval are not subject to the claims of the buyer's
33 creditors until acceptance; goods held on sale or return are
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1 subject to such claims while in the buyer's possession.
2 (3) Where goods are delivered to a person for sale and
3 such person maintains a place of business at which he deals
4 in goods of the kind involved, under a name other than the
5 name of the person making delivery, then with respect to
6 claims of creditors of the person conducting the business the
7 goods are deemed to be on sale or return. The provisions of
8 this subsection are applicable even though an agreement
9 purports to reserve title to the person making delivery until
10 payment or resale or uses such words as "on consignment" or
11 "on memorandum". However, this subsection is not applicable
12 if the person making delivery
13 (a) complies with an applicable law providing for a
14 consignor's interest or the like to be evidenced by a sign,
15 or
16 (b) establishes that the person conducting the
17 business is generally known by his creditors to be
18 substantially engaged in selling the goods of others, or
19 (c) complies with the filing provisions of the
20 Article on Secured Transactions (Article 9).
21 (4) Any "or return" term of a contract for sale is to be
22 treated as a separate contract for sale within the statute of
23 frauds section of this Article (Section 2--201) and as
24 contradicting the sale aspect of the contract within the
25 provisions of this Article on parol or extrinsic evidence
26 (Section 2--202).
27 (Source: Laws 1961, p. 2101.)
28 (810 ILCS 5/2-502) (from Ch. 26, par. 2-502)
29 Sec. 2-502. Buyer's right to goods on seller's
30 insolvency.
31 (1) Subject to subsections subsection (2) and (3) and
32 even though the goods have not been shipped a buyer who has
33 paid a part or all of the price of goods in which he has a
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1 special property under the provisions of the immediately
2 preceding section may on making and keeping good a tender of
3 any unpaid portion of their price recover them from the
4 seller if:
5 (a) in the case of goods bought for personal,
6 family, or household purposes, the seller repudiates or
7 fails to deliver as required by the contract; or
8 (b) in all cases, the seller becomes insolvent
9 within 10 days after receipt of the first installment on
10 their price.
11 (2) The buyer's right to recover the goods under
12 subsection (1)(a) vests upon acquisition of a special
13 property, even if the seller had not then repudiated or
14 failed to deliver.
15 (3) If the identification creating his special property
16 has been made by the buyer he acquires the right to recover
17 the goods only if they conform to the contract for sale.
18 (Source: Laws 1961, p. 2101.)
19 (810 ILCS 5/2-716) (from Ch. 26, par. 2-716)
20 Sec. 2-716. Buyer's right to specific performance or
21 replevin.
22 (1) Specific performance may be ordered where the goods
23 are unique or in other proper circumstances.
24 (2) The judgment for specific performance may include
25 such terms and conditions as to payment of the price,
26 damages, or other relief as the court may deem just.
27 (3) The buyer has a right of replevin for goods
28 identified to the contract if after reasonable effort he is
29 unable to effect cover for such goods or the circumstances
30 reasonably indicate that such effort will be unavailing or if
31 the goods have been shipped under reservation and
32 satisfaction of the security interest in them has been made
33 or tendered. In the case of goods bought for personal,
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1 family, or household purposes, the buyer's right of replevin
2 vests upon acquisition of a special property, even if the
3 seller had not then repudiated or failed to deliver.
4 (Source: P.A. 84-545.)
5 (810 ILCS 5/2A-103) (from Ch. 26, par. 2A-103)
6 Sec. 2A-103. Definitions and index of definitions.
7 (1) In this Article unless the context otherwise
8 requires:
9 (a) "Buyer in ordinary course of business" means a
10 person who, in good faith and without knowledge that the
11 sale to him or her is in violation of the ownership
12 rights or security interest or leasehold interest of a
13 third party in the goods, buys in ordinary course from a
14 person in the business of selling goods of that kind but
15 does not include a pawnbroker. "Buying" may be for cash
16 or by exchange of other property or on secured or
17 unsecured credit and includes receiving goods or
18 documents of title under a pre-existing contract for sale
19 but does not include a transfer in bulk or as security
20 for or in total or partial satisfaction of a money debt.
21 (b) "Cancellation" occurs when either party puts an
22 end to the lease contract for default by the other party.
23 (c) "Commercial unit" means such a unit of goods as
24 by commercial usage is a single whole for purposes of
25 lease and division of which materially impairs its
26 character or value on the market or in use. A commercial
27 unit may be a single article, as a machine, or a set of
28 articles, as a suite of furniture or a line of machinery,
29 or a quantity, as a gross or carload, or any other unit
30 treated in use or in the relevant market as a single
31 whole.
32 (d) "Conforming" goods or performance under a lease
33 contract means goods or performance that are in
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1 accordance with the obligations under the lease contract.
2 (e) "Consumer lease" means a lease that a lessor
3 regularly engaged in the business of leasing or selling
4 makes to a lessee who is an individual and who takes
5 under the lease primarily for a personal, family, or
6 household purpose, if the total payments to be made under
7 the lease contract, excluding payments for options to
8 renew or buy, do not exceed $40,000.
9 (f) "Fault" means wrongful act, omission, breach,
10 or default.
11 (g) "Finance lease" means a lease with respect to
12 which:
13 (i) the lessor does not select, manufacture,
14 or supply the goods;
15 (ii) the lessor acquires the goods or the
16 right to possession and use of the goods in
17 connection with the lease; and
18 (iii) one of the following occurs:
19 (A) the lessee receives a copy of the
20 contract by which the lessor acquired the goods
21 or the right to possession and use of the goods
22 before signing the lease contract;
23 (B) the lessee's approval of the contract
24 by which the lessor acquired the goods or the
25 right to possession and use of the goods is a
26 condition to effectiveness of the lease
27 contract;
28 (C) the lessee, before signing the lease
29 contract, receives an accurate and complete
30 statement designating the promises and
31 warranties, and any disclaimers of warranties,
32 limitations or modifications of remedies, or
33 liquidated damages, including those of a third
34 party, such as the manufacturer of the goods,
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1 provided to the lessor by the person supplying
2 the goods in connection with or as part of the
3 contract by which the lessor acquired the goods
4 or the right to possession and use of the
5 goods; or
6 (D) if the lease is not a consumer lease,
7 the lessor, before the lessee signs the lease
8 contract, informs the lessee in writing (a) of
9 the identity of the person supplying the goods
10 to the lessor, unless the lessee has selected
11 that person and directed the lessor to acquire
12 the goods or the right to possession and use of
13 the goods from that person, (b) that the lessee
14 is entitled under this Article to the promises
15 and warranties, including those of any third
16 party, provided to the lessor by the person
17 supplying the goods in connection with or as
18 part of the contract by which the lessor
19 acquired the goods or the right to possession
20 and use of the goods, and (c) that the lessee
21 may communicate with the person supplying the
22 goods to the lessor and receive an accurate and
23 complete statement of those promises and
24 warranties, including any disclaimers and
25 limitations of them or of remedies.
26 (h) "Goods" means all things that are movable at
27 the time of identification to the lease contract, or are
28 fixtures (Section 2A-309), but the term does not include
29 money, documents, instruments, accounts, chattel paper,
30 general intangibles, or minerals or the like, including
31 oil and gas, before extraction. The term also includes
32 the unborn young of animals.
33 (i) "Installment lease contract" means a lease
34 contract that authorizes or requires the delivery of
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1 goods in separate lots to be separately accepted, even
2 though the lease contract contains a clause "each
3 delivery is a separate lease" or its equivalent.
4 (j) "Lease" means a transfer of the right to
5 possession and use of goods for a term in return for
6 consideration, but a sale, including a sale on approval
7 or a sale or return, or retention or creation of a
8 security interest is not a lease. Unless the context
9 clearly indicates otherwise, the term includes a
10 sublease.
11 (k) "Lease agreement" means the bargain, with
12 respect to the lease, of the lessor and the lessee in
13 fact as found in their language or by implication from
14 other circumstances including course of dealing or usage
15 of trade or course of performance as provided in this
16 Article. Unless the context clearly indicates otherwise,
17 the term includes a sublease agreement.
18 (l) "Lease contract" means the total legal
19 obligation that results from the lease agreement as
20 affected by this Article and any other applicable rules
21 of law. Unless the context clearly indicates otherwise,
22 the term includes a sublease contract.
23 (m) "Leasehold interest" means the interest of the
24 lessor or the lessee under a lease contact.
25 (n) "Lessee" means a person who acquires the right
26 to possession and use of goods under a lease. Unless the
27 context clearly indicates otherwise, the term includes a
28 sublessee.
29 (o) "Lessee in ordinary course of business" means a
30 person who in good faith and without knowledge that the
31 lease to him or her is in violation of the ownership
32 rights or security interest or leasehold interest of a
33 third party in the goods leases in ordinary course from a
34 person in the business of selling or leasing goods of
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1 that kind but does not include a pawnbroker. "Leasing"
2 may be for cash or by exchange of other property or on
3 secured or unsecured credit and includes receiving goods
4 or documents of title under a pre-existing lease contract
5 but does not include a transfer in bulk or as security
6 for or in total or partial satisfaction of a money debt.
7 (p) "Lessor" means a person who transfers the right
8 to possession and use of goods under a lease. Unless the
9 context clearly indicates otherwise, the term includes a
10 sublessor.
11 (q) "Lessor's residual interest" means the lessor's
12 interest in the goods after expiration, termination, or
13 cancellation of the lease contract.
14 (r) "Lien" means a charge against or interest in
15 goods to secure payment of a debt or performance of an
16 obligation, but the term does not include a security
17 interest.
18 (s) "Lot" means a parcel or a single article that
19 is the subject matter of a separate lease or delivery,
20 whether or not it is sufficient to perform the lease
21 contract.
22 (t) "Merchant lessee" means a lessee that is a
23 merchant with respect to goods of the kind subject to the
24 lease.
25 (u) "Present value" means the amount as of a date
26 certain of one or more sums payable in the future,
27 discounted to the date certain. The discount is
28 determined by the interest rate specified by the parties
29 if the rate was not manifestly unreasonable at the time
30 the transaction was entered into; otherwise, the discount
31 is determined by a commercially reasonable rate that
32 takes into account the facts and circumstances of each
33 case at the time the transaction was entered into.
34 (v) "Purchase" includes taking by sale, lease,
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1 mortgage, security interest, pledge, gift, or any other
2 voluntary transaction creating an interest in goods.
3 (w) "Sublease" means a lease of goods the right to
4 possession and use of which was acquired by the lessor as
5 a lessee under an existing lease.
6 (x) "Supplier" means a person from whom a lessor
7 buys or leases goods to be leased under a finance lease.
8 (y) "Supply contract" means a contract under which
9 a lessor buys or leases goods to be leased.
10 (z) "Termination" occurs when either party pursuant
11 to a power created by agreement or law puts an end to the
12 lease contract otherwise than for default.
13 (2) Other definitions applying to this Article and the
14 Sections in which they appear are:
15 "Accessions". Section 2A-310(1).
16 "Construction mortgage". Section 2A-309(1)(d).
17 "Encumbrance". Section 2A-309(1)(e).
18 "Fixtures". Section 2A-309(1)(a).
19 "Fixture filing". Section 2A-309(1)(b).
20 "Purchase money lease". Section 2A-309(1)(c).
21 (3) The following definitions in other Articles apply to
22 this Article:
23 "Account". Section 9-102(a)(2) 9-106.
24 "Between merchants". Section 2-104(3).
25 "Buyer". Section 2-103(1)(a).
26 "Chattel paper". Section 9-102(a)(11) 9-105 (1)(b).
27 "Consumer goods". Section 9-102(a)(23) 9-109(1).
28 "Document". Section 9-102(a)(30) 9-105 (1)(f).
29 "Entrusting". Section 2-403(3).
30 "General intangible intangibles". Section 9-102(a)(42)
31 9-106.
32 "Good faith". Section 2-103(1)(b).
33 "Instrument". Section 9-102(a)(47) 9-105 (1)(i).
34 "Merchant". Section 2-104(1).
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1 "Mortgage". Section 9-102(a)(55) 9-105 (1)(j).
2 "Pursuant to commitment". Section 9-102(a)(68) 9-105
3 (1)(k).
4 "Receipt". Section 2-103(1)(c).
5 "Sale". Section 2-106(1).
6 "Sale on approval". Section 2-326.
7 "Sale or return". Section 2-326.
8 "Seller". Section 2-103(1)(d).
9 (4) In addition, Article 1 contains general definitions
10 and principles of construction and interpretation applicable
11 throughout this Article.
12 (Source: P.A. 87-493.)
13 (810 ILCS 5/2A-303) (from Ch. 26, par. 2A-303)
14 Sec. 2A-303. Alienability of party's interest under
15 lease contract or of lessor's residual interest in goods;
16 delegation of performance; transfer of rights.
17 (1) As used in this Section, "creation of a security
18 interest" includes the sale of a lease contract that is
19 subject to Article 9, Secured Transactions, by reason of
20 Section 9-109(a)(3) 9-102(1)(b).
21 (2) Except as provided in subsection subsections (3) and
22 Section 9-407 (4), a provision in a lease agreement which (i)
23 prohibits the voluntary or involuntary transfer, including a
24 transfer by sale, sublease, creation or enforcement of a
25 security interest, or attachment, levy, or other judicial
26 process, of an interest of a party under the lease contract
27 or of the lessor's residual interest in the goods, or (ii)
28 makes such a transfer an event of default, gives rise to the
29 rights and remedies provided in subsection (4) (5), but a
30 transfer that is prohibited or is an event of default under
31 the lease agreement is otherwise effective.
32 (3) A provision in a lease agreement which (i) prohibits
33 the creation or enforcement of a security interest in an
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1 interest of a party under the lease contract or in the
2 lessor's residual interest in the goods, or (ii) makes such a
3 transfer an event of default, is not enforceable unless, and
4 then only to the extent that, there is an actual transfer by
5 the lessee of the lessee's right of possession or use of the
6 goods in violation of the provision or an actual delegation
7 of a material performance of either party to the lease
8 contract in violation of the provision. Neither the granting
9 nor the enforcement of a security interest in (i) the
10 lessor's interest under the lease contract or (ii) the
11 lessor's residual interest in the goods is a transfer that
12 materially impairs the prospect of obtaining return
13 performance by, materially changes the duty of, or materially
14 increases the burden or risk imposed on, the lessee within
15 the purview of subsection (5) unless, and then only to the
16 extent that, there is an actual delegation of a material
17 performance of the lessor.
18 (4) A provision in a lease agreement which (i) prohibits
19 a transfer of a right to damages for default with respect to
20 the whole lease contract or of a right to payment arising out
21 of the transferor's due performance of the transferor's
22 entire obligation, or (ii) makes such a transfer an event of
23 default, is not enforceable, and such a transfer is not a
24 transfer that materially impairs the prospect of obtaining
25 return performance by, materially changes the duty of, or
26 materially increases the burden or risk imposed on, the other
27 party to the lease contract within the purview of subsection
28 (4) (5).
29 (4) (5) Subject to subsection subsections (3) and
30 Section 9-407 (4):
31 (a) if a transfer is made which is made an event of
32 default under a lease agreement, the party to the lease
33 contract not making the transfer, unless that party
34 waives the default or otherwise agrees, has the rights
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1 and remedies described in Section 2A-501(2);
2 (b) if paragraph (a) is not applicable and if a
3 transfer is made that (i) is prohibited under a lease
4 agreement or (ii) materially impairs the prospect of
5 obtaining return performance by, materially changes the
6 duty of, or materially increases the burden of risk
7 imposed on, the other party to the lease contract, unless
8 the party not making the transfer agrees at any time to
9 the transfer in the lease contract or otherwise, then,
10 except as limited by contract, (i) the transferor is
11 liable to the party not making the transfer for damages
12 caused by the transfer to the extent that the damages
13 could not reasonably be prevented by the party not making
14 the transfer and (ii) a court having jurisdiction may
15 grant other appropriate relief, including cancellation of
16 the lease contract or an injunction against the transfer.
17 (5) (6) A transfer of "the lease" or of "all my rights
18 under the lease", or a transfer in similar general terms, is
19 a transfer of rights and, unless the language or the
20 circumstances, as in a transfer for security, indicate the
21 contrary, the transfer is a delegation of duties by the
22 transferor to the transferee. Acceptance by the transferee
23 constitutes a promise by the transferee to perform those
24 duties. The promise is enforceable by either the transferor
25 or the other party to the lease contract.
26 (6) (7) Unless otherwise agreed by the lessor and the
27 lessee, a delegation of performance does not relieve the
28 transferor as against the other party of any duty to perform
29 or of any liability for default.
30 (7) (8) In a consumer lease, to prohibit the transfer of
31 an interest of a party under the lease contract or to make a
32 transfer an event of default, the language must be specific,
33 by a writing, and conspicuous.
34 (Source: P.A. 87-493.)
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1 (810 ILCS 5/2A-307) (from Ch. 26, par. 2A-307)
2 Sec. 2A-307. Priority of liens arising by attachment or
3 levy on, security interests in, and other claims to goods.
4 (1) Except as otherwise provided in Section 2A-306, a
5 creditor of a lessee takes subject to the lease contract.
6 (2) Except as otherwise provided in subsection
7 subsections (3) and (4) and in Sections 2A-306 and 2A-308, a
8 creditor of a lessor takes subject to the lease contract
9 unless: (a) the creditor holds a lien that attached to the
10 goods before the lease contract became enforceable,
11 (b) the creditor holds a security interest in the
12 goods and the lessee did not give value and receive
13 delivery of the goods without knowledge of the security
14 interest; or
15 (c) the creditor holds a security interest in the
16 goods which was perfected (Section 9-303) before the
17 lease contract became enforceable.
18 (3) Except as otherwise provided in Sections 9-317,
19 9-321, and 9-323, a lessee takes a leasehold interest subject
20 to a security interest held by a creditor of the lessor. A
21 lessee in the ordinary course of business takes the leasehold
22 interest free of a security interest in the goods created by
23 the lessor even though the security interest is perfected
24 (Section 9-303) and the lessee knows of its existence.
25 (4) A lessee other than a lessee in the ordinary course
26 of business takes the leasehold interest free of a security
27 interest to the extent that it secures future advances made
28 after the secured party acquires knowledge of the lease or
29 more than 45 days after the lease contract becomes
30 enforceable, whichever first occurs, unless the future
31 advances are made pursuant to a commitment entered into
32 without knowledge of the lease and before the expiration of
33 the 45-day period.
34 (Source: P.A. 87-493.)
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1 (810 ILCS 5/2A-309) (from Ch. 26, par. 2A-309)
2 Sec. 2A-309. Lessor's and lessee's rights when goods
3 become fixtures.
4 (1) In this Section:
5 (a) goods are "fixtures" when they become so
6 related to particular real estate that an interest in
7 them arises under real estate law;
8 (b) a "fixture filing" is the filing, in the office
9 where a mortgage on the real estate would be filed or
10 recorded, of a financing statement covering goods that
11 are or are to become fixtures and conforming to the
12 requirements of Section 9-502(a) and (b) 9-402(5);
13 (c) a lease is a "purchase money lease" unless the
14 lessee has possession or use of the goods or the right to
15 possession or use of the goods before the lease agreement
16 is enforceable;
17 (d) a mortgage is a "construction mortgage" to the
18 extent it secures an obligation incurred for the
19 construction of an improvement on land including the
20 acquisition cost of the land, if the recorded writing so
21 indicates; and
22 (e) "encumbrance" includes real estate mortgages
23 and other liens on real estate and all other rights in
24 real estate that are not ownership interests.
25 (2) Under this Article a lease may be of goods that are
26 fixtures or may continue in goods that become fixtures, but
27 no lease exists under this Article of ordinary building
28 materials incorporated into an improvement on land.
29 (3) This Article does not prevent creation of a lease of
30 fixtures pursuant to real estate law.
31 (4) The perfected interest of a lessor of fixtures has
32 priority over a conflicting interest of an encumbrancer or
33 owner of the real estate if:
34 (a) the lease is a purchase money lease, the
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1 conflicting interest of the encumbrancer or owner arises
2 before the goods become fixtures, the interest of the
3 lessor is perfected by a fixture filing before the goods
4 become fixtures or within 10 days thereafter, and the
5 lessee has an interest of record in the real estate or is
6 in possession of the real estate; or
7 (b) the interest of the lessor is perfected by a
8 fixture filing before the interest of the encumbrancer or
9 owner is of record, the lessor's interest has priority
10 over any conflicting interest of a predecessor in title
11 of the encumbrancer or owner, and the lessee has an
12 interest of record in the real estate or is in possession
13 of the real estate.
14 (5) The interest of a lessor of fixtures, whether or not
15 perfected, has priority over the conflicting interest of an
16 encumbrancer or owner of the real estate if:
17 (a) the fixtures are readily removable factory or
18 office machines, readily removable equipment that is not
19 primarily used or leased for use in the operation of the
20 real estate, or readily removable replacements of
21 domestic appliances that are goods subject to a consumer
22 lease, and before the goods become fixtures the lease
23 contract is enforceable; or
24 (b) the conflicting interest is a lien on the real
25 estate obtained by legal or equitable proceedings after
26 the lease contract is enforceable; or
27 (c) the encumbrancer or owner has consented in
28 writing to the lease or has disclaimed an interest in the
29 goods as fixtures; or
30 (d) the lessee has a right to remove the goods as
31 against the encumbrancer or owner. If the lessee's right
32 to remove terminates, the priority of the interest of the
33 lessor continues for a reasonable time.
34 (6) Notwithstanding subsection (4)(a) but otherwise
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1 subject to subsections (4) and (5), the interest of a lessor
2 of fixtures, including the lessor's residual interest, is
3 subordinate to the conflicting interest of an encumbrancer of
4 the real estate under a construction mortgage recorded before
5 the goods become fixtures if the goods become fixtures before
6 the completion of the construction. To the extent given to
7 refinance a construction mortgage, the conflicting interest
8 of an encumbrancer of the real estate under a mortgage has
9 this priority to the same extent as the encumbrancer of the
10 real estate under the construction mortgage.
11 (7) In cases not within the preceding subsections,
12 priority between the interest of a lessor of fixtures,
13 including the lessor's residual interest, and the conflicting
14 interest of an encumbrancer or owner of the real estate who
15 is not the lessee is determined by the priority rules
16 governing conflicting interests in real estate.
17 (8) If the interest of a lessor of fixtures, including
18 the lessor's residual interest, has priority over all
19 conflicting interests of all owners and encumbrancers of the
20 real estate, the lessor or the lessee may (i) on default,
21 expiration, termination, or cancellation of the lease
22 agreement but subject to the lease agreement and this
23 Article, or (ii) if necessary to enforce other rights and
24 remedies of the lessor or lessee under this Article, remove
25 the goods from the real estate, free and clear of all
26 conflicting interests of all owners and encumbrancers of the
27 real estate, but the lessor or lessee must reimburse any
28 encumbrancer or owner of the real estate who is not the
29 lessee and who has not otherwise agreed for the cost of
30 repair of any physical injury, but not for any diminution in
31 value of the real estate caused by the absence of the goods
32 removed or by any necessity of replacing them. A person
33 entitled to reimbursement may refuse permission to remove
34 until the party seeking removal gives adequate security for
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1 the performance of this obligation.
2 (9) Even though the lease agreement does not create a
3 security interest, the interest of a lessor of fixtures,
4 including the lessor's residual interest, is perfected by
5 filing a financing statement as a fixture filing for leased
6 goods that are or are to become fixtures in accordance with
7 the relevant provisions of the Article on Secured
8 Transactions (Article 9).
9 (Source: P.A. 87-493.)
10 (810 ILCS 5/4-210) (from Ch. 26, par. 4-210)
11 Sec. 4-210. Security interest of collecting bank in
12 items, accompanying documents and proceeds.
13 (a) A collecting bank has a security interest in an item
14 and any accompanying documents or the proceeds of either:
15 (1) in case of an item deposited in an account, to
16 the extent to which credit given for the item has been
17 withdrawn or applied;
18 (2) in case of an item for which it has given
19 credit available for withdrawal as of right, to the
20 extent of the credit given, whether or not the credit is
21 drawn upon or there is a right of charge-back; or
22 (3) if it makes an advance on or against the item.
23 (b) If credit given for several items received at one
24 time or pursuant to a single agreement is withdrawn or
25 applied in part, the security interest remains upon all the
26 items, any accompanying documents or the proceeds of either.
27 For the purpose of this Section, credits first given are
28 first withdrawn.
29 (c) Receipt by a collecting bank of a final settlement
30 for an item is a realization on its security interest in the
31 item, accompanying documents, and proceeds. So long as the
32 bank does not receive final settlement for the item or give
33 up possession of the item or accompanying documents for
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1 purposes other than collection, the security interest
2 continues to that extent and is subject to Article 9, but:
3 (1) no security agreement is necessary to make the
4 security interest enforceable Section 9-203(b)(3)(A)
5 9-203 (1)(a);
6 (2) no filing is required to perfect the security
7 interest; and
8 (3) the security interest has priority over
9 conflicting perfected security interests in the item,
10 accompanying documents, or proceeds.
11 (Source: P.A. 87-582; 87-1135.)
12 (810 ILCS 5/5-118 new)
13 Sec. 5-118. Security interest of issuer or nominated
14 person.
15 (a) An issuer or nominated person has a security
16 interest in a document presented under a letter of credit to
17 the extent that the issuer or nominated person honors or
18 gives value for the presentation.
19 (b) So long as and to the extent that an issuer or
20 nominated person has not been reimbursed or has not otherwise
21 recovered the value given with respect to a security interest
22 in a document under subsection (a), the security interest
23 continues and is subject to Article 9, but:
24 (1) a security agreement is not necessary to make
25 the security interest enforceable under Section
26 9-203(b)(3);
27 (2) if the document is presented in a medium other
28 than a written or other tangible medium, the security
29 interest is perfected; and
30 (3) if the document is presented in a written or
31 other tangible medium and is not a certificated security,
32 chattel paper, a document of title, an instrument, or a
33 letter of credit, the security interest is perfected and
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1 has priority over a conflicting security interest in the
2 document so long as the debtor does not have possession
3 of the document.
4 (810 ILCS 5/7-503) (from Ch. 26, par. 7-503)
5 Sec. 7-503. Document of title to goods defeated in
6 certain cases.
7 (1) A document of title confers no right in goods
8 against a person who before issuance of the document had a
9 legal interest or a perfected security interest in them and
10 who neither
11 (a) delivered or entrusted them or any document of
12 title covering them to the bailor or his nominee with actual
13 or apparent authority to ship, store, or sell with power to
14 obtain delivery under this Article (Section 7--403) or with
15 power of disposition under this Act (Sections 2--403 and
16 9-320 9--307) or other statute or rule of law; nor
17 (b) acquiesced in the procurement by the bailor or
18 his nominee of any document of title.
19 (2) Title to goods based upon an unaccepted delivery
20 order is subject to the rights of anyone to whom a negotiable
21 warehouse receipt or bill of lading covering the goods has
22 been duly negotiated. Such a title may be defeated under the
23 next section to the same extent as the right of the issuer or
24 a transferee from the issuer.
25 (3) Title to goods based upon a bill of lading issued to
26 a freight forwarder is subject to the rights of anyone to
27 whom a bill issued by the freight forwarder is duly
28 negotiated; but delivery by the carrier in accordance with
29 Part 4 of this Article pursuant to its own bill of lading
30 discharges the carrier's obligation to deliver.
31 (Source: Laws 1961, p. 2101.)
32 (810 ILCS 5/8-103) (from Ch. 26, par. 8-103)
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1 Sec. 8-103. Rules for determining whether certain
2 obligations and interests are securities or financial assets.
3 (a) A share or similar equity interest issued by a
4 corporation, business trust, joint stock company, or similar
5 entity is a security.
6 (b) An "investment company security" is a security.
7 "Investment company security" means a share or similar equity
8 interest issued by an entity that is registered as an
9 investment company under the federal investment company laws,
10 an interest in a unit investment trust that is so registered,
11 or a face-amount certificate issued by a face-amount
12 certificate company that is so registered. Investment
13 company security does not include an insurance policy or
14 endowment policy or annuity contract issued by an insurance
15 company.
16 (c) An interest in a partnership or limited liability
17 company is not a security unless it is dealt in or traded on
18 securities exchanges or in securities markets, its terms
19 expressly provide that it is a security governed by this
20 Article, or it is an investment company security. However,
21 an interest in a partnership or limited liability company is
22 a financial asset if it is held in a securities account.
23 (d) A writing that is a security certificate is governed
24 by this Article and not by Article 3, even though it also
25 meets the requirements of that Article. However, a
26 negotiable instrument governed by Article 3 is a financial
27 asset if it is held in a securities account.
28 (e) An option or similar obligation issued by a clearing
29 corporation to its participants is not a security, but is a
30 financial asset.
31 (f) A commodity contract, as defined in Section
32 9-102(a)(15) 9-115, is not a security or a financial asset.
33 (Source: P.A. 89-364, eff. 1-1-96.)
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1 (810 ILCS 5/8-106) (from Ch. 26, par. 8-106)
2 Sec. 8-106. Control.
3 (a) A purchaser has "control" of a certificated security
4 in bearer form if the certificated security is delivered to
5 the purchaser.
6 (b) A purchaser has "control" of a certificated security
7 in registered form if the certificated security is delivered
8 to the purchaser, and:
9 (1) the certificate is indorsed to the purchaser or
10 in blank by an effective indorsement; or
11 (2) the certificate is registered in the name of
12 the purchaser, upon original issue or registration of
13 transfer by the issuer.
14 (c) A purchaser has "control" of an uncertificated
15 security if:
16 (1) the uncertificated security is delivered to the
17 purchaser; or
18 (2) the issuer has agreed that it will comply with
19 instructions originated by the purchaser without further
20 consent by the registered owner; or
21 (3) another person has control of the security
22 entitlement on behalf of the purchaser or, having
23 previously acquired control of the security entitlement,
24 acknowledges that it has control on behalf of the
25 purchaser.
26 (d) A purchaser has "control" of a security entitlement
27 if:
28 (1) the purchaser becomes the entitlement holder;
29 or
30 (2) the securities intermediary has agreed that it
31 will comply with entitlement orders originated by the
32 purchaser without further consent by the entitlement
33 holder.
34 (e) If an interest in a security entitlement is granted
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1 by the entitlement holder to the entitlement holder's own
2 securities intermediary, the securities intermediary has
3 control.
4 (f) A purchaser who has satisfied the requirements of
5 subsection (c)(2) or (d)(2) has control even if the
6 registered owner in the case of subsection (c)(2) or the
7 entitlement holder in the case of subsection (d)(2) retains
8 the right to make substitutions for the uncertificated
9 security or security entitlement, to originate instructions
10 or entitlement orders to the issuer or securities
11 intermediary, or otherwise to deal with the uncertificated
12 security or security entitlement.
13 (g) An issuer or a securities intermediary may not enter
14 into an agreement of the kind described in subsection (c)(2)
15 or (d)(2) without the consent of the registered owner or
16 entitlement holder, but an issuer or a securities
17 intermediary is not required to enter into such an agreement
18 even though the registered owner or entitlement holder so
19 directs. An issuer or securities intermediary that has
20 entered into such an agreement is not required to confirm the
21 existence of the agreement to another party unless requested
22 to do so by the registered owner or entitlement holder.
23 (Source: P.A. 89-364, eff. 1-1-96.)
24 (810 ILCS 5/8-110)
25 Sec. 8-110. Applicability; choice of law.
26 (a) The local law of the issuer's jurisdiction, as
27 specified in subsection (d), governs:
28 (1) the validity of a security;
29 (2) the rights and duties of the issuer with
30 respect to registration of transfer;
31 (3) the effectiveness of registration of transfer
32 by the issuer;
33 (4) whether the issuer owes any duties to an
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1 adverse claimant to a security; and
2 (5) whether an adverse claim can be asserted
3 against a person to whom transfer of a certificated or
4 uncertificated security is registered or a person who
5 obtains control of an uncertificated security.
6 (b) The local law of the securities intermediary's
7 jurisdiction, as specified in subsection (e), governs:
8 (1) acquisition of a security entitlement from the
9 securities intermediary;
10 (2) the rights and duties of the securities
11 intermediary and entitlement holder arising out of a
12 security entitlement;
13 (3) whether the securities intermediary owes any
14 duties to an adverse claimant to a security entitlement;
15 and
16 (4) whether an adverse claim can be asserted
17 against a person who acquires a security entitlement from
18 the securities intermediary or a person who purchases a
19 security entitlement or interest therein from an
20 entitlement holder.
21 (c) The local law of the jurisdiction in which a
22 security certificate is located at the time of delivery
23 governs whether an adverse claim can be asserted against a
24 person to whom the security certificate is delivered.
25 (d) "Issuer's jurisdiction" means the jurisdiction under
26 which the issuer of the security is organized or, if
27 permitted by the law of that jurisdiction, the law of another
28 jurisdiction specified by the issuer. An issuer organized
29 under the law of this State may specify the law of another
30 jurisdiction as the law governing the matters specified in
31 subsection (a)(2) through (5).
32 (e) The following rules determine a "securities
33 intermediary's jurisdiction" for purposes of this Section:
34 (1) If an agreement between the securities
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1 intermediary and its entitlement holder governing the
2 securities account expressly provides that a particular
3 jurisdiction is the securities intermediary's
4 jurisdiction for purposes of this Part, this Article, or
5 this Act specifies that it is governed by the law of a
6 particular jurisdiction, that jurisdiction is the
7 securities intermediary's jurisdiction.
8 (2) If paragraph (1) does not apply and an
9 agreement between the securities intermediary and its
10 entitlement holder governing the securities account
11 expressly provides that the agreement is governed by the
12 law of a particular jurisdiction, that jurisdiction is
13 the securities intermediary's jurisdiction.
14 (3) If neither paragraph (1) nor paragraph (2)
15 applies and an agreement between the securities
16 intermediary and its entitlement holder governing the
17 securities account does not specify the governing law as
18 provided in paragraph (1), but expressly provides
19 specifies that the securities account is maintained at an
20 office in a particular jurisdiction, that jurisdiction is
21 the securities intermediary's jurisdiction.
22 (4) (3) If none of the preceding paragraphs applies
23 an agreement between the securities intermediary and its
24 entitlement holder does not specify a jurisdiction as
25 provided in paragraph (1) or (2), the securities
26 intermediary's jurisdiction is the jurisdiction in which
27 is located the office identified in an account statement
28 as the office serving the entitlement holder's account is
29 located.
30 (5) (4) If none of the preceding paragraphs
31 applies, an agreement between the securities intermediary
32 and its entitlement holder does not specify a
33 jurisdiction as provided in paragraph (1) or (2) and an
34 account statement does not identify an office serving the
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1 entitlement holder's account as provided in paragraph
2 (3), the securities intermediary's jurisdiction is the
3 jurisdiction in which is located the chief executive
4 office of the securities intermediary is located.
5 (f) A securities intermediary's jurisdiction is not
6 determined by the physical location of certificates
7 representing financial assets, or by the jurisdiction in
8 which is organized the issuer of the financial asset with
9 respect to which an entitlement holder has a security
10 entitlement, or by the location of facilities for data
11 processing or other record keeping concerning the account.
12 (Source: P.A. 89-364, eff. 1-1-96.)
13 (810 ILCS 5/8-301) (from Ch. 26, par. 8-301)
14 Sec. 8-301. Delivery.
15 (a) Delivery of a certificated security to a purchaser
16 occurs when:
17 (1) the purchaser acquires possession of the
18 security certificate;
19 (2) another person, other than a securities
20 intermediary, either acquires possession of the security
21 certificate on behalf of the purchaser or, having
22 previously acquired possession of the certificate,
23 acknowledges that it holds for the purchaser; or
24 (3) a securities intermediary acting on behalf of
25 the purchaser acquires possession of the security
26 certificate, only if the certificate is in registered
27 form and is (i) registered in the name of the purchaser,
28 (ii) payable to the order of the purchaser, or (iii) has
29 been specially indorsed to the purchaser by an effective
30 indorsement and has not been indorsed to the securities
31 intermediary or in blank.
32 (b) Delivery of an uncertificated security to a
33 purchaser occurs when:
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1 (1) the issuer registers the purchaser as the
2 registered owner, upon original issue or registration of
3 transfer; or
4 (2) another person, other than a securities
5 intermediary, either becomes the registered owner of the
6 uncertificated security on behalf of the purchaser or,
7 having previously become the registered owner,
8 acknowledges that it holds for the purchaser.
9 (Source: P.A. 89-364, eff. 1-1-96.)
10 (810 ILCS 5/8-302) (from Ch. 26, par. 8-302)
11 Sec. 8-302. Rights of purchaser.
12 (a) Except as otherwise provided in subsections (b) and
13 (c), upon delivery of a certificated or uncertificated
14 security to a purchaser, the purchaser acquires all rights in
15 the security that the transferor had or had power to
16 transfer.
17 (b) A purchaser of a limited interest acquires rights
18 only to the extent of the interest purchased.
19 (c) A purchaser of a certificated security who as a
20 previous holder had notice of an adverse claim does not
21 improve its position by taking from a protected purchaser.
22 (Source: P.A. 89-364, eff. 1-1-96.)
23 (810 ILCS 5/8-510)
24 Sec. 8-510. Rights of purchaser of security entitlement
25 from entitlement holder.
26 (a) In a case not covered by the priority rules in
27 Article 9 or the rules stated in subsection (c), an action
28 based on an adverse claim to a financial asset or security
29 entitlement, whether framed in conversion, replevin,
30 constructive trust, equitable lien, or other theory, may not
31 be asserted against a person who purchases a security
32 entitlement, or an interest therein, from an entitlement
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1 holder if the purchaser gives value, does not have notice of
2 the adverse claim, and obtains control.
3 (b) If an adverse claim could not have been asserted
4 against an entitlement holder under Section 8-502, the
5 adverse claim cannot be asserted against a person who
6 purchases a security entitlement, or an interest therein,
7 from the entitlement holder.
8 (c) In a case not covered by the priority rules in
9 Article 9, a purchaser for value of a security entitlement,
10 or an interest therein, who obtains control has priority over
11 a purchaser of a security entitlement, or an interest
12 therein, who does not obtain control. Except as otherwise
13 provided in subsection (d), purchasers who have control rank
14 according to priority in time of:
15 (1) the purchaser's becoming the person for whom
16 the securities account, in which the security entitlement
17 is carried, is maintained, if the purchaser obtained
18 control under Section 8-106(d)(1);
19 (2) the securities intermediary's agreement to
20 comply with the purchaser's entitlement orders with
21 respect to security entitlements carried or to be
22 carried in the securities account in which the security
23 entitlement is carried, if the purchaser obtained control
24 under Section 8-106(d)(2); or
25 (3) if the purchaser obtained control through
26 another person under Section 8-106(d)(3), the time on
27 which priority would be based under this subsection if
28 the other person were the secured party.
29 (d) A equally, except that a securities intermediary as
30 purchaser has priority over a conflicting purchaser who has
31 control unless otherwise agreed by the securities
32 intermediary.
33 (Source: P.A. 89-364, eff. 1-1-96.)
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1 Section 15. The Local Records Act is amended by changing
2 Section 14 as follows:
3 (50 ILCS 205/14) (from Ch. 116, par. 43.114)
4 Sec. 14. Part 5 4 of Article 9 of the "Uniform Commercial
5 Code", approved July 31, 1961, as amended, is subject to the
6 provisions of this Act, as now or hereafter amended.
7 (Source: P.A. 76-1708.)
8 Section 20. The Counties Code is amended by changing
9 Section 3-5018 as follows:
10 (55 ILCS 5/3-5018) (from Ch. 34, par. 3-5018)
11 Sec. 3-5018. Fees. The recorder elected as provided for
12 in this Division shall receive such fees as are or may be
13 provided for him by law, in case of provision therefor:
14 otherwise he shall receive the same fees as are or may be
15 provided in this Section, except when increased by county
16 ordinance pursuant to the provisions of this Section, to be
17 paid to the county clerk for his services in the office of
18 recorder for like services. No filing fee shall be charged
19 for providing informational copies of financing statements to
20 the recorder pursuant to subsection (8) of Section 9-403 of
21 the Uniform Commercial Code.
22 For recording deeds or other instruments $12 for the
23 first 4 pages thereof, plus $1 for each additional page
24 thereof, plus $1 for each additional document number therein
25 noted. The aggregate minimum fee for recording any one
26 instrument shall not be less than $12.
27 For recording deeds or other instruments wherein the
28 premises affected thereby are referred to by document number
29 and not by legal description a fee of $1 in addition to that
30 hereinabove referred to for each document number therein
31 noted.
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1 For recording assignments of mortgages, leases or liens
2 $12 for the first 4 pages thereof, plus $1 for each
3 additional page thereof. However, except for leases and
4 liens pertaining to oil, gas and other minerals, whenever a
5 mortgage, lease or lien assignment assigns more than one
6 mortgage, lease or lien document, a $7 fee shall be charged
7 for the recording of each such mortgage, lease or lien
8 document after the first one.
9 For recording maps or plats of additions or subdivisions
10 approved by the county or municipality (including the
11 spreading of the same of record in map case or other proper
12 books) or plats of condominiums $50 for the first page, plus
13 $1 for each additional page thereof except that in the case
14 of recording a single page, legal size 8 1/2 x 14, plat of
15 survey in which there are no more than two lots or parcels of
16 land, the fee shall be $12. In each county where such maps
17 or plats are to be recorded, the recorder may require the
18 same to be accompanied by such number of exact, true and
19 legible copies thereof as the recorder deems necessary for
20 the efficient conduct and operation of his office.
21 For certified copies of records the same fees as for
22 recording, but in no case shall the fee for a certified copy
23 of a map or plat of an addition, subdivision or otherwise
24 exceed $10.
25 Each certificate of such recorder of the recording of the
26 deed or other writing and of the date of recording the same
27 signed by such recorder, shall be sufficient evidence of the
28 recording thereof, and such certificate including the
29 indexing of record, shall be furnished upon the payment of
30 the fee for recording the instrument, and no additional fee
31 shall be allowed for the certificate or indexing.
32 The recorder shall charge an additional fee, in an amount
33 equal to the fee otherwise provided by law, for recording a
34 document (other than a document filed under the Plat Act or
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1 the Uniform Commercial Code) that does not conform to the
2 following standards:
3 (1) The document shall consist of one or more
4 individual sheets measuring 8.5 inches by 11 inches, not
5 permanently bound and not a continuous form. Graphic
6 displays accompanying a document to be recorded that
7 measure up to 11 inches by 17 inches shall be recorded
8 without charging an additional fee.
9 (2) The document shall be legibly printed in black
10 ink, by hand, type, or computer. Signatures and dates
11 may be in contrasting colors if they will reproduce
12 clearly.
13 (3) The document shall be on white paper of not
14 less than 20-pound weight and shall have a clean margin
15 of at least one-half inch on the top, the bottom, and
16 each side. Margins may be used for non-essential
17 notations that will not affect the validity of the
18 document, including but not limited to form numbers, page
19 numbers, and customer notations.
20 (4) The first page of the document shall contain a
21 blank space, measuring at least 3 inches by 5 inches,
22 from the upper right corner.
23 (5) The document shall not have any attachment
24 stapled or otherwise affixed to any page.
25 A document that does not conform to these standards shall not
26 be recorded except upon payment of the additional fee
27 required under this paragraph. This paragraph, as amended by
28 this amendatory Act of 1995, applies only to documents dated
29 after the effective date of this amendatory Act of 1995.
30 The county board of any county may provide for an
31 additional charge of $3 for filing every instrument, paper,
32 or notice for record, in order to defray the cost of
33 converting the county recorder's document storage system to
34 computers or micrographics.
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1 A special fund shall be set up by the treasurer of the
2 county and such funds collected pursuant to Public Act
3 83-1321 shall be used solely for a document storage system to
4 provide the equipment, materials and necessary expenses
5 incurred to help defray the costs of implementing and
6 maintaining such a document records system.
7 The foregoing fees allowed by this Section are the
8 maximum fees that may be collected from any officer, agency,
9 department or other instrumentality of the State. The county
10 board may, however, by ordinance, increase the fees allowed
11 by this Section and collect such increased fees from all
12 persons and entities other than officers, agencies,
13 departments and other instrumentalities of the State if the
14 increase is justified by an acceptable cost study showing
15 that the fees allowed by this Section are not sufficient to
16 cover the cost of providing the service.
17 A statement of the costs of providing each service,
18 program and activity shall be prepared by the county board.
19 All supporting documents shall be public record and subject
20 to public examination and audit. All direct and indirect
21 costs, as defined in the United States Office of Management
22 and Budget Circular A-87, may be included in the
23 determination of the costs of each service, program and
24 activity.
25 (Source: P.A. 89-160, eff. 7-19-95; 90-300, eff. 1-1-98.)
26 Section 25. The Public Utilities Act is amended by
27 changing Section 18-107 as follows:
28 (220 ILCS 5/18-107)
29 Sec. 18-107. Security interests in intangible transition
30 property and grantee instruments.
31 (a) Notwithstanding any other provision of law, neither
32 intangible transition property, grantee instruments nor any
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1 right, title or interest therein, shall constitute property
2 in which a security interest may be created under the Uniform
3 Commercial Code nor shall any such rights be deemed proceeds
4 of any property which is not intangible transition property
5 or grantee instruments, as the case may be. For purposes of
6 the foregoing, the terms "account", and "general intangible",
7 (as defined under Section 9-106 of the Uniform Commercial
8 Code) and the term "instrument", and "payment intangible" (as
9 defined under Section 9-102 9-105 of the Uniform Commercial
10 Code) shall, as used in the Uniform Commercial Code, be
11 deemed to exclude any such intangible transition property,
12 grantee instruments or any right, title, or interest therein.
13 (b) The granting, perfection and enforcement of security
14 interests in intangible transition property or grantee
15 instruments are governed by this Section rather than by
16 Article 9 of the Uniform Commercial Code.
17 (c) A valid and enforceable security interest in
18 intangible transition property and in grantee instruments
19 shall attach and be perfected only by the means set forth
20 below in this subsection (c) of Section 18-107:
21 (1) To the extent transitional funding instruments
22 or grantee instruments are purported to be secured by
23 intangible transition property or to the extent
24 transitional funding instruments are purported to be
25 secured by grantee instruments, as the case may be, as
26 specified in the applicable transitional funding order,
27 the lien of the transitional funding instruments and
28 grantee instruments, if any, shall attach automatically
29 to such intangible transition property and grantee
30 instruments, if any, from the time of issuance of the
31 transitional funding instruments and grantee instruments,
32 if any. Such lien shall be a valid and enforceable
33 security interest in the intangible transition property
34 or the grantee instruments, as the case may be, securing
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1 the transitional funding instruments and grantee
2 instruments, if any, and shall be continuously perfected
3 if, before the date of issuance of the applicable
4 transitional funding instruments or grantee instruments,
5 if any, or within no more than 10 days thereafter, a
6 filing has been made by or on behalf of the holder with
7 the Chief Clerk of the Commission stating that such
8 transitional funding instruments or grantee instruments,
9 if any, have been issued. Any such filing made with the
10 Commission in respect to such transitional funding
11 instruments or grantee instruments shall take precedence
12 over any subsequent filing except as may otherwise be
13 provided in the applicable transitional funding order.
14 (2) The liens under subparagraph (1) are
15 enforceable against the electric utility, any assignee,
16 grantee or issuer, and all third parties, including
17 judicial lien creditors, subject only to the rights of
18 any third parties holding security interests in the
19 intangible transition property or grantee instruments
20 previously perfected in the manner described in this
21 subsection if value has been given by the purchasers of
22 transitional funding instruments or grantee instruments.
23 A perfected lien in intangible transition property and
24 grantee instruments, if any, is a continuously perfected
25 security interest in all then existing or thereafter
26 arising revenues and proceeds arising with respect to the
27 associated intangible transition property or grantee
28 instruments, as the case may be, whether or not the
29 electric power and energy included in the calculation of
30 such revenues and proceeds have been provided. The lien
31 created under this subsection is perfected and ranks
32 prior to any other lien, including any judicial lien,
33 which subsequently attaches to the intangible transition
34 property or grantee instruments, as the case may be, and
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1 to any other rights created by the transitional funding
2 order or any revenues or proceeds of the foregoing. The
3 relative priority of a lien created under this subsection
4 is not defeated or adversely affected by changes to the
5 transitional funding order or to the instrument funding
6 charges payable by any retail customer, class of retail
7 customers or other person or group of persons obligated
8 to pay such charges.
9 (3) The relative priority of a lien created under
10 this subsection is not defeated or adversely affected by
11 the commingling of revenues arising with respect to
12 intangible transition property or grantee instruments
13 with funds of the electric utility or other funds of the
14 assignee, issuer or grantee.
15 (4) If an event of default occurs under
16 transitional funding instruments or grantee instruments,
17 the holders thereof or their authorized representatives,
18 as secured parties, may foreclose or otherwise enforce
19 the lien in the grantee instruments or in the intangible
20 transition property securing the transitional funding
21 instruments or grantee instruments, as applicable,
22 subject to the rights of any third parties holding prior
23 security interests in the intangible transition property
24 or grantee instruments previously perfected in the manner
25 provided in this subsection. Upon application by the
26 holders or their authorized representatives, without
27 limiting their other remedies, the Commission shall order
28 the sequestration and payment to the holders or their
29 authorized representatives of revenues arising with
30 respect to the intangible transition property or grantee
31 instruments pledged to the holders. An order under this
32 subsection shall remain in full force and effect
33 notwithstanding any bankruptcy, reorganization, or other
34 insolvency proceedings with respect to the electric
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1 utility, grantee, assignee or issuer.
2 (5) The Commission shall maintain segregated
3 records which reflect the date and time of receipt of all
4 filings made under this subsection. The Commission may
5 provide that transfers of intangible transition property
6 or of grantee instruments be filed in accordance with the
7 same system.
8 (Source: P.A. 90-561, eff. 12-16-97.)
9 Section 30. The Illinois Vehicle Code is amended by
10 changing Section 3-114 as follows:
11 (625 ILCS 5/3-114) (from Ch. 95 1/2, par. 3-114)
12 Sec. 3-114. Transfer by operation of law.
13 (a) If the interest of an owner in a vehicle passes to
14 another other than by voluntary transfer, the transferee
15 shall, except as provided in paragraph (b), promptly mail or
16 deliver within 20 days to the Secretary of State the last
17 certificate of title, if available, proof of the transfer,
18 and his application for a new certificate in the form the
19 Secretary of State prescribes. It shall be unlawful for any
20 person having possession of a certificate of title for a
21 motor vehicle, semi-trailer, or house car by reason of his
22 having a lien or encumbrance on such vehicle, to fail or
23 refuse to deliver such certificate to the owner, upon the
24 satisfaction or discharge of the lien or encumbrance,
25 indicated upon such certificate of title.
26 (b) If the interest of an owner in a vehicle passes to
27 another under the provisions of the Small Estates provisions
28 of the Probate Act of 1975 the transferee shall promptly mail
29 or deliver to the Secretary of State, within 120 days, the
30 last certificate of title, if available, the documentation
31 required under the provisions of the Probate Act of 1975, and
32 an application for certificate of title. The Small Estate
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1 Affidavit form shall be furnished by the Secretary of State.
2 The transfer may be to the transferee or to the nominee of
3 the transferee.
4 (c) If the interest of an owner in a vehicle passes to
5 another under other provisions of the Probate Act of 1975, as
6 amended, and the transfer is made by a representative or
7 guardian, such transferee shall promptly mail or deliver to
8 the Secretary of State, the last certificate of title, if
9 available, and a certified copy of the letters of office or
10 guardianship, and an application for certificate of title.
11 Such application shall be made before the estate is closed.
12 The transfer may be to the transferee or to the nominee of
13 the transferee.
14 (d) If the interest of an owner in joint tenancy passes
15 to the other joint tenant with survivorship rights as
16 provided by law, the transferee shall promptly mail or
17 deliver to the Secretary of State, the last certificate of
18 title, if available, proof of death of the one joint tenant
19 and survivorship of the surviving joint tenant, and an
20 application for certificate of title. Such application shall
21 be made within 120 days after the death of the joint tenant.
22 The transfer may be to the transferee or to the nominee of
23 the transferee.
24 (e) The Secretary of State shall transfer a decedent's
25 vehicle title to any legatee, representative or heir of the
26 decedent who submits to the Secretary a death certificate and
27 an affidavit by an attorney at law on the letterhead
28 stationery of the attorney at law stating the facts of the
29 transfer.
30 (f) Repossession with assignment of title. In all cases
31 wherein a lienholder has repossessed a vehicle by other than
32 judicial process and holds it for resale under a security
33 agreement, and the owner of record has executed an assignment
34 of the existing certificate of title after default, the
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1 lienholder may proceed to sell or otherwise dispose of the
2 vehicle as authorized under the Uniform Commercial Code.
3 Upon selling the vehicle to another person, the lienholder
4 need not send the certificate of title to the Secretary of
5 State, but shall promptly and within 20 days mail or deliver
6 to the purchaser as transferee the existing certificate of
7 title for the repossessed vehicle, reflecting the release of
8 the lienholder's security interest in the vehicle. The
9 application for a certificate of title made by the purchaser
10 shall comply with subsection (a) of Section 3-104 and be
11 accompanied by the existing certificate of title for the
12 repossessed vehicle. The lienholder shall execute the
13 assignment and warranty of title showing the name and address
14 of the purchaser in the spaces provided therefor on the
15 certificate of title or as the Secretary of State prescribes.
16 The lienholder shall complete the assignment of title in the
17 certificate of title to reflect the transfer of the vehicle
18 to the lienholder and also a reassignment to reflect the
19 transfer from the lienholder to the purchaser. For this
20 purpose, the lienholder is specifically authorized to
21 complete and execute the space reserved in the certificate of
22 title for a dealer reassignment, notwithstanding that the
23 lienholder is not a licensed dealer. Nothing herein shall be
24 construed to mean that the lienholder is taking title to the
25 repossessed vehicle for purposes of liability for retailer
26 occupation, vehicle use, or other tax with respect to the
27 proceeds from the repossession sale. Delivery of the
28 existing certificate of title to the purchaser shall be
29 deemed disclosure to the purchaser of the owner of the
30 vehicle.
31 (f-5) Repossession without assignment of title. In all
32 cases wherein a lienholder has repossessed a vehicle by other
33 than judicial process and holds it for resale under a
34 security agreement, and the owner of record has not executed
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1 an assignment of the existing certificate of title, the
2 lienholder shall comply with the following provisions:
3 (1) Prior to sale, the lienholder shall deliver or
4 mail to the owner at the owner's last known address and
5 to any other lienholder of record, a notice of redemption
6 setting forth the following information: (i) the name of
7 the owner of record and in bold type at or near the top
8 of the notice a statement that the owner's vehicle was
9 repossessed on a specified date for failure to make
10 payments on the loan (or other reason), (ii) a
11 description of the vehicle subject to the lien sufficient
12 to identify it, (iii) the right of the owner to redeem
13 the vehicle, (iv) the lienholder's intent to sell or
14 otherwise dispose of the vehicle after the expiration of
15 21 days from the date of mailing or delivery of the
16 notice, and (v) the name, address, and telephone number
17 of the lienholder from whom information may be obtained
18 concerning the amount due to redeem the vehicle and from
19 whom the vehicle may be redeemed under Section 9-623
20 9-506 of the Uniform Commercial Code. At the
21 lienholder's option, the information required to be set
22 forth in this notice of redemption may be made a part of
23 or accompany the notification of sale or other
24 disposition required under subsection (3) of Section
25 9-611 9-504 of the Uniform Commercial Code, but none of
26 the information required by this notice shall be
27 construed to impose any requirement under Article 9 of
28 the Uniform Commercial Code.
29 (2) With respect to the repossession of a vehicle
30 used primarily for personal, family, or household
31 purposes, the lienholder shall also deliver or mail to
32 the owner at the owner's last known address an affidavit
33 of defense. The affidavit of defense shall accompany the
34 notice of redemption required in subdivision (f-5)(1) of
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1 this Section. The affidavit of defense shall (i) identify
2 the lienholder, owner, and the vehicle; (ii) provide
3 space for the owner to state the defense claimed by the
4 owner; and (iii) include an acknowledgment by the owner
5 that the owner may be liable to the lienholder for fees,
6 charges, and costs incurred by the lienholder in
7 establishing the insufficiency or invalidity of the
8 owner's defense. To stop the transfer of title, the
9 affidavit of defense must be received by the lienholder
10 no later than 21 days after the date of mailing or
11 delivery of the notice required in subdivision (f-5)(1)
12 of this Section. If the lienholder receives the affidavit
13 from the owner in a timely manner, the lienholder must
14 apply to a court of competent jurisdiction to determine
15 if the lienholder is entitled to possession of the
16 vehicle.
17 (3) Upon selling the vehicle to another person, the
18 lienholder need not send the certificate of title to the
19 Secretary of State, but shall promptly and within 20 days
20 mail or deliver to the purchaser as transferee (i) the
21 existing certificate of title for the repossessed
22 vehicle, reflecting the release of the lienholder's
23 security interest in the vehicle; and (ii) an affidavit
24 of repossession made by or on behalf of the lienholder
25 which provides the following information: that the
26 vehicle was repossessed, a description of the vehicle
27 sufficient to identify it, whether the vehicle has been
28 damaged in excess of 33 1/3% of its fair market value as
29 required under subdivision (b)(3) of Section 3-117.1,
30 that the owner and any other lienholder of record were
31 given the notice required in subdivision (f-5)(1) of this
32 Section, that the owner of record was given the affidavit
33 of defense required in subdivision (f-5)(2) of this
34 Section, that the interest of the owner was lawfully
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1 terminated or sold pursuant to the terms of the security
2 agreement, and the purchaser's name and address. If the
3 vehicle is damaged in excess of 33 1/3% of its fair
4 market value, the lienholder shall make application for a
5 salvage certificate under Section 3-117.1 and transfer
6 the vehicle to a person eligible to receive assignments
7 of salvage certificates identified in Section 3-118.
8 (4) The application for a certificate of title made
9 by the purchaser shall comply with subsection (a) of
10 Section 3-104 and be accompanied by the affidavit of
11 repossession furnished by the lienholder and the existing
12 certificate of title for the repossessed vehicle. The
13 lienholder shall execute the assignment and warranty of
14 title showing the name and address of the purchaser in
15 the spaces provided therefor on the certificate of title
16 or as the Secretary of State prescribes. The lienholder
17 shall complete the assignment of title in the certificate
18 of title to reflect the transfer of the vehicle to the
19 lienholder and also a reassignment to reflect the
20 transfer from the lienholder to the purchaser. For this
21 purpose, the lienholder is specifically authorized to
22 execute the assignment on behalf of the owner as seller
23 if the owner has not done so and to complete and execute
24 the space reserved in the certificate of title for a
25 dealer reassignment, notwithstanding that the lienholder
26 is not a licensed dealer. Nothing herein shall be
27 construed to mean that the lienholder is taking title to
28 the repossessed vehicle for purposes of liability for
29 retailer occupation, vehicle use, or other tax with
30 respect to the proceeds from the repossession sale.
31 Delivery of the existing certificate of title to the
32 purchaser shall be deemed disclosure to the purchaser of
33 the owner of the vehicle. In the event the lienholder
34 does not hold the certificate of title for the
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1 repossessed vehicle, the lienholder shall make
2 application for and may obtain a new certificate of title
3 in the name of the lienholder upon furnishing information
4 satisfactory to the Secretary of State. Upon receiving
5 the new certificate of title, the lienholder may proceed
6 with the sale described in subdivision (f-5)(3), except
7 that upon selling the vehicle the lienholder shall
8 promptly and within 20 days mail or deliver to the
9 purchaser the new certificate of title reflecting the
10 assignment and transfer of title to the purchaser.
11 (5) Neither the lienholder nor the owner shall file
12 with the Office of the Secretary of State the notice of
13 redemption or affidavit of defense described in
14 subdivisions (f-5)(1) and (f-5)(2) of this Section. The
15 Office of the Secretary of State shall not determine the
16 merits of an owner's affidavit of defense, nor consider
17 any allegations or assertions regarding the validity or
18 invalidity of a lienholder's claim to the vehicle or an
19 owner's asserted defenses to the repossession action.
20 (f-7) Notice of reinstatement in certain cases.
21 (1) If, at the time of repossession by a lienholder
22 that is seeking to transfer title pursuant to subsection
23 (f-5), the owner has paid an amount equal to 30% or more
24 of the deferred payment price or total of payments due,
25 the owner may, within 21 days of the date of
26 repossession, reinstate the contract or loan agreement
27 and recover the vehicle from the lienholder by tendering
28 in a lump sum (i) the total of all unpaid amounts,
29 including any unpaid delinquency or deferral charges due
30 at the date of reinstatement, without acceleration; and
31 (ii) performance necessary to cure any default other than
32 nonpayment of the amounts due; and (iii) all reasonable
33 costs and fees incurred by the lienholder in retaking,
34 holding, and preparing the vehicle for disposition and in
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1 arranging for the sale of the vehicle. Reasonable costs
2 and fees incurred by the lienholder include without
3 limitation repossession and storage expenses and, if
4 authorized by the contract or loan agreement, reasonable
5 attorneys' fees and collection agency charges.
6 (2) Tender of payment and performance pursuant to
7 this limited right of reinstatement restores to the owner
8 his rights under the contract or loan agreement as though
9 no default had occurred. The owner has the right to
10 reinstate the contract or loan agreement and recover the
11 vehicle from the lienholder only once under this
12 subsection. The lienholder may, in the lienholder's sole
13 discretion, extend the period during which the owner may
14 reinstate the contract or loan agreement and recover the
15 vehicle beyond the 21 days allowed under this subsection,
16 and the extension shall not subject the lienholder to
17 liability to the owner under the laws of this State.
18 (3) The lienholder shall deliver or mail written
19 notice to the owner at the owner's last known address,
20 within 3 business days of the date of repossession, of
21 the owner's right to reinstate the contract or loan
22 agreement and recover the vehicle pursuant to the limited
23 right of reinstatement described in this subsection. At
24 the lienholder's option, the information required to be
25 set forth in this notice of reinstatement may be made
26 part of or accompany the notice of redemption required in
27 subdivision (f-5)(1) of this Section and the notification
28 of sale or other disposition required under subsection
29 (3) of Section 9-611 9-504 of the Uniform Commercial
30 Code, but none of the information required by this notice
31 of reinstatement shall be construed to impose any
32 requirement under Article 9 of the Uniform Commercial
33 Code.
34 (4) The reinstatement period, if applicable, and
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1 the redemption period described in subdivision (f-5)(1)
2 of this Section, shall run concurrently if the
3 information required to be set forth in the notice of
4 reinstatement is part of or accompanies the notice of
5 redemption. In any event, the 21 day redemption period
6 described in subdivision (f-5)(1) of this Section shall
7 commence on the date of mailing or delivery to the owner
8 of the information required to be set forth in the notice
9 of redemption, and the 21 day reinstatement period
10 described in this subdivision, if applicable, shall
11 commence on the date of mailing or delivery to the owner
12 of the information required to be set forth in the notice
13 of reinstatement.
14 (5) The Office of the Secretary of State shall not
15 determine the merits of an owner's claim of right to
16 reinstatement, nor consider any allegations or assertions
17 regarding the validity or invalidity of a lienholder's
18 claim to the vehicle or an owner's asserted right to
19 reinstatement. Where a lienholder is subject to
20 licensing and regulatory supervision by the State of
21 Illinois, the lienholder shall be subject to all of the
22 powers and authority of the lienholder's primary State
23 regulator to enforce compliance with the procedures set
24 forth in this subsection (f-7).
25 (f-10) Repossession by judicial process. In all cases
26 wherein a lienholder has repossessed a vehicle by judicial
27 process and holds it for resale under a security agreement,
28 order for replevin, or other court order establishing the
29 lienholder's right to possession of the vehicle, the
30 lienholder may proceed to sell or otherwise dispose of the
31 vehicle as authorized under the Uniform Commercial Code or
32 the court order. Upon selling the vehicle to another person,
33 the lienholder need not send the certificate of title to the
34 Secretary of State, but shall promptly and within 20 days
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1 mail or deliver to the purchaser as transferee (i) the
2 existing certificate of title for the repossessed vehicle
3 reflecting the release of the lienholder's security interest
4 in the vehicle; (ii) a certified copy of the court order; and
5 (iii) a bill of sale identifying the new owner's name and
6 address and the year, make, model, and vehicle identification
7 number of the vehicle. The application for a certificate of
8 title made by the purchaser shall comply with subsection (a)
9 of Section 3-104 and be accompanied by the certified copy of
10 the court order furnished by the lienholder and the existing
11 certificate of title for the repossessed vehicle. The
12 lienholder shall execute the assignment and warranty of title
13 showing the name and address of the purchaser in the spaces
14 provided therefor on the certificate of title or as the
15 Secretary of State prescribes. The lienholder shall complete
16 the assignment of title in the certificate of title to
17 reflect the transfer of the vehicle to the lienholder and
18 also a reassignment to reflect the transfer from the
19 lienholder to the purchaser. For this purpose, the
20 lienholder is specifically authorized to execute the
21 assignment on behalf of the owner as seller if the owner has
22 not done so and to complete and execute the space reserved in
23 the certificate of title for a dealer reassignment,
24 notwithstanding that the lienholder is not a licensed dealer.
25 Nothing herein shall be construed to mean that the lienholder
26 is taking title to the repossessed vehicle for purposes of
27 liability for retailer occupation, vehicle use, or other tax
28 with respect to the proceeds from the repossession sale.
29 Delivery of the existing certificate of title to the
30 purchaser shall be deemed disclosure to the purchaser of the
31 owner of the vehicle. In the event the lienholder does not
32 hold the certificate of title for the repossessed vehicle,
33 the lienholder shall make application for and may obtain a
34 new certificate of title in the name of the lienholder upon
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1 furnishing information satisfactory to the Secretary of
2 State. Upon receiving the new certificate of title, the
3 lienholder may proceed with the sale described in this
4 subsection, except that upon selling the vehicle the
5 lienholder shall promptly and within 20 days mail or deliver
6 to the purchaser the new certificate of title reflecting the
7 assignment and transfer of title to the purchaser.
8 (f-15) The Secretary of State shall not issue a
9 certificate of title to a purchaser under subsection (f),
10 (f-5), or (f-10) of this Section, unless the person from whom
11 the vehicle has been repossessed by the lienholder is shown
12 to be the last registered owner of the motor vehicle. The
13 Secretary of State may provide by rule for the standards to
14 be followed by a lienholder in assigning and transferring
15 certificates of title with respect to repossessed vehicles.
16 (f-20) If applying for a salvage certificate or a
17 junking certificate, the lienholder shall within 20 days make
18 an application to the Secretary of State for a salvage
19 certificate or a junking certificate, as set forth in this
20 Code. The Secretary of State shall not issue a salvage
21 certificate or a junking certificate to such lienholder
22 unless the person from whom such vehicle has been repossessed
23 is shown to be the last registered owner of such motor
24 vehicle and such lienholder establishes to the satisfaction
25 of the Secretary of State that he is entitled to such salvage
26 certificate or junking certificate. The Secretary of State
27 may provide by rule for the standards to be followed by a
28 lienholder in order to obtain a salvage certificate or
29 junking certificate for a repossessed vehicle.
30 (g) A person holding a certificate of title whose
31 interest in the vehicle has been extinguished or transferred
32 other than by voluntary transfer shall mail or deliver the
33 certificate, within 20 days upon request of the Secretary of
34 State. The delivery of the certificate pursuant to the
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1 request of the Secretary of State does not affect the rights
2 of the person surrendering the certificate, and the action of
3 the Secretary of State in issuing a new certificate of title
4 as provided herein is not conclusive upon the rights of an
5 owner or lienholder named in the old certificate.
6 (h) The Secretary of State may decline to process any
7 application for a transfer of an interest in a vehicle
8 hereunder if any fees or taxes due under this Act from the
9 transferor or the transferee have not been paid upon
10 reasonable notice and demand.
11 (i) The Secretary of State shall not be held civilly or
12 criminally liable to any person because any purported
13 transferor may not have had the power or authority to make a
14 transfer of any interest in any vehicle or because a
15 certificate of title issued in error is subsequently used to
16 commit a fraudulent act.
17 (Source: P.A. 90-212, eff. 1-1-98; 90-665, eff. 1-1-99.)
18 Section 31. The Illinois Vehicle Code is amended by
19 changing Section 3-202 as follows:
20 (625 ILCS 5/3-202) (from Ch. 95 1/2, par. 3-202)
21 Sec. 3-202. Perfection of security interest.
22 (a) Unless excepted by Section 3-201, a security
23 interest in a vehicle of a type for which a certificate of
24 title is required is not valid against subsequent transferees
25 or lienholders of the vehicle unless perfected as provided in
26 this Act.
27 (b) A security interest is perfected by the delivery to
28 the Secretary of State of the existing certificate of title,
29 if any, an application for a certificate of title containing
30 the name and address of the lienholder and the required fee.
31 The security interest It is perfected as of the time of its
32 creation if the delivery to the Secretary of State is
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1 completed within 21 days after the creation of the security
2 interest or receipt by the new lienholder of the existing
3 certificate of title from a prior lienholder or licensed
4 dealer thereafter, otherwise as of the time of the delivery.
5 (c) If a vehicle is subject to a security interest when
6 brought into this State, the validity of the security
7 interest is determined by the law of the jurisdiction where
8 the vehicle was when the security interest attached, subject
9 to the following:
10 1. If the parties understood at the time the security
11 interest attached that the vehicle would be kept in this
12 State and it was brought into this State within 30 days
13 thereafter for purposes other than transportation through
14 this State, the validity of the security interest in this
15 State is determined by the law of this State.
16 2. If the security interest was perfected under the law
17 of the jurisdiction where the vehicle was when the security
18 interest attached, the following rules apply:
19 (A) If the name of the lienholder is shown on an
20 existing certificate of title issued by that jurisdiction,
21 his security interest continues perfected in this State.
22 (B) If the name of the lienholder is not shown on an
23 existing certificate of title issued by that jurisdiction, a
24 security interest may be perfected by the lienholder
25 delivering to the Secretary of State the prescribed notice
26 and by payment of the required fee. Such security interest is
27 perfected as of the time of delivery of the prescribed notice
28 and payment of the required fee.
29 3. If the security interest was not perfected under the
30 law of the jurisdiction where the vehicle was when the
31 security interest attached, it may be perfected in this
32 State; in that case perfection dates from the time of
33 perfection in this State.
34 4. A security interest may be perfected under paragraph
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1 3 of this subsection either as provided in subsection (b) or
2 by the lienholder delivering to the Secretary of State a
3 notice of security interest in the form the Secretary of
4 State prescribes and the required fee.
5 (Source: P.A. 81-557.)
6 Section 33. The Code of Civil Procedure is amended by
7 changing Section 9-316 as follows:
8 (735 ILCS 5/9-316) (from Ch. 110, par. 9-316)
9 Sec. 9-316. Lien upon crops. Every landlord shall have a
10 lien upon the crops grown or growing upon the demised
11 premises for the rent thereof, whether the same is payable
12 wholly or in part in money or specific articles of property
13 or products of the premises, or labor, and also for the
14 faithful performance of the terms of the lease. Such lien
15 shall continue for the period of 6 months after the
16 expiration of the term for which the premises are demised,
17 and may be enforced by distraint as provided in Part 3 of
18 Article IX of this Act.
19 A good faith purchaser shall, however, take such crops
20 free of any landlord's lien unless, within 6 months prior to
21 the purchase, the landlord provides written notice of his
22 lien to the purchaser by registered or certified mail. Such
23 notice shall contain the names and addresses of the landlord
24 and tenant, and clearly identify the leased property.
25 A landlord may require that, prior to his tenant's
26 selling any crops grown on the demised premises, the tenant
27 disclose the name of the person to whom the tenant intends to
28 sell those crops. Where such a requirement has been imposed,
29 the tenant shall not sell the crops to any person other than
30 a person who has been disclosed to the landlord as a
31 potential buyer of the crops.
32 A lien arising under this Section and duly perfected
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1 under Article 9 of the Uniform Commercial Code shall have
2 priority over any other agricultural lien as defined in, and
3 over any security interest arising under, provisions of
4 Article 9 of the Uniform Commercial Code.
5 (Source: P.A. 83-70.)
6 Section 35. The Uniform Federal Lien Registration Act is
7 amended by changing Section 4 as follows:
8 (770 ILCS 110/4) (from Ch. 82, par. 404)
9 Sec. 4. (a) If a notice of federal lien, a refiling of a
10 notice of federal lien or a notice of revocation of any
11 certificate described in subsection (b) is presented to a
12 filing officer who is:
13 (1) the Secretary of State, he shall cause the notice to
14 be marked, held and indexed in accordance with the provisions
15 of Section 9-519 9-403(4) of the Uniform Commercial Code as
16 if the notice were a financing statement within the meaning
17 of that Code; or
18 (2) any other officer described in Section 2, he shall
19 endorse thereon his identification and the date and time of
20 receipt and forthwith file it alphabetically or enter it in
21 an alphabetical index showing the name and address of the
22 person named in the notice, the date and time of receipt, the
23 title and address of the official or entity certifying the
24 lien, the total amount appearing on the notice of lien, and
25 in the case of federal tax liens, the collector's serial
26 number of the notice.
27 (b) If a certificate of release, nonattachment,
28 discharge or subordination of any lien is presented to the
29 Secretary of State for filing he shall:
30 (1) cause a certificate of release or nonattachment to
31 be marked, held and indexed as if the certificate were a
32 termination statement within the meaning of the Uniform
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1 Commercial Code, but the notice of lien to which the
2 certificate relates may not be removed from the files; and
3 (2) cause a certificate of discharge or subordination to
4 be marked, held and indexed as if the certificate were a
5 release of collateral within the meaning of the Uniform
6 Commercial Code.
7 (c) If a refiled notice of federal lien referred to in
8 subsection (a) or any of the certificates or notices referred
9 to in subsection (b) is presented for filing to any other
10 filing officer specified in Section 2, he shall permanently
11 attach the refiled notice or the certificate to the original
12 notice of lien and enter the refiled notice or the
13 certificate with the date of filing in any alphabetical lien
14 index on the line where the original notice of lien is
15 entered.
16 (d) Upon request of any person, the filing officer shall
17 issue his certificate showing whether there is on file, on
18 the date and hour stated therein, any notice of lien or
19 certificate or notice affecting any lien filed under this Act
20 or "An Act in relation to liens of the United States of
21 America", approved June 27, 1923, as amended, naming a
22 particular person, and if a notice or certificate is on file,
23 giving the date and hour of filing of each notice or
24 certificate. The fee for a certificate is $5. Upon request,
25 the filing officer shall furnish a copy of any notice of
26 federal lien, or notice or certificate affecting a federal
27 lien, for a fee of 50¢ per page.
28 (Source: P.A. 86-254.)
29 Section 37. The Uniform Commercial Code is amended by
30 adding Section 9-404.5 as follows:
31 (810 ILCS 5/9-404.5 new)
32 Sec. 9-404.5. Termination statement; duties of filing
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1 officer.
2 (1) If a financing statement covering consumer goods is
3 filed on or after July 1, 1973, then within one month or
4 within 10 days following written demand by the debtor after
5 there is no outstanding secured obligation and no commitment
6 to make advances, incur obligations or otherwise give value,
7 the secured party must file with each filing officer with
8 whom the financing statement was filed, a termination
9 statement to the effect that he no longer claims a security
10 interest under the financing statement, which shall be
11 identified by file number. In other cases whenever there is
12 no outstanding secured obligation and no commitment to make
13 advances, incur obligations or otherwise give value, the
14 secured party must on written demand by the debtor send the
15 debtor, for each filing officer with whom the financing
16 statement was filed, a termination statement to the effect
17 that he no longer claims a security interest under the
18 financing statement, which shall be identified by file
19 number. A termination statement signed by a person other than
20 the secured party of record must be accompanied by a separate
21 written statement of assignment signed by the secured party
22 of record. If the affected secured party fails to file such
23 a termination statement as required by this subsection, or to
24 send such a termination statement within 10 days after proper
25 demand therefor, he shall be liable to the debtor for $100
26 and in addition for any loss caused to the debtor by such
27 failure.
28 (2) On presentation to the filing officer of such a
29 termination statement he must note it in the index. If he has
30 received the termination statement in duplicate, he shall
31 return one copy of the termination statement to the secured
32 party stamped to show the time of receipt thereof. If the
33 filing officer has a microfilm or other photographic record
34 of the financing statement, and of any related continuation
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1 statement, statement of assignment and statement of release,
2 he may remove the originals from the files at any time after
3 receipt of the termination statement, or if he has no such
4 record, he may remove them from the files at any time after
5 one year after receipt of the termination statement.
6 (3) If the termination statement is in the standard form
7 prescribed by the Secretary of State, the uniform fee for
8 filing and indexing the termination statement in the office
9 of a county recorder shall be $5 and otherwise shall be $10,
10 plus in each case an additional fee of $5 for each name more
11 than one at each address listed against which the termination
12 statement is required to be indexed.
13 Section 40. The Toxic Substances Disclosure to Employees
14 Act is amended by changing Section 6 as follows:
15 (820 ILCS 255/6) (from Ch. 48, par. 1406)
16 Sec. 6. Exemptions. This Act shall not apply to:
17 (a) Use of toxic substances, compounds or mixtures
18 regulated by this Act which are:
19 (1) Intended for personal consumption by employees in
20 the workplace.
21 (2) Consumer goods used, stored or sold by an employer,
22 manufacturer, importer, retailer or supplier in the same
23 form, approximate amount, concentration and manner as they
24 are sold to consumers, provided that employee exposure to
25 such consumer goods is not significantly greater than
26 consumer exposure occurring during the principal consumer
27 uses of the consumer goods. For purposes of this Act,
28 "consumer goods" shall be defined as in Section 9-102 9-109.1
29 of the Uniform Commercial Code.
30 (3) Present in a concentration of less than 1%. In the
31 cases of carcinogens, mutagens or teratogens, only those
32 substances shall be exempt which are present in a
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1 concentration of 0.1% or less. No substance shall be exempt
2 under this paragraph which is present in concentrations
3 exceeding threshold concentrations established by regulation
4 of the Department.
5 (b) Laboratories in which a toxic substance, compound or
6 mixture regulated by this Act is used by or under the direct
7 supervision of a technically qualified individual, provided
8 that the toxic substance or mixture is not produced in the
9 laboratories for commercial sale. The Department shall
10 promulgate rules prescribing the standards used in
11 determining whether a laboratory is under the direct
12 supervision of a technically qualified individual.
13 (c) All retail trade establishments as listed in the
14 "Standard Industrial Classification Manual" Division G,
15 Retail Trade, published by the U.S. Government Printing
16 Office, except the Act shall apply to those retail trade
17 establishments listed within Major Groups: 52 - Building
18 Materials, Hardware, Garden Supply, and Mobile Home Dealers;
19 and 55 - Automotive Dealers and Gasoline Service Stations,
20 except for those activities involving the retail sales of
21 gasoline motor fuels or lubricants, or if the retail trade
22 establishments are engaged in any of the following specific
23 activities, this Act shall apply only to the retail trade
24 establishments' involvement in such specific activities:
25 paint mixing, other than the tinting of consumer sized
26 containers of paint; finishing or refinishing operations
27 using paint or paint related products; automobile battery
28 servicing, photo finishing operations; and dry cleaning
29 operations.
30 (Source: P.A. 85-506.)
31 Section 99. Effective date. This Act takes effect on
32 July 1, 2001, except that this Section and Sections 31 and 37
33 take effect upon becoming law.
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